There has been quite the brouhaha in the right side blogosphere (including on this site) over the no vote on the bailout from Cong. Gresham Barrett, as well as the opposition to the bill from Senator Jim Demint. While I often agree with my friend Bob McAlister on issues, I have to gently disagree with his take on the vote this week.
The bill that came to the floor this week presented the largest expansion of the federal government since the Great Society. While we all (or at least most of us) agree that something needs to be done to stabilize the markets, there are serious and legitimate reasons to believe that this bill wasn’t it. Kudos to Senator McCain for giving the House Republicans their voice back, and allowing them to step up to the plate and stand up for the American taxpayer by voting No.
Take a look at what House Republicans are bringing up as an alternative this week.
* Require the Treasury Department to guarantee, at up to 100 percent, bank losses resulting from failed mortgage-backed securities originated prior to the plan’s enactment. Such insurance, supporters say, would provide immediate value to the securities and a foundation for which they could then be sold. The Treasury Department would finance that insurance by assessing a premium on outstanding mortgage-backed securities.
* Allow companies to carry back losses arising in tax years ending in 2007, 2008, or 2009 back five years, generating a tax refund and immediate capital
* Allow a “repatriation window” for profits earned by U.S. firms overseas. Such repatriation amounts would not be taxed if invested in distressed debt (as defined by Treasury) for at least one year.
* Allow banks to treat losses on shares of preferred stock in Fannie Mae and Freddie Mac as ordinary losses, not as capital losses
* Suspend the capital gains tax rate for two years
* Limit backing of high-risk loans by Fannie Mae and Freddie Mac
* Schedule Fannie and Freddie for privatization
* Suspend “mark-to-market” accounting until the SEC can issue new guidelines that will allow firms to mark these assets to their true economic value
* Stabilize the dollar by repealing the Humphrey-Hawkins Full Employment Act, which alternative bailout supporters say diverts the Federal Reserve’s attention from long-term price stability to short-term economic growth
* Require the Treasury to write rules prohibiting excessive compensation or golden parachutes to executives of failed companies
* Task the SEC with regular, annual audit reports of entities the federal government has brought under conservatorship or now owns
By including sunsets on Freddie and Fannie, a removal of “mark to market”, and a retroactive business tax credit, House Republicans proved today that they are serious about improving the legislation and fixing the economy without putting every single American man, woman, and child (illegals included) another $2300 in the hole by spending $700B in money we don’t have (and would have to print to spend, a seriously inflationary step that would have other ramifications).
Kudos to House Republicans for standing firm yesterday, and kudos for continuing to work to stabilize the situation today with serious proposals that can work without bankrupting our future. Clearly, the markets are also encouraged by these developments, as the Dow regained nearly 500 points today despite a lack of a bailout vote. (and Rush agrees…)
If the House Republican version is the next to be voted on, I hope it passes. If the Dems tack left, and put in the left-wing goodies for ACORN and La Raza back in the bill to try to buy votes, as has been reported, then every Republican, including the three from SC who voted “yes” on Monday, will almost assuredly have to vote no.
One other, final, potentially more serious note. At this point, I’m also for the resignation of Treasury Secretary Paulson. Having the former Chair of Goldman Sachs sit down with the current Chair to bail out AIG, which Goldman just happened to own a $29B stake in, with federal dollars, while allowing other firms to fail without a bailout, and with no other apparent explanation as to why this one gets bailed out, but not the others, stinks to high heaven. Paulson should resign immediately.
Paulson’s actions, combined with a culture of corruption in Washington (in BOTH parties) provides yet another reason why a proven reformer like John McCain should be our next President, and why his choice of Sarah Palin (another proven reformer not afraid to take on corruption, including in her own party) was the right thing to do. Don’t be surprised if calling for Paulson’s head (as he did for Chris Cox) shows up on McCain’s radar very soon.