The proposed financial bail-out plan is a bad deal for American taxpayers and should be opposed unless several changes are made to protect the taxpayers' interests and the well-being of ordinary Americans.
The financial assistance should take the form of an equity interest in the distressed companies. This is essentially the same approach taken to the bailout-out of AIG, and other bail-outs before then. Why change the model now? The current plan apparently envisions federal purchase of toxic debts at prices high enough to bail out those companies, but that will likely result in the federal government -- the taxpayer -- paying too much for them, and getting gouged in the end. An equity interest would inject the necessary capital while giving the federal government a realistic chance to recoup the taxpayers money. It would also give the federal government greater say in guiding the behavior of the companies that got us into this mess. After the economy has recovered, the equity interests could be sold at a profit for the taxpayer.
Any financial assistance provided to the companies which spawned these toxic mortgages and the ensuing crisis should include relief for the millions of Americans facing foreclosure. At the very least, bankruptcy judges should have the power to modify the terms of their mortgages. This power exists in most forms of corporate bankruptcy; why not extend the same principle to ordinary citizens?
Financial corporations should be required to pay into an insurance system to protect us against any recurrence of such problems in the future.
Any bailout should not go forward unless it has true bipartisan support. Conservative Republicans will otherwise use this hugely unpopular measure to castigate Democrats who are, after all, going to provide most of the "heavy lifting" on this bill. In particular, the Democrats should make the whole-hearted support of the package by Senator McCain a requirement for passage.
Yes, this approach would be a high-stakes gamble. But this crisis is the product of the very people now resisting its resolution, and they should be forced to become part of the solution as well.
Note: this was originally posted on ketches, yaks & hawks 29 September 2008
Subscribe to:
Post Comments (Atom)
2 comments:
I don’t think government should be intervening in the financial services sector – what is happening is a natural consolidation after a huge run up in that sector. Fully 1/3 of *all* US corporate profits in 2006 were from that sector.
Dave
Note: originally submitted by dwrugh, 28 September 2008
I understand your perspective, Dave, and ideally I would agree. However, the “natural consolidation” you speak of is highly unlikely to occur without extremely adverse and long-lasting consequences for the national and even the global economy. The basic problem is that a largely unregulated sector of the financial market collectively pursued extraordinarily counterproductive polices that put all segments of the economy at risk. The scale of the problem is so great that the private sector cannot correct the situation on its own, so government must intervene. Indeed, the problem is so great that intervening is entirely consistent with the core governmental function of protecting the common good and the security of the nation. Thus, the question is not whether governmental intervention should occur, but how best it should occur.
Note: originally posted by Sanderling, 28 September 2008
Post a Comment