Monday, September 29, 2008

Monday Editorial: The Bailout--What do you think?

I have not been sure what to think of the whole bail out thing. Tom Lehman, our most vocal economist at IWU, tends to take a "let her burn, baby, burn" approach to markets. They'll eventually even out.

Funny enough, I've decided in the end to take my cue from Warren Buffet. If he says we need it, okay. Fine.

Here are some of the provisions of the current draft (taken from the CNN website):
  • The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury's use. [I'm glad for this.]
  • Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, the bill would limit golden parachutes to executives at companies that participate; they will not be able to deduct the salary they pay to executives above $500,000. [Seems fair to me.]
  • An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary. [Happy for the oversight. Would like some additional people from contrasting points of view]
  • Allow for the Treasury to receive the option to take ownership stakes in participating companies under certain circumstances. [I like it. Let the American people own some of it and maybe get some money back one day.]
  • Treasury may establish an insurance program - with risk-based premiums paid by the industry - to guarantee companies' troubled assets, including mortgage-backed securities, purchased before March 18, 2008. [This was part of the Republican rebel base.]
So what do you think about it all? I guess we'll know soon enough whether it's working.

1 comment:

Angie Van De Merwe said...

I agree with McCain that government programs produce corruption.
I know that seems like a blanket statement, but it seems to be always the case. Whenever there is a posision of power, such as the Washington power base, it is highly improbable and almost impossible for someone with no "strings attached" to make inroads into the "big time". Why? because usually, everyone justifies their wrong-doing by looking at what everyone else does. And because there is no balance to power in these high areas, the common American only hears about the corruption or problem after it becomes too big to hide.
Politics is played in this way, as well and sometimes, the media uses it for their own purposes. I wish this wasn't so. But, lobbyists have a strong influence in what Congress hears and passes. And even though there are laws on the books, many do not adhere to the laws and there are always ways aroung the laws.
People who work in government, not only are paid well, but government's perks in travel expenses and other perks are well above what could be considered reasonable.
Executives who make in the double digit millions, are paid so much that they have no concept of what they ask of the common American in sacrifice for the 'bail-out".
My concern is that anything the government touches quadruples the costs. Beauraucracies are run by people in government who are doing the oversight. And the oversight jobs are sometimes political as well.
I don't mean to sound so cynical, but filling out several pages for the oversight of the government's "paper clip", while others travel to five star hotels and wine and dine on three meals at lavish resturants is not "public service". We are a people that can easily get accustomed to "high end". So, government taking care of the country's business is not apt to pay big dividends to anyone other than the ones who run the beauracracy. Just go to Germany and drive from West Berlin to East Berlin and see the extravagant buildings that the government built compared to the average hut.
We don't want the government taking care of our economy.