Bailout: The Final Bill

by hilzoy

I don't think our Congress has faced a more important decision than whether or not to pass the bailout bill in decades, perhaps longer. (Summary here; CBO analysis here.) To state what is beyond obvious: it is incredibly important to set aside our preconceptions, whatever they may be, and really think hard about whether to support this bill or not. If you're easily alarmed by predictions of disaster, think long and hard about how long it will take to pay this off. If you're inclined to think that experts telling you that you need to fork over large sums of money are necessarily wrong, go back and listen to the audio clips near the end of my last post. Look at the graphs and the pictures. Think hard.

The costs of being wrong, in either direction, are staggering. This is not a time to leap to conclusions.

It is also, in my judgment, not a time for those of us who are not professional economists to imagine that we can sort things out without expert advice. I have read some bloggers who have no background in economics or finance, who are nonetheless sure that there is/is not a crisis, or that the bill under discussion obviously is/is not necessary. We're lucky enough to live at a time when experts provide good analysis very quickly. We should use it.

(Note: of course I'm not suggesting that anyone mindlessly defer to experts. I just think that questions like: what is likely to happen if we don't pass this? are more likely to be answered correctly by people who knew what the TED spread was before a few months ago. It's a judgment call, and one that requires a fair amount of sophisticated knowledge. I am of course trying to understand it as best I can. But I am not under the illusion that I could arrive at a view I feel real confidence in on my own. I feel sort of the way I might if I had to decide between two courses of action, each of which might turn out horribly, and which was right depended on the solution to some completely novel problem in theoretical physics. I might end up solving that problem all by myself, despite the fact that I last took physics in high school, but I'd be a fool to count on it, and an even bigger fool if I simply assumed that the totally awesome solution I just thought of was necessarily right.)

In considering the opinions of experts, it is of course important to restrict oneself to their opinions on the present bill. Thus, the Chicago economists' letter is not relevant at present: it concerned the plan Paulson proposed, which is now dead.

The problem, of course, is that the experts are divided. For instance: Paul Krugman (and again), Brad DeLong (as of Saturday, but the outlines were clear then, and he has not taken it back), Lawrence Summers (ditto), and Mark Thoma think it should be passed, though none of them seems particularly enthusiastic. Nouriel Roubini is against it, and while Dean Baker hasn't expressed an opinion on this particular draft, if his earlier comments are any guide, I imagine he'll oppose it.

For my part, I support it. There are a lot of people who I respect who are genuinely worried that we might be on the brink of a serious depression, and who think this would help avert or mitigate it. But I hate this.

It also seems to me to be really important to keep my anger focussed where it should be: partly on the people whose deals got us into this mess, but much more importantly, on the legislators who failed to do their jobs, or who allowed themselves to be seduced by idiotic economic theories which were, as it happened, in the interests of powerful lobbies.

We're obviously going to have to pass some serious regulation to prevent this from happening again. I'm happy to postpone that: I think the next Congress is likely to do a better job in any case. They are also likely to pass some real assistance to homeowners; again, while I'd rather this happen now, since people need help now, I think the next Congress is likely to do a better job.

We will also have to have some serious deficit spending. Regulation might prevent the next disaster, but it will not help with this one. I'm normally a deficit hawk, but I have absolutely no problem with the idea of rebuilding a whole lot of infrastructure if it helps us head off the problems that are surely coming.

Which is all to say: I support the bailout, but I do not imagine for a moment that it will do more than mitigate the damage, or that we will work our way out of it without a whole lot more work, and a whole lot more pain.

Comments

[Nell]

Marcy Kaptur for President.

[KCinDC]

And if it had had those things, the bill might have passed on straight partisan lines; at a minimum it would be easier to defend.

Easier to defend on its merits, maybe, but I'm not sure the details affect the politics that much. Any bill will be portrayed by its opponents as a bailout for Wall Street at the expense of working people, and I don't know how you counter that in a soundbite or a 30-second ad.

[bedtimeforbonzo]

With the Dow down 625 at last look, I wonder if privatization of Social Security will be tabled for a while.

[cleek]

I don't know how you counter that in a soundbite or a 30-second ad.

Announcer:
September 29th, 2008. Dow Jones down 700, S&P down 100.

That's 7% of your retirement, gone in an afternoon, because the House Republicans would rather grandstand than take steps to help our economy regain its footing.

[bedtimeforbonzo]

Most of us are Democrats here, so I don't expect anybody to like him, but Mitt Romney, who knows a thing or two about making money, would be looking pretty good to me if I were a Republican.

Let's put it this way: I trust him with my money well before I'd want to put it in the hands of McCain and Palin.

[gwangung]

So...what next?

[Peggy McGilligan]

Just Say No: imagine, a $1-trillion dollar bailout without even a hint at wrongdoing or malfeasance. Many of the fat cats who circulate from board to board and from job to job, also happen to be members of the Trilateral Commission and or the Bilderberg Group. When someone takes your money and steals your car, it makes an impression. When they’re committed globalists, it leaves a lasting impression. Many elected officials even belong to the cabals. When Bill Clinton eased banking restrictions, he dished out $8-billion dollars for community reinvestment loans. When the financing schemes fell through, as is their wont whenever 30-million Mexican nationals buy inflated properties and default, it left banks in the lurch. Hillary Clinton counted on the loan giveaways to buy votes. Interestingly enough, had Hillary secured the nomination; she, instead of Barack Obama would preside over the bailout. So, where is that $8-bilion plus dollars? The Global Initiative people (code speak for car thieves) took my money; they stole my car. If you or I did half the things these people have done, we’d be serving consecutive life sentences. Let the bubble burst. Gentlemen, I want my money back: http://theseedsof9-11.com

[Thomas Nephew]

Not if it's sold as nationalization or, if necessary, half a baby step short of it, with a progressive tax on the very rich to fund it (Sanders). "Putting adults in charge, not the GOP *or* Wall Street -- and the people who made this mess will pay for it " has an attractive ring to it.

The Dem leadership needs to stop worrying about the GOP crazies and get its *own* members behind it, then they can pass something *and* have something worth passing. If this is truly the next Great Depression we're trying to avoid, then it will follow -- politically, too -- that the solution ought to be the next New Deal.

[Thomas Nephew]

(my 3:40 was responding to KCinDC at 3:19: Easier to defend on its merits, maybe, but I'm not sure the details affect the politics that much. Any bill will be portrayed by its opponents as a bailout for Wall Street at the expense of working people, and I don't know how you counter that in a soundbite or a 30-second ad.)

[ThatLeftTurnInABQ]

So...what next?

Go back to the drawing board and draft something along the lines of the Swedish solution. Put in enough sweetener for Main St. (mortgage cramdowns) that if necessary the Dems can pass it on a straight party line vote and be proud to tell everyone that they did, and tell the GOP to sign up or go hang. If they (the GOP) block it in the Senate or Bush vetos the bill, run them out of town as a bunch of 21st cen. Hooverites.

If the bill passes and the banks don't want to play, they obviously were lying about the systemic risk (as they see it) or were trying to hold us hostage (= financial terrorism). If they decide to play hardball that way, threaten to draft a new bill nationalizing them and then breaking them up into little pieces which aren't too big to fail and selling the shards back out to the market once they've been cut down to size.

If you want it boiled down to bumper sticker slogans then:

"Main St. before Wall St."

+

"No equity, no deal"

+

"Too big to fail = too big to exist"

[Nell]

@gwangung:

What's next is renegotiation. House not in session tomorrow (Rosh Hashanah), back in session Wednesday.

My preference would be to go in the direction of a bill that Dems could pass by themselves, but Nancy Pelosi and Barney Frank are probably planning which figleaves to remove from the current bill.

Bad move; I can't imagine trusting the Republican leadership to deliver votes at this point. The incentives are for them to have Dems pass it and run against it. So there's a political as well as merits reason for Dems to move to a real Plan B. But is there time?

The process of getting a bill drafted seems to have been one hell of a lot more collegial in the Senate than the House. Partly that's a structural difference, but not entirely; Marcy Kaptur is right to roast the leadership on the way members, particularly members with something to contribute, were shut out. Might be a lot easier to build Plan B if they hadn't had such a closed process...

[KCinDC]

Barney Frank on the House Republicans' whine that they voted against the bill because Nancy Pelosi hurt their feelings.

[ken]

Eric Martin, are you really this clueless?

Does politics really mean more to you than does the economy itself?

We are doomed because of the politicians who cannot put the needs of the country above partisan interests.

I talked to Loretta Sanchez's office today. She voted against the bill. Her reasons were stupid. We are faced total economic calamity and she voted against this bill because some exectutives might actually make a few bucks.

These are the kind of democrats you defend against sending us into the abyss? Please, spare me.

If a Speaker cannot turn such a weak minded representative as Sanchez (who I once gave money) at a time like this then what good is having that person as Speaker?

[Nell]

I'm impressed with the capsulizing political skills of TLTIAbq and T.N.

Confident, calm, combativity is what's needed, not the pre-emptive cringing that we've been sold as "leadership".

[gwangung]

Well, I know what I'd LIKE to see (something along the Swedish plan with more equity, more oversight and smaller scale would be nice), but what's likely to happen? Are Pelosi and Frank going to do the right thing, or are they going to do the lazy thing?

[gwangung]

Confident, calm, combativity is what's needed, not the pre-emptive cringing that we've been sold as "leadership".

Hear, hear.

[ThatLeftTurnInABQ]

Nate Silver points out what should have been thumbsuckingly obvious from the get go:

Among 38 incumbent congressmen in races rated as "toss-up" or "lean" by Swing State Project, just 8 voted for the bailout as opposed to 30 against: a batting average of .211.

By comparison, the vote among congressmen who don't have as much to worry about was essentially even: 197 for, 198 against.

...

among 26 congressmen NOT running for re-election (almost all of whom are Republicans), 23 voted in favor of the bill, as opposed to 2 against and one abstaining.

So let's see if I got this straight: Congresspeople who are directly exposed to the howling lynch mob with pitchforks and torches voted to save their hides.

Gee, ya think?

Next up: water is wet (film at 11).

[Nell]

ken: Does politics really mean more to you than does the economy itself?

You've got crust, ken, I'll give you that.

Commenter mds at Unqualified Offerings says it better than I could:

After Democrats surrendered guaranteed equity stakes, genuine independent oversight, restrictions on distribution of the $700 billion, and judicial foreclosure interventions, all to get a promise of Republican support for the bill, House Republicans have just now tried to stick Dems with sole ownership of the mess by voting en masse against it. A betrayal by House Republicans? Who could have ever foreseen that?

[KCinDC]

I'd certainly like a more progressive bill, but can anyone explain exactly whose votes such a bill would gain that would more than make up for the votes it would lose relative to what happened today? Wishing we had more and (especially) better Democrats doesn't create them.

[Eric Martin]

What Nell said.

[Nell]

@ken: One more point and I'll leave it alone.

This bill is the Republican administration's bill, urged on by the Republican president and supported, however tepidly, by the Republican presidential nominee. It has had only only one significant alteration, and that to protect taxpayers (equity warrants) -- in a weaker form than could or should have been proposed, to satisfy Wall Street and the banks. Bernanke met with the Republican caucus for several hours last night, emerging with what he thought was the support of enough members to go forward.

But the temptation to stick Democrats with this swindle cooked up by their own administration proved irresistible.

[Nell]

exactly whose votes such a bill would gain that would more than make up for the votes it would lose relative to what happened today?

I see about thirty more solid votes for a decent Plan B, maybe another fifteen more if some of the conservative/moderate freshman members could be rallied to it on the basis of genuine Main Street benefits.

[ThatLeftTurnInABQ]

But the temptation to stick Democrats with this swindle cooked up by their own administration proved irresistible.

In fairness to the GOP delegation, if there was duplicity involved (IMHO probably yes) it was at the leadership level. I think the GOP house rank and file are in all likelihood either bitterly opposed to the bill or sincerely and genuinely terrified of the howling mob of outraged taxpayers. If you haven't been listening to AM talk radio the last couple of days you really should - it sounds like something from the early stages of the French Revolution.

Getting any bill passed in this climate is going to required a huge effort at public education (which simply hasn't happened yet) to explain to people why the plan in question is both necessary and desirable and has a chance of working. "Just because I said so" isn't going to fly - there isn't enough trust in govt. left for that (something about crying WMD "Wolf" too many times).

In some ways this impasse is another piece of collateral damage from the Iraq war. A government that destroys public trust is likely to find itself in precisely this sort of pickle at some point.

[Turbulence]

In some ways this impasse is another piece of collateral damage from the Iraq war. A government that destroys public trust is likely to find itself in precisely this sort of pickle at some point.

For many of the people posting here, I suspect you're right. But for the Republican base, the people listening to talk radio, do you really think this conclusion holds? I thought that a third of the country still believes that Hussein was involved in 9/11 and that he did have nuclear weapons that were smuggled to Syria. I'd guess that many of those people are concentrated amongst talk radio listeners in the Republican base. So why do you think the Iraq War undermined them?

Or are you saying that congressional Republicans themselves (and not their voters) are the ones who are soured because of the war?

[Nell]

Meant to link to the roll call vote of Dems to back that up. I see 27-28 progressive Dems who voted no but would back a more Main Street bill. Definitely there are another 15-20 movable, mostly first-term dawgs. Not enough if there were complete Republican solidity, I guess.

Dang, we have some dead wood to move out.

[freelunch]

Apparently John McCain believes that Senator Obama is the leader of the House Republicans and is therefore responsible for the Republicans scuttling the program. Boehner, of course, blames the Democratic leadership for trying to encourage people to do what a Republican president wants. Up is down indeed.

I expect the WSJ opinion section (also known to me as the funny pages) to decry the irresponsible behavior of the Democrats in half a dozen articles tomorrow.

[Nell]

ARgh, screwed up the link. Roll call of Dems.

Time to go do something else

[ken]

Eric and Nell, This is pathetic.
It is all about politics to you guys. Yeah the President is a Republican, BFD. The economy is collapsing but the President is a Republican. Well so what? The economy is STILL collapsing. Get it? We have a problem. That part seems to escape you guys who cannot see beyond the politics of the situation.

And guess what? The Speaker is a Democrat with a large Democratic majority. So yeah, the responsibility of getting such an important piece of legislation passed lays with the Democratic leadership starting with the Speaker.

[gwangung]

Eric and Nell, This is pathetic.

Son, you don't have a clue on how politics work. I'd ease up, if I were you.

[freelunch]

Dang, we have some dead wood to move out.

Democrats don't have to do anything until House Republicans begin to do a little to help their paymasters.

[Eric Martin]

It is all about politics to you guys. Yeah the President is a Republican, BFD. The economy is collapsing but the President is a Republican. Well so what? The economy is STILL collapsing. Get it? We have a problem. That part seems to escape you guys who cannot see beyond the politics of the situation.

Ken: What on earth does this mean? 60% of Republicans in the House voted against. 30 percent of Democrats.

Get a grip man. You're republican roots are showing through your fake democratic bleach job.

[ThatLeftTurnInABQ]

for the Republican base, the people listening to talk radio, do you really think this conclusion holds? I thought that a third of the country still believes that Hussein was involved in 9/11 and that he did have nuclear weapons that were smuggled to Syria. I'd guess that many of those people are concentrated amongst talk radio listeners in the Republican base. So why do you think the Iraq War undermined them?

I think the war + Katrina + everything else has contributed to a general climate of thinking that everybody in govt. is a lying crooked swine, without sweating the small details of who voted for what and when and why.

This especially applies to the economy because unlike our fiascos overseas or in the arcane of govt. (like the US Attorneys scandal) the evidence is just undeniable – many people are feeling the impact at least on small scale, and hardly anyone is buying this “recession, what recession?” BS.

A lot of the cognitive dissonance defense mechanism arguments that I’ve encountered from Republican voters and right leaning Independents over the years (as the toll from the Bush admin. has piled up) have taken the form of “well, they’re ALL politicians – you can tell they’re lying when their lips move”, in other words trying to spread the blame around for GOP inspired disasters to smear both parties equally rather than try to argue that the pile of manure isn’t actually there or doesn’t smell.

The net result of people making these arguments is that I think there is a generalized feeling that the wheels have come off on our system of government and it seems to be shared on both the right and the left, albeit for very different reasons. It is hard to find somebody who has confidence in the ability of our democracy to get anything right any more, and such people are far more likely to be found on the left (in anticipation of Democratic victories this fall I think) than on the right in my experience.

[KCinDC]

Nell, the problem is the number of votes that would be lost by making the bill more progressive. You'd have make it a lot more progressive in order to have much chance of winning the politics by telling the howling lynch mob that it isn't really a Wall Street bailout, so I'd imagine the number of votes lost would be very large. Then there's the problem of getting it past a filibuster and getting it signed by Bush.

If it's true that something has to be done now, then I don't see how the something can realistically be very progressive. Unfortunately.

[Nell]

ken, we're done here. It's Republicans who pulled a political stunt today (an echo of the stunt pulled by McCain on Thursday).

I opposed this bill on the merits; see my blog, see my comments on this and other threads.

There is a problem that government intervention is needed to help resolve: There is a credit freeze-up created by anxieties about insolvency due to highly leveraged bets on mortgages that are being defaulted on (due to a combination of hinky lending vetting and recessionary effects).

This proposal is neither effective nor fair, and puts way too much money and power in the hands of people who've been minimizing the problem and failing at their regulatory jobs. It has been foisted on Congress suddenly, with a metaphorical gun held to all our heads.

To the extent that anyone is obligated to rise above political pressures and vote for it on the basis that evan a deeply flawed bill is better than not acting this minute, Democrats and Republicans are equally so obligated. Republicans failed this test, all the more dramatically because their administration and their leaders are the ones who came up with the ultimatum.

John McCain has spectacularly failed this test.

[Tony P.]

Ken, any bill the Dems could pass single-handed would be such that either:

1)Dubya would veto it; or
2)Cheney would die of apoplexy.

Take your pick of catastrophes.

--TP

[ThatLeftTurnInABQ]

Here’s what happened put into lyrical terms:

Oh God said to Abraham, "Kill me a son"

Abe says, "Man, you must be puttin' me on"

God say, "No." Abe say, "What?"

God say, "You can do what you want Abe, but the next time you see me comin' you better run"

Well Abe says, "Where do you want this killin' done?"

God says, "Out on Highway 61."

so Abraham (the Dems) duitifully showed up on Highway 61 with offspring in tow and ready for sacrifice, but when they got there they didn’t find God waiting, just the GOP leadership sharpening its knives.

[byrningman]

Three thoughts relating to the political side of this crisis:

1) How on Earth is it remotely acceptable for McCain and the House Reps to publicly blame Pelosi's comments for their vote? Regardless of one's position, nobody denies it is a massively massively important matter, and yet they readily admit they just voted opposite to the person they don't like???? Will the bill pass easily tomorrow of cunning Nancy Pelosi suddenly says, "oh I'm against the bill now", so that all the republicans will trample each other in their rush to approve the bailout?

2) McCain is putting his foot in it every single day because he is claiming to be in control of a very dynamic situation in which in fact he has played very little part. Now, as events swing back and forth, he is constantly over-correcting his previous excesses. Today's example: with the press declaring the bill was in the bag, he hits the airwaves to claim credit for it. He's probably still pontificating when the whole thing goes south thanks to his own party, you know, the people he suspended his campaign to confab with. Now it's all Nancy Pelosi's fault, he tells us.

3. People have criticised Obama for being coy on the plan for most of last week. Yet for an issue this important and this complex, I don't see anything wrong with guardedly supporting moving forward with Plan A while constantly gathering further data. Once decided that Plan A was the least worst option, he started putting his weight behind it. In fact, there's a word for that kind of behaviour...oh yes - leadership.

[Nell]

@KCinDC: You are sadly correct.

[Anarch]

I think the war + Katrina + everything else has contributed to a general climate of thinking that everybody in govt. is a lying crooked swine, without sweating the small details of who voted for what and when and why.

Which, not at all ironically -- though, ironically, probably coincidentally -- is exactly what "small government" types like Grover Norquist wanted: to cripple the very legitimacy of government itself, the easier to dismantle it.

[Turbulence]

byrningman, Nell, KC, and ThatLeftTurn: you guys have been on fire lately. Many thanks for much wise commentary.

[Jay C]

Sen. McCain just commented on the bailout-bill failure.

Shorter version:

"It's Obama and the Democrats' fault - but now's not the time to cast blame!"

(only slightly condensed. Seriously.)

Plus: Sen. McCain looked awful: tired and/or overmedicated. Far from the animated (if creepy) McCain crowing over the bailout "victory" this morning.

[Jay C]

Sen. McCain just commented on the bailout-bill failure.

Shorter version:

"It's Obama and the Democrats' fault - but now's not the time to cast blame!"

(only slightly condensed. Seriously.)

Plus: Sen. McCain looked awful: tired and/or overmedicated. Far from the animated (if creepy) McCain crowing over the bailout "victory" this morning.

[Anarch]

What Turbulence said.

[KCinDC]

I'm not getting much work done today, and my savings are evaporating, but at least I'm getting compliments for my blog comments. Thanks.

Think where I could go if I actually knew what I was talking about.

[Thomas Nephew]

If it's true that something has to be done now, then I don't see how the something can realistically be very progressive. Unfortunately.

Not necessarily. I think two little words might reframe things quite well:

"Millionaire's Tax."

10% for 10 years. After much gnashing of teeth, settle for 5-7 years. (Senator Sanders wants 10% for 5 years, and calculated that could pay for a substantial part of the $700B price tag estimated at the time.)

[ThatLeftTurnInABQ]

Many thanks for much wise commentary.

Hey Turb, you're part of the team too, ya know. You're our safety net of skepticism while we try stunts on the high wire and the trapeeze act. We couldn't do it without you there to catch us when we fall.

[bedtimeforbonzo]

Nell: "It's Republicans who pulled a political stunt today"

They kind of foreshadowed it with all their chest-pumping populism all weekend.

---

Nell: "John McCain has spectacularly failed this test."

I suspect this, and his debate performance, points to why he is behind, 50-42, in today's Gallup Tracking.

[bedtimeforbonzo]

A good wrap-up on this whole complicated mess.

[Nell]

Thanks, Turb.

As often as Barney Frank makes me grind my teeth, he makes me laugh. He was excellent in responding during a leadership press conference to the bogus Boehner-McCain whine about how Nancy Pelosi's floor speech cost the bill the crucial twelve votes.

"Remarkable. They're admitting to something even I would have been unwilling to impute to them: taking hurt feelings out on the country. The Minority Leader stood with us, saying that there is a grave crisis and we have to come together for the country. Yet now he says that there were a dozen members of his party ready to do the right thing, but because their feelings were hurt they decided to take it out on the country, and make all the rest of us pay."

[bedtimeforbonzo]

As today's news from this story makes clear, this is a glob crisis:

"In Europe, financial institutions were also ailing, with the governments of Belgium, the Netherlands and Luxembourg launching a $16.4 billion rescue of Fortis, the Belgian-Dutch bank.

"The U.K. government said it is nationalizing Bradford & Bingley after investors and lenders lost confidence in the mortgage lender, with its stock market listing canceled shortly before the markets opened.

"Also, the Icelandic government said it bought a 75% stake in Glitnir HF, the country's third-largest lender, while a consortium of German financial institutions bailed out real-estate firm Hypo Real Estate."

Where's Palin and her foreign expertise when you need it -- I'm sure Russia's markets are down, too?

[ken]

Eric, all Pelosi needed was thirteen votes out of the 94 dems that voted against the bill. It was her responsibility as leader to get those votes.

The seething loathing I have for politicians at a time like this is hard to express. This is not about politics, it about our economic survival.

It seems that you and Nell and most of the other folks here just cannot concieve the size of the problems we face. Because you do not understand it you think it is still politics as usual. I don't know what will convince you and Nell that this is no time for political one-upmanship.

I have offered a run down before of some of the actions taken over the course of this year. Any one of these actions alone would have been enough, in normal times, to keep the pundit blogs going hot with heavy analysis for years to come. Each one of these is worth a book, or at least a dissertation.

If this series of events doesn't convince you that we are on the brink of a peril so great that extreme an immediate action is required then I think you are just completely out of it:

1) Fed arranges bailout of Bear Stearns and gaurantees up to 39 billion of losses.

2) Fed opens up fed window to nineteen primary dealers. There are now only seventeen left. (Does anyone here even a clue what a primary dealer does?)

3) Fed begins special term lending facility and starts accepting lower quality collateral, including stock.

4) Working in conjuction with central bankers around the word the Fed has flooded the markets with over 600 billion dollars.

5) Treasury borrowed 200 billion in special bill to re-fund the Fed.

6) Treasury took over Fannie Mae and Freddie Mac.

7) Treasury started buying MBS directly. Five billion was first purchase and more have been made but other news has dwarfed this program.

8) Treasury loans AIG 85 billion dollars and takes 80% ownership interest. AIG is the worlds largest insurance company.

9) Treasury tries to arrange purchase of Lehman but ends up having BAC buying MER instead.

10) Credit totally freezes up.

11) Treasury gaurantees the trillions of dollars in Money Market funds. Good for three months but with extension.

12) SEC bans short selling of around a thousand financial and related stocks.

13) Paulson asks for up to 700 billion dollars to invest in mortgage related securities getting them off the books of banks and other lenders.

14) Oh, and the Fed has reduced the overnight lending rate between banks, also known as the fed funds rate to 2%

15) Markets worldwide are collapsing.

What more do you need?

Many of the above items are far more radical than what the US did with LTCM, and that was a HUGE event. We are in such dire straights and the steps taken are so radical and so dramatic that I suspect most people just cannot grasp it. It is too far outside their experience to give credence to what is happening right in front of their eyes.

[ThatLeftTurnInABQ]

shorter Barney Frank:

"I'm rubber, you're glue..."

[KCinDC]

The guy on Marketplace just said more Democrats voted no than Republicans! Has NPR outsourced the programto Fox?

[wonkie]

So what if DUbya voetos? If its a good bill and the dead duck vetoes it, how is that bad for Democrats or the country?

I wish the Deomcrats would write a good bill and put it out there so everyone could see what Democrats stand for. If the R's refused it or Dubya vetoed it then the country would knw what they stand for,too.

Unfortunately don't hava a lot of faith n the Congressional Dems to think that way. Even withthe R's in disarray and Dubya discredited in everyone's eyes Pelosi and Reid are likely tothink just as the commenter upthread said: why try since it won't get passed.

Because trying in and of itself makes a statement, that's why! Just as selling out one's values in order to get a bill passed makes a statement. It's a question of which staement the deom leaders want to make about Deomcrats.

[bedtimeforbonzo]

I wonder if things were this political during the Great Depression.

[russell]

From bedtime's good wrapup:

Bush is the lamest of lame ducks, with a minuscule approval rating and no clout or political protection left to offer. Bush and Vice President Cheney were reportedly making calls to wavering Republicans right to the end

In my dreams, every rep that Cheney called replied with a hearty "Go f*ck yourself".

And yes, ken, that was a partisan comment.

Thanks -

[Eric Martin]

The seething loathing I have for politicians at a time like this is hard to express. This is not about politics, it about our economic survival.

Then why, fake Democrat, do you only express your loathing for Democratic politicians, at a time like this. Again: 60% of Republicans voted against this bill. 60%. Yet you focus on the 33% of Democrats. Fake. Democrat.

It seems that you and Nell and most of the other folks here just cannot concieve the size of the problems we face. Because you do not understand it you think it is still politics as usual. I don't know what will convince you and Nell that this is no time for political one-upmanship.

No, it's time for a good bill. And if Nancy can't get Dems to support a GOP-friendly bill, and the GOP won't support a GOP-friendly bill, then she should go with a Dem-friendly bill that Dems will support. It's up to the GOP whether they want this to be bi-partisan, and they have voted.

What more do you need?

Me? Last time I checked, I didn't get a vote. "I" don't need anything more. Or less.

60% of the Republican caucus voted against this bill, and you want to chide Nancy Pelosi, Nell and Me?

Sounds like a fake Democrat's response to me.

[russell]

I wonder if things were this political during the Great Depression.

Well, there apparently was an attempt by conservative financial interests to overthrow FDR in a military coup.

Does that count?

Thanks -

[ken]

Eric, you are still playing politics. What will it take for you to deal with reality and leave your political idealogy aside?

Can you not see what is happening? I gave you a brief rundown. Are you so overwhelmed that it just doesn't register with you? Ignoring the reality or burying your head in the sand will not change the reality of what we face.

And Eric, Pelosi is the Speaker. She only needed a handul of votes. It is her responsibility to see that legislation vital to our nation is passed.

It is dishonest of you pass the buck elsewhere when Pelosi not only had the responsibility but also the ability to pass the deal.

[gwangung]

60% of the Republican caucus voted against this bill, and you want to chide Nancy Pelosi, Nell and Me?

Sounds like a fake Democrat's response to me.

Nah, it's a moron's response. Or a Republican. Think they're the same, blaming the side that came through, and not the side that turned coat.

[gwangung]

So, are we gonna see a second try at passing this bill? Or will we try something like a case by case nationalization of businesses?

[KCinDC]

DNFTT.

[byrningman]

Where's Palin and her foreign expertise when you need it -- I'm sure Russia's markets are down, too?

Russia's market collapsed back in...August if I recall. She must have been looking at Canada at the time...

[byrningman]

Thanks, Turbulence, btw.

[Gary Farber]

"...also happen to be members of the Trilateral Commission and or the Bilderberg Group."

Oh lord.

"He's probably still pontificating when the whole thing goes south thanks to his own party, you know, the people he suspended his campaign to confab with."

My favorite parts are these: McCain "suspends his campaign" (there's no sign of this whatever) because he has to fly to Washington immediately to help a deal pass; he stays in NYC to be interviewed by Katie Couric; then he flies to Washington, and after he says nothing at the White House meeting, he holes up the next day at his Washington apt., and spends the day on the phone -- something he, of course, could have done without being in Washington.

Today he declares he's "not a guy who phones it in."

(Anyone who wants links for any of this, ask.)

My contribution to the whole bailout discussion, btw, is to keep my mouth shut when I know I don't know enough to contribute anything useful.

"Does that count?"

Not to mention the Bonus Army, and Douglas MacArthur's use of tanks under Major Patton to attack the encampment.

Wasn't someone talking the other day about how the U.S. government is legitimate because it never uses force or violence against political opponents?

Now, please excuse me; I have a black helicopter waiting.

[YBCsteve]

Hi,

Great thread - it’s refreshing to read so many thoughtful and insightful posts!!

I’m with an online business TV network called yourBusinessChannel - we’re looking to collect opinion on Obama and McCain’s performances as persuasive communicators during the debate on Friday.

Ask yourself - politics aside, who would you buy a used car off?

We’re looking for comments and contributions from people who have been following the 2008 campaign closely, who can offer really valuable insights. Clearly, there are many such people commenting on this thread, and elsewhere blogosphere).

A bit about us - yourBusinessChannel produces short internet business TV shows providing advice to business people and entrepreneurs on all aspects of business. Our shows feature advice and insights from a pool of the world’s leading business experts.

We’re interested in the 2008 presidential race because of what it tells us about the power of persuasion, and how to give a really amazing presentations.

Yesterday we posted this three minute summary of the first presidential debate:

http://www.youtube.com/watch?v=KD2DqHqK2Cw

We are currently producing a series which focuses on how to be really persuasive when making business and sales presentations.

Obama and McCain have very different styles, and it’s fascinating to watch what works with the public and what doesn’t. Clearly there are lessons here for businesspeople who have to prepare presentations in their professional lives.

I’ve been reading the comments thread on this blog and I’ve been impressed with the level of discussion here - so I’d love any or all of you to reply to this post with your views and opinions…

I want to know - in your opinion - which candidate:
- Had the most persuasive tone of voice?
- Made best use of body language?
- Seemed genuinely passionate about their message?
- Used humour to good effect?
- Showed total mastery of policy details?
- Rebutted his opponent most convincingly, and dealt best with criticism?
- Was relaxed and confident in making off the cuff comments?
- Avoided major faux pas and screw-ups?
- Came across as a real human being, not a robot regurgitating talking points?

…and why do you think so?

I’m looking forward to hearing your comments!!

cheers,

Steve Kerr
http://www.yourBusinessChannel.com

[xanax]

133 out of 199 House Republicans voted NO on this bill and its failure to pass is the fault of Nancy Pelosi and the Democrats.

Swift Boat logic.

[Gary Farber]

Nell, KCinDC linked to the video of Barney Frank above a few hours ago.

But you left out one of my favorite moments:

Give me those twelve people's names, and I will go talk uncharacteristically nicely to them, and tell them what wonderful people they are, and maybe they'll think about the country.

[Justin Slotman]

gwangung: It looks like Paulson's going to give it another try.

[Ara]

ken: First, I'm not sure she had the ability. And if she didn't have the ability, she didn't have the responsibility. The Dems said they got every vote they could.

Second, it's a prisoner's dilemma, and some people are sick of letting the Republicans free-ride. Politicians love to vote NO on bills that pass. There is no accountability for them. And if this bill passes and succeeds, then there will be *no visible consequences*, meaning it will be hard to take credit for. Of course, if it passes and fails to have the intended effect, then Heaven Help You. If you keep letting the part of no discipline get away with this, you're going to keep having situations like this. We talk about not setting up perverse incentives and moral hazard on Wall St. The same is true of politics.

If you bailout the Republican party, if you let them free-ride, you are just going to keep having disasters of governance like this in the future.

[byrningman]

My favorite parts are these: McCain "suspends his campaign" (there's no sign of this whatever) because he has to fly to Washington immediately to help a deal pass; he stays in NYC to be interviewed by Katie Couric; then he flies to Washington, and after he says nothing at the White House meeting, he holes up the next day at his Washington apt., and spends the day on the phone -- something he, of course, could have done without being in Washington.

I know, it's all too much.

First the economy is sound. Then he remembers that in fact he has been warning of imminent economic doom for two years. Then he says a guy no one else thinks should be fired, and who has played no obvious role in this crisis, should be fired (I guess that's mavericky at least). Then he has to cancel all his appointments and drop the other stuff he was planning on doing in order to deal right now with the problem he already knew about two years ago. Then he does random stuff for a day. Then he shows up in Washington, and as far as anyone can tell, doesn't say anything to anybody about the problem he has yelling about for two years only no one would listen to him, and which is now the greatest crisis the country has faced in decades, except for the Russia-Georgia spat which was the greatest crisis since the Cold War, except the Iraq War which was the greatest crisis since 9/11 which was so great a crisis it trascended time itself, or something. Then after saving the day, the deal flopped. Then he showed up at the debate that was totally trivial in light of the greatest crisis since etc., and told us all that the crisis was all about earmarks. Then he put the deal together singlehandedly before it turned out that there was no deal again. Now is not the time to cast blame, but just in case we couldn't wait for time to not be trascended by crisis anymore to find out who really is to blame, it's Obama to blame.

He's so darn mavericky.

[Ara]

*party of no discipline

[Gary Farber]

"Eric, you are still playing politics. What will it take for you to deal with reality and leave your political idealogy aside?"

Fortunately, ken is here to reproduce the Republican talking points all Republican supporters are echoing today, and demonstrate how Not To Play Politics, by repeating by rote that It's All The Fault Of The Democrats, and completely ignore the fact that 133 Republicans voted against the bailout, while only 65 Republicans voted for it.

Far more Republicans voted against it than Democrats voted against it: 133 Republicans, and only 95 Democrats.

Far more Democrats voted for the bill than Republicans voted for it: 140 Democrats voted for the bill, more than twice the number of Republicans: 65.

But ken is here to rise above politics by blaming Democrats, Democrats, Democrats. And only Democrats.

Number of words ken -- who is here to not play politics! -- has regarding the Republican failure of both the leadership and rank?

0.

Do as ken says, not as Ken does, is his lesson.

"Can you not see what is happening?"

We can, ken. Thanks for asking.

I'm just waiting for you to explain how affirmative action is to blame for all this.

[Gary Farber]

[WTF that Typepad now won't let me post two links?]

By the way, while everyone is preoccupied with the bailout, etc., it's worth paying attention to the fact that a special prosecutor has been appointed in the firing of the U.S. attorneys case, following the release of the [SHEESH!]

[Gary Farber]

DOJ report.

[...] At the urging of the investigators, who said they did not have enough evidence to justify recommending criminal charges in the case, Attorney General Michael B. Mukasey appointed the Acting United States Attorney in Connecticut, Nora Dannehy, to continue the inquiry and determine whether anyone should be prosecuted.

[Nell]

wonkie: wish the Deomcrats would write a good bill and put it out there so everyone could see what Democrats stand for ... because trying itself makes a statement.

Thanks for that, wonkie. I do too. It's also smart politics to have a concrete idea of what you stand for and would want. Without it you can never persuade anyone to your side, you're always just trimming at the edges of the other side's initiatives. It can also be used as a credible threat to bring the opposition around when you're negotiating.

Timing made that a real challenge in this case, but it could still have been done if the leadership had invited the progressive caucus to draw up a Plan A at the same time that they were putting together a Plan B to try to pull in Republican votes.

[ken]

Gary, can you make yourself useful?

Research the below items and polish them up a bit. Also see if I left anything out.

1) Fed arranges bailout of Bear Stearns and gaurantees up to 39 billion of losses.

2) Fed opens up fed window to nineteen primary dealers. There are now only seventeen left. (Does anyone here even a clue what a primary dealer does?)

3) Fed begins special term lending facility and starts accepting lower quality collateral, including stock.

4) Working in conjuction with central bankers around the word the Fed has flooded the markets with over 600 billion dollars.

5) Treasury borrowed 200 billion in special bill to re-fund the Fed.

6) Treasury took over Fannie Mae and Freddie Mac.

7) Treasury started buying MBS directly. Five billion was first purchase and more have been made but other news has dwarfed this program.

8) Treasury loans AIG 85 billion dollars and takes 80% ownership interest. AIG is the worlds largest insurance company.

9) Treasury tries to arrange purchase of Lehman but ends up having BAC buying MER instead.

10) Credit totally freezes up.

11) Treasury gaurantees the trillions of dollars in Money Market funds. Good for three months but with extension.

12) SEC bans short selling of around a thousand financial and related stocks.

13) Paulson asks for up to 700 billion dollars to invest in mortgage related securities getting them off the books of banks and other lenders.

14) Oh, and the Fed has reduced the overnight lending rate between banks, also known as the fed funds rate to 2%

15) Markets worldwide are collapsing.

Thanks. But really you should be thanking me. When you finish your assignment you might just get a glimpse how real and how big the problem facing America is. If then you still think this is all about politics, then we'll talk and I'll be able to straighten you out. Until then I would just be wasting my time engaging in a discussion with you.

[JanieM]

byrningman @ 7:08 -- Thanks for the laugh of the year (maybe even of the century). In the midst of all this serious business I didn't want to let such a gem go by without a note of appreciation.

:)

[liberal japonicus]

If then you still think this is all about politics, then we'll talk and I'll be able to straighten you out. Until then I would just be wasting my time engaging in a discussion with you.

Oh no! ken, you haven't told us how much better Hillary would have handled this than Obama did?!? How will we ever manage?

[Gary Farber]

"If then you still think this is all about politics, then we'll talk and I'll be able to straighten you out. Until then I would just be wasting my time engaging in a discussion with you."

No, you'll just write me long, repetitive, responses. Actually engaging in a discussion where you explain yourself isn't your thing.

How about you first complete your "assignment," ken, by going back to this comment of yours, and this one, and answering these questions -- since we're handing out assignments, and you were asked first, second, third, fourth, and fifth, and you've yet to explain yourself:

"I can never forgive him for useing racism against the Clintons."

How did Barack Obama do that?

"But I also will no longer support afirmative action, preferential admission policies and other programs designed to assist minorities gain access to good job opportunities."

What does Barack Obama have to do with this?

"But we also know that when somone like him does not get accepted it is because they made room for a minority applicant with lower GPA. Skin color made all the difference."

How, exactly, do you know this? Please be specific.

"jes, Your comment about me is typical racism."

Can you please define what you mean by "racism"?

Thanks.

[gwangung]

Gary, can you make yourself useful?

You first. Have you answered Gary's questions? The questions that several other people have wanted to see answers to?

It's only polite.

[Jesurgislac]

ken: Until then [you] would just be wasting [everybody's] time engaging in a discussion with [me].

Fixed.

[gwangung]

More substantively, what about the Fed's move to pump $630 billion into the world economy? Eases pressure on a bail out? Or inflationary mistake?

[Jeff]

Today he declares he's "not a guy who phones it in."

LOL. That's so mavericky of him!

[hilzoy]

ken: calling people dishonest violates the posting rules.

[ericblair]

Let's look at Gary's list. Nobody here seems to be arguing that Wall Street is going to hell, damage self-inflicted. Almost every point deals with institutions that catastrophically screwed up and the Fed trying to help out the institutions that catastrophically screwed up.

Then we get "10) Credit totally freezes up." Can you back this up? Nobody's cut consumer credit lines for lack of liquidity that I'm aware: you can still get 0% financing at the auto dealers, my credit card lines haven't been reduced, and so on. Probably HELOC lines have been cut, but that's due to the lack of collateral due to lower housing prices, not liquidity.

Some sniffing around small business people hasn't seen anyone's credit lines get cut for no reason: some people's lines are being cut because of reduced earnings and so on, but this again isn't related to a lack of liquidity.

We might see problems tomorrow with commercial paper turning over; the Fed is lending commercial banks cash for 84-day periods, but they waited a hell of a long time to start doing this so it might not percolate through the system fast enough.

So is the problem really there (I'm quite willing to be convinced it is), and if so, how is this plan supposed to fix this particular problem efficiently? Wouldn't more Fed loans be a better idea if it's a liquidity issue?

[ken]

"ken: calling people dishonest violates the posting rules."

LOL, ok. If you think so.

But how many times have you called a certain person dishonest? You do it at least once a day. Perhaps you should try to set a better example.

[Gary Farber]

"Let's look at Gary's list."

That's ken.

[bedtimeforbonzo]

Russell: "In my dreams, every rep that Cheney called replied with a hearty 'Go f*ck yourself.'"

After a very, very bad day -- I just got home -- thanks to Russell, I had my first good laugh. (BTW, I really did think that was a good wrap-up. For my money, The Washington Post is the best paper out there.)

And then Byrningham gave me my second good laugh: "Russia's market collapsed back in . . . August if I recall. She must have been looking at Canada at the time . . ."

And while the country may be going broke, YBCsteve is right: This is a very good thread -- even Ken couldn't ruin it.

[bedtimeforbonzo]

ericblair:

I want some of what you are drinking if you mixed ken up with Gary:-)

[Gary Farber]

McCain, straight talking.

[bedtimeforbonzo]

This conclusion from that "wrap-up" author's link I posted is scary:

"It's possible despite weeks of warnings, and a stock market that is cratering as we speak, that a lot of members (of the House) still aren't taking any of this seriously enough."

Is it too early to ask what preparations one should make to help best make it through a Depression?

If it's anything like the aftermath of 9-11, the government will be telling us to store up on lots of duct tape. You can never have too much duct tape.

[bedtimeforbonzo]

Forget what ericblair is drinking -- after reading Gary's link -- I want whatever McCain is having: He's truly lost it!

[KCinDC]

Bedtime, if YBCsteve was right, it was by accident. I'd imagine he writes that bit about "thoughtful and insightful posts!!" on all the threads he sticks his sp*m in.

(Really, this filter is ridiculous. How many sp*m comments actually use the word "sp*m"?)

[ericblair]

I want some of what you are drinking if you mixed ken up with Gary:-)

Just picked a bad week to stop sniffing glue. Carry on.

[Anarch]

If it's anything like the aftermath of 9-11, the government will be telling us to store up on lots of duct tape. You can never have too much duct tape.

It does hold the universe together...

[KCinDC]

Rachel Maddow just covered the "phone it in" bit as well as McCain's premature declaration of victory.

[ken]

ericblair, that is my list. I gave it to Gary for him to research, polish up a bit and see if I left anything out. Each item on it is worthy of a complete dissertation and many will be the topics of books some day.

That each of these has taken place in such a short period of time is mind boggling. It is so stunning that the mind cannot comprehend the enormity of what is happening. So people, like Gary and others, still think that the old rules apply.

The purpose of the list, and it is in no way complete, is to demonstrate the seriosness of the financial crisis facing this nation. So far you may have escaped any personal fiancial discomfort. If so, a lot of that is because of the actions taken already by Bernanke and Paulson.

I am certain however that you, like all of us, will not escape unscathed. The only issue is how much damage will we suffer before it is all over. Just today the American people lost one trillion dollars in stock market value funding our retirment accounts. That will hurt. Not now but it will hurt later.

But with all that said, we are still in grave danger. Paulson has offered a plan that is a comprehensive solution. It has been explained like this:

The mortgage securities still on the books of banks are clogging up the system. They must be removed for the free flow of capital to be restored to the overall system. The Treasury is the only institution with the resources and the time to buy and hold these securites without having to take any write downs on them. Over time the government should actually make money on their investment. In any case, the financing cost is minimul as the Treas can borrow at 4% and buy assets that pay 6% and hold on to them until the economy recovers and sell most of them at a profit.

And the risk of doing nothing is the certainty of a disaster worse than any of us can fathom.

[bedtimeforbonzo]

KC:

Sorry about that. Skimming fast when I first got home, I only read his first line. You'd think I would have noticed this: "Ask yourself - politics aside, who would you buy a used car off?"

BTW, I don't want to ever read "McCain" and "premature" in the same sentence again. Very scary image.

[bedtimeforbonzo]

Oops -- ken is back. I think that's my cue to go upstairs and see who's winning the Ravens-Steelers game.

Good night, everybody.