Congressional representatives should read more blogs
I am so sick of the “bailout,” “wall street vs. main street,” “corporate fat cats lining their wallets” rhetoric that keeps spewing from the mouths of politicians and journalists right now. Today’s debacle of a vote in the House of Representatives just goes to show you how ineffecient, uninformed, and irrational our elected officials are. While I love free markets and democracy and capitalism and all those other things our country supposedly stands for, I’m almost ready to conceded all of that just to get some people with some real knowledge in power. Clearly, a hodge podge of slick talking former doctors, trial lawyers, and community activists are not cut out to be making fiscal and monetary policy decisions.
The supposed “bailout” plan, or more properly named “emergency financial rescue package,” is not about protecting evil Wall Street fat cats or giving away tax payer dollars. It’s about finding a way to create credit liquidity in a market in which fear has caused credit markets to freeze and investors to run scared. The proposal would have created a Federal vehicle which would be allowed to purchase illiquid assets from banks. This would have forced realized losses on bank balance sheets, but allowed many of these banks to create more certainty around their balance sheets and hopefully allow for a return to order in the market place. American tax payer dollars would be invested in income generating assets at 10, 20, or 30 cents on the dollar and, in addition, the Federal government would have the ability to levy high fees and taxes on companies who sell assets that don’t return within five years.
In plain English, the above steps would have accomplished the following:
- Force “Wall Street Fat Cats” to realize massive losses on risky assets currently held at tenuous valuations on their balance sheets
- Allow tax payers a chance to profit off of the very backs of “Wall Street Fat Cats” by gouging them in a provision of cash in exchange for their assets at pennies on the dollar, but not only that recoup any losses through further taxes and penalties in the future
- Create a market and price floor for risky assets and allow money to flow between banks which also means the return to a normal lending environment which is required for the rebound of the housing industry, continued performance of small and medium sized businesses in the US, and general economic prosperity on “main street”
Instead, we see Congress bowing to their uninformed constituencies or outright misinterpretting the necessity and application of the financial rescue plan and effectively causing more than $1 trillion in value to be wiped away from the U.S. stock market (not to mention the global ramifications). All this to save $700 billion “taxpayer” dollars that really would have been funded with debt that, given our country’s propensity for budget deficits, probably would never be paid back anyways and most of which probably would have generated significant return after being invested for a few years. Oh, and, what’s worse all this will serve to do is likely put more companies on the verge of bankruptcy for a few days before our all-intelligent representatives finally do their jobs, put a nearly identical bill up for vote (albeit including hundreds maybe thousands of albatross additions and kickbacks), and come riding in like knights in shining armor. Hopefully, we’ll see at least somewhat of a rebound for those left standing.
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