The $700,000,000,000 Hot Potato

Congress is clearly does not understand how to handle the hot potato that the Bush Administration has handed them.  

 

  Currently this bailout is more than some of our Congressmen can understand.  This latest blow up is unbelievable.  The Republican plans to FDIC insure mortgage backed securities will only burden the taxpayer’s more.  I would expect Sen. Schumer to make such a ridiculous.  Good Grief…   

 

  I can understand how this bailout can be viewed as a panic remedy designed to prop up the crumbling mortgage market by buying up mountains of near-worthless paper currently poisoning America’s credit system while ignoring the root causes of the nation’s economic malaise.

 

  I have been watching Paulson speak about his plan and it seems that each Congressman is asking questions that position themselves politically and not questions that get to the meat of the plan.  Love or hate Bush once he made up his mind he did exactly what he said he was going to do.  Our Banking Committee needs to show some guts and let’s go one way or the other.

 

  The Paulson / Bernanke Bailout plan in my option is a very good plan.  We need to all understand that there is no way to make a perfect plan where no one will get hurt.  Some people are still going to get hurt on all sides. 

 

The plan is to buy up bad paper mortgage backed securities. 

 

  Yes in today’s financial market the subject paper looks like junk.  These securities do have some value and will be an asset.  The 700 billion is going to put liquidity back in the market which will help everyone.  It will help the banks with much needed available money.  It will help the real estate market to stabilize.  It will the people as loan programs will return and people that have short term loans will be able to refinance into other loan programs so they can stay in their homes.  These same securities will be later sold at a price higher that “zero”.  Ok that is a bit much but this paper will be worth much more than today. 

 

  The real value of the subject paper will only show itself once the real estate market and financial markets stabilize.  There is a potential for the Fed’s to profit on this investment in its own economy.  What seems to be getting lost on the news is that in order for the banks to get any of the 700 billion they have to sell off there securities at the reverse auction.  I am finding myself asking if the media understands what a reverse auction is.

 

  We clearly have too many lawyers and not enough business men.  If we had a balance between businessman and lawyers for all parties then there would at least be Capital Hill arguments that make sense.

 

  Congress should waste no time at all in repealing the ill-conceived Sarbanes-Oxley Act, which was allegedly designed to reform American business practices but instead drove scores of American firms abroad to foreign nations.

 

  Turn America’s economic engine loose and all by itself it will create the kind of prosperity that saw a rustic combination of 13 British colonies transformed into the wealthiest and most powerful nation in world history.

“We did it before,” as the World War II song boasted, “and we can do it again.”

 

 

Stay Tuned….

 

 

 

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