Horse manure: makes the grass grow greenIf you think Henry Paulson’s three-page rewrite of the nation’s financial and governmental systems was vague and open-ended, you might want to check out the responses to his plan from John McCain and Barack Obama. The presidential candidates are hardly powerless bystanders in the financial crisis — as senators and as leaders of their respective parties, either could have suspended his campaign and headed to Washington to lead his party’s legislative response to the proposal. Far from that, neither McCain nor Obama has yet to venture so much as a detailed comment on the substance of today’s proposed $700 billion bailout. Instead the candidates are sticking to party-appropriate bromides while waiting to discern the public’s reaction, and also what move their parties’ respective congressional leaders are planning to make. Saturday was tiptoe time. Politico
I am trying to get a handle on the great "bailout" of Wall Street and I admit I haven't got one yet. However my olfactory nerves are sending me distinct signals that they have picked up the hints of a significant quantity of equine excrement hovering around this question.
What I see (smell), is that the same folks that brought us the War in Iraq are again in a big hurry. That always makes me wary, how about you?
Certain things are striking.
People that contribute a lot money to both party's political campaigns are set to lose a lot of money and we are all being asked to cough up an immense sum to keep that from happening... We are being told that if we don't the sky will fall.
The odor hanging around this is pretty rank and I imagine that people are going to get very angry in increments when they stop to think about it.
Politically this issue is as tender as rotten dynamite.
History's most unpopular president is about to negotiate this "pennies from heaven" deal with history's most unpopular congress. This is a deal, that as far as I can understand it, is going to put a great burden of debt on the American people well into the future. Nobody is talking about sending anybody to jail. Nobody is talking about where the money is going to come from, nobody is talking about raising taxes. And since nobody is talking about cutting defense spending to pay for it, I imagine that it will have to come out of "entitlements"... But why go on? You can see the picture.
Both presidential candidates should be very careful how they grasp this question, both are taking a lot of contributions from Wall Street, but at the same times they hope to get the votes of a lot of people who are going to get angrier and angrier as the week wears on. Certainly this is our Berlin Wall and today's most relevant American politicians may soon be looking like dear old Egon Krenz.DS
What I see (smell), is that the same folks that brought us the War in Iraq are again in a big hurry. That always makes me wary, how about you?
Certain things are striking.
People that contribute a lot money to both party's political campaigns are set to lose a lot of money and we are all being asked to cough up an immense sum to keep that from happening... We are being told that if we don't the sky will fall.
The odor hanging around this is pretty rank and I imagine that people are going to get very angry in increments when they stop to think about it.
Politically this issue is as tender as rotten dynamite.
History's most unpopular president is about to negotiate this "pennies from heaven" deal with history's most unpopular congress. This is a deal, that as far as I can understand it, is going to put a great burden of debt on the American people well into the future. Nobody is talking about sending anybody to jail. Nobody is talking about where the money is going to come from, nobody is talking about raising taxes. And since nobody is talking about cutting defense spending to pay for it, I imagine that it will have to come out of "entitlements"... But why go on? You can see the picture.
Both presidential candidates should be very careful how they grasp this question, both are taking a lot of contributions from Wall Street, but at the same times they hope to get the votes of a lot of people who are going to get angrier and angrier as the week wears on. Certainly this is our Berlin Wall and today's most relevant American politicians may soon be looking like dear old Egon Krenz.DS
8 comments:
dont remember the article, but an excellent point was made that neither candidate can now come through with their promises from before. mccain cant maintain tax cuts and obama cant afford any of the domestic spending programs that he promised. the only option is (you know me. wait for it!) is cuts in federel spending, or "entitlements" as you put it.
no one will go to jail because both sides have had their pockets lined with money from the same people who helped bring this crisis about. that's all government is to me is one big conflict of interest.
here's my thing, why the hell would the government spend 700 billion dollars to buy up loans which are not even inslovent yet? seems like an expensive boondoggle that will discredit the idea of the neccessity of government intervention. maybe not now, but in the years to come. it might even help put us in that depression people keep saying that we're headed towards.
Adam
Once he gets the ramifications, your inner Lenin will not be pleased.
RC,
To tell you the truth, I think that my inner Lenin is going to be tickled to death... what we are seeing is the whole ideological underpinning of the system being discredited.
has anyone here asked what the ramifications are of giving billions of dollars to bail out people who have already made billions?
if the ideological underpinning of the system was not destroyed by the savings and loan crisis in the 80's why would this do it? even if it costs more to bail the industry out.
a man's "inner Lenin" can only thrive during an economic crisis, if a culture is prosperous, and need turns into want, then you can be assured you inner Lenin will recieve a bullet to the head, like so many enemies of the Bolsheviks recieved.
Adam
Adam,
Today's crisis seems a bit worse than the old savings and loan one in the 80s. Also, you'll recall that in the 80s the Cold War was still in full swing. That really makes a huge difference. There is nobody these days "waiting in the wings", the ideological wagons are no longer circled, so this means that things can play out in a more natural fashion.
David --
In part this is a huge power grab by the treasury and federal government.
Section 8 of the proposed bailout
Sec. 8. Review.
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
This is horrible. Paulson is saying that he is above the law and above the constitution.
Second comment:
The governement is proposing to take over bad debts, meaning mortgages that the borrower is not paying on or secured by collateral that has fallen substantially in value.
The debt holders could sell the debts right now for market value, which is substantially less than face value. They have not because that would mean recognizing the losses. In many cases this would bankrupt the lenders. So if the government buys the loans at market value it will result in bankrupt banks.
If the government buys the loans at more than market value it is giving a tremendous windfall gift to the debt holders.
The government will then hold loans which the borrower is not paying. Does that mean the government will foreclose on thousands of homes? If it does, what will it do with the homes? (one lunatic report has suggested destroying them) Does it mean it will forgive loans to defaulting debtors? This means huge losses to taxpayers, huge benefit for borrowers who took on too much risk.
Where is the money coming from? Is the US going to increase its borrowing from foreign central banks? Will foreign central banks agree to this increased lending? Will the fed purchase the new debt for cash, thus increasing the money supply by $700,000,000,000? The latter could be highly inflationary.
Paulson was foremerly at Goldman Sachs and should be forbidden from advocating any action that benefits his old employer; otherwise this smells like Cheney and Haliburton.
A pile of road apples is very much the best image for this proposal.
I thought that your I.L. would have preferred that the whole spider web be blown away rather than be preserved with sprayed on plastic.
The non existent underpinnings have been conspicuous in their absence for a very long time now, and that is something that anyone who really cared to find out did find out months or years ago.
However, I do not believe either that the rescue will "take" so perhaps old I.L. will be as happy as you say.
I was raised by an economist/financier/professor who was not at all shy about pointing out the failings of his profession or the political chumps' vast ignorance either. So I actually am very well versed in the details -- and truth be told, this is an extraordinary year as I am not just a political junkie, but an economics wonk besides. It does not get any better than this, and since my life is already perfectly arranged to move seamlessly into any level of post Wall Street life that may occur, I sleep well and worry not.
Neither the bailout nor any of its alternatives {including doing nothing} will solve the current problems, but it may mitigate the pain slightly by spreading it out over a long period.
I certainly hope that you, David, have by now somehow managed to escape the long arm of the IRS over there in the land of Cervantes. I have. And I suggest very heartily that all who still have that opportunity {to escape} please exercise it now. Vote with your feet.
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