Leave the Taxpayers Out of It!

So some large Wall Street investment banks find themselves in serious trouble these days. Through a combination government mandated poor business decisions caused, in no small measure, by the Community Reinvestment Act, unrealistic economic assumptions, greed and foolishness, they wound up with a ruinous portfolio of non-performing real estate loans. The consequences? They should all now go out of business!! That’s the way it works in the real world. You make too many poor choices, the consequences are — you lose your business. It has always been that way. That’s the way it should work now and forever. That’s capitalism.

However, in an incredible collapse of good common sense, otherwise conservative-leaning politicians are leaping blindly into a new socialism to rescue these banks with taxpayer money! Uncle Sam will give the very banks that made the mess enough money to paper over their problems. Of course anytime you create the nation’s biggest federal bureaucracy in one fell swoop, and put billions of dollars into it, you have set the stage for years of taxpayer hardship to pay the freight. Our children’s children will be paying for this boondoggle for many years to come. You also create the inevitable feeding grounds for every special interest, government money grabbing, lobbyist known to mankind all lining up to get their “share” of the pie. This money will be spent on every liberal special interest program imaginable, earmarked to bring pork to every greedy congress person who can extend their hand, and will expand from a mere $700 billion, to who knows how much in the blink of an eye. It’s a bad idea! It should go away! It really could be the downfall of this nation!

But what can we do to help out the economy you ask? These large bank failures really have put the nation’s economy at risk. The threat of recession or worse is real. The economy really is in danger due to the lack of capital in the banks to fund loans to businesses and home purchases! This is true — and something really does need to be done. But what?

First, congress should immediately repeal the capital gains tax effective 1/1/08. This would cause multiple millions of dollars to pour into the economy immediately. The incentive to invest would increase greatly. Next, the president should announce that the non-performing assets held by these failing banks are for sale at thier current market value. He should stress that the patriotic thing for persons with means to do is to purchase these assets, which are backed with real estate after all, in the rational expectation that they will inevitably increase in value over the years, making them a good investment in the long run – and the fact that the investors will not have to pay capital gains tax on the gains from these investments will only make them all the more attractive. This is the private enterprise solution to this problem. There is money out there looking for investment opportunities. These assets are not worthless and will attract potential investors if packaged and marketed correctly. The above steps along with some additional penalties and sanctions against the senior management of the profligate banks involved, plus some modest banking regulation reforms would solve this problem quickly. This approach will leave the bloated government bureaucracy out of it in large part. This plan will help, rather than hurt, the future of our nation. We should insist that our elected representatives take the proven capitalist pathway and leave the failed socialist theories alone. If not, we’ll all regret it — sooner, rather than later.