I like this proposition...but the ideas is that every body should get at least some thing not the select few. Why don't u write a letter to New York times, Washington post and WSJ??? really good idea
The Treasury plan to buy illiquid financial assets has been widely criticized as being unfair to taxpayers, who will have to bear losses ahead of shareholders of the institutions that will be bailed out. [The Public Deserves a Better Deal] Corbis There is a better alternative to stabilize the markets: Invest the $700 billion of taxpayer money in senior preferred stock of the troubled financial institutions that pose systemic risks. Let's call this the "Preferred plan." In fact, it is the Fannie Mae and Freddie Mac model -- which the Treasury Department has already endorsed and used in practice. It is also the approach Warren Buffett used for his investment in Goldman Sachs. There are major problems with the Treasury plan. First, by buying banks' worst assets at above-market prices, taxpayers take an immediate economic loss -- while transferring wealth to shareholders and executives of the very institutions that brought on the financial crisis. Second, this plan puts too much discretionary power in the hands of Treasury officials. Who determines what financial assets are purchased and at what prices? Who determines which bank gets to benefit from these taxpayer subsidies? Will bank shareholders continue to receive dividends, and executives continue to get paid huge bonuses? When financial institutions borrow massive amounts of money to invest in assets that are now found to be illiquid and poorly performing, it is not the responsibility of taxpayers to bear the resulting losses. These losses should be borne by the shareholders. If taxpayers have to step in and provide capital to keep operating enterprises that the government decides are key to the functioning of the economy as a whole, taxpayers must receive protection. Treasury Secretary Henry Paulson said at the Senate Banking Committee hearing this week, "[the] Fannie Mae and Freddie Mac [interventions] worked the way they were supposed to." These enterprises continued to function, maintaining homeowner access to and lowering the cost of mortgage financing. However, managements of these companies had to leave and forfeit the compensation packages they had negotiated. Shareholders had their dividends blocked and remain first in line to bear losses, as they should have been. Taxpayers came both first and last -- first to get paid back, as the new preferred stock is senior to all shareholders; and last in realizing losses, as common and other preferred equity would be extinguished before the taxpayers would be at risk. This mechanism -- purchases of senior preferred stock with warrants in troubled institutions -- addresses the problems with the Treasury plan. The financial market is stabilized, companies get recapitalized, failures are avoided, debt securities are supported, and time is gained for illiquid assets to mature. The institutions continue to function, their cost of funding will decline as equity capital increases, and innocent third parties like bank depositors, broker/dealer clients and insurance-policy holders are all protected. The only difference is that potential losses are kept with the shareholders where they belong. The Treasury plan would also entail larger outlays than the Preferred plan. By allowing all banks to sell their worst assets to Treasury at inflated prices, taxpayers would be subsidizing healthy banks which have access to private capital (Goldman Sachs, J.P. Morgan, Wells Fargo, and Bank of America, for example) as well as banks that don't have a private alternative. But under a Preferred plan, only banks that don't have a private alternative will be given federal assistance. This would reduce the outlay otherwise required to solve the crisis. Few people familiar with the issues deny that Treasury action is needed to stabilize the financial markets. However, the question is who should bear the cost? Under the Treasury plan the taxpayer pays the price. Under a Preferred plan, the shareholders of the firms who created the problems bear the first loss. Who do you think should pay? Before committing $700 billion of our money, we should encourage Congress to take a few extra days to get this legislation right. Mr. Paulson is president and portfolio manager of Paulson & Co. Inc., a New York-based investment management firm.
I like do like above plan a lot better compared to anything we know about the 700b plan. I think it's similar to Swedish bailout plan of 1990. The problem many people would have about it is nationalisation of wallstreet.
If things as bad as they say (without recession straight to depression ) than more people will loose their jobs. People need constant source of income, they do not need $600 donations per year of $1,000 tax cut. What is better to make $20K per year and get tax cut or make $50K and pay 20% tax? Or have no job at all? Yes I know bankers got rich and do not get to suffer as poor people suffering right now but their life style will not change much even if economy will suffer 5-10 years of severe recession or depression. It will make them even stronger and richer because they will scoop everything for pennies. People who bought their houses for $500K (in California) will not be able to sell it for 50K cash because majority doesn't have cash savings. Who will be able to afford it? Those who's got cash. Majority will not be able to survive 6 months without pay. Another thing to consider is relationship to crime rate when unemployment is high.