Posts Tagged ‘year-end bonuses’

We will see if this recent stimulus package and second round of the  bailout  money to shore up the banking institutions will have some oversight to make sure that the money will be used as intended.

Post your thoughts and comments.

 

 

I have to say, I’m less than impressed with the way the $700 billion bailout has been handled. Didn’t this whole mess start with a complete failure of the mortgage industry due to its prolific writing of really bad loans to people who they knew couldn’t possibly pay them back? And when those loans (many of them interest only) adjusted, wasn’t it the mortgage industry that insisted they get money from the government (or taxpayers) to pay their own bills, while the homeowners who were defaulting on the badly written loans are just left to fend for themselves? (Nevermind that they are the same taxpayers that the mortgage companies are taking money from.) NYSE

 

Well, I have a solution to the issue that I believe is simple, direct and gives everyone what they need. (President Obama, you can take this idea as your own. I don’t mind.)

 

First, loan the banks what they need in increments. Let’s say $100 million to start. But don’t just hand over the money. Instead, make the lender sit down with the borrower and figure out what they need to be whole. For example: Let’s say Joe Citizen bought a home for $200,000, interest-only loan, no money down. Now that home is worth $150,000. Then Joe gets $50,000 of the $100 million to pay down his mortgage, but the money goes from the government to the lender. The lender is then required to write a new mortgage for Joe, at current rates and NOT interest only.

 

Only after the lender can prove in writing that they have spent $100 million assisting individuals with their mortgages, and that new mortgages have been written at current market rates (low), and that the homeowners are capable of repaying, will the lending institution be given any additional funds. And they must prove that ALL of the money went to help homeowners – no bonuses, big raises, or conferences at swanky hotels.

Washington bill 

If the first $100 million isn’t spent within a year then whatever money is left over goes back into the pool of money earmarked to help homeowners stay in their homes. In other words, if the lending institution wants to hoard the money instead of using it for good, then they get nothing. They will fail, and a bank that is more willing to help Americans stay in their homes will be there to pick up the slack.

 

What’s the result? People have mortgages that they can afford. Banks aren’t left holding the bag for the correction in the housing market. Individuals will have more cash at the end of the month to spend on rebuilding the economy. Banks will have the cash flow they need to feel more secure about lending to businesses again. Businesses will feel more secure and be able to expand and hire more workers. And on and on.

 

Don’t tell me it’s more complicated than that – I know it isn’t. The issue is to get money flowing, and this solution is designed to do just that. It really is that simple.

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What a mess! Not only is the economy crumbling around us, but the government bailout that was supposed to help homeowners stay in their homes, has become an unprecedented one-two punch that is taking the wind out of taxpayers.

 

No one wants to see the financial crisis worsen, but the idea behind a bailout was to help the people who were ending up in foreclosure or without a job because businesses couldn’t borrow even enough money to make their payrolls. Now it seems as if the bailout – which was railroaded through Congress – may not be designed to help those in real need at all.

 wallet of credit cards

Blogger Amey Stone (www.BloggingStocks.com) hit the nail on the head with her list of “Eight ways the Wall Street bailout is adding insult to injury”. According to Stone these are a few of the egregious ways that the companies benefiting from the bailout, keeping taxpayers from benefiting at all (heavily edited – see full text here):

 

·        Not only are Wall Street financial firms getting bailed out but they get to keep their big bonuses too. Estimates anticipate that as much as $70 billion (of the $700 billion bailout money) will get paid out in bonuses to bankers this year.

 

·        After getting an $85 billion bailout, AIG sent salespeople on a lavish retreat at the St. Regis resort in Monarch Beach, Calif. It cost AIG $440,000 but AIG execs should have put a stop to such unnecessary spending, not just because it was a potential public relations nightmare, but because it was the wrong thing to do for a company that could not make ends meet without burdening taxpayers.

 

·        Some Lehman executives got signing bonuses to stay at the banks that acquired their divisions in bankruptcy proceedings. Nomura, which bought Lehman’s European and Asian divisions, gave bankers cash equal to last year’s bonus if they agreed to stay at Nomura for a year, for example. Shouldn’t keeping their jobs have been compensation enough given the massive firings on Wall Street?

 

·        CEOs of failed financial firms still get a golden parachute to soften the blow. Even though their firms’ profits have been essentially wiped out, most will still be making millions at taxpayers’ expense. Five dollar bill

 

·        Banks that are sharing in the $700 billion bailout money are supposed to use it to keep the economy humming, right? Nope. It turns out that banks can use the money however they want. Banks that are getting government bailout money are contemplating using it for other things — like buying other banks — not adding it to the lending pool so they can make more loans and end the credit squeeze.

 

So, the question is: What can be done about this entire situation that has become a train wreck for every taxpayer?

 

Where does the greed and corruption stop? Who will be held accountable in government and at every corporation that now has its greedy hands out begging for more so they get their lavish trips, bonuses and golden parachutes?

Enough is enough!

 

As a taxpayer, are you fed up with this? Please, share your thoughts.