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  • Morning Bell: The Wrong Direction

    There is no doubt that past government intervention in the market, particularly by Fannie Mae and Freddie Mac, is largely to blame for the current financial turmoil. And while past government intervention cannot be used to justify further government interference, we also have to ask how much unnecessary pain the economy must bear. Absent action along the lines proposed by Treasury Secretary Hank Paulson, capital markets at home and worldwide would eventually normalize. But how many large and small companies are going to have to fail to make payroll because of failed credit markets before we get to that point? That is the question we are facing.

    The plan Treasury released Sunday was by no means perfect. It needed more oversight and more limits on Treasury’s power so that markets could be restored while also protecting the taxpayer. Unfortunately, the debate on Capitol Hill is heading on the opposite direction. Lawmakers, in particular Senate Banking Chairman Chris Dodd (D-CT), have only added proposals that enlarge Treasury’s mandate and encourage wider government intervention in the market.

    Government ownership of Wall Street: The Dodd draft instructs Treasury not just to buy select assets of distressed firms, but to also demand ownership of them. Treasury’s current plan already allows taxpayers to keep 100% of any profits from assets bought. There is no reason the government should be allowed to go beyond on this and be allowed to own and manage previously private firms.

    Destruction of contract: The Dodd plan undermines contracts in two ways. First, it directs Treasury to tell banks which mortgages they should and should not rework. Worse, it expands the power of judges to arbitrarily rewrite mortgage contracts. This will only increase the uncertainty that is plaguing the financial system.

    Government as human resources manager: Americans are understandably upset at the compensation packages financial executives have received over the past decade. But putting government in charge of setting compensation levels for private firms is not the answer. Pay should be decided by the company and its shareholders, not managed by a congressman or a bureaucrat.

    Housing slush fund: The worst feature of the Dodd plan not only directly hurts taxpayers, but it also encourages the very fraud and corruption that caused this crisis in the first place. Dodd wants to divert 20% of all revenues from the eventual sale of currently distressed assets into housing slush funds for his political allies.

    Markets both here in the United States and throughout the world fell yesterday as it appeared the Paulson plan might fail to win approval on Capitol Hill. According to The Hill, Speaker Nancy Pelosi (D-CA) is telling Democrats that she will not support President Bush’s $700 billion bailout unless there is significant Republican support for the controversial plan. Conservatives have a voice in this fight. A clean bill limiting Treasury’s authority to the absolute minimum is necessary to restore the markets and protect taxpayers

    Quick Hits:

    Posted in Ongoing Priorities [slideshow_deploy]

    10 Responses to Morning Bell: The Wrong Direction

    1. Danny Grimes says:

      Dear Morning Bell: If America is failing because of mis-management why do we contenue in the direction? I would as you how many Countries owe us money? What are the resources they have that could be used by us? Why are we suffering when our healthcare is being exploited by none citizens? Harsh times require extreme actions,Other countries are taking a very hard look at us now- and i might add so -are our enemies, as they are comming forward in this Black September.

    2. Sam Deakins says:

      The newest entry into the economic bailout mess is the fast food industry. McDonalds has announced they are in a tenuous situation and have sent Ronald McDonald to testify on Capitol Hill. McDonald will ask Barney Frank and the Senate for a bailout value package. The economic mess at the fast food giant can be traced back to the dollar value meal that McDonalds was coerced into backing to provide more favorable pricing for lower income folks who would not normally qualify for a Big Mac. It has been reported that Barney Frank is a recipient of special lower priced meals at the restaurants. Senator Chuck Schumer also has had preferential treatment from McDonalds by having his meals delivered to his home and office. As we all know..McDonalds does not deliver to the general public.

      Next up to testify will be the Burger King. I can't wait to hear what he has to say.

    3. Ken Jarvis - Las Veg says:

      What HF Doesn't tell you is that -

      Shareholders have NO Voice in Corp any more.

      HF = "Pay should be decided by the company and its shareholders, not managed by a congressman or a bureaucrat."

      This is a Socialistic System.

      It is Socialistic BECAUSE THE FREE ENTERPRISE SYSTEM FAILED.

      Example -

      eXXon has paid the SAME 40 CENT DIVIDEND FOR THE PAST 14 QUARTERS,

      even while Executive's are paid MILLIONS.

      $39 billion in bonuses Wall Street's five largest banks doled out in 2007.

      Shareholders would have NEVER approved that.

    4. Ken Jarvis - Las Veg says:

      What HF doesn't tell you is -

      Doctors, Hospitals, and drug companies got this money.

      The Senate Permanent Subcommittee on Investigations found $4.8 billion in Medicare payments for suspicious claims.

      Medicare patients can't cheat.

    5. Roy Fassel says:

      Offshore Drilling

      It will take 5-7 years for the offshore drilling to have any affect on our oil production.Why not cancel the ban immediately. As this is considered

      Heavy Industry it would also improve our middle class job opportunities. Welders, Fitters, Steel Workers, etc…

      74% of all wells being drilled today are for natural gas, not oil. Most of these wells cannot be brought on line due to the lack of inferstructure, mainly pipelines. No improvement in the oil shortage.

      If you want to have an immediate affect, pass laws that would stimulate onshore, lower 48 oil only drilling. If we increased our rig count to

      pre 1982 levels, or 4800 rigs, raised the count to 6000 rigs,this would have an immediate affect,

      by decreasing our forign oil imports.

      If we subsidized CNG & LNG usage using technoligy

      thats been around for 60 years, this would have an immediate affect.

      Who I'am I to suggest this, why I'am a 70year

      old, blue coller, retired american, who does care.

      Roy Fassel

    6. R. Rhodes, San Anton says:

      While I know the U S gov. had to help to with Fannie and Freddy. I hope the ones to blame are delt with. We middle Americas are ALWAYS the ones that get stuck with the bill and nothing ever comes our way. Why should someone with a $350,000.000, or whatever, house get a lower interest rate because they were stupid and were qualified at 2.5%. Knowing they could not qualified at a higher rate of interest.And why aren't Mortgage companies and mortgage broker held responsible for their actions? I am really tired of the middle class bailing out everyone.

      If you want to help someone, help the ones that make this country what it is. AND not the ones that always just take from it!!!!!!!!!!!!!!!!1

    7. Jack Kyle, Lubbock,T says:

      It seems to me that the current problems within our financial institutions are due largely to the social engineering programs forced upon us by the “if it feels good, we should do it” left wing democrats. These people believe that they are so much smarter and care so much more than anybody else that they have to control every ones lives from cradle to grave. They want to control who will be allowed to be born through the use of abortion and some day soon who will be allowed to live through the use of euthanasia. If you are lucky enough to live long enough you will see it, it may be the last thing you see.

      The reason why liberal democrats hate “Big Oil” and are doing everything they can to take control is because the oil companies have proven they can be successful even with their interference, and this they cannot abide.

    8. Michael J O'Bri says:

      Excellent topic for the morning bell… "The Wrong Direction". Indeed American is not only headed in the wrong direction but has lost its way. The case for fiscal responsibility has ceased to exist in this country. Congress is still in food line with the taxpayer's money, and they are willing to give it away to just about anyone. We have an urgent need to clean up our balance sheet and fiscal practices. These bail outs will be paid by treasury bonds, and we need other countries to have confidence in our fiscal integrity so they will continue to purchase treasuries. The weak dollar is signaling there is something wrong with our fiscal house and these issues must be addressed quickly and with force. The next President will have a monumental task of getting the fiscal house restored, and back to sound fiscal practices.

      Congress is the villain here with its liberal policies of spending our money and raising taxes, Dems and Repubs alike. Structure Finance [MBS and CDOs] have been around for 60 years, it was only when sub prime and Alt -A mortgages became the flavor of the day that this caused a crisis. Fannie and Freddie encouraged these mortgages and the off loading of the associated risks to the taxpayer. But congress has taken this irresponsibility too far with bail outs for the very people that should not be helped.

      Finally, Secretary Paulson, the administration, or Chairman Bernake have yet to announce an exit strategy that allows the government to exit the bail out should this program fail, or result in a dangerous drain to the GDP. Maybe this nut from Iran was right about one thing, the demise of America…I pray not, but we seem to at a crossroad and I hope we take the right direction.

    9. TopAssistant says:

      What nobody is talking about is our federal debt. Neither the useless Drive-By Media nor presidential candidates are talking about our $56 trillion, 942 billion, 900 million dollars debt. Politicians from both parties have long used our tax dollars to buy them our votes by “bringing home the bacon.” Here are a few websites to research: Pete G. Peterson Foundation, I.O.U.S.A., Ross Perot Charts, and Truth in 2008. You also might want to Google an article by Bill Walker titled, “Our $100 Trillion National Debt.” Once at the LewRockwell.com website there is a link to a speech by the President of the Dallas Federal Reserve, Richard W. Fisher. In a May speech at the Commonwealth Club of California, he states that the US national debt is close to $100 trillion. You can read his whole speech at the Federal Reserve web site.

      Keep in mind, just this year our federal government has spent $815 billion in bailouts, not counting on what the administration is going to promise TODAY!

    10. Pingback: Morning Bell: Having Their Cake and Eating It, Too | The Foundry: Conservative Policy News.

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