- It was funded by borrowed money, as I discussed in my last entry. Borrowing this amount of money would have driven down the value of the dollar, thereby spiking inflation.
- It rewarded the people who risked our money by reducing their exposure to risk. Fat cats who gamble on the economy should be allowed to go broke, just like the thousands of people facing bankruptcy and foreclosure.
- It gave unprecedented power to the Secretary of the Treasury.
- Though Republicans claimed the government could turn a profit on the bad debts purchased by these funds, that is clearly rubbish. If these were good investments, chances are they would not be considered worthless today. That is why we are in this mess.
- The provisions that attempted to reduce executive salaries and golden parachutes were so full of loopholes, you could drive a truck through them. For example, it said that companies couldn't write off salaries above $500,000. Whoop dee doo! It also did not prevent multimillion dollar golden parachutes as long as they were part of an existing contract.
- Remember that the Bush administration has a history of choosing not to enforce parts of bills it doesn't like using signing statements. So, we have no reason to trust they would uphold any of the provisions in the first place.
Monday, 29 September 2008
Good riddance, bad bailout
Thank God that pig of a bailout bill did not pass. The last thing we needed was another bill passed in a panic, without careful thought, and with more attention paid to the political calculus than the economic needs of the country. This was a bad bill because:
This is not to say that nothing should be done. I like Thom Hartmann's idea to re-institute a transaction fee. Until 2007, there was a 0.25% fee for stock transactions. This was a miniscule amount for retail investors such as myself (in comparison to my brokerage fees), but was enough to curb speculation by investment banks and day traders. It also generated enough revenue to fully fund the activities of the SEC, which used to actually ENFORCE the law. Thus let the speculators pay for the bailout, not taxpayers who are the victims of this fiasco.
I would also support a bailout for resident mortgage holders. People who actually live in a property could apply for some kind of refinance package on better terms than their sub-prime rates. This would put millions of Americans back on their feet, and fuel a true recovery. This is what FDR did after the Great Depression.
We'll see how this plays out. I am afraid that Congress will eventually fold on this, just as they did on FISA, torture, etc. I predict that they will pass a revised bill before the recess. Too bad. In 1931, Herbert Hoover tried to end the Depression by bailing out the banks. It failed, and the banks failed a year later anyway. I predict that this will happen again. The Bush Administration is just trying to buy a few months so that the big crash will happen after the election. Then the Republicans will try to blame Obama....
Here is a Hoover flashback:
Posted by Chris