Two superior alternatives to the Paulson stupidity

Two superior alternatives to the Paulson stupidity (Full Version)

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DarkSteven -> Two superior alternatives to the Paulson stupidity (9/27/2008 11:08:11 AM)
Well, the current players are as follows: A lame duck President, who one year who declared that we would have a crisis of Biblical proportions if we didn't privatize Social Security and now is claiming we will have a crisis of Biblical proportions if we don't socialize our banking system. A Secretary of the Treasury, who helped create the mess while he was CEO of Goldman Sachs. His philosophy is that no taxpayer sacrifice is too great to prevent said crisis of Biblical proportions. The Congress/Senate. They are totally unschooled in economics and are focused on getting out of the mess short term with as little connection to the "crisis" as possible. In other words, whine about the bailout proposal, posture, and eventually vote for some form of it. So the government won't give us anything useful. Fine. Here are a couple of MY OWN proposals that are far superior to the stupid crap that you want us Americans to pay $700 billion for. 1. Use eminent domain. If a house is vacant more than 90 days, the local government seizes it and sells it at auction. Someone gets a house, the bank gets what the house is worth, and the damn thing is off the books. The local government then pays the bank the entire bid minus auction costs. 2. Make the morons value their own derivatives. Legislate that all the derivatives is question MUST be valued within 60 days, and that they have a fixed value of 1% of original cost until then. Either proposal will fix the problem without punishing us taxpayers for the greedy Wall Streeters' screwups. I've written a bunch of Congresspeople with my proposals. Please forward them on to Congresspeople as well, and add your own ones.

slvemike4u -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 11:59:24 AM)
The Paulson Plan is dead......Thank God(or whatever higher power you like)

pahunkboy -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 2:04:39 PM)
Dark! Thats is BRILLIANT! Eminent domain. GOod idea.

Politesub53 -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 2:15:46 PM)
quote: ORIGINAL: DarkSteven 1. Use eminent domain. If a house is vacant more than 90 days, the local government seizes it and sells it at auction. Someone gets a house, the bank gets what the house is worth, and the damn thing is off the books. The local government then pays the bank the entire bid minus auction costs. Who will lend the money to the new buyer ? If some banks are allowed to fail, the ones that are left wont be willing to lend money for mortgages, without guarantees.

Musicmystery -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 2:42:02 PM)
I'd like to see derivatives and loan sales ended. I want to choose my lender, not find I've been sold to someone I don't want to do business with--and only a month after the loan is done. Writing loans merely to immediately sell them should stop.

cloudboy -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 2:42:27 PM)
Here what the Senate Majority Leader had to say about the issue: Presidential Politics are not helping!!

Musicmystery -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 2:47:18 PM)
Well McCain called for a rush to Washington to address this, and when he got there---had no proposal. Just a stunt.

Lorr47 -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 4:46:17 PM)
Eminent domain under the governments police power is inspired. However, what if the government LOANs these Wall Street Companies the money. In return for the LOAN convertable preferred stock is given to the government. If the borrower company screws up, the preferred is converted to common and the defaulting company's assets are sold curbside. Then we do not have to worry about the worth of the derivative securities because the LOANs are secured by the worth of a company's total assets. Private lenders are already doing this. Why not the goverement? Not a bailout, but a loan which can be recovered by selling the company's assets. Taxpayers have a right to have their money adequately secured.

Musicmystery -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 5:05:30 PM)
That's what Warren Buffet did---and for 10% interest. The problem, though, is that the government isn't a business (or at least wasn't until the Freddie/Sallie buyout), and these things can go south (look at the scare on the "secure" Money Market funds last week). Already, we're betting housing prices will rise----and that isn't necessarily the case. And stock, even preferred stock, in a defunct company is worthless (debts are paid first).

bestbabync -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 5:53:32 PM)
why can't the feds just insure the loans? it will be cheaper!

Musicmystery -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 5:57:13 PM)
No. The Freddie/Sallie loans were already insured, and insuring Money Market funds (which pay better interest because of the higher risk) would undermine banking (why put your money in a bank when you can get an insured higher interest rate), virtually eliminating the loan market.

Lorr47 -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:02:15 PM)
I believe that Buffet and Mort R. (cannot think of his name) believe that they are nimble enough on their toes to convert the preferred stock to common stock in the event of problems and take over the company before someone else pushes it into bankruptcy. Thereafter, they can sell it or run it. In any event, they would not loaned the money if they felt they would lose it. That leaves a question of whether the government has anyone who could perform this function. That could be a problem. The question of whether the government should be in the business could be answered by another question. Would you rather hold derivatives, the value of which, if they have a value, is questionable? Why should the taxpayers hold the questionable derivatives as collateral when they could loan the money and hold the entire company as collateral? I personally would not bail them out at all but if the politicians are going to do it, I would want the Wall Street are designated a national park.

TNstepsout -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:03:57 PM)
A seizure of these properties under imminent domain will not help homeowners stay in their homes or refinance them and would create more red tape and lengthen the time for the homes to sell. A better plan would be for the government to buy the loans at a discounted rate directly from the banks which would inject immediate cash to the bank. Then the government could sit on the loan for a period of time, allowing the homeowners time to refinance or sell the home. With cash now injected into the banking system there would be more money to loan and these people could get out from under their adjustable rate mortgages. The government would make back their money when the home is refinanced or sold. I don't knowhow the banks can value their derivatives until the bad loans are separated from the good ones. The problem all along has been that the lending institutions have been valuing their own goods. How would anyone know if they are right or not? Isn't that part of what caused the problem in the first place? A better solution would be for the gov to purchase the bad loans (as above) thus insuring that the remaining loans (good ones) could be valued properly. That would inject some confidence back into the market and these companies could once again SELL their derivatives and generate some cash. (with added regulation of course)

Musicmystery -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:05:01 PM)
quote: I believe that Buffet and Mort R. (cannot think of his name) believe that they are nimble enough on their toes to convert the preferred stock to common stock in the event of problems Typically preferred stock comes with restrictions preventing that (and a few other things).

Musicmystery -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:06:44 PM)
you're responding to me, but arguing against points I didn't propose---the OP did.

Lorr47 -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:20:06 PM)
quote: Typically preferred stock comes with restrictions preventing that (and a few other things) quote: ORIGINAL: Musicmystery When Mort R. discussed the preferred stock on the McLaughlin Report the essence of this preferred stock was its convertable nature. Apparently Mort R. was asked by Goldman whether he wanted a second level offering. Mort R said he did not want any of the second offering but was interested in buying on the same level as Buffet. Apparently Buffet locked in the convertable nature of the preferred stock and probably had other draconian terms attached. Mort R. seemed to feel that Buffet's investment at that interest rate and safety was a good investment for him also especially since he has about $3 billion in cash and metals on hand. Taxpayers should be secured should the money be loaned. Just copy the paperwork generated by Buffet's attorneys.

Musicmystery -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:22:05 PM)
Ah--thanks! Seems Buffet was ahead of the curve on that one too.

bestbabync -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:22:39 PM)
quote: ORIGINAL: TNstepsout A seizure of these properties under imminent domain will not help homeowners stay in their homes or refinance them and would create more red tape and lengthen the time for the homes to sell. A better plan would be for the government to buy the loans at a discounted rate directly from the banks which would inject immediate cash to the bank. Then the government could sit on the loan for a period of time, allowing the homeowners time to refinance or sell the home. With cash now injected into the banking system there would be more money to loan and these people could get out from under their adjustable rate mortgages. The government would make back their money when the home is refinanced or sold. I don't knowhow the banks can value their derivatives until the bad loans are separated from the good ones. The problem all along has been that the lending institutions have been valuing their own goods. How would anyone know if they are right or not? Isn't that part of what caused the problem in the first place? A better solution would be for the gov to purchase the bad loans (as above) thus insuring that the remaining loans (good ones) could be valued properly. That would inject some confidence back into the market and these companies could once again SELL their derivatives and generate some cash. (with added regulation of course) does anyone know what this type plan would cost the taxpayer?

Lorr47 -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:36:19 PM)
quote: A seizure of these properties under imminent domain will not help homeowners stay in their homes or refinance them and would create more red tape and lengthen the time for the homes to sell. A better plan would be for the government to buy the loans at a discounted rate directly from the banks which would inject immediate cash to the bank. Then the government could sit on the loan for a period of time, allowing the homeowners time to refinance or sell the home. With cash now injected into the banking system there would be more money to loan and these people could get out from under their adjustable rate mortgages. The government would make back their money when the home is refinanced or sold. I don't knowhow the banks can value their derivatives until the bad loans are separated from the good ones. The problem all along has been that the lending institutions have been valuing their own goods. How would anyone know if they are right or not? Isn't that part of what caused the problem in the first place? A better solution would be for the gov to purchase the bad loans (as above) thus insuring that the remaining loans (good ones) could be valued properly. That would inject some confidence back into the market and these companies could once again SELL their derivatives and generate some cash. (with added regulation of course) quote: ORIGINAL: TNstepsout Why deal with the derivatives? If we are going to give Wall Street money why not take convertible debentures or convertible preferred or even common stock in return for the taxpayers money. Then you have the assets of entire companies to secure your money. Then, since we are not spending millions trying to unravel the derivative issue, you can help the home owners. Since Wall Street has the money shouldn't they be happy. My problem is that they are trying to have the taxpayers take the possibly worthless derivatives at more than market value without recourse. I would rather loan Wall Street the money with the power to take their companies away from them if they screw up again. If they default we could house the homeless in the various Wall Street Exchanges and other offices.

Lorr47 -> RE: Two superior alternatives to the Paulson stupidity (9/27/2008 6:42:11 PM)
quote: does anyone know what this type plan would cost the taxpayer? quote: ORIGINAL: bestbabync Every person I have asked just says "Only God Knows and He ain't talking". The politicians talk about $700 billion but I have seen cynics say "add a trillion." And, we felt Iraq was expensive.

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