Wednesday, September 24, 2008

Bailout Thoughts (UPDATED x2)

While we have many anti-communist impulses on this week's $700 billion bailout chatter, we've purposely hesitated to comment with the hope facts would emerge with which we could trust and form and convey sensible opinions.

We agree - if the market is in a free-fall and this is the only option, then do it with a firm plan to re-sell the assets as soon as their value returns. But is it the only option?

We agree - with fellow conservatives that this is a form of communism - government owning industry. It isn't that far from Russia's takeover of Yukos. One is a "rescue", the other overt theft, but both are government takeovers.

But we're puzzed by the following:
1) The more it is discussed, the more Secretary Paulson is isolated as one of the few pushing for immediate bailout. Why? Because it mostly helps his former co-workers on Wall Street?

2) The two biggest groups screaming for more time are the conservative members of congress, and the Communist Party USA! How did that happen?!

So, we're staying on the fence with the plan to chime in later as we know more.

In the meantime, a great article in today's WSJ about William O. Perkins III, a trader that made $1.25 million last week on Goldman Sacks. He plans to spend this profit on a campaign exposing the bailout crowd as "communists". That got our attention! And he's an Obama supporter. Where's the Advil?

He has spent some of his profit on the cartoon above, and will spend the rest on nationwide ads.

"I see it as trickle-down communism," Mr. Perkins said. "We have a communist action where everybody is paying for the benefit of the few and hoping the benefits will trickle down to everyone else.
What Mr. Perkins got back was a cartoon showing Messrs. Bush, Paulson and Bernanke planting a flag in the graveyard of capitalism, Iwo Jima-style, with a hammer and sickle where the field of stars would normally go. Mr. Perkins said he plans to run a series of antibailout ads nationwide until he has spent all of his Goldman gains. "I've gotta give that money back," he said."

Comments are on. Tell us what we're missing!

UPDATE 7PM: Newt Gingrich spoke on Hannity & Colmes on the bailout subject. We liked what we heard. Here are the highlights:

1) He calls it "an appalling bad plan", and says it will be "an engine of corruption". Says it will be a "nightmare to implement". Calls it "socialism at its worst".
2) He says the bailout will buy assets at above the market value, not less than the market value.
3) Suggestions: Use rolling 3-year average mark-to-market, zero capital gains, adopt a US-centric energy plan, and loan money at treasury+2% to let entities fix their bad-debt problems themselves - a "workout" rather than a "bailout".

UPDATE 9.25 11AM:

More links and quotes on the subject:

Rush hits the analogy perfect in his Wednesday show:

Barack Obama is nothing different than a high-risk loan. He has no history of accomplishment. He has nothing besides a nice smile and a firm handshake as evidence that he can deliver what he promises. The White House should not be available to high-risk people, such as a 144-day junior senator who has a myriad of highly-questionable, high-risk associates. And when he fails? We will be asked to bail out the United States for the damage that he caused. I'd like a little more collateral on a presidential candidate than just having Bill Ayers, Jeremiah Wright and Tony Resko as co-signers on his application.

Larry Elder adds perspective on the significance of bank failures on our economy in his Townhall column today, Is Capitalism on the Ropes?

According to the FDIC, in the almost two-year period of 2007 and 2008, 15 banks failed. Similarly, during Clinton's last two years in office, 1999 and 2000, 15 banks also failed. In the recession-free years of 1988 and 1989, there were 1,004 bank failures. And since the Great Depression, the average number of yearly bank failures has been 94.

The WSJ editorial, The Candidates Vote 'Present', says "the behavior of both candidates has an air of running for political cover":

...count us as mystified by Senator John McCain's decision yesterday to suspend his campaign and call for a postponement in Friday's first Presidential debate so that he and Barack Obama can work out a consensus bill to stabilize the financial system. This is supposed to be evidence of leadership?

Mr. McCain's decision follows an equally odd suggestion from Mr. Obama yesterday morning that the two candidates issue a joint statement of principles and conditions for the financial rescue package. As a purely political matter, we understand why Mr. Obama would just as soon say "present" on a tricky Senate vote. He probably figures the current economic mess plays into his argument for "change," so why not minimize any differences with Mr. McCain on the Paulson plan as he heads to Election Day?

We also understand Mr. McCain's desire to further dress his campaign in "Country First" gilding, as if patriotism and consensus are one and the same, or that getting something done is more important than getting it right.
As candidates, however, they are not serving the public by hiding behind a fog of faux bipartisanship that obscures their core economic principles and their approach to governance in times of crisis. Far from being an issue that is above electoral politics, the financial panic is too serious not to have a serious discussion about.

And another from Hugh Hewitt, Hugh himself this time:

Obama’s halting response to yesterday’s dramatic announcement`by John McCain followed by his about-face and agreement to attend the meeting convened by President Bush even as he insists that tomorrow’s debate go forward reveals much more than standard operating bumbling by Obama when the script he's been reading from unexpectedly changes.

Obama appears to genuinely not grasp the stakes here. He is not acting like a leader who understands the risks the country faces. And this is not surprising giving his experience gap when it comes to money, work, and savings much less finance.

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