All -
The "Emergency Economic Stabilization Act" passed by the US Senate
today, and being moved on to the House, has some interesting
characteristics, and contains some (vaguely) amusing elements.
It turns out that the bill is actually an amendment to a bill
intended to require equity in the provision of mental health and
substance-related disorder benefits under group health plans (and to
prohibit discrimination on the basis of genetic information). (The
House bill, defeated Monday, was actually an amendment to H.R. 3997,
entitled "Heroes Earnings Assistance and Relief Tax Act of 2007,"
subtitled "Benefits for Military and Volunteer
Firefighters" (previously known as the "Defenders of Freedom Tax
Relief Act" . . . don't we love Congress? They at least know how to
name things! Old joke: we all know that "con" is the opposite of
"pro" -- so what does that say about the relationship between congress
and progress? :-)
Somehow I find this both charming and disorienting, not least
because what started out as a Senate bill designed to facilitate
medical and insurance assistance for troubled humans (mental health
and substance abuse) has morphed into a bill to help out "troubled
assets" instead (see below) . . . :-)
You can see the text of the Senate Bill (to be known as the
"Emergency Economic Stabilization Act of 2008", and having as its
primary purpose the establishment of the "Troubled Assets Relief
Program" - TARP) here, if you want:
http://banking.senate.gov/public/_files/latestversionAYO08C32_xml.pdf
The Senate Bill at least goes a long way toward officially giving
up the fiction that the "cause" of the financial markets "meltdown"
was "subprime mortgages" (i.e., those pesky homeowners who "borrowed
beyond their means"). The Senate Bill would authorize the TARP to "to
make and fund commitments to purchase, troubled assets from any
financial institution, on such terms and conditions as are determined
by the Secretary" where "troubled assets" are "residential or
commercial mortgages and any securities, obligations, or other
instruments that are based on or related to such mortgages" ("related
to" ????), or, more generally, subject to certain minimal
restrictions, "any other financial instrument . . . " (umm, right,
"any other" -- in other words, stuff having nothing at all to do with
"supbrime mortgages"). Subprime mortgages amount to perhaps $1.3
trillion (10^12) (and far from all of these are actually "troubled,"
of course), dwarfed by these "other financial instruments" that
include, for example, the $62 trillion of credit default swaps (CDS)
-- and even those are but a small part of the $450 trillion "financial
derivatives" market, whose explosion was facilitated by wide-ranging
deregulation of the financial markets in the 1990s and 2000s.
If you'd like to learn more about the "real causes" of the current
financial crisis, I recommend that you read this essay, published last
spring in the London Review of Books (it has the charming title "End-
of-the-World Trade"):
http://www.lrb.co.uk/v30/n09/mack01_.html
I must say that my favorite part of the Senate Bill is Sec. 503:
"Exemption from excise tax for certain wooden arrows designed for use
by children" (see page 300 of the Bill . . .). I am absolutely not
making this up!!!! But anyway, thanks to the Senate, at least now
we can be assured that "the children" (as we affectionately call those
who will be inheriting this mess . . .) will have at least a chance of
being prepared for life after "the end of civilization as we know
it." . . . Thank goodness the House defeated their Bill -- it didn't
have this provision! :-)
I'm also (somewhat) thankful that the Senate has retained most of
the original content of the Bill, in the form of Subtitle B— the "Paul
Wellstone and Pete Domenici Mental Health Parity and Addiction Equity
Act of 2008." It would assure that if this whole thing drives me
crazy, or leads me to drown my sorrows in drink or to try to escape
into drugs, at least it won't be any harder for me to get my insurance
to pay for mental health or substance abuse treatment than for any
other medical treatment (it won't make it any easier, though, and of
course it doesn't commit one penny of the $700,000,000,000 in "rescue
funds" to helping Americans without medical insurance get any health
coverage at all . . .).
All in all, I guess I'd have to say that it certainly restores my
confidence in America to know that the Senate cares enough, to be sure
to exempt "certain wooden arrows designed for use by children" from
the excise tax . . . :-) :-) :-) . . . no, wait . . . :-(
tom
p.s. I read in the San Francisco Chronicle this morning that "This is
not about a bailout of Wall Street. This is about doing something to
ensure confidence in the American Economy." Oh. I get it. This is
all a big "confidence exercise." I've done some studying of von
Neumann and Morgenstern's mathematical Game Theory, and there are a
variety of standard "game theory" examples: a "prisoners' dilemma
game," a "hawk-dove game," a "stag-hunt game," a "dictator game," an
"ultimatum game" . . . I suppose this one would have to be
called an example of a "confidence game" (or, for short, a "con
game" . . . :-) .
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