Posted on 09/23/2008 10:01:05 PM PDT by nickcarraway
House Republican Policy Committee Chairman Thaddeus McCotter is proposing a ten-point private recapitalization plan to restore stability to the financial markets, in opposition to the Bush administration's proposed bailout plan that Congress is currently considering.
Over the past three days, conservatives in Congress have raised serious doubts about the $700 billion Paulson Plan, and as Democrats have attempted to play politics with the plan, it now appears the Bush bailout may not be passed by the end of the congressional session, which is expected late Thursday or Friday. McCotter's plan is the most specific alternative on the House side and reflects criticism from such quarters as former Speaker of the House Newt Gingrich.
According to a senior House leadership aide, Minority Leader John Boehner has been attempting to rally GOP support for the Paulson Plan, with an expectation that some Democrats will not back it.
Below is the alternative plan as laid out in an email McCotter has sent out:
September 23, 2008
McCotter Opposes Paulson Plan; Outlines Pro-Taxpayer, Private Recapitalization Plan
"Expedited American Recapitalization -- Now" Act
(EARN Act)
1. Expedited American Recapitalization -- Now (EARN) Proceedings: A sunset bill that makes available to financial institutions a pre-packaged recapitalization (EARN) proceeding in which debt forgiveness is expedited. (This is similar to expedited bankruptcy proceedings. The strike warrant price will determine values.)
2. Inducement to EARN Proceedings: To induce financial institutions to undergo EARN proceedings, future government recapitalization (if necessary) may not be offered to a financial institution which does not go through an EARN proceeding.
3. Incentivize Private Recapitalization: If, within a limited one year window (commencing upon this legislation's enactment into law), a person invests in (i.e., recapitalizes) a financial institution that has undergone an EARN proceeding, this investment over its lifetime is subject to a ZERO capital gains tax rate. If, within the same one year window, a person purchases a toxic asset, this investment over its lifetime is subject to a ZERO capital gains tax rate.
4. Government Backstop: If no private capital is forthcoming, the government can take a preferred equity stake in an EARN financial institution. No dividends may be paid to any other investor until the taxpayers' claim is redeemed with appropriate interest. The government shall also hold voting rights, as determined by the percentage of its equity shares owned, in an EARN financial institution only until such time as the taxpayers' claim is redeemed with appropriate interest. (This addresses CEO salaries and bonuses without permanently vitiating the private sector's setting of compensation.)
5. Distressed Homeowner Relief: 5% of all government recapitalization invested in an EARN financial institution must be dedicated to an across-the-board reduction in the face value of "toxic" mortgages. This will help keep people in their homes; stabilize the foreclosure crisis; and begin to stabilize and raise all homeowners' values.
6. Non-EARN Financial Institutions: Financial institutions choosing not to participate in an EARN proceeding, may wall off their toxic assets (as determined by the Secretary of the Treasury) which were purchased between December 2003 and August 2007. For these toxic assets, the current mark-to-market rule will be suspended and replaced with a more accurate three year rolling average mark-to-market; and for a fee, insurance of these toxic assets can then be purchased from the federal government. If, within the above referenced one year window a person purchases a toxic asset, this investment over its lifetime is subject to only HALF the capital gains tax rate applicable at present; if the capital gains tax changes, the toxic asset's purchaser possesses the option, upon alienating the toxic asset, of being taxed at the capital gains rate applicable at the enactment date of this legislation into law.
7. Market Transparency and Congressional Oversight: To ensure Market Transparency, the Secretary of the Treasury is empowered to examine any and all appropriate financial records at any time of financial institutions and individuals covered under this act; and Congress at any time may request of the Secretary of the Treasury any and all information required to protect the taxpayers' investment incurred under this act.
8. End "Too Big To Fail": Make an express commitment to a future, pro-active regulatory system in which a market share cap provision is imposed upon financial institutions to prevent future taxpayer bailouts and market meltdowns due to entities deemed "too big to fail."
9. American Families' Prosperity Package: Make an express commitment to further American families' prosperity in a free market future by enacting pro-growth legislation, including, but not limited to: an "all of the above" American energy security plan; income tax and capital gains relief; the repeal of Sarbanes-Oxley; suspend the mark-to-market rule for all financial institutions for six months and replace it with a more accurate three year rolling average mark-to-market; GSE privatization; and dollar stabilization. (See Gingrich and RSC proposals.)
10. Ultimate Cost to Taxpayers: ZERO!
Go Thad!
It will pass. Bush will call Congress back if he has to.
If Congress refuses, then Bush will try to figure out some form of Executive Order to make it happen anyway, even though he can't actually allocate dollars.
There is no solution by man to this problem. The damage has already been done and now our country will pay for its many sins.
The Congress and President should only act in this financial crises if they believe that we are a Socialist country.
If we are not a socialist country, they should do nothing.
the problem is that there is a lot of socialism in this non-socialist country
There are some good points in his proposal, even point nine.
But Dim votes are needed for the proposal and point nine will hurt getting them. I agree with the point, but Dims will see it as “sticking it to them” and vote no.
So, Thad should leave it out and aid the chances for the heart of his proposal.
but #9 is the RSC plan
http://www.humanevents.com/article.php?id=28678
Nice alternative to Socialism bump.
I hate to break it to you but, when the Government Nationalizes a major corporation, bans short selling, pays out a Trillion Dollars to Wall Street and the President proposes a bill that gives dictatorial powers to the Secretary of the Treasury, you have to admit that you live in a Socialist country.
"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." - Manuel II Palelologus
yeah now...that is what we’re fighting against
I sense that the Bush/Paulson BOHICA bailout plan is beginning to get a great deal of well-deserved critical attention. I tend to trust Newt and Cornyn on this- and NOT BOOSH!
I don’t know the answer any more. When this was a save the country kind of thing, I was on board.
But being politicized as it has been and with the potential of “add ons”, my cynical nature has reared it’s ugly head.
When in doubt (as I am today)...don’t.
If we are not a socialist country, they should do nothing.
You must be Herbert Hoover reincarnated. Don't throw the baby out with the bath water. If this market crashes Obama is president.
Obama and his left wing friends can't wait to delegitimize market economics and replace it with a command control French/Soviet model. Don't let the perfect be the enemy of the good.
So, you are saying that we must become a Socialist Nation and Nationalize a major Corporation, prohibit trading on Wall Street, grant dictatorial powers to the Sec. of the Treasury and spend a Trillion Dollars to bail out Wall Street just so we can keep Obama from being President?
You, do realize that only a Socialist would support the above actions?
How do we get our elected “elites” to go for this?
Great work by the GOP!! Putting together a thoughtful alternative and something McCain and those in tight congressional races can latch onto!
We always do come up with the best ideas.
Ideologues run think tanks and academic departments but nothing of practical value. The credit markets are frozen, recession, and a downward deflationary spiral are virtually guranteed if the banks won’t lend money.
Rail on about socialism all you want Herbert. But it won’t resolve the financial crisis we collectively face as a country.
A. Borrow it from the Chinese
B. Print More Money
Either way is going to cause massive Inflation.
Wall Street, where Profits are Private and Losses are Nationalized.
People on this thread are endorsing a specific alternative to fix the credit crisis, one that protects the taxpayer, and all you can do is criticize them for opposing socialism?
Why do you think Paulson's plan is the only one that can work?
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.