Dan Drezner has a great post:
There have been two problems from the beginning with the proposed rescue plan. First, it was labeled a bailout, which is a really, really bad public opinion frame.
(Let me add that neither presidential candidate has helped. McCain's
interventions seem to have bolstered the House Republicans who said no;
Obama's frame of Wall Street vs. Main Street made it easy for voters to
believe that a financial meltdown would not affect them in the
slightest.Second, the idea of the package was to prevent a financial
mewltdown. But here's the thing -- no one gets credit for stopping a
meltdown if it doesn't happen. To use a security analogy,
think about what would have happened if either the Bush or Clinton
administrations had killed the leadership of Al Qaeda and the Taliban
prior to June of 2001. Even if they had claimed that they were foiling
a terrorist plot against the United States, no one would have known
about it, and it would have been pretty easy to attack either
administration for belligerent unilateralism. In other words, it was
only after 9/11 that the American public was ready to take the actions
that would have prevented 9/11.I'm wondering if ther same thing will happen now. If the public, or
House members, sees how Wall Street is reacting to what they are doing,
they might have time to change their mind (I'm not sure how long the
vote will stay open). Will the evidence of a meltdown be sufficient
cover for politicians to do what they have to do? Or will the meltdown
be sufficiently melt-y to make government intervention futile by that
point?You might see several members who were opposed to the bailout financial rescue before they were in favor of it.
I think Aesop described the problem rather well:
Once upon a time all the Mice met together in Council, and discussed the best means of securing themselves against the attacks of the cat. After several suggestions had been debated, a Mouse of some standing and experience got up and said, "I think I have hit upon a plan which will ensure our safety in the future, provided you approve and carry it out. It is that we should fasten a bell round the neck of our enemy the cat, which will by its tinkling warn us of her approach." This proposal was warmly applauded, and it had been already decided to adopt it, when an old Mouse got upon his feet and said, "I agree with you all that the plan before us is an admirable one: but may I ask who is going to bell the cat?"
Or as Grandma used to say, "Everyone wants to go to heaven, but nobody wants to die." 12 congressmen need to switch their votes. But whoever does will suffer mightily not merely for voting for the hated bill, but for having flip-flopped. If the bill passes, and nothing bad happens, people will blame those congresscritters even worse than their fellows. And from what I understand, the people who voted no tend to be people facing competitive races in November.
Diogenes spent a lifetime searching for one honest man. Where are we supposed to find 12?
I just read Luigi Zingales argument against the bill:
http://www.reason.com/news/show/129107.html
And I'm torn. Megan, I have an incredible amount of respect for you. Why is he wrong?
But here's the thing -- no one gets credit for stopping a meltdown if it doesn't happen.
Right. I keep meeting people who insist that Y2K was a fraud and refuse to be convinced otherwise. When I point out the amount of time and effort that was spent to patch, repair, and update the software that would have failed on 1/1/00, they say "See? The scam worked."
He's not wrong. But his plan isn't on the table. The question is not whether this is the best possible plan--it isn't--but whether it's better than nothing, which is what it looks like we might get. IMHO, it isn't.
I think I'll rent Swordfish this week.
so, how much is wall street making it's own weather here? You know, a wildfire begins to influence the weather if it gets big enough. Out here in the trenches, we may feel that it's much ado about nothing. But seems as though it doesn't matter if it's actually good or bad, but thinking makes it so. Are we in the midst of the self fulfilling prophesy?
Those mice were bloody amateurs. You can bell any cat you like after supplying about an ounce of catnip-laced albacore.
Megan says, "He's not wrong. But his plan isn't on the table."
Congress is supposed to be the world's greatest deliberative body. So you're telling me they can only deliberate one option? Secretary Paulson is a Wall Street insider, and the public detests what is perceived as his attempt to save his mates on Wall Street from their well deserved bankruptcy. Surely members of Congress can think of solutions that are both better and not tainted with the stench of Wall Street cronyism. So let's get some of these plans on the table.
Concerning Drezner's post about Wall Street's reaction. Well, what would you expect? The street is disappointed that $700B won't be drifting their way after all. Does the failure of the bailout (and yes, it IS a bailout) change any fundamentals?---aside of course from the expectation of government largesse. I don't disagree that something most certainly should be done, but this was not it. Paulson should have known better. IMHO, it is a vote of no confidence and he should resign.
"He's not wrong. But his plan isn't on the table. The question is not whether this is the best possible plan--it isn't--but whether it's better than nothing, which is what it looks like we might get. IMHO, it isn't."
?!
If I'm reading your posts of today correctly, you've been advocating all along that the House should ignore the will of the people, because in this case, the people don't have enough information to make a good decision. To a certain degree, I agree with this concept. We do not live in a direct democracy, we live in a representative democracy.
However, doesn't that also mean that we ask them to make more informed decisions than simply "vote only for the first plan presented to us"?! Isn't the idea of having a group, to also have a group that can study multiple alternatives, and if one person doesn't put an option on the table... someone else will?
If this were simply a matter of only voting up or down on a single crappy bill, then we might as well have a direct democracy and be done with it.
it is no so clear that this bill is so unpopular anymore. it's just one poll, but perhaps "hated" is now too strong a word.
http://www.rasmussenreports.com/public_content/business/general_business/opposition_to_bailout_plan_falls_dramatically
What worries me is the nagging fear that this bailout will not work
at all and that the $700+ billion will have been thrown away
addressing the wrong problem.
I claim no clear understanding of this. I have no solution
to offer. I understand the sub-prime problem and have understood
it for years. I have some understanding of the derivatives problem
although that understanding is only a few months old. What I don't
see is how to get out of this.
What worries me more is the suspicion that people that should know
better than me don't know how to get out of this either. That are
a lot of alarmists out there, and always have been, but there are
remarkably few, if any, people offering solutions.
President Carter took a lot of blame for "stagflation" on his watch, but I have always had a little sympathy for him because of the unprecedented nature of the situation.
Keynesian theorists had long taught that you could not have both high inflation and high unemployment - that they operated like a see-saw; if unemployment went up, there were fewer buyers and dollars chasing goods, which was deflationary. On the other hand, inflation was caused by an "overheated" economy, which meant more workers were needed.
When Carter was faced with both, the best economic advisors had no idea what to tell him; what was happening was theoretically impossible.
My best analogy is that we learned for the first time that the "see-saw" was suspended by a spring. We learned the hard way that petroleum products were so infused throughout the economy that a hard shock like that of 1977 broke the spring. As it turns out the spring is a "bigger picture" - what happens to the see-saw doesn't matter if the spring gets sprung. For the first time we had to incorporate a shock to the spring into economic theory.
It seems much the same has happened here. We had all kinds of theories about how the financial markets worked and how they related to the markets for goods and services, how global markets and local markets related, etc. But the rapid, large-scale breakdown of credit markets based on complicated interrelationships of types of derivatives and credit default swaps that didn't even exist a generation ago is unprecedented and the fact is that we now see for the first time that the spring is attached to a beam, and we don't know what to do when the beam breaks because we've never seen it happen before.
Anyone who claims to know what to do is almost surely lying. We wont know until it can be dissected in retrospect, without the press of time, and outside of a political lens. Then once we come to conclusions about what to do when the beam breaks, confidence will return. . . until, unexpectedly, we learn that the walls can fall in and the process begins again.
the common thread is the hubris that comes from thinking we have, finally, figured it all out and acting as if there is nothing more to know or to fear.
I agree with Tseeba, Paulson should walk.
The hypothetical at the end is wrong: If the twelve congressmen flip, and nothing happens, then they can take credit for having prevented disaster.
But if they flip and everything goes to hell, then they wasted our money.
If they do nothing, and everything goes to hell, then they have 200 friends to share the blame.
If they do nothing and nothing happens, then they were infinitely wise.
It's just really hard to rally people around something when absolutely everyone says "This sucks", even if half the people are saying "This sucks, but we have to do it." I understand that people want to voice their unease with the bailout, and make sure that everyone knows they are supporting it in duress, but tactically, that's a disaster. Political careers are made on not doing what's unpopular but necessary. Bailout supporters conceding that the bailout blows ensures it won't be passed.
Think Titanic, it's usually better not to act when you have shitty information. If they hit head on instead of trying to turn when it was already too late, very few would likely have died.
Well, it should be. There's no reason to rush into this. In fact, there's every reason not to rush into anything. We're 36 days from a major national election. Can anything happen in 36 days that can't be fixed on day 37?
But look: we already have numerous alternative plans appearing, even now. I don't think we have to wait 36 days to get a good plan laid out. Handing $700 billion dollars (in new national debt!) over to Wall Street, when it turns out the SecTreas just pulled that number out of his hat and that's not even necessarily going to fix the problem, is just reckless and stupid. These are supposed to be "top men," so let them come up with a better plan. There's time.
They could have sold the bill if they just would have said "this will decrease the rate at which the value of your home is falling". A couple of years ago, they pegged home ownership at close to 70%. Not sure where it is now.. but I don't believe that the public is so invested in the problem as most claim.
It is a feedback loop. Prices keep falling. People don't have as much income to buy houses or anything else. Prices fall more. Take some of that inventory off the market. Prices start to stabilize. People understand this concept. All this other baffoonery is just theater.
Megan, why don't you link to Nate Silver's blog, being the original soure? Not only that, he explains the bailout-dilemna very coherently.
Megan writes:
He's not wrong. But his plan isn't on the table. The question is not whether this is the best possible plan--it isn't--but whether it's better than nothing, which is what it looks like we might get. IMHO, it isn't.
The market hung on to see if the Paulson plan went through. Oddly enough, I'd bet it will hang on to see if the next revision goes through. In fact, I'd be it could hang on longer. The government is creating moral hazard by continuing to act as if it will come to the rescue. Everyone sits on the sidelines waiting. Instead we could be spending the time, letting the free market clean up the mess, which it is perfectly capable of. Are you really saying we don't have time to advocate a better plan?
It's one thing, given the plan being voted on to advocate for a position, but it's another thing after having been voted down to simultaneously say it wasn't a good plan, and then wonder "what happens now?". I'm trying to figure out your position on this mess; whether you've got principles or are simply a pragmatist.
Since the clock is reset, and this option's out the window, I'd think what you advocate for next would give me some sense for that.
That should read "I don't believe that the public is so un-invested in the problem as most claim."
In addition to the aforementioned problems the 12 'flip floppers' will face, Rep Barney's characterization of them as having their feelings hurt will also make them look shallow.
I swear that the Democrat's goading is sickening.
Half, you think that the Republicans who had their feelings hurt shouldn't be mocked?
In actuality, there were no Republicans who had their feelings hurt; it's all a matter of the failure of the House Republican membership to reign in its crazies (and, yes, every Democrat who voted against this is also a fuck nut). But if any did exist, who'd be willing to risk tossing us into the greatest economic crisis since the Great Depression, then they deserve every bit of mocking they get.
What do you want Barney Frank to do? Just ignore the actual cause of the failure and let Democrats take undeserved blame? They provided over 60% of their caucus to vote for the bill; the Republicans barely broke 30%.
The "prevent meltdown" language was disingenuous. Not because it was bad politics but because it was untrue. To be only slightly kinder it was a con. Further meltdowns are a certainty. Well that's my opinion. Logically however if continued significant drops in the values of the targeted assets was not expected then the 'bailout' is not necessary.
The word we hear as motive for the plan was to bring confidence to the markets. There is another way to state that. They were hoping to run a con game. In fact the entire credit bubble was a con game. A con game of a specific kind, the Ponzi scheme.
New debt was necessary to pay off the old. To a certain extent this is always true in our system. However the scale of the excess starting in the early 80's, morning in America, should be obvious from this famous chart.
http://mwhodges.home.att.net/nat-debt/debt-total-ratio-trend.gif
The mortgage credit bubble was a strategic plan. Enacted to keep the game going. For the banking and financial players the motive was huge incomes, while it lasted. For the policy/political class the strategy was to keep the economy humming because, for want of a better description, because we were at war. We could not afford a hard landing after the tech bubble collapse and 9/11.
Zephyrus:
Why is every Democrat who voted against this a fuck nut? Is this a liquidity crisis? No, it is not. It is a solvency crisis. Why should Democrats vote for a giveaway to Wall Street with out getting something for Main Street back? Remember, an ounce of prevention is worth a pound of cure. Then again, Republicans don't believe in that kind of thing.
A couple of observations:
1) There is a tendency among Republicans to adhere to their principles even more tightly when the going gets tough. They think that if they stick to their principles, the voters will respect them for it. This causes them to often reject pragmatism when they most need it. Republicans dogged adherence to principles has marginalized them in many states such as California and New Jersey. This trend is appears continuing. It is hardly surprising that the battleground states in this election are mostly Red states.
2) Politicians who are using polls to decide which way to vote on the bail out package are delusional. As the Iraq war proved, voters will often widely support an action by an elected official. Then, those same voters will blame the elected official when it turns out that the action was ill-advised.
The cause of the bubble overinflating so much was Freddie, Fannie and the Fed. The reason it is so intractable is the lack of transparency caused by derivatives pioneered by firms like Goldman. So, yes, a plan by Frank, Dodd, Bernake and Paulson is problematic--- they are all tightly associated with problem sources.
But that is a marketing problem--- or rather feature--- making it less likely that this worse than nothing plan will pass. It doesn't speak to the merits of the plan, which are that it largely increases the federal deficit without being large enough to get the financial firms out of the woods and does nothing to help the transparency problem. All while ensuring that every deadbeat around the world will be bailed out for generations.
Investors need to know which banks will fail. Those banks must be allowed to fail. Then we can get on with our lives.
Is there any index, market or indice that would indicate whether the sky is falling? Stock prices are not the issue, it's the money market, credit market.
Derek
This happened to a few acquaintances of mine back in jr. high school: in civics class they were part of a team of four for a two-week class project. Being acquaintances of mine, you'd be correct in supposing they were a nerd of the type who joins the science club, and that they tended to do very well academically. The other two were kewl kidz, and were also boyfriend and girlfriend sometime around that time. Anyway, they had to do a presentation on the economy and political history of one of the plains states, Oklahoma, and give a presentation as well as turn in a written report.
As is easily imagined, my peeps did most of the work, well over half. In fact, they did the written report, and the other two were were working on a presentation with overhead transparencies (the technology of the day being what it was.) Come the morning of the big day, surprise, the kewl kidz still don't have their act together and prevailed upon the nerds to pull their bacon out of the fire. Well, they tried, they really did. But they didn't have two weeks to put together any transparencies, or a dialogue to go with it, so the presentation was a few crude images and some graphs. And the guys didn't even try! At the end (damn! I can't remember her name! Linda, maybe?) the girl just shrugged her shoulders and said, well that's all we have and sat down.
The applicability? The two nogoodniks put it to the teacher that it was really their partner's fault, and that if they had worked a little harder, they could have done a better presentation. Well, probably. Their best bet would have been to discount this worthless pair and just decided to do all the work from the beginning.
And this is what the Republicans are doing. They're trying to put the blame on the Democrats by saying they could have gotten the votes needed to pass this bill. So it's really their fault that nothing happened. Kinda sorta if you squint your eyes, this is a halfway true statement.
But it's a much truer statement that the Republicans for whatever reason didn't deliver on what they had previously promised. And that's the best possible spin they have; I would imagine their true intention all along was to renege on the votes and hope there were enough Democratic votes for the bill to pass.
Nobody has even tried hard to explain to Congress or the public why this action is needed. The best argument I've seen is Greg Mankiw's, which amounts to "Bernanke is very smart and he says we have to do this." On the other hand, Barney Frank, who a couple of years ago insisted that Fannie and Freddie were rock solid and needed no more oversight than his own, also says we need it. So I don't really have an opinion. But calling people who disagree with you "dishonest" is wrong, in this particular case. Maybe some of them are. Maybe some of them disagree with Paulson. Maybe most of them don't have a clue and are therefore going with what their constituents seem to want.
So Megan (or any other bailout proponent), as clearly and concisely as you can explain it:
1. What do you expect to happen (or fear will happen) in the absence of a bailout?
2. What probability do you attach to any given scenario?
3. How does a $700 billion bailout affect your probability assignments?
(The harm to taxpayers from an unexpected $700B government outlay should be obvious enough.)
You seem quite convinced that disaster looms; how would you go about persuading an ordinary American of same? ("The public doesn't quite grasp what's at stake, and there's no reason they should" may be a fine explanation of current reality, but it can't be your answer to the question at hand - that would be tantamount to saying democracy can't work.)
Rapier,
"Logically however if continued significant drops in the values of the targeted assets was not expected then the 'bailout' is not necessary."
You are missing something here. In normal times with normal prices and interest rates, banks and business with good credit can get loans and sell off loans because the assumption is that (i) the bank or business are good for it and (ii) the collateral is good. However, in crisis times with firesale prices and high interest rates, if a bank or a business tries to take out a loan or sell a loan, then the question becomes: "Why would anyone take out a loan or seek to sell in this market?!?" In other words, the very act of seeking short or long term liquidity calls the credit-worthiness of bank or business that seeks the liquidity.
"The word we hear as motive for the plan was to bring confidence to the markets. ... New debt was necessary to pay off the old. To a certain extent this is always true in our system. "
Once confidence in the credit-worthiness of business is gone credit contracts. Loans are not given out. Cash is hoarded. Credit contracts. Companies begin defaulting and defaults cause further defaults.
Joe Klein's conscience: Yeah, it's a shitty bill, I'll be the first to say it. I'd prefer outright nationalization. But that's not politically in the cards. It wouldn't get enough Democratic support, and no Republicans would vote for it. This plan is closest to the optimum that's reasonable given our current circumstances (though the increasing desperation on Wall St will change that landscape rapidly).
And in the end, yeah, it's bailing out Wall St and the bunch of idiots who got us into this mess. But if we refuse to pass the bill because it helps them, we'd be providing a classical example of cutting off your nose to spite your face.
Anything close to a Great Depression will, on paper, hurt the rich more than anyone else; so, in a sense, bailing them out helps them much more than anyone else. But that's on paper. Millionaires would lose millions but still have millions; the middle class will lose tens of thousands but have nothing. That's the situation we're faced with, and a bitter but necessary pill to swallow.
12 votes? Please, we know where at least fifty are. They are standing in line waiting for their pork.
Put a little grease on the table and most Dems will jump in a heartbeat especially if it is described as acorns...
And just to show you how jaded I really am I think today's vote was all stagecraft. Nitwit Nancy knew before the vote even started the bill was not passing--as she wished.
No Speaker in my memory brings a bill of this magnitude to the floor not already knowing the outcome. Now she gets to pound the Repubs with CNN's help for a couple of more days. It also revives her hopes for lard.
Even assuming that this bill is capable of delivering the goods, that's not quite it. I suspect the real sticking point is that this bill does _nothing_ to ensure that the people who pulled these shenanigans won't be doing the same thing again ten or fifteen or twenty years down the road. And why shouldn't they, by their own lights? The way things are unfolding, there is absolutely no incentive not to do so.
It wasn't about Pelosi hurting their feelings - her speech made it crystal clear that voting for the bill was a repudiation of free markets and laissez faire capitalism, and an endorsement of the idea that everything bad was only the fault of the Republicans and Bush. Since many of them believe that the Dems (including specifically Dood and Frank) had a pretty major hand in making the current mess, they were not particularly inclined to give their vote of approval to the Pelosi narrative.
That said, the Dems get their knickers all in a twist if they even suspect that someone has obliquely questioned their patriotism, yet on Sunday they full-on called the House Repubs un-American.
Can we end the mighty fiction of "Megan McCardle, Libertarian crusader"? What a friggen joke.
We are seeing the blowoff top in the greatest bubble of them all- one that has been running since 1981. Everyone is crowding into the exact same investment, and when they try to get out, and they will, the system will come crashing down.
I am a Conservative. I have no love lost for DEMOCRATS.
However, these foolish, partisan Republicans have no clue as to the financial whirlwind they have unleashed on the world by voting down this bill.
Credit markets have already ground to a halt. Interest rates on Munis have jacked over 100 basis points. There have been almost no Municipal issuance in 2 weeks. No ONE WILL get "credit". Not students, Not Municipal governments, not consumers looking to buy a TV or auto.Businesses must borrow to pay salaries, finance inventories, and to grow. Not now...
The Great Depression was created by raising taxes in a severe recession, and the Smoot Hawley trade protection act. In short, bad Policy decisions by the US govt. We ought to all pray that this policy mistake does not bring down the US and global financial markets. The market dropping close to 800 points would argue that a policy mistake has been made.
Holdfast, in case you haven't noticed, this is all about the repudiation of free markets and unrestricted capitalism. That's the point. And that's what has people upset.
These jaspers what to do the Socialism thing to the tune of $700 billion, you know that Socialism that supposedly saps the average citizen's precious American bodily fluids, and then turn right around and resume their free-wheeling ways. Uh-uh. Not going to happen.
Despite the fact that libertarians and conservatives don't wish to admit they are wrong, they are simply going to have to put up with the fact that their simplistic little philosophies are by the public as being massively discredited. Wanting that loot but not expecting to have to admit to error does seem just a _bit_ cheeky.
Oh, Patrick. Nancy and Boehner made an agreement; she'd provide a certain number of votes for the bill, and he would provide a certain number of votes for the bill. She would provide more, both absolutely and as a percentage of her caucus, than he would.
She came through and exceeded what she promised; Boehner failed.
Pelosi's pretty clever if she's able to manipulate Ron Paul and John Linder behind the scenes.
The point remains, the Democratic leadership successfully implemented their part of the responsible course of action, and the Republican leadership attempted to and failed, either by incompetence or design.
And Holdfast, you've obviously not even listened to her speech. It's just boilerplate Democratic talking points, nothing particularly incisive or insulting. No one would even have taken note of her speech if not for the faux-outrage of the Republicans as they scrambled for some excuse for their total failure to hold up their feeble end of the bargain.
Crusader, Megan's always struck me as the pragmatic breed of libertarian who acknowledges the wisdom of the markets and tries to incorporate them into public policy.
If you're going to drive out everyone who doesn't think the Invisible Hand is a Divine Hand, well, you're not going to have enough public support to get a single official elected of any influence.
Oh, wait.
I suspect the real sticking point is that this bill does _nothing_ to ensure that the people who pulled these shenanigans won't be doing the same thing again ten or fifteen or twenty years down the road.
You're right, no doubt. But surely those who opposed this bill need a better reason than that, considering what's at stake? The list of "people who pulled these shenanigans" is long and includes people from both sides of the aisle and goes back 15 years or more. The same type has benefitted from other examples of greed and avarice, and will without doubt find a way to game the system in the future. I wish we could legislate away greed and avarice, but I'm not aware of any political system in the history of the world that's managed to do that.
Holding this bill up because it doesn't do enough to punish those who caused the problem is little more than using revenge as public policy, and we're the ones who are going to suffer for it.
If this Bill was so God-awful bloody important, why were Pelosi and the Dem leadership seen and heard on the Floor giving at risk Dems permission to vote "no"?
http://www.youtube.com/watch?v=qdGpxUEN4RU
It seems to many that there either is no real crisis, or Pelosi and Company wanted this Bill to fail. Remember, a Professional Politician never lets you see what is in his/her heart, and you know they are lying when their lips are moving.
hahah. So fucking funny. When it was the run up the Iraq War all you libs screamed "no evidence of WMDs, can't go to war, no imminent threat". Yet with this, you ask us to believe in an imminent threat, with NO evidence. Why? Because it's convenient for liberals.
Another factoid that this doesn't pass the smell test. If this were truly an imminent economic threat, you'd have 400+ votes today. 228 saw through the bullshit.
There is no imminent threat, stop fear mongering McCardle AND her water carriers.
The problem here is that there is an X% chance of a financial catastrophe that will damage us to the tune of Y trillion dollars, and Paulson's plan offers us a opportunity to reduce X by Z.
And we basically have no idea what the values of X, Y, and Z are, save that they are non-zero.
Hence those who would argue for Paulson on the grounds of prudence are reduced to hand-waving; yet they're not wrong just for that reason.
I suspect the real sticking point is that this bill does _nothing_ to ensure that the people who pulled these shenanigans won't be doing the same thing again ten or fifteen or twenty years down the road.
And it's more important that people learn not to mis-estimate default risk on a new type of loan than to keep the whole world from going into the biggest economic collapse since the Great Depression?
You know, if there were some way to ensure that the depression only threw people like you out of work, I'd welcome it, because you deserve it. Instead, I'm going to have to try to get Congress to save your sorry, undeserving ass in order to save mine.
This country must go through a deep recession. We have been overconsuming for almost 20 years. The pool of real savings in the United States has been slowly destroyed by a system that systematically robs savers and rewards consumption. The bill has finally come due, and what is our response? To attempt to reinflate the just now bursting credit bubble, only problem is that it simply will not work. In the process, we will finally destroy the dollar and the credit worthiness of the United States.
What you are seeing is the inevitable result of putting all our eggs into a single debt based currency basket. By tying everyone to the same such system, we have guaranteed a system-wide financial collapse. If you really want to prevent such sytemic collapses, you must have a decentralized monetary system. Of course, relinquishing power over money issue is not something that governments have ever done willingly, but they always are forced to do so eventually.
This bailout will pass some time this week, and, for a time, it will appear to have worked, but the continuation of economically unproductive activities that will have been further enabled by the bailout will eventually lead to a debt crisis in the United States. I predict this final crisis will occur just as the peak numbers of boomers attempt to retire on SS and Medicare and their other paper financial assets- right around 2015-2020.
Zephyryus,
I expect Barney Frank to be an adult and not assume the lowest motivating factor for disagreement. There are very rationale reasons for disagreeing with this bill (note, I support it, tepidly, because of the "experts" who support it), not least of which is that it is 700 billion dollars. But Frank insinuated that the disagreement was ONLY over hurt feelings.
That is no way to persuade someone to your POV. Just like his claim that MAC and MAE were sound, Frank screwed up royally, and its about time he answered for both.
I believe that House Speaker Pelosi intentionally tanked the recovery bill today in order to continue the market melt down so that Obama would have a better chance of winning the election. She told her committee chairs and sub-chairs to vote however they wanted. She then gave a speech designed to antagonize the Republicans. She is a despicable person, willing to severely damage all of our livelihoods to strengthen her party’s political position.
A lot of us like seeing a bunch of bankers squirming because they need money in a hurry really bad and are being told "It's nothing personal, we never lend money in a hurry to people especially if they really need it bad.", by the American people. Let's face it, it just feels good. The problem is, sometimes the guy who needs the money really bad is the same guy who keeps your lights on, in which case you hold your nose and make the loan.
Pelosi's problem is her phones are ringing off the hook with negatives. You can see her stressing out. Her other problem is she's not too bright.
Half Canadian:
If you saw the press conference, Barney Frank said he thought the no votes were not due to peak but conviction, a reporter asked him if that was what caused Reps to defect, he said if it was, he would be uncharacteristically nice to them making fun of the notion that's what caused the loss of votes, not the sentiment itself.
On analysis of the yea and nay votes: http://www.slate.com/blogs/blogs/trailhead/archive/2008/09/29/the-house-vote-roll-call.aspx
Looks to me like they could scratch up 12 who are in safe seats. I think they could get the "Swedish" plan (nationalization) through the House, but it would likely not pass the Senate.
Yea,
Well how about Obama calling some of those members of the Congressional Black Caucus, all of whom are in secure districts and all of whom voted no!
Those hypocritical and disingenuous Democrats will get their due though; this is ultimately a just universe.
And, after all of the demagoguery directed at the Republicans it's gloves off time. It all good now, lets talk about all of Obama's nefarious connections and questionable accomplishments. Talk about it far and wide, whenever you possibly can...
The reliquification of the credit markets is necessary. The bill may not have been perfect, but time is of the essence here. And the perfect bill is not as important as getting the money into the market. As time goes by the size of the reliquification gets bigger because the fear and lack of confidence increase everyday. When a blue chip corporation like McDonald's cannot get money to upgrade its coffee machines that is a canary in the coal mine. If McDonald's is having trouble borrowing what about all the small businesses.
There is several trillion dollars out there in gold, money markets, treasuries, mattresses and other safe havens. If confidence is restored a lot of that money will go back into CDs, Bonds, preferreds, and even common stock that will help reliquify the system. But the government has to restore that confidence by taking these Mortgage Backed Securities (MBSs) in tow and establishing a value for them. Does anyone believe that 80% of the mortgages in this country are going to default? That is essentially the value they at which they are being carried on the books of these financial institutions because of an (stupid) accounting rule called "mark to market." Right now approximately 5% of the 90 million mortgages in this country are in technical default or foreclosure. Doesn't that indicate that, even given a worst case scenario, these MBSs are worth 80% or more of their original value? If they could be valued that way by the banks, insurance companies, etc. there would be no liquidity problem.
Jimmy J. is misrepresenting the McDonald's issue. Firstly, McDonalds, the publicly traded company, isn't the one taking out the loans; they are being taken out by individual franchisees. Secondly, they are not "having trouble borrowing"; BofA is not expanding their loan program. BofA is currently making a well-publicized gamble to buy up distressed finance companies at firesale prices while people like Jimmy J panic, so why would they want to tie up their cash in coffee machines?
There is no sign that the McDonald's franchisees are having any trouble raising funds in general.
Sorry for the double-post, but I just noticed the other whopper (no pun intended) from Jimmy J:
No. Many (most?) MBSs do not represent just a bundle of mortgages, but a specifc tranche of a bundle of mortgages that are lined up in slices to take the hit from defaults as they happen. If an MBS is in a tranche previously thought to be in the safe zone, but a small increase in the default rate moves it into the danger zone, it can potentially be worth only pennies on the dollar of it's previous value.
Put another way, these are leveraged derivatives. Small losses in the underlying mortgage can result in big losses in the derivative's value.
This is pretty much the whole origin of the mortgage market meltdown: people incorrectly assuming that mortgage derivatives have the same (safe) risk profile as mortgages do.
The plan requires that the Treasury borrow the $700 billion. So how exactly is this going to reliquify the credit market? Borrowing from Peter to pay Paul is wash for the credit market.
Last week to fund the ongoing bailouts the Treasury borrowed $198 billion. The week before 78 billion. This week they are borrowing $143 billion.
Look no further for a good reason why the credit market is freezing. Uncle Sam is crowding out other borrowers.
You want to reliquify the credit markets. Send notes to Abu Dabi, Peking or a few other places and say send us your dollars or we nuke you. A bit too extreme? Then the Fed has to print it.
The credit market as it existed a two months ago is now dead. Wall Street as a source of financial intermediation is dead and with it the supply of credit is going to be much much smaller going forward.
The dead cannot be brought back to life.
The result of less credit will be a sharp drop in consumption as the credit based binge of consumption is over. That's what happened in real estate and will now roll through the entire economy.
Please, enough with the metaphors!
No, the problem is the plan will probably make things worse.
Now John, number one, while it is doubtless true that 'both sides of the aisle participated', be honest - who's more responsible? You know the answer and I know the answer.
Nor is anyone thinking about doing away with greed and avarice, nor are the more thoughtful types thinking of punishment.
What we are thinking about is - regulation. You know, the regulation that worked pretty well for a number of years before 'conservatives' became ascendant in the 80's with their mantra that 'government is not the solution - it's the problem'. The 'conservatives' who wanted government to get out of the way of business, as I think they put it.
I think you need to be very clear on this: you need to admit that it was not 'greed' that did for us, it was 'conservative' policies and conservative philosophy. That's it.
I'm guessing that perhaps these admissions even now are being drawn out of you with only minimal cooperation on your part. _That's_ what opposition to this bill is about. Conservatives don't get to bemoan some sourceless greed and then go back to their destructive policies to do the same thing over again.
You have no idea how I feel, or what I wanted for this bill, idiot, fool, poltroon, mischievous monkey. In fact, I agreed with Krugman and Delong that it was best just to hold your nose and hope you could do some cleanup later. Let me guess - you're one of the people who got us into this mess one of those right-wingers/conservatives/libertarians. You're not getting anyone out of trouble. People are having to bail _you_ and your sorry kind out, who _still_ won't admit that their policies and philosophies are the root cause of this mess.
awww.....such a disappointment Megan.
I had thought you might reference the actual Prisoner's Dilemma from Games Theory.
I forgot...this is the Stupid Party.
....trying to explain the correlation with mathematics and games theory would surely get you branded as one of those elitist intellectual snobs that are the mortal enemies of the honest, spunky, gritty anti-intellectual commoners that are the lifeblood of the Republican Party, lol.
And of course...it simply isn't possible that you might actually understand the PD...you think poor Sarah Palin is qualified to be president of the united states.
hahahaha!
We have survived bear markets. We have survived recessions. But our freedom will not survive if government continues to grab larger and larger pieces of the economy. This bill deserved to die.
"Last week to fund the ongoing bailouts the Treasury borrowed $198 billion. The week before 78 billion. This week they are borrowing $143 billion.
Look no further for a good reason why the credit market is freezing. Uncle Sam is crowding out other borrowers. "
The problem with this argument is - the credit markets really froze up two months ago. Just because the "public" is just noticing it now, doesn't mean this hasn't been going on for about 6 months. The last two the most severe. Even for people with pristine credit.
I think you need to be very clear on this: you need to admit that it was not 'greed' that did for us, it was 'conservative' policies and conservative philosophy. That's it.
SOV -- I introduced no partisan attacks in my post, and agreed with some of the spirit of what you wrote. But since you opened the door about the need for more regulation -- you mean like the CRA mandates forcing banks to lend to borrowers with poor credit, introduced by the Carter Administration? Or the dramatic expansion of CRA under the Clinton Administration? Or the shouting down of separate attempts by the Bush administration, Greenspan and McCain to reign in Fannie and Freddie - shouted down by Frank, Dodd et al?
As I wrote, both sides are guilty here. Your attempt to pin this entirely on conservatives does not pass even a cursory examination.
John, you need to stop getting your talking points from Limbaugh and Powerline. No, in fact, CRA's were a better than average bet. And you'd know this if you bothered to do some research:
Get out of that bubble you inhabit. Or how about this:
So, no, none of this current mess had much to do with CRA's. And of course - it goes without saying, or should - I shouldn't have to look this up for you. You made the claim, you support it. You haven't and you probably won't, even though the burden is upon you to do so.
None of this stuff is hard to find, btw. But it does require that you actually go out looking to see if what's being belted out by Hindrocket is actually true.
Does the other side of the aisle bear some of the blame? Certainly. Is it anything like the blame attached to 'conservatives' and Republicans; and their ideological rigidity, their slavish devotion to an econ 101 version of the free market. Not a chance.
But the fact of the matter is that your kind is simply unwilling to take responsibility. Not unless you can find - or manufacture - someone just as guilty. Face it 'Conservatism' failed, failed spectacularly, and just as it had been predicted. Just like what happened with Communism. And for almost precisely the same reasons.
You made the claim, you support it.
I never claimed CRA regulation created the problem. I was responding in part to your statement that the lack of regulation created the problem.
Reading comprehension. I should't have to explain that to you.
John, you said this:
So, what you had to say had nothing to do trying to refute the fact that deregulation was the problem?
Gee, must be that poor reading comprehension of mine.
Nope, that whole conservative meme about deregulation, about government not being the agency to fix a problem - it is the problem? That's the problem. And 'conservatives'/libertarians/Republicans/right-wingers own it. That's what the general public seems to be thinking these days.
So, I'm not going to put any more energy into showing you how intransigently wrong you are. Not only is the burden of proof on you to defend this 'conservative' credo, the public seems to agree with me.
I have _no_ motivation to try to persuade you of anything, and in fact, I hope you go on with this being the fault of anyone _but_ conservatives. If I were you, I'd be getting busy trying to make a case. Doing all that hard work, like actually looking stuff up, instead of relying on bullet points from all the usual suspects.
So, what you had to say had nothing to do trying to refute the fact that deregulation was the problem?
SOV -- Reading comprehension is at least as important as looking things up. You are reading my posts and projecting meaning that is not supported by my actual words. I never tried to refute that de-regulation was the problem. You wrote that we need more regulation. I pointed out the irony that CRA was a regulation which contributed to the problem. The private mortgage issuers cited by your source would never have existed had not the environment been primed by the CRA mandates. I also pointed out that the Bush Administration, Greenspan and McCain tried to INCREASE regulatory oversight of FNM, but were shouted down by Democrats. How do you conclude from this that I support deregulation? An honest reading of my post would conclude that I decry the de-regulatory environment promoted by the Clinton administration (who was it who repealed Glass Steagall?)and Senate and House Democrats who were the chief enablers of Fannie and Freddie.
Look, SOV. I have never given conservatives a pass here, and I challenge you to point out where I did, your insults notwithstanding. (I don't listen to Rush -- I work during the day for a living. You're probably reading Powerline far more often than I) Nowhere did I write that deregulation is a good thing.
Your argument is that the conservatives are responsible for a lack of regulatory oversight, and therefore this whole mess is their fault. Even if I were to admit that conservatives alone were responsible for de-regulation, which again is not supported by the facts, my point has been that liberals have been more than happy to feed at the trough that deregulation offered them -- see FNM contributions to Dodd, Frank, Obama, and Clinton. Bear Stearns and Lehman were big Democrat contributors well. You simply cannot blame this mess on conservatives alone. Did they contribute to it? Absolutely. But so did the other side of the aisle. If it makes you feel better to blame the whole thing of conservative idealogy, then good luck with that. But the facts don't support it.
Sigh. John, for CRA regulation to be a problem, you have to actually show that something harmful came from it. This isn't hard to understand. My sources - which I quoted, and which you can follow up on - say unequivocally that CRA legislation was not a problem, that in fact, those loans to minorities and other undeserving folks were actually a safer bet.
You were saying about reading comprehension again?
Further, I never said one side was solely to blame, it's right up there:
Can we say reading comprehension ;-)
No, you really don't care about this, quite frankly. All you care about is making sure this mess is not identified with only one side of the aisle. Everything else follows from that.
But if you look at the polls, it's pretty clear who the public blames. And it _ain't_ the Democrats. Gee who was it that said, "Government is not a solution to our problem, government is the problem." Guess which party is identified with this? Don't let the door hit you on the way out, you unpatriotic snivelling weasel. Be a man for once, and accept some goddamn responsibility.
The private real estate debacle is the result of two interwoven themes: (1) artificially cheap credit policies of the central banks, and (2) the stated policies of the federal and state governments to make home ownership a right available to as many people as possible.
These two themes led to where we are today. The first made mortgages look cheaper than they otherwise would have, and the second led to mandates requiring accomodation of riskier loans in the secondary mortgage market and implicit guarantees for these riskier loans.
Not even the most biased perusal of the nature of loan defaults could lead one to conclude that loans to low income people were better bets overall- they clearly weren't, and aren't. They were, in fact, the first sign of the impending collapse, and this makes perfect sense since they are exactly the people most vulnerable to worsening market forces.
Absent the government incentives, we may still have had a bubble, but it would never have reached the epic proportions it did since no private entity could have attempted to provide the levels of cheap finance and the credit guarantees of the GSEs- such a private entity would have gone down long before this bubble ever reached the size it did.
I did not say that they were better bets over all. Read what I wrote again, and let me quote someone else:
Don't let the door hit you on the way out, you unpatriotic snivelling weasel. Be a man for once, and accept some goddamn responsibility.
Written like a real man, courageously ensconced in anonymity.
You're unpatriotic because for you it's all about making sure the conservative ideology doesn't get taken down, no matter what it has done to the country (ironically, to defend the claim that this is 'bipartisan' you mentioned supposed instances of Democratic _deregulation_. Iow, when Democrats were going along with conservative ideology.)
You're a snivelling weasel to the extent that you refuse to admit that conservatives and their ideology might be just a tiny bit more to blame than Democrats. You know, the party of Big Government? The 'tax and spend' types who are rescuing your buds - and the U.S.! - with their Big Government interventionist ways?
You are _exactly_ like those Communist Party apologists who kept insisting well into the 70's that there was nothing wrong with Communism, it just hadn't been done right. Why you think zealots on the right get a free pass when the ones on a left is beyond me. But it shows that you're not someone who's arguing honestly. At this point, I can't think of anything, ever, even in theory that would get you to admit that your philosophy is bankrupt.
And you're a dick. Does that make us even?
No, it doesn't. What I write is dead-on 100% true. You're just behaving unpleasantly when caught in the glare of publicity. But hey, I'm willing to acknowledge when I'm wrong:
Are you willing to admit that the dogma of deregulation is wrong? Are you willing to admit that those high-flying CEO's on Wall street pulling down millions to hundreds of millions a year were _not_ being paid what they were worth, but quite a bit less? That is, are you willing to admit that the market did not set their level of compensation?
Or is this where you keep desperately chanting the mantra "Democrats did it too?"
Trust me, Mr. McNamara, if Democrats were even half as culpable in a hypothetical meltdown hinging on too much centralization, taxation and regulation as the Republicans are in this disaster involving their pet talking points, I'd be all over them and calling for the tar and feathers.
That's the difference between the two of us: I'm not willing to be a partisan robot merely to shield one party from it's just rewards, and at the expense of the country to boot. You, however, most definitely are.
Are you willing to admit that the dogma of deregulation is wrong? Are you willing to admit that those high-flying CEO's on Wall street pulling down millions to hundreds of millions a year were _not_ being paid what they were worth, but quite a bit less? That is, are you willing to admit that the market did not set their level of compensation?
SOV -- This is becoming tiresome. Please point to where I ever specifically stated that deregulation was wrong? Where did I ever even reference that highly paid CEOs were worth their salaries? I'm not talking about where you inferred meaning but where I explicitly stated what you accuse me of stating? I've commented here perhaps half a dozen time in the past year so you know absolutely nothing about me, or how I feel about regulation, which you might discover is closer to your own views if you thought to actually, you know, ask me about it with even a modicum of respect.
If you honestly believe that prior to my last post, that I am the one who is behaving unpleasantly, and that you are some paragon of respectful and good natured debate, then I am wasting my time here. You strike me as a bitter and lonely man. I'm sorry for you.