Im sorry you lost money in WB, I lost money in WM. I dont think either of these banks had to fail. I agree that changes are needed but I dont think the proposed bill was any good at achieving what needs to be achieved. For example: it would have been a lot simpler had the feds increased the amount of fdic insurance provided to $1 million six months earlier and had not permitted 100% financing on mortgages to begin with, if the sec had enforced the ban on naked short selling years ago, and if the government had flat out said we will not let these institutions fail. Instead they just confiscated the banks and sold off the assets to "friends" at the expense of investor and debt holders.
Now they have created a two tiered system- There are a select group of too big to fail "friends of ---" financial institutions and then there are thousands of others who are potential roadkill. How would the proposed bill have undone any of this damage? To me this bill was and is akin to invading Iraq as a solution to al-queda. rah rah rah but no connection. For example I think that it would be much cheaper to increase the fdic insurance on banks to $1 million and spend more money on regulating them properly, not letting them do stupid things that nobody understands. Then banks could raise money in the open market, and the fdic rather than rating agencies would be responsible for the soundness of the institutions. Over time confidence would be restored. This is a plan under which we would not be promoting the few at the expense of the many. We could set up a
federal office in each state, who would have the power to modify mortgages where the owner/resident can make a mortgage payment that would cover the current 30 year rate of interest on what the house is currently worth. The government could then subsidize part of the loss to the mortgage holder. In return, the governement would get its money back, if the property were sold for a profit at some future date. I believe that such a plan could keep a large number of properties from being foreclosed upon and add to the current glut. While I am not happy about authorizing the government to modify legal contracts, clearly we are in a situation that call for drastic means, but they should be means directed at solving the problems that we have, not creating new ones without solving the old ones. On a corporate level, we could establish a federal institution that would purchase real assets from financial institutions at appraised values if need be. I strongly object to the purchase of multiple asset backed securities. These are investment banking products that should never have been purchased by financial institutions to begin with. If they were stupid enough to buy them then they are stuck with them. |
