In the News
All Aboard the Fail Boat!
Bailout plan fails, leaving taxpayers treading water
In a move worthy of failblog.org contributors everywhere, House Republicans have singlehandedly stalled the $700 billion bailout package that has been hailed as the economy’s redemption.
Following the failure of the bill to make it through the House, the stock market dove more than 700 points – the biggest dip ever in a single day, including during the Great Depression and the day after 9-11.
Why did the bill fail to pass?
It’s a simple one word answer: election. Too many politicians were too afraid of losing their jobs five weeks from now. The bailout measure is hugely unpopular – and it’s easy to see why, when you take into account that CEOs would be able to take a nice chunk of change out of their bailout money as “compensation” while we (the middle class taxpayers) foot the bill. I don’t know about you, but I sure don’t have so much money that I’m willing to give it to some RWD (rich white dude) as a reward for his bad fiscal behavior.
To be fair, the politicians are stuck between a rock and a hard place – pressure from the administration to pass the bill, for fear of complete economic collapse, and pressure from their bosses (that would be us, the constituents) to stall the bill in hopes of another solution. They picked a side, that’s for sure. And the finger pointing began – with Republicans blaming Speaker Nancy Pelosi’s partisan speech just before the vote for their unwillingness to pass the bill.
What exactly was in the bill of doom, you ask?
For starters, the Secretary of the Treasury (Henry Paulson) would be given a $700 billion blank check to buy up troubled mortgages and other loans that are currently clogging the pipes of the credit system. And yes, he gets to decide what gets bought and what doesn’t.
The Treasury would have to modify troubled loans – those in danger of foreclosure – wherever possible to help families keep their homes. This could involve refinancing the loans or expanding eligibility for others, and in some cases, making certain concessions in the form of tools available to homeowners.
Taxpayers would be, in part, protected by a clause that states that companies must sell some of their bad assets to the government – which means that when the economy improves, and the assets are once again making a profit, so are the government and the taxpayers.
No big bonuses for the executives – they wouldn’t be allowed to just dump their bad assets on the government and walk away from it all. In “some” cases, executive pay must be limited, and their companies would lose certain tax benefits. (I, however, am rather skeptical of this clause – it seems to me to be worded in such a way that the execs still get plenty of money out of the deal.)
Strong-ish oversight measures. Politicians contend that this is not just a blank check – that the Treasury will initially be given only $250 billion (to spend however it wants with no oversight), then the President will have to certify that the remaining money is necessary. A special inspector would also be in place to protect against waste and abuse.
There is more of course – by the hundreds of pages – but the crux of the bill was that the Treasury would receive what is essentially a blank check with little to no oversight, and the same guys who caused the problem could make a pile of money during the bailout. For now, though, this remains one big FAIL!
Tell us: what do you think about the failure of the bill?