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Let it be written: If the Senate-passed financial services bailout bill turns out to save us from the next Great Depression, we will owe a deep debt of gratitude to… chicken poop. If not, we can simply say the entire proposition turned out to be little more than, well, you know.
After the House walked away from the bailout on Monday, thanks to a curious coalition of hard core conservative Republicans and liberal Democrats, the Senate leapt into the fray and passed the measure with uncharacteristic swiftness last night. And it did so in a time-honored way, by buying votes one at a time. And what better way than to tack on a shameless collection of tax extenders, which were not only a motley collection of special interest give-aways, but were also entirely funded with borrowed money. The House backed the same provisions, but at least had the decency to pay for some of them with offsetting tax hikes.
Not the Senate, which for years has steadfastly refused to pay for any of these tax breaks. So, it has added a cool $100 billion dollars in unfunded tax give-aways to $700 billion in bailout money. Just imagine: We are going to fix a credit crunch driven by massive leverage by, of all things, borrowing more money. We are going to replace hundreds of billions of dollars of private debt with a hundreds of billions of public debt. Wall Street may have temporarily forgotten how to borrow money, but Washington surely has not. These second rate investment bankers have now turned to the real dukes of debt, the true rajas of red ink—Congress and the President-- to show them the real road to long-term financial ruin.
The madness only got worse over the past few weeks. First, in an effort to get through the short-term financial crisis, regulators encouraged a handful of mega-banks to acquire failing financial institutions such as Washington Mutual and Wachovia. These arranged marriages look a bit like the shotgun wedding of two high school dropouts. It may make the relatives feel better, but the long-term prospects are dicey at best.
In this case, though, Uncle Sugar will take care of everything. If Citigroup and Bank of America were too big to fail before, imagine what they are like today. Anybody think Citi/Wachovia or Merrill Lynch/Bank of America/Countrywide would ever be allowed to go down? Then, the Senate compounded the mess by increasing the government’s liability for bank failures from $100,000 per account to $250,000. I’m sorry. I thought the House initially rejected the bailout because taxpayer obligations were too big. Didn’t we just make them bigger?
What does all of this have to do with chicken poop? Thought you’d never ask. It turns out the hundreds of pages of tax breaks the Senate tacked on to help assure the bailout’s passage includes one of my favorites—a tax credit for turning biomass (aka chicken waste, garbage and, apparently even algae) into jet fuel. Now, I have nothing against alternative energy. But more tax credits? Did we learn nothing from the ethanol debacle?
If you think I’m kidding, you could look it up on page 184 of the now 451 page bill (by the way, didn’t this whole enterprise start off with a bill that was 3 pages long)?
Are we a great country, or what?
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