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September 21, 2008

Comments

Oh, something for discussion, if Gary hasn't already put it up.... CRA loans SLOWED DOWN default rates.

Gary: You're right, "dudgeon". But somehow "dungeons" were on my mind ... the kind from "Wizard of Id", perhaps, with Paulson and Gramm just chattin' ...

KCinDC: I think they could feel shame about one thing only: poverty. Impoverish 'em all, sez I.

Though commenter Dr. Wu proposed at echidne of the snakes's:

I am concerned that among your various proposals for achieving a long-term solution, you have not given sufficient consideration to the idea of identifying the best of the "smart and clever financial managers" and eating them.

Modestly.

you have not given sufficient consideration to the idea of identifying the best of the "smart and clever financial managers" and eating them.

I recommend a side of fava beans and a nice chianti.

Slurp!

Thanks -

"There are no buyers in this marketplace."

Horsehockey. There are buyers offering lowball prices. There are way too many buyers who refuse to come to grips with the reduced value of their assets.

But the major problem (short term) is there are no lenders...even for hum drum ordinary day to day commercial transactions.

I'm confident both TTL and bobbyp have it right as regards the market for the MBS. There are buyers, or rather bidders. There almost have to be. I myself would probably buy, say, $1 million face value of mortgages for $100. The issue is that the sellers are unwilling to accept the bids. Whether this is for institutional reasons or because of honest disagreement over value, or because the sellers expect govt rescue I don't know.

Since we seem to have entered the dark humor phase of this event, I just have to share this which was posted to one of the comment threads at Yves Smith's blog:

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to [email protected] so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Karen Hurtz: "So if the stability of financial institutions comes before the protection of citizens, and the stability of financial institutions requires the protection of sovereign wealth funds and foreign banks, it seems clear that citizens of the United States of America have lost control of their government."

I haven't heard Barack Obama or John McCain say anything as eloquent.

Neither Obama nor McCain is showing leadership on this issue.

They are stating the obvious: Paulson's plan allows for a blank check, little oversight and not enough protection for taxpayers.

In a campaign in which months have been spent on trying to convince us who is best to lead the country, Obama or McCain could show real leadership -- after all, they are members of the United States Senate -- and show some courage.

From what I've seen, neither man is ready to take charge of such a crisis -- both instead are stuck in campaign mode while consumers, businesses, banks and homeowners feel paralyzed and powerless by the current economic meltdown.

In the link above, from today's Washington Post, Bruce Bartlett, a Treasury official in the Reagan administration, said:

"This is just a terrific opportunity for both of these guys to do a do-over. Most of these proposals were formulated when they were running to get their party's nominations. It looks ridiculous to keep peddling ideas that are no longer viable, as if nothing has changed. Then whoever is elected is at least elected on a plan that makes sense."

Neither Obama nor McCain has given us any such Straight Talk.

Instead, as the Post noted, "while Obama and McCain have pledged that they would live within some fiscal constraints, neither has offered enough details about how they are going to pay for promised tax cuts, health-care plans and energy spending," according to Leonard E. Burman, director of the nonpartisan Tax Policy Center.

Yet:

"Even before the bailout plan was announced, the Congressional Budget Office estimated this month that the deficit for fiscal 2009 would reach $438 billion, already a record in dollar terms. If Treasury needs half the money it has sought for the bailout plan in 2009, as well as money already promised to seize Fannie Mae, Freddie Mac, Bear Stearns and the insurance giant American International Group, the deficit could approach $900 billion."

It took a Depression Era type crisis, but mercifully, the Lipstick on a Pig phase of the general election has passed.

Sarah Palin is no longer on the cover of Time or Newsweek. Joe Biden is doing his best to stay out of the spotlight. It's all about who's best to lead the country and make American whole again: Barack Obama or John McCain.

But both candidates are giving essentially the same stump speeches, seemingly waiting for the other to take the Bailout lead -- all the easier to offer criticsim than a plan for action.


But both candidates are giving essentially the same stump speeches, seemingly waiting for the other to take the Bailout lead -- all the easier to offer criticsim than a plan for action.

Btfb,

The problem that both candidates are grappling with is that this issue alone is enough to sink them, and there is no electoral reward for doing the right thing, but lots of downside risk.

Suppose that Congress puts together a bailout package which is not totally toxic and has a chance for success (Dodd’s plan for example is looking a bit better than the initial Paulson TARP proposal, although it stops well short of what I’d like to see in the crucial area of sticking the bondholders with some of the damage as pointed out by John Hussman - fyi, note that there are typos in that letter which I hope will be fixed).

Suppose this plan works. What happens next?

Nothing.

As in there are no headlines in the news regarding the Great Crash of 2008 which never happened.

The best outcome we get is that a crash which might have happened, didn’t.
How do you take political credit for preventing something which didn’t happen?

Meanwhile, the other candidate who didn’t support the bailout package (which prevented the crash that didn’t happen) gets to spend the remaining 40 days and 40 nights endlessly flailing his opponent for being a sellout hopelessly in the deep pockets of Wall St. bankers, for betraying the American taxpayers and sucking up to special interests.

Who is going to win the election in this scenario?

So in this case both candidates have enormous pressures bearing down on them to oppose any bailout plan.

I just did a little bit of googling, and it turns out that with $700 billion to work with and unlimited Section 8 authority to use it, Hank Paulson would effectively be the fiscal equivalent of the 7th largest sovereign nation on Earth, all by himself:

Budget expenditures 2008 Country Ranks

1 United States $2,731,000,000,000

2 Japan $1,575,000,000,000

3 Germany $1,477,000,000,000

4 France $1,372,000,000,000

5 United Kingdom $1,237,000,000,000

6 Italy $1,029,000,000,000

7 China $634,600,000,000


In the larger context of this chapter of our fiscal soap opera, one of the problems with this bailout is that it probably isn't big enough. See: what Yves Smith (hedge funds suffer mass redemptions - I don't think she means the rapture BTW) and billmon (Things Become More Serious) have to say.


TLTIABQ:

Great post. I'd only add that the pressure on the candidates comes from both sides. Not only can neither one afford to throw his full backing behind any plan that might actually pass, for the reasons you detail, they also can't come out in full opposition to a bailout. If either Obama or McCain were to announce, unequivocally, that there would be no bailout, and the market were to crater in response (or, since no one really knows why the market moves, if it were to crater for any reason at all shortly thereafter) that candidate would be blamed for acting irresponsibly, destroying trillions in shareholder wealth, and demonstrating his manifest lack of preparedness for office.

It's really an impossible situation. Supporting any particular plan exposes them to attack, and coming out firmly against any particular plan does the same. So instead, they're both blandly bloviating, issuing statements worded in overtly moralistic terms that condemn greed and excess and which say more about the regulatory reforms of the future than the interventions of the present. Both have unveiled their own plans, secure in the knowledge that they're not serious legislative proposals and so stand no chance of passage. The plans are simply designed to allow the candidates to point out, after some other plan eventually passes, that their plan wouldn't have had its flaws. Of course, neither of their plans is remotely feasible, but that's not the point.

It's enough to discourage the most hardened cynic.

LeftTurn: "The problem that both candidates are grappling with is that this issue alone is enough to sink them, and there is no electoral reward for doing the right thing, but lots of downside risk."

While I understand that point and see how you could write off Obama and McCain as playing practical politics, hiding from the campaign's biggest issue to date also strikes me as cowardly.

The next time I hear Obama or McCain say they are better to lead the country than the other, I will be reluctant to believe either.

As usual, Americans are being asked to vote for the candidate they find least risky.

With Clinton superstars Bob Rubin and Larry Summers, among others, as Obama's chief economic advisors -- versus Phil Graham and Carly Fiorina in the McCain's camp -- I'd like to hear Obama voice how Rubin and Summers view the Bailout crisis. Or at least how they have influenced his view.

I've heard all I need to hear about McCain's seven houses or Obama's prowess as a fundraiser.

While I understand that point and see how you could write off Obama and McCain as playing practical politics, hiding from the campaign's biggest issue to date also strikes me as cowardly.

You're absolutely right. A brave candidate would risk losing the election for the noble purpose of talking loudly about a plan that they have no power to implement during the campaign. That would be very brave. Wait, did I say brave? I meant stupid.

I like how some actions, despite being really stupid, can in the political arena get recast as brave. Joe Lieberman wants to spend 3 trillion dollars building a giant laser to pulverize the moon? And Democrats are convinced that's stupid because it might destroy our planet? Wow! Look how brave Lieberman is! If only all politicians were so brave...and willing to kill us all for no reason.

More seriously, everyone needs heroes and interaction with a tough he-man persona, but healthy people work through those needs while role playing in the bedroom, not through their political choices.

everyone needs heroes and interaction with a tough he-man persona, but healthy people work through those needs while role playing in the bedroom, not through their political choices

I do both. At the same time.


If either Obama or McCain were to announce, unequivocally, that there would be no bailout, and the market were to crater in response (or, since no one really knows why the market moves, if it were to crater for any reason at all shortly thereafter) that candidate would be blamed for acting irresponsibly, destroying trillions in shareholder wealth, and demonstrating his manifest lack of preparedness for office.

Totally agree. I just posted a comment on Balloon Juice which made the same point.

We have a zugzwang situation here.

Whoever moves first loses (politically speaking), no matter whether they are for or against the plan, no matter whether the plan works, or doesn't work. If candidate X commits to a position on the plan while candidate Y remains noncommittal, it works like this:

If candidate X comes out in favor of the plan, then

- If the plan works and no crash occurs, then candidate Y flays them alive for being in the pockets of Wall St. banks and wins the election using populist slogans. When candidate X tries to criticize Y for being against the plan, candidate Y replies that there is no proof the plan worked.

- If the plan fails, then candidate X gets no credit for being in favor of something which didn't work, and candidate Y gets credit for being against it

If candidate X comes out against the plan, then

- If the plan works and no crash occurs, then candidate Y shreds them for blinking during a crisis. When candidate X tries to criticize Y for not being in favor of the plan, the reply is “at least I didn’t oppose it like you did”. X doesn’t get to criticize Y for being in the pockets of Wall St. (like in the example above), because Y didn’t actually come out in favor of the plan, they sat on the fence.

- If the plan fails, then candidate Y accuses X of being personally responsible for triggering Great Depression 2.0.

Even before this, one could read Protect Homeownership and Crack Down on Mortgage Fraud and Read the plan to protect homeownership and crack down on mortgage fraud.

BTFB:

How do you feel about Obama's press conference (McCain: "Press what, now? What's a prezzz confirantz?")? Transcript is at http://www.crooksandliars.com/2008/09/23/obamas-press-conference-this-plan-cannot-be-a-welfare-program-for-wall-st-executives/>Crooks and Liars.

The next time I hear Obama or McCain say they are better to lead the country than the other, I will be reluctant to believe either.

One gives thoughtful consistant answers. One can't remember what he said from one day to the next, how a Committee he sits on works or what the power of the Presidency is. Yep, both equally able to lead.

Yeeeesh.

Turbulence: "A brave candidate would risk losing the election for the noble purpose of talking loudly about a plan that they have no power to implement during the campaign. That would be very brave. Wait, did I say brave? I meant stupid."

Perhaps you have forgotten that both Barack Obama and John McCain are both sitting United States Senators -- who, by your count, would rather win an election than repair the economy.

What's stupid is that John McCain will cast a vote in the direction that will make George Bush happy.

Forget about Country F---in' First.

What's stupid is that Barack Obama will essentially cast one of his infamous "present" votes.

Forget about Change We Can Freakin' Believe In.

Forget about leadership.

Rather, let's watch Stand Pat McCain and Play It Safe Obama, debate "other" issues of the day.

As the Nation notes here., "the 'debt crisis story,' whether at home or abroad, is almost always told mainly from the standpoint of what's in it for the industry, the banks, the regulators and investors. And once they are secure, the story disappears."

And Obama and McCain can breath easy.

But wait, warns the Nation author: "All of the money has just been spent. And it has not been spent on you."

After all, "the costs of this bailout could easily 'crowd out' almost all of the $140-to-$160 billion of new federal programs that Barack Obama has proposed."

And:

"It will certainly make it impossible for Obama to finance his programs without either borrowing even more heavily, or going well beyond the (modest) tax increases (on oil companies and the upper middle classes) that he has proposed. Without such changes, there may be little federal money available for comprehensive health insurance or the reform of the healthcare delivery system.

"There will be little additional funding for pre-school education, child care or college tuition.

"There will be little additional funding for investments in energy conservation, wind or solar power.

"There will no money for additional investments in national infrastructure (e.g., the reconstruction of our aging roads, highways and bridges to 'somewhere.') Highway privatization and toll roads, here we come.

"There will be no money to bail out the millions of Americans who have already lost their homes, or on are on the brink of losing them.

"There will also be no money to shore up the long-run drain on Social Security or Medicare. Indeed, ironically enough, this latest bank bailout may even increase the financial pressure to privatize these comparatively successful government programs.

"There will be no extra money to house our thousands of new homeless people, relieve poverty, rebuild New Orleans or support immigration reform.

"There will be no additional funds for national parks. There will, however, be more homeless people dwelling -- or getting evicted -- from the more and more toll-intensive parks that exist.

"There will be no funds available for increased homeland security. This is likely to depend increasingly on the Sarah Palin model -- a .38 in the glove compartment and a Winchester under the bed.

"There will certainly be no 'middle-class' tax cut. Absent a progressive tax reform, the only 'cut' the middle class is going to receive is yet another sharp reduction in living standards."

Hopefully, we can use Liberman's laser to the moon to see that "U.S. debt levels may indeed be reaching the point where they might well impose a limit on increased spending -- if for no other reason than foreigners, who now own about 40 percent of our publicly held federal debt, are beginning to wonder whether or not the United States isn't going to be the latest 'submerging market.'"

Finally, a plan that Obama -- or McCain -- should not be afraid to recommend, dare they take the time to show some real vision and foresight.




Thanks for the link, Jeff. Good to know that I'm not crazy and that my concerns were well-founded: This crisis is too big to ignore.

bedtimeforbonzo, what specific action do you want Obama to take and why exactly do you think that action will change the outcome of the current crisis? Or is your point that Obama should do something no matter what because doing stuff is very important?

Bedtime, you're reminding me of your panicking last month about Georgia.

"you're reminding me of your panicking last month about Georgia."

Yeah, KC, my own personal financial crisis is driving mad.

Yeah, KC, my own personal financial crisis is driving mad.

Well, one way to escape one's own personal financial crisis is to give tons of cash you don't have to some guy with no plausible explanation for how the cash you're giving away will improve your financial situation. On the other hand, that might be a bad idea.


On an unrelated note, I'm don't understand why so many lefty blogs have been enthusiastic about adding measure to cut off foreclosures and encouraging modification of mortgage terms by judicial fiat. A lot of people purchased houses with mortgages that their income simply could not sustain, even under reasonable loan terms. Futzing the loan conditions so they can limp along financially for a little longer is cruel: we can only postpone the inevitable, and as long as we do, the borrowers will suffer more. I could understand the desire if we had solid evidence that there existed a large chunk of mortgages in danger of foreclosure where the borrower really could afford the load under reasonable rates, but I haven't seen anything like that yet. Has anyone else? Is there any data suggesting that? Or is the thinking that any such plan would be limited to a very small set of borrowers? Because if we do something like that, there will be a lot of ticked off voters who expected to get help but didn't qualify...

Are the points in the Nation article right or wrong, or is it impossible to tell right now? If they are right, or possibly right (and they seem plausible to me but I'm pretty ignorant on this stuff), then I think Obama should be more forceful about Wall Street greed and one-sided class warfare and how it hurts ordinary people in the ways the Nation article described. I just read the transcript that Jeff supplied and while I liked much of it, there's too much bipartisanship, too much "Democrats and Republicans working together", too much Wall Street and Main Street cooperating for my taste. I mean, that's a neat idea--Wall Street and Main Street working together. I'm not sure I expect to see it anytime soon, though maybe if everyone were like Warren Buffet it might happen.

This statement in Obama's speech strikes me as disturbingly naive, at best--

"Let me be clear - we shouldn’t include this stimulus package into this particular legislation, but as we solve the immediate crisis on Wall Street, we should move with the same sense of urgency to help Main Street. "

Sounds like ponies to me. Does he think that's going to happen? Are conservatives and centrists going to say (as the Nation article says) that we can't afford to do what Obama wants and that we have to be fiscally responsible?

I'm just asking--I'll be very very happy to be wrong and would like it if someone convinces me that I'm too pessimistic.

"Yeah, KC, my own personal financial crisis is driving mad."

You might want to check if you're eligible for food stamps.

"Let me be clear - we shouldn’t include this stimulus package into this particular legislation, but as we solve the immediate crisis on Wall Street, we should move with the same sense of urgency to help Main Street. "

Any help to Main Street HAS to be part of the bailout. It just won't pass otherwise.

I like the idea of buying equity with the bail-out (as I understand the proposal -- IANAE). Then it's putting tax dollars to work instead of just throwing them at the a-holes who got us into this mess.

====================

You might want to check if you're eligible for food stamps.

But don't get an EBT card, because it's Eeeeeeeeeeeeeeeevil!

The idea that we can somehow get concessions after passing the "clean" bailout bill is so stupid that I can't believe anyone is actually putting it forward (and I have to think that Ezra must have gotten something wrong about what Bill Clinton said, unless the old boy is blatantly undermining hopes for a good outcome).

Any help for working people, any attempts to hold anyone on Wall Street responsible for their bad decisions, and any measures to restrain further bad decisions and prevent more disasters will obviously be blocked by Republicans in the Senate (like other worthwhile legislation) or at the very least vetoed by Bush unless it's tied to the bailout.

"But don't get an EBT card, because it's Eeeeeeeeeeeeeeeevil!"

Cite?

A lot of people purchased houses with mortgages that their income simply could not sustain, even under reasonable loan terms. Futzing the loan conditions so they can limp along financially for a little longer is cruel: we can only postpone the inevitable, and as long as we do, the borrowers will suffer more.

Being over here, I'm a bit more sanguine, though the anger I see, I understand completely. But having lived thru the 'soft landing', while crappy, it seems a lot better than the massive social dislocation of foreclosing on a lot of houses and having empty houses standing around. Lots of stories floating around about the problems of these ghost towns.

I thought Ezra's post http://www.prospect.org/csnc/blogs/ezraklein_archive?month=09&year=2008&base_name=the_need_for_speed#109434was very on point

If Wall Street were teetering on the brink of collapse, their only hope of survival a $700 billion emergency action from the government, they'd be in a state of total desperation and Paulson and Bernanke would be able to dictate terms. As it is, they're instead creating a package meant to entice firms into participating: They'll buy assets without demanding equity, purchased the assets at "maturity" rather than current prices, protect them from congressional oversight, etc. If Wall Street is in a position to haggle, it's hard to imagine it's also about to collapse. The only way to square that circle is to assume that the traders in charge are betting that they can dictate terms because if they go under, the economy tumbles. If that's true, we're looking at a Dead Man's Gamble -- a final, career-making trade that's leading these guys to play Russian roulette with the entire American economic system. And if that's the case, Paulson and Bernanke should simply run them over and have Congress strip their autonomy.

This recent Typepad refusal to allow for comments of more than a handful of paragraphs if there's a link is driving me crazy.

Pt. 1: "To the extent this is true, you have no cause for complaint about the Bush Administration"

Sure I do. Want a list?

"A government is illegitimate if it maintains power by actively engaging in violence against its peaceful political opposition."

Presumably you can define a bit more clearly a somewhat clearer level of violence, since certainly there's indisputably a certain amount of this sort of thing. I guess there's also a time limit, so the assassinations of Black Panther leaders, shootings at Jackson State, and Kent State, endless beatings and arrests, and so forth, of the Sixties, don't count, nor the many murders of civil rights leaders by local law enforcement types, the use of the Army to shoot union protestors, and so on, doesn't count.

Pt. II: "I do not believe that Iran is willing to trade away its pursuit of nuclear weapons."

I have no idea one way or another. I don't know how to find out without trying to find out via negotiations. What alternate means of knowledge do you base your belief on?

"And I believe that legitimizing its government with a Presidential visit will help it to maintain itself internationally and domestically."

How did we get onto discussing a Presidential visit to Iran? Did I miss a comment?

Pt. III: "Yes, but the Sauds are more interested in self-preservation than in Armageddon,"

Extreme and wild speculation aside, what reason do we have to think that the Iranians are different? If they're so wild for Armageddon, why did they make peace with Saddam Hussein after a vicious and devastating war with Iraq that Hussein launched? Where's the evidence that the Iranians are irrational? What wars have they started so far?

"Also, the USSR fell apart about 10 years into 'right-wing' (Reagan-Bush) rule in the US, not after years of detente."

Rewriting history so that the extremely conservative Eisenhower-Nixon era, in which our foreign policy was led by John Foster Dulles and ilk, who purged all the liberals from the State Department, and agitated for "rollback" rather than Truman and Acheson's (and Kennan's) "containment," wasn't "right-wing," isn't a line I'll buy. And, yeah, the Soviet Union fell apart also after years of detente. And the detente, and the Helsinki Accords, and the greater and greater exposure of Soviet citizens to the outside world, were a huge and fundamental part of why the Soviet Union collapsed.

"The idea that we can somehow get concessions after passing the "clean" bailout bill is so stupid that I can't believe anyone is actually putting it forward "--KCinDC

Obama said the following, in the link that Jeff posted above--

"Let me be clear - we shouldn’t include this stimulus package into this particular legislation, but as we solve the immediate crisis on Wall Street, we should move with the same sense of urgency to help Main Street. "

Unless I'm misinterpreting it, Obama seems to think we can pass the Wall Street bailout and then afterwards insist that we pass something equally helpful for ordinary people. Which seems a bit unlikely to me, to say the least, but maybe I'm wrong on the politics or wrong on what Obama means.

Gary,

Your last couple of comments on this thread sound like a continuation of the debate near the end of the "Ego Tripping at the Gates of Hell" thread.

Did you mean to continue that conversation here in this thread, or did you post them to the wrong thread, or is typepad playing tricks on us?

Or perhaps I'm just wrong.

what specific action do you want Obama to take

I'm not sure what Obama, specifically, is supposed to do, but I'd give my left nut to hear anybody, anywhere tell Lehman Bros that their bankruptcy filing and approval for sale to Barclays is off the table until the $2.5 BILLION DOLLAR BONUS PAYOUT is cancelled.

Fat chance of that happening.

Seriously, why shouldn't we all just head down to NYC and beat the living shit out these guys? Kick their sorry behinds up and down Wall St until they cry for momma. If I left now I'd be there in plenty of time to take a nap, take a shower, have some breakfast, and do some stretches before I started wailing on their sorry @sses.

Is it against the posting rules to ask that?

If so, can I get a temporary insanity exemption due to the fact that we're all going to eat the loss from their bankruptcy while their NY staff splits two and a half BILLION dollars?

B-I-L-L-I-O-N.

Seriously, when is it enough? Is there no point when we get to say "No more"?

I'm about ready to say pull the plug and whatever happens, happens. Somebody needs to reel me in and explain why these SOBs should get one thin dime from any of the rest of us. What exactly is it they contribute to the rest of us that merits our generosity or our forbearance?

These creeps should be negotiating their jail time, not their bailout terms.

Futzing the loan conditions so they can limp along financially for a little longer is cruel: we can only postpone the inevitable, and as long as we do, the borrowers will suffer more.

We can pony up $700 billion for the lenders, but there should be no relief for the borrowers?

WTF, never mind tossing them out in the street, that will just postpone the inevitable too. Just take them out back and shoot them.

Two in the hat, and their hard times are over. If that's too exorbitant, one will get it done, you just have to aim more carefully.

Thanks -

"...or did you post them to the wrong thread, or is typepad playing tricks on us?"

One or the other, sigh. Now fixed; thanks for calling it to my attention.

Hmm, Donald, Barack just e-mailed me to say this:

Please sign on to show your support for an economic recovery plan based on the following:

No Golden Parachutes -- Taxpayer dollars should not be used to reward the irresponsible Wall Street executives who helmed this disaster.

Main Street, Not Just Wall Street -- Any bailout plan must include a payback strategy for taxpayers who are footing the bill and aid to innocent homeowners who are facing foreclosure.

Bipartisan Oversight -- The staggering amount of taxpayer money involved demands a bipartisan board to ensure accountability and oversight.

So it looks like the help for Main Street is different from the stimulus package.

"Barack just e-mailed me to say this"

Barack emailed me, too! Gosh, he must type really fast!

Thanks, KC. That does sound better.

What the Swedes did.

lj and russell, Felix Salmon does a much better job of explaining why I feel uneasy here. Perhaps both he and I are missing something obvious here.

Thanks Turb,
I repeat, I am over my head with the econ stuff, so when there are questions about how these mortgages are modified and who is given an opportunity to apply, and why it is so difficult, etc, I'm lost.

There is a huge cultural difference that is at work when comparing Japan and the US in this. I'll try and come back with the links (they are on my home computer, I think), but there was an interesting one by a Japanese-American who talks about his uncle finally getting an opportunity to get a 2 generation mortgage because the market went south, and the writer noted that if he had just waited, he would have gotten twice the house or maybe a mortgage payable in a generation. However, I don't see anyone flipping houses, nor do I see people moving out of houses because they can snag a better deal. So you don't have the churn in the housing market that I think exists in the states. In fact, the shows that they have are not things like 'flip this house' but people who take where they currently live and 'reform' them.

This cultural difference may be a key point, and giving people the opportunity to get out from bad decisions, irregardless of whether they went rushing into them or they were lured into them by banks and mortgage companies, might be a problem, but I think the whole notion of predatory borrowing is a crock, and if the Federal government holds all of these bad mortgages and they find themselves turning people out of their houses or alternatively having to use tax increases to keep people in their homes, it will be a demagogue's delight.

The physicist's point of view on the financial crisis.

What makes garbage garbage?

The answer to this is known: entropy. Garbage is any mixture so disordered that it isn't worth separating into usable components. What makes household waste a resource is keeping its parts separate right in the kitchen, instead of throwing them all together into a single pail. Creating economic resources, more generally, is in large part a matter of separating stuff that's mixed together in nature, like metal from ore and food plants growing randomly with each other in the wilderness. A cornfield is valuable because it has low entropy.

The same principle applies to the mortgage bonds. Individual loans to specific owners, on particular properties, got smushed together on the theory that their risks were uncorrelated. Oops. They're called "garbage" now not because we know that everything in any one of them is worthless, or even worth less, but because they are high-entropy phenomena.

Posted by Michael O'Hare

High entropy is desirable when generating random numbers for use in encryption. Just saying.

Turbulence: Joe Lieberman wants to spend 3 trillion dollars building a giant laser to pulverize the moon? And Democrats are convinced that's stupid because it might destroy our planet? Wow! Look how brave Lieberman is! If only all politicians were so brave...

I take it you also ready Fafblog...?

I take it you also ready Fafblog...?

I do indeed read Fafblog, although this post was closer to what I had in mind.

THIS JUST IN:

When I called for McCain or Obama to take action on the Bailout Crisis, I am not sure this is what I had in mind.

I wanted to type that news in quickly.

Let's see. McCain has suspended his campaign on account of the economic crisis and wants Obama to do the same.

A few words come to mind:

Stunt.

Desperate.

Perhaps others could join in with some of their own.

By the way, here's a McCain quote from the CNN story:

""I am calling on the president to convene a meeting with the leadership from both houses of Congress, including Senator Obama and myself," McCain told reporters in New York. "It is time for both parties to come together to solve this problem."

Soon McCain, with President Bush, and Vice-President Cheney, will announce that the economic crisis is so severe that the election needs to be postponed to everyone can focus on fixing the country without distraction in a bipartisan way. To facilitate this, Dick Cheney will be resigning, and Bush will appoint McCain Veep, and then resign. So that the Senate will approve this, Joe Lieberman will be nominated to be Vice-President, making it all bipartisan. Anyone who objects doesn't have the good of the country at heart, and wants the Islamofascists to take advantage of the disunity they'll be provoking, after the terrorist attack on the heartland that will have just taken place.

No, I don't expect this to happen. But I imagine Dick Addington might have some fallback notions he likes to think about.

It would be for the good of the country, after all.

A man has to have dreams, after all.

Donald: "I mean, that's a neat idea -- Wall Street and Main Street working together. I'm not sure I expect to see it anytime soon . . ."

Every time I hear the President Bush, Obama, McCain, Schumer -- any of them -- use this Wall Street/Main Street theme, I view it strictly as rhetoric. It's almost as if they are patting me on the head and saying, "Good boy. It will be all right."

Russell: "Seriously, when is it enough? Is there no point when we get to say 'No more?'"

To Russell's point, what will Congress say when the airlines and autos come knocking on the door next? Aren't they vital to our economy?

FWIW, I thought that Nation article was one of the best articles I've read on the Bailout mess. The writer wasn't talking down or talking up to me.

If the first debate doesn't take place Friday -- which I'm sure is McCain's real aim -- I will feel cheated.

I've had that marked on my calendar for weeks.


"It is time for both parties to come together to solve this problem."

That is GOP speak, translated into English it means "surrender unconditionally and give me everything I want. If you are nice to me and kiss my a**, afterwards we'll pretend this never happened."

Screw McCain, screw Bush, screw the GOP. Traitors to the country all of them - put them in front of firing squad and shoot them.

LeftTurn, you're taking this much better than I am....

McCain must be sensing that this Bailout Crisis -- which a recent poll noted Americans place more of the blame on the GOP than Dems -- has him doomed.

Good to see that Obama isn't letting McCain squirm out of this one.

Obama has "hit McCain for switching from his stance as an advocate for market deregulation to a strong supporter of regulation since the Wall Street crisis became front-page news," according to CNN.

More Obama: "He's suddenly a hard-charging populist. And that's all well and good, but I sure wish he was talking the same way over a year ago, when I introduced a bill that would've helped stop the multimillion-dollar bonus packages that CEOs grab on their way out the door."

The same story noted that McCain's bombshell about suspending his campaign comes as a new CNN "poll of polls" out of Virginia on Wednesday shows McCain with the slimmest of leads in a state that traditionally has been a safe bet for Republicans.

Just a guess:

If Obama had initiated this call for a suspension in the campaign, the McCain camp would be saying he was playing politics and needed time off for Ramadan.

OK, I can breathe now.

My apology to everyone for that last outburst. I do not wish physical violence on anyone, most especially not public officials of any stripe.

My apology to everyone for that last outburst. I do not wish physical violence on anyone

I'd like to second this by withdrawing my proposal of beating up Lehman Brothers employees. Bad form on my part.

Thanks -

Josh Marshall's reaction looks right to me.

Thanks, LeftTurn. I'd prefer to keep the violent rhetoric on the right (well, I'd prefer to have it nonexistent, but that's not going to happen). At least firing squads are normally associated with some sort of trial.

Thanks, LeftTurn. I'd prefer to keep the violent rhetoric on the right

Oh, would calls for public humiliation count? I'd love for those yokels to make a grand tour of the 50 states and try to explain what happened to the public.

I can't believe all the meta-commentary from the press. There's not even a pretense that this is anything but a campaign stunt, and then all the speculation about "will this work" for McCain (with "work" meaning fooling the public into thinking he's actually doing anything constructive).

Memo to the Media: It will only work if you fncking let it!

Wow, McCain is such a drama queen.

Oh, would calls for public humiliation count?

I think Tanta at CR came up with the best idea:

I've been an advocate of bankruptcy cram-downs for ages, so no argument there. What I really really like is the idea of subjecting CEOs to the same petty humiliation everyone else gets treated to. I suggest that for every separate asset these CEOs sell to the government, they be required to write a Hardship Letter over a 1010 warning (that's a reference to the statute forbidding lying in order to get a loan) explaining why they acquired or originated this asset to begin with, what's really wrong with it in detail, what they have learned from this experience, and what steps they are taking to make sure it never happens again. Furthermore, the Treasury Department will empanel a committee of the oldest, most traditional, and bitterest mortgage loan underwriters--preferably those downsized to make way for automated underwriting systems--to review these letters and opine on their acceptability.

"bedtimeforbonzo, what specific action do you want Obama to take and why exactly do you think that action will change the outcome of the current crisis?"

I was reminded of this question when I saw that President Bush will be meeting with Barack Obama and John McCain jointly Thursday on the Bailout Crisis -- clearly, he is not an insignificant player in all of this.

In much the same way that the President has the bully pulpit at his disposal, so does Obama in his capacity as leader of the Democratic Party.

I'd much rather see Obama be the Voice of Economic Sanity for the Democrats than Barney Frank or Charles Schumer.

Good guys, both. But not the guy I'm voting for to be my President.

We can stop the Great Bailout!

Given the now likely passage of the Great Bailout, I'm mad as hell and I'm not going to take this anymore!

If you're mad as hell too and want to stop the passage of the Great Bailout, please visit http://ImMad.net to sign a petition, right now!

Then spread the word about http://ImMad.net to as many people as you can, right away!

This is our last chance to speak up.

Hearty Congratulations!

This was a mighty VICTORY for the American people, for justice, for what you have left of your Democracy.

Don't get too relaxed though. The crooks will soon be back with even more devious schemes to swindle the suckers again. Be ready for them.

Be ready, too, for a lot more pain and suffering, for a lot of financial turmoil, for political hazards, for a massive increase in unemployment and prices, for social upheaval such has never been seen before in the United States, for sworn enemies - taking advantage of your distress and weakness - to launch military and terrorist attacks.

These are all bad .... but the good things are that your Great Republic now has a fighting chance of surviving as a united sovereign nation and now that the foolish Bill has been rejected, there is hope for all of you at the end of your terrible troubles.

The United States will never be the same again but at least it will still be the United States .... and your children and grandchildren will get to enjoy the fruits of its reconstruction and recovery.

We here in Australia will be thinking of you. Best of luck.

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