Example of a rescue plan that worked

Carmine A. DiFazio, Las Vegas

Sunday, Sept. 28, 2008 | 2:03 a.m.

As a taxpayer and citizen, I oppose the bailout of Wall Street companies as it is being proposed by Treasury Secretary Henry Paulson. It is a handout and corporate welfare, and it rewards bad management, greed and reckless decisions made by those companies and the people in charge of them.

But if financial assistance is needed for these companies, here are the conditions:

• It should be in the form of loans at a reasonable rate of interest.

• Government (read taxpayers) should not buy the “toxic” bad debts of these companies. The companies can write them off and/or rework them with the borrowers so the borrowers can meet their obligations.

• There should be restrictions on executive compensation as well as a moratorium on the companies’ dividend distributions.

• Government should be represented on the boards of these companies by government-appointed directors.

• Government should receive stock options to the extent there is an interest subsidy on the loans. This will compensate the taxpayers for footing the interest subsidy now, in the form of profits on sale of the stocks.

During Jimmy Carter’s presidency, there was a taxpayer bailout of Chrysler Corp. It was in the form of loan guarantees with restrictions on the company’s operations. The government also received stock options. Chrysler did well and paid off the loans sooner than expected, and the government made profits selling the stock options. It was a winner all the way around!

The Chrysler bailout should be the model for the current bailout, and not handouts to the Wall Street moguls at taxpayers’ expense.

I trust Congress is too smart to cave in to President Bush’s arm-twisting by agreeing to a quick and dirty fix in seven days with taxpayers paying the consequences for the next 20 years.