Otto von Bismarck is credited with the phrase, "The less people know about how sausages and laws are made, the better they'll sleep at night." So much more sleep disturbing is how economic policy has been made since Ronald Reagan who convinced us if we just scrap regulation and let the rich keep more of "their" money, we'll all eventually get rich.
I listened intently yesterday to the testimony of Treasury Secretary and Goldman Sachs ex-CEO Hank Paulson. I'm listening with just half an ear to Fed Chair Ben Bernanke right now as he continues to push for the Wall Street bailout of Bush's billionaire buddies.
Now that Congress seems willing to inject some oversight into the plan, let's consider some advice coming from far beyond the beltway.
Susan Hammitt, a financial councilor from the Portland area offers these ideas to protect homeowners and penalize financial pirates:
| ||Recast all mortgage loans under $1,000,000 at a low interest rate (4%) with a maximum LTV of 100% of fair market value (regulated by FHA standards). This will stabilize the housing market, keep millions of people in their homes, and be equitable for a majority of American households footing the bill for the bailout.|
If homeowners can not afford the payments based on this criteria and it was their primary residence, provide them a bailout, 'walk away', sell the house to another owner occupant and keep the economy functioning.
Also, it's time to criminalize what has been going on in the financial markets. Every executive in these firms knew what they were doing, it was predatory! Let's get real in America.
Local curmudgeon and law professor at Lewis and Clark, Jack Bogdanski has this advice:
Why not throw these into the package?
While we're completely rewriting the rules of American capitalism -- or more specifically, erasing all the rules and handing the pencil over to the Secretary of the Treasury, here are a few new provisions I'd like to see considered:
1. It shall be unlawful for any employee of any company whose securities are traded on a public securities market to receive from that company or any of its affiliates in any 12-month period compensation for personal services that totals in the aggregate more than $1,000,000.
2. It shall be unlawful to buy or hold any future, forward, option, swap, or other derivative contract, except to the extent that (a) the underlying asset to which the contract pertains is also owned by the holder of the contract, or (b) holding the contract is reasonably necessary as a hedge against risks that would otherwise be incurred by the holder in the conduct of his ongoing trade or business.
Way too drastic? Can these problems be addressed effectively with different rules?
[See also Paulson's first pitch from Sunday.]