Was it any accident that David Blaine was hanging upside down with the blood rushing to his head in a life threatening "death dive" when John McCain decided to "suspend" his campaign? My guess is McCain was watching the news about David Blaine's latest stunt and decided to try his own luck as a stunt man to leverage this debacle to his own benefit.
We don't need stunts and we don't need politics right now. What we need is reliable information from our government so Congress can make informed decisions about what the bailout should include. Any plan must be fair, balanced, independent, and most of all transparent.
It is highly questionable that we should pay "hold to maturity" prices for mortgage-backed securities that Wall Street can't give away while the market is conducting "price discovery." The practical implication is that we may become the biggest landlord on the planet, trying to prevent the homes backing these securities from depreciating, i.e. falling apart, while we wait for the real estate market to recover. Would Warren Buffet buy high and sell low?
In his statement to Congress, Ben Bernake stated:
"The development of a comprehensive proposal for reform would require careful and extensive analysis that would be difficult to compress into a short legislative timeframe now available."
Would it be too much to ask for an outline? If anyone had consulted me for suggestions as an independent, non-partisan thinker, I would recommend discussion points for the bailout terms include:
1.Require "earn-out" provisions of the executives of all involved financial institutions instead of limiting their compensation. These "earn-outs" would vest over a period of years, encouraging them to pursue the long-term health and stability of the firms they run.
2.Require the bailed out banks to make restitution to the American people to relieve us of our $11 Trillion national deficit by paying back a percentage of profits over time.
3.Structure careful oversight of derivative products that are tied to the heart of our economy.
4.Include meaningful regulatory reform such as emergency Glass-Steagall like measures.
5.Direct appropriate regulatory enforcement actions against corporations and individuals who intentionally committed wrongful acts.
6.Provide resources for the criminal investigation and prosecution of both corporate and mortgage fraud.
7.Ensure commitment that the safety and soundness of our banks must be the overarching mission.
The terms for how the money should be used must be viewed as it would in a negotiation to prevent foreclosure on any property. As part of the bailout there should be some basic terms that could be required to be applied to the mortgages behind the pools of securities:
1.Renegotiate the terms of all non-performing mortgages to a reasonable and fixed rate of interest.
2.Remove any other onerous terms.
3.Require each institution to analyze the loan portfolios they hold to determine the good, the bad, and the ugly. Present this information to the government with the threat of prosecution if the information has been falsified.
4.Allow homeowners to stay in their homes so long as they begin paying under the new terms and continue to act in good faith on their payment schedules.
5.Add any outstanding balances to the back end of the loans.
Most interesting is the offer by William H. Gross, the manager of the country's largest bond mutual fund to help handle the bailout for free. He also called upon others on Wall Street to do the same. It is actually in everyone's self interest to offer their time and knowledge to quell the terror in the marketplace. I was so excited by this idea that I've decided to offer my time, free of charge, to the Federal Reserve Bank for any enforcement or policy assistance they may need.
There is no reason the solution to this mess needs to be veiled in secrecy. The ways to approach it can and should be detailed for the American people. We are owed a point-by-point substantive plan that provides the proposed measures in the near term and projects out the scenarios for the future.