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Tell me again how a government that gives ANYBODY trillions of dollars with no transparency and no accountability is legitimate?

William Buiter:

The Fed can deny and has denied information to the Congress and to the public that US government departments like the Treasury cannot withold. The Fed has been stonewalling requests for information about the terms and conditions on which it makes its myriad facilities available to banks and other financial institutions. It even at first refused to reveal which counterparties of AIG had benefited from the rescue packages (now around$170 bn with more to come) granted this rogue investment bank masquerading as an insurance company. The toxic waste from Bear Stearns balance sheet has been hidden in some SPV in Delaware.

The opaqueness of the financial operations of the Fed in support of the financial sector (which are expanding in scale and scope at an unprecedented rate) and the lack of accountability for the use of tax payers’ resources that it entails, threaten democratic accountability. Even if it enhances financial stability, which I doubt, democratic legitimacy and accountability are damaged by it, and that is too high a price to pay.

Indeed. Let me check the operating manual here:

Article I.
Section. 7.

Clause 1: All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.

ection. 8.

Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

Clause 2: To borrow Money on the credit of the United States;

Clause 3: To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

Clause 5: To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

Clause 6: To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

Section 9

Clause 7: No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time

I hate to sound like I'm joining the black helicopter crowd here, but whatever the Founders had in mind, it certainly wasn't the Executive branch throwing trillions of dollars into an enormous hole, with nobody the wiser as to where it ultimately ended up.

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Submitted by jawbone on

"transparency" may not mean to the Obama transparency what it means to most of us).

Ah, 2PM NPR hourly news summary mentioned that the great majority of losses will be borne by the taxpayers. That may wake some people up...but Obama fan club? Probably not.

Mandos's picture
Submitted by Mandos on

For some reason, economists believe that national banks should be politically independent, but I've never seen this as anything but corrosive to democracy.

Submitted by jawbone on

--during those weekend meetings about the TARP legislation, etc.??

The WaPo article on Sunday explaining the new Obama-Geithner-(Paulson) Plan notes in Paragraph 11 (toward bottom of Page One on web):

Last fall, billionaire investor Warren E. Buffet, Goldman Sachs chief executive Lloyd Blankfein and William H. Gross, the managing director of PIMCO, the largest bond fund in the world, approached Treasury officials about an idea to create investment funds, using public and private money, to buy toxic assets from banks, according to former senior Treasury officials.

Waldmann highlights Buffet's name, Elana Schor at TPM highlights Gross's name*. I would say don't ignore Goldman Sachs's Lloyd Blankfein--and that they "approached" Treasury officials with the PPIP idea.

Robert Waldmann thinks he was naive not to have seen this earlier:

I wonder if I can explain the Fatal Attraction of the Geithner plan, it seemed dead but it came back.

One strange thing about Geithner is that he humiliating himself by saying he had a plan, then presenting nothing at the big roll out press conference. To me this made sense only if someone had decided the plan was so bad that it was better for him to be humiliated at a press conference than implement it. That means real bad. Then it came back. Plans usually come out on schedule. However, deals often fall through at the last minute. I now have this image of Geithner and Buffet furiously arguing about just how generous a put Buffet would get in exchange for buying and holding sludge and just how restricted participation in the plan would be.

The official line is that the Obama administration decided to involve private investors and then began looking for private investors to involve. Yeah right. I now think that the plan was late because negotiations take time.

*Gross was all over the MCM last night, praising the loan-to-profit plan to the skies. Someone at Goldman Sachs was earlier quoted as saying they were just waiting for the right "incentive" to dive into the Big $hit Pile. Commenters at the TPM post get into the tall weeds of PIMCO's financial moves at the time....

Again, the question: Why are two such disparate administrations with different people coming up with the same solution? Oh, yeah--Who's their Daddy?