Friday, October 03, 2008
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IBD Editorial: Plan Will Save Free Market, Not Destroy It
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Posted by:
John Campbell at
9:32 AM
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Below you will find an editorial I penned for Investor's Business Daily today.
Plan Will Save Free Market, Not Destroy It
By REP. JOHN CAMPBELL
This free-market, Milton Friedman devotee, conservative Republican congressman will be voting strongly in favor of the $700 billion bailout for Wall Street. What, you ask? Has the California sun fried my last brain cell?
No. I will vote for this bill because it will likely not cost anything, is not a bailout of anybody and will help every American with a bank account, a job or a retirement plan. It also will save the free market, not weaken it.
Allow me to explain.
The $700 billion figure so often mentioned will not be spent, but actually entirely invested with three different mechanisms to ensure that the taxpayers get all their money back.
First, these "troubled assets" will be purchased at less than the expected net present value of their cash flow. That means taxpayers should make a profit by holding them to maturity.
Second, taxpayers will get warrants to purchase stock in the companies from whom these assets are bought. That is more profit potential if the companies recover.
Third, whoever is president five years from now is required to offer to Congress a proposal to recover from these same companies any net loss incurred by the taxpayers to that point. No investment's return is certain, but this one looks pretty good. It for sure will not cost anything close to $700 billion over time.
Furthermore, you are not bailing out companies when you buy assets from them at 30%-60% of what they paid for the asset. That's a bath, not a bailout.
And they should take a bath. They made an investment decision, and it turned out to be a bad one, so they lose money. The purpose of the purchase plan is to create a market where one does not now exist and allow these companies to move that capital back into productive use in the economy. It is not giving them any kind of deal.
If this bill does not pass and Congress does nothing, Wall Street will suffer for sure. But so will everyone with a retirement plan as those values drop precipitously and their nest egg disappears.
Just imagine a whole week of days like Monday. People with bank accounts or money market funds may find their money inaccessible as the debt markets freeze over. And nonfinancial businesses that rely on short-term borrowing to meet payrolls and finance inventory spikes may be unable to get that credit, resulting in layoffs. In short, we all lose, whether we live in Manhattan or Peoria.
So has the free market failed us and that's why we need the government to take it over in this way?
No again. Free markets work. They are still working. They are rational. But on both sides of any free market transaction are two human beings who are subject to emotional behavior. The market cannot correct for overwhelmingly irrational behavior, whether that behavior is fear and panic or risk-ignoring exuberance.
When the short-term debt of some of the world's most profitable companies has no buyers, that is evidence of widespread fear bordering on panic. The objective of this bill is to remove the object of that fear, the bad mortgage-backed securities, from the market so that rational behavior will return.
In some ways, this bill is more of a free-market solution than other actions that have been taken. The government will not take over any companies here. Even the warrants will be nonvoting. No one will be compelled to sell the government their assets if they don't want to.
Even the "reverse auction" process of establishing pricing for the assets, where sellers submit bids to one buyer rather than the other way around, is a market-based pricing method.
Other ideas are out there to correct this problem. I have seen most of them. None has a better chance than this one to stabilize the credit and equity markets. Furthermore, no other plan has the broad base of political support that this plan has from leaders in both parties.
The credit markets in particular are too fragile. We cannot afford the time delay of starting over.
If we do not pass anything, I shudder to think of how bad things might get as that fear turns to full-fledged panic.
If we pass this plan, some banks and other companies will still fail. The world economy will still struggle and have problems for months if not years to come.
But markets will function again, and we will likely avoid the abyss. That will save our free-market economy, not jeopardize it. I hope and pray that at least 217 of my colleagues in the House of Representatives will see it that way on Friday.
Campbell represents California's 48th congressional district, which includes much of Orange County.
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I voted for him the first time. He has proven he is NOT a fiscal conservative. I just mailed in my ballot for Steve Young, the Democrat. I don’t know how fiscally conservative Steve Young really is but we MUST send a message to any incumbant that if you do this then you are OUT! This was not a very good plan. 166 economists, one a noble laureate, wrote a letter in opposition to this plan. Why does this guy think its so great?? One answer, $$$$ to his campaign contributors. Put this guy out of a job on Nov. 4th. |
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I voted for him the first time. He has proven he is NOT a fiscal conservative. I just mailed in my ballot for Steve Young, the Democrat. I don’t know how fiscally conservative Steve Young really is but we MUST send a message to any incumbant that if you do this then you are OUT! This was not a very good plan. 166 economists, one a noble laureate, wrote a letter in opposition to this plan. Why does this guy think its so great?? One answer, $$$$ to his campaign contributors. Put this guy out of a job on Nov. 4th. |
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1-F) A more general problem is security valuations, since people are worried about portfolios collapsing. Valuations are based on profitability. Profit is dragged down by corporate taxation. The solution is to eliminate corporate taxation, since corporations don't pay taxes; only customers, employees, and investors can pay taxes. The solution is NOT a tax payer bailout of the worst wall street firms.
The collapsing stock markets are rational. You undermined capitalism, and that's generally bad for markets. If you understood anything, you would have seen it coming. |
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1-D) A more general problem is the scarcity of securities that generate cash flow. Securitized mortgages are one solution. However, the underlying problem is that dividends are double taxed. This causes investors to disfavor dividends, and prefer a ROI from stock growth. This causes short term thinking in management, and a misallocation of resources, and many other problems. A truly free market devoid of distorting tax law would steer investments towards the most profitable companies, cooling off the desperate search for cash flow generating mortgage securities, which helped cause the bubble. Solution: eliminate double taxation of dividends, not a bailout of the worst wall street firms.
1-E) A more general problem is CEO salaries and bonuses. The most root cause is the double taxation of dividends. With dividends very disfavored, the only way that top management can benefit from their efforts is to cause the stock price to go up, and then sell. But selling is a sign that the management no longer believes in the company, and is exiting. This wrong signal encourages the situation where compensation takes the form of bonuses based on stock performance. It doesn't work well, because it encourages short term thinking and cooking the books. The solution is to eliminate the double taxation, and then top management will benefit the same as the other shareholders. The solution is NOT a tax payer bailout of the worst wall street firms. |
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Congressman, and other people who supported the bailout: Would you support a massive well funded trip to Vegas to help a gambling addict with his problem? Have you heard of AA setting up people with a massive drinking party to help them with their alcoholism?
If not, then why did you do the same for this problem? It's probably because 1) you didn't take the time to understand what the real problem was and 2) you believed the BS told to you by people highly motivated to lie to you.
1-A) The immediate problem was that banks were no longer loaning money to each other. The real problem was related to the Fed interfering with the free market, and reducing transparency. Naturally, the free market attaches a stigma to any firm which needs to borrow money from the Fed in order to operate. That's why companies try to avoid it. However, the Fed was determined to undermine the market and loan money anyways. It arranged for companies to be able to do so anonymously. This backfired and resulted in companies not willing to lend to anyone, since they could all be in getting Fed help. The problem was Fed action and the lack of transparency. The solution is for the Fed to back out, and increase transparency, not a bailout.
1-B) A more general problem was that the GSEs had artificially created a housing bubble by being a willing buyer of any mortgage, no matter how risky. The solution is to disband the GSEs, not a bailout of the worst wall street firms.
1-C) A more general problem was that the financial sector had grown very large to accomodate the IPO needs of various other bubbles. While the IT industry has gone through a painful, but healthy consolidation, it was now the finance industry's turn. Instead of facing the music, the much more politically connected finance industry concocted this very unhealthy bailout to ease the pain. It keeps weak companies from failing, which is very bad. Solution: Let them consolidate, not an ill-conceived bailout. |
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This bailout plan began with Bush. I voted for this guy and at this point I would not buy a toothbrush from him and so why on earth are democrats and many republicans dancing the same tune. There can only be one answer. They are all pathetic crooks that have spent this country into enormous debt and now are printing money to dig an even bigger hole. What we should be hearing instead is how they plan to cut expenses not on how they plan to raise taxes or even worse how they plan to spend more money on entitlement programs. It is time to do away with as much government as possible. Local communities need to make investments in their towns with money from their own citizens and stop look for Washington to foot the bills. John Campbell, you live in a state that is now how much in debt and yet is still spending like crazy with no answers in sight. Shame on all states and Washington that refuse to follow fiscally conservative principles and live within their means. Balanced budget? |
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"First, these "troubled assets" will be purchased at less than the expected net present value of their cash flow. That means taxpayers should make a profit by holding them to maturity."
"That means that taxpayers SHOULD make a profit..."
Does the term 'should' give a connotation of 'will' or 'guarantee'? What happens if those 'troubled assets' present value is even less than you estimate? What happens if those assets never increase? The taxpayer is left holding tha bag.
"Second, taxpayers will get warrants to purchase stock in the companies from whom these assets are bought. That is more profit potential if the companies recover."
Since when does Government purchase stock on my behalf? Do you recall an episode in Orange County, CA a few years back? One of the hotshot County officials bought stock with county money and lost it all.
"Third, whoever is president five years from now is required to offer to Congress a proposal to recover from these same companies any net loss incurred by the taxpayers to that point. No investment's return is certain, but this one looks pretty good. It for sure will not cost anything close to $700 billion over time."
"...to recover from these same companies any net loss incurred by the taxpayers to that point."
What is 'these same companies' (you know - the ones that are failing) FAIL? What happens if they just disappear? Can you get blood from a turnip? If they are gone, you will not get anything from them.
"It for sure will not cost anything close to $700 billion over time."
For sure? I'll bet some broker told those holding these same 'troubled assets' it was a sure thing. I will guarantee that every cent will be spent and gone.
God bless your heart, John, I think you must believe Obama is the Messiah too.
What a moroon!!! |
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Nice puff piece to attempt to placate your constituents. I've already informed my one senator who is running for re-election that his vote for the bailout cost him my vote next month.
My other senator hopes to sit in the Texas governor's mansion sometime soon. She won't get my vote, either! |
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What kind of borrowers did IndyMac specialize in? (Hint: it wasn't poor people). Why did they go belly up so early?
And I agree with $. There are lots of people who are rightly angry but waste it to beat on their favorites hobby horse. This is first and foremost a failure of government. The greedy corrupt elements of Wall Street could never have created this mess without corrupt regulators and politicians who were forcing them to discard all safeguards and precautions in pursuit of an artificial socialist goal of "home ownership for everyone".
And now that the government has spent and borrowed its way over the cliff, the only solution is to accelerate the spending and borrowing?
There is an election coming up. Vote ALL of these crooks out. |
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At what cost do we have to pay????? Not in $$$ but in the Pork that you supported and the opening of socialism in our world today...its no wonder you people support it it has all the pork that you dolt's love and we are stuck with the tab!!!! You, don't even research or try to figure out what to do....and most disgusting you don't even go after your fellow members of both houses that caused this mess in the first place...give me a break this was done with alot of thought on your part other than you are more concerned with your cuss job in the House and the Senate...you and your other members of stuipity, don't give a hoot about what we think or believe...why do you think there where more people who did not want you to support it....yeah, it would have hurt and yes more people would have lost money....but at least maybe it would have gotten more of you out of office and maybe we could get people in who do really care...yeah, you're really concerned, tell that to the kid's and young adults that will suffer in there future...I hope that you don't have any...then you can go on with out the guilt...sleep well, what do you have to worry for, you're set with your kuss job.
Sir, if you feel you have to explain your vote that in it self is a sign of weakness...
Peter,
Grass Valley, Ca. |
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Alexander Hamilton's the king of all He sees. James Madison's knocked off his feet and can't get to His knees. Tom Jefferson who'll save us from this credit crunch disease? Republicratic Demecans -give us $change$!??? (Oh Pleeease)
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Ignorant comments like this one are why I'm not voting Republican ever, ever again.
"And they should take a bath. They made an investment decision, and it turned out to be a bad one, so they lose money."
Wow dude. No mention of the fact that the government lied and interfered in the marketplace in the first place by holding a gun to the head of mortgage companies and forcing them to make those investments in the first place.
The responsibility for this fiasco falls at the feet of government, though the victims are widespread across all levels of our society. And you are actually proposing as a solution to REWARD THE GOVERNMENT WITH MORE POWER TO INTRUDE INTO THE FREEDOM OF OUR DAILY LIVES?!?!
Whatever you are smoking, you need to pass it, because it must be pretty good stuff. And then you need to be fired, along with everyone else in any elected office, for allowing this to have happened in the first place.
Can I borrow your lighter? |
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...went mostly to people who don't pay taxes. They get the taxpayers to pay for their houses and it's all simple wealth re-distribution. |
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The fact that this 700 billion dollar figure was just contrived out of thin air is beyond ridiculous. How you can say with a straight face that this is not going to cost we taxpayers anything is an utter lie! Maybe if politicians like yourself and Barney Frank could stop taking all this cash from these crooks posing as Political Action Groups and actually begin to work for the best interests of the people and our country we would not be in this mess. I wish everyone would go into work on Monday, fill out new witholding forms stating we all have about 100 dependents. This would result in our not paying any federal tax up front. It would send a clear message to you people. |
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I am stunned at the level of sheer angry nihilism emanating from some on the political Right. The attitude seems to be "If we can't have pure capitalism, then let's just allow the national economy to collapse! We'll rebuild it later!"
No doubt these folks are indulging in the mental masturbation of Atlas Shrugged, imagining themselves as John Galt.
Actually, history has shown that economic collapse usually leads to a total loss of freedom, not the regaining of it. Proving how little Ayn Rand knew about history.
Give it up, folks. You sound more and more like the lunatic fringe every day.
Congressman Campbell's point is that pure free markets are like driving a car without shock absorbers: It's a rough ride, and if you hit a bad bump, you can go out of control altogether.
Yes, the free market would eventually recover after the panic had subsided. But only after the country had been plunged into a major depression, with widespread human suffering.
We conservatives are also supposed to be NATIONALISTS; and that means we have to have solidarity with all our fellow Americans. To accept widespread unemployment, widespread poverty, the social dislocations, crime, and violence that accompany urban decay, all to preserve that car without shock absorbers, seems to be unpatriotic. Nihilism is unpatriotic.
The free market failed to provide shock absorbers in this case. The rating agencies lied about the quality of their securities. Well, if the free market won't provide the shock absorbers, let the government do it. And America will have a smoother ride from now on.
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Philosophocon writes: "Can't have losers, equality of outcome, that's somewhere in the Preamble of the Constitution, right? "
If your economic philosophy leads to widespread human suffering, then there is something wrong with your economic philosophy.
The purpose of an economy is to properly manage resources for a society. The notion that we should sacrifice the lives, dreams, and futures of tens of millions of innocent human beings on a political theory, whether that theory is Marxism or Nazism or laissez-faire capitalism, sickens me.
A proper philosophy of economics has to BALANCE the competing demands of freedom and a certain degree of material comfort. The price of total freedom cannot be total suffering.
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"Furthermore, you are not bailing out companies when you buy assets from them at 30%-60% of what they paid for the asset. That's a bath, not a bailout."
BS. They can't sell these toxic assets privately without taking a much bigger loss. The idea of the bailout is to buy them at a high enough price that we help out the companies' balance sheets. They took on risky investments and then over-leveraged. They should suffer the consequences. Let the market work.
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YOU SOLD US OUT and I'll be happy to see you get voted OUT of office!!! The people you represent, actually deserve to be represented!!
Lucky wrote: Why won't you lead in a "mad as hell and not going to take it anymore" way? Why not repeat your effective strategy when Pelosi closed the House? Why not play the Barney Frank/Chuck Schumer clips ad nauseum....
WHY didn't you???? Great point Lucky, and many more of them should have taken this stance!
And please explain to us why you did nothing, but vote yes, even after the adding of the additional pork ON TOP!!
This bailout was wrong, and done in haste!!
(PP, I'm sure the media will come up with a name that the History books can use...unfortunately)
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Rep. Campbell is psycho. A plan that steals money from taxpayers to bring relief to losing financial enterprises can never be a savior of the free market, because by definition, it is a negation of the free market.
Vote all the rats out on Nov. 4. |
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Campbell is a known RINO in California. This phony "crisis" was engineered to get Obama elected. The big Wall Street Houses, the Goldman Sachs, from which we got Democrat Paulson, Democrat Bernanke, Democrat Greenstein, etc. are huge Democrat contributors. They LOVE government manipulation of teh markets, because it makes them RICH. Why do you think that the government practically forces you to invest your 401k in mutual funds> Yo can;t buy gold.you can't buy real estate, or other tangible assets. Only a bunch of paper from Wall Street. The Democrats have hoodwinkled us once again, and ehy will be back for more. |
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The Congressman fails to realize that most of these defaulted homes are trashed once the defaulters leave causing additional costs. He thinks buying toxic properties 30-60% under top price will result in a profit. Living in a nice middleclass in Thousand Oaks , California , I've seen the house across the street drop from a $635,000 subprime (2 years ago) to $515,000 a 6 months ago. Now a comprable home three doors down sold for $499,000 in one day. That home was in a better location. These homes could drop to $3-400,000 or lower thus making the bailout the worst piece of financial legislation in this century. NEVER BUY ANYTHING UNLESS YOU KNOW THE TRUE VALUE AND CONGRESSMAN HASTE MAKES WASTE ! |
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Sir,
You are a fool as well as a liar.
This was a farce hoisted upon the taxpayer by Paulson, Bush, Pelosi, Reid, Frank, Dodd, and a cast of others.
Paulson come running saying the sky is falling and everyone starts hyper-ventelating and agreeing that it is. Last I looked, 72% of the people are going, oh not again...show me the proof.
I've already "spoken - like you really get to speak to them...not enough $$$ or too much $$$ in my account" to my two Senators (Hutchinson & Cornyn) and told them that when it's re-election time, I'm voting for who ever is on the opposite side.
McCain's not escaping my ire either. He should have voted "No" and truly established himself apart from the pack and lived up to his claim to be a maverick. |
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The reason that Ford and GM aren't lending is because their banking divisions blew themselves up with toxic investments. They are not a good example.
Like a few of us have pointed out, there IS financing available for those who are qualified. Corporations are not hurting for credit. The banks are just hurting those they can for political reasons. They could lend if they want, they choose not to. |
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If the bail out is ALL positive why does the plan not allow for any legal review of government agency oversight. We have just given Paulson a blank check (and 850 billion is a blank check because they will be back for more) to make decisions about how to spend the money WITHOUT any legal review or government agency. Brilliant I tell you, brilliant. It's time to default on our mortgages and get our piece of this pie. |
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You and your clown friends just passed the bill and 401ks are still going down. They will go lower.
Good Job, be proud of your ignorance.
Sold to You. |
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Campbell this is a ruse, a sham that was created, for the purpose of a false saving. It's like kicking a kid in the river to pull him out by his nose and requiring he pay you back for saving a life. BS.
I told my wife we should announce to family and friends a Divorce, so we could split up what we have a new announcement that we are renewing our vows so that we could get all those presents again...check that we'll just ask for their cash.
Thanks honorable elected official. (lower cased on purpose. |
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What did your constituents have to say about the Bailout Bill?
You are so wrong. The only entity taking a bath here is the govt/taxpayer. Hank will over pay and we will be left holding the bank. You don't even know what you are buying and you keep saying "we'll make money on these securities."
Complete and total horseshiite.
Sold to You. |
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I guess the point is academic. But my query was genuine. I didn't buy into the idea that credit was completely frozen and couldn't be 'unfrozen.' I just wanted to know what the consequences on credit would really be if the deal hadn't gone through. All I had heard from our 'leaders' was this hysterical 'sky is falling' scenario. The sales at Ford GM and Chrysler seemed to support a contraction in lending, but I noticed the numbers from foreign automakers weren't released. Was that another scare tactic? |
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2004: Barney Frank unabashedly supports Freddie Mac & Fannie Mae to usher in the destruction to financial institutions.
2008: Barney Frank dodges blame and spearheads the revisions to the Bailout Plan and heads support for its passing at a cost of $700B+
2008-2009: Barney Frank as chairman of the House Financial Services Committee demands and gets control of the oversight of the $700B.???
Warren Buffett net worth: $62B
Bill Gates net worth: $58B
Total: $120B
Barney Frank net worth: $700B (Can $700B make one the most powerful man in the world?).
It sure helps.
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Invest taxpayer money and tell us how good it is. America bought into Social Security, too. Will this be as good an investment??
But, as already covered, this "deal" is BS.
Government should not, NOT be buying private companies or securities! You say Free Markets work, yet this whole bill is full of stuff and fluff that undermines the Free Market.
Yes, Congressman, get out of the California sun.
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You do realize that lending has not stopped,I hope. You can still borrow money for housing loans and other things as long as you QUALIFY. No more ninja loans. For God's sake, don't fall for that. |
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Made by government for government.
Others have written about this, but I think it bears repeating, here, in your neighborhoods, in your local papers and radio shows, and in your Representatives' and Senators' and President's offices.
On top of the lamentable position of those who think the federal government is going to do a better job of managing the market, there is NO justification for stuffing a so-called bail-out bill with favors for special interests and planks on which to build additional socialist platforms, e.g., additional governmental controls for supposedly reducing the effects of that monumental hoax, man-made global warming (see the carbon dioxide auditing provision -- Congress would have as much success outlawing sunspots and volcanoes).
What emergency exists concerning arrowheads, bicycles, rum, wool, etc.? The blatant fear-mongering on display by even usually level-headed people is just maddening. There are plenty of people who are getting loans and jobs. This is not a one-way street.
The expansion from $700B to $850B overnight alone should be enough to kill this bill. Congress has lost its way. Senator DeMint had it right: we are tipping into socialism. It has been a creeping thing for years, per Communist plans, but now it is stalking. It is past time to kill it.
For the Foundation (1 Cor. 3:11) of the Founders ><>
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This pork laden ripoff of the American citizen should result in a complete turnover of Congress. Sadly, it probably will not happen.
I will miss the United States of America.
I already despise the United Socialist States of America.
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and dialed 911.
Congress responded by dispatching the arsons who started the fire to put it out.
We are in deep trouble if we don't start electing responsible adults soon.
Throw the bums out. They are ALL crooked.
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The whole idea that the government needs to "bail out" or "rescue Wall Street and Main Street" is so fundamentally flawed that it goes to the very heart of what this country is supposed to mean. As a matter of fact, here's James Madison on the subject:
"I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress of expending, on the objects of benevolence, the money of their constituents."
Madison would probably be having a heart attack right about now.
The only thing stopping a recovery from starting on its own, driven by market corrections in accord with traditional economic principles, is that everyone's waiting for YOU POLITICIANS to finish with your rain dance. If you're going to be handing out free money, well.... they're waiting to see if they can get some, and I don't blame them.
We got into this bloody mess because of the relaxation and, frankly, downright ignoring of sound banking practices in the "sub-prime" sector in order to "encourage minority home ownership", a goal promoted by Clinton AND Bush. You Republicans are just as guilty as the Democrats for not putting a stop to this nonsense long ago. Loans were being granted on the basis, essentially, of skin color, with no regard to actual ability to repay. And, Congressman, that happened on YOUR party's watch as well the the Democrats'.
You want to do something helpful? Get rid of the rules that allowed sub-prime lending to even happen. Ignore all the nonsense about "racism" from all the Usual Suspects, and cure the root ill. You guys want to put a bandaid on a cancer, and I'm underwhelmed.
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Sorry Rep. Campbell. This bill, with its billions in pork and money even for wooden arrows, will not deal with the fundamental shortcomings of our economic policy. Why not shelve the "bailout" until you can broker an actual overhaul of our markets, end the social engineering via Fannie & Freddie, cut corporate tax rates, end naked shorts and more.
Why won't you lead in a "mad as hell and not going to take it anymore" way? Why not repeat your effective strategy when Pelosi closed the House? Why not play the Barney Frank/Chuck Schumer clips ad nauseum?
Campaign hard for and enact the right fixes before you bail us out!!! |
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Refused to listen to their constituents--refused to listen to economic experts--and voted for this trash. Now I will vote against them.
A word of advice to your constituents, John: time for this fake to go! |
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Johnson's Golden Parachute was estimated at $28 Million.
WHERE ARE THEY NOW?
FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor
TIM HOWARD? Howard is also a Chief Economic Advisor to Obama
JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected to run Obama's Vice Presidential Search Committee
IF OBAMA PLANS ON CLEANING UP THE MESS...HIS ADVISORS HAVE THE EXPERTISE, AFTER ALL...THEY MADE THE MESS IN THE FIRST PLACE!
THE ONLY QUESTION VOTERS MUST ASK THEMSELVES NOW IS: HOW CAN I TRUST THESE PEOPLE, WHO HAVE DESTROYED THE FINANCIAL SYSTEM OF AMERICA, TO OVERSEE IT?
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This is what needs to happen:
1. DISCLOSURE. The banks have refused to disclose what is actually in those off-balance sheet holdings that they cannot sell nor value mark-to-market because the market has no basis for placing a value on them.
2. Re-instate the uptick rule on short selling. This will put the brakes on down drafts when the sellers try to pile on.
3. Force the SEC to enforce the NO NAKED SHORT SELLING RULE!!! If you have an investment account, you almost certainly signed a rehypothecation agreement. Read it. Your insured stock holdings are the shares used to cover short sales. It's a GOOD thing.
4. Suspend mark to market for ONE MONTH ONLY. This will take the urgency out of frequent daily forced selling that is rocking the stock market. But see my first point.
5. Declare a two-year moratorium on the taxes that are discouraging the repatriation of $7 TRILLION of U.S cash deposits in foreign banks. We are never going to collect the taxes anyway. Let's bring that capital home. We need it.
ALL OF THE ABOVE CAN BE ACCOMPLISHED BY EXECUTIVE ORDER FROM THE PRESIDENT! Why doesn't he do that?
Because of the Marxist provisions that lie at the core of this corrupt bailout bill. WE DON'T NEED THIS BILL! It is a massive seizure of of private wealth to be redistributed by the government to CRA.
I would like YOU to explain to me how that helps our economy. Did it work for Hugo Chavez in Venezuela? |
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Tim Howard - Was the Chief Financial Officer of Fannie Mae. Howard "was a strong internal proponent of using accounting strategies that would ensure a "stable pattern of earnings" at Fannie. In everyday English - he was cooking the books. The Government Investigation determined that; "Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae,"
On June 16, 2006, Rep. Richard Baker, R-La., asked the Justice Department to investigate his allegations that two former Fannie Mae executives lied to Congress in October 2004 when they denied manipulating the mortgage-finance giant's income statement to achieve management pay bonuses. Investigations by federal regulators and the company's board of directors since concluded that "these management individuals did manipulate 1998 earnings to trigger bonuses". Raines and Howard resigned under pressure in late 2004.
Howard's Golden Parachute was estimated at $20 Million!
Jim Johnson - A former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO. A look at the Office of Federal Housing Enterprise Oversight's May 2006 report on mismanagement and corruption inside Fannie Mae, and you' ll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson's 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million." Johnson is currently under investigation for taking "illegal loans" from Countrywide while serving as CEO of Fannie Mae. (Remember, Countrywide was named by the Justice Department as being the "prime lender" responsible for the most "Sub-Prime Loans", that began this "financial collapse".)
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Here is a quick look into 3 former Fannie Mae executives who began the "bringing down" of Wall Street.
Franklin Raines:- was a Chairman and Chief Executive Officer at Fannie Mae. Raines was forced to retire from his position with Fannie Mae when auditing discovered "severe irregularities" in Fannie Mae's accounting activities. At the time of his departure, The Wall Street Journal noted; " Raines, who long defended the company's accounting methods, despite mounting evidence that it wasn't proper, issued a statement late Tuesday conceding that "mistakes were made" and saying he would assume responsibility, as he had earlier promised. News reports indicate the company was under growing pressure from regulators to shake up its management in the wake of findings that the company's books "ran afoul" of generally accepted accounting principles for four years." Fannie Mae had to reduce its surplus by $9 billion dollars.
Raines left with a "golden parachute" valued at $240 Million in benefits. The Government filed suit against Raines when the depth of the accounting scandal became clear. The Government noted, "The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner."&nb sp; These charges were made in 2006. The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the miss-stated Fannie Mae profits.
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Yes , we are the hostages, either way we go. I didn't mention this earlier, but we did try to get our home refinanced, as matter of fact we owed just over $100,000.00 on our mortgage. a few months later it sold for $126,000.00 , Two 1/2 years later it sold again.(the new owners just moved in this september). I had a gentleman ask me why I had the bad mark on my credit to show up, when the rest of my credit history prior to it was A +.We didn't have bad credit, we had an ARM, we were told at the signing of our home that we could make payments on our home for 2 years, then refinance for a fixed rate before the interest reset. I paid an extra house payment per year toward the principle on our loan, for the first two years and we were still refused. That is why it is frustrating. We are now traveling with my husbands job, our children are grown so my husband and I can do this. We live in a travel trailer, we owe only 6 more payments on our vehicle, and we have about $6,000.00 worth of student loans to finish paying for. We live inside our means, no credit cards, a small savings at our hometown bank, so yeah, we are hostages to this 700 billion dollar buyout. I know that more than likely this bill will pass, eventually. I think we really need to think about change, change in the seats that the current representatives are holding. How they vote should not determine whether they stay. remove them all. If they don't get the job done then in 2 years replace the replacements. |
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If this bill does not pass House Republicans will offer up a new bill that they have been working on. Just because the bill coming up for vote gets defeated doesn't mean it will be the end of the issue. |
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Pasadena Phil (and anyone else who is opposed tothe bill),
Can you explain what will happen if the bill doesn't pass? What will restart lending. My instinct is to oppose the bill because (1) It was pushed on us like a used car: "I've got three other people looking at this, so you better buy it now"(2) It is laden with pork and special interest to get people to vote for it (why in God's name was Feinstein talking about train safety funding when they're voting on an economic train wreck?) (3) It's a government takeover (4) the government is taking the toxic assets from banks so they can then go and make good loans now - will they make good loans or just more of the same? (5) Some of the provisions of the bill require 'protecting' people with bad mortgages - doesn't that just prolong the problem?
But I've heard about consequences for lending - that is, lending from bank to bank and lending to solid businesses and individuals is drying up. Honestly, I don't know. How will that lending restart without the bailout? Help me understand. |
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The Citi deal to buy Wachovia comes with a provision that requires taxpayers to pony up to buy $260B of toxic debt. Wells Fargo offered $7/share ($15B) for the whole company WITHOUT any agreements exposing taxpayers to stupendous losses. Would someone in Congress, (like oh, I don't know JOHN CAMPBELL?) give the FDIC a call and ask a couple of rude questions please?
The board of Wachovia has an obligation to maximize shareholder value and the Wells Fargo deal does that. If I were a Wachovia shareholder, I would be suing. |
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Since we're talking about using government funds to make money investing where the private sector won't, why not have the Fed start spending more into embryonic stem cell research?
After all, the private sector is investing almost exclusively in adult stem cell research, for the foolish reason that it's generated actual results while embryonic hasn't.
By what has passed for logic in Congress of late, this should represent a tremendous business opportunity. |
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Economists Raise Concerns About Bailout Plan
While some politicians were reconsidering their opposition to the bailout this week, there is one group that still expresses a lot of concerns with the legislation: economists.
Interviews conducted with a dozen prominent academic economists, Obama supporters as well as McCain supporters, found little support for the bailout bill. Indeed, even the one economist who supported the proposal passed by the Senate Wednesday night had serious reservations.
http://www.foxnews.com/story/0,2933,431645,00.html
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irrational behaviour was one of the defining elements of the free market. Foolishly spend more than you have or make pie-in-the-sky investments, you lose. Save and invest wisely you win.
And in terms of your thesis that tax-payer's nest eggs will be disappearing if you do nothing, where exactly does the money for the proposed bail-out come from, Congressman Campbell? This is no more than robbing Peter to pay Paul, or more specifically, robbing Main St. to pay Wall St. Well, that and all of those with friends in high places on the receiving end of the monstruous amounts of government largess also included in the bills so far.
But I suppose because "But on both sides of any free market transaction are two human beings who are subject to emotional behavior", we must be compassionate to those human beings, mustn't we? Can't have losers, equality of outcome, that's somewhere in the Preamble of the Constitution, right?
I would suggest that the emotional and irrational behaviour has not come from the market, but from Washington. |
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I'm watching these windbag weasels in the House take turns pounding the dais extorting their komrades to pass the bill and every single one of them hammers on fear and patriotism. Why are voters cynical about their government? Beats me. If only this bill had a name we could all remember forever like Smoot-Hawley. This bill will make us wonder what was so great about The Great Depression so the bill that triggered it should have a name that will be easy for our children to remember when they are tested on American history. |
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This is getting to be a tired argument.
We're all going to get rich investing in what the private sector won't buy?
The value of MY home is not going to be effected by government buying up bad mortgages at pennies on a dollar and dumping fire sale real estate on a depressed market?
My investments are going to rise on huge deficits and a worthless dollar?
This sales pitch is full of the minority leaders sandwich spread.
It is the government that is fear mongering here, together with the media.
Go ahead, bail'em out, we can't stop you.....today! |
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Time to throw them all out! |
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You said "if we do not pass anything, I shudder to THINK of how bad things MIGHT get as that FEAR turns to full-fledged panic"...
You, the politicians, should not have used fear to get support for this bailout!! I cannot believe this tactic! If you were strong, instead of scared, reassuring instead of weak, and supportive to Americans instead of sneaky tactics, the market would not have took such a negative turn. We didn't need to see a bunch of elected drama-queens, but a group of officials gathering ideas from inside and outside the political arena. You had the opportunity to help in a crisis, and now look at this bailout, how much of this money is going to other countries? You're taking from our pockets to give to greedy Wall St, OTHER countries, Rum producers, Hollywood producers, and Wool research (to name a few)??????? I AM FURIOUS!!!! For what this bailout is costing, each US household can get at least a $300k check to payoff their debt, and invest into our economy.
This bailout should not be passed as it stands, much more effort should have been focused on the correct solution!! You are forcing us to do the wrong thing!!!
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Here is the issue: YOU are the hostage. The banks are exacerbating the problem by refusing to lend to each other which drives the Ted spread upwards while also refusing to make sensible mortgages. My understanding is that you CAN refinance your mortgage if you are qualified and find the right bank. What has been happening has been nothing short of certain Wall Street interests combining with their whores in Congress to hold Main Street hostage.
This bailout bill solves nothing. The market will probably rally if it passes but not because Wall Street wants the bill. It will rally because the investors have stepped aside until this resolved which surrenders the daily market activity to speculators who are betting one way or the other. After this is done, the market will probably sell-off as investors return and price assets according to economic fundamentals which are awful. And this plan makes them worse. |
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you make a lot of sense when you are not talking about presidential politics. :)
It is obvious that many of our elected politicians are falling prey to the proverbial "bums rush".
I just finished e-mailing my Congressman. I suggest everyone else do the same. I think they are voting on this boondoggle today. I told my Rep. that if he supports this bill he loses my support which he has had since the first day he ran for office. |
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Investigate why the FDIC is stepping in to prevent Wells Fargo from buying Wachovia by offering a better deal? What is the political quid pro quo that makes the FDIC step in on behalf of CitiGroup to defend a deal that frustrates free market forces at the expense of the taxpayer?
That's your job for today Congressman. Make yourself useful. |
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Part of me doesn't want to give warning to anyone, and part of me wants to be able to stand in front of America with big color posters like the ones that were used this week by Sen. Chris Dodd and Byron Dorgan, and just show you what these securities look like.I will tell you why the leinholders of these mortgages do not disclose what they contain. If you were out on mainstreet enough you would already know. The mortgage companies refused to help the homeowner in any way, I have personally gone through this, we tried refinancing for a fixed interest rate. we tried as many others have,to make partial or biweekly payments after the ARM reset, so we could keep our home, they refused to even talk to us about negotiating.Ultimately, we as many millions have, lost our home(which had 25,000 dollars of equity at the time of foreclosure). my husband and I were so frustrated, and mad that the thought of destroying our foreclosed home crossed our mind, however God provided a home for us and our family,so we felt that maybe another family like us deserved to enjoy what we had enjoyed for 5 years. My point is, most all of these "toxic mortgages" are homes that have been gutted through, and the plumbing torn out , in some cases water was turned on after the plumbing was torn out. Flooded , gutted homes are what sits on these properties all across america. Because just like us people were frustrated and mad, only they actually DID what my husband and I only thought about doing.
So, if they pass this, and the securities are bought, we the taxpayers own a lot of land, but the majority of the homes that sit on them aren't worth the paper that the mortgages are written on. It leaves me to wonder:How many of them are going to walk toward the cameras smiling then? |
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Congressman Campbell,
While I normally respect you, you are dead wrong on this. If government could "profit" off the bailout, it wouldn't be necessary. Private investors would be buying up these assets now.
And if you think this is a good investment for me (as a taxpayer) that I will get a good return on - you should be persuading me to voluntarily invest my money, not compulsory takings of my money to let Hank Paulson invest.
Changes like the mark-to-market accounting rules, lowering taxes on investments, and privatizing Fannie Mae and Freddie Mac would free up the private sector to invest, rather than government.
Finally, looking at a one day stock market loss as evidence this plan is needed is silly. Stocks rebounded on Tuesday, and fell after the Senate passed their version of the bailout. In fact, 90% of stock market gains occur when Congress is not in session. So the best thing Congress could do is simply go home. |
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how much does each one have? Until those two questions are answered, it is best to not get involved in this bill.
My sense is that most of these failing mortgages are being held as collateral for securities owned by investors some of whom are banks. Others are held by the retirement funds of unions, cities, states, foreign governments and private and foreign investors. Are we bailing these people out also?
Congressman, give us the answers to our questions before you ask for our support. Why do you think it is good for Americans to buy this pig in a poke?
Seven hundred billion dollars is only 7% of all bank assets in America. If some of the securities that are undercollateralized are owned by entities other than banks, i.e. retirment funds, foreign investors and foreigh governments, than the amount all American banks are due to lose is even less than 7% of their total assets.
Perhaps you can explain how a loss of less than 7% of total bank-held assets is creating a liquidity crisis. My understanding is that most banks are solvent and not all banks are holding failing mortgages.
If you want to sell something, try to be honest about what it is you are selling. |
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Sorry Congressman but i am totally against this bailout. Don,t tell me it is not a bailout. You want more of a socialist nation then just come out and tell us. Socialism alive and well here in the US and has failed everytime everywhere else and will also will fail in Chavez country. Ha what idiots |
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Congressman Campbell,
While I normally respect you, you are dead wrong on this. If government could "profit" off the bailout, it wouldn't be necessary. Private investors would be buying up these assets now.
And if you think this is a good investment for me (as a taxpayer) that I will get a good return on - you should be persuading me to voluntarily invest my money, not compulsory takings of my money to let Hank Paulson invest.
Changes like the mark-to-market accounting rules, lowering taxes on investments, and privatizing Fannie Mae and Freddie Mac would free up the private sector to invest, rather than government.
Finally, looking at a one day stock market loss as evidence this plan is needed is silly. Stocks rebounded on Tuesday, and fell after the Senate passed their version of the bailout. In fact, 90% of stock market gains occur when Congress is not in session. So the best thing Congress could do is simply go home. |
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Here is how the deal is structured:
1. Government collects toxic securities without inspection and transfers 20% (at face value of debt) to a CRA-based fund to be re-distributed to unspecified (ACORN, LaRaza) community development agencies functioning as defacto quasi-private/public agents of the government (Fannie/Freddie redux).
2. That means that the 80% of toxic securities have to return 25% before the taxpayer sees a cent. What are the chances of that? The free market has already declined to buy these securities at any price due to the refusal of banks to disclose what they contain. Now the government buys them and suddenly these bad morgages are not only going to have value but return more than 25%?
3. Sadly, they will. Why? Because it will become government policy to guarantee that NONE OF THESE MORTGAGES DEFAULT. So the taxpayer will assume the carrying costs of subsidizing the performance of these mortgages. How many $trillion will THAT cost?
This is a criminally bad bill and I have lost all respect for you as a "conservative" politician. Could you tell us please which page your particular pork item appears on? You clearly didn't read this bill. |
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