synopsis of the congressional plan. so far we have come from the inception of the Fed to reign in hyperinflation, to Congress trying to reign in the Fed.
The important part of the congressional plan seems to latch itself to the financial institutions that are dumping the bad assets on the taxpayers. taking a stake in wall street if you will. what the banks are crying about is that this will hamper their recovery, dilute their shareholders (a.k.a. the insiders). caps executive bonuses, or axes them completely. all in all not friendly to the banks. in fact they may choose not to fork over the bad debt to the Fed if it means forking over a share of the pie. Congress does not know the culture of these institutions. Enron's culture pales in comparison to BSC, GS, LEH, etc. They will go down in pride than lose face, admit they were wrong, in fact they will sell you how they were right in going down and get you to place one last bet before the ship sinks.
This plan does not give the banks much incentive other than their survival to sell their debt. If they do agree to it it means they will increase fees to clients. Remember the days before electronic trading when commissions for trades were 5-10% of capital, when the markets were so illiquid that the spread on bid and ask were 10% of the stock price!
Might not get that bad, its a huge global economy, but it underlays the trend to protectionism, to a recessionary economy that plans to be multi year, over regulation stifles growth, but it puts a floor in on a bust, so do you want to sacrifice future economic growth to slow and stop the deflation?
in the deregulative economy you have more opportunities to advance and advance quickly, but at greater risk, and at the downside that when you do risk you loose almost everything. you have the choice of not risking and playing it safe but the net result is that inflation will increase at a rate faster than the safe level you grow at so you will get wiped out over the long term, you have to risk.
in a regulative economy there are less opportunities to advance and advancement is slowed by regulation which caps your ability to grow the further you advance. you have to work harder the more you advance as asset reallocation is used to support the economy so it doesn't fall under. everyone gets bailed out. economy recovers faster but at the cost of your future production, or higher taxes presently, so you are forced to pay down debt sooner and not pass it off, so less growth over the next few years in hopes that over the next 10-20 there will be a more substantial and stable economy that we can start deregulating again.
whew.. this is getting too long... I'll leave it here for now.
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