10 Things You Should Know About Bush's Trillion Dollar Fleecing Plan

By AlterNet Staff, AlterNet. Posted September 23, 2008.

The Bush administration's proposal to bail out some of Wall Street's biggest players with an unprecedented transfer of public wealth to the private sector sent shock-waves throughout the nation.

Already deep in deficit, the administration wants to borrow $700 billion dollars -- in addition to the $900 billion already spent this year to prop up troubled lending institutions and deal with the fall-out from the housing crisis -- and entrust it to Treasury Secretary Henry Paulson, fresh from a long run on Wall Street himself. He'd then buy up worthless paper from struggling banks.

Who would get the money? Nobody knows. Paulson says he wants to hire Wall Street firms to oversee the process.

Under Bush's plan, the taxpayer would get little, if anything, in return. The whole thing would happen without Congressional oversight, save for a semi-annual report on the process, and Paulson's actions would be beyond challenge in the courts.

It is an economic coup d'etat in the making. And people are talking about little else. Here's 10 things that have been on our radars ...

1. Shock Doctrine: Profiting from Crisis

Robert Borosage of Campaign for America's Future invokes Naomi Klein's "Shock Doctrine in asking whether we're going to "get fleeced in this crisis" ...

Call it extortion. Every American is told to ante up $2,000--an estimated $700 billion in all--to bail out the banks from their bad bets, or they'll bring down the entire economy.

In a speculative frenzy that allowed the Masters of the Universe to pocket millions personally, the banks filled their coffers with toxic paper that no one wants to buy. Now they sensibly don't want to lend money to each other, since no one knows if the other is solvent. So they go on strike, and threaten to trigger a global depression, if they don't get rescued.

The bailout will happen simply to avoid that depression. But depressions have some salutary effects - the scoundrels go belly up, the weakest get purged, and in the wake of the disaster, people demand strict regulation of the money lenders to keep their greed and predatory behavior in check, and government spends money on the real economy to put people back to work.

2. Has a "Consensus" Really Formed Around the Idea That Something Must Be Done?

Martin Crutsinger of the Associated Press reports that "economists" -- implying, troublingly, all economists -- see the Bush Bailout as"Necessary."

But Atrios -- economist Duncan Black's blog handle -- has some questions about how everyone got on the same page so quickly ...

It's fascinating to watch how easily consensus is manufactured. A few days ago elite opinion seemed to be cheering Paulson's "no bailout" line, and now they're cheering a trillion bucks thrown down the crapper ...

It's unrealistic to imagine that I'd be able to really get enough honest information to have an informed opinion, but I spent some time thinking about what question all the Very Serious People should, at a minimum, want answered before they start cheering on [any] plans. This is what I came up with:

What changed between Monday and Friday? What new information did you have at the end of the week that you did not have at the beginning of the week which caused you to go from $0 to $1 trillion?

And, no, tumbling stock prices or babble about "deteriorating credit conditions" don't count.

3. Is This Even Legal?

The Constitutionality of the plan is being hotly debated, according to Frank James, writing on the Chicago Trib's blog:

Troubling to many critics is the breathtaking extraconstitutionality of the proposal which would give the Treasury secretary unusual powers that couldn't be countermanded by Congress or the courts.

That appears on its face to violate the Constitution's assertion of a balance of powers where no one branch is unchecked by the others.

James goes on to quote Alan Blinder, "former Federal Reserve vice chair and normally a mild-mannered, live-and-let-live Princeton University economics professor," who said Paulson should be booted out of office for his proposal ...

"I'm speaking now as one of the earliest advocates of creating an institution like this, many, many months ago. And it's a crying shame to see the way the Treasury has written this. I think the secretary of the Treasury should be dismissed, frankly. ... Asking for the authority to buy anything, with no review, with no court review, with no limits practically as to quantity or scope, with almost no congressional oversight. We have something more precious at stake than our precious financial system and that's our precious Constitution. And frankly, if I were a member of Congress, having advocated for this for nine or ten months, I would vote against this unless it's changed, dramatically..."

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