Bailout: Who gains, who pays? Posted by Gail H at 09/23/08 11:46 AM

What do you get for $700 billion? Banks don't go under? What about those empty houses in so many neighborhoods? Consumers Union says that any bailout should be designed to stabilize neighborhoods, not just banks, by stopping the foreclosures. We think that the way to do that is both with new powers in bankruptcy courts and with special rules to make it easier to restructure a mortgage whenever the federal government has bought any interest in that mortgage. We say taxpayers should share in the benefits of any increase in stock price of bailed out investment houses and banks, and that there must be limits on big bonuses and severance packages for the executives who led their companies, and our country, into this mess. We want strong oversight of any bailout process, and real long-term mortgage reform. We also want rules for how the federal government later sells the "troubled assets" it buys back into the market, so that the bailout doesn't leave us a few years from now with a new form of "zombie debt." Zombie debt is outdated debt that shows up much later.
Read Consumers Union's statement: http://www.consumersunion.org/pub/core_financial_services/006177.html

Treasury's plan for the $700 billion bailout now being discussed in Congress is short on protections for anyone except the banks. Consumers Union has proposed that consumers, neighborhoods, and taxpayers be protected in the structuring of any bailout. Here are the key points we think must be included:

Help homeowners at risk of foreclosure: Prevent people from losing their homes due to foreclosures. Any financial institution that benefits from the bailout, and any mortgage in which the federal government purchases an interest with taxpayer dollars, must be subject to a mandatory, fast, effective restructuring process. These loans should be designed to keep consumers in their homes and help strengthen neighborhoods.

Give bankruptcy courts power to prevent foreclosures: Give bankruptcy courts the power to alter all mortgages that are in bankruptcy to help people keep their homes.

Stop Excessive Executive Compensation: Executives whose actions have caused the bailout should not reap the benefit of bad decisions. There should be strict limits placed on the severance, bonuses, and stock options and grants these executives receive.

Protect neighborhoods hit by foreclosures: Help stabilize neighborhoods already hard hit by foreclosures by rehabilitating vacant homes and revitalizing communities.

Prevent Bailout Abuse: Grant the government warrants to purchase stock in companies taking advantage of the bailout. This would let taxpayers share in the benefit if companies participating in the bailout turn profitable.

Be sure we aren’t just postponing the problem: When the government sells these assets back into the market, there should be restrictions on how the debt can be collected, so it doesn’t become a new form of outdated debt.

Make everyone who profits responsible: We have to change the way mortgages are made and sold so that everyone who gets a fee also keeps some of the risk of future nonpayment. Everyone getting a fee and passing the buck to the investor was a big part of the current crisis.

Require greater transparency: For businesses that benefit from the bailout, Congress should require greater transparency of financial firms' risk management and other business practices.

Oversight: Ensure that there is strong oversight of this bailout process but we also need a more long-term plan that provides strong and effective regulations to avoid future mortgage and credit meltdowns.

Curb abusive credit card practices: Give taxpayers a break too by including credit card reform. Cash-strapped consumers shouldn’t continue to be gouged by excessive credit card rates and fees by the same financial institutions that will benefit from this bailout.

comments (8)

1 Posted by Daniel Nieliwocki at 09/24/08 01:34 PM

This is stricly a legislation "flag fraud ". This problem was set to action when Clinton deregulated some of the businesses of doing business and Bush did more to help his rich friends. If the people bail these corporations out then each "LEGAL CITIZEN " should receive the exact amount of stocks in the company, when it is broken down as to how much each one of us is paying.NO PARACHUTES any person doing business in such a way that is detrimental to the individual and the business "DESERVES NO "golden parachute

2 Posted by Dr and Mrs R.W. Springstead at 09/24/08 04:28 PM

If one CEO gets a dime from this bailout you are going to have a revolution on your hands. If one greedy Banker makes extra monies on this, or one politician makes money on this, We will scream to anyone in the press who will listen.
You need to realize that the U.S. is not beyond a Coup of the Government and people are livid on main street in regard to what is going on on Wall street.

3 Posted by Dave Williams at 09/25/08 09:13 AM

Bad decisions by loan institutions and by individuals cost the US taxpayer again. What is in it for the taxpayers. What motivation do we have for doing the right thing and being responsible by getting loans we can afford and for paying the bills?

4 Posted by Duwayne at 09/25/08 03:52 PM

The fact that banks etc got us into this mess and the Goverment seems to act like they were blindsided by this is proof enough that the american people are in much more trouble then we are led to believe. How can this sort of thing happen without the knowledge of our Goverment? Why do the tax payers that are already suffering expected to give money to already filthy rich CEO's? Our Goverment has taken us for nearly all we have and gotten away with it. We need our own monitoring system to watch what our Polititions do with our money. They simpely do not have to worry about paying bills or living day to day because we foot the bill, even for their $250.000 family vacations. The American public has been taken advantage of for long enough,this crap must STOP. No more pay hikes for already way overpaid Polititions,Bankers and anyone else who has climbed aboard the screw the taxpayer bandwagon.

5 Posted by Linda at 09/25/08 07:07 PM

Why are we allowing our ELECTED GOVERNMENT TO distroy this great country that we have? If they continue to try and make this country SOCIALIST we must find a way to reduce the amount of elected officials we have in Washington. I for one am sick and tired of working my fingers to the bone so they (Government) can take my hard earned money and give it to Special Interest Groups. If I failed to make my business work would they help me make it right?? NOT ON YOUR LIFE!!!!! Stop this insanity and boot the LIBERAL BUMS out of Washington. WE THE PEOPLE HAVE THE RIGHT TO FAIR REPRESENTATION, not to have Government constantly in our pockets. I say, NO BAIL-OUTS. Let the bums fix there own problems. Open the oil fields. Let businesses operate here with out paying extreme taxes. This would generate interest for companies to hire AMERICANS to work in their companies and allow this country to get back on it's feeT and flourish. WE WOULD ALL PROSPER INSTEAD OF A SELECT FEW. WE ARE AMERICANS AND WILL NOT STAND FOR MORE OF THIS INSANITY. FIGHT! FIGHT! FIGHT! GOD BLESS YOU ALL.

6 Posted by michele at 09/26/08 09:41 PM

Hey, Hey, Hey. What a gravy train. The homeless are living on the streets while all these homeowners are charging high rents for their houses and apartments. Boo Hoo kids of the 60's. For those of you that are antigovernment, how come everytime you get into trouble you land on Congresses front porch. It would be unconstitutional to bail out the "spoiled brats" above the homeless, the disabled, the uninsured and to tell Russia and the rest of the world how to run their business when we can't run ours. Perhaps Bush should cough up some of that oil money to bail all these spoiled brats out of trouble. No it ain't coming out of his pocket. This is a disgrace, and the people behind it ought to be investigated. And if you go to the property websites on this internet you will see the most outrageous home prices in your life. Where do people who cannot afford this game go. I know that our parents from the 50's did not teach us this. Where did all this come from. Our parents saved to buy a home. Perhaps a return to sanity might be the answer. No to the Bailout.

7 Posted by DJ at 10/15/08 08:29 AM

What about Ralph Nader's comments that trading - buying and selling stocks should have a transaction tax just like a sales tax when an item is purchased in a store?

8 Posted by Lisa P. at 11/20/08 12:39 AM

It was apparently not enough to cover the mortgage crisis up with a TARP. No, Treasury Secretary Paulson’s Troubled Asset Relief Program wasn’t the kind of credit repair scores the endangered homeowners needed. Now that Federal Deposit Insurance Corp Chairman Sheila Bair has pushed a new mortgage modification program forward, 1.5 million homeowners will have someone new on their side when they’re facing foreclosure. This $24.4 billion program will be drawn from the $700 billion pool that TARP set up, and it’s a very straightforward system. Lenders will be given a stipend of $1,000 per loan they renegotiate with financially stuck homeowners, and in the event of default on a loan, the FDIC has promised to take on up to 50 percent of the loss. Paulson has condemned this as mere spending that will only bankrupt the FDIC, others view this action on Bair’s part as a needed investment to maintain liquidity in the mortgage industry. While this won’t solve all of the problems at once, it’s certainly a valiant effort to help repair credit, isn’t it?

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