- I don't believe that Henry Paulson and Ben Bernanke are lying, devious hacks simply because they were appointed by Bush. I don't believe that Paulson's aim is simply to enrich himself after his current gig is up. I don't believe the runup to the Iraq War is a particularly relevant comparison to what's going on now.
- I don't believe that most people know that the $700 billion is not an outright cost to the taxpayers, flushed down the toilet, never to be seen again. That's the proposed outlay for the assets, which are not totally worthless, and might even be sold later at a profit. The problem is that no one knows what they're actually worth.
- I don't believe the press has been particularly helpful in making that distinction clear to people — maybe because they're not clear on it themselves.
- I don't believe that the first people we should be listening to right now are Markos Moulitsas, Jerome Armstrong, or Chris Bowers.
- I don't believe that House Republicans voted against the bill because Nancy Pelosi is too mean.
- I don't believe yesterday's or today's stock market is the appropriate measure for how urgent the bill is. (I do believe it's the credit markets, since that's what this is all about.)
- I don't believe that Republicans know how to govern. At all. I don't believe they have anything constructive to offer.
- I don't believe that Congressional Democrats know how to govern as progressives — which is what is desperately called for right now. The bones we were thrown to us in the bill that went down yesterday are proof of that. Extra votes ought to be found by strengthening the progressive side of the bill — oversight, getting equity, CEO pay, etc. Enough Republicans will go along, particularly those spooked by the market panic. (Or not.)
- I don't believe Republicans have anything to gain by voting against an eventual bill and then running against Dems who voted for it. People know who the president is, and who has enabled him with their sycophancy. They're still doomed. It's all over but the shouting — this is the shouting.
- I don't believe that anyone who votes for the bill is politically helpless against criticism from a challenger. Whatever position one takes, one has to play offense.
- I don't believe Obama or McCain are leading much of anyone in Congress right now. I don't think that's surprising.
What don't you believe?
Please share widely!
I don’t believe John Tierney and Bill Delahunt (two otherwise intelligent people not facing serious opposition for their seats) made things any better by voting no yesterday. That’s grandstanding; it’s not governing.
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p>I don’t believe a more progressive bill passed with just democratic votes would be good politics or good for the country.
why not? specific reasons?
It is just something for the other side to undo.
between two parties, one of whose platforms is much lower taxes, no restrictions on corporations, no government involvement in health care, minimal govt. expenditure on education, creationism taught in the schools, no abortion rights, no gay rights reduced rights of workers… and the other that, for the most part, believes in the opposite.
Most reforms in our history were accomplished with those opposed kicking and screaming.
Republican leaders like Delay have been offering a cartoonish and hyperbolic characterization of Democrats on a professional basis. Anything you’d offer would be merely amateurish.
I am ecstatic he voted that POS bill down. It deserved to lose. Passing that bill wasn’t good governing, it was knee-jerk reacting. Having the foresight to vote it down and demand something better is good governing.
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p>why not?
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p>Face the facts: the bill was essentially Paulson’s bill. The strings the Democrats attached were as thick as floss. There still wasn’t any real oversight and it was a virtual guarantee that all $700 billion would be spent (it would take overriding a Bush veto to stop the last $350 billion from being spent – ain’t happening).
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p>There’s only three ways to pass any bailout bill at this point.
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p>1. Hold together some fraction of the Democratic vote and create a right-wing bill.
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p>2. Make the bill palatable to the Democratic Majority.
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p>3. Strong arm congress to passing essentially the same bill, which is a tough, tough sell.
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p>What’s the best thing for the American people? Option one literally sucks. It’s what’s gotten us to this point to begin with. Republicans have had their chance for a decade and have proved massive failures.
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p>Option 3 enforces the passage of a bad bill – and let’s not mince words, Paulson’s bill sucked. It didn’t treat the disease, it treated the symptoms – we’d be back at the same point either in a few months or a few years, likely looking at another big bailout and $700 billion poorer. No thanks.
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p>Option 2 enforces strong regulations and makes sure that come what may, the American people get a return on their investment – and makes sure that we rigorously address the economy’s fundamental problems, both in terms of credit and foreclosures. That means passing a progressive bill. I find it hard to fathom, in any scenario, how that would be worse for the country than either of the other two options.
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p>I don’t believe it’s honest/correct to repeat the meme that we’re going to get anything close to $700 billion back.
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p>A few things to consider: 1 – coming from Treasury itself, they’re going to overpay for the loans.
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p>Furthermore, not only will we overpay, but we’re taking out debt to finance the bailout. At even a 5% interest rate, how long would the debt have to be on the books before the $700 billion initial price tag for the people doubled? 5 years? 10? It’s been a while since I’ve taken statistics, but I know it doesn’t take long.
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p>So, I really don’t find it at all helpful to suggest that we’re not really losing $700 billion. If we spend $700 billion on crap, all we have is crap (that we’re paying interest on to even own).
If the interest was compounding, you’d use the rule of 70 (some use 69 or 72) to figure this out: 70 / 5 (percent) = 14 years.
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p>But this is not a compounding situation, so you’re looking at 100% / 5% = 20 years.
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No matter how it’s sliced, the amount we’d be paying in interest on these bailouts would clearly suck up the myth that we’d get some/all of the $700 billion back. Even if the Treasury drove hard bargains and purchased this bad debt at good prices, we’d still probably lose untold billions. The fact that they won’t drive hard bargains means we’re going to lose all the more.
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p>Nobody’s saying that. Some people have been brutally honest about this. The term “bailout”, however, is dishonest. This is not a bailout. I’ve heard between 50 and 70% in recoup.
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p>The 30 to 50% ‘surcharge’ is the price we pay for price discovery and the lessons learned. And hey… it this the price of the final nail in the coffin of the rights idealogy then I say it’s cheap and why haggle?
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p>I dunno. When a fire is heading right towards you, sometimes the fireman has to throw 700 billion gallons of water at it. I don’t know of anybody who worries about water conservation during a forest fire…
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p>I think, with equity stakes, this makes a lot of sense. It’s not debt, but a swap of (potentially) bad paper for good paper. If the government carries equity in the companies then either the stock price (or bonds in some case) can increase in value.
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p>Before I take it to the google =p
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p>Barney Frank, for one, has said something pretty similar. Suzy Orman on CNN last night… etc. etc. etc.
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p>50-70% recoup is losing at least $350 billion dollars. The entire Massachusetts budget for this coming year is currently $32 billion – and is faces stiff cuts in face of a changed revenue situation. Furthermore, I think your number is generous considering we’re going to be paying interest on the debt we take on to finance this bailout (and it is a bailout).
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p>BS. Who’s learning that lesson? Paulson’s plan would reward Wall Street for bad decisions. The lesson learned in that scenario is to be ‘too big to fail,’ and run risks knowing Government will bail them out. Calling this a “surcharge” is an absurdity – to the point that I find it morally offensive. Call the thing what it is.
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p>I’m not saying we shouldn’t come up with a solution, but it’s got to be a smart one. A smart decision protects that tax payer by treating this like a real investment – whatever we spend, we need to get back in real dollars and then some. Alternatively, revenues should be raised from Wall Street to pay for it, such as taxing each stock transaction. .25 cents a transaction would about to $350 billion a year, ensuring Wall Street pays for its own mess.
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p>50% recoup is getting 350 billion back on initial sales of good debt and then having bad debt that needs to be restructured. Plus the equity bought. The losses (if any) will be a percentage of that remaining. Good book-keeping ought to sort this out… then sell the equity and write down the irredeemable debt.
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p>75% recoup is getting about 525 Billion back on initial sales of good debt and then having bad debt that needs to be restructured. Plus the equity bought. Again, any losses will be a percentage of the percentage of the whole thing. After equity sales and write down… not that bad at all.
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p>Then of course, there was the provision to have wall street pay back the difference… which is an incentive for them to clean up their act and get the prices right so that they’re out of pocket costs aren’t in the 350 billion range.
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p>All in all, not caring to make a profit off this, I can very easily see net loss of zero to taxpayers over the long term. Get off your high horse for a second, it’s hard to do math at a rodeo… Now is not the time to be all-fired intent on punishing anyone, much as we all might wish to do so..
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p>Save your moral dudgeon for someone willing to swallow it, mkay.
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p>Assumine we did ‘finance’ it in the way you’re (incorrectly) thinking about it, with T-Bills, whose interest rates are approaching nil… where’s the cost?
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p>Puh-leeze. A bailout is a low or no interest loan, or even a giveaway, for the express purpose of keeping an entity afloat. Not happening here. What you don’t realize is that, under this plan (or similar) companies can still go under. In fact, for major holders of toxic debt, they probably will sink hard… but this plan allows for the government to buy of the toxic debt and another company to come in and buy up, at fair market value, the rest. Without that, the sinking company will be sold, toxic assets and good assets alike, at rock bottom fire sale prices. Good luck with that.
according to you, we need to have this – whatever you want to call it – because if we don’t do it, companies may be sold at rock bottom prices? Really?
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p>Well, yeah.. Rock bottom fire sale prices are fine only if that’s what the company is worth! Rock bottom fire sale prices are not good if that’s NOT what the company is worth. I’m sure you’ll agree with me, arguing as you do that paying too much is a problem, that paying too little is also a problem…
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p>A company worth a whole lot, whose good assets are being held hostage by their bad, or even by the perception of bad assets, is a bad thing. Surely, since you’re arguing for price fairness, that we ought to have… well… price fairness. The last thing we want, and the most unfair, is some daytrader picking up good assets for a song…. that’s even more unfair than ‘rewarding’ Wall St. CEO’s.
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p>The bad debt is going to work its way outta the system. We can do it painfully and quickly or really really painfully and slowly. That sucks, fer sure, but that’s the way it is. The rescue plan is painful and quick rather than really really painful and slow. Think of it as chemotherapy.
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I don’t give a shit if Goldman Sachs buys some smaller company for a fraction of what it’s worth, if that means we don’t have to pick up the tab on the bad debt.
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p>If what you say is exactly what will happen, I think we’ve found ourselves the ideal scenario…
You’re arguing with someone who knows more about finance than you. Would you argue medicine with a doctor. For god’s sakes, it’s embarrassing.
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p>Look, right here, I’ll volunteer right now to buy the shares of Lehman for a $1.00, or Wachovia, WAMU or any lousy company you line up. As many as the government wants me to buy. I’m sure Goldman’s would do the same.
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p>Then you know what I’ll do? I’ll strip out the good assets, if any, pay myself a whopping salary, and walk away from the bad, leaving the CDOs in place because I can’t sell them, and leave the company in place with its high leverage, and assets that are non-sellable. Because I’ve stripped the company of any good assets it had, it’s now left with a highly leveraged balance sheet, and the inability to lend.
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p>which is where we were in the first place. except I’m richer.
If it’s such a great deal where are the private buyers?
For $1 total? The private buyers are everywhere, anywhere. But the marketplace has the insolvent banks priced higher than that, under the assumption that they will prosper. The point is that, simply offloading “the companies for a fraction of what it’s worth,” won’t address the problem of that institution’s failure to lend because of the bad assets it holds.
The banks could have been sold to private buyers before they failed, but they thought they could get a better price from the government.
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p>Buying the banks will only attract other weak companies to try to get bought by the government. Ford Motor Company for instance.
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p>Lending is not happening because nobody knows what’s going to happen to the dollar. Except if we get $700B+ additional deficit spending, the dollar is going down.
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p>The banks are getting paid back in dollars worth half what they lent out. Fix the dollar and you’ll have plenty of liquidity and you won’t need the bailout.
The DOW rose some 400 points yesterday… after a 777 point drop the day before. Those are the private buyers. Problem is… there aren’t enough of them to, at once, get all the bad debt out of the system. Like I said above, the bad debt will work it’s way out of the system but, barring intervention on the scale proposed by the fed, slowly every so slowly and really really painfully (the Dow is down another 150 points today…)
what a surprise – Gary being condescending!
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p>Do I get to spray any nasty insults too, now?
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p>Gary, I hate to tell this to you, but you’re not nearly as intelligent as you think you are…
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p>Why would you hate to tell me that?
… if you expect to retire on that 401k…
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p>You’re arguing from your anger, which is real and, frankly, valid. But whatever the righteousness fueling your arguments it doesn’t mean that the arguments are righteous. If you’re in an airplane, and it’s falling out of the sky, swearing at the negligent propellor manufacturer whose ultimately at fault isn’t going to get you to land safely.
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p>Or… Consider a company, let’s call it LeGree Financials. It’s run by Simon LeGree, the shadiest, most low-down and greedy of men. He’s cut every corner and worked every angle to maximize his profit and avoid even the semblance of regulation. He’s not very competent, but he makes up for that with rapacious and ruthless behaviour. He’s just the kind of rank bastard you hate and wish terrible punishment upon.
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p>LeGree Financials gets caught up in this liquidity crisis, basically because he’s leveraged hard (let’s say in excess of 30:1) and bought into derivatives containing some toxicity big time and now nobody will lend him money. So let’s say, for the sake of simplicity, that the leverage was done straight up at one to one, over 30 different companies: For every dollar he has, he’s in debt one dollar each to 30 different companies for a total leverage of 30:1. If he’s got 300 million in assets, that’s 9 billion in debt spread out over 30 companies…
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p>So Simon Legree can’t get a loan and so he can’t make payroll… so his equally greedy VP’s start selling their investments, but the guys in the mailroom, the earnest accountants, and the secretaries they employ don’t have investments and so they can’t make their rent. LeGree can’t cover his positions in money markets so he raids the pensions of his employees. He starts selling all his assets at rockbottom firesale prices. There’s 30 companies, some of which AREN’T insanely leveraged, that call LeGree on their loans, but they can only watch as the assets LeGree has are sold off at pennies to the dollar. They can’t, or won’t, buy the assets themselves. Some can’t, or won’t, touch derivatives for fear of getting sucked into a whole different kind of leverage. Some just fear getting stuck with something that’s only going to depreciate more… One company, doing wrong and perhaps even evil, affecting the fortunes and lives of 30 other companies… and all their employees… Mostly because nobody can decide what the actual value of LeGree’s assets are.
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p>This is what’s happened to the market on a much much bigger scale: Nobodies lending, so nobodies buying. The assets, way undervalued now, might be anything from mortgage backed securities to money markets to regular stocks but all of them tie back in to somebodies 401k. Nobody wants to touch them for fear of getting sucked into the toxic derivative maelstrom. In the end, the tab lands on the retirement of some nice 64 year old gentlemen, who’s never hurt even a fly, preparing to retire in ’09. He is now looking at dog food futures. For real.
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p>So your desire to let LeGree suffer, righteous as it is, invites a whole lot of extra suffering that need not happen if Legree is able to sell at a fair price. LeGree doesn’t have to get of scott free, mind you. At a fair price, he can still lose his shirt.
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p>Under the rescue plan, the government will buy up some of LeGrees assets. LeGree will then be able to sell his remaining (good) assets at a fair price and pay off some of his creditors who’ll be glad to get 30 or 50 cents on the dollar rather than a fraction of a penny on the dollar.. Or maybe they’ll just take the assets and wait for them to appreciate. LeGree goes out of business, the creditors stay in business and the government unwinds the debt and figures out how to either sell it at a fair market price or write it down if it’s irredeemable.
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p>All of this is independent of the structural issues of the housing crisis, poor regulation (de-regulation) and greedy corporate cronyism that needs fixing as well.
I don’t believe that buying bad mortgage paper is the most direct route to keeping the credit markets liquid. As bad as the First and Second Banks of the United States were, one of their purposes has recently been reborn:
How about a Third Bank of the United States whose limited charter would be very simple: to be a safe credit harbor of last resort. Really, if the problem facing us is credit market liquidity, then let’s write new collateralized loans directly to good businesses instead of buying the known bad loans.
I believe the American people are showing that they know when they are being flim-flammed. A guy that works for Goldman Sachs wants $700B for a bailout, no questions asked. You may think the American voter is stupid. You may be right. But the voter isn’t crazy. (I don’t know about the politicians.) Yes, it is a bad situation. Although Congress and the Administration were warned many times over the last decade, the roll-up continued. Now, those in Congress and business with vested interests seek to mitigate their losses at the voters’ expense. Where were the so-called leaders when effective action could have prevented the situation?
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p>I believe the American people are angry, damned angry. People are talking about not only voting the hucksters out, but withdrawing their money from banks and other financial institutions as a way to fight back. Voting with their money may be the only way to fight the financial Attila-the-Hun progressives. Is progressive a synonym for huckster?
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p>I believe we should thank the Congressmen that voted to save the citizens more financial distress.
Are you kidding me? They were handed a completely rightwing bill (blank check) tried (rather unsuccessfully I thought) to put some limits on that, and if they produce another bill it might be actually pro-Main St instead of merely a handout to Wall St.
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p>A lot of Dems voted against this despite the arm twisting that went on.
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p>How do the progressives get the blame for this, when the mess created and the solution suggested came from the far-corporate-right??
The original post spoke of “progressive” governing. Wrapping this fish in progressive guise does not make it stink less. A bailout is still a bailout. It matters not whether the congresspeople consider themselves progressives, liberals, moderates, neo-cons or conservatives. It matters not whether a few crumbs are scattered to the people whilst their wallet are pilfered. Ensuring the wealthy keep their wealth at the expense of the larger population is just plain wrong.
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p>The rubber hits the road here. “By your judgments, you shall be judged.” Whatever cloak the politician tries to wear, their actions here determine what they really are and the public is understanding that. Personally, I could care less the political belief of the person with their hand in my wallet. Kleptocracy is the government of all political persuasion.
The actual progressives in the House, in general, didn’t vote for this bill. Plenty of liberals did, but not the progressive populists. That’s for sure.
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p>A progressive version of this bill would fix the problem, but make sure that Wall Street pays for that fix. We can’t let them ruin our economy, but that doesn’t mean we should have to pay for the fix either.
Does anyone remember the genesis of the Fannie Mae/Freddie Mac dabacle? The American taxpayer didn’t become outraged and seething mad, until they found out that Frank/Dodd and Co. foisted a homeowner giveaway to the under employed, unemployed, and illegal aliens on Fannie Mae/Freddie Mac and then their alleged good intentions ran amok. The average Joe begs, borrows, and works his butt off for a downpayment, closing costs, and mortgage payment and then he finds out that there was a “giveaway” only Joe didn’t qualify—because he had a job, or two or three. Now congress wants to forgive up to 80% of some of these loans and refinance? Pelosi and Reid want to throw in credit cards and automobiles? Paulson wants 700 billion for his amigos?
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p>No—–! Enough is enough. Sometimes you have to swallow the bitter pill.
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p>Since when did progressives and liberals engage in fiduciary responsibility. It’s the we need more money for “programs.” No matter the amount of money appropriated, more is needed. We sink further and further into debt. We haven’t made a dent in our national debt in decades. The current sitting president operates under some delusion that he will make everything right in the world and everyone will love him. He succeeded in only screwing up everything he touched and he is almost universally despised. Truth be told, Barack Obama scares the living daylights out of me. I think he is a Bush with a factor of ten.
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p>No bailout—–not a penny. If 700 billion is apprpriated it will wind up in the same black hole as the 23 billion of the big dig. Politicians and accountants shrug and point in numerous directions when asked where the money went.
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p>Let the chips fall where they may.
http://farm2.static.flickr.com…
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p>I guess the lesson is some holes are useful.
The original post spoke of progressive governing too, but your interpretation seems to be that the bailout was a progressive idea. It was not.
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p>The original post spoke of “the bones we [progressives] were thrown”. As in, the guts of it weren’t progressive, but progressives held out and got some progressive ideas in there. Not enough.
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p>The original post is suggesting that we hold out and get the next attempt to be even more progressive.
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p>But, upon donning my own reading glasses and re-reading your comments, I suspect you’re not actually interested in getting this right. You just want no fix whatsoever. Keep the government’s hand off your wallet, no matter how much may fall out of it without a fix. Do I have that about right?
Camp Nellie Huckins
A little camp on the shores of Lake Osipee, a place where girls stand on benches and sing at the top of their lungs. Spend nights on the island, jump off a pontoon boat, learn how to shoot an arrow, get down and dirty, and most importantly make the best friends a girl could have. Us Nellie girls will never forget– the midnight thunderstorms, the barnyards, being a huckster, the feel of sand in your bed, a bugle blowing to wake you, college day, finally being the older girl, your first night, capers, candlelight ceremony.
But. I don’t believe the “Its all the fault of Republican policies and Bush” line either, no more than I believe that it is all the fault of ACORN and the CRA. I do believe, as I do with 9/11, that there is plenty of blame to go around, and such blaming games are pointless. Instead, fix things.
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p>And I don’t necessarily agree that Iraq is irrelevant. Here’s why:
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p>Then, as now, I recognize my own deficit of relevant knowledge and expertise. The impulse then, is to look for a trusted someone with such knowledge and expertise.
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p>Thus: “OK, I see that Saddam is a long term problem that must be addressed, but why RIGHT NOW, and why at such scale and cost. Well, I trust Secretary Powell on matters such as these, so…”
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p>There is a certain parallel with Secretary Paulson, who didn’t get to where he did outside of government by not knowing how the machine works, is there not?
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p>I am of the somewhat rare opinion that an invasion of Iraq was not a disaster until it was bungled in the execution, but must admit that the initial justifications for doing so proved lacking.
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p>The parallel has to give one pause, no?
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p>I remain deeply ambivalent about the bailout/restructuring. I am growing more confident that something has to happen, and waiting until February is not an option, and that the something must therefore be crafted to acknowledge the existing power structure.
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p>One thing I do believe: Continued declarations by government that there will be a bailout, coupled with continued failure to produce it, have created an atmosphere of uncertainty that makes things worse than they might otherwise be. It was absurd to bring the thing to a vote, with everyone expecting it to pass, without knowing that it would. We need a new Speaker of the House ASAP.
for getting their sorry asses rolled over and giving in to the intimidation in the last 8 years.
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p>I sincerely hope this makes “deregulation” a dirty word. Let’s kill trickle-down for once and for all. There is NO SUCH THING as the free market.
In markets that are excessively regulated.
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p>Instead, pragmatic regulation with a light touch, where necessary, and without the creation of government bureaucracies that will simply serve to preserve harmful, pointless, and counterproductive regulation–and suck up money– simply to justify their own existence, please.
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p>Moderation in all things.
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p>Deregulation became a movement because the regulatory police state became, by the end of the 60s, way to big, too expensive, and was, by any reasonable measure, a manifest failure. In other words, deregulation was necessary in the economic climate of the 70s. Perhaps that is no longer so. Different context in 2008 than 1978.
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p>The principal problem with big government regulation is that it produces monsters, like the TVA building dam after dam, decades after the Depression, and long after any need for industrial parks and power had been met.
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p>If we return to a state in which people support “regulation” generally, without even knowing what regulation they’re talking about, then we will be no better off, but with a different set of corrupt officials in charge, again.
“… in markets that are excessively regulated.”
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p>Everyone believes that. The disagreement is in what can be defined as “excessive”.
Or even if there will be a catastrophic decline in our economy. Even if it declined—it won’t be permamnent.
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p>Good analogy with Iraq and our present issue. Folks lambast Bush for interceding in Iraq for WMD (that the president was told were there by the CIA). Why the hurry? The same people are all in a lather because congress is not racing to spend money (we don’t have) for an issue—that may be a nonissue—or at least the end of times. It’s not like everyone in USA will perish in two years.
I can’t believe that Charlie has turned into a Bushie. Read Michael Moore’s blog from yeterday. I never thought that I would agree with Moore on anything. But now he makes sense. Giving away our money to losers is morally wrong and will only encourage more foolishness. I am glad, though, to see that Charlie (and probably David) hasn’t blamed this whole mess on Palin.
Besides the fact she’s the two-year governor of a very tiny state that doesn’t have much national policy power (though it does have lots of earmark power!) she also doesn’t know shit about anything, so how could she make any decisions or statements she made in the last few weeks do any real harm? No one expects much from her, hence she is largely ignored. (Unlike McCain who wants to take credit for a deal made before it happens, and who screwed the pooch on his little SCUBA dive into Washington to be a “leader.”)
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p>That said, politics makes some damn strange bedfellows, that’s what this crisis is teaching ME anyway.
Did Michael Moore include those who took out mortgages and equity loans which they could not carry, when he described “losers”?
most foreclosures and bankruptcies happen because of medical problems and our fundamentally flawed health care system HMO system, your insults become humor…
I asked if Michael Moore included those who were foreclosed upon under his label of “loser”. I insulted no one. Perhaps I was wondering if Mr. Moore was insulting those people. As you brought it up however, can you source your claim that “most foreclosures and bankruptcies happen because of medical problems”; these days I doubt that to be the case. Subprime borrowers I imagine.
I referred to them as “subprime borrowers”, not “losers” as perhaps Mr Moore did.
http://www.realclearmarkets.co…
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p>”Standard & Poor’s chief economist David Wyss, who reported last week that payroll and unemployment statistics are far more significant than interest rate resets in producing mortgage foreclosures. Wyss found that only 2% of mortgage foreclosures in 2007 were caused by interest rate resets under adjustable rate mortgages, according to data released by Countrywide Financial. Yet 60% of mortgage foreclosures were due to loss of jobs! Way to go, FOMC!”
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p>What happened is that the Fed raised rates 8 times in 2005-2006 because it saw high prices as a sign that the economy was overheating. This threw the people out of work and out of their homes eventually. Then their lenders failed. Now we are here bailing out the lenders.
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p>In truth none of them are losers, strictly speaking. The borrowers certainly were hit with economic actions they had no control over. They lost their homes for reasons that had nothing to do with how hard they worked or how well they planned.
but as I looked into the issue it seems many are now arguing that the cause of so many foreclosures is actually falling real estate values. From the Boston Globe:
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p>…and therefore logically speaking, I guess my insults are not humorous.
First, Paulson effectively handed Obama a victory in November. Polls are showing the gap widening and I think we’ll see the mainstream polls showing a 10+ gap next week regardless of how idiotic Palin is on Thursday.
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p>Second, wouldn’t the most “progressive”- not to mention the most responsible- response to this crisis to be for the gov’t to just take over the damn companies and place them under a conservatorship like Brad Delong outlined in his blog. After all, taxpayers are being asked to foot $700b to buy junk debt, they should get more out of that deal.
Government employs governmental employees to get things done. Unfortunately, governmental employees can’t be fired for inefficiency and ineffectiveness (see FEMA a few years ago). Governmental employees aren’t hired for the activity between their ears, but the color of their skin, ethnicity, and sex. I don’t want government owning anything. The entire “bailout” has the potential to be a debacle unto itself.
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p>BTW—European currencies are falling. Banks are failing. Seems to be a worldwide issue now.
Bear a lot of responsibility for solving this problem. They are the majority party in the House. They have the Speakership. Barney Frank is the Chair of the House Financial Service Committee. So, lead!
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p>Charley is exactly right when he says that the Democrats are not leading as progressives (and Ryan is right with many of his complaints). Who is to blame for that? Why, the Democrats.
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p>Finally, I think Governor Patrick put his finger on the long term problem in his post last week: any solution has to help the people at the bottom, as well as the people at the top.
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p>To add to the “don’t believes:” I don’t believe this is a fake crisis. And to add to the “do believes:” I do believe this will affect you and me directly; I do believe some solution has to be found; and I do believe that a compromise solution is better than nothing. The economy needs functioning credit markets to operate.
Not a fake crisis, but can we please stop saying “TODAY OR DIE! TODAY OR DIE!”?? Getting a better bill and taking a couple days to do so to my mind is worth a little roller coaster ride in the interim (DOW up 273 right, like pretty much all morning) instead of tying the hands of the next three presidents with extremely risky taxpayer debt.
I no longer trust anyone in congress. Essentially, this entire problem was the creation of congress. Barney says that it was through good intention and when the executive branch wanted to put the brakes on, he interceded because, “No one could foresee the present dilemma.” Huh?
Isn’t part of any plan to look for worst case scenario, what can go wrong, what do we do to put safeguards in?
Ya know——like designing an airplane or a nuclear powerplant. We know they work—-we know they’ll crash—-would do we do to prevent the crash?
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p>And now—70 billion. And Paulson says, ” Trust me.” There used to be an old yiddish parable about, “trust me”. I should trust Frank, Dodd, and Paulson?
you never trusted congress, at least not for a very, very, very long time. “I no longer trust anyone in congress,” therefore doesn’t have the same meaning. It’s like when I told my best friend that, if she helped me the other day in doing something important, I’d be her best friend. She already had that =p
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p>Obviously, Congress hasn’t been very effective over the past 14 years – 12 of them lead by the Republicans, the other 2 obstructed by them. But we do need a solution to this mess and it’s not going to be pretty coming from any ideological perspective. I suggest you way the ‘success’ of it, and use it as a future predictor of how much trust you could place in the Democratic congress/senate/presidency, is a) if it addresses the fundamental problems and b) if it spreads the help around or preferably makes sure that Wall Streak is held accountable in paying for this bill, in full.
People are saying diametrically opposed things. If you trust nobody, it’s because you haven’t looked hard enough.
… if and only if the “diametrically opposed things” are the only two possible choices. It is possible that two diametrically opposed things are completely wrong. It is therefore possible to be very well informed and come to the conclusion that they are both BS.
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p>Of course, I’m not justifying that opinion that “diametrically opposed things” might both be BS, just pointing out that it is possible.
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p>In fact, one were going to assert that one was both well informed and opposed to two “diametrically opposed things”, I’d say that one would have to demonstrate why the opposed things were both wrong (possibly by asserting a third, ‘right’ solution) or the assertion of ‘being well informed’ might be held suspect.
Charlie apparently does and blames, at the end of the day, an economically ignorant electorate.
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p>I also don’t believe we can do nothing, though, and I don’t believe we will. I think that Robert Reich is probably right when he says
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p>I don’t believe that is very good either, but it is better.
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p>**********
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p>Look, the Bush deal–even as tweaked by our folks in Congress–would be a fundamental shift from public to private, a bad new deal on the order of the Bush tax cuts. If, arguendo, that is necessary, there ought to be mitigating elements that increase the odds we will be able to roll that shift back.
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p>So far, things like reregulating the industry or repealing the Bush tax cuts on those who have had fun at this party have not been on the table. Even the changes negotiated by our side have been weak cya window dressing. What the heck have those negotiations been about, anyway? Which bench to bend over?
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p>So once again, we have a crisis, but the response is business as usual, except when it serves a conservative agenda. Hey, I’m OK with giving the Treasury Secretary more power than anyone else in government–as long as the Treasury Secretary is Barny Frank. Why isn’t that on the table, if this is such a dire emergency?
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p>Maybe voters are economically illiterate and don’t grasp the situation. But they’ve been burned before. I think they see the fundamental asymmetry of the situation and smell a rat. And, I think they are right.
A dedicated Progressive and Reformer, Hoover saw the presidency as a vehicle for improving the conditions of all Americans by regulation and by encouraging volunteerism. Long before he entered politics he denounced laissez-faire thinking.[11] As Commerce Secretary he had taken an active pro-regulation stance. As President he helped push tariff and farm support bills through Congress.
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p>Prior to the start of the Depression, Hoover’s first Treasury Secretary, Andrew Mellon, had proposed, and saw enacted, numerous tax cuts which cut the top income tax rate from 73% to 24%. As the depression worsened, Congress, desperate to increase federal revenue, enacted the Revenue Act of 1932. The Act increased taxes across the board, and the percentage increased with income, to near pre-1928 levels for top income earners. It also implemented a 13.75% tax on corporations. The unintended result of the Act, was decreased spending among consumers and businesses alike, and the country sank deeper still into the Great Depression.
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p>Wiki
I think you’re putting words in my mouth. I don’t necessarily think yesterday’s package should have passed. This post was about refuting a number of lines of argument, but you’ll notice there was precious little in the way of a positive thesis. That’s because I don’t really know what to think; and I find myself having to refer to authority in a way that makes me quite uncomfortable.
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p>There’s a lot of noise right now, and part of this was simply to help me cut through the clutter.
and thanks for setting me straight.
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p>I would like to share one thought, namely that blaming the people is a losing argument. Not necessarily an incorrect one, as people believe and do the darnedest dumb things, and sometimes you have to say so (and, usually, lose).
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p>But first, it’s worth seeking out whatever is true amidst all the unsophistication and popular misunderstanding and innumeracy and economic illiteracy.
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p>In this case I think there is a solid basis for popular rejection of the $700-billion plan, whatever misconceptions and cliches may accrete around it in the popular culture or its fringes. Progressives should plant their thinking there.
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p>If this does not speak to your condition or confusion, then I apologize again–it speaks to mine and I am also working things out.
I don’t believe $700 billion is anything but an arbitrary number. Show me a breakdown to justify it, or I’ll want to top out at $400 billion.
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p>I don’t believe I’ve heard of $400 billion “Appearing” after a good day on the stock market, so don’t tell me about $1.2 trillion “disappearing” after a bad day.
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p>I don’t believe in the relevance of a measure where a 700 point decline one day is followed by a 250 point rebound the next — even though nothing happened in between.
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p>I don’t believe that the use of raw figures of stock market decline rather than percentage lost is good for anything other than scaring Americans.
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p>I don’t believe we’ve gotten a decent enough explanation for the fact that the world is still spinning despite this CRISIS being a week old.
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p>I don’t believe that Suze Orman or Jim Kramer have any authority in the eyes of people who don’t depend on television ratings.
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p>I don’t believe that Time Warner, News Corp., Viacom, and other corporate media are unaware of how much money they stand to lose unless a bailout happens.
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p>I don’t believe that this has anything to do with the capital gains tax.
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p>I don’t believe that I’m against anything that Eric Cantor is against.
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p>I don’t believe Bush will veto any bill that gets through Congress. I don’t believe McCain wants him to veto any bill that gets through Congress.
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p>I don’t believe it is McCain’s or Obama’s job to “lead” right now. That’s the job of Frank, Pelosi, Boehner, Reid, McConnell (where has he gone?), and Cantor. That’s frankly the job of Bush, but we know that’s not going to happen. Obama and McCain are not even on the relevant committees, and don’t have the relevant experience.
That’s the problem. Congress is/was the problem—now they want to fix it. This will take a lot of people and a lot of time. This should be seen as an anlogy of writing another constitution. Enough freedom for markets to prosper and enough regulation and oversight to keep the train on the tracks. Forget about social engineering.
Gee, whiz, I kind of thought the companies that were involved in trading for CDSs and taking on massive debt without having the assets to back it up were the problem. Of course, Congress deserves a part of the blame, especially the Phil Gramm wing for writing the legislation that allowed for both these problems and the Enron problems, but you’re probably not quite ready to accept such sanity…
that the new talking point is about how the Liberals in Congress held a gun to the mortgage companies’ heads, forcing them to make shaky loans to unqualified borrowers. In the most strident versions, the unqualified borrowers are “inner-city” residents, or “Hispanic.” This whole mess is a conspiracy of brown people and Left-Wingers to rob the Good People by making the Noble Bankers do things they hate doing. No Republicans or Free Mouseketeers were involved at any point.
Case in point – and I am deliberately chosing one with Republican involvement. Here on the Cape we have hundreds of foreign workers. The Cape Cod Times ran a story about this last year, but there are no unpaid archives I can link to. Some are legal with H2B visas, some are not. With the advent of the 2003 Dream act (CRA never affected us much because…well..YOU know, everybody on Cape is a lily-white gazillionaire). Many of these workers got together and bought houses with interest-only balloon mortgages, and because of the Dream Act, they didn’t even have to make a deposit.
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p>Flash forward five years – the balloon payments are falling due and the workers – Bulgarian, Russian, Brazillian, Irish, all colors/ethnicites – are walking away from the houses having paid in interest less than rent would have been. They are going home to their nations of origin, where they’ve been able to send wages earned all these years, since we subsidized their down payments. It’s a big part of why we have an unheard-of 15% increase in foreclosures here.
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p>I mention this because this is a Bush Administration plan with a laudable goal, and it helped 5 million peole into home ownership. The vast majority still own their homes.
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p>BUT – how did a foreign national with no Social Security number qualify for a subsidized mortgage? This wasn’t Lehman-level corruption, but more like Ameriquest/Countrywide level. Those brokers, those borrowers lied – are they victims, or did they victimize the taxpayers?
Every politician with a (D) after his or her name is good and/or intelligent. Carrying the party line can only go so far.
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p>As long as there is a strong contingent of free market capitalists in Congress, I don’t think any kind of bill that involves giving/loaning money to companies is gonna fly. A bill that involves buying assets just might…but it’s a long shot. And a bill that involves everyday homeowners has just as good a chance.
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p>I have to say though…I never knew how much of our country’s businesses rely totally on “paper”. Loans to meet payroll? To me that just seems like bad business practice, but I guess it’s a pretty accepted mechanism.
Here is just one small example for you (or big example, actually, depending on your perspective). From AP:
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p>The financial markets generally lead the “real” economy by a few months. The effects of what is happening now will be seen on the streets around the end of the year, and definitely by next spring, depending on whether the situation is fixed (small or little impact), or stays the same (significant impact), or gets worse (potentially very big impact).
Especially early in a business.
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p>You borrow $100,000 as working capital. You buy material, equipment, etc., and pay up-front licensing and business fees. You hire people and create your product. AS payment comes in, you repay all (HA!) or part of your capitalization loan.
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p>Your product does well, you have more orders, and borrow again to get more help to produce more product and to pay withholding, unemployment, worker’s comp. etc., for the influx of new hires, using your accounts receivable as collateral. As you become more established, you need to borrow less, but the need for temporary bridge loans never entirely goes away.
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p>The receivables are ‘paper’. People COULD reneg on paying you en masse – my personal favorite experience along these lines is the customer who wanted delivery without payment as they were going on a Greek cruise, and wanted as much spending money as possible, and they’d pay us really soon after they got back. We had already paid the people to produce the product, paid the sales tax on the material, etc., but THEIR extra spending money was more important then our debts. Told them we were Cash On Delivery, and we’d be HAPPY to take their delivery back, and hold it for them until they had the money to pay for what they had ordered. They paid, whining the whole time about how we were interfering with their trip of a lifetime.
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p>Likewise, the loans are paper. You don’t borrow more than you are owed or can produce (hopefully!) and this kind of transaction is not only common, it’s necessary.
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p>It isn’t even all business – I sat on my daughter’s day care board for years, and we had a revolving loan to meet expenses as we waited for state reimbursement for paid-for slots. In fact, cities and towns routinely borrow in expectation of state reimbursement as well.
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p>It isn’t bad business practice – it’s usual business practice.
I don’t belief that strange dig at the bloggers makes any sense.
at the quality of analysis coming from Kos, Armstrong, particularly Bowers — and even the economist Atrios. These guys are politics people — sometimes even political savants. They’re out of their depth now (as are most of us), but that doesn’t always stop them from holding forth with the same confidence and swagger.
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p>Josh Marshall, on the other hand, has made this possible. Kudos to him.
i don’t believe in trickle-down economics.
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p>i don’t believe that the only way to energize growth and prosperity is to shower legislative and execuitive favors on the top 1 or 2 percent of richest americans and most powerful corporations.
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p>i don’t believe that what is good for wall street (or general motors or any other massive corporate power) is automatically good for america.
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p>i don’t believe that a vibrant capitalist economy requires a robber baron class that is above all reproach and regulation to facilitate the prosperity of average people.
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p>i don’t believe that republican free market idealogues will still be able to hustle and pimp typical working americans as easily as they have during the last 30 years.
that Paulson and Bernanke are creatures of the Wall Street industry that created this problem. They are the problem and their way of thinking prevents them from even seeing a solution to the problem. What they do see are ways to some solutions that minimize the cost to their industry. After all, there is life after Washington. This isn’t to say that they are intentionally being devious, just that they can’t see the forest through the trees, and they’re trees. They should be kept far away from any aspect of this issue, and have nothing to do with developing a solution or administering to it after it’s created. You don’t have foxes guarding the chicken coop.
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p>Insofar as the (immediate) problem is liquidity, Paulson and Bernanke are rather well qualified to deal with the issue. And, insofar as the liquidity crisis has it’s roots in a variety of causes, it’s not up to Paulson and Bernanke to re-architect the cluster fuck of economic, policy and regulatory incompetence that led to it.
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p>Insofar as we need to solve the immediate crisis (liquidity) I say let Paulson and Bernanke put 700 billion fingers in the dike until President Obama can appoint Robert Rubin or Paul Krugman to be the Treasury Sec. The president and the next congress can then get down to the job of fixing the systemic problems.
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p>The presidency will be key, as Obama will have to authority to both tighten regulations and tighten enforcement. In the same way, Bush had the ‘authority’ to loosen regulation and forego enforcement… which is a big big part of the present situation.
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p>Of course, if McCain wins, it’s going to be Treasury Sec Phil Gramm and then… well, then… we return you to your regularly schedule apocalypse.
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Look at Paulson and Bernanke and are they any different from the Senators, or the heads of the big Wall Street firms? Interchangable in looks and more importantly ideas.
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p>The bailout is the perfect Washington solution, a big deal worked out among big men on Mount Olympus. The taxpayers are going to get a great asset swap? Bullshit. The government may get the assets if they amount to anything, the taxpayers will get nothing but the liability. Ever.
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p>The Democrats instinctively love it because it’s wise men running things while the crazy House Republicans and Dennis Kucinich are standing in the way. Robert Rubin for God’s sake!!!??? Plug in any Wall Street/Treasury/Fed/IMF door-revolver and tell me they would have made a different decision. Like those companies wouldn’t be in trouble if Robert Rubin was in charge???
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p>Most incisive comment on the whole thread. Glad I read to the bottom. I love how the good stuff sinks down here, ignored.