- Paulson presented a 3 page plan that would give the Treasury a blank-check (ok, well ~$700 billion) and absolute authority over the bailout
- There are few details in the proposal about what the bailout actually is
- There are no proposed measures for accountability for executives of banks who got us into this mess
- There is no clear mechanism for the taxpayer recouping the money invested in the bailout
- It appears as though the bailout will really only help banks that are carrying loans as already low prices on their books. Many banks that have not yet come clean about true loan values would still
face substantial write-downs and the need to raise capital if they off-loaded these loans. Even if some banks decide to hold onto the loans, they may be forced to write down their values when other banks sell and actual market values can be determined.
Finally today both Republicans and Democrats found something to agree on – dislike for this bill. Even Vice President Cheney’s lobbying wasn’t enough to dissuade House Republicans from voicing their displeasure en masse. Paulson and Bernanke are not doing anybody any good by telling everyone that if we don’t pass legislation this week then the sky will fall.
I want to applaud both sides of the House for thinking this one through. Granted, we’re close to election time and nobody wants to make an unpopular choice, but this is a one-shot bailout and we must get it right. Here are the things I would like to see as part of the bailout plan:
- Eliminate excessive golden parachutes for executives who blew up their banks
- Ensure the tax payer gets a return on their investment. I’m not sure I like idea of the taxpayer getting equity in participating institutions as this sounds a lot like socialism. However, there needs to be some guarantee. We cannot allow banks to profit at the taxpayers’ expense.
- Provide a comprehensive plan for assisting homeowners in trouble. The bailout only works if we can stem the tide of foreclosures.
To concluse, let’s all remember that the goal here is to bail out the American taxpayer. It is not to bail out Wall Street or bank executives.
