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Your Participation in the Financial Bailout

It’s your 700billion at stake, so speak up! I wrote my Congressman and both Senators today, and hope you’ll do the same (regardless of where you stand).

Here were my comments (heavily quoted from folks I respect):

I am against this bailout plan.

While I do believe government is equally culpable for this current situation due to its relaxation of regulation (repeal of Glass-Stiegel, investment bank exception for leverage ratios, etc.), I do not think buying assets at above market price is in any way the right solution.

You don’t solve the problem of over-leverage pouring more gas (credit) on the fire.

One of the key issues in Real Estate is one of affordability. Having assets come down to more reasonable prices in relation to income, while painful for those who bought at the top of the market, is a Good Thing for the majority and more in alignment with historical norms.

Regarding the stock market, I would rather see my 401k drop by $50k than have my families “share” (there are 5 of us) of the federal debt increase by the same. I have faith that if we maintain some semblance of a free market, my savings will recover in the long run. I don’t have same faith that the government will every pay off that debt (my children will be left with it).

The market is already hinting at the right solution:

– “People are breaking up their big deposits and CDs into $100,000 chunks covered by the FDIC. The big deposits tended to be in big banks; the chunks get distributed to local and regional banks (because there are more of them). Money is flowing but not the way Wall Street wants it to. The proposed bailout reverses the flow and pumps money back uphill to Wall Street.”

So, what should the government do?

“… Build up the Main Street defenses. We’ve already re-nationalized Freddie Mac and Fannie Mae to keep mortgages flowing. The quick move taken to stop a panic in money market funds was a good one. Make sure there is a standby appropriation for Federal Deposit Insurance. Get some massive public investment underway in thing there ought to be public investment in: the electric grid, maybe broadband, government energy efficiency, bridges and roads. Banks are not public infrastructure; they’re not where we ought to be investing public money.”

Artificially keeping prices high doesn’t end the pain from a burst bubble; it prolongs it (and shifts the pain from the ones who willingly purchased these assets at artificially high prices, to the taxpayer).

Please, if there must be a bailout, shift your support away from this ill-advised plan and towards a more thoughtful one. And do NOT fall pray to the panic of presidential politics that is trying to get you to make a decision today.

The last time congress made a rushed decision on the advice of the Administration, we ended up in an expensive, perpetual war.

Please do your due diligence.

Sincerely,

Michael Rahmn
Seattle WA

Comments on this entry are closed.

  • Steve Curtis October 28, 2008, 6:38 pm

    It’s like our house is on fire, fueled by a broken gas line. We have two choices … pour a whole lot of water on it and hope we can overpower the gas leak, OR turn off the gas line first and then put out the fire that’s left.

    DO THIS FIRST, fix the adjustable loans , THEN THE REST CAN FOLLOW …

    1. Stop all foreclosure actions nationwide
    2. Convert all adjustable loans to 30 yr fixed rate
    a. Interest rate to be 4.75% for owner-occupied
    c. Interest rate to be 5.0% for non-owner-occupied
    d. An incentive interest rate reduction of .25% to be given if the Borrower pays off all amounts in arrears or reduces their loan balance by 5% of its original amount, whichever is less
    3. Permit a one time retirement fund withdrawal
    4. Homeowners must “Opt-in” in writing
    a. Borrowers who have stopped making payments MUST make a partial payment, which the lender MUST accept.
    b. Loans must stay current.
    5. Within 60 days the Lenders will receive a NET INFLUX OF CASH THROUGH PAYDOWN OF LOANS / AND BACK PAYMENTS of approximately $39,000,000,000 … and that doesn’t count any funds from those whose loans have not reset yet (potentially $300,000,000,000 in paydowns).
    6. Within 60 days the modifications can be in place and generating approximately $6.6 billion per month
    7. Cost to Taxpayers close to $0000