We have met the enemy and he is us!
Pogo
While a “bailout” may be an incorrect term for what seems to be the only plan on the table to restore liquidity in US and world financial markets, for the average American taxpayers and their children the costs will be enormous, bringing the national debt to a staggering $11,350,000,000,000! When added on to a nearly half-billion deficit, not including the cost of the Iraqi war and the enormous unfunded Medicare and Social Security obligations, one wonders where Mr. McCain or Mr. Obama are going to find the monies to address the crumbling transportation infrastructure, health care reform, national security and myriad of costly programs they have proposed?
Voters should demand detailed, clear and concise
financial proformas from both candidates before the election.
Perhaps the most striking aspect of the $700 billion bailout is that it was proposed and is being debated by the same cast of Republican and Democratic politicians who effectively emasculated industry oversight, fought to kept interest rates artificially low, proactively encouraged lenders to give mortgages to anyone with a beating heart, ignored the risks associated with newly created mortgage securities and swaps, and yet found the political contributions from Freddie and Fannie, in particular, too seductive to do their jobs of protecting the American public whom they pledged to serve. Further, their regulator cronies sanctified the consolidation of the financial services industry to an extent where the failure of any of major institution seemingly threatens the US and even world economies.
Your representative’s votes on this bill should play a role in your vote in November!
The Paulson Tax Plan contemplates leaving most of the same executives in place who made personal fortunes by making billions of dollars of bad mortgage and other loans. Then there are the incompetent or grossly irresponsible credit rating agencies which looked the other way, primarily concerned with the enormous fees to be earned by blessing huge packages of collateralized mortgage obligations.
Where is the corporate and individual accountability and why
shouldn’t they bear some financial responsibility for the resulting fiasco?
Given that US taxpayers are being asked to foot the bill for the current bailout, on top of the costs associated with the rescue of Freddie Mac and Fannie Mae, commitments to the purchaser of Bear Stearns not to mention the previously enacted $160 billion stimulus package and $300 billion homeowner rescue program, the total costs/exposures can run well over $1 trillion with no guaranties of success … it’s amazing a copy of the actual 3-page plan has not appeared on the front page of every newspaper across the country. Moreover, the details of the mechanics of how the monies would be used should be published for public comment before final Congressional action, “Trust me.” doesn’t cut it!
Given the government’s nearly unblemished record of dramatically understating program costs,
a total figure of $2 trillion is not beyond the realm of possibility.
This bill, if passed as written, would enshrine the Secretary of the Treasury with enormous powers which would be both “without limitation” and “non reviewable … by any court of law or any administrative agency”. One wonders what Congressional oversight would be permitted.
Raising serious constitutionality issues about legislation.
The plan does not set any caps on what the Secretary can spend to implement the program and such expenditures will not require further Congressional appropriations. This becomes even more concerning when floating around the edges of the mortgage bailout are comments attributed to the Secretary’s office that the Treasury Department may also look to purchase other distressed assets including bad car loans and credit card debt.
Fiscal madness!
When asked in a recent interview, what if this plan failed to achieve its goals, Secretary Paulson mumbled something to the effect, “It had to work.”
Washington-speak … I have no idea!
Some considerations for the Senators and House members currently reviewing the draft legislation include:
- The Treasury Secretary must be subject to Congressional oversight and his actions must be reviewable by the courts.
- Total executive compensation for any institution receiving consideration under the program must be capped (perhaps no higher than that of the President of the United States) and tied to long-term corporate performance.
- Require that all residential mortgages purchased by the government be subject to renegotiation to try to keep homeowners in their homes with payment plans they can afford.
- Specifically restrict the program to defaulted mortgages and not permit the purchase of credit card, auto loan or other non-performing consumer or institutional debt.
- Limit assistance to US financial institutions only.
- Reinstate the Glass-Seagall Act keeping banks out of the stock market, the Bank Holding Company Act and compel divesture of businesses other than banking.
- Require that the senior management of failed financial institutions receiving assistance resign en masse.
- Direct the Justice Department to investigate the credit rating agencies which awarded overly optimistic ratings to the mortgage-backed securities and related obligations.
- As the economic health of many other industrialized nations, as well as that of some developing nations such as China, are tied to the US economy, pressure those governments to bear some of the exposure.
- Finally, absolutely no ear marks for any other programs should be permitted in any final legislation.
As distasteful as effectively placing the burden of rescuing the US economy, as well as that of may other nations, on American taxpayers may be, if properly implemented, it pales to the alternative.
The key should be crafting non-partisan legislation which accomplishes the goals of renewing liquidity in financial markets, reinstituting necessary regulatory authority, restoring international confidence in our financial markets and minimizing the economic impact on taxpayers.
