I was fortunate to watch some of the debates on CSPAN this morning. Aside from a few dissenting dems who thought the bill didn't do enough for the little guy, it was overwhelmingly a dem bill. Most dems supported it, most of GOP opposed it. The thing that fired me up was the mantra:
a) Bush caused this
b) We don't want to do this, but...
c) This is bipartisan, but the GOP really messed this up because of their "failed free market ideology"
d) 700 bln is a lot of money but this ain't over, we are going to seek more bailouts especially ones that would make it impossible to foreclose on a house
e) Wall St. is the worst
The republicans who supported it were more in the camp of, it will cost more to do this than to not, so we might as well.
I was surprised to hear a couple of things from dissenting GOP.
a) Bank examiners are going beyond their authority and requiring banks to mark-to-market loans where payments are current. The law says they don't have to be marked down if the pmts are current. This results in a decline in assets on the bank's balance sheet and forces the bank to hold more capital reserves, drying up funds to loan due to the money multiplier affect.
b) The savings and loan crisis was worse in terms of bank failures and we only spent 1.8 bln to get out of that mess which saved over 100 bln in assets.
GOP lawmakers want to take a more practical approach to resolving the issue rather than just dumping 700 bln in taxpayer dollars.
Furthermore, the first 250 bln that would be the first tranche used in the reverse auction would probably yield the worst returns for tax payers as institutions would have dumped the loans that illegals have taken out that have run back to Mexico and are completely worthless (i.e. CA inland empire) We would have taken a huge bath on the first 250 bln. The second tranche was 100 bln to be used at will by the president. Please! Talk about free money for earmarks. This whole thing was a total sham.
We dodged a huge bullet today.
Monday, September 29, 2008
Dodged a Bullet
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1 comment:
Wel,, I'lladmit that Im one of them Dem's, but I never supported this bill. While I will admit that bankruptcy for many of these firms isn't a pleasant thought, the idea of rewarding risky bejhavior with taxpayer dollars disgusts me even more. If the goal is to create liquidity, it seems to me that making a temporary change to the mark-to-market rules (say for 90 days not having to require every organization to work those out every single day) would thaw a little of this credit freeze up if not outright open it.
Anyway, I'm personally sick of the partisan rancor on both sides of the aisle and I'm all for solutions that keep the government's hands out of the mix as much as humanly possible.
Oh, and I think tomorrow may be a *great* day to max out my ROTH IRA's :). Since I don't need the money for another 30 years or so, I'm perfectly happy to purchase the securities I'd be buying anyway at a discount. How bout you two, are you buying during the fire sale as well :)?
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