Random thoughts on Ways and Means
and Wall Street blame

As we wait for the next round in the financial services bailout bout, here are a couple of tidbits to fill the time.

Tax writing procedures: The Senate package that the House is expected to consider today adds another $150.5 billion over 10 years to the $700 billion targeted to help Wall Street recover. Less than 30 percent of those new tax breaks, or about $43.5 billion, would be offset by revenue from other sources.

The rest of the bill will just be added to our federal deficit tab.

This payment issue has been a continuing battle in the 110th Congress, as Representatives, for the most part, insist on a "pay-go" approach to staunch the flow of red ink tallying our federal deficit. That means finding money from somewhere else to make up for tax breaks. The Senate, however, likes to operate on the Scarlett O’Hara "tomorrow is another day" philosophy.

That, as well as political and procedural pride, are part of the reason why there’s a bit of drama surrounding the bailout vote today.

House Ways and Means
Committee Chairman Charles Rangel (D-NY) says that many of the tax breaks, specifically the extenders, were going to be approved before Congress adjourned for the year. So cramming them into the bailout was unnecessary.

Plus, it represents the latest instance of the Senate butting into the Constitutional process established for creating new tax laws.

The House, via the Ways and Means Committee, is the body that has the power to originate tax bills. The Constitution states, "All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills"

That "may propose" opening is how the Senate tacked on the tax break sweeteners.

Strictly speaking, the Senate’s tax-break-filled bailout package is an amendment
to a House bill that would require group health insurance plans to
provide parity in the coverage of mental and physical
illnesses. That’s why that medical language is in the bill.

Blame the borrowers, too: Of course, few folks on or off Capitol Hill are worrying about how the bill was created today. They are concerned about whether it will pass. They, and by they, I mean we, also are thinking about whether it will work.

And, since the election is just five weeks away, folks are also pondering who’s to blame.

For the most part, fingers have been pointed (or otherwise gestured) at Wall Street and the greedy rich folks who made a killing at Main Street’s expense.

But in The Borrowers, an op-ed piece in today’s New York Times, Bethany McLean says, "I hope the titans of finance who expect us little people to save
them are ashamed of themselves. But at the same time, in painting Main
Street solely as a victim of a rapacious Wall Street, we are being
hypocritical. We are all to blame."

McLean, a contributing editor for Vanity Fair and co-author of "The Smartest Guys in the Room: The Amazing Rise and the Scandalous Fall of Enron," continues:

But who made the decision to take on that mortgage she couldn’t really
afford? Who lied about her income or assets in order to qualify for a
mortgage? Who used the proceeds of a home equity line to pay for an
elaborate vacation? Who used credit cards to live a lifestyle that was
well beyond her means? Well, you and I did. (Or at least, our neighbors
did.)

In other words, without the complicity of Main Street, Wall Street’s
scheme never would have flowered.

McLean also notes that many Main Streeters also did OK while Wall Street was packaging mortgage products that led to the our financial crisis.

Folks who sold their homes as the housing bubble and Wall Street practices pushed up prices (guilty!) got an inflated price. 

And folks who bought a house, says McLean, got a lower mortgage rate than they would have (guilty again!) thanks again to Wall Street.

So if you’re going to complain about who made out like a bandit as our national finances were crumbling, you might want to be standing in front of a mirror when you point your finger.