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I try not to focus on political or economic issues on Sunday, but I had a hard time when I noticed the figure "$700 Billion" yesterday. I was particularly worried by this statement:
. . . it would allow Treasury to act unilaterally: Its decisions could not be reviewed by any court or administrative body and, once the emergency legislation was approved, the administration could raise the $700 billion through government borrowing and would not be subject to Congress’ traditional power of the purse. . .
”It essentially creates an economic czar with no administrative oversight, no legal review, no legislative review. And it gives one man $700 billion to disperse as he needs fit,” said Sen. Dianne Feinstein, D-Calif., referring to Treasury Secretary Henry M. Paulson Jr.
”He will have complete, unbridled authority subject to no law,” she said.
In an administration that is already known for stretching its authority I have long had some fear of the consequences of the War on Terror. After this I am equally worried about the consequences of the War on Economic Uncertainty if this measure passes as submitted.
Thankfully the Democratic congress is pushing back on some aspects of the plan such as the lack of oversight.
Democrats want the measure to include independent oversight, homeowner protections and limits on executive compensation, House Speaker Nancy Pelosi, D-Calif., said in a statement early Sunday evening.
"We will not simply hand over a $700 billion blank check to Wall Street and hope for a better outcome," she said.
While I historically agree with the Republican party more often than the Democratic party on economic issues, I very much side with the Democrats on this one (if I’m forced to choose one of those two positions). We must have a healthy system of checks and balances between branches of the government. Regardless of the checks that may be imposed by Congress, anyone who still argues that we have a free market is either lying or ignorant.
I saw much more encouraging news this morning:
Goldman Sachs and Morgan Stanley, the last two independent investment banks on Wall Street, will transform themselves into bank holding companies subject to far greater regulation, the Federal Reserve said Sunday night.
The firms requested the change themselves . . .
(emphasis added)
This is how a free market is supposed to work. The individual companies recognize their precarious position and make changes themselves. Only the threat of failure will cause them to do this. Having the safety-net of a bailout available only encourages more risky practices. What is really interesting to me about this move is that it essentially reverses a "protective measure" that was passed in the Great Depression. Apparently that intervention in the market helped to facilitate our latest economic shock.
By the way, the plan includes a provision to raise the debt limit from $10.6 Trillion to $11.3 Trillion. What good is it to have a limit if those who are "limited" are allowed to move the goalposts at will?
2 replies on “A Managed Economy”
The Democratic quibbling about certain factors in the bill amounts to much ado about nothing. They aren’t that big of a deal. They’re just a marginal increase of the massive power grab being proposed by the Bush Administration. What’s more is that these ‘increased provisions’ are being pushed by some of the very same characters that caused the crisis and profited handsomely from lobbying by the firms being bailed out.
I see two morals here. 1) Don’t believe the spin the press puts on matters. 2) When both parties line up to rapidly pass major legislation, the taxpayers had better keep their hands on their pocketbooks.
I totally agree with you, but if my only options are the original proposal, or the Democrat version with some vestige of oversight I’ll take option 2. In a world where I could have a real say I would definitely vote neither.
The only constant is that I’ll be keeping my hand on my wallet.