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Member Since: 3/2007Last Seen: 9/29/2009

A Viable Alternative to the Paulson Bail-out

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The masters of the universe now seem masters of nothing. Within the financial world though, alternatives to the Treasury plan emerge from bright and independent money managers outside the group-think of large corporatist investment banks. Rather than buy the bad assets on the books of foolishly managed banks (without Congressional oversight nor court review), economist and money manager John Hussman proposes something more like a traditional bankruptcy, wiping out the equity and some junior debt of the banks. He also suggests a way to solve the root of the crisis, the pile of bad mortgages still accumulating.

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Today Treasury Secretary Henry Paulson announced the Department would no longer buy troubled assets, abandoning original plans he floated and succeeded in convincing Congress to approve. Many economists and even astute observers said such plans would not work. Angry taxpayers, 100 to 1, called Congress to oppose the bail-out.

Fortunately, someone inserted into the Troubled Assets Relief Program authority for the Treasury to buy preferred shares of troubled banks. In the intervening month the Treasury pursued this remedy and injected $290 000 000 000 into banks.

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    Reply#1 - Thu Nov 13, 2008 12:29 AM EST
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