American citizens are calling it the “bailout bill,” but it is properly and euphemistically titled the Emergency Economic Stabilization Act of 2008, or HR 1424. The actual bailout bill began as a three-page measure and grew to 110 pages by the time it was first rejected by the House of Representatives. Upon the House’s rejection, the Senate apparently realized that they would not be able to pass the bill without yes-currying add-ons, so the bill grew to 451 pages. And, since legislators could not pass the bailout plan on its own merit, they tacked it on to the real HR 1424, the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, threw in hundreds of pages of pork and extensions, and handed us $70 billion in additional national debt.
The bill was not posted for public consumption until the very day it was voted on, a departure from normal procedure and an insult to the American people. And before we had even had a chance to read it, our president signed it into law.
This is not about politics or about membership in a particular political party. Whatever political moniker we go by, we’re all in the same boat as citizens today. To put it in the vernacular, America, we’ve been bitch-slapped; we’ve been played. Our Republican president goaded lawmakers on both sides of the aisle to give him some legislation now, and the funny thing about it is that the majority of those we voted into office jumped to obey George W. Bush and ignored what their constituents had to say about it. “The sky is falling! The sky is falling!” This was their cry.
George W. Bush, the man everyone loves to hate, maligned by many as the stupid, ill-informed, war-mongering nincompoop who has virtually ruined our country overnight became the man to follow, the man of the hour, the trustworthy and wise leader of the western world whose demand for instant satisfaction was heard and obeyed. The hypocrisy of our liberal lawmakers is breathtaking, second only to that of the so-called conservatives who told us they would back traditional, common-sense values in Washington and instead passed this atrocity. I am convinced that history will record George W. Bush as one of our worst presidents, and the effects of the passage of this law will effect our children’s children.
the nuts and bolts of the law
Public Markup posted the bill section by section the day it was passed into law and signed by the President. Those who prefer to read the bill in .pdf format can read it at Taxpayer.net. This bill should never have been 
passed, much less on a Friday when lawmakers could go home for the weekend, hide out at the local pub, and hope that Americans would be done with our dismayed and even furious outcries by Monday morning. As Public Markup commented, “it is appalling that Congress posted this massive document the very day they intend to vote on the bill. Now more than ever, we the taxpayers need to tell Congress enough is enough. We can’t expect that citizens or lawmakers themselves can decipher such broad legislation in such a short period of time. Tell Congress to read the bill first!” Indeed.
This 451-page behemoth is no bailout bill. Even the title is a dead giveaway, for on page one of the law we read:
H. R. 1424
To amend section 712 of the Employee Retirement Income Security Act of 1974, section 2705 of the Public Health Service Act, section 9812 of the Internal Revenue Code of 1986 to require equity in the provision of mental health and substance-related disorder benefits under group health plans, to prohibit discrimination on the basis of genetic information with respect to health insurance and employment, and for other purposes.
Evidently, by the time our senators finished throwing the bill together to send to the House, someone 
realized that the citizenry may take exception to the fact that what we were told was going to provide economic stabilization was actually a law to “require equity in the provision of mental health and substance-related disorder benefits” and “for other purposes”—which, by now, we know includes provisions for manufacturers of toy wooden arrows, alternative energy provisions, and a ton of budget and tax provisions that do nothing for the mortgage industry and are not even related to it. So, to minimize the impact of the less-than-stellar (but revealing) original title, on page 451 of the bill the title is amended to this:
Amend the title so as to read: ‘‘To provide authority for the Federal Government to purchase and insure certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, to amend the Internal Revenue Code of 1986 to provide incentives for energy production and conservation, to extend certain expiring provisions, to provide individual income tax relief, and for other purposes.”
Now we grow closer to the real intentions of this bill, which is more about undercover operations, eroding our civil liberties, and budget and tax provisions unrelated to the need for a mortgage industry bailout than 
it is about an actual bailout. Of the 451 pages of the bill, only about 100 address the crisis some mortgage markets and lenders caused themselves. These first 100 pages give the Secretary of the Treasury unprecedented power and require his accountability to the “appropriate” Congressional committees through regular reports. The typical citizen will never see any of these reports or know how to obtain them, much less have time to read them or the ability to understand them. It is as if Mom and Dad just sent Junior away to college, gave him a credit card with a $700 billion line of credit, and said, “write and let us know how things are going after you spend the money.”
I managed a weak smile when I read Section 134 of Title I, the part of the law that actually addresses the real economic problems we’re having. Section 134 is about recoupment, and says that any revenues from the sale of troubled assets will be “paid into the general fund of the Treasury for reduction of the public debt.” What public debt, you ask? We can begin with the $10,157,350,158,878.73 public debt as of today. And congress and the president just foisted $700 billion in additional debt upon us in an 11th-hour vote by lawmakers who didn’t even bother to publish the bill for public consideration until right before they made it law.
Way to go, Congress! We feel the love.
Highlights of the Bailout Law
One of the biggest concerns citizens and lawmakers on both sides of the aisle had about the original bill 
was that it gave the Secretary of the Treasury unprecedented and unmitigated power over the $700 billion “relief” program he insisted we needed. The final and now-legal version of the bill established a troubled assets relief program (TARP), overseen by the Comptroller General of the United States. The TARP is, according to Section 116 of Title I of the new law, subject to judicial review, temporary restraining orders, and preliminary injunctions against the Secretary of the Treasury. This is heartening, is it not? This should make citizens and lawmakers feel better, since the original bill allowed for no oversight whatsoever of the Secretary of the Treasury. Injunctions and restraining orders and other sorts of judicial review are good, right?
Well, yes, of course judicial review is good, unless you allow for it in one section, and then dispense with it a few sections later. And this is just exactly what this bill’s authors did. Though Section 116 of Title I allows for oversight and judicial review, Section 119 (4) of Title I turns around and limits “equitable relief” by stating that
Section 119 (a)(2)(A). No injunction or other form of equitable relief shall be issued against the Secretary for actions pursuant to section 101, 102, 106, and 109 [the sections related to the actual bailout], other than to remedy a violation of the Constitution [. . .]
(4) STAYS. Any injunction or other form of equitable relief issued against the Secretary for actions pursuant to section 101, 102, 106, and 109 shall be automatically stayed. The stay shall be lifted unless the Secretary seeks a stay from a higher court within 3 calendar days after the date on which the relief is issued.”
Clever, aren’t they? The very oversight and protections against the unmitigated power of the Secretary of the Treasury under one section of the Act are abrogated by the provisions of a subsequent section. This reminds me of the ever-changing laws written on the barn in Animal Farm, Orwell’s 1945 novel satirizing totalitarianism. Regardless of what face it wears or what name it goes by, the practice of taking control and re-inventing the laws under cover of dark and by sleight-of-hand is the same.
Other highlights of the 451-page missive include:
- The statutory limit on the public debt was increased to $11,315,000,000,000.
- FDIC insurance increased from $100,000 to $250,000.
- All government borrowing limits were increased. The limit by law was perviously $30,000,000,000.
- Transportation fringe benefits and tax breaks were given to bicycle commuters.
- Seven pages of credits for purchase of energy efficient home appliances such as dishwashers, clothes washers, and refrigerators.
- Raised the Alternative Minimum Tax (AMT) exemption amount from $66,250 to $69,950 (by $3,700, in other words). Woop-te-do!
- Extends but does not otherwise increase the deductibility of qualified tuition and related expenses until December 31, 2009.
- Extends a new real property tax deduction for non-itemizers.
- Extends a host of already-existing credits, such as those for railroad track maintenance, motorsports racing track facilities, expensing of environmental remediation costs, tax incentives for investment in the District of Columbia, duty suspension on wool products, and expensing rules for film and television productions, among many others.
- Exempts from excise tax certain wooden arrows designed for use by children.
- For tax purposes, treats those who receive settlement income from the Exxon Valdez spill as fishermen.
- Spends eight pages reauthorizing the Secure Rural Schools and Community Self-Determination Act of 2000.
- Spends 42 pages addressing states and counties containing federal land, special projects on federal land, and dealing with counties receiving federal funds.
- Adds 47 pages of temporary tax relief for areas damaged by the 2008 Midwestern severe storms, tornados and flooding and by Hurricane Ike and other national disaster relief.
- Addresses spending reductions and revenue raisers for the new law, raising revenue by including deferred compensation of certain, narrowly-defined foreign companies into gross income, adding interest and a 20% tax. Don’t get all excited about how we’re going to finally tax those foreigners; the definition of the foreign entities who will be so taxed is so narrow and the rate so much lower than that charged to many American companies that it’s hardly worth mentioning. But it is one more great example of just how dumb they think we are.
- The deductible salaries of the CEOs and other highly-compensated employees of purchased troubled lenders was limited to $500,000 (Title III, Sec. 302). This means that the troubled company can deduct up to $500,000 of the CEO’s salary as a business expense, but nothing over that amount. Many commentators were misled by this number, believing that it limited the income the CEO could make. Not so; it merely limits the tax deductibility of the CEO’s salary for the company (employer). Big difference.
- Establishes a 5-member oversight panel to be paid at an “annual rate of basic pay for Level I of the Executive Schedule.” This salary is $191,300.00, or $524.00 per day.
- Improves and extends many different energy credits, production credits for various renewables, wind property, geothermal heat pumps, steel industry fuels, coal provisions, transportation credits, a plug-in electric drive motor vehicles credit of $10,000, and even a credit for new, energy-efficient homes (Hey, I thought we were saving existing homes!?).
- Makes permanent Section 7608 of the United States Code, which governs authority for undercover operations of internal revenue enforcement officers.
- Makes permanent Section 6103 of the United States Code, which governs the privacy and release of individual tax returns.
insurance parity for mental health and addiction
Besides the billions of dollars this questionable bailout plan will cost taxpayers for coming generations, one of the most significant changes brought about by the new law is a mental health and addiction parity plan. Ostensibly a bailout bill, HR 1424 was originally the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008. The bailout bill was added onto the mental health parity bill to help pass both bills, as both failed during their first runs through Congress. Evidently our legislators decided it would be a good idea to merge the bills, throw in some bacon, and call it an emergency bailout plan.
Information about the mental health parity bill and many interesting comments can be found at 
WashingtonWatch.com. In short, pushed by many consumers for a variety of good personal reasons, the bill was passed in divergent versions by the House and Senate in the spring; but the two houses couldn’t agree on the legislation. Over the summer of 2008, a consensus version of the bill was drafted, and in late September, the House passed a stand-alone version of the bill, while the Senate attached the measure to a bill that extended tax breaks for alternative-energy projects. This hodgepodge of a bill was combined by conspirators on both sides of the aisle with the emergency bailout plan to give us what we’re calling the Emergency Economic Stabilization Act of 2008.
As a Ph.D. psychologist, I have much to say about this part of the bill, which I’ll publish tomorrow. On the one hand, I have to agree that if a health insurance plan covers 
mental health and addiction at all, it should cover them like any other illness. I have no problem with that. Families with autistic children, those with mentally ill or addicted members, and even those hair-pulling moms who manage to have their children diagnosed with the very silly sounding (but bona-fide) Sibling Rivalry Disorder ought to have their doctor visits and other needs addressed equitably. Few of us would argue with that.
But I have concerns about the ultimate costs of this bill and the false hope it probably gives to people who will not be able to get as much help as they may think. But more about this tomorrow.
THE GOOD NEWS
Besides a few common sense fixes and the passage of the mental health parity legislation, the bailout bill had a few other admirable provisions. It does offer some promise of help for Americans with homes in danger of being foreclosed. I doubt that many of us want to see decent citizens thrown out of their over-priced, over-leveraged homes when they can afford to pay a reasonable mortgage at a reasonable rate.
There is also some tenant protection in the new law. If your landlord is a greedy fool who borrowed too much money too quickly and whose property (your home) is foreclosed, any rental subsidies and protections already in place will be federally backed, and operating funds to “maintain decent and safe conditions of the property” should be available. As with everything else in the bill, how this is actually implemented and whether normal people will get any real help remains to be seen; but it was heartening to see that those who need subsidized housing and other housing help may receive some much-needed protection. So often it is the needy who suffer at the hands of those who have more due to greed, and who aren’t looking out for their neighbors. I for one was heartened to see even the smallest provisions that took care of the more dependent members of our society.
In an attempt to control unbridled greed among CEOs, all golden parachute payments to the senior executive 
officers (the top five highly paid executives of publicly traded companies) of a bailed out institution are prohibited as long as the Secretary of the Treasury “holds an equity or debt position in the financial institution.” This goes for new CEOs hired by ailing companies, too. The golden parachutes are not cancelled forever, unfortunately; they are cancelled until the entity no longer needs government assistance, which we hope will motivate CEOs who have failed to perform well to get out there and do their jobs, so that they can earn their precious golden parachutes back.
THE COMMON SENSE FIX
Christian finance guru Dave Ramsey proposed a one-page common-sense fix for our mortgage industry 
crisis and posted it on his web site. His three-pronged approach is simple and the good news is that Congress actually did include a few of the fixes Ramsey suggests. For one, the new law insures for 100% the troubled subprime bonds, mortgages, and other instruments with an underlying federal insurance that will bolster confidence in the financial industry’s participation with these.
Furthermore, the new law gives the Secretary of the Treasury broad power to change interest rates, but does not specify the low, fixed 6% rate suggested by Ramsey. The bill also gives the Treasury Secretary the power to change mortgage terms and amounts and to use available programs to minimize foreclosures, but it does not guarantee or make possible the prevention of all foreclosures. Many people will simply not be able to make their house payments even with help. The bill does not attempt or claim to be able to fix the problems of human greed, sloth, or plain bad luck; all foreclosures will not be preventable.
The new bill also fails to cancel prepayment penalties that would encourage refinancing or the sale of a property to pay off a bad loan. It does not address short sales or foreclosures, as Ramsey suggests and 
which is only sensible. We can only hope that Secretary Paulson will do the right thing. However, I am not hopeful, and I doubt any one will be, after seeing the hoax that has already been perpetrated here.
Many, including Ramsey, suggested that the mark to market accounting rules be suspended or removed, and the new law does give the Secretary the “authority to suspend.” Again, whether he will actually suspend these rules for any length of time remains to be seen. A suspension of this rule would keep companies from “being forced to artificially mark down bonds or mortgages below the value of the underlying mortgages and real estate,” which “creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing” (Dave Ramsey, The Common Sense Fix).
Finally, just about anyone who knows anything about small business has cried for the complete removal of the capital gains tax, either temporarily or permanently. A capital gains tax is a tax on the profit realized 
from the sale of a non-inventory asset such as stocks, bonds, and property. Had congress taken our advice (and they did not), businesses and individuals with money to invest would have rushed to invest, knowing that any asset they might make a profit on while the capital gains tax was suspended or revoked would benefit their bottom line without undue penalties. The infusion of investment money into our failing markets would have been like a blood transfusion to an anemic. But congress didn’t do it because many said removing the capital gains tax even temporarily would benefit only the rich. Since most Americans don’t appear to have much or any knowledge about how business works, much less to know the facts about just how much of our economy is supported by small, mom-and-pop businesses run from the kitchen table (about 52% of all businesses, actually), they decided not to touch the one other measure that could have made a real difference.
where do we go from here?
In an already fearful and negative climate, given immediate need and opportunity, our congress did nothing to inspire immediate, positive investment or common-sense behavior our grandmas would approve of. They did nothing to get those who produce jobs and income to invest in anything. Instead, they tricked us, betrayed us, and then charged us with the bill. They inspired us to do nothing other than become even more mistrustful of government.
As citizens researched the potential impact of the bill, it was already being voted on. By the time we started emailing and calling our senators and representatives, they had already passed it into law. And, before we could even contact the president to urge him to refuse to sign into law a measure that the majority of the American people opposed, he had already signed it.
Where do we go from here? I think that all we have to rely upon is ourselves and good, old-fashioned common sense now. We know we can’t trust our legislators. And may God help and bless our next president, because he’ll need all the help he can get. I can’t think of another modern president who will enter office with a bigger mess on his hands.
Hopefully we still share a common vision of what made America what she is:
O beautiful, for patriot dream
That sees beyond the years,
Thine alabaster cities gleam
Undimmed by human tears!
America! America! God shed His grace on thee,
And crown thy good with brotherhood, from sea to shining sea!
May our brotherhood sustain us in the future as it has in the past.
Resources & Further Reading
- An Open Letter to the U.S. Congress Regarding the Current Financial Crisis, John P. Hussman, Ph.D.
- FedSmith article on the bailout.
- The CATO Institute perspective.
- Congressional vote on the bill.
- Text of the bill in .pdf format.
- The Sunlight Foundation
- Open Congress
- “What Can We Do Now?” at Significant Pursuit
- “How to Survive the Great Depression of 2008-2009,” Bob Hoffman, Real Estate & Mortgage Broker
