i have no idea who you are, but i have read your posts and look forward to them.

i am going to go buy a car now!!

my take away, DO NOTHING….KILL THE BILL….it is already in it’s downward spiral….go out go see American Carol and buy some dinner and something at the store and the let the markets do their gyrations. LIFE and the markets will recover….America will be fine. It always recovers….it’s AMERICA!

Is that a big enough purchase? Don’t want or need a car and already have a house so that’s the best I can do… for now.

During this financial crisis I have been wandering the halls of academia, blog space and the business world and I’m shocked by our people’s lack of comprehension about what is going on in the economy. The misperceptions about the current banking crisis, its seriousness, the implications, and potential solutions defy understanding. There are times when I just shake my head.

I have found that the groups of incomprehension fall into four camps and wrote about them here

Are Americans Worthy of Being Saved?

I thought you’d be interested.

Doug

www.dougist.com

Francis,

As always very nice article. I completely agree.

I simply cannot believe how badly Congress has dropped the ball on this recovery. Waiting 2 weeks to take action on this bill has forced us into a recession that I believe will last abnormally long (I think 1.5 to 2 years, where most of them last 6 to 8 months). I believe the length of the recession is caused by a two-headed monster:

1. The consumer type recession you describe above, where the inaction of Congress will compound the issue as further freezing of the credit markets occur causing job and productivity losses.

2. Under capitalized markets killing growth. Congress/Treasury/Fed/Bush have completely failed to address the issue of how to recapitalize markets and stimulate growth (and no sending everyone stimulus checks won’t get it done). I have yet to hear any of them even acknowledge the fact that this problem exists, much less have a plan to deal with it.

The more unbelievable issue to me is how McCain/Palin absolutely have failed to capitalize on this issue and have let the Dems turn it against Republicans. McCain/Palin and those Senators/House members need to blast on two fronts:

1. How the Dems have forced through blackmail (including Obama when he was associated with ACORN) bank managers to loan people money when they new those borrowing didn’t have the capacity to pay.

2. It is Pelosi, Frank (use the O’Reilly interview last night), Dodd, etc. that have delayed action trying to pork-up the current bill (giving ACORN future bank profits).

I received an email from Senator Hatch this week stating that he is tired of playing Mr. Nice Guy, I agree, it is time to take the fight to the Dems on all fronts.

Well, the purpose of the bill seems to be basically moot and adding to our debt makes little sense at this time. Unfortunately, McCain not only squandered an opportunity to define himself on this issue but turned his campaign back into the toilet.

Instead of fighting against earmarks and a power grab by the Treasury (which would also have helped distinguish him from the Bush Administration) he suspended his campaign to try and work out a bad deal that most Americans were against.

He’s already pulling out of my state of Michigan where Democrats are insistent that 50 out of 50 states for economic growth isn’t good enough. They want Puerto Rico to pass us as well.

Let’s fight hard for good small government House Republicans of which we found a few these last two weeks.

For you folks in Michigan

“It is well enough that people
of the nation do not understand
our banking and monetary system,
for if they did, I believe there
would be a revolution before
tomorrow morning.”

Henry Ford

If Obama wins by November, I think we will be having more of your “THIS”.

How can we stay calm, Blackhedd? Just how?

FACT 1: Obama sued banks for not giving away enough subprime loans. “Obama represented Calvin Roberson in a 1994 lawsuit against Citibank, charging the bank systematically denied mortgages to African-American applicants and others from minority neighborhoods.”
source

FACT 2: Senator Mccain did everything in his power in 2005 to both warn and legislate against the current subprime loan financial crisis.
source: Bill title is – S. 190 [109th]: Federal Housing Enterprise Regulatory Reform Act of 2005

FACT 3: The root of this whole mess is the Clinton administration for both giving out and making popular subprime loans to people who had a stressed ability to pay them back, and Democrats who later repeatedly blocked regulation reform.
source 1
source 2

FULL STORY:
Freebies From the Obama Camp
MORE ON OBAMA HERE:
what you need to know about barack obama

recovery but probably not until second quarter 2009. And Maybe much later if the problems in Europe follow the American path. Meanwhile, it is a great opportunity for investment if you have cash.

I have a little bit, I am looking at real estate. But if stocks become severely devalued, a nice stock fund might be the way to go.

Instead of a fear reaction, you should view economic downturns as opportunities.

Republicans have to stop acting like suckers and taking their bait. One bailout bill does not usher in an era of socialism, four years of an unchecked Obama will.

All Sarah. All Day Long

Republicans have to stop acting like suckers and taking their bait. One bailout bill does not usher in an era of socialism, four years of an unchecked Obama will.

All Sarah. All Day Long

Is there any point in passing the bailout at this point? What would it help if anything now?

By the way thank you for all your awesome posts, have been keeping track of all of them.

This mess is in large part due to stupid consumers, stupid exec’s but also due to Cox and the SEC NOT doing their job. Bush may have handed the Messiah this election by not doing what he could to get Cox out of there. Stupidity run amuck is why this mess is upon us and there has to be some type of rescue package. Granted that we are stronger than in ’29 and there is the FDIC and Main Street has spoken loud and clear-a note that has been dismissed which is extraordinary when one considers how connected Main Street is with investments today.

The panic led by Bush and Paulson along with that worthless excuse for a Speaker, is what is causing the panic. I say we need a package but at least the coalition of House Dem’s and GOP against this bill have forced everyone to slow down and take a breath before they act. What Speaker would ever go to a floor vote on such a bill and not know ahead of time what will happen? Then her remarks beforehand shows that the cheerleader has no idea what she is doing in her position as Speaker. Add in the panic of Bush and what a mess alright.

Treasury professionals I speak to on the corporate side said one reason they are holding onto cash is because they don’t trust any fund that has bank or agency paper. That belies the importance of getting this passed, since they also believe a constructive, wise effort to buy paper with questionable value would directly address their confidence issue. Translation; when companies sit on their cash it is bad for everyone. They are also slowing down R&D spending, which in the long term is really bad.

Add to this leveraged loans prices are in the basement, quality corporate bonds are being flogged and short term debt markets are ghost towns. Even FHLB auctions are failing because there is no demand. This will all have lasting effects which will ripple through the economy.

Meanwhile Congress fiddles and adds 450 pages worth of junk to this bill. I am speechless and only have one thought; they all need to go.

This is your Democrat led Congress who has done zero for the better part of two years. So, I don’t know why we should be surprised.

This is your Democrat candidate for President,who rejected John McCain’s call for more control over Fannie/Freddie- the starting point for this entire mess.

Do you really believe Obama has a tax cut for 95% of all American’s? I am just curious how this income redistribution, gets accomplish with $1 trillion in new spending and nationalizing the healthcare system?

Thank you for very helpful analysis.

I supported the original Treasury Bill. I believed the President when he said we would buy the MBSs and hold them. I trusted they could create a mechanism to value them properly for purchase and to create a sufficient market so that the Treasury did not only acquire the very worst.

I believe that 1.5 page plan, along with a reform of mark to market rules would have worked – then.

I am disgusted by a 451-page bill. I do not trust it. I’ve read it and I see too much scattered throughout. I’ve seen this before with Tax Legislation, about which I know a great deal: make it so complicated no one can decipher it and bury the messy parts.

Hence, I do not trust this bill at all. I deeply regret Senator McCain voted for it.

While I fear a liquidity crisis, I am becoming more and more convinced that hoards of vulture funds exist with hoards of reachable cash. Once they know how the government will act, they will proceed to pick up the pieces. That is how the market works.

In the future, we must reform the accounting system for more transparency and also more trust. If a CPA does not understand a type of security, or if a real market for the security does not exist, the CPA must say so and he must issue a qualified opinion or no opinion at all. The Big 4 have not done this. I suspect each of the failed firms has had a clean audit in recent years – were that not true, they would have failed earlier and not so suddenly.

If some investment products are so complicated that average CPAs cannot understand them, and if they are so limited in marketability that a fair market value cannot be determined, then the holders of them have nothing to report. That should be clear from the start. If it were, these products would not exist long because they could not be reported on audited financial statements. I do not care how cleaver or helpful the investment products and derivatives may be: if the marketers and creators cannot explain them to Independent Certified Public Accountants, then the products are worthless. The creators should find another line of work or something else to peddle. Sarah is right: I do not want to be fooled again.

And this is important: Sarah Palin is who convinced me. She stood up and said she’d been fooled and it was not to happen again. Well, I’ve taught law and accounting for 29 years. I admit it: I do not understand many of these financial products. I’ve heard so much about how so many others do not understand them and how they are so complicated, only a few people understand them, if any at all. Well, if they are that complicated, it is time for them to go (though I guess for the most part, they’ve already gone). Too much in our financial system relies on faith and trust. If we do not have faith and trust that the overseers (the CPAs, not the government) can properly evaluate financial statement such that they can issue an honest opinion, we have nothing.

My suggestions:

1. Let the House Republicans kill the bill.

2. McCain and Palin should denounce it, too. How they reconcile that with his vote will be interesting.

3. Force accounting firms to divest themselves of any association with tax planning or management consulting. Until they do so, their audits are untrustworthy.

4. Do not accept International auditing standards – they are less reliable than are our own.

who is more likely than not going to have new unprecedented power over the financial industry. You think the treasury plan to buy securities might not be a little bit influenced by the lobbyists and friends up on Wall Street?

The determining factor for how much a security is worth will be decided arbitrarily by the treasury. No risk for them to overpay right? No risk that they only buy the worthless securities from their friends first right? The age of cronyism in finance is about to begin big time.

The real danger of the bill is that it will continue putting capital in businesses and markets that are inefficient. It is the exact opposite of what we should want.

The bill that passed in the Senate on Wednesday was a classic pork-barrel incumbent-protection act. They quadrupled the size of the legislation in two days.

This is simply wrong. The Paulson stuff was itself attached to a “pork” (not really, but that’s another issue) bill THAT HAD ALREADY PASSED.

Otherwise, the Senate wouldn’t have been able to act first.

I so enjoy your posts. Still when considering the huge influence credit deprivation has on the ability of American business to function I wonder how we got here.

When you run a business with success predicated on the ability to borrow you are ALWAYS at risk. Sure credit is a great tool but it seems many companies are using credit as a primary means to revenue growth rather than a tool — and that, in my view, continues to put the economy at risk. Unless American business rethink their approach to the credit drug, I fear we will be here again in the future.

And they are right to be afraid. Had Congress acted last Friday, or even as late as mid-afternoon on Monday, those redemptions wouldn’t be as much of a threat. Some of the earlier posters have made some good points about the psychology of what is happening now. It is the psychology of a panic. And if you can see the panic coming, and set aside enough cash to whether it, you will come out the other side. Otherwise, welcome to Lehman Brothers St.

Blackie, as always I trust your read on the markets. If it is true that there are only 4 people in the US who understand these things, you seem to know 2 of them and be able to translate it into English for the rest of us. Right now I’m not sure what I’m going to do. I was preparing to ride out the coming storm. I’ve switched my 401(k) contributions to mostly bonds, but haven’t monkeyed with my accumulated assets yet. On that count, I have been an insane investor, with most of the contributions going into stock, so it was overdue for me to start investing in bonds anyway. But I wasn’t overly impressed with the part of last night’s debate that I watched. I think Palin was on too much of a leash. I think McCain has lost momentum, and doesn’t know how to turn it around. I will go out and pull the lever for him, even here in the People’s Republic of Maryland where I know it won’t make a difference, but I’ll be doing it the same way I would have voted for the bailout on Monday – holding my nose. I can’t even cast a decent protest vote because the Libertarians went and nominate Bob Barr as their candidate, and he seems to have jumped off the same cliff Pat Buchanon did a few years back. I’m thinking about watching the vote today, and if the market bounces up on Monday because they finally did the right thing, moving my stocks to bonds. Not because of the current credit crisis (you are right, that we can weather), but because McCain is returning to feeling like Democrat-light, and I’m starting to think the Marxist just might win. I’ll watch the rest of the debate sometime this weekend and hope the half I didn’t watch gives some signs of hope that McCain can still pull it out. If I don’t, the only reason I won’t be investing my 401(k) money in gold is because it’s not an approved part of the plan. Now my $30K in that plan isn’t a big deal in a multi-million (billion?) dollar fund, but if there are a lot of other people out there thinking the same way I am, those cash hoarders are going to need those reserves.

On the bright side, I probably will go see An American Carol with a friend tomorrow. I might even follow it up on Sunday by seeing Igor with two friends (the second friend doesn’t care for overtly conservative movies) and buying the overpriced popcorn and soda on both days. But other than that I’ll only be doing my part to loosen the credit markets by paying down my insanely high credit card debt.

Passed.

Unfortunately (even though I personally profit from it).

American made, of course, albeit in the early 1840s. Got it about 40% off the price it was listed at in June.

People are panicking out there, which means that calm people with cash can pick up some bargains.

You would have me thank Pelosi. I thank the House Republicans, because I think it is inane to argue that the Democrats should have shouldered the burden of this unpopular bill alone (either it’s a bipartisan crisis or it’s not, and going partisan ex post facto is just tacky; worse than that, partisans on either side that try to pin partisan blame on this just make it less likely that politicians will be willing to come together to solve the next crisis because they will know what’s eventually coming).

Whoever you credit or blame, this storm will pass, and people who have been prudent, who have avoided debt and stockpiled cash, and who keep their cool will do just fine.

We are going to have a very hard time over the next 2-4 years, PERIOD. The only issue of consequence in the medium-long term was whether we were going to surrender to socialism writ large and sentence ourselves to very long hard timeS (see “s”).

We didn’t, thanks to the GOP.

But let’s not kid ourselves that any law by Congress can prevent death or the consequences of the real estate party we’ve had for more than a decade.

The piper will be paid, and very soon we will have a crash, and no one will opine that thank God the crash didn’t come in October 2008.