Financial Crisis: Rewarding Financiers for Bad Behavior Concerning Investments

An email from Mike Huckabee concerning the Bush administration/congressional $700 billion bailout …

Frankly, I’m disappointed and disgusted with my own Republican party as I watch them attempt to strong-arm a bailout of some of America’s biggest corporations by asking the taxpayers to suck up the staggering results of the hubris, greed, and arrogance of those who sought to make a quick buck by throwing the dice. They lost, but want the rest of us to cover their bets so they won’t be effected in their lavish lifestyles as they figure out how to spend their tens of millions and in some cases, hundreds of millions in bonuses and compensation which was their reward for not only sinking their companies, but basically doing the same to the entire American economy.

It’s especially disconcerting to see the very people who pilloried me during the Presidential campaign for being a “populist” and not “understanding Wall Street” to now line up like thirsty dogs at the Washington, D. C. water dish, otherwise known as Congress, and plead for help. I thought these guys were the smartest people in America! I thought that taxpayers like you and I were similar to the people at the U. N. who have no translator speaking into their headset – that we just needed to trust those that I called the power bunch in the “Wall Street to Washington axis of power.” The idea of a government bailout in which we’d entrust $700 billion to one man without Congressional oversight or accountability is absurd. My party or not, that is insanity and I believe unconstitutional. … But may I suggest that letting “Uncle Sugar” step in and bail out the billionaires who made the mess will be far worse and will start a long line of companies and individuals who will demand the same of the government—which last time I checked means that they will be demanding it out of YOU and ME. This is not money that Congress is risking from THEIR pockets or future, but ours. Many if not most of us have already experienced lost value on our homes, retirement accounts, and pensions. Now they’d like for us to assume some further risks so they won’t have to. What happened to the “free market” idea? Is that only our view when we WIN and when we LOSE, we ask the government to come in and take away the pain? If you are a small business owner, is this the way it works at your place? When you have a bad month, a bad year, or face having to close, can you go up to Congress and get them to write YOU a fat check to take away your risk?
Some of what contributed to this disaster is too much government in the form of Sarbanes/Oxley. Some is due to the tax structure that created the hunger for companies to “game” the system. Some is the common sense that was ignored like loaning money to people who can’t pay it back. …
1. Eliminate ALL capital gains taxes and taxes on savings and dividends right now. Free up the capital and encourage investment. This is the kind of economic stimulus the Fair Tax would bring and if Congress is going to lose money, let them lose it with lower taxes, not with public dollar bailouts of private market mistakes.
2. Repeal Sarbanes/Oxley. It has failed. It was supposed to prevent this. It didn’t. Kill it.
3. Demand that the executives who steered their ships into the ground be forced to pay back the losses of their companies. Of course, they can’t, so let them work and give back to the government and they can live like the people they put on the streets or kept there. It makes no sense to put them in jail—that’s just more they will cost you and me. I’d rather them go out and earn money—just not get to keep so much of it this time. I’m not talking about limiting CEO salaries—just those of the people who now are up in Washington begging for help because they ruined their companies.
Attempts by Democrats and Republicans to blame each other is nonsense. They are both guilty and ought to own up and admit it. They all lived off big campaign contributions and the swill of the lobbyists who strong armed them into permission to steal. Enough of blame. Fix it! This would be a start. If we don’t hold these guys responsible, we are all finished.

Well said, Mr. Huckabee – the GOP should have backed you over McCain in the primaries, although my pick was Fred Thompson. However, although the GOP elite have been involved in the primary selections, it should be fairly noted that NOT ALL Republicans are for this disastrous expenditure of taxpayer funding. The following is a list of Republicans who are fighting against this ridiculous corporate welfare move (or is the government considering it a loan with paid interest?) …

Sen. Jim Bunning (R-KY)
Sen. Jim DeMint (R-SC)
Rep. Scott Garrett (R-NJ)
Rep. Darrell Issa (R-CA)
Rep. Marilyn Musgrave (R-CO)
Rep. Mike Pence (R-IN)
Rep. Dana Rohrabacher (R-CA)
Sen. Richard Shelby (R-AL)

Former House Speaker Newt Gingrich called the administration’s bailout “just wrong.”

William H. Gross, Washington Post writer, is a chief investment officer and founder of the investment management firm PIMCO, and writes in his article concerning the bailout and How Main Street Will Profit …

…Critics call this a bailout of Wall Street; in fact, it is anything but. I estimate the average price of distressed mortgages that pass from “troubled financial institutions” to the Treasury at auction will be 65 cents on the dollar, representing a loss of one-third of the original purchase price to the seller, and a prospective yield of 10 to 15 percent to the Treasury. Financed at 3 to 4 percent via the sale of Treasury bonds, the Treasury will therefore be in a position to earn a positive carry or yield spread of at least 7 to 8 percent. Calls for appropriate oversight of this auction process are more than justified. …
In effect, the Treasury will have the fate of the American taxpayer in its hands. The Resolution Trust Corp., created in the late 1980s to deal with the savings and loan crisis, dealt with previously purchased real estate, which was flushed into government hands with a “best efforts” future liquidation. …
he Treasury proposal will not be a bailout of Wall Street but a rescue of Main Street, as lending capacity and confidence is restored to our banks and the delicate balance between production and finance is given a chance to work its magic. Democratic Party earmarks mandating forbearance on home mortgage foreclosures will be critical as well. If this program is successful, however, it is obvious that the free market and Wild West capitalism of recent decades will be forever changed. Future economic textbooks are likely to teach that while capitalism is the most dynamic and productive system ever conceived, it is most efficient over the long term when there is another delicate balance — between private incentive and government oversight.

Senator McCain has been accused by the political opposition of following Bush policy, but this, once again is untrue. McCain has specifically not felt comfortable “giving too much power to Treasury Secretary Henry Paulson”, MSNBC …

Never before in the history of our nation has so much power and money been concentrated in the hands of one person. This arrangement makes me deeply uncomfortable,” McCain told an Irish-American group in Pennsylvania, a key battleground state. “We will not solve a problem caused by poor oversight with a plan that has no oversight. … McCain also called on Congress to move quickly and work with the administration to restore stability to the troubled financial sector. But he said the goal of any action must be to allow homeowners to stay in their homes and prevent Wall Street executives from profiting from a taxpayer bailout. … He also said that despite the ballooning national debt he would not raise taxes if elected president.
In Green Bay, Wisconsin, Obama sounded a number of populist themes, saying of the economic bailout, “we cannot give a blank check to Washington with no oversight and accountability when no oversight and accountability is what got us into this mess in the first place.” He vowed to slash federal spending on private contractors by 10 percent in an effort to cut costs to help the failing economy, singling out Haliburtion, the giant oil services company that won millions of dollars in no-bid contracts in Iraq. Vice President Dick Cheney ran the company before moving into the Bush administration.

On the other side of the political aisle, Obama also is against the bailout (in a way) …

Obama ticked off seven conditions that he believed should be imposed on the Paulson proposal, joining some fellow congressional Democrats in raising warning flags and signaling the bailout mechanism might not make it out of the legislature by week’s end as demanded by the Bush administration. Obama said any bailout must include plans to recover the money, and protect working families and big financial institutions and be crafted to prevent such a crisis from happening again. …
“We’re now seeing the disastrous consequences of this philosophy all around us, on Wall Street as well as Main Street,” Obama said. “Yet Sen. McCain, who candidly admitted not long ago that he doesn’t know as much about economics as he should, wants to keep going down the same disastrous path.”
McCain, at a National Guard convention in Baltimore, Maryland, said Obama was behaving more like a politician than a leader, faulting him for not offering a plan to stabilize financial markets after the crisis in the mortgage industry led to the collapse of two investment banks and the government bailout of housing lenders Fannie Mae and Freddie Mac and insurance giant American International Group, Inc.

On September 23^rd, Senator Obama was reported to say according to The Caucus [New York Times blog] …

Senator Barack Obama this afternoon urged Treasury and Federal Reserve officials to include four conditions that he and other Democrats are seeking in the proposed $700 billion federal bailout for financial firms – though he stopped short of saying he would vote against the bailout if his terms were not met. Adding some specificity to proposals he has already made, Mr. Obama, the Democratic presidential nominee, called for a payback plan for taxpayers if the bailout succeeds; a bipartisan board to oversee the bailout; limits on any federal money going to compensate Wall Street executives; and aid to homeowners who are struggling to pay their mortgages. If those four objectives are not met, Mr. Obama told reporters at a news conference here, he would recommend that federal and Congressional negotiators “go back to the drawing board” to restructure the bailout plan. He side-stepped two questions about whether he would vote against bailout legislation that did not include his priorities, and he also did not commit to returning to Washington to go on record and cast a vote on a final package. …
“It is wholly unreasonable to expect American taxpayer would or should hand this administration, or any administration, a $700 billion blank check with absolutely no oversight,” he added. “The American people have every right to certain protections and assurances from Washington.” … “This plan cannot be a welfare program for Wall Street executives,” he added. He also called once more for an economic stimulus package that included a job-creation program for rebuilding schools and bridges. He emphasized that the stimulus package should be considered and enacted separately from the bailout plan, which Mr. Obama wants approved quickly.[i] …
Tucker Bounds, spokesman for the McCain-Palin campaign said that Mr. Obama’s conditions are similar to recommendations Senator McCain had already made. “Whether calling for a bipartisan oversight board or prohibitions on golden parachutes, Barack Obama is simply following in John McCain’s footsteps while trying to respond to this financial crisis, as he followed in John McCain’s footsteps when he attempted to respond to the recent crisis in Georgia,” Mr. Bounds said. “Again, Barack Obama has shown indecision and a lack of leadership at a time when the American people need certainty.”

Meanwhile, in a response to an Obama ad stating that John McCain’s campaign manager was paid $2 million to lobby against tighter regulation of Fannie Mae and Freddie Mac, the John McCain group reminded voters how Barack Obama had gained his political power through the Chicago political machine, as well as the link with Tony Rezko. FoxNews:

The ad claims Obama is “born of the corrupt Chicago political machine,” before calling Jones his “political godfather” and Rezko his “money man.” Jones and Blagojevich are under an “ethics cloud,” says the McCain camp, relating to investigations into nepotism and favors to political donors by the two pols. As for Daley, the ad suggests cronyism is at play for the former Fannie Mae “lobbyist” and brother of Chicago Mayor Richard Daley. The ad is to be released nationally. The Obama campaign responded by saying the Democrat is the true maverick when it comes to ethics reform.
Click here to view the ad “Chicago Machine”

In an effort to make America more self sufficient when it comes to crude oil, the House of Representatives has voted for offshore drilling 236-189 which will allow waters 50 miles off the Pacific and Atlantic coasts to drill for oil and natural gas. Of course, if passed, it will take years before it affects fuel pricing, especially if a new refinery is not built, needed for 29 years. Even Senate Majority Leader, Harry Reid, D-Nev, said that he would allow states to opt for offshore exploration from New England to the Pacific Northwest. The Senate attitude has made a filibuster likely regarding the proposed legislation concerning offshore oil rigs. MSNBC reports that:

President Bush, who has called for ending the offshore drilling bans, signaled he would veto the legislation if it reached his desk, arguing that it would stifle offshore oil development instead of increasing it.
House Speaker Nancy Pelosi, D-Calif., called the bill “a new direction in energy policy … that will end our dependence on foreign oil” by shifting federal subsidies from promoting the oil industry to spurring development of alternative energy sources and energy efficiency. The House measure would allow drilling in waters 50 miles from shore almost everywhere from New England to Washington State as long as a state agrees to go along with energy development off its coast. Beyond 100 miles, no state approval would be required. The drilling ban would remain in the eastern Gulf of Mexico.

Guest Writer, Tom Carew writes:

Two minutes into his interview yesterday, Tues Sept 23, 2008, on his campaign bus with CBS news-anchor, Katie Couric, now posted on Youtube,  the Dem VP candidate, Delaware Senator Joseph Robinette  Biden,  told us of  “the Great Crash when Roosevelt went on TV and didn’t just talk of the Princes of Greed”.
Joe had just remarked to Katie that “part of what a leader does is demonstrate confidence … that he or she knows what they are talking about”.
True, there was a Great Crash -   in 1929.
True FDR was US President. In fact, twice.
BUT FDR was 32nd US President – from 1933 to 1945.
Hoover, not FDR, was 31st US President when the Great Crash occurred in 1929.
FDR did not even stand against the Republican Hoover – it was NY Dem Al Smith.
True, FDR broadcast a lot – but on radio.
There was no TV – in 1929 – or when FDR was inaugurated in 1933.
And Katie, whose smiles and body-language always seem to suggest she is very comfortable with Dems, as during her chat with Obama last night on his favorite film [The Godfather] did not correct this garrulous gaffe-prone veteran Senator after his double-howler.
Of course, Joe hasn’t much experience – only 35 years in the US Senate.
And he is still so young – he will be 66 when Palin is inaugurated as VP.
But the very same Joe, speaking at IOWA State Fairgrounds on Aug 23,  1987, when seeking the Democratic Presidential nomination, notoriously plagiarized [almost word-for-word] UK Labor Leader Neil Kinnock’s soaring conference rhetoric about being the first in 1000 generations of his family to get higher education. He had introduced that florid passage with the words – “I started  thinking  as I was coming over here”.
TIME suggested that Joe would be remembered “as the candidate who truly offered the voters an echo and not a choice”. Joe quit exactly one month later – on Sept 23, 1987. But Joe is a serial plagiarizer, for in 1965, in Syracuse Law School, he failed a paper in Legal Methods for his “stress-less scholarship” – aka copying.
Joe however has a deep-seated and long-standing problem. But just of memory?
He claimed to [a] have finished in “the top half” of his law class. In fact, he was 76 – out of 85. He [b] also claimed to have had a FULL scholarship to Law School.
In fact, he had HALF. And [c]  he claimed to have 3 college degrees.
In fact, he had a single BA – in History and Political Science. The History, of course, might not have covered 1929, or 1933, or the History of TV.
And some commentators still sneer that Palin is not suitable for the job.
Who today offers an echo and who a real choice?
Who is the phony, and who the original?
Or is this Serial Bidenism more “Change you can believe in”?

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Further Comments on the Economic Crisis:

Financial institutions are not being bailed out as a favor to them or their stockholders. In fact, stockholders have come out worse off after some bailouts. The real point is to avoid a major contraction of credit that could cause major downturns in output and employment, ruining millions of people, far beyond the financial institutions involved. If it was just a question of the financial institutions themselves, they could be left to sink or swim. But it is not.
Thomas Sowell

The credit crunch and foreclosure problems are failures of government policy. In fact, what we see now is a market correction to foolhardy government policy. Congress’ move to bail out lenders and borrowers who made poor decisions will simply create incentives for people to make unwise decisions in the future.
Walter Williams

As lawmakers debate buying hundreds of billions in assets, they should realize that the government’s aggressive meddling in financial decision-making is what got our economy into this mess in the first place. The long-term answer isn’t more federal control; it’s a return to free-market principles.
Ed Fuelner

Wall Street Journal published an article concerning economics and the ideology of the political left in higher taxation as a solution to most everything …

Joe Biden isn’t backing down from his startling claim last week that raising taxes on the rich is the ‘patriotic’ thing to do. [In fact,] he upped the ante, thundering that he also has Jesus in his corner. ‘Catholic social doctrine as I was taught it is, you take care of people who need the help the most,’ Mr. Biden preached to a group of union supporters… We won’t get into a theological debate with Mr. Biden, except to say that Biblical tax rates tended to run around 10%, not the 39.6%-plus that Barack Obama’s tax plan calls for. As for patriotism, maybe the young Joe Biden missed school the day the Boston Tea Party was being taught. There’s also the point that if you want to finance a war, you need a strong enough economy to throw off the tax revenues to pay for it. As we learned in the 1980s under Reagan, lower taxes that help an economy grow can finance a defense buildup that helps win the Cold War. By that standard, cuts in marginal income tax rates deserve to be called patriotic. Regarding taxes and social justice, the issue is whether the high taxes that Mr. Biden favors promote economic growth and prosperity, not least for America’s poorest citizens. There he doesn’t have evidence on his side. Studies from around the world, including the annual Wall Street Journal-Heritage Foundation Index of Economic Freedom, conclusively indicate that countries that keep taxes low tend to have the least amount of poverty. As for fairness, we’d note that today the top 1% of taxpayers pay twice as large a share of income taxes (39%) at a 35% rate than they did in 1980, when they were taxed at a rate of 70% yet paid only 19% of income taxes. In that sense, the tax code is more ‘progressive’ now. By the way, Mr. Biden and his wife recently released their tax returns, and they reported an average of $380, or 0.2% of their income, in annual charitable contributions over a 10-year period. The national average was about 2% of income. Every new regulation concerning commerce or revenue, or in any manner affecting the value of the different species of property, presents a new harvest to those who watch the change and can trace its consequences; a harvest reared not by themselves but by the toils and cares of the great body of their fellow citizens.
Federalist No. 62

With freedom comes responsibility. Those who would have self-government must, by definition, govern themselves. Self-government only works when people act responsibly and fulfill their obligations. When people abuse these freedoms to enrich themselves at the expense of others, then the public will demand the government to step in. That is how government grows, and how freedom is diminished. The prospect of government intervention should be terrifying to corporate leaders. For too long many of them viewed it as a safety net. …After the recent federal bailouts, some corporate officers are likely considering seeking the same bailout. As my grandmother was fond of saying, if you reward bad behavior all you are going to get is more bad behavior. Reckless and irresponsible individuals like those at the companies mentioned above give decent corporate managers a bad name. When financial meltdowns occur, the public’s outrage drives government to take over part of the private sector. When the government does so, it replaces irresponsible executives with unaccountable bureaucrats. That takes us out of the frying pan and into the fire.
Ken Blackwell

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[i] I guess Senator Obama doesn’t think that this plan wouldn’t cost taxpayers more money than already taken.