This is from Robert Reich's blog:
Prediction: A scaled-down bill will be enacted by the end of the week. It will provide the Treasury with a first installment of $150 billion. Treasury can use it to back Wall Street's bad debts with lend no-interest loans of up to two years, until the housing market rebounds. Or to invest in Wall Street houses directly, in exchange for stocks and stock warrants. There will be strict oversight. Congressional leaders will promise further installments, but with conditions calling for limits on salaries and relief to distressed homeowners.
Some or perhaps most of the members of the house who voted down the bailout bill are said to have done so in response to their constituents. . This morning I was thinking about that and it occurred to me that sure, yesterday, the constituents are all against the bill, but now that the bill has been voted down, they will shift to being against not doing something. Dumb, fickled constituents. Then I found this on the MSNBC web site:
Mary Ann Bock got pretty angry when she found out that lax mortgage standards had started a financial maelstrom that appeared likely to require billions of dollars in federal money to fix.She got even angrier after she heard that Congress wasn't able to pass a bill aimed at stemming the ensuing financial crisis.
"Clearly, as insane as that bailout was, something had to be done," said Bock, 58. "Now, I'm thinking it's just all about politics and these people wanting to keep their jobs ... and forget about helping the country."
So, what is a member of congress to do?
I like Bob Reich's plan pasted above, but I have a better plan.
1) President releases executive order: No private residential mortgage foreclosures whatsoever until December 1. This gives a reasonable symmetric range of time around election day to allow congress to work out details.
2) Any segment of the economy that is to be underwritten by the Federal Government is also taken over by the Federal Government until payback. This could count purchases of securities, but should also count the institutions themselves. So if an investment bank hold a lot of paper, it gets nationalized.
3) Divide the debt that is being covered into basic categories such as US based vs. foreign, types of properties (residential, commercial) being affected and so on, and treat these categories differently.
- foreign assets or paper = tough luck.
- US based residential = cover these right away
- US based commercial = nationalize.
Some may argue that the government cannot be trusted to own commercial/financial institutions. Right. Sure. The private sector is at this point not in a position to make this argument.
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'No private residential mortgage foreclosures whatsoever'
The President has such power?
Its not a fickle constituency. Many people honestly do not care what happens on Wall Street. I talked with several people at work. They own no stocks, rent their apartment, and have less than $10,000 in the bank. Did the stock market go down? Wall Street has no visible impact on their lives at all. So yeah, they dont want to see the Government giving their tax money to wealthy banks. Others who have their retirement funds in 401(k)s and pension plans are a bit more knowledgeable, but are riding out the storm, just hoping that the market recovers before they have to (or can) retire.
Scott, even those who rent (me included), don't have much saved up, and don't own stocks are going to suffer along with everyone else if the financial market crashes. They won't be among the first hit, but they WILL be hit. So they SHOULD care. Hopefully they will start to care, before Wall Street's relevance to their lives becomes all-too-visible.
I'm as angry as anybody about the need for a bailout, but anger and the desire to punish the wrongdoers is not constructive right now. Avoid the meltdown first and stabilize things, then start casting about for someone to punish. The proposed bill was far from perfect, but it should have been an acceptable stop-gap. Hopefully Congress will come up with a revised version quickly.
Tomorrow -- Oct 1 -- is a big day for me: I become eligible for early retirement under the "rule of 75" (age + time at company = 75). I'm sure glad I decided a couple of years ago that I would wait until I reached full retirement age, still plenty of years off. Maybe the economy -- and my investments -- will have recovered by then.