I’ll stick with Splenda

October 1, 2008 at 9:41 am | Posted in Business, News | 2 Comments
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News here that the Senate will attempt to revise and pass the bailout bill today by adding several “sweeteners” that House Republicans can’t resist. 

Anyone else think this sounds a bit like the “Open a Home Equity Line of Credit and get a free toaster” strategy that got these banks in trouble in the first place? Here are some highlights of what is being added to the bill:

1) There is a proposal to raise the FDIC insurance limit from $100K to $250K for personal bank accounts. In today’s (sensible) rules, banks are required to pay fees to the FDIC for this insurance; however, as the banking industry is not doing so hot right now (you may have heard), Congress is proposing that we waive the fees. This even though there only exists $1 in the FDIC backing every $100 of insured funds – the lowest level in history.

Are these people insane? We are going to shore up the failing banks by replicating their behavior in our government (not holding enough assets to back your debt)? This is the equivalent of helping your neighbor, whose house is burning down, by lighting your own house on fire. A bigger, crazier fire.

2) Congress wants to relax restrictions on “Mark-to-Market” accounting rules. The Wall Street Journal today explains it as, “On the question of the SEC’s mark-to-market accounting rule, the agency issued guidance Tuesday that could give management more flexibility in valuing securities when there isn’t a regular market for them.” It continues: “…its implications are nonetheless significant, potentially giving financial firms a way to revive the value of assets that were previously considered worthless. ”

Read that carefully. Management will be allowed to assess the value of a security even though there is no market for it. I believe that my fingernail clippings are worth a million dollars. Sure, nobody out there wants to buy them, but someday, they might. If “Mark-to-Market” accounting rings a bell, you might be remembering the last big company to become enamored with this accounting principle.

3) There is a provision to provide a new $1,000 tax deduction for homeowners who don’t itemize their deductions. If you are a homeowner and you don’t itemize your deductions, you are essentially passing on the opportunity to deduct the interest you paid on your mortgage last year. You would only do this for one of two reasons: your mortgage payment is so low that the standard deduction (a pittance) is bigger, or (and here’s where I’m leaning) you are an idiot. We are essentially giving a tax cut to people that either don’t need it, or are too lazy to copy the number provided to them by their mortgage company into a box on their tax return. Awesome. 

4) Because you can’t even pass a kidney stone these days without adding in some kind of “green” provision, there are tax credits for renewable energy usage. I submit that our Congress may be focused on the wrong kind of green here.

5) The final, crowing achievement of this bill is just too precious for words; it’s called the “Mental Health Parity” provision. It forces health insurance companies to cover mental health claims at the same level that they cover physical health claims. It’s presence in the financial bailout bill makes complete sense if you think about it, as this entire plan is batshit insane. These people are clearly in need of treatment.

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