The No BAILOUT Bill, and Our Strategy Moving Forward

by: David Sirota

Tue Sep 30, 2008 at 21:29


Over at the Campaign for America's Future I've posted a draft of a memo that I've been asked to write by a number of folks - it looks at progressives' No BAILOUT Bill, and the strategies our movement should adopt moving forward. I'll post it here at OpenLeft tomorrow when I polish it and put the finishing touches on it, but considering this debate is moving so fast, I figured it couldn't hurt to put up a draft right now.

Bottom line: The No BAILOUT Bill isn't perfect, but it is better than the Democratic/Paulson plan to dump $700 billion on Wall Street, no strings attached. It is a legislative instrument to strengthen the Left-Right coalition that stopped the Paulson plan - and if it can be melded with economic stimulus, it would do some good.

David Sirota :: The No BAILOUT Bill, and Our Strategy Moving Forward

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The No BAILOUT Bill, and Our Strategy Moving Forward | 30 comments
will it gain any support outside the Democratic party? (0.00 / 0)
will it gain enough support within the Democratic party?

In principle, I like what I hear. But I've mostly read second-hand accounts thus far.

you had to repeat the patriotism crap (0.00 / 0)
You just had to go and repeat Matt's patriotism crap, didn't you?  I'm still going to read the whole thing, but you already shot yourself in the foot on the issue of credibility.
Questioning Obama (3.00 / 4)
Questioning Obama's attacks on progressives makes me "not credible." I'd say if you want a dictionary definition of "not credible," take a look at what you just wrote.

There is truth, and then there is partisan blindness and cultish head in the sand behavior. You are worse than even that. You create your own reality in your head, and then criticize those of us who dare to live in the fact-based world.

[ Parent ]
I don't mind questioning Obama (4.00 / 2)
Never have, never will.  But that quote has nothing to do with questioning patriotism.  He is simply explaining what he thinks is best for the country, which is what a politician is supposed to do.

I wouldn't consider anyone saying this quote questioning someone's patriotism.  You made no attempt to defend your accusation, even now.

"For the rest of today and as long as it takes, I will continue to reach out to leaders in both parties and do whatever I can to help pass a rescue plan," he added. "To the Democrats and Republicans who opposed this plan yesterday, I say -- step up to the plate and do what's right for this country."

So yea, saying that is questioning patriotism is crap.

[ Parent ]
Trollish (0.00 / 0)
Insult those who disagree with you much David?

"partisan blindness"
"cultish"
"head in the sand"
"create your own reality in your head"
"dare to live in the fact-based world"

It's amazing how fully you were able to characterize Mark Matson based on his small comment.

[ Parent ]
Thank you for the analysis David (0.00 / 0)
Now for some questions:

1. I do not see how this bill does anything for homeowners or renters except in once-removed sort of way by allowing banks to recapitalize and to claim that their assets are worth more than they could get for them now. Am I right in this observation?

2. Are there any estimates of the cost to FDIC for this program? If it's on the order of the S&L bailout, then (adjusting for inflation), are we talking about, what, 2-10 billion?

3. I know there were too many loopholes in the original bailout bill. But why not take the step of trying to improve that bill? My friend said we should change all the "mays" to "shalls" and all the "shalls" to "mays" in that bill and then it would be a good bill. Seems like that would be an easier sell than a completely new approach. Plus, fixing the original bill maintains one of its best possibilities, i.e. the prospect of the government gaining equity stakes in these firms. Once these firms do gain value again, the government will gain from these equity stakes and thus provide income for treasury and an example of how an increased public sector in the economy is a good thing for the country. A "teachable" moment to counteract the right-wing laissez-faire orthodoxy.

The Defazio plan seems imminently reasonable on many fronts (except mark-to-market). But that's ALL it seems. Nothing really imaginative or bold that will further progressive ideals. It reads like something that the DLC or Bob Rubin himself could have come up with. My question is, is this really the best we've got?

Mostly agree (0.00 / 0)
Look, I mostly agree that the DeFazio plan isn't the full-on progressive plan that we should be pushing. And I say that in the memo. But if its a device to stop the $700 billion bill, then its definitely useful - especially because it includes some really solid stuff.

The point here is that we now have a battering ram to stop the $700 billion, in the (sadly, likely) event that the Democratic leadership tries to ram that through Congress again. As I said, however - if we had a real progressive Congress, it would have scrapped Paulson's plan from the get-go, and made it a New Deal-style package.

[ Parent ]
I know you do (say that in the memo) (0.00 / 0)
And I appreciate that you point out some of the potential flaws of the bill in your analysis.

I would still like to see a two-pronged approach to this. Say, push for the Defazio bill on the one hand, but also lobby to get some of those "mays" changed to "shalls" in the bill that's coming back from the Senate.

That way if the crap-sandwich bill does pass, at least we can make it stronger to the point where the treasury can't laugh off the provisions as jokes to the Wall Streeters on a leaked conference call.  

[ Parent ]
Following up on that (0.00 / 0)
we (meaning the lawmakers that are on our side or that will listen to "us") could even say that if such and such isn't changed in the original bill, then we're voting for the DeFazio bill.  
[ Parent ]
includes what? (4.00 / 1)
the FDIC raise is already in the newfangled Paulson bill.  Eliminating mark-to-market, which is potentially awful, was already administered today by the SEC.  Eliminating naked shorts increases volatility.  The FDIC purchase could be OK, or it could be just a different way to funnel money to the same people.

If that's a progressive alternative then I'm Edith Head.  It's ridiculous to go one inch out on the limb to support this.

Insert shameless blog promotion here.

[ Parent ]
Hi, (0.00 / 0)
It is a legislative instrument to strengthen the Left-Right coalition that stopped the Paulson plan

Are you suggesting here that the "no bailout" bill might have some support among Republicans who opposed the bailout bill?

Exactly (4.00 / 1)
Yes, exactly - that is the strategy, and its a sound one, especially when you read the Congressional Quarterly piece linked to in my memo.
[ Parent ]
Oh most definitely (4.00 / 1)
They want both the FDIC and mark-to-market provisions.

The strong FDIC oversight, probably not so much.

[ Parent ]
Cheap (0.00 / 0)
This plan doesn't seem quite so much progressive as cheap.  Which if it works is a very good thing.
Yeah I think that's its best selling point (0.00 / 0)
we can preserve some money for social programs.

But when oh when are Democrats going to stop being afraid to raise revenue. Sigh....

[ Parent ]
not even that (0.00 / 0)
there are no guarantees on outlays anywhere in that bill.  It could be just as pricey as the Paulson plan.

Insert shameless blog promotion here.
[ Parent ]
I really am pretty disappointed (0.00 / 0)
that this is the best Defazio et al. could come up with. I wasn't expecting complete nationalization of the banking sector, but come on. This is a little weak.  
[ Parent ]
It is worse than weak (4.00 / 1)
The No-BAILOUT bill would possibly make things even worse.

If housing prices continue to decline, as is likely, this bill, by switching from GAAP and mark-to-market accounting, to RAP, would likely allow banks to further obfuscate losses and make it pretty much impossible to tell when they will fail until the day they actually do.

Futhermore, there's absolutely nothing progressive about it. It's just different (and in my opinion) stupider mechanics to achieve the same thing that the Paulson plan is trying to do, with a couple of unrelated handouts to various interest groups.

[ Parent ]
So what the hell were they thinking? (0.00 / 0)
It sounds like they just put in writing exactly what the FDIC chairman told them too, no? Plus threw in the stuff about mark-to-market.
[ Parent ]
Probably just to say they had "an alternative" (4.00 / 1)
In the end, the heart of the No-Bailout Bailout is basically the same thing as the Paulson plan. Both plans have a variation of the following:
The Federal Government gives you some paper that says you now have capital in exchange for something of value back.

In the Paulson plan, they print up some new Federal Bonds and give it to the banks in exchange for equity and assets.

In DeFazio's plan, it's a bit more complicated, but basically the government gives them a "paper" loan in exchange for an IOU. It also changes the accounting rules in favor of allowing the banks to cook the books, which will make them, in theory, "look" solvent long enough to ride out the crisis. The problem with this plan, is, of course, that if they keep "looking" solvent but the crisis gets worse, then when they eventually run out of money and go under it will be total chaos, with no way to save them at all.

[ Parent ]
hmmm (0.00 / 0)
The scary thing is the Paulson plan may actually be better than this one.  The main point in this plan I don't really get, so it may be great.  But the points I do get don't really impress me.
[ Parent ]
The strategy has to be sound government, (0.00 / 0)
temperance, industry and justice amongst the populace.

Where does the bailout fit into this?

It does not.

What are the hopes for nationalization? (0.00 / 0)
Hi, David.  If you're still reading, I wanted to ask you what the hopes are for Congress forcing through a Sweden-style nationalization of troubled banks, simply on the strength of Democratic votes.  

I supported the Dodd-Frank modified bailout because I wanted to see the government use its strong bargaining position to save banks while acquiring majority stock positions.  This would probably result in a net profit for the government, just like many past bailouts have.  (I liked the AIG deal -- we're charging them 11.5% interest and taking away 80% of their company!)  

But nationalization is what I'd really like to see.  I see you mention it in the linked article, but only on the 'do nothing' side, which strikes me as kind of weird -- wouldn't further legislative action be required?  

Donkeylicious

'if we had a progressive Congress' (0.00 / 0)
Yeah ... and if I was 25 not 57, I'd be 32 years younger.  This is a bunch of fury signifying nothing.  The best bill possible was beaten in the House by that wonderful 'uprising' of assholes like Cantor, Sali, Bachmann and the rest, joined by jackasses like Kucinich.  Now, as the Senate easily passes a worse piece of shit, every passing day means another turd on the pile that will eventually become law.  And we can read blog posts about how badly the DEMOCRATS suck.  From supposedly Democratic partisans whoi can't wait anouther five weeks to trash their own party, because it's not what they wish it was.  'Swedish Nationalization Plan' and 'No Bailout Plan.' Why not the 'Shoot All Bankers and Give Out Ice Cream' Plan?  It would have the same chance of passage and sounds a lot neater.
For real. (0.00 / 0)
The number of supposed economists here with THE REAL PLAN ready to burn at the stake any democrat that opposes their hare-brained scheme is crazy.

I'm not saying the Paulson plan isn't a turd, but this is complicated stuff where the ramifications of even minor regulatory changes can have significant impact. Right now many progressive economists are divided on what to do, which makes it even harder to judge what the right course is.

To scream out off with their heads at progressives that are trying to figure out what the best plan is (or rather, which is the least horrible that stops the financial crisis) no-nothing populism at its best.


[ Parent ]
Give Dennis a break ... (0.00 / 0)
Pelosi came up with the votes she said she would .. Bonehead stuck a knife in her back .. do you have better suggestions .. besides passing the POS that was Paulson/Dodd?
[ Parent ]
I think my better idea (4.00 / 3)
is to pass Paulson/Dodd but make all the progressive crumbs in there requirements instead of suggestions (r.e. forcing equity stakes, restructuring past salary/bonus arrangements, rewriting mortgage terms).

I really can't figure out why progressives aren't more on that train. I guess because that big 'ol 700bn was too much to swallow and the bill as written had too many loopholes and people convinced themselves it was just a POS with no hope. But there was a lot of potential (if enough pressure put on Frank to actual put teeth in the bill) for it to turn into a nationalization plan.  

[ Parent ]
I guess the only hope here (4.00 / 1)
is that Obama gets elected and turns those mays into shalls with a progressive Sec. Treasury. It'd be nice if he made a statement to that effect.
[ Parent ]
Yeah it would be nice (0.00 / 0)
and truth be told, I'm pretty sure that's what his sec. would do.

I just kind of get the feeling people felt really empowered by being able to defeat this bill ("Where's my damn pitchfork!") and it may end up resulting in a worse bill being passed.

We also didn't really have any allies in this fight who had real power. Dodd gave up too much. Frank cares more about Paulson and Bernanke than the progressives on this issue. Would have been nice to have Mel Watt in those negotiations.  

But the more I read about this "right/left" coalition that is forming, the more I feel that the result of any bill that gets its support will in essence be a conservative bill. No progressive trojan horses will be carried in it. Again, THERE'S NO HOUSING PROVISIONS!

[ Parent ]
Too late - republicans win again (0.00 / 0)
If the newspapers get it right, it increasingly looks like the rethugs outplayed the clueless Dem leadership again. Instead of Pelosi et al. publicly blaming the right wing ideologues for the rejection of the Paulson/Dodd Plan and using the opportunity to ram a more progressive plan through, based mostly on Dem votes, it sure looks like all efforts concentrate on getting those 12 additional GOP voites on board by surrendering to the wishes of the rethuglicans. What a great show of leadership by the Dems again (NOT)!

This not only provides an easy way out for republican naysayers, who already have come under pressures from angry voters who lost money with stocks and funds, but actually rewards them with a PR victory. Now they can say their determined opposition resulted in the bill they wanted all along, but couldn't get because the Dems didn't want to add their "insurnace" provision. At the same time, the Dems who held their nose and followed the "lead" will get nothing for their sacrifice, but are expected to now support even the pro-republican modified bill again. Horrible.

Well, what do y'all say? Not even not a more progressive bill, but a PR victory for the rethugs instead? Now that's a result that no liberal can be happy about. This shows that it's not only important to get Obama elected at president, but for the situation to change in favor of progressive goals, there has to be a change of leadership in the House and Senate, too. Pelosi and Reid have to go, or else this policy of appeasement to rethuglican blackmail will continue, ruining any chances for real change in the next years.

REID =FAILURE
PELOSI = FAILURE
We need a change in 2009!

The No BAILOUT Bill, and Our Strategy Moving Forward | 30 comments
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