Republicans: Stop Holding the Bailout Hostage to Political Agendas

House Republicans are attempting to stop the Paulson bailout plan and replace it with a proposal they have developed. Here's one of their alternative plans (released yesterday):

RSC pitches 'market-based' alternative to bailout, by Jackie Kucinich, The Hill: The House Republican Study Committee is set Tuesday to officially unveil its proposal to address the financial crisis through a “market-based” approach.

The conservative group ... is touting its plan as a “true alternative” to Treasury Secretary Henry Paulson’s plan to rescue the financial markets.

The RSC plan, which will be unveiled at noon, calls for a two-year suspension of the capital gains tax.

“By encouraging corporations to sell unwanted assets, this provision would unleash funds and materials with which to create jobs and grow the economy,” an outline of the proposal said. “After the two-year suspension, capital gains rates would return to present levels but assets would be indexed permanently for any inflationary gains.”

The group’s plan would also transition Fannie Mae (FNM) and Freddie Mac (FRE) to private companies “in a reasonable time,” seeks to stabilize the dollar, and would “suspend the mark-to-market regulatory rules for long-term assets.” ...

Obviously, selling off Fannie and Freddie to cronies in the private sector won't do anything to solve the present crisis, so let's focus on their main proposal for getting out of the danger we are in, a tax cut for the wealthy through a cut in the capital gains tax. Justin Fox:

[Do] Republican counterproposals floating around make any sense...

One, that of the House Republican Study Committee, seems to be a joke. It calls for a two-year suspension of the capital gains tax to "encourag[e] corporations to sell unwanted assets."

But the toxic mortgage securities clogging up bank balance sheets are worth less now than when they were acquired. Meaning that no capital gains tax would be owed on them anyway. If you repealed the tax, banks would have even less incentive to sell them because they wouldn't be able use the losses to offset capital gains elsewhere. Seriously, where do these people come up with this stuff?

And even if there was a gain, a 15% cut in the tax rate for two years is not enough of a benefit to offset the high degree of risk in these markets. So this wouldn't unfreeze money markets even if there were gains instead of losses (and it wouldn't inflate asset values enough to provide much capitalization).

Additionally, since it's a tax cut on all capital gains, people could benefit from transactions that didn't do a thing to help the banking sector. This is a giveaway of taxpayer dollars that uses the crisis as cover.

The economy is facing serious problems, as I've said before, people's livelihoods are at risk. This is not the time to hold the process hostage in an attempt to implement political agendas.

Comments

[Steven Hansen:]

if the market goes up today with WaMu, the Paulson bailout mess, consumer goods decline, and an increase in unemployment, this market is rigged. Washington may be a joke but Wall Street is hilarious.

2008 Sep 26 06:12 AM

[Worldtravel...:]

Rep. Paul Kanjorski was on CNBC this morning and admitted that the House Repubs were left out of the discussions. Kanjorski went on to say that the calls to lawmakers are running 50/50. That's 50% no and 50% HELL NO!!!!

It sounds like the Dems are going to own this mess all by their lonesome if they push it through without the Repubs. Politically, that ain't smart.

2008 Sep 26 08:30 AM

[john s. gordon:]

fraud/deceit rubs amok within the republican party.
> jack

2008 Sep 26 08:49 AM

[sieraromero:]

The bailout plan forged by bush and paulson was a disaster for this country and only bailed out the very rich. The compromise bailout program was much better and would save the country from a depression. This gop proposal is far worse than the original proposal and exists only to push their failed policies that couldn't pass muster with the congress and the american people. They have to do this before bush leaves office and know that this is the only way to do it. It also gives mcain an excuse to not debate obama tonight. The gop party is a mess and corrupt beyond belief. Not the party itself--but the top leadership of the party!! Realisticly the bailout will keep the us gov. from getting foreclosed on temporarily by our foreign debtholders who now effectively control what actions we take. HOW VERY SAD FOR "OUR" Once GREAT COUNTRY ! GOOD LUCK TO YOU ALL!

2008 Sep 26 11:03 AM

[ETF STER:]

A substantial amount (20%) of any profits that may be generated in the future was earmarked for a public housing fund that is run by the liberal activist group ACORN. This is a Democrat proposal!

Before you point your finger at the Republicans, maybe you should read the guts of the bill that the Democrats are filling with their pork.

Any bill that is finally finished will have so much pork in it that the essence of the bill will be substantially useless.

A pox on both parties for their incompetence in operating the federal government responsibly.

2008 Sep 26 11:14 AM

[IP Daily:]

sieraromero is typical of political party cheerleaders, as it offers NO solutions, just political tirades. I will submit that BOTH parties are corrupt and I am presuming that ALL members of our Congress and Senate are corrupt OR have compromised their fundamental principles and standards.

Clearly, when a Fed Chairman and Treasury Secretary and the the President say the economy is fine three weeks before disaster strikes shows, incompetence, lack of understanding and just good old lying.

Mr. Thoma, I won't disrespect you here on your forum. However, while I don't agree with your headline, I certainly don't agree with ANY of the solutions suggested by either party. I ESPECIALLY don't like ANYTHING about Paulsons plan. It does not give the details to the very source of the proposed funding ( taxpayers ) and in fact he wants to be indemnified if he screws up.

WHAT KIND OF F%$**#@ plan is that ? It's not a plan, it's EXTORTION, pure and simple.

My plan is this.

Fund gov't efforts to seperate CDO's, CMO's ( which are wortless anyhow ) and seperate the mortgages that are the underllying collateral.

Then, go through each mortgage that is not performing and find a way if possible to get them to perform through a " new " mort gage with a stringent process to qualify the mortgage holder again, THE RIGHT WAY.

In addition, the executives who received BILLIONS in executive bonuses for mortgages they knew were BOGUS, should have all of that pay re-claimed for off setting the cost of what would be an obviously massive undertaking, BUT, neccessary.

Realistic costs for such a program should be established as much as is practical and presented to the TAXPAYERS who will ultimately foot some part of the bar tab, as it were.

The taxpayers should firmly establish through their elected officials if this is acceptable. The gov't has proven they are corrupt, unaccountable, deceitful and incapable. ONLY John Q. Public can hold them accountable through our votes in five weeks.

I can assure you, that while I have voted almost straight Republican in past elections, NOT one of them will garner my vote this year or any other year. AND, neither will the Democrats.

BUT, I guarantee I will vote.

2008 Sep 26 12:16 PM