Republican Bailout Ideas
Below are some of the Republican plans for the bailout. Better, but I am still waiting on something (that is actually nothing). Preservation of the basic assumptions of market forces will pay off more in the long run then a short term bailout now. Anyways, I would like to hear any thoughts about any of the individual proposals/ideas.
PROTECTING TAXPAYERS:
CHANGES AND ALTERNATIVES TO THE TREASURY BAILOUT
Secured Loans: The Treasury proposal essentially infuses capital onto the books of financial institutions. Instead of purchasing assets at inflated prices, a secured loan at a punitive interest rate would provide needed capital and give firms time to restructure, while still holding shareholders and debtholders accountable.
“Pay to Play”: Require Treasury to determine an up-front fee for firms to offload their assets, perhaps $0.10 (or more) for every $100 of the post-auction purchase price. The proposal would ensure that firms pay some portion of the financial exposure borne by taxpayers and provide a disincentive for firms that are more inconvenienced than jeopardized by their current portfolios.
Increased Transparency: Require participating firms to disclose to Treasury the value of their mortgage assets on their books and the value of any private bids within the last year for such assets. This information should be made publicly available, as well as the specific assets purchased, their purchase price, and the identity of the sellers.
Empower Private Investors I: Require that the auction process envisioned by Treasury include private investors. Some continue to overlook the willing buyers currently ready to purchase these mortgage-related assets. The problem is that the bailout firms are not willing to sell at such low prices, and taxpayers should not have to pay inflated prices as a result.
Empower Private Investors II: An alternative proposal would allow financial institutions (in 2008 or 2009) the option of a one-time, five-year carryback deduction on net operating losses. Firms could only take advantage of it by selling off undesired assets at the market rate. Such targeted tax relief for the financial services sector would provide an immediate infusion of liquidity and capital without handing a blank check to Treasury.
Limit Federal Backing for High Risk Loans: Mandate that the GSEs no longer securitize any unsound mortgage that is: (1) not fully documented to meet minimum requirements for work, assets, and income, (2) not backed by private mortgage insurance for no less than half the value of the loan, (3) written to comply with the Community Reinvestment Act and otherwise would violate a firm’s lending rules.
Corporate Accountability: Require that any firm selling its assets to Treasury replace its senior management immediately and freeze all executive bonuses and golden parachutes. In addition, all employees and board members of participating firms must forfeit their stock options before entering into negotiations or an auction with Treasury.
Limit Financial Firm Eligibility: Require the Treasury Department, in conjunction with the Federal Reserve, to publish a list of financial firms who pose a legitimate systemic risk to the entire economy, those truly “too big to fail,” and limit the purchasing program to those firms.
Independent Entity with an Independent Director: Set up an independent government-corporation to buy these assets, instead of Treasury, run by a Senate-confirmed administrator who can be held accountable by Congress. In addition, the administrator would have a fiduciary duty to minimize taxpayer exposure.
Criteria for Assets: Set some criteria for the quality and type of assets that are allowed to be purchased to guard against mission and asset creep.
Lower the Cap, Subject to Appropriations, and Offset: Lower the purchase authority to $350 billion in order to limit the amount of bad assets purchased or force the Secretary to return to Congress for additional authority. In addition, all funding needs to be subject to appropriations and offset, either through spending restraint or permanent authority to drill in the OCS and ANWR.
Ban Wall Street Cronyism: Mandate that no financial firm can both participate in the purchasing program and act as an agent of the government in order to limit potential conflicts of interests.
September 24th, 2008 at 6:41 pm
How about just having a free market where the government doesn’t get involved? Then, we wouldn’t have these economic disasters in the first place!
September 26th, 2008 at 1:33 pm
I’m in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.
To make the math simple, let’s assume there are 200,000,000 bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billion that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.
Of course, it would NOT be tax free.
So let’s assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it’ll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent’s medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else
Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.
If we’re going to re-distribute wealth let’s really do it…instead of trickling out a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed
By one of our candidates for President.
If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!
As for AIG - liquidate it.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private sector bargain hunters cut it up and clean it up.
Here’s my rationale. We deserve it and AIG doesn’t.
Sure it’s a crazy idea that can “never work.”
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion
We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC .
And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
September 29th, 2008 at 7:34 pm
I realize that there is more to the financial crisis than the mortgage fiasco, but since we the tax payers are ultimately to bear the burden of the “fix”, I have a partial fix that I would like to offer.
Rather than bail out the institutions, require the mortgage lenders who hold the notes on personal family homes to refinance the loans on the homes, where the subprime trap has sprung, at a fixed rate based on the current value of the home. The government bailout would involve: they, (whatever institution is supplying the bail out money), would negotiate with the lender a paydown of part or all of the difference and carry a second at no interest until the home is sold at which time the government would recoup some or all of the money. As an additional option, if the home did not sell at the original loan amount and the second was not erased, the difference could be added to the selling price as a continuation of the second mortgage. I believe that this approach would be far less costly and would still hold the lending institution and the home owner responsible for their creative financing. Yours truly, Richard A. Wiseman
September 29th, 2008 at 11:32 pm
I like it
September 30th, 2008 at 1:00 pm
That is still bailing out the homeowners…….which although I feel bad about the hardship, responsible buyers should not have to pay a price for irresponsible actions. If this happens we riskproviding incentives for moral decay, or causing a race to the bottom.
March 3rd, 2009 at 6:53 pm
Ppl go to mechanics to fix their car.
They go to doctors to diagnose illness.
They go to financial experts for mortgages.
When these financial experts give the home buyer a loan it’s because they are the expert and they have the home buyers best interest at heart. (Or so I thought.)
The blame starts there. When someone lends money it’s their responsibility first to ensure that they’ll get it back. If they lend money the question as to whether or not they’ll get back then they are not acting in anyone’s interest but their own.
Now, that being said, I don’t believe in bailing out home owners. You made your bed so lie in it. With the same breath I say you can’t bail out banks that are the primary reason for this situation in the first place. If you bail banks you’re almost obligated to bail out home owners. I say let them all sink into the mud.
Home go into default, banks go under, and we can all start fresh.
Isolating the banks from their decisions will only ensure that this happens again.