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RTC II an Affront to the Market and to Democracy

When you think of the Bush administration, the words that generally do not pop to mind are "competency," "transparency," and "non-cronyism." (Is that a word? - ed.)

So why would the bailout of the financial system be any different?

The Bush administration asked Congress for unchecked power to buy $700 billion in bad mortgage investments from U.S. financial companies in what would be an unprecedented government intrusion into the markets.

The plan, designed by Treasury Secretary Henry Paulson is aimed at averting a credit freeze that would bring the financial system and economic growth to a standstill. The bill would bar courts from reviewing actions taken under its authority. [emphasis added]

``It sounds like Paulson is asking to be a financial dictator, for a limited period of time,'' said historian John Steele Gordon, author of ``Hamilton's Blessing,'' a chronicle of the national debt. ``This is a much-needed declaration of power for the Treasury secretary. We can't wait until the next administration in January.'' ...

Paulson would gain discretion to act as he ``deems necessary'' to hire people, enter into contracts and issue regulations related to a revival of U.S. mortgage finance, according to a three-page proposal. The Treasury would ``take into consideration'' protecting taxpayers and promoting market stability. ...

The Bush administration seeks ``dictatorial power unreviewable by the third branch of government, the courts, to try to resolve the crisis,'' said Frank Razzano, a former assistant chief trial attorney at the Securities and Exchange Commission now at Pepper Hamilton LLP in Washington. ``We are taking a huge leap of faith.''

So in other words, they are proposing we give these clowns who got us into this mess almost unlimited power to solve it? 

Unbelievable.

EDIT - From The Wall Street Journal

The most ambitious part of the government plan is to create a new entity to purchase impaired assets from financial firms. The process could work as a type of reverse auction, in which the government would buy from the institution that sells its assets for the lowest bid.

However, the government may find itself in a quandary: Does it pay more than fair-market value for hard-to-assess distressed assets, putting taxpayers on the hook for any losses? Or does it drive a hard bargain, buying for pennies on the dollar? [emphasis added] The latter approach would further hurt financial institutions, since they would have to write down the losses and take additional hits to their balance sheets.

My guess is that it ain't gonna be the taxpayers whom those appointed by our elected officials will be looking out for.

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