NoBailoutYesRescue sign now

The past week we have, for the first time in most of our lives seen a small sample of what a financial crises looks like (from the Baby Boomers onward). I submit to you that as formidable as this pending crises is it is diminutive, a mere fore shock of what is to come when Social Security goes bust before our eyes.

My proposal expatiated below puts forward an enormous opportunity for the House and Senate to set into motion a plan that would not only rescue these companies - but simultaneously begin a viable system to phase out the current Social Security debacle in a way that would allow the Baby Boom generation to receive their benefits without the revolt that will undoubtedly ensue if the plan is not remedied in such a way that would require generations following the Baby Boom Generation to work the rest of our professional lives supporting the retirement of the Baby Boom while knowing that the Ponzi Scheme will collapse before we receive a cent of the money we paid into it over the past 20 years and the next 25.

This proposed plan is a historic opportunity to make good on a promise that was errantly made generations ago and paid for by we the taxpayers. It cannot be a bail out. That would be a misnomer. It would simply be a purchase from other shareholders who would have lost 100\% of their investment without the help of the tax payer..

Lending these companies money while letting the current management to stay in place is a BAIL OUT. Bailouts reinforce bad behavior for the people who ran the companies into the ground as it sends a message to everyone else that fiduciary responsibility is a joke and its ok to gamble with shareholder equity as well as the livelihood of their employees.

Taking EQUITY positions in return for the needed money is NOT A BAILOUT. If it is, the only people being bailed out are the customers and the employees who were victimized by bad management. The people who wrecked the company lose their money as they should. The people who saved the companies get rewarded when the company and the economy turns around as they SHOULD.

Taking EQUITY positions in return for the needed money is also not socialism or Marxism. They would not be owned or run by the government. This is simply a chance for the government to put the money into accounts of the people who bought them.

http://tableofwisdom.com/MrArbitrage_on_Market_.html
by MrArbitrage

Everybodys looking for a bailout. Now these companies are demonstrating a sense of entitlement. I believe that we the tax-payers should come out ahead if we are going to foot the bill.

If we should be the lender of last resort we should make terms that will help these companies survive - but not to our detriment.

The elderly have been the most powerful lobby group in the past because they are the people who have historically voted. The elderly have benefited greatly from entitlement programs for many decades as many have taken out far more than they ever put in.

Now the Baby Boomers are becoming the elderly and they are beginning to collect Social Security. Because the system is a Ponzi-scheme and Congress has relentlessly raided the trust fund over the years, they are counting on my generation, generation-X to keep those payments coming.

My generation as well as those who follow Gen-X are faced with the knowledge that in order to support the Baby Boomers on Social Security and Medicare, we have to face the fact that we have been working for the past 20 years, paying into this system and will receive nothing in return. Not only that, they are demanding that we continue to work and pay even MORE into it while we KNOW that we are getting the old shaft. Thats supposed to be our civic duty.

A great deal of concern has been expressed about the government taking over companies like AIG. The government owning the dominant players in various industries brings about fears of Socialism or Communism. With the AIG proposed bailout, the government would own 80\% of the company. The stock has consequently fallen headlong to reflect such a dilution.

My thought on the matter is that the government should not retain ownership but rather the new equity for all bailed out companies should be placed in privatized retirement accounts in custody for generations following the Baby Boom who have been paying into Social Security for a specific number of years. These can be special class B, dividend paying shares with less voting power, leaving the control and operation to the private sector.

If companies like GM, Ford & Chrysler need to come to us for a bail out; they should be subject to the same terms. Nobody would force them to go to the tax payer. If they hadnt run their companies imprudently, they wouldnt have to agree to such terms. This system would keep the government out of the operation of these companies, save jobs and avert a meltdown while helping to solve an enormous problem we are going to be facing in the coming years with Social Security. Any other plan will likely result in the government turning around and selling off valuable assets to Goldman Sachs for pennies on the dollar while the tax-payer gets left with the garbage. This way the only people who lose will be the people who purchased the stocks of these companies, which is fair since that is the inherent risk one takes when investing in equities. That is why we diversify.

The same goes for the mortgage bailout. The assumptions are perhaps overly pessimistic as to the number of expected toxic mortgages. If the tax-payers are expected to assume the bad mortgages, our elected charlatans need to see to it that the good mortgages in the bunch end up in the custodial accounts as well.

These custodial accounts need to be tamper proof, meaning that under no circumstance can politicians raid them for their prodigal spending. I expect resistance to such a proposal for the same reason why they resisted privatizing Social Security in the first place: In such custodial accounts, Congress cannot plunder them and replace stock with IOUs.

Their specious rhetoric about how risky this would be wouldnt be as effectual because we are already agreeing to take the risk due to the alternative risk of allowing these companies to fail. They couldnt claim that this is a conspiracy to drive up stock prices through excessive buying because the stocks are falling as a result of share dilution. The beneficiaries would be the people who are going to become the victims after all the Baby Boomers are receiving their Social Security checks.

We could use this rescue plan as an opportunity to deal with two problems at one time and set in motion a plan for the gradual phasing out of Social Security starting with Generation X. Eventually these companies will come back and command market caps in the hundreds of billions of dollars. Once that happens, the positions in such accounts could be gradually unloaded into the marketplace and replaced with low cost index funds that have historically returned over 10\% per year long term without having each beneficiary day trading their accounts, a preposterous notion the opponents of privatization have often propounded in order to maintain the status quo of their unabated plunder.

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