First off, here's the Post article to which Dean Baker refers and now, here's what Dean had to say today:

By Dean Baker

We all know how hard it is to get by on tens of millions of dollars a year. That is why the Washington Post was near hysterical in its support of the Wall Street bailout earlier this month. They argued that if we didn't give $700 billion to the banks right away that all hell would break loose.

Those who wanted to put conditions that ensured that the money didn't go into the pockets of shareholders or top executives, or even that the bailout was done the right way through direct injections of capital (as it eventually was) were denounced as reactionary Neanderthals. So, the bailout went through and the Wall Street executives are now getting tens of millions in compensation, courtesy of average taxpayers.

Now the occasion comes to bailout the auto industry and the Post goes ballistic the other way.

After all, the average autoworker makes $56,650 a year. That's almost as much as Robert Rubin makes in a day. Who do these autoworkers think they are?

There are serious issues that should be asked about any bailout of Detroit, but it is a bit obscene to see a paper that in both its editorial and news pages was an active supporter of handing tens of billions of dollars to rich Wall Street bankers suddenly turn around and get hysterical about the idea of helping workers making $57,000 a year. And remember, none of these autoworkers are responsible for wrecking the economy.

The class bias at the Post is so thick that most people should know to treat this one as a leftover from the comics section. But it is still pretty disgusting to see people who make six figure salaries and who anxiously promote policies to help people who make seven and eight figure salaries, get outraged over a policy designed to help people earning $57,000 a year.

Personally, gotta agree with Mr. Baker, and it was really these two paragraphs that really made the case:

Well, we can think of several objections. First, there is the question of whether the U.S. government should be picking winners and losers in a business such as this. It's one thing to bail out the financial sector, whose product -- credit -- is essentially fungible and on which all other businesses depend. Automobiles, however, are not interchangeable, and Congress can't substitute its specific technological and aesthetic preferences for those of the market. What if we lend Detroit $25 billion and still nobody buys its cars?


Second, this bailout taxes the less well-off to protect the relatively privileged. The average individual General Motors production worker, whose job would be saved by the bailout, makes $56,650 per year, according to the Center for Automotive Research, and that doesn't count better-paid, white-collar types. Meanwhile, half of all households-- which typically include more than one earner -- make less than $50,000 per year. Where's the justice in that?

Think about it for just one minute.

Okay, so then let's try again, the Post is ACTUALLY saying here that it's okay to bailout credit and insurance companies whose executives' greed brought down those same companies and destroyed the economy, but it's not okay to LOAN money to the Auto industry because their workers, union workers, make more than $50k on AVERAGE. that's not the median salary, that's the average. Apparently, to the Post, it's still okay to reward Investors over helping WORKERS. And yeah, that's really what this comes down to in the end. The Post is really suggesting that "fungible" industries like finance are essential, but jobs that pay well are simply not needed.

Nice job Post Editorial Board. Nice job.

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Cash strapped communities all over the country are now feeling the pinch of the egregious Wall Street CEO behavior. Mostly, it's in the costs for their municipal bonds which have rising interest rates now cause by what is affectionately called the "credit crunch."

Credit Crunch my ass.

This is about a blatant disregard for sound financial decisions, accounting and serious lack of transparency. And now, for their sheer stupidity, these CEO's and their friends and family members in the White House want the People's Congress (yeah, that's right, you work for the PEOPLE!) to write a F*&KING BLANK CHECK to bail them out. Cause all the union members screwed by "market forces" in Michigan and the behavior of CEO's like Dick E Dauch of American Axle are getting bailouts like this, too. Oh wait, they aren't, that would be welfare. But for Wall Street, we call it a bailout. Hell no, no Wall Street Welfare.

And I'm not the only one thinking this way, take Dean Baker for instance:

According to George Bush, our financial structure is in such desperate shape that if Congress doesn't hand a $700bn blank cheque to Henry Paulson, the US Treasury secretary, immediately, the whole structure will collapse. While no one should doubt the damage that Bush's policies have done to the economy, the fact is that Congress has some time to structure a bailout that is not just another give-away to the richest people in the country.

The policies of President Bush and the recklessness of the Wall Street crew did bring the financial system to the edge of an abyss. There was a near meltdown last week as Lehman Brothers, the huge investment bank, collapsed, and AIG, the nation's largest insurer, followed suit. Banks stopped lending to each other, creating a situation in which our system of payments (eg cheques and electronic transfers) stopped functioning.

snip

Everyone should understand that we are in this mess for two reasons. First the financial regulators, both in the Bush administration and more importantly at the Fed, were completely asleep for most of the decade. As the housing bubble grew to ever more dangerous proportions, and lenders adopted increasingly questionable lending practices, the regulators did nothing.

The other reason we are in this mess is that the Wall Street banks got themselves hugely leveraged in real estate and other assets. In many cases they had no appreciation of the value of the underlying assets. They also apparently did not understand the complex financial derivatives that they had themselves created.

Now this situation has exploded in their faces, sinking several of the country's largest financial firms and bringing dozens of others near the cliff. As a result of this recklessness, the economy is now facing a recession with the unemployment rate rising rapidly. Millions of families are losing their homes.

So what is Bush proposing? He is telling Congress that everything can be put back in order if they just give $700bn to Paulson, with no strings attached.

No strings attached? WTF?

So, then Obama comes out and says what I've also been thinking (care of the Politico):

In Clearwater, FL, Obama began by talking about capping pay for executives whose companies participate in the bailout, and the prospect that that would be a deal-breaker for some CEOs.

"I cannot imagine a position that's more selfish and more greedy," Obama said, addressing executives directly.

"Do not make that mistake. You are stewards not only of your companies but also of workers and communities across this country who have put their trust in you," he said.

"This plan cannot be a welfare program for Wall Street executives," he said.

And then Ben goes on to summarize Obama:

And he raised the notion of a post-crisis "financial stability fee," a new tax on Wall Street, after it recovers, to pay back taxpayer losses.

Damn straight. You want the Wall Street Welfare, then you make serious concessions. There should be no blank check to these robber barons, especially for what they've now put our communities through in terms of municipal bonds and our freaking retirement funds!! Oh, and hell, while you're at it, let Congress know how you feel by heading over to the SEIU and signing the petition.

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Dean Baker's done it again, this time over at TPMCafe (Talking Points Memo has the stuff):

Principles to Guide the Bailout

1) Financial institutions should be forced to endure the bulk of the losses with taxpayer funds only used where absolutely necessary to sustain the orderly operation of the financial system.
2) The bailout must be designed to minimize the opportunity for gaming.
3) The bailout should be designed to minimize moral hazard.
4) In the case of delinquent mortgages that come into the government's possession, there should be an effort to work out an arrangement that allows the homeowner to remain in her house as owner. If this proves impossible, then former homeowners should be allowed to remain in their homes as renters paying the market rent. This should be done even if it leads to losses to the government.
5) There should be serious efforts to severely restrict executive compensation at any companies that directly benefit from the bailout.

Principles for Restructuring the Financial System

1) Combating asset bubbles must be one of the Fed's key responsibilities.
2) The government should impose a modest financial transactions tax, comparable to the one in the United Kingdom. This can both restrain excessive trading and raise more than $100 billion a year in revenue.
3) Regulatory agencies should require that potentially tradable assets (e.g. credit default swaps) actually be traded on exchanges.
4) There should be strict limits on leverage for all regulated financial institutions.
5) Fannie and Freddie should remain fully public institutions, returning them to a status comparable to Fannie's prior to its privatization in 1968.
6) The Fed should be restructured so that all the key decision makers (e.g. the open market committee) are appointed by democratically elected officials. Its responsibility is to manage the economy in the interest of the general public, not the financial sector.

Given the urgency for passing a bill, Congress should look to enshrine principles in a bailout bill that will allow subsequent legislation to circumvent ordinary procedural issues (e.g. the filibuster in the Senate).

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I read his American Prospect column and blog and find it really easy to read and understand. He just knows how to connect the dots, especially with this latest piece:

September 21, 2008
Senator Shelby Doesn't Understand the Bailout

That would have been an appropriate headline for a Washington Post article on the bank bailout. The article reported Senator Shelby's objections to including any provisions in the bailout that would restrict executive compensation. According to the article, Shelby said that he thinks that compensation should be set by corporate boards.

Of course nothing proposed in the bailout would prevent corporate boards from setting whatever compensation levels they want. However, if the corporation wants to take advantage of the government's largess than it would be required to meet rules on executive compensation.

This sort of restriction on those getting special privileges from the government is common. For example, churches that enjoy tax exempt status are restricted in their ability to lobby Congress and take part in other political activities. No one questions the right of any individual or group of individuals to lobby Congress. However, those that directly benefit from special tax treatment, do face restrictions. Similarly, corporations can pay their CEOs whatever they want. However, if they want a share of the government's bailout, they may face restrictions if the Democrats get their way.

--Dean Baker

So, I just had to go to the Post article and found that Shelby really does have his head up his ass:

Many lawmakers also want additional protections for taxpayers. House Republicans, for example, have asked that any profits generated by the sale of the bad assets be used to reduce the budget deficit and not for any other purpose.

Where the parties appear to diverge is over Democrats' demand for government authority over the paychecks of executives whose companies participate in a taxpayer bailout. House Republicans oppose the idea, aides said, and Sen. Richard C. Shelby (R-Ala.), a key figure in the debate, said yesterday on CBS's "Face the Nation" that he thinks compensation should be set by corporate boards.

Speaking on the same program, Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said voters would protest a program that appears to permit corporate executives to pocket taxpayer dollars.

"It would be a grave mistake to say that we're going to buy up the bad debt that results from the bad decisions of these people, and then allow them to get millions of dollars on the way out the door," Frank said. "The American people don't want that to happen, and it shouldn't happen."

The idea does have a recent precedent: When regulators took over mortgage financiers Fannie Mae and Freddie Mac this month, they not only removed the firms' top executives but also eliminated $12.59 million in "golden parachutes" that had been promised in severance pay and bonuses. The executives, Daniel H. Mudd of Fannie Mae and Richard F. Syron of Freddie Mac, will now get a combined $9.43 million upon their exit.

Speaking on "Fox News Sunday," Paulson acknowledged "excesses" in executive compensation but said the debate should be put off for another time.

"If we design it so it's punitive and so institutions aren't going to participate, this won't work the way we need it to work," Paulson said.

Paulson expressed more openness to the idea of foreclosure relief for homeowners whose loans are being financed by the securities the government would buy. "I think there should be a mortgage relief component to this," he said, without elaborating.

For nearly a year, Paulson has touted an initiative that calls on banks to voluntarily modify mortgages held by struggling homeowners so they can stay in their homes. Paulson said in a recent interview that this effort, called Hope Now, has helped 1.7 million households. But Democrats are skeptical, noting that the data are vague about the extent of assistance provided.

Paulson again warned lawmakers to resist adding too many provisions to the bill.

"We want this to be clean, and we want this to be quick, and it's urgent that we get this done," he said.

But so does Secretary Paulson. Which is probably about the time I also noticed that Mr. Baker also took Paulson to task for, well, being Paulson:

« Conditions for a Bailout | Main | Senator Shelby Doesn't Understand the Bailout »
Paulson Missed the Bubble and Understated the Financial Crisis at Every Point

Treasury Secretary Henry Paulson is telling Congress that if it doesn't give him a $700 billion blank check the financial system is going to collapse. It would be reasonable for reporters discussing this request to present some background on the track record of the person asking for this enormous blank check.

In March of 2007, after the first shock waves of the housing meltdown had already hit, the Associated Press reported Mr. Paulson's view that the credit difficulties linked to the housing slump would be limited.

In August of last year, after the second round of financial shock waves disrupted markets worldwide, Paulson commented, "We have the strongest global economy I’ve seen in my business lifetime."

Just last March he warmly endorsed a reduction in the capital requirements for Fannie Mae and Freddie Mac, saying "additional capital [invested in mortgages by Fannie and Freddie] will enable the companies to help more homeowners and will strengthen the underlying fundamentals of the mortgage market."

At every point along the way, Secretary Paulson has failed to see the extent of the crisis resulting from the collapse of the housing bubble. This raises serious questions about his judgment. Reporters should be discussing Paulson't track record in the context of this bailout proposal.

--Dean Baker

But the really good stuff is the graphic in the sidebar of the New York Times piece on Paulson and Bernake. It pin points this Secretary's complete disregard for anything that isn't McCain-esq economy is strong crap. You've really got to check it out.

Hey, Mr. Baker, thank you for saying what's been bumbling about in my head for the last few days. It's like you were reading my mind, only with a translator attached!!

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