September 29, 2008 8:11 AM

Still Vote No on the Bailout

If one reads the headlines or the press releases, one might conclude that significant progress has been made in making the Bush bailout bill into something that is more reasonable. I, for one, was considering moving into reluctant begrudging support when I read about limits on Wall Street compensation, serious oversight, equity in the bailed out firms, and limiting the first pool to "only" $250 billion, rather than the full $700 billion.

Unfortunately, I was wrong. In each case, the limits that are being incorporated are either meaningless or explicitly designed to fool us. And after initially arguing for actually helping those foreclosed upon, our elected officials have negotiated away any bankruptcy reform, saying that it is too complicated to take up now. Really? If I recall correctly, it was one of the lobbyists for the banking industry that said that it was bankruptcy reform was a deal killer. But it is the only thing that actually helps someone we care about.

Just a few notes on each of the promised reforms:

Oversight - oversight will be provided by the same people who got us into this mess - the Federal Reserve, the SEC, the Treasury Secretary, the Secretary of HUD, etc. This is a total sham.

Limits on executive compensation - the legislation at best makes executive compensation cost more as it limits tax deductions. It does not undo ANY existing deals, including golden parachutes. Again, a sham.

Equity compensation for bailouts - this is entirely optional, not mandated.

Limited first tranche - this again is intended to mislead us. At first I had hoped that well, we had limited Bush to $250 billion, and since the new legislation allows the Secretary of the Treasury to pay any price for any security, this would allow a new Secretary of the Treasury to stop bailing out Wall Street and start bailing out homeowners, small businesses, and others. But the fine print makes it clear. Bush can get another $100 billion by simply saying he needs it without any congressional review. Congress at first glance has to approve any more, but Bush can veto that vote! Effectively, Bush is likely to be able to spend the entire amount before he leaves office if he wants to do so.

We are in a serious mess. The Bush Administration played Congress just right and got everything it wanted. This is not a serious solution befitting the magnitude of the problem.