Brainstorm some Bailout packages

[caulfield]

Since congress is at a standstill, while our investors are hyperventilating (and our citizens stand outraged), I thought it might be fun for any prospective amateurs online to post some of their own solutions to this messy crisis.

Here are a few things to keep in mind before tossing out ideas, possible packages, and off the wall rants for a new revolution...

1. The banks are not "broke" and only lack adequate liquidity to meet current obligations and long term liabilities. They are overweight in mortgage backed securities and mortgage revenue bonds, and need desperately to convert them. This has effectively put them into "miser mode", hoarding every penny just to stay alive, which has in turn frozen our system of lending (and theoretically our economy)

2. These securities are not worthless. On the contrary, when people say the $700 billion plan will eventually end up profitable, they are telling the truth. The only question in the equation is time, because eventually the good loans will cover the bad ones. Even if people foreclose on their mortgage, if the property is auctioned and sold far below cost, the investment did not end up "worthless" because it has still retained SOME value.

3. Nobody knows the actual dollar amount of our economy's exposure to these currently overvalued toxic securities. The optimistic estimate was around half a billion and the pessimistic estimate was just over the suggested $700 billion. Total invested assets however are in the trillions. Because of this, any figure we throw out is little more than an educated guess.

4. Nobody can accurately predict the fallout of an inadequate bailout package or any of the long term consequences of a package that is too large a burden for the populace to bear. We can only guess and some of our incorrect guesses regarding the market in the past have been real blunders.

5. The constantly spoken phrase that keeps getting thrown at us dictating that "Doing nothing is not an option" is untrue, BUT the assessment that "Doing anything about this is better than doing nothing" may likely prove valid. Though we lack a consensus regarding what must be done, an overwhelming majority agree that we must do something.

But what... I can start off to get the ball rolling, but any and all input on possible scenarios (including LET THEM BURN AND REBUILD THE US DOLLAR FROM THE BLOODY ASHES!) are appreciated in advance.

[caulfield]

Okay here we go...

Considering all of the above, and keeping in mind that our trust in volatile market forces is what got us into this mess, it is quite unfair to FORCE the taxpayer populace to invest in these risky long term securities at any predetermined price tag or umbrella figure. We can not know any accurate value for such assets and to select a price is VERY dangerous. If the number is too low you will not be able to cover enough securities and bonds, and if the number is too high then it may take longer than necessary to attain profitability.

Only one entity can be trusted to price these securities at any reliable projection.

WALL STREET... The very culprit (or scapegoat) of our hour of desperation.

This is what I believe we should do. (and right off the bat I am no expert)

1. Raise the limit on insured deposits by the FDIC as high as we can afford to prevent as many bankruns as possible, then allocate as much money as possible to keep AIG afloat in the insurance business (to prevent panic).

2. STOP BAILING OUT FINANCIALS! We have done enough of that already...

3. Shore up enough funding to create an entity which will oversee this whole bailout process and, (this part is very important) design it in such a way that it can EASILY be dismantled when this is over (because we have enough oversized self-perpetuating Federal institutions already).

4. DEMAND that all banks and financial institutions declare their holdings in mortgage backed securities which they need/desire to liquidate into cash. Have them sign them all over to be given to the new institution you just created when the time comes.

5. Put someone like Warren Buffet in charge of the institution and plaster his/her face all over the media and let them give press conferences about the plan. Try to sound REALLY optimistic about the potential.

6. Turn all the securities into one massive mutual fund or ETF. This is done all the time with bonds, options contracts, and even physical gold holdings, so I don't see why this would not be possible.

7. Oversee the payments, defaults, and property auction income and convert it all into monthly/quarterly dividends for the shareholders. The government should do this happily because dividends are taxable, OR use a portion of the generated income to pay for the expenses of the new Federal institution and declare these dividends TAX EXEMPT (the rich drool over non-taxable yields). Doing the latter might cause problems when you get to step 11 however.

8. Let the shares go public on Wall Street and hope for the best. If you believe in God, then go ahead and pray.

9. Take the money from the sales of the shares and release it to the banks proportionally and let the ones who still do not have adequate liquidity just declare bankruptcy. We can't save them all and the nature of capitalism is survival of the fittest for the greater benefit of the many.

10. Wait for lending to ease up on its own. Even if we do NOTHING, this will eventually happen. We only intend to speed up this process... (with the least amount of burden on taxpayers)

11. Wait for the real-estate market to find a true bottom and when home prices start to rise, sell rights to the oversight of the fund to the the highest bidder (when the market recovers, it is entirely probable that this bidding will be HOT).

12. When oversight has been passed on, immediately dismantle the created entity and turn the headquarters into a museum. Declare it a national monument. Let schools take children there to learn all about how we as a nation succeeded or failed to avert economic catastrophe. Inspire them to learn more about the US dollar and the markets that move it.

13. If there is any money left over, pocket it. (Uncle Sam seems to need it)

Right off the bat I can already hear how this will be shot down because people will say, "That is CRAZY! Do you know how long all of that will take?! WE HAVE NO TIME! THIS NEEDS TO BE FIXED NOW!!!"

My only response to that is that when you speak like that to the media and citizens, you only add fuel to the fire. Wall Street is an emotional animal. When we announce that we are working on a plan, indices rally and likewise when it fails, everything plummets. CALM THE FUCK DOWN...

Tell the media "We have a plan which may take the burden off taxpayers." Stocks will gain back some of their losses on this news alone. Describe the process step by step and put it up to a vote. If it fails, we are back where we started and lost nothing (okay a few days). On the other hand, if it passes, then the generated market confidence could raise indices enough to tide us over (with calmer heads) until we can implement this correctly. (hopefully after the next election)

Peace all.

,Caul

[laughingwillow]

Interesting question.

I might need some time to ponder the possibilities.

My first inclination would be to attempt to educate the public as to the facts of the matter at hand, as caul mentioned above and insure no panic ensues.   However, I'd settle for an unbiased media that refused to paint dark pictures and use scare tactics seemingly in an effort to shove the idea of a corporate bailout down the throat of John Q Public.

I'd encourage the public to realize its time to tighten our collective belt and do away with excesses in our lives. This is not an era for tax cuts.

I would throw big bucks at the development of alternative energy technologies and encourage the country to take the lead in this inevitable future opportunity.

Then I'd fire Paulson. Send him out of town on a rail, tar and feathered and trussed for all to see. Restore some sanity, maybe.

Then I'd fire any advisor preaching trickle down economics and make sure the good of the people is back to being represented by the gubmit.

I'd swing the current system toward socialism for the people and capitalism for corporations instead of the current model of socialism for the corporations and  capitalism for the masses. This would include developing social medicine or at least universal health coverage not tied into a person's job situation. And as corporations don't vote, I see no reason for these entities to have such influence in a gubmit of and for "we the people."

lw

[caulfield]

You bring up a good point LW in that if you want to utilize this bailout plan as a means to socialize the system, then other things should be socialized too (like healthcare God damn it). It isn't fair to socialize the losses for something in which the gains were privatized. You can't have it both ways. It's one or the other. If the entire citizenry had profited from the housing bubble and subprime debacle, then by all means tax us all, because we had it coming.

But such was not the case. Select pockets of people profited handsomely at the expense (and ignorance) of everyone else. Dishonest loan brokers raked it in. Rating agencies and insurers made money without processing due diligence. Financial institutions and investment corporations leveraged unwisely to generate massive yields during the bull market. Even some desperate homeowners who liquidated all their equity and credit before foreclosing and declaring chapter 11 walked away with some cash...

The people you are forcing to commit to this strategy saw none of that money, but here you are handing them the bill...

What I intended to do was to pass that bill right back to Wall Street. If investors, speculators, and hedge funds got us into this mess, then let THEM be the ones who pay to fix it! Everyone in Washington and on Wall Street is screaming that the banks need cash because they are overexposed to the current waterfall of defaults and foreclosures and are overweight in mortgage backed securities.

So have a yard sale...

What I proposed issues those same investors a challenge. If this bailout is so instrumental and necessary in keeping our economy flowing and in helping the banks to sort this all out with adequate liquidity, then collect all the trash, tie a pretty bow around it, and release it in public offerings. Wall Street will price it appropriately. If this is so very important, then they will pay and if instead it tanks and sells far below we predicted, then that likely means that whatever package we determined was REALLY gonna screw us over in the long run (according to technical analysis anyway).

Either way, you have placed the blame squarely where it ought to be and protected the taxpayers as best as possible.

"I'd encourage the public to realize its time to tighten our collective belt and do away with excesses in our lives. This is not an era for tax cuts." - And Amen to that! I'm sick of hearing the government suggest that citizens can spend their way out of every national crisis.

[laughingwillow]

Btw, I just read that the latest proposed bailout expected to gain traction includes tax cuts. And THAT incentive is thought to be what is needed to bring the (momentarily) fiscally conservative repubs that have previously balked at the bailout back across the bi-partisan isle of bidness as usual.

Insidious, eh? Kinda like throwing a fix into the toilet in front of a jones'in junky.

Btw, I like what you have proposed so far. Unfortunately, I'm guessing the supremely omnipotent wizards of wall street will manage to sell We the People another shipment of trickle down smoke and mirrors before all is said and done.

lw

[laughingwillow]

http://www.reuters.com/article/newsOne/ ... 01?sp=true

Senate leaders were confident they could deliver the votes needed sometime after 7:30 p.m. EDT/(2330 GMT) on Wednesday to pass the Wall Street bailout bill. If the controversial legislation clears the Senate with bipartisan support, the House was likely to consider the retooled bill on Friday, House Majority Leader Steny Hoyer, a Maryland Democrat, said.

The Senate wants to couple the measure with extension of some popular tax breaks to the middle-class and others while also providing more insurance -- a maximum $250,000 per account instead of $100,000 -- for people's bank deposits.

Quote Larry: "I'm confident that we'll get a good strong bipartisan vote here in the Senate," predicted Senate Majority Leader Harry Reid, a Nevada Democrat.

Quote Curly: His Republican counterpart, Sen. Mitch McConnell of Kentucky, added, "We're confident that the way we've got this package will work in the Senate and we're optimistic it'll work in the House."

Hey, Moe! President George W. Bush expressed confidence in the bill's fate this time around but warned lawmakers the measure was necessary "so as to stabilize this (economic) situation, so that it doesn't get worse.

I feel so much better now. The crisis has passed. Nothing to see here. Everyone just go about your bidness of shop, shop, shopping until the sound of the other shoe can be clearly heard drop, drop, dropping. Then we'll make up some more shit and pin it on the next lucky bastard to occupy the white house.

lw

[Stonehenge]

"Doing anything about this is better than doing nothing"

I don't buy that for a moment. It was shrub who told us that and everything he has said has been a lie starting with the WMD's that Saddam supposedly had

If we buy any mortgage backed securities, it will have to be at no more than 50 cents on the dollar and if the actual value has dropped more than that, then perhaps as little as 20 cents on the dollar. Let us be the buyer of last resort and if the govt actually made a profit, then good.

The big wheels won't like that but too bad. Let them take it or go under. I don't care if they do go under.

[laughingwillow]

Right on, stoney.

lw

[laughingwillow]

Here's a question for you chaps......

While it makes me feel a little better seeing other forum members posting similar and detailed opinions concerning the current debacle, it scares the hell out of me that our elected representatives in DC don't seem to grasp the situation at hand.

Who is going to step up to a national microphone and put the blame for this mess squarely on the shoulders of the failed theory of trickle down economics? And if the answer is "nobody," I'd like to know why not?

Are we smarter than the powers who be? 'Cause that's giving them the benefit of the doubt over the second possibility; that of collusion or at least manipulation of our elected officials by the representatives of the Captains of Industry.

Either way, I want big bidness out of the gubmit of "We the Peoples.."

lw

[caulfield]

Who is going to step up to a national microphone and put the blame for this mess squarely on the shoulders of the failed theory of trickle down economics? And if the answer is "nobody," I'd like to know why not?

Obama mentioned that exact idea in his latest political ads.

Two-Minute Obama Ad Blasts Failure Of Trickle-Down Economics (VIDEO)

I think Palin goes down in flames tonight. Not sure how Biden will do though. If he shoots his mouth off or starts talking in circles then Sarah might crank up her annoying folksy charm and win back all the conservatives who lost faith in her following the disastrous Katie Couric interview.

[JRL]

"Who is going to step up to a national microphone and put the blame for this mess squarely on the shoulders of the failed theory of trickle down economics? And if the answer is "nobody," I'd like to know why not?"

Well put Bruddah willow. Seems like trickle down just proves that shit runs downhill and not much else.

[laughingwillow]

Hey, wait a minute.... if Obama realizes the current crisis is due to trickle down economics, why is he supporting this trickle down bailout?

lw