Just Say No to Bailouts
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[This was submitted by Bundy on September, 23]
We were told over the summer that when the $300 billion-plus housing-bailout bill passed the Congress it would solve the problem.
It didn’t.
President Bush signed a housing bill that gave $500 million a year to a variety of political organizations, because it was going to solve the problem.
It didn’t.
Now we are told the next $700 billion spent by Secretary Paulson will solve everything.
It won’t.
In the mid 19th century, Lord Acton warned that “power tends to corrupt. Absolute power corrupts absolutely.” Note that he dropped “tends” in the second sentence.
Secretary Paulson’s proposal for a $700 billion grant with no legislative oversight and no judicial review is a fundamental violation of Lord Acton’s principle. It is an invitation to corruption and tyranny. It also places way too much power in the Executive Branch and flys in the face of Constitutional protections and federalism.
If Russian leader Vladimir Putin had written the plan, I would have understood it. But having an American Secretary of the Treasury write such a plan is such a fundamental violation of our constitutional processes that it makes you wonder how Secretary Paulson can serve in the Cabinet.
Here are four immediate steps we can take:
- Eliminate the “mark to market” accounting provision which is driving companies into bankruptcy unnecessarily.
- Repeal the Sarbanes-Oxley law which failed in every case this year and which burdens new companies with a $3 million-a-year accounting fee.
- Join China and Singapore in eliminating the capital gains tax and watch money pour into the system from private investors at no cost to the taxpayer.
- Pass a strong energy bill to return at least $500 billion a year in energy money to the United States.
If we had an extra $5 trillion in energy spending in our economy in the next ten years with a zero capital gains tax and a liberated entrepreneurial sector no longer crippled by Sarbanes-Oxley we would generate the wealth to absorb all the current losses.
A No-Growth Bailout Just Sets the Stage for More Bailouts
Congress should pass no bailout without attaching a powerful economic growth component to it.
A bailout in isolation simply sets the stage for more bailouts.
In the absence of economic growth the economy will decay and debts will decay and they will be back next year for even more of your money.
Economic growth is the only way to get America on the right track. Allowing the Federal Reserve to put more money into the system only serves to make Wall Street richer and inflation a more real prospect that those of us on Main Street will feel in our wallets. The Bailout is a bogus idea that is unconstitutional and not very pragmatic in any sense. The government wants us to again trust that they will fix the mess that they helped create. I don’t have to be a member of Alcoholics Anonymous to know that this line of thinking is pure insanity. Fool us once shame on them. Fool us twice, shame on us.
Please do not allow a blank check to be written in our name to people that failed to act morally and appropriately. The lack of responsibility being taken by these companies is galling and does not deserve taxpayer support.
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Comments
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1 
0 Government policy did a great job of making perfectly good renters lousy homeowners!
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0 1 You got that right Bundy! Great post btw.
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0 1 great post Bundy; excellent explanation of what needs to happen, and, more importantly, what DOESN’T or shouldn’t happen next………
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3 0 I see our good Congressman Mike Simpson is still supporting a bailout with a blank check. This guy is out to lunch not joining the other Congressional Republican House members to put the skids on this. He was also out to lunch on the Energy Bill of 2007. I can’t believe I am saying this, but I am voting Democratic Candidate Debbie Holmes. I probably don’t agree with her on much, but to see Simpson act like this makes me want to throw the bums out…..and Simpson is a bum!
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2 0 Hi, Bundy…
Good and thouhtful post!
I agree largely with you; one of the big reasons why the whole sub-prime mortgages happened was due to wages not keeping up with the stratospheric housing prices. Human nature being what it is, far too many folks who wanted an essential piece of the American dream- owning a home- were suckered in to complicated mortgages that looked manageable until the sugar coating of super-low downpayments wore off. The struggle these folks go through to keep their homes is titanic, and a lot of the problem can be fixed other than just propping up those crazy mortgages with more money. The banks and institutions need to take the hit this time more than Joe Public, and a bottom needs to be found for the housing prices; most of those repo’d homes are now falling into serious disrepair and are being gutted for their wiring and plumbing. There’s no way they’re worth the price of the mortgage.
Take a look at Las Vegas to see how bad it can get. Entire neighborhoods have been repo’d and/or abandonded. Thieves are everywhere in these neighborhoods, ripping off whatever they can, and the banks are doing nothing to protect the houses. If they are going to be bailed out, it needs to be done on actual value, not the over-fat mortgages that they sold.
Dropping capital gains tax is a good way to encourage higher wages, as is some sort of penalty structure for companies who move all their production overseas- the US deeply needs to re-bulid it’s industrial base, and there needs to be some consequences to closing American factories.
Another good way to keep homeowners in homes is to drop the inheritance tax. A sudden death of a homeowner combined with this stupid tax forces too many people to have to sell homes that would rather be kept by the family. Same goes for farms and small businesses, especially partnerships.
At the same time, it’s obvious that America is weaning itself off imported oil that goes to transportation, but we really need alternatives to oil-fueled power generation. I’m all for nuclear power plants built on the newer designs used in Japan and France (and other European countries as well). These plants are smaller, cheaper to build, produce less waste, and are safer than any here, and could free up millions of gallons of oil.
We also need to overhaul our rail system and lose our reliance on all our goods being transported over the highways by truck. Moving goods by rail is not only cheaper, but it is much more secure and less prone to terrorism if modern developments are employed widely.
Just moving into these areas seriously would improve the job picture a lot. We have far too many well trained people out of work who could be put to work on these developments and construction.
As a Democrat, I’ve always thought Mike Simpson was the best of our delegation; he’s put in some hard work for Idaho. For most of this year, I still supported him as I’ve done in the past.
But more and more, he’s become part of the cave-in-to Bush herd over the summer, and like you, I’m looking more at Debbie Holmes.
She’s not charismatic, but she’s very plain spoken and level-headed. She doesn’t try to hedge any of her answers to questions, and she’s very moderate and sensible in her thoughts. For sure, she doesn’t go along with the bail-out is it’s being put together, either. More importantly, she isn’t going to be a part of anything that doesn’t put Idaho first in her vote.
We really need a delegation that can work together. Simpson and Sali hate each other, and have nothing to do with each other. I’m sure Holmes won’t ever be a Sali fan, but she will be willing and able to work with Sali.
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0 0 After reading these posts, I am so pleased to see there are other intelligent people that are looking at the real problem. All have very good points.
I am frustrated to see that people are willing to sit back and watch the politicians give OUR MONEY to institutions, who were guided by less than ethical people (less than ethical is being polite - they are criminals), so they can continue digging. How many times have you heard this week, “we need to firm up these institutions, so they can start loaning money again.” Isn’t that how we got in the hole we are in? If any one of us did what these companies did, we would be in jail, and certainly allowed to go bankrupt.
What this country needs is:
1) Industry - jobs of all colors (blue and white collar ) - This country was founded by people who worked hard and they worked hard in all sectors.
2) A tax system that supports small business and large corporations. Caviated by, a tax system designed to help those corporations that are investing in America by putting Americans to work. Penalties for those companies that are outsourcing every aspect of their operation, except the money counters.
3) A check on the well funded extremist that have brought industry to a halt by filing frivalous law suits that will not allow for the advancement of nuclear and other “clean” energy technologies.
4) Institute a new framework for loaning money (the former framework that loaned only the amount of money they could afford to pay back).
This isn’t an all inclusive list, but do these things and America begins to heal. Lets not do a “quick fix”, lets do the right fix. Put America back to work making tangible things - not making the next deal on paper that transfers more of our money over seas.
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0 0 You guys are all preaching to the choir. But writing on this blog is not going to change a thing. We all seem to have an idea of what we think should be done, but in reality can we as ordinary John Q Public do anything to change what is happening even as we write these blogs. How many of us have called our representatives, our senators, our congressman, and let them know what we think. By the time we go to the polls in November, the deed will have been done. We are all good at talking the talk, but do we walk the walk? Call and call today.
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4 0 Good point native… Lets start here. I just sent mine.
Mike Simpson:
http://www.house.gov/simpson/emailme.shtml
Contact Mike
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Mike Crapo:
http://crapo.senate.gov/contact/contact.cfm
Larry Craig
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4 0 It’s good you’ve raised this issue. Just to clarify - your title says “Say No to Bailouts” but later it seems that you actually do want a bailout - as long as it has a “powerful economic growth component to it.” Is this what you’re saying?
A major problem here is that we currently don’t know the details of what’s happening and I saw some people commenting on this topic in the chatbox that thought “bailout” meant that this was mainly focused on people with mortgages they couldn’t pay and that the proposal was about “bailing them out” of having to pay their mortgage! This demonstrates a silly and naive ideological knee-jerk response, but it does also illustrate that there is a lot of confusion out there as to what this issue is really about.
For all those who believe there should be no referree on the playing field (no government regulation/enforcement), I hope you’ve learned your lesson. Whether it’s these huge financial corporations or individuals, if you give them enough rope, they will hang themselves. If you don’t give them enough rope, they can’t get anything done.
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2 0 There’s a current written draft proposal of what’s being discussed - NOT finalized. A copy can be seen at http://money.cnn.com/2008/09/28/news/pdf/index.htm
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2 0 When reviewing the plan, be sure to pay particular attention to Sec. 109-111.
This thing still needs some work to pass my grin test… Be sure to read who the members of the oversight board will be…
The plan indicates they will review the existing regulations (the ones that got us into this mess) by April 2009 - and make recommendations to modify. I have to question our representatives on this… shouldn’t you fix the dam before you start refilling it?
Would love to read any feedback after you have reviewed the plan… but don’t wait - send a note to our representatives. If you don’t, then don’t complain if you aren’t happy with the outcome. People it’s time to get involved.
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1 0 Great comments. I agree about sending comments. I hit Simpson with several E-mails as well as Senators Crapo and Craig. Send multiple e-mails so they get the message. Just say NO to the bailout.
It astounds me that no one looks at alternatives that could make a large difference and improve the situation.
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1 1 I see that Simpson voted yes for the bailout and Sali voted no. Who is the idiot now?
I would like to see Congressman Simpson redeem himself and sponsor some alternatives immediately that restore some semblance of confidence in investors. It seems to me that too many of our folks in Congress are presented with only one alternative and don’t focus in on other fixes that can and will have positive effects on the economy without breaking the bank and rewarding poor behavior.
The Federal Reserve is taking steps to pump more money into the economy and expand lending limits and timelines to banks in effort to free up the credit markets. Congress is set to adjourn until after the election. If they leave town without enacting reforms and changing accounting rules in Mark to Market and looking at guaranteeing more loans through FHA (at a substantially lower price tag of $40 billion) they are crazy and should be voted out of office.
Has anyone heard about any serious efforts to get other alternative bills to the House floor?
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3 0 The news reported this morning that the House nixed the 700 billion dollar bailout plan.
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1 0 Say NO to bailouts.
I recommend the following actions:
1. Inject 500 billion into the Social Security Fund. Give all taxpayers making under $250K a year a $25,000 check.
2. Close the Social Security Fund from the General Fund. LOCK IT DOWN as to only service retirees. Double the SSN payouts! This makes my retirement secure and will help everyone weather the decline in value of 401K accounts.
3. Require all banks to align all primary resident home loans to 6% 30 yr mortgages, no balloon payments, no tricks.
4. Get of out Iraq and Afghanistan.
5. Stop the formation of the US military AfriCOM division.
6. Invest in alternative energy and NASA.
7. Stop all investment in bio-fuels. How stupid - removing productive farm land to make fuel.
8. STOP any missile placement in Poland. Why restart the cold war?
9. Enforce GAAP, do not go to the European accounting standard that is based on ethics. What a laugh.
Enough is Enough!
Mind our own business.
Help our own working class.
Put Ethics in Action NOW!
The big boys play with our hard earned monies. For every failed institution, all of the associated Vice Presidents, Presidents, CXX’s, Board of Directors -> freeze all of their assets, take their homes, cars, savings, everything and put it towards their failed programs! It is time to hold the greedy accountable. The Sarbanes-Oxley Act is a joke, it did not stop the theft from the top and that is where it all occurs.
The mantra should not be ‘CHANGE’ it should be ‘Ethics NOW’. Is this too much to ask?
Registered Republican
CL
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1 1 You should go back to the drawing board CL because nothing on your list is even worth considering.
Good try though.
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1 0 I emailed Crapo but didn’t get to the others, but will try and follow up. Boo-His to those like Craig and others that support the Billions for Bankers bailout. Shame on them! Here is another step that could be take to offer real change:
Support HR 2755 earlier in this session. The bill was referred to the U.S. House Financial Services Subcommittee on Domestic and International Monetary Policy, Trade and Technology of which Ron Paul is the ranking minority member.
While it is unlikely that this bill as a stand-alone piece of legislation will make it out of committee, it is possible that similar language be written into the “solution” that the committee is now re-working.
PLEASE MAKE CALLS TO THE OFFICE OF THESE FINANCIAL SERVICES SUBCOMMITTEE MEMBERS and encourage them to incorporate language from HR 2755 into any solution that they craft to address the current financial crisis. You should ask to speak to the “financial services” staffer. In addition also contact Barney Frank (Mass.), the Financial Services Committee Chairman and Spencer Bachus ranking minority member (Alabama)
HR 2755 is Dr. Ron Paul’s bill to abolish the Board of Governors of the Federal Reserve System and the Federal Reserve banks and to repeal the Federal Reserve Act. You can read it online .
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0 0 Here is the Common Sense Fix espoused by Dave Ramsey (read below). He brings up alot of good points and mentions the mark to market accounting rules again. This accounting change doesn’t even require legislation, the SEC Chairman could change this pronto!!! Looks like Congress will take another shot at it on Thursday. Don’t let up on e-mails to Congress. They will be coming after us again.
_______
Years of bad decisions and stupid mistakes have created an economic nightmare in this country,
but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support
any congressperson who votes to implement such a policy. Instead, I submit the following threestep
Common Sense Plan.
I. INSURANCE
a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance.
Government-insured and backed loans would have an instant market all over the
world, creating immediate and needed liquidity.
b. In order for a company to accept the government-backed insurance, they must do two
things:
1. Rewrite any mortgage that is more than three months delinquent to a
6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the
balance. This brings homeowners current and allows them a
chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or
the sale of the property to pay off the bad loan. In the event of
foreclosure or short sale, the borrower will not be held liable
for any deficit balance. FHA does this now, and that
encourages mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures and
ruined lives.
2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and
executive team members as long as the company holds these
government-insured bonds/mortgages. This keeps underperforming
executives from being paid when they don’t do their jobs.
c. This backstop will cost less than $50 billion—a small fraction of the current proposal.
II. MARK TO MARKET
a. Remove mark to market accounting rules for two years on only subprime Tier III
bonds/mortgages. This keeps companies from being forced to artificially mark down
bonds/mortgages below the value of the underlying mortgages and real estate.
b. This move creates patience in the market and has an immediate stabilizing effect on
failing and ailing banks—and it costs the taxpayer nothing.
III. CAPITAL GAINS TAX
a. Remove the capital gains tax completely. Investors will flood the real estate and stock
market in search of tax-free profits, creating tremendous—and immediate—liquidity in
the markets. Again, this costs the taxpayer nothing.
b. This move will be seen as a lightning rod politically because many will say it is helping
the rich. The truth is the rich will benefit, but it will be their money that stimulates the
economy. This will enable all Americans to have more stable jobs and retirement
investments that go up instead of down.
This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to
stand up, speak out, and fix this mess.
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0 0 This video is amazing. It speaks volumes of efforts to cover-up the Freddie Mac/ Fannie Mae mess we are in now:
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0 0 Okay folks,
The Senate passed the same 700 billion bailout package last night the House rejected…..and they loaded on a variety of spending items and tax breaks to curry favor on both sides to ensure passage.
This is still a terrible bill, and in fact a WORSE bill that the first. I am all in favor of tax breaks……but they MUST BE PAID FOR. This bill does not do that. Over 25% of the tax breaks are not paid for by these politicians. They have no clue how to balance a budget and live within their means. They are running the United States in the ground so they can get elected again……it won’t mean much when the economy goes in the tank because these buffoons can’t balance a check book and say no to spending.
Has anyone considered how much inflation will rise when they inject 700 billion in new money into the economy? This isn’t real money….it is electronic money, and it stifles our purchasing power. Ever wonder why your dollar doesn’t buy as much as it did before, and why prices shot through the roof…..that is inflation folks. Essentially, it is a hidden tax increase you don’t really see……but we all know it is there. I used to buy Basmati Rice at Sam’s Club for $9.00 a year ago…..it is now $18.00 a bag. That is inflation at work. This bill actually promotes this.
Don’t give up. Send Simpson e-mails and phone calls like crazy. We have all got to do our part to derail this bill from passage. Sen. Mike Crapo did the right thing and voted NO. Sen. Craig voted YES. As this bill moves to the House, we need to kill it before it kills us!!!
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0 0 I watched Warren Buffet, the richest and smartest investor in the world, explain it last night.
He said the American economy is like a super athlete who just had a heart attack. If the athlete doesn’t get immediate help, he may not die, but the recovery will take a lot longer, as the athlete will just get sicker. Buffet predicted a 2-3 year recession if the bill is passed, and a 5-8 year recession if not.
Buffet said it cost him $700 million to get his companies shed of the credit swaps and sub-primes that caused this mess. He dumped all those from 1998-2003, and none of his companies got hit by this mess.
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2 0 Ok folks, now is the time for our action, since it appears that Mr. Simpson has chosen to ignore the ones that put him in office… No matter who runs against him, I for one will vote for that person…
Please read Senator Crapo’s letter to the people - he heard our calls and responded accordingly.
This little exercise by our representatives, that has put this great nation on the brink of entering the world of socialism, must hold consequences for them that ignored “we the people.” They have chosen not to listen to us (as remarked by the representative from California) “my constituents will just have to understand.” Well, we don’t.
Join me in voting these people out of office… republican/democrat - doesn’t matter, we are Americans first and foremost… Vote the liars and the ones on the take out.
The tax payer gets screwed again… I’m sure this bill with all it “pork” will make some CEO breath a little easier tonight…
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1 0 I admire your faith in democracy. The people didn’t vote this president, the people didn’t want this war, the people don’t want this bail out. And of course that is just the tip of the iceberg. I think it is officially out of our hands. I cannot believe that this went all around the merry-go-round and back and passed in 5 days.
If either presidential major would have stood against this, they would have won my undecided vote. As it is, I’m looking elsewhere if I vote at all. I honestly can’t say I feel represented, anymore.
Vote:
1 0 I’m with you, but I’m not giving up on America. I see that both those clowns running for president supported the bill. I won’t vote for either of them and I planned on voting for McCain, just because you could ALMOST figure out where he was trying to go.
We need to start by voting independent for president and then vote our representatives out (at least the ones that have forgotten who put them there). Simpson needs to go first… Craig voted in support of the bill, but he’s already gone anyway (a proven fake). So let’s start with Simpson, promote the “American” message across the US via the internet - friends / family in other states - do not give up… make a difference. Start now.
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Vote:
Very well said, I hope our leaders listen to their people.
And what is it that we’re bailing out? More credit ! Even with the current proposal on the table, the bottom line is that what will be saved will be the ability for the lenders to lend more money. We’re not bailing out the dollar by printing more dollars.
The solution, on a small scale, to a family in debt is not to take on another credit card to pay off the rest. It’s a vicious cycle.
Let’s make no mistake: America has great demand for credit in business and personal sectors. But printing more money doesn’t make more exist. Our economy has been a deck of cards ever since we surpassed the gold standard, realistically. So: It’s time for America and Americans to cut up the credit cards and resolve the debts.