Friday, December 12, 2008

Mea Culpa

When the debate in Congress over whether to give Treasury Secretary Hank Paulson $700 billion with which to bail out the financial industry began, I reluctantly sided with those who argued that Congress should approve the funds. I was wrong.

That is not to say that I am agreeing that an infusion of cash into the system was not necessary. It may well have been. However, in this circumstance, Congress did two things that almost always should send up red flags: it adopted significant legislation on the fly, and it gave virtually unlimited powers to the executive branch to spend an enormous amount of money.

Thus, the $700 billion started out as a way to buy up bad mortgages, then it was going to buy stock in banks, then it was going to help out with credit cards and other things, too. Now, part of that money is going to be used for automobile manufacturers, after the U.S. Senate rejected spending funds on their bailout. The fact is that they can do pretty much whatever they want.

Thus, the approval of the $700 billion has resulted in a seizure of power unprecedented at any time in American history, with the possible exception of powers deemed necessary due to the conduct of a war.

If the system required liquidity, Congress needed to provide it in a way that created limitations and required accountability. What happened should not be allowed in a constitutional government.


Anonymous Anonymous said...

I mostly agree with you. while using 20/20 hindsight. I think now it would have been much more effective to have authorized a circuit breaker fund to stop a chain reaction, dominoes falling catastrophe to inject liquidity later in the chain to stop a financial meltdown freeze. in others liquidity provider of the last resort-but let failed institutions fail and the market sort it out.

2:28 PM  

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