Los Angeles Sweet Digs

September 24, 2008

Congress Shares America’s Outrage — and Skepticism

My new hero is Christopher Dodd, Democratic senator from Connecticut and chairman of the cjd front Congress Shares Americas Outrage and SkepticismSenate Banking Committee.  In packed hearings Tuesday on Capitol Hill to discuss the Bush administration’s mind-boggling request for $700 billion to bail out America’s financial system, Dodd made it clear that Congress wasn’t quite ready to write a trillion-dollar check, not to mention hand over unprecedented power, to Treasury Secretary “King Henry” Paulson and Fed chairman “Big Ben” Bernanke.

Here’s what Dodd had to say following the hearing, according to The Washington Post:

“This proposal is stunning and unprecedented in scope — and lack of detail, I might add,” Dodd said. “It would allow the secretary of the Treasury to intervene in our economy by purchasing at least $700 billion of toxic assets. It would allow the secretary to hold on to those assets for years and to pay millions of dollars to handpicked firms to manage those assets. It would do nothing, in my view, to help a single family save a home. . . . It would do nothing to stop even a single CEO from dumping billions of dollars of toxic assets on the backs of American taxpayers. . . . And it would allow this secretary and his successors to act with utter and absolute impunity, without review by any agency or a court of law.”

Dodd added, “After reading this proposal, I can only conclude that it is not just our economy that is at risk, but our Constitution as well.”

While speed is important, he said, “I’m far more interested in whether or not we get this right. There is no second act to this. There is no alternative idea out there with the resources available if this does not work.”

Amen.  Dodd isn’t the only one who’s skeptical.  Other members of Congress were leery as well, saying their constituents had flooded their offices with messages of outrage.

Guess who else is outraged:  Paulson!

“I’m not only concerned, I’m angry about the things that got us here,” said Paulson. “It makes me angry, and it makes you angry. You talk about taxpayers being on the hook? Guess what? They’re already on the hook. If the system isn’t stabilized, they’re going to bear the cost.”

Really?  Didn’t Paulson have the ability to put a stop to this mess while it was going on? And now he wants a trillion bucks to clean up the mess he did nothing about?  Why should anyone trust this guy?  What evidence do we have that he has any clue what he’s doing?

So thank goodness for Dodd and others in Congress for not falling for the “we have to do something RIGHT NOW — OR ELSE!” scare tactic. And thank goodness for all the American citizens who are contacting their representatives to express their views.  If you want to do the same, click here and here and here.

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Posted by Cindy Allen on September 24, 2008 7:30 AM | del.icio.us | Digg

  • alvine
    amen bradley. congress is as much at fault for our current economic mess as anyone.

    Paulson and Bernanke have been on the job for two years. I hardly think it's fair to blame them, let alone suggest they could have done something sooner to stop it (they've been trying as the hits keep coming, but nothing has been enough so far).

    You ask what experience do they have to suggest they have "clue"?

    Well, Paulson ran the preeminent IB on Wall Street - Goldman Sachs - the one firm that avoided the whole subprime meltdown and is still far and away the healthiest of the remaining IBs (well, now technically a bank, since the events of the last three weeks have forever transformed wall street as we knew it).

    And Bernanke was a distinguished professor best known as perhaps the foremost expert on the Great Depression.

    I'm not sure what the right answer is either, but i think those two are as qualified as any to try and find a solution out of this mess.
  • Bradley Cain
    By the mid 2000s, Freddie and Fannie were primarily financing risky, expensive loans for speculators and people living beyond their means. Freddie and Fannie leveraged $100 billion in equity to nearly $5 trillion in debt. Since nearly $1 trillion of that debt was held/financed by the Chinese, the U.S. government had no real alternative but to step in and make good on the debt or we'd risk losing future financing. These are the same politicians who repeatedly stated that the Freddie and Fannie debt was not backed by the U.S. government. Now it is -- officially.

    For more on Franks' contribution to this mess, please read: http://bostonherald.com/news/o...

    In principle, I'm not in favor of these bailouts, but I think the macro damage that will be caused by not quickly getting us back to some sort of equillibrium could be staggering, so I support their quick passage with few strings attached. Once stability has been restored (hopefully), we can put safeguards in place to prevent a recurrence of this type of financial black hole.

    In the meanwhile, I am apalled at the vote-baiting posturing of Dodd and Frank, the supposedly wise politicians who are now looking out for the common man (please). They should not be celebrated, they should be investigated.
  • Bradley Cain
    Cindy,

    Your heart is in right place, but you need to dig deeper if you're going to hold out Mr. Dodd as some sort of populist hero in this mess. You should be wary of taking Mr. Dodd at his word unless you look back a few years to see what he did and didn't do. Please read this Washington Post column:

    http://www.washingtonpost.com/...

    Dodd and Barney Frank, also one of the biggest critics of the currently proposed bailout, were among the most vocal critics of the Bush Administration's proposal to place additional safeguards on Freddie Mac and Fannie Mae starting back in 2003. As Freddie and Fannie were essentially becoming giant hedge funds, betting that housing prices would never drop, some Washington folks saw the risks, warned of the issues and called for action. They were rebuffed by Dodd, Frank and others who claimed that Republicans were trying to eliminate fair housing by enacting reasonable controls on a risky venture (dead false claims, BTW).
  • Bradley Cain
    Sorry for the double post, folks.
  • Bradley Cain
    Cindy,

    Your heart is in right place, but you need to dig deeper if you're going to hold out Mr. Dodd as some sort of populist hero in this mess. You should be wary of taking Mr. Dodd at his word unless you look back a few years to see what he did and didn't do. Please read this Washington Post column:

    http://www.washingtonpost.com/...

    Dodd and Barney Frank, also one of the biggest critics of the currently proposed bailout, were among the most vocal critics of the Bush Administration's proposal to place additional safeguards on Freddie Mac and Fannie Mae starting back in 2003. As Freddie and Fannie were essentially becoming giant hedge funds, betting that housing prices would never drop, some Washington folks saw the risks, warned of the issues and called for action. They were rebuffed by Dodd, Frank and others who claimed that Republicans were trying to eliminate fair housing by enacting reasonable controls on a risky venture (dead false claims, BTW).

    By the mid 2000s, Freddie and Fannie were primarily financing risky, expensive loans for speculators and people living beyond their means. Freddie and Fannie leveraged $100 billion in equity to nearly $5 trillion in debt. Since nearly $1 trillion of that debt was held/financed by the Chinese, the U.S. government had no real alternative but to step in and make good on the debt or we'd risk losing future financing. These are the same politicians who repeatedly stated that the Freddie and Fannie debt was not backed by the U.S. government. Now it is -- officially.

    For more on Franks' contribution to this mess, please read: http://bostonherald.com/news/o...

    In principle, I'm not in favor of these bailouts, but I think the macro damage that will be caused by not quickly getting us back to some sort of equillibrium could be staggering, so I support their quick passage with few strings attached. Once stability has been restored (hopefully), we can put safeguards in place to prevent a recurrence of this type of financial black hole.

    In the meanwhile, I am apalled at the vote-baiting posturing of Dodd and Frank, the supposedly wise politicians who are now looking out for the common man (please). They should not be celebrated, they should be investigated.
  • Jose
    Apparently if you gamble in Wall Street and you loose, it is expected that the tax payers should bail you out. I apologized it is offensive to call it a bailout it should be called a rescue. So let’s facilitate the elite at Wall Street with the 700 billion dollars and soon we will be informed that the money was mismanage and distributed among them selves. Wouldn’t it be nice to be bailed out or rescued after you have gambled your livelihood in Las Vegas.
  • Bradley Cain
    Cindy,

    Your heart is in right place, but you need to dig deeper if you're going to hold out Mr. Dodd as some sort of populist hero in this mess. You should be wary of taking Mr. Dodd at his word unless you look back a few years to see what he did and didn't do. Please read this Washington Post column:

    http://www.washingtonpost.com/...

    Dodd and Barney Frank, also one of the biggest critics of the currently proposed bailout, were among the most vocal critics of the Bush Administration's proposal to place additional safeguards on Freddie Mac and Fannie Mae starting back in 2003. As Freddie and Fannie were essentially becoming giant hedge funds, betting that housing prices would never drop, some Washington folks saw the risks, warned of the issues and called for action. They were rebuffed by Dodd, Frank and others who claimed that Republicans were trying to eliminate fair housing by enacting reasonable controls on a risky venture (dead false claims, BTW).

    By the mid 2000s, Freddie and Fannie were primarily financing risky, expensive loans for speculators and people living beyond their means. Freddie and Fannie leveraged $100 billion in equity to nearly $5 trillion in debt. Since nearly $1 trillion of that debt was held/financed by the Chinese, the U.S. government had no real alternative but to step in and make good on the debt or we'd risk losing future financing. These are the same politicians who repeatedly stated that the Freddie and Fannie debt was not backed by the U.S. government. Now it is -- officially.

    For more on Franks' contribution to this mess, please read: http://bostonherald.com/news/o...

    In principle, I'm not in favor of these bailouts, but I think the macro damage that will be caused by not quickly getting us back to some sort of equillibrium could be staggering, so I support their quick passage with few strings attached. Once stability has been restored (hopefully), we can put safeguards in place to prevent a recurrence of this type of financial black hole.

    In the meanwhile, I am apalled at the vote-baiting posturing of Dodd and Frank, the supposedly wise politicians who are now looking out for the common man (please). They should not be celebrated, they should be investigated.

    -Bradley Cain
  • The anger of Americans upon discovering Wall St's financial alchemy is understandable. They have made turning your gold into lead - is understandable.

    How do you avoid this falling leaded anvil?

    Buy the right real estate as it has a historic capital appreciation rate of 4 to 5%, bought correctly and rented can throw off inflation protected cash flow forever and offers huge tax advantages.

    A home or investment property is more understandable to the average American as an investment than an MBS, CDO or SIV....and then the Chinese (et al) won't "hold a gun to your personal head" to recapitalize the domestic banking system. That is exactly what's happening to our financial institutions who have been discovered as no longer "the smartest guys in the room.".

    We should all be angry and it begins with each and every one of us and our personal expectations.......The "want it/get it now entitlement economy" just bit back.

    If we wish to irrevocably destroy the American way of life....look at the proposed Capital Gains Taxes changes that will absolutely discourage any investment!

    Ah America....what wonderful country! Please do not vote emotionally and change this country to another failed socialist experiment!

    Best: Andrew Waite
  • Elise Kalfayan
    Thanks, Cindy, for encouraging everyone to let their representatives know this won't be tolerated.

    I sincerely hope if any of our "leaders" sell their constituents short they will be mass voted out of office.

    I'm grateful for some representatives who are telling it like it is. This is an Ohio representatives' speech to the House posted yesterday in the comments section on Calculated Risk:

    http://www.youtube.com/watch?v...
  • Cindy, you are an amazing writer, you eloquently and succinctly simplify this complex issue.
  • spinsLPs
    Wasn't the last time this administration wanted something railroaded through, we ended up invading Iraq?
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