Frankly, I've lost count of what number this week's bailout is. Although I am convinced we need to do something to prevent the total meltdown of the financial markets (for those of you who don't watch the markets daily, we came very close last week), I don't profess to know what the solution is. But, after watching C-Span, I do have some observations:
1. Congress would get a lot more done if there weren't cameras in the room, especially in an election year.
2. Although Paulson's plan doesn't include a bailout for homeowners, some pols are demanding bailouts for the homeowners too, apparently forgetting the $300 b homeowner bailout that Congress approved just a few months ago.
3. And although Paulson's plan doesn't include any caps on executive compensation, some members of Congress are determined to use this legislation as their stepping stone to take control over this aspect of corporate affairs. (This isn't new for those of you who recall Eliot Spitzer's failed attack against Richard Grasso's NYSE compensation package.)
Paul
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This whole bailout thing is lame. But seriously, here's what the Fed should do with this deal and be done with it.
1. The Fed takes the $700B and purchases distressed mortgages and/or mortgage backed securities from Banks at $0.20 to $0.30 on the dollar. The banks would take a huge hit with this loss, but c'mon those mortgages aren't worth face value anymore.
2. Then The Fed works with the homeowners of these mortgages they just bought and re-works them and sell them back to the homeowner at $0.50 to $0.60 on the dollar (i.e. the original mortgage amount).
3. The Fed would get an immediate pop of $0.20 to $0.30 on the dollar, which they could then use to either inject into the financial system, or more likely, loan that money to the ailing banks at little or no interest and over a term which would allow the banks to recapitialize and start lending money again to folks who have been "buying time". This would probably include allowing the banks to monetize their losses against their previous tax returns, and the IRS would have to cut them a refund check (just like the Big Builders have been doing lately).
4. Either that, or as Jon Stewart suggested the other night, we could go out and buy 2,000 pies for each man, woman, and child. That'd be awesome.
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