I took a look at the new legislative text of the proposed Wall Street bailout overnight, and while the plan is no longer structured as a slush fund, it still offers Treasury Secretary Henry Paulson tremendous flexibility — enough to:
- Spend all $700 billion before November 2
- Pay large banks as much money as he wants to
You might hear from someone in Washington that this second point has been addressed. The bill has a provision requiring the Secretary to pay fair prices for some assets it purchases. This is the first sentence of subsection 101(c), which is titled “Preventing Unjust Enrichment.” Sounds good. Yet the second sentence of this subsection offers a loophole big enough to drive a nuclear bomb through. “Unjust enrichment” is permitted for “troubled assets acquired in a merger or acquisition.” Virtually all of the assets of a bank like JPMorgan Chase went through their big merger, so I am calling this provision the JPMorgan Chase clause. Do you think it will bother anyone that the Wall Street bailout bill gives JPMorgan Chase an advantage over your reliable hometown bank that hasn’t been through a merger?
The House of Representatives is planning to vote today on this deeply flawed and dangerous legislation, a bill that, even if implemented correctly by the Treasury Secretary, would do far more harm than good. Now would be an excellent time to email or telephone your Representative to say, “The Wall Street bailout bill is deeply flawed and dangerous. Please save the U.S. dollar by voting no on the bailout bill.”