If you are asking yourself the question... What is this Bailout About anyway? You are not alone. A lot of us sat glued to our t.v.'s over the past couple of weeks waiting for the news on whether the colossal $700 Billion Investment would be passed, and if so what does it mean for America? The working people? Jobs? The Economy? Is there hope in the near future?
REVISED POINTS
Raising the limit on federal insurance for bank deposits from $100,000 to $250,000.
The bill also extends several tax breaks popular with businesses.
It would keep the alternative minimum tax from hitting 20 million middle-income Americans.
Provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.
I am including a 2 page info sheet on the Myths, Half-truths and Inconsistencies within the plan provided by Mike Fink of Countrywide Home Loans.
The Bailout: Myths, Half-Truths, and Inconsistencies
The mother of all bailouts is quickly turning into not just one of the largest financial events in history, but a heated political argument as well. Many questions still remain unanswered about how this plan is structured and whether it should be implemented at all.
You're going to get a different opinion from everyone you ask, but here are a few thoughts on four of the chief areas of debate getting tossed around.
Myth: The proposed bailout will cost taxpayers at least $700 billionThe $700 billion isn't a donation, a grant, or a gift -- it's an investment. The money will be used to purchase assets from banks at a steep discount, and then sold down the road once the smoke clears. The proceeds from those sales will go back to the Treasury and pay off the debt issued for the bailout. It's completely reasonable to assume taxpayers could in fact profit from this venture in years to come if done properly. In fact, part of the updated proposal announced over the weekend specifically states, "In any case in which there is a shortfall, the President shall submit a legislative proposal that recoups from the financial industry an amount equal to the shortfall ..." Even Warren Buffett weighed in on this topic, saying, "If the government makes anything over its cost of borrowing, this deal will come out with a profit. And I would bet it will come out with a profit, actually."
Half-truth: This is a bailout of Wall StreetThis is not a bailout of Wall Street: It's a bailout of the American financial system from a problem caused by Wall Street (as well as Main Street). There's a tremendous difference between the two.
First, ask the shareholders of AIG, Freddie Mac, or Fannie Mae (all three of which have undergone 95% declines in the past year) if they feel they've been bailed out. The common shareholders of these companies (and other companies like them that took on extreme risk) have been taken to the cleaners. Whether you think they should have been, or not, is your decision.
The portion that does get bailed out is the financial system that all Americans rely on whether they know it or not. From grocery stores that rely on lines of credit to stock their shelves to small businesses that rely on credit to make payroll every month, there truly isn't an inch of the economy that wouldn't get sucked down the tubes in one way or another if the financial system were allowed to collapse.
Inconsistency: The economy won't implode if a big bank goes underAfter all, we hear that "Lehman Brothers was allowed to go bankrupt and the world didn't come to an end." I can see why this is a widely held belief, but let's dig a little further into the events of two weeks ago. Lehman Brothers went belly-up sometime Sunday afternoon. By Sunday evening, Merrill Lynch had to be hastily thrown into Bank of America's arms. By Tuesday, AIG had imploded. By Thursday, Goldman Sachs and Morgan Stanley were on the brink of collapse.
I'll go out on a limb and assume that four once-in-a-lifetime events happening within 96 hours of each other wasn't a coincidence. The only thing that stopped the domino-style financial meltdown was word that the mother of all bailouts was taking shape. Like it or not, many of these companies truly are too big to fail.
Inconsistency: Let 'em fail; the sooner they die, the sooner we recoverI disagree. Tough medicine makes sense if the medicine isn't so tough that it kills you. The big factor that needs to be addressed here is that foreigners own more than one-quarter of all the public debt in America, which in effect gives them the ability to send the financial system into Armageddon if they sense that our financial fortitude teeters on collapse.
Any large-scale fallout in the financial sector could give foreigners a good reason to start dumping treasuries in mass, causing a bank run on the largest debtor in the world: the U.S. government. There is no doubt that such a run would push the value of the dollar to unimaginable lows, as well as cause a domestic credit crisis to boil into a currency meltdown. Such a meltdown would make any recovery several orders of magnitude more difficult than it would be with the bailout.
In all fairness, issuing $700 billion will have a seriously negative affect on the value of the dollar as well, but it pales in comparison to the amount of carnage foreign investors could bring if they gave up on us. Relying on the kindness of strangers is a tough spot to be in.
To find out more information on the housing market.. please call or email us. We would love to help keep you informed.
1 comment:
The bailout was the wrong thing to pass. It's time to do something right.
Please support this proposal and get your Congressional representative to sponsor this solution to our current monetary crisis.
A complete list from the Detailed Executive Summaries of the National Economic Stabilization and Recovery Act:
http://nesara.org/bill/index.htm
The Federal Reserve System
# The Federal Reserve Act of 1913 is amended
# The Federal Reserve System is abolished and replaced by a new Treasury Reserve System
# Control of the currency is moved from private control of the Fed to public control of Congress and the new Treasury Reserve System
# Congress sets the standards for the new monetary system but the people create as much or as little currency as they need
# Functions of the Federal Open Market Committee are transferred to the Board of Governors of the new Treasury Reserve System
# A new mechanism, the Treasury Reserve Account, is created to provide the Treasury Reserve System Board of Governors a better method to fine-tune the money supply, effectively eliminating inflation
# The Treasury Reserve System Board of Governors will continue using the previous three mechanisms for controlling the money supply: 1. Setting reserve requirements. 2. Setting the national discount rate. 3. Purchasing U.S. Treasury securities on the open market.
# All U.S. Treasury securities purchased by the Treasury Reserve System Board of Governors will be immediately turned over to the U.S. Treasury and cancelled out of existence.
Monetary Policy
# People are provided with several alternatives for currency
# Constitutional currency is restored
# Currency becomes debt free as the people stop paying interest payments for their use of a public utility
# Unlike previous policy, the new Treasury Reserve Board is provided one very specific mandate: maintain a stable currency
# Expansion of the economy is returned to the free market
# Private coinage is encouraged
# Exchange ratios for the various currencies are published at least weekly
# Printing of redeemable gold and silver certificates is allowed
# Postal money orders are made available in denominations of gold and silver coin
Banking
# Returns the banking industry to serving public interests
# For secured loans, compound interest is outlawed and replaced with a monetization fee
# Provides stricter banking controls by imposing excise taxes to discourage high or runaway monetization fees
# On secured loans obtained from a fractional reserve bank, principal must be paid in full before the bank begins collecting its monetization fee
# Eliminates the facade for banking insurance (FDIC)
# Except for fraud and criminal activities, virtually eliminates bank failures
# Banks are prohibited from using as reserves any commercial paper
# Only Treasury credit-notes can be used as bank reserves
# Banks are prohibited from purchasing government issued debt, effectively removing banks from influencing monetary policy
# Checking accounts against gold and silver deposits are prohibited
# Commingling of funds among the various money accounts without owner’s permission is prohibited
# All currency deposits with banks are general warrant deposits and custody accounts.
The Income Tax
# The Income Tax Act of 1939 is amended
# People need no longer fear the IRS
# Billions of hours of nonproductive labor are eliminated
# Mounds of paper work are eliminated
# The cost of the income tax is no longer hidden and embedded in the cost of doing business and passed down the chain with the consumer paying the final tab
# Most likely eliminates state income tax plans because state income taxation piggybacks on federal income taxation
# The IRS is reformed into the National Tax Service
# Volumes of complicated tax code are history
# Eliminates personal income taxes
# Eliminates corporate income taxes
# Eliminates gift taxes and estate taxes
# Eliminates capital gains taxes
Sales and Use Tax
# Tax rate of 14%
# Government entities are exempt
# Government mandated expenses such as licenses, permits, passports, are exempt
# Sales of bullion, coin and currency are exempt
# Sales made by or to nonprofit schools are exempt
# Sales of prescription drugs, medical supplies and services are exempt
# Real estate rents and leases are exempt
# Sales of groceries are exempt
# Sales of plants, livestock and fish used in the production of food for human consumption are exempt
# Insurance sales are exempt
# Segregated portions of labor in retail service contracts are exempt
# Incidental or occasional sales such as garage or rummage sales are exempt
# Sales for the purposes of recycling are exempt
# Meals provided by companies at company expense are exempt
# Sales that are nonprofit in nature are exempt
Immediate Relief and Results
# Eliminates more than $1 trillion of the nation’s public debt
# Reduces future private debt by more than $1 trillion
# Immediately eliminates some private debt, especially for many homeowners
# Workers maintain better control of their earnings
# Production is no longer taxed, just consumption
# Most of the necessities of life are not taxed
# Encourages production thus revitalizing industry in America
# Encourages rebuilding of inner cities
# Discourages wasteful uses of natural resources
# Exposes the true cost of government
# Greatly eliminates the struggle between tax “protesters” and bureaucracy
# Allows the “underground” to resurface and become a viable contribution to production of goods and services
# Greatly restricts the influence of special interests and lobbyists
Please do not confuse this with a hoax with a similar name. Tell your congressional representative to sponsor this proposal and submit it as legislation. It's time we as the people took back our monetary rights. Tell your representatives and senators, and the candidates they are running against, that you will not vote for them if they do not openly support and sponsor this bill themselves. It's the only short and long term solution for our current crisis.
Post a Comment