Well it is an election year so it's not that surpsising that we're seeing such gross distortions and exagerations of a subject that most Americans know affects them but do not actually understand the finer points of.

Dave,
I haven't been here in a while. I spent part of this afternoon carrying a sign protesting this latest bailout as well as annoying my entire email list by sending them the contact information for our local representatives. Not once outside of the internet, a couple of Fox interviews of a certain former presidential candidate and a Senator or 2 with the cojones to disagree with this in person, has anyone even mentioned the alternatives you speak of.
This is more about increasing power through fear than actually helping our financial situation.

Wildnfree

Well, Dave, you finally finished your own bailout article. You must feel relieved. Bailed out, perhaps?

Your ideas may make sense, but I do not see an intelligent solution being adopted by a Congress scared for its seats. I foresee only panic.

And you know what panics result in, right?

Great article. Appreciate the time and effort that went into this.

Here, here, Dave! I say Congress should proceed with extreme caution. A rush to bail-out is not the answer.

The fact that such revolutionary legislation is being rushed through is strong evidence that members of congress in both parties care more about getting the crisis off the front page until after the election than they do about the future of the people and country they supposedly serve.

In Achmed the Dead Terrorists words, "If this s paradise, I've been screwed."

It seems to me the problem is the size of these companies. They are deemed too big to be allowed to fail. Given that's the case shouldn't there be limits on how large these financial institutions can grow. And aren't the current mergers and bargain basement takeovers only going to exacerbate this problem.

Dave:
1. Capital has been vacuumed permanently for military outlay, the financial world is not alone in this problem. I find it interesting that the amount needed for this infusion is about equal to what has been vacuumed for Iraq.
2. Covering over-valued securities is terrible, but at least we have a chance at some return.
3. Not everyone that needs loan money is lazy or a "fat cat." I work for a construction company. Three of the six jobs we are working on were being financed by a local bank that failed, so are having to wait at least 60 days beyond the usual 45 for payment for services. We are not irresponsible, that is the way construction is done. The projects are viable, the owners are responsible, and as far as I know the bank was a prudent lender.
4. Greed is something that must be controlled; it is an inherently human characteristic that will not "take care of itself." It must be controlled with laws and public censure which is a fact of life. Those that cry for deregulation are probably the greedy ones, complaining they didn't get their share of the booty. As you say Gingrich is a proponent of deregulation, my case is made. Greed made SOX necessary. Ask anyone who is an ex-Enron employee and the public accounting industry as a whole.
Hard as the idea is to take, these are the lessons we should take from history and understand some controls are necessary if we are to proceed responsibly.
The ancient adage "Absolute Power Corrupts Absolutely" is quite appropriate in this case.

Sure, bail out all the rich whiteys who commit white collar crimes. Meanwhile, a poor nigga can't get bailed out of jail because his family ain't getting no help.

The American system is racist, corrupt, and evil.

1. Capital has been vacuumed permanently for military outlay, the financial world is not alone in this problem. I find it interesting that the amount needed for this infusion is about equal to what has been vacuumed for Iraq.

Which is entirely coincidental. There's certainly no causal relationship between the two. But if you think there is, please explain how spending on the war can cause excessive lending to unqualified borrowers. I'm interested to hear it.

Just a hint. Spending on the war does not, in fact, go out of the economy. It goes to pay salaries of US soldiers, US contractors and for weapons and equipment manufactured in the US. So while it goes out of the government coffers, much of it stays in the US economy.

2. Covering over-valued securities is terrible, but at least we have a chance at some return.

Says the man sitting at the bottom of the outhouse waiting for the sun to shine through the hole in the door.

3. Not everyone that needs loan money is lazy or a "fat cat."

Where did you get the idea I was using 'fat cat' in a negative way. I was just differentiating between those who need loans to buy houses and those who need loans to do business.

I work for a construction company. Three of the six jobs we are working on were being financed by a local bank that failed, so are having to wait at least 60 days beyond the usual 45 for payment for services. We are not irresponsible, that is the way construction is done. The projects are viable, the owners are responsible, and as far as I know the bank was a prudent lender.

Construction is one of the industries which relies a great deal on interim loans, so it's going to be particularly vulnerable when there is a tightening of the credit market, not just at your level, but all the way up the industry. But the fact is that new home starts are up nationwide, so there's no evidence that the credit crunch is having a significant negative impact.

4. Greed is something that must be controlled; it is an inherently human characteristic that will not "take care of itself."

Theoretically the greed of each individual or group can be set against that of others so that no one gains too much of an upper hand. That, of course, requires some sort of relatively level playing field.

It must be controlled with laws and public censure which is a fact of life. Those that cry for deregulation are probably the greedy ones, complaining they didn't get their share of the booty.

I don't see it this way at all. Those that cry for deregulation are likely those who want to see the economy grow without arbitrary restrictions, to the benefit of everyone.

As you say Gingrich is a proponent of deregulation, my case is made.

Why? Outside of his political work he's a novelist. How does deregulation benefit him personally?

Greed made SOX necessary. Ask anyone who is an ex-Enron employee and the public accounting industry as a whole.

It made regulation necessary - but it always had been. There's a different between reasonable regulation which takes the form of oversight and guidance and intrusive regulation which attempts to run business based on arbitrary creiteria determined by bureaucrats.

Dave

Well, my friends, if you've any shadow of doubt about this bail out plan, I urge you to call your local Congressional office first thing in the morning. I am calling my Rep and I'm shouting, "JUST SAY NO!" (sorry, Nancy, drugs lately are the only thing that get me through this mess.)

And I would like to point out that there is no provision for home owners who are making mortgage payments on undervalued property. There's a small portfolio of mortgages belonging to home owners in the $250K - $600K range who will ultimately lose in this bail out. For the fat cats who overspent on their homes I have no sympathy. The problem is that the forgotten little people will lose their homes. And the fat cats who have a little nest egg left will scoop up all these properties at fire sales nation wide. So, once again, the rich get richer and the poor get intercourse.

Dave, I have maxed my "fun time" this week, I work full time (about 50 hors per week) and am going to college full time, so will work on digging up the stats on manufacturing, etc. later this week.

Sorry.

"Just a hint. Spending on the war does not, in fact, go out of the economy. It goes to pay salaries of US soldiers, US contractors and for weapons and equipment manufactured in the US. So while it goes out of the government coffers, much of it stays in the US economy."

Just a hint of how little Dave knows about economic fundamentals.

A first order approximation reveals that the military expenditures produce absolutely no value. The soldiers get paid but do not contribute any product or service that is consumable by those producing the food he eats, the house his family lives in, etc. This is also true of the material and 'services' provided by the military contractors. They are used to destroy. Again, all the wages, etc. of their employees are used to buy products for their survival and comfort which are made by workers and farmers producing real value.

A sector of economic activity is devoted to going down the drain which would otherwise go to consumption of other productive sectors.

It is nothing but a drain on the economy.

So once again Les demonstrates that he clearly does not understand even the most basic elements of economics.

Your description of soldiers as a 'drain on the economy' is no different from the description of ANY government employee. And unlike other government employees they DO produce revenue for the economy beyond their sustenance because they consume a large amount of very expensive hardware and munitions, the consumption of which feeds a variety of industries.

Admittedly, it's all tax money. But better that money should go back into our economy than otherwise.

If we were not at war, what would be done with that money that would benefit our economy more than war spending?

I suspect that as a marxist Les forgot that consumption is an essential part of any economy.

None of this is a justification for the war, but to say that war spending is basically just throwing money away is totally untrue.

Dave

Dave,

"Your description of soldiers as a 'drain on the economy' is no different from the description of ANY government employee."

I would certainly agree here, at least in most cases. But do you deny that most of the government bureaucracy is a 'drain on the economy'?

"And unlike other government employees they DO produce revenue for the economy beyond their sustenance because they consume a large amount of very expensive hardware and munitions, the consumption of which feeds a variety of industries."

Yes, and to the extent the 'products' go up in smoke, do not provide any commodity or service to the real economy. And to the extent that labor, material and capital are expended in other industries, to provide to military industries, those are also wasted.

"Admittedly, it's all tax money. But better that money should go back into our economy than otherwise."

More importantly than the fact that it's 'tax' money is that it is 'money'. Your, '...they DO produce revenue...' leads to some enlightenment here. What is money that does not have the commensurate commodity and useful services to back it? It's called inflated money.

"If we were not at war, what would be done with that money that would benefit our economy more than war spending?"

Produce products that are necessary for the survival and comfort of the population.

"I suspect that as a marxist Les forgot that consumption is an essential part of any economy."

Read my preceding sentence, 'Produce products that are necessary...". Do you suggest that I recommend that these products just be admired for their intrinsic value, the labor that went into them? No, it is obvious that they are to be CONSUMED!!!

Les

Good article. What it doesn't address (and no one else seems to be doing it either) is the fact that many businesses don't misuse credit. I can vouch for my own. Many people weren't financially irresponsible and took out loans they could afford. I guess we suffer for the misguided actions of others.

As for the military being a drain on the economy, I am an ex-Army brat, and I can tell you that local economies LOVE it when bases pump up their numbers in anticipation of deployment. More people = more money flowing for stores and services. Dependents = more school aid. Perhaps some look at it like government "waste" or economic "bail out" but to me it looks like an economic shot in the arm. We're going to always need a military, right?

Joanne,

"I am an ex-Army brat, and I can tell you that local economies LOVE it when bases pump up their numbers in anticipation of deployment."

Any enterprise in a community affects the economy of that community. The difference is that most enterprises actually build products or provide services. The military sucks up services from the community. The funds to do so come from the tax base or borrowing from China.

The military produces nothing economically of value that can be consumed by the population.

Les

That's true, Les. But what's the alternative? Dismantle it all and sing Kumbaya?

The military produces nothing economically of value that can be consumed by the population.

No part of the government does.

That's true, Les. But what's the alternative? Dismantle it all and sing Kumbaya?

Try it. You might like it. At the very least, stop spending so much damn money on it.

Joanne,

"That's true, Les. But what's the alternative? Dismantle it all and sing Kumbaya?"

U.S. foreign policy is carried out in the interests of a small minority of the population, namely the super rich that not only own the two major parties but the vast majority of information dissemination and opinion making.

It is not in our interest to have this military. It is not our military. It does the bidding of our enemy. As things get worse and worse it will be used against us.

Les

See, this is why there's no point arguing a point like this with Les. He doesn't understand that in a capitalist system the interests of the rich are ultimately inseparable from the interests of the population as a whole.

Plus, at the end of the day Les will end up classifying any of us who earn over the median income as either members of the wealthy elite or their bourgeois lackeys and insist that we have our assets taken away and our income 'equalized'.

He also seems not to understand the idea that the US has always had a consumption-driven economy and that super-consumers like the military are just as valuable in their way as producers of actual goods.

Dave

Although we've all been using the shorthand term 'bailout' for the [just rejected!] Paulson plan, I think it's a misnomer.

Dave implies that relatively few companies were affected, and he's still fixated on Fannie and Freddie, which the government is already running.

But Wall Street as it was a year ago has ceased to exist. There are no large investment banks left. Bear Stearns, Lehman Brothers, Merrill Lynch, all gone or sold to other companies. Goldman Sachs and Morgan Stanley are restructuring themselves as 'bank holding companies,' meaning no longer investment banks.

Paulson would not be bailing out companies. He would be allowing the credit markets to return to normal. Some of the individual companies could still fail and may well do so.

The reason the Dow just dropped over 750 points is that many working in the credit markets, and many watching them closely, know how dangerous the situation is, and how fast and wide the contagion could spread.

This is by no means about a few big foolish companies. It's about a culture of debt, from individuals running up their credit cards, to governments running up deficits, to companies investing huge sums of borrowed money.

Even the surviving big banks like Citigroup are still trying to come to grips with bad mortgage securities they own, though they just absorbed Wachovia.

Some folks on both left and right are allowing their knee-jerk ideological reflexes to prevent them from seeing the situation as it is -- opposing the Paulson plan in populist, nay-saying, know-nothing terms.

As I've said before, read Steve Pearlstein of the Washington Post, or find his recent interviews on Hardball and This Week with George Stephanopoulos. He is remarkably convincing on the point that not passing this plan is a near-guarantee of imminent disaster.

I have to agree with your second to last paragraph, Handy. Most of the reaction to the plan is irrational and makes no sense at all. I don't believe that my article falls into that category.

I'm all for a plan. I'm just not convinced that the plan we were offered originally or the minor variations of it being discussed or the variant of it being voted on today are necessarily the answer or the best answer to the credit problem.

They may be answers, but they are answers which are just as driven by hysteria as those who are demanding 'no bailout'. What I want to see, as I hope this article made clear, is some reasoned consideration of sensible alternatives and not just a rush to throw money at the problem because it seems easy and obvious.

Dave

Bernanke and Paulson are hardly wild-eyed radicals. The [admittedly jaw-droppingly] strong medicine they were prescribing matched the fearful consequences they saw, i.e., a Depression. Weaker medicine may or may not clear enough bad debt off the institutional books to accomplish anything.

Does ANYONE else find it completely outrageous that the Republicans are blaming Pelosi's speech for their ultimately voting against the bailout?

Talk about your na na na boo boo response. What ARE they? Seven years old?

Dave is trying to be funny, I think:

"See, this is why there's no point arguing a point like this with Les. He doesn't understand that in a capitalist system the interests of the rich are ultimately inseparable from the interests of the population as a whole."

That's a good one, Dave.

But everyone and his brother is aware that the rich have gotten richer at the expense of everyone else for the past 20 years or more.

Lisa, it makes perfect sense to me that when Pelosi gets up there and starts lecturing them like a school marm, pointing fingers and outright lying in her efforts to politicize this issue, it's going to be enough to sway the vote.

We don't really know who reacted negatively to her behavior, but given how close the vote was I can believe it was enough to swing a dozen votes - maybe even some Democrats - away from the bailout. Just like the rest of us, there are a lot of people in Congress who are sick of her divisive, partisan bullshit.

Dave

handy sez:

"Goldman Sachs and Morgan Stanley are restructuring themselves as 'bank holding companies,' meaning no longer investment banks."

Say it isn't so!

Holding companies are a curse on the economic system (they siphon off profits, leaving their slaves with no earnings for a rainy day, so they collapse).

Holding companies were responsible for the economic catastrophes at the end of the 19th century.

Oh, Dave, such little bitty babies. WAAAAAAAA.

You would defend them if they got scared and peed their pants.

You mean the issues wasn't political? Gosh. Wow. You might be the only person in America who thinks that. Oh, I forgot. You are from Mars, or somewhere. You won't tell us where.

Congresscritters voted against the bailout because they got the message from their constituents who didn't like having this thing rammed down their throats.

It's hard to blame this on Pelosi since she was advocating the Paulson/Bernanke/Bush solution.

Bliff, what Pelosi was perceived as advocating was no accountability for the problems which led to the bailout, or even worse a long term attempt to blame the crisis on the Republicans while applying no accountability to the left. As more and more information about the situation at Fannie Mae comes out the obscenity of how that institution was politicized and used by democrats becomes more and more sickening. Pelosi and especially Dodd, Frank and Obama MUST NOT be given a pass on this. They MUST be held accountable and they must not be allowed to get away with shifting the blame to Republicans.

Dave

We have to decide what the purpose of the bailout is: Are we trying to save the banks or are we trying to save the economy and the people?

Dave, you're going mad. Your extreme partisan attempts to find some convoluted way to blame this problem on the dems has driven you to utter incoherence on the topic. Face it, your pet theory of unbridled capitalism is going on the rocks.

Dealing with the credit freeze is quite simple.

First, we must recognize that the problem got worse the minute the $700b bailout was announced. The problem is not fundamentally liquidity. The fed has opened the spigots quite liberally, already to the tune of hundreds of $b. Estimates are floating that this could end up costing upwards of $2t. The problem now is uncertainly as to who is going belly up next.

The fed and/or the treasury could order all banks to service all loans necessary for the short term operation of the economy based on the historic credit worthiness of the borrower. The treasury would provide the funds for the loan and would collect payment. An agreement with the bank as how much the bank would be compensated for its handling of the loan could be worked out.

What is wrong with Republicans.

How dare they pout because it was stated that "The buck stops here". They wanted the Presidency and rule. They got it and screwed up royally. Because Pelosi stated where the fault lies, they pouted and decided against the nation, no, the worlds stability; people's retirements and futures. Bush and Florida/Ohio was one thing, the Iraq war another, the gas prices and food prices yet another, but THIS is unforgivable.

Dave sez: "...or even worse a long term attempt to blame the crisis on the Republicans while applying no accountability to the left."

But Dave, it IS the fault of this administration.

They've exercised iron control over the congress with their majorities and presidential vetoes. They haven't even been subtle about their partisanship. Even with a dem majority the past 2 years they've bullied relentlessly with the veto power.

The neo-republicans pushed everyone aside and said "get out of our way - we know what's right, whether it's starting war or deregulating the economy or putting in a paritisan unqualified Attorney General or appointing political hacks as department heads who are opposed to the charters of their departments. We know what we're doing - get out of the way!".

And you have contributed to it with the same kind of bullying. You've defended the most egregious violations of law and good sense endlessly. You've harked up the most extraordinary rationalizations one can imagine.

Now you whine that Pelosi didn't pursue some kind of even-handed condemnation of the dems as well as the reps? Are you daft?

#32!!! (that is, Bliffle's absolutely right.)

Now it's time for Congress to earn their pay. I believe that if the pressure comes off, they're going to fall back and do the easy thing, so the pressure has to continue. Congress must be forced to enact serious regulatory reforms, most of which should, in my humble opinion, include directions in the interim on banking and loan laws, Mandatory as opposed to voluntary, insurance protections on any recipient of future bailouts, strict future lending rules to prevent the rise of "ninja" loans (No Income, No Job, No Assets), a repeal of the CRA's ridiculous exemptions from credit-worthiness, and a general tightening of consumer credit rules. It is absolutely asnine to have so many Americans living beyond their means at the encouragement of both the finance system, and the government.

Those can be counter-balanced by loosening regulatory shackles on manufacturing and resource development, including energy, to create REAL jobs instead of "Service industry" slow-starvation plans or governmental handouts that just create a state akin to political serfdom.

In the late 1970's, on average you needed to have a 25 to 35% down payment on a mortgage, and that mortgage could not be more than 300% of your annual income After factoring interest, tax, and closing costs. This should be an iron-clad rule, in my opinion, as it would prevent the phenomena we've seen in recent years where you have a combined income of 61k$ buying a 250k$ mortgage on a loan written under false pretenses by a broker whose whole intent is to (speculatively) sell the inflated asset to another bank.

Profit should be based on Production. If our economy is to be politicized then it is better to have that politics be the politics of building, than the politics of papershuffling.

I would agree with cannonshop except that we are too late!

Bush and his flunkies have been fiddling while Rome burned. All this has been getting worse and worse during his administration while he stood aside as if not comprehending what was happening. Maybe he didn't comprehend. Maybe he was too lazy (a common Bush sin) to do anything. Maybe his handlers wouldn't permit him to do something, and kept providing crutches to prop up the potemkin economy, say with monetary manipulation of fiscal problems with Fed rate manipulation.

Not to excuse Bush's predecessors, going back at least to Carter and Reagan, who just kept kicking the can down the road as they kept overspending like drunken democrats.

The most 'republican' (trad conservative) of the bunch was Clinton (!) who at least created some surpluses, followed by Bush 1.

In fact, Clinton is finally showing his real colors, as the remnant of those who didn't convert to neo-republicanism in the 80s and 90s. Isn't he campaigning for McCain, now? His and his wifes Good Friend in the senate?

Anyhow, it may be too late to exit this crisis without an awful lot of innocent bystanders being hurt by the collapse of the facade that the neo-reps have constructed.

More people will lose jobs and join the ranks of the unemployed and uninsured. More bankruptcy. More economic dropouts. More crime.

the only solution I can see is to jettison the old credit and banking system and rebuild it anew, starting with direct government intervention at the lowest levels of the economy, where the instrinsic values are, and where the real capital value of the USA reside.

The banks and their employees and shareholders and hangers-on will have to go, and then attempt to re-enter in the new institutions.

"Those can be counter-balanced by loosening regulatory shackles on manufacturing and resource development, including energy, to create REAL jobs instead of "Service industry" slow-starvation plans or governmental handouts that just create a state akin to political serfdom."

I hope by that you don't mean environmental regulations. After all, if you log unsustainably for instance - which a competitive industry might be inclined to do - then you're apt to destroy the commons of that economy.

My guess is this likely had something to do with the bailout plan problems:

Big Financiers Start Lobbying for Wider Aid

Even as policy makers worked on details of a $700 billion bailout of the financial industry, Wall Street began looking for ways to profit from it.

Financial firms were lobbying to have all manner of troubled investments covered, not just those related to mortgages.

At the same time, investment firms were jockeying to oversee all the assets that Treasury plans to take off the books of financial institutions, a role that could earn them hundreds of millions of dollars a year in fees.

Rudy Giuliani's 'crass opportunism' reflects on Mac: Dems

Even as the nation's $700 billion, taxpayer-funded Wall Street bailout was still being hashed out, the former mayor announced Thursday his high-powered law firm has set up a task force.

Its mission: to help corporate clients get a piece of the action - or keep the federal wolves from the door.

#41 Mister Scanlan, the current direction of Regulation has made this country dependent on third-world assholes for energy, and stripped the productive capacity of our nation down to this point of weakness while leaving the Phat-Catz to suck up the money. Only the largest companies can compete in the current environment, because only they can afford to either pay the fines or pay off the enforcers with cosmetic displays of compliance.

IOW, your "Sustainable" ISN'T. We'd be better off stripping the whole mechanism out and starting over. Part of that, is letting these institutional pirates fail.

bliff,

"the only solution I can see is to jettison the old credit and banking system and rebuild it anew, starting with direct government intervention at the lowest levels of the economy, where the instrinsic values are, and where the real capital value of the USA reside."

It looks like you're coming around to the idea of advocating the nationalization of the banks. Very good.

Les

Yeah, but the irony is that reduced regulation could bite you in the backside...

After all, if most other nations set higher emissions and fuel efficiency standards, then you guys pretty much have to institute that if you expect to compete via export.

What you need is strategic regulation that is pragmatic and not in any way protectionist.

We have to decide what the purpose of the bailout is: Are we trying to save the banks or are we trying to save the economy and the people?

We're trying to save the lobbyists so the favors keep rolling in for members of Congress.

Dave, you're going mad. Your extreme partisan attempts to find some convoluted way to blame this problem on the dems has driven you to utter incoherence on the topic. Face it, your pet theory of unbridled capitalism is going on the rocks.

Good lord, Bliffle. Go out and read some of the history of Fannie Mae or something. Do you know what a GSE is? It has nothing to do with capitalism. Capitalism isn't the problem here. The problem is government socializing risk so that they can pander to special interests.

And trying to absolve the Democrats of blame is just insane. The Democrats created Fannie Mae. They used it as a private slush fund for their candidates. They milked it and encouraged abuses and cheered with every bad loan it made. They attacked those who would have held it accountable. They tried to destroy anyone who wanted to regulate it. And in the end it was out of control and doomed and they still tried to turn the bailout to partisan profit.

How can you possibly be so blind? Where do you get this one-sided perspective from?

Dave

FNMA has been around for 75 years and made house ownership possible for millions of americans.

It seemed to work quite well, with low failure rates and good returns, regardless of whatever patronage you object to.

Until the current administration, that is.

We're trying to save the lobbyists so the favors keep rolling in for members of Congress.

LOL @ Silas

My Bailout headlines: "This too shall NOT pass"

"Use your own damn money!"

Have black folks had their "reparations" though the mortgage meltdown? That thought occurred to me as I researched this subject. And here's a quote the folks at Huffpo should read: Yes, it was caused by minorities--get over it:

"The financial crisis is real. Most people don't realize it yet, but banks, investment managers and corporate treasurers around the world all know what is going on. It started with the Freddie - Fannie collapse. They wrote loans to individuals who they shouldn't have. Government policies encouraged loans to minorities and the underwriting function of banks was no longer approving loans upon an individual's creditworthiness but their race was now a factor in the loan decision. In 1997 President Clinton's HUD secretary, Andrew Cuomo, claimed Fannie Mae had exhibited "racial discrimination" and proposed that 50 percent of the GSEs' (Fannie and Freddie) loan portfolio be made up of loans to low- and moderate-income borrowers by 2001. When individuals are given loans based on race and not their ability to pay, it is inevitable that bad loans would be written and foreclosures would come. That's what happened and in a big way."

from here.

Heloise

So Blacks are at fault? Next it will discovered that it was the Jews after all.

Reactionaries have no limit as to how low they will stoop.

#45 If you can sell improved efficiency on the market, you don't need to mandate it in the law. Companies and Corporations have the right to fail, and if they insist on failing , they should be allowed to do so.

Lisa, I think (hope?) that the Republicans were more honorable than you're portraying them. Both parties made an agreement to take a hit on a bailout plan that isn't popular. The Republicans didn't have to provide cover for the Democrats, who after all have a majority in both houses. The left is more hospitable to the idea of intervention, so the conservatives really had only two reasons to go along with the deal: loyalty to their President, and the belief that this was the best bad deal that they could get. They were definitely not going to take a political hit and a partisan lecture for a deal they didn't believe in.

Have you ever seen the Seinfeld episode where Jerry loses a tennis match to Milosh the tennis pro? If you haven't, I'll tell you the moral of the story: don't humiliate someone who's doing you a favor.

54 - Baronius,

What was Pelosi thinking when she wrote that speech? It almost looks like she was deliberately attempting to scuttle the agreement.

Les

Back to the meat of the matter -- is a bailout really necessary? Well, last Thursday we had predictions of Armageddon. The American public was led to believe that failure to pass the bailout yesterday would crush us. Well, it didn't pass. The Republic still stands. But, now that we're in the midst of the Jewish Holy Days, action halts until Thursday. The market rebounded quite a bit today. And the Republic still stands. Folks, Mr. Bush and the panicking Democrats under the shrill leadership of Nancy Pelosi have not prevailed. It took a group of Conservative Republicans out of step with the mainstream to show that Bush, Pelosi and Barney Frank were wrong.

So, what caused the market to rebound? Did Muslim financiers buy up all the low priced stocks today because Jewish financiers allegedly could not trade? Or is it something far less sinister? Did the market rebound because even Wall Street realizes that Congress continues to be clueless? This lack of Congressional action in deference to the religious holiday is a violation of the oath these people took upon taking office. Protect, defend and uphold the Constitution of the United States? Those Gentiles who agreed to deferral should be held accountable and removed from office for violating their oath, period.

Silas Kain:

"This lack of Congressional action in deference to the religious holiday is a violation of the oath these people took upon taking office... Protect, defend and uphold the Constitution of the United States?"

Oath?

Protect, defend and uphold the Constitution of the United States?

How quaint.

Quaint? Here are the facts from this link.

As required by Article 6 of the U.S. Constitution, Members of Congress shall be bound by oath or affirmation to support the Constitution. Representatives, delegates, and the resident commissioner all take the oath of office on the first day of the new Congress, immediately after the House has elected its Speaker. The Speaker of the House administers the oath of office as follows:

"I, (name of Member), do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign or domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter. So help me God."

So, I am off the mark or what?

"It took a group of Conservative Republicans out of step with the mainstream to show that Bush, Pelosi and Barney Frank were wrong."

No... the public hysteria and online campaigns to have people call their reps is what did it. In fact I have not found one youtuber or blogger in support of the plan.

Perhaps if this had been a quieter bill then it would have passed. But we'll never know.

Silas Kain:

"So, I am off the mark or what?"

You missed my point,

"Quaint" was being sarcastic.

No... the public hysteria and online campaigns to have people call their reps is what did it. In fact I have not found one youtuber or blogger in support of the plan.

Public hysteria? I think most of us by now realize that we just saved a LOT of money which otherwise would have been blown by Congress for nothing. The Republic will continue in spite of the Bush-whackers and Pelosians. (God, I feel like this is a bad episode of Star Trek.)

Hey, something just occurred to me (okay, so I'm slow on the uptake...) But, it occurs to me that from now on, only the Democrats that voted against the 700b$ of corporate welfare have a leg to stand on with the phrase "Corporate Welfare". The rest of the Party have no place ever using those words as an attack, ever again.

We haven't saved all that money yet. The Senate is considering a bill which is basically the same, being written overnight and up for vote tomorrow. The Senate will be harder to influence with public protest than the house was.

Dave

True. If we can keep up the pressure, it's still got to pass the House again.

Here's a member by member list of who voted "yes" and who voted "No" in the House, and how much they received from PACS associated with the gift for corrupt givers package.

I'm thinking maybe a coordinated effort to unseat (or make very, very uncomfortable) those congresscritters is a really neat idea, they're all up for re-election this year.

Well, Cannonshop, according to Bruce Shapiro the best predictor of a NO vote was their being in a swing seat.

Any concerted effort should focus on those people and a particular emphasis on the safe players.

*Focus on the YES voters.

If we're determined to spend $700billion to solve the credit problem the best way is to copper the loans of people who have are are going to lose their homes, establish new credit institutions which are publicly administered similar to Credit Unions and Thrift Associations with limited scope, and let the old institutions save themselves.

I don't know, Bliffle. Copper is awfully expensive. Could we coat the loans in zinc instead?

Dave

Here's an interesting article, written in April, that summarizes the "Moral Hazard Club" and the bad policy that got us there. Notice the high level of non-mark-to-market securities.

Minyanville


What strikes me as particularly odd is that there seems to be some favoritism displayed here by the Fed. Millions of people have lost their homes or will likely soon lose their homes, the economy is sinking into recession, companies are going bankrupt and what do we do? We allow brokerage firms and banks to shamelessly exchange their 'supposedly AAA rated Mortgage Backed Securities' for Treasury securities of the Federal Reserve.

I use the word 'supposedly' because if they were really AAA and had a market, why wouldn't these firms just sell them in the open market? Because there is no market.

I've been referring to our economy as an 'asset based economy,' one based on high levels of money and credit growth, for the better part of ten years. Now credit growth and leverage have finally caught up with the creators of this mess, namely the Fed and the broker-dealers themselves. Since the government has begun to rescue them from their own self inflicted wounds, I guess you can call the dealer community 'the Moral Hazard Club'.

What I want to know is why I didn't get an invitation into the club. We manage money on behalf of clients and ourselves, yet when we make mistakes, I can't just call up Chairman Bernanke and ask how I exchange my mistakes for Treasuries at 2.5% per year. It would be nice -- and would feel shameless -- but I have to admit that if I had a free put option underneath every trade, I would take a lot more risk. Wouldn't you?

Cannonshop -- THANK YOU! I have been screaming for months about following the money trail. If we are to achieve reform it does NOT begin at the top. It begins with sending a shock wave through the Capitol equal to Hiroshima. I would like to point out Rep. Rahm Emanuel who has been a major beneficiary of PAC money. Here is a guy who is supposed to be FOR the little guy. He's one of the most prolific recipients of PAC money from questionable sources. Even my own Congress Person, Rep. Tierney has blood money in his pocket. Granted it's a little over $50K but that still doesn't cut the mustard with me. He's not getting my vote.

It's time for trickle-up politics in America. Regardless of who you support for the Presidency, it just doesn't matter. Our lives are in the hands of each member of Congress. Hit Washington at its heart. Forget about all the "favors" your member of Congress allegedly secured for your Congressional district. Throw every incumbent out, period. Then achieve term limits for members of Congress and cap off the revolution with prosecutions. Ask yourself this question, "Is my life better today than it was when my member of Congress took office?" If you answer, yes, keep your person in. If it's no, throw the bum out.

#70
You're welcome, Silas.

Silas, one thing you missed in your catalog of Rahm Emannuel's sins is that while he was out of office he was put on the board of Freddie Mac for a couple of years as part of the ongoing Democrat program of using Freddie and Fannie as ways to provide special perks to their insiders and favorites.

Dave

There's a fine line between greed and treason. One of these days John Q. Public is going to wake up and say "ENOUGH!". Anyone so naive as to believe this financial crisis is a Democrat vs. Republican thing should just hang it up and defect. Both major parties have stifled competition in the market and in politics. I have now added another culprit and that is Union leadership. Rank and file union members take note of how much you pay for your "union dues". Your officials are equally to blame.

Rahm Emmanuel is indeed a shady character. But a minor character.

Let's look at the guys who are actually running for the job: McCain and Obama.

Today McCain gave a speech that I think fingers him as utterly irresponsible. He said that people should stop protesting the bailout and get in line. "We know what we're doing, stop complaining", he seemed to say. At least, that's the way it sounded to me. But John McCain, by his own admission, knows little about economics. He depends on his advisors (Phill Gramm????) to tell him what to think. McCain has shown NO sign of studying the issue and venturing a solution.

Obama is little better. He, too, seems to say we should stop protesting and follow our leader. But if he is to seriously claim the title of "Agent of Change", he has to do better.

Both of these guys have abdicated responsibility on this very important issue. At the least they should be able to EXPLAIN why we should obey. They should be able to explain the ins and outs.

Better, they should be able to offer alternatives and amendments to the offered plans.

IMO, the Paulson/Bernanke/Bush plan is so flawed that it will immediately result in a $10,000 deficit to every American family, with NO BENEFIT! The same guys will be back asking (nay, demanding!) more money in a few months. They'll threaten us with not only loss of the $700billion but also the original problem we were trying to cover! We'll be hooked!

Let's look at the guys who are actually running for the job: McCain and Obama.

No, bliffle, let's look at the members of Congress. THEY control the nation's checkbook. THEY are the ones who need to understand how American and global economics work. THEY are the ones that need an education. And guess what? They rely on the advice from the "economic experts" who just so happen to contribute money to their campaigns! The Presidential election is Congress' bait and switch scheme on America. Forget Obama and McCain. Vote for whomever you choose. But the change we deserve will not occur until there is a complete ransacking of Congressional membership - so sayeth the Silas, so sayeth the flock.

Bliffle, one thing you do have to take into consideration is that for the $700 billion to be passed on completely to the taxpayers the assets of Fannie and Freddie would have to be worth only a tiny fraction of their presumed value. Even if they are leveraged at 20 to 1, they'd still be worth about half of the amount being fronted by the government, and if they can be managed for several years the asset value would increase to offset any leveraging, so in the long term the obligation for taxpayers is probably going to be fairly small unless we see a real and complete economic collapse in which case it won't really matter as money and taxes will all be fantasy anyway.

Dave

Dave sez:

"...if they can be managed for several years the asset value would increase to offset any leveraging,..."

This is at the heart of the problem: the belief that these (overpriced) properties and securities will recover and exceed their previous values. It cannot be taken as a given.

Take my friend J for example: he has a $700k (a very modest residence there) townhouse in Los Altos, which is an excellent community, good schools, last to be hit by recession, always in demand. His mortgage is $600k, but the current assessment is only $550k. He's 50k under water. His canny judgement about 5 months ago was that it was not worth $3500/month to defend that investment, so he quit payments, although he still lives there (it's a very nice place, but he has other options). The bank quit calling him and only sends threatening mail.

He doesn't care. He'll enjoy the place as long as he can and then go to one of his other options. In the meantime he saves $4500/mo. He doesn't care about Credit Ratings because he hasn't depended on THAT in years! He has cash and property.

His judgement was that $4500 cash was worth a lot more than any hope of future price recovery AND price appreciation. He figures that he followed prudent investment policy by mortgaging to the max because that would serve whether there was inflation (ride it up!) or recession (bailout with cash).

Who wants to wait around for YEARS to recover the price? Then, even more years to get a profit?

Now, if this Paulson/Bernanke/Bush scheme comes into play and they actually buy J's property with anywhere near it's "mark-to-model" value then it will represent the US government throwing money away.

QED.

You miss a vitally important part of the formula, Bliffle. As the dollar is devalued, the price tag on that real estate is bound to go up. There's never been a real estate bust that wasn't followed by a recovery, and if the value of the dollar goes down at the same time then the new prices which result should be crazy high, at least on paper.

Who wants to wait around for YEARS to recover the price? Then, even more years to get a profit?


No one. But the government CAN afford to wait those years, unlike most private investors or corporations.

Dave

Dave Nalle:

"But the government CAN afford to wait those years"

Who is the government?

Ans. The poor suckers who are also but infrequently known as taxpayers.

The question is whether the taxpayers can wait.

Dave,

So you want the government (the poor belabored taxpayers, really) to sit out the fallow period?

Can I come back in X years and have my property back after the gov has weathered the fallow period? Where do I sign up?!

It's a daft idea, Dave. Daft.

Well one week into this financial melt down and the Republic still stands. Who lied to us? Inquiring minds want to know.

Who lied?

Anyone who said they knew what was happening and what the solution is, was lying.

The truth is that WallStreet can take a lot of adversity: that's why it is there, to take risk. We should be VERY reluctant to bailout WallStreet.

The critical asset that we should defend is MainStreet. That's where the REAL value is. Everything else is fluff. We should be VERY reluctant to damage Mainstreet in favor of WallStreet. But that is what is proposed by the Paulson/Bernanke/Bush plan.

Well, I've about had it with the freak show for tonight.

How a bunch of assholes making shit up that will get them elected is of any use to actual problem-solving has got me puzzled.

Well, my union buddies supporting Obama are apoplectic tonight. They thought Palin would tank and they saw a tough lady.

And as far as this bailout goes -- NO DEAL! I'd suggest we start watching the Republic of Ireland. Evidently their little "bailout package" may very well lead to the fall of the Euro. And THAT should be a cause of major concern to every American.

Guess Cindy didn't like what she saw in the debate.

Dave

With all due respect to Cindy, whom I respect, she was predisposed not to...

Well, my union buddies supporting Obama are apoplectic tonight. They thought Palin would tank and they saw a tough lady.

A tough lady with 4 union members in her immediate family, something none of the other candidates can claim. This may be the year that the unions finally wake up.

Dave