Posts filed under “Bailouts”
This was a full page advert in today’s New York Times, paid for by Bill Perkins
UPDATE: September 24, 2008 9:44am
The WSJ picked up the advert in this morning’s paper:
The president has run into a wall of skepticism over his plan.
Troubled voters are calling their congressmen. Academic economists are
churning out sound bites. Democratic lawmakers are demanding that the
plan include perks for the working classes, while Republicans are
saying the plan interferes with the invisible hand of the free market.
But the 39-year-old Mr. Perkins is putting cash behind his anger. He
commissioned an African-American arts collective to draw a cartoon
depicting Mr. Bush, Treasury Secretary Henry Paulson and Federal
Reserve Board Chairman Ben Bernanke trampling on the graves of private
enterprise and capitalism. Then he paid $139,104 to run the drawing as
a full-page ad in the Tuesday editions of the New York Times. And he
promises to spend a million more on ads before he is done.
“I see it as trickle-down communism,” Mr. Perkins said. “We have a
communist action where everybody is paying for the benefit of the few
and hoping the benefits will trickle down to everyone else.”
Trader Makes a Quick $1.25 Million on Rescue, Then Slams It
MICHAEL M. PHILLIPS
WSJ, SEPTEMBER 24, 2008
All of the bad loans made by various banks and mortgage underwriters are now being accepted by the Fed, or are potentially going to be bought by the Treasury Department. Why not us? We can’t we all turn in our crappy paper, stock in Exodus Communications or Pets.Com, and even old lawn furniture to the…Read More
A Modest Proposal: The housing crisis worsened over the summer of 2008, prompting Congress to debate various bailout proposals. But the housing market worsened, raising the default rate on mortgages. The entire inverted pyramid of derivatives built on top of the mortgage market further worsened, adding yet more pressure to the credit crisis. The bankruptcy of Lehman Brothers and the nationalization of AIG were the results.
The response to this financial crisis from the Treasury Secretary Hank Paulson borders on Insanity: An outrageous trillion dollar plus bailout, with the potential for unlimited expenditures at the behest of the Treasury Secretary. It is a terribly expensive plan, one that prevents judicial or administrative or budgetary review. It is fraught with moral hazard, rewarding bad judgment and excessive risk taking. It punishes the prudent and rewards the profligate.It focuses on all the wrong issues.
Worst of all, it is unlikely to work.
Most of the current solutions under discussion amount to throwing obscene amounts of money at the problem, rather than recognizing what the key issues are.
These approaches have several fundamental problems. The goals are less than desirable: 1) they attempt to keep people in homes they cannot afford; 2) The Paulson plan takes bad loans off of the books of poor lenders, and dumps them onto taxpayers; 3) They maintain price supports for homes that remain significantly over-priced.
At the heart of the
$700 billion dollar unlimited finance Paulson bailout is the desire to move weak performing or poorly made loans off of the books of the lenders who made them and onto the taxpayers back (likely via the FHA). To understand the folly of the this housing bailout, one must grasp the magnitude of the prior housing boom, as well as the historical norms that exists in the American housing market.
The current proposal moves bad mortgages from the irresponsible lenders to the innocent. It punishes every taxpayer who was prudent, and every homeowner that behaved in a responsible manner. It eliminates the sanctity of contracts, and allows judges to “cram down” mortgages.
These may be desperate times, but they do not call for ill thought out, desperate measures. Rather than merely criticize the
$700 billion dollar unlimited finance Paulson plan, I would instead like to propose an alternative approach, one that costs much, much less, and is more likely to be effective: The 30/20/10 Proposal.
A MODEST PROPOSAL: A MORE REASONABLE WORKOUT FOR LENDERS AND BORROWERS THAN THE TAXPAYER FUNDED BAILOUT . . .