October 7th, 2008 tkadom
I think the problem affecting wall street today is very similar to the problem affecting our american system of government. Shareholders are not involved with their companies just as voters are not involved with their representatives. Shareholders to some degree have an excuse given the lack of shareholder rights, and the tilted proxy voting system which favors management every step of the way. However, there is no reason why this balance can not be shifted with some oversight and new regulation which would either swing the broker vote, or eliminate it altogether forcing companies to reach out to shareholders to reach quarum in order to pass their agenda’s.
Congress requires oversight just like wall street does. We now have plenty of watchdog groups springing up which keep an eye on how representatives are voting, but the concern with most of those groups is their partisan nature. It is the peoples house, why not fund an oversight board that is charged with identifying how many self serving ammendments are made by each member of the hosue and senate. Why not open the books for all those ammendments? John McCain said "I will make them famous, and you will know their names!" After the extra 150 billion in tax incentives that were added to the already staggering 750 bailout package, I am still waiting for someone to make the people who demanded the extra 150 billion famous. Could we have a list of their names?
As far as the bailout is concerned, I think I would like to have a seat at the table when my mortgage is sold for pennies on the Dollar to some other financial institution. I think a majority of Americans would welcome the opportunity to buy their mortgage back for pennies on the dollar from the company that wants to get that toxic asset off their books. It seems to me that the folks who are sub-prime and paying ridiculous interests on their loans wouldnt mind that opportunity either. They could essentially lower their payment substantially, and in some cases wipe out their debt entirely. If a bank is only paying 10 cents on the dollar and an 80k mortgage becomes 8000, id wager folks would be happy to put that 8k on their credit card to own their house outright.
The "solution" congress gave us ignored three better alternatives in the house that all targeted the actual credit problem. The "no BAILOUTS act" was derived from a successfull swedish program that resolved almost the same issues we are facing in our credit markets today. What is staggering to me is that in the 750 billion dollars, the issue of foreclosures was not even addressed. Afterall, it is the large number of foreclosures that is driing down home valuations, and bank balance sheets. The temporary relaxation of the mark to market accounting rule helps banks with their balance sheets, but does not address the foreclosure crisis. Maybe allowing home-owners to have a seat at the table when their toxic mortgage is sold for pennies on the dollar would make more sense… Why hasn’t that been suggested? If, as a bank, you own a "toxic" mortgage and are willing to sell it for pennies on the dollar… why not offer it to the person who has to pay it back?
Tim
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