13 years ago
Bailout vote: Is this alternative superior in its fairness? ?
ECONOMIC RESCUE ALTERNATIVE PLAN
September 29, 2008
We believe that policymakers must act decisively and correctly.
We believe that we can help Wall Street “workout” of this crisis, not force the taxpayers into a “bailout.”
We believe that voluntary private capital, not involuntary taxpayer capital, will help the system recover.
A Work-Out—Not a Bail-Out
Stabilizing Financial Markets: Require the Treasury Department to guarantee losses up to 100%, resulting from the failure of timely payment and interest from mortgage-backed securities (MBS) originated prior to the date of enactment.
Such insurance would provide immediate value to the MBS and a foundation for which they could then be sold.
Risk-Based Premiums: Direct the Treasury Department to assess a premium on outstanding MBS to finance this insurance. Participation in the program would be mandatory for all holders of such MBS in order to guard against adverse selection where only the holders of troubled assets participate.
A risk-based premium would be assessed on those with troubled MBS. The premium would expire when the Treasury Secretary determines the fund has sufficient resources to meet any projected losses.
Private-Capital Off the Sidelines by Empowering Private Investors
Net Operating Losses: Allow companies to carry-back losses arising in tax years ending in 2007, 2008, or 2009 back 5 years, generating a tax refund and immediate capital.
Despite the presence of willing buyers, many firms with MBS are not willing to sell at such a huge loss. Such a carry-back provides a cushion for any such loss, making firms more willing sellers.
Repatriation Infusion: Allow a repatriation window for profits earned by U.S. firms overseas. Such repatriation amounts would be taxed at 0% if invested in distressed debt (as defined by Treasury) for at least one year.
Bank Losses on GSE Stock: Allow banks to treat losses on shares of preferred stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital losses.
Two-Year Suspension of the Capital Gains: Immediately suspend the capital gains rate from 15% for individuals and 35% for corporations. By encouraging corporations to sell unwanted assets, this provision would unleash funds and materials with which to create jobs and grow the economy.
After the two-year suspension, capital gains rates would return to present levels but assets would be indexed permanently for any inflationary gains.
13 years ago
It certainly sounds more reasonable than just chucking good money after bad, and into the pockets of people who already stuffed their nests from their failing companies.
I like Dave Ramsey's better
a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.
b. In order for a company to accept the government-backed insurance, they must do two things:
1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives.
2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.
c. This backstop will cost less than $50 billion—a small fraction of the current proposal.
II. MARK TO MARKET
a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.
b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.
III. CAPITAL GAINS TAX
a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.
b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.
But this could be worse.
5 years ago
The way things are looking right now Obama will be president weather you like it or not. It doesn't look like the vp debate did any justice for McCain. Anything can happen between now and election day. As far as the bailout goes I'm with you on that one.
13 years ago
Most of these people that want the bailout are crooks, would rather go through a little pain for a while and keep the money. besides there is no guarantee that this plan will work either.
13 years ago
Sounds fine, but it won't happen. Plus, it focuses more on punishment than on fixing the problem. I don't see how this proposal would unfreeze the credit markets, for instance.
13 years ago
Its a hell of a lot better than what is proposed now.