No deal (click here)
I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets.
As I posted earlier today, it seems all too likely that a “fair price” for mortgage-related assets will still leave much of the financial sector in trouble. And there’s nothing at all in the draft that says what happens next; although I do notice that there’s nothing in the plan requiring Treasury to pay a fair market price. So is the plan to pay premium prices to the most troubled institutions? Or is the hope that restoring liquidity will magically make the problem go away?...
Mine is not a political blog. I have political views, but I try to keep them out of my writing here, because they aren’t relevant to my readers. This is a rare point where the two worlds collide, and I have to take a political stand.
Let me state this plainly at the beginning of my piece, so that you know where I am going: I am asking all of my readers, and all of the financial bloggers that read me to call their Congressmen, and ask them to oppose the Bailout Plan as currently structured. I am also asking the financial bloggers to ask their readers to do the same thing.
I don’t do things like this often, so understand that I think that this bailout plan is very ill-conceived. I also think that opposing the bailout should appeal to all, regardless of party affiliation....
September 21, 2008
...Bring back the Resolution Trust Corporation, for real. Don’t do deals with solvent institutions. Let them figure out how to best maximize their financial positions on their own; after all, it was their great decisionmaking skills that got them into this.
But do do deals with insolvent companies. Take in their illiquid assets, reposition them, and auction them off once they are more saleable. To the extent that we bail out whole firms, make it so costly to the firms that it is clearly a last resort, as with Fannie, Freddie, and AIG.
I am willing to testify before Congress on this issue, not that I think that will happen. If anyone from Congress happens to read this and wants me to testify, please contact me here.
Finally, to any readers or financial bloggers that take me up on my request, I offer you a hearty thanks.
This is a 'Dumping Syndrome' Bill. Every 'bad debt' from the past will end up as the USA Taxpayers' Nightmare, whether it was generated by Subprime Lending or Not. The whole lot of them belong in prison. The Republican majority Congress of 2000 to 2006 raised the national debt limit every year after 9/11. The Democrats haven't done any of that up to now. I guess Bush's administration had to 'get their way' somehow !
FACTBOX: Key facts on U.S. Treasury's proposed mortgage fund (click here)
Buy any mortgage-related assets, both residential and commercial, for a two-year period. The types of mortgage assets this could cover and how long the government could hold them is left wide open, as is how they would be valued.
* Up to $700 billion in mortgage assets could be bought at any one time
* Broad authority granted to decide how to purchase, manage and dispose of the assets, including setting up a special fund and naming financial institutions to work for the Treasury Department.
* Assets must have been originated or issued before September 17, 2008, by a bank or financial institution with U.S. headquarters
* The Treasury Secretary would be given these powers to ensure stability or prevent disruption of financial markets and to protect the taxpayer
* No court or government agency could review the secretary's decisions. The secretary would report to Congress within the first three months and then twice yearly
* The U.S. debt limit would be increased by $700 billion to fund the plan, to $11.315 trillion from $10.615 trillion.
Let me state this plainly at the beginning of my piece, so that you know where I am going: I am asking all of my readers, and all of the financial bloggers that read me to call their Congressmen, and ask them to oppose the Bailout Plan as currently structured. I am also asking the financial bloggers to ask their readers to do the same thing.
I don’t do things like this often, so understand that I think that this bailout plan is very ill-conceived. I also think that opposing the bailout should appeal to all, regardless of party affiliation....
September 21, 2008
...Bring back the Resolution Trust Corporation, for real. Don’t do deals with solvent institutions. Let them figure out how to best maximize their financial positions on their own; after all, it was their great decisionmaking skills that got them into this.
But do do deals with insolvent companies. Take in their illiquid assets, reposition them, and auction them off once they are more saleable. To the extent that we bail out whole firms, make it so costly to the firms that it is clearly a last resort, as with Fannie, Freddie, and AIG.
I am willing to testify before Congress on this issue, not that I think that will happen. If anyone from Congress happens to read this and wants me to testify, please contact me here.
Finally, to any readers or financial bloggers that take me up on my request, I offer you a hearty thanks.
This is a 'Dumping Syndrome' Bill. Every 'bad debt' from the past will end up as the USA Taxpayers' Nightmare, whether it was generated by Subprime Lending or Not. The whole lot of them belong in prison. The Republican majority Congress of 2000 to 2006 raised the national debt limit every year after 9/11. The Democrats haven't done any of that up to now. I guess Bush's administration had to 'get their way' somehow !
FACTBOX: Key facts on U.S. Treasury's proposed mortgage fund (click here)
Buy any mortgage-related assets, both residential and commercial, for a two-year period. The types of mortgage assets this could cover and how long the government could hold them is left wide open, as is how they would be valued.
* Up to $700 billion in mortgage assets could be bought at any one time
* Broad authority granted to decide how to purchase, manage and dispose of the assets, including setting up a special fund and naming financial institutions to work for the Treasury Department.
* Assets must have been originated or issued before September 17, 2008, by a bank or financial institution with U.S. headquarters
* The Treasury Secretary would be given these powers to ensure stability or prevent disruption of financial markets and to protect the taxpayer
* No court or government agency could review the secretary's decisions. The secretary would report to Congress within the first three months and then twice yearly
* The U.S. debt limit would be increased by $700 billion to fund the plan, to $11.315 trillion from $10.615 trillion.
