You know it’s bad when the scruffy-scragglies seem to make more sense than our political leaders. The Sunday Washington Post showed one demonstrator at a Wall Street Saturday protest against the financial bailout. The young gent was holding a sign that said in part, “No Banker Left Behind.”
There you have it: the latest federal entitlement program: first Congress gave us SCHIP, the first middle-class entitlement, and now we’ll have NBLB.
Yesterday, House Speaker Nancy Pelosi announced a deal on the president’s proposal to bail out Wall Street that House Republicans had signed on to. It’s not as bad as it could be, but nevertheless intervenes in — and thereby limits — free market capitalism to a degree unprecedented in American history. Control of the financial market no longer resides in London and New York: it’s relocated forcibly to Capitol Hill.
The compromise package may be voted on as early as today in the House, and Wednesday in the Senate. (There will be no votes tomorrow in observance of the Jewish holiday on Tuesday.)
Conservative Republicans are already lining up to oppose the bill. Rep. Mike Pence (R-Ind) announced his opposition yesterday.
The understated Rep. Thaddeus McCotter (R-Mi) said, “Congress has left 700-billion dollars worth of dung on the taxpayers doorstep, rang the doorbell and ran away.” Former Speaker Newt Gingrich called the bailout package “un-American.”
The announced bailout package adopts part of a suggestion I made last Monday, splitting the $700 billion in Treasury Department authority to buy illiquid mortgage-backed securities into three parts. Immediately, it authorizes $250 billion to purchase the unmarketable securities. Another $100 billion will be made available later after the president certifies certain conditions have been met, and a third authorization in the amount of $350 billion can be authorized later by the congress.
(A side-by-side of the White House original proposal and what House Republicans believe to be the agreed version can be seen here, courtesy of the indispensable Mark Tapscott of the Washington Examiner).
One problem overshadows the debate: the bill is still far, far off from the basic principles conservatives can support. According to one report late yesterday, Speaker Pelosi has said the bill is “frozen”, and that Republicans cannot obtain any more changes in return for their support.
If that’s the case, conservatives should deliver a few hundred pounds of ice to the Speaker’s office, instead of their votes.
As one source closely involved in the deliberations told me House conservatives, in closed meetings this weekend, have strongly expressed their frustration that the compromise doesn’t vary enough from the original Paulson bailout. The taxpayer is still on the hook for up to $700 billion.
At this writing, it’s entirely unclear that the House Republicans are going to vote for this package. And they shouldn’t until their basic problems are solved.
Many of the Democrats’ worst ideas have apparently been eliminated from the agreed package. Among them are:
1. No money goes to left-wing activists such as ACORN. All money paid back to the government goes to debt reduction;
2. No union power grab: Sen. Chris Dodd (D-Ct) and Cong. Barney Frank (D-Mass) wanted to enable unions to force themselves into the board rooms of all companies whose securities are purchased by the government;
3. No “cram down” bankruptcy provision enabling bankruptcy judges to modify the terms of mortgages; and
4. No tax hikes: The Democrats wanted to tax securities transactions to help fund a payback. The proposed compromise instead requires a proposal by the Treasury Department to Congress to recoup any potential losses.
But most of those ideas were even too much for Barack Obama, who indicated that they should be eliminated from the bill. They appear to have been throw-away bait for Republicans to kill as the price for supporting the “compromise.”
According to the latest Rasmussen poll, only 24% of Americans support the bailout, and 60% remain worried that the government will do too much. House Conservatives must hold their ground and gain the key changes to the bill that they have demanded, including — especially — the primacy of an insurance program that banks will have to buy into.
Unless they do, the Paulson bailout will cost vastly too much, and the taxpayers will lose hundreds of billions of dollars.
If the House Republicans kill this “compromise”, they will have the leverage to force the revisions necessary to do it right. Some political careers will be ended — and others strengthened greatly – by the positions taken on the Paulson bailout compromise.
Something must yet be done. But no kid-gloved bailouts should be allowed to pass.