The plan, which would ideally involve a mix of government and private capital, aims to stabilize the U.S. financial system by injecting capital into banks, helping to determine prices of toxic assets weighing on firms' balance sheets and stemming foreclosures.
"We believe that the policy response has to be comprehensive and forceful," Treasury Secretary Timothy Geithner said in his speech Tuesday. "Instead of catalyzing recovery, the financial system is working against recovery. And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it."
The Wall Street Journal adds that "critical details of the plan remained unanswered, despite the weeks of planning leading up to Tuesday's announcement." Plan? That's not a plan, it's a fervent wish. No details at all on the foreclosure program, and precious few beyond platitudes about the mechanisms for dealing with toxic assets. The only real new information is the amount: $1 trillion total, $500 billion to start.
I don't envy Geithner his position. But he's known this was coming for months. I expected a little more than telling us that he wanted to spend a lot of money to help banks clean up their balance sheets. We knew that much already.
I'm thinking there's no solution for the toxic assets that won't piss off a majority of Congressmen and voters.
Buy the assets from the banks for an amount that won't result in the bank going under, and the Congress screams right now about the taxpayers bailing out the FatCats.
Buy the assets for what they're worth on the open market and Congress screams later about banks going under, stockholders (who also vote, and may, in total, be a majority of voters) getting severe haircuts to their mutual funds,401ks, etc.
Awesomely, though, it didn't stop the generally insightful David Brooks from praising the planoid before it had even been described.
Vacuous platitudes were the centerpiece of the entire Obama phenomenon. Nice to see that he's governing the way he campaigned.
Clearly, he's learned the lesson of TARP: declare a crisis, and if at all possible get the money to deal with it before you have to explain how.
As I've said before: You want to get rid of these "toxic assets"? Sell them back to the homeowners. I would happily buy an MBS that represents my mortgage, if I could do so for even, say, 90% of its face value. If they're really "toxic", and worth half (or less!) of their face value, the bank should be begging me to refinance and offering to do so for 75% or so of my outstanding principal. Until I see that, I won't believe that this is anything but a money-grab.
I am keeping an open mind, but this plan is compatible with the character reading advanced by someone at the Volokh Conspiracy before the election that Obama is very liberal (i.e., he wants to be sure that any plan doesn't help the fatcats or even the 401(k) holders) and very indecisive (i.e., he can't really decide on a plan at all). Of course, the net result is a plan that barely exists, and doesn't work even when it does exist.
Another theory is that Geithner is in over his head. I really would rather have the Captain Sullenberger of finance at the helm, i.e., a CEO from one of the major banks. Unfortunately, there are very few of them and they are political poison at the moment.
Any bailout plan (and that is all we are talking about any longer is bailouts for bondholders) is going to cost a lot. You will get no real details on the bank plan until the stimulus package is passed and signed.
You can get the electorate to only swallow one shit sandwich at a time.
As opposed to the original TARP that you were so gung-ho about! It was totally planned completely! Three whole pages of planning in the proposal!
Then, they completely did what they said they were going to do with the money! It was a perfect plan!
I really would rather have the Captain Sullenberger of finance at the helm, i.e., a CEO from one of the major banks.
Sullenberger took a plane disabled through no fault of his own and made a stunningly competent dead-stick soft landing on water. Now, I'm no expert on finance, but it seems to me many of the banking CEOs are a bit more like First Officer Gameel Al-Batouti.
@Megan_McArdle: Can you please explain what is meant by "cleaning up a bank's balance sheet"? Even if Geithner didn't explain anything, surely you can explain what *kinds* of government actions would accomplish this goal. I mean, since you've gleefully jumped into the role of mouthpiece for zombie banks ...
Remember, government "capital injections" (i.e. moronic loans) can only "clean up the balance sheet" if the underlying problem is the timing of RELIABLE cash flows, i.e. liquidity. If, as is most likely the case, the assets won't deliver the cash flows, such "capital injections" function as giveaways. Since most of the banks in question are simply insolvent, there shouldn't be any plan to help them out; the sooner they're broken up, the better.
So really, what is the best-case scenario for what Geithner can propose?
And why do you let banks get away with using "liquidity" interchangeably with "free cash giveaway"?
"the generally insightful David Brooks"
Please tell me that is sarcasm.
You want to get rid of these "toxic assets"? Sell them back to the homeowners.
My understanding is that a massive part of the problem is the level of obfuscation in these assets, not to mention the number of buyers and stakeholders in them.
Like Japan, we are unlikely to dig ourselves out of this until some very extensive banking reform. Clearing houses for CDOs and such being top of the list. Unfortunately, as Megan has pointed out in a previous post, the full knowledge of financial instruments we are talking about (their actual value and composition) may be depressing enough to really crash the economy.
Way to over promise and under deliver, Geithner.
It's wonderful when guys who cheat the treasury run the treasury.
Obama is not my president
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
Everyone should read this Barron's article.
I'd love to see your take on it Megan.
It actually references a point you make again and again - the HUGE DEBT OVERHANG.
This is the article that fully accepts that point, and then points to what will happen, once that point is accepted.
#1 - Don't think of this in terms of recessions, think of this in terms of the "D Process".
On why nothing is working so far - bad expectations on a recession type of turnaround, when the reality is:
"However, the reason it hasn't actually produced increased credit activity is because the debtors are still too indebted and not able to properly service the debt. Only when those debts are actually written down will we get to the point where we will have credit growth. There is a mortgage debt piece that will need to be restructured. There is a giant financial-sector piece -- banks and investment banks and whatever is left of the financial sector -- that will need to be restructured. There is a corporate piece that will need to be restructured, and then there is a commercial-real-estate piece that will need to be restructured."
That's a lot of areas of debt restructuring that's going to happen, one way or another.
Talks about -
China not having any good reason to invest in the U.S. market - will wind down slowly.
More devaluation of the U.S. dollar.
A good read - though not much on what happens to the jobs situation, but we can look at Japan, Central America, to see if this lines up with the experience of the Great Depression.
Maybe he had the speech today so that Obama could deflect questions last night. "I want to answer you're question...I really do but then you wouldn't show up for the Geithner show tomorrow."
Intially I pegged Geithner as a tax cheat since [I reasoned] no one with his background could possibly be so fucking stupid as to make the type of tax mistakes he did. Reading now about the [lack of] details in his plan to have a plan to preserve banker incomes and perquisites, I see I was wrong. This guy is so fucking stupid that he might just have made those tax mistakes honestly, even if he is venal. Either way, "meet the new boss, same as the old boss."
Basic, are you going to copy & paste your Obama schtick every day? Talk about *embarassing*
Basic Fact wrote:
For the first time in my adult life I am NOT proud to be an American.
Gee, I wonder what Coulter and other right-wingers would call you. Proud of the USA when a Republican frat boy is in-charge. A traitor when a hard-working Democrat stuck with a Depression is in-charge.
Basic Fact,
I generally find your comments valuable, but I too am tired of your repeating the same lines about Obama over and over. You've made your point on him, now please focus on the specific subject at hand.
I was double-teamed last night by a Jew and a black guy. It seemed appropriate.
Obama is not my president
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
BF:
Give it a rest, we survived Jimmy Carter, we can survive President Obama.
I was double-teamed last night by a Jew and a black guy. It seemed appropriate.
Obama is not my president
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
Posted by Basic Fact | February 10, 2009 3:25 PM
As a democratic supporter the comments from Basic Fact, which encapsulate fairly well the mindset of Republican bloggers, actually fill me with optimism. These are basically people with no serious governing philosophy other than nihilism. And they are so completely out of tune with the vast majority of popular opinion can it be long before they are totally marginalized to a party of the South and Mormon heartlands. For most of my life I've been a Republican voter but it's this sort of nonsense that caused me to leave about seven years ago. It's why they are losing middle America and they are in total denial about it.
As for the comments about Geithner by McArdle and sundry ranters they seem to amount to fire this guy after all he knows nothing whatever about it and turn it all over to me. Sure... you can do some brain surgery next week....then how about flying a Jumbo to Australia the week after that.
VJJ:
"Basic, are you going to copy & paste your Obama schtick every day?"
---the same way we heard it for 8 years, baby. Turnabout is fair play.
Dhalgren:
"Proud of the USA when a Democrat moron is in-charge. A traitor when a hard-working Republican stuck with a bunch of cowards unwilling to free a dictator-oppressed people is in charge."
Fixed that to reflect the left's mindset for the last 8 years.
Poor wittle wiberals. They run home and cry when someone treats them EXACTLY how they've treated others for the past 8 years.
America died because of you scum; as you acted, so will I. Deal with it, bitch boy.
Ann:
"You've made your point on him,"
---8 years of this crap with no let up, Ann. No civility, no peace, no truthtelling by the left. All, bile and hatred. Now they get it back in their mud-soaked cowardly little faces. The point won't be made until every liberal is driven off a cliff.
Again, bitches:
Obama is not my president
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
BF, is it your goal to persuade anyone to your point of view?
"BF, is it your goal to persuade anyone to your point of view?"
I thought it was the "But mommy, they did it first" strategy. Depending on my mood, I perosnally find it yawn inducing or slightly amusing.
Basic Fact sounds an awful lot like Jim Adkisson.
BF:
Again, bitches:
I love this guy. Can't we get him a two hour prime time spot with say Limbaugh, Beck, Palin, and Jim Bunning (R) Fathead KY to explain how well their ideas fit in with the needs of America at this time. Perhaps him and Joe the Plumber could sing a duet.
BF:
Again, bitches:
Of course there is always the straightjacket.
Basic Fact is basically correct- we saw mindless partisan drivel like this for the last 8 years. Normally, I would take little notice of it and simply ignore the commenter altogether, but Basic Fact often does have something of worth to read, so it is a bit annoying having to determine which kind of comment he/she is writing at a particular moment.
It is amusing, however, to read a lot of the more incensed commenters' replies.
I expected a little more than telling us that he wanted to spend a lot of money to help banks clean up their balance sheets. We knew that much already.
What Mike Earl said. If you don't commit to how you're going to fix the problem, you leave yourself a great deal more leeway in what approach to take -- even if that approach turns out to be "hand hundreds of billions of dollars to my friends and my boss's political supporters". Truly, this will be the greatest looting in the history of the world.
To all:
First, it seems that some wittle wiberal has taken the wiberal game plan of acting like an uncivil little rodent to heart, and started co-opting my name. Rest assured anything related to gay sex is some rat-fucking little liberal stealing my name because he can't argue that I'm wrong. Showing that democrat class we've come to know and love for the last 8 years.
But I'll be doing the same, bitches. We've learned from your underhanded tactics.
John:
"These are basically people with no serious governing philosophy other than nihilism."
--Because democrats= klassy. See DailyKos/HuffPo.
"And they are so completely out of tune with the vast majority of popular opinion"
---52 to 48, bitch. But 52% ina liberal mindset= vast majority. Welcome to Obama's world.
"can it be long before they are totally marginalized to a party of the South and Mormon heartlands."
---blah blah blah I write for the daily kos.
"For most of my life I've been a Republican voter"
--b.s.
"but it's this sort of nonsense that caused me to leave about seven years ago."
--and join the party accusing bush of war crimes with no proof, accusing bush of the failed economy, accusing bush of lieing us into war, accusing cheney of running the white house, and accusing bush of ending free speech. And calling republicans hitler.
you're right, you chose the classy, deep-thinking party.
"It's why they are losing middle America and they are in total denial about it."
--definitely a koskid drunk on the koolaid.
"As for the comments about Geithner by McArdle and sundry ranters they seem to amount to fire this guy after all he knows nothing whatever about it and turn it all over to me."
---or "fire the tax cheat who doesn't knwo what he's doing."
"Sure... you can do some brain surgery next week....then how about flying a Jumbo to Australia the week after that."
---you're right, wiberal. we should leave brain surgery to the guy who cheated to get past his boards.
wiberals. gotta love those brainless pussies.
B.F.:
"Give it a rest, we survived Jimmy Carter, we can survive President Obama."
---8 years of scummy, uncivil warfare, that netted them the white house and congress? 8 years of lies and treachery to get power? This is war by their own rules: dirty, nasty, smelly. Fuck civility to the left, they show none to us.
I repeat, morons:
Obama is not my president
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
I like to beat up homeless people.
I can't help but be amused by the reaction to Basic Fact. It wasn't too long ago that MoeLarry&Jesus drove everyone here to distraction with his obnoxious and insulting, though occasionally spot on commentary. Now someone from the other side of the aisle is filling ML&Js shoes. I watched BF absolutely skewer and silence SOV (a rare treat)once with facts so I personally wish he'd tone it down because he can make his point without the poison. But hey, argue with him on the merits, not his tag line.
How long until the call rises for him to be banned?
I like to give 8 year olds crack. And then demand welfare for them.
The sense of deja vu is too much. Remember when imposters were claiming to be ML&J? This is hysterical.
I will crush you with my intellect before I choke you with my cock, you liberal bitches.
Obama is not my president
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
My intellectual inferiority is only surpassed by my classless behavior.
8 years of scummy, uncivil warfare, that netted them the white house and congress?
As long as we're using the language of warfare, let's consider the 5 elements: objectives, strategy, tactics, logistics, and morale.
What is your objective? To win the White House in 2012?
Strategically, how do you hope to accomplish your objective? By winning moderates, or exciting the base?
Do your tactics advance your strategic goals? Are moderates being won over? Do you see signs of the "base" here (conservatives like me or libertarians like Ann) embracing your behavior?
Logistically, are blog comments the most efficient use of your resources? Is this blog the right place for this particular brand of comment?
Morale-wise, are your comments depressing or amusing liberals? Are they motivating or irritating conservatives?
To offer my own diagnosis, if you hope to help Obama's 2012 opponent, you are failing at all levels.
To Rob Lyman:
Daily Kos. Moveon.org. Huffpo. Code Pink.
Game, set, match.
Obama is not my president
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
It wasn't too long ago that MoeLarry&Jesus drove everyone here to distraction with his obnoxious and insulting, though occasionally spot on commentary.
The difference being that MLaJ was often funny.
I stick too close to the truth. What liberals have done to what was once America has little humor in it.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
Daily Kos. Moveon.org. Huffpo. Code Pink.
So...your comments here are a major source of fundraising and networking for motivated members of the Republican base?
The difference being that MLaJ was often funny
I'd say ML&J was occasionally funny. He was just as often rude and intolerable. Give BF some time. Maybe he'll grow into the role. ML&J honed his skills for years before he showed up here.
Sorry about the misuse of the HTML tag.
Rob Lyman:
"So...your comments here are a major source of fundraising and networking for motivated members of the Republican base?"
---My comments do exactly what the commentators have done on those trashy sites have done for years, to obvious great success.
Paying attention when your enemy subvertts the rules of warfare. It's best to do the same, rather than fight with one hand tied behind your back.
You can bet a bunch of Obama voters here were influenced by the lies and trash eminating from Kos, Maher and their ilk.
Time to re-balance the scales, baby.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
My comments do exactly what the commentators have done on those trashy sites have done for years, to obvious great success.
It may be time for another lesson in "correlation v. causation."
You can bet a bunch of Obama voters here were influenced by the lies and trash eminating from Kos, Maher and their ilk.
Possibly. I see no sign of them being influenced by your juvenile behavior.
Rob Lyman:
"It may be time for another lesson in "correlation v. causation.""
---and you claim to be a conservative. sigh. this is why the country is lost.
"Possibly. I see no sign of them being influenced by your juvenile behavior."
----again, have you been paying attention to the last 8 years?
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
Had the left been made up of people liek Rob Lyman---shouting down rudeness--I would never have been inspired. Rob, you're trying to fight a boar AND not get dirty. You're going to lose if don't get down in the muck, as the left just proved.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
"Time to re-balance the scales, baby."
Do you have any success metric in mind, or do you just consider hyperposting the same stuff to be a sign of productivity? If it doesn't work, will you consider holding your breath and stomping your feet?
"----again, have you been paying attention to the last 8 years?"
Yes, American people are sheep and are eaisly led astray by DailyKos and the liberal media. It had nothing to do with the track record of the person in office. Why such disdain for your fellow citizens? Why do you hate democracy?
Basic Fact, I'm telling you: you're derailing the threads, occasionally with inappropriate content. Dial it back or I'll have to ban you. We value your contribution, but the endless reiterations that you hate Obama are making it impossible for anyone else to have a conversation.
Thanks,
Megan
You're going to lose if don't get down in the muck, as the left just proved.
Politically speaking, the options for me are basically "lose badly" or "lose somewhat less badly." So I guess I'm used to it.
Yes, American people are sheep and are eaisly led astray by DailyKos and the liberal media.
In fairness, the media do have tremendous power and have been known to lead people astray--the widespread belief, shared even by Carl Levin, apparently, that "assault weapons" are machine guns being one good example. But TARP and the stock-market crash would have been tricky to fake.
Megan, how can you possibly ask me to dial it back with MoeLarry&Jesus around?
I assume you're mad about my tags. Fine, they are gone. But I still believe in all of them. Assuming you are Megan and not some impersonator....just shoot me an email (you have my address when i log in) to let me know. Otherwise, I will assume you have been impersonated (probably by John or RG).
RG:
"If it doesn't work, will you consider holding your breath and stomping your feet?"
---worked for the left for 8 years for you left wingers, along with patently false charges.
Rob Lyman:
"the options for me are basically "lose" or "win."
---FTFY
RG:
"Yes, American people are sheep and are eaisly led astray by DailyKos and the liberal media."
--thanks for waking up to that.
"It had nothing to do with the track record of the person in office."
--you mean winning two wars? Keeping us from another 9/11? Following american law? Keeping the economuy going until the democrats took over congress and allowed corruption to run wild?
"Why such disdain for your fellow citizens?"
---wow. the fact that a liberal would say this, after 8 years of being told republicans are evil, viscious warmongers, is the height of hypocrisy.
"Why do you hate democracy?"
---just like a liberal. Assumes hating Obama=hating democracy. Welcome to NewSpeak, brought to you by the left.
You are the height of bravery BF.
You'll do ANYTHING to fight the Obama presidency, but the second someone asks you to stop saying the boilerplate, you drop it.
Very brave Sir.
As I'm sure your retorts using variants of bitch will be.
Your tone deafness is confirmed by you managing to annoy Rob Lyman of all posters. You've got to go some to do that.
"cy, but the second someone asks you to stop saying the boilerplate, you drop it."
--if by that you mean "the owner of the blog" then yes. For you...not so much, lefty.
awww, no 'bitch', only lefty.
go on, be brave.
You're such a hero, BF
Basic Fact:
I spent the last eight years being bombarded by "not my president" crap from the far Left. Coming from those who seemed unburdened by the importance of the Constitution, tradition, and the rule of law in preserving our republic and the peaceful transition of power, however, it was to be as expected as it was lamentable.
I find it intolerable, though, when coming from those who appear to be self-styled conservatives. Such individuals rail against liberals while embracing one of the uglier mantras that characterized many of the worst of the liberal lot while "W" was in office. I daresay that this shared disregard for the office of the presidency as an institution betrays a habit of thought that has more in common with those on the far left than it does conservative ideals.
It is one thing for a conservative to be disappointed in the outcome of the election (as I am). It is another thing entirely to deny its legitimacy. By doing so, you stake your place among radicals instead of the right.
Megan,
With all due respect, BF should have been banned the moment he wanted to drive every liberal off a cliff at 3:43 PM. What's the point of any other argument, repetitive or otherwise, when you want the other person in your argument dead?
Returning to the original topic at hand, is anyone truly surprised that an insider such as SecTreas Geithner, who as a former NY Fed-head surely knows as much about the toxic, radioactive financial dark matter within the Level 3 assets at Citigroup et al, can't come up with a plan? He knows full well what the leverage on top of that stuff was, too, or should. And therein lies the real problem: levering 40:1 on top of some illegal immigrant's McMansion in the Inland Empire, sold for a price of $440,000 in 2006, isn't as good a deal when the house is repoed in 2008 and sold at auction for $325,000, is it?
Look, there are "assets" out there with market values of zero. Lehman's financial dark matter turned out to be worth less than 10 cents on the dollar, and we now finally know that SIV's were written on pure air, thus they are worth nothing. The banks cannot reveal exactly what their Level 3 assets are worth on the market without being also revealed as insolvent. The Fed/Treas. is surely not going to value those things at par. There is a Mexican standoff here, and as time decays even the nominal value of the toxic junk in the trunk, the market will in time force Geithner to do something. That "something" unhappily is likely to involve lots of sashimi...
Rock, meet hard place. Hard place, meet rock. Anyone who expected the Obama administration to do anything different from what Paulson did for Bush was basically engaging in faith-based economics; the economics of hope.
The issue is debt. Call it credit if you wish, but the facts are clear: borrowed money was used to buy stuff "now" in exchange for paying back "later". The expectation was that "later" would never come.
Ooops. Now it's "later"...
Megan, since you have not written back to me via email, I assume that you did not post that plea, so my tag line now comes back. If it is you, a simple email will stop it.
I do so voluntarily because it is your blog.
Ronny:
"I find it intolerable, though, when coming from those who appear to be self-styled conservatives."
Ronny, once upon a time, liberals had civility. Extremists like the daily kos of Huffpo or worms like James would have been laughed out of their party.
Radicals/extremists/incivility exists in all movements; it is the hallmark of civility when those elements are marginalized.
in the last 8 years, not only have so-called "responsible" leftists not denounced and thrown out the scum. they have built themselves upon it. John Kerry writes for dailykos; HuffPo gets a question on national TV from Obama; Moveon.org forms the primary response organ for liberals. The horse is out of the barn, and inmates are running the asylum.
The right had its radicals too, but its diligently purged its extremists systematically. however, the purge has backfired, because now there are no more strong right wing radicals to fight back against what can only be described as underhanded warfare from the left.
America died in the last 8 years, to be replaced by this filth. They won with incivility, brutality, violence, and lies, and if you don'[t want to be stomped over or blown up by William Ayers and his acolytes (like Obama), you'd better fight the same way.
Sportsmanship and civility are dead. Only the dirty, underhanded ways that handed power to the liberals can take it back. They taught us well; do not fight with a hand tied behind your back
VOR:
"What's the point of any other argument, repetitive or otherwise, when you want the other person in your argument dead?"
---said the liberal who wished for GWB's assassination during the last 8 years. Hypocrisy, thy name is liberal. Bite me, boy.
I repeat, for all to hear:
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
"Only the dirty, underhanded ways that handed power to the liberals can take it back."
No, no, no, and no.
Power is not the end in politics. The good of the community is. The latter is not gained by adopting the unjust ways of one's opponents, but rather by standing firmly on one's principles, speaking the truth even when it is unpopular, and doing what is right though the mob and its demagogues ridicule it.
You, sir, are becoming what you hate.
America died in the last 8 years, to be replaced by this filth.
I really shouldn't respond but, who was in charge the last 8 years to make it possible? Is it possible that if Bush was a better president, that he didn't heavily overreach in his powers, stood up to the worst aspects of Cheney and didn't politicize the DOJ that the Republicans wouldn't be so far out of power?
I voted for Obama mainly to roll back the worst aspects of the Bush presidency, and hopefully force the Republicans to put forth a decent message. If they end up doubling down on the policies of the last eight years, then that's their fault.
Continuing on my soap box, I once again urge one and all to visit or revisit MacKay's "Extraordinary Popular Delusions and the Madness of Crowds". View the sections on the French experiment with John Law's fiat, the "Mississippi Bubble", and the British fallout from that event, the "South Seas Bubble". Behold how Isaac Newton, a towering genius of his age, made a fortune in the Bubble, and then lost it later on.
The point of this is simple: debt/credit bubbles have happened before. They end badly. However, such an event is not the end of the world.
Advanced students may peruse "Fiat Money in France" by White, a study of the revolutionary Assignat, backed in principle by land (lands of the church and nobility, siezed in the revo). A slim volume, it explores the social and legal effects of the Assignat.
Also, Kindleberger's "Manias, Panics and Crashes" from the 1970's explores in more detail the events described. He concludes that a "lender of last resort" is needed in an economy, but there must always be doubt about whether that lender will come through or not. If there is no doubt, then that lender is just another participant...
I have obtained a facsimile of one of Kondratieff's articles on "Long Waves", in which he charted and studied commodity prices in France and England over a period of generations. His data was good, and his observations simple.
From all the above reading, I have concluded that manias, and the panics/crashes that follow them, are a feature of human greed, stupidity and arrogant forgetfullness. Reading first-person descriptions of 1929, one finds claims "It's Different Now", just as in 2007. One finds people way over their heads in debt, just as now.
Here is the unvarnished truth: there can be no recovery until the skein of complex debt instruments has been unwound...fully unwound. All the "stimulus" of last year, this year and next year will serve mainly to prolong the agony, regardless of the political party attempting to stimulate.
Ronny:
"Power is not the end in politics."
---in an ideal world, yes. Liberals have just proven we live in the opposite.
"The good of the community is."
--- a moron black supremacist president into killing babies, being advised by terrorists, cowering before threats, apologizing for being strong, and openly lying about the economy to use it as an excuse to pay off corrupt groups is not good in the least.
"The latter is not gained by adopting the unjust ways of one's opponents, but rather by standing firmly on one's principles, speaking the truth even when it is unpopular, and doing what is right though the mob and its demagogues ridicule it."
---Ronny, you're thinking that nobility will win out. Liberals have proven that nobility gets trashed. You're setting yourself up for the Charge of the Light Brigade style obliteration.
"You, sir, are becoming what you hate."
---poetic, but untrue. I am using the tactics of my enemy, not their ideals. By your argument, we would lose any war waged by guerilla warfare, because we cannot become that.
Again, never fight with one hand tied behind your back. Especially now, when the left wing has taken their gloves off.
Byrk:
"I really shouldn't respond"
---no, moron, don't play with grown ups with your childish mind.
"but, who was in charge the last 8 years to make it possible?"
---classic liberal answer. It's all Bush's fault we cheated and lied and acted like pigs in poo!
"that he didn't heavily overreach in his powers,"
---untrue. the koskids really don't know shit about con law, do they?
"stood up to the worst aspects of Cheney"
----more liberal fiction. Bush had a trusted adviser. No proof of anything more.
" and didn't politicize the DOJ"
---untrue. again, Glen Greenwald= liar.
"I voted for Obama because I'm a mindless scumbag who thinks a black supremacist america-hating baby killing terrorist coddling economic socialist is a great person"
---FTFY
"If they end up doubling down on the policies of the last eight years, then that's their fault."
---lol moron. I love how you're not responsible for any scumminess (it's all bush's fault! Huffpo told me so!) and yet if you get it spat back in your face, suddenly the other side is to blame.
hypocrite. at least take it like a man, pussy.
Again:
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
Basic,
Alright bud, what are you trying to do take on the political left all by your lonesome? It's romantic, but not very smart. You could say it's even noble, but like you said that's not enough you have to also be effective.
Yes, we get it, the left used every single attack they could think off, they didn't hold back on anything, they played dirty. Conservatives get it, Independents get it, liberals get it, even if they have some explanation as to why it wasn't really dirty, but call it what you will, they know what you are talking about. They still won. So can call them out on their tactics all you want, but that is not enough to win anything. What is your message? Conservatives don't have one at the moment. The message has to be better than a repeat of the election talking points. You got a few years, help your side work out a persuasive message.
PS: Several times in the last few years I urged a discussion of the housing market bubble, and what it would mean. Assymetric Information disdained such a plebian topic. Therefore, I took my opinions elsewhere, and did things with them, such as buying put options on Countrywide, Centex, Hovnanian, Downey Financial, Citigroup, and others in 2006-07. My time was better spent looking at charts than trying to point out what was obvious to people who refused to think.
Lest the proprietress believe that this is a moot issue, there are still ARM's out there resetting, and now commercial Real Estate is following residential as it always does.
PS: The short interest in Boston Properties (Boston commercial RE) and Vornado (NYC and DC area commercial RE) is huge. Gee, I wonder why...
This would be funny if it weren't happening to us. They don't even try to fool us anymore. They just arrogantly believe that they're in control, they can do anything they want to, and there's nothing we can do about it. I guess we'll see if they're right.
I'm guessing:
Geithner sounds planless because there is nothing to do besides nationalize three or four of the nation's largest banks (since they are insolvent, not illiquid), but this wouldn't go well with Republicans (being 'socialist' - the way Obama puts it, "it's not in our culture"), and being 'bipartisan' is important to Obama, therefore the only alternative is to expensively dither until nationalization of the banks is forced on the Obama administration - until it's obvious to everyone, not just economists, that there is no alternative.
However all this could be different next week; I've noticed things are moving fast.
BF,
Could you let us know what other forums you post at, so we can follow your hilarious insanity once you get banned from this blog?
Your self-importance demanding Megan email you to confirm it is her was especially priceless.
If Obama is not your president, who is at the moment? Does it mean Biden is? Or has His Imperial Majesty Emperor Norton I come back to reclaim his throne?
And as Rob Lyman said, how exactly are you fighting a war, let alone winning it, by pissing off conservatives more than liberals?
You are a wonderful fantasist. Are you still planning to throw eggs at Obama if he happens to walk past you? That'll show him, if you get day release to go the grocers.
Looking forward to clueless military analogies, the 'they did it first' defence, followed by bitch/pussy etc. It's like William F Buckley has risen from the grave.
Congratulations to TheWesson for recognizing that the problem with certain banks (cough)Citigroup(cough) is not liquidity but solvency. All the credit (read: DEBT) in the world won't fix the problem of solvency. Only paying down debt, one way or another, will do that.
About a year ago, on another weblog, I read of a person on the West Coast of North America who had obtained a $50,000 line of credit. This was the person's "emergency fund", until one day when the lender cut that line to $10,000. Several commenting people had the scales fall from their eyes that day, as the difference between $50,000 in cash or cash equivalent vs. %50,000 in credit came home to them.
Banks that hold trillions (yes, trillions) worth of Level 3 mystery-meat "assets" are insolvent, and credit won't fix their ills. Many people are about to find out the difference between solvency and credit the hard way.
PS: Last night on Fast Money, Guy Adami illustrated the notion of a "trillion". Suppose that you started in the year 1 A.D. spending $1,000,000 every day. No holidays, no Sundays off, either, you spend 1 million bucks every day for 2000+ years. By the time you get to this day, spending 1 million dollars a day through the Dark Ages, through the Crusades, through the Renaissance, through the Reformation, through the age of exploration and colonization, through the 19th century, through the 20th century...you still have not spent a trillion dollars.
And Congress is poised to spend that, and more. Gee, I wonder if that could possibly have any effect on, oh, Treasury debt, or the value of the dollar, or boring stuff like that?
Ellipsis:
But a liquidity crisis can cause a solvency crisis.
If company A has sufficient assets to cover its obligation, but insufficient cash to do so, and the obligations are suddenly called in, then this company must quickly sell its assets. In order to sell them quick, it may have to accept less than full value, which may cause it to become insolvent.
Is this not, at least partly, what is happening right now? I assume that the banks in question would remain solvent if all that paper was valued at something pretty damn close to face value. Since so many people are being forced to sell their houses, the price is dropping, causing everyone to go insolvent. But if one could afford to hang on to their house or the paper backing it, and if that house was to recover its original price, then everyone in question remains solvent, no? Admittedly, those are two pretty big if's...
@ellipsis: I made the point about liquidity vs. solvency much earlier in the thread.
@ken_magalnik: That's certainly what the banks *want* you to think. But the reality is that their insolvency has nothing to do with the fact that they have to sell their assets quickly: the assets really are worth much less than face value, or else the few rich people with money would leap at the chance to buy them up. They aren't, needless to say.
The quality of these threads appears to be in decline. Very sad.
Ken Magalnik:
"So can call them out on their tactics all you want, but that is not enough to win anything."
---not calling them out so much as using them and shoving it in their faces. It was enough to win 2 elections for those scum.
"The message has to be better than a repeat of the election talking points."
---maybe I can mumble about "hope" and "change" too; lol, jk. The Messiah depended on the dirty, dirty work of his scum to get elected without any substantive message behind it. the left proved you need nothing but viscious attacks to win.
"You got a few years, help your side work out a persuasive message."
---thanks. I always take advice on politics from people not on my side. Because that's a smart idea.
James:
"Could you let us know what other forums you post at, so we can follow your hilarious insanity once you get banned from this blog?"
--your mom has a great blog.
"Your self-importance demanding Megan email you to confirm it is her was especially priceless."
--your bad impersination of her was worth its weight in gold (/sarcasm).
"If Obama is not your president, who is at the moment?"
---I ask the left who their president was for 8 years of this crap. Then we can talk, son.
"Or has His Imperial Majesty Emperor Norton I come back to reclaim his throne?"
--why just an emperor? You invented a Messiah, little man.
"by pissing off conservatives more than liberals?"
---seems to me your little socialist knickers are in a twist, bitch.
"You are a wonderful fantasist."
----said the man accusing Bush of war crimes.
"Are you still planning to throw eggs at Obama if he happens to walk past you?"
---Yep. Just like inauguration day, 2001. Remeber that, bitch?
Looks like I've hit a nerve with littlwe lefty whiners. Waaaaa! He's being mean to us! Only we can be mean! lol, little man.
Get ready for every dirty trick you liberal tiwst have pulled for 8 years, thrown back in your face.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
You got a few years, help your side work out a persuasive message.
Wonderful.
You outdid yourself BF.
I'm going to miss you when the hammer drops.
shaking in my shoes, Jamey boy. You frighten me, really.
Obama is not my president.
I am embarassed to be an American because of him.
For the first time in my adult life I am NOT proud to be an American.
lol,
I'm not trying to frighten you, just point out the obvious. You've been asked to stop, you've ignored it, you'll be banned and deleted.
I know you have trouble with obvious things, like your president - but what's coming should be obvious.
Basic_Fact, if you're the same guy as before, remember that I said I really loved your comments back then. While they were rude, you always made good points in a humorous way.
But when you repeatedly say the same thing in each post, and get extremely vile, that is just plain annoying and probably going to get you banned.
Please, return to the old Basic_Fact, who criticized liberals in a funny way.
Silas Barta, you did raise the issue of liquidity vs. solvency in a terse way, but unhappily because so many poeple still regard those terms as interchangeable, more explication is required.
ken magalnik, the problem banks have is financial-dark-matter (as Fleckenstein has labeled it for multiple years, now) heavily leveraged (30:1, 40:1) on top of questionable real assets. However, even if the CDO's were not heavily leveraged, there would still be a problem, just not one as big, with solvency, because too many house loans were made by too many lenders to too many people with no hope of repaying the debt.
Slicing and dicing mortgages into wafer-thin tranches then bundling all of them into one package that is magically rated AAA by Moody's was big fun, until the nominal value of the underlying assets declined. Since the underlying assets included No Income No Job No Asset (NINJA) or Stated Income ("Liar loan") mortgages with rates that were guaranteed to adjust upward in a very few years to a cost far above what the buyers could pay, it was a given that these "just as good as a bond" instruments would fail. There wasn't even a question of when, because the stats on reset dates were out there, with 2007 and 2008 very prominent.
Banks lent out more money to more bad credit risks than any sane person would ever dream of doing. The resulting mania led to a huge overbuilding of residential, and commercial, real estate. Thanks to "magic" finance, the debt to finance all this construction was sold to other banks, to insurance companies, to pension funds and other entities around the planet. No one really knows how much of this stuff is on the books of pretty much everyone as an "asset", but for sure it is a lot.
And it's not just the US. Huge overbuilding on the Spanish coastline went on, funded by British demand for 2nd homes, Shanghai saw an apartment boom in which many, many Chinese families bought two or more apartments, just like the Las Vegas and Florida flippers, etc. and etc. I guess Japan didn't join the party, only because they haven't recovered completely yet from their own RE boom/bust.
Returning to the Geithner issue, he cannot make Citigroup solvent, and C is hardly the only bank in trouble. Bankrupting the US Treasury in order to fill out the want-list of every left-wing and liberal constituency won't fix things, either, but that won't stop the Pelosi-Reid Congress from trying.
BF,
I agree with Silas. I once watched you skewer Scent of Violets and send him running. It was brutal. It was a thing of beauty. You've ratcheted up the personal of late. I can understand why but personally I'd like to continue to read your posts. Don't get yourself banned. That won't help.
Somewhere in Indonesia or Kenya a village has lost its idiot.