The Great Transformation

It seems that Paulson and chums may not be getting all they want in the big bailout. As I detailed yesterday, the bill that was originally being drafted would have given the Treasury Secretary complete and unreviewable discretion to control the entire $700 billion that was earmarked for the bailout. The key passage in the bill as it stood then, was this one:

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

It may be that it was generous terms such as these which had encouraged the market rally on Friday.

Since then, things have been moving very fast and it seems that the usually pliable Congress has realized that granting what will in practice be $1 trillion dollars in debt relief without any oversight may not be the most functional behavior for a democracy. Furthermore, the original bill had made no compensation for ordinary peons at the bottom of the trickle down effect. The plan was for banks to be bailed-out sufficiently well to be able to continue the hard work of ousting people in foreclosure.

Now Congress is demanding oversight, debt relief for the hard-up at the bottom of the pyramid, and a share in some of the future profits of these otherwise bankrupt institutions. This has not made Wall St. especially happy.

I am glad that Congress is trying to take charge of such an important and wide-reaching solution and has not handed dictatorial powers over to big-business just yet. If Congress fails to respond actively it will be extremely damaging to U.S. democracy in two ways.

1. Such a radical nationalization of business, without democratic accountability, pushes the U.S. further into a corporatist form of government. The idea that one individual, a previous head of Merril Lynch, who was appointed - not elected - to office, should be able to wield total control of what is left of the federal reserve is something that should make anyone - no matter how commited to fixing this problem, pause.

2. "Solving" the financial crisis by only helping the financial sector - which is responsible for this to begin with - will not enamour ordinary people very much to the governoring classes. In fact, such a situation will not only enrage most people; it will enrage them at a time when we can expect day-to-day life to become seriously tough for the next few years. Such an environment is a breeding ground for radical politics. Considering the current state of political discourse in the U.S., this something that should not be encouraged.

I will post further on this second point at a later date.