Bailout Has Devilish Details
By: Mark W Adams

I've but one word for the drafters of the Emergency Economic Stabilization Act Of 2008:


Honestly, was this really the best we could do?

Unlike many on the left and the overwhelming majority of PrezTard Bush's former supporters who now conveniently run from their leader like Pavlovian mutts who rolled around in their own shit for eight years suddenly realize they smell bad at the ding, ding, ding of Bush's name -- I still think the bailout is essential. I haven't heard anything else out there that would more effectively unclog the credit market's tubes in the time frame necessary to mitigate the disastrous supply-side damage directly caused by the conventional voodoo since the dark day that Ronald Reagan was sworn in.

If you aren't convinced this was all orchestrated, consider Naomi Klein's take on this bit of theater even before Drama Queen McCain brought his circus act into the West Wing. Unfortunately (and this is where I differ with John Amato), even though it sure looks like this is a manufactured crisis, it's a crisis nonetheless.

That said, the plan still sucks.

Or at least we have a lot more work to do, some of which will probably have to wait until we see if we get a filibuster-proof Senate and impose a progressive version of the Shock Doctrine. What a strange dynamic when the outnumbered children in the House GOP caucus were allowed to pull the strings this time. Come January, no one will give a damn what they have to say. All they did was give John McCain and a couple of other worried Republican Senators cover as they acted their predictable douchey selves. I think America is finally weary of their stunts.

So why Mark? Why does it suck?

Glad I asked: Inadequate help for distressed homeowners.

I don't care what they tell you, I've looked at the Act carefully on this point, which magnanimously expands Chris Dodd's Hope For Homeowners Act to include not just FHA, but also Fanny Mae and Freddy Mac covered loans and anything covered by one of these junk mortgage backed securities we're buying or owned by a bank opting into the bailout. The EESA allows for renegotiation of distressed loans, by changing the interest, the term of years, or sending anyone with 10% equity into a 30 year fixed, which cuts out the house flippers.

Okie, Dokie. That sounds like a good thing, but it isn't cuz it's optional at the discretion of the bank. Under H4H, it's still the banks which decide which loans to renegotiate -- and only folks whose loan is over 31% of their income are eligible. In other words, only folks that got a loan from an almost criminally irresponsible loan officer would qualify, and only if their bank already tanked, the loan is held by Uncle Sam or out of the goodness of their heart the bank decides to give you a break.

There are a lot of otherwise perfectly solvent lending institutions that don't need to opt into the bailout who will laugh at this legislation unless homeowners are empowered to initiate the process and make the thing mandatory if the homeowner qualifies -- whether the lender is opting in or not. Homeowners are still at the mercy of the bankers in this to a large degree.

Sorry, that doesn't cut it, it doesn't help the real people who pay the real taxes that will fund this monstrosity. Barney Frank had the right idea. It needs teeth, like the ability of a Bankruptcy Judge to restructure a loan if they rule that's a just result even if the bank doesn't. Leaving this solely to a bankers discretion is simply pointless.

Take a look at this language from the full EESA (pdf). It's even worse since we're buying the paper guaranteeing the mortgages and not the debt instrument itself. The folks collecting the payment have no incentive to help out the little guy. Go figure.
SEC. 109. FORECLOSURE MITIGATION EFFORTS. (a) RESIDENTIAL MORTGAGE LOAN SERVICING STANDARDS.—To the extent that the Secretary acquires mortgages, mortgage backed securities, and other assets secured by residential real estate, including multifamily housing, the Secretary shall implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Home owners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures. In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.
So what's Paulson going to say to these fat cats? "Pretty Please, with serfs and handmaidens on top?"

Such is the sausage making that creates laws. We gave up on Bankruptcy reform. We threw away community centric housing relief, where the hopelessly ignorant wingnuts could claim victory over ACORN, an outfit that gives them a perpetual dose of Cialis. They also will dance with joy that they get to play more privatization games with an insurance "solution" to this thing -- which for the life of me I have no clue how it's supposed to work, or help.

So what did we get, politically or for, you know, fixing that whole crisis thingy? Well, very strict reporting on exactly which millionaire can only take home a half million next year without paying (gasp) higher taxes; and "oversight!" on every billion dimes they'll be handing out to the richest financial institutions on the planet. (As long as they don't get lost and shipped to Baghdad in the meantime.)

Look suckers, just be grateful they didn't eliminate the capital gains tax or really deregulate everything -- or do what Gingrich and Bill Kristol prayed for, using the FDIC to create a safe haven for their millions that don't have a safe place to sit this out. The ultimate game of corporate/wingnut welfare yet concieved.

So bitch, moan, and never forget that when Republican are anything more than an obstructive bunch of nay-sayers, but actually get to run things, their ability to fuck up your world is beyond imagination. Meanwhile, just pay up or they'll make Wall Street and Main Street look like Burbon Street. You should feel privileged to be allowed to participate in cleaning up their mess, you ungrateful peasant.

UPDATE: One more thing. I was negligent not to mention that Krugman deems the plan "sufficiently not-awful" since it includes his deal breaker demand for an equity stake so we have a non-zero chance of recouping something on this. Otherwise it was just a handout. I always figured that and the populist red meat of curbing CEO golden parachutes would be a part of this. Nobody buys a pig-in-a-poke without going home with either the pig or the poke, especially if it steals away enough cash to buy it's own lipstick factory.