Bailout Day

Despite receiving the approval of less than a quarter of the American public, politicians in Washington will vote today to approve the latest version of a $700 billion taxpayer bailout of “troubled assets” created by the implosion of the American housing market.

Spawned in large part by failed government policies and millions of bad, government-mandated loans, the bailout will be the largest federal intervention in the American economy since the Great Depression.

Sadly, it’s a measure that offers no promise of success, little accountability and an exorbitant price tag that will raise the national debt to an all-time high of $11.3 trillion. Additionally, the bailout raises serious Constitutional questions as to whether it’s even legal or not, and much more fundamental questions about the role of government in a free market economy.

Supported by President George W. Bush, Treasury Secretary Henry Paulson, House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and both major party presidential candidates, the bailout plan grants unprecedented – and some say unconstitutional – powers to the Treasury Department.

Under the terms of the agreement to be voted on by Congress today, a new Office of Financial Stability would be created within the Treasury Department to manage the immediate purchase of $350 billion worth of “troubled assets,” with another $350 billion purchase of additional “troubled assets” authorized 15 days later- unless Congress specifically passes a resolution blocking the second installment.

Like its price tag, the sweeping discretionary powers this latest bailout plan gives the government are unprecedented in American history.

Not only does Secretary Paulson get to determine what constitutes a “troubled asset,” but he gets to hire and fire the fund managers who will handle these new government investments. He’ll also get to act as judge and jury over any potential conflicts of interest which arise in that process, including any related to his prior employment at the helm of Goldman-Sachs, which will be among the prime beneficiaries of the bailout plan.

The agreement even grants Paulson the authority to value assets and adjust interest rates as he sees fit, although in a nod to the DC-style political correctness that helped get us into this mess in the first place, he will be required to follow certain federal guidelines for contracting with firms owned by women and minorities as he makes those decisions.

Perhaps it’s just us, but we’re not really comfortable giving that kind of power to any one person – let alone a guy who during the bailout negotiations literally got on his knees and begged the Democratic Speaker of the House not to walk away from the table and then had to be physically propped up by Democratic Sen. Charles Schumer at the press conference announcing the compromise.

Basically, Paulson got worn down and ran up the white flag, sort of like House Republicans, who succeeded only in getting a few pork ornaments taken out of a proposal which they will now swallow en masse – oversight and constitutional uncertainties included.

And aside from legitimate separation of powers questions raised by this bailout plan, there’s also the bigger question of whether or not a government whose policies directly contributed to this disaster should now be granted Orwellian authority to clean it up – to say nothing of the still larger question of whether or not capitalism should even permit such an intrusion under any circumstances.

Philosophically, what our elected representatives are about to do runs completely counter to the economic system on which modern democracies are founded.

Of course, the argument from those supporting the bailout is that it is necessary to stave off a full-scale economic depression – a point which grows more dubious with each passing day, thus necessitating the headlong rush to get a proposal passed sooner rather than later.

Frankly, based on the latest economic data, even this $700 billion taxpayer “investment” could end up being little more than a band-aid on a bullet wound.

New home sales in America dropped 11.5% last month, new orders for durable goods dropped 4.5% and American consumer spending is projected to decline for the third quarter – which would be the first time that’s happened in seventeen years.

Additionally, unemployment is steadily climbing, with the most recent projections estimating the economy will shed over a million jobs in the next eight months no matter what happens with the bailout.

So yeah … this could all be for nothin’ folks …

Anyway, stay tuned to FITSNews for updates throughout the day and a recap on how each Washington politician ultimately voted on this, the “mother of all bailouts.”

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