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Treasury Bailout Proposal: Zero Pain for the Perpetrators, Toxic to Taxpayers
True to its pedigree, the Bush administration's proposal to bailout the financial system contains not a single element of shared pain by Wall Street. According to the text I have read, the bozos who bought the mortgage-related assets (MRAs) that contained toxic loans, or that floated the toxic loans in the first place, get those loans purchased by the US government.
That's it. No pain for Bush-McCain-Paulson pals on Wall Street.
The only "considerations" for the Treasury Secretary, who is to do the purchasing, is to foster financial stability of the banking system and to "protect" the taxpayer.
I propose several additional "considerations"
1) Change the word "considerations" to "requirements."
2) No employee or consultant of any organization that sells an MRA under this law may earn total compensation of more than $150,000 plus no more than 25% in benefits.
3) No employee or consultant of any organization that sells an MRA under this law may receive a severance package of more than 2 months' base salary; if an organization already has contractual obligations for larger severance than permitted under this law, it must first change all those contractual obligations prior to selling an MRA under this law.
Why should organizations that the government bails out be allowed to pay their executives huge compensation? They absolutely should not. And, note the government is not dictating the compensation package--all it is saying is that, if an institutions wants to take advantage of the government bailout, then it must abide by certain rules.
No organization is compelled to avail itself of the bailout option. The availability of the bailout does, however, erect a force-field around the executives: if the company fails because the executives do not want to abide by the requirements above, then shareholders will hold them responsible. If an executive leaves prior to renegotiating a severance contract to comply with the requirements, he resigns--and severance usually can only be triggered by a termination without cause, not a resignation.
Toxic to taxpayers. Under the proposed bill, the Treasury Secretary has the power to: "designate financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them".
So, get this, the Secretary is going to designate financial institutions to earn money from the government to determine, for example, the value of the assets of other financial institutions that the government will then purchase.
This provision is highly toxic to the taxpayer. To value the assets--that today, by hypothesis, have little to no value because the holders cannot sell them--a financial institution will have an incentive to assign them a relatively high value because that will establish comparative value for its own similar assets.
I propose, therefore, the following additional requirements:
4) The Secretary should be prohibited from hiring any financial institution to value these MRAs. Nor should he be able to hire any of the major accounting or other firms that do business with banks.
5) The Secretary should be required to get an independent valuation of the MRAs the government buys before the purchase is made. Such independent valuations should be performed by organizations that meet the limitations of #4 above, and have no relationships with organizations in the field.
6) In the Secretary's quarterly reports to Congress, a written basis for the valuation of the MRAs must be included. The Congress reserves the right to forbid certain firms from being engaged by the Secretary at any time.
If this bailout is to be successful, and there are many other reasons to think it may not, it must last least have the sustained support of the American people who, after all, are paying for it not only in cash, but in lost opportunities. Old-boy networking among financial institutions, and high compensation for the perpetrators of this fiasco, will kill it before it gets off the ground.
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Under the guise of the Great Bailout of the U.S. economy proposed by Paulson/Bernanke/Bush (Paulnankebush) and passed by Congress and President Bush on October 3, 2008, U.S. Government officials are stealing over $700 billion from U.S. taxpayers to bail out people around the world who freely chose to gamble on the financial industry. Paulnankebush and Congress are giving this stolen money to investors in, and management and employees of, financial companies who made risky bets and lost...well, they lost until they were bailed out by Paulnankebush and Congress. By the way, the investors, management, employees, and financial companies who are receiving this stolen U.S. taxpayer money are all over the world, not just in the U.S.!
Are you ready to give up, or to rise up and "convict" the perpetrators?
Go to http://I-mMadAsHell.com
Given the now likely passage of the Great Bailout, I'm mad as hell and I'm not going to take this anymore!
This is our last chance.
Visit http://ImMad.net to stop the passage of the Great Bailout right now!
Then spread the word to as many people as you can right away.
An open letter from America Is Our Creation! at http://AmericaIs.OurCreation.info .
To my U.S. Government representative:
Please DECLARE VICTORY with your Save America Plan for the American economy! Please STOP the lunacy that is the proposed $700 billion Paulnankebush Bailout of Global Financial Investors and Employees!
You have a choice.
You had the foresight to insure the stability of the U.S. financial system, and to insure the safety of deposit and investment accounts in banks, savings and loans, credit unions, and brokerages up to reasonable levels by establishing the FDIC (Federal Deposit Insurance Corporation), NCUA (National Credit Union Administration), and SIPC (Securities Investor Protection Corporation). You gave the FDIC and NCUA the power to use the full faith and credit of the U.S. Government to do this for banks, savings and loans, and credit unions.
You also have allowed the Federal Reserve to grease the wheels of the credit markets by accepting high risk debt as collateral for short term loans.
Please declare victory via your Save America Plan and focus your efforts on enabling the FDIC, NCUA, SIPC, and Federal Reserve to do what they do even better, instead of focusing your efforts on the duplicative, excessive, and THIEVING Paulnankebush (Paulson/Bernanke/Bush) Global Financial Investors and Employees Bailout.
Your Save America Plan is a much better solution than the proposed Paulnankebush Bailout of Global Financial Investors and Employees because:
(Please read the rest at http://AmericaIs.OurCreation.info .)
The perpetrators at companies who plan to ask for bailouts must first return their multi-million $$ bonuses and/or golden parachutes for the merest chance of consideration for corporate socialism. I'm looking for a relatively level playing field here.
Excellent post.
I practiced law for 30 years and consider myself a pretty good negotiator. It would be simple for any new law to require the seller of any toxic paper to repay the government for any loss sustained upon the ultimate disposition of that asset, including interest. Indeed, more onerous terms were imposed on AIG. Shareholders at AIG lost 80% of their equity.
Otherwise, this is a heads I win tails you lose proposition. I hope the Democratic leadership is not so foolish to buy this one-sided proposition which is nothing more than Paulson bailing out his friends on Wall Street at the expense of the American taxpayer.. Paulson came from Goldman Sachs and is one of them, no one of t us.
(continued from previous post due to length limitations)
The financial companies in trouble are the ones who freely chose to make bad decisions about what they invested in, and about how they managed risk and cash flows. They deserve to fail so that a new generation of financial companies which are better managed can flourish, making it much less likely that the current situation will ever repeat. The financial companies in trouble do not deserve to be gifted, or even "loaned," taxpayer money so that they can continue their past mistakes. If they are able to avoid failing by changing quickly into a next-generation financial company WITHOUT a taxpayer-funded bailout, then they have proven they deserve to survive. Whether new or re-born, we need better managed next-generation financial companies in our economy.
You are free to use the arguments made here to publicly justify your vote against the proposed $700 billion bailout.
I am asking you to vote AGAINST the proposed $700 billion bailout, in any form. I will record which of my representatives vote FOR the bailout, and will vote AGAINST them and their parties in the November election. I am also urging my friends, colleagues, and community to do the same.
Warm regards,
David
To my elected representative,
Please STOP the lunacy that is the proposed $700 billion bailout of the financial industry. Make no mistake, this is not a bailout of the citizens you were elected to represent. This is a bailout of the corporations from whom you've accepted money and other support, using money you are taking from the citizens you were elected to represent...and from their children...and from their children.
The citizens you were elected to represent are substantially protected from major changes in the financial industry via FDIC, SIPC, and excess SIPC insurance on their bank and brokerage accounts. Only those citizens who freely chose to invest in financial companies will suffer substantial investment losses, just as those did who freely chose to invest in technology companies before the dot com bust. That's the way it should be.
(continued in next post due to length limitations)
As far as I can see this whole problem could have been avoided by one simple virtue, personal resposibility. It is the potential buyers responsibility to either read the find print himself, or find a respected advisor to determine if, in fact, he can afford this loan. It is also the responsibility of the loan company to actually inform the potential buyer of certain possibilities i.e. their loan rate going up.
What we have left is a fiasco where both parties made horrible decisions and now the common taxpayer is left holding the bag. We don't need a bailout, we need a little more restraint in the lending area. I find this thing little different than the thousands of college students that are sent credit card offers by the dozen with little or no means to actually pay. Simply an attempt by Big Banking to get a chokehold on them from the start.
I guess what I'm saying is maybe start with classes/laws that inspire a little common sense. My family is by no stretch of the imagination rich, yet we still live comfortably because we follow one simple rule. We do not spend more than we can afford to lose. Period.
Actually the bill says nothing about guaranteeing immunity from criminal prosecution under Sarbanes-Oxley.
So the officers of these companies could still have their assets seized and their asses thrown in jail.
"Yesterday, a key lobbyist for the financial services roundtable, Scott Talbott, warned, "We're opposed to adding provisions that will affect [or] undermine the deal substantively," The Roundtable's members are banks, securities firms and insurance companies, the prime beneficiaries of Paulson's proposed bailout. He warned that any effort to attach other provisions would be a deal breaker."
Who is Scott Talbot and why does he think he can demand anything for the people that are responsible for this? It is outrageous that they are begging and demanding in the same breath. Stop this madness now!
No the problem is they're holding us to ransom.
Approve this, or we'll call in all loans now, and we'll have a "collapse" -- i.e. your ATM card will stop working and you won't be able to access your accounts.
That's what they're threatening.
I think we should goad them into making demands and get enough visibility over their operations & publicize that information to the point that it's obvious to even the most casual observer:
This is a stick-up.
I think we should also name all the companies and their management swine publically. Their websites should provide this information easily.
There is no reason to believe that the plan as it currently exists will do anything other than buy a little time for Republicans to get out of town leaving generations of taxpayers with a bag full of toxic financial paper.
How is Treasury going to be able to turn this junk that Wall Street can't sell into an "asset?"
The answer seems pretty obvious to me. That is not their goal.
The more they press for immediate action, the more obvious it is that this is a pig in a poke. It is also the clearest indication that time is on the side of the taxpayer. They are desperate to get something done. That's a great position to be in when you are negotiating. Good reason to take lots of coffee breaks and a few days off to 'consult' with your experts.
This is a bailout of every American who lied on their mortgage app and didn't have the money to cover their responsibility. This is a joke.....
I know a little about the financial industry and the only way a mortgage applicant can lie on an application is if the lender does not check their facts. It is very easy for financial institutes to verify an applicants credit worthiness, to issue a loan without discovering whether or not the applicant can repay the loan is a bad business decision.
So I ask you, who are we bailing out?
You mean the less than 1% who did such a thing?? Realize that the average percentage of homes going into foreclosure is less than 5% of all the homes sold in the last 5 years. Almost every one that is going into foreclosure is a case of a person who took out a loan not knowing that they couldn't afford it. The bankers/brokers had a REASON to lie to them and tell them that they could afford more than they actually could!
By contrast, instead we are going to bail out all the banks who made loans to people that they either knew couldn't afford it, or SHOULD have known that they couldn't afford it.
Who is worse, the guy who borrows money thinking he can afford to pay it back, or the guy who loans money KNOWING that he won't get it back?
You mean they might be held accountable for past action? Imagine that!
How about, instead of spending $700 Billion to bail out those who MADE the bad loans/TRADED the bad loans, we spend less than HALF that on saving the loans themselves. Bail out the taxpayers who TOOK bad loans, and now cannot pay them. Pay off that loan, but then give that taxpayer a reasonable fixed loan, that they MUST pay back! This will not only fix the financial sector, it will fix the HOUSING sector, and it will actually HELP our economy, something which bush is unwilling to do! All that HE wants to do is simply ensure that it creeps on for another 40+ days!!
I'm in favor of letting it die and I hope it dies. The price tag for every one of these programs escalates. This one will too. Starts out @ 700 billion, ends up a 4.7 trillion. You know what you get when you open Pandora's Box. I hope we don't wade into this toxic dump.
Confused. Considering the amount of debt we are carrying, isn't some guy in Japan effectively buying these mortgages if Bush gets his way?
And again, I have to say it. Thanks VERY little Ms. Pelosi. If impeachment hadn't been taken off the table perhaps Bush would have been reined in and wouldn't be shoving more good-for-his-fat-cat-buddies down the country's throat.
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