Treasury Officials Admit Bill's CEO Compensation Measure and Restrictions on Paulson Were a Farce

by: Matt Stoller

Mon Sep 29, 2008 at 19:04

Steny Hoyer Press Conference Part One

Despite their shit-eating grins, Democrats nearly got rolled today, but a mixture of luck and bad faith from Republicans saved them.  How do you know that the Wall Street types were trying to steal from us, other than the fact that they said that the refusal to hand over money was akin to a terrorist act?  Treasury officials had a secret conference call with Wall Street executives.  Unfortunately for them, some bloggers were on the call.  The 'Treasury boys' on the call made it clear that "the tranching is a mere formality, and the Treasury boys as much as said so. They could take the $700 billion max as soon as the bill has passed."  That was always obvious.

And they admitted that "the exec comp provisions sound like a joke, They DO NOT affect existing contracts, they affect only contracts entered into during the two years of the authority of this program and then affect only golden parachutes."  Both of these provisions were 'concessions' sought by Democrats.  Of course, no one could have predicted this bill's 'concessions' to Democrats were farcical.  No one at all.

It's worth noting that the blogosphere is very much split on this measure.  Here's Nate Silver:

Having said all of the above, the schadenfreude of certain liberals on this issue is absolutely obnoxious. A lot of people are going to be hurt by this, and not just those in the investor class. I tend to see this more as a failure of our democracy than a reaffirmation of it. The congressmen who are retiring this year -- and who therefore can perhaps be described as the most neutral arbiters of the public good -- voted overwhelmingly for this measure.

Why would retiring Congressmen who do not have to face the voters but might have to face Wall Street recruiters be neutral arbiters of the public good?  Why is it bad that candidates in tight elections voted against this bill for political reasons?  Isn't that how we decide stuff?  I've had the TV on all day, and I just don't get this attitude.  This bill was unpopular and hated because the people proposing it do not have the faith of the public to write honest laws or carry them out.  That is the problem, not partisanship or an excess of democracy.  The belief that democratic pressures augur against the public interest is widespread, from Silver to this recommended diary by dansac on Dailykos.

This is a political crisis, which is why the public is angrily rejecting laws based on Republican demands for a bailout and Democratic concessions which everyone involved at the time knew were a total farce.

Matt Stoller :: Treasury Officials Admit Bill's CEO Compensation Measure and Restrictions on Paulson Were a Farce

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This is class warfare. (4.00 / 1)
For real.

we FINALLY get the American people to pay attention (4.00 / 1)
and everyone complains.

go democracy!

now we need to get real protections into a bill. Sweden 92 baby! come on America!

Michael Bloomberg, prince of corporate welfare

And Treasury said it would wait weeks before sending bags of money (0.00 / 0)
In other words, on the conference call you refer to, Treasury said it wouldn't begin deliver the ransom, uh, rescue package, for a couple of weeks!

Meaning, There Is No Crisis. Hey, wasn't that the name of a successful online and media campaign against the privatization of Social Security?

Wait, what? (4.00 / 2)
The congressmen who are least beholden to the public are the most neutral arbiters of the public good?  What possible sense does that make?  I suppose that might be logically valid if the public was consistently opposed to its own best interest, but it's a patently ridiculous statement.

Paul Rosenberg's progressivism vs populism concept is useful here. (4.00 / 2)
There is a strain of thought that the public isn't expert enough, in some way or other, to know what really is best for it.  Think of the value put on expertise and advanced knowledge, and the fact that on any given subject ordinary voters know next to nothing about even the first-level details.  Go down that thought-channel far enough, and you get to a place where experts craft sophisticated solutions that might not sound good to the man on the street, but that nonetheless really are best.  That's where Nate is coming from with that sentence.

[ Parent ]
Unfortunately in this situation (4.00 / 1)
there were far more experts saying "don't do it." This was being sold by snake oil peddlers. Bush's Treasury, which is mainly responsible for the problem in the first place has no credibility, and the Democratic leadership, with a long history of ineffective opposition to executive excess has no credibility either. And frankly, the actual text of the bill is proof that neither are credible. The stuff we heard about a tax being imposed on Wall Street in five-years, or the money being tied to oversight, or the limits on executive pay were in fact lies. There is no tax to be imposed on Wall Street. Dispersal of the money is not tied to oversight. The compensation provisions applied to almost no one. Voters need no expert knowledge to smell a rat, especially when the rat's been seen in the kitchen several times before.  

[ Parent ]
It was worse than farce. It was cynical self-protection. (4.00 / 1)
The only reason the tranches were added, apparently, is so that R challengers couldn't run against incumbent Ds with ads that said "X voted for a $700 billion blank check to Wall Street."  See, because the tranches mean it wouldn't have been a blank check; Paulson would have had to come and ask for the next $100B, and then Congress could have voted to deny the next $350B.  So that's technically not a blank check, and so the R campaign couldn't have cut that ad with those exact words, because the broadcast stations would refuse to run it.  As far as I can tell, the only purpose of the tranches was to muddy the waters enough to prevent R challengers from using that kind of clear, accusatory language in ads.

And the executive compensation limits look to have been a showpiece, not actually an effective measure.  If they only apply to contracts signed in the next two years, and by companies that have already accepted aid, then it looks like they would affect very few actual executives, and thus existed mostly to allow Dems to say that they had "cracked down on excessive CEO pay."  So again, useful in political rhetoric, but meaningless outside it.

I don't know the details of the bailout package, and I don't know what other elements may or may not have existed that may or may not have been more meaningful.  But these two much ballyhooed measures look to have been designed for the self-serving purposes of political rhetoric.  If these actually were the bulk of the Democratic "concessions", then we know where their real interests lay: giving Paulson what he wanted, while covering their own ass, and giving their voters false impressions of their actions.

Why are so many on our side still so bad at playing chicken? (4.00 / 3)
Which, of course, is the game being played right now.

There will be some sort of bill eventually. The better it is, the better for the majority of Americans. I don't understand why and how so many on our side still don't understand how high-stakes negotiation works, under pressured conditions such as prevail now. You don't blink, you don't flinch, you don't fold, you don't cave in to demands, you don't accept scare tactics. You hold out for what you want, and you eventually get a better deal.


The US and global economy will not collapse if a prettied-up version of the original Paulson bill doesn't pass ASAP. There will, of course, be interim financial and possibly even economic (i.e. Main St.) setbacks, as today's market plunge shows. But in the long run, a better bill is better for all. Except, of course, for the people pushing hardest for this plan.

I weep for them.

"Those who stand for nothing fall for anything...Mankind are forever destined to be the dupes of bold & cunning imposture" -- Alexander Hamilton

Why are so many on our side still so bad at playing chicken? (4.00 / 1)
Maybe they're vultures?

[ Parent ]
somebody said it here (0.00 / 0)
basically, they don't believe in anything except passing laws.  It's a bit like what Colbert said about the press in his White House Press Secretary faux-interview - copy, type, print.

[ Parent ]
Nothing this major is ever this simple (0.00 / 0)
There are lots of reasons for this, that have been endlessly dissected. But basically, I think that this is what you get when you've effectively been unable to accomplish anything major in terms of what your party is supposed to stand for, for 40 years. Being out of real power for that long tends to turn people into compromisers, appeasers, bended-kneers, ass-kissers, risk-avoiders--and worse. Dems haven't passed a major progressive bill since the mid-60's, and a big reason for that is that they started losing their power at that time. So they've had to make the best of it since then, which inevitably meant that some started selling out, or at least caving in. But now that we've got the GOP on the ropes, there's no need for it. And yet, they keep on doing it. They're playing chicken, but with their heads cut off. Or, just as likely, so many of them have sold out by now, that it's not so much a matter of being weak, as of being indifferent, to progressive (i.e. Democratic) values and goals.

A party saddled with cowards, idiots and sellouts. It's going to take years to fix that. Not sure if we have that much time. Someone, be it the netroots, activists, younger Dems, are going to have to leapfrog past this nonsense and get the party back to where it needs to be.

"Those who stand for nothing fall for anything...Mankind are forever destined to be the dupes of bold & cunning imposture" -- Alexander Hamilton

[ Parent ]
yeah i agree (0.00 / 0)
i don't give the full analysis sometimes when I'm frustrated and the nut of the criticism is more important to me than communicating the whole thing :)  I think something  like the aurora project or SOMETHINg that operates inside and outside the Democratic Party - something that is taking shape already - is what's necessary - at least on this level.  On the level of the day-to-day - the place where people live without being obsessed without politics, I'm at something of a loss.  I don't know what can be done there other than to just tell people what I think and try and get them to see (i.e. portions of what's called organizing).

leaders generally follow, but these leaders....oof.  they can't be bothered to follow!

[ Parent ]
Why do you keep saying it's just a political problem? (0.00 / 0)
Stuff is actually happening.  Have you noticed?  Sirota's at least discussing ways to make this actually turn out ok, not just doing a happy dance.

Here's why (0.00 / 0)
Why is it bad that candidates in tight elections voted against this bill for political reasons?

Because the public isn't as informed as experts on complex issues like this, and can easily be swayed by things as irrelevant as it being termed a "bailout".  Sometimes our politicians need to protect us from ourselves.

This is NOT a political crisis.  It's an economic crisis that has been trumped by nearsighted politicking.

politics is not economics until they say it is? (4.00 / 2)
How is this not politics? If you are a crazy free-market ideologue then I suppose you can separate out economics and politics, but it was the crazy free-market ideologues who are currently asking for the public to pay for their mistakes.

There is indeed a crisis, and it's up to the American people to decide how they are going to solve it.

As for complex issues: the current mess was created entirely by the elites on Wall Street -- the ones who I suppose you think can be trusted to "understand complex issues". It turns out that they, surprise, have not been acting in the public interest!

Whether you like it or not, the masters of the universe have been unable to savage democracy sufficiently that they can charge their mistakes to the public tab as if nothing happened. God knows they tried.

[ Parent ]
this is a political crisis built on a liquidity / financial market crisis (4.00 / 2)
whether this has reached the point of being aptly described as an economy-wide crisis (yet) is a matter of serious debate.

As someone who's read up on this for a year or so, i can tell you that I have no confidence in the "experts" that are being consulted here.  The experts have their own ideologies and biases and some experts will be selected and others won't.  For example, you see Roubini's name mentioned here all the time - he's not a flamning Marxist, but he has a broad and deep plan to address this issue in what seems to be a sensible way.  But we're stuck with "what does Secretary Paulsen" think and "Shouldn't we listen to Buffett?"

Moreover, the idea that technocrats can fix everything is profoundly democratic but more than that philosophically flawed.  Small groups of people can make terrible decisions (
e.g. the last 25 years of american economic policy)- large groups of people can collectively make good decisions (e.g. the civil rights movement or the anti-war movement).  The question is the process.

[ Parent ]
The experts don't think this is a life and death crisis (4.00 / 2)
The only people saying this are 1)persons with a stake in the game 2) so-called experts who have been wrong about everything. Don't forget that it was the experts at Treasury and the Fed who helped create this mess, then denied for a year that it was a mess, and now tell us if we don't act on a problem of immense complexity the economy will perish. What credible expert is saying this? Even the experts that claim there is a problem don't claim this is the only solution, or even a passable solution, and many of them say it's not a solution but merely a catalyst to a bigger problem. Keep in mind that the experts at the Fed and Treasury, who had years to diagnose and propose a therapy for these problems and couldn't, found a workable cure almost overnight. How believable is this?  

[ Parent ]
this really needs to be emphasised (0.00 / 0)
Where are the credible, independent experts lining up to agree on the masive, immediate urgency of a bailout?

There are none that I have seen. But in a near exact reprise of the 9/11 -> Iraq debacle, the media ("even the liberal New York Times") and the heads of both parties are banging the drum for immediate, massive and lethal action.

[ Parent ]
They'll have a hard time finding any (4.00 / 1)
I've scoured the newspapers, and the tubes for two days and I can't find anyone, credible, or not, who is predicting an economic conflagration. Even Dr. Doom, Roubini himself, scoffs at such a scenario. I've encountered three hysterical claims made on blogs, including this one 1) the interbank lending system is nearing collapse, or has collapsed and this portends an economy-wide meltdown. 2) a Great Depression is probable, or possible 3) without an immediate bailout commercial  lending will seize. All three are absurdities.

If scenario 1 happened, the Fed would step in and essentially nationalize the interbank operation, no one would even know anything had happened, a disruption would be short. The Fed has nearly done this in the past, and there are contingencies for it. Scenario 2 is so silly it's not even worth addressing, but if anyone has a plausible scenario how a depression event could happen in the current environment, I'd love to read it. The last scenario is the most plausible of all the potential disasters, but even the seizing of commercial lending is far-fetched. People are reporting that credit is harder to come by now, but that's because of increased scrutiny of loan applicants. Good credit risks will continue to receive loans. The few stories I've read of tightening credit markets are anecdotal, and could be off-set with just as many anecdotes debunking them.  

[ Parent ]
You can find experts on agreeing on massive urgency (0.00 / 0)
of a bailout. Check Krugman's and DeLong's blogs, they are the most renowned liberal economist pundits. As for an immediate bailout, this depends on your definition of "immediate", of course. But that both advocated for the passing of the Paulson/Dodd plan, despite all the flaws that they found in it, is telling. De Long made his point very clear: "Hold your nose and vote".

At the same time, both Krugman and De Long think the swedish pan is favorable, anf they hope this will get a chance. But nothing they wrote can be construed as to suggest this can wait until next year. De Long explicitly talked about a special session of the House after the election, with Bush still being in office. And if you look at the graphs they run at their sites, and have a lil bit of economic knowledge, you can't escape the insight that this is a crisis urgently calling for action.

Ok, 'nuff said. How about you telling us about your ideas what should be done when, and if at all? This constant sniping becomes annoying, it would be only fair if you would leave your cover and expose yourself so that the bailout supporters can take aim for a change.

[ Parent ]
'American Idol' greatest TV show (0.00 / 0)
Of all time; ratings prove it.  'Voters hate bill ... angry phone calls prove it.'  This is nonsense, Matt.  Wait a few days until the $1.1 TRILLION in wealth that was lost today by you and me and millions of other non-Wall-Streeters sinks in.  Worse than that, do you honestly believe any new bill is going to be BETTER than the rejected one?  You already hate the Dem leadership (and most Dems as far as I can tell, including Obama), so you must know they are gonna move TOWARD heroes like Cantor and Bachmann and Issa and all the rest of those GOP populists.

you know what (4.00 / 1)
if the only way to get an actual solution to this economic problem is for things to get worse, then, from my admittedly privileged position, i say go ahead.  I don't care anymore.  How much worse is it really going to get for poor and working people in the world in the next 50 days compared to the last 25 years?  And if it appears that it will, well, the phone calls will start coming into the offices again and people will start coming out in the streets.  That's what happened in Burma and in India and in other countries.  People did politics.

I say this because this entire debate has been total bull$hit, and the rush with which it was conducted obscured a considered approach to really serious problems.  That's not how you do politics about important things.  The worst case scenario is not doing nothing - the worst case scenario is doing the wrong thing at an enormous price and losing the ability to solve whatever it is you were trying to solve and thereby creating a huge and protracted problem that you were allegedly trying to avert.

[ Parent ]
so the argument is (0.00 / 0)
1. the people don't want the bill (but don't listen to them -- they're too dumb. Democracy is a joke, give up.)

2. if you give the people what they want, they will punish you by voting GOP (again: they are very dumb.)

I have heard many people over the last eight years tell us how dumb the people are -- the people also opposed the Iraq war, by and large, until the "smart" people told enough noble lies ("9/Saddam/11").

What I want to know is who, exactly, the smart ones are right now. The journalists at the Times yelling about the need for immediate action in editorial pieces tagged as news? The elites in both parties doing the same? How well, exactly, did that work last time?

[ Parent ]
The new bill (0.00 / 0)
The new bill needs Universal Healthcare attached. And I want our coffee shops to be like those ones in Amsterdam. I AIN'T JOKIN HERE!!!!


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