Most politicians and pundits are bewailing the lack of “oversight” that allegedly led us to the brink of disaster. The rhetoric suggests that the real perpetrators were negligent regulators failing to enforce—or “overseeing”—existing laws. And while there’s certainly a bit of that, CBS’s Bob Schieffer said it best when he reported that, “This is not the work of those who broke the law, it is the work of those operating within the law—those who pushed the law to the limit, making loans the law allowed but common sense dictated should not have been made.”
Substituting a debate about “oversight” for a debate about regulation isn’t merely a semantic error, nor a harmless accident. It allows incumbents to avoid culpability for their votes that gutted existing regulations and helps challenger candidates make a deceptive argument claiming the only change necessary is the specific officeholder, not the system of free-market fundamentalism itself. They get to make a self-servingly partisan case while eschewing the wrath of their regulation-averse business donors.
Crushed, of course, is the potential election mandate. Candidates elected on pledges to beef up “oversight” have only to staff agencies with new faces to fulfill their campaign promises, rather than doing the hard work of passing much-needed new laws.
[....]
During initial meetings with Congress about the bailout, Treasury Secretary Henry Paulson rejected “calls to include tighter regulations, corporate reforms or limits on executive compensation as part of the measure,” according to the Associated Press. He also stated his opposition to using a fraction of the money to help homeowners struggling with their bills, shore up the social safety net, or stimulate job growth through public infrastructure spending.
Almost universally, his position was praised by lawmakers and reporters as a judicious and apolitical one worthy of bipartisan praise. At the same time, demands to make sure taxpayers get something for their money were labeled unacceptably “political,” divisive and extraneous.
“What you heard last evening is one of those rare moments, certainly rare in my experience here, is Democrats and Republicans deciding we need to work together quickly,” Banking Committee Chairman Chris Dodd gushed to the New York Times after meeting with Paulson.
Fox News Sunday anchor Chris Wallace praised the White House proposal as “clean” and berated those who he said were trying to “Christmas tree” the bill with relief for homeowners, prompting Sen. John Kyl (R-Ariz.) to enthusiastically agree.
“There is a crisis in our country,” Kyl said. “We’ve got to come together as House and Senate, Democrat and Republican, and deal with this crisis as Americans, for the American people, and not try to bring on all of our political agendas.”
Senate Minority Leader Mitch McConnell (R-Ky.) echoed the sentiment, telling Politico.com that he does not want the bailout to become a vehicle for other “partisan plans and pet projects.”
This framing comes directly from the financial industry itself. The Wall Street Journal reports that congressional leaders are already meeting with lobbyists from the nation’s largest banks, securities firms and insurers “whose message to lawmakers was clear: Don’t load the legislation up with provisions not directly related to the crisis, or regulatory measures the industry has long opposed.”
So, handing over $700 billion of taxpayer money to Wall Street speculators with no conditions whatsoever is now so supposedly apolitical that reporters and politicians take offense at any suggestion otherwise. Meanwhile, proposing to better regulate Wall Street or help ordinary citizens in exchange for that bailout is an unacceptably partisan “political agenda” inappropriate at a time of “crisis in our country”—as if the wage, housing, and health care crisis afflicting workers, homeowners and families is far less critical to the national welfare than the crisis hitting millionaire speculators.
<http://www.inthesetimes.com/article/3932/the_700_billion_questions/
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[CrookedTimber.org, John Quiggin:]
Steven Poole is taking a break from blogging, so we can’t get his thoughts on the “clean bailout” as an example of Unspeak. To me the natural association is something like “clean handover” as in “I want a clean handover. Leave the money in unmarked used bills, no tricks and no police, nobody gets hurt.”
<http://crookedtimber.org/2008/09/23/unspeak-and-the-clean-bailout/>
[Paul Krugman:]
There’s a turn of phrase I hate in the current discussion, because it sounds smart and serious but is in fact a complete evasion of the key issue. And I’m sorry to say that Ben Bernanke uses it in today’s testimony:
"More generally, removing these assets [i.e., toxic mortgage-related waste] from institutions’ balance sheets will help to restore confidence in our financial markets and enable banks and other institutions to raise capital and to expand credit to support economic growth."
“Removing these assets from institutions’ balance sheets” — what an evasive phrase.
I mean, any bank that wants to remove toxic assets from its balance sheet can do it at a stroke — just declare them worthless, and poof! they’re gone. But of course, that would reduce confidence and capital, not increase it — and that’s not what Hank and Ben are talking about. They’re talking about turning the assets over to Uncle Sam, and getting cold hard cash in return. And then the question is how much cash they get in return. It’s all about the price.
Now, if the price Treasury pays is very low — anything comparable to what financial institutions are able to sell the stuff for now — it’s going to do nothing for confidence and capital. If the price is high, confidence and capital will improve — but taxpayers may well take a big loss. The premise of the Paulson plan– though never stated bluntly — is that these assets are hugely underpriced, so that Uncle Sam can buy them at prices that help the financial industry a lot, without big losses for taxpayers. Are you prepared to bet $700 billion on that premise?
But how can we help the financial situation without making that bet? By taking an equity stake. That way, if it turns out that the feds are pumping money in at above-fair prices, at least they get ownership, just as a private white knight would have.
There is no, repeat no justification for refusing to grant equity warrants that provide some taxpayer protection. This is, for me, an absolute deal or no-deal point.
<http://krugman.blogs.nytimes.com/2008/09/23/balance-sheet-baloney/>