Wednesday, September 24, 2008

Even More, Yet, Again, on The Bailout

Eminently sensible stuff here, cited by PowerLine.

David John, argues in favor of (1) strict oversight over all the new RTC's activities, (2) allowing the new RTC to exercise rights over purchased securities, as opposed to being a passive holder of them, (3) allowing it to hold the assets without "sunset," so as to maximize the ability of taxpayers to receive full value for them, and (4) a limit on total taxpayer exposure. It is my understanding that the Treasury Department's proposal contains all of these features [this from a Heritage Foundation paper].

There are some sensible additions to the package which John endorses:

...the Treasury draft lacks the two features that John considers important. First, the new RTC should be allowed to refer cases to the Justice Department for civil suits to recover bonuses or termination compensation received by executives where appropriate. Second, the new RTC "should purchase securities only at a deep discount, where the market for the security is having difficulty clearing" in order to "exact a cost on the asset holder and ensure that only dysfunctional markets are eligible."


..."the new RTC should focus on restoring the markets, not on providing funding for other programs or serving as a platform for other goals."

By now, anyone who has read more than Democrat Party talking points on the issue should understand that the market-gridlock on these securities was caused by several elements:

1) Democrat legislation and regulation forcing or enabling Fannie/Freddie (and banks) to make bad loans.

2) Democrat and Republican passage of SarbOx, which contained the infamous "mark-to-market" clause, meaning that banks who were forced to make crappy loans were also forced to write down the value of those loans.

3) Al Greenspan's horrific "easy money" policies--which supported ridiculously high purchase-price valuations of housing by stuffing cash into the markets at unrealistically-low rates.

4) Greed, corruption, and abominable behavior by a number of financial execs, including those NOT on Wall Street (see, e.g., Countrywide Loans and WaMu.)

5) Greed, corruption, and abominable behavior by a number of Congressmen who took monstrous campaign contributions from Fannie, Freddie, Wall Street, and the banks (not to mention the Realtors)--see, e.g., Dodd and Obama.

6) Greed and/or stupidity on the part of home-buyers who THOUGHT that the value of their homes would rise forever--and quickly--beyond the value of the mortgage they incurred to purchase it. This particularly applies to 'flippers' and 'climbers.'

Some, such as Gingrich and Malkin, seem to think that crippling the banking system is better than a $700Bn bailout. Obviously, reality doesn't cloud their judgment.

Others, notably Congressional Democrats, seem to think that more lousy lending (and even MORE targets for bailout dollars) is a better solution than what's proposed by Paulson, modified with the above suggestions. These are people who suffer from mental diseases, possibly brought on by physical diseases. (Remember King Herod?)

Cleaning up Fannie and Freddie and repealing CRA/HUD regs should be the first items on the Congress' agenda for next session.

They won't be, of course, because of #5 above.

But repeating The Depression to teach Democrats a lesson is not in the national interest.


Anonymous said...

Re: #5...

Where's the honorable mention for St. John's capable campaign chair Rick Davis and his $15k/month "retainer" from Freddie Mac. Davis and Dodd definitely dropped their trousers when big Freddie came calling....your "O and Savior" is no angel but linking him to this financial fubar contradicts your previous contention that he was an empty suit as a US Senator.

Dad29 said...

Your insinuation about Davis is unfounded. See my post on the topic immediately below this one.

Obama was both an empty suit AND a happy recipient of mega-bucks from Fan/Fred.

"Empty suit" doesn't mean that he never voted Party-Line--which he did.

It simply means that there's very little there in leadership--and, I think, even less in original ideas.

Dad29 said...
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Anonymous said...

There is a distinction to be drawn between Freddie/Fannie PAC donations and money from individuals who list their employer as one of the above, no? The money seemed to be spread around pretty evenly among D's and R's with R's getting more PAC and D's getting more individual. My head's spinning so maybe this is a non-starter...

But is it not a fact Davis (and/or the company that bears his name) rec'd roughly half a million from the COMPANIES based on his proximity to St. John? Why else shower free dough on an ex-lobbyist? I read your link and it is instructive, but why then the payments to a guy who claims he isn't working that corner of the street anymore? Money generally changes hands when services are rendered. When the campaign ends and Davis returns to his day job, won't he benefit from this money in one way or another?

It's obvious in light of the last few months that Freddie and Fannie were running on auto-pilot but that does not explain why payments to Davis and/or Davis Manafort WERE made, nor does it shed any light on what the purpose was. Thanks for trying to inject a measure of sanity into this mess.

Dad29 said...

There is a distinction to be drawn between Freddie/Fannie PAC donations and money from individuals who list their employer as one of the above, no

Yes. But since everyone knows that Corporations CANNOT contribute to campaigns...As to R/D contrib's, this is no surprise, except for the size of Obama's take.

Davis QUIT his company to manage McPain's campaign. Does it occur to you that perhaps his ex-PARTNERS might have earned the monies which were paid to the firm?

Or are they simply potted plants?

Seems to me that what's significant here is McPain's introduction of legislation to reform Fan/Fred, not what his campaign manager did. The guy was hired b/c he knows from politics.

Anonymous said...

Fair enough. The fact Davis is currently not an active player in his own company is clear enough but he's only on a leave of absence. It's safe to assume he continues to have a very real stake in how that company performs while he's off making a wreck of McCain's campaign (Mike Murphy, where art thou?). Should McCain eek out a victory in November, Davis's company stands to profit BIG TIME. An Obama win, which seems more likely, would have a crippling effect on K Street lobbyists and Davis Manafort would need to diversify.

If you follow my point, which may or may not be valid, Davis would seem to be involved if only behind the scenes.

Dad29 said...

An Obama win, which seems more likely, would have a crippling effect on K Street lobbyists

You must be kidding--or delusional.

Lobbyists are equal-opportunity; their job is to influence legislation and regulation. Makes no difference if (D) or (R) is in office.

And if you think Obamamama is some sort of vestal virgin, I have a very nice bridge you may wish to purchase....

Anonymous said...

Does that bridge lead to...Ketchikan?