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Walsh: Review and Comment
The bailout: Proof again that socialism doesn't work
By Matt Walsh
While legislators in the District of Criminals scheme, thoughts and perspectives on the bailout ...
Why the bill failed
The bailout bill failed because Americans on Main Street overwhelmingly conveyed their moral sense of fairness to Congress. It's a fundamental belief on Main Street - thank goodness - that everyone should be held accountable for his actions. It's called personal responsibility.
People must pay for bad choices.
Every deal: voluntary
To be sure, there are innocent victims in this, i.e. unwitting employees at Lehman Brothers and WaMu who had no idea their bosses were reckless. At the same time, however, here's another Main Street belief: Every person who entered into a business transaction that has resulted in foreclosure or failure did so voluntarily. Each was responsible for knowing the terms and risks.
No guarantees
A government bailout only will entrench even deeper into the American psyche the belief that the government is as forgiving as God and that everyone is entitled to a no-failure guarantee.
Risk their own cash
If the bailout bill is so wonderful, how much of their own money are Hank Paulson, Ben Bernanke, Nancy Pelosi and Harry Reid willing to kick in?
Pelosi is clueless
Speaker of the House Nancy Pelosi on the House floor Monday blamed the economic crisis on years of Republican economic policies. "For too long this government, eight years, has followed a right-wing ideology of anything goes, no supervision, no discipline, no regulation," she said. "It has created not jobs, not capital; it has created chaos."
Shows you how extraordinarily clueless she is.
Let's see, to name a few, there's the SEC, the FDIC, the Federal Reserve Bank, the OCC and Pelosi's own House, which had responsibility for the oversight of Fannie Mae and Freddie Mac. Unregulated free market? Hah!
Will any regulator be fired?
Don't hold your breath for this headline: "Regulators fired for lax oversight of financial system."
We demand a refund!
Taxpayers should demand a refund - of the salaries of all of the regulators who missed Lehman, WaMu, AIG, Bear Stearns and the banks yet to go down.
'Root causes'
As pols like to say, we need to find the "root cause" of this crisis. No need to investigate too long. It's obvious: 1) It starts with the creation of the Federal Reserve System in 1913, which controls the money supply and interest rates. 2) The creation of Fannie Mae in 1938, a quasi-government company that funds and guarantees mortgages. 3) The 1977 Community Reinvestment Act, which requires banks to lend money in risky areas (to appease congressional social desires). 4) The easy credit, low interest rates of the early 2000s, the Greenspan era. 5) The refusal of Barney Frank and his congressional Democratic friends to reign in the reckless practices of Fannie Mae and Freddie Mac. 6) Greed.
FDIC encourages greed
Here's another root cause: the FDIC. It fosters greed and a false sense of security. Because the government guarantees bank deposits up to $100,000, depositors and taxpayers have no reason to pay attention to the health and soundness of their banks Take away FDIC, and you would make the banking system safer and sounder.
Bailout bill a recipe for mischief
Talk about a recipe for disaster and government mischief: The bailout bill that failed would have given the Treasury secretary the authority to "establish a troubled asset relief program (or ''TARP'') to purchase and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary, and in accordance with this Act and the policies and procedures developed and published by the Secretary."
This is unbridled power for the Treasury secretary to control and decide what to buy with $700 billion of your money. Very scary.
Why save AIG, not Main Street?
What is the difference between the decisions that, say, a Main Street insurance-agency owner makes and the decisions the chief executive officer of AIG makes? When a small business, with, say, 50 employees, is unable to collect the cash its due on the sales it made to customers with weak credit, the market says: Sorry, too bad; management should have known better. It should have done a better job.
Why should AIG be saved but not the Main Street business owner?
Government shouldn't pick winners.
Capitalism corrects excesses
Is this crisis proof that free-market capitalism does not work? Not at all. Capitalism is self-correcting. And this crisis is proof that it is so.
Capitalism was not the problem here. Socialism and statism were the "root causes."
What should be done
Let the bad banks fail.
THE WILSON REVIVAL PLAN
Ted Wilson, chief financial officer of The Review and its parent company, The Observer Group Inc., has the makings for a good alternative to the bailout: a private-sector route.
"The basis of the plan is to restore confidence in the financial system while doing as little as possible to benefit the companies that exhibited the greediest practices.
"First, identify the strongest and weakest financial firms and banks. This should be relatively quick and easy using the FDIC and bank audit reports, as well as any resources available from A.M. Best, S&P and any other firms involved in rating banks, insurance companies, etc.
"Once the strong and weak firms are identified, the lists of strong and weak organizations should be distributed to each other, with instructions that any weak firm should try to arrange an acquisition by one of the strong firms within 48 hours. At the end of that period, all firms on the weak list would be auctioned off to any of the strong firms. Any of the strong firms could make an offer for any of the weak firms, and in the event there is more than one offer for a weak firm, a committee would decide which offer to accept. At the end of 48 hours, any weak firms not acquired would be taken over by the FDIC and closed. If there are substantial mortgage packages in the firms that are closed, those could be auctioned off separately, with government financing that could include some split of any future profits on the liquidation of the pool of loans.
"The government's role would be to select the committee that would evaluate the offers for the weak firms. The government would then finance the acquisition of any of the weak firms with a non-recourse loan equal to the full purchase price.
"Strong firms would include financial firms, venture capital firms and conglomerates. This would broaden the available list of firms, increase the total equity represented and increase the pool of management talent. All of them are also experienced at merger and acquisition tactics.
"In the auction of the scenario above, a negative auction would be acceptable if it were the best offer. The firm being acquired would be totally acquired, i.e. the FDIC would not first assume the bad loans. Therefore it would be possible that the target firm would have a negative net worth.
"Some considerations that would need to be established beforehand would include terms of the government's acquisition loans and whether the acquiring firm include a provision for sharing profits with the government.
"In this plan, Congress and regulators are minimized."
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