Bailout Pork

Hi All,

This posting is a little bit off topic, but since the press and our elected officials seem to be believe that the nation is staring at an onrushing economy catastrophe, a few words of comment about the remedy our government is proposing seems in order.

The text of the bill the senate passed last night has made it into the blogsphere. In addition to several egregious provisions and 700 billion in direct payments to wall street bankers, the bill would add over 100 million dollars of spending on pet projects of questionable value. Lets break it down:

Egregious Provisions:

1) Sections 101a: This gives the secretary of the treasury the unbridled power to purchase any “troubled asset” he or she likes. There will be no oversight and no limitations on the discretion of the secretary as to what sorts of assets or from whom the secretary wishes to purchase assets or how those assets will be valued.

2) Section 107 & 109: These sections of the bill allow the US treasurer to waive federal regulations regarding the purchase and management of mortgages. They also give the treasurer implicit powers to modify the terms of these mortgages. While ostensibly for mortgage foreclosure protection, the text of the provision links this power to the governments purchase of mortgage backed securities. Since mortgage backed securities bundle many individual mortgages of varying quality, this implicitly gives the treasurer the power to do essentially anything he or she wants with any one’s mortgage.

3) Section 119: Limits on legal redress. If the treasurers actions cause your business to go bankrupt – say by setting the price of mortgage backed securities too high or too low, then you have virtually no recourse to sue. You’re out of luck.

4) Section 205: I love this part. All the funds referred to in the act will be considered “emergency” and won’t be counted for purposes of “budget enforcement”. This means that the funds won’t count towards rules governing the budget. In plain English, the 700 billion will be off the books.

In short, there are lots of potential long term consequences in this bill, including the consolidation of power in the office of the treasurer, increased risks to companies in the financial sector and decreased transparency in the federal budget.

Pork:

But, what makes this bailout bill outrageous is the awesome amount of pork it contains. For example there are payments, tax breaks and redefinitions, specifically designed to benefit:

1) Sectors of the coal industry
2) Oil refineries
3) Bicycle commuters
4) Alternative energy and bio-fuel producers
5) Children’s toy manufacturers
6) Movie producers

Most of it is loaded with modifications that benefit the energy industry, including both fossil fuel producers and the newer greener industries, but there is plenty of other breaks for other sectors as well. Estimates are that the total amount of funding for pet projects included in this bill could top 100 billion.

So, the conclusion that one can draw from this is that along with a massive bailout for the financial industry, congress has seen fit to tack on an epic amount of pork. If you don’t believe me, feel free to check out the bill yourself.

Best,

James