The Paulson Plan was — as many suspected at the time — just the first step in a larger expansion of government power. Now Geithner proposes additional powers, discretionary and open-ended expansion of the government’s authority. How many more such steps will be necessary in the next few years? Where will this end?
Meanwhile Congress watches as our freedoms drain away, content to passively agree to each new rip in the Constitution.
Both Left and Right have warned about loss of freedoms, usually to jack-booted government thugs. Is it better or worse that this happens quietly, in tiny steps, though the growing power of well-dressed and mild-mannered bureaucrats?
Just for practice, while you read this chant “Baa, baa, baa.” But softly; please do not disturb the rest of the flock as we stroll into the pen. At the end are links to various expert reviews of the Geithner Plan.
An excerpt from Treasury Secretary Tim Geithner’s written testimony on March 24 to the House Financial Services Committee
As we have seen with AIG, distress at large, interconnected, non-depository financial institutions can pose systemic risks just as distress at banks can. The Administration proposes legislation to give the U.S. government the same basic set of tools for addressing financial distress at non-banks as it has in the bank context.
The proposed resolution authority would allow the government to provide
- financial assistance to make loans to an institution,
- purchase its obligations or assets,
- assume or guarantee its liabilities, and
- purchase an equity interest.
The U.S. government as a conservator or receiver would have additional powers
- to sell or transfer the assets or liabilities of the institution in question,
- renegotiate or repudiate the institution’s contracts (including with its employees), and
- prevent certain financial contracts with the institution from being terminated on account of the conservatorship or receivership.
This proposed legislation would fill a significant void in the current financial services regulatory structure with respect to non-bank financial institutions. Implementation would be modeled on the resolution authority that the FDIC has under current law with respect to banks.
Before taking any emergency action, the Treasury Secretary would need to determine that resolution authority is necessary upon the positive recommendations of the Federal Reserve Board and the appropriate federal regulatory agency.
This is an extraordinary time and the government has been forced to take extraordinary measures. We will do what is necessary to stabilize the financial system, and with the help of Congress, develop the tools that we need to make our economy more resilient and our system more just. Financial crises contain a basic and tragic unfairness – that those who were prudent and responsible in their personal and professional judgments are harmed by the actions of those were less careful and less prudent.
The actions that we take will help restore confidence in our markets and revive the flow of credit to households and businesses. They will create an environment where it is safe to save and invest and where all Americans can trust the rules governing their financial decisions. The process of repair will take time, but our actions will succeed. For all the challenges that we face, we still have a diverse and resilient financial system. Together we will help prevent future crises and the costs they would impose.
Some experts review the Geithner Plan
- “Despair over financial policy“, Paul Krugman, blog at the NYT, 21 March 2009 — Nobel Laureate economist.
- “More on the bank plan“, Paul Krugman, blog at the NYT, 21 March 2009
- “Geithner Plan Will Rob US Taxpayers“, Reuters, 24 March 2009 — Remarks by Joheph Stiglitz, Nobel Laureate economist.
- “Successful bank rescue still far away“, op-ed by Martin Wolf, Financial Times, 24 March 2009
- “The Geithner Plan Won’t Work“, James K. Galbraith, posted at The Daily Beast, 24 March 2009
- “Obama’s bank plan could rob the taxpayer“, Jeffrey Sachs, op-ed in the Finanical Times, 25 March 2009
What conspiracy? This is happening in open view, reported in the newspapers. This is a conspiracy in the same sense as that between a Shepard and his dog, working to fool the sheep.
Tangible evidence provided by electrophoresis in comment #1:
Originally published at Fabius Maximus and reproduced here with the author’s permission.