At the beginning of today's Treasury Hearing on the Bailout, Senator Dodd invited Senator Tester to pose a question that he was quite agitated about. Here's that question:
I'm a dirt farmer. You guys have been in the business -- the former chairman of Goldman Sachs.
Why do we have one week to determine $700 billion that has to be appropriated, or this country's financial systems go down the pipes?
Wasn't there some opportunity sometime down the line where we could have been informed of how serious this crisis was so we could take some preventative steps before this got to this point?
The converstation following that question failed to even pretend to address the Montanan's query. I watched for about 45 minutes, I think, before I had to leave for work. Why did Dodd let the question just die as he moved on to the GOP smarm-fest.
So someone tell me if they ever addressed that question today, because...
...later today it was answered in the news (thanks to lgcap):
Fratto insisted that the (bailout) plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.
Ok. So now we know they were getting ready for this. But Tester's question still remains: why didn't they clue Congress in on their preparation for the biggest financial calamity in history? Maybe because that would have spoiled the Party?
What other reason can there be for their failure to consult with the peoples' representatives concerning a catastrophe that (if you take their self-assured warnings seriously) rivals the Great (Worldwide) Depression?
The term "premeditation" comes to mind. Hell, maybe a govt bailout isn't even the right way to approach this:
"The key is to recognize that for nearly all of the institutions currently at risk of failure, there exists a cushion of bondholder capital sufficient to absorb all probable losses, without any need for the public to bear the cost.
For example, consider Morgan Stanley's balance sheet as of 8/31/08. Total assets were $988.8 billion, with shareholder equity (including junior subordinated debt) of $42.1 billion, for a gross leverage ratio of 23.5. However, the company also has approximately $200 billion in long-term debt to its bondholders, primarily consisting of senior debt with an average maturity of about 6 years. Why on earth would Congress put the U.S. public behind these bondholders?
The stockholders and bondholders of the company itself should be the first to bear losses, not the public. That is the essence of what a free and fair market, and a responsible government would enforce. The investors in the companies that produced the losses should be accountable for them, and the customers and counterparties should be protected."