I was in Mill Creek earlier this evening having sushi with my daughters and everytime we drive down into Mill Creek I say the same thing: “I remember when this whole place was nothing but trees!” They’ve already heard the stories about how I use to leave the house at dawn with the neighborhood boys and play in the woods all day until dinner time. But they haven’t heard the stories about the banks. As I was driving back up the hill, I was stopped at a horribly long stop light which gave me time to ponder the bank to my left, a Wells Fargo, and educate my children: “That bank use to be a First Interstate Bank. Before that it was an Olympic Bank.” Before that it was something else.
With so much shock and awe over the past few days about the possible imending doom headed our way unless we quickly pass Paulson’s bailout plan, and all the taxpayer backlash on the blogs as well as being reported in the MSM, the new question becomes, well what are some other worthwhile ideas for how to get us out of this mess? Today, Dr. Krugman suggests that we consider anything coming out of Henry Paulsen’s mouth to be a lie. This might be a good way to solve the financial crisis extremely fast.
“So, this morning Hank Paulson told a whopper:
“We gave you a simple, three-page legislative outline and I thought it would have been presumptuous for us on that outline to come up with an oversight mechanism. That’s the role of Congress, that’s something we’re going to work on together. So if any of you felt that I didn’t believe that we needed oversight: I believe we need oversight. We need oversight.”
What the the proposal actually did, of course, was explicitly rule out any oversight, plus grant immunity from future review. Read more here.
Want to see Henry Paulson in action? Watch this quick video. When he’s testifying, at the part where he says “I want oversight” watch his head go back and forth in a “no” motion. I tend to believe people’s nonverbal signals over the words they say.
The Paulson/Bernanke bailout plan details are starting to rise to the surface:
One thing is clear – something we all guessed correctly – is that the intention of the plan is to pay premium prices for troubled assets to recapitalize the banks. It’s still not clear how the price mechanism will work, and unfortunately Paulson and Bernanke are unable to describe how this will work..
This means the TARP plan would buy assets from banks at a higher price than what the banks could get if they tried to sell them at fair market value. Bernanke and Paulson believe the assets are being unfairly underpriced in the free market because of their bad reputation so instead, they’re proposing that the taxpayers subsidize the re-capitalization of the banks.
One analyst says it would take at least 5 trillion for the proposed plant to work.
Why not let the banks come clean and sell their assets at today’s prices, and we can spend taxpayer money building back up the FDIC insurance fund. Weaker banks will fail and stronger banks will buy the assets of the weaker banks from bankor from the FDIC after failure. Big banks like WaMu could be split up into smaller entities which will be easier for many different banks to absorb.
Eleua, a frequent commenter on this blog, has been working with a group of other like-minded individuals and he has penned an outline for a solution here:
There is a solution that costs the government nothing, eliminates “moral hazard,
