The House Republican Steering Committee (HRSC) has it right!

House Republican Steering Committee comments on the bailout
Their list of concerns with the bailout is a must read (via Leslie Carbone with my thanks to DJ McGuire):

1) Fundamentally alters the nation’s free-market system in that it broadly socializes firm’s money-losing mortgage assets and places the U.S. on a slippery slope whereby profits will also be nationalized. Even if one accepts the idea that such a proposal could work, valid questions about whether such a cost is an acceptable trade-off for the market turmoil we are hoping to avoid must be raised.

2) Fails to penalize the debtholders and shareholders (including many of the executives themselves), who should bear the risk of any losses, and indirectly infuses capital onto the books of financial institutions with no recourse.

3) Cedes massive authority to Treasury, with virtually no accountability. The Presidential election is a mere six weeks away and a new Secretary will take office in January 2009. Lawmakers and taxpayers have no idea what individual will ultimately be exercising this vast new authority over the long-term.

4) What if it fails? The plan does not give any consideration to what would occur if this authority failed to solve the current crisis. Those reasons could potentially include risk from other private sector failures outside of mortgage-backed assets, international financial services failures, lack of willing sellers, lack of willing buyers, an understatement of the depth of the problem or the financial commitment needed to abate it, or even the fact that the program might work according to planned but produce no beneficial impact.

5) Forces Treasury to pay inflated prices for assets. Since there is nothing in the proposal that forces financial institutions to sell their assets at a discount rate, or even at all, many of these owners may simply wait out the government to increase their bid, leading to more inflated prices than the market would currently bear.

6) Increases the federal deficit and national debt. The new mandatory spending will cause a massive increase in the national debt and the federal deficit. These annual deficits are funded by selling government bonds purchased by a host of large investors, including foreign countries. There is a limit to the amount of bonds that a government can float without adverse financial effects.

7) Contains no taxpayer protections, such as requiring the cost of purchasing these assets to flow through the annual appropriations process or requiring a participation fee or premium so that firms have to “pay to play.”

8 Insulates financial institutions that do not even pose a systemic risk. Some companies may truly pose a systemic risk to the entire market. However, there is no requirement under the proposal that a company truly be “too big to fail.” Instead, any financial institution with mortgage-related assets would be eligible.

9) Contains no safeguards against favoritism. Treasury officials will have no criteria for which to prioritize which mortgage-related assets to purchase first, from who, and when.

10) Bails out foreign-owned banks. The latest incarnation of the proposal allows foreign-owned banks and their U.S. subsidiaries to participate. This change runs the risk of forcing taxpayers to subsidize the poor decisions of foreign companies at a time when their local governments are refusing to supply their own capital to make such a subsidy themselves.