Imagine this scenario: The U.S. Congress, concerned about rising energy prices, future oil supplies and greenhouse gas emissions, holds a heated debate on a $700 billion bill to finance mass transit and development of alternative-fuels vehicles. The measure becomes an issue in the presidential race and is dissected on Capitol Hill and in newspaper editorial pages until the expensive measure is passed, with much fanfare. A month later, the Secretary of Transportation reports back. He says too many roads and bridges are in imminent danger of collapse, so he took most of the funds and spent them on highway infrastructure instead, without any public announcements or informing Congress of the 180-degree policy change until after the fact.
That would be pretty outrageous, right? -- but something along those lines, albeit more complicated, basically just happened with that $700 billion financial bailout that most folks weren't so happy about in the first place. The program is called TARP, which stands for Troubled Assets Relief Program -- except, heh heh, this is kind of funny, but...they decided not to buy any Troubled Assets after all.
Is this a great country or what? Here's an overview:
Mr. Paulson said the $700 billion would not be used to buy up troubled mortgage-related securities, as the rescue effort was originally conceived, but would instead be used in a broader campaign to bolster the financial markets and, in turn, make loans more accessible for creditworthy borrowers seeking car loans, student loans and other kinds of borrowing.
“During times like these with a slowing economy and some deterioration in credit conditions, even the healthiest banks tend to become more risk-averse and restrain lending, and regulators’ actions have reinforced this lending restraint in the past,” Mr. Paulson said at a news conference.
But, he added pointedly, with their financial foundations already shored up by recent government support, “our banks will be more confident and better positioned to play their necessary role to support economic responsibility.”
Here's the thing: A lot of people who know a lot about high finance say that Paulson's about-face is exactly the right thing to do, that the original TARP plan was not only hasty but ill-conceived (imagine that!) and that this completely different approach will do more to help the economy more quickly. Fine, then -- but why didn't Paulson reveal his decision to anyone sooner? The reason the $700 billion bailout didn't pass right away was because Congress wanted more accountability, and more of an oversight role.
So what exactly did our representatives vote for? There is no real oversight or accountability. So the question now also becomes: Where is the outrage? It's become increasingly clear these last few days (just after we voted...that's a coincidence, right?) that there is no transparency or any good public information about how the federal government is conducting one of the biggest non-military uses of our taxes dollars, ever:
How much will the AIG bailout ultimately cost? What are the banks applying for the government's $250 billion capital purchase plan? Who is the Federal Reserve lending to and how can taxpayers be assured they'll get their money back?
After weeks of sometimes frenzied efforts by the federal government to rescue the financial system, and on the heels of the government's latest move -- the announcement of a new $40 billion infusion to the ailing insurance giant American International Group -- critics say there are many questions but few answers about the work performed by the Treasury Department and the Federal Reserve.
"The bailout, the Treasury, the Federal Reserve -- it's like a three-card monte game, you don't know where the money's coming from, you don't know who it's going to, and I think the public has every right to be outraged by this," said Bill Allison, a senior fellow at the Sunlight Foundation, a government transparency watchdog group.
OK, so there's some outrage, but not too much. I was listening to some of the news coverage of Paulson's $700 billion switcharoo on the way into the office, and expected the blogosphere and the news world to be on fire over this, but not so much, not really. I think some of it is simply shell shock. On top of everything else, the Dow nosedived another 5 percent today -- that used to be Page One news, and now it's an afterthought. People don't know what's going to come next -- this is like the economic version of 9/11, and it's only 9:45 a.m. and we don't know if other planes are out there, or how many. Forbes is reporting tonight that the real bailout effort is $5 trillion so far....and counting!
Meanwhile, despite all this bailing out, virtually no useful help has gone to the everyday Americans with toxic mortgages or their homes already in foreclosure, and thousands of hard-working men and women in the auto industry are seeing their livelihood collapse without any government aid, even as billions flow to some banks that are relatively sound.
Did you vote for Henry Paulson, either four years ago or last week? Of course not, but he seems to have more power than any of the branches of government right now, and he's making huge decisions without telling much to Congress or even the president, for all we know. As noted early, his new policy may be an improvement, but only if there's also openness and honesty with the American public. Without that kind of transparency, you should be outraged. I know I am.
(Tarp picture from The 700 Level.)