Cash for trash. Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the U.S. financial system “cash for trash.” Others are calling the proposed legislation the Authorization for Use of Financial Force, after the Authorization for Use of Military Force, the infamous bill that gave the Bush administration the green light to invade Iraq.

There’s justice in the gibes. Everyone agrees that something major must be done. But Paulson is demanding extraordinary power for himself – and for his successor – to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense. — Paul Krugman, International Herald Tribune

Wall St plan a hard sell on Capitol Hill. Treasury Secretary Henry M. Paulson Jr. received an angry and skeptical reception on Tuesday when he appeared before the Senate Banking Committee to ask Congress to promptly give him wide authority to rescue the nation’s financial system …

[A]fter hours of back-and-forth, the committee’s leaders said explicitly what had seemed clear all day: that they rejected the administration’s plan. “What they have sent us is not acceptable,” the committee chairman, Senator Christopher J. Dodd, Democrat of Connecticut, told The Associated Press…

One after another throughout the session, senators from both parties said that, while they were prepared to move fast, they were far from ready to give the administration everything it wanted in its proposed $700 billion plan to buy up and hopefully resell troubled mortgage-backed securities. — New York Times

Watch some of Bernanke’s testimony here:

Why you should hate the Treasury buyout. First, let’s focus on the aspect that should get the proposal dinged (or renegotiated) regardless of any possible merit, namely, that it gives the Treasury imperial power with respect to a simply huge amount of funds. $700 billion is comparable to the hard cost of the Iraq war, bigger than the annual Pentagon budget. And mind you, $700 billion is not the maximum that the Treasury may spend, it’s the ceiling on the outstandings at any one time. It’s a balance sheet number, not an expenditure limit.

But here is the truly offensive section of an overreaching piece of legislation:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

This puts the Treasury’s actions beyond the rule of law. — Naked Capitalism

Dems say they won’t get fooled again. [T]he current generation of Democratic congressional leaders feels burned — and not a little humiliated — by the Bush administration’s use of the 2001 attacks to justify both the speedy enactment of the controversial and complex USA Patriot Act and congressional authorization of the resolution authorizing the use of force in Iraq.

“They can’t get away with what they did in 2001,” Leahy said. “This will be ‘trust but verify.’ The biggest mistake they can make is holding a press conference while we’re negotiating to say there’s going to be a worldwide depression if Congress doesn’t do exactly what we want them to.”

The legislative hangover from 2001 isn’t going to derail — or even seriously stall — the $700 billion bailout. The consequences of inaction are too grave. But it has emboldened Democrats to seriously question Treasury Secretary Henry Paulson’s two-and-half page demand for the reins of the American economy, even as Paulson worked the Sunday shows to warn of economic Armageddon if a “clean” version of his bill isn’t passed soon. — Glenn Thrush, Politico.com

Opposition to bailout plan grows. The more voters learn about the proposed $700 billion federal bailout plan for the U.S. economy, the more they don’t like it, according to a new Rasmussen Reports national telephone survey taken Monday night.

Now 44% oppose the taxpayer-backed plan, up seven points from 37% yesterday. Twenty-five percent (25%) support it now, versus 28% in the earlier poll. Thirty-five percent (35%) were undecided before; now 31% are (demographic crosstabs available for Premium Members).

While 35% think the bailout plan will help the economy, nearly as many (30%) say it will hurt, and 13% believe it will have no impact at all. But, despite their concerns, 74% of voters also believe it is at least somewhat likely to be approved by Congress this week. — Rasmussen Reports

A better bailout. Paulson’s proposal would let the Treasury Department buy mortgage-related assets from financial firms with few constraints on how the power would be used. For an administration accustomed to overreaching, such a request for unfettered authority is neither surprising nor welcome; the Bush White House is in no position to ask for that kind of trust. Congress should make the Treasury’s bailout efforts subject to the same oversight — by Congress and the courts — as its nonemergency actions, while also requiring that banks compete for aid and that taxpayers be protected against wasteful spending on overpriced assets. — Los Angeles Times

Peter Fray

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