The Henry Paulson $700 billion bailout plan is a disaster, an outright robbery of America. Paulson is little more than the front man for Wall Street bandits. Some of the NYC firms that are in trouble were paying out 40% or more of total revenues in salary and bonuses. Their business model was unsustainable, immoral and corrupt. It leveraged bad debt and repackaged it into investment securities. This business model allowed massive amounts of illegitimate revenue to be converted into privately held wealth — through salaries and bonuses. But while executive and professional employees made a killing, the businesses got stuck with the flawed securities.
Now that the business is moribund for Wall Street and growth prospects for many NYC banking entities are a decade away (if the debt were to be retained), the thieves have conned government officials into a bailout by declaring the end of the financial world unless government caves in to their demands. This is blackmail. It is immorality of the highest order. Why? Because the sins of Wall Street are being shifted to Mom and Pop taxpayers so that the taxpaying public has little chance of experiencing real income growth over the next decade.
Contrary to the Paulson plan, Wall Street should bear its own burden. Also, the bigwigs of Wall Street owe reparations to the American public and the world. Public outcry from coast to coast is more than warranted. For once, the U.S. Congress should show a little spine and perception. But don't hold your breath; if the past is any indicator of the future, they will not only cave in but try to load the bailout with more pork to boot.
Granted, some will argue that the bailout is necessary to prevent a financial holocaust. Not so! It is possible to get through this ugly patch in our economy by changing a few regulations. No bail out is needed; just earplugs because of the shrieks of Wall Street that would result.
The most important regulatory change to be made in place of a bailout is this: There should be a suspension of the regulations that require financial institutions to mark the value of their assets to the current market environment. (The public has been carefully inoculated against this idea because it would undercut the need for a bailout.) Once mark-to-market is suspended, Wall Street is solvent again — its assets sufficient to meet reserve requirements. It does not need to seek new assets. Stock prices stabilize and the crisis is over. But while Wall Street survives, it loses its ability to be the center of capital creation for the new world. (There is priceless beauty in that!) But wait. There are three other things that must be done if this strategy is to work properly.
First, we need a full disclosure and transparency requirement — an absolute necessity when mark-to-market is suspended. Full transparency will dramatically crimp Wall Street's business. Wall Street will have to sit on the sideline with its bad debt, while watching new competitors gain strength. Second, we need a stringent set of controls to keep the money supply in line with economic fundamentals (so that working folks can enjoy the benefits of increased productivity and business efficiency). Third, the U.S. Congress must change its thirty year old mandate to the FED. Instead of requiring growth (which benefits Wall Street), it should require that the money supply be directed to the advantage of real industrialization and the development of technologically advanced infrastructure.
If these recommendations were to be implemented, it would pull money away from the quasi-Ponzi system of Wall Street, redirecting the capital into productive activities that are less easily preyed upon by Wall Street elites. Currently, too much of America's net worth is tied up in a stock market that is inefficient in converting the capital into productive enterprise.
Do you want to help save America? Bring these considerations immediately to the attention of your representatives in the Congress. And get this alternative plan to the attention of worthy people in the media! We need a national conversation, not rushed legislation in the environment of fear. And tell your short-sighted friends to lay off the shorting since it is pushing us into the very trap that Wall Street has laid.