One Last Chance to Stop the Bailouts
By Robert Romano
Top Capitol Hill sources are reporting to ALG News that the Obama Administration “does not contemplate Congressional involvement…” in implementing its latest $2.75 trillion bank bailout plan. In other words, they're just going to implement it—without any authorization from the people's representatives in the House and Senate.
If true, then the bank bailout will represent the single greatest expenditure in U.S. history without the explicit approval of Congress.
It would also represent a very significant shift in doctrine, because it appears to contradict what Sen. Dodd said when the Financial Stability Plan was unveiled by he and Treasury Secretary Geithner just one week ago: "The framework will require swift and concerted action by policy- makers throughout our government using existing authorities. The elements it may require will require new legislation and, certainly, I look forward along with my colleagues, to work with the secretary and his staff in that effort to flush out the details in the coming days and week [emphasis added]."
So, which is it? A failure to have an up-or-down vote on investing almost $3 trillion into the financial system, and potentially nationalizing the banking system, would be an affront to the very system of government that America was founded upon. It would mean that the executive branch, in practice, can simply appropriate money—in this case, a sum representing nearly 26 percent of the current national debt—out of thin air to do with whatever it wishes.
According to FinancialStability.gov, the plan would include $1 trillion for a “public-private investment fund” to price “troubled” assets; $1.1 trillion—$100 billion allocated and $1 trillion lent-printed from the Fed—for consumer and business lending; $600 billion for purchasing bad paper from Fannie and Freddie; and another $50 billion to give homes away to those facing foreclosure.
If these provisions are simply undertaken without new Congressional authorization, then it is clear that a lack of clarity—on display by Mr. Geithner's disjointed press conference—is actually what the Administration wants, so that no opposition can or will be mounted. Top sources also suggest that there are no plans for legislators to even stand in the way of this outright end run around the American people.
If true, this troubling news in turn purports that leaders on Capitol Hill have all but lost the political will to mount any resistance what amounts to the enslavement of their own people to an ever-growing mountain of debt. Which is exactly what this plan will do to the American taxpayer. Forevermore.
But, believe it or not, it gets worse. The Federal Reserve is also currently considering purchasing long-term U.S. Treasuries, a move which would basically mean that the U.S. central bank was simply going to print money to finance the government's spending spree. By definition, that would be quantitative easing. Congressman Paul Ryan (R-WI) states that, as a result, “our money supply, which has already increased substantially over the past year, will grow even faster.”
This, too, would occur without any approval from the people's representatives in Congress. Nor would the ensuing inflation—which devalues all Americans' purchasing power to by essential staples such as food, clothes, and fuel—be subject to any vote.
And there is no question this will result in inflation. As Luo Ping, a director-general at the China Banking Regulatory Commission stated, “[W]e know the dollar is going to depreciate…” China is the largest holder of U.S. Treasuries and, thus, the national debt. And even they know that their investment is becoming increasingly worthless by the day, although they see no viable alternative.
In related news, last week, the governor of the Bank of Italy, Mario Draghi, speaking on behalf of the G7, all but endorsed firing up the printing presses: “We have seen in the United States that quantitative easing does work, and when I say quantitative easing I mean direct intervention in specific segments of the financial service industry…” through bank recapitalization. So, to deepen the crisis even more, central banks all over the world plan on printing up yet more money to cover their own bad debts.
In sum, to make up for the deleveraging of debts around the world, governments across the globe are flooding the world economy with as much cash as they can print, borrow, and spend. This will not work. Just ask the happy printers of the Weimar Republic, or those today at the central bank in Zimbabwe.
Instead, the American people would do well to demand that the first step to getting out of this hole be to simply stop digging. They must demand that their leaders be honest about the state of the monetary and financial crisis facing not just the U.S., but the entire world. They must demand that Congress be allowed to have its say—in the negative—on the $2.75 trillion bank bailout plan. And they must demand a return to sound monetary and fiscal policies—price stability and debt reduction—that are the only avenue for setting a sustainable foundation for prosperity.
This could be their last chance. The only alternative is government by executive edict which would spell an end to democratic rule.
ALG Editor's Note: As reported in Monday's edition, Americans for Limited Government is prepared to launch a major nationwide campaign to demand full congressional hearings into the pending bank bailout. For additional information, contact ALG President Bill Wilson at 703-383-0880.
Robert Romano is the Editor of ALG News Bureau.