I have to keep this relatively brief because I have an insane day at work today, but I wanted to give a brief heads-up to some people who have questioned why I have been so strongly in favor of the bailout. Many of our commenters seem to be misinformed about what the bailout is intended to fix, where the money is going, what the final price tag will be, and what the consequences of not passing the bailout will be.
First, and perhaps most important, the price tag on this bailout is not $700B. That’s an initial capital outlay – and the Treasury Department might not even use the entire $700B as capital outlay. The money is not going directly into the coffers of Wall Street firms, it is being used to purchase securities for which there currently is no market. As Megan McArdle has been painstakingly and repeatedly explaining over and over again for the last two weeks, the value of these securities is not actually zero, or close to zero. In the absence of a panic, they have marketable value. As our own Blackhedd has explained, the key sticking point here is the valuation Treasury is going to make of these securities at purchase – that will basically answer the question of whether this bailout has the possibility of actually making money as Treasury claims. However, there is literally no case in which the government will shell out $700B for these securities and get nothing back. It simply won’t happen.
More below…
Second, contra Thad McCotter and others who are demagoguing this issue, the government is not going to drive $700B in cash to various Manhattan locations in Brinks trucks to fund Wall Street salaries. Securities are being purchased with this money – securities that will be resold when the market corrects itself.
Third, I suspect that most people don’t fully understand the dynamics of what is happening here. Imagine that downtown Manhattan is ground zero for the financial equivalent of a nuclear blast (it is). A lot of people throughout the country seem to feel that since they’re outside the area where sand is going to be turned into glass, they are safe from what’s going to happen. Nothing could be further from the truth. As has already been explained, consumer credit (including mortgages and car loans) are already about to be much harder to come by. But that isn’t the worst part of what’s happening and what is about to happen. Let me tell you about some things that I have noticed over the last few days:
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The commercial paper market has completely dried up. Now, three or four years ago, I didn’t have anything but the vaguest understanding that any such thing as a commercial paper market existed. But it does, and it’s vital to the orderly function of our economy. See, when businesses purchase the supplies and inputs that make their companies run, they almost never pay cash. Your local T.G.I. Friday’s receives a shipment of produce from the good people at Sysco, who hand them an invoice that says “Net30″ or “Net60″ on it. This invoice then gets forwarded to T.G.I. Friday’s corporate office and a bean counter somewhere cuts a check for all the food invoices within 30 or 60 days of getting the invoice. Meanwhile, Sysco has a piece of paper entitling them to payment from T.G.I. Friday’s within 30 or 60 days – in effect, they’ve extended short term credit. But this is okay for them because they can generally either sell the commercial paper at face value or very close to it, or the paper can be used as collateral to secure short-term financing. If this paper stops moving (and it’s already stopped, for reasons that I can only chalk up to a crisis in confidence), then the short-term credit that businesses extend each other that allows an economy as large as ours to function is going to stop and the disruption to the economy is going to be catastrophic. Let me repeat that for emphasis: catastrophic. And it will not matter what line of work you are in, you will feel the effects when companies shut down left and right.
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Virtually all companies rely on lines of credit with financing institutions to ensure an orderly flow of capital to level out the inevitable peaks and valleys that come with operating a business. These lines of credit are basically what allow your company to keep paying you during the inevitable periods of time that your company runs in the red. If the credit markets freeze much worse than they are now, significant numbers of companies will be immediately unable to make payroll. Average, everyday workers who are far, far away from Wall Street or anything connected to it will suddenly have interruptions in being paid. You can imagine the disruption to the economy that would cause. Some companies will simply not be able to survive the tightening and will fold altogether. Unemployment could reach well into the double digits.
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We haven’t even touched what happens if there’s a run on hedge funds or similar event within the next week and lots of margin calls can’t be met. If you got hacked off by the AIG bailout, you’re really going to hate what happens in that eventuality. It’s not outside the realm of possibility that the NYSE could face an emergency shutdown, among other delicious possibilities.
The bottom line is that the consequences of the “no bailout” plan all add up to Depression with a capital, 20-point font “D”. It will furthermore almost inevitably result in the government being on the hook for a lot more than $700B in risky assets. We are looking, at this point, at trillions and trillions of dollars in potential losses across the economic system.
No, the bailout will not completely prevent bad things from happening to the economy. THere are players in the picture that are simply not solvent and that need to be absorbed and/or cut up into pieces and sold. But the bailout will allow this to happen in an orderly fashion that does not take the United States economy down with it. Basically, it’s the difference between the late 80s and the mid-30s.
I finally took a look at the House GOP “alternative” plan last night, and the best thing I can say about it is that it is not a plan hatched by serious people who intend that anything actually be done. The plan basically has two parts – First, a whole bunch of bullet points that basically amount to “tax breaks.” Now, I’m a huge fan of tax breaks, but tax breaks in this case are not going to provide the necessary liquidity to unfreeze the credit markets. Furthermore, you, the House GOP, went and ruined your reputation with the American people and so you don’t control the show anymore. Get that? Anything you want to pass has to get by the Democrats. So, you know, what a brilliant idea, trying to ram through a “plan” that basically amounts to “tax cuts for the rich.” The only way you could have proposed a plan less likely to pass would have been to propose that we fix the economy by amending the Constitution to outlaw abortion. Second, the plan includes 100% insurance against default, which not only has no chance of passing, but also no chance of working. Have you ever tried to sell someone who can’t pay their bills insurance against not being able to pay their bills? That’s a genius idea. Furthermore, the entire problem right now is that the market has no way of transferring the risk associated with a given class of assets. So… your solution to that is to inject a risk allocation device (insurance) into that same market?? Again, this is not a proposal put forth by serious people.
If you get the idea that I’m somewhat steamed right now, I am. I live and work fairly far from the epicenter of what’s going down, but I understand the concept of fallout, and I have no idea at this point how my family and I are going to avoid it. And in the face of potential impending disaster, a group of allegedly serious people are throwing snits because of speeches they didn’t like, throwing snits because their precious Congressional sensibilities have been offended, and pretending all of a sudden (after 4 years of demonstrative evidence to the contrary) that they have principles against spending (which in this case is actually capital investment). Make no mistake about it, I am taking down names of the people who are trying to take the country down in a vain hope for good press, and in the process taking down the Republican party even further when the American people start feeling the effects of the depression and remember which party spent this vital week posturing for the cameras. You see, the Critters can afford it because they get paid by the Government and are thus insulated from the effects on the private sector that they are allegedly trying to protect – if everything goes boom in the next month, they’re fine unless they get kicked out of office. For my part, if everything does go boom, I am going to do everything I can to make sure that they get the opportunity to try to find private work in the environment they have helped to create.
Steve Maley
Moe Lane
Dan McLaughlin
Neil Stevens
Daniel Horowitz
Not the point!
Waderic Wednesday, October 1st at 9:03AM EST (link)I think you’re missing the point. I think the problem here is not the number. $100 billion, $700 billion, $1 trillion, I don’t care… The fact is that I don’t think the government should be buying up all this bad paper, no matter the cost. I’d be ok with a plan that costs this much giving the companies incentive to work out the mortgage crisis, but for the gov’t to buy up all this bad paper that apparently noone wants is not the solution!
We’re giving them a free ride on years of mistakes. Give us a different plan where the companies have to fix what they did by the gov’t buying preferred stock or something that equates to this and I’d be all for it.
I just don’t want us to get stuck with the Secretary’s one idea, which doesn’t still solve the problem. There’s still the mortgage mess, just the gov’t owns it now.
With all due respect Leon,
c17wife (Diary) Wednesday, October 1st at 9:06AM EST (link)I think many of us here feel something has to be done. We know we have a problem. And there is more than one way to solve it.
Most of us took issue with your screed to fire a congressman that was doing his job to best represent the people who sent him to DC. I know that is a tough concept for some to grasp, but it truly is their job.
It seems to me that instead of calmy and rationally questioning his motives, you fed off of the emotion of a crappy financial day and posted a screed that you really shoudl apologize for. It was unneccessary and not very becoming of RS. Sadly, this post isn’t much better in tone either.
Duty is ours, outcomes belong to God.~Mike Pence
Grab hold of your shoelaces, pull upward
Leon H. Wolf (Diary) Wednesday, October 1st at 9:06AM EST (link)as hard as you can. If you don’t start flying, it’s because you’re not trying hard enough.
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We can’t stop here. This is bat country.
My company
Dave_in_Fla (Diary) Wednesday, October 1st at 9:08AM EST (link)We work with many large defense contractors, where they act as the prime contractor. When we invoice them, they have standing policies of not paying until the invoice due date. As a result, we draw against our capital reserves or use commercial paper to cover payroll and paying our vendors.
If both the commercial paper and our access to our asset secured lines of credit were to freeze, we would not be able to make payroll. And we are a $5B company.
Very good analysis, Leon.
“If they were merely incompetent, then at least SOME of their actions would have been to the benefit of the country.” – Joe McCarthy
No, he isn't.
Leon H. Wolf (Diary) Wednesday, October 1st at 9:11AM EST (link)If you really think that he has some principle that he adheres to that prevents him from voting on this on the basis that it’s best for the American people, then I don’t think you’ve followed his career that closely. And you really think that his constituents are burning up his phone lines with “Fire Paulson” calls? I don’t believe that for a second.
And why in the world would he have suggested to fire Paulson? What would that accomplish? Same thing McCain hoped to accomplish with his valueless call to fire Chris Cox – adulation from the press for criticizing a Bush administration official. Doesn’t help the situation whatsoever. Doesn’t help or represent his constituents in any way.
Again, I read what the House GOP is planning as an “alternative,” and it is not a serious, good faith effort to get anything passed. It is nothing more than a serious effort to get some press to the effect that the GOP is proposing an alternative.
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We can’t stop here. This is bat country.
It is possible...
Waderic Wednesday, October 1st at 9:15AM EST (link)look at what Warren Buffett did at Goldman Sachs. If the government were serious about finding the best solution for this mess, it might consider doing something similar. Now I know that would require a lack of politics, ergo my velcro shoe straps won’t cause me to levitate, but there are alternate solutions which might solve the mess without the government buying up all the bad mortgages and then somehow having enough beaurocrats to go through them and make sense of it all.
At the end of the day, if the government is essentially stuck with all the foreclosed properties, how do they renegotiate to get people back in the houses? We’re assuming the gov’t can now competently do the job of a mortgage broker.
I "Get It"...
alaskaescapeartist (Diary) Wednesday, October 1st at 9:18AM EST (link)… and I oppose it.
If we don’t have sensibilities, then what else do we have?
Foreclosures In 2009
BigGator5 (Diary) Wednesday, October 1st at 9:20AM EST (link)Hey Wolf, why do you have such a hard-on for the bailout?
Do you not realize that over a million foreclosures are estimated next year alone? Does this bailout stop these foreclosures?
NO!! Your logic is flawed, this bailout will not help us on MainStreet! Not only will we never see that $700 Billion again, but without the risk, Real Estate as we know it will fall apart over night.
Call The Capitol switchboard at 202-224-3121 and tell your Senator that you do not want to send good money after bad!
Educated (About The Issues Facing Us Today), Dedicated (To Making A Difference), And Highly Motivated (To Getting Things Done)
And foreclosures produce zero revenue, right?
Leon H. Wolf (Diary) Wednesday, October 1st at 9:21AM EST (link)If you’re not going to read the post, don’t comment on it. Period.
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We can’t stop here. This is bat country.
If that paper is worth something...
liberalrepublican (Diary) Wednesday, October 1st at 9:22AM EST (link)Somebody will come along and buy them.
And perhaps make an obscene profit on it for being willing to take a risk.
That’s how capitalism works.
Socialism has the government buy that paper.
I believe in capitalism and not socialism, so I go for option 1.
“Broadly speaking, liberalism emphasizes individual rights and equality of opportunity. … including extensive freedom of thought and speech, limitations on the power of governments, the rule of law, the free exchange of ideas, a market or mixed economy”
What I fail to understand
alchemist17 (Diary) Wednesday, October 1st at 9:24AM EST (link)Is why there isn’t more movement here regardless of the bail-out. One of the key questions is the valuation of these securities, and the risks involved are preventing a true market from generating a reasonable price given the degradation of the mortgages that make it up.
It would seem to me that Treasury should be looking at how to value these NOW, and that one simple way to do it would be to set up a bidding-type program – that is, allow both prospective sellers and buyers to offer bids on what transactions they’d currently accept for blocks of these securities.
To reduce gaming the system, force them to put money or securities behind their bids, so that if you can link a seller and a buyer whose bid prices overlap you actually complete the transaction. It would seem something along these lines would both help nurture a ground-up market as well as building valuable information for the purchase valuation guidelines they’ll inevitably need.
The government isn't buying commercial paper
Leon H. Wolf (Diary) Wednesday, October 1st at 9:30AM EST (link)That’s not what the bailout is about – I was describing a side effect of the current crisis.
Also, the situation you posit is simply not realistic. Commercial paper by definition cannot possibly be worth more than its face value. So the only way someone “makes a killing” on commercial paper is by buying it for far, far, less than face value and then reselling it for higher. The problem is that if you hold a note entitling you to payment of $50,000 in 30 days, you are simply not going to sell that for $10,000 in cash now. No way, no how. And if your situation becomes dire enough that you’re forced to do it, that means that you’re pretty much on the verge of going out of business. So, it’s not outside the realm of possibility that someone will make a bunch of money hedging the commercial paper market, but if that scheme works it means that a bunch of companies are going out of business. The more likely result is that people are going to start demanding cash on delivery, which purchasers are going to have to fund by getting additional credit… which isn’t currently available. Oh, and also, the largest purchaser in the world (the government) is simply not going to accept demand for payment on delivery.
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We can’t stop here. This is bat country.
Mini-van mom often writes what I think...
Fallon (Diary) Wednesday, October 1st at 9:33AM EST (link)Yes, there is a problem. One solution? Probably not. The shift of referring to this crisis from Wall Street to Mainstreet is just one more attempt at changing minds by fear rather than with information.
I have heard Harvard Economics professors calling for allowing these businesses to go bankrupt. I have heard Leon and Mr. Forbes calling for bailout now, or better, yesterday.
I’m not even close to being competent with regards to economics issues, but all the scare tactics that have come and gone in the past week have done nothing to convince me that any of the experts have a handle on this, either.
Unintended consequences. This is the phrase that keeps popping into my head. Well-meaning legislation often, no, almost always leads to unintended negative consequences.
I wish Congress would pass legislation to maintain and improve the infrustructure and finance the military every couple of months, and then go home to civilian jobs. I know I am a political simpleton, but telling me that the people who helped screw all of this up, and profited from it in various ways, are the same people who can save me rings hollow. Sorry.
Potential fallout from the bailout
derechista Wednesday, October 1st at 9:33AM EST (link)A very interesting concern was raised on talk radio over the past week (maybe on Boortz?). If the federal government buys the “toxic” mortages, will radical taxpayer groups be able to sue to micromanage the homes tied to them.
Just an idea, but could they become Al Gore and Leo DiCaprio’s enviromental activism dream? Remember Leo’s Greensburg, Kansas ad?
Could American Leftists sue the government and force it to manage the homes in a “green” manner? And, could they force the government to make as a condition of their purchase that the homes be made green by the homes’ buyers.
Maybe such groups wouldn’t be able to fully succeed in such lawsuits, but just having standing as taxpayers to bring such suits could boggle up the entire mess. It’s at least something for Congress to consider fully.
Your arrogance is insulting
Maggie_in_Indiana (Diary) Wednesday, October 1st at 9:33AM EST (link)to say we here at redstate are uninformed and imply we are incapable of knowing what is at stake or what we need.
BTW: The house GOP as well as the Dems who voted down this monster bill both have an alternative bill that make more sense than what they voting on today in the Senate.
This Bail out is still an intrusion on what is suppose to be a free market. It’s the federal governments job to protect us from corruption on Wall Street and nothing more. This Bail out falls on our shoulders as taxpayers and just drives our nation deeper in debt.
If you want to be taken seriously on this try being cordial not condescending.
Maggie in Indiana
My biggest problem, Leon
Change Jar Conservative (Diary) Wednesday, October 1st at 9:35AM EST (link)is that there hasn’t seemed to have been a discussion of alternatives like the one listed above in the comments.
Jumping to a solution without analyzing the problem and looking at different ideas is the kind of thing that leads to a serious problem in just about any industry.
********
Formerly know as “Oz” in these parts
Why the Republican Party needs to compromise on gay marriage.
birdmojo (Diary) Wednesday, October 1st at 9:41AM EST (link)Hey, family values, right?
Strong families, right?
What do you mean that you have beliefs about the way the world works that directly contradicts the very premise of gay marriage?
I suspect that you just don’t understand the underlying dynamics.
(You could also do this for abortion, international interventionism, drug prohibition, you name it. The point is not whether reasonable people can disagree, it’s whether you are one of these reasonable people and whether you’re disagreeing reasonably or whether you are yet another of the people who just doesn’t understand what is REALLY going on here.)
Man is free at the moment he wishes to be. –Voltaire
Allright (fist bump) n/t
Maggie_in_Indiana (Diary) Wednesday, October 1st at 9:43AM EST (link)n/t
Maggie in Indiana
Disagree that we "need" the Paulson bailout
JSobieski (Diary) Wednesday, October 1st at 9:44AM EST (link)but agree that we need prompt government action.
Why is an insurance framework “not serious”?
Why are asset purchases the way to go instead of say, purely equity purchases? (not saying I agree with Soros, but if the government is going to intervene, isn’t the money multiplier higher for an equity investment than an asset purchase?)
If your attitude is that dems control the show so we should do what they want, then just say that and mean that across the board.
Flee Iraq–dems do control the Congress.
Raise taxes—dems do control the Congress
Commit to hard global warming caps—did I mention that dems control the Congress?
This idea that dem control means we shouldn’t even try to question a large controversial government intrusion into the economy is crazy.
Hey Leon, urgent crisis, you need to give me all of your money. Its urgent, its necessary, and if you don’t do it, the dems will just make you give it away to planned parenthood if you don’t give it to me.
My rules of the road for primary season.
Rule #1: Vote for YOUR first choice in the primaries
Rule #2: Vote for the R in the general.
Rule #3: Don’t let anyone convince you to violate Rule #1 or Rule #2
Rule #4: When in a center-right argument, reaffirm Rules #1-#3–it will help us all to get along better.
Rule #5: If you are using the language of the left, you probably aren’t furthering conservativism
Rule #6: The priority is issues first, candidates second, and supporters third. Nobody is bigger than the issues. Conversely, if you spend your time focusing on supporters, you are wasting everyone’s time.
STOP THE MADNESS!
A reduction in the rate of spending increases is NOT a cut!
In-state tuition for illegals is NOT amnesty!
Requiring someone to pay their medical bills is NOT an individual mandate!
Reducing tax rates is NOT a tax increase!
Hey, people are entitled to whatever knee-jerk reaction they want to have.
Leon H. Wolf (Diary) Wednesday, October 1st at 9:45AM EST (link)When that potentially interferes with my family’s ability to eat and have shelter, they should probably expect me to get a little snippy about it.
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We can’t stop here. This is bat country.
555555555555!
JSobieski (Diary) Wednesday, October 1st at 9:48AM EST (link)nt
My rules of the road for primary season.
Rule #1: Vote for YOUR first choice in the primaries
Rule #2: Vote for the R in the general.
Rule #3: Don’t let anyone convince you to violate Rule #1 or Rule #2
Rule #4: When in a center-right argument, reaffirm Rules #1-#3–it will help us all to get along better.
Rule #5: If you are using the language of the left, you probably aren’t furthering conservativism
Rule #6: The priority is issues first, candidates second, and supporters third. Nobody is bigger than the issues. Conversely, if you spend your time focusing on supporters, you are wasting everyone’s time.
STOP THE MADNESS!
A reduction in the rate of spending increases is NOT a cut!
In-state tuition for illegals is NOT amnesty!
Requiring someone to pay their medical bills is NOT an individual mandate!
Reducing tax rates is NOT a tax increase!
Treating people like this worked for the Iraq War, why isn't it working now?
birdmojo (Diary) Wednesday, October 1st at 9:49AM EST (link)Maybe you need to ask people if they honestly support your children starving.
It’s a yes or no question. Do you want my kids to starve to death?
Man is free at the moment he wishes to be. –Voltaire
My company issued CP just fine yesterday...
tempest Wednesday, October 1st at 9:49AM EST (link)The company I work for issued 1 Billion of CP without any problem yesterday at a reasonable rate and it was even the end of the month when companies have to meet payroll.
The sky might be grey, but it is not falling!
The Competent Government?
Granitestater Wednesday, October 1st at 9:50AM EST (link)Let me get this straight. You want me to trust congress and the regulatory agencies that were asleep at the wheel and didn’t see any of this mess?
You want me to trust the same people that got it wrong to now all of a sudden get it right and be able to handle this crisis without Washington making it even worse?
Leon, if you want to persuade people, you will need to stop insulting them
JSobieski (Diary) Wednesday, October 1st at 9:50AM EST (link)To insinuate that most of the opposition to Paulson plan is “knee-jerk” is not accurate, and is the kind of thing one would expect from a liberal, not a Redstater.
My rules of the road for primary season.
Rule #1: Vote for YOUR first choice in the primaries
Rule #2: Vote for the R in the general.
Rule #3: Don’t let anyone convince you to violate Rule #1 or Rule #2
Rule #4: When in a center-right argument, reaffirm Rules #1-#3–it will help us all to get along better.
Rule #5: If you are using the language of the left, you probably aren’t furthering conservativism
Rule #6: The priority is issues first, candidates second, and supporters third. Nobody is bigger than the issues. Conversely, if you spend your time focusing on supporters, you are wasting everyone’s time.
STOP THE MADNESS!
A reduction in the rate of spending increases is NOT a cut!
In-state tuition for illegals is NOT amnesty!
Requiring someone to pay their medical bills is NOT an individual mandate!
Reducing tax rates is NOT a tax increase!
You'll tie *any* topic to sodomites (nt)
Neil Stevens (Diary) Wednesday, October 1st at 9:52AM EST (link)RS contributing editor, technical administrator, and “a hardy variety of crabgrass.”
Read the RedState Posting Rules
Unlikely Voter: Poll Analysis, Election Projection.
“I rejoice that America has resisted.” – William Pitt, the Elder
No defense for House GOP
John E. (Diary) Wednesday, October 1st at 9:55AM EST (link)Recapitalization through warrants to the government is a serious plan. One can examine how this kind of thing worked in Chile. And it avoids the severe hazard of introducing government into the management of mortgage assets. The House Republican’s aren’t offering this as the alternative are they, so this cannot defend them from Leon’s silver hammer.
The commercial paper market
olsmithie (Diary) Wednesday, October 1st at 9:55AM EST (link)Reading your section “1″ and “2″ above ,regarding the structure of the commercial paper market,which appears to me quite accurate, reminds me succinctly of a house of cards, built in the den by small children on a rainy Sunday afternoon.
Regards
Respectfully Disagree
Mike Friesen (Diary) Wednesday, October 1st at 9:57AM EST (link)Sir,
You may be right about some of your economic points but nationalizing more and more of our economy will only serve to move us toward socialism and set the stage for another bailout need at some point in the future. I would rather take my lumps now than force it on my kids. I also think you sell Americans short in some of your assumptions. Government needs to get out of the way not just prolong our pain. Why would I trust those who created this mess to fix it?
Very respectfully,
Mike
Best regards,
Michael
Well, I want Paulson fired.
c17wife (Diary) Wednesday, October 1st at 9:59AM EST (link)And so do a bunch of other people. So the possibility is there.
Leon, attacking Thad McCotter for standing up to this BS is not very becoming. Nor is attacking anyone that disagrees with you.
My last word on this. You can have the final if you wish.
Duty is ours, outcomes belong to God.~Mike Pence
Well, I want Paulson fired.
c17wife (Diary) Wednesday, October 1st at 10:00AM EST (link)And so do a bunch of other people. So the possibility is there.
Leon, attacking Thad McCotter for standing up to this BS is not very becoming. Nor is attacking anyone that disagrees with you.
My last word on this. You can have the final if you wish.
Duty is ours, outcomes belong to God.~Mike Pence
This is one time
slckid Wednesday, October 1st at 10:03AM EST (link)That I wish the congress would actually pass a bill that only addresses the issue at hand, instead of attaching already passed bills and directions as to where money that we might not even receive should be spent. However, I’m unfortunately informed enough to know that it won’t happen.
Hank Paulson has made a living as an investor. It’s what he knows best. So it’s understandable that he sees a once-in-a-lifetime opportunity here to buy a product for far less than face value. It would be a home run deal if not for one thing – the price of energy. The price of energy is the fungus growing under the surface of our sickening economy. As stated elsewhere, they’re projecting a huge number of defaults next year and it’s not all because of people who bought more house than they could afford. It’s because our necessary expenses are rising far faster than our incomes, and it’s not going to improve over the course of the next couple of years.
Here in PA, our electricity rates are about to go up anywhere between 30-60 percent next year because of rate caps that are set to expire. We’re in for a world of hurt, and the US Government is going to be the one left holding the bag. I personally believe that the stronger definition for the mark-to-market rules will help stabilize the situation enough for the short term to allow more capitalism-driven buyouts to occur, hopefully in the mold of the Goldman-Sachs deal.
Sodomites? No. You just don't understand the underlying dynamics.
birdmojo (Diary) Wednesday, October 1st at 10:04AM EST (link)It’s about the limitations of government power.
The question comes down to: Do you think that the federal government should have the power to put its nose into who my church is or is not allowed to have stand in front of the altar?
It’s a yes/no question. Do you think the Federal Government should be able to order my pastor around?
Man is free at the moment he wishes to be. –Voltaire
Have it Both Ways?
jimmuy8 (Diary) Wednesday, October 1st at 10:04AM EST (link)You can’t say: “However, there is literally no case in which the government will shell out $700B for these securities and get nothing back.” And say that is a good thing while going on to say: “It will furthermore almost inevitably result in the government being on the hook for a lot more than $700B in risky assets.” And say that like it is a bad thing.
If having these assets at low cost now is good, having a bunch more later at even lower cost should be better, yes? Maybe we are just holding out for a better deal? If we take your approach now or the threatened,inevitable purchase later–we end up at the same spot, don’t we? Massive government ownership of formerly private assets. Yay. So, we’ve established the prostitute, we’re just haggling over the price.
And this is just silly: “a group of allegedly serious people are throwing snits because of speeches they didn’t like, throwing snits because their precious Congressional sensibilities have been offended . . .” You know darn well that’s not why they voted against it–that speech by Pelosi was a massive “fire all guns” broadside to the Republicans that the Democrats were not even going to wait until it passed to blame the problems on the Republicans, not even going to wait to see if the proposal failed or succeeded before they were going to blame the Republicans–let them know that no matter what, it was their fault. Why sell rope to them that intend to hang you, why sell gunpowder to them who have you in their sights? “Oh, but they should be adults, be “serious” regardless.”
No, this is politics, they brought a knife–you don’t turn the other cheek.
My kids...
enrique Wednesday, October 1st at 10:12AM EST (link)might like to live in a free country when they grow up as well. Perhaps handing over the keys of the financial industry to government fiat isn’t a good idea. There’s no guarantee that ‘our guy’ will control it in the future.
The risk of letting the government control things is far greater than the risk of a great depression where I know at the end I may still be free with my finances. With this centralization of power I *know *I will be less free with more and more federal involvement to ‘save’ future industries until they control or have an ‘interest’ in everything.
“There are a thousand hacking at the branches of evil to one striking at the root.” Henry David Thoreau
People don't seem to understand
kowalski (Diary) Wednesday, October 1st at 10:13AM EST (link)At the risk of seeming condescending, people don’t seem to grasp the really serious downside risk of doing nothing and allowing the banks to fail and the markets to tank.
If anything, what this legislation represents is the American people bailing themselves out.
If anyone thinks things are bad right now, when a few million more people get thrown out of work because they will lose their incomes. Where will they go? What will they do?
They will apply for welfare and unemployment benefits. They will file for bankruptcy. They will not be able to pay their mortgages, their car loans, their electric bills, their grocery bills, their insurance premiums, and all of their other debt obligations.
Give it a few more weeks and absent a plan to shore up the financial sector, there isn’t going to be anyone to sell anything to, because millions of people on Main Street will get pink slips. That’s the death spiral, folks.
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Thats not what we're saying.
Waderic Wednesday, October 1st at 10:30AM EST (link)Although there probably are a few exceptions, I don’t think many people who are opposing this Paulson plan are saying “Do Nothing!” They are saying, we don’t like this plan! Give us something else!
We are being told that the sky is falling and this is the only way to prop it up. We’re not falling for it. There are alternatives that would still require gov’t intervention, just not buying up all the bad mortgages.
It's a pity that so many Americans have learned to rely on The State.
birdmojo (Diary) Wednesday, October 1st at 10:32AM EST (link)Or The Corporation, acting as a mini-State, providing money and, eventually, pension.
What’s the best way to change this vector (because, I assure you, you will NOT like where it ends up)?
I submit: It relies elsewhere than reliance upon the government to save us.
Man is free at the moment he wishes to be. –Voltaire
Just a Historical Reference Point
wolfgang Wednesday, October 1st at 10:36AM EST (link)In November, 1932, after he had lost the election to FDR, aware of the long interim period before FDR would be sworn in as president in March 1933, lame duck President Hoover appealed to the president elect for a joint, cooperative effort in saving the multitude of the nation’s banks poised at the edge of failure.
Roosevelt turned his nose up and his back to Hoover’s suggestion, preferring to allow the banks to fail on Hoover’s watch and to come in and clean up the pieces. Hundreds of banks subsequently
did.
They printed scrip in Salt Lake City afterward, because there was no money to be had. Barter became a way of economic life across the nation. A normal two to three year economic downturn stretched out to the eleven year Great Depression.
Strange things happen when large amounts of wealth dissappear from national economies.
I thought everything will suck on Fri.?....we have a few weeks now?...Cool
speciallist (Diary) Wednesday, October 1st at 10:37AM EST (link)lol
Death Of Fiscal Conservativism
BigGator5 (Diary) Wednesday, October 1st at 10:39AM EST (link)Wolf, I want you to write a front page article announcing the death of fiscal conservativism and all those who hold it dear is right now completely wrong for believing in a dead philosophy.
If you can do that and convice me that you actually believe what you are writing, then (and only then) will I sign onto this bailout. I will also apologize in my own article.
Educated (About The Issues Facing Us Today), Dedicated (To Making A Difference), And Highly Motivated (To Getting Things Done)
I'm not joining in your obsession with sodomites (nt)
Neil Stevens (Diary) Wednesday, October 1st at 10:46AM EST (link)RS contributing editor, technical administrator, and “a hardy variety of crabgrass.”
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“I rejoice that America has resisted.” – William Pitt, the Elder
No, Maggie. You have it somewhat backwards.
Nick Haynes (Diary) Wednesday, October 1st at 10:46AM EST (link)First of all: Honestly, do you think any serious person here wants to see the government sink billions of dollars into this project? No. When it comes down to principle, most RSer’s would want nothing to do with this.
But that is not the point. One of the key reasons we had the Great Depression is because, when faced with a crisis, Hoover relied exclusively on the invisible hand. While it works 99.9% of the time, there comes times when crises arise and something must be done. There are other alternatives to the bailout that Congress just rejected. The Chilean alternative that someone mentioned downthread has some possibilities.
However, the Republican alternative is “cut taxes.” Excuse me-cut taxes? Saying that a tax cut will work in this situation is like telling me that the solution to my fears of buying a Volvo because I don’t think it will work is to give me a pay increase. The reason for me not buying a Volvo is not because I don’t have enough money-it’s because I don’t think it will work. In a similar vein, the current meltdown of the markets is not because people don’t have enough money to sink into it-it’s because they’re fearful that the securities will not make money for them. Furthermore, Leon’s right when he says that the Republican alternative is not serious, because there is no way on God’s green earth that they would get 218 votes in the House or 51 votes in the Senate. Even if they did, it wouldn’t solve the crisis. People would have more money to sink into buying the Volvo, but they are worried about the value and ability of the Volvo.
If the Republicans were serious, they would take out the bells and whistles the Dems tried to propose, and come up with a solution that leaves the U.S. Treasury in a better place in a few years, and also propose a side bill to protect against the problems that got us here in the first place. But they don’t seem to want to do that, because that would be too much work and the majority of the American people wouldn’t understand what the government is doing anyways and, besides, they’ve got elections to go win and saving the economy might risk their employment, and why would they do something silly like their jobs?
I’m lucky in my current situation-I don’t have any investments other than an IRA, I rent my home, I’m a student attending college on the GI Bill, and I’m a state government employee in a fairly secure position. But I know economics pretty well (it’s one of my minors), and as much as the bailout that got shot down was a poop sandwich, the Republican alternative is a 5-course meal of poop, with a nice glass of sparkling poop to wash it down with.
Leon’s arrogance is insulting? No, ma’am, no-the ignorance (not stupidity-there is a difference) of much of the American populace is insulting. There is a crisis, and with that in mind, the vast majority of citizens and lawmakers want to sit around on their hands and give a “Who, me?” look to the crisis. That, ma’am, is insulting.
If you’re not networking, you’re not helping.
c17wife-Normally, I agree with you.
Nick Haynes (Diary) Wednesday, October 1st at 10:51AM EST (link)But Leon has a point. McCotter is standing up to this because ‘he doesn’t want to take on all the spending and debt.’ Funny how McCotter didn’t seem to have a problem with loading up the federal budget with Medicare supplements and other such goodies. Leon is right on this-this is an awfully funny time for McCotter to finally grow a pair and realize that we spend too much money.
Look-if it was Jeb Hensarling or Jeff Flake or Tom Coburn calling for Paulson to step down, that would be one thing. That ain’t the case, though. If Paulson should step down, then so should 95% of the Democratic caucus and at least 2/3-3/4 of the Republican caucus. In fact, they should step down before Paulson does-they bear more responsibility than Paulson, IMHO.
If you’re not networking, you’re not helping.
BAILING OUT CREATED PERCEPTION
PacificGatePost Wednesday, October 1st at 10:52AM EST (link)The perception has been set. The world awaits a promised bailout. Are American taxpayers more knowledgeable than the White House, McCain and Obama?
Or are they suddenly just less susceptible to bad PR?
http://pacificgatepost.blogspot.com/2008/09/bailout-of-perception.html
It sure looks like it.
You are wrong. The securities are almost worthless. That is a fact.
asleep06 (Diary) Wednesday, October 1st at 10:53AM EST (link)Leon, Leon, Leon. The pressures of this economic downturn have gone to your head. You actually think opponents of the bailout don’t understand what’s going on, when clearly your Fear (understandable, certainly) has clouded your judgment.
I will make one point, and one point only: The mortgage-backed securities are in fact almost worthless.
You cite McArdle, but offer no evidence, logic or links. I think it is because no one can actually bring it, though they so WISH it were true.
This is why mortgage-backed securities are almost worthless:
Mortgage-backed securities are backed (given value) by mortgages. Whether mortgages default or not critically depends on… the housing market.
If the housing market goes down the toilet, mortgages default more and more, and the securities those mortgages are backing lose their value.
Well guess what? The housing market IS going down the toilet, and Moody’s projects it will continue to do so till at least 2010.
What’s more important to note is that the decline in housing prices is NOT due to panic. It is a true market correction because housing prices have been over-inflated due to the housing policy of the US in the past 30 years.
Your entire “the securities are worth a lot!” assertion depends on the assumption that the market is acting irrationally due to fear rather than a correct apprehension of the housing market, that irrationality is why the securities are being valued so low on the market rather than rationality.
But the market is acting rationally. The housing market will continue-CORRECTLY-to decline for years. “The U.S. mortgage market is estimated at $12 trillion[16] with approximately 9.2% of loans either delinquent or in foreclosure through August 2008,” which is an increase from just 1% in 2007. 9.2% might not sound like a lot, but each mortgage default destroys the returns on multiple good mortgages due to bank having to be forced to liquidate the house in a sinking market. And that 9.2% will continue to rise.
What does the rising delinquency and default rate of mortgages mean for securities they’re supposed to be backing? It means that they are truly worth almost nothing long-term.
Yesterday, I found this link on National Review’s website that is an economic analysis of the actual value of these securities by a third-party. His conclusion? Take a wild guess.
The value of the put options on which the US banking system is short would then be above $900 billion, and the total losses on all US mortgages could amount to over $2 thousand billion. If expectations of future house price declines are now appropriate, the value of all the securities built on sub prime mortgages might be close to zero.
Small is beautiful.
The great thing about it being possible for reasonable people to disagree...
birdmojo (Diary) Wednesday, October 1st at 10:53AM EST (link)Is that reasonable people can disagree over which side is obsessed with sodomy.
Man is free at the moment he wishes to be. –Voltaire
alaskaescapeartist: What would be your solution, then? -nt-
Nick Haynes (Diary) Wednesday, October 1st at 10:54AM EST (link)-nt-
If you’re not networking, you’re not helping.
He's not calling every opposition knee-jerk.
Nick Haynes (Diary) Wednesday, October 1st at 10:58AM EST (link)What he was being critical of is that the only alternative proposed by anyone, R or D, is to basically offer tax cuts and hope that the market completely corrects itself absent any confidence in the market.
The Paulson plan ain’t pretty, but unfortunately, it’s better than the ones being offered up by our esteemed Congresscritters.
If you’re not networking, you’re not helping.
Forgot the link for the 9.2% delinquency and default rate:
asleep06 (Diary) Wednesday, October 1st at 11:02AM EST (link)But the market is acting rationally. The housing market will continue-CORRECTLY-to decline for years. That is why:
“The U.S. mortgage market is estimated at $12 trillion[16] with approximately 9.2% of loans either delinquent or in foreclosure through August 2008,” which is an increase from just 1% in 2007. 9.2% might not sound like a lot, but each mortgage default destroys the returns on multiple good mortgages due to bank having to be forced to liquidate the house in a sinking market. And that 9.2% will continue to rise.
Small is beautiful.
I guess so
kowalski (Diary) Wednesday, October 1st at 11:14AM EST (link)But the alternative to working for the government or a large corporation is to try and start your own business as I am doing.
Ok, that’s great. Be an entrepreneur. Who do you sell your products and services to? You sell them to corporations and to the government, and to individuals who work at corporations and for the government. If you put millions of them out of work, who do you advertise to? Who do you take to lunch to pitch your products and services to?
It’s a rhetorical question but every entrepreneur knows that they rely on the fundamental health of the economy just to do business. Let’s say you are a small-town guy who sells boats to vacationers, or a convenience-store owner who relies on the floor traffic from people passing by on the Interstate. Or the chiropractor who works out her home, helping contractors who have bad knees feel a little better. Or the flamboyant guy who likes Judy Garland who enjoys styling people’s hair so they can look good while they drive to work.
All of those people, all independent to a greater or lesser extent, are going to suffer if millions of people get pink slips at their Big Corporate / Chain Corporate / Corporate Corporate / Government Corporate / Government Government jobs. It will be a cascade of woe, an avalanche, not a gradual erosion.
There are some people who seem to like the idea of an avalanche for reasons that I just don’t understand. They seem to get a kind of sadistic thrill when they think about so many millions of people’s livelihoods being thrown into chaos. But I don’t, I’m not a sicko.
So we’re going to grumble about the political details of this plan as we should, but something is going to get passed. Or history will write that the American people hated themselves so much that they all decided to be destitute together. Let’s hope it doesn’t happen.
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Yup
Neil Stevens (Diary) Wednesday, October 1st at 11:21AM EST (link)And I think reasonable people will say the person who brings them up in any conceivable thread is the one obsessed with them.
But you can have the last word after this.
RS contributing editor, technical administrator, and “a hardy variety of crabgrass.”
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“I rejoice that America has resisted.” – William Pitt, the Elder
I belive
Xraxnd_Caracarn Wednesday, October 1st at 11:21AM EST (link)The paper he was talking about is the NBS’s themselves. From which folks have speculated that the government might make 1 trillion.
But I dont want the government to make that money just to pee it away either directly retire the national debt or hard fund SS. And this bill is less effective.
So I have thanked Jeff for voting no and asked him to continue doing so until there is a good bill.
Tougher times than this
Maggie_in_Indiana (Diary) Wednesday, October 1st at 11:25AM EST (link)is not just a saying we all use to pull us up from a bad situation. It’s true. WW11 comes to mind.
We knew when we went in our population was going to be hurt monetarily. We knew thousands would be killed. We knew family businesses would go under.We knew the government would incur debt. We knew recession was possible. We knew our country and it’s people would be devastated in so many areas and we went any way. There are things in this world and in our country worth fighting for and giving everything for.
What happened to that feeling and loyalty.
We knew life would never be the same. Right it wasn’t. IT Got Better. We grew. We prospered. We came back bigger and better than before. That was war and all the horrible consequences that came with it.
We are talking about MAYBE losing houses,having to find another job. Huge corporations crumbling,to make way for 2 smaller to rise and succeed. You get my point. This is how I see it. It may seem simplistic but why does government come in make everything so complicated?
Because like this bail out ,we let them. It has to stop!
Maggie in Indiana
Tougher times than this
Maggie_in_Indiana (Diary) Wednesday, October 1st at 11:27AM EST (link)is not just a saying we all use to pull us up from a bad situation. It’s true. WW11 comes to mind.
We knew when we went in our population was going to be hurt monetarily. We knew thousands would be killed. We knew family businesses would go under.We knew the government would incur debt. We knew recession was possible. We knew our country and it’s people would be devastated in so many areas and we went any way. There are things in this world and in our country worth fighting for and giving everything for.
What happened to that feeling and loyalty.
We knew life would never be the same. Right it wasn’t. IT Got Better. We grew. We prospered. We came back bigger and better than before. That was war and all the horrible consequences that came with it.
We are talking about MAYBE losing houses,having to find another job. Huge corporations crumbling,to make way for 2 smaller to rise and succeed. You get my point. This is how I see it. It may seem simplistic but why does government come in make everything so complicated?
Because like this bail out ,we let them. It has to stop!
Maggie in Indiana
Leon is right, here is an example.
WmCraig Wednesday, October 1st at 11:30AM EST (link)I don’t like the package. It is a socialist grab for control – flat out. Makes you think Nancy Pelosi and company planned the whole collapse. THAT SAID – Leon is RIGHT. *The republicans are being Hooveresque in their stand. *
Sixty days ago I HAD a client that represented a substantial portion of my business’ revenue. They are an international professional service firm. One of their big clients was located in a country invaded by Russia. This put a dink in their cash flow. Professional service companies live on lines of credit. They spend lots of money producing billable work, sending out invoices, then waiting to get paid. Designing something being constructed takes lots of high paid hours put in before any payments are made. Weekly payrolls, benefits, etc. all out of pocket before you can bill for the services. Bill and then wait to collect.
So the invasion was going to cause a bump in that process, and they went to their bank for a boost in their credit line to handle it. The bank not only told them no to an increase, but that they were being forced to reduce the existing credit line to the balance outstanding because of market conditions.
Suddenly the money that thought they had to pay payrolls and expenses until collections were received had vanished. Well, my contract was terminated immediately, and they started reducing staff. They have no choice. With credit tight, the principles are finding it difficult to borrow the money they need to sustain cash flow.
That bank, by the way was one of the largest in the nation and was forced to sell it’s banking operations to another company earlier this week.
Now so far this is history, facts. But here is some speculation.
The principles of the company are being forced to sell off liquid assets to meet their on cash flow requirements.
They are going to stop doing certain speculative work until they get the cash flow problem resolved. Speculative work is how they generate new business. It is expensive, paying people to create ideas to sell to clients, and only some will result in a contract win. This speculative work accounts for about half their payroll. About half their employees will not be needed.
Even in a good year contract wins don’t start generating revenue for six to eighteen months. Cutting out speculative work means they are going to be faced with a shortage of new business to grow back on for the next couple years.
Some of the contracts they signed over the last two years will be delayed or never move forward to the next phase of construction. This means additional lost revenue and additional staffing cuts.
The laid off employees are going to be selling liquid assets to get through their own cash flow problem, because, the market for their services has dried up. Without money for new construction, there isn’t a big demand to add lots of expensive project planners, engineers and designers.
You can do the math.
- Selling liquid assets under duress, means a continuation of the downward pressure on the markets.
- People out of work don’t make new purchases, cut expenses and that reduces income for everyone else.
- Those hurt at my former client will by young people, most within five years of college graduation. They have mortgages, college loans to pay off and only tiny investment portfolios. Portfolios they are going to be forced to liquidate under pressure.
In sixty days a small corner of the American economy has collapsed and could disappear. Sure, it is a small corner, my business, my former client’s business, and the hardship their most vulnerable employees face. But I doubt they are alone. They just got started a few weeks earlier because of the invasion of Georgia.
Without liquidity these events are likely to become more common, and spread like a virus. A virus is a small thing too, but a bad one will kill the host.
Nick....us dumb rubes are all just so ignorant...
Attack Mode (Diary) Wednesday, October 1st at 11:30AM EST (link)Yet you are the one who insists that the House GOP’s economic rescue plan only amounts to tax cuts. This is not true. The plan also calls for changes in the mark to market accounting rules, which if I understand correctly is one of the root causes by requiring the devaluation of what should, as long term investment, be higher. It is also my understanding that if the corp and capital gains taxes were to be suspended that it would encourage the flow of credit by providing sufficient incentive to cover the known risk. I will concede that I do not understand the insurance part or whether that would actually be practical, but I disagree with your premise that we are ignorant. We are not ignorant, we just have a different perspective.
“Land of the Free and Home of da Whopper” Peter Griffin…Family Guy
conform and celebrate diversity….or else!!!
Steel-Belted Radial Right Winger
“I’ll create 5 million jobs from out of unicorn farts and pixie dust” Justatron paraphrasing Obamessiah…yes I love it that much.
And we see where "reasonable people can disagree" really means...
birdmojo (Diary) Wednesday, October 1st at 11:31AM EST (link)“I’m only showing respect because I’m currently in the minority but the second I get that 12th Democratic vote, I’m going to tell everyone that you actually hate the country, you get a sick thrill at the thought of people being unable to eat, and that you hate yourself.”
“Additionally, if my plan that you disagree with doesn’t work, I’m going to point out that it would have worked had we installed it a week earlier.”
Man is free at the moment he wishes to be. –Voltaire
And I say these things
kowalski (Diary) Wednesday, October 1st at 11:37AM EST (link)Because in the past year I’ve done work for everything from some of the largest companies in the world to some of the smallest — from macro. to microbusinesses, giant insurance conglomerates to, literally, a town hair salon trying to get new customers, and also for non-profit organizations trying to solicit donations, like a Policemen’s Benevolent Association or a First Aid Squad.
The large companies pulled back last November. The smaller companies are still in the process of pulling back, and the microbusinesses are simply going to get washed away if the economy tanks.
So will I.
Failures of this magnitude will affect everyone and they will hurt everyone, to a greater or lesser extent. The biggest moral hazard we face right now is letting Congress adjourn before something is done to prevent it.
Two days ago Rush Limbaugh said something that I profoundly disagree with: he told his listeners that they shouldn’t care about the stock market. I don’t know why he said it, because he advertises products on his show all the time that people aren’t going to be able to afford if they’re unemployed. Nobody is going to be buying a Sleepnumber bed or a nice cut of beef if they can’t afford their electricity bills. I can only conclude that he’s doing it because he’s boxed himself in rhetorically.
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There are other points on the continuum
MikeO Wednesday, October 1st at 11:38AM EST (link)I dread rather than take delight in the prospect of the impending collapse, but I am pretty sure it is coming—bailout bill or no.
I dread it, but I prepare to take advantage of opportunities that may arise.
Boy are you wrong!
jrettin08 Wednesday, October 1st at 11:46AM EST (link)We need to stop the bailout. This is an incredibly slippery slope as other posters have pointed out.
Watch this video and get it on the cable news outlets!
Stop the Bailout!
This is Steve Wynn's Plan
Waderic Wednesday, October 1st at 11:48AM EST (link)Steve Wynn’s Plan
I know i might be politically naiive, but where are the objections to this plan, other than within the mortgage companies??
If we would suspend Mark-to-Market and implement this plan, I think we would not only have injected liquidity into the system, but also fixed the real problem underneath it all.
The Last Word.
birdmojo (Diary) Wednesday, October 1st at 12:13PM EST (link)I’d better make it a good one, then!
It’s an issue of why the fiscal conservatives are feeling less than at home in the Republican Party. They seem to be hearing the following message:
It’s never possible for people to think that government should be limited in this area or that one without them being disrespectful of the people who believe things deeply.
A deep belief in Human Liberty is treated as something quaint. Something Jefferson might have believed in. You know… all those dead white men. The slaveowners. Those guys. A deep belief in the limits of government power and in unenumerated rights of The People is seen as nigh-anarchistic. Quaint at best, subversive and libertine at worst.
The deep belief in the need for the government to enact laws that reflect the writers’ knowledge of The Mind Of God is seen as something that everyone needs to have respect for… which is fine, I suppose, as far as it goes.
But the deep belief in the beliefs of the Fathers of our Country is seen as, well, something about which reasonable people can disagree.
Man is free at the moment he wishes to be. –Voltaire
I'm just an average Joe,
persiflage Wednesday, October 1st at 12:26PM EST (link)but it seems to me that the proposed purchase of several hundred billions worth of damaged financial assets by the government could work to create a market and help establish a price range. This plan would only become a “bailout” if the government systematically overpays for the assets, or systematically resells them for too little. Or both. Am I off base with this simplistic analysis?
“A republic, if you can keep it…” – B. Franklin
That's all well and good for the future.
Nick Haynes (Diary) Wednesday, October 1st at 12:27PM EST (link)And I hope that some of those proposals, including the mark to market and the insurance proposal (modified some from its current proposed form), become part of the final bill. But that does diddly for our current crisis. That’s like calling for reinforced steel and non-burnable materials for construction in a building that’s on fire, but not calling the fire department to try and stop the fire.
And, as far as the capital gains taxes, it’s not because people don’t have enough money to spend on it-it’s because businesses are going under, investors are panicking, and with the collapses of Lehman Bros., AIG and what not, there are no firms that are large enough and willing to take on all these securities and assets.
Wolfgang summed it up nicely down below.. The inaction of officials in the 1930′s was what led the Great Depression to being a decade-long event, rather than an normal cycle of a national economy. They tackled everything except what actually caused the darn thing, and attempted to fix everything except the darn thing. And that’s what the GOP alternative is, sad to say. It’s reinforcing the structure on a burning building without calling the fire department to put out the blaze.
We can stand on philosophy or politics or whatever all day long. We can pontificate about the government’s role in the market. We can do all we want to, but if we fail to act in a way to solve the current mess rather than prevent it in the future (which needs to be done, but not at the expense of the present), then we will have a chance to experience the first reason why my grandparents were known as the Greatest Generation.
I, for one, would like to avoid that fate. At least Paulson’s got the right aim. Even if it’s just a Supersoaker being shot at the flames, at least he’s trying to put out the fire.
If you’re not networking, you’re not helping.
And to pull a Kowalski...
Nick Haynes (Diary) Wednesday, October 1st at 12:34PM EST (link)Yes, it is ignorance on the part of many people-not necessarily you, but many people. Ignorance, in its root definition, is simply a lack of knowledge, and not stupidity as many people use the word. And that’s not necessarily meant to be an insult.
But when people take a Pollyannish view of things, such as the poster I responded to:
…well, it drives me up the wall. She’s essentially calling for a laissez-faire market when we’ve never had one, never will have one, and never should have one. At the risk of assumption, she seems to have a distorted or ignorant view of the history of our economy and of free-market philosophy.
A market doesn’t have to be a completely utopian laissez-faire market in order to be a free market. The essentials of the bill are that the government takes the securities and eventually sells them off-in essence, that the government becomes an investor. Maybe not the best way to do it, but it doesn’t portend a slippery road to socialism as long as the government sells them off in the future.
If you’re not networking, you’re not helping.
It is not unreasonable to think of the Paulson plan as chemo treatment for the skin cancer
JSobieski (Diary) Wednesday, October 1st at 12:44PM EST (link)after the patient begins to suffer from a stroke.
My rules of the road for primary season.
Rule #1: Vote for YOUR first choice in the primaries
Rule #2: Vote for the R in the general.
Rule #3: Don’t let anyone convince you to violate Rule #1 or Rule #2
Rule #4: When in a center-right argument, reaffirm Rules #1-#3–it will help us all to get along better.
Rule #5: If you are using the language of the left, you probably aren’t furthering conservativism
Rule #6: The priority is issues first, candidates second, and supporters third. Nobody is bigger than the issues. Conversely, if you spend your time focusing on supporters, you are wasting everyone’s time.
STOP THE MADNESS!
A reduction in the rate of spending increases is NOT a cut!
In-state tuition for illegals is NOT amnesty!
Requiring someone to pay their medical bills is NOT an individual mandate!
Reducing tax rates is NOT a tax increase!
It is not unreasonable to think of the Paulson plan as chemo treatment for the skin cancer
JSobieski (Diary) Wednesday, October 1st at 12:45PM EST (link)after the patient begins to suffer from a stroke.
My rules of the road for primary season.
Rule #1: Vote for YOUR first choice in the primaries
Rule #2: Vote for the R in the general.
Rule #3: Don’t let anyone convince you to violate Rule #1 or Rule #2
Rule #4: When in a center-right argument, reaffirm Rules #1-#3–it will help us all to get along better.
Rule #5: If you are using the language of the left, you probably aren’t furthering conservativism
Rule #6: The priority is issues first, candidates second, and supporters third. Nobody is bigger than the issues. Conversely, if you spend your time focusing on supporters, you are wasting everyone’s time.
STOP THE MADNESS!
A reduction in the rate of spending increases is NOT a cut!
In-state tuition for illegals is NOT amnesty!
Requiring someone to pay their medical bills is NOT an individual mandate!
Reducing tax rates is NOT a tax increase!
Nick...I would still disagree...
Attack Mode (Diary) Wednesday, October 1st at 12:51PM EST (link)First, let me say that my original comment was less about the proposal and more about your tone. You purposefully left out information and inferred that the supporters of that proposal were ignorant. The was low class and you should apologize.
Second, even the Paulson plan in its 3 page form didn’t address the ROOT CAUSES of the issue. Instead of thinking of it as a house on fire think of it as a forest fire in California with the Santa Anna winds blowing. First the hills got struck by lightning and started a fire in the underbrush. That fire was put out, but calls to remove the underbrush were ignored. Another 4 lightning strikes occur and all the underbrush is set ablaze. So yes we need to put out the fire but maybe this time we can clear the underbrush out as well. The question is now what is the best way. Any bill that doesn’t address mark to market is worthless , unless you want to go through this whole ordeal again in another 4-8 months.
Third, I would argue that if the corp and capital gains were cut investor would arise because the potential ROI would immediately be greater, this would mitigate the risk associated with the toxic paper. This in conjunction with the repeal of mark to market would in fact get credit flowing again. Part of the reason the paper is toxic is because it’s valuation is skewed by the short term view of mark to market. With a realistic (3 year rolling average) valuation and freed up capital staying in the hands of investors there is more incentive to invest.
Fourth, it is also my understanding that Sarbanes Oxley regulates how much credit can be extended based upon the valuation of assets held, 40% I believe. If this was modify temporarily to be a higher percentage, in conjunction with everything mentioned above, say 55% we would see stabilization of the credit market and availability quickly and without putting the government in the business of choosing an “investment” opportunity for the tax payers without those same tax payers consent. Now I know that it is “actual” tax payer money that is being used, but as long as this ends up on our balance sheets it will cause inflation, effectively making our dollars worth less. This has the same effect as taking the money directly from the taxpayer.
“Land of the Free and Home of da Whopper” Peter Griffin…Family Guy
conform and celebrate diversity….or else!!!
Steel-Belted Radial Right Winger
“I’ll create 5 million jobs from out of unicorn farts and pixie dust” Justatron paraphrasing Obamessiah…yes I love it that much.
It's not just simplistic, Maggie.
Nick Haynes (Diary) Wednesday, October 1st at 12:55PM EST (link)It’s Pollyannish. You are right in saying we were bigger and better after World War II. But that was what saved us from the Great Depression.
What caused the Depression? Well, after the stock markets crashed, it was a complete and utter failure of the government to act and help the companies keep from going under. When the corporations went under, that led to the mom and pop’s going under. That led to thousands of jobs lost, and an unending run of bad times for over a decade. Why? Because the wealth that economies have to have in order to sustain themselves vanished. The government provided all these jobs, and built up all these programs to keep people from going under again, but they didn’t help because they didn’t address the root problem: the lack of wealth in the economy. World War II bailed us out of the Great Depression, so to speak, because it was a massive cash and monetary infusion into the marketplace.
Oh, and additionally, Republican inaction at that time led to 12 years of Roosevelt, and a Democrat Congress (except for a few years in the late 40′s and early 50′s) until 1994. The people who grew up during that time saw the inaction early on, and that still propagates the myth that the Democrats are the party of the working class.
In a ideal situation, we don’t have to see this happen. Unfortunately, this is not an ideal situation, and is actually eerily similar to the conditions that caused the Great Depression.
So here’s your choice, Maggie: we either sit on our hands and do nothing in the so-called name of principle, and maybe see our economy sink for the next 10 years, and maybe wave goodbye to Republican leadership for the rest of our lifetimes…or we try to find something to right the course of the ship.
Personally, I would prefer to have a job, a roof over my head, and money, as well as a mostly-conservative Congress that occasionally skips on principle to do the right thing and act in a time of crisis. But that’s just my view-your mileage may vary.
If you’re not networking, you’re not helping.
Nice literary license leon
Marcus_Traianus (Diary) Wednesday, October 1st at 1:01PM EST (link)Let’s make the rudimentary link; the money is being used to buy securities. Buy is the operative verb since the cash is being used to re-inflate their balance sheets for liquidity purposes. That’s just a point of fact and if presented any other way appears to masque fundamental purpose. Secondarily, but more importantly this money is being used to buy back all the bad loans Congress forced financial institutions to make, most of it through CRA and HUD fiats. So net-net this is actually a bailout of the government, funded by our money.
Now if you look at mortgage outstandings for subprime-Alt/a (I don’t have the number within reach) but they are safely over a trillion. There seems to be many numbers being thrown around with respect to the $700 billion and how far it will go. But depending on who is doing the valuation and, I would add, their motive, it is valued at par, current market or some extrapolation (I frankly find “market” price a bit specious). There is also some analysis which accounts for inflated values after the buy backs start. So, as Treasury said the $700 billion was a guess and so is any other divination that attempts to use future value as a measure of determining how far this goes.
This is hardly a “bailout” as Democrats seem fond of saying. It is more of what we call a guaranteed credit, sort of like one big CDS Democrats underwrote, being called. Do we have a choice? No, we really don’t at this point as liquidity is increasingly drying up each day.
By the way, I look forward to the Fire Mitch McConnell article, given all the nonsense he either put into or agreed upon in this Senate bill.
“Both of our political parties, at least the honest portion of them, agree conscientiously in the same object—the public good; but they differ essentially in what they deem the means of promoting that good. One side believes it best done by one composition of the governing powers; the other, by a different one. One fears most the ignorance of the people; the other, the selfishness of rulers independent of them. Which is right, time and experience will prove.”.Thomas Jefferson
If I had a solution...
alaskaescapeartist (Diary) Wednesday, October 1st at 1:10PM EST (link)… I wouldn’t be sitting here.
The premise of your question is flawed. The “bail-out” may not be any more of a solution than doing nothing, and it occurs at the expense of forever maligning the freemarket and many of the tenets (of those that still remain) of this country.
If the result of this is to clearly and unquestionably identify the catastrophic inside-the-beltway governance we have been treated to for the last 70 years, then financial chaos may actually be a reasonable price to pay.
I’m not being facetious or rhetorical. What the hell are we going to leave the next generation if this boondoggle bail-out is passed?
Even if all goes as is being sold to us in the form of the bail-out, the free market as we know it will be reduced to a ghostly memory.
There are already campaign ads playing in my area saying that the dumb old Republican “wanted to privatize my Social Security”. Well guess what folks… that little notion is now in the dumpster, and it’s only the tip of the iceberg.
If this is silly old “sensibility” as was described in the original post… then so be it.
I resent the notion that my principles must be suspended for this extraordinary circumstance. That does not define what a principle should be.
If we had principled elected officials (term limited), we would not be having this dreadful conversation.
And by the way, who is that started the notion on this thread that Hoover’s attempt to implement the “Invisible Hand” of economics was at the root of the Depression?
It will be easy to say that my response offers no solutions, but my response is just as valid as the legislation crafted by people whom are unqualified to lead, follow, serve on ANY corporate board, or have the audacity to tell me that they are going to bail me out.
Now I must get back to work, and I may have to work a helluva lot harder for the next few years, thanks to my esteemed representatives.
Maybe this is the revolution that Jefferson spoke of.
Valid points all...
Nick Haynes (Diary) Wednesday, October 1st at 1:11PM EST (link)and I agree. The bill does need to address the underbrush. But it’s hard to get to the underbrush if it’s on fire, which should be the main priority. The ideal bill will have both items addressed, but my beef is with people who want to clear the underbrush but not put out the forest fire. On your proposals, they make sense. But you still have the investor concerns, and compounded on top of that is Leon’s correct assertion that we are not in control of Congress, so putting something in there that essentially makes the whole bill look like nothing but tax cuts to the rich will fail. Sorry to say, but we squandered away our chance to be the ones to address the crisis, so it’s now our lot in life to try and show leadership in the minority. And, if they can’t propose something that has a reasonable shot of passing, then we look impotent and callous.
On my accusation that supporters of the proposal are ignorant: I know I wrote somewhere (maybe in my Kowalski post) that it wasn’t intended to be a all-persons statement, but rather an indictment of some people who aren’t knowledgeable of the situation. Either through purposefully ignoring the situation or not acquainting themselves with the situation, they are more insulting to me than someone who’s a little peeved-off because he sees the potential for our economy to go under and sees people giving an Alfred E. Neuman position.
So let me say this to you, Aaron, and individuals like you: my statements are not directed at you. It is clear you are paying attention, so if you took offense, I’m sorry. My statements/insults are directed towards those who have their heads in the sand, because that is more insulting (and endangering) to me than someone who might have woken up on the wrong side of the bed. I can get over a mean statement by cooking dinner for my girlfriend tonight, buying a videogame, and then sinking into my bed tonight. It’s a little harder to get over that stinging insult, though, if I don’t have the ability to afford food, games, or a bed or roof.
If you’re not networking, you’re not helping.
Let's Write a New Law
Gary Cook (Diary) Wednesday, October 1st at 1:16PM EST (link)While we’re at it maybe Congress should just write into law a provision to guarantee the existence and preservation of Moral Hazard.
Hell, they’re doing it now, so just make it law.
The error in your logic is that you think free men will use their liberty for good.
Vaughn Harold (Diary) Wednesday, October 1st at 1:24PM EST (link)I would ask the question then, why is our country in the position that it is currently in? “We the people” was given liberty, and what have we done with it? We have used it to both lord over others and pleasure ourselves. While limited government is a wonderful construct, it can only exist for a people who are willing to limit themselves first!
I would also add my appreciation for your very detailed description of the real root problem to which there is no human solution: mankind’s personal lust for power & pleasure!
And, therein, alaska, lies the problem
Nick Haynes (Diary) Wednesday, October 1st at 1:28PM EST (link)It’s a hell of a lot easier to identify a problem than to fix a problem. The bail-out, while in its current form is not a completely plausible solution, is miles ahead of doing nothing. There are reasonable points to be made for the bail-out, and there are reasonable points to be made for the Republican alternative. Absent a Republican majority, though, the Republican side will have a hard time getting in, and I would prefer to put out the fire and worry about the structure and underbrush later if push comes to shove.
I’m trying my best not to come off as insulting, so if any of this comes off as such to you, my apologies. Because I usually would find myself in complete agreement with you.
But we have a situation similar to the Great Depression. Hoover’s inaction, followed by Roosevelt’s political inaction leading up to his term and then his inaction on solving the major problem in the Depression (a lack of wealth in the market to sustain it) was what caused and continued the Depression. It took World War Friggin II (which was a massive infusion of cash by the government into the economy-sound familiar?) to get us out of the Depression. What are we going to leave the next generation? Well, if it sinks into a Depression-style era, I won’t have to worry about that because I won’t be able to afford kids.
On our elected officials, I can only concede the point. But, until we wise up and elect new ones, there’s bloody little we can do about it. So we can either hope that they’ll do the best they can, or we can try to force them to do nothing in the hopes that, maybe in 10 or 20 years, we’ll get back the Congress to clean up their mess.
Hoover’s invisible hand was one of the roots of the Depression. Had he actually done something, rather than nothing, it would have been a normal downturn rather than a cataclysmic event.
Do I want the bailout? No. Do I realize that it may be one of our only options? Yes. It sucks, but that’s the price you have to pay sometimes. Either we can stand on principle and watch our economy sink, or we can try to infuse those principles while enacting policies that keep us from having to go through what my grandparents experienced.
If you’re not networking, you’re not helping.
The Gods Of The Copybook Headings.
birdmojo (Diary) Wednesday, October 1st at 1:30PM EST (link)As I pass through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.
We were living in trees when they met us. They showed us each in turn
That Water would certainly wet us, as Fire would certainly burn:
But we found them lacking in Uplift, Vision and Breadth of Mind,
So we left them to teach the Gorillas while we followed the March of Mankind.
We moved as the Spirit listed. They never altered their pace,
Being neither cloud nor wind-borne like the Gods of the Market Place;
But they always caught up with our progress, and presently word would come
That a tribe had been wiped off its icefield, or the lights had gone out in Rome.
With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.
When the Cambrian measures were forming, They promised perpetual peace.
They swore, if we gave them our weapons, that the wars of the tribes would cease.
But when we disarmed They sold us and delivered us bound to our foe,
And the Gods of the Copybook Headings said: “Stick to the Devil you know.”
On the first Feminian Sandstones we were promised the Fuller Life
(Which started by loving our neighbour and ended by loving his wife)
Till our women had no more children and the men lost reason and faith,
And the Gods of the Copybook Headings said: “The Wages of Sin is Death.”
In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four—
And the Gods of the Copybook Headings limped up to explain it once more.
As it will be in the future, it was at the birth of Man—
There are only four things certain since Social Progress began:—
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!
Man is free at the moment he wishes to be. –Voltaire
Again...
birdmojo (Diary) Wednesday, October 1st at 1:34PM EST (link)My problem is not with what I suspect are the hidden assumptions behind this:
It seems to me that the hidden assumptions include stuff like “and that’s why you need to elect this guy” and “and that’s why we need to take away your right to free speech” and “and that’s why we don’t interpret the 2nd Amendment that way anymore.”
Man is free at the moment he wishes to be. –Voltaire
Important stuff left off.
birdmojo (Diary) Wednesday, October 1st at 1:58PM EST (link)That’s Rudyard Kipling, sorry I didn’t attribute that to him. It’s public domain.
Man is free at the moment he wishes to be. –Voltaire
Nick, I understand where you are coming from...
Attack Mode (Diary) Wednesday, October 1st at 2:24PM EST (link)But again I think this is a matter of perspective. From my perspective when you mention that we had our chance in the majority and blew it, I agree but the reason why I agree may differ. I believe we blew it because we had a bunch of Republicans who gave up on principle and voted with the Democrats to block the fixes presented over 11 times by President Bush and John McCain specifically. They decided politics was a good enough substitute for conservatism. In 2006 many of them found out otherwise. Now in the current situation your call of leadership is capitulation because “there is no way it is gonna pass”(not a direct quote but you get the point). I would say that we need to support a strong conservative free-market solution to this crisis because the Democrats know that you feel the way you do and are trying to make a play out of this. If we come to the table of negotiation defeated then there was no point in showing up. We may not get a full repeal of corp and capital gains but if we start there maybe we could get it cut in half. Maybe if we start rigid and show support to our Rep.’s and Senator’s they would show enough spine to thwart the Democratic Socialist Power Grab, and instead end up with a truly bipartisan (read that “We the People” approved) bill that contains maybe a smaller number being involved and possibly even pro growth at the same time. Too many are giving in to the fear and totally abandoning their logic and their heart. This is how the socialist take power. In WWII Germany it was the Jews and the economy, now it is the GOP and the economy. As much as things change they always stay the same.
Anyhow that is where I stand.
Aaron B. Gardner
“Land of the Free and Home of da Whopper” Peter Griffin…Family Guy
conform and celebrate diversity….or else!!!
Steel-Belted Radial Right Winger
“I’ll create 5 million jobs from out of unicorn farts and pixie dust” Justatron paraphrasing Obamessiah…yes I love it that much.
"What are the objections"?
John E. (Diary) Wednesday, October 1st at 2:40PM EST (link)Heh.
My caveat is that I’m basically ignorant and trying to figure out what the experts are saying. Perhaps we are paddlers in the same boat. The objections that I’ve heard are.
1. There isn’t enough time to argue about this. Bernanke and Paulson, two of the most knowledgeable and experienced minds on the economy say we need the purchase option. It is hard to ignore these guys.
2. When Paulson was asked about what is essentially this alternative in the Congressional hearing he dismissed it as the Japanese solution which has been accompanied by over a decade of economic stagnation. Some may argue that Japan’s stagnation was due to a failure to reduce lending rates and raising taxes. But so what, because we don’t have time to argue.
3. This doesn’t cut out the cancer; it doesn’t get the bad assets off the books.
Keeping government out of business ops makes something like the Wynn plan more palatable to me. But I doubt our alternative would satisfy most of the other opponents represented on this board because it is still a step toward socialism. The headlong dive into socialism which is currently being promoted by Hillary Clinton and other Dems is the absolute scariest aspect of a bailout to me. If Obama wins we may find that government intervention in either of these forms turns into an avalanche of socialism.
Given what our politicians are currently considering and the time pressures, it appears we are either going to get a plan with Paulson’s gambit at its core or nothing but the weaker measures that the Admin can take under current law. The risks are enormous either way.
No, it's best to do nothing.
asleep06 (Diary) Wednesday, October 1st at 2:42PM EST (link)“The bail-out, while in its current form is not a completely plausible solution, is miles ahead of doing nothing.”
Doesn’t sound heroic, but it’ll work the best.
US banks will have to write down $650 billion. Big deal. They control $10 trillion in assets. And better banks that didn’t screw around with subprime mortgages and derivatives will mop up the pieces.
That is all, my Keynesian friend.
Small is beautiful.
Sure, foreclosures produce revenue. At a large net loss. nt
asleep06 (Diary) Wednesday, October 1st at 2:44PM EST (link)nt
Small is beautiful.
If only the assets were worth that much.
asleep06 (Diary) Wednesday, October 1st at 2:55PM EST (link)“The problem is that if you hold a note entitling you to payment of $50,000 in 30 days, you are simply not going to sell that for $10,000 in cash now.”
If only that note actually entitled you to $50,000, rather than $9,000, which (proportionately) is closer towhat those assets are worth.
Small is beautiful.
Thoughtful response....
alaskaescapeartist (Diary) Wednesday, October 1st at 3:28PM EST (link)… and appreciated Nick, and certainly not insulting.
The current situation is such an unnecessary mess that it’s hard to even say I agree to disagree. It encompasses so much in terms of economics, philosophy, and politics… it difficult to isolate into a single issue.
I do have a different take on the Hoover side of things and the policies that were enacted, tax and otherwise, which contributed to the depths of the Depression. Roosevelt played it perfectly politically… and it is analogous to our current situation in more ways than you point out.
Roosevelt “Governmented” us out of the Depression. That is what we are poised to do yet again, on top of the failed laws and programs that still exist from that era.
And this may be insensitive, but ironic that you mention not being able to “afford kids” for future generations. Indeed, isn’t one of the problems we now face is the failed policy of paying people to have kids they can’t afford?
Should we enact a policy that indirectly offers tacit approval for owners of home which they cannot afford? Forget about bailing out Wall Street… so we want a new welfare system for houses? “Proof” that the free market just can’t quite survive on its own? That thought is repulsive and insulting, yet it is a philosophy which is gathering strength.
The question I pose to you and others is this… is it possible that we face a “solution” that could prove more dire than a depression? Is it possible that today we would be more prosperous, closer to our founding roots were it not for the New Deal?
Think about it.
The course of action in my view is the temporary suspension of cap gains taxes, and other immediate rules and policy changes as emergency steps… many have been written about by learned economists and business people.
If Government wants to help, then do as Reagan would do… get itself the HELL out of the WAY!
You're ahead of about half the commentators on this thread (n/t)
Finrod (Diary) Wednesday, October 1st at 3:54PM EST (link)Let’s get down to brass tacks here. How much for the ape?
Skipping on Principles
MitchRapp Wednesday, October 1st at 4:25PM EST (link)This premise is false and a tenet of the Democrat party. Come clean and garner at least a modicum of respect.
Many people are extremely upset at the direction of our country, eg. illegal immigration, gay marriage, affirmative action, earmarks, and bloated government. Part of our government has tried to sabotage the war on terror. Our leaders are weak and just sit back and take the BS. We feel powerless. Personally, I hope for a total economic collapse and the certain revolution that would follow. Sooner or later, you will have to pick sides. I’m ready to fight for the traditional values of our country. Bring it on!
Skipping on Principles
MitchRapp Wednesday, October 1st at 4:31PM EST (link)This premise is false and a tenet of the Democrat party. Come clean and garner at least a modicum of respect.
Many people are extremely upset at the direction of our country, eg. illegal immigration, gay marriage, affirmative action, earmarks, and bloated government. Part of our government has tried to sabotage the war on terror. Our leaders are weak and just sit back and take the BS. We feel powerless. Personally, I hope for a total economic collapse and the certain revolution that would follow. Sooner or later, you will have to pick sides. I’m ready to fight for the traditional values of our country. Bring it on!
Every point in this post is well-taken
Francis Cianfrocca (Diary) Wednesday, October 1st at 4:36PM EST (link)Very impressive. Thanks, Leon.
To everyone else: I hate socialism at least as much as all the rest of you. But the Paulson plan is actually the least socialistic proposal on offer. And as Leon says, if we wait, our options only get worse.
Blackhedd....I think things are working towards progress now...
Attack Mode (Diary) Wednesday, October 1st at 4:45PM EST (link)With the FDIC up to 250,000 and the mark to market being addressed I feel much better. I also think the delay, while dangerous, was needed to hash this out.
Again I will reiterate, the R’s needed to hold firm on the starting position to ensure some aspect of their position would survive negotiation…we are almost there. The House will have the last word.
“Land of the Free and Home of da Whopper” Peter Griffin…Family Guy
conform and celebrate diversity….or else!!!
Steel-Belted Radial Right Winger
“I’ll create 5 million jobs from out of unicorn farts and pixie dust” Justatron paraphrasing Obamessiah…yes I love it that much.
Professing to be wise they became fools
cravelight Wednesday, October 1st at 5:41PM EST (link)I see a lot of conventional wisdom here by people that are “experienced” and “really know what they are talking about”. One of them even has economics as a minor in his current college studies. Wow!
What a person thinks is wise has an awful lot to do with their core understanding of cause and effect relationships. In this case Mr Wolf seems to believe that debt is good in that the effect it produces is a thriving economy.
He may be correct, but I do not agree with him any more.
I won’t bore you with the details but from 1995-2000 I lived in houses that I owned debt free. I wasn’t a super-saver or anything else financially admirable, I just happened to marry a girl that had grandparents who lived through the depression and hated debt with a passion unlike any other.
They were really smart.
I was an idiot.
I believed that there was good debt and bad debt. Good debt allowed you to “leverage” “other peoples money” so that you could do bigger things now than you could do otherwise. Good debt was stuff like mortgages and business debt. Bad debt was buying tools or a couch that you didn’t need on a Sears card.
Over time, my belief system began impacting my life. We sold our paid for house and bought a nicer one with a mortgage. Then life happened and we got a home equity line. Then more life happened and we got a credit card… “just in case”. More life happened and now…
Yeah – you are agreeing with me – you are saying “Yes, you are an idiot.”
But not really. If you have a mortgage and credit cards, I’m really a lot like you. I just happened to lose my nice technology job twice in a row (DotCom fallout) and then tried to start a business that didn’t make it. We lived on equity and credit.
Over the last few months I have been rethinking my views on debt.
Debt makes people slaves.
I never wanted to believe that even though others before me said it was so.
I believe it now.
At best, all this bailout will do is perpetuate a general sense of normalcy that will allow us to dig ourselves deeper and deeper into debt. At the same time it will take us farther down the road of socialism and make us less free.
Its time that as a country we decide to become the lenders and producers and not the borrowers and consumers. If I have to lose my job to make that happen, so be it. I need some quantity time with my kids anyway.
Aim for perfect, work for better, keep at it until you reach the goal.
Somehow I Still Have This Feeling. . .
Right Reason (Diary) Wednesday, October 1st at 5:52PM EST (link)…that the boy is crying wolf.
I just can’t bring myself to believe that the financial system as we know it will cease to exist. I think some tightening of credit is inevitable, but I think that’s a reality even with the bailout.
But a complete shutdown?
I can’t believe credit card companies will simply stop doing business, in essence shutting themselves down. Car dealers won’t stop selling and financing cars. Nor can I believe that banks will revoke lines of credit across the board. I can’t see how a company that has been doing business with a bank for years will be suddenly turned away by that bank when requesting the same payroll bridge loan that they have requested numerous times before, or be refused a loan for expansion when they have a solid business plan and collateral.
Believing all the nightmare predictions of a credit shutdown, to me, means believing that the financial world will decide to put itself out of business. I just don’t see it.
Success is not final, failure is not fatal: it is the courage to continue that counts.
- Winston Churchill
Now that's a
JakePrime (Diary) Thursday, October 2nd at 1:44AM EST (link)5
Are you serious?
JakePrime (Diary) Thursday, October 2nd at 1:48AM EST (link)Hope for a total economic collapse? That’s no better than those on the left who hoped the Iraq war would go poorly so we’d be forced to pull out.
A people who limit themselves would not elect officials based on vailed promises. n/t
Vaughn Harold (Diary) Thursday, October 2nd at 8:01AM EST (link)Tough times require socialism?
1440minutes Thursday, October 2nd at 10:11AM EST (link)I’m not an expert on any of this stuff, but defending bailouts seems socialist, not conservative. IMHO, freedom is not just for good times. It’s for tough times, too. Rather than resorting to socialism, why not try freedom:
The American people have had it with these bailouts. It’s too late for McCain, but if rank-and-file Republicans want to regain the majority in the house, maybe they just need to fight for conservativism.
Here is an interesting explanation
John E. (Diary) Thursday, October 9th at 9:58AM EST (link)of the reasoning which insists it is necessary to remove the bad assets.
http://online.wsj.com/article/SB122351071819917433.html