Naked Capitalism

MyDD and others are commenting on a story from naked capitalism.

It's probably wise to show some restraint on this - but it appears that a US Treasury Dept. conference call involving Sec. Paulson and industry financial analysts has been leaked.

Yves Smith is reporting that the phone number was posted on Calculated Risk and members of the public were able to listen in.

Now, it's easy for folks who (like myself) know little about the financial markets to view every word uttered as evidence of a Machiavellian plan to screw the taxpayer - but if what they are saying is accurate, Sec. Paulson was laughing down his sleeve at the Dems trying to pass his bailout plan.

Smith's first point is perhaps his best:

...the report I got from one person who was on the call was the the questions came from financial services industry members. In other words, this was most assuredly not intended to be a call open to the public at large. If anyone from the media or other member of the great unwashed was listening in, it was by accident.

This is simply scandalous. To have a group of interested parties get a privileged briefing by government officials on a matter of keen public interest flies in the face of what a democracy is supposed to be about. The proper method would either be a published FAQ on the Treasury website or a briefing with the media included.

The notes suggest that Treasury was spelling out the bailout plan in the wee hours to industry insiders.

They also suggest that Treasury viewed the division of the bailout funds the same way I did - as meaningless posturing. (I was hopeful that some good might come of it - but I clearly fell for the same Bush stratagem: my plan is the only plan. The Dems occupied themselves with rearranging deck chairs - and I was looking at the patterns they made.)

Treasury viewed the executive salary limitations as equally meaningless.

That they would have these opinions isn't really news - that they would use them to assure the financial industry in a late night conference call is pretty tacky.

But here's my question - With all the talk of stopping Golden Parachutes - it would appear that Congressional leadership either missed (or chose to ignore) the fact that the entire bailout bill IS a golden parachute.

• Wall street buys up all the mortgage-backed securities they can get.
• When they run out - they demand more and tell mortgage brokers to lower their underwriting standards. i.e. "Make more crap so we can buy it."
• When they've bought up all good mortgages and all the crap mortgages they can - they turn them into CDOs and start selling them to anyone they can.
• Then the bad mortgages fail, the writedowns start, people stop buying MBS and CDOs, and banks start dying.

And a cry goes up from Wall Street "Help!! Somebody buy our crap!"

And Sec. Paulson and Congress rush to the rescue.

The plan stinks. And if it died because of the House Republicans - we owe them a great deal. My Democratic Rep. voted for the bill and I'd love to hear their rationale for the vote.

What would that sound like, exactly?

"At this time - with the economy in crisis, it is essential for the government to buy 700 billion dollars of crap."