FISA all over again as Barney Frank Undercuts Dodd
There’s a summary copy of Frank’s bailout bill up at TPM. It’s essentially a Wall Street giveaway plan, with only some fig leaves to try and pretend that it isn’t.
Why? Because the language about taking warrants in exchange for buying up toxic assets is only for direct purchases and not for reverse auction puchases, which will be the majority of the purchases. As Soros points out, in any reverse auction, the government will get stuck with the most toxic of toxic waste because of information asymetries. In exchange they should at least get stock, equal not to what they paid, but to the face of the crap they are buying.
There is quite a bit of language about helping mortgage holders, but it is almost all qualified with words like encourage and request, rather than require. Since the Treasury is bailing mortgage holders out, the idea that the Secretary must "encourage" and "request" is just BS. The correct response is to make help for mortgage holders a requirement of participating in the program at all. If financial institutions don’t like that they don’t need to participate. Good way to make sure that companies that don’t really need help don’t swill at the trough.
Unlike the Dodd bill, this is not a copy of the actual language of the bill, but a summary gloss. Without seeing the language we don’t know what’s actually in there. Dodd was straight up with us. Frank is hiding his legislative language. Why?
This isn’t to say there isn’t some good stuff in here, the best part of it is that it includes the "Helping Families Save Their Homes in Bankruptcy Act", which allows restructuring of mortgages so that bankrupt individuals can keep their houses. Not as good as helping people not go bankrupt in the first place, like is being done for banks, but still an excellent provision.
Nonetheless, overall, this is a stab in the back, an attempt to give public money to private concerns with almost zero upside for ordinary citizens. If Reid doesn’t back Dodd, hardcore, or if the House doesn’t revolt, this is probably the bill we’re going to wind up with.
(Update: Dave Johnson nails the scam pefectly.)