$700 Billion Dollar Bailout Here We Come WooHoo!!!

On 9/29/2008 Congress finally came to a tenative agreement on the overpriced bailout. The senate and house still has to ratify the plan. For all of us non financial people out there a nice reporter from Reuters has laid out the key terms of the plan.

-The $700 billion in buying power would be doled out by Congress in stages. After the first $250 billion is authorized, the President could request another $100 billion. The final $350 billion could be cleared by a further act of Congress.

- Washington will take a stake in companies helped through the program so that taxpayers can share in the profits if those companies get back on their feet.

- A new congressional panel would have oversight power and the Treasury secretary would report regularly to lawmakers in two elements of a multi-level oversight apparatus.

- Compensation limits would be set for the chiefs of participating firms to prevent excessive pay and "golden parachutes" for those who might tap government aid and then quit.

- The federal government may stall foreclosure proceedings on home loans purchased under the plan.

- Alongside the plan to buy securities outright, the Treasury Department will conceive an alternative insurance program that would underwrite troubled loans and would be paid for by participating companies.

- If the government has taken losses five years into the program, the Treasury Department will draft a plan to tax the companies that took part to recoup taxpayer losses.

Here's another description:
-Authorize $700 billion for the government to purchase troubled assets and buy equity in distressed financial firms.

-Require the Treasury Department to make rules to prevent excessive compensation for executives whose companies benefit from the rescue.

-Establish a strong oversight board with authority to halt the program, a special investigator general to monitor it, and egular government audits.

-Require the government to renegotiate mortgages it acquires under the program with the aim of helping borrowers keep their homes.

-Phase in the money for buying troubled assets, with $250 billion available immediately, $100 billion to be released if the Treasury secretary certifies it is needed, and the last $350 billion available with another certification, but subject to a congressional vote to block it.

This so called plan is supposed to save us from the greed of Wallstreet.
David Cay Johnston had some very interesting points on our little economic problem.
He says:
1.) Let. The. Banks. In. Trouble. Collapse. It's called capitalism. (Actually Johnston is only speculating that "perhaps" once we know what we have, then we can let the worst offenders die off. Frankly, I don't see how my ability to pay rent has anything to do with whether Lehman Brothers exists or not.)

2.) Paulson was a former CEO of Goldman Sachs. His views, and the views of people wanting to grant monarch powers to him, come from that world. Goldman Sach just turned itself into a bank holding company, which means it will make money off the bailout.

3.) Small businesses are still able to take out their usual loans, as usual. Banks are still advertising crappy mortgage deals on the Internet. And you're still receiving offers for new credit cards.

4.) Most important: The media isn't doing its job asking the simple question: what are the alternatives to spending $700 billion of our money?

The markets have a long way to fall before they reflect the magnitude of debts incurred by corporations and government. The US has been living off credit and inflated corporate expectations for at least two decades. There is no way to borrow or print hundreds of billions of dollars without creating inflation or devaluing the dollar. A very long recession is quite probable...a recession by which the nation is already firmly gripped.

A guy on gawker wrote a probable letter for the Wallstreet people
Wall Street, NYC.

Attention: the President/Ceo Dear Sir, Confidential business proposal

Having consulted with my colleagues and based on the information gathered from the chambers of washington, i have the privilege to request for your assistance to transfer the sum of $700,000,000,000.00 (seven hundred billion united states dollars) into your accounts.

The above sum resulted from over-valued mortgage contracts, executed commissioned and paid for about five years (5) ago by a citizens of the nation. This action was however intentional and since then the fund has been in a suspended account at the central bank of ny bank. We are now ready to transfer the fund and that is where you come in. It is important to inform you that as civil servants, we are forbidden to operate a private bank; that is why we require your assistance. The total sum will be shared as follows: 95% for you and 5% for local and international expenses incident to the transfer (ie bonuses).

If you find this proposal acceptable, we shall require the following documents:

(a) your banker's name (preferably goldman sachs affiliated), telephone, account and fax numbers.

(b) your letter-headed paper stamped and signed The business will take us five (5) working days to negotiate through congress.

Please reply urgently.

Best regards

An analogy: Let's say you want that candy bar but it costs $1.50 and you only have 50 cents. I say to you here is a loan of a dollar, go buy it. What you don't know is that I own the candy store. So I get your 50 cents plus my dollar back, but now you owe me a dollar. Brilliant! Now that candy bar that cost $1.50 I sold to you for $2.50 and now I get interest on top of that. Suka!