Wall Street and Washington’s wrecking crew aim for the most expensive free lunch in U.S. history.

If a museum ever commemorates the decline of a superpower nation, it will make the two-and-a-half page bill introduced this week in Congress the center of the display.

Just like the National Archives’ Declaration of Independence exhibit, tourists in the future will see a framed draft of the White House legislation demanding Congress surrender its power of the purse and give a political appointee – in this case, Treasury Secretary Henry Paulson – the power to hand $700 billion of taxpayer money to any financial institution “without limitation…on such terms and conditions as determined by [him].”

This bill – even the mere thinking of it – is a sign the tenets of American democracy are on the auction block: from constitutional checks and balances, to legislative and judicial oversight to electoral accountability itself.

Here are five key questions we should all be asking:

What stops the parties from enriching campaign donors under the guise of buying worthless mortgages?

Other than $700 billion, the White House proposal didn’t reference how much taxpayers can pay private investment firms for worthless mortgages. This omission is almost certainly deliberate – not just as a power grab, but in its potential to convert the Treasury into a graft machine with international reach.

Paulson came from Goldman Sachs. With these new powers, he could be free to pay inflated prices for mortgages to reward Wall Street colleagues who created this mess.

Sure, he would have to report semiannually to Congress. But that offers no safeguard either, as Democrats and Republicans are awash in contributions from the companies that would benefit from government overbuying.

Since the deregulatory splurge of the 1990s, the financial industry has donated almost $600 million to both parties – splitting donations almost 50-50. That includes an astounding $9.8 million to Sen. Barack Obama and $6.8 million to Sen. John McCain. Another $500 million dollars in lobbying expenditures in the last decade are on top of these.

Those expenditures could generate a $700 billion return on worthless mortgages – well above the 100-to-1 ratio of return that lobbying expenditures typically reap in Washington.

Should we feel confident that the people who engineered the crisis can solve it?

McCain and Obama are campaigning on “change” and both are playing this message off the Wall Street meltdown. Yet they both rely on Wall Street and Washington insiders who engineered today’s crisis.

According to Mother Jones, McCain’s campaign is run by at least 83 staffers who have lobbied for AIG, Lehman Bros., Merrill Lynch, Fannie Mae, Freddie Mac, and Citigroup, the corporations that caused the financial implosion.

Likewise, McCain’s economic guru is Phil Gramm, the Texas senator and vice-chairman of investment bank UBS.

Gramm spearheaded Congress’ radical deregulatory agenda in the 1990s, including authoring the repeal of the Glass-Steagall Act, the Depression-era law forbidding consolidaiton that could have prevented, or softened, the current emergency.

Obama, meanwhile, has long relied on Gramm’s boss, UBS chairman Robert Wolf, as an economic advisor and fundraiser. Worse, during his emergency meeting to discuss the crisis, five of nine people he said would direct his response have played a role in the crisis they claim expertise in fixing.

They are: former Clinton treasury secretaries Robert Rubin (now an executive at Citigroup) and Lawrence Summers; William Daley, Clinton administration architect of NAFTA and now a top official at J.P. Morgan Chase; Gene Sperling, the top economic adviser in the Clinton White House that deregulated Wall Street; and Paul O’Neill, former Bush Treasury Secretary, who a lockstep conservative on economics.

How should this fox-in-the-henhouse situation inspire confidence in Americans or investors our political leaders are serious about fixing the problem?



How is this meltdown a failure of “oversight” if it has almost nothing to do with illegality?

“Lack of oversight” rhetoric suggests negligent regulators failed to enforce laws. While there’s a bit of that, CBS’s Bob Schieffer said it best when he reported, “This is not the work of those who broke the law, it is the work of those operating within the law – those who pushed the law to the limit, making loans the law allowed but common sense dictated should not have been made.”

Substituting debate about “oversight” for debate about regulation allows incumbents to avoid culpability for votes that gutted existing regulations. It helps challengers make a deceptive argument claiming the only change necessary is the officeholder, not free-market fundamentalism. They get to make a self-serving partisan case while eschewing the wrath of regulation-averse business donors.

Crushed, of course, is the potential election mandate. Candidates elected on pledges to beef “oversight” have only to staff agencies with new faces to fulfill their campaign promises, rather than passing much-needed new laws.



<>Why is giving taxpayer cash to business apolitical, but spending taxpayer money on taxpayers political?

During initial bailout meetings with Congress, Paulson rejected “calls to include tighter regulations, corporate reforms or limits on executive compensation as part of the measure,” according to the Associated Press.

He also opposed using a fraction of the money to help homeowners struggling with bills, shore the social safety net or stimulate job growth through public infrastructure spending.

His position was praised by lawmakers and reporters as judicious, apolitical, and worthy of bipartisan praise. At the same time, ensuring taxpayers got something for their money was labeled political, divisive and extraneous.

This framing comes from the financial industry. The Wall Street Journal reports Congressional leaders were meeting with lobbyists from banks, securities firms and insurers “whose message to lawmakers was clear: Don’t load the legislation with provisions not directly related to the crisis, or regulatory measures the industry has long opposed.”

Giving $700 billion to speculators without condition is apolitically praiseworthy, but better regulating Wall Street or helping citizens in exchange for the bailout is a political agenda?

How will we pay for this?

We’re talking about adding $700 billion to the national debt-or $2,000 for every man, woman and child in America. Moreover, if, as bailout proponents say, the ultimate goal of a bank rescue is keeping credit markets liquid and interest rates under control, then adding $700 billion to the interest-rate-exacerbating national debt seems an odd economic analgesic, to say the least. This is to say nothing about the insanity of responding to a debt crisis by firing up the national credit card and incurring more debt.

To date, Sen. Bernie Sanders (I-Vt.) was the only lawmaker who has a specific plan to re-regulate financial markets and responsibly finance a bailout. He proposed a 10 percent surtax on those making over $500,000 a year, raising roughly $300 billion. “The people who can best afford to pay and the people who have benefited most from Bush’s economic policies are the people who should provide the funds for the bailout,” he said.

How that fiscal conservatism is met on Capitol Hill will expose the real motives – and interests – behind the bailout package.

David Sirota is a senior editor at In These Times magazine and a bestselling author whose newest book, “The Uprising,” was released in May 2008. This piece first appeared in In These Times on Sep. 22.


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