Posted by: distributorcap | September 30, 2008

What I would do for the ‘Rescue’ or ‘Bailout’

The problems this country faces from the crisis in the financial markets are multi-faceted and incredibly complex. I would guarantee that no more the 5 or 6 people in Congress have any sort of reasonable grasp of how intertwined and fragile the system is. I would further venture there are probably less than 20 people on earth who actually have a clue. I am definitely one of the clueless. But that is not going to stop me from putting my 2¢ in on what I would do.

First – the “Modified Paulson” bill – the bill was rejected by the House on Monday.

I hated this bill. It was basically just throwing a lot of money into the markets with virtually no oversight or accounting as to what exactly would be done with the money. The explanation given “to buy toxic securities and inject liquidity” is pretty minimal and downright lame. Most people have no idea what that actually means, and it does not tell the American people how this whole $700 billion plan is expected (but not guaranteed) to work. Paulson, in his own arrogant way, assumes we are all students of financial and economic theory and just know “Hank knows best.” Well Hank, after 7 years of lies and deception from your boss, NO ONE trusts one word from any Bush crony. In addition, I would venture that most Americans couldn’t differentiate a mortgage backed security from a yellow bellied sapsucker.

The oversight board that was to be created to monitor Hank’s wallet – this is even more of a joke. Three of the five were Bush appointees! One would be appointed by the House/Senate minority leader and one appointed by House/Senate majority leader. So 4 or the 5 overseers are Republican. Talk about the foxes guarding the hen house.

Then there are the lack of provisions that actually help people (as opposed to Wall St.):

  • to help homeowners trapped in the mess (whether it is their fault or not)
  • to figure out how to unbundled the securities to perhaps separate the bad mortgages from the good ones
  • to help get the general economy rolling so more people could get back to work at better paying jobs
  • to prosecute any company execs that might have broken any laws (the ones that remain on the books)
  • …and a whole slew of other significant provisions that might make this more palatable to the American public – including a socialist/communist like me.

What has happened in the past few months and in reality since Bush was installed in office – is a complete breakdown not only of the financial system – but of the trust and confidence between the Nixon’s famous “silent majority” and the “power elite.” We have a political and economic upper class in this country that has gated their community so tightly from the rest of the country, their insulation ultimately became their Achilles heel. Eight years of complete mismanagement by the worst executive in history, on the tail of 28 years of deregulation – made the invincibility of the upper crust peel away like a stinky rotten onion.

It is obvious Bush has checked out of this whole debacle. Look at him – just be careful of turning to stone like when you glance at Medusa. He scurried out today to mumble something unintelligible and ran back to the bunker. He has turned all power over the Paulson. He cannot get any support from his own party – or from his own GOP Texas delegation! He is the epitome of a coward, asshole and douchebag. I hope his dick falls off.

You can practically hear the markets collapsing every time Bush opens his mouth. No wonder he speaks before 930am Eastern Time.

And you know what — he doesn’t give two flying Orrin Hatch shit logs – with the corn in it. Bush cannot wait until Jan 20, 2009 when he can retire to Crawford or Paraguay and pick up brush. And as a side thought – this whole fiasco may effectively end McCain’s campaign (we hope) and Nancy Pelosi’s tenure as Speaker (we double hope).

I believe the Paulson bill as it is – is dead. Resurrection in its current form without some major revisions is just a waste of time.

Government intervention into the markets isn’t an option at this point – it is a necessary evil. The question is just what kind of intervention and to what extent. My big question is why $700 billion? Why not $679 billion? Why not $315 billion. None of this is actually known by anyone. If you do the math, it seems like there is only about $350 billion or so in bad mortgages — why do we need more money?

What I think we need to do is actually get some sort of assessment of how much of the MBS business is truly toxic. We will never get an exact amount – but there has to be some way of accounting for the depths of the problem. Otherwise you will end up either running short on money and having to keep going back to the till (so $700 billion will look like chump change) –or- having extra money and opening the whole process up to the greed and corruption that got us here to begin with.

The Dcap bill:

  • Anyone who agrees to accept the taxpayer’s money has to (NO CHOICE, NO NEGOTIATION, NO EXCEPTIONS) a bunch of pre-defined terms of acceptance. Some of which would include: No more buying of securities backed by air. None. You want to gamble – either go to Las Vegas or don’t take taxpayer money. And no bailout in the future.
  • CEO’s and other corporate officers would have to forgo significant pay. The Boards of Directors would have to be disbanded and reformed – they are to blame for this obscene CEO pay. No bonuses and salary increases ONLY based on audited performance.
  • If possible (and I have no idea if this is possible) – unbundling of the mortgages. Figure out where the problems lie. Moratorium on foreclosures. Maybe something like the 1933 Home Owners Loan Act during the depression when the Federal Government bought bad single mortgages and attempted to renegotiate them to allow people to stay in their homes. People who get new mortgages are subject to oversight/penalty as well – you do not get something for nothing – even the home owners.
  • All mortgages are open to renegotiation for terms – rates, length, payouts etc. The banks are entitled to a profit – and the homeowner is required to pay his/her debts. But some sort of set of guidelines needs to be set up. Perhaps instead of just giving a blank check to the bank, some of the Treasury money goes directly to paying off bad mortgages down to a level where the homeowner can make reasonable payments.
  • The banks are required to finance projects that actually build/do/create something. Sort of like a throwback to the WPA during the Depression of the thirty’s. This would help rebuild infrastructure, create jobs, and generate some cash flow to the banks. Even if the projects end up being paid with government dollars – the banks could generate cash from helping produce real assets and real jobs.
  • No lobbyists from the firm – no payments by participating firms to industry groups for lobbying.
  • Oversight board consists of business/economic leaders from the public, private and even international sectors – some from each party, some non-partisan. All appointments are from Congress, no appointments by the executive branch – NO MATTER who wins in November. Keep presidential politics out of this
  • The FDIC must be strengthened. Perhaps insurance should be increased beyond the $100,000 limit.
  • The Treasury has limits on its doling out of money – nothing is done in a vacuum. Taxpayers get equity in firms buying into the program. Socialism – you bet it is. To quote Dick Cheney – So? If we are going to assume risk, we need some collateral. We have to stop thinking socialism is this big evil. American capitalism has proven to be an emperor with no clothes – how can socilism be much worse?
  • Start fixing health care – firms buying in have to do something to ensure their employees are covered. Health care is the BIGGEST reason for mortgage foreclosures. As people’s medical bills pile up – mortgage payments are ignored way before food and medicine.

I am no John Maynard Keynes or Milton Friedman (thank god). I am not even that smart. But I do know that what the government is currently proposing is just not fair or right or palatable. It protects the members of their exclusive club. I think America is finally wising up to the nonsense of Bush and Congress (yes you too Nancy) – for once is it asking too much for someone to actually believe in Country First.

But somehow I doubt it. Why the fuck is Bush still at 27% approval? — this is totally baffling. I have no faith in the American public. They are just a bunch of lemmings marching like good soldiers into the sea.


Responses

  1. When are you running for office?We need you.As for unbundled mortgages… I heard something on the radio that said that there is real reluctance to do this as it will make things worse, much worse.Can you imagine?Today when I went for a walk, I listened to the episode of This American Life called “Giant Pools of Money” again… I have mentioned on my blog a few times. It was aired in May.It is like a giant train wreck unfolding before me, I just listen and listen again. Each time I hear new things.We were already so fucked and no one really spoke up.WTF?

  2. Between this weekend and sometime next week our 535 members that represent us will come up with a bailout bill that will be base on Main Street needs or more money for Wall Street to play with.With $700 billion dollars there should be no unemployment or foreclosures.Great post!

  3. Hey Cap;Your plan looks pretty good overall and makes enough sense that most people can understand it.There is only one huge problem with it.Its realistic and may work.It’ll never pass 🙂

  4. Sorry D-Cap, not enough golden parachutes in your plan. It’ll never work! ;^)I agree with Franiam, when are you running?

  5. Yeah, you oughta run for office. You make a ton of sense, unlike those pinheads. My their dicks fall off indeed!

  6. By the way Distributorcap , what are your feelings about the Trillion Dollar Defense Bill. see Defense Bill or $630 billion our Federal Reserve will pump into the global financial system. see Bushsidesteps Congress

  7. Fran – yeah – me run. They guy who cant keep his mouth shut and has no tact. I don’t know much about unbundling – other than it is probably not easyLets – whatever gets passed will barely help main st trust meIch – why should they pass anything that helps those who cant contribute to them. I don’t even know that much about these MBS – but enough to know whatever we do – these firms have to EARN OUR MONEYSkyler – I will run when pigs fly with lipstickLib – thanks – most of us make more sense than any of themLets – let me read up on them – but if you ask me about defense spending – cut it by 60% immediately. End of discussion there

  8. Distribitorcap, I hope that you read the links I gave you because as we seem to be concerned about the $700 billion, there is even more that has been issued out it seems without most Americans knowledge.On Wednesday, the House passed a mammoth defense bill and the Homeland Security in the tune of a trillion dollars, much more than the $700 billion.What the bill does for vet is great, but we seem to be unaware of this money moving around without our knowledge.Then there is the point made at Bloomberg. The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression. Now heres the kicker…this came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry.

  9. I have but one question….Have we had enough of the Decider’s regime?

  10. dcAp,i think that no matter what happens, we are going to wind up paying for it. if it isn’t through taxes, then we will be paying extra fees to banks and the investment bankers who handle our retirement accounts. i have no idea what the right answer is. i don’t know if there is a right answer. what i hope for, more than anything else, is for real economists who are not tied to wall street overseeing the whole shebang.

  11. Despite the pleas from sane people and the most bright and knowledgeable economic scholars, the entire world seems in a panic and wants something done quickly right now without taking into consideration that the American people are going to get screwed. The message I got from tonight’s headlines – due to global pressure, is that I think we’re going to get pretty much screwed. I love yer plan, but let’s face it, this thing isn’t being renegotiated, they might add on a higher FDIC insurance rate, but not much else. And then of course, they’ll sugar coat the whole thing and make believe they were looking out for us all along. Bullshit.Heh guys, let’s just not pay taxes.Right.

  12. This is a great start but it’s only part of the problem. There’s around $46 trillion in credit swaps. What are credit swaps you ask? They’re insurance policys that investment houses sold to cover the mortgage backed securities. The problem. Most investment houses had no idea what they were doing when they sold them so when the MBS s started going bad the companies that bought insurance wanted to collect on the bad paper. The investment companies hadn’t collected enough money to cover all the losses. Those that bought like UBS sued to try to collect. Only problem was the investment companies went bankrupt. And to top it all off none of credit swaps were covered by the SEC. So the mess is even greater than we little folk can get our heads around.Update: Two banks in Belguim just went tits up from these toxic mortgages.

  13. Yeah, what fran said. You’re too smart for us rubes. But I take issue with this:And you know what — he doesn’t give two flying Orrin Hatch shit logs – with the corn in it.Why, man, why?Hey look, a flying, lipsticked pig. Get your exploratory committee going.

  14. Either Ben or Jerry of Ben and Jerry’s ice cream fame came up with a little cartoon video that explains how to cut defense spending, using Oreo cookies, that was brilliant. Google it.We spend more than any other nation on Earth for defense. Items like cost-plus contracts are killing us.If we buy a fighter plane for $5 million, then that’s all we should pay for it, period.

  15. The HOPE for Homeowners Act needs to pay less than 36.5 % of the face value of the subprime mortgage back securities. If more is paid the government loses money in the long run and owners of the securities profit now. nomedals.blogspot.com

  16. Why not the $612 billion dollar 2009 “defense” bill they passed three days ago?Our war machine is bankrupting us, our kids, our grandkids, etc. Empires Fall. The Blowback trilogy is a must read.

  17. I agree with Fran, DCap. You need to run for office. Maybe you can give Bloomberg a run for his money. Or how about coming out here to Long Island. Pete King could use a good fight on his hands.

  18. The most frustrating thing about Pelosi is that she knows damn well what is going on. Have you seen her floor speech yet? She made total sense and then voted for the thing because she is a part of that executive club. Another thing I think we need to immediately start talking about are Congressional elections. We need to vote out incumbents. Plain and simple. We need to take back Congress. It is supposed to be our branch. And we can take back the entire House with one move because they are all up for reelection this year.Throw them all out. Fire them all and then we don’t have to figure out the good ones from the bad ones in the next 4 weeks. Will we lose some good ones? I don’t know. If a Congressman is so good for a community, the constituents should know. Also, the 30% seems to be a magic number with Americans. Look at any type of poll. On the debate coverage about an hour ago, they said the 23% of those surveyed questioned Biden’s experience. 66% Palin’s. This pattern emerges all the time. Close to 70-30.Good news is that there are 70% of us. 30% crazy is not good, but there are more of us than them. Lookin’ at the bright side.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Categories

%d bloggers like this: