A Skeptics Caucus Forms in the House

by: Matt Stoller

Mon Sep 22, 2008 at 14:10

I just got this Dear Colleague letter.  

Democratic MEMBERS Meeting on Bailout Plan, TODAY, Room 2220, 2:30-3:30pm
From: The Honorable Brad Sherman

Date: 9/22/2008
Skeptical About the
Administration's $700 Billion Bailout Plan?
Democratic Members Meeting
Room 2220
2:30-3:30 P.M.

Dear Democratic Colleague:

Are you skeptical about the $700 billion bailout bill?  Let's meet in Room 2220 on Monday, September 22, 2008 at 2:30 PM.  Come to the first and perhaps only meeting of the Skeptics Caucus to discuss President Bush's $700 billion bailout bill.  Democratic Members and Senior Staff only.

Bring specific legislative proposals.  I will be bringing legislative proposals to carry out the principles set forth in the letter below.  If you have questions about this meeting, please contact me or my Legislative Director and Counsel, Gary Goldberg, at xyz.


Brad Sherman
Member of Congress

On the flip is are specific proposals that will be raised at the meeting.

Matt Stoller :: A Skeptics Caucus Forms in the House
September 22, 2008
Dear Democratic Colleague:

Bush/Paulson tell us immediate action is necessary, but demand action only on their terms.  If speed is necessary, Bush should agree to include Democratic priorities in any new financial rescue plan legislation.

Foreign Investment: Under the Bush proposal, the U.S. banks that get hundreds of billions are free to invest these dollars overseas.  We should require that any taxpayer bailout monies are invested in America.

Foreign investors:  At first glance, the Bush proposal calls for bailout payments only to banks headquartered in the United States.  I agree that foreign investors should be bailed out by their own central banks and governments.  However, the statutory language is loophole ridden.  Under the Bush proposal, foreign banks can simply sell their mortgage assets to US banks, knowing that the US banks will then unload them on the US government.  The bill should be limited to mortgage related assets owned by American investors on! September 20th, and "American investor" does not include the US subsidiary of a foreign headquartered bank.

Regulatory, Corporate Governance, and Executive Compensation Reform: The Bush proposal will provide zero Regulatory Reform, zero Corporate Governance Reform, and no limits on executive compensation at firms receiving the bailout.  Secretary Paulson suggests we defer these issues until next year - knowing full well that next year Wall Street lobbying and Republican Senate filibusters will prevent the passage of meaningful reform.  Our only opportunity to pass meaningful reform is now.  An alternative is to provide for fast track throughout the 111th Congress for all bills dealing with regulatory reform, corporate governance reform, and executive compensation limitation.

Help for Homeowners: In July, the Bush administration finally agreed to provide roughly $3 billion in help for homeowners, and then only as part of a bill the Administration desperately wanted.  Now they want more than $700 billion for Wall Street, and nothing additional for homeowners.

High Fees Payable to Wall Street: The Bush proposal allows the Administration to pay unlimited fees to some Wall Street firms to manage the bad loans purchased from the other Wall Street firms.

Tax Reform: The Bush proposal transfers hundreds of billions to the wealthiest.  Shouldn't we consider rolling back some of the Bush tax cuts for the top 1%?

GAO Supervision:  Secretary of the Treasury shall enter into no contracts or purchase agreements unless determined by the Comptroller General (head of the GAO), that such contract, agreement, or purchase is in the interest of the United   States.  Asset purchase agreements of less than $1 billion, and service contracts providing for fees of less than $10 million, are exempt from this requirement.

We should quickly put a bill on the President's desk that protects working families.


Brad Sherman
Member of Congress

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I like the 10% surcharge on incomes (4.00 / 2)
Over $1 million.  Let the people who profitted from this mess pay to clean it up.

Also, a limited-term .25% stock transfer tax ($2.50 per $1000 in the transaction) to raise money for the bailout. Maybe it could be imposed as an "exchange fee".

The provisions to let the taxpayers share in any profits and having the CEOs at the participating institutions pay back some of their bonuses sounds good.

And especially the bankruptcy restructuring provisions.

Key is also the price paid for the toxic securities.  Say 30-40 cents on the dollar sounds about right.  If the bankers think their stuff is worth more, let them hang onto it.  And don't include credit cards and auto loans.  Just mortgage-backed securities.  Let them deal with the bad credit they were all so eager to dole out.

This is a good first step, as is Dodd's proposals.  The Dems should require a substantial number of GOPers to agree to any proposal as well.  Share the pain.

John McCain--He's not who you think he is.

This is like Social Security Privatization (4.00 / 4)
i.e., a political and policy fight on which the Dems are clearly on the right side and can win if they stick together and don't knuckle under. This is where we take a stand against the Republican philosophy of "Privatize the profits, socialize the losses" and call them out on it once and for all.

More like him ... (4.00 / 1)
Doesn't Congress go on recess at the end of the week till after the election? .. Shouldn't that be one of the priorities .. if we can get to the end of the week .. with out anything happening .. then we'll have won round 1?

Two things (4.00 / 1)
(1) I think this is a political opportunity to return to McCain's role as one of the "Keating 5." His ACTIONS on the Savings and Loan crisis tell us much more about his financial instincts and policies than his proposals now. If I were running against him, I would bring this up ASAP.

(2) More importantly, I think you're bringing up important questions about our newest handout to banks. And I think this is less of a time to mobilize on the first point and more of a time to try and work toward a more progressive Wall Street. One thing would be to get corporate taxation back in (through the back door). The principle could basically be this: we bail you out, we have long-term profit sharing (unless and until you buy the state out). And I would tie the proportion of profit sharing in degree to forms of executive compensation. As for regulation, I would look at two things: (1) the interactions between firms and (2) the actions within them. The latter is more difficult to legislate. And so there is a further consequence of "we bail you out" - that consequence is what any other entity would demand: we get to appoint representatives to your board. Those representatives are employees of the state who protect the interest of the state and the people within the economy.  

SOME of the Bush tax cuts?? (4.00 / 3)
"Tax Reform: The Bush proposal transfers hundreds of billions to the wealthiest.  Shouldn't we consider rolling back some of the Bush tax cuts for the top 1%?"

You roll back ALL of the Bush tax cuts and then you add on a wealth tax:

80% tax on all accumulated intangible assets over $50 million.

That's where your $700 billion comes from.  

Bush tax cuts created the 10% tax bracket (0.00 / 0)
that ain't going to go over well if you try to repeal that.  

[ Parent ]
"tax cuts for top 1%" (4.00 / 3)
That's what should be rolled back.  All of them.

I suppose the above might have been unclear.

The larger rhetorical point is that there is no percentage in taking a moderate position and then negotiating back from that.

Now is the time to put down the chips on the table.

We've got a winning hand and we should play it.

Don't you agree?

[ Parent ]
do you think it will go over better than a depression or the american government defaulting on its debt? (0.00 / 0)
because that's what the threat is (allegedly).  so if it's that severe, it's about f-ing time that the ideologues take their heads out of the sand and stop trying to be manipulative.

[ Parent ]
I don't want to raise taxes on people making $20,000 per year (4.00 / 1)
Raise it on those making 10 times that much. Their the owns who have benefited the last 8 (or 28) years.  

[ Parent ]
i agree (0.00 / 0)
but no one in their right mind would suggest something like that.  or to quote mark twain:

All Congresses and Parliaments have a kindly feeling for idiots, and a compassion for them, on account of personal experience and heredity.

i would ordinarily condition this by saying something like "i don't mean to be too mean" but honestly they're about to give away a lot of my money and i'm not convinced yet that they're actually going to solve any long term problems.

[ Parent ]
This is very encouraging (4.00 / 4)
Not only are more and more democrats apparently not wanting to get rolled over like they did with Iraq and Patriot Act, they are also starting to realize that this may be their one opportunity to get passed any or all of their proposals to reign in corporate power.

Good. Let's keep it up. As soon as they get a name for their proposals (that are acceptable) let's start calling all our Democratic representatives (or the democrat running to replace the republican in your district) to get them on board. We have one week to do this.  

Yeah (0.00 / 0)
I think Paulson may have opened a Pandora's box for the Rs  - a bill that has a lot of things the Ds want in terms of regulation, etc.  If things are as bad as they say they are they will have no choice but to sign it.

[ Parent ]
This Is Definitely Promising (4.00 / 3)
I'd like to add the idea of a negative bonus for executives of bailed out firms: forfeiture of 90% of their salaries, bonuses, stock options and benefits over $1 million for the past 5 years, to help pay for the bailout.

I know it won't come to a lot in the grand scheme of things, but it certainly will bring a level of street justice to the table.  And it can't hurt in the way of detering future bad acts, either.

What?  They say it's a deal-breaker?  Hmmm.  Well then they could open themselves up to shareholder civil suits, now couldn't they?

What's the word I'm looking for here?  Oh, yeah, treble damages.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

Sherman (4.00 / 5)
That's what makes this interesting.  He's pretty middle-of-the-road as Democrats go, not a guy who's out in front a lot and not (to my knowledge) a member of the Progressive Caucus.  I've met him a couple times out here in California and he seemed OK, but not exactly the guy I'd expect to go to war with.  If Sherman is marching (pardon the pun), there's a very large skeptic's caucus, I'd gather.

Insert shameless blog promotion here.

Board Of Equalizaiton Background (0.00 / 0)
There really seems to be something in the CA Board of Equalizaiton water, Sherman's haunts before moving to Congress.

I interviewed CA Controller John Chiang last week--also ex- of th BOE, and though he described himself as a "moderate liberal" we all know how he stood up to the Gropenator.

The thing is, it seems to me, these guys who've had their heads deep into the money side of government for some time just aren't that easy to spin, and they get personally insulted when someone tries to do it to them.

Not in aristocratic duel-fighting sort of way, but rather in a personal integrity, "What would my mother think of me if I did that sort of way."

Not a bad thing to have on our side.

"You know what they say -- those of us who fail history... doomed to repeat it in summer school." -- Buffy The Vampire Slayer, Season 6, Episode 3

[ Parent ]
yeah (0.00 / 0)
he was an accountant before his political career.

Chiang's really great and he got an unequivocal win - with the crap budget being signed those workers will never have seen their wages cut.

Insert shameless blog promotion here.

[ Parent ]
Woot! (0.00 / 0)
And I must post this obligatory Colbert Report interview fellow UCLA alum Brad Sherman did back in 2006.  :-)

[ Parent ]
he missed a key thing from what i saw (0.00 / 0)
which is that the u.s. government is only taking the BAD assets over from these companies.  This is ridiculous - moreover, it doesn't address the fundamental problem - what if the extent of the assets is so great that it causes the american government to default on its debt or less dramatically just seriously damages the ability of the government to do what it does?  This is not just an issue about the market, but about the government - it's ridiculous for the government to take over only the sick parts of bad industries without having some way of recouping the losses - i don't care if it's repealing all the ridiculous pro-wealthy tax cuts or buying or holding some of the assets that are actually profitable - this is absolutely the best way for the conservative endgame - to starve the beast until social security and many other programs actually ARE in crisis and has to be dismantled.

That's the whole point (0.00 / 0)
Foreign holders of dollars see this very clearly, so the dollar collapsed today.  Perhaps our Democratic lawmakers could look at some foreign news sites to find out what is really going on.

[ Parent ]
i can't believe they're just digging us deeper into a hole while claiming to solve this problem (0.00 / 0)

it's really frustrating though i know it's nothing different than what's happened over the last eight years.  it's just hit a breaking point and i've found that anger is more satisfying.

and it gets me to write my congresspeople.  tomorrow, i call.

[ Parent ]
he should have mentioned punch & pie (0.00 / 0)
seriously, though, i wish they would get out of this frame of "help for homeowners", like it's an unrelated goodie they want to attach to the "real" bailout.

at the bottom of all of this are thousands of mortgage loans that are going to go bad. yes? so until you come up with a way to restructure those mortgages, how have you really solved anything?

maybe i'm misunderstanding this, or mixing two different problems together, but it sure seems that fixing the actual mortgages isn't an extra, it's the HEART of a solution.

first, the people. then, maybe, the bankers. that sounds like a Democratic plan to me.

PS What Ian Said)

not everything worth doing is profitable. not everything profitable is worth doing.

That is the point of Barry Ritholtz' plan (0.00 / 0)
His alternative focuses on the underlying problem, mortgages, instead of the symptom, credit crisis.

The Paulson "plan" is a short-term bandaid that will wipe out the remaining credit-worthiness of this country.  All the Dodd amendments in the world do not change that fundamental reality.

[ Parent ]

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