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21 September 2008 @ 02:25 pm
$700 Billion Bandaid  
For anyone who might be thinking that rolling handouts are a bad idea... here's some background info. This might be a good time to make those phone calls, yah.


Articles about the stupidity of the Federal bailout plan below. We need to make some noise about this fast, as both parties are saying they 'must' put us 700 billion more in debt and 'fast' because 'the alternative is worse'. Haven't we heard that one enough times by now?

Saner alternatives include forcing banks to raise capital equilaterally by cancelling dividends and/or issuing new equity; using the government to buy equity stakes in the banks themselves instead of buying up bad debt; and debt relief directly to households rather than financial institutions, allowing them to keep their mortgaged property under new terms.

Go to congress.org to find your officials and their contact information. Actual phone calls work best.


Mallaby on the folly of starting a financial war:


[quote]"With truly extraordinary speed, opinion has swung behind the radical idea that the government should commit hundreds of billions in taxpayer money to purchasing dud loans from banks that aren't actually insolvent. As recently as a week ago, no public official had even mentioned this option. Now the Treasury, the Fed and congressional leaders are promising its enactment within days. The scheme has gone from invisibility to inevitability in the blink of an eye. This is extremely dangerous."[/quote]

Krugman says the bailout plan won't work anyway:


[quote]"The Treasury plan, by contrast, looks like an attempt to restore confidence in the financial system — that is, convince creditors of troubled institutions that everything’s OK — simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem — which seems doubtful — or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.

And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving."[/quote]

Zehner on the fatal flaw of trying to protect crippled financial institutions:


[quote]"Similarly, as the homeowner loses his equity, so should the investment banks. Out of greed, they took on too much risk and funded it too short term. That's their mistake, not the U.S. taxpayer's, and they should not be protected by changing the rules of trading.

The free markets are meant to function as a corrective mechanism for companies, and for governments for that matter too. When a company is doing well, its stock is meant to rise, when it does poorly, the opposite should happen. The change in short selling rules has circumvented that feedback mechanism. Financial companies are now insulated against market discipline. The consequences could be disastrous because the global markets will ultimately provide the discipline that the US authorities lack the courage to administer. The result will be nothing short of the destruction of the US dollar as a reserve currency."[/quote]

Exley even more plainly:


[quote]"ZE: If their representatives did stand up for them, what should the American people be looking to get in this deal?

MFW: Firstly, they should have a say. They are missing the size and profundity of what is happening. We are selecting our national priorities and committing our tax dollars -- for years -- right now. What is on offer to distressed homeowners, struggling college students, unemployed Americans, pension and 401K accounts hammered by what has already happened? What is being done to address the core mismatch that created this problem? People can't substitute loans for wages and savings! They still can't after this deal goes through! Until and unless we fix that problem, all solutions are temporary and we fix one problem by creating the next problem.

By the way, the US Dollar is now the world's first currency backed by home mortgages!"[/quote]

Hillary's plan for mortgage modifications, where homeowners and lenders re-negotiate terms:


[quote]"Last spring when I called for a modern version of the HOLC, that’s the Depression-era entity that bought up old mortgages and issued new, more affordable ones in their stead, most people did not pay much attention. But I think it’s important to note that by the time the HOLC closed its books, that agency had turned a small profit and helped over a million people keep their homes. And this was 70 years ago. Our population has grown dramatically.

So, obviously, if we did it right, we would be able to save a lot of homes. And I think if it is administered correctly it could be actually a net expenditure or even winner for the federal government."[/quote]

NPR article on the power grab language in the bailout bill:


[quote]"I would guess that this has to be one of the biggest peacetime transfers of power from Congress to the Administration in history. (Anyone know?). Certainly one of the most concise.

The Treasury Secretary can buy broadly defined assets, on any terms he wants, he can hire anyone he wants to do it and can appoint private sector companies as financial deputies of the US government. And he can write whatever regulation he thinks are needed...

This graph really stands out:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."[/quote]
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