That’s the estimated price from Bush/Paulson to soak up all the bad mortgages, giving the government a two-year window to buy up bad debt of any financial institution?
What’s missing, so far at least? Tit for tat;The story notes the plan does not say what the government would get in return from financial companies.
In other words, what’s missing so far is new regulatory standards.
McCain morphs Palin — And, speaking of that, John McCain thinks a mortgage lenders’ insurance agency (If I can interpret his convoluted thought processes) is what we need. But, Schmuck Talk Express™ has no regulatory powers mentioned. I’m sure thatt’s because Mr. “No More Bailouts” doesn’t want any such regulation.
And, of course, lack of financial reserves for calls on CDOs and other toxic mortgage products is a part of the problem that got us to this point.
Beyond that, can McCain tell me how his Mortgage and Financial Institutions trust is different from the Office of Thrift Supervision, since AIG, Merrill Lynch and Lehman Brothers (as well as the failed IndyBank) were under its supervision? I doubt he can do that himself.
Now, that’s not to say that the OTS doesn’t need both new regulatory authority and new regulatory requirements. And the difference between those two is:
• New regulatory authority: OTS, you can (now have the power to) look at these companies’ books once a year.
• New regulatory requirements: OTS, you shall look at these companies’ books once a year.
Problem No. 1 is that Paulson’s already resisting some of these ideas:
Democrats said they wanted some concessions. Firms that received government money should restrict executive salaries and give taxpayers a share of their profits. And once the Treasury bought all those mortgage-backed securities, it should work to make sure the people on the other end of the mortgages didn't get thrown out of their homes.
Paulson was cool to those ideas.
And, there’s about a 5 percent chance that Passive Pelosi™ and Land-Swap Harry Reid will actually play brinkmanship with him.
As for the bad-assets auction portion of the Bernanke-Paulson program, I don’t want it unless the Treasury has authority to recover the difference between buy and sale price from the original holder of the mortgage security or whomever for a sufficiently long period, like 20 years. And, I would rather have that than the Treasury having authority to directly hold these products for as long as 20 years in search of better sales terms.
Speaking further of McCain, it appears he ranks high on the WaPost Pinocchio list for his over-the-top attempt to link Obama to former Fannie Mae CEO Franklin Raines.
That said, as far as other, related issues, I do agree with Democrats looking for some sort of relief for homeowners stuck with bad mortgages. I’m sure Treasury Secretary Henry Paulson is politically savvy enough to drop his opposition to that, even if Shrub needs some persuading.
BUT, that is NOT the same thing as needed new regulatory requirements.
Among those regulatory requirements that immediately come to mind? If the Treasury is going to extend FDIC-type protection to money market mutual funds, then we’d better have FDIC-type regulations on the issuers of such mutual funds.
Beyond that, snark aside, it raises real issues of who’s in charge of our country. The only thing missing from Gail Collins’ column is a quote or comment from goldbug Ron Paul or other hardcore libertarians.
Meanwhile, off in BizarroWorld, Newt Gingrich pontificates from the wahhhmbulance about Shrub abandoning ideology without offering anything constructive as an alternative. That’s why you’re stuffing your face with freebie donuts at think tanks and getting ready to divorce Wife No. 3 (hey, it’s Newt, it could be happening) instead of running Congress.
Newt’s not alone, though. Here’s Kentucky Sen. Jim Bunning:
“The free market for all intents and purposes is dead in America The U.S. Treasury's proposal would "take away the free market and institute socialism in America.”
The “free market” of federally subsidized loan guarantees for small businesses? The free market of federally subsidized student loans? The free market of federally subsidized home mortgage loans? Your middle-class ’winger Kentuckians may be stupid, but, to enlighten them, we’ve never had the “free market” your nocturnal emission dreams lust for.
Finally, here’s an in-depth q&a explainer about how this all came to be.
A couple of talking points:
• GDP growth will be lowered by 2 percentage points for this year and next;
• The AIG backup/quasi-bailout was indeed virgin territory for the Fed;
• Other institutions should (will?) look at Lehman and realize they need to scrounge up more reserve cash, no matter the cost.
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