I have taken a quick look at the legislation. It is broad and a bit scary but I do see three limitations to Paulson’s power.
1. The $700 Billion limit.
2. The reporting to Congress after three months and semiannually thereafter.
3. The two year limits of the bill.
We can argue as to whether these limitations are appropriate or whether more are needed. Hopefully that is what our representatives are doing!
Yes- but:
b) Necessary Actions.—The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:
2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
Sec. 8. Review.
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.
Sec. 2. Purchases of Mortgage-Related Assets.
(b)(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;
Sec. 8. Review.
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.
1. The $700 Billion limit.
2. The reporting to Congress after three months and semiannually thereafter.
3. The two year limits of the bill.
The $700 billion is $700 billion AT ANY ONE TIME. The entire portfolio of bad loans of any of FNM/FRE/C/LEH/AIG and the liabilities created by the CDSs written on same could be cycled through HP’s credit line $400-$500-$600 billion at a time.
Since there is explicitly no limitation upon what HP can do, nor is there any ability nor recourse upon any action he might take, which would presumably include lying to Congress as to the progress being made (or not) disposing of these toxic assets, such limits are no limits at all. Forget not that before any and all of this reached critical mass, the sub-prime issue was “contained” according to Mr. Paulson. Then we got the Fed-financed BSC takeunder. Shortly thereafter, FNM/FRE were “well capitalized” despite having paid fines for shifting their earnings and having not filed adequate financials for some three years. KaBoom on Fannie. Then, LEH was NOT to be bailed out. But the Tsy STILL furnished some numbers of billions in order for LEH’s TTT (Toxic Trove of Trash) to be unwound. Then, AIG would not get bailed out. Then, AIG DID get a bridge loan (which I don’t consider a bailout...I consider it highly draconian) and now this.
You’ll excuse me, but Mr. Paulson has a well-documented history of lying.