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9/23/08
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7 comments
Editorial
Building a Bailout
The Bush administration has presented Congress with an outline of a $700 billion bailout package for Wall Street and told lawmakers to pass it fast. While a quick resolution is necessary to stabilize financial markets around the world, lawmakers must take their time in assessing, and if necessary, changing, the package to ensure that help isn’t limited to investment banks and that tax-payers see some benefit from the Treasury’s largesse. Late last week, President Bush urged Congress to quickly pass a bailout program and not to add to the plan, which was “detailed” in a three-page handout. Previously, when the Bush administration told lawmakers to quickly pass legislation without changing it, the results have been bad. Think of the Patriot Act, detainee torture and wiretapping. As lawmakers begin consideration of the package, some words of wisdom come from an unlikely source, former House Speaker Newt Gingrich. “Congress has an obligation to protect the taxpayer,” he wrote in the National Review Online. “Congress has an obligation to limit the executive branch to the rule of law. Congress has an obligation to perform oversight.” Congress can do all these, but only if it does not lose track of its goal: to structure a package that rescues not only the companies that hold mortgage-backed securities, but also homeowners who can no longer afford their mortgages. Looked at another way, the bailout shouldn’t reward — at taxpayer expense — investment firms for making poor decisions or creating new investment schemes to avoid oversight. Along these lines, Sen. Jack Reed, a Democrat from Rhode Island, has proposed allowing the government to buy stock in the companies that are bailed out. This way taxpayers would profit if the value of the companies rises after selling off their bad debts to the government. Lawmakers from both parties favor measures to ensure profits that result from the bailout are returned to the Treasury. Before such provisions can be added to the legislation, lawmakers must first know who is being bailed out and if there is a prospect of some of the $700 billion being recouped. For example, much of the $85 billion the government pledged to loan to American International Group will likely flow to large financial institutions that engaged in credit default swaps with the insurance giant. Many of these swaps also involved foreign banks, so they, too, will likely get some of the U.S. money. Determining how assets such as mortgage-backed securities are valued is critical to recouping some of the taxpayer funds. Banks have an incentive to overvalue such assets, while lower values would benefit taxpayers if the securities could be sold for more at a later date. Having an independent valuation would help balance the competing interests. Sen. Olympia Snowe has reintroduced legislation to do this. In a letter to Senate leaders, Sen. Arlen Spector wrote, “we must take the necessary time to conduct hearings, analyze the administration’s proposed legislation, and demonstrate to the American people that any response is thoughtful, thoroughly considered and appropriate.” Congress would be wise to follow that advice.
Comments
For those who refuse to acknowledge the ills associated with the Federal Reserve, can there be more glaring evidence of the criminal central banking control of our government (and American citizens) than this proposed bailout of our financial system? The very folks who have drained America of it resources since the 1930's, and burdened successive generations with debt, are requesting $700 billion more to "save us from ourselves," and they need it NOW. The market should be allowed to correct itself and fall under it's own weight of deceit to become truly healthy again. That's a rough road, but not nearly as rough as what lies ahead by allowing this scam to continue. Our government is now assuming control of some players in this game to stem further meltdown. But socialization of private enterprise is the norm in countries like Russia, not the U.S. One might want to begin the process of dissolving the Federal Reserve (a private bank run by a criminal financial elite) and subsequently, it's amoral child -- the I.R.S. These institutions keep the shell game flourishing, and their power is feared on the Hill. The Fed prints worthless paper I.O.U.s at will, lends it to our government, who wastes it in blood and treasure, and we must pay the staggering interest on that indebtedness. (Federal taxes on personal income do not pay for ANY governmental services; it is mostly absorbed by just the interest on the national debt -- soon to be $11 trillion). The Constitution mandated monetary control to Congress, and no one else. Our current plight is a shining example of why the founders of our country fought against those who would usurp power by controlling our currency, and thus our economy and our lives.
I can not believe that you people are still hanging on the sophomoric wiretapping of Americans deal. How long do you plan on beating that dead horse anyway? Until you get Saint Barry Obama elected? Americans will have to pay from each household, an average of $10,000.00 (Ten Thousand Dollars)...again...per household...for this bill. Where is the breaking point already? I think the congress needs to study this situation more deeply than what is on the surface...and doesn't this come at a very inconvenient time, just before the recess in DC? Looks like they may have to delay their recess until mess is ironed-out! Not even the Presidential candidates know much about this. The US cannot accept any more "bailouts" of banking systems and other institutions. We are heading straight down into the financial pits of hell with this last one, believe you, me. Bush, right now, is a lame duck. What is his purpose to demand the Senate of the US to "pass it fast", referencing the 700 billion dollar bailout package for the Wall Street cartels. If the financial billionaires of this country (the US) are so conceived upon themselves, and driving Rolls Royce's as any one of us would drive our Ford Escorts to the mall...then I think it is high time we sent a dire message to the US government that no more tax dollars need to be looted from the American householder's pockets. Did you know, more than $10,000.00...ten thousand dollars, per household is required to bail out "Wall Street" investment firms...just on this 700 billion dollar bailout alone? How much is that, and how long is that, in tax revenue per household, on top of all the other aggregates we are footing the tax dollar on, for failed overseas and domestic economic writedowns? Gee whiz...Winky Dink...where and when is this nimbo-mania going to stop!!?? By the way, folks, I was not being bad..."Winky Dink" was an actual cartoon character on TV in the 1950's. Look it up on your internet. Even Mainelyme remembers that one...he probably had a "Winky Dink kit" for drawing on his TV screen, too. So did I. For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted.
Unfortunately, these warnings went unheeded, as the President's repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.
The White House released this list of attempts by President Bush to reform Freddie Mae and Freddie Mac since he took office in 2001.
Unfortunately, Congress did not act on the president's warnings.
While it is obviously wrong to let Wall Street profit from the bailout, because of making faulty decisions, it is just as wrong to let borrowers profit from making the opposite side of those decisions.
There is one easy answer as to how to get the Wall Streeters to cough up their ill-gotten gains, we could create a class of taxpayer called, "Employed by a firm that took a bailout", and tax any earnings beyond, say, a Congressman's salary at a 100% rate of taxation. This protects the administrative assistants, etc, the low-paid people, and grabs the windfall profit from the high rollers. Similarly, we should regard the "forgiveness" of a mortgage's obligation as a type of income, and allow them to deduct any realized loss against it, even if it is from a personal residence. |
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