DISQUS

dad · 1 year ago

fundamentals

DCinDC · 1 year ago

This Bail Out is fishy. McCain and Bush are getting ready to do it to you one more time. Think of the Bail out as actually Bush and McCain has just raised your taxes .

DCinDC · 1 year ago

From DailyKos:

So here's a four-part solution:
1 Reinstate Glass-Seagall, overturn Gramm 2000. There is nothing wrong with investment banks as long as they are properly regulated, and their leveraged risks are separated from the regular credit markets.
If we did, anybody taking bets on whether Goldman would re-morph into an i-bank, and return as a private partnership....?
2 Set up "Home Bankruptcy Courts" alongside our existing bankruptcy system. There are two parts to this Point 2.
When you file for corporate bankruptcy under Chapter 7, the assets of the company become the property of the court. One individual (or individuals) is designated the "Responsible Person." The court appoints a trustee who discusses the possible value and disposition of the assets with the Responsible Person. Then the trustee tries to find a buyer(s) for the assets, ideally multiple bids to increase the price. The trustee finds a buyer, then makes a recommendation to the bankruptcy judge, both that the assets should be sold to this buyer for this price, but also recommending a specific allocation of funds from the sale.
There are rules about how the asset sale proceeds are disposed of ($10K off the top first to each employee, then the trustee, then her lawyer, then the trustee's accountant, then any state and federal taxes, then distributing the leftovers to the creditors including the investors). Depending on where you live, there is a bankruptcy "district" already set up for you.
My suggestion is that every homeowner who has foreclosed would download a one-page form or bring in a tax return filed within the past 60 days to the bankruptcy court. File the homeowner's financial status with some court paperwork. Receive a case number and be assigned a trustee. Sit with the trustee - this is face to face, no lawyers needed - and make a proposal about a new mortgage (monthly payments, term, amount).
The trustee will have as a reference "comparable sales" in the neighborhood. In other words, she will use existing methods for finding the current value of the house. If the homeowner is smart, she will also bring in her comparables data from the public record and MLS. Or the trustee can ask for an independent valuation. Sure, the bank takes a hit on the value, if the home is worth less than when it was (overvalued) and purchased. But a new mortgage would provide more value to the bank, the homeowner, and the community than the current system.
Those fearing foreclosure could do the same thing. The system is set up so that it's very difficult for scam artists to "game," trying to get a better deal on their existing mortgage.
Yes, bankruptcy courts will have to add staff, perhaps bring more judges out of retirement, and appoint more trustees. But it is a fair and reasonable approach, with plenty of oversight, and one that could be implemented immediately.
The second part of this Point 2 is to have the federal government make loans to cities and counties who wish to set up "Community Housing Foundations." These are usually philanthrophic in origin, like this great faith-based one in Kentucky, Faith Community Housing. In other words, have local entities buy up empty homes, care for them, rent them and eventually re-sell them. The city-county would keep x% of the sale, the American taxpayer would get y% of the sale. Not to mention converting a blight into a cache of affordable housing.
Think of it as a citywide-based Habitat for Humanity in slow motion.
3 Toxic Assets Stockpile. Paulson can set up a fund, but companies should transfer - not sell - their toxic assets to this stockpile.
Trustees would be appointed to manage asset sales. As in a plain vanilla Chapter 7 bankruptcy, the trustees should try to get the best price possible for the assets. As we watched Lehman implode, it was obvious that Barclays waited until Lehman hit the wall, then scooped down like vultures and bought the assets. [I can't help but wonder....did Paulson, a Goldman alumnus, allow this to happen on purpose to settle some old score....?...oh, never mind....]
One of Paulson's arguments under the current plan for "selling" these assets to American taxpayers is to raise capital for the companies offloading them. This is confusing asset valuation and those companies' liquidity requirements.
The companies should simply transfer toxic assets, no value assumed. When and if the assets are sold, the taxpayer should get x% and the company should get y%. In other words, compensate taxpayers based on the value of the assets in the marketplace - not on what Paulson thinks they should be.
I betcha that companies without toxic assets will be able to raise capital. In other words, just cleaning up balance sheets should improve their ability to tap into capital markets. However, if they need more, set up a special credit drawdown facility. This would be more expensive than interbank borrowing. There would be a natural disincentive to access taxpayer funds (more expensive than other forms of borrowing). Companies would only draw down what they need. The extra say, 100 bps over LIBORwould be how these companies pay for the right to restructure themselves.
Note that companies would still have a strong incentive to get the best price for toxic assets. At the moment they have no incentive, other than dump them into Paulson's plan and run.
4 Small business loans. Many of us are running small businesses in part by short- and longer-term loans from credit cards. Access to capital is one of the key issues facing us, see Small Business Majority. Right now banks send us entrepreneurs unsolicited credit cards for our businesses - but they want these corporate cards guaranteed by our personal assets. Not so fast.
If Paulson is so worried about small business owners, why not have SBA or SBIC issue corporate credit cards through banks? In other words, the bank issues a corporate credit card, but SBIC assumes some of the risk.
Small business owners win (access to capital on reasonable terms, not putting homes up as collateral), banks get to keep customers in business and develop a new line of business, and the Feds keep credit flowing to the people who are providing most of America's new jobs.

http://www.dailykos.com/storyonly/2008/9/24/115...