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Saturday, September 27, 2008

BAILOUT OF 2008 – A NEW WORKABLE PROPOSAL

BAILOUT OF 2008 – A NEW WORKABLE PROPOSAL
What is presently happening in Congress concerning the so-called 700 billion bailout is typical of what happens there every day. Perhaps by the end of the day they will pass a package which will help get us out of our financial mess. But I believe there is a way out which has not yet been proposed.

1. Secretary of the Treasury Hank Paulson proposed a 700 billion bailout package which met a lot of resistence in Congress. It was an initial proposal which brought Congress’ attention to the problem. It apparently consisted of three pages which everyone knew would eventually mushroom to many times that as the proposal was refined.

2. The proposal consisted of a suggestion that the US treasury used 700 billion in funds to buy toxic mortgage entities which were bringing down many financial institutions. It was suggested that these toxic mortgage entities would be purchased at rock bottom prices and eventually sold at a later date for considerably more money bringing a profit into the Treasury. The banks would have these toxic entities off their books so that they could begin to do business as they did in the past. The buying of this bad debt would most likely be a grant to the institutions even though they would be selling the entities at rock bottom prices and incurring some loss.

3. The Treasury wold eventually make money when they sold these toxic mortgages later after the real estate market turns around, which it will eventually do.

4. This is where my proposal takes a turn. Why should these financial institutions bee off the hook. These are all good companies with the potential of making considerable profit almost from the get go. These companies have made billions of dollars in the past and have the potential to do so again.

5. After these companies begin to make profit again why can they not begin to repay the Treasury and either slowly re purchase the toxic mortgages or repay the money directly? When the Treasury purchase the toxic mortgages they should receive some kind of a promissory note from the institutions in the form of a promissory note or warrants. A formula could be devised whereby the Treasury could receive just recompense from the companies who were saved from the brink of extinction. The companies should not be allowed to wind up debt free.

6. Unfortunately, the Democrats are adding pork to the package which will induce the ire of the Republicans – like giving outright grants to the leftist organization called Acorn whose nefarious activities in the area of voter registration is becoming more evident by the day. It is amazing to me how and why Congress can take a simple situation and convert it into a complicated mess.

7. Let us not forget that repayment of a loan is not unprecedented. Some years ago the federal Government loaned money to Chrysler. After this auto company became profitable it repaid the Treasury the entire debt plus interest. So properly done these bail outs can be done and the public can profit from the deal.

nicola michael ©. Tauraso, M.D.)
Director, Tauraso Medical Clinic
Web site: www.drtauraso.com
Blog site: http://www.drtauraso.com/blog/index.htm
Email: drtauraso@drtauraso.com

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