To paraphrase the late Senator Everett Dirksen, “A trillion here, a trillion there, pretty soon you’re talking real money.”
Friday, September 19, 2008
This situation is beyond ridiculous.
I don’t know about you, but lately, ever since our national financial crisis started coming to a head, I’m been feeling a lot like a sap. I can’t get over the impression that the obviously overpaid managers of our most prominent financial institutions are holding our economy hostage to save their collective asses at our expense, that is, at the expense of ordinary Americans and our progeny for perhaps generations to come.
My gut tells me we should dismiss these troubled institutions with the old phase, “Never write a check with your face that your ass can’t cash.” (Don’t you just love that expression?) Unfortunately, we’re apparently now to the point that, if we don’t do something, large numbers of regular people will suffer. Okay, I get it, but would like to make a seasoned suggestion to at least minimize the cost of a solution while imposing some real, albeit minimum consequences on the firms that let all this happen.
Do not buy the bad debt these institutions are holding, and do not loan them money. It’s way too expensive, much more than we need to spend to fix the problem, and it sets an horrific precedent.
Instead of buying the bad debt, all our Government needs to do is insure – under carefully controlled circumstances to avoid cheating – the potential losses which these institutions might incur pursuant to an orderly, properly paced liquidation of their troubled assets. Losses pursuant to liquidation, particularly given that this bad debt is largely collateralized by real estate, are likely to be far less than the balances of these bad debts.
We can still protect these companies, but there’s no reason to put the cost of a solution up front, or to save them the effort of getting themselves out of trouble. Let the companies manage the liquidation of these assets at their own expense. Our government doesn’t do stuff like this well.
In return for this insurance against losses, all the offending executives are out, without their whopping severance and retirement packages. These executives are being fired, and should not be allowed to benefit from the extraordinary costs their greed and poor judgment have imposed upon the public.
And finally, we should demand a premium for this insurance in the form of a special, priority class of stock in these companies which we can eventually sell and which will assure us a reasonable share of these companies’ corporate profits which they will enjoy precisely because the American people have stepped up to save them.
There. How ‘bout them apples?