“Nationalizing Every Bad Mortgage in America Is Not the Answer” Washington, Sep 22 - U.S. Congressman Mike Pence is circulating the following “Dear Colleague” letter among his fellow House Republicans today: Republicans Should Oppose the Bailout Plan “Nationalizing Every Bad Mortgage in America Is Not the Answer” Dear Republican Colleague: Our financial markets are in turmoil and the Administration was right to call for decisive action to prevent further harm to our economy, but nationalizing every bad mortgage in America is not the answer. As Bill Kristol wrote in “A Fine Mess” in today’s New York Times: And I acknowledge that there are serious people who think the situation too urgent and the day too late to allow for a real public and Congressional debate on what should be done. But — based on conversations with economists, Wall Street types, businessmen and public officials — I’m doubtful that the only thing standing between us and a financial panic is for Congress to sign this week, on behalf of the American taxpayer, a $700 billion check over to the Treasury. The Administration’s request amounts to the largest corporate bailout in American history. Congress should act, but should act in a way that protects the integrity of our free market and protects the American taxpayer from more debt and higher taxes. Congress must not hastily embrace a cure that may do more harm to our economy than the disease of bad debt. And the stakes for our free market could not be higher. As George Will observed on ABC’s This Week with George Stephanopoulos program yesterday, When the British Labour Party was socialist, it defined socialism as government control of the commanding heights of the economy. And in Britain, at that time, it was coal, steel, and railroads. The commanding heights of the American economy are financial services, and they are now controlled by the government. To avoid a slide into socialism for our financial sector, Congress must consider all available options to put our nation’s economy back on its feet. There are no easy answers but there are alternatives to massive government spending. As was observed in an editorial titled “A Bad Bank Rescue” by Sebastian Mallaby published in The Washington Post on Sunday, September 21, 2008: Within hours of the Treasury announcement Friday, economists had proposed preferable alternatives. Their core insight is that it is better to boost the banking system by increasing its capital than by reducing its loans. Given a fatter capital cushion, banks would have time to dispose of the bad loans in an orderly fashion. Taxpayers would be spared the experience of wandering into a bad-loan bazaar and being ripped off by every merchant. Alternatives to a massive federal bailout must be fully considered and debated before Congress acts. Finally, any new expenditure of taxpayer dollars should be paid for with fiscal discipline and reform. If Congress decides to spend nearly 1 trillion dollars on a corporate bailout, it must find budget savings to prevent that cost from being passed along to the American people. As our distinguished former Republican Speaker of the House, Newt Gingrich, wrote in a post titled “Before D.C. Gets Our Money, It Owes Us Some Answers” on The Corner on National Review Online yesterday and prominently displayed today on the homepage under the headline “Newt: Wait One Minute”: Congress has an obligation to protect the taxpayer. Congress has an obligation to limit the executive branch to the rule of law. Congress has an obligation to perform oversight. Congress was designed by the Founding Fathers to move slowly, precisely to avoid the sudden panic of a one-week solution that becomes a 20-year mess. I urge you to join me and other conservative voices in opposing the bailout plan. Republicans should demand that Congress take time in deliberating the merits of any legislation until the facts and competing solutions can be fully debated. We should demand consideration of free market alternatives to massive government spending and we should fight to pay for the solution through budget cuts and reform instead of more debt or taxes. Sincerely, Mike Pence Member of Congress http://mikepence.house.gov/News/DocumentSingle.aspx?DocumentID=103254
bump
53 total signature so far.
61 now…
62 Great letter, btw.
PtrainerNY Wrote: ------------------------------------------------------- > > As Bill Kristol wrote in “A Fine Mess” in today’s > New York Times: > > When the British Labour Party was socialist, it > defined socialism as government control of the > commanding heights of the economy. And in Britain, > at that time, it was coal, steel, and railroads. > The commanding heights of the American economy are > financial services, and they are now controlled by > the government. this is the biggest problem with her argument. The commading heights of our economy are financial services. We don’t make anything. All we want to do is give people advice… except our school system is terrible and the rest of the world is (deservedly) getting educated at our best universities. What do we make anymore that we will ever be able to pay back this kind of national debt?
Ouch…
Great, so what’s the alternative. Funny, nobody ever thinks of that.
uh,… “Within hours of the Treasury announcement Friday, economists had proposed preferable alternatives.”…
JoeyDVivre Wrote: ------------------------------------------------------- > uh,… “Within hours of the Treasury announcement > Friday, economists had proposed preferable > alternatives.”… I haven’t seen them outline them in detail. What are the costs? Advantages? Disadvantages? If they were so great, where are they? Where are the supporters?
JasonU Wrote: ------------------------------------------------------- > > this is the biggest problem with her argument. The > commading heights of our economy are financial > services. We don’t make anything. All we want to > do is give people advice… except our school > system is terrible and the rest of the world is > (deservedly) getting educated at our best > universities. What do we make anymore that we will > ever be able to pay back this kind of national > debt? Ideas have always moved the world, not the products or raw materials needed to implement them. IMO that is why so many people want to get to the US, because it is a place where they can turn their ideas into reality. At the very least you actually have a chance to do so in the US as opposed to some other parts of the world. I do agree that the rest of the world is catching up. Which is a good thing.
spierce Wrote: ------------------------------------------------------- > JoeyDVivre Wrote: > -------------------------------------------------- > ----- > > uh,… “Within hours of the Treasury > announcement > > Friday, economists had proposed preferable > > alternatives.”… > > > I haven’t seen them outline them in detail. What > are the costs? Advantages? Disadvantages? > > If they were so great, where are they? Where are > the supporters? Check out this NY Times article for some alternatives… http://www.nytimes.com/2008/09/23/business/23skeptics.html?ref=business
dcallocchia0322 Wrote: ------------------------------------------------------- > spierce Wrote: > -------------------------------------------------- > ----- > > JoeyDVivre Wrote: > > > -------------------------------------------------- > > > ----- > > > uh,… “Within hours of the Treasury > > announcement > > > Friday, economists had proposed preferable > > > alternatives.”… > > > > > > I haven’t seen them outline them in detail. > What > > are the costs? Advantages? Disadvantages? > > > > If they were so great, where are they? Where > are > > the supporters? > > > Check out this NY Times article for some > alternatives… > > http://www.nytimes.com/2008/09/23/business/23skept > ics.html?ref=business Those aren’t alternatives, they are just different versions of the same plan. They really only differ in two ways. One, getting “even” with the executives, by firing them or monetary restitution. The other way is extracting a “pound of flesh”, by getting equity. Personally, I’ve got no problem with either and would love to see both included.
I don’t have a comprehensive alternative, but I have some suggestions: a) The country probably needs some sacrificial lambs to make this more palatable. I don’t care about this. It doesn’t matter and it’s getting in the way of solving things. Appoint some panel, try a bunch of people, send a few to country club prisons. In most of the rest of the world at most of the other times in history, people have been better at this than we are. b) Any solution that has gov’t buying impossible to value securities doesn’t work. There is no way to make this work. Ultimately, those securities have cash flows and valuation isn’t an issue if they can be held until maturity. Any good plan involves the govt holding the securities and doing accounting not valuation. c) A decent solution needs to address all areas of the problem. One of the problems these security holders have is that the collateral is not really something they can do anything about. Ultimately, the source for the losses is underperforming assets, e.g., home equity loans. People who took out these loans should suffer disproportionately to their share of taxes for the problem. Foreclosure, bankruptcy, liens, etc. are tied into a mass of state laws and local courts that are cumbersome and only mildly attached to the securities. Let’s fix that with some federal jurisdiction and much tighter rules on defaulting on your loan payments. I’m into taking stuff that would normally be off-limits including retirement funds, social security payments, assets protected by state bankruptcy laws. d) Include more layers in the villains. A bank or mortgage broker that originated “liar loans” that defaulted is now scot-free. Throw RICO at them or something, threaten them, make them pay. Anybody involved in this process has more culpability and should bear more responsibility for paying. e) Figure out what is needed to fix securities and do that. How much of this collateral could be fixed with refinancing plans that won’t work because the people who need the refinancing can’t get it because of credit reasons? On one side we have creditors of the big banks (other big banks) and on the other we have a bunch of debt that needs restructuring. There are too many layers in between these people to do it well, but it surely needs to be done. If we can do something like create jobs in disproportionately troublesome areas, this might be a decent plan too. If taxpayers are bailing out someone because you didn’t pay your HELOC, you need to spend some time cleaning up trash by the highway trying to make good. In the meantime, you get a wage that goes to pay down the debt. Sorry to interfere with your Saturday cook-out plans, bud. f) Wipe out equity holders I can’t believe anybody thinks equity holders should be protected. WTF do people think equity is? g) Let counterparty risk come home to roost Wipe out more equity holders in people who lent money. WTF do people think equity is? h) Coordinate three branches of govt Nobody told Paulson about the checks and balances of the three branches of gov’t. He seems to be working with the legislature now because he has to, but he is doing his darnedest to keep judges out of the picture (LEH is an exception but he never liked those guys anyway). Appointing the guy who was supposed to be doing something aboutthis before it became an emergency to fix the problem is silly. Some of this needs to be handled by judges who are supposed to be learned in law and equity. i) Forget about contagion arguments Ben is really into this, but he is not as smart as he thinks he is. The contagion from unintended consequences can be every bit as bad. Using time-tested procedures for solving problems, even if they aren’t optimal, is almost always better than newly conceived solutions. Nobody can imagine the consequences from the enormous market disruption of the gov’t diving in with $700B (which incidentally always grows by the same arguments that they are using now when $700B is not sufficient. For example, every military project in the last 20 years comes out at least 20% over-budget). Chapter 11 has resolved lots of problems peacefully in the US. None of that is particularly sound bite stuff and the exact details would probably run into the thousands of pages (which of course won’t stop people from complaining that I have inadequately laid out the plan). I think that a plan based on stuff like above is no more likely to cause serious economic problems than the P&B plan and it sure seems a lot more like fair to me.
THis is an excellent plan. i am on board.
Looks good, ship it.
Sounds good to me.
JoeyDVivre Wrote: ------------------------------------------------------- > I don’t have a comprehensive alternative, but I > have some suggestions: > > a) The country probably needs some sacrificial > lambs to make this more palatable. > yes, this is necessary for catharsis. jail, jail, jail > b) Any solution that has gov’t buying impossible > to value securities doesn’t work. > there may be ways to buy at marked to model prices, with clawbacks against bondholders for contingencies. why did i not suggest against equity? - ha ha ha - good one - equity, what equity??! > c) A decent solution needs to address all areas of > the problem. > homeowners who bought in 2004-2008 with less than 20% down should not be bailed out. suffer the consequences of your choices. i rented, moved, so could you. you wanted the mortgage deduction - and got it. i got no rental deduction, i paid my taxes in full. > > d) Include more layers in the villains. > heads, heads, heads, yes, we want heads. we want a pile of heads as tall as the biggest home financed fraudulently in each town. [sharpens the sword in preparation…] > > e) Figure out what is needed to fix securities and > do that. > too complex for my little brain to wrap itself around, but you may have a point > > f) Wipe out equity holders > this one is such an obvious gimme, i think we should try reps, senators, hank and ben for lunacy for missing it. > > g) Let counterparty risk come home to roost > ditto > > h) Coordinate three branches of govt > i agree here about the judiciary - tremendous disrespect for them. seeing the lehman judge basically get arm twisted into signing orders was painful. it was a fait accompli. > > i) Forget about contagion arguments > hank and ben pee and poo like all of us. so does the queen. they are humans, and i think joey may actually be smarter than them in many areas. i say we take them off the pedestal, see them in all their endearing human vulnerability, and tell them to shut up when they aren’t adding value. their self-important chicken little stuff is really starting to get on my nerves.
Bump. I’m presenting my partial bailout plan again in case the Prez wants to call me.