Paulson has declared himself king of America and the majority of media hasn’t had the nerve to tell him he’s been part of the problem and isn’t trusted to be part of the solution. Essentially he and the Republicans have declared martial law. Hank expects us to trust him to deal fairly with his buddies without any oversight or advice. What’s next? Will he decide the economic crisis is to volatile to allow national elections?
The facts show that the problem was caused by allowing the market to operate without regulation. So logically, Paulson’s solution is to allow him to make thing right by not regulating his actions. Only in Alice’s Wonderland would anyone suggest such an idea.
So where do we go from there to an efficient and fair policy to deal with the volatile value of mortgages. First of all, let’s limit the scope of the fix. The New York Times has already detailed the numerous wolves trying to attend the feast. From vendors that want the billions in fees to arrange the buyouts to the various financial markets who want their products available for government money. Imagine an arsonist who was paid to burn your house to the ground getting paid by the insurance company to salvage the damaged goods. Step one. Make this only about mortgage loans. Nothing more. No derivatives or futures. We know that if the administration wants $700B, the true cost will probably reach $1T. By limiting the scope we will be less likely to see cost overruns.
Make certain that oversight is accomplished by a majority of non politicians. Let’s include 1 Republican, 1 Democrat and 3 others. The other three will have to be agreed upon by both parties. Guys like Buffett would do nicely.
Finally, and most importantly, drop the word bailout. Change it to loan. All of us know that when we go to the market for money, it’s always expected we will repay the loan. Whether that is in the shape of ownership or preferred stock, we must insist on being made even. Make certain that bankruptcy won’t avoid repayment. Insist that executives pledge their company stock and pension guarantees to insure the debt is repaid. Bottom line. This isn’t a bailout. It’s a loan. Limit executive compensation until the loan is repaid. We’ll be told that’s unfair by some. Tell them to go somewhere else for a loan then.
This is a defining period for America. We must adhere to the American principals that business understands. There is no free ride. Take it or leave it.