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|111th Congress Should Be Complete Overhaul|
|Commentary/Politics - Editorials|
|Written by Kathleen McCarthy|
|Wednesday, 22 October 2008 02:29|
The crushing lack of leadership, underscored by the absence of even a rudimentary understanding of the factors that contributed to the current economic crisis, begins to unfold in the wake of a demoralizing vote by the U.S. legislature for a $700-billion bailout. The House of Representatives originally voted it down, obviously holding out for earmarks from the Senate. Incredibly, the Senate obliged, attaching an additional $125 billion worth of such bribes to ensure the House majority vote in favor of bailing out Wall Street, and indefinitely indenturing future generations with impossible debt.
At a recent dinner for the Quad Cities Home Builders Association, Senator Chuck Grassley was asked where the government was getting the $700 billion it intended to use for the bailout, and if we had to borrow it, what interest rate would we be charged. He claimed he wasn't sure, but said that he thought the Federal Reserve would profit greatly, additionally surmising that the Fed would contribute a portion of its profits back to our treasury. Contribute? What evidence he has for this can only be guessed. But the mere fact that this answer sufficed in Senator's Grassley's mind is indicative of how completely at sea this legislator - along with so many of his peers - is.
So far, $250 billion has been allocated to the nine largest banks in the nation, even though some of the banks declined the funds, stating they had no need of them. After receiving $25 billion of the $250 available in the first round of giveaways, Bank of America's CEO, during an interview with 60 Minutes on October 19, explained that his bank was pressured to take the money to help disguise which of the nine banks were actually failing. How is this deception any less fraudulent on the part of the Treasury? Even more incredibly, there is no mandate attached to the $250-billion allocation that requires the nine participating banks to re-loan any of the funds they get. The money could be used for acquisition of weaker banks, or to purchase smaller banks in an effort to consolidate, or for any other reason the banks see fit. The first round of bailouts, in other words, does not contain a single dollar of financial assistance for Main Street's homeowners, but instead fully funds the recovery and protection of much of Wall Street's ill-gotten wealth.
Is it any wonder that the world's financial markets are not rebounding? All the bailouts in the world can't restore confidence in a system corrupted by (a) incompetent greed (most of Wall Street), and (b) competent greed (central banks such as the Federal Reserve, whose insatiable appetite for more power through financial control guides a global agenda that requires unilateral asset grabs such as the one currently occurring, and not unlike many other such asset takeovers throughout history).
Smart money knows that the fox is watching the hen house. The fox (Congress) is as culpable for the economic crisis as any of the Wall Street players in its willingness to be manipulated by lobbyists and special interests. Add the glaring absence of regulatory oversight/enforcement undermining the recent $700-billion subsidies to the reckless tolerance for violations of current, enforceable regulation, including infractions against standard accounting rules and policies, and voilà: You have a formula for further failure. Mixed together, the resulting formula represents the antithesis of market confidence grounded in mistrust and across-the-board disdain for the current leadership.
This Congress has forsaken its credibility. Its promise of vigorous future transparency is laughable coming from a legislature (on both sides of the aisle) whose part in eroding capitalism via its inequitable favoritism of special interests in the form of a $700-billion bailout makes the 110th Congress a particularly heinous corrupter of capitalism, and our republic for that matter. In light of this recent bailout, the transfer of constitutional authority to the Federal Reserve to coin money in 1913 fulfills Woodrow Wilson's rueful prediction that "I have doomed my country." By ceding that authority to the Fed, it is arguable that the legislation really did doom capitalism as an economic model.
Soon the Federal Reserve will cherry-pick assets for its engorged portfolio, while aiding Secretary Paulson in striking deals for taxpayers that are woefully deficient compared to the same deals being struck for the Warren Buffetts of the world. Buffet will receive 10 percent on his newly acquired equities, along with warrants against future failure. Taxpayers, on the other hand, will get less than 5 percent with no warrants, or weakened ones at best. My prediction is that, down the road, the Fed will buy back these same equities from us at discounts it never would have received in the market. Meanwhile taxpayers will still be paying the Fed interest on portions of the $700 billion it borrowed from it to buy the equities in the first place.
There is only one recourse left for voters. We have an imperative duty to one another, and to our heirs, to make sure that the oversight left to a "future Congress" referenced in the $700-billion-bailout legislation is composed of mostly new members. We must clean house, literally and figuratively, by voting in the slate of challengers to this deficient Congress wherever possible. An unprecedented sweep of new men and women must be given an opportunity to mitigate the harm done by this current Congress in its collective ignorance and willing haste. Too many in our Congress are career politicians, more loyal to their lobbyists than to their constituents. This sorry truth is highlighted by the campaign finances of both major presidential candidates (McCain and Obama), evidenced by their combined expenditures totaling nearly $1 billion. While the collected dollars are not as obscene, the campaign finances for state and federal legislators tell a similar story when compared with voting records.
Each state elects two senators, whose terms are six years each. However, because their seats are up for election in alternating years, only one senator per state is up for reelection this year. In Iowa, Chris Reed (R) challenges incumbent Tom Harkin (D). In Illinois, Dr. Steve Sauerberg (R) challenges incumbent Senator Dick Durbin (D).
It is no surprise that Senator Harkin voted in favor of the $700-billion bailout, considering investment banker Goldman Sachs is his third largest contributor, according to Project Vote Smart, a nonpartisan reporting agency that records data for the nation's elected officials, both state and national. The public can look up how an elected official voted on a specific bill, or get a summary of how a legislator voted over time respective of a specific issue. It is an invaluable resource to learn the facts about your elected representatives. Vote-Smart.org (via OpenSecrets.org) also lists campaign contributions by the five largest contributors, as well as by industry of contributors. It is easy to discern your legislators' spheres of influence when you know whom his/her largest contributors are. A lot of dots get suddenly connected.
In Senator Harkin's case, not only is Goldman Sachs listed in his top-five contributors, Securities & Investments comprise his third largest industry of contributors. Senator Harkin enthusiastically supported the bailout.
Senator Durbin also unabashedly supported the $700-billion bailout, and the Securities & Investments industry is his second-highest industry contributor. Interestingly, Senator Durbin's third-largest contributor is Citigroup.
As for some of that pesky dot-connecting: It was reported in The Guardian on October 18 that banks receiving bailout funds are ignoring compensation caps. "Financial workers of Wall Street's top banks are to receive pay deals worth more than $70 billion, a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year." Among the worst offenders are Goldman Sachs and Citigroup, each of whom received $25 billion from the first $250-billion subsidy. "The sums that continue to be spent by Wall Street firms in payroll, payouts, and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Goldman Sachs and Citigroup have declined by more than 45 percent since the start of the year." Citigroup is claiming $25.9 billion in salaries and bonuses, while Goldman is claiming $11.4 billion.
The House of Representatives is broken up into districts. For the Quad Citians, the Iowa side is District 1; the Illinois side is District 17. In Iowa David Hartsuch (R) challenges incumbent Representative Bruce Braley (D). In Illinois, Representative Phil Hare (D) is running unopposed. This is disappointing considering Hare is also a staunch supporter of the bailout.
Braley originally voted against the bailout, but was essentially bribed by the $125-billion earmarks that also bought the vote of most of his peers for a final vote in the House of 268-148 that sealed our fate. He claimed that initially calls came into his office 100-1 against the bailout, but as the week progressed that ratio dropped to 50-50. Braley told reporters during a Q&A session shortly after the vote on October 3, in defense of his vote supporting the bailout: "I made a decision that was in the best interest of Iowans." However, a small industrial manufacturer reported to the Reader that he was told that very morning by an aide in Braley's office that the calls were coming in "200-1" against the revised pork-laden bailout.
In November, voters have a chance to effect real change, while sending the loudest possible message to politicians across the land that we have had enough. Enough! Watch Americans demonstrate the true might of the people's vote this election by overhauling the U.S. Congress. The 110th Congress has proven its members are unfit to serve in these trying times. If the 111th Congress is made up of incumbents' challengers, each will arrive in Washington with a clear mandate from an American electorate dedicated to taking this country back.
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