The Bush administration asked Congress for unchecked power to buy $700 billion in bad mortgage investments from U.S. financial companies in what would be an unprecedented government intrusion into the markets.
The plan, designed by Treasury Secretary Henry Paulson, is aimed at averting a credit freeze that would bring the financial system and economic growth to a standstill. The bill would bar courts from reviewing actions taken under its authority….
As congressional aides and officials scrutinized the proposal, the Treasury late today clarified the types of assets it would purchase. Paulson would have authority to buy home loans, mortgage-backed securities, commercial mortgage-related assets and, after consultation with the Federal Reserve chairman, "other assets, as deemed necessary to effectively stabilize financial markets," the Treasury said in a statement….
The plan would raise the ceiling on the national debt and spend as much as the combined annual budgets of the Departments of Defense, Education and Health and Human Services.
Let me quote that last part again:
the combined annual budgets of the Departments of Defense, Education and Health and Human Services
From the occupation of New Orleans after Katrina to the financial socialism-for-the-rich we're seeing right now, the Bush Republicans' instincts in a crisis have always been to seize more power. And then -- just wait! -- to demonstrate how enormously unsuited they are to wield it.
And the Democrats, those alleged alternatives? Maybe it's their innate affection for economic intervention, maybe it's just the same spinelessness they've brought to issues ranging from FISA to Iraq, but they don't seem to be objecting to the Paulson plan. ("The consequences of inaction could be catastrophic," says Harry Reid, according to the Bloomberg report I quoted above. The consequences of really stupid actions must not be up for discussion.*) McCain's position on these issues keeps evolving; I expect that at some point next week he'll call for parading short sellers through the streets in dunce caps.
I'll exit with some cheery thoughts from Glenn Greenwald:
Haven't we heard all these years that national health care was an extremely risky and dangerous undertaking because of what happens when the Federal Government gets too involved in an industry? What happened in the last month dwarfs all of that by many magnitudes.
The Treasury Secretary is dictating to these companies how they should be run and who should run them. The Federal Government now controls what were -- up until last month -- vast private assets. These are extreme -- truly radical -- changes to how our society functions. Does anyone have any disagreement with any of it or is anyone alarmed by what the consequences are -- not the economic consequences but the consequences of so radically changing how things function so fundamentally and so quickly?
Other countries are debating it. The headline in the largest Brazilian newspaper this week was: "Capitalist Socialism??" and articles all week have questioned -- with alarm -- whether what the U.S. Government did has just radically and permanently altered the world economic system and ushered in some perverse form of "socialism" where industries are nationalized and massive debt imposed on workers in order to protect the wealthiest. If Latin America is shocked at the degree of nationalization and government-mandated transfer of wealth, that is a pretty compelling reflection of how extreme -- unprecedented -- it all is.
* Maybe he's expecting a bailout.