So it looks like I’m not the only one who thinks the bailout should be dropped…
I had been taking some time to pour through the version of the bailout bill that the House voted on, but the Senate threw a wrench in that by releasing another version. This new one is 450+ pages! I just don’t have the time to read something THAT large…
As I mentioned the other day, the bill the House voted on grew by a few pages. My first perusal was a quick one, intended to figure out what the deal was rather than digging into the nitty gritty. Now, however, I want to understand it a bit more. So, here are my current thoughts.
First and foremost, all the brouhaha about executive pay, I would like to go on the record by saying that this is nothing more than a big fat RED HERRING! Look, executives get paid a lot. They get all sorts of bonuses and end up getting massive payouts, even when companies fail. The current wording in the bailout bill (in the senate version too) really doesn’t block anything.
But, let’s look at it another way. First off, you need to understand what a golden parachute is. Simply put, it’s a guaranteed payout that top executives get *IF* the company fails or is taken over. In short, unless that executive loses their job, there is no payout. The purpose of the bailout plan is to prevent companies from failing, which means that executives wouldn’t be able to take advantage of the golden parachute anyway. Also realize that the provisions in the bailout bill are only in effect for companies that are assisted, and only for as long as they are assisted. Sure, there’s a chance that some companies will still fail, but even if 10 failed, and the average parachute was $10 million, that’s only $100 million. That’s a drop in the bucket compared to how much this bill is going to lay on the line… So let’s stop pretending that executive pay is the only issue here.
This bill also gives the Secretary of the Treasury an unprecedented amount of power. There are so-called checks and balances in the form of justifications, but if he wanted, he could easily sink a company, purely by stating that they were a risky investment, as if any of them aren’t… That is a fairly large amount of power to put in the hands of someone who used to run one of those companies. As I mentioned before, he may be a stand up guy, and he may have the best of intentions, but the temptation is definitely there.
The rest of it is pretty much everything that has been in the news. Insurance, paid by the bailed-out institutions, public reporting, oversight, etc. One important note is the modification of existing mortgages. The only mortgages that can be modified are ones from companies that get bailed out. If your bank doesn’t take part, you are out of luck.
The new bailout bill, per the senate, has some additional “stuff” in it.. Let’s see… Tax breaks for motorsport facilities, a bunch of energy stuff, disaster aid, etc. The list just goes on and on… So much for bailout, this thing is loaded with crap. I’ve heard estimates of $150 billion or more in extra junk. It’s unreal how large these bills can get in just a day or two…
Well, we’ll find out what happens next.. The bailout just passed. 263 to 171.
Shit.