The Bailout failed, roll call here
I am happy to say my Representative voted against it. The Democratic tally was unfortunately for it. I am disappointed with our leadership.
The problem was Pelosi and Reid wanted a bi-partisan bill. Yet we already know that the Republicans have no morals and will always go for personal gain over the good of the country. The republican’s couldn’t get the 70 votes they promised, and thank God. Though they needed 12 No votes to swap to pass. Those 5 promised but not delivered wouldn’t have made it.
What we need is a partisan bill, passed by Democrats despite the Republicans. The bill should be modeled after the successful Sweden bailout. Without the compromises that working with the Republican's demand we can actually make a bill that is good for this country.
This past bill was dangerous and nothing but a fig leaf on the Paulson plan. They need to move away from Paulson's plan and work with other plans actually designed by economists. Check out this link to two better bailouts
The summary is this:
- Force banks to write down assets to market value, stop paying dividends, and raise new equity. We've basically tried this, and except for the top firms, it hasn't worked: Because no investors are dumb enough to invest.
- Force banks to write down assets and then recapitalize them by converting debt to equity. This hits both bondholders and shareholders, and it costs the taxpayer nothing. It will also likely be so unpopular with Wall Street--and, more importantly, investors--that it would be politically untenable.
- Force banks to write down assets and have the government take equity stakes via preferred stock. This is the way Buffett invested in Goldman (he was comfortable with the carrying value of its assets). It's the way the Sweden did it. It's also the way any responsible private market investor would invest.
As you can see option 3 is the tried and true method.