Roll your own bailout -- it's easy!

by: Zack Exley

Mon Sep 22, 2008 at 22:53


Have you actually read the bill that Secretary Paulson and his Goldman assistants wrote for Congress? Not the current version (I shudder thinking about it) with all its inserts from financial industry lobbyists, but the first version. It was beautiful in its simplicity and proved that revolutions can be initiated by the stroke of a pen in societies ruled by law -- as long as ruling elites supports them.

It got me thinking. I have a mortgage. I still owe a lot on it. People in my neighborhood are in the process of foreclosure. And still others are struggling to pay rents that spiked in the real estate bubble but show no sign of coming down with housing prices.

I decided to use the treasury's proposal as a template for one that would help me and my neighbors. Paulson's bill is so user friendly, that it took me only 15 minutes just now to convert it from a bailout for billionaires to a "Homeownership For All" act. See below for the text of my proposal to Congress.  

Zack Exley :: Roll your own bailout -- it's easy!
Some of you will be asking, "Where will the money come from? We don't have any trillions left!" That's a silly question. We didn't have trillions for the war. We don't have trillions for this bailout either. The government is essentially printing money to pay out these trillions. Well, not actually printing it -- but it is pledging to borrow huge sums of money to meet these obligations. Who has to pay that back? That will be decided in the future in the struggle between the rich, the middle-class and the poor over taxes and the federal budget.  

Yes, the dollar will crash (it's backed now by bad mortgage investments thanks to Paulson's bailout). Yes, there will be inflation. But that's all happening already. When things get this crazy, it's no longer about amounts of money -- what's really being negotiated in Paulson's bailout (and mine) are social relations. In other words, Paulson is (as we speak) winning society's commitment exchange future payments by all Americans for worthless assets owned by a bunch of rich people, pension funds and university endowments.

In Paulson's world, struggling homeowners and renters will not get any such deal. Their relationship to society stays the same: if they fail financially, then eventually a sheriff comes to their door and orders them out of their home. All I'm doing is proposing the same kind of relationship-shift for ordinary Americans with regard to housing. In my proposal, the Government buys our mortgages themselves and sets new terms that we can afford. Maybe "the Secretary" will even decide to forgive some of our principal. Is that unfair? Maybe so, but the consequences are so dire -- millions of Americans out on the street, whole neighborhoods boarded up, etc... -- that we have no choice! It's just like what Paulson says, except not ridiculous.

For renters, we'll just buy their apartments and give them mortgages with good terms. The dream of home ownership vs. the dream of Yacht ownership. Which do we value more in America? Time to decide.

And who knew how easy doing this would be! It took those smarties from Goldman to show us. Tomorrow, if I can squeeze it in, I'll do a search-and-replace on my housing proposal to generate a proposal for a national health care system. My friend Marc just told me the total market capitalization of the top health insurers is well under a trillion. And unlike in Paulson's scheme, we'd be buying profitable, healthy companies, not worthless investments. Sounds like good business to me!
________

A Financial Bailout Proposal to Congress from the American People

(Generated with minor edits to Henry Paulson's bailout proposal to Congress.)

The following is the legislative proposal from the American people to grant authority to the next Secretary of the U.S. Department of Housing and Urban Development to protect Americans from foreclosure and convert renters into homeowners:

Section 1.  Short Title.

This Act may be cited as The Homeownership For All Act.

Sec. 2.   Purchases of Mortgages and Rental Properties.

(a) Authority to Purchase.-The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary: mortgages from any financial institution having its headquarters in the United States, and residential rental properties in the United States.

(b) Authority to adjust mortgage payments- The Secretary is authorized to reduce mortgage payment terms to ensure homeowners can remain stably in their homes and work more quickly toward full home ownership.

(c) Authority to convert rental agreements into mortgages- The Secretary is authorized to grant mortgages to renters in properties purchased by the the Secretary. The principal of such mortgages will be shares in the amount paid for the properties. The Secretary is authorized to set mortgage payment terms at levels that will allow residents to remain in their homes and work quickly toward full home ownership.  

(b) Necessary Actions.-The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions and landlords as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgages and rental properties and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3.  Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for-

(1) providing stability or preventing disruption in the lives of millions of Americans who are in danger of displacement because of foreclosure or inability to afford high rental prices; and

(2) increasing home ownership and general capitalization of American families by providing mortgage relief and converting rental properties into owned homes; and

(3) protecting the taxpayer; and

(4) getting ours because, damn it, you got yours.

Sec. 4.  Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5.  Rights; Management; Sale of Mortgages and Rental Properties.

(a) Exercise of Rights.-The Secretary may, at any time, exercise any rights received in connection with mortgages or rental properties purchased under this Act.

(b) Management of Mortgages and Rental Properties.-The Secretary shall have authority to manage mortgages and rental properties purchased under this Act, including revenues and portfolio risks therefrom.

(c) Application of Sunset to Mortgage-Related Assets.-The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6.  Maximum Amount of Authorized Purchases.

The Secretary's authority to purchase mortgages and rental properties under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7.  Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses.  Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8.  Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9.  Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10.  Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11.  Credit Reform.

The costs of purchases of mortgages and rental properties made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12.  Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgages.-The term "mortgages" means residential mortgages that in each case originated or issued on or before September 17, 2008.

(2) Secretary.-The term "Secretary" means the Secretary of the Department of Housing and Urban Development.

(3) United States.-The term "United States" means the States, territories, and possessions of the United States and the District of Columbia.

Tags: , , (All Tags)
Print Friendly View Send As Email

Roll your own bailout -- it's easy! | 12 comments
funny! (0.00 / 0)
i was just thinking that i wanted to write a real alternative bill rather than the kinds of stuff that Dodd et all are coming up with as reactions to the Paulson bill. I was actually planning on spendign tomorrow on it.  
I have read the original Paulson bill and agree with you it was breathtaking and horrifying in its simplicity and naked arrogance.  

I think we should do it.  Come up with a progressive alternative collectively.  I know you perhaps didn't mean this bill seriously, but honestly, why not take it so? :)

I mean it seriously! (0.00 / 0)
I just think we have a lot of work to do to build a movement capable of taking this kind of thing seriously too.
[ Parent ]
awesome (0.00 / 0)
i meant the idea of doing a progressive alternative seriously as well.  is there anyone else here with bill writing skills and strategy ideas?  i have mediocre ones, but i can devote several hours tomorrow to putting together a piece of draft legislation.  or we can just go with this one.
[ Parent ]
I really like Zack's "mirror image" of Paulson's bill (0.00 / 0)
It shines a clear and simple light on the choice we face as a country.  

Do we spend taxpayer dollars to bail out wealthy and greedy speculators who created so called "investments" that now have little, no or even negative value; or do we use this same money to help citizens (many of whom were directly or indirectly victimized by the speculation-fueled real estate bubble and the mortgage-market chaos and foreclosures caused by it) afford to live in decent homes?

Paulson's bill pretty clearly sets the former as the nation's most urgent priority, by giving him near-dictatorial powers to implement this priority without any oversight and with huge amounts of taxpayer dollars and no increase on taxes for those who profited massively from the mortgage-related ponzi scheme.

Zack's bill is on one hand a simple and clear expression of social priorities.  But, beyond that, its use of the Paulson bill as a template provides a revealing mirror that might help Congress and citizens recognize the distorted priorities and absurd overreach reflected in Paulson's plan, and the profound choice our nation faces at this critical juncture.

Being a little familiar with (and appreciating) Zack's RevolutioninJesusland blog, let me suggest a question we might ask about these two bills:  Which bill would Jesus vote for?  Though I'm no Bible scholar, I don't think there was anything in the Gospels about the poor and struggling masses caring for greedy financiers holding worthless credit default swaps.

[ Parent ]
oh yeah... (0.00 / 0)
I actually have an idea for a book that'd be called "What Would Jesus Do (With Three Trillion Dollars)". As I've been writing on revolutioninjesusland.com there's been a rise of progressivism among evangelicals. But they're very much oriented away from goverment action. They feel like they got burned so bad by getting involved with the GOP -- and they also read Jesus as teaching that we should just take care of our people on a one-on-one individual basis.    
[ Parent ]
that's fine (0.00 / 0)
anarchists need love too :)
[ Parent ]
o we have a movement (0.00 / 0)
we just don't have a leader.
[ Parent ]
leaders usually follow movements :) (0.00 / 0)
here's what sanders is proposing, from the nation (h/t benny).

I have proposed a four-part plan to accomplish that goal that includes a five-year, 10 percent surtax on the income of individuals above $500,000 a year, and $1 million a year for couples; a requirement that the price the government pays for any mortgage assets are discounted appropriately so that government can recover the amount it paid for them; and, finally, the government should receive equity in the companies it bails out so that when the stock of these companies rises after the bailout, taxpayers also have the opportunity to share in the resulting windfall. Taken together, these measures would provide the best guarantee that at the end of five years, the government will have gotten back the money it put out.

Second, in addition to protecting the average American from being saddled with the cost, any serious proposal has to include reforms so that we end the type of behavior that led to this crisis in the first place. Much of this activity can be traced to specific legislation that broke down regulatory safety walls in the financial sector and allowed banks and others to engage in new types of risky transactions that are at the heart of this crisis. That deregulation needs to be repealed. Wall Street has shown it cannot be trusted to police itself. We need to reinstate a strong regulatory system that protects our economy.

Third, we need to address the needs of working families in this country who are today facing very difficult times. If we can bail out Wall Street, we need to respond with equal vigor to their plight. That means, for example, creating millions of jobs through major investments in rebuilding our crumbling infrastructure and creating a new renewable energy system. We must also make certain that the most vulnerable Americans don't freeze in the winter or die because they lack access to primary healthcare.

Finally, we need to protect ourselves from being at the mercy of giant companies that are "too big to fail," that is, companies who are so large that their failure would cause systemic harm to the economy. We need to assess which companies fall into this category and insist they are broken up. Otherwise, the American taxpayer will continue to be on the financial hook for the risky behavior, the mismanagement and even the illegal conduct of these companies' executives.

I think the one proposed in the post is better.  This is too lacking in specifics on "the needs of working families" though I'm glad that SOMEONE in congress cares enough about the most vulnerable to mention them, even if it's in a throwaway line.  It also has nothing about how to make up for the conduct of these companies overseas.   I like the surtax idea though I don't know the numbers.

[ Parent ]
EXCELLENT!! Let's play some offense! (0.00 / 0)
Great idea.

How to pay for it?

I posted this a couple of times but will one more time and ask that Roosevelt's 1942 proposal be included. We need to think offense!

Bernie Sanders proposed a 10% surtax on incomes over 500,000 per single and a million for couples. IIRC, he said it would raise 300 billion in ten years. It doesn't go far enough, Roosevelt's proposal would put us on the right footing. If it doesn't raise enough let's make it retroactive about ten years!!! (disclosure I wrote the post linked to about the real war president's (FDRs) tax plan...)

I am sure ALL truly patriotic Americans would support FDR's proposal during our nation's hour of need. :)

Not Income Tax-Wealth Tax (4.00 / 1)
The only way to get back that which Wall Street has systematically looted is through a tax on existing wealth, nor future income.  That is weakness with Sanders plan.

Therefore, the bailout should be entirely financed by an 80% tax on intangible accumulated assets above $50 million.


[ Parent ]
This is damn true.... (0.00 / 0)
When things get this crazy, it's no longer about amounts of money -- what's really being negotiated in Paulson's bailout (and mine) are social relations.

Every lawmaker that has shown the wisdom and spine to hold out for further negotiations deserves our applause, and every lawmaker that has voiced eager willingness to submit to whatever insta-solution the powers that be put forth should be voted out of office. This is a litmus test of the most basic kind - are you a self-absorbed knee-jerk political careerist, or do you actually have some inkling of concern for the welfare of this nation today and into the future?  

"Don't hate the media, become the media" -Jello Biafra

Idea (0.00 / 0)
Let's impose conditions on Wall Street as stated in Senator Dodd's proposal but not give Wall Street any of the money.  
Roll your own bailout -- it's easy! | 12 comments
USER MENU

Open Left Campaigns

SEARCH

   

Advanced Search

QUICK HITS
STATE BLOGS

Home | RSS/XML Feed | Register | Contact

  © OpenLeft 2007-2010, Powered by SoapBlox

Powered by: SoapBlox