We Need Oversight - and Compensation to Taxpayers

Here are the issues as I see them in the bailout:

• The Treasury can’t do it as if they are autocrats.  The powers of the other branches of our government should not be curtailed here.  The Treasury should submit to oversight from Congress and be subject to the Judiciary.  Fortunately, it seems like that is happening.
• Second, if you are going to bail out firms that are still alive, you must ask them for equity stakes that are somewhat punitive.  The Dodd bill does that, and though there are areas where I might disagree, it is a lot fairer to the American taxpayer than the original Treasury proposal.  Bailouts should always be painful, making the rescue a last resort.  (Note, in the Dodd plan, the key weakness is that the finances of the firm selling distressed assets to the government might will likely see its stock price weaken after the purchase, leaving not enough protection by the time of sale.  But it is better than the Treasury proposal.)
• Third, the bailout still needs a way to deal with insolvent institutions.  The Resolution Trust Corporation was a way to deal with those problems.  It’s possible that a new entity could absorb the assets of failed financial institutions, but given the nature of regulated companies, deciding on the proper transfer price is difficult.

We are on slippery ground here, and I’m not sure that the market would react badly if no plan were put in place.  A bad plan is worse than no plan, and I believe the market fell on Monday because the original Treasury plan was horrid.  If something like Dodd’s plan were enacted, I think the market would rally, even with its deficiencies.  We need oversight, and compensation to the taxpayers.

To all my readers, I still say, contact your Congressmen and Senators, and tell them to stand up to the Treasury, and demand compensation for any bailout, and if no compensation, we only bail out insolvent firms.  Bailouts must hurt.

PS — For an entertaining view of one possible future as we socialize the financial system, read this piece from the ever-wise Caroline Baum.

Comments

[williambanzai7:]

Ballad of Hank
(Tune of Beverly Hillbillies)

Come and listen to a story about a komrad named Hank
A swanky Goldman banker, who ably kept his partners fed,
Then one day he was laughin at some AIG fools,
And up through the ground came a toxic derivative stew.

CDSs that is, fools gold, Wall Street krud.

Well the first thing you know ol Hank buys $70 billion of CDOs n shares,
Kinfolk said "Hank move away from here"
Said Zheleznodorozhny is the place you ought to be"
So he loaded up the junk and moved it overseas (to Moscow that is).

Szwimming pools, Oligarchs , and everything.

Well now its time to say good by to Hank and all his kin.
And they would like to thank you kapitalist folks fer kindly droppin in.
You're all invited back a gain to this socialist locality
To have a heapin helpin of state hospitality
Set a spell, Take your white shoes off.

Do swidania, y'hear?.

2008 Sep 23 06:58 AM

[NYM Arts:]

Absolutely ALL of the People invovled in the Scamming of Homebuyers MUST be put into labor camps, where they will be Worked Until their Nautural Deaths.
ALL of their Worldly ILL - Gotten Possessions MUST be "Liberated" Back to the American People. Amen

2008 Sep 23 08:17 AM

[GSlusher:]

The bailout should be personally painful to the top executives of the companies involved. Many (90% of the top tier?) should be fired immediately; all should have their salaries cut to no more than the President of the US makes. (Yes, I understand that contracts are involved, but many companies seem to have little compunction and are under little risk for violating labor contracts with their rank-and-file workers.)

2008 Sep 23 06:56 PM

[williambanzai7:]

CHARGE OF THE TARP BRIGADE

(Charge of the Light Brigade, Alfred Lord Tennyson)

(Modified by WilliamBanzai7)


Half a trillion, half a trillion,
Give or take 200 billion, onward!
All in the valley of Balance Sheet Death
Rode the seven hundred billion tax dollars.
"Forward, the TARP Brigade!"
"Charge for the ABS Credit Default Swaps!" Hank said:
Into the valley of Balance Sheet Death
Rode the seven hundred billion taxpayer dollars.


"Forward, the TARP Brigade!"
Was there a politician dismay'd?
Not tho' the Congress knew
Some guy named Hank had blunder'd:
Their's not to make reply,
Their's not to reason why,
Their's but to do and die:
Into the valley of Balance Sheet Death
Rode the seven hundred billion taxpayer dollars.


CDOs to right of them,
CDSs to left of them,
AIG and the GSEs in front of them
Volley'd and thunder'd;
Storm'd at with Wall Street shot and shell,
Boldly that load of Federal largesse rode and well,
Into the jaws of Balance Sheet Death,
Into the mouth of subprime contagion Hell
Rode the seven hundred billion taxpayer dollars.


Flash'd all the workout sabres bare,
Flash'd as they turn'd in air,
Sabring the asset backed losses there,
Charging an army of tawdry bankers, accountants, and shysters, while
All the world wonder'd:
Plunged in the seedy subprime-smoke
Right into the red numbers they broke;
Lehman and Bear Stearns
Spared from the sabre stroke
Shatter'd and sunder'd.
Then they rode back, but not
Not the seven hundred billion.


Subprime CDOs to right of them,
Subprime CDSs to left of them,
Fat Wall Street advisory fees behind them,
Volley'd and thunder'd;
Storm'd at with derivative losses, asset backed shot and shell,
While level 3 zeros fell,
They that had fought so well
Came thro' the jaws of Balance Sheet Death
Back from the mouth of subprime contagion Hell,
All that was left of it?
Nothing left of seven hundred billion buckaroos!


When can its glory fade?
O the wild loss charges!
All the world wondered.
Honor the huge expenditures they made,
Honor the TARP Brigade,
Noble seven hundred billion taxpayer dollars.


(TARP--Troubled Asset Relief Plan of 2008)


williambanzai7.blogspo.../

2008 Sep 23 10:58 PM

[GSlusher:]

To add to my earlier comment: Bernake & Paulson should both be required to resign as part of the bailout. They are part of the problem--if they are so smart, they should have seen this coming and done something earlier, not wait until the last minute. (Perhaps all the Fed governors should also resign, along with the top 25 officials at Treasury.) Bring in new management. Then, the FBI should add B&P to their investigations.

Can you imagine that the owner(s) of an NFL team would keep on a coach who allowed his team to fall apart in this way? He'd be out on his ear and never work in football again. The high pay of executives should reflect their performance AND constantly be at risk--they should be able to be fired immediately, with no "golden parachute."

2008 Sep 24 07:01 AM