dcxavier

When It Rains, It Pours

Say NO to Paulson's "welfare for billionaires" plan. The WaMu model from last night is the way to go.

Under Paulson's plan, the taxpayer would have purchased mortgages from WaMu and close to full value to reliquify the bank and take them off the books. That would free WaMu to make more loans and ease the credit crunch. Uh huh. That also would have bailed out Bonderman and others who made foolish investments in these zombies. I think Paulson can't bear to see his beloved Goldman Sachs, leveraged 25:1, go BK. It's this taxpayer bailout of fat cats that has everyone but the rent seeking politicians against it.

Here's what to do. Make failure a prerequisite for taxpayer money. the government acquires the assets, then auctions them off to the highest bidders. Stock and bond holders should get wiped out. Will this cost money? Sure, but I don't think it will be as much as Paulson's plan, but the benefits go to the innocent creditors, and people who are willing to risk their own money have an opportunity to pick up assets on the cheap. This will work especially well for mortgage backed securities, which no one says they can accurately price. Let's auction them off after failure to people spending their own money, that establishes no fooin' prices for these securities.

If your insolvent, too bad, lights out, no more gravy train. It doesn't matter who you are. We're going to take you over and sell your assets to people putting their own capital into the market.