Congress Spends Billions Without A Coherent Plan

It has been pretty obvious to the Stock Market every time he appears. Treasury Secretary, Henry Paulson usually holds a press conference in the middle of the trading day. Soon after he starts speaking, the Dow Jones Industrial Average will begin a steep descent.

The market knows that the Treasury Secretary is a man with 700 billion dollars of taxpayer money that does not have a real economic plan. The Troubled Assets Relief Program (TARP) was originally rushed through Congress as money that was going to save the economy from disaster by buying distressed mortgages from consumers.

However, the TARP plan now seems to have evolved into a huge bailout of selected firms in the financial services industry. Of course, TARP was passed with extensive Congressional oversight but half of the taxpayer's money has already been spent and much of the oversight provisions have not been enacted.

The only ongoing review of the TARP program is headed by Elizabeth Warren. She is the the chairwomen of a new Congressional panel that was set up to monitor the bailout. Recently, (New York Times) Ms. Warren was quoted as saying that "the government still does not seem to have a coherent strategy for easing the financial crisis, despite the billions it has already spent in that effort. The government instead seemed to be lurching from one tactic to the next without clarifying how each step fits into an overall plan."

Meanwhile, the Treasury has just bailed out Citigroup in the last week. It was a financial services company that was "too big to fail". The Citi was not sleeping well since it had billions of dollars of bad loans on its balance sheet and its stock price had reached the status of a penny stock.

The TARP was used to bailout Citi and now billions of those toxic loans will be the responsibility of the United States taxpayer to guarantee. In addition, Citi was given billions of taxpayer dollars to shore up the liquidity on its balance sheet.

Someone may ask what did Citi use all that new taxpayer cash for? Well, Inner City Press is reporting that Citi is sponsoring a Congressional junket to the Caribbean and spending over seven billion Euros to buy the highway business of Spanish construction firm, Sacyr Vallehermoso. Seems like the taxpayer's money could have been spent better, doesn't it?

This week the automakers are back in town requesting a bailout from the United States Congress. A few weeks ago the Big 3 flew in on private jets to attempt to get a piece of the TARP pie and were rejected. The reason given by Congress was that they didn't have a coherent business plan.

So, the automakers did not present a coherent business plan to obtain money from a 700 billion dollar government program that does not have a coherent plan. In the real world this would be considered absurd, but its just business as usual inside the beltway in Washington D.C.

The Crisis Presidency Of George Walker Bush

President George Bush said in his televised speech to the nation last night: "We are in the midst of a serious financial crisis and the federal government is responding with decisive action."

Of course, the decisive action he is talking about is trying to convince skeptical members of Congress to give away 700 billion taxpayer dollars to bailout the financial services sector.

The problem for George Bush is credibility due to the fact that the word "crisis" has appeared in his speeches very frequently during the last eight years.

There was the crisis of the terrorist attacks of September 11, 2001. The crisis of Osama Bin Laden and the Taliban leading to the war in Afghanistan. The crisis of weapons of mass destruction that were never found in Iraq. The crisis of an internal civil war in Iraq that could have lead to American failure. The crisis of the subsequent troop surge in Iraq to prevent the crisis of failure in that country. The crisis of Iran and their acquisition of a future nuclear capability that apparently will not be handled under this Administration's watch.

Indeed, the list goes on and on: The crisis concerning the handling of Hurricane Katrina, the economic crisis of deep recession that led to those tax rebate checks drawn from the Federal Treasury several months ago, and now finally this serious financial crisis involving sub-prime mortgage loans.

The Bush solution to all of these crisis events is usually the same. Throw billions and billions of taxpayer dollars at the problem and try and make it all go away. Unfortunately, it is the solution of the reactive manager, not the proactive planner.

In retrospect, many of these crisis could have been avoided. The war in Iraq lacked proper planning ( See : "There never Was An Iraq Exit Strategy" on eWorldvu.com) and the success of the troop surge confirmed that there were not enough "boots" on the ground from the beginning. Afghanistan is a mess and soon will become the next crisis, because it was left to an ineffective NATO and subsequently ignored.

Today's financial crisis and the problems of Hurricane Katrina were really failures of government oversight and leadership. Henry Paulson was hired to lead the Treasury from Goldman Sachs two years ago but never saw this crisis that would lead us to the brink of the financial abyss.

Also, Paulson's reaction to this crisis over the last several weeks has been to guarantee a bailout of Bear Sterns, refuse to bail out Lehman Brothers,and then to bailout Aig, Fannie Mae and Freddie Mac. Finally, with his 700 billion dollar plan , he now wants the taxpayer to bail out everyone. It certainly can be argued that Paulson's erratic policy led to so much confusion and uncertainty in the Financial markets that confidence in the Treasury was lost.

In addition, it was only one week ago that John McCain said he would fire Securities and Exchange Commission Chairman Christopher Cox and accused government regulators of being "asleep at the switch'' during this market turmoil. It should be remembered that Cox took over from the previous SEC Chairman Harvey Pitt. Both Pitt and his predeccesor, Arthur Levitt were in charge of the SEC during the Enron fiasco of several years ago.

We need to remember that a Senate investigation would accuse the SEC and Wall Street research analysts of allowing "the greed of a few" at Enron to go "unchecked and unchallenged. The investigation revealed a story of "systemic and catastrophic failure, a failure of all the watchdogs to properly discharge their appointed responsibilities". This is the SEC that Cox would inherit in 2005. It doesn't really seem to have changed very much , does it? Only now the scale of the problem may be much larger.

An effective President should hire the people necessary to set a proactive, agressive tone in managing the day to day business of the federal government. A reactive firefighter to put out the latest crisis is not what this country needs in the Oval office.

A President' slogan like any competent executive should be that the best crisis is the one that you can manage to avoid.