Bailout killed — my alternative

In the current now-dead bailout (roll call vote is here), Congressional Democrats caved on the idea of giving bankruptcy judges flexibility to adjust mortgages in default.

And, the caps on CEO pay were more symbolic than legally enforceable, too, with things such as deferred compensation. And, from Obama on down, they kicked the idea of further regulatory reform down the road, claiming we didn't have time.

So, you shouldn’t have been expecting more from Democrats in the first place. (That’s why I’ll be voting Green again this year, as in 2004.)

But, of course, the GOP is worse; House Minority Leader John Boehner accused Speaker Nancy Pelosi of well-poisoning within the House when he’s really mad she couldn’t deliver enough Democratic votes to cover for the massive GOP opposition.

That said, what SHOULD we be doing?

I offer a compendium of my own ideas and some gathered from other pundits and analysts.

(If the Dow is as “desperate” as it appears, as it appears, it will sign off on any deal that’s even close to being in its neighborhood; some Dow financial members could yank GOP House campaign contributions to send a message.)

First, have a bank holiday, similar to FDR’s in the Depression. It might not need to be as sweeping, but it would give Congress more working space. Don’t restrict it to Main Street deposit banks, either – make a whole range of financial institutions potentially And, if banks squawked about that, you’d realize that maybe this wasn’t so serious.

Second, reinstate the Glass-Steagall Act that was abolished in 1999
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Third, tie interest rates on adjustable-rate mortgages more closely to the Federal Reserve’s funds rate, the rate it charges banks to borrow money.

Fourth, we need to look at getting out of BOTH Iraq and Afghanistan; if this crisis really is that bad, we need the money here.

Fifth, completely nationalize failing banks. Sweden was in a similar situation in the 1990s, and that’s what it did. It actually made a profit when it later resold the banks it took over.

Those five all come from columnist Ted Rall.
I offer a few additional ideas.

First, look at tightening IRS regulations on home mortgage interest deductions. If either McMansions, or “flipped”/investment homes need some IRS wing clipping, well, that’s what needs to be done.

Second, rein in Henry Paulson even more. Given his conflicts of interest on the AIG bailout, we don't need him having that much power. Ditto since he may be held over in an Obama presidency.

Third, since the Treasury Department is supposed to take an equity stake in the banks and other institutions in which it bails out, mandate that it has to sell that stake back on the open market at a profit. If that means sitting on bank holdings for 20 years, rather than selling out to vultures in 18 months, so be it.

Fourth, instead of putting caps just on the salary of CEOs of bailed-out companies, maybe we ought to at least put a cap on the tax write-off amount for the salary of any CEO.

Fifth, make so-called “liar’s loans,” where would-be homeowners can state their own income, illegal — or at least illegal for financial institutions getting any sort of federal insurance backing. And, even though they have been legal, have the Department of Justice start investigations into exactly how they were marketed.

Who knows: a few fraud charges might pop up.