Posted on 09/21/2008 12:48:00 PM PDT by SE Mom
Watching Washington rush to throw taxpayer money at Wall Street has been sobering and a little frightening.
We are being told Treasury Secretary Henry Paulson has a plan which will shift $700 billion in obligations from private companies to the taxpayer.
We are being warned that this $700 billion bailout is the only answer to a crisis.
We are being reassured that we can trust Secretary Paulson "because he knows what he is doing".
Congress had better ask a lot of questions before it shifts this much burden to the taxpayer and shifts this much power to a Washington bureaucracy.
Imagine that the political balance of power in Washington were different.
If this were a Democratic administration the Republicans in the House and Senate would be demanding answers and would be organizing for a no vote.
If a Democratic administration were proposing this plan, Republicans would realize that having Connecticut Democratic Chris Dodd (the largest recipient of political funds from Fannie Mae and Freddie Mac) as Chairman of the Banking Committee guarantees that the Obama-Reid-Pelosi-Paulson plan that will emerge will be much worse as legislation than it started out as the Paulson proposal.
If this were a Democratic proposal, Republicans would remember that the Democrats wrote a grotesque housing bailout bill this summer that paid off their leftwing allies with taxpayer money, which despite its price tag of $300 billion has apparently failed as of last week, and could expect even more damage in this bill.
But because this gigantic power shift to Washington and this avalanche of taxpayer money is being proposed by a Republican administration, the normal conservative voices have been silent or confused.
Its time to end the silence and clear up the confusion.
Congress has an obligation to protect the taxpayer.
Congress has an obligation to limit the executive branch to the rule of law.
Congress has an obligation to perform oversight.
Congress was designed by the Founding Fathers to move slowly, precisely to avoid the sudden panic of a one-week solution that becomes a 20-year mess.
There are four major questions that have to be answered before Congress adopts a new $700 billion burden for the American taxpayer. On each of these questions, I believe Congresss answer will be no if it slows down long enough to examine the facts.
Question One: Is the current financial crisis the only crisis affecting the economy?
Answer: There are actually multiple crises hurting the economy.
There is an immediate crisis of liquidity on Wall Street.
There is a longer time crisis of a bad energy policy transferring $700 billion a year to foreign countries (so foreign sovereign capital funds are now using our energy payments to buy our companies).
There is a longer term crisis of Sarbanes-Oxley (the last "crisis"-inspired congressional disaster) crippling entrepreneurial start ups, driving public companies private, driving smart business people off public boards, and driving offerings from New York to London.
There is a long term crisis of a high corporate tax rate driving business out of the United States.
No solution to the immediate liquidity crisis should further cripple the American economy for the long run. Instead, the liquidity solution should be designed to strengthen the economy for competition in the world market.
Question Two: Is a big bureaucracy solution the only answer?
Answer: There is a non-bureaucratic solution that would stop the liquidity crisis almost overnight and do it using private capital rather than taxpayer money.
Four reform steps will have capital flowing with no government bureaucracy and no taxpayer burden.
First, suspend the mark-to-market rule which is insanely driving companies to unnecessary bankruptcy. If short selling can be suspended on 799 stocks (an arbitrary number and a warning of the rule by bureaucrats which is coming under the Paulson plan), the mark-to-market rule can be suspended for six months and then replaced with a more accurate three year rolling average mark-to-market.
Second, repeal Sarbanes-Oxley. It failed with Freddy Mac. It failed with Fannie Mae. It failed with Bear Stearns. It failed with Lehman Brothers. It failed with AIG. It is crippling our entrepreneurial economy. I spent three days this week in Silicon Valley. Everyone agreed Sarbanes-Oxley was crippling the economy. One firm told me they would bring more than 20 companies public in the next year if the law was repealed. Its Sarbanes-Oxleys $3 million per startup annual accounting fee that is keeping these companies private.
Third, match our competitors in China and Singapore by going to a zero capital gains tax. Private capital will flood into Wall Street with zero capital gains and it will come at no cost to the taxpayer. Even if you believe in a static analytical model in which lower capital gains taxes mean lower revenues for the Treasury, a zero capital gains tax costs much less than the Paulson plan. And if you believe in a historic model (as I do), a zero capital gains tax would lead to a dramatic increase in federal revenue through a larger, more competitive and more prosperous economy.
Fourth, immediately pass an all of the above energy plan designed to bring home $500 billion of the $700 billion a year we are sending overseas. With that much energy income the American economy would boom and government revenues would grow.
Question Three: Will the Paulson plan be implemented with transparency and oversight?
Answer: Implementation of the Paulson plan is going to be a mess. It is going to be a great opportunity for lobbyists and lawyers to make a lot of money. Who are the financial magicians Paulson is going to hire? Are they from Wall Street? If theyre from Wall Street, aren't they the very people we are saving? And doesnt that mean that were using the taxpayers money to hire people to save their friends with even more taxpayer money? Won't this inevitably lead to crony capitalism? Who is going to do oversight? How much transparency is there going to be? We still haven't seen the report which led to bailing out Fannie Mae and Freddie Mac. It is "secret". Is our $700 billion going to be spent in "secret" too? In practical terms, will a bill be written in public so people can analyze it? Or will it be written in a closed room by the very people who have been collecting money from the institutions they are now going to use our money to bail out?
Question Four: In two months we will have an election and then there will be a new administration. Is this plan something we want to trust to a post-Paulson Treasury?
Answer: We dont know who will inherit this plan.
The balance of power on election day will shift to either McCain or Obama. Who will they pick for Treasury Secretary? What will their allies want done? We are about to give the next administration a level of detailed control over big companies on a scale even FDR did not exercise during the Great Depression. Is this really wise?
For these reasons I hope Congress will slow down and have an open debate.
And in the course of that debate, I hope someone will introduce an economic recovery act that makes America a better place to grow jobs. I hope the details will be made public before the vote.
For more details on my action plan for getting the American economy back on track and building long-term economic prosperity, you can read this message recorded yesterday to American Solutions members.
This is a very important week for the integrity of the Congress.
This is a very important week for the future of America.
If Washington wants our money, then it owes us some answers.
09/21 03:08 PM
I’m no financial mastermind, but this crisis reminds me, as you point out, a lot of the `undocumented immigrant crisis’ two years ago when our august senators tried to ram amnesty down our throats, without discussion or debate. We’re seeing the same Greek chorus of urgency and panic again.
The biggest problem I see now is our lack of confidence in our legislators. If they can’t explain what it is that should be done, and why, then as far as I’m concerned they can just `hold their water’ until we figure it out ourselves as we did with the illegal aliens problem (and with no help from them, only constant disinformation, threats and insults).
Good ol’ Newt. How I love him!
President Bush, please ask the Republican members of Congress to join you in a news conference, with McCain in attendance.
Explain Your desire to have a hearing on this situation. Don’t roll over at this time. With us or against us, target the problem, Barney Frank deserves to have his 15 minutes of fame recognized. I am sick of him and his condescending tone winning every point because of his “off limits status”
I want to see some yelling and punching.
President Bush has an opportunity to focus the discussion in this critical election time frame.
We did, but look at what we got & what happened pandering to the Left.
Well, yes, “we’re” gonna vote non-Democrat of course, but it’s not just “us” voting.
Sorry, I have to say it... I was hoping for some more laid out potential plans from FR, instead of sheepleness, but perhaps that’s all that’s left in America.
Crank up the printing presses and spend, spend, spend!!!
The panic mongers are too busy pissing themselves to listen to reason.
You asked about a peaceful revolt. Well, we have one coming up in six weeks. Hope you’re seriously onboard.
Mark Levin said that members on congress on both sides of the aisle will try to prevent any investigation because Congress will never take responsibility for anything.
Congress cannot be trusted to investigate themselves. They are the culprits. No one in government will get to the bottom of it. Ever! It’s up to us, the real owners and bosses of America to decide which of our unfaithful servants are at fault and fire them!
It’s a cinch Bush is out in January. And I say we have an opportunity to not allow an inept, inexperienced, corrupt, America-hating Marxist/socialist from taking over our top servant’s job. And an opportunity to rid our nation of as many corrupt socialist liberal Democrats as we possibly can from DC and throughout America. Vote out the Democrats in November!
*gulp!*
We're s-c-r-*-w-e-d ...
I agree, I was just thinking the same exact thing. I’m afraid that it’s too late to dump some of the corrupt Republicans. The alternative would be worse.
Yes, and peaceful revolt goes beyond the presidential race. We need to vote out the offending congresspeople, no matter how much they have endeared us to their pork.
Which ones? Raines, Gorlick, andJohnson (Fannie Mae)? Barney Frank, Bill Clinton, Jimmy Carter (Community Reinvestment Act)? GW Bush (occurred on his watch, and somewhat asleep at the switch)? Hard to tell.
In countries where punishment for economic crimes is severe--like Communist China--power and popularity decide who takes the fall.
I’m so sorry, I missed the thread on the revolt.
Will there be something on the main page?
I’m in.
“Congress has an obligation to protect the taxpayer.
Congress has an obligation to limit the executive branch to the rule of law.
Congress has an obligation to perform oversight. “
lol Newt sounds like Ron Paul! One of the FEW in DC who’s actually making sense right now.
The revolt is coming in 6 weeks. Fire the liars and thieves! Vote out the America-hating Marxist/socialist Democrats!
The Clinton White House thugs running Fanny and Freddie giving Ninja
( no job no income no assets ) loans to illegal aliens
in an effort to bankrupt this country.This with the full assistance of Barney Fwank and Chris Dodd.
Run the Democrats out of Congress with pitchforks.
Newt is right that SarBox hasn’t done a THING to prevent this. Not a single banker has yet been brought up on charges under SarBox for misleading forward-looking statements.
Yes- he’s right. There’s just one problem- Congress does not see itself as accountable to we, the people.
I like some of Newt’s ideas yet at the same time- he wants Congress to do something it’s proven- particularly under the leadership of Redi and Pelosi- incapable of doing.
Oh I’ll be voting and pushing others to do the same!!!!!
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