Congress America Needs Tarp II!

JimofPennsylvan

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Jun 6, 2007
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These times call for the authorities in America to respond optimally and I hope that the opportunism and unfair criticism of the U.S. government's response to the last devastating economic crisis America faced which was back in 2008 doesn't impede the U.S. government doing what wisdom calls for. America needs a TARP II piece of legislation to save and stop devastation in the Airlines Industry, Aircraft Manufacturing Industry and the Cruise industry to save the millions of jobs at peril; America may even need this TARP protection extended to some other industries to protect against alarming job loss.


TARP stands for Troubled Asset Relief Program it was a program created by Congress in October of 2018 to respond to the fact that the Banks and the Financial Industry had a lot of mortgage bank bonds on their books and SWAP contracts on their books, SWAPS are essentially insurance policies on those bonds-bonds default bond holders get their money back thru the SWAP contracts; and many of these mortgages should never have been made because the borrowers did not have the income to make the mortgage payments-the fraud caught up to the industry and mortgage defaults increased and it collapsed the whole residential real estate market which ruined the finances of the banks they didn't have money to pay their obligations and loan money and seized the entirety of lending industry in America. TARP's initial purpose was to recapitalize the banks but it was expanded to help the auto industry General Motors, the insurance industry, AIG and was even expanded to help homeowners across America that were underwater with their mortgages in HARP the Home Affordable Refinance program


TARP got a bad rap, poorly informed and opportunistic people always painted it as a "bail out for Wall Street" when "Main STreet was left out in the cold". The truth of the matter was that it was outstandingly good government policy when it was passed it put a floor on the financial markets throughout the world and stopped them from sliding into a total collapse. It injected confidence throughout the world in America's banking industry and spared America from seeing widespread run on America's banks and complete collapse of their stocks and bonds. Most noteworthy it did not end up costing the American taxpayer any money. in part, this was because when the U.S. government invested in these troubled businesses through TARP it got warrants for these businesses stocks which when the businesses recovered it sold for profit!

Today's circumstances warrant a TARP II piece of legislation passed by the end of next week. Circumstances it seems to me warrant a little different approach with this TARP program, with TARP I the government helped businesses by giving them money through preferred shares (preferred shares are shares with a guaranteed interest rate) with pretty high interest rates like five to nine percent which had as its purpose incentivizing the executives of these businesses to buy back these share quickly so the American taxpayer could get their money back and of course there were warrants to see that the tax payer shared in the capital gains it was responsible for creating. With TARP II Congress should cap the interest rate on the preferred stocks to one percent in order to incentivize the executives to buy back these preferred stocks the legislation should restrict these businesses from either increasing their dividend, issuing a dividend if they don't already or buying back stocks until all the Treasuries preferred shares in that company are redeemed and the legislation should mandate that the Treasury get heavy warrant amounts like twenty to thirty-five percent of the businesses outstanding float. If the government rescues these businesses with the current price of these companies stocks long-term investors are going to have a humongous pay day - U.S. taxpayers should share in that pay day which heavy warrant issuance will deliver on. The one percent seems compellingly called for because when this Covid-19 pandemic has passed America and the world's economy returns to its prior normal the economic outlook is not great the U.S. economy and the European economy all need extraordinary low interest rates to maintain clear economic growth levels; if the goal is to help get and maintain these business as strong it doesn't seem to me to be prudent to load these businesses with high cost financing! Further, the enabling legislation should mandate these warrants be in effect for fifteen years and while the government holds these warrarnts the Treasury has to approve any plans by these businesses to issue more stock and bonds one doesn't want to see cunning executives devalue the prices of their stock through dilution of that stock and cheat the taxpayer out of their payday!

Because of the urgency of the following issue the Congress should address this issue in the legislation that creates TARP II. America and the World desperately need Saudi Arabia and Russia to cut a deal to cut their oil production output thereby taking oil supply out of the market so that there is a long-term floor on the price of oil of at least $42/barrel. The American people and America's leaders need to see Saudi Arabia and Russia's point of view on this matter they cut production to try to be responsible participants in the energy industry that is to try to maintain prices fair to the producer and user and what do they see is American Shale
Producers expand their drilling and increase their production thereby lowering oil prices and undermining the responsible work they are trying to do! To tell you the truth the whole oil production industry can be characterized as a herd of pigs and two human beings those being Saudi Arabia and Russia; and I mean ExxonMobil, Shell, Chevron, etc. they are all pigs only interested in feeding their stomachs with oil money none of them do their part and lead the industry to stabilize prices so fairness to consumer and producers prevails. Unfortunately, Congress cannot legislate character for the industry but what Congress could do is legislate a concrete gesture to Saudi Arabia and Russia indicating America is trying to help bring fair pricing; everyone needs to remember low gasoline prices is not good for anyone everyone needs moderate pricing so as to incentivize people to move to electric powered motor vehicles so we can save the earth's climate and preserve a good standard of living for the human race. Congress should enact the gesture where it reinstates the ban on oil produced in the continental United States from being permitted to be exported outside the continental United States; the ban was repealed only in 2015 and it was in existence for over forty years prior to that America did fine under the ban and reinstating the ban could take some oil supply off with world markets and help put a good floor on the world-wide price - Congress could give the U.S. industry some time to adjust and make the effective date of the ban July 1, 2021!

Last but not least ordinary Americans have been watching their 401K plans take a nose dive to a significant degree because of computer driven trading. This stock trading run by computers which has magnified downward price pressures on stocks the last few weeks, is essentially stock trading driven by algorithms long formulas with multiple variables. This computer trading drives down the price of stocks based on variables like the gaps between bid & ask spreads, the volatility in the market and for individual stocks and it rides the downward price wave on stocks. The bottom line is that the system has detached from responsible trading of stock; stock pricing should be based on earnings in the future for the respective business not seismic activity and anomalies in the market. Probably what needs to be done to stop this system abuse is to put in place regulation that reduces the number of shares volume and the weekly and monthly transaction trade volume on individual securities these traders are permitted - in any event this campaign is for another day after this crisis has passed. Currently though if this computer trading abuse does not dramatically subside immediately the Securities and Exchange Commission should shut down the markets until April 1 where by that time the Congress and the President will have enacted all the legislation needed to make an impenetrable berm against this Coronavirus onslaught so these abusive traders won't have the means to hurt the system!
 

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