Archive for Wednesday, October 1, 2008

KU professors oppose economic bailout plan, urge caution

As the bailout legislation moves back to the House, a group of KU professors are hoping that legislators take their advice. As 6News reporter Jesse Fray explains - they're among about 230 university professors who had urged members of Congress to slow down...

October 1, 2008

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As congressional leaders look to adopt a financial rescue plan, three Kansas University professors are among about 230 university economics professors nationwide who oppose the deal.

While the educators say "bold action" is necessary to make sure the financial system keeps functioning, they're not so satisfied by the financial crisis plan proposed by U.S. Treasury Secretary Henry Paulson. That plan would allow the government to buy bad mortgages and other sour assets held by troubled banks and other financial institutions.

The group of economists, which signed a petition sent to congressional leaders last week, urges Congress to slow down with its efforts to resolve the situation. The professors work for universities from across the country, including Harvard, Northwestern, Massachusetts Institute of Technology and the University of Chicago.

"It just asks Congress to take pause, not to be in a rush to pass this complex new legislation," said Paul Koch, a KU business professor whose name appears on the petition. Finance professor George Bittlingmayer and associate dean of academic affairs Keith Chauvin, both KU faculty members, also signed the letter.

The group of economists identified three pitfalls with Paulson's proposed "bailout" plan:

¢ The plan isn't fair to taxpayers. The economists claim the government can ensure a well-functioning financial system, without bailing out particular investors and institutions that made unwise choices.

¢ It's ambiguous and has unclear missions and oversight.

¢ The effects of the plan would be around for a generation, and that weakening "America's dynamic and innovative private capital markets" to calm short-term disruptions is "shortsighted."

"This is an important decision, and we just want them to make sure they consider all the angles before they do something rash," Koch said.

Bittlingmayer said there are varying views about how to best handle the financial meltdown, even among faculty at KU's business school, but he said there's no reason for lawmakers to be in a big hurry when passing the appropriate legislation.

"There are a lot of good ideas out there, above and beyond simply buying up these troubled assets," he said. "You want to do something that saves the financial system but doesn't save people who made mistakes."

Comments

Tony Kisner 6 years, 9 months ago

Editorial correction Tenured Economics professors ::.Godot speaks true. I'm have not read one comment from Boyda or our Senators but if one of them claims to know what the hell is going on I will vote them out without a second thought.

Godot 6 years, 9 months ago

The Senate added at least $150 BN to the bill, and all of it, all of it is pork!!!Bush promised to veto any bill with pork.I'm Calling you Out, Bush! Veto this Pig!

Godot 6 years, 9 months ago

150 bn in pork on a 700 bn bill. The Senate is demanding its 20% cut. Corruption is rampant in the US Senate.

doc1 6 years, 9 months ago

Thats why they are professors of a university in the middle of Kansas and not financial advisors in washington.

PosseComitatus 6 years, 9 months ago

Keep pressure on Boyda, they will give her a free pass since she is in a traditionally republican seat. We have to hit Moore hard and non-stop.

Economist 6 years, 9 months ago

Easy_Does_It -Actually none of the three are tenured economics professors. They are all tenured business professors.

63BC 6 years, 9 months ago

Brownback and Roberts voted no.Moore was a yes. Remember that.

Godot 6 years, 9 months ago

Moore must go. If Boyda does not vote no when this bill hits the house, she will be gone, too,.

Godot 6 years, 9 months ago

Both McCain and Obama voted in favor of this bill. Neither is fit to serve.

ASBESTOS 6 years, 9 months ago

Additionally there is now $150 billion in "added pork just from the Senate. When it gets to the House this $700 Billion bailout is going to cost $1 Trillion flat.Those that are adding pork and earmarks should be taken out behind the Capital and shot in the head for being criminals and being stupid.

PosseComitatus 6 years, 9 months ago

The bill just passed the senate. Brownback and Roberts held true and voted against this. We must work the house to stop this.

ASBESTOS 6 years, 9 months ago

Yes, if it is such an "energency" then they need to pass a "clean bill".Otherwise, if they have to "buy votes" with "sweeteners" (pork), the situation must not be as dire as these fearmongers say.

situveux1 6 years, 9 months ago

No, I'm pretty sure that's why they're 3 of 230 professors across the country that came to oppose the bailout and why you're just an anonymous, ignorant internet commenter.

Godot 6 years, 9 months ago

Nonone should ever have alerted Congress about this situation. If the press had not made it front page news, Congress would never have addressed it. Now that they have gotten their teeth into, they are making matters worse, much, much worse.We need a part-time Congress. Actually, we have a part-time Congress on a full time salary. Anyway, three months a year - that is all we need from them-------if that.FIRE CONGRESS~!!!! They always, always, make matters worse.

Jaylee 6 years, 9 months ago

frankly ive heard less outcry about this than when bush was going to be elected, AND re-elected. i really dont think the average person understands enough to give a crap about this problem and that is the problem with america. nobody cares enough to learn anything above and beyond their daily goings-on. namely where to aim their ass when they go to the bathroom and how to drive a vehicle to their drone job and back.no knowledge one way or the other leads to dull-minded individuals with no convictions, political or otherwise.this problem will never resolve because americans are dumber every day. call it pessimism. call it what you will. but just when america has bent over to the government what you think would be too far, they are convinced they need to bend over further.i hope to someday bend the united states government over.

tvc 6 years, 9 months ago

Yeah, cuz then we would only need 702 + billion!

Sigmund 6 years, 9 months ago

Ask yourself this, how many of those Senators who voted for this bill actually had time to read and understand all 400+ pages of new legistlation? I can only hope the peoples representatives, in the House of Representatives, will actually do the will of the people and reject this POS and then demand that a new bill, dealing solely with Fannie and Freddie mortgages, be drafted, debated, and then voted on.

Sigmund 6 years, 9 months ago

Ask yourself another question, will ANYONE in the media (ABC, CBS, NBC, MSNBC, FOX, WSJ, NYT, CNN) ask Obama, McCain, and Biden this question. "Senator, you recently voted in favor of the 400+ page Deluxe Bailout Bill Happy Meal with double cheese and triple bacon. Did you read it before you voted and which provision in that bill do think will most address the toxic Freddie and Fannie loans which most economist agree are at the root of the current worldwide economic turmoil?"

Sigmund 6 years, 9 months ago

You can add these professors names to Jeffrey A. Miron, a senior lecturer in economics at Harvard University, and 166 academic economists who signed a letter to congressional leaders last week opposing the government bailout plan."... a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources."http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html?iref=mpstoryviewWhat started out as a 3 page bill with the greatest concentration of economic power ever into the hands of a unelected hand picked BushCo Wall Street insider, is now over 400 pages of pork and earmarks none of which are directed at the root of the problem, Fannie and Freddie mortgages!Future generations of Americans, both democrats and republicans, who will have this albatross hung around their necks will curse this congress as the worse ever. Of course with an current approval rating of less than 10% and knowingly voting against the will of their constituents, who are overwhelming opposed to this bill, that is hardly a surprise.

S0uPnAzi 6 years, 9 months ago

I think the Dave Ramsey plan is the only one that makes any sense, but that's precisely why it won't a) get introduced,b) debated, andc) voted for.

BigPrune 6 years, 9 months ago

Look at the bright side, Lawrence got earmarked money to finally complete the South Lawrence Trafficway :)~A socialist action throws dirt in the face of our local socialists who oppose the trafficway.Hurrah Lawrence!:)

jonas_opines 6 years, 9 months ago

"this problem will never resolve because americans are dumber every day. call it pessimism. call it what you will."Can we call it an example of you not learning anything above and beyond your daily goings-on? You've certainly come up with a highly-simplified analysis of the problem.

GOPConservative 6 years, 9 months ago

This con job feels exactly like the con job that led to our wasting a trillion dollars so far in Iraq. Just like then, we are being told we must do this or all hell will break out. Just like then, members of Congress on both sides are lined up like robots doing whatever they are told. The banks wanted deregulation. They need to live with the consequences. Unfortunately, all of us will suffer. There will probably be some deep recession or even a crash, but it will happen whether we pour good money after bad or not. Hoover tried similar stuff just before the 1929 crash. Things just have to shake out as the greed that caused this finally self-destructs. Maybe the rest of us deserve suffer. Maybe we deserve to be punished for letting Bush and the Neocons get away with what they did and are still doing. After bilking us for a trillion dollars for their no-bid contracts in Iraq, Katrina and other "outsourcing," they now want the taxpayer to buy $200 billion in bad debts and give $500 billion to Paulson and others who will "adminster" this give-a-way. As a final insult to the taxpayer, the Senate wants to add another $150 billion in pork for dessert. This thing stinks to high heaven. BTW, Boyda voted "no" the first time this came before the House. I don't know how Jenkins would have voted, but since she is such an obvious brown noser of Bush, she is probably supporting his position on this socialistic welfare program for the banks. Slattery is non-committal, and Roberts is against it. It is good to see Roberts finally showing some courage and honor by standing up to Bush. It's an especially refreshing change since it was Roberts' faulty intelligence as Chairman of the Senate Intelligence Committee that led directly to all the wasted money and blood in Iraq. He probably knew it would pass, but thought it would help him politically to vote against it just to be able to say he did.

Bruce Rist 6 years, 9 months ago

Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following threestepCommon Sense Plan.I. INSURANCEa. Insure the subprime bonds/mortgages with an underlying FHA-type insurance.Government-insured and backed loans would have an instant market all over theworld, creating immediate and needed liquidity.b. In order for a company to accept the government-backed insurance, they must do two things:1. Rewrite any mortgage that is more than three months delinquent to a6% fixed-rate mortgage.a. Roll all back payments with no late fees or legal costs into thebalance. This brings homeowners current and allows them achance to keep their homes.b. Cancel all prepayment penalties to encourage refinancing orthe sale of the property to pay off the bad loan. In the event offoreclosure or short sale, the borrower will not be held liablefor any deficit balance. FHA does this now, and thatencourages mortgage companies to go the extra mile whileworking with the borrower-again limiting foreclosures andruined lives.2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs andexecutive team members as long as the company holds thesegovernment-insured bonds/mortgages. This keeps underperformingexecutives from being paid when they don't do their jobs.c. This backstop will cost less than $50 billion-a small fraction of the current proposal.II. MARK TO MARKETa. Remove mark to market accounting rules for two years on only subprime Tier IIIbonds/mortgages. This keeps companies from being forced to artificially mark downbonds/mortgages below the value of the underlying mortgages and real estate.b. This move creates patience in the market and has an immediate stabilizing effect onfailing and ailing banks-and it costs the taxpayer nothing.III. CAPITAL GAINS TAXa. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous-and immediate-liquidity in the markets. Again, this costs the taxpayer nothing.b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.This is not a time for envy, and it's not a time for politics. It's time for all of us, as Americans, to stand up, speak out, and fix this mess`Dave Ramsey

JerryStubbs 6 years, 9 months ago

FDR eventually implemented many of the ideas that Hoover had started but never got into action. Hoover's biggest error was his slow reaction.

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