I opine

Wall Street on the Dole

Posted in economy, ethics, politics by jaeminuf on September 23, 2008

Someone tell me why that $700 billion can’t be put to actually helping out individuals rather than Wall Street.

The Feds will need to create some administrative infrastructure that will handle doling out – yes, I am using the rhetoric of welfare intentionally here – $700 billion to Wall Street. There will be some wrangling over how many cents to each dollar of debt to be acquired. Blah blah blah.

How much more difficult would it be to set aside that money, create the administrative infrastructure by which mortgage owners who are suffering can apply for re-financing from that pot of money? The banks will get their loans back, homeowners would be able to keep their homes (presuming that a majority will be able to afford discounted mortgage rates), and the fed will get its money back over time, and bankruptcy laws wouldn’t need to be changed?

And really, I can’t be the only person who thinks this may be feasible and far preferable than what Paulson, Bernancke, and the Bush administration are demanding, oops, “proposing as necessary to avoid financial meltdown, global economic crisis, a recession, Armageddon (choose your pick).” Other than that this may be impolitic, why can’t this work?

And tell me again, why ought the US Treasury include foreign investors in the bailout? Nevermind why Wall Street can’t pull itself up by its bootstraps.

I’m asking, not being rhetorical. Sarcastic, but not rhetorical.


3 Responses

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  1. raymond said, on September 23, 2008 at 10:01 pm

    it’s an international monetary crisis. this is way beyond bill and mary main street. the time for options has passed–and punitive punishments too. we can come back to this in 90 days and start chopping heads (under an obama admin), but today, they need to repair and rebuild (confidence).

    that said, there should be a freeze on some CEO assets. not sure what’s allowed, but any bank that required bailing out should have some constraints on bonuses, salaries, etc.

  2. echo said, on September 23, 2008 at 10:22 pm

    Although the crisis may be international in scope, I am not convinced that the answer isn’t through Main Street. I don’t see this as being a punitive measure. I don’t see how it can be.

    What the banks need immediately is a cash infusion asap, yes? To increase the amount of capital they have on hand in relation to their debt. In a process similar to the way student loans are handled, mortgages refinancing through the federal government can supply Wall Street with the cash infusion they need asap. They’d be getting upfront cash for sums they’d not anticipated for many years down the road originally. Depending on accounting rules, write downs may not even be necessary. Mortgage holders may need a waiver for penalties for early payment.

    The model for the process already exists. Stafford Loans for example are processed and disbursed within 3-5 days of application.

  3. And They All Fall Down « I opine said, on September 25, 2008 at 11:26 pm

    […] to get confirmation that my years as a financial analyst weren’t for notta. A few days ago, I wondered aloud whether it would be feasible and helpful to create a federal entity…. Well… James K. Galbraith, the author of The Predator State: How Conservatives Abandoned the […]

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