The Bailout's Dirty Little Secrets

Before it went down to a crushing defeat, top officials at the Treasury Department and Federal Reserve were describing the $700 billion bailout plan that failed Monday in starkly different terms during private conversations with Wall Street investors.

As most people know, the proposed bailout failed yesterday in a surprising 205-228 vote, defying the wishes of President Bush as well as Democratic and Republican party leaders. Overall, there were 140 Democrats in favor of the plan and 95 opposed, with 65 Republicans in support and 133 opposed.

Progressive bloggers were tipped off that Treasury officials were holding a secret conference call with Wall Street executives Monday before the vote and managed to access the call and listen in. What they heard reveals a lot about who really wields power in the U.S. political system, and how Congress — both Democrats and Republicans — shade the truth for constitutients.

Treasury officials reportedly told the executives that provisions calling for the $700 billion to be given in phased payments were a formality and the entire amount could be accessed at once, if needed.

Also, provisions limiting executive pay at failed firms were mostly symbolic and would have little actual effect, as they didn’t affect existing contracts.

Further, clawback provisions that would attempt to help taxpayers recoup some of the money once assets were sold by the government “would need more congressional and presidential action to implement” and was unlikely to occur.

It’s interesting how Treasury Department appointees — who are supposed to be acting in the public’s interest — give a different description of the bailout in private.

Meanwhile, Democratic and Republican leaders promise to try again with a revised bailout plan when they reconvene Thursday. Already the U.S. Chamber of Commerce and the National Association of Realtors are busy trying to pressure GOP lawmakers into approving a bailout plan, threatening to withhold campaign cash from those who don’t.

Although hometown boy and House Minority Leader John Boehner (R-West Chester) initially tried to blame the bill’s defeat on a fiery floor speech by House Speaker Nancy Pelosi, today’s Washington Post undercuts that position.

GOP leaders said later they had been pessimistic about the bill’s chances from the start because many conservative representatives were ideologically opposed to a large, taxpayer-funded intervention. In fact, Boehner and others seriously considered asking Pelosi to delay any vote Monday, The Post reports.

Adhering to simplistic GOP talking points, Hamilton County Republican Party Chairman Alex Triantafilou blasts Pelosi on his blog for the bill’s defeat. Ol’ Alex defends Boehner, adding his stance showed leadership. What, then, does the opposing position taken by Steve Chabot, Jean Schmidt, Geoff Davis and the rest of Greater Cincinnati’s Republican congressional delegation show? The chairman is remaining mum on that one.

Some observers on both the right and the left describe what happened Monday as a modern day Boston Tea Party, with an angry public finally standing up to an out-of-control investor class. Let’s hope the party doesn’t peter out anytime soon.

— Kevin Osborne

Comments

[Michael Ejercito]

No bailout can pass if the American people overwhelmingly oppose it.

[Neal]

I'm mixed on the bailout plan, because, like many, am uncertain that it is anything more than another case of Corporate Welfare. It bails out those greedy folks who got caught and badly at that.

Also, regardless, this issue is quite important and it irks the hell out of me that both sides of the aisle in Congress would play politics. I would hope that for once in their careers, our elected representatives might do what is the right thing for the country.

[Not the Mamma Cass!]

The linked-to post describes this as a call with analysts, not investors: which is it?

[Average Joe]

Mamma,

Who cares? It doesn't change the salient points of the story. Many analysts work for companies that have an investment arm these days. That's part of the problem.

[ciesko kid]

There IS an alternative, of sorts, proposed by Rep. Marcy Kaptur, Toledo OH, @ the URl above.
Also, the way the savings and loans were "bailed out" back in the '80s could be used.
Don't believe the hype, people! Keep phoning the office of your Rep., look for it on www.congress.org

[ciesko kid]

Ok, this URL, on YouTube, for the Rep.Kaptur ideas.

http://fr.youtube.com/watch?v=S27yitK32ds