Gold prices up.
Crude oil prices up.
Stocks dropping like a rock down.
Foreclosures not slowing down.
$700 Billion Dollars? Not enough, I guess. Maybe Plan A isn’t such a great idea.
Saturday’s $700 billion junk mortgage bailout is the largest and worst giveaway since a corrupt Congress gave land grants to the railroad barons a century and a half ago. If it goes through, it will shape the coming century by giving finance unprecedented power over debtors – homebuyers, industry, state and local government, and the federal government as well.
But what threatens to be even worse is the government’s move to let the financial sector make even higher, unprecedented gains by working its way out of negative equity to “make taxpayers whole” by repaying the government’s bailout by bleeding the economy at large. Anticipating congressional capitulation in this license to engage in predatory credit, the latest Sunday evening surprise is that Treasury Secretary Henry Paulson’s own firm, Morgan Stanley, is to become bank holding company picking up the financial wreckage now that the government is covering the bad loans and investment gambles Wall Street has made. […]
It is bad enough for the government to buy $700 billion of bad bank investments at prices that no private-sector investor has been willing to approach. This itself is an undeserved giveaway to the financial institutions that caused the problem by living recklessly in the short run. But making them – and indeed, helping them – pay back this gift with the aid of favorable tax and deregulatory policies will simply shift the cost off their shoulders onto those of bank depositors, credit-card users, mortgage borrowers and hapless pension-fund contributors to the money managers who have taken most of the current income in the form of commissions, salaries and bonuses to themselves. This will sharply add to the price of doing business in the United States, and specifically to the economy’s debt overhead by the banks making even more predatory loans.
I wonder what Plan B is? Oh wait. Sorry, I forgot that this is the Bush administration we’re talking about. Plan B is to make Plan A work. Well, with Senator Harry Reid in charge of the Senate, I’m sure they will get all the capitulation “help” they need from Democrats.
By the way, rather than bail out greedy, stupid bankers and security brokers, a real solution would address the problems of those millions of Americans facing foreclosure:
A plan that addresses root causes must:
Lift the ban on judicial loan modifications. Voluntary loan modifications are not working, as the as mounting crisis attests. Today homeowners are barred from applying for loan changes through the bankruptcy courts if the loan is on their one and only home. Bankruptcy courts provide an existing infrastructure for supervising court-ordered loan modifications and addressing the many hurdles that prevent voluntary modifications. Judicial modifications are the best solution for preventing foreclosures that will drag down the economy further. This provides a fair, targeted way to make a real impact without requiring any tax dollars.
Cap consumer loans at 36% interest. This stops abusive interest rates that push vulnerable families back even further, and it also protects responsible lenders from unfair competition from abusive payday lenders charging 400% interest. This action alone would save America’s working middle class billions of dollars.
Myself, I support a temporary mortgage foreclosure moratorium on primary residences (a policy proposal which Al Franken has made a point of emphasis) for at least the next 12 months until legislation can be passed authorizing loan modifications to allow families to stay in their homes while still providing payments to lenders. Foreclosures too often end up as complete write-offs because in current market conditions the value of the properties has declined so dramatically that the holders of those securitized mortgage instruments will never recover their principal.
Sadly, the chances of anything remotely resembling this happening are slim to none, and as the saying goes, slim just left town.
Update [2008-9-22 16:36:17 by Steven D]: Deal or No Deal? Looks like Bush and the Treasury were leading the Democrats on to me folks. What a surprise.
The negotiations over a $700 billion Wall Street bailout plan took a new turn when the Treasury disputed a claim by a key Democrat that it had agreed to changes in the rescue proposal.
Barney Frank, chairman of the House of Representatives Financial Services Committee, told CNBC that the Bush administration has accepted changes to its bailout plan that would give the government a stake in institutions unloading assets under the plan.
