Elkhorn Creek Lodge

The McCain Rescue Plan

Posted in democratic party, economics, gop, mccain, obama by Eugene Podrazik on September 29, 2008

The importance of McCain’s intervention in the financial rescue plan cannot be overly emphasized. It was the catalyst that made this plan that will address the financial crisis cleanly and without the pork and favors that the Frank-Dodd plan had. Or, the no strings attached that the Paulson plan had. And, it makes provision for transparent bipartisan oversight:

 

          

Side-by-Side Comparison of Rescue Legislation           

 

Issue

Paulson Plan

Frank-Dodd

Final Bill

$

700B

700B – Delivered in 150B traunches that can be delayed by  Congressional disapproval (and a Presidential signature)

250B – Immediately available to the Secretary.

100B – Available upon report to Congress.

350B – Available ONLY upon Congressional action.

 

Insurance (HouseRepublican Mode)

 

 

Requirement to establish mandatory insurance/guarantee program at no expense to the taxpayer.  “Pay to play” for participating companies, based on risk.

 

Executive Compensation

 

Far reaching executive compensation standards that would affect companies not even involved in this financial crisis.  Additionally, the bill lowered the deduction on executive pay to $400,000 for ALL companies.

Workable prohibitions on executive compensation to ensure bad actors are not rewarded. In a total takeover (like what happened with AIG), there will be no golden parachutes or severance pay.  For equity participation, over $300M total ban for top 5 executives on golden parachutes and tax deduction limit on compensation above $500,000.

 

Oversight/Transparency

 

Onerous, unworkable and repetitive reporting and oversight requirements, hindering proper implementation of program. 

Establishment of bipartisan oversight commission, split evenly between minority and majority.

Practical reporting requirements to ensure proper reports to Congress and the public.

 

If after 5 years the government has a net loss of taxpayer funds as a consequence of the purchase program, the President will be required to submit a legislative proposal to recoup such funds from program beneficiaries.

 

“Say on Pay”

Union Take Over of Corporate Boards

 

So-called “say on pay” or “proxy access” which propose to mandate a nonbinding shareholder vote on proxy access and other corporate governance issues for all companies in which the Treasury Department buys a direct stake in certain assets. 

 

OUT

Affordable Housing Slush Fund (ACORN Fund)

 

Included a giveaway that would force taxpayers to bankroll a slush fund for ACORN – an organization fraught with controversy for, among other scandals, its fraudulent voter registration activities on behalf of Democratic candidates. 

 

OUT

Bankruptcy “Cramdown” (aka, trial bar give-away)

 

Included so-called “cramdown” provisions allowing bankruptcy judges to reduce mortgage principal under the guise of helping those at risk of foreclosure.  If enacted into law, the provision would be a bonanza for trial lawyers and undercut the effectiveness of any economic recovery effort by making it even harder to value mortgage-backed securities.

 

OUT


          

Mark-to-Market Accounting

 

 

GAO study on the impacts of mark-to-market accounting standards and effects on the banking crisis.  Restatement of existing authority to suspend mark-to-market.

 

Equity/Warrants

 

Mandatory equity interest in all participating firms. 

Mandatory equity interests in total takeover scenario.  Proportional equity interest based on percentage of assets sold if deemed appropriate Secretary.

Tax benefits for community banks

 

 

Ability for community banks to take capital losses on GSE assets against ordinary income.

 

 

 

 

 

 

 

 

 

 

 

 

Remember, going in last Thrusday, all we had was the Democrats holding the economy hostage to a plan that would have taken the corruption that had lead to the original financial mess, saddled it on the GOP and then further used the bail out to reward their friends and extend their influence into the economy. The Frank-Dodd plan had the “cramdown provision to allow judges to modify the original terms of the mortgage contract, a slush fund for ACORN, and provisions for Union interference in Corporate governance.”  The Frank-Dodd plan was part of the Democrat game plan for a 1929 redux; Market crash, depression, big election gains and the glory days of the New Deal.

McCain, by going to Washington, rallied the House GOP and turned the tide on the Frank-Dodd plan that would have been the opening shot of the New Deal II of the incipient Obama administration. It has also stopped the “October Surprise” in its tracks and kept the GOP viable for November. McCain can still win his election. The GOP can still deny the Democrats a filibuster-proof Senate. Pelosi will still need to seek political cover from the GOP because the margin of her House majority will come from competitive seats that the GOP can plausibly threaten for 2008 and in the future.

Now, however, is the time to shed the bi-partisanship and to insure that the Democrats are held fully accountable. There’s only thirty days to make the point.  McCain and the GOP must make the following very clear:

First, this financial meltdown was the direct result of corruption. This meltdown can be traced to Fannie Mae and Freddie Mac. It was the result of purposeful Democratic inaction to protect favors to its favored constituencies and sources of campaign contributions that led to this disaster. 

Second, McCain, among others, saw this coming in 2005 and crafted oversight legislation that would have prevented this meltdown. The Democrats blocked this reform on a straight party-line vote. This corruption and McCain’s reform attempts must be made clear.

Third, this is not a failure of free-market economics. This disaster occurred because of governmental intervention into free-markets in trying to force the free market to take on loan obligations that were otherwise untenable. 

Fourth, governmental economic intervention has real costs. Governmental economic intervention is latent corruption. Governmental economic intervention will invariable lead to blatant corruption. It is this latent and blatant corruption that are hallmarks of Blue State governance that renders Blue State America as so many examples of “social service” economies that seek to tax and spend suffocating all economic growth. 

Fifth and finally, Obama was a cipher. An unproductive fifth wheel. In fact it was his uninformed remarks that blew up last Thursday’s White House summit meeting by causing the GOP members to walk out thinking, justifiably, they had been sandbagged by the Democrats. It was McCain, early Friday morning, who urged the House GOP members to get back in the game.

No, McCain wasn’t the only act in town. But, in this case he played a positive and central role in solving this issue. It was he, putting his prestige on the line that provided the key pressure at the right time. He, very literally, had a very critical role in preventing this crisis from further spinning out of control and devolving into a recession if not  a depression.

 

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