It would be just like these idiots on Capital Hill to kill this deal over some BS. The demands show exactly how they are not cut out to make financial decisions.
Under other additions the Democrats are asking to the administration package, according to a draft of the plan obtained by The Associated Press:
• Judges could rewrite mortgages to lower bankrupt homeowners' monthly payments.
Yeah, let's let a person trained to be a lawyer make banking decisions. Maybe they can legislate to get a plumber to do brain surgery next. They need to let some mortgage board or something make the decision instead of some unqualified person.
• Companies that unloaded their bad assets on the government in the massive rescue would have to limit their executives' pay packages and agree to revoke any bonuses awarded based on bogus claims.
So in other words the cost to get rid of your bad debt is to cut your own pay? I'm sure that some executives would just let their company fail because they get their golden parachutes that way instead of having their contracts renegotiated by the government. Only their stock options going to zero will get executives motivated enough the do something. If they do a cost benefit and find that their golden parachute is more then the value of their lost options then Chapter 11 it is. Then the government gets to control the dead bank just like IndyMac. I hope the FDIC has enough money stored up.
The proposal by Sen. Chris Dodd, D-Conn., the Banking Committee chairman, would give the government broad power to buy up virtually any kind of bad asset — including credit card debt or car loans — from any financial institution in the U.S. or abroad in order to stabilize markets.
Yup Dodd is involved. His deal was probably written in crayon. I like how we will suddenly be able to buy foreign distressed debt. I guess we can now control the economy of a foreign power by buying up their mortgaged backed debt then causing a default. Then we can seize large portions of their territory in foreclosure and put army bases or CIA installations on them. I think the Ottoman Empire did something like this IIRC. I'm sure Dodd has thought about that possibility.
But it would end the program at the end of next year, instead of creating the two-year initiative that the Bush administration has sought. And it would add layers of oversight, including an emergency board to keep an eye on the program with two congressional appointees, and a special inspector general appointed by the president.
They also cut it short by a year because I'm sure Dodd knows better then Paulson the time they are going to need to get house prices back up. That is the key to this whole deal. If house prices improve then all of the bad debt turns back into good debt again. That means this bailout needs to go as long as possible to make sure they catch everything. Maybe Dodd was distracted by a shiny object and didn't think about that.
The plan also would require that the government get shares in the troubled companies helped by the rescue.
Great now the government will get to dilute the companies stock as well? I'm sure Wachovia and Washington Mutual will jump at that idea. They can get rid of all of their bad debt but their execs only have to lose pay and see their options die due to dilution from the government? That will really motivate them to not see their companies fail. After all the government can't touch their golden parachutes.
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