Welfare Check Day for Wall Street

(H/t Larwyn.) Mark Hemingway of National Review Online blogs that a "deal" has been reach with respect to the bailout scheme and that Henry Paulson has been given a free hand to spend $350 billion, with another $350 billion available in the future. According to the Wall Street Journal:

"The bill leaves many mechanics of the operation up to the Treasury. Among these are the crucial issues of how the U.S. government would decide which assets it will buy and how it would decide what to pay for them. The legislation leaves the Treasury 45 days to issue guidelines on those procedures. The bill awaits votes in Congress starting on Monday.

"From big Wall Street houses to small community banks, executives have expressed an interest in signing up for the bailout. But some have said the extent of their involvement will depend on critical details."

"At the bill's core is Mr. Paulson's concept of buying impaired mortgage-related assets from financial firms -- giving them cash to replace the toxic debts that have put them in danger or dissuaded them from lending. The plan is to help the firms restore their capital bases as well as the trust that enables them to borrow and lend at reasonable terms. Without this, officials worry that the credit markets, the lifeblood of the economy, would grind to a halt.

"Sellers of assets could include a broad range of financial entities -- not just banks but also credit unions and pension funds. The assets offered to the government must have been originated or issued on or before March 14, 2008."

"Support from House Republicans, who staged an 11th-hour revolt on Thursday, is still uncertain. Asked about the outcome of the House vote, Rep. Christopher Shays, a Connecticut Republican, said, "I think it's up in the air. This is what we call a legacy vote."

JustOneMinute links to C-Span's website that carries the draft bill. JustOne Minute notes:

"Section 113 starting on page 33 is the place to look. At a quick glance it appears that the Treasury Secretary is exhorted but not obliged to buy warrants giving the taxpayer some upside participation - the Dodd formulas have disappeared, thank heaven. But at second glance, it appears that *any* purchase by Treasury must be accompanied by warrants of some type; earlier reports suggested that auction purchases would be exempt. The Secretary has broad flexibility in setting terms but I suppose he would be evading the spirit of the bill if he set an absurdly high exercise price with the idea of making the warrants meaningless. Paulson was worried that healthy firms would stay away from the auctions rather than deliver warrants. I guess we'll see if he's right."

I'm a little confused why Paulson would be rescuing healthy firms. I'm even more confused why incompetently managed firms deserve a $700 billion dollar subsidy to keep them afloat in order to continue being incompetent so that they can waste even more money, allowing conservatives to blame the Democrats and Democrats to blame capitalism. Only in the United Socialist States of America.

The majority of Americans did not favor a bail out. But Americans continue to support the two party system despite indifference to the public interest. This is probably because of the mental incapacity of the electorate to grasp problems that progressivism has demanded they resolve. The result is that progressives reach exploitive and incompetently thought through solutions that harm the public. The banking system is one of the biggest examples. It produces no value; it extracts enormous value; and it impoverishes the public. Yet, the public is not able to discern the issue. Progressivism has killed democracy by expanding the required information set because it vastly expanded government. America is no longer much of a democracy. This is accentuated by the bailout's permitting government to take direct ownership of banks. We are moving to a true socialist state accompanied with the economic decline concomitant to one.