Paulson has tweaked the language of the bailout bill, with the Freudian-slip acronym TARP (“Troubled Asset Relief Program”) to make some additions that in theory make it more sweeping but in practice, with no review or oversight, the Treasury can do what it bloody pleases; the rest of the language of the bill, besides the maximum outstanding at any one time, is window-dressing.
The changes (hat tip jck):
Changes assets eligible for purchase from ” mortgage-related assets” to “Troubled Assets”. This makes clear the willingness to buy instruments such as collateralized debt obligations, which may not contain only mortgages in their underlying assets, and LBO related paper, such as collatealized loan obligations, and any other dreck the Treasury might see fit to acquire.Changes the eligible sellers from “any financial institution having its headquarters in the United States” to “any Financial Institution” which is defined as
any institution including, but not limited to, banks, thrifts, credit unions, broker-dealers, and insurance companies, having significant operations in the United States; and, upon the Secretary’s determination in consultation with the Chairman of the Board of Governors of the Federal Reserve, any other institution he determines necessary to promote financial market stability.This change means that Paulson can assist the currently demonized hedge funds and foreign institutions. Note Nouriel Roubini, whose has one of the best records in calling this credit crisis, predicts in today’s Financial Times that the next eruption will be a run on hedge funds.
Reuters described Paulson’s defense of assisting foreign firms:
U.S. Treasury Secretary Henry Paulson said Sunday that foreign banks will be able to unload bad financial assets under a $700 billion U.S. proposal aimed at restoring order during a devastating financial crisis.“Yes, and they should. Because … if a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution,” Paulson said on ABC television’s “This Week with George Stephanopolous.”
Since a good deal of the most toxic 2006 and 2007 vintage mortgage paper went to European financial institutions, and we have leaned on the ECB to support our liquidity operations, we aren’t in a strong position to limit the clean-up to domestic institutions.
The earlier post on the bailout received comments from plenty of folks who had, or intended to, write their Congressmen.
For those opposed to the bill (I presume just about all of you) Michael Shedlock advocated focusing on senators and urging them to filibuster, since it take 60 votes to halt one. He provides a useful list of suggestions on how to register your objections. If you are unhappy, first and foremost do something concrete rather than just vent here,
Nevertheless, I thought having readers post their missives might prove useful, as a resource for others who might want to voice their opposition, and as a record of sort of the level and nature of the oppostion to this proposal.
Several political blogs have taken note that virtually no commentator in the econoblogsphere supports the Paulson plan. See:
Many economists skeptical of bailout Avi Zenilman, PoliticoA pig without lipstick Steve Benan, Political Animal
Update 11:15 PM: My assumption above, that the officialdom leaned on the Treasury to get foreign banks included in the TARP, appears to have been incorrect. The New York Times reports that they lobbied on their own behalf:
Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks…..As the day wore on, some raised their concerns with the Treasury Department, arguing that foreign institutions were both big employers and major players in the American capital markets. By Saturday evening, the language had been changed to allow any financial institution “having significant operations” in the United States.
However, the piece does mention that it might behoove us to be nice to foreigners if we want them to help us.
I found this section in the same article simple astonishing:
“I’m skeptical of the bailout, the whole bill is only a couple of pages long,” said Representative Scott Garrett, Republican of New Jersey, who is a member of the House Financial Services Committee. As for the participation of foreign banks, Mr. Garrett said: “I have a concern with it, they probably should be treated differently, but Congress is really not getting any say.”
Congress is not getting any say? Congress doesn’t have to pass it. I do not understand why the legislative branch has become so spineless.
Another New York Times article described how the prospect of Federal handouts has everyone angling to feed at the trough:
Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.
At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees….
The scope of the bailout grew over the weekend. As recently as Saturday morning, the Bush administration’s proposal called for Treasury to buy residential or commercial mortgages and related securities. By that evening, the proposal was broadened to give Treasury discretion to buy “any other financial instrument.”
The lobbying became particularly intense because Congress plans to approve a package within just two weeks, without the traditional hearings and committee process.
“Of course there will be fierce lobbying,” said Bert Ely, a financial services industry consultant in Alexandria, Va. “The real question is, Who wouldn’t want to be included in the package?”
Mr. Ely said the open-ended nature of the Treasury’s plan could be interpreted to mean that the government was open to acquiring “any asset, anywhere in the world.”….
Each part of the financial industry is pursuing its own interests…
There were signs of the industry’s fingerprints on drafts of the legislation released over the weekend. While an earlier draft said that only firms with headquarters in the United States could sell assets to the government under the program, a later version said sellers could include any financial institution. Securities firms were initially excluded but were included in a version released Sunday afternoon.
Members of the American Bankers Association held internal meetings to plan their strategy and the group planned to send teams of lobbyists to Capitol Hill.
Dean 
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As of tonight, the Investment Banks are no more. The Federal Reserve has just baptized MS and GS as bank holding companies, joining the company of the other saved financial institutions masquerading as banks.