How to spend $1 Trillion of your money.

Treasury Secretary Paulson ( let's not even discuss how he used to be the CEO of Goldman Sachs, and the conflict of interest that entails) is apparently objecting to any limits on executive compensation in the Wall Street bailout plan. US taxpayer money - my money - should, he argues, be used for multimillion dollar payouts to those very people who caused this crisis. Anybody who thinks about it for two seconds will answer this question the same way. The person most responsible for reckless risktaking at the heart of the mortgage crisis is: (a) the largely uninformed homebuyers who each made one transaction; or (b) the well-informed lenders who made millions of transactions and had armies of accountants and risk managers at their beck and call, and the well-informed billion-dollar investment banks that sliced and diced the commercial paper afterward.

Bueller? Bueller? Paulson? The answer is "B".

SecTreas Paulson says that if these limits are included, companies may be reluctant to participate in the bailout. Is he serious? If a company is so mismanaged with so little oversight that it would go into bankruptcy rather than restrict management salaries (particularly after the managers have proven to be such spectacular failures), the company is beyond any hope of redemption.

What does this say about Paulson, though, whose primary concern is for the welfare of corporate managers rather than anyone else? This reminds me very much of Carly Fiorina who plainly thinks that being a highly-paid CEO of a billion-dollar company (a job she got fired from) is much harder than being President of the United States.

Even John McCain knows that taxpayer money shouldn't be spent on large executive bonuses for executives who, especially these, totally failed their companies by greedily ignoring obviously unacceptable risks.

Of course, McCain and other converts to better corporate governance is still hoping that Congress will not wake up tomorrow and realize that we should spend $1 trillion to bailout homeowners rather than investment banks. According to the Pew Research center, total residential mortgage indebtedness stands at about $9 trillion. According to CBSNews, the national default rate on mortgages stands at just over 1.3% (10.3 for each 1,000 homes). Note that that is not a very high default rate, really. In some states it is as high as 3%, others much less. So, for $90 billion, the government could pay off all defaulted mortgages. Of course, all the govt has to do, actually, is keep them *current*, not pay off the principal. At a fixed 30/yr rate times 5% interest, the monthly mortgage payments for the entire country would be about $48 billion (at 6%, it's $53 billion - you can do this on any mortgage calculator). So the government could, for $1 trillion, pay every mortgage in America for almost two years. Or it could pay half the mortgage payments for four years. Or it could pay the principal of 1/9 of everyone's mortgages. We could be even more creative. The government could spread the $1 trillion evenly to each homeowner (rather than pro rata depending on the size of the mortgage. The math is hard to do on a napkin, but this would mean that houses below the national average price would get a payoff greater than 1/9, and those above less. For many homeowners, this would be huge.

That's how much money, how much of OUR money, the government is about to hand to Wall Street to blow.

Of course, as a progressive, I find all of this a bit mirthful. As Mark Shields said, "there are no libertarians in a financial crisis." Not since the New Deal has the government hurled anything like a trillion dollars around with the express goal of staving off economic downturn. This is a vindication for every progressive who knew, during the last 25 years, that laissez-faire was French for "irresponsibility." I just want to start hearing them admit it publicly. McCain spent his entire adult life pushing for deregulation. Electing him would be the dumbest thing we could do.