Some of the reasons why Wall Street ended up in its meltdown mess involve little or no oversight of some of the financial instruments it was creating.
Mortgages were approved willy-nilly over the past few years. Debt was securitized into fancy products. But investors had no real idea of whether the mortgages were good or bad and could not assess actual risk.
So, when there’s a solution proposed, such as the $700 billion bailout law that would give the Secretary of the Treasury incredible powers to buy bad debt, you’d think there’d be some kind of oversight.
Not!
Consider this from Section 8 of the draft law:
“Decisions by the Secretary pursuant to this authority of this Act are non-reviewable and committed to agency discretion and may not be reviewed by any court of law or administrative agency.”
Henry Paulson or whoever ends up as treasury secretary can disperse up to $700 billion to anyone he or she wants. Nobody can so much as peep about it. You can’t haul anyone to court. You can’t blow the whistle to any government regulator.
It sounds like my homeowners’ association.
Congress will be under enormous pressure this week to pass this law drafted by Paulson, Federal Reserve head Benjamin Bernanke and their staffers. If they don’t, they will be blamed with throttling the American economic system.
The conventional wisdom at the moment is that without a bailout program sort of like a Resolution Trust Corporation, we’ll be in the soup as thickly as the Great Depression or Japan in the 1990s.
But I squirm when I think about giving one individual or institution that much power.
