Wednesday, October 1, 2008

Marks 4 point plan.

I'm sending the following to Sens. Kyl and McCain. Also Flake if I can get through.

Here is my 4 point plan to get us out of the financial mess that we currently find ourselves in. Although the roots of the crisis can be found in the Clinton administration pressuring Freddy and Fanny into underwriting sub-prime debt, now is not the time for shrill fingerpointing, but the time to actually fix things.

The main points are the same as Dave Ramsey's 3 point plan, with some very minor modification. I actually don't like the 1st point, but I think it's necessary to unwind the consolidated dept instruments, and insurance is far preferable to outright purchase by the government.


Dear Senator Kyl,

I am writing to express my extreme displeasure with the current "bailout" or "rescue" package. The fact is that as conservatives we must recognize that the desire to do something in the face of crisis inevitably leads to the cure being worse than the disease.

FDR's meddling in the market did not cure the Great Depression, rather it caused it to last 10 years longer than necessary. This package (over 400 pages as I write this) is the wrong response, and will make the problem worse, not better.

We can solve this credit and liquidity problem with four straightforward steps.


A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

B. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures and ruined lives.

2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

C. This backstop will cost less than $50 billion—a small fraction of the current proposal.


A. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

B. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.


A. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

B. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to
stand up, speak out, and fix this mess.

C. Long term we need to abolish the tax on dividends. Taxing dividends encourages the market to artificially inflate stock prices at the expense of dividends which causes long term instability.

IV. Repeal Sarbanes-Oxley

Sarbanes-Oxley results in millions of dollars in compliance costs for any business wanting to go public. It has done nothing to avert this crisis, but has done plenty to prevent growth in the economy by stifling business growth.

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