Sep 25 2008
The Rush to a Wall St. Bailout. Money… It can’t wait.
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I’ve been thinking of this “Bailout” over the past week. The Bailout can’t wait according to the Feds. I wish I could go to my bank and say “This loan can’t wait. I need it in 2 days.” It just doesn’t work that way for me. The bank has to do their dilligence and come up with a plan of action for my loan request. Do they give me the whole amount, do they give it to me in parts, how much interest, what collateral, and is the loan terms even legal that I’m asking for?
Well Money… It can’t wait. It reminds me of this great Pink Floyd song. Pay special attention to the words in the background.
The Feds need to think long and hard how they’re going to do this. Whether it is needed or not is an entirely different debate.
Possible Fed Bailout Choices & Scenarios:
- Do nothing and things get Bad. Potentially we have a cascade effect and we go into some depression-like state.
- Do nothing and things work themselves out eventually with some pain.
- Bailout – Ends up Expensive and alot of loans end up bad.
- Bailout – Ends up inexpensive - Costs little in the long run as the government resells the securities at a higher price and may even turn a profit.
The question as a leader is do you take the risk of 1? or take the chance that it might be expensive? Most will take option 1.
So the question comes down to how do you administer it and what will the terms be?
Personally I think:
- Government should get equity. If the companies want the Feds to foot the bill the Feds need some collateral and by collateral I don’t mean collaterized mortgage back securities.
- No Carte Blanche for the Treasury. Remove the line these 32 words that give unlimite power to the treasury: “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” Yes. They are trying to pull a fast one. Remove that language. We’re not idiots and don’t use fear.
- No Food for the Pigs. Establish the oversite and be dilligent. This thing is not going to be managed by the Treasury without some major Wall St. consulting. Some have estimated the consulting fees to approach a billion dollars annually to administer.
- Don’t be a Garbase Disposal. This should be focused on the securities that caused the problem. Don’t have the Fed buying unrelated portfolio’s. The Treasury is not a goat and should not be expected to digest everything the companies deem unpalatable.
- Time heals all wounds. After all the wound heals or you die, but one way or another it goes away. Don’t throw out artificial dates putting America in a panic to railroad this through written by Wall St. Stop throwing out language like “Must have a deal by the weekend.” Be reasonable and diligent and come up with a solid plan. American can wait for the RIGHT plan.
The rush in the proposed $700 billion bailout is a repete of the practices that led to our rush to war in Iraq and the adoption of the Patriot Act. No the economy is not going to seize up tomorrow. My mortgage lender has not called in my loan and my credit card still works. Last I checked my ATM still gave me money when asked of it. Stop being dramatic.
The fact is the media is focusing on the surface of the bailout, namely the amount. Noone is focusing on its lack of detail or absence of accountability. It is a blank check in its current form subject to be implemented however the Treasury chooses. The administration has scared the markets and some congressional leaders but they have not laid out a CLEAR & COHERANT plan. It is not compelling and it seems to me that the administration is going to blame the current economic slowdown on this one event. It is a convenient scapegoat even if caused by the administration over the past 8 years.
The $700 Billion Question
My last thought is this… How can this much money can be raised so quickly if the credit markets are seized up. Ask yourself.
That’s the $700 billion question.
1 Comments on this post
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The World's Worst Stock Picker said:
The politician’s are full of lies. They should be jailed.
September 26th, 2008 at 8:08 am
