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The Bailout
THE BAILOUT....Matt Yglesias looks at the past year of economic upheaval and says:
This is why the right response to a Bush/Paulson decision that we have to "do something" would probably be to take their specific proposal, light it on fire, and then call up some people who hadn't spent the past 12 months ignoring festering problems and ask them to help you write a proposal.
This is unfair. Bernanke and Paulson have, in fact, taken tons of action over the past year. They've injected massive amounts of liquidity into the market through multiple term lending facilities, slashed the discount rate, opened up the discount window to all comers, passed a big stimulus package, and have become willing to accept everything from double-wides on up as collateral for loans. None of it worked. But even at that, they're still having trouble getting everyone on board for a systemic bailout bill. Does anyone seriously think they could have proposed something like this a year ago and gotten anything but guffaws from Congress?
On the other hand, my left-wing populist instincts are just fine with this:
If anything should be done, the case seems clear for wildly higher tax rates on high-income individuals than prevailed during the Clinton years. Are we afraid of stifling the kind of fat cat activity that's brought us to our current situation?
OK, I don't know about "wildly." But we could use a few more brackets with higher marginal rates for very high earners. The negative effect on the economy, contra modern supply side goofballism, would be about zero.
I kind of agree that Paulson and Bernanke are getting a bit of bum rap, they have been trying to put out this fire for a while. They just failed.
But they should be proposing a tax surcharge on higher income people to help pay for this thing in order to protect the dollar. That's outside the Fed Chairman's purveiw, but it's certainly the job of Treasury to talk about funding.
That's the fight the Dems should be engaging in. They could humiliate Bush for this mess, score some populist points and propose good fiscal policy all in one shot.
Reid and Pelosi really need to go. They lack any imagination.
This new thought provoking video touches on this and the other issues going on in our society right now.
Your antipathy for yacht dealers and exclusive, members only golf course developers is showing.
BWAGAAAAAAAAAAAAAAAHHH CLASS WARFARE!!!!!! /pre-emptive wingnuts
Buffett says he's confident Congress will pass the bailout, but does he say how urgently it's needed?
Right now, it's "Pass this $700 bln right now, without any mom & pop, labor, or main street amendments, or we'll push the economy over the cliff and blame Democrats."
After the election, no matter who wins, it'll be "Give us our amendments, or your Republican finance buddies go bust."
"Our institutions, our banks and investment banks, are strong."
-- Treasury Secretary Henry Paulson, 3/08
How many times in the last year or so did we hear Paulson and Bernanke say that the problems were "contained".
They can hardly be said to have been ahead of the curve, especially when responsible people were warning of the consequences 3 or 4 years ago.
Surely there was someone in this administration that figured out that people trying to buy houses at far above the old standard of 3 times annual income would lead to trouble. But it certainly wasn't these two.
Surely someone in this administration knew that the amount of leveraging being done on the shakey base of over-stretched borrowers was asking for trouble. But it wasn't these guys.
They have applied bandages when the damage was apparent to all. But it was still "contained".
Now we have the danger of a "global financial meltdown". It's contained, but only in the sense that it is contained to planet Earth.
And don't continue to call the Paulson bill or the Dodd bill a "plan". That wildly misrepresents a bundle of money tossed out of a helicopter as a "plan".
If you look at the bills, both of them buy some sort of paper of possibly no value in a process yet to be determined for some amount of money yet to be determined and somehow disposes of the paper in a manner yet to be determined. The ultimate cost of purchasing the paper is not known or limited. The value to the taxpayer of this process has not been determined. The effectiveness is not known. There is no road forward, no metrics for along the way, and no final destination.
The only advantage of the Dodd bill is that the taxpayer ends up owning part of an institutions whose facade of expertise and profitability was partially or wholly based on the dodgy paper in the first place
These are the same people who led the war in Iraq, let Osama escape, ignored the Afghanistan problem, fumbled the Katrina recovery, awarded billions in no-bid contracts to their buddies, provided signing statements that hollowed out bills, politicized the legal, intelligence and scientific processes of the government, managed to convict only a driver after 5 years of legal and extre-legal gyrations, etc., etc..
And the US is supposed to turn over $700B plus in addition to the hundreds of billions already committed?
Really?
They have the answers today--when they didn't have them yesterday?
Please.
so if this most recent flareup was caused by allowing Lehmann to go bankrupt, as seems plausible, how about reviewing and reversing, or partially reversing, the decision to let Lehmann go bankrupt? I guess I'm biased since I just read that a lot of Bay Area municipalities are creditors of Lehmann.
Part of the problem with an uncontrolled bankruptcy seems to me that from the management's perspective, there's no difference between being a little bankrupt and a lot bankrupt. But it makes a big difference to creditors, and the broader financial system.
Shouldn't the Fed and Treasury do a mea culpa, and at least agree to try & change Lehmann's uncontrolled bankruptcy, into a more patient, orderly bankruptcy?
The case is for a combination of pre-1997 capital gains tax rates and structure, pre-Bush income tax rates, and a financial transaction tax (previously mentioned here) on sales stocks, bonds, options, futures, swaps, derivatives, and any other financial instrument that is traded or quacks like one.
But the budget situation has gotten so bad that even those three tax catch-ups (as in catching up to Bush's spending - to spend is to tax!) probably won't be enough. Since the Republicans have already converted us to a social state, I'd throw in a temporary (5 years) 1% wealth tax on assets over $20M to "claw-back" some of the ill-gotten gains.
I think PeakVT is on to something. To get out of this budget mess some kind of tax on assets, in addition to income, will be necessary.
Has this ever happen before in U.S. history?
Come to think of it, real estate taxes are an asset tax.
Come to think of it, real estate taxes are an asset tax.
True, true, though those go mostly to preserve that real estate asset - police, fire, local government, local courts, etc., whereas a Federal wealth tax would go into the general fund for nationwide use on anything. I'm sure 1% wealth tax would encourage a whole new level of tax avoidance (guarranteeing David Cay Johnson a lifetime of material) but it would be pretty easy to track down the worst offenders - just look at financial firms' annual reports for the past 10 years.
ooooooh, false equivalence. They're proposing "something like this" right now and getting guffaws (albeit with a ring of gallows humor to them). The fact it would have looked even more ridiculous a year ago isn't an argument in their favor. The point being made is that Bush and Paulson should have seen something coming and have acted in a manner appropriate to the easily-anticipated risk.
This is unfair. Bernanke and Paulson have, in fact, taken tons of action over the past year.
Indeed, and it didn't work. George Bush took plenty of action in Iraq and that didn't work either. I wonder WHY?!
They've injected massive amounts of liquidity into the market through multiple term lending facilities, slashed the discount rate, opened up the discount window to all comers,
Except, you know, homeowners.
passed a big stimulus package, and have become willing to accept everything from double-wides on up as collateral for loans.
That is to say, they have continued the policies that created the problem in the first place.
None of it worked. But even at that, they're still having trouble getting everyone on board for a systemic bailout bill.
Because a long track record of miserable failure is such a confidence-inducer.
Does anyone seriously think they could have proposed something like this a year ago and gotten anything but guffaws from Congress?
Perhaps that is because what they proposed shouldn't have been proposed.
max
['Perhaps they are simply wrong.']
The case is for a combination of pre-1997 capital gains tax rates and structure, pre-Bush income tax rates, and a financial transaction tax (previously mentioned here) on sales stocks, bonds, options, futures, swaps, derivatives, and any other financial instrument that is traded or quacks like one.
But the budget situation has gotten so bad that even those three tax catch-ups (as in catching up to Bush's spending - to spend is to tax!) probably won't be enough. Since the Republicans have already converted us to a social state, I'd throw in a temporary (5 years) 1% wealth tax on assets over $20M to "claw-back" some of the ill-gotten gains.Posted by: PeakVT
Sounds good to me. If we'd left the tax brackets and such as they were in 2000, we'd be in much better shape today.
Anyone who has ever been scammed before will remember those classic words "This is a limited time offer."
That's the essence of the current Bush/Paulson scam. "Do it NOW or we can't protect you from the dire consequences of your own inaction! We'll tell you what to do. Don't worry. But do it NOW!"
Anyone who trusts the Bush administration, bankers, Gypsies or conservatives is a fool. As the McCain campaign has been demonstrating, they lie as a matter of reflex, just like any experienced scammer does. It's all designed to shift your money to their pockets.
"Do it NOW, without any Democratic amendments, or we'll let it explode and blame Democrats before the Nov. election!"
I was listening to Barney Franks yesterday, and he related how the initial arrogant proposal was objected to, and that the bailout boys agreed to oversight and legal liability, but dug their heels in on executive salaries. This tends to make one suspicious that we are talking cronyism as well as crisis.
One of my biggest issues in the discussion of actions taken recently is that Bernanke seems unfarily marked as part of the failure, when it was Greenspan's actions (from a Fed perspective) over the years that helped propel this along. He then hits the door running and drops it in Bernanke's lap.
Not to say Bernanke may need to be held accountable for the proposals coming out these days. But at least he has, seemingly, refrained from discounting the seriousness or injecting his standing in the political arena.
I got an interesting email this morning; pass it on:
SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP
DEAR AMERICAN:
I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.
I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.
I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.
THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.
PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV
SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.
YOURS FAITHFULLY MINISTER OF TREASURY PAULSON
I don't know about
I don't know about management salaries, but Corker is insisting that all auto worker's send their first born child to perform indentured labor for finance company executives, who apparently can no longer afford butlers due to their reduced bonuses.