Mike the Mad Biologist

The Mad Biologist Writes Letters About the Proposed Bailout

Posted by Mike on September 22, 2008
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Before I get to the letter I sent to my Congressional delegation, I want to discuss why the proposed bailout matters if you consider yourself a friend of science.

It’s very simple: if we sink $700 billion or more into propping up brokers you can kiss any science-related initiatives goodbye. No increases in certain basic research areas. No increases for public health. No research and development of green technologies. None of the things that a bunch of ScienceBloglings are talking about here. Instead, it all disappears down the porcelain crapper.

There is no science fairy: the most vital science initiatives have always been federally funded (and for those who think private industry will pick up the slack, this only shows that you have never tried to get funding from private industry at any meaningful scale). So, unless you think getting fucked with your pants on to the tune of $700+ billion is a good thing, email your representative and senators, and tell them to block the Paulson bailout. I would advise being polite, but there’s a good argument for being furious and abusive too. Here’s my stab at a letter

Dear [Congresscritter],

I am writing to you to ask that you oppose the current financial bailout plan proposed by the Bush Administration. To give, once again, this administration a blank check will be disastrous for the country, not to mention profoundly foolish. There is an opportunity to solve the crisis that is far more equitable to the average citizen-not Wall Street-and that would also establish mechanisms that would make similar crises less likely in the future.

First, rather than bailing out mortgage holders and banks, any policy should focus on helping home owners, as the fundamental problem is not a ‘liquidity’ problem, but that lenders made foolish loans, and others created financial instruments and insurance products based on these loans. What the government should be doing is buying mortgages at a discount (most likely 60-70% of current value), and then reestablishing the face value of the mortgage at this value. If the property were to be sold, the government receives half of the profit, so that taxpayers receive the profits of the sale. This mortgage must be paid off on schedule, and not earlier, to prevent lenders from refinancing based on the property. Additionally, this new mortgage would be fixed to the property and would take precedence over all other mortgages attached to the property.

This policy would not reward the bad behavior of lenders and borrowers, while stabilizing housing prices. It would also give the American people a chance to recoup some of the expense of this bailout. At the same time, it would allow people to retain their homes.

Second, any bailout plan should be conditional upon and include a financial transactions tax of 0.25%, similar to that imposed in the UK. Much of this crisis stems from exotic transactions such as credit default swaps, options, and futures as well as stock sales of companies that profited from these financial instruments. The cost to the long term investor would be negligible, but a transactions tax would discourage short term speculative products, and also raise much needed revenue for the purchase of mortgages.

Third, this crisis demonstrates that greed should not be the organizing principle for the economy. To provide a disincentive for ‘get rich quick’ speculation, a 50 percent tax rate surcharge on incomes over $5 million and a 70 percent rate on incomes over $10 million should be instituted. Additionally, capital gains should be taxed as income, not at a lower rate. Someone will have to pay for this crisis: those who have gained the most from the run-up to this crisis should carry the greatest burden.

Fourth, citizens should not be subsidizing excessive CEO pay. Loopholes that benefit top executives should be abolished, such as deferring compensation offshore, placing a cap on the tax deductibility of salaries and other compensation, and revamping the standards for stock option accounting.

As a fourth generation Democrat and reliable voter, I am tired of the leadership of my party, as has happened so many times during the last eight years, once again placing the prerogatives of the powerful before the needs of the people.

I respectfully ask that you oppose the proposed bailout plan.

Sincerely,

[Mike the Mad Biologist]

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Comments

  1. #1 Joe
    September 22, 2008

    Thanks for the letter template. I’ll use it, for what it’s worth. As you’ve correctly pointed out, approving this bailout is nothing more than another blank check for the clown-shoe gang. As far as serious science initiatives are concerned I’d have to point out that even before this latest disaster the possibility of greatly increased science funding by the next U.S. administration has been small. The U.S. debt is currently at $9.6 Trillion with next year’s deficit projected to run around $500 Billon. And that’s pre-bailout numbers. You do the math…

  2. #2 Andy Harris
    September 22, 2008

    Prerogatives of the powerful before the needs of the people? Please read Howard Zinn’s People’s History of the United States if you haven’t already. According to that account of history, the change you seek can only be done with dramatic grassroots support. It will not be done by any elected official of today.

    In the meantime, support Barack Obama with your time and money if you ever want any hope of attaining the things you set forth in your letter. He is not a messiah, but he’ll come closer to getting the grassroots support we need to actually reverse the squandered opportunities of the Bush administration.

    YES WE CAN

  3. #3 Jerry
    September 22, 2008

    I do not agree with the Congressional bailout and ask whether REP or DEM, to please sent your Congressman the following petition found at this site:

    http://financialpetition.org/petition-nobail.shtml

    Stop The Bailouts!

    We the Undersigned Americans, having seen two 500-point selloffs in the Dow over the last week, witnessing the bankruptcy of Lehman Brothers and the bailouts of AIG, Fannie and Freddie, and seeing over eight hundred billion dollars of new debt being taken on by America that we do not have, demand immediate action of our Congress and Executive.

    All the “bailouts” and other similar actions have accomplished is to speed up the economic and market crash; they are now coming not on six month intervals but on one month intervals, and are more severe in each instance.

    This ongoing crash in our markets was caused by a refusal to force banks and other institutions to stop lying about their debt – both in the “credit default swap” market and with so-called “Level 3″ assets. As a direct consequence of not being able to determine what a company is actually worth it becomes impossible for their stock to find price support.

    In addition, it was the “excess liquidity” of the years from 2001 – 2007, intentionally created by Alan Greenspan and Ben Bernanke, that led to this mess – inappropriate and even fraudulent lending – in the first place. Providing “more liquidity”, which has been Bernanke’s primary strategy since last August, is like giving a drunk a bottle of whiskey as a “treatment”, and is equally indefensible.

    If this is not stopped the selling will rotate from financial stock to financial stock until all are zeros. Each will in turn need to be “bailed out”; down this road lies disaster as not only will the stock market crash beyond anything since 1929, but in addition we will take on so much new Federal Debt that it is very likely that foreign governments will refuse to fund our deficits – a threat that China issued, obliquely, through their official State newspaper on the 17th of September.

    This is likely to produce a bond market “dislocation” and crash in the economy similar to the 1930s if it is not stopped now. You have been petitioned in the past on these measures but have failed to act; you must now choose between decisive and immediate action and being responsible, in full, for the consequences.

    We insist that Congress and Treasury:

    Direct Ben Bernanke to “drain the swamp” and shut down the TSLF, PDCF and TAF, returning the “slosh”, or free liquidity, to normal levels. We must take the bottle of whiskey away from the drunk.
    Direct The SEC, OTS and OCC to have all financial firms mark to market all assets on their books, bring all off-balance-sheet vehicles back on the balance sheet, and stop hiding assets in “Level 3″ where values are literally made up.
    Insist that all “over the counter” derivatives either be moved to an exchange with a central clearing party, thereby enforcing margin limits and providing published open interest figures, or, in the alternative, declared void.
    Direct that all firms with a federal guarantee or “backstop” of any sort, including but not limited to investment and commercial banks, be strictly limited to a leverage ratio of 12:1, which is the natural limit for a system with an 8% reserve.
    Remove all “game-playing” with reserves in our nation’s banks, including “zero reserve” sweeps and other similar evasions of reserve requirements, as this game-playing is part and parcel of the excessive leverage that created this mess in the first place.
    Remove Treasury’s authorization to issue more debt for bailouts or any other purpose without an explicit Congressional authorization for each such action. Hank Paulson said he would not use his “Bazooka”; he lied. In addition he has now announced plans to issue $100 billion of funds for “more slosh” to be provided to The Federal Reserve, yet nowhere has this been authorized by a specific bill in Congress. Per the Constitution, all spending bills must originate in The House.
    Remove all regulators involved in willful blindness from office, including the Mr. Lockhart (formerly OFHEO), the OTS, OCC, FDIC and SEC chairs, Treasury Secretary Paulson and Fed Chair Ben Bernanke.. All must be replaced immediately as all have willfully looked the other way for nearly a decade – or more – while this fraudulent credit bubble was being fostered.
    These remedies cannot wait for the next Congress; Henry Paulson, Ben Bernanke and the other regulators are increasingly “making it up as they go along”, with the latest instances adding (according to the CBO) $5.3 trillion dollars to the Federal Debt, or a doubling in just one act, plus the additional $800 billion spent on other bailouts and “market stability actions” – all money we do not have.

    We VOTE and elections are held November 4th, 2008.

    ——————————————————————————–

    If you’d like to “sign” this petition, enter your information below and click “SIGN”. This petition will be faxed to President Bush, your members of Congress, and Henry Paulson, Secretary of the Treasury. You may only sign the petition once, and your email address must be valid (the system will email you a confirmation code and instructions.)

    I have read the above petition and agree with its contents. The above information is my registered voter address, or, if I am not registered, my legal address, I am qualified to vote, and will so register prior to the next election

  5. #5 mortgage lenders
    September 24, 2008

    What do you mean?

    Just throw money at it with no accountability?

    In that case it is exactly like it.

    http://www.mysunsetmortgage.com