"The Mother of All Bailouts"
WASHINGTON (AP) — The Bush administration insisted Sunday that Congress must move quickly to approve what one lawmaker called the "mother of all bailouts" — a $700 billion proposal to buy a mountain of bad mortgage debt in an effort to unfreeze the nation's credit markets.And
However, congressional leaders said the administration's spare three-page plan must be expanded to include help for people on Main Street as well as the big Wall Street financial firms who have lost billions of dollars through their bad investment decisions.
The plan the administration has developed with support from the Fed would have the government buy up to $700 billion of the bad loans, taking them off the books of financial firms... Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said the government's efforts would be the "mother of all bailouts" that could well cost $1 trillion when the cost of the government takeovers of Fannie, Freddie and AIG were included.
The whole congressional debate [on the bailout] is occurring just weeks before voters go to the polls.
(CBS) Treasury Secretary Henry Paulson defended the Bush administration's proposal to spend up to $700 billion to buy up bad debt of financial institutions struggling with illiquid assets (such as defaulted mortgages), saying not acting would have jeopardized the possibility of anyone getting a loan - and may have jeopardized Americans' savings and retirement funds.Oh, and while we're at it, let's have the U.S. taxpayer bail out foreign financial institutions and governments too.
Of course, bailing out incompetence, failure, fraud, speculators, and the like (foreign or otherwise) is wrong as wrong can be. But for some reason that last quote from CBS really got to me... the one about how we have to save people's retirement accounts.
Don't get me wrong. Despite what you read on this blog, I don't like the idea of people losing their house and/or their retirement funds any more than the next gal. But come on! People gambled. People have been gambling with their retirement! That's what it means to pay obviously ridiculous prices for houses (and doing so as part of your retirement plan). That's what it means to put you retirement in the stock market (401K, mutual funds, what have you). It's gambling and no one can claim ignorance as people make a point of highlighting the risky nature of the markets even clear way back when the move to 401Ks first started and was viewed with some skepticism. The stock and bond markets (etc.) are inherently risky. It's little different than putting your entire retirement on red 99 (refer to the graphic for this post). Don't put your money into those markets if you cannot afford to lose it. That's rule numero uno in the investing world.
But if we are going to bail out risk-takers who lost, then shouldn't we just bite the bullet and remove all risk from the stock market? Let's make it more like the housing market which is rigged to (almost) always go up. Let's say that it is now illegal (not just temporarily stopped) to short the market; no more puts. Let's say that you can only buy a stock as long as you are willing to only pay more than the last price paid for that stock. In fact, let's call it what it is and not call it a "market" anymore... certainly not a free and open one. Let's call it "Social Security 2.0".
I like kleptocracy*. You will like it too (not that you have any choice anymore). And besides, Paulson will make for a good king of America.
*"A kleptocracy (sometimes cleptocracy, occasionally kleptarchy) (root: klepto+kratein = rule by thieves) is a term applied to a government that extends the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats) at the expense of the population.
The effects of a kleptocratic regime or government on a nation are typically adverse in regards to the faring of the state's economy, political affairs and civil rights. Kleptocracy in a government often results in a severe deficit of foreign investment prospect, and drastic weakenings in the market and exportation/importation affairs. As the kleptocracy often embezzles its money from its citizens by misusing funds derived from tax payments, or money laundering schemes, a kleptocractically structured political system can be degrading to the quality of life of the general populace. In addition, the stolen funds that kleptocrats take to their own gain is often removed from funds that were to go towards public improvements, such as the building of hospitals, schools, roads, parks and the like, bringing about yet further adverse effects on the quality of life of the citizens living under a kleptocracy."
Update: Mish has a convenient way for you to blast emails, all at once, to all senators with a single click of a link. Check it out.