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This is the so-called $700 billion bailout "deal" that Democrats in the Senate and Hank Paulson agreed to without consulting enough House Republicans who are revolting against it with good reasons. My somewhat sarcastic comments are in bold type:

Agreement on Principles 1. Taxpayer Protection a. Requires Treasury Secretary to set standards to prevent excessive or inappropriate executive compensation for participating companies.

False promises. Do "participating companies" include those that buy the distressed mortgage backed securities from the government after those securities are bought by Treasury from financial institutions? If so, no one would buy the securities from the government and the taxpayer would be stuck with worthless junk mortgages. An added thought: Would the government take equity in sovereign wealth funds, pension funds, hedge funds and endowments that took the securities off its hands?

b. To minimize risk to the American taxpayer, requires that any transaction include equity sharing.

Equity sharing for sellers to the government or buyers from the government? The government obviously expects to buy low and sell high, but no one would buy from the government if he had to give up equity in his business to the government. There must be a better way to penalize the sellers than to take their equity. For one thing, if the government buys at 35% of par and is lucky enough to sell at 55% or higher, the seller has already paid a huge penalty and given the government a nice profit. Why take equity and make things complicated?

c. Requires most profits to be used to reduce the national debt.

Define "profits." Define "most." Why not use the profits to reduce the taxpayers' commitment to the rescue fund? How are taxpayers protected against Congressional earmarkers who will try to use the funds to build research labs to study the Polar Bear?

2. Oversight and Transparency.

God and Country.

a. Treasury Secretary is prohibited from acting in an arbitrary or capricious manner or in any way that is inconsistent with existing law.

Define "acting," "arbitrary," "capricious." What existing laws would this bill amend? Which ones would not be amended by this bill? Looks like a full employment bill for lawyers and district attorneys.

b. Establishes strong oversight board with cease and desist authority.

Devil is in the details.

c. Requires program transparency and public accountability through regular, detailed reports to Congress disclosing exercise of the Treasury Secretary's authority.

Maybe the Secretary will have a blog and sign up for YouTube. The idealism is great. Execution is what matters.

d. Establishes an independent Inspector General to monitor the use of the Treasury Secretary's authority.

Doesn't Treasury already have an IG? I don't oppose this, but would have to see the final bill and the details.

e. Requires GAO audits to ensure proper use of funds, appropriate internal controls, and to prevent waste, fraud, and abuse.

Doesn't Treasury already undergo GAO audits? Since it sells treasuries and other financial instruments routinely, isn't it ready to go, aside from the small details of designing systems to buy the mortgage backed securities?

3. Homeownership Preservation.

A broad generalization that has to be a deal killer. This continues the socialistic policies that got Fannie and Freddie in trouble.

a. Maximize and coordinate efforts to modify mortgages for homeowners at risk of foreclosure.

This should be in another bill. It makes this plan unworkable.

b. Requires loan modifications for mortgages owned or controlled by the Federal Government.

This freezes the blood of free market purists who don't want the government bailing out people who lied on their credit applications, got caught speculating in the real estate market and bought more than they can afford.

c. Directs a percentage of future profits to the Affordable Housing Fund and the Capital Magnet Fund to meet America's housing needs.

Socialistic earmarks by and for Democrats who thought they had the conservatives in a corner.

4. Funding Authority

a. Treasury Secretary's request for $700 billion is authorized, with $250 billion available immediately and an additional $100 billion released upon his or her certification that funds are needed.

The George Bush and Donald Rumsfeld war strategy—keep the cost of this war against a worldwide depression as cheap as possible even if it means it will last 100 years or until Americans tire of it and agree to wave the white flag to the terrorists who are trying to undermine our economy. Why haven't politicians learned that Americans won't stand for long wars against our enemies or against a depression? How would speculators game this incremental war against an economic implosion?

b. final $350 billion is subject to a Congressional joint resolution of disapproval

Just as members of Congress are in over their heads in trying to design this rescue effort, they would be out of their league when they tried to determine whether the program was working, whatever that means. And the political kneecapping that would ensue during the debate over whether to give Treasury the additional $350 billion would be a campaign fund raiser's delight.

Republicans have good reasons to fight this Christmas tree "deal." How Bush and Congressional leaders could approve this so-called deal or term sheet without seeing a bill is very hard to understand. That's Washington for you.

Stock position: None.

Source: No Wonder the $700 Billion Bailout 'Deal' Failed