Hell No

by: Matt Stoller

Sun Sep 28, 2008 at 04:02


Dean Baker:

According to the NYT, Lloyd C. Blankfein, Goldman Sachs CEO, was in the room with Henry Paulson (former CEO of Goldman) when the decision to save AIG was made. Why does this matter? According to the NYT, AIG owed Goldman $20 billion. If AIG had been allowed to go bankrupt, Goldman would be in line with all the other creditors, hoping for a few dimes back on each dollar of debt. Because Henry Paulson decided to rescue AIG, Goldman gets paid in full.

The bailout details aren't clear, but I see no reason to think that the addition of House Republicans to the negotiating process has improved anything.  For what they've tried to do here, Barney Frank and Nancy Pelosi should be moved into the 'moderate Republican' column.  I've long thought that Pelosi got a bad rap, that she was just managing a Blue Dog dominant caucus.  But this, plus Barney Frank's utter contempt for the voters, for common sense, and for a completely corrupt Wall Street bailout, changes my mind.

I can't believe these two would do this.  It's not just the $700 billion give-away.  Pelosi and Frank are jamming this down the throat of the Democratic caucus for no good reason.  This probably won't unfreeze the credit markets, it's not going to solve the crisis, all it's going to do is give money to Wall Street executives.  And it is wildly unbelievably unpopular; no member is getting positive calls about it and every member is getting huge numbers of angry calls.

It's a horrible, craven, corrupt deal, it's politically idiotic, and it is a testament to the utter and intentional failure of Speaker Pelosi, Majority Leader Hoyer, Caucus Chair Emanuel, and Finance Chair Frank.

The Democratic rank and file haven't seen this bill, and I'm pretty sure that the Republicans aren't going to want to vote for it.  No one likes it.  Hell no on this deal.

Update:  How many times do we have to go through this?  There IS NO PONY PLAN.  It's either the plan on the table or the election.  There is no alternative.  You can't vote for your own particular bailout, it's a yes/no on this one.  

In 2002, you couldn't vote for a specific type of war, you had to vote to let George Bush run his own war.  That's the choice on the table, my friends.

Matt Stoller :: Hell No

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Hell No | 63 comments
Pitchforks and walls! (4.00 / 1)
Yippee!

I'm not saying this bill is the solution (it probably isn't), but let's see some specific facts why it isn't. Also, what's the alternative that you propose? I get the perception that many are opposing it just to oppose it.  

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Bingo... (4.00 / 1)
This has been, imo, a pretty ridiculous episode in the liberal blogosphere... railing against something without necessarily having a good idea of what they're talking about.

I'll agree to one thing: the transparency for this was absolutely terrible, and that's a disgrace.  But people seem awfully cavalier about the fact that a multi-billion dollar industry basically just disappeared in the past couple weeks, the biggest S&L just folded, and a huge insurance company were just taken over by the government.  These underlying issues that caused these problems need to be fixed, but at the same time, the problems that were created also need to be treated.  Is that this bill?  

I don't know for sure, but neither do, as far as I know, most of the people who seem to be railing against it.  Like it or not, this is why we have an elected, representative government.  That's not to say we shouldn't express skepticism or dissent, but it's also their jobs to worry and fix this kind of shit.  From what I understand, there were some provisions that the liberal bloc in the house also got in, and the conservative stuff sounded "optional" and, from what I'm reading, basically won't be used.  We'll have to wait to see the whole thing in the morning, I'm guessing.

[ Parent ]
You've got it backwards (4.00 / 5)
It's the side that wants to spend $700,000,000,000 that needs to make the case to do something. In 2 days of testimony, neither Paulson nor Bernanke could explain why this would do any good. With good reason, because virtually no academic economist thinks it will help. Check out Krugman.
[ Parent ]
Weird logic (4.00 / 2)
The transparency was absolutely terrible, nobody knows what's in the bill, where the money comes from and goes to, or what evidence there is that it will do a particle of good, but people are "awfully cavalier" about the economic problem -- and that's apparently "ridiculous". Seems to me it's you who are being awfully cavalier, dismissing the as mere terrible transparency a secret process the recalls Stalin's Soviet Union.

We are evidently supposed to quietly demonstrate our faith that the rulers will do the right thing, that giving us some clue about what they intend to do with our money is just a waste of their precious brilliance. We are supposed to just forget that these movers and shakers are precisely the sorry assholes who made this happen in the first place. It is, after all, THEIR JOB to worry about this kind of shit, even though of all the people on earth they are the only ones proven beyond a doubt to be incompetent to deal with it. But ye gods, let's not rock their boat, whatever we do.

I don't care what "liberal bloc" tweaks got into the "compromise". All I do know is that this mess was a long time coming and was created by the exact same crooks and liars that are now screaming for a handout. I also know that this scene follows the precise same script as the Iraq invasion scam, FISA, the Patriot Act, and the rest of the Bush/GOP/Blue Dog assaults on the American people. But I guess it's unseemly to ever learn from experience because, after all, "we have an elected, representative government." Was that some kind of subtle joke?

[ Parent ]
You are a trusting and optimistic soul. (4.00 / 1)
The problem is that you still give this bunch credit for being creditable.      

I've long thought that Pelosi got a bad rap, that she was just managing a Blue Dog dominant caucus.  But this, plus Barney Frank's utter contempt for the voters, for common sense, and for a completely corrupt Wall Street bailout, changes my mind.

My question for Matt is, what took so long?  We've already seen plenty backroom deals on the war and trade to have formed this conclusion.  
[ Parent ]
Fear and ignorance (4.00 / 4)
I don' think this bill is corruption.

It gets pushed for the same reason drug reps get doctors to push their stuff.  Because they are skilled manipulators.  The money they use is merely to get a chance to manipulate them.  Not quite the same as straight up graft.

My suspicion is that Pelosi et all are probably acting on a lot of fear of the unknown and ignorance.  

If they were genuinely corrupt and understood what they were doing I think the bill would be better and that it would solve the problem.

Its more like the one persons complaint you posted up here.  Ignorant people listen to the lobbyists and the lobbyists are merely skilled salesmen with no actual knowledge.  But of course salesmen wouldn't get paid if they couldn't convince you to act in whatever way they see fit.

If they were genuinely corrupt they would be working in secret and not talking about the bailout.  But they want to trumpet what they are doing precisely because they think it is a good idea.  Not because they are corrupt but because they like to surround themselves with the failures who got us into this mess.

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they were told the stock market would fall 4000 points (0.00 / 0)
followed by a depression worldwide

and they had to decide in a day

they bought it

[ Parent ]
Hell. No. (4.00 / 2)
No need to hurry.
This stinks! (4.00 / 4)
The CEO in the room with the Secretary of the Treasury -- who happens to be his predecessor -- as a company that owes their firm $20B is bailed out?!?!  This has got to be the absolute, most corrput adminstration in the history of the United States.  And I read somewhere that Paulson is worth $500M and those assets are in a blind trust ... in Goldman Sachs.  Unbelievable!

The proposal by members of the Progressive Caucus is the best plan I've seen yet.  I say: no deals until after the election, then push the Lee-Woolsey plan.

I would get on my knee and beg Pelosi too (4.00 / 1)
to earn $500 million and billions for my friends, shoot it is better than working.
[ Parent ]
One more thing to add... (4.00 / 1)
"The Democratic rank and file haven't seen this bill, and I'm pretty sure that the Republicans aren't going to want to vote for it.  No one likes it."

I suppose we'll have to wait and see what happens, but when I read that "a bipartisan agreement has been reached", that sounds to me like... well, people are going to vote for it.  This is, of course, unless McCain decides to blow it up again.  As we already know from the events of the last week, the Democrats won't even bring the bill up unless it has enough bipartisan support.  

To be more precise (0.00 / 0)
It is just someone saying that a bipartisan agreement has been reached.

This isn't some calm controlled deliberation.  Its chaos with no one really knowing what is going on even inside the capitol.

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[ Parent ]
Matt, why did you demonstrate on Wall Street? (4.00 / 1)
I would have thought that nation-wide demonstrations on Main Street were the way to go.

Well, if you want an uprising that might make a Dave Sirota smile, passage of a $700 Billion bailout bill might be just what the doctor ordered. There seems to be unanimity, across the political sprectrum of the demos, that a key principle that Obama (e.g.) did not enunciate is that

The public shall not bear the burden of bailing out Wall Street, except temporarily. Every penny of the bailout will ultimately come out of Wall Street, itself, starting immediately.

As Thom Hartmann has pointed out, Wall Street is easily capable of funding this bailout, to the tune of $150 billion/year, via a very modest STET tax. It'll just have to be temporarily financed by the public.

So, there is your uprising issue - no taxation without justification. People holding  demonstrations on Main Street, across the country, educating their fellow citizens about the bailout (and about it's bipartisan nature of the public's rejection of who is bearing the brunt of the bailout, as well as the bipartisan nature of what is almost sure to be a sellout by Congress of hard-working America to Wall Street), demanding a STET tax on Wall Street be enacted immediately to (eventually) pay for every last penny of it. Any appreciation of assets that the government enjoys will simply be gravy.

We need not just better Democrats in Congress, we need better Republicans, too. Why not use your bloggerly talents to make this happen in a big way? It's too late to primary anybody in this election cycle, but it's not too late to start a bipartisan mass movement, so as to be fully prepared for the next one.

Any such movement should pay heed to how Hands Across New Jersey, another tax revolt group, was sabotaged. Maybe you should blog about that. For a starting point, you can watch Walter Burien's presentation, which is mostly about the legally required - but hidden from the public - documents known as the Comprehensive Annual Financial Reports.

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A bipartisan, national tax revolt movement should also cooperate on ostracism (0.00 / 0)
A bipartisan, national tax revolt movement should also cooperate on ostracism. I mean cooperate by Republicans ostracizing their own, and Democrats ostracizing their own. So, "cooperate" means separately but simultaneously adopted, with results communicated to the demos as a whole.

Please see my proposal for a modern day ostracism. We need to put pressure on Congress persons throughout their terms to do the right thing. Both Democrats and Republicans need to take out their own trash, so to speak.

If Congress passes a bill for taxation without representation tomorrow, the arguments over who to ostracize over this should begin the next day. Certainly, leaders of the gang such as Pelosi would get my ostracism vote.

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[ Parent ]
Dictatorship of the populists? (0.00 / 0)
I see lots of grave dangers in the very idea. And, btw, don't you think the rethuglicans at least laready ostacized unopular Representatives and Senators? Hardly any moderate left on their side. Lots of red meat party populists with a serious lack of responisibility for the public good instead. Just look at the way they try to exploit the economic crisis and the discussion of the bailout plan to get just another profit tax cut through. Despicable.

That how your hobbyhorse ostracism fares in practice. Where do you get the idea that that's much better than the current system???  

[ Parent ]
I get that idea from the ether. From where do you draw your ideas? (0.00 / 0)
I would love to be able to make inferences, based on comparisons with other democratic societies that practice the sort of ostracism that I call for. Unfortunately, I don't know of any. Do you? If so, I'm all ears.

As for the original ostracism, typically involving banishment for 10 years, it dates back to ancient Athens. Though it's application was uneven, and IMO often unethical (since it could be used pre-emptively), it is said by some commentators to have succeeded in reducing tension between factions - tensions that might have led to bloodshed and coups.

In other words, it seems to have achieved it's major goal.

What are the "grave dangers" of which you speak? Do tell. I don't think the public is always right, but I thought it was almost universally agreed that the advantage of incumbency is one of the primary reasons for Congress not being responsive to it's putative masters, and instead preferring well-moneyed interests who know how to spend cash on incumbents' campaigns. How does one fight that?

One way one fights that is by doing what dailykos does - it tries to get members of the public to fund "better Democrats". But at the end of the day, this funding is primarily to communicate campaign messages in favor of these "better Democrats". Ostracism, as I have conceived, will work (hopefully) by communicating negative messages about typically future candidates for re-election that need to lose. Or at least sweat winning, instead of counting on advantages of incumbent campaign funding.

If there's "hardly any moderates left on their (the Republicans') side", then all the more reason to dump them when they are up for re-election, thus all the more reason for districts and states that are likely to choose Republicans to choose 'better Republicans'. You've basically suggested a clear argument for ostracism. Or do you consider rank-and-file Republicans to be happy with Republican Congress critters? That seems quite impossible, given the overall miserable approval ratings of Congress - lower even than President Bush! I wonder if you understand my proposal?

That how your hobbyhorse ostracism fares in practice. Where do you get the idea that that's much better than the current system???  

You haven't produced any arguments for why it wouldn't make the current system better, though I readily admit that I can't produce evidence of the effects of modern ostracism, for or against, since it doesn't exist (AFAIK). If I had the time and patience, I might search for such evidence, but I'm willing to guess that it doesn't exist, since I haven't heard of it.

Probably the best that one could do in terms of an empirical study is to look at countries and states that have referendums that can be easily added to elections, and then study the effects on the willingness of politicians to prefer the public over moneyed interests. One might also be able to infer useful things from parliamentary systems which have votes of no confidence capable of removing members of the executive branch, and in which the parliamentarians are somehow determined to be sufficiently responsive to the public (again, as opposed to moneyed interests). Thus, the parliamentarians would be construed as being extensions of "the people".

An ostracism is a form of "no confidence" vote....

IMO, questions about my ostracism proposal touch on a much larger issue. And that is, how do you communicate the insights, opinions, and information one can find in superior blogs, such as openleft and dailykos, to the public, at large? The only reason that Congress gets away with the crap that it does is because issues are framed in such a way that perfectly reasonable and practical populist notions are marginalized. That's when they're not being essentially ignored.

I suggest you take a look at Frontline's 'Sick around the world' program, which you can view, online. I find it hard to believe that if every American had seen that show, and if there were ongoing, new shows comparing health care in America with health care overseas, Americans' would stand for bogus arguments against nationalized health care.

National health care is a no-brainer, just as making Wall Street fund it's own bailout, ala STET, is a no-brainer. Far from being dangerous, making Congress less insulated from criticism, both explicit (openleft, dailykos) and implicit (Frontline), seem absolutely required so that we can take back congress from the plutocrats.

My guess is that you are so afraid of conservative populists, you would rather put up the stinking mess we have now, which is about to slap a $700 billion tax on people who had nothing to do with creating such a liability. When the government starts moving to auction off the Grand Canyon and privatize Social Security, will you still make noises implying that it's the current system which is more "responsible"??? If the current system was responsible, they never would have deregulated the way that it did, to begin with. You have lots and lots of corrupt Democrats and Republicans in power, who have allowed America to fritter away it's prosperity for the benefit of less than 1 percent of the population. Is this your idea of "responsible"?

There were laws against predatory lending passed in NY State over two hundred years ago, yet de-regulation, without which we wouldn't have had this current mess, was accomplished via both Democrats and Republicans. I much prefer to get rid of irresponsible crooks, whether they have a D or R after their names, than to pretend that every populist movement is inherently dangerous. Only the super-rich and indoctrinated Mandarin class believe that.

I used to rent from an old-timer, who was a union organizer in his heyday, and who had to protect his life by walking around with a couple of "goons" as bodyguards. He told me that the unions got too greedy.

I don't have great faith in the wisdom of the mob, but at the present time, it's still superior to that of plutocratic elites. If you disagree, why don't you demonstrate your sincerity by volunteering, along with other Americans who agree with you, to shoulder the $700 billion bailout liabilities, yourselves, and leave the rest of us alone?

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[ Parent ]
I've learned in the army never too volunteer (4.00 / 1)
Plus, I'm German, and you should know from the news that Chancellor Merkel refuses to participate in the bail out. She's conservative, of course, and most of the time I disagree with ther views, but I support her stance in this issue. The US broke it, the US own it, the US should pay for the superglue.

As for your hobbyhorse: Sry, but I see Ostracism as a total fringe movement and I'm not very much interested in discussing it.  

[ Parent ]
How can you criticize Frank for doing the wrong thing... (4.00 / 2)
..when there is absolutely no consensus among liberals about what would be the right thing? See, there has been a story about Frank recently at Wapo (or was it the NYT?), and the quotes from him make it clear he is totally aware that the bailout will not be popular, but he is convinced that the stakes are too high for not doing anything. He may be totally wrong, ok, but imho there's no evidence that he isn't honestly doing what he really thinks is necessary for the US economy. Now, if there would be a clear consensus on a better plan, supported by economic pundits like Krugman,  Roubini or maybe even Samuelson, ok, then you would have a point in saying Frank is showing "utter contempt for the voters". But polls show that the majority of people is aware that something has to be done, and that the "intervention is unnecessary" fraction is really quite small. The problem is that there is no clear frontrunner among the several plans that are discussed. Frank may have chosen the wrong plan, he may have gone too far in trying to get the rethugs on boards, yes, but you have to admit that it's not at all obvious if the alternatives would really be better at safeguarding the economy.

If nothing else, you should at least honor the courage that Frank is showing by being an active player in this, instead of chosing the easy exit by refusing the responsibility and delaying this with endless discussions. Unlike John McCain, who is all talk and no walk, Frank shows leadership. Maybe he is leading the wrong way, but only time will tell us.  

Frank gets no fucking kudos (4.00 / 3)
The most generous reading of his actions is that he is a dolt, beholden to the inside-the-Beltway myth of Serious People Making Serious Decisions.  Doltish, because only Serious People will consider the Dodd/Paulson bill, no other alternatives have received serious attention.  When the ultimate cost will be well over a trillion dollars, and at a time when doing the wrong thing will leave the country with nowhere to turn, this is stupidity on a grand scale.

A less generous reading is that the Democrats are only concerned with giving money to their Wall Street donors, and the reason for the urgency is that they must do it while Bush is still around to be their fall guy.

Stupid or venal, the result is the same.  

And it's a lie to say you can't reconcile all these competing plans.  Robert Oak has done a good job of compiling the different plans and distilling common elements.  

This really is AUMF II.  The Democrats never learned a fucking thing from the first one, even when their most powerful politician lost her chance for the presidency because of it.

[ Parent ]
Who tf is Robert Oak? (4.00 / 1)
Sry, but I don't think a guy who so far hasn't even managed to gain the small amount of popularity and importance to get his own Wikipedia entry will manage to built a public consensus on the bailout plan. But, ok, in your general point you're right, it sure would be possible to find the least common denominator of most popular plans, and to use it to create a consensus plan from it. And I'm certain this would be quite different from the Dodd/Paulson bill discussed now. However, the problem is that the numerous critics so far haven't manged to get their shit together and to present an alternative that would have broad public support. And while the rush in the House to reach a decision is over the top, time IS essential. For WaMu, the bailout will already be too late. How many other banks are you willing to sacrifice in order to come up with a perfect bill???  
[ Parent ]
WaMu was on the skid for months (0.00 / 0)
it was bound to fail no matter if there was a bailout, and more banks will fail after the bailout passes. You say you know the bailout will save banks but the treasury and the fed  do not know, they are all hoping throwing a lot of good money after bad will put a band aid on the crisis until after the election.
[ Parent ]
Well, I didn't say that... (0.00 / 0)
...the bailout will save each and every bank. But it would sure save some, and may help others to get into chapter 11 instead of chapter 7. Inaction, on the other hand, would do nothing to improve the situation. That's how I see it.
[ Parent ]
Wait - what's the point of the bailout again?!? (4.00 / 1)
This is what really pisses me off about this "debate."  There isn't even consensus (or transparency) about what its goal is.  (Which will make it easier to declare victory i guess.)  The thing that is generally highlighted by the Dems speaking out for this bailout isn't that its goal is to save banks the are insolvent.  It's that its supposed to restore liquidity to the market so that businesses can get loans.  So this isn't supposed to be about stopping banks from failing that SHOULD fail because they're insolvent.  But yet there's this underlying assumption in what people write (like "Gray" above) that the goal is to save the big banks.  And i don't think this is completely accidental - from reading various proposals out there from credible sources it certainly seems that there are other options out there that restore liquidity more reliably and cheaper.  However they don't all save the banks the are under water.

So which is it?  to restore liquidity? or to save private banks from following the normal result of poor decision making?  Did we rescue the .com's when they imploded 10 years ago?  what about all the telcos whose stock crashed and were merged?  Go back through the last 50 years and you'll find many industries that suffered this same fate w/o a massive bailout.  so why are we treating the financial industry different?

Dan

[ Parent ]
Why didn't Congress do their fucking job? (4.00 / 2)
Roubini for example has been way out in front in predicting this meltdown.  Congress should have had him in to give testimony last week.  No time to get everyone in I grant you, pick one or two, Roubini gets priority because so far he's called everything right.  Just get some outside authoritative voices in to state basic principles of what should be done to stave off the crisis.

But no, in their usual bovine fashion, they cluster around their insular consensus and are too lazy or too stupid to even consider alternative points of view.

Bernanke and Paulson have been working on their plan for months.  MONTHS.  What the Hell have the Democrats been doing all this time?  What the fuck have Frank and Dodd been doing all this time?  Did they really think things were hunky dory?  Are they really that stupid?

[ Parent ]
Imho the treson by the republicans took away most of the time (0.00 / 0)
Put the blame where it belongs: Instead of actively participating in discussing the available ways of action, the rethugs went the easy way, popular with their base, and almost totally blocked any governement bailout. The Dems, on the other hand, don't want to be the only ones on record supporting a risky plan and be the total losers if it fails. So, Dodd, Pelosi, Frank, et al, have been trying to find a compromise package that would get the GOP assholes on board, instead of discussing with experts about the best way to save the economy. A horrible mess, sure, but it's not the Dems who were creating it.
[ Parent ]
Democrats will have only themselves to blame for the fallout from this (4.00 / 1)
Democrats are in a lose-lose situation now because they've been asleep at the wheel.

They should have seen this coming long ago, and been planning their own emergency legislation.

Even now, they could have had Roubini and one or two others in to give testimony and lay down some basic principles for any rescue plan, that might have built popular support for some of the things they'd like to do.

Instead they allowed themselves to be taken by surprise, having not even thought about this possibility (unbelievable!), and have been too busy backroom-dealing to develop any popular support for what they'd like to do.

I don't fault the House Republicans.  They don't believe in taxpayer-funded bailouts to the amount of a trillion dollars, and they haven't allowed themselves to be panicked.  And they know the Democrats are too craven and too disorganized to do anything on their own.

[ Parent ]
Asleep at the wheel, maybe. (0.00 / 0)
That's a point. But "I don't fault the House Republicans"??? WHAT??? You're saying their idiotic idiology, a fuzzy matter that they violated against for eight years now, is a good reason for them not caring about the public good, and letting the US economy go to hell? Now, come on, really, what's the matter with you? Stockholm syndrome???
[ Parent ]
Conservative conventional wisdom (0.00 / 0)
is that the Depression wasn't so bad.  That companies like AIG etc should be allowed to go the wall, let the market work out the imperfections.  That what we are seeing is the result of previous bailouts for LTCM etc.

I don't agree with it, but their recent actions are consistent with it.

I see no underlying rationale for Democratic actions, but panic, blind panic.

And what their Wall Street masters will or will not countenance.

[ Parent ]
Well, ok, I guess we both agree... (0.00 / 0)
..that the Dems should be much more principled, too. Instead, their becoming the victim of rethuglican blackmail, again and again. Finding the Dems who are at fault is necessary, and the proper action is to get rid of them in their next primaries. However, excusing rethuglican irresponsibility isn't helpful right now. And canibalism among Dems isn't the proper action right now, too. After all, there is an election ahead! And the rethugs will look much better to the voters, playing their usual "right or wrong, my party" game, while the Dems present their habitual image of a party obsessed with infighting. Again, this isn't helpful.
[ Parent ]
Roubini (4.00 / 1)
Why isn't advising Obama? Why isn't he a candidate for Council of Economic Advisers? Why isn't he on TV every night and radio every morning?
[ Parent ]
He's right, but he's horribly negative (0.00 / 0)
And it would be much better to bring those pundits into the spotlight right now who are able to see a silver lining at the horizon. After all, economy is mostly a phenomenum of mass suggestion. You don't want the market players' depressions enhanced by wizards from the dark forces right now.
[ Parent ]
Bush showed leadership on Iraq too (4.00 / 1)
he was an active player and there was no clear consensus among liberals about what would be the right response to 9/11. There was no clear consensus because there was a rush to war and all objections got swept away instead of deliberation for getting a consensus.

Frank is showing no real courage, he is doing Bush and Paulson's bidding, he is doing the job assigned by the big daddies who stampeded Dem leaders with scare talk. All of the top economists in the USA would give advice to the Dems for a better plan but Dems want to cut backroom deals instead.

[ Parent ]
There's still a difference between economy and war. (0.00 / 0)
Sry, but I honestly think this comparison doesn't make any sense.
[ Parent ]
what's the difference (0.00 / 0)
when it comes to stampeding Congress with scare talk? It the same rush without thought. Bail here, bail now. Bail baby bail!
[ Parent ]
Imho all perticipants, even Bush, are really scared this time.. (0.00 / 0)
but, ok, we can't know for sure. And while the rush sure has been created to get this out of the campaign issues before the election, the urgent situation in the fiancial markets doesn't allow drawing out the action for too long.  
[ Parent ]
Distillation of alternative plans (0.00 / 0)
[ Parent ]
Fine, but there is no consensus right now, (0.00 / 0)
and that's the important point. Where are the prominent pundits and politicians stomping for such a "destilled" plan? All we can see are small fractions fighting for their preferred hobbyhorse. And by reading columns and blogs you can fell the unsteadyness behind even the most renown pundits. Not even Krugman is able or willing to authoritatively support one plan over all others. Yes, I think the current proposal, supported by Frank and Peloise, is,hmm, suboptimal. But can you really blame them for getting it wrong when there isn't a strong group of pundits united insupport of a better plan? How long shall the politicians wait for a consensus to build? Time is essential.
[ Parent ]
Roubini's plan is what was done during the Depression (0.00 / 0)
There is no precedent for the Dodd/Paulson bill.  Contrary to what you're saying, they are actually taking the riskier approach.  The Roubini approach worked well when it was tried before.  The Dodd/Paulson will isn't "suboptimal," it may not work at all.  And by bankrupting the national finances, it may actually make things much worse.

So why is the Democratic Congress taking such a leap in the dark?

Because, unbelievable as it sounds, they had clearly given no thought to the impending meltdown before Paulson made them brown their pants.  Now they're scared cattle being herded to the cliff edge.  They're too panicked to realize that there are other, less risky, alternatives.

Or they're too beholden to their Wall Street donors, too fucking corrupt, to push a bill that would dilute shareholder equity.

[ Parent ]
US national finances are already almost bankrupt (0.00 / 0)
Look at the level to which the national debt has grown under Bush. Adding 700 billions on top of that doesn't make much difference anymore. And every reasonable plan will cost money, so there is noreal alternative. Plus, all come with a huge risk of failure. However, taking a risk is still better than the near certainty of economic disater caused by inaction.

Having said that, I still prefer the idea of taking public ownership of banks by forcing them to increase their capital by selling new stocks to the goverment. Buying the damn mortgages,with all the problems that will come with it, is only the scond best plan, if at all. But still better than doing nothing.

[ Parent ]
I agree (0.00 / 0)

I still prefer the idea of taking public ownership of banks by forcing them to increase their capital by selling new stocks to the goverment.

But it will never happen, because Democrats are now owned lock, stock and barrel by Wall Street.

That is why we are rushing into Dodd/Paulson.

[ Parent ]
I better abstain from mindreading (0.00 / 0)
I'm not good at it. You may be right, or it may be that it's just that nobody took the lead with a better plan. Imho we can only guess what is really going on.  
[ Parent ]
Time is essential. (0.00 / 0)
no it isn't
[ Parent ]
In the long term, wee will all be dead (0.00 / 0)
or what do you want to say?
[ Parent ]
Hurry up and do something! (0.00 / 0)
Anything!

Even if it doesn't work! Even if it's a huge waste of money!

Just for god's sake do something!

Sorry, but lack of consensus around something else is not a good reason to pass a shitty bill. There already is a consensus: not this.

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[ Parent ]
Btw, you may have noticed the change of paradigms (4.00 / 1)
in economics. Pundits have become aware that the market players more often than not are NOT acting rationally. And as part of the studies focussing on a deeper, psychological oriented look at economics in practise, it has been found that markets react positively on action (and engatively on inaction), with the exact nature of the action playing only a secondary role.

So: A new bill to regulate financial institutions? A positive sign! A new bill to deregulate banks? A positive sign! A bailout plan? A positive sign! No change at all, no need for action, the markets will be fine? A negative sign.

Needless to say, we don't need any negative signals to the markets right now. Frank may support the wrong plan, sure, count me in with the critics, but at least he understands the urgent need for leadership and for action. It's the diehard naysayers, the politicians refusing to bear their part of the responsibility, assholes like McCain, who should be criticized in the hardest way for ruining the economy.  

I'm sorry, you really are clueless as to the severity of the credit crisis (4.00 / 1)
going on in the banking system right now.

Bnaks are not willing to lend to other banks.  In turn, it is getting nearly impossible to get credit from banks to finance inventory, accounts receivable and other working capital.  The cost of home mortgages and auto loans are also rising, if you can even get them.

The crappy mortgage assets must be gotten off the bank' balance sheets.  This plan will do that.  While it may not be perfect, there is no alternative right now.  If you think we can wait 40 days until after the election, you are living in fantasy land.

My only concern is that this plan implies a level of competence in the Treasury Dept that may not be there.  But given that it seems that the Wall St Masters of the Universe turned out to be fools anyway, what the hell.

Not necessarily... (4.00 / 1)
"The crappy mortgage assets must be gotten off the bank' balance sheets."
Well, you don't necessarily have to get the bad papers out of the balance, you can work the other way round and improve the capital side, so that the impact of the assets is reduced. That's what Krugman, DeLong and some other are favoring. But something has to be done,  right, the markets need a positive signal, and soon. Not sometime next year.  
[ Parent ]
The advantages to the gov't buy the assets themselves are: (4.00 / 1)
1.  when the gov't owns the mortgage assets, it's in their power to re-negotiate the terms with the homeowners to avoid foreclosure and to improve the chances of recovery of cash flow and principal.

2.  it removes the assets from the pressure of mark-to-market rules and Wall Street's earnings fixation.

[ Parent ]
The disadvantages to the gov't buy the assets themselves are: (0.00 / 0)
1.  when the gov't owns the mortgage assets, it has to mange them. In order to do that, a new agency has to be build from scratch. Looking at the horrible job the banks and financial institutions are doing in managing their mortgages (they don't even have their paperstuff in order at court!), this totally new, inexperienced agency most probably would be a total disaster. Not to speak of that any further change of ownership will result in complicating the matters even more. Already lots of papers have been lost, and homeowners been left without a clear partner to resolve the issues.

2. Mark to market is necessary to drive prices down to a level where ordinary folks can affotd buying a house again. The income/price ratio is the important point! In many markets, especially in California, the ratio still is above a reasonal threshold. And so, demand is still too weak for an equilibrium that would stop the decline. And, btw, the goverment buying those assets at an inflated price would actually improve Wall Streets earnings, and do nothing for making the bankers realize that their short term profit orientation is part of the problem.

[ Parent ]
There is an alternative (4.00 / 1)
http://www.rgemonitor.com/us-m...

A real one that actually would fix the underlying issue.

The liberal wiki
Send an email to terra@liberalwiki.com

[ Parent ]
This is Roubini's plan (0.00 / 0)

[ Parent ]
if this is severe crisis shouldn't the powerful (0.00 / 0)
be suffering some too?

I want to see some sacrifice by financial institutions, Congress and the executive branch.

I'm not seeing any.

[ Parent ]
Cindy Sheehan is running against Pelosi (4.00 / 1)
Are you mad enough at Pelosi to put up a fundraising page for Sheehan?
I'd vote for Sheehan in a heartbeat over Pelosi (0.00 / 0)
Don't even get me started on Pelosi....

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[ Parent ]
What a choice! (0.00 / 0)
Peacenick Sheehan or Appeasenick Pelosi - what a choice! I don't envy you. Maybe it's just a prejudice, but imho Cyndi Sheehan would prove to be an even more embarrassing loony than Cynthia McKinney. Not really an improvement over Pelosi...
[ Parent ]
How would she prove to be more .. (0.00 / 0)
embarrassing? .. Bush sucks at playing poker .. I mean he is really bad .. and yet he schools Pelosi every damn time
[ Parent ]
are Sheehan and McKinney "loony" (0.00 / 0)
b/c they question U.S. policy toward Israel?
[ Parent ]
Damn, I wish I was as smart (0.00 / 0)
as some of the progressives posting here.  How come you folks aren't running the country?  Come to think of it, how come you folks aren't explaining what is wrong with the proposal and formulating your own proposal (like the House republicans wanted to do)?  Heck, I'm sure both the House and the Senate would be delighted to entertain your proposal!
the proposal I want (4.00 / 1)
is get broad based input from experts who are good at explaining what is wrong with the proposal and formulating better proposals. All of a sudden there is a huge rush to bail baby bail even though the treasury has been sitting on this plan for months. We can't even get expert input for a few days. We saw this stampede tactic before in the Iraq war runup and it stinks.
[ Parent ]
I agree with that... (0.00 / 0)
but I don't agree with the rush to condemn efforts to find a solution.  And, I don't agree with the notion that resistance is a solution.  I expect reasonable people to come together to discuss the problem and explore solutions.  That is where we will find consensus and a promise of a workable plan.

By the way, I am posting as cjabresch--BECAUSE I HAVE BEEN BANNED FOR THE COMMENT ABOVE!  THAT'S PROGRESS, ISN'T IT!?

[ Parent ]
Ponies! (0.00 / 0)
How many times do we have to go through this?  There IS NO PONY PLAN.  It's either the plan on the table or the election.  There is no alternative.  You can't vote for your own particular bailout, it's a yes/no on this one.

But, but, but, I want a pony!

"Pony" plan? Screw you (0.00 / 0)
I really object to the snide denigration of those of us who, unlike you, are discussing responsible plans for dealing with the problem.

The point in doing so-and coming to a consensus on which one we want to push, as Paul is trying to do above-is first, to head off the objection, repeatedly made even here, that we are obstructionist/catastrophists with no interest in dealing with the alleged crisis and second to have a proposal available to lobby for should we succeed in torpedoing Dodd-Paulson.

I suppose this response was predictable coming from a long time defender of DP hacks like Pelosi.

Get a clue.

300 Economists saw "three fatal pitfalls" and urge no rushing (0.00 / 0)
I'm probably breaking a rule, here, but if so, I think it's justified. I got this from
http://faculty.chicagogsb.edu/...

To the Speaker of the House of Representatives and the President pro tempore of the Senate:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses.  Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If  taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects.  If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity.  Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

Signed (updated at 9/25/2008 8:30AM CT)

Acemoglu Daron (Massachussets Institute of Technology)
Adler Michael (Columbia University)
Admati Anat R. (Stanford University)
Alexis Marcus (Northwestern University)
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