Thursday, May 27, 2010
I oppose any more federal government bailouts of financial institutions. Secretary of Treasury Henry Paulson is making a desperate attempt to bail out the money center banks and investment houses that recklessly gambled their businesses on risky bets on mortgage related assets backed by houses which are worth less than the debts owed. Thus, he is essentially taking the far riskier path of gambling what is left of the United States credit rating upon assets that the banks cannot sell to anyone (except the U.S. Treasury). These "assets" are essentially worthless as nobody in the know in the banking or financial industries will pay a nickel for them. Secretary Paulson is requesting essentially dictatorial power over the proposed bailout. He is asking for a blanket prohibition on judicial review of his actions. He is asking for a blank check on taxpayer funds for at least $700 million dollars in order to prop up the prices of homes and to save otherwise insolvent banks. This is lunacy of the highest order. See section 8 of the proposed bail-out plan: "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." I strongly object to this "trust me, I'm with the government" approach. Secretary Paulson is not a prophet. He does not really know the consequences of his proposals. I am fearful of all kinds of inside and corrupt deals if this type of largess is given to one man to control without any substantial oversight. There is no way that the Treasury can put the humpty-dumpty of insolvent financial institutions back together again without severe financial stress upon the Treasury. Either taxes will be raised or inflation will be used to hide the real tax on citizens. The fact of the matter is that the bubble in housing has burst and it is not coming back any time soon. Prices must adjust to their natural level. Any attempt to manipulate prices upward is bound to fail and the measures proposed will cripple the economy for years after the market would have otherwise adjusted to the changed reality of lower home prices. We must face reality. The tax, spend and borrow-some-more mentality of our incumbent politicians has been ruinous to our economy, our freedom and our overall happiness. Throwing good money after bad is the quickest way to economic ruin known to mankind. Those people and institutions that brought us this speculative bubble should suffer their losses and find honest work instead of pleading for billion-dollar handouts and transfers of wealth from people who are financially more prudent.
Posted by Doug Cloud at 2:20 PM