Thursday, October 2, 2008

You Have Been Officially Shafted in this Trainwreck

Perhaps you've heard that the Senate decided to pass the trillion-dollar bailout bill that the House rejected earlier this week. Obviously, our wise and prudent Senators would not be so foolish as to pass that old rejected bill with its stale and unfashionable provisions. That would be an insult the House. Therefore, changes were required.

If you watched the CSPAN debate over the bill Wednesday night (you really need to get a life, don't you think?), you were treated to much bloviation about trains. As the public has been told repeatedly, the Welfare for Wall Street bill is maximally urgent. We can only assume that the elongated discussion about trains is to prevent this legislation from causing the very trainwreck which it seeks to prevent. Sadly, I was unconvinced.

As my mind wandered from the wise words spoken on the floor of that hallowed chamber, I decided to see what modifications might have been added. Via the most excellent Calculated Risk and Naked Capitalism blogs, we find the heart of the changes:

(a) IN GENERAL.—Paragraph (2) of section 4161(b) is amended by redesignating subparagraph (B) as sub301 paragraph (C) and by inserting after subparagraph (A) the following new subparagraph:

‘‘(B) EXEMPTION FOR CERTAIN WOODEN ARROW SHAFTS.—Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly—

‘‘(i) measures 5⁄16 of an inch or less in diameter, and
‘‘(ii) is not suitable for use with a bow described in paragraph (1)(A).’’.

(b) EFFECTIVE DATE.—The amendments made by this section shall apply to shafts first sold after the date of enactment of this Act.
I realize that the Senate is voting to bail out banks and shaft the next three generations of Americans, but I really never expected them to say it this plainly.

Then, came the exciting moment: The moment where voting occurs and we watch democracy in action. Apparently, the Senate was never wired for electricity, because while we are hearing about urgency (OMG! HARRY REID SAYS THAT A MAJOR INSURER IS GOING BANKRUPT SOON! WE NEED TO PASS THIS NOW!) these wise men and women cast their votes in the same manner as the Greeks, by calling out a name and writing longhand on a piece of paper. I really don't understand why we think that 100 grown men and women that can't bring themselves to vote electronically have any insight into how to spend a trillion dollars on bailing out Wall Street.

Seriously folks, if you want any hope of the House dealing with this problem of our generation in an intelligent and just manner, you need to call your representatives at (202) 224-3121 and threaten to vote them out of office next month unless they ditch the current plan. The fundamental flaw is that the plan still has the structure proposed by Secretary Paulson, former CEO of Goldman Sachs, who will profit handsomely from this legislation. He is sending a gift to banks for making bad investments.

There is an age-old and intelligent way of dealing with insolvent institutions, and Paulson is avoiding these solutions, as it would bankrupt many of his colleagues. However, if we are to restore confidence in the banking system, we need to clean house, not buy crappy assets above market value. The current solution will only convince investors to leave the market, selling their stock as they go.

We cannot coddle the failures on Wall Street: If you have a bad company that is taking down the financial system, wipe out the shareholders, haircut the bonds, fire the board and CEO, recapitalize, and reboot.

1 comment:

John said...

Well done post, however I think (very unfortunate) that the bill will pass probably very easily. The banks have gotten there employees to join in to contact their reps to make sure they get their pork. We are screwed.