I, like 70 plus percent of Americans, have one thing to say to Congress.
No bailout. No way, no how, for no darn reason.
In case you’ve been hiding under a rock — either because you’re scared of high gas prices or you’re like Diana West and scared of the terrorists hiding under your bed — Congress is debating whether or not to bailout Wall Street companies and banks due to their financial irresponsibility, primarily caused by the complete mismanagement of the mortgage industry. The main proposal suggests a bail out to the tune of $700 billion. Like the prescription drug program, it will probably cost much, much more.
President Bush, completely ignoring the wishes of the majority of Americans (haven’t we said that before?), is pushing Congress to save the financial industry. The same financial industry that racked up billions and billions of dollars in profits over the last few years. The same financial industry that paid out millions in commissions to their employees. The same financial industry that made horrible decisions based upon the idea that real estate prices would never fall.
Let me simplify the White House’s proposal. They want to buy $700 billion worth of “troubled assets” from these financial companies, primarily mortgage-backed securities (MBS), at face value, a.k.a. at the original price. The problem here is that these MBS are no longer worth anywhere near what the banks originally paid for them.
An apt comparison is the government buying a five-year-old used car for the original sticker price. While that might be great for the car owner (think wealthy stockholders), now the government will own assets worth 25 to 30 percent of the original price. Possibly less.
Oh yeah, the government will pay for these assets by printing more money. (I wish I could do that)
Allowing Congress to bailout these companies will have disastrous ramifications for the entire U.S. economy and it’s the American taxpayer who’ll take it square on the chin. We’ll pay the difference in value out of our pockets via taxes, see the value of the dollar fall, see our purchasing power reduced and see the U.S. debt jump by 5 to 10 percent — all in one fell swoop.
For my money (and yours) I say it’s time to let ‘em fail. It’s time to abandon the idea that no company is “too big to fail.” It’s time to reinforce the idea of bad consequences for bad decisions.
I don’t understand the philosophy of funding a crumbling enterprise by giving money to people who have mismanaged a business into the tank. If you mismanaged your small business, you think the government would bail you out? Nope. I say equal treatment.
When the government bails out a failing enterprise they throw good money after bad. Do you give a drunk another drink? Do you give an addict another needle? Do you give someone with a repossessed car another car loan? NO! Then why give more money (tax dollars) to bad managers of money?
Want an idea of how clueless our “financial leadership” is? Last weekend, Treasury Secretary Henry Paulson gathered 10 large financial institutions together to find a way to salvage Lehman Brothers. He wanted $7 billion from each institution to create a $70 billion bailout. Merrill Lynch was one of those at the table. Yes, the same Merrill Lynch bought for $50 billion by Bank of America at $29 per share, way less than its 2007 price of $98 per share.
Where the dickens did Paulson think Merrill Lynch was going to get $7 billion? Just how oblivious is this guy? Do we really want him to be the architect of the economy’s rescue? I don’t.
By the way, Merrill Lynch’s future has been uncertain for months now and, according to the Wall Street Journal, was an acquisition target as far back as October 2007. Oy vey.
Tom Petty’s sums up my feeling for the Fed, Paulson and the president’s plan in his song “Yer So Bad.”
“But not me, baby/I’ve got you to save me/Aw, yer so bad/Best thing I’ve ever had/In a world gone mad/Yer so bad.”
No company is too big to fail.
Phil Boyum thinks Ron Paul should be Secretary of the Treasury. (Enough eye-rolling already) If you read Paul’s predictions of the current situation, you’ll find they’re Nostradamus-like. Phil may be reached at (912) 489-9454 or by e-mail at pboyum@statesboro-