Fat Cats First

By Dan Froomkin
Special to washingtonpost.com
Tuesday, September 23, 2008; 12:47 PM

Looking back on the wreckage of the Bush era, there is one undeniable bright spot: It's been a very good time to be a fat cat. A consistent result of virtually every major Bush policy, from tax cuts to war, has been to enrich the already wealthy.

The pinnacle of Bush's legacy may turn out to be a $700 billion bailout of the high-flying Wall Street firms that made enormous fortunes -- and rewarded themselves with billions in bonuses-- leveraging risky mortgage-backed assets. Now that those firms are in deep trouble, the Bush administration wants taxpayers -- many of whom are facing their own financial troubles -- to come to the rescue.

And, in case there's any doubt that it's fat-cats-first with this White House, the news today is that Bush aides are balking at moves that would require companies accepting bailouts to cap executive pay, or give taxpayers equity for their contributions.

Lori Montgomery and Paul Kane write in The Washington Post: "The Bush administration is resisting changes to the measure being sought by Democratic leaders and many Republicans, including one that would grant the government authority to cut executive pay at firms that participate in the bailout and another that would guarantee that taxpayers share in the profits if those firms recover financially.

"Meanwhile, rank-and-file lawmakers -- returning to Washington after a weekend in their districts -- voiced outrage that taxpayers were being asked to pay for the excesses of Wall Street and that Congress was being prodded to rubber-stamp the biggest federal intervention in the private market since the Great Depression."

Here's the official White House position on CEO pay from spokesman Tony Fratto, via Thinkprogress.org: "We certainly understand and are sympathetic to the sentiment regarding the pay of CEOs and senior management of these firms, but we have to focus on the problem, and the problem is that we need these firms to participate in the program and sell us this debt. Having punitive measures would provide a disincentive for firms to participate, and that would make the program much less likely to succeed.

"CEO compensation and corporate governance in public companies are very important issues -- especially when receiving taxpayer support -- but we need to be focused on fixing this problem in our markets right now. We can and should return to those issues once we get this legislation passed."

Peter G. Gosselin and Richard Simon write in the Los Angeles Times: "The action now centers on bargaining between Treasury Secretary Henry M. Paulson and Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee. . . .

"Frank wants to give the government the power to cap the compensation of executives of the firms helped by the bailout.

"'I just think it is inconceivable . . . that the taxpayer should put money at risk because of bad decisions made by people who would then continue to be rewarded without any restriction,' Frank said.

"But administration officials said Paulson was 'dead set' against a compensation cap, fearing that it would discourage companies from taking advantage of the program."

From a statement by Rep. Henry Waxman, chairman of the House Oversight committee and an influential House Democrat: "The Administration's plan completely eviscerates the concept of moral hazard. It would enrich the Wall Street executives whose reckless investments caused the financial crisis. The taxpayer is being asked to risk billions to protect the bonuses of investment bankers. . . .

"Congress needs to insist on firm limits on executive compensation. No financial institution that gets federal relief should pay its CEO more than $2 million annually. That's over ten times what the Secretary of Treasury makes."

Peter S. Goodman writes in the New York Times that some economists say "that any bailout must pinch the people who have run the companies now needing rescue, along with their shareholders, addressing the unseemly reality that executives have amassed beach houses and fat bank accounts while taxpayers are now stuck with the bill for their reckless ways."

Allison Linn writes for MSNBC: "As Americans digest a dizzying series of events that has left Wall Street shaken to its core, the mood on Main Street is shifting from fear to loathing. . . .

"They think it's despicable that many of these top executives could walk away with millions of dollars in their bank accounts, even as some average Americans see their retirement plans thrown into chaos."

Eugene Robinson writes in his Washington Post opinion column: "Why shouldn't the executives who put their companies at risk by making unwise investments pay a price for their lack of prudence?

"We can't just let the system collapse -- nobody wins in that event. But I thought one of the fundamental tenets of capitalism was a direct relationship between risk and reward. The Masters of the Universe who created this mess ought to share the pain of cleaning it up."

E. J. Dionne Jr. writes in his Washington post opinion column: "One core doubt about this bailout is whether taxpayers will be left holding a bag of dreadful investments that reckless financial mavens get to unload without having to part with their houses in the Hamptons. This isn't just rhetorical populism: There is a moral problem for capitalism itself if taxpayers take on a burden created by the foolishness of the privileged and get little compensation in return."

Dana Milbank writes in The Washington Post: "After 7 1/2 years of drift, President Bush has finally returned to his compassionate conservative roots with a heartfelt plea to Congress to help a needy and deserving group: those Wall Street CEOs who, for all their hard work, have been unable to lift themselves up by their wingtips."

The Rush to Action

Montgomery and Kane note in their Post story: "As activists and other lobbyists weighed in on the plan, the pressures on lawmakers were reminiscent of those after the Sept. 11, 2001, terrorist attacks, when Congress, out of a sense of urgency, greatly expanded the executive's national security powers.

"'All of a sudden, things are happening lickety-split, resulting in an enormous concentration of executive power the likes of which no one has seen in the financial area before,' said Stephen Kroll, a professor at American University's School of International Service."

David Herszenhorn write in the New York Times: "Senator Richard J. Durbin (D-Ill.), in a speech on the Senate floor, angrily recalled that the administration had similarly requested swift approval of its plan to attack Iraq. 'Just as we should have asked more questions about weapons of mass destruction six years ago before we found ourselves in this war,' Mr. Durbin said, 'we need to ask questions today about where this is leading.' . . .

"The skepticism was equally palpable at the other end of the ideological spectrum.

"'This is going way too fast,' said Representative Mike Pence, Republican of Indiana and a conservative leader who said constituents he met this weekend were flabbergasted at the plan. 'The American people don't want Congress to make haste with the financial recovery legislation; they want us to make sense.'

"And [Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee], said: 'Congress must immediately undertake a comprehensive, public examination of the problem and alternative solutions rather than swiftly pass the current plan with minimal changes or discussion. We owe the American taxpayer no less.'"

Bob Herbert writes in his New York Times opinion column: "Does anyone think it's just a little weird to be stampeded into a $700 billion solution to the worst financial crisis since the Great Depression by the very people who brought us the worst financial crisis since the Great Depression?

"How about a second opinion?

"Everything needs much closer scrutiny in these troubled times because no one even knows who is in charge, much less what is going on. Have you ever seen a president who was more irrelevant than George W. Bush is right now?"

The Trust Problem

Goodman writes in the Times that the common reaction among economists "is a visceral discomfort with giving Treasury Secretary Henry Paulson Jr. -- himself a product of Wall Street -- carte blanche to relieve major financial institutions of bad loans choking their balance sheets, all on the taxpayer's bill.

"There are substantive reasons for this discomfort, not least concerns that Mr. Paulson will pay too much, thus subsidizing giant financial institutions. Many economists argue that taxpayers ought to get more than avoidance of the apocalypse for their dollars: they ought to get an ownership stake in the companies on the receiving end.

"But an underlying source of doubt about the bailout stems from who is asking for it. The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress.

"'This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything,' said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington. 'It's almost amazing they can do this with a straight face. There is clearly skepticism and anger at the idea that we'd give this money to these guys, no questions asked.'"

The New York Times editorial board writes: "The nation's financial mess was caused to a great degree by a culture of lax regulation and even less oversight, in which ordinary Americans were told to trust the government and Wall Street to do the right thing.

"President Bush's proposed solution, which he wants Congress to authorize immediately, tells taxpayers to write a check for $700 billion and trust the government and Wall Street to do the right thing -- with inadequate regulation and virtually no oversight. . . .

"In an appalling, though familiar fashion, the ground rules proposed by the Bush administration are wholly unacceptable -- as are its tactics. . . .

"We've seen this kind of over-reaching from the Bush administration before. It has usurped far too many powers under a banner of urgency -- think wiretapping -- and abused those powers. . . .

"We know that it will be hard for lawmakers to resist White House pressure -- especially if the Dow continues to drop. But it is essential that Congress takes the time to get the bailout right, even if it cuts into lawmakers' campaigning."

The Los Angeles Times editorial board writes: "For an administration accustomed to overreaching, such a request for unfettered authority is neither surprising nor welcome; the Bush White House is in no position to ask for that kind of trust. Congress should make the Treasury's bailout efforts subject to the same oversight -- by Congress and the courts -- as its nonemergency actions, while also requiring that banks compete for aid and that taxpayers be protected against wasteful spending on overpriced assets."

Bush's Words

Patrick Worsnip and Matt Spetalnick write for Reuters: "Bush used his farewell speech to the United Nations to offer assurances of his commitment to stabilizing world markets. . . .

"'I can assure you that my administration and our Congress are working together to quickly pass legislation approving this strategy, and I'm confident we will act in the urgent time frame required,' Bush said."

Terence Hunt writes for the Associated Press that since arriving in New York, Bush has been trying to assure "world leaders that the plan outlined by Treasury Secretary Henry Paulson 'is a robust plan to deal with a serious problem.

"'And now they're wondering about our Congress,' Bush said. 'And I've assured them as well, having spoken to the leaders of Congress of both political parties, that there is the desire to get something done quickly.'

"Bush spoke during a meeting at the Waldorf Astoria Hotel with Pakistan's new president, Ali Zardari. . . .

"White House spokesman Tony Fratto told reporters flatly the legislation will pass this week.

"For that not to happen, he said, would be 'unthinkable.'"

Cheney on the Case

Hunt also notes: "Vice President Dick Cheney, White House chief of staff Josh Bolten and Keith Hennessey, the director of the president's economic council, were on Capitol Hill lobbying on the president's behalf" and meeting "with conservative lawmakers from Bush's party who oppose the bailout."

Fox News reports: "House conservatives are seething about the 'big government' approach that they say President Bush is taking in the financial crisis. They don't like how much power it cedes to the Treasury or the price tag.

"'(Cheney) is going to walk into a firing squad. I hope he brought his hunting rifle,' an aide to one House conservative told FOX News."

Bush at the UN

Deb Riechmann writes for the Associated Press: "President Bush, who once expressed disdain for the United Nations, says multinational organizations are now 'needed more than ever' to combat terrorists and extremists who are threatening world order.

"In his eighth and final speech to the U.N. General Assembly on Tuesday, Bush said the international community must stand firm against the nuclear ambitions of North Korea and Iran. He scolded Russia for invading neighboring Georgia. And he said that despite past disagreements over the U.S.-led war in Iraq, members of the U.N. must unite to help the struggling democracy succeed."

Michael Abramowitz and Colum Lynch wrote in this morning's Washington Post that "there's little doubt that many U.N. diplomats and bureaucrats will be happy to see [Bush] go. Few have been fans of what they see as his cowboy style of diplomacy, epitomized by the invasion of Iraq without a Security Council resolution in 2003.

"For his part, Bush has no great enthusiasm for the United Nations, which he views as a morally compromised organization that has not stepped up to challenges such as genocide in Darfur, Saddam Hussein's repeated violations of Security Council resolutions and human rights abuses elsewhere in the world, said former administration officials and others close to the president.

"Still, Bush has largely set aside his feelings. He has turned to the United Nations during his tenure to bring pressure on Iran and North Korea to halt their nuclear programs, to force Sudan to stop the killing in Darfur and to secure international assistance for the political and economic reconstruction of Iraq and Afghanistan."

Meanwhile, Steven Edwards reports for Canwest News Service: "Sarah Palin is set to upstage George W. Bush in New York Tuesday as the Republican vice-presidential candidate meets world leaders and the singer Bono on the margins of the United Nations World Summit."

Pakistan Watch

Deb Riechmann writes for the Associated Press: "President Bush on Tuesday expressed sorrow for the victims of a deadly truck bomb that devastated a Marriott hotel in Islamabad and acknowledged tensions over U.S. military incursions into Pakistani territory.

"Publicly, Bush and President Asif Ali Zardari, who met on the sidelines of the U.N. General Assembly, exhibited a show of solidarity against extremists. Privately, the two leaders must try to craft a delicate strategy to make progress in fighting militants while keeping U.S.-Pakistan relations on an even keel until Bush leaves office in four months."

Afghanistan Watch

Eric Schmitt and Thom Shanker write in the New York Times: "Four months before President Bush leaves office, his top civilian and military aides are conducting four major new reviews of the war strategy and overall mission in Afghanistan, which have exposed internal fissures over American troop levels, how billions of aid dollars are spent, and how to cope with a deteriorating security situation in neighboring Pakistan.

"The most ambitious of the assessments, run by the White House, begins in earnest this week with a series of high-level meetings, administration officials said. Officials have been directed to produce detailed recommendations within about two weeks for Mr. Bush's most senior advisers on a broad range of security, counterterrorism, political and development issues. . . .

"As the Bush administration enters its twilight months, many senior national security policy officials and military commanders say there is a new urgency to put the mission in Afghanistan on the right path. Among the reasons are the standard updates required of military strategy in a time of war. But officials acknowledge there are aspects of legacy-building, an effort to make sure the next president, whoever he is, cannot accuse the Bush administration of leaving Afghan policy in disarray."

Book Watch

Michiko Kakutani writes in the New York Times that "In a trenchant new book, 'America and the World: Conversations on the Future of American Foreign Policy,' [Zbigniew] Brzezinski and [Brent] Scowcroft (along with the Washington Post columnist David Ignatius, acting as moderator) incisively discuss the fallout of the Bush administration's war in Iraq, including the empowerment of Iran, the recruitment of more terrorists and the inflaming of hatreds within the region. . . .

"In addition to the continuing problems in Iraq, Mr. Scowcroft says, there exists now the overarching 'possibility of a general Middle East conflict in which the costs of Iraq would look minuscule.' . . .

"Unlike neoconservative ideologues in the current administration, the two former national security advisers say that talks with hostile parties can be a useful tool, and they argue that in the wake of 9/11, the Manichean language employed by President Bush has alienated allies and aggravated resentments in many parts of the world.

"They point to the importance of alliances in an increasingly complicated and interconnected world. And they object to what Mr. Scowcroft refers to as the propagation of 'an environment of fear' at home, which Mr. Brzezinski says has made Americans 'more susceptible to demagogy' and to 'a fearful paranoia that the outside world is conspiring through its massive terrorist forces to destroy us.'"

Fundraising Watch

Cynthia Burton writes in the Philadelphia Inquirer: "President Bush took some time off yesterday from the global financial crisis to help a couple of New Jersey congressional candidates with financial crises of their own.

"The president attended a fund-raiser in this wealthy Monmouth County community for Republican candidates Chris Myers, the mayor of Medford, and Leonard Lance, a state senator from Hunterdon County. Myers and Lance are being lapped by Democratic opponents in the money race for a pair of open seats."

Tickets ranged from $1000 to $10,000.

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Late Night Humor

Jay Leno, via U.S. News: "See, you know the way a bailout works? Here's the way a bailout works. A failed president and a failed Congress invest $700 billion of your money in failed businesses. Believe me, this can't fail."

Cartoon Humor

RJ Matson on Bush's new bullhorn moment, Curry on Bush's bad aim, and enter Walt Handelsman's caption contest.

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