To bail or not to bail?
That is the question facing lawmakers this week ” and they may cut a deal by the weekend ” in the face of Wall Street’s financial meltdown.
With the credit markets ” the lifeblood of this country’s economy ” contracting faster than a startled armadillo, President George Bush last weekend proposed that the government spend up to $700 billion to buy mass of financial companies’ bad debts. In theory, the feds’ action would get the debt off those companies’ books, allowing them to lend money again, and our economy could start rolling again.
We’re torn, but the plan is probably the better among several bad alternatives. And there’s a real possibility that taxpayers might actually make money on the deal, since many of these bad loans will look a lot better ” and can be sold at a profit ” in the next year or four.
Of course, anything that gets done in Washington comes complete with political posturing and preening, and the bailout package is no different. By the time Congress acts, though, we’d like to see a few things in whatever legislation is passed.
– No golden parachutes. The executives of any company participating in the bad-debt buyout absolutely cannot walk away with zillion-dollar bonuses or severance packages.
And it has to be a “my way or the highway” deal. Want to save your company from the bad decisions made on your watch? Then you don’t even get bus fare home.
– The bailout can’t become a permanent government agency. We’d like to see a firm end date for whatever bureaucracy is created to manage the bad debts taxpayers buy. At the end of, say, seven years, the bailout machinery must be dismantled. If the crisis persists, Congress can only extend the bailout agency in one-year increments.
– Management for profit. The managers of the bad debt must be required to administer these investments in a way that will make a profit whenever possible.
– Take care of Main Street. This might require separate action from Congress, but we’d really like to see the adjustable rate loans that got so many home buyers in trouble fixed for five years or so. People could continue to make mortgage payments, the housing market would have time to recover, and home owners who got a federal reprieve would then be required to refinance their homes into fixed-rate mortgages.
If all that happens, this very large pill would be a little easier to swallow.
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