This past weekend, the philosopher kings from Congress and the Executive branch met in Washington with the high priests of finance from the Treasury Department and Federal Reserve to decide how best to transfer $700 billion from the American people to the financial firms which have spent the past few decades taking advantage of the American people. Despite nine out of ten people being against the bailing out of Wall Street, government bureaucrats met throughout the weekend to assure that a compromise would be reached and passed. The bill that these wise leaders came up with, named the Emergency Economic Stabilization Act of 2008, promises to propagandize voters into believing that legislators did not just capitulate to very nearly every single one of Secretary Paulson and Chairman Benanke's demands.



The propagandizing of the bill has already begun, with the Congressional Budget Office releasing a letter (PDF) outlining the major provisions of the Act. Upon reading the letter, it is striking how many times it is mentioned that the government will be able to recoup its expenditures of taxpayer money on the sale of the "valuable financial assets" it will be purchasing to bail out the banks. After all, how could the government lose money on these assets when the Wall Street firms that hold them now are going out of business by the day because of the perceived (lack of) value of the debt instruments?

Further, it has been widely publicized that Fed chairman Ben Bernanke has recommended the government buy these worthless assets at 100 of their face value and lie to the American people by telling them to expect a profit in the future.

But the CBO even admits that the present value of the assets the government is expected to purchase $700 billion worth of is unclear, let alone a future value at which they may be sold. And with future failures and more foreclosure across the nation, the value of the assets will drop even further. Wall Street is dumping its garbage on the American people and expecting them to pay for it, with the vague hope of an ambiguous profit sometime in the future. But the assets are illiquid because there is no value to them; if they had any worth, buyers would still be available.

The Act will create a Troubled Assets Relief Program (TARP) to cover (pun intended) private banks' losses from consumer credit backed securities. Although the primary assets to be purchased will be commercial and residential mortgage backed securities, the Treasury is authorized to purchase, insure, hold, and sell virtually any kind of financial instrument. "Under the TARP, the Secretary would have the authority... to purchase any financial asset at any price and to sell that asset for any price at any future date." From credit cards to car loans to subprime mortgages, banks can drop off any old defaulted security in exchange for cash from the Treasury department.

Another atrocious aspect of the bill is that this is not a one-time $700 billion appropriation; rather, the banking system will have a $700 billion line of credit directly with the American people. The Treasury can only have $700 billion of assets to hold at one time, but once it begins selling them, it can then purchase more delinquent garbage financial instruments up to the maximum again. As the CBO letter states, "The purchase price of all such assets outstanding at any one time could not exceed $700 billion (though cumulative gross purchases could exceed $700 billion as previously purchased assets are sold)."

Wall Street even benefits from the protections designed to prevent against asset price abuses. Banks that sold securities to the government would also have to provide warrants or senior debt instruments. But a warrant that allows the Treasury to buy company stock at fixed future price from a bankrupt firm is just as worthless as a CDO backed by subprime mortgages.

But the irresponsibility does not stop even there, as Wall Street is expected to insist on higher prices for its junk securities if it also provides warrants or senior debt instruments: "since the warrants or debt instruments would have value, Treasury would generally face higher prices because sellers would seek compensation for both the value of the troubled asset and the value of the warrant or debt instrument." This must be as opposed to the relative deal Treasury would receive if it just bought the worthless assets with no guarantees. Leave it to financial investment firms to require people to pay money for services that the people themselves are providing the firms.

There is also a thinly-veiled attempt by the government to provide a jobs creation program for out of work Wall Street bankers. As the CBO puts it, "the government would have to compensate the private asset managers hired by the Treasury. Those administrative costs are not included in the $700 billion limit on asset purchases." Private asset managers? Well, someone needs to be able to figure out how much to pay for the troubled assets -- why not hire the professionals who used to work at Bear Stearns or Lehman Brothers to consult with the government, right?

But the most important question is what is in the bill for homeowners, who have been hit the hardest by the collapse of the lending industry and the housing market? There is roughly part of one sentence in the letter mentioning homeowners, urging various buzzwords and voluntary participation. "Require the Secretary of the Treasury to take steps to maximize assistance for homeowners, including encouraging servicers of the underlying mortgages to take advantage of the Hope for Homeowners Program." If this could be termed absolutely worthless, it could at least not be expected to hurt foreclosure victims even more; but the Hope for Homeowners Act, like all government programs designed to address the housing crisis, only makes the situation worse.

It is little wonder that the vast, vast majority of people across the country are against this bailout of the wolves of Wall Street. These firms have already received nearly a trillion dollars in bailout money -- giving them trillions more and allowing them to unload toxic debt from their balance sheets is nothing more than the government's complicity in securities fraud. No one should support this bill, least of all congressmen and women who will be required to go back to their constituents and explain to them why Congress stole billions of dollars from the people to bail out the same firms impoverishing the communities which elected them to Congress.