I opine

From My Senator on the Bailout of Wall Street

Posted in economy, politics by jaeminuf on September 27, 2008

Senator Feinstein‘s veeeeeeeery long response to a letter I submitted to her office. Her key points are:

  • Necessity for a bailout
  • Phased funding of bailout
  • Paulson plan thumbs down because too much power in one person. Entrust responsibility not just to one person. More oversight/accountability necessary.
  • Legislative reform of the financial system in the first quarter of 2009
  • Protection for tax payers in the form of warrants/stock/etc. Learn from the Swedes.
  • Cap on executive compensation for firms that participate in bailout. If executives balk, let them sink or swim on their own.
  • Mortgage relief

Dear Ms. XXX:

Thank you for your letter expressing concern about Congress’ consideration of a plan to meet our Nation’s credit crisis with financial help from the Federal Government. This is a difficult situation for which there are no perfect solutions, and I would like to share my thoughts and concerns about this issue with you.

On September 19, 2008, Secretary of the Treasury Henry M. Paulson, Jr. announced a legislative proposal to use $700 billion to purchase illiquid mortgage-related assets from ailing financial institutions. Secretary Paulson’s three-page proposal was a non-starter, and without critical changes it has no chance of approval from Congress.

This proposal would have given a blank check to an economic czar who would have been empowered to spend it without administrative oversight, legal requirements, or legislative review. Decisions made by the Treasury Secretary would be non-reviewable by any court, agency, or Congress. The proposal also lacked a requirement for regular reports to Congress on the status of the program. This was simply untenable.

Since this announcement, my offices have received thousands of comments from Californians like you concerned about how this action will affect them. Yet, I believe prudent action must be taken. The bill should include the following principles: a phase-in of funding; oversight, accountability and transparency; a mechanism allowing the Secretary of the Treasury to modify mortgages to prevent additional foreclosures; and a precise cap on executive compensation.

The current credit crisis affects all Americans. If action is not taken to stem the crisis, Americans risk losing their homes, jobs, personal savings, life insurance and more. Banks will cease to lend to businesses and homeowners, and credit will be increasingly difficult to come by for average Americans. I strongly believe that the consequences of failing to act now would be greater than not acting at all.

Attached please find a statement I recently made on the floor of the Senate expressing my feelings on this issue. Please know that I will keep your thoughts in mind as this situation unfolds.

Once again, thank you for writing. If you have any additional questions or concerns, please do not hesitate to contact my Washington, D.C. office at (202) 224-3841. Best regards.

U.S. Senator Dianne Feinstein (more…)

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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.