The general consensus seems to be that bailouts are a bad idea. I tend to agree. But there are some things to think about before we say no bailouts.
Generally if you have money invested in IRAs or 401ks you will have a choice of investments. Usually one of those choices is some sort of money market fund which is where proceeds will go when you sell other investments. You can also invest directly in these funds. They are billed as offering low returns but being very safe. It now seems that some of those funds have been infected with sub-prime mortgages. I've discovered the money market fund for my 401k has collateralized mortgage obligations which almost certainly contain sub-prime mortgages. It also contains mortgage backed securities and commercial mortgage backed securities. Those two are questionable as to risk.
I've also found the "Government Securities fund" in an IRA account has heavy investment in Fannie Mae.
That's not the most secure investment if you ask me.
At many investment firms there may be no safe place to put your money. A few firms offer FDIC insured CDs, but many do not. So your choices may be limited to the stock market which has been on a wild rollercoaster ride lately or the money market fund which could be heavily invested in sub-prime mortgages. Anyway if there are no bailouts you may lose some of the money you have in those money market funds.
Its just something to think about.
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Bob Conley -- Nothing Free about "Free Trade Agreements"
http://www.youtube.com/watch?v=OmPlm7Zlf8c
Bob Conley believes that We need Fair Trade, not Free Trade!
http://www.youtube.com/watch?v=HaIIInmnMd4
Bob Conley on Term Limits
http://www.youtube.com/watch?v=wCF9k5pgC9E
Bob Conley -- Lindsey Graham is not Representing us!
http://www.youtube.com/watch?v=79DEBBtf4Vw
Bob Conley - Keep Energy Dollars in the U.S.A.
http://www.youtube.com/watch?v=eMNbVMPvD7E
Bob Conley Repeal the Federal Reserve Act of 1913!
http://www.youtube.com/watch?v=Ohh0_AvUsIE
Bob Conley 2,500,000 to L. Graham by ones wanting bailed out http://www.youtube.com/watch?v=uZjIk6T0PUc
Bob Conley "I am a problem solver!"
http://www.youtube.com/watch?v=Yq14HlakYvc
Bob Conley NO Amnesty for Wallstreet or Illegal Invaders!!
http://www.youtube.com/watch?v=LzDnJFRfg04
I found this letter while perusing some sights discussing the bailout. One sight suggested sending the following letter in mass to our reps... I'd like to get some opinions on the content.
Dear (your congressional rep)
I am writing to demand that any bailout of investment bank include a mandatory requirement for private co-investment.
As you know, the current plan proposed by the Treasury - and now being rushed through approval is designed as follows:
·Financial Institution with 'bad paper' will be able to sell their paper to the government.
·The government will then sell this paper to other investors at whatever discount they need to in order to 'keep the system alive'.
·The buyers of this paper from the government have no incentive to bid up prices because the farther the asset valuation falls, the more money the bankers will make.
·Ultimately, the public will fund the difference between the current valuation of the instruments and however low these same investment bankers can drop their bids.
Obviously, this is an absurdity because under Game Theory, the lower the bids are when the government sells, the higher the yields on these debt instruments.
What's worse, an instrument sold by one firm, such as hypothetically Goldman Sachs (or more likely the Goldman Sachs Asset Management group) could ultimately be purchased from the government bailout agency purchased by Morgan Stanley. At the same time, a hypothetical Morgan Stanley\asset sold to the government could ultimately be picked up – dirt-cheap - by the same Goldman group selling their hypothetical paper.
To my way of thinking, this "bailout" is a flim-flam deal. The investment "banksters" could 'wash the paper and take the spread' as things are presently proposed. As a Taxpayer, I am appalled and demand a better solution.
Is there an alternative? Of course!
Write and enforce a new provision requiring that any sales of government purchased instruments to private firms retain a minimum 90% public participation. Thus, when the [toxic waste] bonds are resold by the government, the tax paying public, which is footing the bill, would be compensated for its risk. Give the paper vultures compensation with a small 1-3 basis point spiff for managing the public's side of the deal.
The new deal structure would look like this:
·Financial Institution with 'bad paper' will still be able to sell their paper to the government.
But because the government will sell only a maximum 10% private share (the rest being the public's skin in the game) the markdowns would likely be less.
·The public would retain a 90% ownership position. Thus any profits made by the paper vultures would be diluted 10:1 and the public compensated for its risk.
In this way, the public would make back much of its initial cost and the debt load on the American financial system would be lessened dramatically - reducing the ultimate cost of the bailout dramatically.
As you can readily see, this approach - let's call it Private Sector Co-investment - will work very well, although now that the investment bankers have "seen the green" in the form of the rudimentary "bailout plan" which is nothing short of a banker's coup d'état, will scream bloody murder when a rational and money saving plan is proposed.
It all comes down to whether you represent the interest of the People, or the interests of the Bankers who began their theft of the American economy in 1913, but that's another story.
As a vote in your district, I beseech you to look out for the interests of the American Taxpayer and honor the intent of the Framers to defend and protect this Great Nation.
Sincerely,
(your namehere)