The sticking points in the bailout plan

As a former member of the armed sevices, I am agasht at the adacity of the U.S.Govt. I KNOW we need the bailout, but what chaffs my ass; is why the realitor,the morgae Co., and the major finniacial institune, that procreateted,promoted, and instilled this fraud, or not now being sought by the FBI. If left un checked, this type of abuse will re-appeat as soon as the dust settles. What I believe needs to be done, is to evaluate who was involed; who made money; and what was their connection to the bigger banks thatthey sold theys screwed up morgages to. the Point is....... I I have to pay for my mistakes..... Should not STUIPID CEO HAVE TO PAY FOR THEIRS""". Not only the CEO's; but every individual involvrd in these loans. TAKE THEIER BANK ACCOUNT AND FINANCE THIS BAIL OUT......If not. I know 26,000,000 American Veterarans that did not fight for socialisim.

What I would like to know is--what happened to the ol' fashion notion of "what goes up, must come down"!?? Seems like in the last few years, everybody sorta forgot about that little "fact of life".

A deeper comment here: Phil Graham--and others of his ilk--should have known better!! (To refresh memory: Mr. Graham and his supporters basically dismantled Glass-Steigal.) When the Republicans took over in 1994 and started working on their so-called "Contract with America" I was amazed and wondered just where were they during their history classes--if they even took history in the first place!! Were they sleeping through the lectures/lessons on the Great Depression??

I don't think a simple "fix" of restoring that firewall torn down during "deregulation" is going to fix this mess, especially the more I learn about it. However, it would behoove everybody to remember: regulations set up during the 1930s were set up for a reason: not necessarily really to regulate the financial system--but to regulate human nature!! During the heyday of the housing bubble, there was so much "easy" money floating around--and the potential for lots more--even good, honest, honorable people were tempted by the "harvest to be had". I would defy anyone, especially those with some sort of notion of honor and integrity, to at least not think about the rewards, as opposed to the risks inherent in these deals. And, oh yeah--forget the basic law of gravity, while we're at it.

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 significant 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.

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

Here is some advanced mathematical economics

Total Cost of Mortgage Bailout (including companies specific loans
etc) = 1300 Billion Dollars

Number of US households defaulting on loans = 100 million (assumed)

Bailout per Household = 13,000 Dollars

Deleting extravagent houses/overpaid /people at fault /above 3
bedrooms = 50 million households

New Bailout per Household =26,000 Dollars

Lowering of EMI by Lowering of Mortgage Rate, by Fed Rate Cut =1000
Dollars per annum

Lowering of EMI by increasing tenure to 40 years = 500 dollars per month

Why cant we give tax payer's money back to the tax payer themselves

Risk Added to Govt Treasury = 0

Jobs lost at financial sector = 0

Houses lost by ordinary Americans =0

Note- Numbers are close approximation of estimates using Fermi Logic
of problem solving.Feel free to tweak or spin them.

Can someone tell whats the problem in this logic ???

--
http://www.decisionstats.com

everybody - please loan me all urs monies. I will live lavish lifestyle, and then when unable to make payments, will be considered too big to fail and we will be bailed out by US Govt. Its win win. Must receive at least 1 trillion in loan monies for this to be effective.

A $700 billion bailout of the banks and investment houses is an outrage. We've been told this is a "credit crisis" caused by a "liquidity problem".

Lets's therefore try "trickle UP" economics.

Place the $700 billion in the hands of taxpayers by way of a tax credit, those earning $250,000 per year or less. Restrict the use of the tax credit to a first or second mortgage or line of credit on a home that is a primary residence, pro-rated for multi-family homes. For those without morgtgages, allow the payment of credit cards.

The banks still get an infusion of cash, helps the "liquidity" problem. But the American taxpayer gets some relief from the scam-mortgages, etc. Afterall, they pay the bill.

Further, any bank participating by choosing to accept the tax credits, in return, ends sub-prime lending. They also end double-cycle interest on credits. They end universal fincance rates. They end "we may change these terms whenever". They end increases in rates that are based on a re-assessment of your credit profile.

In return, they get to survive another day, hoefully reformed.

Those who chose to accept the risk of investing in sub-prime mortgages and repaed the profits now suffer the consequences. They didn't give back the money they gained, they can't now give us back the bill either....

As scary as the prospect of the bailout is, Waldman's diagnosis is scarier still. I'm reminded of the timeless declaration from the philosopher Pogo Possum: "We have met the enemy, and he is us."

I listened to Secretary Paulson yesterday. He basically said that he waited until the situation got this bad so that he could ask for the power he is not asking for. This is a clear demonstration of his incompetence! He also said he doesn't know if his plan will work.
I demand a better plan than the one Paulson is proposing.
I don't feel that this man is trustworthy and should be given the expanded superpowers that he and the president demanding. I am against expanding the powers of the executive branch.

I want a plan for america not just wall street.

Someone please slam McCain for his blatant lies. I am sick of his blatant lying. I can't even stand to listen to him at all any more. I can't listen to anything he says because he has resorted to such sleaze and lies. I don't trust him with out future in any way shape or form. McCain/Palin is a recipe for disaster for our country.

Enough is Enough!!
Obama/Biden '08

No one seems to be mentioning the provision in Paulson's bailout proposal that states that this whole crap shoot is exempt from any action in/by any Court of Law, and that it empowers a non-elected official to establish whatever bureaucracy he feels is needed, and can authorize government financed contracts that are not subject to government contracting laws/ rules, have the power to designate any financial institution he wants as financial agents of the Government, the pwer to issue "such regulations and other guidance as may be necessary or appropriate to define terms or carry out authorities of this Act" can use the alleged proceed from the selling of the debts to pay for the administrative costs of the new unlimited bureaucracy, and that the authorities granted to the Secretary under Act, except for these provisions, will expire in two years!

Are we really supposed to buy this is for those of us who have been honoring our financial obligations and paying our taxes? All this is is more smoke and mirrors on the smpoke and mirrors get rich quick financial escapeds of so many for so long!

No one seems to be mentioning the provisions in Paulson's bailout proposal that state that this whole crap shoot is exempt from any action in/by any Court of Law, that it empowers a non-elected official to establish whatever bureaucracy he feels is needed, and can authorize government financed contracts that are not subject to government contracting laws/ rules, will have the power to designate any financial institution he wants as financial agents of the Government, the power to issue "such regulations and other guidance as may be necessary or appropriate to define terms or carry out authorities of this Act", can use the alleged proceeds from the selling of the debts to pay for the administrative costs of the new unlimited bureaucracy, and that the authorities granted to the Secretary under Act, except for these provisions, will expire in two years!

Are we really supposed to buy this is for those of us who have been honoring our financial obligations and paying our taxes? All this is is more smoke and mirrors on the smoke and mirrors get rich quick financial escapades of so many for so long!

It certainly seems that once again the unscrupulous or incompetent will be rewarded. Bailing out financial institutions who took their profits up front on insecure mortgages is simply rewarding bad behaviour. If these banks had held and serviced the loans for 10 years and then had them go bad, one might understand the inclination to help them. Unfortunately the new business model in the mortgage industry has become: 1 Qualify them any way you can, 2 Load the closing with upfront fees and prepaid interest, 3 Sell the loan to unsupecting investors by hiding it in a package with false ratings, 4 Cry to the government that allowed you to grow too big that you are losing money and the economy cannot stand to have you fail.
Before any financial institution gets financial aid from the government, it should be required to pay back the short term profits that it greedily gained in the boom years. If it cannot or will not do that, then let it sink. Taxpayers who cannot pay their mortgage payments, certainly cannot afford to pay $700 Billion in increased taxes to bail out CEOs with multimillion dollar golden parachutes.
On another front, isn't it time to stop fighting world war III and start putting those untold millions back into our own economy? Bring those soldiers home and let them again become consumers while at the same time saving all that gas and ammunition.

Followed the rules, paid my loans, pay my taxes - now without any kind of oversight the President wants me to bail out the wall street crooks who gamed the system to the tune of millions upon millions of dollars.

I am getting by on money I saved and with interest rates what they are, do not have any excess money to give to these hi rollers.

Wake up Congress!

No money unless outside auditors monitor the entire process day by day.

No money to any organization whose CEO makes more than the Senators or Congress person voting this money.

No money to buy properties that are so ruined by neglect they are worthless.

No money dispersed unless the Senate and House leadership of both parties publicly sign off that they have reviewed the transaction and it is legal.

DO NOT give away taxpayer money again

This situation points out an obvious flaw in our justice system. We need a corporate death penalty. We need to be able to put corporations down when they act irresponsibly and harm hundreds of thousands of, if not millions of, Americans.

Up until now, if you wanted to steal millions, or harm or even kill thousands, with near impunity, you had to be incorporated. Countless corporate acts have been committed that, if done by an individual, would result in incarceration at least. Somehow, we as Americans have forgotten that there are people out there running these corporations. More on that in a bit.

Now we are faced with a situation where the greedheads on Wall Street are battling with the greedheads in Washington, and I am not confident that the two factions will not come to terms at the expense of the rest of the country.

My suggestion would be to take over all these firms, sell off their assets, and terminate their corporate charters. Recover what can be recovered from the "control parties", i.e. the officers, directors and majority or controlling shareholders under a theory of avoidable preferences, and indict the same parties under federal law. What do you want to bet that these folks bailed on their own companies, or sold short, when the profits dried up?

I would also posit that since we are engaged in a war on at least two fronts, Iraq and Afghanistan, that the same individuals be indicted for treason. What could be clearer than that the irresponsible activity by Wall Street and the lack of oversight by Washington has given "aid and comfort" to our enemies? Perhaps we are in an economic war, as well, and these people have been working for the other side.

I know that I worry less about a terrorist attack then I do about the behavior of these folks.

We learned some harsh lessons in the Depression and put safeguards in place, only to have those same safeguards removed in the last eight years of Bush-league leadership. Now we find out that the true measure of what will happen if our markets are de-regulated is that the greedheads will kill us all for an extra nickel of profit.

Let's take their money away and send them to jail. And not some country club jail, but a real penitentiary befitting their crimes.

We have met the enemy, and they own Wall Street.

When one focuses on the "boilerplate" language of the proposed bailout it is clear that the current Administration still wants to continue its unacceptable and dangerous policy of non-accountability for their actions. Specifically Section 8 "Sec. 8. Review.
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.”

This proposal's assertion that they don't have to be accountable to our laws and to the public is the very approach many see as one of the root causes of our financial meltdown. Sure it would be easier to “fix” things if you don't have to be responsible for how you do it, but we cannot allow this approach. Our Constitution set out a democratic form of government that should not ever allow such dictatorial Executive Branch authority. to escape oversight and review by Congress and the Courts.

Congress, the media, and the public must not allow the pressure of the need to quickly move to resolve this disaster to allow such a threat to democracy to become law.

Tom from Northern California

Curmudgeon has it right. Another great Pogo quote, relative to the lobbyist/Wall Street/rape the economy crowd: "....sharper than a child's tooth, is a thankless serpent."

The following clause is from the proposed legislation to bail out the financial industry:

“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.”

It is being proposed that one NON-elected official is given absolute authority over the entire financial industry of the United States. No congressional oversight, no judicial review, no restraints, no recourse. That's not democracy, that's dictatorship. Our elected congressional leaders and the news media need to be vocal and very direct with the public as to what this clause means to our system.

Dale of Northern California

Everyone look into the Keating five (The five senators, Alan Cranston, Dennis DeConcini, John Glenn, John McCain, and Donald W. Riegle were accused of improperly aiding Charles H. Keating, Jr., chairman of the failed Lincoln Savings and Loan Association, )...if elected McCain will be in charge of the largest bailout in history...history shows he has little concern for main street and if not bailed out ...how much does he stand to lose? This is why all the politicians need the bailout...their relationship with Wall Street has led to this and they now want us to help them again...send the money to me and let me choose how to infuse it back into the economy.

Curmudgeon,

I beg to differ. I think Waldman is on the right track even if I don't agree with his prescription.

I suppose the first thing to ask is what is the fundamental problem in this country.

I suspect it is as Buffet discusses in '02 in his newsletter...I believe about pages 14 - 17. He warned us of the dangers of overleverage, derivatives, credit default swaps, etc. Nobody listened.

Further, I, and I shocked to do this, note that Gingrich (http://corner.nationalreview.com/post/?q=ZGE5MmE0YmRiODA3YTRiNzFlN2FmNDU5N2I0ZDc3YTE=) finds the current bailout plan to be a bit short-sighted. There I agree as well.

The real questions that need to be answered here and quickly are:

1) What is the problem?
2) Do we have a set of tools to fix the problem?
3) In using our set of tools to fix the problem, will we create equally bad or worse problems?

I'm thinking some comprehensive plan is in order. Worker retraining, liquidity infusions, buy-out of foreclosed properties, elimination of illiquid derivatives, postponement of mark-to-market rules, infrastructure investment, energy policy overhaul, and finally, short-term suspension of Sarbanes Oxley.

Doesn't this 1.1 trillion bail-out plan constitute re-distribution of wealth, upward?

Personally, I'd rather see this money stimulate the economy in ways that benefit the people whose taxes it represents.

-Infrastructure that isn't rusted and broken
-Development of alternative energies
-Health Care reform
-Social Security Reform
-Meaningful Education

Certainly jobs could be created in these areas and others.

It simply disgusts me to think we are saving folks in the top .01% of the tax bracket; allowing them to keep thier mansions, yachts, personal jets, and Lamborghini's (that they acquired by unethical means)... while our senior citizens and veterans can't afford basic health care. Just disgusting ...

Bryan, you misunderstand me. I'm afraid that Waldman does make sense. Could the true criminal here be all of us, and Wall Street was only a willing accomplice?

That makes it a problem of an entirely different magnitude, if that were possible. Imagine an entire society self-destructing. I know that in this revolution Wall Street will be the first up against the wall (no pun intended), but I'm afraid that the mob may fire wide and hit me too.

I think MR.Waldman's ideas deserve some pondering the infrastructure sucks everywhere.that's lot's of work that will involve lot's of new employment opportunities.Maybe the oil companies could hack up afew 100 billion to help their thirsty nation,getting poorer by the minute

I don't know that I'd quite read Waldman as referring to 'main street' as the criminal and 'wall street' as the willing accomplice. Maybe more like 'drug user/ addict (?)' and 'drug dealer / pusher'. Many of the excesses in the real economy, the failures to confront hard choices, etc - well, who has ever faced a hard choice without being presented with a tough set of options. When assured by an 'expert' that, of course you can afford this - after all, they wouldn't give you the money if they didn't think you could afford it, they'd lose money operating like that - that's not the structure of tough options.

I think (no promises) I read Waldman differently. When Wall Street talked to Main Street, did Wall Street lay out the consequences and risks (as is expected of a doctor or other professional) and then provide what in the considered opinion of 'Main Street' was the desired course of action (which may have involved saying something like: sure we can do that now butit may require moving growth forward, i.e. grow in 2002-2007 but then not grow in 2008-2011). Or did 'Wall Street' approach the conversation with a decided interest in one course of action and advocate for that one (the defense attorney who argues for a not-guilty plea because he needs to build rep and bank on courtroom acquittals). A we're not going to talk about the downside and besides we'll probably have solved that by then anyway (but either way, we'll get paid now and paid later) type of approach.

Of course, Wall Street could have been delusional enough to never notice the long risks (this is highly believable) until it was too late to bail and thus a) gave its best professional advice and b) helped lead itself and 'Main Street' off a cliff.

Whichever way, the odds we get around to working on Main Street anytime soon seem low.

I wish to share a segment of a book I am writing that focuses on a shift from the past "Push" (laissez-faire) democracy of the past two centuries to a new "Pull" (consumer) democracy needed for the 21st century.

The Financial Industry bailout cannot wait for this book, so I am sharing my position for fixing at least a percentage of the Mortgage meltdown through the consumer. There are many details that can be discussed later but the crux of the process is simple:

A huge layer of capital exists in consumers IRAs, 401ks, and other retirement funds. The first source of real capital to solve the mortgage meltdown can come from these accounts with the proper incentive to the account owners.
First, make these accounts available to purchase mortgages or foreclosures without taxation. This can be done by transfering loans to IRA, etal, accounts from mortgage lenders as a buyout. A retiree may like to payoff a mortgage, but will not use IRA funds because they would be taxed as revenue first. By letting an IRA pay down a mortgage, it would free up lending capital for other loans. IRA owners could also buy foreclosures for family members, leveraging captial in the middle-class base that is presently off the market. To ensure that there is no shorting of the process of swapping loan for IRA funds and then selling the property, an amortized transfer of value over 20 years would keep this from being a short-term investment. By crediting the paper transfered to the IRA at a rate of 5 percent annually, recognized quarterly, the IRA owner could reduce the IRA payback amount the longer the mortgage paper is held in the IRA.
This may sound like an escape from a tax opportunity, but it really replaces something much worse: a loan buyout by government!!! Instead, by giving the taxpayer with an IRA to buydown mortgage debt instead of the government the risk to the average taxpayer is reduced dramatically. The advantage to the IRA owner is that a mortgage on a primary home can be reduced or eliminated and the incentive is to use existing dollars to solve a long-term problem for the Country. This puts the power in the hands of the middle-class and out of the hands of the government.

John, those IRA's you're talking about may soon be worthless.

This is not new. Does anybody remember the Keating 5? One of them is running for president. Why has the media failed to make this connection?