Obama has made a plea for bipartisan support for the passing of the current $800 billion package being debated before congress providing it includes 4 key points.
An overseeing independent board.
Taxpayers are to be treated like Investors-(This would be relatively simple by the issues of non voting warrants).
Additional measures to help those facing current foreclosures
Reward packages eliminated for those CEOs previously involved in the failed companies.
I notice Bill Clinton is currently doing the celebrity rounds and I listened to him the other night on the Letterman late show. He is more or less saying the same thing; to support the package and add those bells and whistles.
The question of those outrageous remuneration packages reminds me of the lectures we got from Management Recruiters who told us if we only pay peanuts we will get monkeys. It hasn't worked very well has it !! Still I have to admit those Wall Street guys were very clever to successfully export so much of their misery all over the world; sizable portions of AAA rated contagious toxic debt to so many eager buyers overseas.
But that reminds me of the fact many Americans don’t seem to fully appreciate it’s caused such severe indigestion overseas, to individual investors and provided the fuel for a possible severe world wide recession. This has meant both the Fed and its counterparts represented by central banks in Australia, Denmark, Norway and Sweden have had to set up additional currency exchange funding to provide a buffer to current pressures.
The other point that is not well understood is the likely eventual cost of this bail out. What is it? A trillion. – NO – It is very likely that it won’t cost anything at all since you can buy up most of these packaged impaired assets for a pittance, and eventually you’re likely to make squillins in the next 3- 4 years. This was clearly evident in aspects of the Savings and Loans crisis.
So why can’t the private sector do that ?
Fear!! Those who could and are sitting on mountainous piles of money don’t want to risk it. For instance Buffet finds it easier to take a stake in Goldman- this complements and fits in with Berkshire's profile - with assets of around $US278 billion including significant stakes in companies such as Wells Fargo & Co, American Express and the Washington Post Co. Foreigners are also becoming choosey
Don’t forget your overall debt is 375 % of GDP (the highest level ever as percentage) so there are limits (outside of government) with much to spare. !
It always been that markets overshoot on the way down and the reverse on the upside. That’s why you need regulation!! Hand on regulation that can pull the levers when they are needed, hardly a novel approach but one sadly lacking in the past. It’s also hard to spot a better opportunity for permanently changing the current regulatory system for the better and making it more transparent.