Bailout bill loops in green tech, IRS snooping
| Bailout type | Cost to taxpayers (Source: Reuters) |
|---|---|
| Financial bailout package approved this week | up to or more than $700 billion |
| Bear Stearns financing | $29 billion |
| Fannie Mae and Freddie Mac nationalization | $200 billion |
| AIG loan and nationalization | $85 billion |
| Federal Housing Administration housing rescue bill | $300 billion |
| Mortgage community grants | $4 billion |
| JPMorgan Chase repayments | $87 billion |
| Loans to banks via Fed's Term Auction Facility | $200 billion+ |
| Loans from Depression-era Exchange Stabilization Fund | $50 billion |
| Purchases of mortgage securities by Fannie Mae and Freddie Mac | $144 billion |
| POSSIBLE TOTAL | $1.8 trillion+ |
| NUMBER OF HOUSEHOLDS PER U.S. CENSUS | 105,480,101 |
| POSSIBLE COST PER HOUSEHOLD | $17,064+ |
Last week, the Bush administration proposed a three-page bill to bail out Wall Street to the tune of $700 billion. It died in the U.S. House of Representatives earlier this week.
On Friday, though, the House approved a far bigger, broader, and beefier version of the bill--which has ballooned to a remarkable 442 pages. The vote was 263 to 171, with the bulk of the opposition coming from Republicans. Because the Senate already approved the measure, it immediately went to President Bush, who signed it into law.
On the theory that this would be a way to convince previously skeptical Democrats to approve the measure, one large chunk of the bailout bill is devoted to renewable energy, energy-efficient appliances, and so on (the "Energy Improvement and Extension Act of 2008"). The authors lured Republicans with protections from the alternative minimum tax (via the "Tax Extenders and Alternative Minimum Tax Relief Act of 2008").
That includes, as the New York Post pointed out, millions in tax breaks and related pork for kids' wooden arrows, Puerto Rican rum producers, auto race tracks, and corporations operating in American Samoa. (The likely explanation for the latter: StarKist has a large tuna-canning operation in American Samoa. And StarKist's parent company happens to be located in the district of House Speaker Nancy Pelosi.)
The bill has become, in other words, something almost unrelated to the business of bailing out Wall Street. The Beltway term for this is a "Christmas tree bill," meaning everyone gets to hang their favorite spending projects on it--though by the time Congress gets it through, it more closely resembles a slop bucket.
"We will not Christmas-tree this bill," Sen. Chuck Schumer, a New York Democrat promised a few days ago. "The times are too urgent. Everyone has their own desires and needs. It's going to have to wait."
So much for that idea.
Here's a look a some of the green-tech measures:
• One-year extension for wind and refined coal energy tax credits. A production credit for electricity produced from renewable marine energy sources (meaning through wave power and river power, or by exploiting the differences in ocean temperature). Energy credits for "small wind properties," geothermal heat pump systems, and energy-efficient residential properties.
• New renewable-energy bonds. Up to $800 billion in energy bonds may be offered to the public, with a third from "public power providers," a third from governments, and the remainder from "cooperative electric companies."
• Tax credits for "cellulosic biofuels" and for "carbon dioxide sequestration." An extension of an alternative fuel credit. Tax credits for "new qualified plug-in electric-drive motor vehicles." Bicycle commuters get a nod, as do regulations aimed at "residential top-loading clothes washers."
IRS undercover operations: Privacy invasion?
The bailout bill also gives the Internal Revenue Service new authority to conduct undercover operations. It would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on. (Think IRS agents posing as accountants or tax preparers and saying, "I'm not sure if that deduction is entirely legal, but it'll save you $1,000. Want to take it?") That section had expired as of January 1, 2008, and would now be renewed.
Starting with the so-called Anti-Drug Abuse Act in 1988, the IRS has possessed this authority temporarily, with occasional multiple-year lapses. A 1999 internal report said the IRS had 126 "trained undercover agents" working in field offices at the time. This is the first time that such undercover authority would be made permanent.
Sens. Max Baucus (D) and Chuck Grassley (R) have been pushing to make it permanent for a while, claiming (PDF) in April that: "Undercover operations are an integral part of IRS efforts to detect and prove noncompliance. The temporary status of this provision creates uncertainty, as the IRS plans its undercover efforts from year to year."
There's another section of the bailout bill worth noting. It lets the IRS give information from individual tax returns to any federal law enforcement agency investigating suspected "terrorist" activity, which can, in turn, share it with local and state police. Intelligence agencies such as the CIA and the National Security Agency can also receive that information.
The information that can be shared includes "a taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return."
That provision had already existed in federal law and automatically expired on January 1, 2008.
What's a little odd is that there's been little to no discussion of the IRS sections of the bailout bill, even though they raise privacy concerns. Treasury Secretary Henry Paulson said this week: "I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy." He never mentioned the necessity of additional IRS undercover operations.
The bailout: Details, controversy, and loopholes
As my colleagues over at CBSNews.com reported on Friday, the law authorizes the Treasury Department to create a so-called Troubled Assets Relief Program, or TARP, as well as a separate insurance fund.
The TARP program permits the Treasury to purchase mortgage-backed bonds or any other "troubled assets" from financial institutions. The idea is that because banks have become so hesitant to lend to each other, this law will help unstick the gears of the modern financial economy.
Some loopholes exist. It's possible for a bank to buy $100 billion of bad debt--perhaps in the form of subprime mortgages that are becoming quickly worthless-- declare bankruptcy, and sell it to the Treasury Department for $120 billion, or $200 billion. In other words, although the Treasury Department is supposed to look out for the best interests of taxpayers, there's no law forbidding such profits in the case of firms involved in bankruptcy, receivership, or mergers.
The Treasury Department is authorized to "guarantee" home mortgages, essentially becoming a kind of co-signer, to reduce the number of foreclosures. If the home owner stops paying his or her mortgage, taxpayers would be on the hook. The Treasury Department can also eliminate a "reasonable" amount of a home owner's mortgage debt, under section 109 of the new law, which would likely delay the process of house prices falling.
In response to grassroots pressure from Americans upset about Wall Street executives cashing in, Section 111 is titled "Executive Compensation and Corporate Governance."
It does not include, however, any statutory dollar limit on how high executive salaries of TARP bailout recipients can be. Instead, it lets Treasury Secretary Henry Paulson, the former CEO of Goldman Sachs, come up with "appropriate standards." In addition, only the top five executives will have their golden parachutes limited; all the rest will remain untouched, even if their second-tier salaries and bonuses happen to be in the millions or tens of millions of dollars.
Bear Stearns CEO James Cayne made $61.3 million from selling his shares a day after the JP Morgan bailout. Daniel Mudd, CEO of Fannie Mae, was replaced last month; he made $11.6 million in 2007. Richard Syron was chairman and CEO of Freddie Mac from 2003 until last month. He made $19.8 million last year. Martin Sullivan was ousted as president and CEO of AIG this summer, and was paid a $47 million severance package.
While salaries of failed executives will have no statutory limit, TARP-participating companies will lose a tax deduction if they pay their top executives more than $500,000 a year. The $500,000 limit only kicks in if the company offloads over $300 million in assets through TARP.
Section 115 of the law says that the administration can, after notifying Congress and waiting 15 days, purchase and hold $700 billion of assets "at any one time." (It can buy and hold $350 billion without waiting.)
This, too, is a potential loophole. It permits the Treasury Department to buy up, say, $700 billion in 2008, sell those assets off gradually over the next year at a (probable) loss, and repeat the same process in 2009. Losses to taxpayers, in other words, could exceed $700 billion. Although the Treasury Department is instructed to try to avoid losses, the text of the law does not forbid that scenario.
If the TARP ends up costing taxpayers money, the president may ask Congress to consider enacting a law to recoup "from the financial industry an amount equal to the shortfall," presumably through higher taxes. But Congress is under no obligation to do anything; a mechanism to cover the shortfall does not exist in this law.
Even though FDIC coverage will be boosted from $100,000 to $250,000 per account through December 2009, premiums to banks may not take "into account" the higher account coverage. In other words, premiums can't increase for that reason.
Also:
• This may be just the beginning of bailouts. California Gov. Arnold Schwarzenegger said Thursday that the state may need a $7 billion loan from the U.S. Treasury, according to a report in the Los Angeles Times. That's because the state has spent more than it takes in through tax revenue, with an annual budget deficit of $14 billion or more, even though its individual income tax rate is arguably the highest in the nation.
• CBS News' John Bentley reports from Arizona that Republican presidential candidate John McCain is taking some credit for the bailout's passage: "I'm glad I suspended my campaign and went back to Washington to bring, and help bring, House Republicans to the table," he said on Friday. Democratic presidential candidate Barack Obama described the law as "absolutely necessary to prevent an economic catastrophe."
• Rep. Ron Paul of Texas, who correctly predicted in 2003 that taxpayers would be "forced to bail out investors," said in a speech on the House floor that the legislation would "only further harm the economy" and was actually worse than the previous version. In a CNN interview, the former Republican presidential candidate said his colleagues are refusing to deal with the underlying problems and spending more tax dollars even though "this country's bankrupt."
• The Dow Jones Industrial Average (-22 percent year-to-date) and the Nasdaq composite index (-27 percent) closed on Friday down 1.5 percent, despite the bailout. Gold ended at $834.80 an ounce, slightly up for the day and the year. Crude oil futures ended at $93.88 a barrel, slightly down for the day.
• U.S. jobs fell by 159,000, a decline of 760,000 this year. Technology firms have also contemplated hiring freezes and some, including Hewlett-Packard and Dell, have already laid off employees, as my colleague Ina Fried reports in a separate article.
Updated at 10:40 a.m. PDT to reflect the House of Representatives' approval of the bill.
Updated at 3:30 p.m. PDT to add more details.
Declan McCullagh, CNET News' chief political correspondent, chronicles the intersection of politics and technology. He has covered politics, technology, and Washington, D.C., for more than a decade, which has turned him into an iconoclast and a skeptic of anyone who says, "We oughta have a new federal law against this." E-mail Declan. 
The government is getting way too powerful and has not provide any provisions for the right of the people to determine its activity.
This is how fascism starts. Welcome to Germany 1934 -- GESTAPO.
Most legitimate preparers will take the heat if any mistakes are found on the return.
Second, People who try to cheat are one reason the rest of us pay more, it's not facsim for a society to protect itself from crime.
Accordingly based on the free market, limited to no government intervention of a market based economy will optimize it. The problem we have today and it is written in his Wealth of Nations, government controls more than 20% of GDP. The more the government has of GDP, the worse the economy is. When communism got its power, you recognize how much the economy is lost do to its inefficiency. The fact that government takes 20% of GDP shift the power and economic interest to the rich. The best example of this is the $800 bailout to the rich.
The gap between the rich and poor is not so much the doing of the people who do not want to work but to the people who cheat the market economy through unjust, unethical, and immoral allocation of the people's wealth using force. It is impudent to implicate the government and restrain the power of government to its limited power bestow by the Constitution. Further impinging on the rights of the individual and its freedom will divide the nation of rich and poor and will surge a revolution unlike the scale we've seen in years passed.
Agreed, the government allowed this all to happen, but that doesn't mean government has the will, power or ability to fix it.
The House is the House of Representatives. It already passed Senate, so since both Senate and House passed it, it's cleared Congress. I don't expect Bush to veto it his baby.
Has Amreica completely forgotten the concept of personal responsibility?
http://www.youtube.com/watch?v=R7mRSI8yWwg
Oh wait, maybe not. Government = Coercion, Harry. You of all people should know that.
When you get your wish, and they tax these corporations, I don't want to hear any complaining about the massive jump in prices. It's simple economics, you see. No business anywhere in the world pays any taxes....It's customers do!
Unless we suddenly expect that businesses should not take any profit, in which case we should have passed this $1.8 Trillion mess, and just let the market collapse (along with all of our retirements).
Nope, there is only one solution. At some point in time, someone in Government is going to have to start cutting programs. Otherwise, we can all expect to pay more an more of a share of taxes: from our income, from our sale expenditures, and now, if this wonderful idea filters to the most corrupt Congress in History, we'll even pay taxes that will be buried in the everyday price of things.
That's what I want as a citizen and consumer!
Who are these "real" taxpayers you cite? Surely you're not refering to the top 3% of the income totem pole are you? Hannity says they pay the most but the math simply doesn't add up, it's the middle class that pays the most. As a test lets ask for a 0% rate for the bottom 97% for one year and we'll see how much the rich really pay.
Job skills of a third world laborer? You maybe, but the USA has always and most likely always will have the most productive and hard working labor force in the world. That is if the greedy and corrupted corporations and the rich would stop sending the jobs overseas.
If you know of a better place to live, you need to go there and get away from all these lazy Americans
If you feel bad now, vote for Obama and you'll feel real pain. Don't worry about him though, his payola will more than make up for the added expense.
* Manufacturers of kids' wooden arrows - $6 million.
* Puerto Rican and Virgin Islands rum producers - $192 million.
* Auto-racing tracks - $128 million.
* Corporations operating in American Samoa - $33 million.
* Small- to medium-budget film and television productions - $10 million.
Another measure inserted into the bill appears to be a bald-faced bid aimed at winning the support of Rep. Don Young (R-Alaska), who voted against the original version when it went down in flames in the House on Monday.
That provision - a $223 million package of tax benefits for fishermen and others whose livelihoods suffered as a result of the 1989 Exxon Valdez oil spill - has been the subject of fervent lobbying by Alaska's congressional delegation.
These look to me to be something that will bailout some congresspersons bank account. Throw all the bums and bumettes out of office!
I will NEVER vote for any politician who voted for this bill. Not a presidential candidate, senator or congressman. I believe this bill brings the US that much closer to bankruptcy as a country.
Even though the people were overwhelmingly against this bill, they passed it anyway and spent my money, my son's money and any money his kids may ever make.
I believe we already are bankrupt and no one has the balls to tell us..
http://www.brillig.com/debt_clock/
Where was Obama's so-called leadership in this mess? What an opportunity in the face of a real crisis to show that he has what it takes to lead. He had a chance to make a real difference by providing change leadership and coming up with a plan that would actually help the American people. Instead, he fell right into line with what the Bush administration wanted.
I was undecided about whether to vote for Obama or McCain. (I'm not impressed with either of them.) Now my vote goes to Ralph Nader who is the only one who spoke out against the bailout.
NEVER VOTE FOR ANY POLITICIAN WHO VOTED FOR THIS BAILOUT!!!
The only change this country will see after this election is the few pennies we may be "allowed" to keep in our pockets from our generous leadership. All hail Nero, for Rome is burning!
Walter M. Clark
I find what Thomas Jefferson wrote interesting, remember the "Federal" Reserve is a PRIVATE bank it is NOT part of the government. Remember that our Constitution says money will be made of gold and silver, recall that over 4000 Fiat currencies have failed, none have made it.
Don't you wish Congress gave you the authority to counterfeit trillions?
Also, our books are cooked! If you realize that Enron math is used to adjust GDP by 40% and inflation by at least 8% then you know we are in a SEVERE depression.
Economist are not using good books when they say our debt to GDP is good. NO it isn't. Especially if you count the debt off the books.
?If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.?
- Thomas Jefferson, Letter to Treasury Secretary Albert Gallatin (1802)
If a nation expects to be ignorant and free, in a civilization, it expects what never was and what never will be.
- Thomas Jefferson
?Lenin was right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.?
We are in a war with our entire reality of how we percieve our Liberty and Freedom. The Industrial Military Complex is in position to take over this country and Globalize the entire world into slavery for thier own Greed. They are a very patient Elite group that has had a plan for decades and at this time in history are ready for the implimentation of thier takeover, Presidents Eisenhower, Kennedy, and Jimmy Carter forewarned us of the growing Industrial Military Complex from within our government to take down America from within as we percieve it. It is all in place and been right in front of our noses all the time. We are at the point of losing all of our Bill of Rights and the Constitution by changing the laws of this country hiding under the pretext of National Security. A new world order, [ sound familiar ] is about to happen. This world and our government is so full of power, greed and corruption it will effect every human on this planet, I know the outcome of both of these wars and it will cost humanity dearly.
The other war going on is one that we can't see, in the spirit world and the outcome of this will change our entire planet for an entire age, and it is very good. I urge you all to pray, meditate and love everyone including the enemy. Love is the most powerful force in the universe and never loses. If we do this collectively we can create such a force of power we will prevail. And we will win even if you dont join me.
I remain in Love to you all,
Dr. Mark
Metaphysical Practicioner
Walter M. Clark
Well they may end up caring we will figure out who voted for wall street and did not listen to their voters.
Gosh help you if you are running for re election in November
Throw the bums out they ONLY care about wall street and their big campaign contributor
Our election system has failed. There is only one way out of this you know it and I know it
- by BSinton October 3, 2008 9:19 PM PDT
- My sincere condolences to all you Americans in your time of great loss.
- Reply to this comment
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- by delilahFL October 3, 2008 10:51 PM PDT
- Your arrogance is astounding... but, thanks.. your condolences are accepted for what they are. Tell me, Mr Sinton, are you still singing "God Save the Queen"???
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- by ronnm1 October 4, 2008 7:30 PM PDT
- it is great to read a blog that is from the "cool aid" of the mainstream media. First of all, i agree with "God help America" the Democrats have pushed us 4 steps forward to socialism. To get back to the democartic media spin on the Patriot Act. obviously you have never read the Act. the Act puts in place items to protect Americans from those factions looking to do harm to the country. if you are a citizen not one right, priviledge is taken away or restricted. As for the spying legislation, the media would have it that any citizen would or could be spied on. Not at all the case, the legislation actually reads; if your are suspected of communicating with an unfriendly nation or person for the purpose of inflicting harm on the country, you could be monitored.. This didn't pertain to US citizen, as if you were suspected the government had to go through the FISA court for justification to wire tap. The American's that just relied on the mainstream media and the talking heads on TV, completely mislead the nation on the whole thing, yet they voted for it several time. Continue the deception vote --liberal or democrat!
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Showing 1 of 5 pages (121 Comments)Your loss of freedom (Patriot Act ), your privacy (all that spying legislation)and your money($17,000 / household).
Irving Berlin wrote a song "God Bless America". Now you need one called "God Help America".