Monday, September 29, 2008

Bailout Fails

Big fail on the Paulson Wall Street bailout. Lots of finger pointing going on. I am oddly relieved.

Yeah Wall Street is in full flame-out...and my portfolio (small as it is in the scheme of things) took a massive hit...most if not all of my stocks are Nasdaq type stocks.

This is what happens when the country has lost ALL TRUST in our president and financial leadership and congress in general. My dad just asked me if he should pull cash out of his savings account!

How do you restore trust? Not by asking people who weren't invited to the party to pay for the clean-up. Nuts to letting the principle take the kids lunch money to pay for the faculties' 3 martini lunch.

1) You restore trust by placing the burden of bailing out Wall Street back on WALL STREET!
Show us how those who will benefit from the bailout, will pay for it.

I don't mind providing a bridge-loan to Wall Street, but at least show me how Wall Street will pay it back.

How can you do this? Institute a small per share/transaction "trading tax" that will raise a few hundred million $ a day--billions of shares trade on each exchange every day, so it wouldn't be that much per share. You could also spread this over bond transactions as well to make sure it stays small. Write the tax so it disappears as soon as the $700B+ interest is payed back (subtracting any residual value Treasury gets from the mortgages it buys).

2) Write legislation that helps main street--directly. I would target a large sum to help struggling homeowners stay in their homes by restructuring their mortgages. Perhaps combine this with a broad fiscal stimulus package so even non struggling homeowners get a pick-me-up.

3) Overhaul the financial regulations. Put reasonable limits on leverage, or make institutions pay higher "insurance rates" based on risky/leveraged holdings. Charge a lot for incremental additional risk--double the risk, quadruple the fees. Place major margin requirements for any non-exchange traded derivities and swaps. If sensible regulation can't be decided on in a few days...make the last half of the bailout contingent on passing this improved regulatory framework.

At this point, Congress is no longer offering only cake to Wall Street, while taking bread off the table of constituents.


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