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.
It’s 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 Congress’s 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-Oxley’s $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 they’re from Wall Street, aren't they the very people we are saving? And doesn’t that mean that we’re 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 don’t 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
Paulsen is an investment banker himself. As chief of Goldman Sachs, I’m sure he left his mark on the industry and may be a little too close to the problem. I’m sure he hates to see his darlings die. He may have actually been part of the problem. His company was no doubt among those who profited mightily by the housing/mortgage/investment churning boom, and now suffers in the bust. I don’t think we should allow him to push our economy “all in” in an ill-advised attempt to bail out his friends.
This bailout will not work.
NO NO NO NO NO NO NO NO
Yes, the economy will be hurt in the short term, jobs will be lost. But in the long term we simply cannot set the precedent that taxpayers will bailout private companies that fail ... especially when they fail through coruption, greed, lies and mismanagement.
We simply should not do it.
I’m in. This is an outrage!
Good for Newt. I also agree with Rush. Not one dime until those responsible for blocking Bush’s reforms resign.
And, considering that Democrat Congress has approval which is only a quarter that of President Bush (against whose "third term" Obama and Dems are running), the easiest way to do this is tying a Democratic opponent to Nancy Pelosi or Harry Reid ("Nine Percent Approval Congress", "Worst Congress Ever"), no matter his 'voting record' which could be phonied up with throwaway votes.
This should be a campaign agenda priority and rallying cry of GOP House and Senate candidates and grass roots this election season, particularly in "red" states and conservative congressional districts:
9% Approval, Worst Congress Ever! Electing a 'conservative' Democrat to Congress
enables and ensures continued Democrats' majority in Congress and
the failed leadership of
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid.
Bump
Bump
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.