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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DON MASHAK'S BANK BAILOUT BLOG 
September 28, 2008 at 8:14 am |
Ben Bernanke plots to fulfill his childhood dreams and rescue the US from the Great Depression, as he is certain he could have done. Mussolini defined fascism as the
merger of state and corporate power; this bailout seems to be doing exactly
that. The Patriot Act gave the neocons their power. Now TARP will fund it.
Perhaps a better bailout plan for the bankers:
http://www.nandotimes.com/nt/images/century/photos/century0252.html
“The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic State itself. That, in essence, is Fascism – ownership of a government by an individual, by a group or by any controlling private power.”
Franklin D. Roosevelt
September 29, 2008 at 2:03 am |
Oh no, its not a Bailout now, its a “Financial Rescue”. Give me a break, how obvious is it that the media itself has sold their soul just like our politicians and is trying to sugar coat the biggest ripoff ever of American taxpayer dollars. Americans have no say in government, why do they even try to sugar coat it?
September 29, 2008 at 9:34 pm |
Please do not let the drop in the Dow make you buy into this Welfare for the Wealthy. The market is reacting to the politians and media saying this is like a FIRE! The Dow is still above 10K which is fine; people have gotten greedy in the recent bull markets.
The credit markets are NOT frozen. In Northern Calif where I live, one loan officer LAST week said “We are still rubber stamping ANY loan under $400K so I don’t know what these people are talking about!!” Not to mention the recent buyouts of Washington Mutual and Wachovia (not small purchases) showing once again that the well managed companies will eat up the lower margin businesses evening the market out on its own. Was I the only one wondering for years how WA MU would stay in business without charging customers for anything? Nice ad campaign but business need to cover their costs.
The banks are getting money from the Fed at 2.25% and the foreclosures didn’t start until variable mortgages went above 7%, so some banking regulation might help “main street”. Put a moratoreum on foreclosures forcing banks to renegotiate mortgages to a level where they are still making 150-200% (not 400%-500%). Then people will be able to resume the payments and stay in their homes.
PLEASE do not let this hysteria make you add to this kneejerk, momentarily-popular travesty of giving away $700 Billion taxpayer dollars to people who admit that they just made up that amount with NO basis.
Responsibility is what we need from Congress, media and banks. People in America get so used to extrordinary conditions (prime down to 1% under Greenspan or Dow over 13K) that they freak out when the conditions go back to NORMAL.
This screaming that the sky is falling and gov’t officials making dire predictions (all of a sudden when credit has been an issue for years) is bound to affect the stock market, so please stop adding to the chorus! People have been told for years that accepting tons of debt is not good.
If that hasn’t convinced you then look at the way the media is acting like used car salespeople or some frantic infomercial. You know that businesses are drooling over this when they trot out their trusty threat of YOU losing your job. That’s what businesses say when the think they can get away with anything from making employees pay for their own health insurance, not adjusting minimum wages for years on end, not altering capital gains rates, or ANY other item which may help the rich.
This bailout is a terrible idea… the banks/wallstreet/rich do NOT NEED your money to help them get their balance sheets into balance. We need to make them be responsible because they are using capital to buy up cheap assets which will leave them with huge profits when the hysteria settles, while claiming there is nothing left for you to borrow. It’s simple greed which is fueling this recent short selling in the stock market.
October 1, 2008 at 8:08 am |
Watch the REAL Reason for Bailout:
http://echoesofwisdom.blogspot.com/2008/10/real-reason-behind-bailout-explosive.html
October 1, 2008 at 8:09 am |
Real reason for bailout:
Real Reason For Bailout
October 20, 2008 at 4:01 pm |
Where can we find the terms of the bank Bail out ? Is any bailout conditional on lifetime banishment of the bankers that got us here?
don mashak
November 4, 2008 at 4:11 pm |
This is a really interesting blog post,I have added your blog to my favourites I really like it,keep up the good work!
December 10, 2008 at 7:07 pm |
This is a post on my blog at http://www.bailoutblogger.com
Feel free to let me know your thoughts.
A deal with the Devils?
So, it seems a deal has been reached between the White house and Congress on a $14B bailout for the U.S. Auto Industry. The plan is to give them just enough money to get them through to the new administration. This proposal should be called operation pass the buck. The idea here is that the auto makers would restructure everything in 30 days to be profitable again. If they don’t, a “Car Czar” would be able to recall the loans. So, to re-cap, here’s $14B. Spend it but if you don’t make money in 30 days we want it back. Am I the only one seeing a flaw in that logic?
The auto makers are saying without the bailout money they cannot survive and “bankruptcy is not an option”. When did bankruptcy become a non-option? Isn’t bankruptcy designed for this kind of a situation? You know, when you have more to pay than you have coming in? The auto industry is saying that of they file bankruptcy consumers will loose confidence in them and stop buying their cars. Here’s some news. We’ve stopped buying their cars and they haven’t had to file bankruptcy to do it. I would have more confidence in them if they had to answer to a court appointed trustee. Ah, but that seems to be the problem. They don’t seem to want to answer to anyone. Not congress, not the courts, not their employees. They want to be left alone to loose as much money as we will give them.
One of the things that has been talked about is the $14B will give the auto makers time to go back to the United Auto Workers Union and re-negotiate even more concessions. So, here’s the good news. When the workers pay is cut so drastically that they can’t pay their mortgages, congress has already approved $700B to buy those bad loans. Nice to see them so ahead of the game on this one.
So, what is the solution? Well, I don’t have the definitive answer but here are some ideas:
-Require the auto makers to file bankruptcy so they are under court control and supervision
-Take a portion of the $14B congress wants to give away and use it to supplement the UAW members unemployment pay if they need to be let go
-Use some of the $700B bailout money for the FHA to offer affordable housing refinances for the UAW members. In these refinances require the current lenders to write down the value of the loans to the current market values of the properties. Offer these loans at a low fixed rate.
-Have money set aside for government backed auto loans for use in buying American made cars.
-Offer loans to car dealers who are struggling or going out of business.
-Require lending institutions who are getting bailout money to keep business credit lines open unless the businesses credit worthiness no longer warrants the loan
Look, the point is congress needs to stop thinking about what will help these companies and industries and start thinking about what will help the people. Here’s a thought, once We The People have money again and feel secure in our jobs, we might just start spending it. And who knows, that might just stimulate the economy.
February 6, 2009 at 1:45 am |
Dear all, no offence, but i persnoally feel, before seeking a bailout, would it not be in order, that the company seeking a financial package / bailout from the public money, in the first place cut down all its flambount expenditures, like business class tickets, 5/7 star hotel stays, super luxury cars, etc to its top executives, CEO’s, directors / promotors, etc.
March 25, 2009 at 8:54 pm |
The bankers bailed out then not passing grace onto consumers but coming after them hard for credit card debt; reminds me of the parable of the wicked servant as told by Jesus:
Therefore is the kingdom of heaven likened unto a certain king, which would take account of his servants. And when he had begun to reckon, one was brought unto him, which owed him ten thousand talents. But forasmuch as he had not to pay, his lord commanded him to be sold, and his wife, and children, and all that he had, and payment to be made. The servant therefore fell down, and worshipped him, saying, Lord, have patience with me, and I will pay thee all. Then the lord of that servant was moved with compassion, and loosed him, and forgave him the debt. But the same servant went out, and found one of his fellow servants, which owed him an hundred pence: and he laid hands on him, and took him by the throat, saying, Pay me that thou owest. And his fellowservant fell down at his feet, and besought him, saying, Have patience with me, and I will pay thee all. And he would not: but went and cast him into prison, till he should pay the debt. So when his fellowservants saw what was done, they were very sorry, and came and told unto their lord all that was done. Then his lord, after that he had called him, said unto him, O thou wicked servant, I forgave thee all that debt, because thou desiredst me: Shouldest not thou also have had compassion on thy fellowservant, even as I had pity on thee? And his lord was wroth, and delivered him to the tormentors, till he should pay all that was due unto him. So likewise shall my heavenly Father do also unto you, if ye from your hearts forgive not every one his brother their trespasses” (Mt. 18:23-35).
August 26, 2010 at 9:41 pm |