I’ve spent the weekend without the internet thanks to the innovative new AT&T program Incompetence 2.0, so I’m kind of at a loss as to what’s going on with the economy right now. From what I’ve been able to gather in the last few minutes, it looks as though we, the people of America, are getting ready to bail out our failing financial institutions to the tune of $700 billion. Everyone’s trying to make sense of it. Some are convinced it’s the final stage of a coup to take over our country. Most economists, however, seem to agree that a bail out of some kind is necessary in order keep the world financial markets from spiraling into collapse. The part that I’m struggling with is the hypocricy of it. I don’t like the idea of bailing out the greed-driven investment bankers on Wall Street while doing next to nothing for the hard-working families across America who are losing their homes to foreclosure. One of my favorite quotes to come out of this so far is from Jim Moore, who said, “Taxpayers didn’t get to enjoy any of the big money profits on the phony financial instruments like derivatives or bundled sub-prime paper, but we get the privilege of paying for their debt and failures.”

It’s horribly unfair. We, the American people, aren’t allowed to share in the profits when times are good – no, that would be socialism – but you can bet your hot buttered ass that we’re allowed to contribute toward the clean up… I know that the ramifications of not acting could be catastrophic, but I’m inclined to say “Fuck ‘Em.” I’m tired of bailing out the greedy white men of privilege who sit in power and continually fuck things up, while all the time criticizing the “welfare queens” among us who they perceive as getting rich on their tax dollars. These men should be in prison, but, instead, we’re talking about paying them bonuses for what they’ve done… You did know that, right?

Yeah, as I understand it, a significant portion of the $700 billion would go toward filling the golden parachutes of the men who led Lehman Brothers and others into ruin. Some, like House Financial Services Committee Chairman Barney Frank (D-Mass.), are trying to decouple bonuses from the bail out, but he’s being fought on it. According to Frank, Treasury Secretary Henry Paulson says the bill won’t happen if it doesn’t include big paydays for the men at top. It’s worth pointing out that Paulson, prior to joining the Treasury, was Chairman and Chief Executive Officer of the investment bank Goldman Sachs.

I can see debating whether or not these individuals should serve time in prison, but it’s absolutely beyond me how we can be discussing, even for one minute, whether or not we should pay them hundreds of millions of dollars in bonuses for, at best, failing miserably, and, at worst, acting unethically and putting our entire country in jeopardy… And make no mistake – our country is in jeopardy. The headline of the UK “Telegraph” today is, “Default by the US government is no longer unthinkable.” We are teetering on brink of collapse.

We should be calling for the heads of every man and women serving in Federal government. They knew that this was coming. They knew, as they were working with financial industry lobbyists to slash regulations, that this day would come. How many years ago was it now that Warren Buffet warned us about the “mega-catastrophic risk” we were facing? But, there was profit to be made. The dollars were flowing, and no one gave a shit. And now, now that the money’s not so easy to come by, now that the spigot is tightening and it’s coming time to face the consequences, I guess it’s our job to come to the rescue and make sure their golden parachutes deploy safely, so they can live out the rest of their days in the manner in which they’ve become accustomed. In a more just world, they’d be pleading for their lives, but we’ll make sure they can keep their vacation homes, and that their kids can still go to Harvard Business School. We do, after all, need our generation of leaders, right?

There are lots of articles floating around. Here are a few clips. I’d encourage you to follow the links and read more.

Paul Krugman:

…Here’s the thing: historically, financial system rescues have involved seizing the troubled institutions and guaranteeing their debts; only after that did the government try to repackage and sell their assets. The feds took over S&Ls first, protecting their depositors, then transferred their bad assets to the RTC. The Swedes took over troubled banks, again protecting their depositors, before transferring their assets to their equivalent institutions.

The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world…

Josh Marshall:

…I’m quite convinced that some drastic action needs to be taken to avoid a cascading and debilitating series of crises. But the more I look at this plan, the more wrongheaded it seems. But if I’m understanding this deal, the taxpayers are going to pony up close to a trillion dollars to take bad debts off the hands of financial institutions who were foolish enough to make the deals in the first place. And in exchange, I think the tax payers get nothing? Sebastian Mallaby makes the good point that this is radically different than the S&L Crisis RTC which was liquidating the assets of thrifts that had already gone belly up — paid the ultimate price, as it were. And as the insurer on the accounts, the government inherited the assets anyway. It was just a matter of selling them off. But here the point is to take these bad debts off these companies’ hands so they can go back to being profitable businesses. This is moral hazard on steroids if I’m understanding this right….

Mulling this more and listening to the insights in your emails, the key clearly is how much the government pays for these distressed assets. They may be bad debts. But that doesn’t mean they have no value at all. Bought at the right prices and given time on the books — which the government is uniquely in a position to allow them to do — the government could even turn a profit on some of them. But the key is at what price they’re bought and whose get bought. That seems like precisely the kind of process that requires oversight and accountability to make sure the taxpayer doesn’t get fleeced…

Sebastian Mallaby:

With truly extraordinary speed, opinion has swung behind the radical idea that the government should commit hundreds of billions in taxpayer money to purchasing dud loans from banks that aren’t actually insolvent. As recently as a week ago, no public official had even mentioned this option. Now the Treasury, the Fed and congressional leaders are promising its enactment within days. The scheme has gone from invisibility to inevitability in the blink of an eye. This is extremely dangerous.

The plan is being marketed under false pretenses. Supporters have invoked the shining success of theResolution Trust Corporation as justification and precedent. But the RTC, which was created in 1989 to clean up the wreckage of the savings-and-loan crisis, bears little resemblance to what is being contemplated now. The RTC collected and eventually sold off loans made by thrifts that had gone bust. The administration proposes to buy up bad loans before the lenders go bust. This difference raises several questions.

The first is whether the bailout is necessary. In 1989, there was no choice. The federal government insured the thrifts, so when they failed, the feds were left holding their loans; the RTC’s job was simply to get rid of them. But in buying bad loans before banks fail, the Bush administration would be signing up for a financial war of choice. It would spend billions of dollars on the theory that preemption will avert the mass destruction of banks. There are cheaper ways to stabilize the system…

Senator Bernie Sanders:

…Now, having mismanaged the economy for eight years as well as having lied about our situation by continually insisting, “The fundamentals of our economy are strong,” the Bush administration, six weeks before an election, wants the middle class of this country to spend many hundreds of billions on a bailout. The wealthiest people, who have benefited from Bush’s policies and are in the best position to pay, are being asked for no sacrifice at all. This is absurd. This is the most extreme example that I can recall of socialism for the rich and free enterprise for the poor.

In my view, we need to go forward in addressing this financial crisis by insisting on four basic principles:

(1) The people who can best afford to pay and the people who have benefited most from Bush’s economic policies are the people who should provide the funds for the bailout. It would be immoral to ask the middle class, the people whose standard of living has declined under Bush, to pay for this bailout while the rich, once again, avoid their responsibilities. Further, if the government is going to save companies from bankruptcy, the taxpayers of this country should be rewarded for assuming the risk by sharing in the gains that result from this government bailout.

Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:

a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;

b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and

c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies’ stock goes up.

(2) There must be a major economic recovery package which puts Americans to work at decent wages. Among many other areas, we can create millions of jobs rebuilding our crumbling infrastructure and moving our country from fossil fuels to energy efficiency and sustainable energy. Further, we must protect working families from the difficult times they are experiencing. We must ensure that every child has health insurance and that every American has access to quality health and dental care, that families can send their children to college, that seniors are not allowed to go without heat in the winter, and that no American goes to bed hungry.

(3) Legislation must be passed which undoes the damage caused by excessive de-regulation. That means reinstalling the regulatory firewalls that were ripped down in 1999. That means re-regulating the energy markets so that we never again see the rampant speculation in oil that helped drive up prices. That means regulating or abolishing various financial instruments that have created the enormous shadow banking system that is at the heart of the collapse of AIG and the financial services meltdown.

(4) We must end the danger posed by companies that are “too big too fail,” that is, companies whose failure would cause systemic harm to the U.S. economy. If a company is too big to fail, it is too big to exist. We need to determine which companies fall in this category and then break them up. Right now, for example, the Bank of America, the nation’s largest depository institution, has absorbed Countrywide, the nation’s largest mortgage lender, and Merrill Lynch, the nation’s largest brokerage house. We should not be trying to solve the current financial crisis by creating even larger, more powerful institutions. Their failure could cause even more harm to the entire economy.

So, how bad is the legislation being pushed by the Treasury? Will it do for finance what the Patriot Act did for privacy? And, what happens if this doesn’t go though? Do things really spiral out of control? Will other industries be sucked down? Do more people lose their homes? Do we give up even more equity in our country to the Chinese and the Saudis? If not, how do we stop the bill from going through? Or, perhaps more appropriately, how do we edit the bill so that it better holds people accountable for their roles, and protects us from having this happen again? Who do we write to? Where do we protest?

[Thanks to Jim and Arun for many of the links.]

[note: It’s worth pointing out that this $700 billion is 7-times what we’d need to enact the Center for American Progress’s Green Recovery Plan we were discussing here a few days ago.]