A failure of leadership, in government and business is the primary culprit in our financial Chernobyl-like meltdown. And it is leadership that we need now to make sure the correct regulatory mechanisms are put into place, responsible parties are appropriately punished, and effective measures are taken that will truly unfreeze the credit markets. We need a leader who can restore confidence in our system and the reimposition of common sense values.

My vote goes to Warren Buffett, the sage of Omaha. I don’t want the effort lead by anyone from Wall Street or the government since they were integrated partners in this massive collapse. Certainly not Henry Paulson. The ramifications of this failure for America will be long-term, and if not handled properly, potentially devastating. Greedy and irresponsible actions have caused America to lose the mantle of the world’s economic leader. Foreign investors, who have been hoodwinked and outright robbed out of billions of dollars, will take a long hard look before ever buying anything other than a U.S. Treasury bond. Some will never buy again. Years of lax to non-existent federal regulation and inattention allowed the financial markets unfettered growth and incredible risk taking. Risk even the firms did not understand. The result... executives got wealthy, the system collapsed, and average Americans got the bill.

Now that Congress was forced to pass a bailout plan to gain control of bad (toxic) assets on the books of financial institutions, taken equity shares in nine of our largest banks and issued further financial market guarantees, here are some of the items I would like to see Warren Buffett, my proposed new finance Czar, implement to protect the American taxpayer:

1. Stop the bleeding. Mortgage real estate loan lenders must renegotiate loan terms for delinquent loans and Adjustable Rate Mortgages (ARMs) based on current property values and current market interest rates to allow those borrowers with income to stay in their homes. Of concern are the millions of borrowers with ARMs that are due to reset in 2009... modify them now. Those who have lost their jobs should be offered loan deferment modifications to give them time to find a job and get back on track. A lower amount of cash flow for investors is a better outcome than foreclosures with zero cash flow and empty properties, further depressing neighborhood property values.


2. The root of the problem. Any person taking a mortgage loan application should be federally licensed and regulated. The legislation must contain provisions making clear the officer’s fiduciary responsibility to place only qualified borrowers in appropriate mortgage loans with the best terms for which they are qualified. The legislation should also limit origination point fees and administrative costs. Yield-spread enhancement (giving the borrower a loan with higher interest rate with the price increase going into the loan officer’s pocket), should be strictly prohibited. The states have proven themselves unwilling or unable to competently regulate mortgage loan officers and firms.


3. We know where the bad mortgage loans came from. Locate loan officers, firms and borrowers who made clearly fraudulent loans and prosecute them. All convictions must include lifetime bans for the principals of the firm and the loan officer. It is a federal crime to lie on a mortgage application - now enforce the existing laws. The bailout resolution should include a Treasury enforcement division with full authority to investigate and file charges. The hardworking, conscientious American people are mad as hell.


4. Bankruptcy judges should be given immediate authority to change the loan terms for borrowers who come before them. The investors will have to accept the terms. This authority should not apply to investment properties, second homes or speculative purchases.


5. Financial market deregulation must stop and the regulatory system reformed. The numerous federal agencies have been decimated by years of deregulation and do not have adequate staffing to enforce even a slight portion of the mandate they were created to perform. We need modern, updated financial controls reviewing new products, limiting debt and monitoring the use of computer financial modeling. The regulation must be consistent and put into place as quickly as possible. Restore the funding and staff levels for the SEC, OCC, Federal Reserve, FHA and OFHEO. Congress must monitor the reinvigoration of these agencies and ensure these steps are implemented. It will be far less costly than the $700 billion dollars for which Americans are now on the hook. Never again should the American people buy Wall Street’s claims that they are over regulated. Our economic history has been one marked by non-regulatory periods followed by crisis. This is it... the American people do not need this unnecessary debate again.


6. All future substantial regulatory agency rule changes affecting capital rules, or primary rules the agency was created to enforce, must be approved by Congress. In a little known April 28, 2004 meeting, five SEC commissioners, with no media or Congressional representation, met at the urging of five investment banks, including Mr. Paulson’s Goldman Sachs. The result was the investment banks were allowed to remove the limitation on the amount of debt they could take on. Further, the SEC decided to rely on the firm’s own models concerning the amount of risk they were actually taking on. The rest, as they say, is history. The duplicitous SEC gave them enough rope to hang themselves. Hardworking Americans get to pay for the funeral.


7. Executives at failed firms, or those subsidized by the government, should have their compensation programs made null and void by Congress. We need congressional and regulatory authority passed now to allow direct, annual shareholder-only votes approving corporate executive compensation programs. The executive compensation merry-go-round, with approval by the Board of Directors they elect, and the HR Manager they will supervise, must stop. Further, Congress might consider a rule requiring two ordinary shareholders, holding 5% or less of stock, to be voted on and placed on the Board of Directors.


8. The federal bailout plan must incorporate provisions for frequent Congressional oversight and reporting to the American people concerning the government management of the bailout funds and firms in order to maximize the return of taxpayer assets and monetary repayment.

Mr. Buffet, please consider the job. Your country needs you.