Jon Scott on the Bailout & on Alternatives

For the first time I can remember, the government is actually moving as fast as the blogosphere can keep up. I had scheduled up a follow-up interview with Republican First District Congressional candidate Jon Scott for Monday, to give him a chance to go on the record about the big bailout deal as it details were becoming clearer. They say that timing in life is everything. I sat down with Mr. Scott at about 1:00, so what follows in the Q&A section below are opinions expressed by Jon Scott BEFORE the bailout was voted down in the House…

Anchor Rising: Federalist 52 says that the House of Representatives, the office that you are running for, is supposed to be the branch of government having the most intimate sympathy with the needs of the people. Do you think that the House right now is doing a good job of fulfilling that function, with its work on the current bailout bill?

Jon Scott: There's a compromise being debated, but it's a compromise that's been brokered by the leadership solely. It doesn't have the opinions of all the Congressmen and Congresswomen -- that input hasn't been there, so I'm not so sure that it does represent the will of the people.

I will give credit where credit is due, and say that Congressman Kennedy is so far sitting this one out.

I said it the other night to the crowd over at the debate watch: this problem wasn't created over 72 hours. It was created over decades and to try and come up with a 72-hour fix is a mistake. I think you get those kinds of fixes that put the spotlight on the businesses and the executives and the class warfare when you don't have broad enough representation in Congress. Some of the people negotiating this bailout are so heavily invested in the market and in the oil companies and in the mortgage companies that it taints their view of how a bailout or a buy-in should go.

Anchor Rising: From what you've learned so far, what parts of the plan do you like or not like?

Jon Scott: I'm not so sure I like any of the plan. I think the wrangling has improved the plan and made it less of a socialist plan. I'm not so sure that any plan that breaks new ground in creating new relationships between government and business should ever be seen as a good plan.

At this point, Mr. Scott went into the details of an alternative plan that he favors. Since the interview, he's placed an outline of the plan into written form, which I will reprint below…

Make no mistake about it: Congress must fix the problems that they have created. They must act and they must shore up our economy but they need to do so without expanding their own power and scope.

I call on Congress to stay in session and pass a plan that mimics one devised by economist James Galbraith and laid out in the Washington Post. The Galbraith plan would have the government shore up the markets by using an existing vehicle: the FDIC. Five hundred billion dollars would get put into the FDIC’s coffers with a portion of that money allocated to the hiring of an expanded work force of forensic accounting experts and investigators who could probe the causes of the failures.

At the same time, the $100,000 FDIC limit would be lifted and another $200 billion put into reserves with the expressed purpose of re-capitalizing failing banks through the purchase of preferred shares – in the same way that investor Warren Buffet sparked the market last week with Goldman Sachs.

This approach does not saddle the American people with the purchase of bad debt. It does not create any wider partnership between government and business than that which already exists. It does not attempt to put a random value on illiquid assets which are not easily valued. It simply shores up the economy and helps spark the markets again.

It is not a fix that will turn the situation around overnight but there is no such fix that preserves the Republic as it was intended to be. There is no solution that will right, in 72 hours, that which has been created over decades.