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Cleaning Up the Rot
CLEANING UP THE ROT....Atrios on the credit crisis:
CNBC just said what most aren't: the reason why interbank lending rates are so high is because banks don't trust each other. The reason they don't trust each other is they don't know how much and which pieces of big shitpile they own.
Yep. That's why having the Treasury Department buy up all those toxic assets is probably a good idea. Recapitalization isn't enough if it leaves banks still owning securities with values so variable that it's too risky to lend to them anyway. We need to get that stuff off their balance sheets in order to make their financial position more transparent and we need to increase their capital base (which the Paulson plan accomplishes by paying above-market prices for the toxic sludge in return for a guarantee of equity down the road if the sludge eventually has to be sold at a loss). That combination has a better chance of working than either one alone.
And why is the toxic sludge so hard to value? Can't we just make banks open their books and provide detailed information on all this stuff? Sure. But you've still got two problems. First, in the later days of the mortgage free-for-all, mortgages were packaged up with no documentation at all. So no one, not even the banks, knows for sure just how good or bad their mortgage portfolios are. Second, even if we knew that, their value would still depend on how much farther down home prices have to go. And that's anyone's guess.
So: get this crap out of the banking system, where it's causing systemic rot. Recapitalize the financial industry. Get equity guarantees in return to protect against future losses. And then hold your breath and hope it's enough.
In a mere 24 hours (the older I get the faster I learn) I've become a convert: pass a bailout bill fast, somewhat more progressive than the Paulson piece of shit, I hope.
And Obama seems to be out maneuvering McCain on this, and will probably be associated with whatever "success" can be gleaned, in the short term, from this mess.
Yes, pass the bailout bill, but let's be clear about where the blame lies so it does not happen again.
Bad mortgages. Lots of them.
Why did banks offer bad mortgages? Because of government intervention to open up the sub-prime market.
Some will argue that the bad loans did not all come under the CRA program, but that idea does not hold water. After the sub-prime market was pushed by the government, other financial institutions had to follow suit in order to compete.
Again, who wanted to put more regulation on this mess. The Republicans and John McCain. Who does Bill Clinton say blocked regulation. The Democrats.
So I agree to pass the bailout bill, but let's not go down the road of having a GSE sponsor more bad loans and repeating this thing.
AFAIK Fannie Mae and Freddie Mac are no longer going to do this. But lets at least get it in writing.
The banks lent money to people without checking their paystubs. That is the bank's problem. Lots of folks made money generating that loan. It is not the taxpayer's responsibility to clean up their toxic crap for them.
If Goldman Sachs can give excellent terms for Buffet, why can't the taxpayer get them? Why can't banks sell as much stock as needed to buy each other's toxic crap? Or why not bundle all that toxic crap into a bunch of ETFs and let the market price it however markets do it.
What you are saying in short is: there are five mafia bosses in town and they don't trust each other. Let the government pardon them all for their past criminal activity and hope they start trusting each other again. What's the problem with this bailout idea? It is moral hazard and all the folks who benefited from that criminal activity are let off the hook. Later the mafia bosses will continue to do what they know best -- criminal activity.
I understand a lot of folks on Main Street will also get hurt if there is no bailout. But that is the bargain they made when they took on a much bigger loan than they could afford. Some of us refused to take bigger loans and refused to buy expensive stocks and fancy derivatives because we knew they were toxic.
Just because we lived with increasing credit the last 20+ years doesn't mean we have to continue maintaining a credit driven economy forever. People can live productive lives and pursue happiness without excessive borrowing.
No bailout. The credit bubble deflates. The economy recalibrates to the new reality. And we will continue to live perfectly normal lives.
I'm not an economist so I EXPECT to get flogged for this concept. Instead of the government (you & I) buying the toxic assets from these firms at a substantial loss to provide liquidity for the market without providing term changes for homeowners; how about we buy the good, performing assets from the firms which could give them a strong surge of capital to reduce the overvaluation of their own poor risk properties for the purpose of bringing them into balance? The new terms could provide working homeowners with a loan that they might be able to afford, help staunch the flood of foreclosure properties onto the market, and give the government good quality assets it could bundle and readily sell off to solvent buyers to keep the taxpayers from "bailing out and rewarding" predatory lenders. Just a thought...
Can this really be true:
"And why is the toxic sludge so hard to value? Can't we just make banks open their books and provide detailed information on all this stuff? Sure. But you've still got two problems. First, in the later days of the mortgage free-for-all, mortgages were packaged up with no documentation at all. "
I can see how this is a bi-product of de-regulation, but being an accountant, I'd want lots of documentation to support what I'm buying. But I guess it wasn't accountants who were doing this stuff.
Well, I'm not so converted. Seems to me there is a mighty sound basis for the anger and distrust that people in general are feeling about Wall Street and the banks.
And one thing there's never been a shortage of in my lifetime is forgiveness and bailouts for the very richest people when they abuse their positions.
Throwing money at an interbank lending problem is not gong to solve structural problems of the economy like unemployment, a national debt that has doubled in eight years, or fuel prices that have done the same.
Now, if those aren't structural problems, I'd be glad to hear that. If anyone can explain why things will be peachy-keen after we buy the rotten investments of the banks, I'm willing to listen.
But until I do hear that, I want to know why we shouldn't cut the war budget to help pay for this extravaganza. I want to know why we shouldn't take a 'Swedish' approach and tax transactions on Wall Street to help pay for this. And exactly why shouldn't we just buy a few big banks, set them on sound financial ground, and keep them that way with regular strict audits?
People are mad because they've watched pigs wallow at the trough and "leaders" stampede us with alarms for eight years. Maybe it's time for some changes around here.
"Why did banks offer bad mortgages? Because of government intervention to open up the sub-prime market."
Or, there was so much competition in the mortgage industry (remember all the ads on TV?) that lenders had to relax their standards if they were going to sell mortgages. And they didn't care because they'd re-sell them one way or another. So it wasn't their problem. It seems to me that the fundamental error by those who bought mortgages from originating lenders was the assumption that the originating lenders did their due diligence. But why should they? What motivation did they have?
And then there's also the fact that many lenders didn't think the housing bubble would burst, or wouldn't burst so soon. Either way, that had their reasons not to dot every "i" and cross every "t" when selling mortgages.
Right on.
But until I do hear that, I want to know why we shouldn't cut the war budget to help pay for this extravaganza. I want to know why we shouldn't take a 'Swedish' approach and tax transactions on Wall Street to help pay for this.
The requirement that legislation passes by majority vote.
Ms. Gillian Tett has a characteristically educational piece in FT on this: "Putting dodgy assets in deep freeze will not remove the rot."
I'm not an economist and don't pretend to know the best solution. But this sounds like a sensible approach.
(Which is a shock, coming from a progressive blog. A lot of lefties have lost their sanity these past two weeks.)
The "mortgages were packaged up with no documentation at all" issue is a result of lax oversight by the SEC, as I have heard. Also, SEC waivers on asset requirements to the big five investment banks are a big reason why none of them is left standing. Now, firing Chris Cox is not going to solve the problem, but SEC changes will be a key part of the reform that's needed beginning in '09.
I hope that the major reforms are passed next year. It will be a better package with a Dem congress and an Obama White House.
The rescue package needs to happen now, though, under Bush, and should be targeted at just the immediate problem.
Atrios has ID'd the problem of not knowing what's in the the Big Shitpile for awhile now.
Am I the only one who suspects the financial institutions aren't auditing their pieces of the Big Shitpile deliberately?
If not knowing is such a problem, why don't the financial institutions hire some auditors and start to figure out how much of their share of the Big Shitpile is good?
Scientists, pollsters and economists all use sampling to evaluate things where counting everything/everybody is impractical.
What's so hard about sampling the Big Shitpile?
I get the impression the financial institutions don't want to sample the Big Shitpile because they are afraid of what the answer will be.
I'd be more inclined to help the financial sector fix its mess if it was making an effort to help itself and explaining who is responsible for the problem.
Absent evidence the financial sector is taking the basic steps to right its own house and absent anyone being responsible for the problem, I'm inclined to let things get worse.
If it's such a dangerous crisis, eventually the people in power will do the right thing, right? Or don't they care about anything but their self-interests?
"Being an accountant, I'd want lots of documentation to support what I'm buying."--JK
I don't get why Kevin Drum thinks this is an absurd thing to ask for.
As far as I can tell the financial sector put a bunch of garbage in these mortgage-backed securities and they want to unload them on the taxpayers without any sort of audit.
Why is this a reasonable suggestion?
Kevin: That's why having the Treasury Department buy up all those toxic assets is probably a good idea. Recapitalization isn't enough if it leaves banks still owning securities with values so variable that it's too risky to lend to them anyway.
Define "all those assets" that make up the Big Shitpile, please.
The total US mortgage market is $12 trillion. The credit swaps based on that is $62 trillion (source: Kevin Drum, "Financial Innovation" 9/23/08).
Are you certain $700 billion is enough? What about $7 TRILLION? or $70 -- that's SEVENTY TRILLION?
I understand a lot of folks on Main Street will also get hurt if there is no bailout. But that is the bargain they made when they took on a much bigger loan than they could afford. Some of us refused to take bigger loans and refused to buy expensive stocks and fancy derivatives because we knew they were toxic.
You really think that because you were financially virtuous, you're not going to suffer right along with the sinful?
Boy, are you in for an unpleasant surprise.
Let the bastards fail!
CRA didn't cause the bubble. You think poor people and minorities drove Southern California real estate prices up by 100% in five years?!?
Lotta them people driving SUV's they got by extracting HELOC money from their Irvine homes. Mmm hmm. You know how "those people" love their stainless steel appliances and granite countertops. Those ethnics are prone to believing real estate goes up forever, that's how come they pressured brokers into approving $1,000,000 1%-teaser ARM loans on 3-bedroom 1970 ranch homes.
Nooo ... securitizing mortgages made a lot of [white] people very rich, nobody holding a gun to their head. Too bad crap loans can only pay if the market always goes up, but that's not the problem of [middle aged white male] people at Goldman Sachs making a mint by packaging these things.
It's not hard to value MBS's.
You can assume almost all no-doc loans were made to people who can't afford to keep the house. Assume X% of people who are 'underwater' by Y% will default (use some historical model for this). Assume housing prices will go back to historic income ratios (down another 15-20%.) You can figure out the recovery rate on defaults - what the bank will get on the house at auction (assuming this is a first-mortgage!)
The only problem is that if you do the math properly, the banking system is insolvent. 10-15% net loss on $15T of real estate loans wipes out the entire capital of our banking system.
You really think that because you were financially virtuous, you're not going to suffer right along with the sinful?
Oh I understand this perfectly well. But it is all relative. Those who were cautious and understood the mania around them will be hurt less than those who let their greed get the better of them.
Been there, done that in the late 90s tech bubble. Those who were careful saw their portfolios take a small hit (or none at all if they went into cash), but nowhere nearly as bad as those who got sucked into the bubble and lost 60%+ of their portfolio to a vicious bear.
CNBC just said what most aren't: the reason why interbank lending rates are so high is because banks don't trust each other. The reason they don't trust each other is they don't know how much and which pieces of big shitpile they own.
Atrios apparently hasn't been paying attention. I have read numerous commentators during the last few months observing the phenomenon that banks (mostly investment banks and hybrids which created and invested in toxic SIVs)don't lend to each other because of the uncertainty of how much of such debt the requesting party may have on their books. There is also uncertainly, even by the owners, of the value of the SIVs.
The U.S. economy has been propped-up by borrowing.
It was unsustainable.
A reckoning has come.
Will giving $700 billion to shady bankers keep the U.S. economy living like when everybody was borrowing? Not likely.
The economy is going to contract. It's wrong for people to use the dip in the stock market as justification for spending a bunch of money on a project to keep the reckoning from happening.
But it is all relative.
But unfortunately, not proportional. Those who didn't have much to begin with and were very careful about not risking it are going to be hurt a lot worse than those with a lot who took big risks and lost, because the latter will still have more left than the former.
Kevin is one small step away from arguing for cramdown. I'm going to take that step for him.
A lot of folk think that cramdown is a favor for homeowners. It may be. But us reptilian financial folk (take my word for it: I'm as reptilian as they get) also support cramdown for purely reptilian reasons.
As Kevin said, Big Shitpile is worse than mere bad credit; it is uncertain credit. As Atrios said, this uncertainty is a huge problem. Uncertainty leads to fear; fear destroys credit.
Nothing will restore certainty quicker than cramdown. Crammed down mortgages are much easier to value than the current toxic sludge. (They are simple in structure and relatively likely to perform.) And cramdown forces price transparency in the housing market. The current market can't do it without cramdown: second liens and so-called "tranche warfare" keep servicers from being proactive in restructuring out of court.
And--if you are a liberal--you get the added gravy of happier homeowners. But even reptiles like me get a housing market that clears quicker, and balance sheets that are easier to value.
Gah! Man, the financial and economic illiteracy around here is just incredible.
One. More. Time. This is not about the stock market, it's about the financial system. If the financial system crashes, You Will Lose Your Job.
Read up on the Great Depression, will ya? Millions of financially totally virtuous people were standing in soup lines.
The answer is simple. These banks could get this crap off their balance sheets today if they wanted to. There are two options; they could sell it (there are buyers ready right now, they just aren't willing to pay premium prices for crap). Or they could write down the value of the crap and move on (they would do this, if they had large profits to take the write down against).
Truly, the only reason the Paulson plan is going to buy this crap is because they are planning on bailing out all banks, even the healthy ones who don't need help, and even the sick ones that will fail anyway.
Yes, I agree a bailout is in order, but no, this isn't a good way to go about it.
db
Focusing on the loans (as horrendous as they were) misses the main problem here, which is the enormous amounts of leverage applied to these "assets" by way of CDO's and CDS's. If it were merely a problem of crap loans and HELOC abuse, the problem would be nasty but manageable.
However once all the garbage was packaged together, through the magic of Credit Default Swaps and leverage, we saw the creation of financial instruments supposedly valued in amounts far greater than the world's GDP. These fantasyland obligations are the reason the whole thing is so terrifying and unmanageable. However, in many ways the numbers in them are meaningless fictions.
It is as if a barful of schlubs, each with only some pocket change to their names, traded million-dollar bets with one another that they'd all get lucky that night, and decided to use these bets to try to impress the few available belles because "I got a guy over there owes me a million." When closing time comes and most aren't hooked-up, they start getting nervous about the bets, as they realize they are not going to be able to pay up, or get paid by any of the other schlubs.
The point here is that none of the million-dollar bets were about anything real. And neither are many of the CDS's currently causing this panic.
What the bailout tries to do is deal with the weakness of the underlying assets, in the hope that the massive fictional overhead of leveraged debt will once again seem like something other than a fiction (or at least, like something that won't be defaulted on). Even if it works, however, we still have the problem that these massive instruments are up there waiting to collapse on us.
A better approach would be to recognize that the whole leverage game being run by the investment banks is a fraud, and never had any relation to reality. Then, stop them from ever pulling the same stupid crap again.
Atrios says, "CNBC just said what most aren't: the reason why interbank lending rates are so high is because banks don't trust each other. The reason they don't trust each other is they don't know how much and which pieces of big shitpile they own."
What most "what" aren't? He's full of it. This has been part of the story from the beginning.
Thank God for Kevin who actually reads widely, admits what he doesn't know and posts thoughtfully instead of indulging his jerking knee.
Why must it be $700B now? Why couldn't it be $70B a month, subject to approval each month?
You're Paulson, you say "whoever gives me the most for this $70B check, wins." Then everybody makes the case for why their vague shitpile is worth so much. But the $70B only represents a fraction of their total shitpile; so they're going to try to get rid of the absolute worst stuff first. So even if they lie to you, oversell it, you at least know you're getting the worst fraction of their portfolio. Then, come back a month later and do the same thing.
My crude point here is that if the banks sincerely want to get rid of this stuff - and I believe they do - then you can make the best deal for the government, leverage its position, by giving the money out in smaller tranches.
But unfortunately, not proportional.
Swift, yes, agreed. But that is how everything always was. Risks and rewards haw always been disproportional -- with or without an economic crisis.
The bigger context in which I am making my "no bailout" argument is that I don't trust Congress and Administration to know how to precisely solve this problem. For many years I have been concerned that the Fed was micromanaging our economy and the markets as if it knew how to precisely control economic activity. It is my belief that the Fed, with full consent from treasury and administration, micromanaged the economy to keep printing prosperity (measured by stock markets, gdp etc). The bailout is more of the same micromanagement. How can the same people who created the problem, failed to acknowledge it, can now be trusted to solve it after letting us deep down into this shitpile?
IMHO, we will be no worse off without a bailout than with a bailout. With a bailout we are putting taxpayer money on the line and encouraging future risky behavior. I simply don't buy the argument that we will be better off with this bailout administered by this administration.
Certainly banks want their bad mortgages off of their balance sheets. Almost all of them. Perhaps they are colluding to freeze up their interbank lending system with outrageously high interest rates. Are the banks holding American tax payers hostage with their own deposits?
Why are you all assuming that the bad assets are mortgages and homes?
Aren't the bad assets the credit default swaps? I mean, the really toxic "assets"? And aren't these pieces of paper not necessarily based on anything meaningful--anything even as meaningful as a half-built house in a ghost subdivision?
I see John Hansen is as ignorant about this issue as he showed himself to be about every other issue back when he was carrying Republican water on Washington Monthly.
This isn't Bill Clinton's fault. It isn't the fault of the Community Reinvestment Act. Why not? If you still don't know after all the documentation debunking this racist drivel then you aren't smart enough to read my posts.
Who does deserve the blame? The people who insisted that what we really needed was more free market capitalism. Of course, these are people too stupid to recognize that any "free market" based on government enforcement of contracts is no longer a free market and that, since experience shows that no market can long exist based purely on trust that everyone will do the right thing government enforcement is a necessity, which means that there is no such thing as a free market at this scale.
In other words, free market fundamentalists are idiots unclear on their own basic premises. Those people find their home in investment banks and the Republican Party (for the most part). And that, is where the blame rests.
You're welcome John. Now crawl back into the hole from whence you came and no longer bother your intellectual betters.
Let me guess:
we can't nationalize these banks because their debts are too much to take on and letting them default first would cause too many others to fail who are propped up on the same bad debt.
If this is true, that means $700 Billion isn't even close to enough and these guys are just trying find a parachute while congress is just trying to kick it down the road a couple of weeks, at least till after the election.
I just read that the Senate bill is being loaded up with tax cuts to woo House Republicans.
If that's how it's going to pass - by REWARDING the babies and the frauds for their deception yesterday - then I will join team apocalypse and turn against this bill which I now reluctantly support.
Spend that money creating many new banks with about $5-10 billion equity that happen to be owned by the federal government. The government could sell them after about a decade. Let them buy loans, one at a time and if there are a few banks that go belly up, the economic system wouldn't be destroyed.
Is a security that is backed by undocumented mortgages really backed by anything at all?
A rational person would value such a security pretty close to $0.
Recapitalization isn't enough if it leaves banks still owning securities with values so variable that it's too risky to lend to them anyway.
IMO this is inaccurate, Kevin.
When you recapitalize a bank, you can/should assume its toxic assets are worth zero, and write a government check sufficiently large to give the bank in question adequate capital (even if its toxic assets really were worth nothing). There's no charity involved, of course, because the institution receiving the money has to fully pay for its infusion of taxpayer dollar with shares.
In actuality, of course, the bank's toxic assets will not be worth zero, and in the fullness of time any upside on that front will only strengthen the bank in question's financial health, as well as accrue to the benefit of taxpayers (who own a bunch of the firm's shares, after all).
When recapitalizing a bank with government money, there's no reason, in other words, to allow for any mystery with respect to the bank's balance sheet, as long as you truly account for all of the bank's damaged assets.
Moreover there's no reason so far as I can tell that the government couldn't (temporarily?) guarantee a bank's interbank borrowings after such a capital injection, assuming such an injection is accompanied by a very thorough auditing of said bank's books. Hence the risk of lending short-term to the bank should go from being merely low, to basically non-existent.
My head hurts from trying to understand all of this. As far as I can tell, jimBOB, you're close to the truth. Carl Nyberg also has legitimate concerns about the bailout and talks sense. Since I seem incapable of grasping all of this on an economics level, I decided to find out more about Paulson. Hank Paulson graduated from Dartmouth in 1968 with a degree in English. He got a Master's in Business Administration from Harvard in 1970. He was an aide to John Ehrlichman (!) in the Nixon administration from 1972 to 1973. Succeeded Jon Corzine as CEO of Goldman Sachs. His compensation package in 2005 was $37M. He's an ardent environmentalist and his philantropic activities center on environmental causes. His financial worth is estimated at $700 million. He was raised a Christian Scientist, as interestingly enough, was John Ehrlichman.
So, what does this tell us? Not much. He certainly has investment bank experience to his credit, having had a long career with Goldman Sachs prior to becoming CEO, but not much economics education. He has sought advice during this crisis from Wall St. CEOs rather than university economics types.
What else to say...Joseph Stiglitz, a Nobel prize-winning economist, has a good article in The Nation entitled "A Better Bailout." Give it a look. In fact, all three 'financial crisis' pieces at The Nation are anti-bailout or bailout-critical at least.
I simply can't shake the feeling that the American taxpayer is being had and that the bailout will enrich those who have made a fortune commiting fraud. Why are these mortage bundles so hard to value? Isn't it because 'someone' mixed good and bad mortagages together to in fact make them nontransparent? And weren't these packages put together at the investment bank level? The non-transparency was quite intentional. These guys we're planning on bailout out are shysters of the first order.
The answer is simple. These banks could get this crap off their balance sheets today if they wanted to. There are two options; they could sell it (there are buyers ready right now, they just aren't willing to pay premium prices for crap)
Absolutely true. Or, to put it another way, banks could find buyers for nearly all their toxic assets if they were willing or able to price the stuff at sufficiently attractive prices. They're understandably not eager to do this as this likely means pennies on the dollar. But it's simply not true to say "there's no market for it." There is a market for it, but bank executives simply don't like the prices said market supports.
we can't nationalize these banks because their debts are too much to take on and letting them default first would cause too many others to fail who are propped up on the same bad debt.
Not true. The government is already on the hook for most of a bank's debts. They're called deposits, and they've been insured by Washington since the 1930s. We can't "nationalize" banks because the political calculus favors that American tradition known as subsidies for the rich.
He has sought advice during this crisis from Wall St. CEOs rather than university economics types.
This raises another good point. Since when does the government contemplate trillion dollar bills without, you know, hearings? Hearings where we the voters actually get to hear from real live experts like economists. Hearings that might -- heaven forbid -- ultimately translate into competing legislation. (Lou Dobbs of all people was ranting about this last night; no, I can't stand him but I had insomnia and was channel surfing at 3am, so there.).
I posted this in another thread the other day but feel its worth posting again. In a Washington Post editorial on Feb 8, 2008, Eliot Spitzer accuses the Bush administration of being a 'partner in crime' with the predatory mortgage lenders. The info in this piece is really quite astonishing and the title is apt. To put it simply, the Bushies tied state AGs hands when they tried to stop predatory lending in their states. How? Read the article:
Predatory Lenders' Partner in Crime, Spitzer
This article is probably the reason the FBI's investigation re: Spitzer was leaked to MSM just three weeks later.
Kevin,
We need a functioning financial sector. But does this financial sector going forward have to be run by the same institutions and individuals who created such a mess (so much social damage)in the past?
Either temporarily nationalize, sort out, then reprivatize
or
Set up a new parallel financial sector
or
Lend the money to the stronger (smarter)banks and let them sort out their Darwinianly inferior brethren
No point betting the family jewels on dinosaurs.
Those who argue "let them fail" don't seem to grasp credit is being cut off for everyone. Businesses generally don't keep their money in a safe; they keep it in bank accounts backed by commercial paper. If there is no market for this paper (even if it is triple A solid stuff) the banks are forced to freeze the account as they cannot generate the money to honor withdrawals. The result is businesses can not make payroll, resulting in job furloughs. This is already happening on a limited scale, and it doesn't take much imagination to see the "kick in the teeth" it will give the economy if it is allowed to spread.
I few notes:
CRA, nonsense. The bad loans were the ones made near the peak of the housing bubble- roughly 2004-2007. That was when proper enforcement of lending standards would have made the difference. Which party was watching the store. Decisions made concerning minorities getting loans ten years earlier don't figure into this.
We get into a big emotional thingy, because we are programmed to punish badguys, and Investment Bankers fit the bill very nicely. The problem is how many innocents get hurt by our attempts to get a few bad big fish. I bet the ratio, of innocent victims to real badguys is probably at least a thousand to one.
No doubt, this bailout, or any other conceivable package can not restore BAU pre crisis. That is neither possible nor desirable. We do need a national attitude adjustment, the era of the free lunch is over. Unfortunately, a lot of us will discover we are a lot poorer than we thought we were during the era of the free lunch. The key is easing us into this new lower state gradually enough, that we don't all break our bones when we hit the ground. That is what the bailout is about, letting us down slowly enough, so we are still whole when we arrive at the new lower level. We can't make this level higher, but we will be a heck of a lot better off without broken legs when we get there.
Kevin,
who/what are you reading?
who/what are you seeing?
you and paulson are quite literally the only one who thinks we need to purchase these crappy assets.
recapitalizing the companies is one thing, buying their poopy diapies off them is another.
OT:
Mark Kleiman's site reads "bandwidth exceeded."
"Perhaps they are colluding to freeze up their interbank lending system with outrageously high interest rates. Are the banks holding American tax payers hostage with their own deposits?"--tpx
Why wouldn't they do this?
Is it worth playing chicken to sell the Big Shitpile to the gov't for $700 billion?
Remember, these are the same companies that recklessly created the Big Shitpile.
Those who argue "let them fail" don't seem to grasp credit is being cut off for everyone.
Perhaps they don't "grasp" this because it's not true.
I don't really know whether the bailout is good or bad on the merits, but I do suspect that the Democrats might have something very good and tricky up their sleeves. Suddenly Obama is coming out forcefully for the bailout. Many wonder why, when McCain faltered doing the same thing. I suspect that Pelosi might have tipped him off to the fact that the Dems can actually get enough votes on their own. Expect to see some fairly minor, progressive changes to the bill, and then see Kucinich and Co. come in from the cold. In exchange, of course, for further progressive legislation later. The bill will squeak by (will a lot of the GOP that voted for the original bill suddenly go against it? I doubt it), Bush will sign it, Obama will look good, and he'll owe the progressives big time once he's in office. Best of all possible worlds, if you ask me. Even those opposed to the bailout can agree that this would represent the greater good.
Nancy Pelosi is not as dumb as she looks. The GOP just got played badly.
rational,
People can live productive lives and pursue happiness without excessive borrowing.
And so a nation swings from "no Communism" to "no Borrowing" as the next great single-issue solution to the problems of the world. Great.
Fantasyland. The nation is no longer made up of yeoman farmers, and nuggets of silver and gold are no longer the legal tender. But if you're game, let's do find out what happens when the lending system completely breaks down. Why not.
If Paulson and Bush don't want to steal the money for their friends, why don't they accept oversight and real installment plans? they endangered the package by not setting up and independent agency and agreeing to come back to congress in say 50 bn dollar chunks.
Honest people would agree to these conditions.