SEE THE REBUPLICAN STUDY COMMITTEE’S ALTERNATIVE PROPOSAL – “A WORKOUT – NOT A BAILOUT”
ECONOMIC RESCUE ALTERNATIVE PLAN
September 29, 2008
We believe that policymakers must act decisively and correctly.
We believe that we can help Wall Street “workout” of this crisis, not force the taxpayers into a “bailout.”
We believe that voluntary private capital, not involuntary taxpayer capital, will help the system recover.
A Work-Out—Not a Bail-Out
- Stabilizing Financial Markets:
Require the Treasury Department to guarantee losses up to 100%, resulting from the failure of timely payment and interest from mortgage-backed securities (MBS) originated prior
Private-Capital Off the Sidelines by Empowering Private Investors
- Net Operating Losses: Allow companies to carry-back losses arising in tax years ending in 2007, 2008, or 2009 back 5 years, generating a tax refund and immediate capital. Despite the presence of willing buyers, many firms with MBS are not willing to sell at such a huge loss. Such a carry-back provides a cushion for any such loss, making firms more willing sellers.•
Bank Losses on GSE Stock
: Allow banks to treat losses on shares of preferred stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital losses.
Reforming a Failure in Government Institutions
- Limit Federal Backing for High Risk Loans: Mandate that GSEs no longer securitize any unsound mortgage that is: (1) not fully documented to meet minimum requirements for work, assets, and income; (2) written to comply with any law or regulation that would otherwise violate a firm’s lending rules.
Suspend “Mark to Market” Accounting: Direct the SEC to suspend the mark-to-market regulatory rules until the agency can issue new guidelines that will allow firms to mark these assets to their true economic value. The current rules contribute to a downward spiral as firms have to evaluate their assets not on the basis of their long-term investment but rather on a short-term mania.
Stabilize the Dollar: Repeal the Humphrey-Hawkins Full Employment Act which diverts the Federal Reserve’s attention from long-term price stability to short-term economic growth. In an effort to fuel the economy, this additional mandate has encouraged the Fed to keep rates artificially low, fueling economic boom and busts, and now a strong up-tick in inflation and the decline of the dollar (as investors free dollars for hard assets). This reform would require the Fed to establish a numerical definition for price stability and maintain a policy that promotes it over the long-term.
Oversight and Corporate Accountability
- Executive Compensation Limits: Require the Treasury to write rules prohibiting excessive compensation or golden parachutes to executives of failed companies at the expense of taxpayers.
Strict Enforcement of Laws Designed to Protect Investors: Task the SEC with reviewing the annual audit reports of entities the federal government has brought under conservatorship or now owns, and determine if those annual audit reports from years 2005 to present accurately reflected the financial health of those businesses.
Staff Contact: Russ Vought, 202-226-8581, firstname.lastname@example.org
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MCAULEYSWORLD WEBLOG – wants these three items included in any “Bailout” package – Congress should stop us from continuing down the same road that got us here in the first place.
1) Suspend the operations of the Community Reinvestment Act (CRA) the Act that fostered the development of the NINJA and LIAR Loans.
2). Withdraw the Boston Federal Reserve Manual, that changed the underwriting standards for mortgage loans, from use. This is the manual that was used to coerce Banks into making the worst of the sub-prime loans.
3). Implement the proposed 2004 Accounting and Oversight Provisions for Fannie & Freddie that were blocked. Will Congresspeople stand up now and say – “There is no problem with Fannie or Freddie” ?
These suggestions do not require an outlay of taxpayor cash.
Lets correct the problem before we try to clean up the mess.
Filed under: Bailout, Bailout Bill VOTE, Bailout Negotiations, Bailout Opposition, Banking Crisis, Financial Crisis, Tax Payer Rip Offs Tagged: | Bailout, Bailout Negotiations, Bailout Opposition, Republican House Plan B