[Xantar]

I haven't looked into the bailout plan. I understand it only just now got worked out, and I haven't had time to read up about it. The idea that some companies are "too big to fail" is an old classic from economics, and nobody has yet worked out a way to deal with the problem.

As a general idea, I hate the bailout. I understand it's sort of necessary, but it still stinks (it's kind of extraordinary that both liberals and conservatives hate it). My understanding is that the current deal will give $700 billion to Secretary Paulson in installments and it will require that we (i.e. the taxpayers) recoup as much of that investment back as possible. That's probably about the best we can hope for, and I've heard that when we nationalized a whole bunch of companies back in the Great Depression, we actually ended up with a net profit.

The problem: it took about a decade for the profit to show.

As to your idea about the Federal Reserve: I wouldn't mind having several Fed Chairmen instead of just one. However, I don't necessarily support making it into a government oversight committee. The Fed has some problems, but one of the good things about it is that it is that the Fed chairman is largely shielded from political whims. Putting a committee to oversee the Fed would destroy that independence, and neither you nor I want economic policies to be decided by people with a political agenda.

Besides, I don't think it was the Fed's fault. The problem is the Investment/Securities market came up with all these new financial products which people didn't fully understand. The Fed has no role in regulating that -- that's the SEC's job, and for whatever reason, they fell behind.

If I understand you correctly, you're proposing to separate mortgages from other investments and securities. That seems like a good idea to me, and I don't think you're crazy for believing that. I'm not sure if it's possible to really do that, though. All the same, it does seem like a good idea to make Freddie and Fannie either fully private or fully public companies. The fact that people could buy stock in them was just not good.

I think that at a fundamental level, we need to re-examine the issue of executive compensation in the financial system.

Hold on a second! Hear me out. I'm not saying we need to stop paying executives so much. I know some Goldman Sachs employees. They work very hard, and they deserve their high salaries. The problem as I see it is that a lot of them are rewarded for taking risks but they are not punished when those risks. Most of these investment bankers are paid with stock options which means the more they can increase the price of their stock, the more money they personally receive. There's nothing wrong with that except if they screw up, that just means they don't get as much extra bonus money. I think if someone in the financial industry screws up, they should lose money in proportion to the amount that they've cost their company. I don't know exactly how this would be done, but I think it would have prevented a lot of the problems we have now.