A Better Economic Recovery Plan

[blackjohn]

A friend of mine just sent this to me. I'm not one to forward stuff along, but I really like this plan!!!

The Birk Economic Recovery PLan

Hi Pals,

I'm against the $85,000,000,000.00 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in a We

Deserve It Dividend.

To make the math simple, let's assume there are 200,000,000 bonafide

U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and

child. So 200,000,000 might be a fair stab at adults 18 and up..

So divide 200 million adults 18+ into $85 billon that equals

$425,000.00.

My plan is to give $425,000 to every person 18+ as a We Deserve It

Dividend.

Of course, it would NOT be tax free. So let's assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes. That sends

$25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket. A

husband and wife has $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?

Pay off your mortgage - housing crisis solved.

Repay college loans - what a great boost to new grads Put away money for

college - it'll be there Save in a bank - create money to loan to

entrepreneurs.

Buy a new car - create jobs

Invest in the market - capital drives growth Pay for your parent's

medical insurance - health care improves Enable Deadbeat Dads to come

clean - or else

Remember this is for every adult U S Citizen 18+ including the folks

who lost their jobs at Lehman Brothers and every other company that is

cutting back. And of course, for those serving in our Armed Forces.

If we're going to re-distribute wealth let's really do it...instead of

trickling out a puny $1000.00 ( "vote buy" ) economic incentive that is

being proposed by one of our candidates for President.

If we're going to do an $85 billion bailout, let's bail out every adult

U S Citizen 18+!

As for AIG - liquidate it.

Sell off its parts.

Let American General go back to being American General.

Sell off the real estate.

Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale. We deserve it and AIG doesn't.

Sure it's a crazy idea that can "never work."

But can you imagine the Coast-To-Coast Block Party!

How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion We

Deserve It Dividend more than I do the geniuses at AIG or in Washington

DC .

And remember, The Birk plan only really costs $59.5 Billion because

$25.5 Billion is returned instantly in taxes to Uncle Sam.

Ahhh....I feel so much better getting that off my chest.

Kindest personal regards,

Birk

T. J. Birkenmeier, A Creative Guy & Citizen of the Republic

[Mission]

While I'm all against the gov. bailing anyone out (including, but not necessarily limited to: AIG, Fannie Mae, Freddy-Mac, the S&L Institutions or even OJ Simpson), can you imagine the destructive effect giving everyone that much cash could have? We would most likely have wild instantaneous inflationary problems.

I have a great book for ya' John. You can probably find it for cheap at a used bookstore. It's called The Buck Passes Flynn by Greg McDonald. It's one of the most interesting explorations of "cash money" I've ever read. (And it's a decent mystery to boot.)

[Captain Pogue]

I got $425.00. If it was an English billion it would be $85,000,000,000,000.00 and come out to $425,000.00.

85,000,000,000 / 200,000,000 = 425

[blackjohn]

Awwwww... boooooo...

The Devil is in the details...

I figured there was a math mistake in there somewhere. Now it will be fun to see how many other people I know forward it to me without checking the math.

[Lady Cassandra Seahawke]

ok so I haven't checked the math, but under the recent incentive plan a few months ago they were handing out a minimum of $600.00 for singles and double that to a bit more for families...to those that filed income tax returns and offered to seniors that didn't initially filed...that do not have to be claimed on the next filing.

And that did not even come close to the amount being considered (700 billiion) for the Wall Street bailout. So, some how I think that the $425.00 is wrong also.

OK, so who here is a math wiz?

[hurricane]

Diosa read this plan to me last night on the way home from pirooting. Can you imagine how that would stimulate the economy vs. giving it to a single company that still might not make it out of its problems?

-- Hurricane

[Mission]

You'd flood the market with money. This whole idea assumes the US market won't react to this uniform outpouring of cash which we wouldn't happen in the real world. The price of things would probably skyrocket to adjust for the cash imbalance if you gave everyone several hundred thousand dollars. Then all the banks would be screwed because their loans were based on "old" money prices which would likely result in even more chaos and instability in the financial sector - a lot more than what you see right now - and the banks would be in trouble because their profits are based on past loans grounded in the "old money system".

The government just needs to stay out of this stuff because they don't bother to look beyond the end of their term in office - they aren't rewarded for long-term thinking so they don't usually bother doing it. They actually mean well, but only in the short term.

[Captain Pogue]

I think it'll work in the short run. Humans being what we are, somebody will find a way to cheat the system the bailout sets up. Then we'll be back to where we are are now.

[Silkie McDonough]

I would like to prove that it doesn't work. lol

[Mission]

Sure, eventually it would level off. Just as average salaries rise over time, causing prices to rise over time (or vice-versa if you like the negative view) and everything sort of levels out. Actually there is always fluctuation in different markets (salary and product). From a micro-economic view it never truly levels out, it just maintains a sort of bumpy upward trend. That is why one market sector seems to provide really good deals while another seems expensive for a short time. But from a macro-econ view it's pretty steady. (The law of large numbers kicks in and the whole mess appears to have a smooth trend even though at the individual market level it's pretty bumpy.)

This why your salary may be double what it was ten or twenty years ago, but so is the price of a gallon of milk. (Nothing was gained here - this is particularly true in commodity prices. Milk is a commodity, as opposed to, say, an iPod which is a specific, branded product and thus has greater potential to buck the commodity pricing. Interestingly, if you can move you brand of milk out of the commodity category - let's say by announcing that your brand of milk is fashionably "organic," you can get away with charging much higher prices. But I digress.)

Anyhow, the huge wodge of cash injected by this flawed plan would eventually get smoothed out at the macro scale, although prices and (you better damn well hope) your salary will increase as well. Nothing will be gained in the very long term. Think about it - how much would your current employer have to pay you to do your job if you suddenly had several hundred thousand dollars? A lot of people would probably short-sightedly quit, but nothing will get done if everyone quits. So salaries go up and thus product prices will have to go up with them to pay the higher salaries. On top of that, the prices will rise as the iPod sellers try to cope with the fact that $300 isn't worth as much now that everyone has several hundred thousand dollars. An iPod isn't as valuable as a brand if they only cost a very small fraction of your cash holdings. Same with any snobby name brand, so that will also pressure prices upwards.

Now, let's look at the poor old bank. Their revenue depends on regular loan payments that include a huge chunk of interest. If no one paid off their loans and just continued making the payments, the interest would be worth less relative to the amount of cash in the market, specifically for fixed-rate loans. The banks would lose a huge chunk of money relative to the average price of things. (Variable-rate loans would probably skyrocket as inflation went through the roof in reaction to all this.) You'd see more banks failing because of this. (I just about guarantee it.)

See how it works?

[Morgan Dreadlocke]

I sees many elected Captains starrin' inta the hold 'o a founderin' ship. Theys plannin' ta refloat the hull by borin' 700 billion holes in the bottom ta let the water out. Manacles an a vacation ta Devils Island they be deservin' fore any more damage be done.

Tea needs be spilt, an quickly.

[Black Nate]

Hummm. . . .

Try this on for size.

3 Men who brought down Wall Street - This is really interesting reading

Be sure to read the "where they are now"!!

Here is a quick look into 3 former Fannie Mae executives who have brought down Wall Street.

Franklin Raines was a Chairman and Chief Executive Officer at Fannie Mae. Raines was forced to retire from his position with Fannie Mae when auditing discovered severe irregulaties in Fannie Mae's accounting activities. At the time of his departure The Wall Street Journal noted, " Raines, who long defended the company's accounting despite mounting evidence that it wasn't proper, issued a statement late Tuesday conceding that "mistakes were made" and saying he would assume responsibility as he had earlier promised. News reports indicate the company was under growing pressure from regulators to shake up its management in the wake of findings that the company's books ran afoul of generally accepted accounting principles for four years." Fannie Mae had to reduce its surplus by $9 billion.

Raines left with a "golden parachute valued at $240 Million in benefits. The Government filed suit against Raines when the depth of the accounting scandal became clear. http://housingdoom.com/2006/12/18/fannie-charges/ .. The Government noted, "The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner." These charges were made in 2006. The Co urt ordered Raines to return $50 Million Dollars he received in bonuses based on the miss-stated Fannie Mae profits.

Tim Howard - Was the Chief Financial Officer of Fannie Mae. Howard "was a strong internal proponent of using accounting strategies that would ensure a "stable pattern of earnings" at Fannie. In everyday English - he was cooking the books. The Government Investigation determined that, "Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae,"

On June 16, 2006, Rep. Richard Baker, R-La., asked the Justice Department to investigate his allegations that two former Fannie Mae executives lied to Congress in October 2004 when they denied manipulating the mortgage-finance giant's income statement to achieve management pay bonuses. Investigations by federal regulators and the company's board of directors since concluded that management did manipulate 1998 earnings to trigger bonuses. Raines and Howard resigned under pressure in late 2004.

Howard's Golden Parachute was estimated at $20 Million!

Jim Johnson - A former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO. A look at the Office of Federal Housing Enterprise Oversight's May 2006 report on mismanagement and corruption inside Fannie Mae, and you'll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson's 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million." Johnson is currently under investigation for taking illegal loans from Countrywide while serving as CEO of Fannie Mae.

Johnson's Golden Parachute was estimated at $28 Million.

WHERE ARE THEY NOW?

FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor

TIM HOWARD? Howard is also a Chief Economic Advisor to Obama

JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected to run Obama's Vice Presidential Search Committee

IF OBAMA PLANS ON CLEANING UP THE MESS - HIS ADVISORS HAVE THE EXPERTISE - THEY MADE THE MESS IN THE FIRST PLACE. Would you trust the men who tore Wall Street down to build the New Wall Street ?

[Captain Pogue]

Here is an interesting look into how we got where we are. The article is dated 1999!

http://query.nytimes.com/gst/fullpage.html...mp;pagewanted=1

[Red-Handed Jill]

Back when I was a financial advisor, I encountered countless people who couldn't afford the houses they had. Oftentimes they'd have one of those "creative" mortgages from a less-than-scrupulous lender and I'd send them to one of my honest mortgage broker contacts to help them out of that miasma, but the fact remained that unless they received a sudden windfall, they wouldn't be in that house long. And yet they would talk about pulling the equity out of their home and buying a second one. These weren't unintelligent people, but they had bought into the housing craze, much like people had bought into the Dot.Com boom and the "it's the New Economy!" myth. (Neglecting to remember that economics is a social science, based on human nature and reactions. One would think that if human nature had changed we'd hear about it on the news, at least...)

Additionally I saw a huge influx of students during my professorial days. I taught Network Engineering and my classes were flooded with people following the Dot.Com money and trying to cash in on the big tech paychecks (when I gave them the reality in the first day of class, many of them dropped out of the program.) My guess is after that crash those people went on to try real estate as a career.

At any rate, bottom line is that humans as a species tend to be reactive. The housing boom is a reaction to people running away from the stock market. And making the same damn mistakes. I keep reading and hearing on the radio about what troubled stocks to avoid, advice that is contrary to good investment strategy; it makes me wonder if the people making these recommendations have any investment qualifications or knowledge whatsoever. A lot of those troubled stocks are bargains right now - you want to buy 'em when they are cheap, not dump them at a loss. Buy LOW, sell HIGH.

Okay - off the soapbox.

[Morgan Dreadlocke]

Eatin' popcorn an watchin' the train wreck in progress. There's a body bleedin' profusely in tha ditch missin an arm. Congress has arrived an is applyin' a tourniquet. They can't find a pulse so theys applyin' leeches ta the body till they fills up wi blood. Then they attaches the leeches ta the arm an squeezes them. They ain't figgered out that the tourniquet should be on the body and not on the lost arm

Ya' ll is watchin' the biggest pirate heist in history. Pass the pork.

[Matusalem]

When election day comes, I am writing in my vote for

. Period. End of story.

Hitchhiker's guide to the Galaxy...just advance to 3:41, 'cause this is 10 minutes long.

[Captain Pogue]

They can handle the small stuff, but I fear they just can't handle the big important issues. Economic armegeddon and they took Rosh Shashana(sp?) off. Didn't they just had August off? It's great to see they're priorities. My boss isn't a slave driver, but when I need to get things completed my wife understands why I might have to cancel something important, our future livelyhood. Good to see that congress feels the same way.

[Matusalem]

Two of my closest friends are in the finance industry, first and second mortgages in particular, and now they are out of work, with mortgages of their own, and a house full of mouths to feed. Things do not bode well, which upsets me. But for me, being in a creative industry, I am grateful that the banking industry is not where my talents lay. Just a bad time overall. The banks themselves got what they deserve. Let's just hope folks like us can weather this out.

[Red-Handed Jill]

I was in the financial services industry and was able to see this coming a mile away. People were reacting during the housing bubble exactly the way they did during the dot com era and somehow thinking that it was going to be different this time. And I kept encountering so many smug folks in the real estate industry who acted as if they had the key to the holy grail, when in fact real estate was just like other investments, with lows as well as highs. The ones who knew better could see this coming as well and did their best to help others out of questionable loans, etc. But unfortunately, I didn't meet very many people like that. It seemed to me that so many folks in that industry grabbed what they could, when they could, the consequences be damned. Or they were pressured into selling those loans by higher-ups who really didn't give a damn. And banks were buying up those questionable loans like mad so that they could receive the additional windfall of the inevitable foreclosed houses. But you can't do anything like that on such a scale and NOT have it collapse.

I don't know why people think that given the same set of circumstances they are somehow magically going to get a different result. Human nature, I guess.

[Matty Bottles]

Hummm. . . .

WHERE ARE THEY NOW?

FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor

TIM HOWARD? Howard is also a Chief Economic Advisor to Obama

JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected to run Obama's Vice Presidential Search Committee

Sources, please.

[Dorian Lasseter]

I just did a quick google on the three folks here and Obama...

http://althouse.blogspot.com/2008/09/so-is...a-economic.html

http://www.propeller.com/story/2008/09/23/...nd-jim-johnson/

It looks like alot comes from an article in the Washington Post...

http://voices.washingtonpost.com/the-trail..._obama_has.html

All very interesting...

[Matty Bottles]

I just did a quick google on the three folks here and Obama...

http://althouse.blogspot.com/2008/09/so-is...a-economic.html

http://www.propeller.com/story/2008/09/23/...nd-jim-johnson/

It looks like alot comes from an article in the Washington Post...

http://voices.washingtonpost.com/the-trail..._obama_has.html

All very interesting...

It seems as though the only substantive claim links Obama with Jim Johnson, who stepped down, which is apparently what snopes concluded:

http://www.snopes.com/politics/obama/fanniemae.asp

This is its own thing to be considered. But I think it's more helpful for everyone if we vet our claims throughly. There's been a lot of ludicrous stuff claimed about Palin, for example, but since I don't know if it's true, I don't repeat it or make any decision based on it, you know?

[Black Nate]

Beggin' yer pardon then. . . .

Ah, they's all crooks. . . .

Hasn't been an honest politician in my lifetime.

[blackjohn]

Beggin' yer pardon then. . . .

Ah, they's all crooks. . . .

Hasn't been an honest politician in my lifetime.

I think you missed a set of ellipses...

"Hasn't been an honest politician..."

[Mission]

Neglecting to remember that economics is a social science, based on human nature and reactions.

An excellent point (one among the many other excellent points). I have often wondered how Keynes made so much money in the market in the early 20th century. I'll bet he didn't do it by observing stocks and markets - he probably did it by watching groups of people.

As for people in danger of losing houses (someone was talking about this I think) they should consider their situation a life lesson. Nobody got into debt they couldn't handle without deciding to do so. A person's life and situation today are a result of the choices they made. So if they are unhappy with where they are at, they must make new choices.