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Thread: Five alternative bailout plans

  1. #1
    Elite Member Fluffy's Avatar
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    Lightbulb Five alternative bailout plans

    Five Alternative Bailout Plans

    The Bush administration is pushing its bailout plan by claiming the only way to save the economy is by having the federal government buy $700 billion worth of bad paper from big financial firms that screwed up. Conservatives should hate this because it is a massive federal intervention in the market. Liberals should hate this because it’s a handout to the richest people and companies in America. But the Bush administration and Wall Street are insisting it's the end of the world and this is the only choice. Well, is it this or nothing? Many on Capitol Hill—especially Democrats—are buying the general premise of the White House plan but insisting on lipstick-on-a-pig modifications involving CEO compensation, taxpayer protection, and oversight and transparency. But are there other approaches to the problem besides putting the Treasury in charge of a $700 billion fire sale? Yup. Here's a quick roundup.

    (1) The Planners: The Republican Study Committee, a group of some of the most conservative Republicans in Congress. The Plan: Two-year suspension of the capital gains and dividend taxes to "encourag[e] corporations to sell unwanted assets." The Problem: It won't work. Over at Time, Justin Fox says the RSC plan "seems to be a joke," and explains that it would just make matters worse by actually discouraging banks from unloading bad mortgage-backed securities.

    (2) The Planners: Eric Cantor (R-Va.) and some House Republicans. The Plan: Instead of having the Treasury buy mortgage-backed securities outright, insure them and charge premiums, paid to the government. The Problem: It almost certainly won't work. Marc Ambinder has a great explanation of why, but a commenter at Time sums most of it up in a sentence: "Writing insurance requires either a long history of past events or, at a minimum, knowledge of present market prices." There is neither a long history of past events nor a knowledge of present market prices in this case. In fact, as Ambinder points out, there's not even a market for the products that would be insured. That's the fundamental problem, and insuring them wouldn't fix it.

    (3) The Planner: Our own James K. Galbraith, an economist. The Plan: Prop up the FDIC. Eliminate the "pointless" $100,000 cap on deposit insurance, put a half-trillion dollars in the FDIC fund, give it extra funding for more employees, and keep another $200 billion in reserve. (There's more in Jamie's article, but the FDIC part is the heart of the plan.) The Problem: It may good policy, but so far, there are few takers in Washington. And there's no major political constituency advocating for it in the way that Wall Street is calling for a buy-me-out bailout.

    (4) The Planner: Senator Bernie Sanders (I-Ver.). The Plan: Make the rich pay for the bailout. Impose a temporary surtax on incomes over $1 million. Pass an economic recovery package that puts people back to work. Then re-regulate and break up any companies that are "too big to fail." The Problem: See #3.

    (5) The Planner: Hedge Fund Gazillionaire John Paulson. The Plan: Buy Wall Street. No, seriously: Paulson thinks taxpayers (or, more specifically, the Treasury) should buy huge amounts of senior preferred stock in banks. Kevin has more on this, which he points out essentially means nationalizing troubled banks. The Problem: This plan essentially means nationalizing troubled banks. Conservatives will be queasy about it; even Kevin Drum, a liberal, is queasy about it.

    MotherJones Blog: Five Alternative Bailout Plans

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    Gold Member Dorahacky's Avatar
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    I like this one:

    A proposal in lieu of a bailout

    I’m against the $85,000,000,000.00 bailout of AIG. Instead, I’m in favor of giving $85,000,000,000 to America in a "We Deserve It" Dividend.

    To make the math simple, let’s assume there are 200,000,000 bonafide adults in the U.S. Our population is about 301,000,000 +/- counting every man, woman, and child. So 200,000,000 might be a fair stab at adults 18 and up.

    So divide 200 million adults 18+ into $85 billon which equals $425,000.00.

    The plan is to give $425,000 to every person 18+ as a We Deserve It Dividend. Of course, it would NOT be tax free.

    So let’s assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam. But it means that every adult 18+ has $297,500.00 in their pocket.

    A husband and wife have $595,000.00.

    What would you do with $297,500.00 to $595,000.00 in your family?
    Pay off your mortgage – housing crisis solved.
    Repay college loans – what a great boost to new grads!
    Put away money for college – it’ll be there.
    Save in a bank – create money to loan to entrepreneurs.
    Buy a new car – create jobs.
    Invest in the market – capital drives growth.
    Pay for your parent’s medical insurance – health care improves.

    Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.

    If we’re going to re-distribute wealth let’s really do it, instead of trickling out a puny $1000.00 ( “vote buy” ) economic incentive.

    If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!

    As for AIG – liquidate it. Sell off its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up.

    Here’s the rationale. We deserve it and AIG doesn’t. Sure it’s a crazy idea that can “never work.” But can you imagine the Coast-To-Coast Block Party?!

    How do you spell Economic Boom? I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than the geniuses at AIG or in Washington DC do.

    And remember, this plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
    We all like to think we're so special. But in the end, we all do the same stupid shit. - Dennis Miller


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    Elite Member Quazar's Avatar
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    ^^Maybe I'm too simple but I don't understand why this wouldn't work? Kind of like a super economic stimulus. Everyone gets the same amount.

    That being said, there does have to be some regulation of the economic system. If we just gave everyone all this money and didn't put controls in place, the same thing would happen again, only in a few years. Greed is always with us.

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    Elite Member burnt_toast's Avatar
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    Quote Originally Posted by Quazar View Post
    ^^Maybe I'm too simple but I don't understand why this wouldn't work? Kind of like a super economic stimulus. Everyone gets the same amount.

    That being said, there does have to be some regulation of the economic system. If we just gave everyone all this money and didn't put controls in place, the same thing would happen again, only in a few years. Greed is always with us.
    I think someone pointed out earlier that the math on that was faulty ... that it's 425$ for each adult, not 425,000...

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    Elite Member Quazar's Avatar
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    Quote Originally Posted by cloud View Post
    I think someone pointed out earlier that the math on that was faulty ... that it's 425$ for each adult, not 425,000...
    Told you I was simple.....

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    Elite Member kingcap72's Avatar
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    Quote Originally Posted by Quazar View Post
    Told you I was simple.....
    But there's 'simple,' and then 'Sarah Palin Simple.' So, you're still ahead of the curve.

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    Elite Member MontanaMama's Avatar
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    I don't understand why they can't just do the right and (god forbid) smart thing...

    http://www.thomhartmann.com/index2.p...o_pdf=1&id=998

    The Fed AND Wallstreet already know how to fix the problem, Bush & Co. just want to bankrupt the country on the way out the door.

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    Elite Member Beeyotch's Avatar
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    From that Thom Hartmann link: "Create an agency to fund the bailout, loan that agency the money from the treasury, and then have that agency tax Wall Street to pay us (the treasury) back. It's been done before and has several benefits."

    I like it, but will it ever happen? Why isn't it being proposed as a viable solution?

    Wall Street ain't gonna like turning down free money in favor of something crazy like paying back all the money they stupidly lost by knowingly engaging in high risk behavior. "Right thing" be damned, you know they don't care about such things.

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    Elite Member MontanaMama's Avatar
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    ^^ Probably because the whole Bush schtick is to do everything and cut taxes (it is astronomically stupid to fight 2 wars and cut taxes) and this whole plan is a tax on transactions. Besides, it makes too much sense for the stupid poicies to fix themselves by paying for it. I suppose the other "argument" is the whole tax argument - if they have to pay for it themselves, the companies won't spend any money or free up any money for credit (the main street argument). I think it's beyond arrogant to think that the market has to be free and without cost.

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