It's somehow amazing that Congress, the media, and the public are not calling what the secretary of the Treasury is doing for what it is: a financial Coup d'Etat. Congress was steamrolled into approving a $700 billion plan under which the federal government would buy up toxic assets from banks. As Phil Mattera writes,
That plan was put on the back burner by Treasury Secretary Henry Paulson as he instead embarked on a program—never debated by Congress—to purchase holdings in the banks themselves.
Today, we also learn, from the New York Times, that now the Treasury Shifts Focus in Credit Bailout to the Consumer. This should be better than the previous Paulson's proposals, but was that approved somewhere, or at the very least debated in the House and in the Senate?
One should go no farther than the Washington Post to find the answer: "It's a mess," said Eric M. Thorson, the Treasury Department's inspector general, who has been working to oversee the bailout program:
I don't think anyone understands right now how we're going to do proper oversight of this thing.
Last time I checked my battered copy of the Constitution, I noticed that Article I, Section 8, stipulates, "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law, and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published..."
If the law approved by Congress appropriated money to buy assets from banks, can the Treasury use it to purchase holdings, to support mergers between banks, or to unlock the frozen consumer credit market? Should the answer be "yes," why Mr. Paulson could not use it to build a new financial city in the desert of Arizona, pay for the landing of marines on the shores of financial-rich Japan, or direct NASA to explore the gold-rich mountains of Jupiter in order to strengthen the financial position of the U.S.?