Posted on 09/25/2008 8:43:03 PM PDT by SmithL
Is it fair that businessmen who fail in neighborhood stores have to close shop and often sell their homes, while Wall Street titans are spared the consequences of monumental stupidity and greed?
No, it is not fair. Yet, Treasury Secretary Hank Paulson may be right. To save the sheep who might have been wiped out in a general financial panic, we may have to save the pigs.
Life is unfair, said John F. Kennedy.
Yet, this is going to be the mother of all bailouts. Paulson probably will be given authority by Congress to spend $700 billion, 5 percent of our gross domestic product, to buy all that toxic paper stinking up the books of our banks.
And this is not the first such bailout of foolish and incompetent financiers and politicians.
In 1975, when its cravenness to extortionate union demands had bankrupted New York, the Big Apple had to be rescued by President Gerald Ford.
Mayor Marion Barry's Washington, D.C., was next in line at the cashier's window.
In the Reagan era, it was Chrysler. Later that decade, Citibank, Chase-Manhattan and Bank of America were staring into the abyss, as Latin American regimes, to whom they had lent scores of billions, were balking at paying their debts. Uncle Sam stepped in.
Then came the Mexican and Asian financial crises and the U.S.-IMF bailouts of the 1990s. The Mexican bailout was as much a rescue of Goldman-Sachs as Mexico City, as Treasury Secretary Bob Rubin's old firm was choking on all its Mexican paper.
The great myth is that these 1990s bailouts were models of U.S. financial statesmanship and great successes. The reality is the U.S. workers took it in the neck.
(Excerpt) Read more at sfgate.com ...
Look on the bright side. It will save time from “You can’t to that, it’s Socialist!” debates for future Federal spending.
Explain to me why this wouldn’t work??? So far, it’s the most logical solution I’ve heard.
The Birk Economic Recovery PLan
Hi Pals,
I’m against the $85,000,000,000.00 bailout of AIG.
Instead, I’m in favor of giving $85,000,000,000 to America in a ‘We Deserve It Dividend’.
To make the math simple, let’s assume there are 200,000,000 bon-a-fide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billon that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a ‘We Deserve It Dividend’.
Of course, it would NOT be tax free. So let’s assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it’ll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent’s medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else
Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.
If we’re going to re-distribute wealth let’s really do it...instead of trickling out a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President.
If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!
As for AIG - liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.
Here’s my rationale. We deserve it and AIG doesn’t.
Sure it’s a crazy idea that can “never work.”
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion ‘We Deserve It Dividend’ more than I do the geniuses at AIG or in Washington DC.
And remember, The Birk plan only really costs $59.5 Billion because
$25.5 Billion is returned instantly in taxes to Uncle Sam.
Ahhh...I feel so much better getting that off my chest.
Kindest personal regards,
Birk
T. J. Birkenmeier, A Creative Guy & Citizen of the Republic
Who said banks own the bad paper?
My bet is Hedge Funds, Foreign Governments, Insurance Companies, Billionaires, etc. own a substantial chunk.
When you "bail out" one group of owners of bad paper (say banks), the remaining owners are also helped (the jerks above) because supply has been reduced and liquidity for that paper exists.
So why bail out a class of assets that may not primarily be held by banks? Let's first make sure that all non-bank holders of this bad paper realize their losses. Then, let the government take over the banks that made such bad decisions, and liquidate their assets and especially their bad management that got them into the fix in the first place.
Everyone is obsessed that someone made money in lending/MBS. OK. Going forward ...
Does anyone on FREEP really believe that doing nothing is appropriate? Bernanke, in his study of the Great Depression, concluded that it was a lack of capital that caused AND continued the Great Depression.
So, we are on the brink of a depression BECAUSE OF LACK OF LIQUIDITY - JUST LIKE 1929!
So, for everyone opposed to the Paulson plan, what is your brilliant idea to increase liquidity?
Because if we don’t do it soon, the economy will really collapse AND WE WILL GET OBAMA AS PRESIDENT!!!!!
Geez, are there any traders (real, not day) that have looked at the credit spreads in the market? They are horrible!!
AIG is getting a loan.
Nice idea though
I read this earlier and someone actually did the calculation.....this is wrong. Comes out to $450.00, not $450,000.00.
I haven't done the calculation, but you might check it.
Check your math. It is $425 per person and not $425,000 per person.
Still I like your idea better than pouring $85 B down the rat hole.
As for the $700 B bail out - we are talking about approx. $4,000 for every adult in the country. Are we out of our freaking minds.
I sincerely hope that if/when Congress passes the bailout that it includes severe penalties for these companies. As in, the immediate dismissal of the entire board of directors and all officers for any company that accepts the bailout help.
Basically, it is a chance for the "leaders" to say we screwed the pooch, royally. They get the chance to do the right thing for their investors, and fall on their swords. Because part of accepting the deal would be no "golden parachutes" - no severance package at all. Acceptance of the bailout for your investors would constitute voluntary surrender of any employment contract clauses involving severance packages of any kind.
These guys (and women) f'd up colossally, they should be made to feel the pain of their stupidity and risk-taking. Not all big financial companies are in trouble. Some of them have leadership with sound judgment. So obviously these other companies didn't "have to" make the choices they did.
This is not intended to be punitive, or at least not entirely punitive in nature. It is also to inspire the subsequent leaders elected to run these companies not to make egregiously bad decisions and take enormous risks with their investors money.
Harsh? Sure. But it would be harsher still (but probably fairer in the long run) to simply let these institutions fail. That would be even rougher on their employees and investors. It is only because these idiots have convinced the feds (and maybe they're right, who knows) that it would be harder on the country as a whole to let them fail. So be it. But these guys don't get off that easy. They're out on their asses.
“Everyone is obsessed that someone made money in lending/MBS. OK. Going forward ...
Does anyone on FREEP really believe that doing nothing is appropriate? Bernanke, in his study of the Great Depression, concluded that it was a lack of capital that caused AND continued the Great Depression.
So, we are on the brink of a depression BECAUSE OF LACK OF LIQUIDITY - JUST LIKE 1929!
So, for everyone opposed to the Paulson plan, what is your brilliant idea to increase liquidity?
Because if we don’t do it soon, the economy will really collapse AND WE WILL GET OBAMA AS PRESIDENT!!!!!
Geez, are there any traders (real, not day) that have looked at the credit spreads in the market? They are horrible!!”
Good points. A crash will bring consequences that would cause people to wish we had done something to stop it.
I agree we have to do something....but, I do not like the idea of ACORN or La Raza funneling money and profiting off the bailout. I just cant stomach that.
Bushonomics: Privatize Gains, Socialize Losses.
No Moral Hazard here, nosiree Bob!
Are you a student of fuzzy math? I get considerably less per adult over 18...$425.00.
We wouldn't have a liquidity problem if lenders knew what useless paper was on the books of their borrowers' balance sheets. A bright light on everyone's balance sheets so we knew the value at which they are holding those assets is the key. Once that is known, everyone knows the maximum potential losses their trading partners may be exposed to, and can therefore form an opinion as to whether to do business with them.
What we have is an information shortfall, not a cash (liquidity) shortfall. The Fed has been pumping massive amounts of money into the market, but nobody will take the money and loan it to anyone, because they don't know if the borrower can survive the writedown of their assets. No amount of liquidity shoved into the market will make a bank comfortable making a loan to a borrower who might be belly up tomorrow.
So, a BRIGHT LIGHT of information, not a FLOOD OF CASH (causing inflation and the next bubble) is what is called for.
Then we can proceed to bankrupt the companies that deserve it, let the survivors pick over their assets, fire the lousy management, get balance sheets back to reasonable valuations, and move on.
This mentions an aspect of what went wrong I’ve seen mentioned in maybe three articles, but it doesn’t seem to get much scrutiny or mention in most discussions. Possible corruption of credit rating agencies:
“These rating agencies have become thoroughly corrupted by conflicts of interest. If you want to package and sell bonds backed by risky loans, you go to a bond-rating agency and pay it a hefty fee. In return, the agency helps you manipulate the bond so that it qualifies for a triple-A rating, even if the underlying loans include many that are high-risk. Without the collusion of the bond-rating agencies, sub-prime lending never would have gotten off the ground, because it would not have found a mass market.”
Quite a statement there, the sub-prime, bundled mortgages would never have found buyers without a good rating, and corruption might have been involved in obtaining those ratings. Sin #2 in this article:
How about a $4,000 stimulus check for every adult in the country but it has to be invested in an account that backs the financial markets for a period of 5-10 years. Sort of like a restricted option on stock. Any profit goes to the investor of the money, i.e. us, not the aholes in DC.
First of all, the Treasury is not writing them a check. If they were, your plan would work. The Treasury is backing these mortgages to make them secure. What has happened is these mortgage packages have become illiquid, essentially valueless because nobody will buy them. This will constrict our entire economy as when the money can’t be borrowed, it can’t be spent and it can’t become someones paycheck. The Great Depression was the result of lousy money management by the feds, not that one day Capitalism failed. They hit an economic turndown and shrunk the money supply causing a disaster for 12 years until we found out we had to build a bunch of machines to go kill fascists. We do need reform out there, get rid of redlining and other government interference. Stick to making sure their numbers are straight and let Capitalism work, not making a social program out our financial markets.
Sounds as good as anything the ‘experts’ are pushing.
Just take the trillion or so dollars this will ultimately amount to, and mail us ALL a check rather than giving it to the banks. lol
It will be the mother of all economic stimulus checks.
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