A Layman's reading of the $700 Billion Bail Out Bill

I am of average intelligence, and have always thought it important to read and understand what I am getting myself into. And while I am not a member of the house or the senate I think that it is important to read the language contained in the Bail Out legislation pending before congress. I can only hope that those elected officials (including the would be presidential candidates) voting in support or against of this legislation actually read the language, parse the language, before casting their vote.

When it comes to politics I am pretty cynical. It is why I read the propositions on my voter's ballot in their entirety. I don't care much for the spin of 30 second commercials designed to convince the voter who doesn't think for themselves, but waits for the right sound bite to determine their vote.

Of course, the politicians sitting in DC and across the country aren't any better at reading through the legislation that they are to vote for or against. Some recent examples that come to mind, the passage of the PATRIOT Act. The rush to invade Iraq, and now this Wall Street Bail Out. Funny, whatever happened to letting the market decide the fate of business?

Well, I started reading the language contained in the Wall Street Bail Out pending before congress, and by the time I got to the ninth page (of 110) I already found the first reason to not support the legislation.

(d) PROGRAM GUIDELINES.—Before the earlier of the end of the 2-business-day period beginning on the date of the first purchase of troubled assets pursuant to the authority under this section or the end of the 45-day period beginning on the date of enactment of this Act, the Secretary shall publish program guidelines, including the following:
(1) Mechanisms for purchasing troubled assets.
(2) Methods for pricing and valuing troubled assets.
(3) Procedures for selecting asset managers.
(4) Criteria for identifying troubled assets for purchase.(p 9)

Sorry, but I don't think Paulson is in a position to determine the "mechanism for purchasing troubled assets." Nor do I think him capable of determining the "methods for pricing and valuing troubled assets." In senate testimony Bernanke argued,

"If we keep the range of participants too narrow, only failing institutions, for example, then we won't have a robust, competitive auction. The more participants we have, the more people who are involved in offering these assets, (then) we'll have a competition."

According to a Bloomberg article, Paulson's former company, Goldman Sachs Group and Morgan Stanley "may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid," according to Bank of America. (Yeah, I wonder if I should really trust B of A.) In reading the language of the pending legislation, there appears to be a provision that would benefit Paulson's former company Goldman Sachs under the section titled PREVENTING UNJUST ENRICHMENT (p.9).

In making purchases under the authority of this Act, the Secretary
shall take such steps as may be necessary to prevent unjust enrichment of financial institutions participating in a program established under this section, including by preventing the sale of a troubled asset to the Secretary at a higher price than what the seller paid to purchase the asset. This subsection does not apply to troubled assets acquired in a merger or acquisition, or a purchase of assets from a financial institution in conservatorship or receivership, or that has initiated bankruptcy proceedings under title 11, United States Code.

The following section titled, SEC. 102. INSURANCE OF TROUBLED ASSETS.(p10) Under the heading of "(a) AUTHORITY.—" Paulson basically has the same authority he wrote into the original 2 and 1/2 pages initially presented to congress. I guess all the talk about Paulson getting down on one knee was to thank Pelosi for giving him everything that he and Bush were looking for.

I confess that I had to laugh at the "protections" placed in this legislation for the taxpayers. While Paulson writes the rules as he thinks of them, he is supposed to remember

The premiums referred to in paragraph (1) shall be set by the Secretary at a level necessary to create reserves sufficient to meet anticipated claims, based on an actuarial analysis, and to ensure that taxpayers are fully protected. p11

Under SEC. 104. FINANCIAL STABILITY OVERSIGHT BOARD (p14) We learn that the foxes will be stewards of the hen house.

MEMBERSHIP.—The Financial Stability Over24
sight Board shall be comprised of—
(1) the Chairman of the Board of Governors of the Federal Reserve System;
(2) the Secretary;
(3) the Director of the Federal Home Finance Agency;
(4) the Chairman of the Securities Exchange Commission; and
(5) the Secretary of Housing and Urban Development.

I feel so much better having only read the first 16 pages. Now if I could only overcome the sick to my stomach feeling I am currently experiencing. I should take solace in noting that the last of the "additional duties" of the Oversight Board is "protecting taxpayers, in accordance with section 112(a)" (p16).

I am pleased to learn that The Financial Stability Oversight Board

shall terminate on the expiration of the 15-day period beginning upon the later of—
(1) the date that the last troubled asset acquired by the Secretary under section 101 has been sold or transferred out of the ownership or control of the Federal Government; or
(2) the date of expiration of the last insurance contract issued under section 102.

As it stands, I'd be voting against this legislation if my vote mattered. I can only hope that Kucinich is correct and that the Republicans can stave off this legislation. I haven't even gotten a quarter of the way through the bill and it sickens me to see that the only benefactors of this legislation is that of big business. If this legislation passes, it will be Bush's final act in completely gutting the nation. And Obama can kiss his chances at getting elected good-bye.



UPDATE: I thought I'd have fun and check my site meter. And while I was away I was visited by someone from NASA and the USDA. I hope that they liked what I penned. Hey government employees, leave a comment or something. It appears that my government visitors found me by searching with the words "layman," "700" and "bailout" in no particular order.