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Bailout Shenanigans: Making 2008 Look Good?

Summary:
Because the legislative sausage-making is still underway, it might seem premature to declare the bailout bill underway a massive exercise in corporate welfare, but it sure has all the hallmarks. As Public Citizen warned by e-mail early Sunday evening (emphasis theirs): Senate Republicans just announced their long-awaited plan to help people and businesses weather the impending economic storm. Their scheme — burped up by Mitch McConnell in league with Donald Trump’s sycophantic Treasury Secretary, Steve Mnuchin — would be a dream come true for Big Business but a nightmare for everyday Americans. Here’s just some of what’s in the Republicans’ disastrous proposal: • Mnuchin gets to dole out hundreds of billions to Corporate America — without revealing which companies got bailed out for

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Because the legislative sausage-making is still underway, it might seem premature to declare the bailout bill underway a massive exercise in corporate welfare, but it sure has all the hallmarks.

As Public Citizen warned by e-mail early Sunday evening (emphasis theirs):

Senate Republicans just announced their long-awaited plan to help people and businesses weather the impending economic storm.

Their scheme — burped up by Mitch McConnell in league with Donald Trump’s sycophantic Treasury Secretary, Steve Mnuchin — would be a dream come true for Big Business but a nightmare for everyday Americans.

Here’s just some of what’s in the Republicans’ disastrous proposal:

• Mnuchin gets to dole out hundreds of billions to Corporate America — without revealing which companies got bailed out for half a year.

• Businesses are not required to keep workers on their payrolls
.
• There are NO meaningful oversight mechanisms to prevent fraud and waste by the companies that get bailed out.

And on and on.

Thankfully, Senate Democrats have — for the moment — forced Republicans back to the drawing board.

But a new plan, which may well be no better, could come up for a vote as early as tomorrow.

So stay tuned, and be ready to spring to action on short notice.

Associated Press has a later account, depicting the talks over the $2 trillion bill as “churning”. Maybe “circling the drain” would be more accurate:

Democrats say the largely GOP-led effort did not go far enough to provide health care and worker aid, and fails to put restraints on a proposed $500 billion “slush fund” for corporations. They voted to block its advance.

Democrats won a concession — to provide four months of expanded unemployment benefits, rather than just three as proposed, according to an official granted anonymity to discuss the private talks. The jobless pay also extends to self-employed and so-called “gig” workers.

While the congressional leaders worked into the night, alarms were being sounded from coast to coast about the wave of coronavirus cases about to crash onto the nation’s health system.

New York City Mayor Bill de Blasio had dire, urgent news from the pandemic’s U.S. epicenter: “April and May are going to be a lot worse,” he said on NBC’s “Meet the Press.”

De Blasio all but begged Washington to help procure ventilators and other medical supplies. He accused the president of “not lifting a finger” to help.

Lambert correctly described the concession to the Democrats as “pissant”. And right now, all a family of four is slotted to get is a one-time, $3000 payment. This ought to be a joke but it is deadly serious.

What is going down is disturbingly reminiscent of the 2008 bailouts, except with much higher stakes for ordinary people. particularly the first draft of the TARP. There, Treasury Secretary Hank Paulson not only demanded a blank check of $700 billion but insisted on being above the law.

How familiar this seems. This Administration has learned to be a tad less brazen, but the spirit is awfully similar.From a September 2008 post:

This is a financial coup d’etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse. Given the truly appalling track record of this Administration in its outsourcing, this is not an idle worry.

The great unwashed public is already being softened up with messaging along the lines of, “Oh, this may be unseemly and unpopular, but look how successful the financial crisis rescues were!” The belief it was a success depends very much on where you sit. Was the greatest looting of the public purse in history a success? For the beneficiaries, most assuredly yes. Boston College professor Ed Kane estimates that super low interest rates amount to a $300 billion a year transfer from savers to banks. Pull out a calculator and see how much that adds to the cost of the salvage operation.

How about the second bailout, of the waiver of massive chain of title liability which would have wiped out banks? The cost of the failure to take advantage of the tremendous leverage was 9 million largely avoidable foreclosures. And how about the tremendous loss of wealth by blacks versus the increased concentration of wealth at the top, and the fact that most of the jobs created were low end McJobs or gigs?

And what about Obama shilling for the creation of the precariat by depicting sweatshop Amazon warehouse jobs as “middle class”? The weak recovery which benefitted the top 10% and particularly the 1% disproportionately was the direct result of the “Go all in for the banks, throw a few bones to workers” philosophy of the bailout.

This is from a September 2012 post. The fact that the Administration was still having to message its claims that the crisis bailouts were a success is proof that there were plenty of nay-sayers after the dust had settled:

I’ll be doing a longer form treatment later on the recent, clearly Administration-driven “the TARP worked” PR campaign. As far as the [Andrew Ross} Sorkin contribution to this initiative is concerned, it’s an example of how the Treasury and bank defenders will try all sorts of creative accounting and will conveniently ignore their own past work to pass off Big Lies deemed to be important.

Sorkin (and one has to assume the Administration) is now trying a new angle on “the TARP made money” canard by arguing that the way to look at the investment is by treating the Fed/Treasury “investment” jointly, as opposed to looking at the TARP (Treasury program) in isolation. That is just another exercise in three card monte. If you are going to include Fed actions, you need to look at them in aggregate, and not cherry pick the ones that suit your case. The Fed’s apparent recouping of its “investment” in garbage barges like Maiden Lane 2 and 3 results from its extraordinary interventions to goose the prices of financial assets, including the alphabet soup of special facilities during the crisis, ZIRP, and QE and QE2. These represent a considerable transfer of wealth away from savers to financial institutions, by design. The most colorful account of how this worked comes from Steve Waldman:

Suppose my kid’s meth habit got the best of him. He’s needs to come up with $100K quick or his dealer’s gonna whack him. But he’s a good kid, really! Coulda happened to anyone. So I “lend” him the money, even though he has no visible means of support and the sketchiest loan sharks in town wouldn’t give him the time of day. Now I believe in bootstraps and hard work, individualism and self-reliance. So I tell my son. “Son, you are going to pay me back every penny of that loan. You are going to work it off. I have arranged with one of my golf buddies, a guy who owes me a favor or three, a job that pays $200K a year. You’d better show up every day at 9 a.m. and sit behind that desk, and get me back my money!” And he does! After a year, he’s made me whole. What a good kid.

No bail out, right? He paid me back every penny! Worked it off!

Bullshit. The opportunity I provided him, the $200K job that he would not have received without my intercession, was a huge grant. On the open market, if I were to accept bribes from the highest bidder to wangle the job from my friend, that opportunity would be worth more than the $100K advanced. I paid my son’s loan with my own money. I just obscured the cash flows, so my son and I can pretend and sustain our mutual self-regard and our righteous disdain for the moochers and the hippies and the riff-raff.

In the Sorkin article, the article revolves around a MEGO (My Eyes Glaze Over) inducing argument of which share price for AIG is the right one to use for determining whether the government got the dough it put at risk in TARP back (never mind the point that Waldman, your truly, and numerous others have made: that merely paying the money back is also a big gimmie, given that the banks wrecked the global economy and no private party would have given them funds at anything other than extremely tough terms when the financiers were on death’s door).

You get the drift of the gist.

The best guess for what comes next, via The Hill:

If they aren’t able to reach a deal in the morning, McConnell has vowed to hold a vote after the Senate comes in at noon to try for a second time to advance the stimulus package. Democrats blocked the bill — technically a shell that the coronavirus legislation will be swapped into — arguing that they had not made enough progress.

With Rand Paul now diagnosed as having coronavirus, it’s a safe bet that the Senate is particularly eager to get this bill wrapped up.

So a suggestion and a request:

1. Since many of you are anxiously idled at home, please put good use to your time. Contact your Senators, best calling their district offices or by e-mail. If you call, be polite but pointed; if you e-mail, you can give them a piece of your mind. Decry the corporate welfare and the lack of accountability. Explain why the only way to save the economy is to save worker earnings. If they can do it in Denmark, why can’t we? If tens of millions of American households go bankrupt, and the ones who didn’t are hanging on by their fingernails, who will fill those planes and hotel rooms?

It did make a difference during the TARP that the initial calls were 99% against, and only by dint of companies telling their workers to shill for the bill did it shift to a mere 80% against.

2. I will be off the grid while this story develops. Could you help make this post more like a live blog, filling in links, tweets, and observations?

Not only is the #COVID-19 situation overly dynamic, both on the health and medical fronts, but I am deeply involved in elder care – making masks, arranging for care-giving coverage, getting screens on the doors for fresh air – and do not have time to write a definitive post, even if one could be written. So let’s see the NC commentariat will bring its legendary information gathering and critical thinking skills to bear!

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