Hank Paulson is not done asking for more authority to “rescue” us from the mortgage crisis. In his first round of legislative begging, he got Congress to pass The Housing Economic Recovery Act of 2008 which gave him the right to take over Fannie and Freddie putting taxpayers on the hook for their greed and mismanagement. Most insiders figure that will cost about $300 Billion after all is said and done.
But Hank is not done!
Now after this horrific week of every company under the sun coming to Washington hoping for a bailout, it becomes clear to Hank he must do something “bigger”. He decided to hold a press conference Friday to announce he was working on a comprehensive rescue package that would alleviate the “crisis” at it’s source…in Paulson’s own words,
“The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy. This troubled asset relief program must be properly designed and sufficiently large to have maximum impact, while including features that protect the taxpayer to the maximum extent possible.”
Well now some of the specifics are coming out as Hank goes to the Hill laying out his plan. Hank’s plan involves getting Congress to give the Treasury Department open ended power to buy, hold, and then sell any residential or commercial mortgage assets originated before September 17, 2008.
According the American Banker,
“As drafted, Treasury could use its power to buy far more than $700 billion worth of mortgage assets over time. The draft language only restricts Treasury to holding no more than $700 billion of mortgage related assets “at any one time.” If it sold some assets back to the private sector, even at a loss, it could continue to purchase more, observers said. That could continue to drive up the potential cost of the plan to taxpayers.
“The authority is broad and the $700 billion represents the total amount at any one time but there is not a cap on the total amount of assets that can be purchased,” said Scott Talbott, senior vice president for government relations at the Financial Services Roundtable. “It’s a revolving line of credit.”
Paulson wants to buy the all the “bad loans” on the books at every financial institution now…not just Fannie Mae and Freddie Mac. Congress rolled over the first time Paulson came to the Hill, but insiders don’t believe Congress, especially the Democrats, will be as cooperative this second time around.
American Banker reports,
“There are going to be some hiccups of this plan because it’s completely open ended — Wall Street runs this plan and there’s no help for homeowners,” said Howard Glaser, a mortgage consultant. “Congress will find it very troubling that the asset managers running this program will be asset managers hired by Treasury.”
This is getting ridiculous. It reminds me of Naomi Klein’s, “Shock Doctrine” theory of the current Administration to use a “crisis” either real or imagined to pass legislation which “the people” would never stand for without the crisis.
To me it seems Paulson is using the Shock Doctrine to get Congress to pass far reaching legislation which includes no help for home owners or protections for the tax payer.
I truly hope Congress doesn’t fall for it.