Because he wouldn't be able to post a diary for another week, and by then it will be too late.
Dear Senator Christopher Dodd,
I understand you are going to be working all this weekend on developing a Federal bailout of our financial institutions from the bad debts they have incurred. I understand that this debt may total as much as one trillion dollars, or more. This is an extraordinary addition to our nation’s overall debt. I can understand that you and our other leaders would hopefully never endeavor just a costly expenditure at taxpayer expense without being convinced that it is necessary to avoid even more negative outcomes. That being said, I firmly believe we taxpayers are due some return in our investment of bailing out these private profit-making corporations who are benefiting from our largess. Here are the benefits and reforms I believe should be considered as necessary to allow this bailout.
- Certain forms of speculative trading, such as short selling, should be banned from the market. The purpose of the equities market was originally to raise capital for production, not to provide a casino for money managers and independent speculators whose actions create unnecessary volatility and contribute nothing to production.
- Financial instruments, such as collateralized debt obligations, must be approved for trading by an independent Federal commission before being permitted to be marketed by any U.S. financial institution. This commission will judge the positive and negative potentials of such instruments upon the larger market as a whole, and will determine how these instruments are to be rated for risk, etc. Failure to get commission approval of a financial instrument or scheme would result in serious criminal punishment.
- Insurance companies doing business in insuring financial instruments, including bonds, must answer to a Federal regulatory board that will check its capital ability to safely insure these instruments.
- Corporate officers who have contributed to this debacle, especially those who have run their companies into the ground and now seek taxpayer relief, should have their private assets seized, with the money being returned to the Treasury to help defray the costs of this bailout. Furthermore, in the future, golden parachutes for failing corporate leaders will be banned.
- A central clearinghouse will be established to register more arcane financial dealings such as credit default swaps, providing more transparency to the market, and allowing for closer supervision and regulation of these markets.
- The future corporate profits of the financial sector, especially the investment and mortgage brokering sectors, should be taxed temporarily at a higher rate to help defray the costs of this debacle.
These are just my current ideas on what the taxpayer should receive in return for bailing out private, profit-making corporations. These are not punitive measures. Rather, they are an attempt to insure against a future raid on our Treasury by careless and greedy executives. The U.S. government has failed us by not having these reasonable safeguards in place before this disaster. In fact, it is even more culpable, considering that the government had recently eliminated many regulations that might have prevented this catastrophe. This list is by no means exhaustive, and I am sure others far more knowledgeable about economics could offer more suggestions. I am by no means a financial guru; rather I am merely an informed citizen who works for a living in a profession far a field of finance and economics.
My only hope is that in your haste to right the ship of finance, you do not make a promise to bail out these corporations without also doing all you can to guarantee that this does not happen again. Toward this end, I will be sending these comments to other officials, such as Representative Barney Frank, Mr. Paulson, and the White House, as well as sharing it with the rest of the nation and the world on the Internet.
Sincerely,
Dr. Joseph Brown
