What's in that big bailout bill? A first look

Why not give the $700B to the American people to deposit in the banks as time deposits that the banks can then lend out?

How about this idea for calming the current financial liquidity crisis?

Instead of handing money over to financial institutions directly, return the money to each and every American in a manner similar to the recent income tax prebates.

However, this time the money is required to be put in the form of time deposits in banks, much like CDs.

This way the money enriches the American people who are required to keep the money on deposit in banks for a proscribed term. The minimum term can be set to provide the needed market stability and minimize inflationary affects.

The banks in turn enjoy increased liquidity and are able to lend the deposits out for commerce and industry.

The banks quickly receive much needed liquidity,

The banks keep and manage their bad loans,

Every American holds a note that they can redeem someday for their own enrichment,

Business prospers and Americans keep their money.

Make the deposits tax free and require the banks to pay interest, also tax free.

This could be done quickly using direct deposit for most tax payers. Others can receive a certificate by mail that they can take to the bank of their choice and deposit.

Call it the Finance American Savings Trust Account or F.A.S.T. Account for short.

It needs to happen fast and should be appreciated by the American people more than the current bailout bill described in the media.

"Insurance?!?" You mean, the Administration should go around to burning buildings and offer 30-day free trial coverage as it sees fit? What kind of nonsense is that? If there's to be insurance I'd vote for reinsurance after arm's length, "free market" insurance got wiped out from the first 25% of coverage.

And why is it the executives wear the dunce caps? What of the Board of Directors in loco parentis for the shareholders? How about requiring an attestation that contracts have been reviewed and that all compensation terms are adequately risk-adjusted for everybody with variable pay?

And suspension of mark-to-market accounting? You mean, allow Management to make up whatever numbers it wants in showing investors what their risks are? This alone makes the act the "Pull Every Stunt Possible to Prop Up Share Prices in the Short Term Act."

Whatever happened to the notion that markets collapse under inadequate disclosure? E.g., Citi casually deciding to pull $49 billion onto their balance sheet when the fit hit the shan, finally giving some inkling about all the hidden risks of investments that allowed management to loot the net worth of the firm? After Enron, we want LESS disclosure and MORE phony accounting? How about adding the requirement that each firm participating disclose ANY AND ALL actual, contingent and potential liabilities with EACH counterparty?

I've seen various versions of what Scotsman proposes and it is an interesting and attractive idea if one could do the math to estimate the cost. But in the search for a solution for this mess what does a $billion here & there have to do with anything? The concept of directly providing residential property owners enough $ to stop the foreclosure hemmoraging and keep folks in their homes might still work. However one comes down on the moral and political issues as to who is worse and least deserving - the homeowner who thought they could get a home at such easy rates or the lending instiutions that made $millions developing and marketing the subprime mortgages - would drive which type of intervention one would promote

Unfortunately the stated problem that our Executive and Legislative leadership have decided to work on is the freeze of the credit structure of our economy. They say this credit freeze will be averted/minimized with a rapid infusion of $$ into our banking and investment markets. It appears that only if this current deal fails would we have an opportunity to restate the problem that could be answered with some form of direct government reimbursement to the taxpayer.

DO we have time to make Rescue Plan changes before the predicted chaos occurs? My best guess? -- It won't be pretty but I believe we won't collapse into chaos. Market stability could result quickly with announced move to have more direct intervention by Government similar to the direct payments in Scotsman's earlier proposal or maybe direct intervention like the New Deal when Government became the biggest employer with programs as the CCC which put people to work repairing our infrastructure e.g.Hoover Dam.- We are a resource rich country so we will have plenty of soup and bread for our soup kitchens. Also the big private players, like Warren Buffet has done, will step up to the plate to protect their own interests. Other nation's banking and market systems are so dependent on ours being sound so they will participate more fully in propping up the US dollar. Pulling back on the expensive IRAQ war and requiring IRAQ to repay us from some of their budget surplus of $79 billion would help. Obama and McCain would need to step up with their own plans if this one fails and then we can elect which of their plans has the most positive reaction from "Main Street', Federal leaders and 'Wall Street" .

This picture summarizes how I feel about the bailout right now.

RISK FACTORS FOR THE TARP PROSPECTUS

The following risk factors apply to the United States Troubled Asset Recovery Plan (TARP) also
known as EESA:

Investment Risk: There can be little or no assurance that TARP will achieve its investment objectives. In fact it is a long shot on global confidence. The value of TARP and the income therefrom will rise or fall, in lock step with the capital value of the toxic subprime securities in which TARP invests. Due to the exponential overhang of related derivative instruments such as CDSs, the value of these assets can be expected to continue to spiral downward into the the vortex.

Currency Risk: The NAV per TARP Share will be denominated in USD and the TARP investments will be acquired directly or indirectly in the same currency. One of the collateral effects of the TARP financing plan is the anticipated downward spiral of the USD. TARP may, in exceptional circumstances, minimize the exposure to currency fluctuation risks by the use of hedging and other sophisticated techniques and instruments. Nevertheless, it is expected that additional funds will have to be printed.

Regulatory Risks and Accounting Standards Disclosure are less stringent in the US asset backed securities markets than they are in certain undeveloped non-OECD countries. Consequently, there is less publicly available information on the issuers of the subprime assets than is published by or about other legitimate businesses.

Political Risks: The performance of TRAP will certainly be affected by changes in economic and market conditions, a potential mega catastrophe such as an unexpected McCain win, an ensuing Palin Presidency, continuous flip flopping in congressional policies, the whimsical imposition of restrictions on short selling and other legitimate trading strategies and continued weak regulatory oversight by the SEC under Chairman Cox.

Credit and Settlement Risk: TARP will be exposed to credit default risk on parties with whom it trades and will also bear the risk of settlement default. We have absolutely no clue how much this could be. Counterparties such as AIG, Goldman Sachs and Morgan Stanley, who were previously thought to be the gold standard, have become a virtual pinata of toxic financial risk and peril.

Risks of ABS Debt Securities: The prices of debt securities purchased by TARP will fluctuate in response to perceptions of the respective issuers' creditworthiness and also tend to vary inversely with market interest rates. Due to the sleazy nature of the issuer's of subprime securities, you should already know what to expect.

Performance Fees: Where incentive fees are payable by TARP these will be based on net realised and net unrealised gains and losses at the end of each calculation period. As a result, obscene incentive fees may be paid on unrealised gains which will in all probability subsequently never be realised.

Risks associated with Financial Derivative Instruments: While the prudent use of financial derivative instruments (“FDI”) is said to be beneficial, FDIs actually involve risks different from, and in most cases greater than, the risks to be hedged. Moreover, FDI do not perfectly or even highly correlate or track the value of the securities, rates or indices they are designed to track. Consequently, TARP's use of derivative techniques, as is usually the case, can never be an effective means of, and in fact is more likely to be counter-productive to, TARP's investment objective.

Counterparties: The counterparties in TARP's anticipated investment activities are a wily and scheming lot. Although every effort will be made to take appropriate countermeasures, no assurance can be given that snake oil selling financial hucksters will not find new creative methods and techniques for pillaging the TARP assets. In fact you can bet your sweet @$$ they will.

A more detailed description of the risk factors that apply to the Fund is set out in the TARP Prospectus.

According to secretary Paulson, he plans to buy mortgage-backed securities at a price HIGHER than their current market value. Here's an alternate approach: Instead of purchasing securities at some artificially and arbitrarily inflated prices, the government (aka we) SHOULD PURCHASE THEM AT THE LOWEST PRICE POSSIBLE, but also provide low interest loans (eg 0.0% for first 5 yrs, followed by gradual increases).

In the current plan, if a security is to be purchased for $100 whose current market value is, say, $20, the difference of $80 is essentially a free gift (Can you say "rip-off"?). In the alternate plan, the $80 would be provided as a very cheap loan.

The alternative plan has the following benefits: 1) It is just as effective as the current plan in providing liquidity to the financial system by taking "toxic loans" off the market. 2) It does NOT reward bad business behaviors with free tax payer money. As a result, the alternate plan discourages future imprudent business behaviors more effectively than the current plan. 3) It significantly increases our future profit potential.

The current situation is a business opportunity for us tax payers. There is demand for something that only we can provide, liquidity for mortgage-backed securities. Yes, we need to quickly unfreeze the credit market. But we also can and should leverage our position to maximize profit by extracting absolute lowest prices for the securities.

Stop the Great Bailout!

Given the now likely passage of the Great Bailout, I'm mad as hell and I'm not going to take this anymore!

If you're mad as hell too and want to stop the passage of the Great Bailout, please visit http://ImMad.net to sign a petition, right now!

Then spread the word about http://ImMad.net to as many people as you can, right away!

This is our last chance to speak up.

how about instead of paying 700 billion where everyone, atleast all 40 hour a week working people realize, the money will go to earmarks and things other than the real problems... how about the gov't sponsor a bill that would force all mortgage holder companies to lower the intersest rate on all mortgages processed from '04 through '08 to 1 or 2 percent. this action would increase the working class net cash position allowing us to afford high gasoline, absorb 20% rate hikes in utilities and higher food costs while slowing the rate of foreclosure by cutting interest payments and making owning a home more affordable. would this hurt mortgage holder corp. earnings, yes, but it would help the country recover, and really the banking sector is is in ruins anyway and what harm could it do that already hasn't been done but lets give money to fix the greedy businesses that caused the problems instead of the people who are living the problem. that's what our country does.....

Will someone notify me when Goldman Sachs gets 299.99 million and gives it to their execs as bonuses? We all know that it is going to happen.

This is disgusting...especially the part about the retirement accounts of state and local authorities which only serves the unions -- another favor for big labor. Got rid of ACORN and replaced with something equally stenched. But then, what do we expect from the Ds? Dodd, Frank, Reid, Pelosi and Rangel have only one goal - to get Obama elected and take control of all three branches of our government, and this bill was crafted with that in mind - Treas Sec Paulson is also a big D, so what else would we expect? If this were Enron, hearings couldn't be scheduled fast enough but alas, this has Dem fingerprints all over it so there will be no outrage, no indignance and no rush to schedule hearings to identify and punish the culprits who created this mess. Anyone have any Febreeze?

President Bush is a big dissapointment to Republicans and this is just the latest move of his transition over to being a Democrat. Notice that he went to the Democrats for support and left his "Party" out of the deal.

This bail out and the bill helps the hi rollers stay rich and puts the burden on the tax payers.

I read the 110 page pdf covering the bill and was just blown away with all the smoke and mirrows.

Not sure what the actual bill has to offer the tax payer is sure to take it in the wallet.

We need to solve the root cause of this event.

That is banks loaning money to people who cannot pay it back and large scale cover up on the resale of those loans.

All this bill does is give the people who are addicted to spending money more of our tax payer money to feed their addiction.

Is anyone getting the irony here? The fund is called TARP, or the Troubled Asset Relief Program. Is that like, let's cover up the junk in my basement with a tarp? Is that like, let me protect the inside of my car's trunk from the garbage I'm about to haul to the dump by putting down a tarp? Is that like let me protect my carpet from drips of paint by laying down a tarp?

I think they should call it the PWOE bill for Pull Wool Over Eyes.

POLITICIANS THAT ENJOY INCOMES AND LOBBYIST PAYOFF, HAVE LOST TOUCH WITH THE AMERICAN CITIZENS.

IF THEY PASS A BAILOUT BILL THAT DOES NOT DIRECTLY BENEFIT THE FINANCIAL DISSASTER ON MAIN STREET, WE SHOULD MARCH ON WASHINGTON, UP TO THE STEPS OF THE WHITE HOUSE AND SIT THERE, UNTIL THEY REALIZE THAT WE ARE THEIR BOSS, THAT WE COME FIRST, AND THAT WE ARE DEMANDING THAT THEY REPAIR THE MESS THAT WALLSTREET AND POLITICIANS GREED HAS PLAYED IN THE DESTRUCTION OF MAINSTREET AND OUR COUNTRY.

ALSO, THE NEXT TIME WE HEAR ANY POLITICIAN PLACING THE BLAME ON A POLITICAL PARTY, THAT POLITICIAN SHOULD NOT BE REELECTED. WE WILL NO LONGER TOLERATE PARTY BICKERING. WE WANT SOMETHING DONE AND DONE NOW, TO SAVE MAIN STREET. IF THE PEOPLE WE HIRED DON'T REALIZE THE DANGER OF THE POSITION THEY ARE TAKING, THAT DOES'T SUPPORT THE WELL BEING OF THIS COUNTRY, WE WILL FIRE THEM, NOT AT ELECTION BUT NOW.

SEND EMAILS TO THE SENATE AND HOUSE. TELL THEM WHAT YOU WANT AND WHAT WE DEMAND.

THEIR JOBS ARE AT STAKE!

ANOTHER THING. HOW DARE THE POLITICIANS TAKE A BREAK!

LET WALL STREET KNOW THAT WE WILL NOT BE SCARED BY THERE THREATS TO SHUT DOWN THIS COUNTRY. THIS COUNTRY HAS ALREADY SHUT DOWN, FOR MAIN STREET. OUR SUFFERING BOUNDARIES HAS BEEN TESTED AND WE ARE STILL STRONG, BECAUSE WE BELIEVE IN THE STRENGTH OF AMERICANS.

OUR BACKS HAVE BROKEN BECAUSE OF THE BURDEN THEY HAVE PLACED ON US. WE WILL NOT TOLERATE THEIR LACK OF ACTIONS.

WE ARE DEMANDING CHANGE FROM CORPORATE AND POLITICAL GREED.

To answer your questions Scottsman, we don't have $700B to give. Period. They say that money would come from the taxpayers? I'd say a more correct assessment would be that it would come from savers and wage earners.

The *only* way the government can come up with that kind of money is to print it out of thin air, courtesy of the Federal Reserve central private bank. And that causes inflation, which is really not prices going up but the dollar getting weaker.

So bad idea all around. I say *don't* print anything up and let the malinvestment clear itself up naturally in the free market.

You know we should all take the blame for this mess that the country is in.
mainly we could have stop this before it got so far out of hand think back about a year ago when people started to loose there homes it wasn't the house payment they couldn't pay. it was the gas prices and the heating oil is what started this when gas went from 1.58 a gal too 4.50/per gal it killed most hard working people and the oil co making outragest profits. the price of gas went up amost 300 % in less then a year and congress said there nothing wrong!!! when the price of gas whent up the price of shipping went up which made the price of food go up now most people are just hanging on

I THINK IT WOULD BE FAIR TO HAVE THE MAJOR OIL CO. TAKE ALL OF THERE PROFITS FOR THE PAST YEAR AND GIVE IT TO WALLSTREET AT 12 BILLION DOLLARE 1/4 IT WOULD BE MORE THEN THE GOVERNMENT IS ASKING FOR. and besides there the ones that started this.

The speed-of-light measurement was off by a factor of nearly 100.
The technology of the era was not up the task. With new technology came new calculations for the speed of light path traveled in a vacuum one meter length is 1/299 792 458 of a second.
One day a Zen master was walking in the jungle and came across a large man eating tiger charging behind him, in a split second the made the decision to run down the path to escape the man eating tiger, suddenly he was at the end of the path which was a edge of a shear drop cliff dropping a long way to jagged rocks, so below which would be a sure death. So, the Zen master was faced with being eaten by a large man eating tiger or jumping off the cliff to sure death! The Zen master looked at the edge and notice a small vine at the edge of the cliff growing over the edge, with a split second decision he decided to use the frail vine to get over the edge of the cliff. The frail vine began to give way and the Zen master was falling to sure death to the jagged rocks below, when he notice a fresh beautiful bright red strawberry growing on the cliff right in front of him, the last thought from the Zen master was this is got to be the best tasting strawberry he has ever had. The economy would be the Man-eating tiger and the frail vine is the rescue or bailout plan. The strawberry is the pork barrel attached to the rescue or bailout plan.
Local Entrepreneur is selling Caps & T-shirt with the logo “Got $700 billion?” http://www.cafepress.com/092308

Paulson is moving to fast-track the reverse auction that will shift worthless assets from Wall Street firms to the government. Missing is any consideration of the stock-injection plan (provided for in the bill), one that most economists believe would better protect taxpayers, but also one the banking industry fears the most. If Paulson is successful, he'll never have to pay for another country-club membership as long as he lives. Don't buy the 'socialism' rhetoric. DEMAND (!) from your congressional leaders a debate on the stock-injection plan. The next 15-45 days will swing hundreds of billions one way or another...