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A Different Kind of Rescue

Along with millions of other Americans, I am outraged at the Bush administration bailout of Corporate America. They lied to get us into the war in Iraq and now they are lying so that they can help their friends, who have already picked our pockets empty.

There have been some comparisons between this bailout and the Resolution Trust Corporation, from the 1980s, which cleaned up the damage from the savings and loan debacle. Friends, there is no comparison. The government had no choice but to deal with the fallout from that fiasco because the government guaranteed, through the Federal Deposit Insurance Corporation, those savings and loan institutions that failed. The current crop of crooks are not insured by the Federal Government (us).

It is incredible that Morgan Stanley and Goldman Sachs requested, and were granted, near instantaneous approval to become bank holding companies. Great, now that they took enormous risks and are in dire financial straits, they can open commercial banks to take deposits from the unsuspecting public to make good on their poor judgement?

Here are a couple of ideas that I’ve gleaned from the web that sound to me much more palatable than what the Bush administration is touting as the solution:

1. Force all banks to cancel their dividends and use those monies to build up their capital – capital that is being used to pay for their mistakes.

2. Force all banks in sound financial condition to issue new equity to bolster their capital reserves.

3. Buy equity stakes in the banks.

All three of these steps would, because it involves the coercive power of the State, have to be followed by the financial institutions involved. There would be no reason to be concerned about “appearances” of being weak. So sorry about the dilution of shareholder equity.

For us, as taxpayers, to take on the toxic debt that these geniuses created (and can’t determine the value of) is so wrong that words fail me. Isn’t one of the foundation stones of the Republican Party the concept of personal responsibility? When a government official sits down with a bank executive with a bonus at stake to discuss whether or not the government should buy that banks’ debt, who do you think is going to come out the winner?

For a rather lengthy analysis of this crisis, I highly recommend Nouriel Roubini’s RGE Monitor site. A basic subscription is free.

A concise description of the incompetence of the Bush administration’s plan is here.

To think that an utterly incompetent administration would come up with a competent plan to solve this financial crisis is incomprehensible. The Glass-Steagall Act was passed in 1933 to avoid just this scenario and now, since it was repealed in 1999, look what we have.

Yogi Berra, where are you when we need you?

1 Comment on “A Different Kind of Rescue”

  1. #1 colleen
    on Sep 23rd, 2008 at 6:02 pm

    This is what less government gets us. A free for all always falls in the end … on the backs of the working men and women.

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