Tuesdays with Tuke
September 23, 2008
Of Blunders and Bailouts
What do you call it when hundreds of financial executives become enormously wealthy from stock options, bonuses and commissions generated from financial transactions so fundamentally unsound that their very existence has threatened to bring down the economy of the United States? You call it a Bush-McCain-Alexander financial policy blunder...
Tuesdays with Tuke
September 23, 2008
Of Blunders and Bailouts
What do you call it when hundreds of financial executives become enormously wealthy from stock options, bonuses and commissions generated from financial transactions so fundamentally unsound that their very existence has threatened to bring down the economy of the United States? You call it a Bush-McCain-Alexander financial policy blunder. What do you call it when the taxpayers are asked to rescue the very companies that employed these executives, and executed these transactions, by covering their massive losses with U.S. government assets? You call it a Bush-McCain-Alexander bailout.
The circumstances I wrote of in last week's Tuesdays with Tuke ("Financial Failure") have come to a predictable head. Now we (that's right - you and me and all the other U.S. taxpayers) are being asked not only to protect Freddie Mac, Fannie Mae, AIG, and various investment banks and their executives and major shareholders from losses their own greedy investments created, but to bail out an entire industry at a cost likely to exceed $1 trillion. Moreover, Bush-McCain-Alexander want us to trust the completion and supervision of this mortgage industry bailout to the very Bush appointees who allowed the crisis to occur in the first place.
Well, I say not so fast! Of course Congress must take immediate steps to stabilize global financial markets by authorizing careful and controlled U.S. government intervention. But this does not require writing a blank check for Wall Street welfare. Instead, Congress should authorize careful investments by the United States Treasury in troubled mortgage assets (including some of the institutions that hold them) to protect essential credit markets and to ensure the stability of the global financial structure.
This must be done with care, direction and oversight. None of our United States assets should be expended to protect executive golden parachutes, to bail out foreign banks that took advantage of the U.S. subprime mortgage market, or to fund bonuses to brokers who traded in high risk securitized mortgage instruments. United States Treasury support must be accompanied by demands for strict accountability for what has occurred and for future financial transactions, by assurances that other nations will support their own threatened financial institutions, and by requirements that American mortgagors and debtors are protected as part of these relief measures at least to the extent of protections afforded to financial institutions.
In addition, there must be operational oversight of this intervention by qualified financial professionals who answer only to the U.S. Treasury and Congress, and if the assets the U.S. government protects increase in value, the United States should realize its fair share of the profit.
Finally, Congress must enact legislation and engage in active congressional oversight that will require the proper regulation of the financial industries once again. The Bush administration let the greed of certain players in those industries run rampant, and Republican Senators like Phil Gramm and Lamar Alexander enabled it by permitting the de-regulation of segments of the banking and investment banking industry and by blocking regulation of subprime mortgage lenders and hedge funds.
That is another reason I am running for the U.S. Senate: to offer Tennesseans a choice of someone with many years of experience as a lawyer in the financial services industry who has knowledge of its proper regulation, who will stand up to powerful financial interests and their lobbyists, and who will watch after ordinary Tennesseans whose mortgages and financial futures are just as seriously at risk as those of the financial institutions for which this bailout seems intended. I offer Tennesseans someone to replace Lamar Alexander, who has received millions from the financial services industries and who has never attempted to impede their demands for a free reign over our financial well being - demands that have been met to the immediate peril of our nation.
Together, let's Take the Hill.
Semper Fi,
Bob Tuke