<nettime> the mother of all subprime mortgages

[t byfield <tbyfield@panix.com>]

The media recently woke up from their election-induced trance to ask
where the president has been during the latest stages of the unfolding
financial crisis. Bush had become a shadow: impotent, marginalized,
deluded, an embarrassment even to his own party, and so on. In his place
the odd couple, Paulson and Bernanke, seemed to be running the show;
and, as perplexing as that was, it came as a relief. So went the
conventional wisdom.

The White House trotted Bush himself out, first for a two-minute talk,
then for a nine-minute talk, both of which might as well have been
written using Markov text generator. But then came the proposed
legislation his administration sent to Congress as its decisive effort
to address the unfolding economic meltdown. At 148 lines of text
allocating US$700B that doesn't exist yet, it's well worth reading --
especially when you consider that initial loss estimates in this area
have typically grown by large factors and, more than occasionally, by
an order of magnitude. Congress may quibble about various details, but of
course a crisis is no time for partisan or ideological debate -- so the
administration will get most of what it has asked for. And is it turns
out that $700B wasn't enough, the administration will get most of what
it asks for again for exactly the same reasons.

This procedural charade shouldn't disguise what this "legislation" is.
The events that led to it show beyond any doubt that the more
staggeringly manifest the incompetence of the Bush administration
becomes, the more likely it is to get what it wants. What the
administration couldn't accomplish through even its own cynical version
of governance, it will accomplish by, in effect, emergency decree. 

The details of this "law" won't matter much, because neither the text
nor its consequences will ever be subject to the kind of scrutiny that a
normal law might receive. The amounts are too immense, the violations of
traditional practice are too extreme, and the phenomena it seeks to
address are too baroque and pervasive in their derivative ramifications.
US governance systems won't be any more able to contemplate or manage
what's coming any more than they were able to contemplate the structures
-- technical, financial, institutional -- that precipitated the current
crisis. As a result, this legislation is a step in the creation of a
provisional framework for a reformulation of the US economy (and
therefore US society) for decades to come (and therefore forever).

Cheers,
T
-
http://b1ff.org

     LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE
     MORTGAGE-RELATED ASSETS
     
     Section 1. Short Title.
     
     This Act may be cited as ____________________.
     
     Sec. 2. Purchases of Mortgage-Related Assets.
     
     (a) Authority to Purchase.--The Secretary is authorized to
     purchase, and to make and fund commitments to purchase, on such
     terms and conditions as determined by the Secretary,
     mortgage-related assets from any financial institution having
     its headquarters in the United States.
     
     (b) Necessary Actions.--The Secretary is authorized to take
     such actions as the Secretary deems necessary to carry out the
     authorities in this Act, including, without limitation:
     
     (1) appointing such employees as may be required to carry out
     the authorities in this Act and defining their duties;
     
     (2) entering into contracts, including contracts for services
     authorized by section 3109 of title 5, United States Code,
     without regard to any other provision of law regarding public
     contracts;
     
     (3) designating financial institutions as financial agents of
     the Government, and they shall perform all such reasonable
     duties related to this Act as financial agents of the
     Government as may be required of them;
     
     (4) establishing vehicles that are authorized, subject to
     supervision by the Secretary, to purchase mortgage-related
     assets and issue obligations; and
     
     (5) issuing such regulations and other guidance as may be
     necessary or appropriate to define terms or carry out the
     authorities of this Act.
     
     Sec. 3. Considerations.
     
     In exercising the authorities granted in this Act, the
     Secretary shall take into consideration means for--
     
     (1) providing stability or preventing disruption to the
     financial markets or banking system; and
     
     (2) protecting the taxpayer.
     
     Sec. 4. Reports to Congress.
     
     Within three months of the first exercise of the authority
     granted in section 2(a), and semiannually thereafter, the
     Secretary shall report to the Committees on the Budget,
     Financial Services, and Ways and Means of the House of
     Representatives and the Committees on the Budget, Finance, and
     Banking, Housing, and Urban Affairs of the Senate with respect
     to the authorities exercised under this Act and the
     considerations required by section 3.
     
     Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.
     
     (a) Exercise of Rights.--The Secretary may, at any time,
     exercise any rights received in connection with
     mortgage-related assets purchased under this Act.
     
     (b) Management of Mortgage-Related Assets.--The Secretary shall
     have authority to manage mortgage-related assets purchased
     under this Act, including revenues and portfolio risks
     therefrom.
     
     (c) Sale of Mortgage-Related Assets.--The Secretary may, at any
     time, upon terms and conditions and at prices determined by the
     Secretary, sell, or enter into securities loans, repurchase
     transactions or other financial transactions in regard to, any
     mortgage-related asset purchased under this Act.
     
     (d) Application of Sunset to Mortgage-Related Assets.--The
     authority of the Secretary to hold any mortgage-related asset
     purchased under this Act before the termination date in section
     9, or to purchase or fund the purchase of a mortgage-related
     asset under a commitment entered into before the termination
     date in section 9, is not subject to the provisions of section
     9.
     
     Sec. 6. Maximum Amount of Authorized Purchases.
     
     The Secretary's authority to purchase mortgage-related assets
     under this Act shall be limited to $700,000,000,000 outstanding
     at any one time
     
     Sec. 7. Funding.
     
     For the purpose of the authorities granted in this Act, and for
     the costs of administering those authorities, the Secretary may
     use the proceeds of the sale of any securities issued under
     chapter 31 of title 31, United States Code, and the purposes
     for which securities may be issued under chapter 31 of title
     31, United States Code, are extended to include actions
     authorized by this Act, including the payment of administrative
     expenses. Any funds expended for actions authorized by this
     Act, including the payment of administrative expenses, shall be
     deemed appropriated at the time of such expenditure.
     
     Sec. 8. Review.
     
     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.
     
     Sec. 9. Termination of Authority.
     
     The authorities under this Act, with the exception of
     authorities granted in sections 2(b)(5), 5 and 7, shall
     terminate two years from the date of enactment of this Act.
     
     Sec. 10. Increase in Statutory Limit on the Public Debt.
     
     Subsection (b) of section 3101 of title 31, United States Code,
     is amended by striking out the dollar limitation contained in
     such subsection and inserting in lieu thereof
     $11,315,000,000,000.
     
     Sec. 11. Credit Reform.
     
     The costs of purchases of mortgage-related assets made under
     section 2(a) of this Act shall be determined as provided under
     the Federal Credit Reform Act of 1990, as applicable.
     
     Sec. 12. Definitions.
     
     For purposes of this section, the following definitions shall
     apply:
     
     (1) Mortgage-Related Assets.--The term "mortgage-related
     assets" means residential or commercial mortgages and any
     securities, obligations, or other instruments that are based on
     or related to such mortgages, that in each case was originated
     or issued on or before September 17, 2008.
     
     (2) Secretary.--The term "Secretary" means the Secretary of the
     Treasury.
     
     (3) United States.--The term "United States" means the States,
     territories, and possessions of the United States and the
     District of Columbia. To top of page


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