Gunpowder Chronicle posted on September 22, 2008 7:52 PM | Rating:
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The government bailout plan -- which I have now decided is a VERY BAD idea (see below for more details) -- like any government "plan", needs a witty and catchy acronym. Prompted by a post at National Review Online's The Corner I would like to suggest "Secured Housing Investment Trust", or S.H.I.T. Why? Because this a single big bad of manure that is being foisted on the American people.
Reading through the proposal is very disappointing. It would give absolute plenary powers to the Secretary of the Treasury, preventing any right for judicial or congressional review. It would amount to $750 billion in authority to borrow -- in other words, issue new bonds. When you factor in the 5.5 rate of current bonds, you are talking over $2 trillion in total debt power in the hands of a single man.
Furthermore, you are talking about a bailout by former GoldmanSachs executives -- Ben Bernanke at the Fed and Hank Paulson at Treasury -- that is effectively a bailout of millionaires paid for by middle class and working class Americans.
These are millionaires that received millions in bonuses over the last year, while their companies -- companies they led and championed -- were clearly moving into financial trouble. They led companies -- especially in the case of Fannie Mae and Freddie Mac -- that expended vast sums to lobby members of Congress like Senator Barack Obama (#2), Senator Chris Dodd (#1) and Congressman Barney Frank (#3) to block any reform efforts. In many cases, they even went so far as to misstate earnings to juke bonuses.
On top of that, the communists in the House and Senate are certain to make this a massive omnibus bill, adding in additional unemployment benefits, mortage relief, and more. All of this, added on top of the $300 billion already appropriated to "rescue" the mortgage industry.
The plan, as it stands now, is bad economic policy. It's bad fiscal policy. It's bad legal policy. And it should NEVER be passed under our Constitution. It would represent the largest taking of private property -- in terms of both future tax payments and current assets -- ever. It would rank as even a greater travesty than the National Recovery Administration and the Agriculatural Adjustment Act combined.
And through the devaluing of the dollar that would occur through the issuance of such new debt, it would light a fire of inflation that would -- in all likelihood -- cripple the economy and send oil and gold prices to even new highs, as investors abandon dollars for hard commodities.
And that S.H.I.T won't fly.