I've been giving a lot of thought to the bailout today. This morning I felt sick to my stomach at the thought. This isn't too suprising, because $700,000,000,000 (or more) is a lot of money. I have a hobby of examining insanely big numbers in the theatrical movie industry. This is a couple orders of magnitude greater. It's a bit greater than I can comprehend and the thought of it being used badly really gets to me.

After it failed, I felt relief. All that I've been reading indicates that this is a bad plan, and it'd likely cripple the US Gov't for a number of years while those who caused the problem would get away so they could do it all again.

And now, hours later after I've had more time to think I'm starting to feel anger, possibly bordering on rage. This isn't just a bad plan, it's a terrible plan. The money would be controlled by a few individuals, the oversight is beyond ridiculous, and the limitations imposed on the companies and individuals who caused the mess is beyond pathetic.

Yes, it's a terrible problem, a financial crisis that's bigger than any that most of us have seen in our lives. However, it's a crisis that will go away and can be solved by reasoned, considered thinking. This or any kneejerk bill isn't going to help, and could make it all worse.

My understanding isn't absolute, but I'm going to try and break down what I have gleamed and then make alternative suggestions.

Let's start with the ideological stuff. This isn't anything that would make or break the bank in either direction, but it matters a hell of a lot from a message standpoint. In the general public we understand that there are a relatively small group of people who can be held responsible due to their influence as executives in the companies who are facing problems.

There are two provisions in the bill which seek to limit what these people can get. The first is in direct pay (essentially penalizing companies who pay execs more than $500k) and the second is in the 'golden parachutes'. I'm all in favor of limiting exec pay. Except half a million is ridiculously high. In fact, I'd guess that it's going to be higher than some of these people already get. Plus, they're penalized, but not prohibited from giving higher pay. If I'm to understand how that'll work, company that's in the shitter will sell off a bunch of bad loans to the federal government and then... have to cover some additional fine if they pay their execs too much, thereby giving some miniscule amount of that money back? Seems kinda weak.

And as far as the parachutes, the limitations (unknown to me what those are at this time) only apply to new contracts. Any existing employment agreements already apply. That means if an exec is due $10m or whatever if he's fired... he still gets the $10m.

So how would I correct that? Two provisions: first, execs cannot be paid more than the median household income in the United States. That's a hard limit. Currently it's about $50k a year. They won't be significantly disadvantaged, since they can still reap the stock options the company may give. And that way their financial solvency is tied to how well they do their jobs: i.e. making sure the companies get out of the shitter and back on track.

Second, All existing parachutes are suspended. Any future ones are limited to the equivilant of one year of the exec's salary. Harsh, I know. It'd be bloody difficult for me to find a new job after getting a $50k severance package. I don't know what I'd do.

Next is who gets to decide how the funds are disbursed and how oversight into this happens. As the bill was proposed, the treasury secretary (Paulson, in this case), is given complete authority to do with the money as he sees fit. Oversight consists of five people, one of whom is Paulson.

Umm... right. I don't know about you, but I certainly don't want to give an appointed individual the keys to the kingdom. In fact, I'm not even sure I'd trust it to elected officials. I'd much prefer a system that can run itself automatically. Instead of having the judgement left to those who are giving the money, I'll leave it to those who are taking it.

Let the companies who have the bad loans decide if they want to sell them to the government. If they decide to do so, they MUST comply with a number of regulations, including those listed above. Said regulations would apply to any company acquired by or that acquires any company that chooses to comply (so they don't have a loophole of shuffling the companies around after the money's been given. Once they buy in, they must play by the rules.)

This gives the companies the choice: They can try to deal with the problem by themselves, or they can take the easy money. I'm really quite curious what those execs would choose between the strong personal financial stance in a company saddled with debt and shitty stock or one where they need to take a massive pay cut but that'll be doing much better. Risk reward system, and all.

And finally, we need to understand how the debt will be recovered. Under the current plan, this is... apparently magical. There's some hope that at some point things will be better and the government can recoup the debt. And after five years, congress can give suggestions on how to do that.

That's really kinda weak, really. So instead, all stock transactions get taxed .25%. I'm led to believe that this will generate about $150bn a year. Second, any company that chooses to receive the disbursement will be taxed an additional .25%. This latter would be removed once the debt is paid off. Effectively, this would throw the entire cost of the recovery in the hands of those who engaged in the problem and those of us who don't engage in stock trading (which is separate from stock owning) wouldn't be inconvenienced. The long term investments such as retirement accounts and so forth should be fine, since unless there's a catastrophic crash, the market will recover and they'll be good... and if there is such a crash it won't matter regardless.

And that's it, really. Writing this up (and making dinner in the middle) used up a lot of anger. I doubt it's an entirely useful plan, but it seems a damn sight better than anything that's been brought up so far.