Sunday, October 19, 2008

What IS in the Bailout Bill?

It's remarkable how quickly coverage of the bailout bill (HR 1424) was removed from the news cycle. After a couple of weeks of intense scrutiny and conflict, the legislation was quickly passed and entered the vast repository of history. One might think that either the government or the mainstream media would make substantial efforts to break down the components of the compromise and present them to the American public that they purportedly serve. But apparently the powers-that-be think that the populace is either too dull to understand the details, or simply disinterested. While these assumptions may apply to a certain segment of reality-television viewers and slavish consumers, I find them extremely offensive.

So I set out on my own to find out what was added to the bill that the president signed into law. The press referred to these additions as "sweeteners", suggesting that many of our legislators would have oppossed the bailout if they were left out. In the process the bill swelled from its original length to a behemoth consisting of 451 pages. It's only natural to wonder how much of the final product was actually examined by the full Congress. Were they only aware of particular sections that would appeal to them and their constituents? If that is so, what little poison pills were inserted and overlooked in the rush to judgment? Do we have a series of nasty surprises coming down the line?

One big alteration involved "temporarily" raising the amount of bank deposits the FDIC insures from $100K to $250K. This was widely publicized, and seemed to garner bipartisan support. Similarly an expanded exemption of middle class earners from the alternative minimum tax seemed to be popular with both sides. As the LA Times reports, "The new law also has tax relief provisions for disaster victims; research and development tax credits; a hybrid car tax credit; and tax breaks for teachers who spend their own money on school supplies." I was particularly pleased to learn that companies seeking to invest in solar and wind power technologies were among those getting tax credits. John McCain and the GOP had been adamantly opposed to allowing those breaks before the presidential election.

Of course there were plenty of House Republicans glomming on to the GOP focus on "pork barrel" and decrying the nearly $150 billion in spending added to the bill (but no substantial opposition from McCain, who has identified this as the major reform of his prospective administration). It didn't matter that there were so many tax breaks and credits included. This was largely a Democratic product, and opponents had to distance themselves from it (even when they voted "yes" to pass it). Naturally it was a bit of deregulation (and a buttload of tax cuts) that successfully wooed the free market loyalists- the Securities and Exchange Commission promised to ease rules forcing companies to value on–balance sheet assets according to their current market prices (source). Obviously holding financial companies to certain standards of transparency was not in the game plan for these laissez faire activists.

While oversight was defined a bit more than in Paulson's original proposal, the bailout did leave a lot of discretion to the Treasury, with the creation of a new " Office of Financial Stability" (to be overseen by a 35-year old former VP at Goldman Sachs). The $700 billion will be released in installments for the Treasury Secretary to buy assets and hold them until (or if) the taxpayer money can be recouped. Who knows whether or not HR 1424 will significantly ameliorate the effects of decades of diminishing governmental regulation and oversight in the economy? Will our leaders make a fundamental commitment to keep abreast of developing financial crises and scandals? I would hope that the feds have more in store that would establish rules that will keep this situation from continually repeating itself.

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Blogger Deekaman said...

I'm not at all happy with the bill. I'd almost prefer a Great Depression over this one. The taxpayers are going to take it in the shorts either way; why not spread the love.

6:21 PM  
Blogger Merge Divide said...

What's especially strange is that I never read anywhere that this bill gave Bush, Paulson and co. the power to actually buy stakes in the major banks. Now THAT is socialism.

6:48 PM  

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