A Brief Note to Those Who Still Back the Wall Street Bailout...

There are a dwindling few - mostly politicians and partisans - who still make the fantastical assertion that the Wall Street bailout - as structured - is the key to alleviating a credit crisis. To those, I suggest you read this New York Times story (h/t Jerome a Paris [1]), that notes:

A review of investor presentations and conference calls by executives of some two dozen banks around the country found that few cited lending as a priority. An overwhelming majority saw the bailout program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future...

A congressional oversight panel reported on Jan. 9 that it found no evidence the bailout program had been used to prevent foreclosures, raising questions about whether the Treasury has complied with the law's requirement that it develop a "plan that seeks to maximize assistance for homeowners."

If you read news about the bailout very carefully, you'll see that the entire goal of the current bailout is to protect bank shareholders - not the taxpayers, homeowners or the financial system as a whole. For instance, the New York Times [2] flippantly noted that one Treasury Department plan to force taxpayers to buy bad assets has "the virtue of protecting the bank’s common stockholders from being wiped out." In the same story, an investment advisor says he hopes "the government guarantees some of the assets" because that would be "a structure that protects common shareholders."

This is why progressives have been pushing for far more oversight, transparency and restrictions on what the bailout money can - and cannot - be used for. If the bailout was structured differently, it might start helping the economy. If our government was a bit less corrupt, we might have a much more effective bailout with strings attached - maybe, as the New York Times [3] reports, we'd do what the British are doing by forcing bank executives to "sign legally binding agreements requiring them to provide more loans to consumers and businesses." But those are big ifs.

Sure, I know it makes us feel better to tell ourselves that the current bailout is really designed to stop an imminent emergency, not just to raid the federal treasury on behalf of the Wall Street donor class. But the evidence - whether from the GAO, the Congressional Oversight Panel, and now from the banks themselves - continues to prove that this bailout is kleptocracy in its most naked form.