The $700 billion bailout debate began in earnest yesterday. There is much to consider - the amount of the bailout, the wisdom of risking tax payer money to bail out the market, the inclusion of foreign financial institutions, the details of what loans can be purchased, what form the purchasing agency will take, how long the agency will last, the need for and the type of tax payer safeguards.

What is being debated though is additional provisions.

This bill needs to be focused, quick, simple.

Presidential candidate Obama says, "Swift and unprecedented action to shore up Wall Street must come alongside equally swift and serious efforts to help struggling families on main street, create new jobs, and grow our middle-class once more."

Frankly, Presidential candidate Obama is still a Senator. He can introduce any legislation needed to shore up main street that he feels is necessary, but this bill needs to be clean and quick.

The Housing and Economic Recovery Act passed in July was loaded down with excessive legislation. It was much too large for anyone to know what was included into the law.

This bill should not be weighed down with excess. It is a simple.

One idea is to provide warrants for equity in institutions that would receive these bailout funds. That would seem to me to be a deterent for institutions to participate. It seems to cloud the measure, and lead to the US nationalizing commercial entities.

Choices that financial institution would have in dealing with these assets.

• negotiate their own modification
• negotiate short sale
• foreclose
• sell to this bailout agency 

Likely, if warrants are required to sell to the bailout agency, then foreclosing is a better financial decision for the institutions.

My understanding of the plan is that the purchases would not enrich the coffers of Wall Street. These debts would be purchased at a discount, giving a significant loss on each sale.

The program is just to purchase assets, at this point not just mortgage assets. These assets have value, and should at some point become liquid again. The federal government is in the best position to modify these assets in such a way that they can become performing assets.

This plan is to restore liquidity to the global economy, by removing underperforming assets. Foreclosures will be stopped, not by extra legislation, but by loan modifications making payment affordable.

Treasury fact sheet for bailout.

Richard Smith
American Acceptance Mortgage, Inc
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