From time to time on this blog, we discuss the obligation scientists assume by virtue of accepting public money to fund their research. These obligations may include sharing knowledge with the public (since public money helped make that knowledge). And they also include playing by the public's rules as enshrined in various federal regulations concerning scientific research.
If a scientist takes public money, she expects there will be some public oversight. That's just how it goes.
Of course, working from this mindset makes it much harder for me to fathom how someone (say a Secretary of the Treasury) could ask for a big chunk of public money (say $700 billion) with no oversight whatsoever. Indeed, in trying to make sense of such a request, I find myself entertaining some pretty odd hypotheses:
- Could this be circumstantial evidence that economics, while dismal, is not a science? Otherwise, an economist would just assume that oversight would be part of the deal, right?
- Maybe Secretary Paulson actually wants extra oversight of the bank bailouts but didn't think he could sell the expense that would require. By asking for no oversight whatsoever, he ensures that lawmakers will build in that extra oversight with no complaints.
- Secretary Paulson's college roommate was a Jedi. Paulson is trying to see if that Jedi mind trick he learned from the roommate actually works.
- Secretary Paulson thinks we're stupid.
This is bugging me way more than most financial/governmental news items do. If you can shed some light on Paulson's request and return (relative) order to my understanding of the world, I'd be grateful.
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Definitely 3 or 4.
Either that or the plan is to just line everyone's pockets with 100 dollar bills.
I would say (4), but I think you've ommitted the possibility that the Bush administration has bought into its own narrative of supreme executive power so strongly that they no longer recognize when they are behaving like totalitarian authorities. Paulson simply doesn't recognize that the absence of oversight is a problem. That's not because he's an economist, but because he's part of an imperium.
I don't think they want to line everyone's pocket with Benjamins, just a few special someones. It doesn't all have to go to friends of W - enough to enrich more than a few friends would be lost in the underflow of the bailout.
5) I don't know how much the Fed costs to run per year, but maybe Paulson figured that, if with that paltry sum, they could cause a financial system-threatening crisis, just imagine what they could do with $7e11.
6) Maybe Paulson learned his selling trade in telemarketing or door-to-door sales - pressure the poor rubes that "this is a can't-miss deal but you have to sign up RIGHT NOW!" and they'll cave.
7) Since morals don't apply to money (or at least the way the Republicans play it), the concept of "moral hazard" is outdated - if you can't bet the entire economy on a failed transaction and expect the government to bail you out if it fails, you obviously aren't investing enough money. Even if it's only other people's.
8) $7e11 could buy a lot of antidepressants - considering the mess he (and his organization) helped create, maybe Paulson is figuring we'll need them.
9) Noone's talking about Iraq now - one little economy-threatening disaster and all that pesky un-American talk goes away. Maybe Paulson is figuring on making this a biweekly event to help out the Republicans.
It isn't just pockets Paulson wants to line, but a whole Scrooge McDuck-style money pit. Baby wants a new pair of spats.
10) He think that there is a non-trivial chance of a disaster and has no idea of how to avoid it. Thus he makes an unacceptable proposal related to the problem so that when the proposal does not pass and if a disaster happens the president can blame the Democratic Congress.
10 sounds about right. An article (I can't remember the reference, I Googled for the banking plan) discussed equity and moral hazard with reference to a Swedish bank crisis about fifteen years ago, and the Swedish government's solution (requiring the government to receive equity in banks in return for guarantees of the bad loans). The presence of gov't equity demands made those who could fix their problems fix them themselves, and those who couldn't accepted the loss in equity. Is this situation analogous? How does it differ? (Are we more heavily leveraged, for example?) If the situations were similar, then one might say there is a workable plan - but that plan doesn't let the banks off the hook for their bad investments.
I thought there was a quote about the mindset that gets you into trouble can't get you out of it.
This is a licence to steal. Everyone that will be involved with this will be able to pocket huge sums for themselves, their friends and their family. They may be honest citizens today, but that will end when money starts flowing and the price for them to become dishonest is quickly achieved. The Senator, Represenative or President that votes for this will instantly become a criminal in my eyes and hopefully in the public's eyes also.
Heh.
re: #1, your "hard science" prejudices are showing, tisk tisk!
For me, the most disturbing thing is the persistent naivete that most Americans continue to hold about the Cheney-Bush administration as one that somehow cares about the average American citizen. Most American millioners, including those who are "willing" to "serve" the American society (Poulson, Carley Fiorina, etc) are doing it for only one reason, to assure their control over the source of their riches. Cheney and Bush have used Republican slogans to persuade American idiots (about 50% of the population) to vote for them twice, which has allowed them to rob the coffers of our country. The bailout plan is the last attempt to empty these coffers before they leave Washington. To continue to believe that Cheney, Bush and their cohorts are doing anything for the good of the country is beyond naivete - it is stupidity.
And now, the same millioners who sold Americans on Cheney-Bush are trying to pull the same trick on the typical American idiot with Palin-McCain.