Thursday, September 25, 2008

Why Paulson Shouldn't Lead Wall Street Bailout

Does it really matter which party is in charge when it comes to bailing out the Wall Street hustlers whose shenanigans have bankrupted so many ordinary folks? Not if the Democrats roll over and cede power to the former head of Goldman Sachs, an investment bank at the center of our economic meltdown.

What arrogance for Treasury Secretary Henry Paulson - who was paid $16.4 million the year before President Bush appointed him Treasury secretary for heading this company that did as much as any to engineer this financial travesty - to now insist we must blindly trust him to solve the problem. Paulson is demanding the power to act with "absolute impunity," as Sen. Christopher Dodd put, admonishing Paulson that "after reading this proposal, it is not only our economy that is at risk, Mr. Secretary, but our Constitution as well."

Clearly, it's a vast improvement to have Dodd in the chairman's seat of the Senate Banking Committee, asking the right questions, rather than his predecessor, Texas Republican Phil Gramm, who presided over the committee in the years when the American economy, long the envy of the world, was viciously sabotaged by radical deregulation legislation.

Gramm, whom Sen. John McCain backed for president in 1996, pushed through the financial market deregulation that has brought the American economy to its knees. Maybe this time Congress won't give the financial moguls everything they want, including the bailout for foreign-owned banks such as Swiss-based UBS, where Gramm now hangs out as a very well-paid executive when he is not advising the presidential campaign of Sen. John McCain, his old buddy and partner in crime. Oops, sorry, no crimes were committed because the deregulation laws Gramm pursued and McCain faithfully supported decriminalized the financial scams that have proved so costly.

Just check out the language of Gramm's pet projects, the Gramm-Leach-Bliley Act of 1999 and the Commodity Futures Modernization Act of 2000. The former reversed the basic Depression-era legislation to prevent the sort of meltdown we are now experiencing that prevented mergers between the various branches of Wall Street, and the latter legitimized the "swap agreements" and other "hybrid instruments" that are at the core of the meltdown.

Referred to in the 2000 legislation as the "Legal Certainty for Bank Products Act of 2000," Title IV of the new law that Gramm snuck into legislation without hearings hours before the Christmas recess provided Wall Street with an unbridled license to steal. It made certain financiers could legally get away with a whole new arsenal of financial rip-off schemes.

One of those provisions, summarized by the headline of Title III, ensured the "Legal Certainty for Swap Agreements," which successfully divorced the granters of subprime mortgage loans from any obligation to ever collect on them. That provision of Gramm's law is at the very heart of the problem. But the new law went further to prohibit regulation of any of the new financial instruments permitted after the financial industry mergers: "No provision of the Commodity Exchange Act shall apply to, and the Commodity Futures Trading Commission shall not exercise regulatory authority with respect to, an identified banking product which had not been commonly offered, entered into, or provided in the United States by any bank on or before December 5, 2000..."

Even some Republicans on the Senate committee expressed exasperation Monday with the swindles that they had voted with such enthusiasm to enable in the past as well as with giving Wall Street yet another blank check. Sen. Jim Bunning, R-Ky., condemned Secretary Paulson's proposal as an effort to "take Wall Street's pain and spread it to the taxpayers." He added that, "It's financial socialism and it's un-American."

He's wrong on that last point, for what is proposed is not the nationalization of private corporations but rather a corporate takeover of government. The marriage of highly concentrated corporate power with an authoritarian state that services the politico-economic elite at the expense of the people is more accurately referred to as "financial fascism." After all, even Adolf Hitler never nationalized the Mercedes Benz company but rather entered into a very profitable partnership with the corporate ancestor of the current car company that made out quite well until Hitler's bubble burst.

Smell a rat if Congress approves the Paulson plan saving Wall Street without severely curtailing CEO pay and putting a freeze on the mortgage foreclosures that are threatening to destroy the homes of millions of Americans.

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