One of the more unknown aspects of the bailout plan is that it provides foreign investors the opportunity to join in the dumping fest of bad assets onto the US Treasury.
Here’s a video interview with Rep. Brad Sherman discussing the pros and cons of the plan.
Below are some of the highlights of that video as featured at Global Economics with Larry Kudlow interviewing Brad Sherman:
Rep. Brad Sherman, D California:
Larry I am glad you have a few seconds to talk to someone who voted against this bill. I am not changing my mind. I want to thank my colleagues who stood up to the purveyors of panic and voted against a very bad bill and voted with 400 eminent economists including three Nobel laureates who wrote to us and said don’t panic, don’t act hastily, hold hearings, work carefully. The fact is Larry if you read this bill, even you would have voted against it.
It provides hundreds of billions of dollars of bailouts to foreign investors. It provides no real control of Paulson’s power. There is a critique board but not really a board that can step in and change what he does. It’s a $700 billion program run by a part-time temporary employee and there is no limit on million dollar a month salaries.
Let me just ask you one question. I think you are referring to foreign banks headquartered in the United States. I do not see how foreign investors get bailed out.
Rep. Brad Sherman:
Larry you have to read the bill. It’s very clear. The Bank of Shanghai can transfer all of its toxic assets to the Bank of Shanghai of Los Angeles which can then sell them the next day to the Treasury. I had a provision to say if it wasn’t owned by an American entity even a subsidiary, but at least an entity in the US, the Treasury can’t buy it. It was rejected.
The bill is very clear. Assets now held in China and London can be sold to US entities on Monday and then sold to the Treasury on Tuesday. Paulson has made it clear he will recommend a veto of any bill that contained a clear provision that said if Americans did not own the asset on September 20th that it can’t be sold to the Treasury.
There are a lot of pros and cons but I still stick to my viewpoint that this bailout plan will do nothing to support the sliding US economy or end the real estate/foreclosure crisis.