553 - Wall street

Wall Street bailout rescues the wrong people


09/27/2008

Crime, punishment

The huge scandal known as the subprime mortgage problem makes Jesse James look like Robin Hood and Al Capone look like The Lone Ranger. The people who perpetrated these scams are criminals. The crimes they committed include the preparation of fraudulent loan applications, the encouragement of those preparers to commit felonious acts, the processing of applications with full knowledge of their fraudulent content, the camouflaging of these fraudulent loans by packaging them with legitimate loans, the misrepresentation of the value of these packages with full knowledge of the content and the guaranteeing of the value of these packages with full knowledge of both the misrepresentation of value and lack of adequate resources to back the guarantee.

These actions are criminal. The failure to charge those responsible and to allow these perpetrators to ride off into the sunset on their white horses shouting "Hi Ho Silver" is intolerable. I'm not talking about only the borrowers and the agents; I am also talking about the bankers and the brokers.

The fix: The government should buy selected batches of these loans at 25 cents on the dollar. These loans then should be examined individually. For any of those in or near default, an attempt should be made to renegotiate the terms of the loan based on the buyer's ability to service the loan. New terms should be established as follows: The principal should be established at the higher of the current appraised value of the home or 85 percent of the paid-up balance of the original loan; fixed interest rate no lower than 5 percent; and terms not longer than 40 years. If these conditions cannot be met, foreclosure would be the last resort.

Under no condition should immunity be considered for the people who created this problem.

William C. Ells | Town and Country

Astockalypse now

Members of both houses of Congress and parties were right to inist on modifying the Paulson bailout plan that was steaming through Washington, D.C. The initial proposal for a $700 billion life raft may have momentarily averted a rapid plunge in many portfolios, but it could not resuscitate a nation already drowning in debt.

It gave unprecedented authority to the Treasury secretary, even as the Treasury and Federal Reserve already grabbed powers beyond their mandate. It prohibited oversight for how the money would be spent and had no accountability for those responsible for this mess, or any provisions to re-engineer the financial markets to prevent a similar disaster.

Lastly, there was no guarantee it would work. Despite the frantic tales of how "something must be done," our legislators contained themselves and avoided heaving a blank check at this problem. A thorough and comprehensive approach includes transparency in the credit-default swap market, oversight for any taxpayer funds approved and real mandatory reform for the Wall Street institutions that failed us.

Steve Skikas | St. George

Suspect plan

The Bush administration's proposed $700 billion Wall Street bailout grew more suspect every day. Testifying before the Senate Banking Committee, Treasury Secretary Henry Paulson blamed Congress for misunderstanding his desire for oversight of the largest bailout ever: "We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us ... to come up with an oversight mechanism. That's the role of Congress.... We need oversight."

Interestingly, his simple three-page outline (which he tried to insist Congress approve immediately) said exactly the opposite: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."

Given Mr. Paulson's blatant lying to obtain unprecedented power, Americans should be extremely skeptical of his motives and his plan. The administration's fear-mongering and evasive maneuvers convinced anyone paying attention to reject the bailout plan as proposed. Those responsible for this mess should clean it up.

Paul Sedovic | Glendale

Bailing out or in?

With our national debt approaching $10 trillion on a $14 trillion economy, with our fiscal-year deficit at $400 billion and next fiscal year's deficit forecast at $500 billion no matter who is elected this fall, with $300 billion spent already and a legislative package to secure another $700 billion in bad debt from our private financial markets, you wonder when someone in our political leadership will realize that you use the bucket to take water out of the boat, not to put water in the boat.

Tim Ekren | Shrewsbury

Siren song

When I consider the troubles of Wall Street, despite that it has inflicted me with its siren song — my 401(k) — the idea that the U.S. government must rescue Wall Street is stupid. Remember when capitalism would rescue everyone? How is your retirement plan doing? If the CEOs really were working for "the good of the stockholders," they would not accept multi-million dollar government bailouts and golden parachutes for failure.

So how is socialized medicine unacceptable but socialized Wall Street acceptable?

Bill Belgeri | St. Louis

Third opinion

By eliminating banking controls, Congress allowed the creation of a very large money-making scheme, which started to fall apart with the continuing scandal.

In addition, Congress has allowed Mr. Paulson and the Treasury's Financial Management Service to collect income and pay expenses for most federal agencies. With this commingling of federal finds, nobody can know where our taxes of more than $1 trillion are spent, wasted or stolen.

Congress has betrayed the American people.

Anthony J. Windisch | St. Louis County

Best solution

The savings and loan meltdown of the late 1980s caused the federal government to create a resolution trust to acquire non-performing assets from distressed S&Ls. That helped end chaos in financial markets, but it also bailed out many of the people who created the meltdown, which we should avoid this time around.

The so-called "subprime" affair appears to be a scam that repeats the methodology of the S&L meltdown. It basically is the same "oops, we made some bad loans" — on steroids. Perhaps as much as $2 trillion dollars has been stolen this time around. Home values have plummeted and financial markets have lost billions of dollars in value, thereby reducing the value of savings and pensions.

Where did the "lost trillions" go? Most likely, the subprime perpetrators have their ill-gotten gains safely tucked away in off-shore accounts and investments. At a time when so many people are suffering, so many people are sacrificing, so many people are dying in wars and so much effort is required to keep our nation safe, how dare a few rotten apples rob us, drain the treasury and put America at greater risk?

To argue that a systemic failure to document the ability of borrowers to repay mortgage loans is accidental is ridiculous. The financial system is set up to prevent this kind of transaction, not promote it. Any future resolution trusts should include law enforcement actions to investigate, identify, arrest and prosecute the subprime perpetrators. Financial scams will not end without accountability. It's time to hunt down these financial terrorists, seize their assets and put them in jail.

Dwight Arant | South St. Louis County

Build the base

Again, the government is going to make good on strangers' bad decisions. The people who lost their homes still will be homeless, but the companies whose business practices caused the problem will be healthy. Let's take the $700 billion and give it to the people with these predatory loans so they can keep their homes.

The government could suspend withholding through 2008, infusing cash into the economy. The Congress should rewrite the tax code so that there is no income tax on the first $26,000 of all income and an $8,000 dependent credit. For a family of four with two wage-earners, the first $68,000 would have no income tax, putting about $10,000 into the hands of people who need it.

Let's build the solid base the economy had from 1941 until the late 1970s, creating a true middle class with solid employment and wages that allow for a modest home, a car and incidentals.

Kevin McConnell | St. Louis

Let the chips fall

Regarding "Bush seeks $700 billion bailout" (Sept. 21): Either you believe in unregulated capitalism or you believe in socialism. If you're a Republican and believe in the free market system, then you should be appalled at the very notion of government intervention.

These banks, investment houses and insurance companies made very bad business decisions and should be allowed to fail. After all, they have been allowed to succeed and take massive profits for years and pay very low tax rates (if they paid any taxes). This would create hundreds, if not thousands, of new businesses, that would pick up the pieces of these former behemoths. Smaller businesses usually make much better business decisions than monster corporations.

I doubt any politician would take such a principled stand. So, at election time, I will note where Rep. John Shimkus, R-Collinsville, stands. He is, after all, one who toes the party line. If he truly is a conservative, he would express outrage at this huge expansion of government. Alas, I'm sure he's a good soldier and will get behind President George W. Bush.

Joe Varda | Troy, Ill.

Unbelievable gall

I can not believe the gall of the Secretary of Treasury and Federal Reserve Chairman Ben Bernanke. If the executives of Wall Street do not want to participate in solving their fiasco by capping their salaries when they take government money, then let them go bankrupt and get nothing. What we would have spent in saving them from their own greed and stupidity we can give to the people of the United States to spend. Seven hundred billion dollars should keep businesses humming.

It is unbelievable that this administration is having another crisis that it said required carte blanche from the rest of the government and that it even was considered. Fool me once, shame on you; fool me twice shame on us, Congress and voters.

Seymour Krout | Frontenac