How to Spend $700B and Actually Solve the Problem

The Bailout Plan's Rough Road Through Congress

House Democrats are very concerned that the GOP will try to use the bailout as a populist rallying cry on the campaign trail, as a few conservative activists have already counseled. Some Democrats have even suggested that they will not vote for it unless Republican nominee John McCain does the same. They are adamant that "this has to be done together - we all hold our noses and jump at once," as one Democratic leadership aide put it.   Wednesday, Sep. 24, 2008   Enclosed herewith are the most two recent CNN polls on $700 billion spending:  Back to home page QUICK VOTE RESULTS Thanks For Your Vote!  <!-- -->1. What's your view about granting taxpayers stock in any company taking part in the proposed $700 billion bailout? It's needed to approve the plan 41% The plan should be approved with no conditions 7% No bailout in any form 51% Total responses to this question: 53876

Back to home page QUICK VOTE RESULTS Thanks For Your Vote!  <!-- -->1. What should Congress do with the $700 billion proposal to take pressure off the credit markets?

Pass the legislation quickly	16%
Pass it, but add stimulus and foreclosure relief	32% 31%
Reject it	52% 53%

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This week almost everyone is eying at one thing: $700 billion proposal made by those Bush Boys.

There are at least two roots we have to consider: One is the root of a democracy and the other is the root of the recent financial chaos.

It is easy to agree the root of a democracy and summed up as "of the people, by the people, for the people."  But it is not so clear that we agree the root(s) of the recent chaos in our economic system. 

According to the two CNN polls, there is a lot of angry expressed by American people.  However, no matter how hard people cry against the idea, it seems the Bush boys' proposal is going to be put into the next act and become one of our laws per those reports this morning.  Sound weired?  who cares of the voice of the root of a democracy?  Where McCain or Obama stands for?

Everybody has his angle.  Greedy, fraud, bad regulation, ... and try to find a scapegoat to be pointed at, you name it.  George Bush, Henry Paulson and Ben Bernanke said that the root of the recent hardship rests on the illiqidity of those big financial institutions.  Is it the true cause?  No, it is just the syndrome or consequence as a result of the Wall Street Ponzi.

However, I believe that it would be acceptable that housing bubble is the immediate cause which ended the fancy Ponzi games created and played by those big fat cats.  If the housing price could keep up, everybody is happy and we have no problem at all.  The real root of this financial chaos is the housing price going down rapidly. 

Let's go back a little bit.  At the beginning those Bush boys claimed that housing problem would be "contained."  They invented some extraordinary program to ease the problem: tax rebate of $600 in the Spring and a crazy "rescue" law to combined "public home equity sharing" and "loan relief with a banker's kind cooperation" in July.  What happened?  The tax rebate went into history.  The "rescue" law is literally pronounced "ineffective", if not "dead" as some said, even before it is effective this coming October.  Now, they even change their tones.  They used to say "the economy is fundamental sound," even a few weeks ago.  Last week, they have begun to say "It will be disastrous if we don't act." (Excuse me, does that mean they are trying to translate "to act" into "to accept" or "unconditional surrender": to accept their proposal that is the last defense tool for saving all of us?)

Well, now those Bush Boys come up with a so-called "broader rescue" plan.  The original 3 page project asked a dictatorship style control of the fund of $700 billion.  They have intimidated our people and threaten our Congress that a big disaster would come if we don't act or accept their proposal.  That remind some of us of Bush's wolf lies, such as those leading us to the Iraqi War.  After their ineffective plans, can those Bush boys accomplish their mission this time?  No, I don't give it a dime.

Just forget those big pictures, let's see the specific Bush proposal. 

First, let's not argue over the question: "do we need the money to act?"  Just let assume we do need the money to act immediately and see if we have the money of $700 billion? 

 (Note: I believe there is in deed no legitimacy and emergency for such a Paulson's plan.  It is very questionable why we need the Paulson plan and what is the motive for him to bring it to us.

Need proof for it?  For a recent example, please look at what just happen to Washington Mutual who has $310 billion asset and $190 billion deposit.  OTS took it over last night in an unusually urgent speed.(some called it "breathtaking."   Even Alan Fishman, who took over the title of chairman of  WaMu 16 days ago, was knocked off while he is on an airplane from DC back to Seattle.  Why is it so urgent?  Don't ask me.  Just look around who is benefited from it?  Oh, my God!   Great, I love it.  The same steal for them: 3 cents for a dollar deal, again?)   But read in between of what OTS Chief said.  He said, "there is no cost to FDIC or taxpayers and create a seamless transaction to all the concerned." 

What he meant?  All the financial students predicted that FDIC would have a loss of about $90 billion and quickly run out of its fund because WaMu would cost at least ten times what Indymac did.  In fact, It seems nothing happen even the biggest thrift of our country failed.    NO, no big deal.   No turmoil like bank run after the seizure.   Sun still comes up, the Wall Street is running (no crash or collapse).  And hard to believe, stock price is rising up this morning.  It is totally contrary to all the scary episode described by those reports.   Looking at the cool WaMu realities, in particular, with bad news in general economy, Paulson's action is freaking enough to me. 

Who decided WaMu is failed as they did in Indymac case?  Oh, It is purely an Administrative discretion to act very agressively to meet an urgent need to protect the public.  In other words, it is the Treasury or Mr. Paulson.  Yes, nobody can go ask a court of law to review the seizure decision as Henry Paulson wanted for the $700 billion in his 3 page proposal.)

No problem, Bush boys said they could run our printing machine in highest gear to create as much as we need with Congress permission. 

Second, how could we spent the fund on those Wall Street big fat cats, if created in the way Bush Boys want? Are you comfortable with it?

Give me a break.  Those Bush Boys are very smart guys, if not knowledgeable.  They want to get money from our Congress and turn around give it to the Wall Street Cats in the form of "blank check"?  If you are the boys, I don't expect you would just hand the money over to someone, especially those who created the turmoils bringing down their company and our global economy? Why those Bush boys are so adamant that there is only one (last?) solution: to give money (surrender) to those spoiled bad boys or die?  Since when we American people are the hostage held as human shield against the bankruptcy of big cats?

The very important issue I have problem with is: when the Bush boys have so much confidence on the Wall street cats, how come they don't believe we, the average Joe on the main street, have the same ability to spend money like those crazy guys?  Believe me we can do much better.

Third, is there no other alternatives except to accept those Bush boys' blackmail?

Well, it seems to me that those Bush boys are so brave to try stopping snow falling on American land in the winter.  How come they are not dare to stop the Hurricane Ike landing on my Texas land?

Why I say so?  Don't blame me.  In terms of economy, real estate is NOT a productive asset.  For a business, a cheaper land is always sought for to reduce its operation costs.  May I ask: why those boys has only one way street in their mindset: they just want keep housing price up in the sky while it is going to fall naturally?  Why don't they let it be and release the pressure as an earthquake?  

When we see only 8% of California people can afford the median house and a lot of American people spent more than 50% of their income on housing, what you feel?

Of course, Mr. Fuld, CEO of Lehman Brother earns $17.000 an hour while he has running his corporation into bankruptcy.  Those big Wall Street cats can easily buy any McMansion.  But, how about Mr. Joe on the main street?  The asset distribution nationwide is expanding to such unbearable level.  20 years ago, the statistics said those CEO earn 30-40 times the income of its worker.   Nowadays, they earn more than 300 times. 

At least, you will agree that the housing market is not affordable to an average Joe.  The high price of housing is not sustainable in terms of our income.  Particularly in the past 4 years, it is not reachable by any responsible citizen for home/ shelter, if they are not a participant of NINjA loans in the abnormal Ponzi games.

Instead of inflating the price tag of housing as only means, why don't we have some sort of brainstorm: what will happen if the housing price is naturally going down?  Does our society need those big fat cats to operate?  Or we can have a more healthy structure waiting for us to pursue for a better future of us and our next generations?

Let's go to more small fine frameworks.  President Reagan has a famous phrase used in his first national campaign against G. Ford and J. Carter: "Let's try a different course."   If we followed his wisdom, we would know there is a different course for us, if it is not sure safe. 

Say, how about go for a "asset distribution" project to DIRECTLY dispense those $700 billion to our people's pocket?

Does it sound too crazy to scare you to death?  Give me a break!  What makes it so different from those Bush boys' Spring "tax rebate"?  Certainly, it is very clear that there is one difference:  the amount of distribution.   Does Bernanke say the amount of rebate is not big enough to stimulate the economy?  If it would work as those boys said, but just not big enough dose, why we don't make it double like we did in the bar, or tripple or hundred times?

Some students release their studies and call our nation "A Debt Empire."  Figures also tell us that American people has a lot of debt.  As I recall, we have $6,500 per capita (or per family?).  If that's the case and if we agree to send our citizen (the root of our country) a government check to use up the fund of $700 billion, what would happen?

Easily we know that an American household will receive about $8,000 to $20,000 (per the Census, we have more than 3 persons in a household.  It is not rare that we have a much bigger family out there which has 5-6 persons or more.)  With this amount of money, most of us would be debt-free like a bird.  If not enough for some people, they'd feel some relief.  I guarantee that they don't have to act as weired as some of my neighbors knocked on my door and asked for a loan of $30 to fill gas, am I right?

If the Bush boys' most recent "broader rescue" can be considered as a "President" pardon to those Wall Street cats for what they have done, why we are unable to equally give the president pardon to the main street Joe for his financial mistake made in the past?

Okay, you're going to say Joe is not going to change his spending behavior as a drug addict.  Well, let's be fair.  Is there any pledge or guarantee from the Wall Street cats to promise "no future misconduct" under the original 3 page Paulson's plan?  Nothing mention about "limits on CEO's perks", am I right?  Then, why we pick on the small Joe?

Well, let assume the worst come into both situations.  The fat cats keep doing the same old shits (trust me it is a truth in my observation), what can happen?  The recent crisis is NOT solved at least.   Look deeply at the Joes, the picture is totally different.   Joe kept his habit to recklessly spend the money to enjoy shopping spree, what happens?  All the retailer will be delighted to see it and wish it is the case, they won't give us a terrible projection to say the coming holiday sale is dimmed as GE did today.  The economic vitality will resume or revive, everyone is happy and business is booming including GM automaker who won't need to file in bankruptcy because their Hummer is hot, let alone its Chevy's volt.  GM takes back the number 1 position globally.  Are you proud of America now?

Now let look specifically at real estate.  Recently I run into a lot of families who cry out "our dream home" when they step into my property.  They can enjoy a lot better home than they have now.   But they never make me an offer.   There are problems as you know: they are not a "ready" buyer.   They have job.  They have enough money to pay the monthly payment since it is about half of their rent.   You may say, the problem is no bank financing is available as those Wall Street boys said "clog in the financial channel."  

No, don't be so simple-minded.  Our ancestors did business so smoothly and successfully even before those Wall Street cats existed.  In my deal, I do my own seller financing, I am the banker.  The buyers don't have to go talk to any banker or loan officer.  The real problem is they don't have $2,000 down payment, let alone my minimum down payment of $5,000.  No deal can be made.

This "broader rescue" plan is so bad to real estate.  With the free lunch hope in sight, the REO bankers are too reluctant to deal with their non-performing assets.  There is no incentive for them to get rid of those assets at a so-called "fire sale price" to end up to get 30 cents for a dollar if they believe they can get 80 cents from the foolish Bush boys.  I used to wonder why there are at least 25,000 REO back to bankers in California in 3 months, only 4,000 shown up on the market.   Now I know one of the reasons: they have tried to use their influence, relationship or manipulation to dump them unto our government at the expense of taxpayers.

We know some home owners are trapped.  There are a lot of situations.  For example, they love to upgrade their living condition and want to buy a new home, due to outgrown or whatever.  The problem is their home can not be sold.  Then they are unable to buy their next dream home.  It is a vicious cycle and business is not moving.

In the above cases, three problems can be solved if our Congress send check to Joe and he spend the money, not to save it, as down payment. 

There are so many ways to spend the fund more wisely than giving it to the big cats.   Don't tell me that we have no choice but to use the well-established Wall Street machine.  Look at Indymac case, FDIC took the private bank over on July 11 and immediately created a brand new Indymac Federal bank on the next business Monday July 14.  It is functioning well under our government control, am I right?  Does this new bank has illiquidity problem?

Do you like my idea of "Cash Santa"?   At first, I expect that you will say: "you are crazy!"   Am I?  I know you have at least one problem with it: WHERE COMES THE MONEY?  I don't blame you. 

Certainly there is no such a Santa.  It is not from Santa too.  But don't give up, let go back to the beginning.  Did the Bush Boys say something?  Where they can get the reminding $695 billion after Warren Buffet bet in his $5 billion on Lehman?  Their goal is simply to get the Congress approval and let them spend it in their way beyond law and supervision of us or our Congress.    (note: Section 8 of Paulson's plan states: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency."  Who can have such a power?  The quick answer is the King Paulson.)

If the Congress issue the approval, money (or more precisely "credit") is deemed to be there, right?  If that's the case, what's the problem for us to spent it and give to our root/ people and to give it to the fat cats through a so-called "bailout" plan? 

Well, "cash distribution" is much better and effective than other alternatives if our Congress needs to act.  Take a right action and do it right at the first time.  It is better than CNN's "stock sharing" proposal.  Half of American don't like to own a share of those bad corporation stocks, but I am sure that nobody will be up against having a pure solid US government check and say "I want a cashier's check from a banker."  

Don't believe me, go ask CNN put my cash distribution idea on its poll.