Announcement

Collapse
No announcement yet.

Paulson Bank Rescue Proposal Is `Crazy,' O'Neill

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Paulson Bank Rescue Proposal Is `Crazy,' O'Neill

    Paulson Bank Rescue Proposal Is `Crazy,' O'Neill
    October 1, 2008 (Bloomberg News)

    Former U.S. Treasury Secretary Paul O'Neill said the $700 billion bank-rescue proposal under negotiation in Washington is "crazy," with potentially "awful" consequences for the world's largest economy.

    "Doesn't this seem like lunacy to you?" said O'Neill, who was President George W. Bush's first Treasury chief, from 2001 to 2002, in a telephone interview today. "The consequences of it are unbelievably bad in terms of public intrusion into the private sector."

    O'Neill's objections mirror those of Republicans in the House of Representatives who rejected the plan in a Sept. 29 vote. The former Treasury chief said he's lobbying for an alternative solution that would offer guarantees for troubled assets, stopping short of purchasing the debt.

    "Is anybody thinking there?" asked O'Neill, who also served as deputy budget director in the Ford administration. "It's too late, it's not going to make any difference, and it's aggravating as hell when there's a better idea and you can't even get it in play," he said, recognizing little success so far in pitching his own proposal.

    O'Neill, 72, was fired after an almost two-year tenure marked by strains with White House officials and comments that roiled markets.

    'Just Like Cash'

    His plan to deal with the crisis would start with a "discounted cash-flow analysis" of distressed instruments that are clogging the financial system. The government would guarantee the assets, paring back the support as principal and interest payments were made, he said.

    "That should take care of the liquidity problem because if they have a government guarantee at a specified level they should trade just like cash," O'Neill said.

    He likened his solution to the Treasury's decision Sept. 19 to guarantee domestic money-market funds for a year to try to stop a run on what traditionally have been among the safest of investments.

    To replenish capital in banks, the government should make 20-year loans to institutions and charge 2 percentage points above the government's borrowing rate, he said. Regulators could count the loans as part of the banks' capital base, he added. Paying the premium would give banks an incentive to retire the government loans faster, he said.

    O'Neill said he has tried to shop his ideas to congressional leaders including Joint Economic Committee Chairman Charles Schumer; Senate Banking Committee Chairman Christopher Dodd; and Senator Richard Shelby, the ranking Republican on the Banking Committee.

    Senate Vote

    "None of them are returning phone calls," O'Neill said. "I honestly don't think they really understand it and they're so much in a bubble that it's impossible to penetrate it."

    "If they pass this thing, it's awful what the consequences are going to be in terms of an ongoing federal relationship that doesn't need to exist with the institutions," O'Neill said. "Are we going to insist on having a federal representative on boards of directors to protect our investment?"

    "We have no capacity in the federal government and it's not possible to create a capacity to manage a $700 billion property portfolio," said O'Neill, who was chairman of Alcoa Inc., the largest U.S. aluminum producer, from 1987 to 2000. "It's crazy. It's like we've lost our moorings." more...

    AntiSpin: "Is anybody thinking there?" Is that a rhetorical question? Of course they're not thinking. They're the US Congress. So now we get the worst of both worlds. Government interference in markets and a Depression because this plan can't possibly work. We like the King plan. It gets money into the hands of small businesses.

    This is a taste of how our Congress will cope with the foreign debt bill coming due. In fact, these machinations are related. In lieu of treasury or agency bonds our investment banks decided they'd sell China, Japan, and Russia instead. In th event we wind up selling them treasury bonds anyway.
    As, pent in an aquarium, the troutlet
    Swims round and round his tank to find an outlet,
    Pressing his nose against the glass that holds him,
    Nor ever sees the prison that enfolds him;
    So the poor debtor, seeing naught around him,
    Yet feels the narrow limits that impound him,
    Grieves at his debt and studies to evade it,
    And finds at last he might as well have paid it.
    - Barlow S. Vode
    iTulip Select: The Investment Thesis for the Next Cycle™
    __________________________________________________

    To receive the iTulip Newsletter or iTulip Alerts, Join our FREE Email Mailing List


    Copyright © iTulip, Inc. 1998 - 2007 All Rights Reserved


    All information provided "as is" for informational purposes only, not intended for trading purposes or advice.
    Nothing appearing on this website should be considered a recommendation to buy or to sell any security or related financial instrument. iTulip, Inc. is not liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. Full Disclaimer
    Last edited by FRED; 10-01-08, 11:24 PM.
    Ed.

  • #2
    Re: Paulson Bank Rescue Proposal Is `Crazy,' O'Neill

    I don't pay a lot of critical attention to politics, but it struck me that O'Neill was a decent sort of guy, whose inclination was to speak truths. That got him fired.

    It is still my contention no one knows how all this shit is going to turn out.
    Jim 69 y/o

    "...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)

    Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.

    Good judgement comes from experience; experience comes from bad judgement. Unknown.

    Comment


    • #3
      Re: Paulson Bank Rescue Proposal Is `Crazy,' O'Neill

      Originally posted by FRED View Post
      [wrapright]This is a taste of how our Congress will cope with the foreign debt bill coming due. In fact, these machinations are related. In lieu of treasury or agency bonds our investment banks decided they'd sell China, Japan, and Russia instead. In th event we wind up selling them treasury bonds anyway.
      As, pent in an aquarium, the troutlet
      Swims round and round his tank to find an outlet,
      Pressing his nose against the glass that holds him,
      Nor ever sees the prison that enfolds him;
      So the poor debtor, seeing naught around him,
      Yet feels the narrow limits that impound him,
      Grieves at his debt and studies to evade it,
      And finds at last he might as well have paid it.
      - Barlow S. Vode



      Patient of contradiction as a child,
      Affable, humble, diffident, and mild;
      Such was Sir Isaac, and such Boyle and Locke:
      Your blunderer is as steady as a rock.
      The creature is so sure to kick and bite,
      A Muleteer's the man to set him right.
      First Appetite enlists him Truth's sworn foe,
      Then obstinate Self-will confirms him so.
      Tell him he wanders; that his error leads
      To fatal ills; that, though the path he treads
      be flowery, and he sees no cause for fear,
      Death and the pains of Hell attend him there:
      In vain; the slave of arrogence and pride,
      He has no hearing on the prudent side.
      His still refuted quirks he still repeats;
      New raised objections with new quibbles meets;
      Till, sinking in the quicksand he defends,
      He dies disputing, and the contest ends --
      But not the mischiefs; they, still left behind,
      Like thistle-seeds, are sown by every wind.
      Thus men go wrong with an ingenious skill;
      Bend the straight rule to their own crooked will;
      And with a clear and shining light supplied,
      First put it out, then take it for a guide.
      Halting on crutches of unequal size,
      One leg by truth supported, one by lies;
      They sidle to the goal with awkward pace,
      Secure of nothing but to lose the race.

      The progress of Error. William Cowper, Esq. 1821

      Comment

      Working...
      X