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Oh, Naomi Klein

I love you, but reading your writings makes me want to jump out of a window.

See if any of this sounds familiar: As soon as the bailout was announced, it became clear that Treasury officials would hire outsiders to perform their jobs for them -- at a profit. Private companies wanting to help manage the bailout were given just two days to apply for massive, multiyear contracts. Since it was such a mad rush -- after all, the entire economy was about to implode -- there was no time for an open bidding process. Nor was there time to draft rigorous rules to make sure that those applying don't have serious conflicts of interest. Instead, applicants were asked to disclose their conflicts and to explain -- and this is not a joke -- their "philosophy in fulfilling your duty to the Treasury and the U.S. taxpayer in light of your proprietary interests and those of other clients." In other words, an open invitation to bullshit about how much they love their country and how they can be trusted to regulate themselves.

There's nothing better than the ol' "We investigated ourselves and found no evidence of wrongdoing" line.

Remember how Treasury Secretary Paulson said all this money that Congress just had to let him have was going to be given to the banks so that they could continue lending and thus not crash the entire system? That wasn't so much with the true:

"There is no obligation for banks to lend the money one way or the other," Jennifer Zuccarelli, a Treasury spokeswoman, tells Rolling Stone. "But the banks have the understanding" that the money is intended for loans. "We're not looking to control their operations."

Unfortunately, many of the banks appear to have no intention of wasting the money on loans. "At least for the next quarter, it's just going to be a cushion," said John Thain, the chief executive of Merrill Lynch. Gary Crittenden, chief financial officer of Citigroup, had an even better idea: He hinted that his company would use its share of the cash -- $25 billion -- to buy up competitors and swell even bigger. The handout, he told analysts, "does present the possibility of taking advantage of opportunities that might otherwise be closed to us."

And the folks at Morgan Stanley? They're planning to pay themselves $10.7 billion this year, much of it in bonuses -- almost exactly the amount they are receiving in the first phase of the bailout. "You can imagine the devilish grins on the faces of Morgan Stanley employees," writes Bloomberg columnist Jonathan Weil. "Not only did we, the taxpayers, save their company...we funded their 2008 bonus pool."

AIG is one example of how this whole thing has failed (or succeeded incredibly well, depending on which end of the bailout you're on). The federal government is supposed to now own 80% of AIG in exchange for the $85 billion. How is it that we own 80% of something and either cannot or will not stop them from going to spa trips or staying at luxury hotels instead of using that money to save them from the imminent collapse they were crying about? Clearly, for AIG executives, they have a different idea of what a crisis means. Apparently, it means having to stay at a Holiday Inn instead of the Waldorf.

Who needs some Hammer of Justice-ing?

Naomi Klein does offer an idea.

There is a better way to fix a broken financial system. Treasury's plan to buy up the toxic debts never made sense and should be immediately scrapped -- a move that would also handily get rid of most of the crony contractors. As for purchasing equity in banks, the next round of deals -- and there will be more -- has to start from the premise that the banks are bankrupt and will therefore accept whatever terms we choose to impose, including real regulatory oversight. The possibilities of what could be done if a chunk of the banking system were genuinely under public control -- from a moratorium on home foreclosures to mandatory investment in green community redevelopment -- are limitless.

The only problem is nobody in power to do so will actually look into implementing such an idea. Though the free market laissez faire economic policies have brought us to this current low, many are unwilling to let it go. Afterall, those who have placed themselves in the right positions stand to make alot of money out of it. And that proves the system works.

By min | November 13, 2008, 9:27 AM | Liberal Outrage