Feck I had a lot to do today, so I never really got around to posting anything tonight as originally planned. Instead, you can choose one or both of the following for your reading/viewing pleasure: I’m not one to debate politics, but there is one issue right now facing lawmakers that I feel demands our attention. Show of hands, how many people are aware that right now, in light of all that is going on in the credit and mortgage crises, that there is a proposed 700 billion dollar bailout planned? By the end of this speech I hope you’ll agree with me that the current proposed bailout is the wrong way to fix the economy’s woes.
1) A hilariously bad 80's Wendy's rap about burgers and grills:
2) My Toastmaster's speech that I spent a good chunk of this evening writing. It's a persuasive speech meant to convince people that the Paulson $700 billion dollar bailout is a bad idea (hint: It is). You can find it, if you're interested, after the break.
Before we talk about the remedy, let’s take a quick look at the ailment: a lot of expensive mortgages that people couldn’t afford were being written on the assumption they could refinance when their houses went up in value. When the housing bubble this was all predicated on burst, suddenly people are stuck with mortgages they can’t afford and default on them. What were finding out now is that a lot of major financial institutions (which thankfully ING is not among) were highly leveraged with these bad mortgages and it’s causing all sorts of serious liquidity issues in the market as all of this bad debt has to be written off. There’s some additional naked short selling of stocks exacerbating the issue, but that’s it in a nutshell.
So if there’s a credit crunch, a logical step would be to inject liquidity into the market right? On the surface, that sounds like a sound approach. And on the surface, it is. However, it’s the execution of this idea that makes the proposed bailout a bad idea.
The current proposed bailout plan calls for the Treasury Secretary Henry Paulson to use $700 billion dollars of taxpayer money to fix the economy. That comes out to about $2,300 dollars per person - $2,300 of my money, $2,300 of your money, and your money and your money. And with this money of ours, his only directives are to:
“1) providing stability or preventing disruption to the financial markets or banking system and 2) protecting the taxpayer”
These are vague and overreaching goals, with absolutely no definition of what success is for these directives. What are we to measure against? How do we know we used the $700 billion correctly? Especially since it’s my money (yours too) that is being thrown around, I’d like to know how it was used and why it was good it was used that way.
And the oversight on this is negligible: the only requirement Paulson has to report to anyone is a report to Congress 3 months after the act in enacted and semiannually after that. The format and nature of these reports are not even defined in this piece of legislation. Paulson gets to set his own price for the assets that he’ll be purchasing on our behalf, even if we’re purchasing at a premium. And the absolute kicker is, and I’m quoting from the proposed legislation:
“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.”
Basically Secretary Paulson gets a free pass on whatever he does. He’s not going to be held responsible for any of his actions in the bailout. This is something I’m not comfortable with.
And let’s not forget what kind of message this bailout sends. Without any oversight, and without any accountability in the execution of the bailout, basically we’re saying to corporations “hey, you can screw up, and if you screw up on a large enough scale, we the taxpayers will bail you out”. What incentive does the market have to succeed if the US Government is just going to help it out?
We are in unprecedented times, and I wish I knew the right way out of it. I don’t. But I do know this proposed bailout is not it and I urge you to get involved. Write your congressmen and women and ask them to look into alternatives. At the very least demand accountability. Demand transparency. Demand they not to allow this plan to be enacted. It’s your money – make sure it gets used wisely.
I’m not one to debate politics, but there is one issue right now facing lawmakers that I feel demands our attention. Show of hands, how many people are aware that right now, in light of all that is going on in the credit and mortgage crises, that there is a proposed 700 billion dollar bailout planned? By the end of this speech I hope you’ll agree with me that the current proposed bailout is the wrong way to fix the economy’s woes.