Thoughts on the Government Bailout

So I finally found a moment to catch my breath. And let me tell you, he was fast.

Anyway, I have about 400 blog posts that I've written in my head, but am sure that I will only capture a few of them on paper…or more accurately, digital print media.

Lately I have been thinking about how the government is buying stock in all of these banks with the hope of propping them up. They have even considered buying stock in GM and Ford with the hopes of helping them, too. Though I don't really agree with this, I understand their logic. If the United States Government is a shareholder, especially a large shareholder, then the company has to listen to them. And with the confidence of a large shareholder to restart the dolling out of credit, this will help get the economy going again.

Now, my problem is several-fold. The first - will the government plan on permanent ownership in stock of these companies? This I am totally against. The government does not belong in our bedrooms, our checkbooks, and we should not be competing with them in the stock market.

Secondly, WHEN the government gets out of direct ownership in the stock market, will it be subject to capital gains taxes? If so, what rate will they pay? I can imagine the tax form now: If you make between $5 trillion and $10 trillion, your rate is Capital Gains tax rate is 39%. And if the government sells the stock at a loss, where does the loss go? Will they deduct that from what they need to pay for Social Security?

And speaking of Social Security. Remember when George Bush floated the idea of allowing Americans to invest a portion (a PORTION) of their social security payments in the stock market? Every Lib in town went berserk. You would have thought that he wanted Aunt Mildred to put her life savings in a dot-com company that specializes in currency arbitrage. I heard from the CFO of the finance department of the Plastic Bubble Wrap Department here at American Amalgamated Conglomerates of America, that what GW really had in mind was investing a small portion, like 1-10%, of their SSI into mutual fund-based investments where risk is diminished. Because, as you know, the stock market has averaged 10% a year since I don't know when. It's not always up, but it is usually up over any 10 year period. Uncle Jesse would not be flipping option straddles under the buttonwood tree on Wall and Broad streets.

Now, no one really flinches at the idea that the government is buying stock in companies. Perhaps now that we are experiencing it, society will be less against it. And imagine if we could invest our money now while many stocks are down 50-70%. Here at AACA, our stock is down 65% in 36 days. Yikes! If there's a quick rebound, that's lots of money!

A Letter From Barbara Mikulski

Dear Mr. Eludius:

Thank you for getting in touch with me about the Emergency Economic Stabilization Act (P.L. 110-343). It's good to hear from you.

I know that taxpayers are mad as hell, and so am I. They've watched Wall Street executives pay themselves lavish salaries. They've watched irresponsible lending practices. They've watched Wall Street gamble on risky investment mechanisms. Now those very same Americans who've worked hard and played by the rules are being asked to pay the bill for those who didn't.

Time and time again we have seen the consequences of loose regulations and wimpy enforcement. Time and time again I voted for more teeth and better regulation. I voted to get the lead paint out of toys and the lead out of the bureaucracy at the Consumer Product Safety Commission. I voted to strengthen Federal Drug and Administration (FDA) to make sure it didn't approve dangerous drugs. I also worked to stop predatory lending and flipping in the mortgage market.

I remember back in 1999 when this banking mess got started. I was one of the nine Senators who voted against the bill that got rid of the division between investment banks and commercial banks. It lowered the bar on regulation and allowed for casino economics.

Now, we are facing a credit crisis that affects everyone - from people getting loans for college, to the small business owner who depends on credit to buy inventory. If we do not deal with this credit crisis, I believe that the Main Street economy will have to pay the bill for the bailout and pay the bill again in lost jobs, and in shrinking retirement and pensions.

Regrettably, this rescue is necessary to restore confidence and stability in our economy. The final version that passed is vastly improved from the three page bill that President Bush and Secretary Paulson originally sent to Congress. It protects tax payers, provides oversight and transparency, and rejects using tax payer dollars to finance golden parachutes for Wall Street CEOs. That's why I voted for it. This legislation was necessary to protect our economy, our middle class, and our way of life. But I heard the taxpayers loud and clear. Much more needs to be done to provide for rigorous reform and retribution against those who broke the law.

The Emergency Economic Stabilization Act was passed by both the House and Senate, and was recently signed into law by the President. Knowing of your views was very helpful to me, and I will keep them in mind. If you'd like to read more, I encourage you to visit the "News Room" page of my website at http://mikulski.senate.gov/Newsroom/PressReleases/index.cfm where you can read the transcripts of my three floor statements on this issue.

Again, thanks for contacting me. Please let me know if I can be of help to you in the future.

Sincerely,

Barbara A. Mikulski
United States Senator

Random Musings

Just a couple of random occurrences that I thought were funny.

Physical Therapy
I'm in physical therapy right now for my neck problem that I had mentioned previously. Today the therapist had me sit in a chair to do my neck exercises. Luckily for me a really nice looking girl was on the table in front of me doing her exercises. Apparently I was doing mine incorrectly because the therapist came over and corrected me. "Keep your head up and focus your eyes on something over there." "Oh, but I am!" I couldn't stop laughing!

Retirement vs. Fantasy Football
With all the market turmoil and yesterday being the last day of the third quarter, I decided to take a look at my retirement statement online. Boy I wish I hadn't. I'm down quite a bit. Now I'm not sure what's doing worse - my fantasy football team or my 401(k).

Ralph Nader
Did you hear this one? The Washington Post announced they were not going to cover Ralph Nader's campaign for President because he has no chance of winning. When informed of this, Nader responded, "Then why are they covering the Nationals?"

VPILF
How about this one? When asked if she was looking forward to the Vice-Presidential debate on Thursday, Republican Sarah Palin responded about Joe Biden, "I'm looking forward to meeting him. I've never met him," she said at a rally here. "I've been hearing about his Senate speeches since I was in, like, the second grade."

And the VPILF acronym? Yes, I lifted that from another blog, but I like it. I'm sure you can figure it out.