So what did Americans really get when Congress approved a bill giving the Treasury power to spend some $700 billion to stem the financial panic? It's becoming clear that Treasury Secretary Hank Paulson has mishandled the crisis in typical Bushian fashion. First with incompetence, by allowing the investment banking sector he came from to march over the edge of the abyss over the past year, long after it the cataclysmic risks to the system were clear. Then, in mad improvisation, he allowed Lehman to fail. He refused congressional suggestions of a direct capital infusion into the banks — until it was clear it "buy toxic debt" scheme wasn't working and Britain and the EU led the way with direct infusions. Brownie, call your office.
Also typically Bushian was the stampede to act, on a bailout plan with no oversight that would have given Paulson unprecedented power. Iraq, anyone. Congress made some oversight improvements, and Obama has made it clear he will alter the "rescue" further if he wins the White House. But everybody had a gun to his or her head to "do something" as the markets collapsed.
Of course, we're not dealing with drowning poor, black folks in NOLA, here. So ultimately, the administration was willing to take any "socialist" action to save its wealthy friends in the investment banks, the hedge funds, etc. So maybe the Brownie analogy is not quite right. Yet we should be on guard. Remember another hallmark of Bush governance: enriching the politically connected and powerful through privatization. How could that happen in the "financial rescue"?
Now it's becoming clear
While little seems to be happening out of Washington besides the opaque "lending facilities" being handed out like candy by the Federal Reserve, it turns out the Treasury is using its growing power to encourage more bank mergers, with the acquiring banks being able to use your tax money to gobble up their competitors.
I am not making this up. The latest is National City being acquired by PNC. The New York Times' Joe Nocera dug deeper into what is a very deliberate policy by the government. It's not what was sold in the bailout bill. And it helps give the healthy banks an excuse to continue to refuse lending.
Aside from the subterfuge of the policy, it's bad on at least two other fronts. First, it creates more consolidation in an industry that had already become too concentrated. That not only harmed competition, including competition of ideas (such as, "of course we're not going to make a home loan to someone with no income."). It also created institutions so huge, so loaded with financial weapons of mass destruction, that they are "too big to fail." It gives them political power to defang regulators. They are a risk to the financial system by their very size. And they inevitably force a government rescue, which now amounts to nationalization of the banks (and by "conservatives."
Second is the damage these mergers continue to do to communities. Cities around the nation have lost their most important corporate citizens to bank mergers, and with it high-paying jobs, philanthropy and CEOs who would work for the community good. Now they're branch office towns and it shows. Now even the "replacement" back office jobs and sales jobs propping up the big mortgage swindle are going away.
So the self-dealing by the plutocracy continues. On Election Day, your vote is as powerful as Hank Paulson's, and perhaps we can set a new course.
It’s the typical bait and switch pig-in-a-poke. It’s true not only for Bush administration bailout policies, but for much congressional legislation in a wide variety of areas. Congress legislates for those who pay its campaign finance funding, and the window dressing seldom matches the details in the fine print or as subsequently developed.
Someone civilization will advance to the point where the idea of allowing private parties to control important social functions like insurance, banking, etc., will seem positively barbaric. Until then, caveat emptor.