I've been around long enough to remember what is arguably the funniest magazin
e cover of all time: National Lampoon's threat that you better "Buy This Magazine" or "We'll Kill This Dog."
That cover came to mind as I thought about how the Congressional bailout talks imploded on Thursday night, and then how the announcement of Washington Mutual Bank's failure came on Friday morning.
My inner cynic wondered whether the seizure of WaMu's assets was a "we're serious" message to the Congress from the Treasury and Fed -- as in, "Buy This Bailout or We'll Shoot Another Bank."
Now, I'm obliged to say that I'm joking, lest you think I'm not. I have too low a view of human intelligence to find conspiracy theories useful, mostly because I "never attribute to malice what can be adequately explained by stupidity."
There are of course occasions when malice and stupidity appear to be working together: The "Draft Proposal" for the "Bailout Plan" appeared earlier this week, with this excerpt from the proposal being widely circulated by email:
"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."
Yes, that language amounts to a shocking power grab, but the shock you feel will take on the full force of a Taser charge if you read the whole document. Treasury Secretary Paulson wants the absolute, unchecked and unlimited authority to buy or sell ANY mortgage related asset at ANY price he deems "appropriate." The man asked Congress to
a) Give him a $700 billion blank check, and
b) Let him be a law unto himself.
Lest we forget how much $700 billion is, the entire Department of Defense has the largest budget by far of any government agency -- the dollar figure was $479.5 billion for FY2008. Can you imagine the Secretary of Defense asking for the authority that Paulson wants?
Whatever deal (if any) the Congress reaches, nothing in it matters more than whether Paulson got the degree of authority he asked for.
Update on $138 billion and Inferences:
(Read yesterday's text.)
Two items to report. First, a reported comment during Lehman's bankruptcy hearing indicates that the $138 billion figure represented "630,000 securities accounts," with "a notional value...in the trillions." Second, I called the New York Branch of the Federal Reserve and spoke with a polite lady in Media Relations. I gave her several details about what I want to find out from the Fed, plus my contact information. They haven't called me back, though something tells me they've got a lot on their hands at the moment. Stay tuned.
The October Elliott Financial Forecast published today -- given the events of the past week and month, I can safely say you don't want to be without the unique analysis and forecasts it offers. Click here to learn more.