Let the companies go bankrupt - No Bailouts

Congressmen,

I rarely write my representatives, but I fear for our country, that we are going to ram bailouts through the political process without using one bit of reason, to the cost of our country itself. We%u2019ve been told that we must do it, now, sign on the dotted line, by men that have purported to have done the thinking for us, but every article I read indicates that the sloppiest type of research and thinking has been done, and the solution is by the men that caused the problem. It is generally bad investment policy to sell in a panic, and I should hope the United States government will not do the same causing our country irreparable harm. Likewise, you rarely go to have something fixed at the place that broke it. Allow me to list a few examples of how sloppy the proposals have been by these men:

1. A no short rule has been put in place for 800 qualified financial stocks. This in spite of actual professionals telling us that all they need to do is put back the up-tick rule. We%u2019ve been told this has been carefully considered. When the list is looked at, it is discovered that there are a number of companies on it that don%u2019t even exist anymore, and one Nigerian Aviation company[1]. It is hard to imagine that this is a carefully considered rule.
   
   
2. We are told that the money funds are going to be insured for a time. The American Bankers Association, (ABA), and other professional bankers warn us that putting such a rule in effect will cause depositors to flee from small banks to mutual funds, where the rates will be better %u2013 and there will be no deposit maximum on accounts insured. This will cause a bank run [2]. This is complete lunacy.
   
   
3. We are told this bailout is to protect the average American and %u201Cmainstreet%u201D. Yet, the CEOs of the companies that have caused this mess are leaving intact and wealthy, and are in fact making money with these bailouts. For instance, the CEOs of Fannie Mae and Freddie Mac initially left with severance packages on the order of 24 million dollars. And the CEO of Freddie Mac made 19.8 million in 2007 alone [3]. This is ridiculous. Under fair bankruptcy, you might expect that they would lose money and leave with nothing. Everywhere we look, we see the bailout is bailing out a few wealthy individuals who caused the problem.
   
   
4. The conflict of interests between insiders on Wall Street and insiders in the political process is outstanding and disturbing. The biggest donators to both political parties have been from Wall Street [4]. Much of the financial staff from the executive came from Wall Street firms, and investments in these firms by government officials is extraordinary high. Both panic and conflicts of interest cause poor decision making. Outside, less vested and panicked professionals should be brought in to give advice. It is obvious from much that is happening (see points 1-3 above) that outsiders are needed, are even now offering good advice, and are being ignored apparently by the people with a vested personal interest in the matter.
   
   
5. The amount of the bailouts is enormous and without precedent. The bailout grows by the day, and even now it is impossible to tell how large the bailouts will become because some are open ended and more are expected. The total cost of these bailouts could easily be 4 trillion dollars. And what is this for? To bail out bad companies at the expense of good ones. Market discipline is important. When a bad company is propped up continuously, all it does is keep good companies from rising up. By propping up bad companies, we are preventing good companies from forming in their wake, and harming our future.

Let these companies go bankrupt. It will create a better American future. Furthermore, it is likely to be cheaper in the end. We can bail out individual depositors for 100k for a lot less then 4 trillion dollars. We will have an economic downturn regardless. Let%u2019s not reward those that caused the problem while saddling the United States with a tax burden that may not easily be paid.

References:
1.
Who's In? Who's Out. Another Look at No-Short List
CNBC.com, 19 Sep 2008
http://www.cnbc.com/id/26794638

2.
Government steps to head off run on money funds
CNBC.com, 19 Sep 2008
http://www.cnbc.com/id/26788089/for/cnbc/

The American Bankers Association issued a statement warning Treasury's move "runs the risk of undermining the nation's banking system." ABA Chief Executive Edward Yingling said because money-market mutual funds lack the same regulatory restrictions that banks face governing the types of investments they can make, the fund companies' rival products could offer higher yields and "will be in a significantly superior market position to FDIC-insured bank deposits."

U.S. offers to insure money market mutual funds
Los Angeles Times September 20, 2008
http://www.latimes.com/business/inve...,1274106.story

But a lobbying group for banks objected to the insurance plan, saying it could hurt the ability of its members to attract and keep depositors. Money market mutual funds will be able to pay higher yields than banks and offer uncapped insurance, said Edward Yingling, chief executive of the American Bankers Assn. "Today's action will undermine the role of banks during this current crisis and has the potential to have an extremely negative impact.%u201D

[3]
Freddie Mac CEO got $19.8 million in 2007: Company loses half its value, but Syron could get $20M in stock awards
AP, July 18, 2008
http://www.msnbc.msn.com/id/25740405/

[4]
McCain, Obama on economic meltdown; their Wall Street bundlers.
September 18, 2008
http://blogs.suntimes.com/sweet/2008...mic_meltd.html

Also:

http://www.opensecrets.org/news/2008...obama-are.html
http://www.opensecrets.org/news/2008...out-a-hea.html
http://www.opensecrets.org/news/2008...onnects-t.html