September 25, 2008

I, Don Mashak, created this blog as a point of rational discussion about the proposed bank bailout.  My first reaction to hearing about the the bailout was, “What happened to free market forces, risk and reward?”  I didn’t hear any of these financial institutions complaining they were making too much money and offering to share the rewards with us when they were getting 5-25 million dollar per year bonuses, but now they want us to share the risk (losses)  From a more pragmatic view point, if there is no pain to the bankers, they will have no incentive in the future to motivate them to avoid making the same mistakes that got us where we are now, again. Worse, the bailout is not a real solution, but rather a postponement and reallocation of the pain. Somebody is going to suffer sooner or later. It can be the stockholder, owners, board members and officers of the banks now or the taxpayers and general citizenry later. Our choices are recession/depression now or hyperinflation and ridiculous taxes in the future. (In effect, we who enjoyed the strong economy will be forcing our children to suffer the consequences) I would prefer we invoke a, “That which does not kill us makes us stronger” attitude and not saddle future generations with the burden of paying for our mistakes.

Next, if we are going to consider a bailout of any kind, should it not be contingent on the passage of laws to prevent it from happening again, should it also not be executed in terms of true factoring. As I understand it, the current terms and conditions call for the US Taxpayers to pay 100% of the value of the outstanding balances on these bad mortgages that these banks are trying to sell us and the real value of the real estate securing the mortgages is between 50% and 70% of the outstanding balance. In the free market, when a business is suffering from insolvency or having liquidity problems, the free market factoring vultures start circling. They offer to buy the struggling businesses recievables/assets a steep deep discount and the struggling business generally has no choice because no one else is going to come to their aid. Depending on how bad the risk is, a FACTOR anywhere from pennies to fifty cents on the dollar. Our representatives, Congress, are not driving a hard bargain on behalf of us the Taxpayer; instead they appear to be spending our money like drunken sailors with a 100% of face value bailout, with the seeming expectation of getting later backroom discussion kickbacks. Shouldn’t they be offering the banks a dime on the dollar, as the representatives of we the Taxpayer?

It seems to me that we, the Taxpayer Factor Vultures, are in position demand terms to our liking.
Besides the foregoing paragraph suggestions. Should not legislation be passed making it a felony for any politician to interfere with the legitimate activity of bank regulators, examiners and auditiors.
Too often, these Government Bank overseers felt a tap on the shoulder by some Senator or Congressman (or the Senator/Congressmans Chief of Staff) telling them to back off when the overseer wrote truth reports about concerns with deviations from accepted banking practices. And, if they resisted, poof they were fired or transferred to another district. Had they been allowed to proceed unimpeded, most of the pain we are about to feel would not have happend.

Even further, where are the terms and conditions requiring the board members, senior management and the stockholders to pay back some portion of big profits earned over the last 5-7 years of being turned into the US Treasury as a requirement for the bailout. And, Should not a condition of any tax payer bailout of this magnitude be contingent on all of the senior management and board members not serving in any senior management or board member capacity for any financial institution for the rest of their lives to prevent them from causing the same situation again and to serve as incentive for future generations of bankers to avoid the same consequence. Well, that is my rant for today. javascript:(function(){var a=”;var t=prompt(‘Enter Tags:’,”);var tr=t.split(‘ ‘);a+='<span class=’+unescape

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House rejects $700 bln financial bailout

September 29, 2008

House rejects $700 bln financial bailout – ALTERNATE PROPOSAL

Ok, maybe we have their attention.  The feeding frenzy for kickbacks may have been tempered by concerns for electorial fallout with the elections upon us.

Before i say more, let me say that free market forces should prevail, the senior management, board members and stockholders should take the hit as a lesson to others to avoid this in the future.  Either course of action seems to saddle America with to adverse outcomes, either hyper inflation with a bailout and a credit crunch and depression without a bailout.

Unfortunately, i think there will be some kind of bail.  And if there is one, here is what I would propose :

BACK TO THE FACTORING :  Buy the loans as a percentage of what the unlying real estate asset is currently worth based on current LIQUIDATION Value.  Extent to the current holders of the mortgages a laon that amortizes over 10 years representing the shortfall that the Liquidation Value is from the Current Loan Balance. The collateral for the shortfall loan will be as many shares at the current value required to cover the initial amount of the shortfall loan.  Taxpayers win as the shares appreciate as time goes by.  Senior Management, Board Members and Stockholders are punished for their wreckless risk taking.


A Federal Law is passed making it a crime for any politician or their subordinates to make any phone calls to interfere with the legitimate actions of Federal and State Bank Examiners.

The buyback is contingent on the current Board Members and Senior Management not holding any of these types of positions with a financial institution for the rest of their lives.

The current board members and Senior Management must pay back half of there income they recieved for the past 5 years.


Any person who has had their house foreclosed on in the past 3 years, and said property has not yet been resold, can buy back their house at the LIQUIDATION VALUE by making three months of payments on calculated on a 30 amortization with a discounted interest rate.



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September 25, 2008

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