The Financial Crisis and McCain’s Response
Just because the Bush Administration has a track record of demanding that Congress immediately pass legislation, which they define as vital to the national interest, and which turned into fiascoes for the American Public, such as going to war in Iraq, establishing the Homeland Security Department, and the Patriot Act, does not mean that their latest push to pass a $700 billion bailout plan is wrong. But it ought to give everyone pause. Robert Reich described the bad assets that the Paulsen/Bush proposal wants purchased by Treasury as creating a Yucca Mountain of bad debt to house the financial toxic waste in Washington, DC. Even congressional Republicans are balking.
The most egregious part of the plan is that it is the only proposal. Maybe it is the best solution, but there is no discussion of alternatives and their good and bad aspects, nor any reasons presented that led the administration to this particular recommendation. It just smacks of one more handout to the people who got Bush elected. First a tax decrease that greatly benefited the richest people in the country, quite a few of them on Wall Street; then an unnecessary war that filled the coffers of big business; and now a massive handout from US taxpayers to the people who caused this problem in the first place.
The alternative solutions that are being proposed sound a lot better than the handout.
1. The AIG model seems like it is worth considering – a government loan that has to be paid off within two years with an 11% interest rate and an 80% equity stake in a very successful insurance business.
2. Instead of taking over the bad assets owned by banks, trying to figure out what no one seems able to do – assess their true value – leave them in the banks and let the banks figure out how best to manage them. This way Treasury doesn’t have to hire ten thousand asset managers to figure out what to do. The banks get a loan to get past the crisis and the government gets stock warrants that will pay back some or the entire loan assuming the economy ever recovers.
3. Spend the $700 billion on the people who took out mortgages (that they shouldn’t have) to help them pay off their obligations in an orderly fashion, which will stop foreclosures from hurting the economy and free the banks to offer credit again.
These may or may not be better than the proposed solution, but they need to be considered and thought through thoroughly before a hasty decision is made to put this country even deeper in debt then it is now.
The latest poll from the Washington Post/ABC has Obama moving into the lead on the heels of the depressing economic news and the Republican advantage following their convention fading, with Palin’s negatives rising. John McCain must be feeling desperate as he has just announced that he wants to postpone Friday’s first Presidential debate so he can ‘concentrate’ on the financial crisis. He knows the economy is hurting his chances and does not want to be placed on the defensive in a debate.
The mere mention of the current economic condition during the debate is going to be deleterious for McCain. I’m sure Obama has memorized all the McCain quotes about how the market should dictate everything and how regulation by government bureaucrats should be eliminated. The deregulation of the Bush years is a primary cause of the problems we are in, as deregulation in the Twenties was prior to the Great Depression, and deregulation in the Eighties was prior to the S&L Crisis, which was not one of John (one of the Keating Five) McCain’s shining hours.
Is he running for the Presidency, the Senate, or is he just running away as fast as he can? Right now he needs to participate in the debates and give the voting public some insight into his view of Presidential leadership and his qualifications for the job. But if instead he insists on playing politics with the election, maybe he should return to the Senate and send Sarah to substitute at the debate with Obama, sort of like a trial run if she ever had to assume the Presidency.
Whatever happened to John McCain, the American hero?
The most egregious part of the plan is that it is the only proposal. Maybe it is the best solution, but there is no discussion of alternatives and their good and bad aspects, nor any reasons presented that led the administration to this particular recommendation. It just smacks of one more handout to the people who got Bush elected. First a tax decrease that greatly benefited the richest people in the country, quite a few of them on Wall Street; then an unnecessary war that filled the coffers of big business; and now a massive handout from US taxpayers to the people who caused this problem in the first place.
The alternative solutions that are being proposed sound a lot better than the handout.
1. The AIG model seems like it is worth considering – a government loan that has to be paid off within two years with an 11% interest rate and an 80% equity stake in a very successful insurance business.
2. Instead of taking over the bad assets owned by banks, trying to figure out what no one seems able to do – assess their true value – leave them in the banks and let the banks figure out how best to manage them. This way Treasury doesn’t have to hire ten thousand asset managers to figure out what to do. The banks get a loan to get past the crisis and the government gets stock warrants that will pay back some or the entire loan assuming the economy ever recovers.
3. Spend the $700 billion on the people who took out mortgages (that they shouldn’t have) to help them pay off their obligations in an orderly fashion, which will stop foreclosures from hurting the economy and free the banks to offer credit again.
These may or may not be better than the proposed solution, but they need to be considered and thought through thoroughly before a hasty decision is made to put this country even deeper in debt then it is now.
The latest poll from the Washington Post/ABC has Obama moving into the lead on the heels of the depressing economic news and the Republican advantage following their convention fading, with Palin’s negatives rising. John McCain must be feeling desperate as he has just announced that he wants to postpone Friday’s first Presidential debate so he can ‘concentrate’ on the financial crisis. He knows the economy is hurting his chances and does not want to be placed on the defensive in a debate.
The mere mention of the current economic condition during the debate is going to be deleterious for McCain. I’m sure Obama has memorized all the McCain quotes about how the market should dictate everything and how regulation by government bureaucrats should be eliminated. The deregulation of the Bush years is a primary cause of the problems we are in, as deregulation in the Twenties was prior to the Great Depression, and deregulation in the Eighties was prior to the S&L Crisis, which was not one of John (one of the Keating Five) McCain’s shining hours.
Is he running for the Presidency, the Senate, or is he just running away as fast as he can? Right now he needs to participate in the debates and give the voting public some insight into his view of Presidential leadership and his qualifications for the job. But if instead he insists on playing politics with the election, maybe he should return to the Senate and send Sarah to substitute at the debate with Obama, sort of like a trial run if she ever had to assume the Presidency.
Whatever happened to John McCain, the American hero?
posted by John Weiss at 8:29 PM
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