my bailout proposal:

[unblock]

step one: authorize no more than $100 billion to bernanke/paulson to buy up subprime mortages along the lines of what they proposed. i don't like their scheme, but this buys time to turn the vague proposal into something that looks like proper legislation.

step two: immediately freeze upward rate resets for those at risk of default on their mortgages.

step three: draft legislation authorizing the remaining $600 billion, but with significant restrictions about how it is to be spent, along with several other features:

a) establish a "too big to fail" bailout fund, paid for through a surtax on any company deemed too big or too significant to fail. companies can avoid the tax by splitting up if they wish. the fund would be used to bail out companies who have been on the too big to fail list for a least a year. bailouts would not be forthcoming to those not on the list.

b) establish federal regulations, with teeth, to ensure that mortgages are not deceptively marketed to home buyers or to banks or to funds.

c) greater financial disclosure of all financial companies, including hedge funds, pension funds, and trading companies, as well as greater financial disclosure of all public companies' financial holdings (e.g., oil companies' futures trading activities)

d) provide that the remaining $600 billion be used only to purchase subprime mortages, and that, for any subprime mortgage steps be taken to help borderline homeowners to stay in their homes, via limited interest rate reductions and/or principal forgiveness. this is not if foreclosure is rather likely or rather unlikely regardless, this is only in cases where it is likely to make the difference between foreclosure and not.

e) recoveries from the fund (regular mortgage payments and foreclosure proceeds) go to pay down the national debt.

f) all the restrictions apply to the original $100 billion and whatever was bought up with it as well.

g) establish that how the money is spent IS subject to oversight and court review.


i'm sure there are a few other appropriate criteria to add, but it's a start.

[lostnotforgotten]

1. Part A - Have The Company Pay Back Its Debt Via Profits In Perpetuity!

Better yet, have all of the defaulting companies put their profits into a pool that pays back the debt in perpetuity.

In perpetuity - how long it will take these thieves to pay back their debt!

[unblock]

2. the "too big to fail" fund and corresponding surtax is like that

the difference being my idea is forward looking. this won't be the last bailout, and it's hard to get money from companies that have screwed things up already. the idea is to get the money from them when they're making money, so that when they get bailed out later, it's with money from their previous profits, not from the general treasury.

having said that, if we designate any company getting a bailout as a "too big to fail" company, then my proposal starts imposing the surtax immediately.

remember, there's plenty of capital out there. the companies need clarity and certainty as to subprime mortgage and mortgage instrument holdings in order to regain mutual trust. this means they can afford to pay the surtax provided they get that clarity and certainty.

[CitizenPatriot]

3. gee, I think that makes sense

You must not be in our government.

I am so outraged; this proposal makes SENSE. Why would they give more power to the very people who got us into this mess? No court review? Hello, what are you planning on doing that you believe would not be reviewed favorably?

Yeah, we're that stupid.

Yeah, I'm going to hand you unchecked and unlimited power because you clearly know what you are doing.

Oh, there aren't even words anymore.

I know we need a bail out; DUE to their malfeasance and failed policies. So, no, more of those policies is not what is called for.

[Frank Booth]

4. How about mandatory jail time for those responsible?

[unblock]

5. that's a toughie. it's hard to say who did anything actually illegal.

hugely stupid, sure. plenty of that to go around. but illegal?

well, some mortgage originators conspired with prospective homeowners to lie on their subprime mortgage applications. some of the originating banks may have been in on it as they in turn defrauded fnma/fhlmc.

it's possible that there was some fraud involved in the investment banks derivative creation, but i actually doubt that. they know how to cover themselves. the contracts are there for all parties to read, and the clients who buy are supposed to be sophisticated enough to know to read and/or have their lawyers read them.

i'm fine with jail time for anyone who commits actual fraud, but note that this would largely by closer to the originating side, i.e., the homeowners and people they worked with to get the mortgage in the first place.

[Frank Booth]

6. But wasn't it widely understood from the beginning that the mortgage-backed securities

were based on loans that were fraudulent? I guess then you ask who actually got defrauded since everyone knew it was a shell game to begin with, but I don't think the average person putting money in their 401k had any idea what was going on.

The originators and the people packaging the mortgage securities certainly knew though.

If there's no punishment, where's the disincentive to stop them from doing this all over again?

[unblock]

7. that's why there's some clamoring for regulation and oversight.

the need for the threat of prison is vastly reduced if there's suitable regulatory oversight.

the threat of prison time does a bit to deter bank heists, but security guards and cameras and effective locks do more.


simply banning "liar loans" would be a good example. simply require that you verify your income with actual documents. sure, a few people will commit fraud even there, but that number is vastly smaller than the ones who overstated income on the no-documentation mortgages.

[adamuu]

8. oh that step 1 is a good idea

it opens the valve and lets some steam out
which is really the point of it right?
and then if its not enough then we tie strings to the rest of it.

NO BLANK CHECK

[BlueIdaho]

9. I think you All should run Treasury

This thread makes one hell of a lot more sense than handing someone a TRILLION dollars - no strings attached.