Posted on 09/24/2008 5:57:38 PM PDT by SeekAndFind
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 senator 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 left-wing 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.
Should I sell all my stocks before Monday?
How much was lost in the aftermath of 9-11-01? If we did NOTHING and let these institutions fail and punish the evildoers, our economy should be resilient enough to bounce back. Markets adjust.
By adopting communistic central control, we may never recover, or it will lead to constant bailouts of multiple industries (oil, automakers, healthcare insurers). Forget about asking “when will this stop?” because it WON'T stop until we are a Marxist state.
We survived 9-11, we survived the S&L crisis, we survived Enron, and we'll survive this. We could install oversight upon oversight, but this crisis HAD oversight that failed tied to overt political corruption with rewards given to idiots (Raines, Johnson, Gorelick, Obama, etc).
I'M MAD AS HELL, AND I'M NOT TAKING IT ANY LONGER! I carry two mortgages now (at my own choosing) and feel like I will be forced to take on a few more at gunpoint of the Federal government.
I had BETTER get a few more father's day cards this year for all the families I now will support!
What Newt can do is ask McCain, and the House and Senate GOP leaders to join him in a press conference calling for Barney Frank and Chris Dodd to step down from their committee positions with banking oversight and recuse themselves from negotiating and voting on any “bailout plan”.
The same news conference should demand that former Freddie and Fannie CEOs, like Raines and Gorelick, return 100% of their multi-million dollar severance/retirement packages.
There was nothing worse yesterday than to know the corrupt history of FranknDodd and Freddie/Fannie CEOs and listen to both of them demand the “bailout plan” include caps on CEO salaries on institutions we bail out.
Disappointed with him. This happened on his watch.
He keeps saying, they, they, they. Hey GW, THEY is YOU.
The same news conference should demand that former Freddie and Fannie CEOs, like Raines and Gorelick, return 100% of their multi-million dollar severance/retirement packages.
Correct (with or without Newt's presence).
The same news conference should demand that former Freddie and Fannie CEOs, like Raines and Gorelick, return 100% of their multi-million dollar severance/retirement packages.
There was nothing worse yesterday than to know the corrupt history of FranknDodd and Freddie/Fannie CEOs and listen to both of them demand the bailout plan include caps on CEO salaries on institutions we bail out.
Keep repeating !
“Congress has an obligation to protect the taxpayer.”
Newt started out with the wrong premise.
You mean Congress DOES NOT have an obligation to protect the taxpayer ?
No, just that most of this Congress doesn’t give a crap about the taxpayer......and proves it daily.
mark
Mac ought to read this, and talk to Newt before he arrives in D.C. tomorrow.
This would place him in the position of architechting the alternative remedy.
Before D.C. Gets Our Money, It Owes Us Some Answers
BEFORE?
Before?
Heck no, not before Wallstreet gets our money.
The title should be:
Before we send the Wallstreet Gamblers to jail we need some answers!
bookmark
If we have to do something RIGHT NOW!!!!! and we don’t have time to wait, and something is better than nothing then the plan to put in to save the Country and all the world........ pass the FairTax.
It would solve our financial woes and many, many others.
Generations of Americans will build shrines to those in Congress who passed this for America.
Let the democrats take credit for it, I don’t care who gets the credit, just do it for the Country.
Not economically. The government should in no way be involved in the economy.
Why the Founders gave the Congress the power to declare war and not the president/commander-in-chief.
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