Posted by
Steve on Tuesday, September 23, 2008 1:50:12 PM
The financial crisis hit a week or so ago and I have been reluctant to write much about it. There are a number of reasons for that. First is that I am not much of a financial whiz. I get by and know some about insurance and real estate as I passed exams to be licensed in both. My knowledge is basically at the local level where the individuals interact with the insurance or real estate, not the big behind the scenes deals that are involved in this financial crisis.
Second, a Republican President and his Treasury Secretary are proposing things that do not sit well with me and I had to find out more about what they wanted to do. My natural instinct in this mess was to say, “Let the companies fail and let the chips fall where they may”. That may sound harsh, but all financial institutions involve some risk. Things fail all the time. Stocks go up and stocks go down. People make millions and people lose their shirt. That is the way capitalism works. My instincts told me that this is what should happen in this case. I was being told that this case was different and if something was not done disaster would occur.
The details are now coming out about what the Treasury Secretary wants the Congress to authorize. It boils down to a $700 billion blank check to do whatever he/she deems necessary. There would be no control over how the money was spent and no way to stop the Treasury Secretary from doing something he wanted to do. It specifically says that the decisions by the Secretary cannot be reviewed by any court or commission. I do not like the sound of that one. Nobody should ever have complete control over that amount of money with no oversight. Everyone that handles money should have someone looking over their shoulder to make sure that their decisions are correct and in the best interests of the people. This takes off all those controls.
The bill also tells Wall Street that they can go ahead and do fraudulent deals; the government will take care of you when it goes belly up. That takes the risk factor out of the equation. Wall Street speculators will have all of the profit to gain and none of the risk. Think about the possibility of fraudulent deals that would be done to have the government take care of their loss. That is also something that just does not sit well with me.
Having my money on the hook to bail out people who knew what the risk was just seems wrong. The people that were involved in these deals should be made to feel some of the heat from the problems associated with the deals. I can see buying the debt after the people involved with the deal absorb the loss, first. The way this proposal seems to be written, the government assumes all of the loss. I understand that the government will purchase the notes at par (value of the note). Then, assume any loss in value after purchase. The notes should be purchased at current market prices, after the loss is already assumed by the company and/or the individuals involved. That would make me feel better about buying up all these notes. It would also save the government millions of dollars, probably even billions of dollars.
The people that were involved in buying and selling these fraudulent securities should be made to pay some price. I am not sure what the penalties should be, but each person involved should have some sort of a penalty given out. The owners and/or CEO’s of the companies are ultimately responsible for what went on under their watch. They should pay the biggest penalties, like a permanent loss of license and a large fine, maybe even jail time. The smaller operators that handled the day-to-day operations that allowed these fraudulent transactions to be made should lose their license for a short time. This would teach everyone involved that dealing in fraudulent securities is something that will hurt their pocketbook. But, there should be penalties for all involved.
I am not trying to be harsh. I am just trying to mete out justice. If I was dealing in fraudulent securities as an insurance agent or real estate agent, I could go to jail or lose my license or both. Why shouldn’t the big players have the same penalties over their head? I really do not care whether the person is a big donor to the Republican or Democrat parties or both parties. I do not care how rich or poor the person is. If I as a local person was involved in fraudulent deals, I would pay dearly. They should pay dearly for doing the same thing, only worse.
Should the government bail out these companies? I really am not sure of the overall answer to the question. I think the companies should be allowed to fail. If that would lead to financial ruin for the entire country, I would have to reconsider my previous statement. I do not believe that a failure of one or more of these large companies would destroy the American economy. I believe that Americans would respond with newer and better ways of doing business. Bailing out these failed companies will just reward failure and lead to continued failure in the banking business.
I agree with many Republican lawmakers that if this big bailout goes through, we need to start on a way to finance it. We need to push for drilling in ANWR and the east coast and the west coast on the continental shelf. The increased oil income would go a long way to pay for the cost of this bloated bill. With this increased oil income, we should also push for increased use of nuclear power. This would help us pay for the cost by decreasing our use of foreign oil and keep that money at home to pay for the costs of this bill.
The Democrats are trying to sneak through bailouts of their favorite groups. That is positively the wrong thing to do. If those things get put in the bill, the bill should be vetoed no matter what would happen to the companies involved. Democrats would have only one reason to put those companies in the bill and that is to make us more dependent on government. We need to wean us away from government.