How Much Will It Cost and Will It Come Soon Enough?

[gopbuster]

good artical very detailed....


How Much Will It Cost and Will It Come Soon Enough?

Could the current bailout bill have been better? Yes. But there are still a few fixes Congress should consider.


James K. Galbraith | September 29, 2008 | web only


There is no question that the current bailout bill represents an enormous improvement over the original Treasury proposal. Unlike the original proposal, this bill protects the public interest with requirements for disclosure and audit, for reporting to Congress both on procedures and results, and with protections against arbitrage, conflict of interest, and fraud, with provisions requiring the secretary of the treasury to try to minimize foreclosures, to acquire warrants, and with limitations on executive compensation, especially golden parachutes.

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How much time is needed? There is in my view very little prospect that economic recovery will restore housing prices and personal incomes within a reasonable time -- that is, before the $700 billion runs out. Therefore, it seems to me unlikely that this issue will finish here; more will be needed at a later date. However, on the assumption that one can trust and monitor the actions of the Treasury to assure that it carries out its mandate in good faith, there is an argument for appropriating the full sum now: It will help ensure that the system will hold into next year. A smaller appropriation increases the risk of a major crisis in the relatively near term. By how much and when? No one can say.

If one does not trust the Treasury to act in good faith and in compliance with the spirit and letter of the monitoring and enforcement provisions, then of course there is no case for this bill.

Many are concerned with the fiscal implications of this bill, so let me turn to that question. Despite the common use of language, the capital cost of this bill does not involve "taxpayer dollars." It authorizes a financial transaction, exchanging good debt (U.S. Treasury bills and bonds) for bad debt (the "troubled assets"). Many of those troubled assets will continue to earn income for some time, perhaps a long time. The U.S. Treasury commits itself to paying the interest on the debts it issues. The net fiscal cost -- which is also the net fiscal stimulus -- of this bill is the difference between those two revenue streams. Given the very low rate of interest presently prevailing on Treasury bills, this is likely to be somewhere between $20 billion per year and zero from the beginning, even if the Treasury were to issue all $700 billion in new debt at once. It is a mistake, in short, to count the capital cost as a "cost to the taxpayer." This is not the war in Iraq.

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In short, as I said at the beginning, the bill is a vast improvement over the original Treasury proposal. Given the choice between approving or defeating the bill as it stands, I would urge supporting the bill. I do so without illusions. There need be no pretense that it will solve our underlying financial and economic problems. It will not. The purpose, in my view, is to get the financial system and the economy through the year, and into the hands of the next administration. That is a limited purpose, but a legitimate purpose. And it may be the most that can be accomplished for the time being.

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James K. Galbraith is the Lloyd M. Bentsen Jr. Chair in government-business relations at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin, a senior scholar of the Levy Economics Institute, and chair of the Board of Economists for Peace and Security. His most recent book is Unbearable Cost: Bush, Greenspan and the Economics of Empire.

more.... http://www.prospect.org/cs/articles?article=how_much_will_it_cost_and_will_it_come_soon_enough

[gopbuster]

1. This is important as well....

snip


Second, neither this program nor my FDIC proposal will prove sufficient to restore economic growth and high employment. For that purpose, resolution of the underlying housing problem, of the revenue problem of state and local governments, and of the wealth and income problems of retirees and other asset-dependent parts of the population are all essential. Those measures lie ahead; they will not be part of this bill.

However, the fate of this program will depend on the willingness of Congress to solve these problems at a later date. If the economy is allowed to stagnate, foreclosures will multiply and the financial system will continue to implode. Only a comprehensive approach to deal with the deeper issues of jobs, wages, pensions, and housing can generate the income streams necessary to make the mortgage burdens sustainable over time.

http://www.prospect.org/cs/articles?article=how_much_will_it_cost_and_will_it_come_soon_enough

[peacebird]

2. cost: TOO MUCH. Time: TOO SOON.

This bailout bill for Wall Street needs to be stopped in its tracks. The Enron-inspired Mark to Market rule needs to be KEPT, not deep sixed. The fix needs to come from the bottom up NOT from the top down.
The only "trickle down" I've seen is the warm wet of the rich pissing on the rest of us.

This Wall Street BAILOUT bill is a disaster, and the "sweeteners" added do nothing to help the underlying problem.

edit to add - There is NOTHING in the bill which guarentees the Fed won't pay top dollar for this asset grab and then turn around and sell the properties to their buddies for pennies on the dollar. Just "Trust us! We're gonna do the right thing. The taxpayer won't be out a dime in the long run"

[snappyturtle]

3. Agree. A bill this important needs to be dry behind the ears before

it is voted on. "They" are not listening. I am exhausted at trying to get through to the Senate, the switchboard, et. al. Resorted to e-mail which was probably deleted within in a minute of receipt. I like getting the staffers on the phone so there is no doubt about what I'm saying.

[peacebird]

4. I have called Goode, Webb, and Warner every day since this bs started

Today I reminded their staffers that Shrub said financial Armageddon would happen if the bill didn't pass immediately without changes last week... and he said we would be in a depression if it wasn't enacted before market opened this past monday.
Guess what? He was trying his old "FEAR FEAR FEAR TERRA TERRA TERRA" and this time we the people ARE NOT BUYING.

[endless october]

5. no welfare for wall street crooks

haul them off in cuffs.

this is being pushed to hard and too fast.

no bailout. that's what i think.

[Alcibiades]

6. This bit is good:

"If one does not trust the Treasury to act in good faith and in compliance with the spirit and letter of the monitoring and enforcement provisions, then of course there is no case for this bill."

He should know better. Do we trust the Bush administration? No. Did Galbraith trust him on the Iraq War? No. Then why the hell does he trust him on this?

When smart people say stupid things.