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If Congress approves a bailout plan, U.S. Treasury Secretary Henry Paulson will oversee the $700 billion rescue of Wall Street.
Economists have struggled to find big enough superlatives to describe the past three days in American financial history. They reach for words like transformative, unprecedented and historic. At stake is a proposed $700 billion bailout of the U.S. financial industry, in a bill being crafted by Congress this week.
While bankers, lawmakers and regulators may not agree yet on the particulars of what should be done to prevent an economic collapse, they do share one understanding: American capitalism has changed. We don't know exactly how. We don't know who will win and lose in the short run or in the long run. But the role the U.S. government plays in the economy — meaning the way most of us will earn, spend, save and invest money — has changed.
Perhaps no single aspect of the proposed bailout illustrates the shift so well as the Bush administration's request to endow the Treasury secretary with nearly absolute control of the $700 billion measure. The measure sent to Congress by the U.S. Treasury includes this clause: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."
Jon Macey, a professor and deputy dean of Yale Law School, says the bill contains the largest transfer of power from Congress to the administration that he has ever seen. Macey says Congress is handing over more power than it did in granting the executive branch leeway in the Patriot Act, more than when authorizing combat through the war powers clause.
He says the move amounts to a sidelining of Congress. Macey says: "Imagine you're going to a partner you've been working with for the last 200 years: 'I'm not going to fire you; you can still be called Congress. But you don't have any power.' "
While Macey concentrates on the legal implications, other players in the debate are focusing on getting the best outcome for themselves. With the details of the proposals and counterproposals rapidly evolving, that's no easy task.
Scott Talbott, chief lobbyist for the Financial Services Roundtable, represents the banking industry. For him, this will be a crazy week. "This is the Super Bowl and New Year's Eve all rolled into one," Talbott says. "This is historic; this is extraordinary."
Talbott's clients oppose the move by Congress to limit executive pay for institutions that benefit from the bailout. They also object to a plan to allow bankruptcy judges to rewrite individual homeowners' mortgages.
"This is the bill on everybody's desk right now," he says. "Normally, this is a process that would take months — years." Instead, the law is being worked out, live on television, over the course of a few days.