Comments on: A First Glance at the Bailout Bill

By: David

David — Mon, 29 Sep 2008 19:47:00 +0000

Yes, I was surprised to hear that. I figured that all the public comments against the bill would result in the House narrowly passing the bill.

By: Reach Upward

Reach Upward — Mon, 29 Sep 2008 19:24:34 +0000

The House of Representatives failed to follow the script. They narrowly rejected the bailout plan. We’ll see a lot of scrambling as players try to figure out what to do next.

By: David

David — Mon, 29 Sep 2008 15:27:25 +0000

I said it was an outside chance. I just think that we should prepare for the best (as our Congress continues to sell us on the idea that such an outcome is possible) even as we expect the worst.

Congress thinks they know more about money than the folks at the WSJ.

By: Reach Upward

Reach Upward — Mon, 29 Sep 2008 15:20:56 +0000

That is wishful thinking, because I doubt we will actually realize the gains that some have optimistically projected. The Resolution Trust Corp’s experience in dealing with the Savings & Loan crisis of the 80s & 90s should be instructive in this regard (see http://online.wsj.com/article/SB122230552706773711.html ).

The Wall Street Journal Editors have suggested ( http://online.wsj.com/article/SB122238667352477103.html ) that instead of buying actual mortgages, the government buy preferred stock (actually a debt instrument rather than an equity instrument) only in the companies that are incapable of raising new capital. That way, the debt servicing and property management is left with companies that actually have capacity to manage this, as opposed to creating a new bureaucracy that will ostensibly poorly manage mortgages and properties. It will cost far less. And those that benefited most from the bubble will bear the greatest cost instead of simply socializing the losses.