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September 21, 2008


Sixth, we need a process that identifies systemic risks to the financial system. Too often, we deal with threats to the financial system that weren't anticipated by regulators. That's why we should create a financial market oversight commission, which would meet regularly and provide advice to the President, Congress, and regulators on the state of our financial markets and the risks that face them. These expert views could help anticipate risks before they erupt into a crisis. "

We already have this - it is called the econ blogs. Many of them work for free. The better ones were calling attention to the outlines of what would eventually become the current crisis 18-24 months ago. Almost nothing that has happened recently was not forecast at least a month in advance by them.

If Obama wants to pay somebody to just read econ blogs all day and then present summary briefings to the President and other cabinet level officials, that would probably be a wise investment.

you're doing God's work, hilzoy, a truly worthwhile read.

And I think Obama framing this crisis a matter of public trust in capital markets should get us past the knee-jerk conservatives who want to lay it at the feet of individuals borrowing beyond their means.

I do need to give the McCain campaign some credit. Their new strategy of simply lying about everything is universally applicable to the challenges they face in this campaign.

And I think Obama framing this crisis a matter of public trust in capital markets should get us past the knee-jerk conservatives who want to lay it at the feet of individuals borrowing beyond their means.

I agree, redwood. After all, how much is Joe Six-Pack paid annually to understand the collective risk of the financial and real estate markets, or the risk/return of mortgage based derivatives? Those who bow down to the religion of "Tinkle Down Economics" were the pump monkeys who told the masses everything was great and they should borrow and buy. Now they want to lay the blame upon the very victims who believed their lies. These so-called conservatives have balls of brass and brains of s***.

Were there also greedy, unthinking people? Of course. Would they or could they have ever created the current crisis on their own, without the GOP kicking out all protections with their deregulatory policy, while the same institutions that gave big campaign contributions to get them to deregulate went hog wild? I don't f***in' think so.

As usual with your historical surveys, hilzoy, this is a very useful compilation. I've followed Obama's thinking on these issues, but it's helpful to have all these speeches, legislative proposals, etc. in one place.

It's also important to show McCain's overall history. His occasional self-righteous bursts of outrage at "bad guys" can lead to his support for specific fix-it legislation. Post-Enron, Fannie/Freddie accounting hijinks, etc. But these are simply outbursts at people he thinks are crooks or have "gamed the system." His default position, however, is an unquestioning belief in "the system" itself, and the goodness of it all if only the bad guys were run out of town.

McCain doesn't understand that any market is, in a certain sense, nothing but a set of rules, it's defined by its rules -- not all of them encoded in laws or regulations; custom and practice is also important and always evolving. And markets are defined by how and by whom those rules are enforced -- sometimes by government, sometimes by market disciplines, such as our current crisis when counterparties won't trade because of lack of transparency. It's really an artifical distinction to glorify the market (and its internal rules and disciplines which are often as arbitrary as any regulator) but disparage the regulators as somehow distorting the market.

All this as a preamble to say that McCain doesn't have any instincts to fall back on if the market doesn't work -- other than to find a scapegoat and try to run him out of town on a rail.

That being said, I think we have to give a hat tip to McCain's advisers, who came up with a rough and dirty proposal for a Mortgage and Investment Trust before Paulson's "plan" was announced. It's no more a "plan" than Paulson's -- just a concept that needs a lot of meat on its bones. But it would be a much better starting point than Paulson's blank check. It creates an entity with some outside governance beyond the heads of Treasury and the Fed -- starts to address the problem of a lame duck administration and transition to a new administration. It also starts to put some conditions (warrants) on access to this facility.

Although McCain has mentioned his Trust concept in his response to Paulson's proposal, McCain himself almost surely doesn't understand the issues well enough to sell his own proposal. I'm confident that would not be a problem Obama would suffer from. I'd like to see Obama pull a fast one and point out McCain's Trust proposal as a better "starting point" than Paulson's proposal while adding additional elements to improve the effectiveness and fairness of a rescue plan. I think Obama could make a better case for McCain's proposal (as further modified by Obama) than McCain could for his own proposal. How much more "bipartisan" could one be, while sticking it to the Paulson proposal.

McCain's Trust idea shares the major problems with Paulson's "plan" -- what's the purpose, and the related question, what's the price Treasury will buy the toxic waste for? But it's not quite such a freebie for Wall Street. I don't usually pimp my posts, but I've written a long "what's wrong with the bailout" post here, which fits with Krugman's most recent assessment here, and I've suggested some of the politics of opposing the bailout here.

Frank Rich covers the truthiness.

everyone who thinks Palin is competent to handle this mess, raise your hand.

Great and wonderful work, hilzoy. Definite headway in grasping the danger, and dangerous task, ahead.
And nadezhda, may I buy you a drink? outstanding and admirable.
You two make a great team!

Wowf. Last I saw, the Demos were making reserved nice with the Pubbles, which doesn’t sound healthy; in fact it sounds suicidal. Seems as if this is one of those moments reminders, bitter or merely nagging, will be with us for a long time. Isn’t this when minds may be expected to be focused? But the feeling appears to be Quick, sweep it under the rug and Is my flight booked? This is the kind of thing that should pull Congress out of recess for a special session devoted to hammering and finessing it out.

John McCain:

Americans are right to be offended when the extravagant salaries and severance deals of CEO's -- in some cases, the very same CEO's who helped to bring on these market troubles -- bear no relation to the success of the company or the wishes of shareholders.

This is a guy who has Carly Fiorina as a senior adviser. How does he get away with this BS?

How does he get away with this BS?


@felix --Thanks for the kind words!. I'll gladly take you up on your offer for a drink on Nov 4, at which time I'll be needing a pick-me up, either as I near-expire from relief or as I try not to contemplate suicide.

"I'll gladly take you up on your offer for a drink on Nov 4, at which time I'll be needing a pick-me up, either as I near-expire from relief or as I try not to contemplate suicide."

We used to think that was a sure thing, the result after election day. Until 2000.

@Gary -- Anything but a clear victory and I'm going to be quasi-suicidal.

How does he get away with this BS?

It's a way of life.

Thanks -

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