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The Zillion Dollar Bailout

Two old friends of mine are in the thick of the zillion dollar bailout. (That’s what it might come to.) But not on the side of the bankers.  They’re on the side of what you can clearly and cleanly call “the people.”

One of them is Barney Frank whom I’ve known for probably more than forty years. He is now the chairman of the House Financial Services Committee, and a brainy and funny man he is. I spoke with him about the emerging crisis around the ratings and insurance aspects of the sub-pine debt crisis. Actually, I didn’t speak to him for long. He spoke to me. He knew everything there was to know and much of what had to be done. The affected industries were putting off the legislative watchdogs and such press as were interested in the issue: “solvent, solvent.” But they were not solvent, almost none of them. Maybe even CitiGroup. And the rating agencies scored just about all of the affected companies -- including those that have gone under -- as Triple A. These agencies (Moody’s, Fitch and S & P) were either stupid or mendacious.  I vote for the last, lying.

In any case, Barney has his eyes out for the public interest.  He told the New York Times’ David Herszenhorn that he would try to have legislation guarantee that those who had caused the catastrophe would not profit from it. “There are going to be federal tax dollars buying up some of the bad paper. They should accept some compensation guidelines, particularly to get rid of the perverse incentives where it’s ‘heads I win, tails I break even’.”

But there was a front page article in Sunday’s New York Post titled “Gall Street” and reporting that, “Even though they were at the helm during the biggest bankruptcy in American history, eight top Lehman Brothers executives will get the lion’s share of a $2.5 billion bonus fund and have been guaranteed salaries between $10 million and $25 million for two years. “ Has anything really changed? Except the fundamentals?

Perhaps anticipating such shenanigans, Chuck Schumer, who’s been a friend about as long as Frank and who is now a very senior Democrat in the Senate, also told the Times that the Paulson-Bernanke plan “includes no visible protection for taxpayers or homeowners.”