Close that Trap

We told you so yesterday. Bush speaks, the market tanks. Now, Bryan is on board.

The best thing Bush could do for the American economy is shut up.

GOP "Nilhilists" Sink Bailout Bill

We spent some time tracking down first-hand reports from anyone who could bear witness to what really happened on the floor of the House of Representatives yesterday when the bipartisan credit crisis bailout bill failed. Democrats delivered on their promise to hold their collective noses and deliver more than one-half of the total votes necessary; Republicans broke their promise to deliver the rest from their own members.

C-Span isn't permitted, by House rules, to show anything except blowhard congress-persons making wind for the camera. Most of the cable Tee-Vee political reporters, who have to travel with camera crews, customarily are kept off the House floor and had to hang around the cloakrooms. So, they could share only second- and third-hand spin stories.

But on Jim Lehrer's News Hour, the New York Times' John Shaw saw it with his own eyes:

Well, it was very interesting, because it's hard to know really how each party does their whipping operations, getting votes, but the Democratic side was much more active.

The speaker was right in the middle of it. There were swarms of people around her. They were feeding her notes. She was carefully monitoring the vote. She was sending emissaries over to the Republican side.

On the Republican side -- and, again, they may do it differently -- but the minority leader, John Boehner, was pretty much alone. It didn't seem like many people wanted to talk to him. Roy Blunt, the whip, was pretty much standing off by himself. His deputy, Mr. Cantor, was also pretty quiet.

So visually it looked like the Democrats were working harder. And at one point, Pelosi looked over and saw that not a lot of movement was going on that side. And she just said, in a very loud voice, "We're finished," which signaled that she was done trying to get more Democrats to vote for the package.

Boehner's peculiar quiescence inspired Rachel Maddow of MSNBC to ask a follow-up question -- "Who leads the Republican Party right now?" She came up with a surprising answer: the aforesaid "pretty quiet" Eric Cantor (R-Va), who is Assistant Minority Whip in charge of rounding up votes for the 'lonely' John Boehner.

Even conservative columnist David Brooks is disgusted by the Republicans' behavior:

House Republicans led the way and will get most of the blame. It has been interesting to watch them on their single-minded mission to destroy the Republican Party. Not long ago, they led an anti-immigration crusade that drove away Hispanic support. Then, too, they listened to the loudest and angriest voices in their party, oblivious to the complicated anxieties that lurk in most American minds.

Now they have once again confused talk radio with reality. If this economy slides, they will go down in history as the Smoot-Hawleys of the 21st century. With this vote, they’ve taken responsibility for this economy, and they will be held accountable. The short-term blows will fall on John McCain, the long-term stress on the existence of the Republican Party.

Brooks holds out hope that some cosmetic changes might make the bill more palatable to Republicans on a second go-around to pass the bill, probably on Thursday. Possibly so, but it seems to us it will be even more difficult to talk anyone who voted "no" yesterday into voting "yes" tomorrow.

How much more embarrassing, and difficult for constituents to swallow, would it be for a congressman -- say, like the hapless Jeff Miller -- to vote for the bailout bill after voting against it? Inescapably, such a vote would mean the congressman voted at least once this week against the national interest.

Ideology Over Reality as Bailout Bill Fails

Early this afternoon, the bipartisan bailout bill, more properly known as the Emergency Economic Stabilization Act of 2008, went down to defeat. Unless it is brought up for another vote, we'll all soon have a chance to see what a worldwide depression is really like.

Remember, this is a bill no one likes. Not Bush, not Treasury Secretary Paulson, not the Republicans and not the Democrats. Main Street doesn't understand it. Every congressperson fears it -- or, rather, fears the political fallout. Yet, all signs are that it is necessary for the public good.

In a very real sense, what it all comes down to is a struggle between reality and ideology.

The reality is harsh. As Representative John A. Boehner (R-OH) said today, "there is too much at stake not to support" the bill:

He urged members to reflect on the damage that a defeat of the measure could mean “to your friends, your neighbors, your constituents” as they might watch their retirement savings “shrivel up to zero.”

Not just retirement accounts, we might add. With day-to-day business credit frozen, as vividly described last Friday on NPR radio, what's at risk are business payrolls, jobs, credit card loans, student loans, home loans, and every other form of lending, from overnight bank-to-bank lending to the cash advanced to fill your favorite ATM machine.

The ideology that opposes the bill is bankrupt. It is perfectly captured in all of its gory glory by the words of congressman Darrell Issa (R-CA). The New York Times reports this afternoon that "he was 'resolute' in his opposition to the measure because it would betray party principles and amount to 'a coffin on top of Ronald Reagan’s coffin.'”

Issa and the other 227 congressmen who voted against the bill may as well eat their ideology. It isn't good for anything else.

Dept. of Amplification

Economics professor Brad DeLong: "This Republican Party needs to be burned, razed to the ground, and the furrows sown with salt..."

Dept of Further Amplification

Roll Call on the motion to pass the Emergency Economic Stabilization Act of 2008

Republican Ayes - 65 .... Republican Nayes - 133
Democratic Ayes - 140 .... Democratic Nayes - 95

Jeff Miller Smack-Down

At about 10:35 am CDT today, Florida panhandle congressman Jeff Miller (R-Chucklehead) took to the floor of the House of Representatives for his assigned two minutes of debate on the Emergency Economic Stabilization Act of 2008 -- probably the most important economic legislation since the New Deal -- and stuck his foot in his mouth. Twice.

It was a deeply embarrassing moment for everyone in North Florida who has to call this guy "our congressman." Miller was elected to be a law-maker, but it seems he can't research or read proposed laws! Either that, or he reads pre-cooked, out-of-date staff memos with utterly no comprehension.

Miller used his two minutes of fame on the House floor to utter two falsities: (1) the fanciful theory that the cure to the banking and financial crisis is more tax cuts for wealthy corporations; and (2) his erroneous understanding that the bailout bill being debated today still contains the Bush administration's ridiculous blank check for $700 billion with no judicial oversight.

1. Tax Cuts for the Wealthy?

Miller's first point is laughable, of course. More tax cuts for wealthy corporations will increase liquidity of our frozen credit system? That makes as much sense as urging the poor to eat pastry. ("Que ne mangent-ils de la croûte de pâté?')

Miller is dead wrong on the facts, too, when he claims U.S. corporate tax rates are among the highest in the world. Check it out for yourself right here. For those who don't have the time to read and compare international tax rate charts, business-friendly Smart Money Magazine summarizes the reality (boldface added) --

You may have heard: U.S. corporations face one of the highest income tax rates in the world, though the mention of "rate" is often enough excised, so that what comes through is the assertion that corporations pay too much in taxes. This is simply untrue if your basis for comparison is the developed world. The truth is that while the 35% corporate income tax rate is high indeed, the creativity and global reach of U.S. corporations make them among the most lightly levied.

Between 2000 and 2005, U.S. corporate taxes amounted to 2.2% of the GDP. The average for the 30 mostly rich member countries of the Organization for Economic Cooperation and Development was 3.4%.

2. No Judicial Review?

As for Miller's second point, once again he shows how fundamentally stupid, lazy, and ineffectual he is. The man appears to be talking about Treasury Secretary Paulson's three-page proposal of nearly two weeks ago. That was plainly a non-starter, as Bill Moyers remarked the same week Paulson pitched it.

After Miller (thankfully) was forced to sit down by his own Republican floor manager, Rep. Barney Frank had to remind our congressman (see the video below) that Section 119 at page 58 of the bill being debated expressly provides for agency and judicial review.

The video below, which concludes with Barney Frank's smack-down of Jeff Miller, is all the proof you need that Jeff Miller should not be in Congress. He's an embarrassment to all of North Florida.

Jeff Miller Gets Tutored in
How to Read a Bill

Wall Street Wizardy Index

While we wait to see if Republican ideologues in Congress will succeed in plunging us into another Great Depression or the bipartisan bailout bill will set fire to a long run of hyper-inflation, we have a question for the gurus of economics. It may be a mere idle inquiry, but it bugs us.

Our question is inspired by a report from the respected Center on Economic Policy and Research. "The Reagan Question: Are you better off now than you were eight years ago?" economists John Schmitt and Jue Jin Rho ask.

This is from the executive summary, with the part that tickled our curiosity put in boldface print for your convenience:

The unemployment rate, the inflation rate, and the "Misery Index" (the sum of the first two) are all higher in 2008 than they were in 2000. Other indicators that capture employment opportunities, wage growth, growth in family incomes, poverty, health-insurance coverage, personal savings rates, the price of gasoline, and college tuition fees, as well as a range of macroeconomic indicators including GDP growth, the trade deficit, the federal debt, and the net foreign debt, are also all worse in 2008 (or the most recent period available) than they were in 2000.

The two indicators that are better in 2008 than they were in 2000 are the inflation-adjusted level of median family income, which is up only 0.4 percent in seven years, and the productivity of the average worker, which has increased faster in the 2000s than it did in the 1990s.

That's certainly good news about worker productivity, even if it doesn't appear to have staved off the current credit crisis. But that set us to wondering this: Is there an economic index measuring the cumulative productivity of corporate CEOs? Wall Street wizards? Government regulators?

Bipartisan Bailout Bill

Reuters News Service has an early, useful summary of key provisions of the bipartisan "Emergency Economic Stabilization Act of 2008" announced late this afternoon. These include --

• $700 billion in buying power would be doled out by Congress in stages. After the first $250 billion is authorized, the President could request another $100 billion. The final $350 billion could be cleared by a further act of Congress.
  
• The government will take a stake in companies that tap federal aid so that taxpayers can share in the profits if those companies get back on their feet. An exception applies to financial firms with less than $500 million in assets or if the government buys less than $100 million of soured investments.
• If a company receives aid but fails, the government will be one of the last investors to see a loss.
• A new congressional panel would have oversight power and the Treasury secretary would report regularly to lawmakers in two elements of a multi-level oversight apparatus.
• If the Treasury takes a stake in a company, the top five executives would be subject to limits on their compensation.
• Executives hired after a financial company offloads more than $300 million in assets will not eligible for "golden parachutes."
• Would permit the Federal Reserve to begin paying interest on bank reserves, giving it another tool for easing credit strains.
• Mandates a study on the impact of mark-to-market accounting standards, that critics blame for a downward spiral in the valuation of assets on corporate balance sheets.
• The federal government may stall foreclosure proceedings on home loans purchased under the plan.
• Alongside the plan to buy securities outright, the Treasury Department will conceive an alternative insurance program that would underwrite troubled loans and would be paid for by participating companies.
• If the government has taken losses five years into the program, the Treasury Department will draft a plan to tax the companies that took part to recoup taxpayer losses.

The full text of the bipartisan bailout bill announced this afternoon is available at:

http://financialservices.house.gov/

Worldwide interest is so intense that the servers are extremely busy right now, so be patient and try again later if you can't get through. Mirror sites are popping up by the minute. Here are some of them (to be supplemented as time permits):

Senate Banking Committee (pdf format, 109 pp.)

Washington Post

Huffington Post

Public Markup.org

New York Times [pdf]

Los Angeles Times [pdf]

C-Span [pdf]

For the official "section by section analysis" click here.


One note about last night's negotiations: In answer to a question from the press, Speaker Nancy Pelosi said at the end of the joint news conference late Sunday afternoon that "great resistance" to limiting CEO "golden parachute" pay was mounted by Republicans. A large faction of conservative GOP congressmen declared themselves strongly opposed to any law that would impose a penalty tax on any corporation that (1) sought cash from the Treasury Department under this rescue bill, and then (2) used some (or all) of it to fashion a golden parachute for their top executives.

What changed their minds? They backed off when Pelosi threatened to use the power of her office to ensure that there would be a roll-call vote, in effect guaranteeing that everyone in the world would know the names of the rabid free-market Republicans who wanted to invite Wall Street tycoons to suckle for free at the teat of the American taxpayer.

That kind of transparency terrified the Republicans, and so they backed off.

Cloudy Crystal Ball - 1929 Edition

From the Las Vegas Daily Optic, October 24, 1929 (subscription only):

The disaster today on Wall Street will have a most salutary effect. It will wipe out the petty gambler, who hoped to become suddenly rich by marginal trading. It should place Wall Street investments on a basis which will check the flood of money from the country banks to New York and restore the stable market for public bonds and other securities necessary for industrial development in the interior of the country.

Many a home is crushed by the collapse of the market today and the happiness of thousands will vanish with the realization of financial misfortune, but the general good is well served.

The Financial Crisis and Yankee Stadium

"When it came to paying for the new pleasure dome costing $1.3 billion, the millionaires on the field and King Midas in the skybox came up with some razzle-dazzle plays to finance their wealth machine. Tax-free bonds, requiring ordinary citizens to subsidize the construction... . Meanwhile, there will be more luxury suites and party rooms where the fat cats gather, safely removed from the sweaty masses."

-- Bill Moyers Journal, Sept. 19

Today marks the last day for Yankee Stadium, The House That Ruth Built. Bill Moyers was inspired Friday afternoon to use that event as a subtle parable for the financial crisis that is now consuming -- and dramatically changing forever -- our nation.

It's a parable worth keeping in mind as we learn more about the emerging Bush Administration's plan to fork over $700 billion to one unelected person, the Secretary of Treasury, to pass along to whichever of his Wall Street buddies he cares to, without prior review by any administrative agency, court, Congress, or even the president.

Moyers begins with a (partial) list of Wall Street CEOs of failed financial corporations and the truck loads of money they dragged out the door as they left the mess behind them. Do yourself a favor and stick with the video as it morphs into why the 'new' Yankee Stadium holds lessons we all should learn.


A full transcript of this program segment is here.