Like most Americans I’m angry and confused about how suddenly a crisis of economically biblical proportions has suddently lept to the top of the political agenda. This is especially galling because only a month ago the Bush administration was – pretty much to a person – telling us that the economy was in good shape.
It strains my credulity to think they didn’t know the credit problem pot was about to boil over, and in my cynical moments I think they probably just hoped they could stave off the crisis until Jan 2009.
But hey, I’m to blame and so are you and so are the legions of people who watched real estate rise and fall and foolishly assumed that near-catastrophic devaluations in houses of trillions of dollars would not lead to the enormous problems we now face.
Solutions? As tempted as I am to agree with Ron Paul who is basically arguing for no bailout and letting market forces revalue the whole mess, I’m thinking we need to go ahead with a staged bailout where investment of our tax money is tied to measurable successes in terms of the credit markets. If the Paulson plan is the right answer we do not need to spend $700,000,000,000 before we know it’s working. I think Congress should approve some modest amount for Paulson and tie subsequent spending to *immediate* market improvements. I want the banks and others (including individual mortgate holders) who will benefit from the bailout to *make major changes* and *absorb major risks* that it seems the current plan simply passes along to future taxpayers aka “our children”. If I understand Paulson and Bernanke correctly they’d say this type of partial bailout plan won’t do enough to work – that we need to restore corporate confidence to the extent they loosen up credit and re-oil the engine of US economic prosperity. That may be true, but I’m not convinced anybody can reasonably predict how any of this will shake out. Clearly these clever boys totally and miserably failed to predict this problem would happen in the first place, so it’s tempting to apply the “fool me once shame on you, fool me twice shame on me” rule and ask for a whole new game with new players.
Look at the people that benefited from Freddie and Fannie…they turned a blind eye.
If you think this meltdown is a coincident…think again it is part of the election strategy…
What else is unnerving is how our congress won’t vote on tough issues until it is a complete fiasco!
Time for us the voters to take our country back!
As always, I refer to Tommo’s rules of investing:
1. Buy low, sell high. Note: lots tricker than ya think.
2. Diversification is the next best thing to free lunch. Note: diversify globally in today’s world.
3. Cost averaging is your friend.
And my own contribution to the state of the art, formulated after the tech bubble:
4. When the smart boys say “the rules of economics have been suspended so everyone can get fiendishly rich,” look to your cash position.
Now, when the smart boys say “the rules of economic governance must be suspended so everyone doesn’t get grievously poor,” we have clearly arrived at guideline #4. But what adjustment do we need to make to the consequent action in this guideline?
Tommo I think you are on to something. Trump, and then CNBC’s Kramer were almost drooling yesterday noting – I think correctly – that this is going to bring some of the best real estate bargains in a lifetime for those who can still invest when the dust settles.
Still, there seems to be a lot more of a consensus on this bailout than one would expect if it were just a power play or stopgap. I remain confused and will only insist that whatever they do we all get to see both the actions and the results.
There are several pundits who think the Feds/taxpayers could actually make money on this deal. Warren Buffett in today’s WSJ: “The government has a great opportunity,” he says. “If they buy things at market prices with the government’s cheap funding, they should make a lot of money.” The package is now on the table and it seems to contain oversights and controls that the 1st draft lacked, which is good. It all comes down to execution now. The precedent is there – Resolution Trust Corp ultimately cost taxpayers far less in the end than initial draconian estimates.
Not that this negates the gross malfeasance that caused all this. Democrats point at Republicans; Republicans point at Democrats – there is plenty of blame to go around on both sides of the political aisle. If they want a culprit/scapegoat, which Washington always does, our political leaders need look no further than the closest mirror. Ditto for the power titans of Wall Street whose insatiable avarice has propagated yet another financial fiasco for the tax-payer to clean up.
Unfortunately we still have people like Reid in office who is trying to slide in a ban on shale oil with this bail-out.
Why is someone putting their personal agenda in front of what is needed for the country right now?
Paul I’m skeptical that this will involve market pricing which would be OK by me. In that case the Govt (aka we) would just be acting like a big pocket player. I’m worried that the bad loans will be bought at a premium and then “we” will be too nice to foreclose and wind up holding the toxic paper on millions of loans (or loan derivatives) that will not be even close to fully repaid.
But that is the down side I admit. If this works like the S and L bailout things should be just fine..
I am convinced an all-out bail-out is a mistake.
There needs to be accountability within this process and this commercial entities need to be loaned the capital to turn things around but they need to be on the hook to repay it 100% at a reasonable interest rate.
We got into this mess by our government interjecting policy into our market system in the first place – namely forcing lending institutions to provide loans to people who wouldn’t normally qualify for a mortgage. Bottom line: not everyone in America is going to be able to own a home.
The last thing we need is more government fiddling with our markets especially at this level.
One thing the banks could consider with all the homes in foreclosure is to work with the people affected by putting them in other foreclosed homes that better match their ability to pay (i.e. someone in a $500,000 home can convert to a $300,000 home).
We need to let our markets do their thing and we need to stop interfering with them. The markets boom and bust and we have always been resilient enough to make it through.
De-regulation didn’t cause this mess – in fact de-regulation has been saving grace as it has allowed companies to buy up these badly managed banks that without de-regulation.
Rarely is government regulation a good thing for us however it is surely needed in some instances. Heck our government can’t even count our votes properly!
This problem began in earnest with the Community Reinvestment Act in 1995. This is where it all began – although is sounds like a noble idea it just didn’t work. When are going to learn when something sounds like a bad idea fiscally that it will probably hurt our economy where fiscally responsible decisions are paramount.
There is plenty of blame to go around on who turned a blind eye to this problem and those that helped enable this atrocity to happen. They all should be investigated – they should start with Barney Frank.
Hopefully they will pass something that will be widely accepted by the taxpayers and not just another government hand-out where we the taxpayers have to foot the bill.
What about all the people in this country that did the right thing? That qualify for mortgages and purchase homes within their means…do we just penalize them for the doing the right thing? Whenever a government program fails it always seems to hurt the people most that it was intended to help and the rest have to pick up the pieces.
There is a lot of talk about the taxpayer monies would be used as an investment in these failing companies. There is not a stock broker (at least who wants to keep their license) would ever recommend to the average joe to participate in such a risky proposition.
Oh yeah, if we wanted to invest in these companies we could have…its called the stock market!
Another problem with this type of investment, you and I are not going to get the same terms as a Warren Buffet and most of us are not professional investors plus we can’t even determine when we want to sell our shares.
This deal is bad news no matter how you look at it. I really don’t like the idea of our government telling us where we have to invest our hard earned money.
Clearly something needs to be done but not this way.
The bailout resembles something like corporate welfare: the big finance companies (like Morgan Stanley and G-Sachs) decided to submit to govt. regs, sacrifice a bit of freedom and receive millions of public funds, while giving foreign banks (Japanese, chinese, etc.) a much bigger share, so that they can compete with the likes of B of A.
The Freddy/Fannie stuff’s a bit different (and well connected to dems–Boy Obama hisself had ties to the sub-prime masters). And while not supportive of GOP, Buscho did at one point sound the alarm about the subprime mortgages and Fannie Mae racket.
At the same time, the deal hinges on the new state-banks paying back the loans at some horrendous interest, supposedly, assuming that they don’t go belly-up. When Black Friday comes…….
The more I follow this the more confusing it becomes. I thought I had a handle on economics until this fiasco has played out to confound a lot of assumptions.
Glenn I’m *extremely* skeptical of those trying to pin this on the Democrats for the Fannie and Freddie decisions now almost a decade old. I do think that compromise and political decision making played a role here but the big “reason” really seems to be that the speculative RE bubble finally burst. We all knew that eventually prices would stabilize and most of us are not all that surprise that they’ve fallen as much as they have. What the leading economists *should have been telling us* was that there were several possible catastrophic scenarios as the effect of this rippled through the financial systems. The fact they were NOT saying this indicates to me that nobody really knew what was going to happen. Wall Streeters took a lot of money off the table as soon as it hit, but that was not the key problem here – more than anything it appears to have been sub prime lending, the main beneficiaries of which were … naive or irresponsible borrowers!
One thing that is VERY conspicuous is that the stock market seems to be staying fairly stable even as the Paulson deal unravels. That seems to suggest that things may not be nearly as bad as suggested.
The usual suspects, aka mainstream Democrats and Republicans, who usually fight with each other over Govt regulations / taxes/ deficits are mostly in agreement that this is a good idea. That would seem to suggest a lot of concensus but could it simply be that both parties now accept as gospel that huge Government spending is how we should manage things. Certainly the Bush plans, having doubled the deficit in a few years, are no friend to the fiscal conservative.
Not so stable: the gold and crude oil spikes this week probably bought a few benzes, if not chateaus— at least for deep pockets (like banks) holding call options, right. The crude move was especially noteworthy: went like double– $20+– the usual limit in ONE day (so much for “regs” again). Don’t have the click counter handy, but that’s probably like 500% profit in futures options. Indeed looks a bit like the secret handshake: if you can’t make money the old-fashioned way, get your brokers to manipulate the market….
Horatiox you are probably right that I should be looking more broadly here rather than just the quick glance at the Dow and S&P. Still, it would seem that if “economic collapse” was going to happen *without* a deal we’d see a lot more folks moving their assets overseas. This does not appear to be happening in a big way ….yet?
Joe the facts are there…black and white. They will try to spin it. But this debacle is directly related to the CRA starting in 1977.
The reason everyone should be furious…
1) The people that this grand social program was supposed to help are screwed and in many cases probably financially ruined forever.
2) The rest of us have to pay the bill to clean up this corrupt mess.
3) 100% of the people connected to this in politics and in the companies ALL walked away with huge sums of money! In most cases millions upon millions.
If that isn’t a crime…I have no idea what is…
I think the facts are very clear here if you are willing to look beyond politics you will see the truth.
For the record I think the Bush administration supporting this bail-out is the worst hour for them – of course Frank, Dodd, etc want this to happen quickly because this can’t go away fast for them.
Granted both parties have a lot of bad eggs but many of the democrats that are in office now have their hands dirty from this in a big way.
Vote them ALL out…this can never happen again.
Obama says he will bring change…is this the kind of change we can afford?
Can you imagine what his tax hikes will do to the economy now?
Joe you are right about the market and Paulson…we don’t know how bad this will be long-term, we also don’t know if this stuff will work…but we do know that a fiscally bad social regulation is what created this mess and more government shenanigans with EXACTLY the same people both in Congress and in the companies we somehow expect this is going to change…LOL
My biggest issue with this…
The government coerced these fiscally responsible institutions to violate their principles and loan all of this money to these unqualified people. In some cases you didn’t even need a SSN to get a mortgage!!!
Obama’s law firm sued banks that weren’t making the quotas…
So literally what is a bank supposed to do…this is insanity.
It’s OK Glenn – tonight on the debate Barack and Mac will come up with *all* the solutions to *all* the problems.
I don’t see this mainly in terms of the specific people or parties in charge as much as our defective system where we try to adjust the profiteering and the elusive idea of “fairness” using politics. That usually fails because profit guys are usually *much* better at manipulating systems to their advantage than the political folks.
Taxpayers wind up absorbing risks that should be reflected in the markets as well as in personal wealth. Actually, I think that very little of the paper wealth lost in the last few years (trillions) was ever converted into real wealth. e.g. many of us gained and then lost hundreds of thousands on home valuations with little impact on our personal financial situation.
Both of them should have put their campaigns on hold – gone to Washington and worked around the clock to solve this. Then they could have had the debate on Monday night.
No big deal…but they both have to play games.
For the record – between McCain and Obama, McCain was the only one to warn our country about this mess and he tried to introduce legislation to stop this from happening but Pelosi and crew blocked it.
You know my bias Joe…it isn’t because I don’t like Obama…it is driven by not liking outrageous spending, no accountability and increases in taxes. Our system would work fine if they just left it alone.
Look at the 17 day CEO of WaMu…he was paid $20 million!!!!
Glenn I followed up on the idea that McCain warned folks about the Fannie Mae problems and now I’m skeptical he did much at all. Even if you accept the unlikely idea that the bill by Hagel (NOT by McCain) would have prevented all this, McCain was NOT on board until July 2006 – he signed on as cosponsor more than a year after the bill was introduced!
I wrote about the details including signing dates here: http://blog.PresidentPicker.com
Here’s a good summary story noting this is best seen as a response to Fannie’s malfeasance reports, not a warning of the crisis to come:
Also, the CRA lending problems seem to have been exaggerated in that clip. I’m still researching CRA but I think it played a role but not a major one in this. Here’s a study of CRA profitability: http://www.clevelandfed.org/research/Commentary/2000/1100.htm
Neither McCain nor Obama has a record to be proud of in terms of making sure Taxpayers are protected from profiteering that will always happen when we allow Governments to “guard” our money. It’s simple: Government usually fails to act effectively. The founders recognized this and therefore worked to keep Government small. The worst cases are now in entitlement spending on health and the military where the huge budgets have blended with the privatizing ideas of Cheney and a passive congress to create the greatest (mostly legal) looting of the US treasury in history. The solution is as simple as it is impossible to politically manifest: Shrink most federal government budgets by more than half over a multiple year period.
Actually a corporate exec tax would bring in a lot of shekels, and seems sort of fair. Many investors have raked it in over the last 6 or 7 years or so with the cuts in capital gains taxes, and the bull markets in oil, precious metals, etc. Raising the capital gains rate on upper brackets should be a priority; and let’s not forget Bush’s slash of the estate taxes back in 2002, which also kept large amounts of cash from the feds.
I am not so down with LBJ style dems, or socialism, but when a few fortunate execs and investors (and bankers) rake it in while the economy collapses, perhaps some adjustments are in order (and I would include anti-trust in that as well). Bailing out a Fannie Mae (and helping poor folk with their mortgages) seems more reasonable than bailing out the deep pocket speculators like Goldman sachs–about like doling out cash to some rich playboy who lost big at the roulette table.
C’mon Horatiox, casino playboys need to eat too.
I’m VERY happy to look for ways to tax the gains of those profited handsomely in part by taking the risk-free rewards of the past several years, though again I think people or the few billions in CEO profits are not so much our problem as a system that politically allocates risk and reward rather than *rationally* allocated risk and reward.
The guys who profited particularly in Freddie and Fannie are part of the dem money machine. They are even still involved…their associations to all of this go back decades and have been profiting of their political relationships all the way along.
Point is…McCain was a co-sponsor the bill…if you want to marginalize it…go ahead…however Pelosi and crew blocked it. If the bill had passed there might have been at least a chance to avoid this.
But we will never know…and we can decide to we want to keep voting for the people that are making these HUGE mistakes or do we want people that will really do what is right.
I will be here give me a call – if you need me…
AYE YI YI…
I don’t buy either that CRA and Fannie & Freddie are the sole culprits here nor that this isn’t a crisis with bipartisan roots. I think the causes are as complex as the crisis itself and, among other culprits beyond the ones already mentioned I would add:
1. Well intentioned but ultimately harmful post Enron legislation that caused banks and brokers to “mark to market” their assets/liabilities.
2. The shredding of Glass-Steagal, a republican bill signed by Clinton.
3. Wall Street Compensation that disproportionately rewards risk taking. One fact unmentioned in all of the above discussion is that investment banks leveraged up their holding of these assets to amplify their returns. Bear Stearns allegedly held MBS at 30:1 leverage; Merrill Lynch 20:1; Lehman somewhere in-between.
4. Greenspan keeping rates too low too long.
5. SEC & Treasury looking the other way and/or not acting as all this was unfolding – this has been years in the making and there was plenty they could have done.
I’ve worked in the investment world for nearly 30 years and have absolutely no faith or trust that Wall Street will ever look out for the bests interests of investors without strict oversight and regulation. Remember “portfolio insurance” – the cause of the 1987 crash?; “Safe” high yield bonds originated by Milken and Boesky but sold enthusiastically by commissioned brokers to hapless investors?; Long Term Capital almost imploding the global financial markets in 1998 through use of derivatives and excessive leverage?; the tech bubble with billions made by investment bankers in IPOs of companies with P/E multiples in the triple digits?…..
Wall Street has shown again and again and again that they cannot be trusted, that greed and avarice always clouds their judgement and too often the small investor pays the price. Financial institutions need more regulation and oversight, not less.
Paul – you are making several interesting points. …. I have a pal that used to be at Lehman Bros., and he was also noting some of the Wall Street challenges you are describing above…
The most confusing thing to me remains why after a week of talk, market swings, and a lot of wheeling and dealing, nobody seems able to articulate the *specific* challenges we’ll face if we don’t do this bail out. Why is it irresponsible to consider a wait and see approach?
Today there was a report that GE stopped loaning new money to Burger Chain SONIC. I love those juicy SONIC burgers, but this is our signal of pending economic collapse?
I was specifically referring to this bail-out as a direct result of the housing market.
The problem was caused by fiscal irresponsible legislation from our governments forced onto institutions which at the very foundation must be run with sound fiscal policy.
The fact that our government forced these companies to give loans to unqualified people is just reckless beyond comprehension.
If any one of us ran a business like the government has railroaded this legislation and subsequent payoffs to people we would be in jail.
Freddie and Fannie are key to this equation of failure and the people that personally benefited financially from Freddie and Fanny are just as much to blame.
As for the rest of the economy some big things need to change.
We need to move to a national sales tax and eliminate all forms of Federal Income Tax, Capital Gains, Inheritance taxes, etc.
A sales tax is self-governing and would streamline a major part of the government and legislation. It also taxes all of the illegal money being spent. Easy to collect, incremental cost on business already collecting sales tax and removes individuals of this great country to be targets of our government.
Government can spend what is brings in.
States can individually decide what tax structure works for them including income taxes. If you don’t like income tax don’t live in that state.
Sarbanes-Oxley needs to go…as I enter my 30th year of building companies and in the process of creating my third IPO – Sarbanes-Oxley is a nightmare and a abomination which does nothing to help this country or corporations.
The elimination of capital gains will greatly eliminate any issue with capital being available in this country.
Inheritance tax is double taxation and completely wrong.
There are some pretty straight-forward changes that can occur and can help our economy and streamline our government we just need someone brave enough to fire the over 150,000 employees in the IRS…LOL.
The answer to your question is pretty complicated, but the simple answer – and this is largely invisible to the average American – is that the credit markets are on the verge of gridlock and are barely functioning and in some cases, not functioning. They need to take some time but not too much because things are bad and getting worse daily in the commercial paper markets and other venues that create liquidity for corporate America. The Sonic burger story is symptomatic of this – if corporate America can’t get the credit it needs to operate and grow – the fallout could be a downturn that makes 1929 look like a walk in the park. Fed Chairman Bernanke has made mistakes, no doubt, but he an appointed chairman, not an elected one, with a term that does not expire until 2010. Appointed vs elected to avoid the pull of partisan politics. He is also one of the foremost experts in the world on the Great Depression. When he says things are imperative, I’m inclined to pay attention. Unlike many of the other talking heads involved here, he is not up for re-election nor will he ever run for his position.
Paul it’s a good point that Bernanke is arguably the top expert for the crisis and also has no partisan dog in this fight. But if we are on the precipice why aren’t the broad market indexes down more, esp. as plans sour for the large scale bailout of the type Paulson and Bernanke want but are probably not going to get?
Because, despite all the political posturing (and that’s all most of it is), the market is relatively confident we are going to see compromise and a bi-partisan package. My guess is if we don’t you’ll see a very nasty sell-off come Monday; and if we get it, you’ll get a nice relief rally. Then comes the hard part – the realization that the package is but the first step and we’ve got more challenging times ahead as the financial sector and – more importantly – the consumer – unwind the significant leverage both have taken on over the last 10 years. Consumer installment debt levels were precipitously high, much higher than any historical precident, when this began (in conjunction with a low to negative savings rate), and that will take time to unwind. More banks will go the way of WAMU. More homes will be foreclosed on…but if we can get banks to start lending again, it will be the first critical step in getting the economy back on its feet.
One of the main problems with any solution.
Typically when you rescue a corporation and infuse capital you also infuse new management talent who you trust will be a good steward.
We are about to hand over 700 billion taxpayer dollars to the same people that got us in this mess to begin in…that includes:
Regulators who did not do their jobs.
Congressman who did not do their jobs.
Corporate management who did not do their jobs.
Whitehouse who did not do their jobs.
Part of the solution must be the removal of ALL the people that helped create this problem if we don’t it will just be handing money over to the same crooks who put us here.
We need accountability!
Wow…heard this today…
During Friday’s conference call with House Republicans with Paulson the House Republicans were told that Paulson, Bernake, Bush, Pelosi, Barney Frank, Reid, and Dodd all knew this was coming 9-12 months ago…
200 billion to Freddie and Fannie – said that would stop the bleeding
85 billion to AIG – no…this time it will stop the bleeding
700 billion to bailout with no oversight just let us spend it
65 additional billion to help homeowners that had no business getting a mortgage in the first place.
Total bill: ~ 1 Trillion dollars…
Who do we give it to – to manage: Same people who created this and who knew about it for up to a year!!!
Seriously does anyone else think this is complete lunacy?
They were also told two weeks ago if they didn’t give Paulson he money by last Monday the markets would collapse…shocker that didn’t happen either.
For everything else there is VISA…
or well maybe a visa to live in another country!!!
Glenn I think it’s an excellent point that we are being asked by those who pretty miserably failed to warn us or take earlier action to give them a trillion to … start fixing the problem? Of course it’s not really our money at all – it’s our *children’s* money since they’ll be paying off the debt which this would bring to something like $11,000,000,000,000.00 That’s just over $33,000 for every America man, woman, and child.
It sure seems like a lot of people must have known enough inside info about banks and the toxic paper they were holding to see some of this coming, which is another reason for all of us to be angry.
This afternoon the news (Cavuto) at 4:30 EST is that the talks are falling apart but not clear why. I’m OK with this falling apart. With all due respect to Paul, I now want to see how the markets react before we commit to the bailout. I’d rather see a fully market based solution here.
Angry taxpayers should vote out ALL of these picaroons!
We need to eliminate this Washington as usual harum-scarum approach to our economy and get back to solid and sound fiscally responsible measures.
Regardless of how high this goes these people need to be investigated – we could be witnessing the largest scam and crime ever committed against the American taxpayer.
Where is our 21st century Bobby Kennedy?
BTW – I think Newt Gingrich has some outstanding ideas on how to tackle this problem.
WSJ says talks are ongoing and progressing. I’d still wager we see a compromise package before/on Monday.
Paul.. I think we are all placing some major wagers whether we want to or not!
No bail-out, let the market decide.
If companies needs capital then provide loans which must be paid back.
Investigate all involved in this debacle and restore accountability – that is best for long-term.
Anyone been looking into ACORN?
They started from a radical anti-capitalist group in the 1960 called the Welfare league or something.
Nasty stuff…of course Obama has been heavily involved.
One of the provisions of the bail-out is to provide money back to specific groups like ACORN, which btw has several voter fraud convictions in multiple states.
ACORN only registers Democrats – doesn’t sound right to me that money in the bail-out should go to an organization that favors a particular party regarding voter registation.
BTW…those added provisions to the bail-out provide money directly into those activist organizations that the far-left has created which lobby and pushed for the sub-prime legislation in the first place.
Doesn’t that seem odd to anyone?
Obama, Barney Frank, Pelosi and Dodd this sub-prime lending concept is a core element of their socialist agenda and it doesn’t seem that they get it. That this idea failed and failed miserably and has put our economy into perilous territory.
So what do they do? Hey let’s add more money back into the machine that helped create this debacle in first place – maybe this time we can get it right!
You would think a problem this large would escape the liberal media trap but alas is anyone talking about this these things…
The far left probably looks at this bail-out as…hey this trillion dollars should have already been given to these people anyway.
They have no desire to fix our economy they just want to keep their far left agenda moving forward until they ultimately destroy this great country.
Call me part of the vast right wing conspiracy if you want but decisions like they are putting on the table make no sense at all…
(35) – so very true, I think the number is somewhere around $2300 or more for every man, woman and child in the country…but the two huge questions are 1. will it work ? and 2. will the final cost be more or less than the dire initial estimates ? RTC ended up costing far less in the end than forecasted, but this is a much bigger endeavor with a much bigger price tag.
Have you seen the Wall Street tax proposed by Pelosi…
They seriously don’t have a clue about this.
If there anything that the Dem’s don’t want to tax?
“If after five years … the CBO decides that the American taxpayer has lost money in this, then there would be a fee on financial institutions,” Pelosi said
Unbelievable – Hello – Pelosi the American taxpayer has already lost money and big time.
Anyone believes that the taxpayers will receive anything back directly from the bail-out as it is currently proposed are smoking crack!!!
Glenn I agree the ACORN connection is whacky and inappropriate. I worry that we’ll wind up with a compromise that helps all the wrong parties in this: Fat cats who pushed risk to taxpayers and very slim cats who took on loans they could not afford. Both those parties should be held accountable far more than Joe average taxpayer.
Paul good points that what *really matters* is the bailout bottom line – if this is going to work as well as Resolution Trust did in the 1980s then it’s a great bet – but I guess I’m skeptical that this will be managed to protect the long term public interest which often diverges from shorter term and political interests.
RTC…hmmm…wasn’t all roses and the scale of problem isn’t even close.
I wrote my final thesis on Continental Illinois and Penn Square bank – I had a double minor in Economics (Money, Credit and Banking) and Operations Research.
Penn Square was a relatively small institution giving insane loans to farmers with no paperwork – in fact the head of the bank would wear Mickey Mouse ears to work – really out of control.
We are talking several orders of magnitude difference plus with electronic transactions and the 24/7 market it will not turn out the same way.
I would not assume the result of RTC will in any way foreshadow the end-result here.
I’m going to withhold judgement until this is finalized, there are a lot of specifics still in play…warrants to give taxpayers some upside seem certain; caps on executive comp and golden parachutes are also gaining traction, but much remains unknown beyond the fact they are still at work in DC.
The main difference between the S&L crisis and this crisis is this one has rather large implications on a global scale. The previous S&L crisis was mostly contained within our borders.
Probably the most prudent approach to solving this crisis would be to provide insurance on the money and back the institutions so they can get going again and not be worried about the bad paper. We can insurance for less than 5 cents on the dollar so we can get this done for less than $50 billion. Much easier to swallow than $700 billion +.
Secondarily we need to fix Sarbanes…this is a major contributor here to the complexity of solving this problem in the first place. The institutions were forces to write off the bad paper.
Lastly we should create a strong incentive plan for the American taxpayers which includes suspension or elimination of Capital Gains Tax and Saving Interest Taxes. They could even try this for a 6-12 month period to see the effect – I think it would be dramatic.
A combination of sound principles as stated will restore the credibility to our markets for the foreign powers. It will let the institutions get back to business. We can clean up some horrible legislation and lastly encourage mass investment and savings by the taxpayers.
Latest…Pelosi is claiming Republicans are “Unpatriotic” for not joining the resolution process immediately.
The FACT IS: they were not invited to the meetings. Pelosi and crew wanted to sweep in and put a horrible solution in place with the corrupt Bush and try to sweep this under the rug.
Pelosi isn’t a patriot – remember how she adjourned congress instead of voting on off-shore drilling.
Pelosi acts like and represents what is worst about American politics.
9:40 my time, which is 12:40am in D.C. Paulson, Pelosi, and other key players just announced that the basics are now agreed upon and they should have an agreement tomorrow. Not clear how it’ll be different from the original Paulson plan.
Points of new rescue plan…
more info on the deal…
The politico site seems pretty rightist, but one commenter, “Meritocrat,” hit the proverbial head on its nail (see reply #6):
“”Why was (the Glass-Steagal Act) repealed by the Republican Congress in 1999? So it could be replaced by the Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, which allowed banks and insurance companies to do it all, investments – grant credit – lend – and use credit; which led to abuses and the fix we’re in today. Who led this charge of Deregulation? Gramm? That’s right, Phil Gramm: Mr. “nation of whiners” who is still advising McCain on economic matters. Senate Democrats Voted Against it 39 to 1 Senate Republicans voted it for it 44 to 1 McCain’s vote on Gramm’s bill – Yea.”””
Much as ah disapprove of the DNCocrats, Pelosi, Obama, Clintoncracy, Barney Frank, the Fred/Fannie BS, and the rest, the GOP and specifically Phil Gramm (one of McCain’s cronies, btw) were the prime movers behind de-reg. While the Dems had a hand in the Freddie/Fannie fiasco, the Gramm-GOP-Congress led repeal of the Glass-Steagal allowed for the subprime scam.
That said, HoCo recommends DFV as a political tactic (as in, Don’t F-ing Vote)
De-reg allowed these institutions to buy this bad paper…it was De-reg that caused it.
Sub-prime lending caused this problem, not de-reg. In fact if de-reg hadn’t happened the bail-out would be much larger into the tune of trillions but since de-reg happened it allowed buy-outs of institutions by financially solvent companies which pre-de-reg would have been banned from the purchase.
Sub-prime lending is what caused this problem and ALL of the people behind supporting sub-prime lending and forcing otherwise fiscally responsible businesses into writing bad loans should be investigated.
They can start with Barney Frank and Chris Dodd.
This bail-out is just another massive spending program at the taxpayers expense – and to think they are about to give the same exact people Bush, Pelosi, Frank, Dodd, etc 700 billion of taxpayers hard earned money to just keep making mistakes.
Sorry it is a bad move for this country. It is great to help our economy stop its massive bleeding but find some people that know what they are doing.
The left wants you to believe the de-reg caused this problem – it just isn’t true. The left doesn’t want sub-prime to be the target because it goes to the core of what they believe – income redistribution…that is what this is all about. Slam the hardworking people who make good decisions in their lives and hand out money to people who want a free-ride and can’t be burdened with the prospect of making good sound fiscal decisions.
Nice to see they dumped the funding for ACORN out of the bill – exactly how does something that absurd get into the bill in the first place? How come we are not told about the genius that wanted that in the bail-out? We deserve better than what we are getting and we deserve the truth.
My first line should have read:
It WASN’T DE-REG that caused it.
Pro-economist I am not, but the repeal of the Glass-Steagall Act did, at the very least, provide banks with a great deal more freedom to move into commercial business, speculate, lend, extend credit to companies, etc. So potential for risk most likely increased, perhaps greatly. AS most economic issues, pinpointing the exact effects of the repeal (or the act itself) requires a lot of legwork, fact-gathering, number crunching; better to stick with some good old fashioned guilt by association and character assassination:
Most would agree that Phil Gramm’s “un pedazo de mierda”. As is Billy Clinton. That those two scoundrels approved it (along with their cronies in GOP) probably good evidence the repeal (and Gramm’s pro-business alternative) were designed to, ah, line the pockets of financiers from Wilshire to Wall Street.
Sorry, I just don’t buy the “it’s all those liberal democrats fault” line….any more than I buy the “it’s all the Repugnicant’s fault” – both parties have very dirty hands. Nor do I absolve de-regulation as a contributor. Glass-Steagal and other post depression legislation managed to do a fairly reasonable job of keeping us out of trouble for a very long time. While that legislation certainly needed revisions to keep up with the times, gutting it entirely opened up a whole new Pandora’s box of problems. It is no coincidence that every major investment wirehouse on Wall Street left are becoming banks so they can survive, and in so doing their ability to wreak havoc will be dramatically curtailed.
The minions of Wall Street do NOT have the small investors best interests at heart. They never have and they never will. They require vigilant oversight and this fiasco is yet another example of why. Too much government is bad, but too little – in the case of Wall Street – is like letting the fox guard the henhouse.
Note that some of the conservative regs on politico cite Bill Clinton as support for their bash the dems rhetoric. That’s to be expected: he was for all intensive purposes, a moderate republican. Clinton signed off on the repeal of GSA, and then on Gramm’s alternative, in effect ending nearly 70 years of New Deal legislation. As they say, “with friends like that……”
I think this is a bi-partisan problem.
Here is how I score it:
If we didn’t do sub-prime lending this would NOT have happened – PERIOD.
Does anyone believe sub-prime lending is a good idea?
Not everyone is going to own a house in America – it is a fact.
Sub-prime lending was a liberal democratic program – first started by Carter, then super-charged by Clinton. Bush is to blame as well for commenting and supporting it.
The sub-prime game was one of the stupidest things this country has every done and now not only America but the world is paying the price.
Those behind this failed policy should be investigated, those in power that forced fiscally responsible organizations to make bad loans should be in jail.
What is the cost? Collapse of our economy and $1 trillion dollars.
Americans should be absolutely furious over this reckless policy.
De-reg may have allowed companies to cross some lines and if anything was done improper those people should be held accountable.
It is clear that Sarbanes was a major contributor to the velocity of this melt-down. That needs to be corrected as well.
To think this could be solved ASAP with an insurance approach at a fraction of the cost and the Democratic controlled congress isn’t even considering it…is outrageous.
ACORN plays a major role in this fiasco as well. Here is an organization that gets taxpayer monies and is supposed to be non-partisan.
For over 10 years they have been investigated for voter fraud and people from their organization have gone to jail over this. ACORN is involved promoting legislation that led to the sub-prime lending and that is why they were going to receive money from the bail-out.
Even though they are supposed to be non-partisan they endorsed Obama and Obama has spent $800,000 with them in this election cycle and btw has changed the filings on why they spent the money with them.
So for over 10 years they keep having voter fraud convictions and the leadership with ACORN blames it on the people – sorry 10 years having some major problems goes right to the top.
ACORN needs to be investigated in its role with this. They currently under investigation right now in 10 states for voter fraud this year.
They are estimating that 1.7 billion will be spent on the Presidential campaign – that equates to $1.2 million a day for every day in office as President.
Considering in 2004 less than $400 million was spent for the Presidential campaign.
They estimate for all the races that $4.7 billion will be spent this year.
Does anyone else think that something is wrong with this picture?
Who are these candidate beholden to with this kind of money at stake?
The emergency spending bill that was passed yesterday in the tune of over $600 billion dollars with $6.6 billion in pork projects (over 2,200 of them) you would think given our financial economic situation that the people that have been elected to serve this country in behalf of its taxpayers would have shown some restraint in the extemporaneous spending.
What needs to happen to get financial control back in place in our country it is most certainly out of control.
Many democrats assume that’s an inherent good–obviously not all do. Really, once distribution’s on the table for discussion (as in, “to redistribute, or not to redistribute”), economics starts to appear something like ethics, if not ideology. Adam Smith hisself was not afraid of arguing for govt. intervention when markets got way out of whack.
In his Leviathan, Hobbes spends a few chapters discussing “fair” distribution. He may not establish distribution (or egalitarianism, as they say) as some logical necessity, but he suggests even distribution as a type of covenant reasonable humans should agree to. Obviously not all humans do (and not all humans are reasonable).
At the very least, the ethics of distribution, and re-distribution should be acknowledged: most rightists error in dismissing the entire question, though many a leftist–especially those intoxicated with marxism–may error in assuming it to be an inherent good.
We might also take a look at what’s happening in say Latin America, where leftist socialism is in full force. One day the homies are discussing Keynes or the commodity markets; the next, there’s a california Hugo Chavez in the streets with a mob screaming for LA HUELGA, and they hate the liberal reformers as much as they do the redneck conservatives.
On the other hand, one could just say F. the liberals or their bastard progeny the socialists (as even Nietzsche did), and keep the pirate-capitalist par-tay rolling without any major alterations. That seems to be the Paulsonian approach (that the multi-millionaire Paulson was selected to broker the bailout deal might concern some).
(scuzi, Duck–rant went on a bit)
Paulson should probably fired. Cox probably too.
Bush should be investigated.
Barney Frank and Chris Dodd should resign.
Any executive involved with Freddie and Fannie should be investigated and all the money paid to them should be returned.
Pelosi should be investigated.
Anyone financially connected to this sub-prime fiasco should be looked into. Any of the monies they have received as part of this debacle should be subject to seizure.
We need drastic action on this to restore credibility to the taxpayers of this country.
At some point when do people start filing civil action against the US for fiscal irresponsibility and corruption?
Does anyone out here feel comfortable paying taxes knowing this is what happens to your hard earned money?
It looks like many of the people involved from the Whitehouse throughout Congress knew this was coming and knew for at least 9 months or more.
That should be looked into.
If it ok for Harry Reid to get and tell the war we had lost the war in Iraq they should have stood up and told the world was about to happen in the financial markets.
The reason they don’t…they are a bunch of hyprocrites who parse words and spin the truth (and we pay them millions to do so). Time to rid our country of all this miscreants!
From the conservative viewpoint on the bail-out. This bail-out is a mistake and will not solve many of the problems we need to solve. It is just a massive expansion of government and socialism at its best.
Brilliant – let’s implement another social program to fix a failed social program that got us here in the first place.
I would like someone to clearly show an example of where a social program of this scale has EVER worked.
Has anyone considered for a moment that what has happened is exactly what should happen?
The market is creating accountability in its own way.
Our government tried to create a program to get people way outside their ability to repay a mortgage…what exactly did people think would happen?
And now every single person that sub-prime lending was supposed to help is totally screwed!
Of course they should deal with their own bad decisions albeit strongly encouraged by our government.
Anyone who votes for this bail-out in its current form should be voted out in November.
PS – My prediction – this bail-out solves nothing.
Looks like round one: free market economy…
Market is down around 600…not good but certainly not depression level wipe out of profits.
This should be a good lesson for us to get back to basics and solve some of these fundamental problems within our economic system.
Additionally we have sent a message loud and clear to the insaniac spenders in Congress and Whitehouse – NO YOU CAN’T WASTE OUR MONEY.
Put together a step by step approach that you can get consensus on from experts and solve it right the first time.
That package is toast and Wall Street is voting with its feet.
Does anyone out here feel comfortable paying taxes knowing this is what happens to your hard earned money?
Glenn I think you were speaking for more than half the taxpayers out there. Paulson & Pelosi & advocates have failed very dramatically to explain to folks how this will impact them directly, and as you note the 500 point decline is not a meltdown.
I think a lot of people are so skeptical of how politics and high finance have managed things to date that they are willing to endure significant hardship as we wait to get a better idea of how this is going to shake out.
The media has played a key role squashing this by characterizing this as a “Wall Street Bailout”. I don’t think that is the best way to view the bailout but I think if everybody understood all that is at stake taxpayers would want to see a lot more blood in the water before we take on all the risk.
Note that much of the taxpayer anger *absolutely* relates to the reckless spending of the past. In a nutshell, folks do not trust Washington to spend our taxes wisely because they rarely do. If we were not sitting on top of a 10 trillion deficit, and fiscal responsibility was a cornerstone of Washington policy I think people would feel a lot more comfortable signing over their taxes. I know I would.
Solution ideas? Washington should be telling us how they are going to balance next year’s budget as *their part* of helping to solve this mess. Yes, that will require massive cuts in Government spending and yes, we can handle that.
Paul 550 on DOW is not really a “meltdown” drop – what is your take on that? Bernanke is the world’s leading expert on 1929 but I’m starting to wonder if he’s been seeing too much of this through the lens of a collapse…
Barney Frank introduces Pelosi and this is what she does…
How come no one is speaking about sub-prime?
From my standpoint this partisan politics is disgusting when our country is faced with such a dire situation.
Democrats had their mandate two years ago and Pelosi has taken Congress to the lowest approval ratings in the history of our country. They blew it, Pelosi cannot lead, they all need to be voted out.
I think one things needs to change in our Government and that is we should be able as a nation vote someone off that heads a national committee when their is such a level of incompetence. These representatives are voted in by relatively small groups of voters from their districts but they hold position that affect us all at a national level.
We shouldn’t award positions because of party we should reward positions based on performance and when they don’t perform they should be removed.
Dodd and Frank if they were decent people would at a minimum resign from their appointments – they have failed the American people miserably.
Best comment so far I have been reading on blogs, etc…
“time for reboot”
Dodd, Pelosi, Frank were not the real culprits, or at least not nearly as guilty as like a Phil Gramm. Gramm, the GOP congress of late 90s, and Billy Clinton are the culprits. Clinton signed off on the repeal of the Glass-Steagall act, in effect giving the banks and mortgage panderers (including the subprime scammers) free rein.
The subprime “meltdown” really forms only part of it. For that matter, it’s been a very profitable 8 years for dee-eep pockets: for one, bullish oil markets (helped by wartime economy) made millions of shekels for American aristocrats, especially since Gramm and Co also freed up commodity and stock regs. The Dems may be buffoons, weak, ineffectual, etc. The GOPers on the other hand more or less destroyed the New Deal (with help from Clinton), and when the casino fun turned ugly, look for people to blame (including Dems).
700 points, coming on the heals of a market that is already down over 22% in the last year is not an insignificant drop. The market is voicing its well-placed concern that we need a solution.
Here is an example of how dire things are in the credit markets:
Last week, on Wednesday, Ford Motor paid 8.5% for money OVERNIGHT (companies borrow overnight almost daily for a host of reasons). Normally they might pay 3.5 given their well-known problems, for overnight lending. Companies like GM and Ford that are in severe distress will be doing well just to survive this recession, but if they have to pay 8.5% for overnight they are surely doomed.
What will happen to the unemployment rate in the heartland of America if we lose GM & Ford ? What will happen to tax receipts ?…to outlays for unemployment and food stamps for all those displaced workers ?
The need for action is not an illusion. Credit markets are in very severe and real distress, though it remains largely invisible to the average guy on the street.
To the degree the market is holding together today it is because there remains hope we’ll ultimately see a compromise bill that is passable.
Having said all of the above, one could hardly blame the electorate for having little to no faith in this administration, our Congress, or our financial intermediaries. The Iraq War; non-existent WMDs; Abu Ghraib; Alberto Gonzales; obscenely high salaries of executives on Wall Street; golden parachutes – this isn’t exactly a group of entities that garners trust.
GM and Ford got their bail-out with Saturday’s vote.
Horatiox…if we didn’t have sub-prime this would have never happened. This sub-prime program was just stupid – it doesn’t make good sense to loan people money that can’t pay it back.
The Government shouldn’t be saving people from their bad decisions.
Republicans shouldn’t be viewed as the culprits because of de-reg. De-reg is good…however people that abuse the situation and practice in bad business decisions this is what is going to happen. There is no way Government regulation is going to solve the problem with bad business decisions.
We need less Government and more accountability for stupidity.
Remember: If we didn’t have de-reg then the purchase of the weaker institutions would have never happened and we would have been burdened with trillions in bail-out. In fact it can be argued with de-reg it has allowed for the emergence of much stronger financial institutions and that has all happened without the bail-out.
So I think we are better off with the marketing driving the decisions – I have zero confidence in our Congress to make these complicated business situations.
Socialization of failures = socialization of profits.
Let the market do its thing, get out of the way, in the end we end up with stronger companies.
Look at Japan – they bailed-out their financial system and it has prolonged the issues for years – HUGE MISTAKE.
To continue the quarterbacking: the Feds ought to tap the insurance giants to fund the corporate welfare aka bailout. Those massive insurance deposits (also helped along by Gramm, Clinton and Co’s actions in late 90s) could be used for all sorts of credit or collateral, couldn’t they? Or say as a general fund when the automotive companies collapse…In fact the bailout deals probably hinge on various bigtime insurance underwriters, the real power in American bidness.
Good for whom? De-reg may be good for like Enrons and other corporations. It’s not inherently good, especially not for citizens (as Californians might recall after Enron started gambling away public funds). The subprime meltdown’s merely a small part of what’s going on, and in fact, Gramm and most GOPers (and Clinton) agreed to the easier mortgage terms (over the objections of some GOPers–see the senate voting record of late 90s) . It was the legislation of late 90s, sponsored by GOP, that gave all lenders (including those pitching “subprime”) more flexibility.
Who is on the hook here in the corruption?
Sheeple forget the past thank god for the web to bring this stuff back in context.
Funny how Republicans called for more regulation on Freddie and Fanny the Democrats thought it was the worst thing in the world.
Now the socialist program has failed with huge corruption inside it…now the Democrats want to blame Republicans and blame it on de-reg and re-write history.
This video shows it all.
Horatiox – btw I am not saying de-reg is perfect however to blame this on de-reg is just left wing spin to deflect from a root cause.
Freddie and Fannie will go down in history as one of the biggest rip-offs this country has ever had to endure and it is a direct cause of this cascading problem.
Can anyone out here state that if Freddie and Fannie didn’t happen that we would be in this situation today?
It is directly related and the majority of Democrats are directly responsible for creating the Freddie and Fannie mess. Just look at the donations – those people don’t get donations by asking for more oversight and regulations – they get donations by turning a blind eye!
You’re spinning rightist, pro-business talking points. The GOP AGREED to more lax lending/credit terms (not all–some NY GOPers objected): indeed, that’s part of de-reg. That was part of the deals between Clintonian and Gramm in late 90s. Besides, that some dems were behind Fan/Fred. does not mean individual lenders/brokers were: blame all the lending companies (probably with many GOP/conservatives at helm) who made the loans, or the underwriters. Bipartisan dystopia, y’all.
Paul I was hoping you … wouldn’t say that the reason things have not melted down is simply hope for a new bill, but I agree that if that is the case we could see the catastrophe some are predicting. It’ll be interesting to see tonight’s Asian market reaction to this.
That said I think many of us want to see a lot more blood in the water before Washington throws in so many of our life preservers. There is not an unlimited supply of those.
I have always said that both parties are to blame for the support of the sub-prime lending.
However when the time came to fix it, the Republicans primarily led the charge to do the right thing.
The Democrats 100% went after that reform and oversight and killed it. THAT IS WHY WE ARE HERE TODAY.
I even heard one of the left propagandists today try to defend Barney Frank’s comments back in those hearings when he stated he couldn’t see anything wrong with Freddie and Fannie – the rationalization was…well the rule and accounting are so complicated there is no way Barney Frank could have known – SERIOUSLY that is BS – How can you be the chair of the committee and not understand what you are doing?
Why is everyone so willing to make excuses for these people that have so clearly screwed up? BTW I think Bush, Paulson and Cox have totally messed up as well.
We need to strong future and we need it with people that will be willing to be non-partisan, work together to affect real change.
Not once has Obama voted against his party – think about that.
Enough of the politics, etc…we need to solve these serious issues or we are all going to regret it.
Ah it’s the “Blame Barney, the Queer Purple DINOsaur” meme. That’s the baptist right-wing’s typical deception tactic, as is putting the blame on all those “minor-itays” too f-ed up to pay their bills: and the “Blame Barney” meme also a good way to keep Americans from say investigating the pirate-capitalist legislation of late 90s enacted by GrammScam/GOP and Mr Demopublican, Bill Clinton.
That dems argued for lax or More “liberal” mortgage lending practices does not in itself mean they are responsible for defaults, foreclosures, bankruptcies, right?? When Tyrone Jackson declares bankruptcy, the collectors will go to the underwriters, his accounts, other lenders, not to legislators and blame them for business codes. All systemic, y’all.
They knew for years Freddie and Fannie were going to cause these problems – it is clearly documented in the congressional record.
The democrats, specifically Barney Frank blocked the regulation that would have avoided this problem.
Does anyone dispute that?
Don’t you think he had a clear conflict of interest?
Just look at the record – it is literally black & white.
Horatiox…I just got your first line – sorry but I find that offensive about Barney Frank. Who gives a crap about his personal life choice? Don’t go there. That’s just not cool.
Racism and gay/hetro crap has no place in America and we should avoid it at all costs.
And now you have Barney Frank claiming Republicans are to blame for the failure of the vote.
The Democrats have the majority and could have pushed this through but their own party abandoned them and Nancy Pelosi poisoned the well.
Not exactly. Most of the 90’s GOP congress approved of relaxed credit terms; that was one of the selling points for the de-reg deals with Clinton and Gramm. Anyway, given some degree of laissez-faire, aren’t the lending companies (and underwriters) themselves liable for their lending practices? Yes, and that’s how courts would view it. Whether certain credit qualifications were eased up or not is not really the central issue.
After the Gramm/Clinton repeal of the New Deal regs, banks were free to use savings/securities/deposits to speculate with, invest, lend itself: they very thing the New Deal planners had designed the regs to prevent. Not to wax historical-materialist, but the entire affair looks something like a repeat of pre-Depression era business practices.
Any reasonable person would look at this situation where you need full bi-partisan support and you would act in a bi-partisan manner to get it done.
Clearly Frank and Pelosi have not acted in a bi-partisan manner – is anyone surprised with this outcome?
Is this what our country needs? People that cannot fathom the idea of working with people with different ideas…Does Pelosi and Frank have all the answers?
We need to wake up. A vote for Obama would create a completely partisan environment where even more wouldn’t get done starting next year. If Pelosi and her do nothing congress can’t even get consensus now on what they say is the most important issue of the century…how will anything get done on other stuff.
Horatoix, a couple of years ago was their a real opportunity to fix the sub-prime mess?
Why didn’t we fix it?
Who is responsible for blocking even the opportunity to fix it?
(81) Almost 7% down on the Dow, almost 9% on the S&P and over 9% on the Nasdaq ? – to me that is a meaningful & strong message from the markets. The 5 largest investment brokers in the U.S. no longer exist (Bear Stearns & Lehman), have been acquired simply to survive (Merrill Lynch) or have become bank holding companies, again just to survive (JP Morgan & Goldman Sachs)…not that I weep for them, they are victims of their own avarice, but they are important as they are symptomatic of the severity of the problem. WaMu – the largest bank failure in US history, IndyMac and now Wachovia – these are neither small nor insignificant institutions while many other banks remain deeply troubled and on the ropes.
It isn’t just what the stock market does, but the whole picture taken in its entirety that says the problems with the credit markets are very serious.
Paul given the hype about the looming disaster over the last two weeks (which has not happened) it is realistic to expect a knee jerk reaction like this from the market.
Quite frankly I was expecting a 15% drop…so 9% is amazing to me. If we were talking about a 20%+ drop in one day…then yeah I would be deeply worried but that hasn’t happened.
A lot of change in the market this year is also due to corrections that are badly needed so many things are out of whack.
Harry Reid actually introduced anti-speculation bills a few months ago that would have put some brakes on the energy-speculation and financial casino, but GOP rejected ’em. So in that case, the GOP blocked the opportunity to fix things, mainly because “fixing things” means regs and less shekels for the dee-eep pockets.
You seem to think this is all about consumers. It ain’t. It’s about big finance and banks wanting to be free to do whatever they want. The GOP even wanted to block the bankruptcy provisions of the bailout and other related actions. Perhaps the defaulters and would-be bankrupts can be put in old school poor houses run by GOP lenders, ala England and France circa 1600s. Or reintroduce chattel slavery.
The problems did not start a few weeks ago: they started mainly in late 90s with bipartisan-supported de-reg policies. At the same time, given “free market” economics (at least nominally), politicians should not be assumed to be completely responsible. Blame the lending companies and underwriters. Or blame predatory lending practices, if not interest itself. Kropotkin had some solutions, decades ago. Then so did even Ben Franklin.
Horatoix – BS…The Democrats control the vote. If the Democrats wanted to pass anything they could without the Republicans. So anything Harry “We Lost The War” Reid wanted to pass they could have gotten it done.
Thanks for Playing, please try again…
Alas, you seem to know as little about the voting procedure of the Senate (not the same as House) as you do about economics (or the bipartisan-led de-reg). All Dem. senators supported Reid’s bills; all GOPers voted Nay (probably because Exxon/Chev/Occi execs ordered them to).
Horatiox…lol…The house passed the anti-speculation bill and the senate didn’t put it through and it feel far short of fixing Fannie and Freddie…in fact it did nothing to fix the sub-prime problem.
To sit there and claim this anti-speculation would have changed the Freddie and Fannie sub-prime situation is just complete insanity.
All they need is 10 votes to pass anything…you are going to try to tell me that Pelosi and her do-nothing buddies couldn’t muster 10 votes. Not to mention how they went on vacation instead of doing the right thing and pass offshore drilling.
Seriously Horatiox this is getting silly – you want to reference a bill for energy speculation as an example of how Reid wanted to fix Freddie and Fannie.
Freddie and Fannie is clearly a corrupt vehicle created by the Democrats, protected by the Democrats and is responsible for the greatest economic crisis in the last century.
LOL…give me a break.
And then today Pelosi couldn’t even get the committee chairs to vote with her today. Unbelievable no wonder they are do-nothing…well unless it is to protect a corrupt organization that is about to be exposed.
If they ever investigated this properly there would be people in our Congress in the Democratic party that would go to jail – it is that blatant and bad.
If it sounds like I am annoyed…I am – this has cost me a lot!
Horatiox just because I don’t buy into Clinton/Obama Economics doesn’t mean I don’t understand it. Part of my minor is Economic with a focus on Money,Credit and Banking.
Trying to discuss it properly in this type of forum is impossible it is far too complex to do it well.
Do you have any formal education in Economics?
Funny how people want to complain that the economy takes a hit when do really stupid things…isn’t that how it is supposed to be?
In fact since the financial institutions are waiting to see how the government will fix everyone’s problems it is only slowing the market correction. Japan is a perfect example of why not to do a bail-out. They still haven’t fully recovered from their last bail-out.
That’s right– the GOP senators prevented it from passing, since GOP/DEM nearly even in Senate. Reid’s bills were not a fix-all, but a start.
For that matter, the speculation problems do have a relation to the lending crisis: the repeal of the New Deal regs in late 90s (again, GRAMM/GOP supported, tho’ Clinton agreed) ALLOWED all banks, including the mortgage lenders (whether subprime or not) the freedom to invest/trade/gamble with SECURED deposits/savings: exactly the sort of risky investment-casino that New Deal planners wanted to prevent in the 30s.
The GOPer’s whines about Fred/Fan. are pretty much just media-hype: most of them AGREED to the easier credit/lending terms in late 90s. Salesmen don’t care about the lending terms/risk–that’s for the underwriters to worry about: the money-guys want the deal. The little green football types of rightists will not cop to it, even though well-documented.
Anytime the government helps create a corrupt organization like Freddie and Fannie this is exactly what is going to happen. Anyone that wants to defend the Democrats on this issue just isn’t being serious about change. Because until we change the exact thing that allowed this happen we are doomed to repeat it again.
Horatiox in regard to the New Deal, etc…I definitely agree there needs to be changes but I don’t blame those as the reason Freddie and Fannie decided to be thieves.
Again if Freddie and Fannie didn’t do what they did – we would not be having this discussion today. Do you agree?
You’re missing the point. The banking regulations from the 30s mostly kept Fred/Fan IN CHECK until the GOP led congress and Clintons freed everything up in late 90s. Regardless, even the politicians don’t make the loans: lending companies/underwriters do. And they were not all Dems, even when doing business under Fan./Fred.
With due respect you are missing the point.
Republicans on multiple occasions raised this specter years ago and directly discussed the obvious problems with Freddie and Fannie but under the lead of Barney Frank they continually shut these attempts down. It was a clear and deliberate attempt to keep oversight away from this corrupt vehicle designed to pay off Democratic faithfuls.
That is the point. If Barney Frank and crew were honest this would have been dealt with a couple of years ago…how can anyone deny that when you look at the record?
Its just like a bridge collapse…the person who inspected the bridge and didn’t act upon the warnings that the bridge was going to collapse is the one that should be in trouble.
We have lots of problems to fix and this was one major problem that could have been avoided but WASN’T and Barney Frank was key in blocking any reform that was needed.
I still stubbornly maintain there is PLENTY of blame to go around but a detailed discussion would run as many pages as the Kim tragedy. Republicans point at Democrats; Democrats point at Republicans – my take is that if the next proposal (and there will hopefully be one) – is one that NEITHER party embraces enthusiastically, but rather only grudgingly, then it is probably pretty solid legislation.
Which is to say, the big banks and lending companies are not just losing because of bankruptcies and foreclosures: they LOSE because they are now at the investor’s commercial casino. They LOSE, like Enron lost, because they take SECURED deposits (or mortgages) and play craps with ’em. Got it? It would take some legwork, but I suspect most of the recent turmoil/buy-outs/take overs are due as much to losses in trades/investments/speculation as to individual foreclosures. The problem isn’t so much due to Ma and Pa Kettle, but to the swine who hold the notes to their property, and use it at the NASDAQ casino.
Horatiox, do you think that Barney Frank and Christopher Dodd have no hand in this problem? Do you think they have done nothing wrong?
Do you believe Nancy Pelosi’s speech right before the vote was necessary today?
How can you expect anyone to vote with you once you have spewed such vile comments right before the vote?
Horatiox, you keep deflecting and moving to broad sweeps of major issues.
Do you agree if Freddie and Fanny didn’t rip off America that we wouldn’t be having this discussion today?
There is a major difference between Freddie and Fannie and the New Deal elements.
Portions of the New Deal can be argued as bad policy and need to be corrected.
However Freddie and Fannie was created as a corrupt organization and protected by key Democrats – that is a big difference.
We are always going to have to deal with bad policy decisions from administrations and legislature and we have a process through elections to affect change – but to have to put up with corruption at this level we cannot tolerate and it must be attacked and eliminated with extreme prejudice – this undermines everything that is great about this country.
I will post this again. Just watch it, in entirety and tell me that you don’t think the Democrats in 2004 try to protect the illicit activities of Fannie and Freddie.
Doesn’t it seem obvious that they knew what was going on here and they deliberately thwarted any and all attempts to fix this?
This isn’t some staged video…it is comments provided by the participants arguing the issue. Just listen to the comments from the Democrats – do you actually believe what they say?
More Americans needs to see this type of detail – and I think Joe would tell if you if this were the Republicans doing this with Freddie and Fannie I would be screaming even louder. I was glad that they were swept out of office last time – they deserved it, and if Bush were running for re-election I definitely would not be voting for him.
I have no problem crossing the aisle when it is better for our country and taxpayers.
I have created a lot of jobs in the country and am very proud of what we do as a nation and don’t ever want to see these types of bad things – it is really bummer.
BTW – Why do you think the press doesn’t talk about what Bush has done in Africa? What he has done there is nothing less than stellar and it is a shame the world doesn’t understand what we are doing there?
Yes, Nixon probably errored by signing Freddie Mac into effect (or not vetoing) in 70s or so, which more or less privatized the older Fannie Mae. So again, usual Lil’ Green Footballs hype misleading: the Dems had some hand in the privatizing of secondary mortgage market, but it WENT DOWN on Tricky Dick’s watch. Not sure of all the specifics, but mainly an attempt to use mortgage capital for investments, so in effect anti-New Deal. The GSEs are hardly a liberal plot: more like a financier’s plot. I wager one could do some research and find many Dem congress or senators opposed FredMac. That GSE credit ratings were later lowered via some commie pinko like Jimmy Carter is sort of negligible point.
Horatix…the problem with Freddie and Fannie this year could have been resolved in 2004 and 2006 and both times the Democrats blocked it – PERIOD.
You don’t have to spin back 40 years to find cause and effect…it is near term just around the corner.
On one hand you have the Dem spinners today saying since it is all so complicated how could Barney Frank even begin to understand that was a problem in 2004 with Freddie and Fannie and then again in 2006 and then you have Pelosi saying this afternoon after the vote failure that Barney Frank has such great wisdom, experience and intelligence about this situation he surely can figure it out.
And you still haven’t answered the questions…you still diverting and not answering the question – no wonder you like Obama and Clinton…lol…they never answer questions either.
For me I have no problem helping people get a home but there is a better way to do it. The government should create a partnership fund where they own property to begin with and the prospective homeowner pays the government a reasonable fee for carrying the property and achieves a portion of ownership every month. Combined with that is an education program that helps the “new” low income homeowner a path to increase their marketability and earning potential so they can accelerate the ownership process.
That is how you can actually help someone and if they don’t keep up with the education process they can be evicted from the property – oh yeah they need to be drug free and not be arrested during this period as well.
If we want to do some good social engineering lets really do it but do it in a way with solid expectations on both parts and the government can actually see a return from its investment in its low income citizens. We need accountability and a person that doesn’t keep up their end of the bargain – well sorry you shouldn’t get a free ride.
The Dems gained control of the House, for better or worse, less than two years ago, so sort of another trivial point, and for that matter, the Gingrichians were all in favor of lessening regs on FHLMC in mid 90s. Indeed the Keating/S n L people made a bundle on GSEs did they not.
Really I think it’s some sort of veiled racist chant: Freddie Mac, like Bernie Mac, or Big Mac. The hicks out in the heartland only need to chant MAC, and like Barney, and are ready to burn some crosses.
There were actions brought against the GSEs starting in 90s for various reasons. Bushco could have done something in early 2000’s, but waffled. And it’s not even really a government program: merely guaranteed by the govt (thanks to GOP privatization).
Why do you want to blame policy for bad business decisions and corrupt politicians?
It isn’t the policy that caused this problem. It is the people who tried to cheat the system for their own personal gain both in Wall-Street, our government and the people that tried to get away with mortgages they had no business getting in the first place.
This is about people doing bad things not about a bad policy.
That is the old convict the gun theory…guns don’t kill people – it is the people who are handling that guns that kill people.
Yeah you’re right: blame the people who wrote the code that allowed corrupt politicians of all types to take advantage of the homeowners. NIXON did it!
Seriously, in a real-world business scenario, the people to blame when bankrupticies/foreclosures occur are usually the underwriters. Barney Mac’s no underwriter: just some bureaucrat. Bush/GOP even whined a bit, but they did nothing, even when they had control of congress. Besides, GSEs are PRIVATE corporations. The bureaucrats are not really in charge, but just overseers.
Glenn in 2004 the Republicans controlled congress – how could the Dems single handedly have killed off the restrictions on Fannie and Freddie? I do agree there’s a lot of ‘splaining to do, esp by the Dems who fought to avoid better Fannie and Freddie rules, but I think pinning everything on them is letting a lot of folks off the hook who should be voted out and in many cases criminally prosecuted. Ben Stein – no friend to many Democrats – seems to think that “most” of the problem comes from Wall Street wheeling and dealing – mostly legally with too few regulations.
Joe there are two main causes of the current economic meltdown.
Fannie and Freddie – a corrupt government entity empowered and protected by key liberal democrats, some republicans in there to. Just follow the money trail and you will have your answers.
Mark to market in Sarbanes/Oxley law. It was insane to do it when they did and now it is coming back to haunt us.
Add in a little Un-American activity from the criminal organization ACORN and you have the perfect storm for screwing over the taxpayer and hardworking, honest Americans.
So what does our government decide to do about it…play partisan politics and come up with a 500 page bill that is filled is earmarks and pork that would make any mind spin.
They all need to be voted out – for sure. Barney Frank should resign from his committee – he failed America for sure. All of the politicians connected to Fannie and Freddie need to be investigated and prosecuted.
There is a big difference when you have greedy people on Wall-Street who take advantage of the law – we should deal with them as well as opposed to our elected officials priming our failure with their corrupt and mindless approach to fiscal responsibility. Wall-Street doesn’t have an obligation to our tax dollars – E Capitol Street does and Congress is most definitely at fault here pretermitting their financial responsibility.
There seems to be this recurring theme in the far left these days…let’s turn our head the other way when organization we support are breaking the law, undermining our economy, etc when they are helping the poor or minorities. Let’s keep spiraling down to a lawless and corrupt government as long as we are helping the poor folk or the under-privileged and make sure we stick it to the man!
If Fannie and Freddie didn’t do what they did – this would have NEVER happened. If we didn’t de-reg but Fannie and Freddie still happened we would still be in this mess.
I have no idea why people want class-warfare in this country it does nothing to help heal the deep wounds in this country and if we keep it up it will eventually lead to civil war.
We ask Congress to clean up the mess they created and what do they give us – pork, earmarks and NO ACCOUNTABILITY – that is an insult to any intelligent person in America.
(115) Joe even Bill Clinton recognizes who is primarily at fault here. He squarely blames the Democrats in this mess.
We had a chance to stop this years ago and the charge led by Barney Frank, Maxine Waters, etc the extreme left of the Democratic party blocked any and all attempts by Bill Clinton, the regulators, McCain, other republicans and even some of the blue dog Democrats.
Why doesn’t anyone recognize we keep getting into trouble when the far left or far right screw the rest of us over?
I don’t think anyone should be protected or excluded from investigations here. Follow the money trail and anyone who has had a hand in this should be fully prosecuted to the full extent of the law.
BTW…the current bill in its current I do not believe is going far enough to solve the problem. We will see what the market looks like in a few months but it is certainly going to continue to languish over the next several months.
Obama sues Citibank under CRA to force them to make bad loans:
Chris Dodd gets a sweetheart deals for mortgages from Country Wide – his explanation – I had no idea I was being given preferential treatment.
Yet Dodd and Obama are #1 and #2 on contributions from Freddie and Fannie over the last 9 years (and Obama has amassed the #2 spot in just 3 short year).
This country seems to be made up of Sheeple and Ostriches.
We need to put a stop to this fiscal irresponsibility that plagues our country – not only in government spending, corrupt government agencies, but with Main Street we need to all stop mortgaging future generations opportunity.
Voter fraud…watch this video with Lou Dobbs on the voter fraud issue.
In Ohio the Democratic Ohio Secretary of State changed the voting rules by directive!
Listen to what is required to register to vote – unbelievable.
Even Lou Dobbs is floored with the prospect of fraud.
I agree 100%.