Update 09/28/08: If you are looking for the latest draft of the bill, look here. The draft in this blog post is now out of date - The Economic Populist Admin.
Calculated Risk has the scoop on the text of the bailout bill.
Hat tip to Calculated Risk via Kossack 3 goldens, who has supplied the text of the Wall Street Bailout Act that Bush expects Congress to approve within the next week.
Heads up, everybody! This is a true "Shock Doctrine" proposal, to vest the Secretary of the Treasury with unreviewable plenary power. If Congress does not enact it to Bush's liking, needless to say, blame for any economic meltdown before election day will be blamed squarely on Congress!
Text of the Act:
LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY
TO PURCHASE MORTGAGE-RELATED ASSETS
Section 1. Short Title.
This Act may be cited as __________________.
Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;
(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--
(1) providing stability or preventing disruption to the financial markets or banking system; and
(2) protecting the taxpayer.
Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.
(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.
(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.
(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.
Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.
Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
Sec. 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.
Sec. 12. Definitions.
For purposes of this section, the following definitions shall apply:
(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.
(2) Secretary.--The term “Secretary” means the Secretary of the Treasury.
(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.
_______________
Please notice the following points:
- the broad reading of the Secretary's power: so long as s/he claims to be acting pursuant to this statute, there is no limit nor review of their authority.
- It appears that entering into crony-capitalist, no-bid contracts a la Iraq and New Orleans, are part of the authority.
- The Secretary's power is unreviewable, not by the legislature, not by any administrative agency, and not by the Courts.
_______________
If Congress allows this to go forward, the "Shock Doctrine" has well and truly come to America's entire economy.
UPDATE: Prof. Paul Krugman has a good, succinct explanation of how the bill is "supposed" to work.
Russ Winter describes how the bill can be used to enable "FOH" (friend of Hank) to push financial companies into trouble, and then purchase them dirt cheap.
Comments
William Greider - Bailout a Historic Swindle!
William Greider just weighed in.
I think McCain just lost the election
Here's McCain's plan on the financial crisis.
Sound familiar? Not one word about CDS.
In case anyone forgot, Phil Gramm:
Obama is reviewing the plan and looks forward to working with the administration.
Is the change we get simply where everything is out of focus and ill defined?
Democrats
CNBC is reporting that Dems want to add a Stimulus package of $100B (in addition to the $700B) then some are calling for a cap on CEO salaries and of course Paulson calls that a poison bill.
My personal choice is to plain somehow make these CDS plain disappear and all those playing them.....get nothing.
Is that possible to do without a financial collapse?
Kevin Phillips, Must see interview, author of "Bad Money"
Last night Bill Moyer interviewed Kevin Philips. He is the author of Wealth and Democracy and recently (I don't think it's out yet) a book on the current financial crisis and how we got here.
Click on the link and you can watch the entire interview online (thanks PBS!)
I caught it last night and what is most amazing is out of his mouth is pretty much everything I have been thinking about this and a host of other problems with this country.
It's a must see interview.
Great interview
Another excellent guest and interview on Moyers.
Phillips truly is an honest broker on economic and financial matters. One of my favorite economic commentators.
Phillips makes a key point that our problems began when the finacial sector was given priority and favor over the manufacturing sector.
He also made the sports analogy that a baseball game has umpires - tyh umpires in the finacial sector were insiders
Neither party or candidate is offering any real solutions, both share the blame in the meltdown
Bailout is only a band-aid and doesn't deal with real problem
The bailout is ridiculous, and not needed, and only taxes future generations. (And both candidates want to increase govt spending?) NESARA as drafted by Dr. Barnard is the only way out of our fiscal and monetary mess. Force balanced budget, abolish income and capital taxes in favor of 14% sales tax on everything else except rents, groceries, insurance, and medical services; new monetary tools to ensure 0% inflation; abolish compound interest on secured loans in favor of simple monetization fee, and require principals be paid before before banks are allowed to collect on the monetization fee. No payment no matter how small will always reduce a debt to zero, banks more willing to prevent foreclosures and will turn around funds for more loans sooner. No more of this pay for 2.5 houses just to own 1. Pay for just 1.5 and be done with it in 17 years. National debt paid off in 30 years while standard of living doubled within a generation. NESARA (not the hoax, but Dr. Barnard's original version). A 21st century engineered solution for a 21st century economy. Google the NESARA Institute.
An absurd law.
It is contrary to the stated purpose of that law to prevent oversight. 1. It makes no difference to the speed of immediate action if there is later court review, and 2. knowing there will be court review makes the people do their job more honestly and less corrupt. The basic purpose of the courts, besides interpreting the exact meaning of the laws.
A law that says there is no review by courts means the end of the "rule of law," at leats if the high court would go along with it. In a coherent nation the legislature or the courts or the "executive" government don't even have the power to prevent court review. The rule of law should be in the Constitution to prevent absurd laws like this, and the Constitution should contain its own protocol for changing that Constitution. Beyond changing the constitution there can be no way to prevent court review of anything. Actually changing the Constitution to prevent court review is neither going to prevent court review.
The courts in Neuremburg after WW2 claimed jurisdiction anyway, despite everything the Nazis did having been formally legal (at least that is the famous claim). That precedent has been widely accepted, making it even easier now to take a similar route. The accepted law is already: whether torture and such extreme crimes were made legal or not, you will still be convicted over it. The very nature of law is that the courts will review it, and the police will enforce it.
Making the absurd additions to this law, they would know would cause the delays that it is causing, makes them responsible for these delays. Congress can not be held responsible for protecting basic rule of law by rejecting this "anti-law law."
But anyway, that law is a temporary fix at best. The really needed changes go much further.
What color of toga are we going to put on the judges that will judge Bushco for their wars, torture practices, lying, and so on ? Potential whistleblowers: start storing evidence, maybe it will buy you immunity in return for service to Justice.
Does Paulson still own Goldman stock?
Just trying to figure out if Paulson still owns his Goldman stock, in a blind trust or otherwise, or did he have to fully divest when he became Treasury secretary? Interesting to plot the daily price of Goldman against the recent decisions made in the financial markets from Bear Sterns to Fannie and Freddie, AIG, the Lehman bankruptcy.. then suddenly... bailout!
good question
It certainly seems that the world of this revolves around Goldman Sachs.
But this has been true previously, massive revolving door.
Same as Citigroup.
It appears he sold his Goldman shares and unvested options.
I cannot find out if he put them in a blind trust, which is also a way to remove "conflict of interest".
Although claiming there is no "conflict of interest" is a joke these days because Robert Rubins also, goes from Goldman Sachs to government.
Slate has an article but it does not say what he actually did. It does say he couldn't lose.
I am fairly certain they were sold but again, it doesn't matter because these boys will get a huge payout after their terms are over. It's a revolving door in D.C.
I couldn't agree more. I have thought of that as well.
You know for sure he still owns tons of this stock. You know it. He is in the "Old Boys Network" on Wall Street. Any surprise that Buffett is bailing out Goldman Sachs? Any surprise why he won't detail a plan on how the money will be spent? He is being so vague and it is absurd how he just expects congress to hand over $700 billon with out handing over a real plan? Bush is on TV right now saying that it is the irresponsible people who bought the houses they couldn't afford that is causing this crises. While I agree partly, it is also the greed of Wall Street. I cannot believe this is happening. I am so upset, but this is crazy. See how much Goldman Sachs gets. They were a HUGE buyer of these mortgage backed securities.
what we know we do not know
I hesitate in writing anything (overtly) that is not based in verifiable fact. That said, I do find it most interesting that the ones with the worst revolving doors with government are the ones seemingly the biggest target for salvation.
Is Goldman Sachs and Citigroup on the FBI list? If not, why not?
Indeed....
...I think the meme of Republicans and their 'conservative' economist fellow travelers are the real terrorists should be fostered.
In point of fact, they have done more damage to our nation than Osama could dream of.
40 years of propaganda about the 'free market'...
Destruction of our manufacturing base...
Destruction of the military...
And worst of all the erosion of trust between all citizens without which we are going to be unable to rebuild our economy.
Ignorant tools like Boehner are still spewing lies which do more than spread false information; they make us suspicious of each other.
Sadly, at this point I wonder if Obama is going to do the same thing. The idea that is 'stimulus' package is all about helping the average citizen gets more threadbare every day.
'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'
I hate to tell you this but.....
I suspect the single most damaging event to the United States economy was the China PNTR, promoted, signed by Bill Clinton and also heavily pushed by Al Gore.
Truly, the United States economic destruction is simply not partisan, it's really corporate lobbyists, corruption so Congress pays no attention to the long term national interest, obtains objective analysis and just does whatever corporate lobbyists want them to do.
The key to get off of the vague partisan blame game is to look at the specifics, the details.
A matter of opinion....
....I submit that what Clinton did, and it was bad...Glass Steagal also, was done in the environment created and fostered by the 'conservative' movement. Certainly, the Democrat Party is just as much a part of the problem as the Republican's actions have been...
Lately.
But let's call a spade a spade. Here are two different lists:
Teddy Roosevelt
FDR
JFK
and:
Richard Milhouse Nixon
Ronald Reagan
George W. Bush
Which group has done more to damage this nation by their ignorance, corruption and stupidity.
I am not playing any games, 'blame' or otherwise, I merely assert what is historical truth. I do this in the face of a blogosphere, a MSM a society that still believes the lies of the second group.
Indeed, unless I miss my guess President Obama is still running plays from the 'conservative' playbook.
That's not a good thing as I will be telling him if they ever open up comments on his 'blog'. It's true we need to look at the specific; thus my McClatchy quote about the CBO's analysis of the 'stimulus' package.
'When you see a rattlesnake poised to strike, you do not wait until he has struck to crush him.'
this would make a nice poll
which action was the worst disaster for the U.S. economy?
On healthcare
Correct me if I'm wrong here, but wasn't it Nixon who approved legislation or something that helped establish the HMO industry? Also, wasn't it under Nixon who cut back on a lot of spending on social health programs? I could have sworn it was him. So if one wanted to take this from the perspective of healthcare, I would say Richard Millhouse Nixon was the worst president. Of course, ever president afterwards had a chance to fix this......but didn't. Like Yoda said in Empire Strikes Back " Don't try....do!"
it was Nixon
HMO Act
CORBA rip off
I just watched a horrific story on 60 minutes about a town in Ohio getting decimated by DHL backing out of US overnight shipping and screwing the entire town in so many words.
Anyway, I've seen this over and over again. by law, they have to offer health benefits when people are "separated from their job" (oh so lovely a phrase) but the payments are so absurd, I don't know who could afford them.
They mentioned 1500 bucks a month for 1 person in this segment.
Anyone want to tackle the CORBA rip off because it sure seems there is a story there.
When can we have some rules
When can we have some rules on these bailouts. That companies help unemployed American workers instead of outsourcing or hiring temporary working visa workers like h1b. It seems the ordinary people gets the bill but they are not even helped at all. We need to bailout what is left of our manufacturing and small business here in America.
Obama is starting to become just a repeat of the Clinton Administration which started all these problems.
Bush I - 1990
The H-1B Visa was changed in 1990. They changed the requirement on the "H" Visa, which had worked perfectly well and been around since 1952 to say there was no requirement that the guest worker would not abandon their permanent home residence.
So, while you are correct, both parties, Democrats, Republicans, Clinton Bush have been doing the corporate lobbyists bidding for years, one needs to realize it is not just one party, one administration. They all are corrupt as hell, doing what corporations want and not what is in the best national interest or U.S. workers interest.
This is an issue of the AFL-CIO and since they are probably the most powerful force we have, considering joining up with WashTech and/or writing, pressuring the AFL-CIO to do more on professional labor issues isn't a bad idea.
There are also numerous grassroots out there and you can't go to slashdot or any technical "geek" site without reading about this. That's because the #1 targeted occupations for global labor arbitrage are STEM/I.T. categories.
Nurses too and note, Congress has not specifically put money to demand U.S. nursing schools expand, pay Professors much more to create more U.S. nurses. Right now 50,000 applicants are turned away and the GPA requirements to get into nursing school are higher than medical school.
Why is that? Because the Philippines and other nations think nurses are something to trade (teachers too), and the United States has offshore outsourced training and education.
i am not sure if we should
i am not sure if we should blame congress for this. IT should be blamed on bush and cheney. I am so glad they are out of office.