Friday, September 26, 2008

No Fan of the Bailout (Updated)

If the Woundup were to state some sort of "official" position on the whole bailout scheme, that position would be "against." I see this as nothing more than punishing honest taxpayers for the sins of those who just couldn't wait to jump into mortgages that they ultimately couldn't handle. I dare say that most of them were those creative mortgages that sounded wonderful until you got a few years into it and realized that once your "fixed" rate expired, your adjustable rate would suck your money out of your wallet faster than a vindictive ex-wife. (Not that I have a vindictive ex... it's just a metaphor that seems to work for a lot of people.)

When Woody was a pup (and several times since) he received advice from several people regarding his financial future. Given the fact that Woody has never actually completed a college degree (Whee! More ammo for my detractors!) he readily admits to being anything but a financial expert. Still, the advice received all those years ago holds true today: if something sounds too good to be true, it very likely is.

One piece of advice I was given stated that the only good mortgage was a truly fixed-rate mortgage. One where the lender couldn't play any head games with your rate, your payment, or the terms whereby you could make an early exit from the contract. Three times I heeded that advice. One time I was forced to enter foreclosure. Ironic, I suppose, that the only times I was able to even consider entering the market were those times where the interest rates were considerably higher than they have been lately.

The foreclosure was a bite. No two ways around it; they were difficult times for me on several levels. Seven years (minimum) of bad credit scores. I say minimum, because after we abandoned the house some dirt-bag opportunists (squatters, really) forged my name on some documents, promised to pay the lender some of those arrears, and dragged the foreclosure process out by at least a year after the house should have been sold at auction.

The point is, I took the hit. It affected me personally, and my new wife by extension. For the first seven years of our marriage we were unable to get anything that didn't have punishing interest rates due to that one blotch on an otherwise good credit report. And I accepted both the hit and the downstream consequences. I never once complained to any of my elected officials that, gee, the banks really led me astray and would they please pass some sort of legislation to give me some taxpayer money and help me keep my house. Whining was not an option. (Not to the government, anyway. I'm certain I whined to someone, but that was several years ago. No idea who that may have been.)

This bailout is touted by too many people who see it as some sort of panacea for the country's financial woes. I wish it were that simple. Far from curing the disease, it will only encourage those who wish to continue their dangerous speculative practices. We don't need a bailout; we need Gamblers' Anonymous.

Hillary Clinton has already raised the spectre of a "government entity" that would rival the New Deal bureaucracies of the 30's. This can't be good. Creating more layers of government oversight will only serve to deepen the already neck-deep welfare state mentality in this country.

[UPDATE: I'm keeping the following section in strictly because I never learn from my own mistakes (hmm... must have political blood in me after all...), but this one should at least teach me to dust off my calculator from time to time. The numbers in this viral email don't quite add up, as pointed out by commenter Chris. Take three zeroes off of the results and you come closer to the truth.

Even with that, I still like this plan better than anything Congress is kvetcing about.]

The best solution I've heard so far came from a viral email that's been making the rounds the past couple of days. Since both my elder daughter and Official Woundup StepDad, ZeeMeister®, forwarded it to me in the past couple of days, I feel it worth passing along to my three or four readers. The original email is attributed to a Tim K Parkinson, Improvements Project Manager for the state of Utah. No idea if it's real, but I like it. He's only addressing the AIG bailout (a mere $85 billion), but think what his proposal would look like using the $700 Billion being touted by Congress right now:
Hi Everyone,

I'm against the $85,000,000,000.00 bailout of AIG. Instead, I'm in favor of giving $85,000,000,000 to America in a We Deserve It Dividend. To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+. Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.

So divide 200 million adults 18+ into $85 billion that equals$425,000.00.

My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend. Of course, it would NOT be tax free. So let's assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes. That sends 25,500,000,000 right back to Uncle Sam. But it means that every adult 18+ has $297,500.00 in their pocket.

A husband and wife have $595,000.00. What would you do with $297,500.00 to $595,000.00 in your family?

Pay off your mortgage - housing crisis solved.
Repay college loans - what a great boost to new grads
Put away money for college - it'll be there
Save in a bank - create money to loan to entrepreneurs.
Buy a new car - create jobs
Invest in the market - capital drives growth
Pay for your parent's medical insurance - health care improves
Enable Deadbeat Dads to come clean - or else

Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.

If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ("bying the vote") economic incentive that is being proposed by one of our candidates for President.

If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!

As for AIG - liquidate it. Sell off its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up. Here's my rationale. We deserve it and AIG doesn't. Sure it's a crazy idea that can "never work."

But can you imagine the Coast-To-Coast Block Party! How do you spell Economic Boom? I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC.

And remember, my plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
So there it is. A proposal I can stand behind.

Of course the bailout is practically a given. Too many constituents (voters) in too many states need it because they got caught with their hands in the virtual cookie jar. Turns out the CEOs of the lenders got there first. It's a shame, but all too soon we taxpayers are going to be told to fork over whatever we have and hand it out to these "poor" defaulters.

Off to bed I go. I'll be a tax-paying pauper in the morning.

UPDATE: Baldilocks gets it.

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