Bailout Schmailout

Several of you have called or messaged me today asking me about the bailout and expressing concern about why it didn't pass. First let me say that in my PERSONAL opinion this POS should not pass under any circumstances. But alas it will pass because whenever we have a crisis we have to hurry up and throw something on the fire instead of taking the time to properly identify and correct issues. (AKA someone flew a plane into our towers so lets start a "War on Terror" in the wrong damn country. As long as it looks like we're doing something it's cool and pointing out that it's the wrong damn country and voting NO to the funding wouldn't be patriotic now would it?)

Nothing like a little knee jerk reaction our gianormous economic crisis.

Anyway, I have taken the time to go through a draft of the plan line by line and offer some comments about why certain (intelligent) members of congress may feel a little uneasy about voting for this bill. You will see some areas I have highlighted in blue because I think they are important and you will see my comments in red.

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Courtesy of The New York Times: http://www.nytimes.com/2008/09/21/business/21draftcnd.html

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY

TO PURCHASE MORTGAGE-RELATED ASSETS
Section 1. Short Title. This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.
(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.
(b) Necessary Actions.--The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;
(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

The Secretary of the Treasury gets to do whatever he wants and hire whomever he wishes without approval from anyone when dealing with the purchase of bad debts. AND he gets to ignore previously written laws preventing this type of activity.

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them; Private banks that are awarded bailout funds are now financial agents of the Federal Government. Holy shit. So much for being a private bank.

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and
I may be mis-reading the contractual language here but it appears to me that this says if a private party (vehicle) wishes to purchase mortgage related assets back from the government they must A) be invited and approved by the Sec of Treasury and B) Follow any and all management guidelines set for by the Sec of Treasury. Holy Socialism Batman.

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.
Once again, do whatever he wants if he feels it will "get the job done".

Sec. 3. Considerations.
In exercising the authorities granted in this Act, the Secretary shall take into consideration means for--

(1) providing stability or preventing disruption to the financial markets or banking system; and
(2) protecting the taxpayer.
Pretty ambiguous. All he has to do is say he thought about it and decided he thought it was right.

Sec. 4. Reports to Congress.
Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.
No one has to report back to congress about what's goin down for three months and then after that, only twice a year. Nice oversight.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
(a) Exercise of Rights.--The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act. He can buy out any mortgages he wants, any time he wants, whether the bank asked him for help or not. SUPER SCARY!
(b) Management of Mortgage-Related Assets.--The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom. The Sec of Treas is now effectively the CEO of every bank included in the bailout.
(c) Sale of Mortgage-Related Assets.--The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act. See above

(d) Application of Sunset to Mortgage-Related Assets.--The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

If the Sec of Treas decides to take over mortgage related assets from a bank, and commits to do so (I guess verbally or on paper because it doesn't specify), but doesn't get around to it right away, he may still do so after the two year deadline has passed because he said he was gonna. WTF?

Sec. 6. Maximum Amount of Authorized Purchases.
The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time
Poor guy only gets a 7 Billion dollar budget.

Sec. 7. Funding.
For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
Part of that 7 Bil will be used to pay bureaucrats to manage this mess but we don't know exactly how much of it will be used for that purpose and the ST doesn't have to clear it with anyone first. Way to put together a budget for your labor expenses. Hello business 101.

Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency. NO COURT OF LAW CAN REVIEW THESE DECISIONS??????? Well that's putting an awful lot of trust in a guy who works in the Bush administration. This is the craziest line of the whole damn thing if you ask me. No consequences.

Sec. 9. Termination of Authority.
The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.
You got two years (and 7 Billion) to buy everything up.

Sec. 10. Increase in Statutory Limit on the Public Debt.
Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.
We hereby acknowledge we are accumulating more national debt.

Sec. 11. Credit Reform.
The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Guidelines from that document will help the ST decide how much each mortgage is worth when he is buying the debt.

Sec. 12. Definitions.
For purposes of this section, the following definitions shall apply:
(1) Mortgage-Related Assets.--The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008. Your house, my house, the hardware store, Albertsons, etc etc. If your bank is in the bailout, the Federal Government owns the debt. That simply blows my mind. I don't know what else to say about it.
(2) Secretary.--The term “Secretary” means the Secretary of the Treasury. AKA "The man"

(3) United States.--The term “United States” means the States, territories, and possessions of the United States and the District of Columbia. AKA: Us

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Ok, we've reached the end. Did you see anything missing? Here are some things I never saw when I read this document:

1) Uh if we're bailing you guys out you are gonna have to pay this back cuz shit ain't free.
2) There will be super strict oversight into every transaction that goes down so the American people do not have to be confused about the state of the state if you get what I'm sayin.
3) Before we go offering you a bailout you need to prove that you sought alternative investments or loans for yourselves because we are the Federal Government, not a friggin ATM machine.
4) If you defrauded your mortgage holders and investors out of a ton of money you're not allowed to go back to your downtown Manhattan apartment. You're goin to jail for fraudulent banking practices.
5). Attention executive level bank employees: you don't get to keep your jobs

If I were your US Congresswoman I would not sign this bill without seeing all of that stuff first because THAT would be putting the nation first. Unfortunately I could never get elected because I am rude and won't pander to one party.

What I do see is a bill that says "hey rich buddies and campaign contributors, sorry about your troubles, I have all this taxpayer money I am just itchin to spend, why don't you let me get your ass out of trouble. That way, you'll still be around when I'm trying to get re-elected and we'll let all these other people pay for your screw up. Don't worry, no questions asked. Just don't let it happen again *wink wink*"

The bailout will pass but if you think that marks the end of our troubles, you got another thing comin and I have a bridge I'd like to sell you. Stay tuned.