Michael’s post below is an excellent recitation of the details of the financial mess the country finds itself in. I offer the following as a segue into the policy dishonesty we are witnessing in Congress and the White House.
This blog has extensively covered the subterfuge at work in the Obama/Geithner bank bailout plan, to wit, that the administration is using the pretense of a public/private partnership (PIPP) to ostensibly move toxic assets from the balance sheets of banks to a “public/private entity”. It is apparent to many in financial community and to taxpayers that this is a shell game financed by what is essentially Monopoly money.
There is another component to this insidious plan that should also be all too familiar to taxpayers: President Obama and Congress intend to run the scheme off budget, meaning that its funding will not be part of the usual appropriations and budget process (just like Social Security). Jeffrey Sachs highlights this misdirection:
Tim Geithner, Treasury secretary, and Lawrence Summers, director of the White House national economic council, suspect that they cannot go back to Congress to fund their plan and so are raiding the Federal Reserve, the Federal Deposit Insurance Corporation and the remaining Tarp funds, hoping that there will be little public understanding and little or no congressional scrutiny. This is an inappropriate institutional use of the Fed, the FDIC and the Tarp. Mr Geithner and Mr Summers should at the very least explain the true risks of large losses by the government under their plan. Then, a properly informed Congress and public could decide whether to adopt this plan or some better alternative. (emphasis mine)
I have just one quibble with Mr. Sachs’ observation: Congress is already properly informed, so much so that they have become the fox in the chicken coop. They are literally letting the bad guys rob the nation’s central bank and its national deposit insurance fund (FDIC) because Congress lacks the will and the courage to confront the problem head on (by bankrupting and wiping out the shareholders and creditors that funded the Rube Goldberg scheme that many of the nation’s banks and financial institutions have become). This is why conservative bloggers have accurately described Congress’ actions as a kabuki theatre, replete with faux outrage and moments of high dudgeon as hypocrites like Barney Frank’s House Financial Services Committee hand over the combination to the safe behind their backs. Their conduct is a monumental moral failure.
Ronald Reagan arguably forfeited the mid term elections in 1982 by adopting a strict monetary policy to shrink the nation’s money supply and end the high inflation that palagued the economy. This policy laid the foundation for a period of historic recovery and growth, but it was done at a serious political cost. Today the President and Congress have a similar duty to lead but they refuse to do so and instead offer policy that is borne of political expediency and cowardice. The disconnect between Congress and taxpayers has never been so stark.