The bailout from hell

I understood the Bush administration's decision to promise up to $30 billion to facilitate the fire sale of Bear Stearns. I got the administration's decision to spend as much as $200 billion to stabilize mortgage giants Fannie Mae and Freddie Mac, which are worth about $5 trillion. Ditto the $85 billion federal bailout of AIG.

As for this Bush administration "troubled asset relief plan" to authorize Treasury Secretary Hank Paulson to spend another $700 billion bailing out investment firms has too many question marks, I am not sold.

Yes, I've talked to experts who believe the package is necessary to thaw an international credit freeze and the run on money markets. But it is difficult to assume that they really understand how to fix the credit mess when most experts didn't see this coming.

As it is, it also doesn't make much sense for the federal government to spend (which means borrow) as much as $700 billion - or a total of $1 trillion, when you add in the other bailouts - in order to stave off a credit crunch.

Alas, I do not see President Bush pushing a fiscally conservative bailout plan. At the very least, Bush should have opened with a smaller price tag, say, $100 billion.

Exhibit A: According to the Washington Post, Paulson has opposed House Democrats' proposal to force companies that sell their flailing assets to the government to "meet appropriate standards for executive compensation." Why? Also, Paulson fears that financial institutions won't participate if there is a compensation cap. As if that's a bad thing.

Exactly. A super deluxe bailout for Wall Street is not what American families do when they're faced with hard times. The bill would impose a $2,000 tax increase on every American family. Its just way too expensive - and it would make the Treasury Secretary our economic dictator. That's too much power for one man!

"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

1. The cost of this bill will be a lot less than $700 billion, which is the amount of assets they can take on, not the cost. They will buy and resell assets, and may make money on the process. (the Congress will spend it anyway)
2. They are rewriting the bill to have oversight.

The bailout is better than not doing a bailout, but is not the best thing to do. Some more thoughts on what we could do better:
http://travismonitor.blogspot.com/2008/09/some-ideas-to-fix-credit-crisis.html

Yes, African pants programs bother me as much as anything.

They have more resource potential than anyone on the globe, yet they lay around and bang rocks and ask for help.

They've had more than enough time to develop their own constitutional republics or whatever will work for them.

What they have proved is that they're not interested in same and feel they can always stay the same because "somebody" will "help" them.

Imagine if we developed this policy with King George III?

.......actually, I can't imagine, somebody help me out, what would America be like under African policy?

I think I'm going to find out one way or another.

Liberal politicians like Chris Dodd who caused the go-go housing financing problems in the first place, allowed it to fester so as to pay off their Freddie & Fannie campaign contributors and other constituent recipients of their income redistribution schemes, are now convulsing and salivating over ANOTHER 700 billion taxpayer dollars like Eliot Spitzer on "Client-9". And these are the people who are supposed to fix the problems?

Newt Gingrich suggests an approach using private capital only:

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.
http://newt.org/tabid/193/articleType/ArticleView/articleId/3725/Default.aspx

Cordially,

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