I wrote this letter to Paul LaMonica in response to his article at CNNMoney.com titled This isn't just a Wall Street Bailout.
I have grown steadily weary of the calls to suck it up and just let the greedy corrupt bastards in Congress and the financial markets dictate how this bailout is going to be run. And after revelations that even the minimal oversight in this bill is an absolute farce, I've had it.
Let them burn. Read my full letter to Paul below the break. The block quotes are bits I've added specifically for this diary.
**UPDATE**
From below:
I definitely understand the perspective of those nearing retirement or in retirement, but what's better. React out of fear and give these people everything they want, the very people who made the mess we're in, or take a step back and actually implement bits that will keep this from happening again?
My mother is 10 years from retirement. My father is a little closer. My aunts and uncles are all 49-56. My grandmother is 78 and in retirement while my grandfather passed away years ago.
I definitely have a lot of pain and empathy for those nearing retirement or in retirement. But we can't be willing to sacrifice the future stability of our market in the fear of today.
Remember the Patriot Act. Remember Warrant-less Wire Tapping. Both, and more, passed out of fear and paralysis.
And we've regretted it ever since.
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Greetings Paul,
I read your article, http://money.cnn.com/..., and understand completely what you're saying. What you and others who are crying about this don't seem to understand, however, is that many of us who DESPISE this bailout bill don't like the fact that the protections for tax payers, as well as regulations against this kind of behavior, are currently a joke (http://www.nakedcapitalism.com/...).
Here are the notes promised. Calculated Risk had put up the conference call number. so some of this is the listener's notes, some are hoisted from CR. They are admittedly skeletal at points, but track and enhance the live blogging report at DealBreaker. You can download a torrent for the call here, which I intend to do post haste and will amend the post accordingly. I've included the long form notes below, but some items jump out:
- The tranching is a mere formality, and the Treasury boys as much as said so. They could take the $700 billion max as soon as the bill has passed,
- However, they do not plan any action immediately, will wait a couple of weeks. They want to focus their efforts on stronger companies but also made noise about protecting the financial system. This, by the way, is the Japanese convoy system all over.
- There seemed to be a lot of tap dancing about what price they will pay for assets and no straight answer about their policy on warrants. They did say that if the amount sold was greater than $100 million, they would take warrants. FYI, the current draft allows them to pay up to the price at which the assets were initially booked (yikes) . I wonder if this is obfuscation, if they have an idea of what the plan to do but will not admit it in any public forum.
- As the person who listened to the call stressed, DealBreaker wasn't clear on the bifurcated process. If you come to the Treasury and you are in trouble, you get reamed. Bear/AIG style treatment, execs probably fired. But if you participate on a voluntary basis, the intent is to make it very user friendly. That is consistent with Paulson's position during the negotiations.
- The exec comp provisions sound like a joke, They DO NOT affect existing contracts, they affect only contracts entered into during the two years of the authority of this program and then affect only golden parachutes. More detail on that point, but I don't need more detail to get the drift of the gist.
Where is the below-market pricing for tax payers? We know these mortgage-backed securities, credit default swaps, and other "exotic" trading vehicles are utter crap. Why should we pay market value for them now? Why not drop the offer price by, say, 50%? If these companies are in such bad shape, and the markets in such unfettered free fall, they'll fall over themselves just to get that kind of guaranteed return on their investment.
Where are the limits on executive pay (all of them, not just CEOs) for ALL types of compensation, combined? Let's say the limit is $500k. CEOs with a $500k salary will get no raises except to match inflation, and can't have any stocks, bonds, or options in the company. Drop their salary to $400k, and they'll be able get those extra kinds of compensation. Where is it I ask?
Where is the return of the Glass-Steagal Act, which was repealed by John McCain's top economic advisor Phil Gramm? (http://en.wikipedia.org/...)
Where is the reversal of the Fed's recent decision to allow investment banks to use the FDIC-insured SAVINGS of their customers to shore up their bottom line?? (http://www.ft.com/...)
The Federal Reserve said it was making it easier for financial institutions to access Fed liquidity by easing terms on its borrowing facilities and accepting a much wider range of assets as collateral. The Fed meets to decide on interest rates on Tuesday.
It widened the set of assets eligible as collateral for loans of Treasuries to include all investment grade paper, and raised the size of these Treasury loans to $200bn.
The Fed also suspended rules that prohibit banks from using deposits to fund their investment banking subsidiaries.
And where is the tacit realization and understanding that even with $700 billion of OUR money dumped into this quagmire, it may not even work?? (http://news.yahoo.com/...)
Under the current plan, the U.S. government will buy up to $700 billion in assets from private holders on Wall Street. That would help banks stabilize their balance sheets, and in theory provide an incentive for banks to begin extending credit among themselves again — a critical component of a functional financial system.
So what’s Plan B?
There really isn’t one.
As a disclaimer, I have a different perspective on all of this because my husband and I are looking at a retirement date 35-40 years out. So quite frankly I don't give two craps about this drop in the stock market in the long run. It just makes our 401k and 403b more valuable in the long run since they'll fill in with stocks, mutual funds, and ETFs that are significantly cheaper than they were even 3 weeks ago.
What I care about is making sure, while we have a literal gun to their heads, that these people pay badly for what they've done to themselves and to us.
Let me give you an example of the kind of greed we're talking about. Not too long after the congress agreed to bail out the banks a couple of weeks ago, the banks were bitching and moaning (http://www.latimes.com/...) that they were being forced to accept credit card consumer protections in the recently passed congressional bill, HR 5244. Seriously.
These people with their hands out are simultaneously complaining about being regulated to protect consumers, the very people they screwed over in the first place?? The unmitigated GALL!
ABA STATEMENT ON HOUSE PASSAGE OF H.R. 5244
by Edward L. Yingling, president and CEO, American Bankers Association
"The American Bankers Association is very disappointed by the action today of the House of Representatives. The so-called "Credit Cardholders’ Bill of Rights" (H.R. 5244), while well-intentioned, will increase the cost of credit for consumers and small businesses across the country, result in less access to credit for consumers and businesses alike, and may further roil the securities markets – all at a time when our economy can least afford it.
"Legislation resulting in higher prices to consumers makes little sense at any time, let alone when global markets face the degree of turmoil that confronts them today. By limiting their ability to manage risk in making loans, this bill will force lenders to increase prices for everyone to compensate for that added risk. That’s unfair.
"Sometimes things that appear attractive on the surface often come with too high a price tag. Increasing prices for consumers, reducing low-cost credit alternatives for small businesses, and causing more ripples in the securitization market make little sense."
So if I may be so bold as to quote a movie, Oh yes, there will be blood. For their transgressions I want not a pound of flesh, but ten pounds. Maybe more by the time this is all said and done.
We deserve nothing less as tax payers who will have to bail those greedy corrupt bastards out.