PRESS RELEASE
Robert Reich Proposes Bankruptcy Reorganization
Sept. 24, 2008 (EIRNS)—Former Labor Secretary Robert Reich, a supporter of Barack Obama, posted the following on Sept. 18 on his robertreich.blogspot.com, under the title, "The Coming Bailout of All Bailouts Bill: A Better Alternative":
"....SOME DEMOCRATS WILL TRY TO MAKE THE BEST OF THE EMERGING BAILOUT OF ALL BAILOUTS BILL, SEEKING TO TACK A STIMULUS PACKAGE ON IT. IN MY VIEW, THEY'D BE BETTER ADVISED TO HOLD OUT FOR A DIFFERENT APPROACH.
"Paulson is right that it makes sense to allow the big banks to wipe their balance sheets clean of as many bad loans as they can identify, and put them into a special agency that then sells them for as much as possible. The agency would bundle or unbundle the risky loans, slice and dice them as needed, with the goal of getting the most for them on world markets by creating a market for them.
"BUT THERE'S NO REASON TAXPAYERS NEED TO BE INVOLVED IN THIS.
"WHETHER YOU CALL IT A REORGANIZATION UNDER BANKRUPTCY OR JUST A HELLOVA FIRE SALE, THE PROCESS SHOULD RESEMBLE CHAPTER 11 UNDER BANKRUPTCY. ANY BIG FINANCIAL INSTITUTION THAT WANTS TO CLEAR ITS BOOKS CAN OPT IN. BUT THE PRICE FOR OPTING IN IS THIS: INVESTORS IN THESE INSTITUTIONS LOSE THE VALUE OF THEIR EQUITY. EXECUTIVES LOSE THE VALUE OF THEIR OPTIONS, AND THEIR PAY (AND THE PAY OF THEIR DIRECTORS) IS SHARPLY LIMITED. All the money from the fire sale goes to making creditors as whole as possible...."
