So the "folks" have now become leaders on major issues? All I see from leaders is political posturing and capitulation. Posturing is not leadership and capitualation is not leadership. Critical thinking--that's leadership.

Many experts agree with the people: the FEDS do not need to fuckin take over bad loans from downhome. They would F it all up! The accounting rules, my friends, have BEEN changed back when ENRON hit. I know I have worked for Reuters Thomson.

For books to be cooked nowadays means somebody's LYING!! It means one party is looking the other way. Looking the other way is not leadership. Lying is NOT leadership.


When a CEO or CFO LIES about the capital they have on hand, or the bottom line and it's big, then they get a BIG raise commensurate with how much they have made for the company. So, if you cook the books to say you have a billion dollars then you have multi millions coming in pay...simple. Lying is easy.


Thanks for your analysis Dave. God help us if this scam of a bill, as it is passes. I am blasting both McCain and Obama for lack of leadership. They are both caving into what they think Washington will do.

The bloggers were right about the Iraq war, Sarah and they are right about this: DON'T LET THIS PASS!!

Dave you've been reading Teddy, well JFK gave away his salary to charity. That's leadership.

Heloise

No, Heloise. That's pandering.

And who is Sarah in this context? Palin? And what
bloggers were right about what aspect of the Iraq war? I guess you mean the Milbloggers who supported the surge, right?

Oh, never mind.

The point of the article is that there are ways to use the power of government to restructure this debt rather than try to bury it in money.

What you seem to miss is that there is a legitimate need for something to be done, because eventually the credit shortage which this situation creates will spill over to other businesses and the economy will grind to a halt.

Dave

There IS a legit need to do something to get over this credit crisis; my beef from the beginning is that the government was so damn worried about wall street and the market and so little worried about the real housing crisis, the people with ARMS and the unfair bankruptcy loans, PLUS giving the public a vested interest in this and making sure we got something for our money. Which was why Paulson's plan was such a sham... and which was why trying to push it through like gangbusters scared the shit out of everyone. If the government had enlisted the help of experts and congress originally, had gone slowly, and had handled this properly all the panic and anger could easily have been avoided but that has NEVER been Bush's way. It has always been ACT NOW and try and explain the reasons later. Which is WHY we got into Iraq and passed the Patriot Act and everything else he has royally fucked up. He has NO leadership qualities. And John McCain has the same jump in and let it all sort itself out later mentality.

Which is why people like Obama. He actually thinks before he acts. People act like thinking is a bad thing. Because, for most Americans it is seen as elitist, for pete's sake.

But asking for help, consulting with experts, looking at other options, and considering consequences is a good thing. It DOES NOT MAKE YOU A WUSS.

Shoot first and sort it all out later is not policy.

good idea - let's create a big agency...we could give these new jobs to all the people with mortgages in trouble and pay them enough to cover their debts

The plan you propose, in fact a better one, was approved by Congress and set into action back in July..But does people know about it...no!!

I work for a major bank, but we do not advertise the program. Homeowners are entitled to refinance their properties to fair market value, without penalties, with forgiveness of past due debt, and lower interest rates. But banks do nothing unless the client is aware and solicits the federal program. The only two requisites are that your home value have decreased and that you can prove your inability to make the actual payments.

Why are not the banks promoting the program...easy...most of the mortgages that are to be foreclosed are insured which means that the bank will received the insurance money plus the sale amount on the property. It's business for them, but the market is suffering in consequence.

On the other side, the mortgage market is in it's whole in extremely bad shape including community banks, savings and loans, and credit unions. I know a vast number of small banks that have been acquired by bigger banks because they can't deal with their losses.

Lord... For the 2nd time in one week I'm actually agreeing with Dave. This isn't a bad plan and makes a lot more since then the failed bailout (I read that and my head STILL hurts).

It's a solid idea Dave. Send it to your congressman and senator. Seriously. It can't be worse than what the bobble-head boobs are doing.

Marlowe

"hope for homeowners" goes into effect today

RE: #5, she is right, there is help for those with good intentions on paying their mortgages but are struggling. I happen to know people who have made use of it.

Dave, this is a sound plan, probably sounder than anytihng that was voted on in the House. To me, that one was reactionary with no hopes of a return. In the end, holes can be picked on any plan, and I'm sure there are loopholes in what the Senate is coming up with today. No matter what happens, it will be extremely difficult to find anyone to trust to run any sort of fiscal plan. I'm wary of people in both parties.

Meh, Dave, I'd rather let Capitalism work (and the Moral Hazard Club eat their losses or die), but whether from right or left, that's not what's going to come out of D.C., so as a second option, your plan looks pretty good.

Cannon, the problem is that the collateral damage from just letting the situation play out is potentially too great. Even my proposal would probably result in at least a mild recession. The fear is that no bailout will result in a full-on depression, probably worldwide.

I know I don't relish the idea of my retirement accounts basically disappearing when I'm in my 50s.

If the congress wants to pass a bill without generating massive public ire, they need to restructure it so that it doesn't have a bigass $700 billion pricetag sitting on the front of it. They either need to find a way to break that money up or spread it out over time or make actual cash play a smaller role in the solution as I've proposed here.

Dave

Dave your plan sounds pretty sound and you explain it very well ..it seems that your plan would not put the burden on the next generation..I am far from a expert in this field but your idea makes sense ..but what about all the ppl who where just flipping ...should they get the same treatment?

#10 Dave, the word is "Potentially". People have a strange and fascinating tendency to struggle MUCH harder to prevent themselves from being destroyed if they don't think the rescuer is just outside.

but what about all the ppl who where just flipping ...should they get the same treatment?

That's a moral judgment call which I'd feel very uncomfortable making, but which would have to be in the hands of the mortgage resolution judges. The fact that they are speculating rather than just buying a family home is seen as a significant difference by many people, but it doesn't really change the technical nature of the mortgage at all, and the fact is that they may have their homes at risk because of their speculation, having used that home to get the extra credit to overextend themselves. I'd tend to give them the benefit of the doubt and address the mortgages themselves rather than the motivations of the borrowers.

Dave.

Down here in Miami, at least, the "flippers" (at least the smart ones with good timing) all made a bundle long before the house of cards tumbled down. What money they might be losing on the properties they held at crash time is, in most cases, far less than they had already made.

Interestingly, a lot of them are back in the market, making "bulk" deals with developers stuck with finished, but empty, buildings. The flippers are buying several units at a time for "wholesale' prices, taking advantage of the developers' need to pay off construction loans in a dead market. Predators preying on predators -- I love it!

I don't think anyone who was flipping needs or deserves assistance. people actually living in the homes/condos they bought, yes.

But not the flippers.

Hey, some of you guys digg this damned article. Some day I'd like to have an article make it into the double digits on digg.

Dave

Dave, Dave, DAVE. Run for office. Good job as usual. Perhaps we need more Blogcritics and their congregations stepping up to the plate and running for Congress. Al Barger your country needs you.

Now there's a scary thought...

Al and I have both run for office as libertarians. I think I beat him with my record-setting 13% finish...

Dave

No scary at all, Jordan. I've listened to Dave on his show. He's a pretty reasonable guy and at least is one who will listen to many points of view. He's not as entrenched in his ideology as to think that there is no alternative. And, Dave, consider yourself "dugg".

Uh Dave its not a mortgage crisis, but in point of fact a credit/swap default crisis.

Or is it that the financiers have run out of PAC money and before those running for Congress can get their next "donation" they need to bail out the hand that feeds them?

This just in

With each permutation, the bill has steadily grown in size. Treasury's initial plan was about three pages long. The House version, which failed, stretched to 110. The Senate substitute now runs over 450 pages. And tucked away in the tax provisions is a landmark health care provision demanding that insurance companies provide coverage for mental health treatment--such as hospitalization--on parity with physical illnesses.

Dave, your 'simple plan' is unfortunately not aimed very accurately.

This is not really about mortgages any more. The mortgages have all been stirred together, sliced into pieces and blended in a derivatives-fueled Cuisinart.

The 750 billion figure will start with just 150 or 200. But whatever the amount, what Paulson will be buying has the same relation to mortgages that a frozen margarita has to limes, or an omelet has to eggs: they'll never be recoverable in their original form.

And these securities are owned by thousands of financial institutions all over the world. Thus the danger of a worldwide crisis and the necessity for a big solution.

The much maligned former Treasury secretary Paul O'Neill had an interesting alternative tonight: the government doesn't buy the securities but instead guarantees their value at some amount that would allow them to be traded and sold. This way the government would make money charging interest on loans rather than getting into the securities buying and selling business in such a huge way.

But as he pointed out, whatever ideas anyone may have as alternatives, it's the Paulson plan that's on the table, and the Paulson plan that will pass.

"tucked away in the tax provisions is a landmark health care provision demanding that insurance companies provide coverage for mental health treatment--such as hospitalization--on parity with physical illnesses."

Not actually tucked away. From what I heard on TV, which admittedly may well be wrong, is that since the House needs to initiate bills and failed to pass the bailout along, the Senate took the bailout and attached it to this health care bill which was already in process in the Senate.

Seems more like political theatre so the Senators could look like they were doing something about the issue to help calm Wall St.

A nice quote from "The Nation" He echo's Heloise's advice--let Paulson and his BFFs pay for the bailout.
"If a bailout is urgently needed, Sanders said, "Let Mr. Paulson and his friends pay for it, not people in Vermont making $30,000 a year."

Sanders also called for a major economic recovery package to put Americans to work at decent wages, a return to stronger regulation of businesses, and the breakup of giant corporations like those that got the country and Wall Street into the crisis. "If a company is too big to fail, it is too big to exist," Sanders said."

Breaking: The bill has passed Senate by large measure. But get this most of them are not up for re-election.

But my recent comment turns out was prescient when I called the bailout a "debacle" before it actually went down in defeat on black Monday, sept. 29th. A debacle is a sudden implosion. Hmm, I misspoke, but it was clean.

Heloise

No Dave I did not miss that something needs to be done: put the f*&^(*& in jail. Let them use their own money. Let them follow the accounting reform laws, let them back up the banks. THere is no need to print 700 billion dollars that's what we are against.

Funny the economists agree with what I've said, so it must be over your head, your bald head LOL.

Now that the damnage is done even when the bill passes the stock market will still sink and stink.

Credit that's what got us into this mess in the first place.

The bloggers FYI were not only against the invasion of Iraq but about 3 years ago called for us to get out way before shit got really bad there and then we had to stay and SURGE. Don't make me mad.

That was a turning point missed by Bush but what else is new.

It's all the fault of the Ownership Society: we own too much. In fact, we own even more than there is to own!

How can that be? How can we own more than there really is?

According to all the paperwork in the USA economy, we own about $550trillion of assets. But the entire value of all the REAL assets in the USA (houses, land, buildings, cars, gold, toothbrushes, everything that has INTRINSIC value) is only about $45trillion.

So all that inverted pyramid of structure is balanced on a very small area.

So, when the scam operators of that $550trillion EXTRINSIC value fantasy tried to increase THEIR numbers by exploiting the little old INTRINSIC value base they overstressed it and some small cracks developed. And those cracks are amplified 12:1 when they go up the pyramid. Thus, a mere trillion in the INTRINSIC base causes a 12trillion crack in the EXTRINSIC fantasy (otherwise known collectively as 'WallStreet').

Now comes Paulson the Plasterer who wants to apply some plaster over the cracks in the extrinsic economy (that is where he's from, that is what he knows and that is where his friends and loyalties are). He gives not a thought to the intrinsic economy because it has only been the subject of exploitation in his thoughts. He's like a slave owner surprised to discover his slaves are dieing merely because he started feeding them sawdust.

P the P is willing to do whatever it takes to cover up the cracks in the extrinsic market.

But his goal is hopeless! Anything he does requires looting the little intrinsic base, which cannot possibly supply enough value to plaster up the pyramid, and everything he liquidates will cause more cracks. It's a downward spiral.

Far better to apply some plaster (in the form of newly printed currency-diluting dollars from the Fed) to really mending the real economy at the bottom.

Let the WallStreet economy go hang. It's easily rebuilt, if anyone thought the whole damn thing was worth it.

Put the money into downhome mainstreet property owners, factory owners, communities.

Throw WallStreet away.

But that's not what we'll do because all of our "Financial Advisers" as appointed by successive presidents, are from the Financial Sector, as it's called. (Paul O'Neill was different, and so he was driven out).

What we'll really do (under the influence of advisors who have conflicts-of-interest) is to loot the real economy to try to shore up the mythical economy. All in an attempt to "boost confidence in the financial system", not because they have any real idea of what to do.

The error which you and many others are making here, bliffle, is in thinking that there is some clear dividing line between the fictional constructs of 'wall street' and 'main street'. That us vs. them mentality is self defeating and will doom us all.

If we abandon Wall Street we're abandonning the companies which finance the companies which hire the people who live on main street and buy products and services from the smaller companies which are located on main street, and which provide the stocks which the people on main street have put their retirement in.

So what you are saying is basically screw everyone and let it all come crashing down. Apparently you're an anarchist.

What we need is a solution which takes into account both the needs of the people and the needs of the economy, which is what I tried to suggest here. Rather than just throwing money at the superficial aspects of the problem we need to focus on restructuring, both for individuals who are overextended and for large corporations which are mismanaged. We need to write off, refinance AND recapitalize, not just one of the three. Doing just one will be a disaster, whether it's a wholesale write-off as you nihilistically suggest or a pure recapitalizing bailout as Paulson wants to do.

But you know what we need even less than anything? A bailout bill with another 400 pages of absolutely gratuitous pork larded onto it, which is what the Senate has just vomited up.

Dave

Is any and every government expenditure to be labeled as 'pork'?

According to Business Week:
The whole deal was attached, for procedural reasons, to a so-called mental-health parity bill that had already passed the House, which requires insurers to treat mental illness much as they do other health problems.
[5-year cost: $3.8 billion; but this hardly seems like frivolous pork.]

from Politico:
The biggest piece in the tax package is an extension of protections for millions of middle- and upper-middle-income families who would otherwise find themselves exposed to the higher levy under the alternative minimum tax. This alone accounts for about three-quarters of the cost, $78.8 billion in 2009.

Almost $14 billion more can be attributed to a variety of tax break extensions important to business, including the research and experimentation credit worth about $8.4 billion in 2009.

At a time of high energy prices, the bill includes about $18 billion in tax benefits for renewable fuels, to be financed at the expense of the oil industry in some cases.

The rural school aid is smaller -- about $3.3 billion over the next five years -- but has great importance for many Western communities and could be a selling point in the House.

Is Dave claiming all these are equally indefensible and worthless?

But of course there IS a distinction between the intrinsic economy and the extrinsic economy.

One day the Dow dropped 700 points and I was told that the economy lost $1.2trillion! Was it true? Did $1.2trillion of buildings, macines, cars, gold and electric shavers suddenly evaporate and disappear? No. All that happened is the market value of some pieces of paper changed. Nothing in the real economy was affected. We did not sell off or destroy REAL things.

If the REAl intrinsic economy were decreased by , say, destroying every 40th house in your community, you would have noticed. I'm sure.

Handy, there's a subsidy for the import or manufacture of wooden arrow shafts for kids, ferchrissakes - $2 mil pricetag.

There's an expansion of the 1870s era mohair and wool subsidy which has been on the CAGW list since CAGW was founded. It was originally passed to underwrite the cost of cavalry uniforms for the Indian Wars and instead of repealing it 140 years later they just EXPANDED it.

There's a tax break for video and film production companies.

There's a subsidy for the Puerto Rican and Virgin Island rum industry, plus additional industrial subsidies for Puerto Rico.

How about a special economic development fund for American Samoans?

Or do you prefer money to underwrite the construction of a NASCAR racetrack?

That stuff is the raw essence of pure pork.

How they could take a bill that was already unacceptable and lard this crap onto it is beyond belief.

Dave

"How they could take a bill that was already unacceptable and lard this crap onto it is beyond belief."

"this crap" is what's going to get some to from 'Nay' to 'Aye.' It's the way the town works.

There's a subsidy for the Puerto Rican and Virgin Island rum industry...

that's the most sensible thing I've heard in days

bliffle,

I must say that I have been an avid reader of every one of your posts lately. You are in perfect form!

"There's a tax break for video and film production companies."

and that will create jobs

"There's a subsidy for the Puerto Rican and Virgin Island rum industry..."

Don't tempt me.

Oh, is there a subsidy for Charles Shaw Cabernet?

So, a provision for Hollywood? Up go the contributions to Obama. Rum for Puerto Rico? There's the Latino vote. Pander. Pander. Pander.

Now comes the news that this dreadful thing has passed.

It will instantly cost every US family $10,000 with no real hope of success.

Hardly instantly. Are there no checks on your alarmism, Bliff? You make it sound like a stormtrooper is going to come knocking on our doors tomorrow with his hand out for the money.

They'll stretch the actual cost over years and take it out of us in inflation rather than in actual cash.

Dave

But the 'pork' is tiny compared to the rest of the bill. And no one is criticizing the mostly supportable items I mentioned.

The cost will come due quickly, when the Fed issues the funds. However, we get to make time payments so that we may repent at leisure.

Despite the fabulous expense, this expenditure will have no visible effect to ordinary people. The money will go to line the pockets of the bankers and financiers who sponsored this reaming.

Talk about "Moral Hazard"! Having not suffered for their sins they will visit new calamities upon us.

This plan will not help even one family which has had it's mortgage foreclosed.

It's a ripoff, and a setup for the next ripoff.

What fools we are to volunteer for slavery in the service of those scoundrels.

Bliffle apparently has no job, no home, no savings, no retirement account, no stocks, no 401K. He lives entirely in the underground economy and keeps his money in cash in his mattress.

Dave

Dave, everything you listed?

It's still going to be ripped off. I think Bliffle's right on this one-it's not going to stop the haemorrage for the rest of us, it's just a bandaid until the perps can get safely out of reach when the rest of the house topples.