Since Secretary Henry Paulson (aka “King Henry”) told House Republicans in a private meeting about two weeks ago that America was facing the greatest threat to our economy since the Great Depression, I feel like I’ve been shot out of a cannon.

The days have blurred together as the level of public fear and Congressional concern mounted.  The pivotal moment for me occurred when Paulson told us at one of those meetings that he has “been making contingency plans for this emergency for the past year.”

Excuse me, Mr. Secretary?  What did you just say?

You have known about this emergency for one year, you never warned us, and you never did anything to try to limit the damage?  Insurance companies expected us to throw a blue tarp over the damage to our roofs from Hurricane Ike to keep it from getting worse.

This entire episode will rank as one of the most outrageous and disgraceful events in our nation’s history.  Never have so many people been driven so deeply into irretrievable debt.  The fast hustle that the Administration put on Congress to pass the bailout immediately just convinced me we needed more time to read the bill carefully and consider other options.

Not difficult since Paulson’s first draft was only three pages long.

The Congress, the public, and the press all demanded more oversight, more judicial review, and more checks and balances over King Henry’s power - so he compromised, he said, and we got a 110 page bill, which experts told us ensured judicial review and Congressional oversight.

I read the bill carefully before I voted “no” - first on Monday and again on Friday.  I am convinced those were the two of the best “no” votes I have ever cast in Congress, and that is saying a lot since I have cast so many “no” votes over the years.

I also opposed such dangerous and financially risky ideas as loosening FHA loan standards so people with less than stellar credit could get a House loan.  Since 2007, when Nancy Pelosi took over as Speaker, I have to vote “no” so often that I am reminded of a year when Democrat Ann Richards was Governor of Texas, and Democrat Pete Laney was Speaker of the Texas House, and I actually burned out the red “no” light on my desk on the floor of the Texas House of Representatives, and they had to replace the light bulb.

Why were these urgent bailout bills such good no votes? First let me reiterate how seriously I take this crisis, and how devoted I am to finding a solution that would leave massive indebtedness and nationalization of investment banking as the absolute last resort - instead of the first choice as Paulson insisted.  I coauthored an effective free market alternative proposed by the Republican Study Committee that did not require massive debt or nationalization, but we were denied a chance to offer it as an alternative on the floor.

The only choice we were given was “yes” or “no.”

Here is my analysis:

1. Paulson admits that nothing in his bill will prevent another crisis or similar fraud from ocurring again in the future.
2. Paulson admits that nothing in his bill will bring the slick Wall Street bankers who pulled this sleight of hand to justice, or deter them in the future.
3. Paulson admits this plan might not avert a deepening credit crisis.
4. Paulson admits $700 billion may not be enough money.  Most experts tell me this is a drop in the bucket when the credit default swap pyramid scheme starts collapsing, and that at an absolute minimum, the cost to taxpayers will far exceed $1 trillion.
5. Our children and grandchildren, and all of us, are already drowning in record debt and deficits.  This bailout doubles the budget deficit overnight.  The national unfunded liability of over $60 trillion expands.
6. Since the $700 billion must be paid for by selling Treasury Bills, and the largest percentage of Treasury Bills are bought by Chinese or Middle Eastern banks, and since Paulson’s bill specifically authorizes foreign owned banks to be bailed out if they have branches in America - American taxpayers will borrow hundreds of billions of dollars from hostile nations to bail out their own banks.

Let that one soak in for a moment. Not only are we bailing out bad actors on Wall Street,we are bailing out foreign owned banks with debt paid by our children and grandchildren.

This is clearly enough bad news for one day - in the coming days I will detail more flawed aspects of the bill, as well as the details of our conservative, free market alternative, and tell you more about how this bad bill became law.

Finally, I will outline what needs to be done in the next session of Congress to help the American economy recover and to keep this from happening again.

Tags: bailout, economic crisis, national debt, Paulson

This entry was posted on Tuesday, October 7th, 2008 at 11:06 am and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.