Are we witnessing the death of the republic? Sound hysterical? Look at how Treasury Secretary Hank Paulson proposes to govern the $700 billion–some $2,000 for every man, woman and child in America–that he wants to bail out the banks.
He wants the power to buy "Troubled Assets from any Financial Institution . . . on such terms and conditions as determined by the Secretary," and his decisions "may not be reviewed by any court of law or any administrative agency," according to the text of the U.S. Treasury Department's legislative proposal. In other words, give him the $700 billion to spend as he sees fit and shut up.
The occasion for this breathtaking insult to the Constitution is the worst financial meltdown since the Great Depression. Essentially, we are being held for ransom: Give us the money on our terms or the banks will take down the global economy.
We know how we got here. Decades of reckless economic policies and batty ideas–deregulation, disemboweling regulatory agencies, allowing a shadow banking system to develop without limits, market fundamentalists preaching nonsense about markets always being efficient and self-correcting–left Wall Street's speculators free to gamble on their own. They borrowed heavily, invented complex new instruments, and pocketed millions along the way. Much of it depended on housing prices going up. Predatory lenders huckstered complicated loans to folks, with no stake in whether they had any chance to repay them.
When housing prices peaked out, banks found themselves with billions in toxic paper, and trillions in exposed credit swaps. Now they want free use of $700 billion, which they say will get the crisis under control.
Treasury Secretary Paulson says Congress must act immediately. Well, wait just one minute. If it takes $700 billion to bail out Paulson's former colleagues on Wall Street, some basic questions have to be answered:
Who pays? The rewards of the economic growth of the last decade went overwhelmingly to the wealthiest Americans. Send the bill to those who had the party. We need an excise tax on high incomes to pay for cleaning up the mess.
Who decides? We can't allow the folks who helped create the mess be in charge of cleaning it up. We need an independent entity, governed by a board with union and consumer representation and the power to make the rules for any bailout.
Who benefits? If taxpayers are bailing out banks, taxpayers should get partial ownership–so if the banks do return to profitability, we get some of our money back.
Who gets helped? We can't just bail out Wall Street and ignore Main Street. The bailout must be bottom up, not just top-down. Any bailout must include provisions for renegotiating mortgages, freezing foreclosures and keeping people in their homes.
What gets the economy going? It's not enough to bail out the banks. We need serious public investment in the real economy–in rebuilding schools and sewers, in green jobs and conservation that will put people back to work.
Who is independent? The oversight committees and the overseers must come off Wall Street's payroll. Financial industry lobbyists should be banned from the beltway for the next year. Legislators=20 should refuse Wall Street PAC and executive donations for at least the next two years.
Who is accountable? No executive of a firm that is bailed out should be paid more than the president of the United States.
Will the Congress act with the wisdom to put us back on track? Or will it squander even more money on Wall Street without making America better? We'd better help Congress make the right choice.