Who should pay for the bailout? Those enriched by it causes!
Jerry Caldwell
September 26, 2008
The Bush administration´s bailout plan burdens the next generation of Americans with a bagful of virtually worthless toxic securities that they want to value at a level that allows Wall Street to avoid catastrophic losses and pay for them with taxpayer dollars. This proposal has its roots in a group of bankers who have received over $39 billion in bonuses in addition to their salaries that by themselves would feed most 3rd world countries.
One essential element that led to this meltdown and also led to these CEO´s and top executives receiving unprecedented levels of compensation is nearly absent from any reporting or discussion on mainstream media or by Secretary Paulson or W for that matter. In 2004 the SEC under then chairman William Donaldson, appointed by Bush, granted exemptions to: Goldman Sachs, Morgan Stanley, Merrill Lynch, Bear Stearns and Lehman Bros. Under this exemption that was made by "administrative finesse" with out Congressional input or oversight these five, now bankrupt, firms were allowed to bypass rules that limited their leveraging of assets to a 12-1 ratio and allowed them to borrow against net capital at up to 40:1. Just think if you could borrow $40 for every $1 of your net capital. Anyone of us who prudently invested those funds would surely prosper. Unfortunately prudent investing was not part of their game plan. Greed quickly overwhelmed the sound principles that kept these firms doors open for many decades. The desire to make a killing while W was still in office led them all on a rampage that became the road to ruin, but only after their bonus checks were cashed and offshored.
It is interesting to note that Secretary of the Treasure Paulson was at that time CEO of Goldman Sachs.
So far I have only found one workable proposal that is a serious alternative to the Paulson plan and it is not the somewhat vague Federal insurance scheme posed by House Republicans. It´s from Sen. Bernie Sanders of Vermont who outlined an alternative plan on his website: http://www.sanders.senate.gov/news/record.cfm?id=303313
It simply says that the people who have gained the most over the last 7+ years through deficit financed tax-cuts; corporate loopholes and the administrative finesse above should and can pay the bill. In fact it won´t even hurt them one bit. It will be politically unpopular because he suggests a surtax on the upper income levels of our society. To me it makes sense and merely offsets the lucrative tax cuts that have largely contributed to our exponentially growing national debt. There is also a petition in support of this idea at the bottom of the page here: http://www.sanders.senate.gov/polls/
Once a workable plan is approved it should not end there. The taxpayers should be paid back by all those who benefit from the bailout. All bank CEO´s and senior executives should return bonuses received over the last 7 years. All loan broker commissions for loans that are purchased under the plan must be returned. This is admittedly a drop in the bucket but it will go along way to restore a very important element – Trust.
Furthermore all of these securitized loan portfolios should be audited, all bad loans identified and separated from performing loans, all those who initiated the bad loans or underwrote them should be held directly responsible.
Another troubling thought occurred to me relating to the presidential campaign. The savings and loan scandal of the 80´s has many similarities to our current predicament. After his firsthand experience through that episode including the Keating Five fiasco. John McCain still believes that unregulated markets are in our nations best interest. After that experience he sought advice on running the economy from Sen. Phil Gram who was lobbying at the time for UBS, a prime player in the sub-prime debacle. Gram is considered by many to have directly caused the sub-prime market catastrophe, He is also known for his ties to Enron and played a key role in energy deregulation. That sure ended swell. His campaign manager Rick Davis has been lobbying for years on behalf of Freddie Mac and is also strongly advocating deregulation. To me this indicates an unwillingness or inability to learn from experience. It hardly engenders any level of confidence in his ability to facilitate a workable solution to the current economic crisis. Then you add his recent comments "The fundamentals of our economy are sound" or "We should deregulate health insurance the way we deregulated Wall Street" it adds up to all the reasons I need to support the Obama campaign in every way possible.
One essential element that led to this meltdown and also led to these CEO´s and top executives receiving unprecedented levels of compensation is nearly absent from any reporting or discussion on mainstream media or by Secretary Paulson or W for that matter. In 2004 the SEC under then chairman William Donaldson, appointed by Bush, granted exemptions to: Goldman Sachs, Morgan Stanley, Merrill Lynch, Bear Stearns and Lehman Bros. Under this exemption that was made by "administrative finesse" with out Congressional input or oversight these five, now bankrupt, firms were allowed to bypass rules that limited their leveraging of assets to a 12-1 ratio and allowed them to borrow against net capital at up to 40:1. Just think if you could borrow $40 for every $1 of your net capital. Anyone of us who prudently invested those funds would surely prosper. Unfortunately prudent investing was not part of their game plan. Greed quickly overwhelmed the sound principles that kept these firms doors open for many decades. The desire to make a killing while W was still in office led them all on a rampage that became the road to ruin, but only after their bonus checks were cashed and offshored.
It is interesting to note that Secretary of the Treasure Paulson was at that time CEO of Goldman Sachs.
So far I have only found one workable proposal that is a serious alternative to the Paulson plan and it is not the somewhat vague Federal insurance scheme posed by House Republicans. It´s from Sen. Bernie Sanders of Vermont who outlined an alternative plan on his website: http://www.sanders.senate.gov/news/record.cfm?id=303313
It simply says that the people who have gained the most over the last 7+ years through deficit financed tax-cuts; corporate loopholes and the administrative finesse above should and can pay the bill. In fact it won´t even hurt them one bit. It will be politically unpopular because he suggests a surtax on the upper income levels of our society. To me it makes sense and merely offsets the lucrative tax cuts that have largely contributed to our exponentially growing national debt. There is also a petition in support of this idea at the bottom of the page here: http://www.sanders.senate.gov/polls/
Once a workable plan is approved it should not end there. The taxpayers should be paid back by all those who benefit from the bailout. All bank CEO´s and senior executives should return bonuses received over the last 7 years. All loan broker commissions for loans that are purchased under the plan must be returned. This is admittedly a drop in the bucket but it will go along way to restore a very important element – Trust.
Furthermore all of these securitized loan portfolios should be audited, all bad loans identified and separated from performing loans, all those who initiated the bad loans or underwrote them should be held directly responsible.
Another troubling thought occurred to me relating to the presidential campaign. The savings and loan scandal of the 80´s has many similarities to our current predicament. After his firsthand experience through that episode including the Keating Five fiasco. John McCain still believes that unregulated markets are in our nations best interest. After that experience he sought advice on running the economy from Sen. Phil Gram who was lobbying at the time for UBS, a prime player in the sub-prime debacle. Gram is considered by many to have directly caused the sub-prime market catastrophe, He is also known for his ties to Enron and played a key role in energy deregulation. That sure ended swell. His campaign manager Rick Davis has been lobbying for years on behalf of Freddie Mac and is also strongly advocating deregulation. To me this indicates an unwillingness or inability to learn from experience. It hardly engenders any level of confidence in his ability to facilitate a workable solution to the current economic crisis. Then you add his recent comments "The fundamentals of our economy are sound" or "We should deregulate health insurance the way we deregulated Wall Street" it adds up to all the reasons I need to support the Obama campaign in every way possible.
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