Sunday, September 21, 2008

Fast track Treasury plan? Put on the breaks

The mantra of the morning is "put partisan politics aside while the markets are melting. We have to save the economy before it all crashes apart!"

I'm looking at the financial deals, folks - and we need to put the breaks on this, and fast.

"Shock Doctrine" by Naomi Klein puts forth the idea that there is a sector of the market that waits for emergency situations - like this one. Once the crisis hits, these groups with pre-made plans come in and do the "shock", which is usually:

* Less regulation on markets
* Decreased labor powers
* Government tax dollars used to finance private industry without any payback (ie: private industry getting paid the job that government agencies did, only now without any oversight)

Folks, we're seeing the Shock Doctrine *right fucking now* in place.

This is part of the Treasury bailout plan that's being floated about, and it's got this line:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

What. The. FUCK.

Bernanke and Paulson will be given complete and utter control *without any oversight allowed at all*. What if he wants to buy up some bad debt for $300 million when it's worth $100, then turn around and sell it back from the same people he bought it from for $100, then turn around and buy it again for $300 million?

Nobody could say boo.

And it's clear that the Treasury is planning on buying assets "above current market value". While the real estate market is still falling - and expected to fall another 10-15% over the next two years (something I planned on accepting when I bought my new house) - the Treasury gets to buy these assets *now* before they hit rock bottom.

Unlike the moves in the 1930's, which bought up bad assets at the bottom of the market, this would allow financial institutions to make a 10-15% profit off of their bad decisions. They sell it off now for "above market value", wait 2 years for the final lower value to kick in, then buy it back from the government - boom, instant profit, taxpayers just paid for them to make money after they screwed it all up.

No. No way. This bill needs to have the breaks put off on it. We need a bill that:

1. Enforces regulation on the credit market and financial markets
2. Bail out institutions to ensure the accounts are solvent (checking, savings, CD's).
3. Preferred stock for any institution that is bailed out becomes worthless - this means that the stock board and upper echelons are the losers, while the common stock (which is usually owned by other banks) don't get blown away.
4. Bailed out companies get no dividends - I don't want to see people getting richer off of a bailout.
5. All bailed out companies get canceled golden parachutes - board members don't get millions for being fired. They get their last paycheck, and they're gone.
6. Something that Jim Cramer said that I agree with: let the government buy up "bad" mortgages for $0.20 on the dollar - ie, the ones that are being foreclosed upon right now. This at least gives banks something for their bad loan, it prevents millions from being homeless (should be offered only to those with 1 home - 2nd and up don't get rescued). Hold those mortgages for 2 years, give resident current value mortgage slightly increased rates, if they don't accept, then it's on the market.

I want to talk about #6 the most. This I believe is the best solution to the real estate issue. Instead of millions of homes being on the market without buyers, and millions of people being kicked out of their homes, #6 gives a chance to everyone.

Banks get *some* money. Not much, but they get some pain for their bad loan. People get a home, but this isn't a freebe - government is coming back in 2 years to make them pay, and if they don't, then they lose the house permanently this time. Government actually gets to make a profit - remember, they bought the mortgages at 20% of the value, then sell back at current market value.

Here's the money breakdown:

If a house has a mortgage of $200,000 and is being foreclosed, the government buys it for $40,000. Foreclosure delayed for 2 years. 2 years later, the house may be actually worth $150,000. Original owner is now saddled with a lower debt - they don't get to walk away from it. But at least they get a shot. If they don't take it, they're out, place is sold.

There may need to be other clauses, like "if resident causes harm to residence while living in it the government can take it out of their paycheck or something". But this gives pain to everybody - especially the banks to screwed up in the first place.

Either way, the current Treasury bill can't be allowed to pass in its current form. Its a Shock Doctrine bill - and the taxpayers will be stuck with the tab.

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