In October 25, 2002 a gray day turned dark. All morning the weather had been trying to make up its mind, like an irritating, indecisive child. The clouds would reach down to touch the earth, then melt away. The sky filled alternately and sometimes simultaneously with stinging rain, sleet, and clinging snow. It was a day when it was easy to imagine fantastic rumors, conspiracy theories, and perhaps catch a glimpse of the Anishinabe trickster, Manabozho, as he painted ghostly outlines with the mist. Somewhere up in the tumbling gray shapes that wrestled above a small plane was carrying Minnesota Senator Paul Wellstone, his wife, daughter and campaign aides to a name that has haunted American history, Virginia, only this was Virginia, Minnesota.
As the pilot began his approach to land, he inexplicably veered off course only a few miles from the airport runway and the plane spun out of control downward into the ground, killing all aboard. An eyewitness recalled that the twin engines seemed louder than those on aircraft that usually went over his house, causing him to look out the window where he glimpsed the belly and wings of the leased King Air. A minute later he heard an impact which he likened to a rifle shot. At that moment as the airport radar display swung yet again in its sweeping arc, it recorded only empty darkness where once had been a ghostly signal. When the tangled mass of metal was finally spotted, it took a great deal of effort to reach the site, hacking through thick pines, spruce and underbrush. It has taken a great deal more effort to understand what happened.
The Strange Twists of History
Almost six years after Wellstone’s death, in the midst of a rainy afternoon during another election and the worst financial crisis in American history, that plane crash suddenly took center stage again. It became tied to what I term the week that changed America. Two events occurred that week that forever altered the nature of American democracy–and not in ways Paul Wellstone would have approved. The first was the Vice Presidential debate and the second was the approval of the bailout bill.
Paul could not have imagined what has happened to America in the years since his death, but I am not sure he would have been surprised given his life-long commitment to the principles of Liberal America, his distaste for what he termed Republican Lite and I have termed Vichy Democrats, and finally his aversion to the Republican Counterrevolution being implemented by one George W. Bush.
That Bush should become the equivalent of Herbert Hoover probably would not have surprised Paul, but the seriousness of the crisis and the nomination of Sarah Palin would have.
Event One–Sarah Palin
In the first essay I pointed to the Vice Presidential debate involving Sarah Palin, a woman unfit for higher office. As I noted, Palin isn’t the first person unsuited to run for VP or President, for she joins such luminaries as Spiro Agnew and Warren Harding. What makes the Palin case so special is the role the media played in building up her candidacy and the depth of her ignorance about even the most elementary aspects of the office she seeks.
When you and I apply for a job we make it a point to learn about the job requirements and the company offering the job, but not Sarah Palin, her ignorance or arrogance or both, extends to not caring to know about the Constitutional duties of the second-highest office in the land.
The Original Bailout Bill
Two weeks ago I argued that the bailout bill that failed to pass Congress was one of the most dangerous pieces of legislation proposed in American history because it granted the Secretary of the Treasury what amounted to dictatorial powers. Not even Franklin Roosevelt in the depths of the Great Depression ever argued for investing the degree of control over the financial system in one person that is in the bailout bill. The original legislation, as written, would have made the Secretary of the Treasury the single most powerful cabinet official in American history.
In the one-hundred page bill were several paragraphs about the powers of the Secretary that were enough to make me wonder whether American democracy had ended. Here is the actual language:
The Secretary is authorized to establish a troubled asset relief program (or ‘‘TARP’’) to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary, and in accordance with this Act and the policies and procedures developed and published by the Secretary.
Later on in the bill you begin to see how far-reaching this authority becomes:
Upon request of a financial institution, the Secretary may guarantee the timely payment of principal of, and interest on, troubled assets in amounts not to exceed 100 per- cent of such payments. Such guarantee may be on such terms and conditions as are determined by the Secretary, provided that such terms and conditions are consistent with the purposes of this Act.
So in plain English, the Secretary of the Treasury could decide who to bail out and determine the terms and conditions of the bailout!
As if that weren’t enough, why not give the Dictator of the Treasury the ability to waive all contract procedures, which is exactly what the bill proposed:
For purposes of this Act, the Secretary may waive specific provisions of the Federal Acquisition Regulation upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest.
The New Bailout Bill and Paul Wellstone
Luckily that bill did not pass, so Congress went back to work. Curiously in their comments to the press few legislators mentioned the issue of granting extraordinary power to the Secretary of the Treasury, which should have made as us nervous as the House, Senate and White House worked to forge a deal that all could accept.
For those of us in Minnesota the final bailout bill is a mixed blessing because the Senate attached it as an amendment to what had come to be known as the “Wellstone Bill” after former Minnesota senator Paul Wellstone who fought to require health insurers to provide equity in mental health and substance disorder benefits. Wellstone had introduced such legislation before his tragic death in a plane crash in Northern Minnesota just weeks before an election in which he was running for a second term.
Supporters of Wellstone vowed to fight for mental health parity as a tribute to the former Senator and his wife. Now the Wellstone Bill has finally passed, but along with it comes what now must be known as the bailout amendment.
The New Bailout Amendment
What is officially known as H.R, 1424 is a bill thick enough to have given hernias to the poor pages and interns who had to carry copies of it in the inner recesses of the Capitol, for it totals an astounding 451 pages!
I read the previous bailout bill cover to cover–all one hundred-plus pages, but I cannot claim to have read this one–and I doubt many legislators did either or the press. I did read enough to report about what has happened to the Dictator of the Treasury. Perhaps leery of the direct way in which they crowned the Secretary Dictator, this version requires you to dig a bit deeper. However here is the very same TARP clause that was in the first bill:
The Secretary is authorized to establish the Troubled Asset Relief Program (or ‘‘TARP’’) to purchase, and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary, and in accordance with this Act and the policies and procedures developed and published by the Secretary.
The second clause that worried me–it’s in there also on page ten:
Upon request of a financial institution, the Secretary may guarantee the timely payment of principal of, and interest on,
troubled assets in amounts not to exceed 100 percent of such payments. Such guarantee may be on such terms and conditions as are determined by the Secretary, provided that such terms and conditions are consistent with the purposes of this Act.
And what about the troubling third clause? Unfortunately it is in there also on page 23:
For purposes of this Act, the Secretary may waive specific provisions of the Federal Acquisition Regulation upon a determination that urgent and compelling circumstances make compliance with such provisions contrary to the public interest.
The Dictator of the Treasury
I hate to repeat myself, but the extraordinary powers placed in the hand of the Secretary demand I do so. PLEASE, PLEASE if you read nothing else in this essay or this bill read the above paragraph; then read it again. The language needs no explanation, but it should inspire the anger of every American who still has an ounce of the blood that flowed through those folks who hosted the Boston Tea Party.
I am no expert on federal law, but I have read a fair number of Supreme Court cases and legislation and studied enough American history to tell you that there has been no instance that I know of in which a government official has not only been allowed but been directed to act “contrary to the public interest.” If the Dictator of the Treasury is not acting in the public interest whose interest is this person acting on behalf of? Nancy Pelosi?
That such a provision should be attached to a bill championed by Paul Wellstone probably moved that huge boulder that serves as his tombstone a few feet. I would not be surprised if around midnight of the day that bill passed it may have even jumped off the ground.
The Wrong Analogy
Investing the Secretary of the Treasury, a former Wall Street executive, with extraordinary powers to bail out firms he may have dealt with or even worked for may be one of the most absurd pieces of legislation ever passed by Congress. Why not just give Wall Street the power to bail itself out?
There is little question America suffers from a liquidity paralysis. Banks are refusing to lend money to other banks or to individuals for fear of being caught in the same mess that took down Bear Stearns and AIG. So essentially we have the equivalent of the Depression’s bank holiday, only this time it is the banks themselves who are refusing to do business.
People are finding it difficult to secure auto or real estate loans. My son even reported that student loans are caught up in the crisis. As for businesses large and small, they cannot acquire the capital needed for plant improvements, research and development or even funds to pay workers.
There is much talk among the pundits about the similarity of current events to the Great Depression, but to me the pundits have the wrong Depression. The situation we face is much more reminiscent of the other major depression in American history–the Depression of the 1890s. Unfortunately little data exists on the severity of that depression, but by all accounts it was close to, if not even worse than the depression of the 1930s.
Why the 1890s?
The current financial mess is brought on by two factors: increasing economic concentration in the financial industry and increasing speculation by these financial firms which the notorious repeal of the 1930s Glass-Steagall Act defined as “too big to fail.” The first was not present during the 1930s. Back then America did not have the financial concentration it does today.
In 1935, after the passage of Glass-Steagall, the Federal Deposit Insurance Corporation notes:
There are 9,027 state banks and 4,692 national banks. The approximate number of banks remains consistent until the 1980s.
It was two decades ago that the financial industry began the wave of concentration which in part is accountable for this mess. If you are of a certain age, you may remember the days of the local bank just as you remember the mom and pop grocery store, independent hardware and clothing stores, and a local cafe that served ten cent coffee. All are gone.
In 2004, the FDIC notes:
By 2004, three banks exceed a trillion dollars in assets. The number of banks declines. The number of branches increases.
This degree of concentration recalls not the 1930s but the Gilded Age in which economic concentration reached a degree still unmatched in American history. As we will see in Part Two it is the concentration along with rampant speculation that make the current crisis more reminiscent of the 1890s, a crisis demanding a far different solution than that proposed in the bailout amendment.
The Ghost of Paul Wellstone
Even Manabozho would have trouble concocting a story in which the bill that supporters of the late Paul Wellstone have worked for more than six years to pass, should become the vehicle for a financial bailout amendment that essentially makes the Secretary of the Treasury the most powerful government official in American history. Nor would Manabozho imagine that the Wellstone Bill should find itself at the center of the worst economic crisis since the Great Depression, proposing a solution that I cannot believe the late Paul Wellstone would have supported.
So Aan issue he passionately worked for during most of his Senatorial career becomes the vehicle for much that he adamantly opposed much of his Senate career.
In The Conscience of a Liberal, Paul Wellstone has one of the best discussions ever written of how Washington works. Near the end of the book he writes:
Policy is not about techniques of communication [take that George Lakoff]. Over and over I hear my Democratic colleagues talk about how to better deliver our “message.” But the question is not how to communicate our agenda, but whether we have an agenda worth communicating.
After the bailout amendment, that sentence seems more apt than ever.
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