Pharyngula

We are all screwed, aren’t we?

Now that I’ve had the current banking disaster explained to me (short answer: the people responsible will be receiving a huge handout from the taxpayers), I can understand why Obama has decided to quit. It makes sense. Whoever wins the election is going to be in for a world of pain and hard work, if they take the job seriously.

Oh, wait…McCain has already signaled that he won’t be taking it seriously.

Comments

  1. #1 Richard Harris
    September 21, 2008

    Choosing that dumb broad, Sarah Palin, as his running mate proves he ain’t taken it seriously. (My apologies to women for using the term ‘broad’, but in this case, I think it’s justified.)

  2. #2 SHV
    September 21, 2008

    We are just feeling the early pre-shocks. It will be 2-3 more years before the economy hits bottom. Whoever wins in ’08 will be a one term president and will likely be regarded as the Herbert Hoover of the 21st century. The Bushite philosophy of privatizing profit and socializing risk is really going to bite us and the next President in the a**, IMHO.

  3. #3 Kevin Anthoney
    September 21, 2008

    Yay! I’ve been Pharyngulated! And I’ve only been blogging for, like, half a day!

    Thanks, PZ!

  4. #4 Matt Heath
    September 21, 2008

    Choosing that dumb broad, Sarah Palin, as his running mate proves he ain’t taken it seriously.

    The mayor of a little town like that doesn’t even get to consider running for governor by being dumb. Sarah Palin has the political street smarts of a Mafia don. “Misunderestimating” her will hurt you all as bad as it did with Dubya.

  5. #5 Brandon
    September 21, 2008

    Obama has quit? There’s nothing about this on his website. I’m doubting the credibility of this website as well, It doesn’t seem in Obama’s character to say “See ya, bitches, I’m off to do my wife” and then ride away on a motorcycle. I really hope this is false because I live close to the United States and what effects them will effect me.

  6. #6 info_dump
    September 21, 2008

    Man you scared me when I read “Obama has decided to quit”. Should have known it was a joke.

  7. #7 Azkyroth
    September 21, 2008

    The mayor of a little town like that doesn’t even get to consider running for governor by being dumb. Sarah Palin has the political street smarts of a Mafia don. “Misunderestimating” her will hurt you all as bad as it did with Dubya.

    She does have a certain animal cunning, yes.

  8. #8 Moody834
    September 21, 2008

    For one moment I was like, “Whhhaaaaaat the fffu…”. Then I saw that it had to be a joke. Then I checked out the link and laughed my ass off. Then I came back to share my experience, and Richard Harris [@ #1] pissed me off. *sigh*

  9. #9 Nick Gotts
    September 21, 2008

    In the post on the end of the second link, Obama describes Palin as a “MILF” – but what’s the Moro Islamic Liberation Front got to do with it? Is this some sort of retaliation for the rumours that he’s a Muslim?

  10. #10 Nick Gotts
    September 21, 2008

    we could require all banks in trouble (which seems to be all of them) to issue new shares, with the sale backed by the Treasury. If private investors buy the new shares, then the banks get their much-needed money at no cost to the taxpayer. If they don’t, taxpayers at least end up with a share of the banks – and a share of any profits the banks make. – Kevin Anthoney on the end of the first link.

    An interesting idea. So far as I can see, it would implement the line I’ve been taking, that a rescue of some sort was necessary, but the government (hence taxpayers) should get an appropriate degree of control in return. Any chance the Dems in Congress will press for something like this? Thought not!

  11. #11 Alan Chapman
    September 21, 2008

    This is reminiscent of the Credit Mobilier scandal.

  12. #12 scott from Oregon
    September 21, 2008

    That synapses did not go back far enough. The real estate “boom” was to cover for a recession that came after the tech bubble popped.

    This was all the federal reserve’s doing as it dropped and held interest rates to almost “free money” status.

    Couple that with a golf course economy and little production of actual wealth, and you can see what the scam actually was.

    Proclaim wealth by inflating housing to obscene levels and then use that proclaimed wealth to produce credit to run the golf courses…

    The synapses failed to mention the millions of Americans who bought into this scheme, pulling out mass amounts of phony “wealth” out of their homes and buying mass amounts of stuff. Americans were giddy and irresponsible, quitting their real jobs to “get in on” the great free cash in home equity give-away.

    Ponzi schemes end, and somebody always gets left holding the bag.

    This time, it be the taxpayers.

    This is only round one of this. There is another larger wave of housing failures coming this winter and next spring.

    Which will lead to credit card debt going unpaid and more mass failings.

    I jumped in (I am a builder) on this whole charade and made money and got out before the bust. Even a dumb carpenter like me saw this coming back in ’04 and ’05.

    Where was Congress when all of this was coming down the chute? Ron Paul predicted this in ’03, calling the Fannie debacle with great prescience.

    Obama claims he came up with a plan to solve this, and then got a call from the federal chairman. Obama shut up like a good politician and let the banksters run roughshod over this process so that they could save their cash and use the cash of regular, hard working Americans. Obama the “change” agent. Yeah right…

    Even your hero Obama knows where the government is centered, and it has nothing to do with elections and honest government.

    Big government liberals on top of the repubs keep feeding these banks power, and this is what they do with that power…

    And y’all agree to take it.

    It is time to rethink the federal reserve and open up its inner circle to public scrutiny.

    After all, the public is getting the royal reaming here, and inflation will make sure the corn cob is twisted but good…

  13. #13 amphiox
    September 21, 2008

    Brandon #5:
    Either you are an unparalleled genius at dead-pan counter parody, or you need your irony meter recalibrated.

    Or I need MY irony meter recalibrated.

    Or both.

  14. #14 Sili
    September 21, 2008

    If only there was a way to take away their nuclear toys (monkey with a loaded gun, anyone?), we’d be happy to welcome y’all over here. I’m the Canucks and the Mexicans feel similarly.

    But as it is, we really really really really really really really really really really really really really really really hope you can somehow keep the nuts in check.

    PLEASE!!

  15. #15 S.Scott
    September 21, 2008

    @9 – this is what he meant. :-)

  16. #16 Brandon
    September 21, 2008

    Amphiox #13:
    Yeah after reading it again I realized it was blatantly obvious what it was. It would be a very sad if McCain / Palin could just stroll right in to the presidency unopposed and after learning what they think it should be understandable why I needed a fresh pair of underwear after hearing Obama quit the race :P

  17. #17 Steve LaBonne
    September 21, 2008

    If they pass this fucking blank-check greatest heist of all time “plan” he will be no more than a figurehead president without the means to do pretty much anything. So he might just as well quit, for real.

    What we’re about to find out is whether the Democratic Party has (and deserves to have) a future.

  18. #18 Nick Gotts
    September 21, 2008

    S. Scott,

    Sorry – I should have put a ;-) at the end. In fact, I knew the more usual denotation of MILF, but not exactly what the acronym was, so I googled it, and found the other MILF as well!

  19. #19 Scott from Oregon
    September 21, 2008

    http://www.msnbc.msn.com/id/10562904/

    If you hate Bush, a good poll to crash…

  20. #20 Oskar Kennedy
    September 21, 2008

    There’s only one real lesson to be learned here. If you’re going to screw up in America, screw up BIG. If you screw up, take out a loan you can’t afford, fall behind on your mortgage and lose your house, nobody gives a mouse’s balls. If you screw up, underwrite millions of bad loans and get so deep in the hole that you’re hearing kangaroos mate, you’ll be such a threat to the entire economy that the federal government will climb up on your desk, drop its red-and-white-striped pants and drop a trillion dollars just to fix your mistake.

    [excerpted from my blog before someone does it for me] =)

  21. #21 B.Dewhirst
    September 21, 2008

    This would be bipartisan fail.

    (Take a look at where these failing firms have given money in the past. Democrats, Obama included, have done very well by the financial sector in the past…)

  22. #22 Richard Harris
    September 21, 2008

    Moody834 @ # 8, sorry for pissing you off, but that woman gives me the creeps. It seems from what I hear that she has that effect on a fair percentage of the population. You don’t like her, or rate her, do you? I thought it was only rednecks & religiots that liked her.

  23. #23 The Cheerful Nihilist
    September 21, 2008

    It will be so cool to be part of a mass extinction.

    I’m going to cash in what’s left of my IRA and spend it all on drugs and alcohol, and watch this train wreck through the blur of serious intoxication.

    Wheeeee!

  24. #24 Dean
    September 21, 2008

    “Ron Paul predicted this in ’03, calling the Fannie debacle with great prescience.”

    I’m sure he would claim this – haven’t seen any facts that would support it (they may likely exist, I simply don’t know). But, the mere fact that some consider Ron Paul to show any manner of integrity, honesty, or post-17th century intelligence, shows just how scary the current situation is.

  25. #25 Anders
    September 21, 2008

    Anyone wants to help turning this poll? One of the largest newssites in Sweden Aftonbladet has a poll “do you belive in ghosts? and yes is, to my horror, leading.

    Dictionary
    Ja = Yes
    Kanske = Maybe
    Nej = No

  26. #27 Brownian, OM
    September 21, 2008

    And somewhere on the south end of Cuba a teenaged Arab is serving the banking industry’s time.

  27. #28 herman
    September 21, 2008

    My heart skipped a beat when I read the first sentence of the Obama bit.

    Please, Americans, keep the idiots in check!

  28. #29 qedpro
    September 21, 2008

    i don’t use this word loosely but Palin is a two-faced ignorant cunt.

    And I can call her that because I’m a woman.

  29. #30 Nick Gotts
    September 21, 2008

    Ron Paul predicted this in ’03, calling the Fannie debacle with great prescience. – Scott from Oregon

    Showing the same awesome intellectual prowess as in his non-acceptance of the theory of evolution?

  30. #31 amk
    September 21, 2008

    Glenn Greenwald hereby gets a link. He makes the scaremongering link too.

    To point out the obvious, in capitalism risk is supposed to be the flipside of profit – indeed high risk is the moral justification (such as it is) for high profits. Bank bailouts nationalise (“socialize” for yanks) risks whilst leaving profits private. That ain’t capitalism. It also has the effect of actively encouraging reckless risk taking. One bailout is highly likely to lead to more down the line, unless steps are taken to deter risk taking. Sadly, no! suggests the stocks.

    There are a few other areas with privatised profit and nationalised risk. The arms industry usually has its contracts underwritten by the national government. The British government would likely bail out any of the private train operators.

    Nationalise the lot of ‘em I say.

  31. #32 amphiox
    September 21, 2008

    The subprime lending fiasco is surely economic imbecility and malfeance of the highest order. Being pretty naive in the realm of economics, I can’t say who’s the idiot and who’s the criminal, though.

    Re “hearing kangaroos mate” – I know there are aussie biologists frequenting this here blog. What does it really sound like to hear kangaroos mate?

  32. #33 Karey
    September 21, 2008

    I wonder if McCain’s advisor is still calling us all a nation of whiners. Like we had no business thinking the economy was in trouble.

  33. #34 Alan Chapman
    September 21, 2008

    #24 Dean, it’s just basic economics. It doesn’t require some special insight. It happened many times before and it will continue to happen.

  34. #35 SC
    September 21, 2008

    Ron Paul predicted this in ’03, calling the Fannie debacle with great prescience.

    BFD. I predicted it (publicly) several years before that based on the study of financial history armed mainly with the insights of Lenin. It’s a pretty fucking sad state of affairs when the analysts of capitalism in 2008 still haven’t caught up to people like Lenin and Luxemburg.

    SfO contributes about as much to any political or economic discussion as Ms. Magicbritches does to a debate on religion. Boring, arrogant, thick, and useless.

  35. #36 Zeno
    September 21, 2008

    I seem to recall hearing somewhere that any economic problem can be fixed by tax cuts for the rich. Isn’t that right? So I guess sucking billions of dollars out of the U.S. Treasury and just giving it directly to millionaires and billionaires to bail out their businesses should be just as good. Gee, economics is real easy, isn’t it?

    Can we use tax cuts for the rich to solve the problem in Iraq, too? That would be cool.

  36. #37 Moody834
    September 21, 2008

    @ #22

    I just find the gender based referents to be unnecessary and in poor taste. As with the pejorative use of the word ‘cunt’. I get the emotional reaction, certainly, but I think it does the comment’s validity a disservice. Palin is a duplicitous, ignorant, religious zealot with no useful experience and, worse, an alleged penchant for misusing political power that bears investigating. That Palin is a woman is secondary, really, and to make it important is to weaken the impact of other observations.

    Anyone wanting to attack your observations or mine has only to pull up sexist comments as evidence that we are predisposed to attack her on such grounds. I’d rather like to have my arguments above that level.

  37. #38 uncle frogy
    September 21, 2008

    why should we believe this administration or its spokesmen about this plan especially when it concerns cost when all the other “plans” they have gotten implemented have seldom matched the “sales pitch” if ever?

    Is the “American Empire” finally over?

    It is my opinion that the “fall of the Soviet Union” was participated by the inability of the system to afford to fight a war in Bosnia, keep up with a international arms race and maintain a working domestic economy primarily due to the almost total lack of international credit. We on the other hand could finance our part by deficit financing.
    Thanks to the management by our government how close are we to that point where we do not have as a government affordable credit?
    These buy outs, take overs and “bridge loans” or what ever they call them this week, are made of borrowed money. Which we will have to pay for how?

  38. #39 CalGeorge
    September 21, 2008

    Hard times demand big bonuses.

    Times Online:

    STAFF at Lehman’s New York office who helped to cause the world’s biggest corporate bankruptcy are to share in a $2.5 billion bonanza.

    The bonus, which has been described by London staff as a “scandal” has been pledged by Barclays Capital, the British-based bank that last week acquired Lehman’s American operation and took on 10,000 staff.

    http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4795072.ece

  39. #40 Quiet Desperation
    September 21, 2008

    @Dean: Well, here’s something:
    http://www.lewrockwell.com/paul/paul128.html

    Not a Ron Paul fan. Just in a helpful mood, and I was curious myself. :-)

    See kids? Sharing is nice!

  40. #41 maureen
    September 21, 2008

    OK, then – Sarah Palin is the sort of woman that gives women a bad name.

  41. #42 Scott from Oregon
    September 21, 2008

    “BFD. I predicted it (publicly) several years before that based on the study of financial history armed mainly with the insights of Lenin. It’s a pretty fucking sad state of affairs when the analysts of capitalism in 2008 still haven’t caught up to people like Lenin and Luxemburg”.

    And if someone as obtuse as you appear to be predicted this as well… you make my point for me. This was easily predictable. WHO in Washington stood up and declared this a bad thing? Ron Paul. Who else? Noone. Who made money on this? Take a hard look at Obama’s financiers and “advisors”. Take a look at Dodd’s ties to Fannie and Freddie… Why did Obama shut up after he announced his “plan” to fix this mess? He knows who his puppeteers are and where the power lies.

    It’s all there.

    “SfO contributes about as much to any political or economic discussion as Ms. Magicbritches does to a debate on religion. Boring, arrogant, thick, and useless. ”

    The simple truth is not always exciting. Remember, it was Toto who pulled back the curtain on the Wizard of Oz. Judging by the ignorance displayed around these parts, even my simple observations are far more enlightening than the go go gadget Obama! sycophantic shouts one reads here everyday.

    “”"The financial crisis besetting the major financial institutions has brought to light comments made by Ron Paul, in his testimony before the House Financial Services Committee on September 10 2003.

    As Paul saw the situation some five years ago, the government backing isolated GSE management from market discipline. If Fannie and Freddie were not underwritten by the federal government, he told the committee, investors would demand the institutions held to higher management and accounting practices.

    “Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market,” Paul predicted. “This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions. As a result, capital is diverted from its most productive use into housing. This reduces the efficacy of the entire market and thus reduces the standard of living of all Americans.

    “Despite the long-term damage to the economy inflicted by the government’s interference in the housing market, the government’s policy of diverting capital to other uses creates a short-term boom in housing,” Paul went on. “Like all artificially created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.”"”

  42. #43 Quiet Desperation
    September 21, 2008

    Why did Obama shut up after he announced his “plan” to fix this mess? He knows who his puppeteers are and where the power lies.

    My money is on sluglike, alien, Heinleinian puppet masters, but that’s me.

    Obama’s slug gave him a quick shot of the hot stuff, if you know what I mean.

  43. #44 Scott from Oregon
    September 21, 2008

    http://www.youtube.com/watch?v=fI4tVPXlQsM

    This is one of the few in Congress who said absolutely NO to the Iraq war and warned of the usurpation of personal liberties as a result of 9-11.

    Once again, he is swimming against the tide and telling it like it is.

    Will you listen this time?

  44. #45 Gary
    September 21, 2008

    We broke the 1001Words Server… The Pharyngula Effect in action?

  45. #46 Quiet Desperation
    September 21, 2008

    FYI: Obamaman sees to be leading again.

    http://www.electoral-vote.com/

  46. #47 Nick Gotts
    September 21, 2008

    uncle frogy,
    I think the American Empire is certainly more likely to end than at any time since it began in the 1940s. It’s suffering from what Paul Kennedy, in The Rise and Fall of the Great Powers, calls “imperial overstretch” – military commitments it cannot afford – as the USSR did (incidentally, when you wrote “Bosnia” you meant “Afghanistan”). This overstretch was an important reason why the Bush administration let the credit bubble get so large: fighting expensive and unpopular wars, they couldn’t afford politically to raise tax rates to fund them. The next administration will be faced with an urgent need to cut spending and/or raise taxes. An obvious option is to slash the military budget, which would probably necessitate withdrawal from at least one of Iraq and Afghanistan. This would, rightly, be seen internationally as a huge defeat, and would be followed by a considerable loss of power and influence. For that reason, important elements of the US elite will oppose it, but the alternatives are also very difficult: cutting welfare spending, or raising taxes. Either is likely to cause political turmoil, and deepen the coming recession, which in turn would exacerbate the problem of overstretch, probably forcing military contraction anyway in a few years. However, there are precedents for a dominant capitalist power recovering from overstretch – Britain after the Revolutionary War, and the USA itself after Vietnam – so it’s hard to be certain.

  47. #48 raven
    September 21, 2008

    The answer is Yes, we are all screwed. Courtesy of the Death Cultists of the Theothuglicans.

    The 700 billion bailout is just a guess. They have no idea what the liabilities are. They didn’t even know this was a crisis until Wednesday, last week.

    They have already committed another 200 billion or so to AIG and Bear and Money Markets.

    This is going to go over a trillion at least. They don’t have the money as the deficit this year is 500 billion, a record. So they will either borrow it or print it. And no one in their right mind is going to loan money to the morons in Washington DC right now.

  48. #49 Moses
    September 21, 2008

    “Ron Paul predicted this in ’03, calling the Fannie debacle with great prescience.”

    Ron Paul has been “predicting this” since he sent out his first “crank” newsletter. That, after 30-years of barking in the weeds one of his thousands of predictions came true neither makes him a prophet, nor even a good guesser as he’s been “mostly wrong” for his entire life.

  49. #50 Fernando Magyar
    September 21, 2008

    Well there are a few silver linings to the current economic crisis. It seems the god businesses are begining to suffer as well! This one was just around the corner from where I live. Anyone have any idea what such a building might be good for. It has a really nice steeple maybe it can be refurbished as a bat nursery or something.

    http://i289.photobucket.com/albums/ll225/Fmagyar/ChurchForSale.jpg

  50. #51 SC
    September 21, 2008

    And if someone as obtuse as you appear to be predicted this as well… you make my point for me.

    You’re the living embodiment of obtuse, Scott, as you demonstrate with every comment.

    This was easily predictable. WHO in Washington stood up and declared this a bad thing? Ron Paul. Who else? Noone.

    They didn’t declare it a bad thing because it’s not a bad thing to them. They don’t want to control it and couldn’t if they did. You think your idiot hero is going to save us from capitalism? You’re an utter and complete fool, and an unwitting corporate tool.

    But no one who says the things you did last night deserves a response anyway, so I’ll leave it at that. Feel free to use the time you save in not responding to me to learn some basic HTML tags.

  51. #52 raven
    September 21, 2008

    Treasury Secretary Henry Paulson stressed that time was critical to get the proposal passed and that changes to the administration’s measure, which was sent to lawmakers on Saturday, could delay that approval, further unsettling global financial markets, which have already seen a number of stomach-churning days as the result of the biggest upheaval on Wall Street since the Great Depression.

    Several things wrong with the bailout plan.
    1. Paulson thinks it is an emergency and started on his plan on friday. He wants it by next friday. They spent 8 years creating this problem. Paulson thinks he can wave a magic wand and create a bailout for a trillion bucks in a few days. This is dumb.

    2. Paulson helped cause this mess along with the Theothuglicans. Bush would have if he was ever more than semiconscious. We are expecting the clowns that brought about “The Greatest Financial Crisis” since the Great Depression to fix it with a few days of what passes for thought in their tiny minds. This is dumb, they should all be fired.

    3. Paulson is dumb. Not even going to bother explaining this one.

    Our place in the world, our military power in a dangerous world of ever shifting threats, and our social stability are contingent on a massive economy. Which is now very sick and run by morons.

    This makes it less likely that McCain and crazy moose killer mom Palin will get elected. One would have to have a death wish to vote for the party that brought us a pointless multitrillion war in Iraq, piles of dead bodies here and there, and a failing country and economy.

    I’ve said for months that the Death Cultists wanted to destroy the USA and head on back to the Dark Ages. Well here we are, off to a good start.

  52. #53 Nick Gotts
    September 21, 2008

    SfO,
    No. Since a large number of people from a wide political range both opposed the Iraq war and saw the crash coming, why listen to a creationist idiot who denies the reality of global warming just because he was among them?

  53. #54 Scott from Oregon
    September 21, 2008

    “”"”1. Paulson thinks it is an emergency and started on his plan on friday. He wants it by next friday. They spent 8 years creating this problem. Paulson thinks he can wave a magic wand and create a bailout for a trillion bucks in a few days. This is dumb.

    2. Paulson helped cause this mess along with the Theothuglicans. Bush would have if he was ever more than semiconscious. We are expecting the clowns that brought about “The Greatest Financial Crisis” since the Great Depression to fix it with a few days of what passes for thought in their tiny minds. This is dumb, they should all be fired.”"”"

    Both Paulson AND Bernanke DENIED the inevitable just a few short months ago. It is all on You-Tube. Two lying assholes who are now going to “fix” the problem?

    THEY ARE the problem.

    And a complicit two fucked-up-party Congress.

    The curtain has been pulled back folks. There’s the Wizard!

  54. #55 Jadehawk
    September 21, 2008

    WHO in Washington stood up and declared this a bad thing? Ron Paul. Who else? Noone.

    Nader did. Just sayin’. And as an added benefit, Nader isn’t trying to turn back the clock to the 19th century and is neither a religious fanatic nor a AGW denier. (but don’t worry, since I don’t get to vote I can’t “steal” anyone’s votes[/sarcasm])

  55. #56 Jason
    September 21, 2008

    I agree that Ron Paul has been predicting this type of disaster (though he and a few of his fellow libertarians aren’t the only ones; much of the far left has been just as adamant about this coming catastrophe), and whether you agree with Ron Paul or not (I dont) he’s certainly not the bad guy in this situation.
    So what should you do?:
    (I’m not an economic expert, but I’m no dunce either)
    1) Put your money in a foreign currency; the U.S. dollar (and likely the Canadian dollar too) are going to take a hit, so things like the Euro look like better options (but there is the risk that this becomes a full scale global problem).
    2) The free-market guys (the legitimate ones, not the lying assholes who are largely at fault here [though, how responsible you want to make the former for the existence of the latter is up to you]) will tell you to put your money in gold, because gold always seems to go up in a crisis. Personally, I always think this is a weird idea, as I agree with Warren Buffet: gold has no real utility, its just an uncommon mineral. But it will probably go up anyway, so what do I know?

    That’s all I can suggest right now, anyway, but anyone out there with their degree in economics ought to chime in; they know more that I do on what you should do in this situation.

    And yes, its mostly people from both parties who are to blame (not quite everyone, but the ‘lesser of two evils’ voting strategy has finally bitten Americans in the ass [no offense intended])

  56. #57 Jadehawk
    September 21, 2008

    oh and also: calling Palin a cunt is denigrating women in the same way calling Cheney a dick is denigrating men; that is to say not at all. i’d actually say it’s demeaning to cunts and dicks…

  57. #58 Scott from Oregon
    September 21, 2008

    “”Nader did. Just sayin’. And as an added benefit, Nader isn’t trying to turn back the clock to the 19th century and is neither a religious fanatic nor a AGW denier.”"

    wow. just wow.

    When was the last time Nader was elected? I can’t recall…

    Oh.

  58. #59 Louis
    September 21, 2008

    Dear Sensible Americans,

    Please feel free to desert your nation and move to Canada and Mexico. This would leave the muppets behind and we can enact the English Counter Terrorism plan that worked so well against the IRA. I.e. Asking people if they are terrorists and shooting them if they say yes.* This time we could ask if they are Republicans. Cunning eh?

    Louis

    P.S. HUMOUR! NOT SERIOUS! DO NOT SHOOT REPUBLICANS! BAD AMERICANS, PUT THE GUNS DOWN!

    * To be fair, we did a lot worse than this, but ’tis not the time nor place to reiterate this (further) blemish on our (very blemished) history.

  59. #60 Jadehawk
    September 21, 2008

    your point being? Nader has done more for this country than pretty much anyone else. he’s a lousy politician because he’s not good at soundbites and smarminess, but if we’re going to listen to someone who has predicted economic disasters etc, I’d rather support someone who isn’t a lunatic who is trying to turn back the clock to the 19th century and is a religious fanatic, a AGW denier, and the best bet for wiping the USA off the map of countries-that-matter.

  60. #61 Blaidd Drwg
    September 21, 2008

    The most chilling section of the 700 Billion bailout bill is the following:

    “Sec. 8. Review.

    Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”

    Just to repeat with emphasis: “MAY NOT BE REVIEWED BY ANY COURT OF LAW OR ANY ADMINISTRATIVE AGENCY”

    Are you folks as thrilled by this as I am?

  61. #62 Jason
    September 21, 2008

    The sad part in all this is that the people really responsible are going to escape from all this (relatively) unscathed, and by the time the ‘average’ American figures out who is to blame (aside from himself) they will have already escaped to their private resort in Dubai on their personal learjet, with all your money in a briefcase.

  62. #63 Scott from Oregon
    September 21, 2008

    “”"Just to repeat with emphasis: “MAY NOT BE REVIEWED BY ANY COURT OF LAW OR ANY ADMINISTRATIVE AGENCY”

    Are you folks as thrilled by this as I am?”"”

    Just to repeat– the banksters are running America and they have not been elected by anyone. even Obama toes the line they draw. Time to catch up to the program you’re watching…

    “I’d rather support someone who isn’t a lunatic who is trying to turn back the clock to the 19th century and is a religious fanatic, a AGW denier, and the best bet for wiping the USA off the map of countries-that-matter.”

    You’re funny. I like you. Did you here the one about the snake who kept crossing the road? He wanted to break his old mark of nine sections flat…

  63. #64 Jadehawk
    September 21, 2008

    yes, I can totally see how making fun of me is a perfect proof that Ron Paul is none of those things.

  64. #65 Azkyroth
    September 21, 2008

    You’re funny. I like you. Did you here the one about the snake who kept crossing the road? He wanted to break his old mark of nine sections flat…

    …”sections?”

  65. #66 Sauceress
    September 21, 2008

    #50 Fernando Magyar

    Anyone have any idea what such a building might be good for

    How about a spaghetti factory? Not too different from its past utility, and that stained glass window does have some basic resemblance to the FSM.

  66. #67 Monado
    September 21, 2008

    Generally, companies that desperately need an infusion of cash give up some control for it. I second the notion of providing the bail-out in the form of stock-buying.

  67. #68 Alan Chapman
    September 21, 2008

    #56 …put your money in gold, because gold always seems to go up in a crisis.

    Actually, the value of gold has remained relatively constant for the past century. The government “dollar” has lost about 98% of its purchasing power during the same period. Printing paper money allows politicians to tax people indirectly. A 1913 “dollar” is worth about two cents today.

  68. #69 John Knight
    September 21, 2008

    On a similar note, I see that EconBlogs has a great post on iterative evolution among forams.

  69. #70 amk
    September 21, 2008

    From this:

    If Wall Street gets away with this, it will represent an historic swindle of the American public — all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called “responsible opinion.” If this deal succeeds, I predict it will become a transforming event in American politics — exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

    via Sadly, no!

    Bringing down a party? Does he mean replacing a party with a (currently) minor party in the 2 party system? AFAIK that’s only happened after devastating wars before: the civil war in the US, and World War I in the UK.

  70. #71 Neil B
    September 21, 2008

    Yeah, what a crock. Worst. Ripoff. Ever? It will also be necessary to counter the arguments of “lower conservatives” like the radio hacks and pseudo-intellectuals like Walter Williams that liberal ideas of egalitarianism were mostly at fault here: the pressure to lend to lower-class folks so they could have their own homes. No, that wasn’t the main problem, since proper regulation would still have ensured proper payment to income ratios, requirements for honest income reporting, no “bubble” loans with higher payments to come in the future, no packaging of loans into weird financial instruments, etc.

    This may all seem pretty clear to readers, but there’s going to be pressure to blame this on the less responsible parties – gird your loins, as they used to say, and be prepared to fight about it.

    PS: Nancy P. showed some spine in resisting the “blank check”, we’ll see how she holds up. Also, Paul Krugman’s “No Deal” column 9/20 was a concise masterpiece.

  71. #72 John C. Randolph
    September 21, 2008

    PZ,

    The essay you linked to left out some rather crucial information. The rather glaring omission is that there was no mention at all of the Federal Reserve, which provided the unlimited line of credit at absurdly low rates which made the mortgage bubble possible in the first place.

    The way that banking should work, is that banks lend out their deposits, not their credit. When they get short on deposits to lend, the interest rates rise, reflecting the scarcity of capital. Higher interest rates make borrowers more careful about what they buy with borrowed money.

    As long as we have the Federal Reserve, we will continue to have a series of bubbles, crises, and bailouts, the overall effect of which is to transfer wealth to the banks that own the Fed, not just from taxpayers, but from everyone who has dollars in savings.

    The Federal Reserve caused the first Great Depression (Bernanke has even admitted as much), and it’s brought us to the brink of the second. What astounds me about this mess is that our congress is so willing to shirk its duty that they would even consider writing a $700 billion blank check.

    That $700B won’t be coming from income taxes. The only source for that kind of cash in a hurry is inflation, and if this measure is passed, the Fed will make an entry in a database and inflate the dollar to cover the bill.

    A free market requires profit and loss to sort out where resources should be invested. By interfering to shelter investors from losses, the government encourages dangerous choices, such as writing loans without due diligence to find out if the borrower can pay them, or whether the property mortgaged is worth the amount of the loan.

    I see several places where the blame belongs here, in descending order:

    1) The congress, for shirking their duty “to coin money and regulate the value thereof”. The constitution doesn’t permit the congress to delegate this authority even to the executive, let alone a private cartel of banks.

    2) the Federal Reserve, which exists to transfer wealth from all of us to its owners by inflating the money. We can thank J. P. Morgan and John D. Rockefeller for the existence of this monster. We should have heeded Jefferson’s warnings about letting banks control the money supply.

    3) Fannie Mae and Freddie Mac, which are government-created companies whose purpose is to churn loan paper in the greatest possible volume.

    4) Loan originators like Countrywide Financial, which routinely lied about the soundness of loan paper they were reselling.

    The right thing to do here is to let the people and institutions who made the bad bets take their losses, let the market reprice these assets at a realistic level, and stop trying to keep the bubble inflated. Right now, the government has their 1929 game plan in hand, and they’re following it all over again.

    -jcr

  72. #73 Genetic Mishap
    September 21, 2008

    My question is, assuming the US economy is unsalvageable, where would the best place to move be? Surely most countries would take a big hit as well, a la the Great Depression. But then I’m no economist.

    Another question–what’s the warmest Scandinavian country? Just out of curiosity, I mean. Has nothing to do with my first question, no sireemaam.

  73. #74 John C. Randolph
    September 21, 2008

    Put your money in a foreign currency

    Jason,

    That can help to an extent for a little while, but when the dollar goes south, so will all the other currencies. The central banks have been colluding to inflate all of their currencies in tandem for many decades now, and most foreign currencies are only backed by their banks’ dollar accounts. When the US dollar crashes, so do they.

    The only safe haven is hard assets.

    -jcr

  74. #75 Neil B
    September 21, 2008

    JCR, great post and takedown of “the system”, I suggest you visit Brad DeLong’s blog if you don’t already and dish out over there too.

    Monado: Unless the company owns substantial amounts of its own stock as such (like from an energetic buy-back program), buying shares just gives the money to the previous shareholder, you know? I mean, if the government wants to “bail out” Ford, their buying my Ford shares wouldn’t give Ford the money it would need – or did I misunderstand what the people you’re seconding had in mind? (Maybe, that financial institutions don’t work in the same “common sense” way that Ford etc, does?)

  75. #76 Meur
    September 21, 2008

    Speaking of polls, here’s one that asks “Is Palin qualified to be the Vice President?” “Yes” is winning.

    I think we should let the goons at NBC precisely what we think.

    http://www.pbs.org/now/polls/poll-435.html

  76. #77 Jadehawk
    September 21, 2008

    the warmest skandinavian country would be denmark, on account it’s only kind-of-skandinavian. but it’s tiny, so there’s only so much room for fleeing americans. better hurry!

  77. #78 clinteas
    September 21, 2008

    Good point about the fact that whoever wins the presidency will be in deep shit and is going to be blamed for all the economical shit thats going to happen.

    What baffles me,leaves me speechless and rubbing my eyes in wonderment,is that nobody,anywhere in the media,apart from Bill Maher and a handful of bloggers maybe,points out the fact that McCain is the Elitist here,the guy who surrounds himself with rich and important and famous people,noone points out how the Republicans would eviscerate Obama if he was the one showing up at the Convention with his knocked up black underage daughter,but for Palin its groovy??Noone,again apart from some bloggers,will even dare to critisize that Palin thing anymore,there is so much wrong with this woman that one doesnt even know where to start,but why is the Media not touching her???
    WTF is the media in the US doing??(You can probably tell that Im a tad frustrated lol)

  78. #79 John C. Randolph
    September 21, 2008

    gold has no real utility, its just an uncommon mineral.

    Actually, it has a great deal of utility. It’s an excellent electrical and thermal conductor, and it’s mostly inert so it doesn’t tarnish.

    What it has going for it as money is that it’s not that easy to increase the amount of it in circulation (mining isn’t cheap), it’s easy to precisely divide by weight, it’s easy to authenticate, and it’s very compact in terms of value for weight.

    -jcr

  79. #80 Kel
    September 21, 2008

    Noone,again apart from some bloggers,will even dare to critisize that Palin thing anymore,there is so much wrong with this woman that one doesnt even know where to start,but why is the Media not touching her???

    It’s quite a disturbing sight to see that the person looking to be the 2nd most powerful person in the world is being wrapped in cotton wool and protected from any form of scrutiny; something that you’d expect the 2nd most powerful person in the world to be under.

    It reminds me of that episode of the Simpsons where NASA picks Homer to go into space. Why isn’t the media asking “no seriously, is this a joke?” and ending with Palin damning us all to hell.

  80. #81 don kane
    September 21, 2008

    $700 000 000 000

    Calculation time:

    That’s enuf to buy some 200 thousand house mortgages, which by no chance it seems is the magnitude of the housing crunch. We are talking buying them outright for the lendee, not paying a year’s worth of payments. Bet that would be a allot more helpful–and cheaper–than how the $$ actually gets spent.

    Another thing that I know we should be calculating out….what is $700 billion divided by 350 million people….$2000 per head?

    Wish I could run my household or my lab like they run the government. I’d be rich.

  81. #82 Zach
    September 21, 2008
  82. #83 Quiet_Desperation
    September 21, 2008

    Please feel free to desert your nation and move to Canada and Mexico.

    I’m an engineer. Do you even *have* engineering in Canada? I tease. :-) Hmm, I *am* a Rush fan, and, um, Canadian…….. geese are cool.

    Or, since pretty much half of Mexico has migrated to Southern California, I can likely buy whole towns down there for just the profit on my current house. I bought a fixer-upper back in 1989, so it would take an extinction level event to wipe out my equity. That sounds like a sweeter deal, and I’m guessing the winters are better.

    Or… summers in Canada and winters in Mexico… hmmm… And when they build the Evil NAFTA Superhighway Of Doom, I can travel from one to the other with stopping! Unless there’s some of Christian Theocracy tollbooths. You know, you stop at the booth and have to offer three Hail Marys, a dozen crackers and a tithe based on your annual income payable right then and there.

    But, seriously, those of you talking about abandoning ship really need some Paxil or Zoloft or something.

  83. #84 Scott from Oregon
    September 21, 2008

    “”"Just to repeat with emphasis: “MAY NOT BE REVIEWED BY ANY COURT OF LAW OR ANY ADMINISTRATIVE AGENCY”

    Are you folks as thrilled by this as I am?”"”

    Lots of people get it. What will be done about it?

    September 19, 2008
    The Cowardly Lions
    Posted by Christopher Manion at September 19, 2008 09:30 PM

    Lew, this scenario has played out “off Broadway” many times before. In the early ’80s, bankers came to Capitol Hill and warned Senators that “the financial system of our country would collapse” if we didn’t bail out the NYC banks for their Latin American loan disasters (I was there).

    Then we had to bail out the S&L’s or “the financial system of our country would collapse.” Then it was bail out the banks that had lent to Mexico, corrupt to the core, which we had to bail out or “the financial system of our country would collapse.” So Paulson is just a walk-on in the rerun of the same old movie.

    Here is the intriguing ingredient: the goal of Paulson and Co. was intimidation — all bluster. If they failed — if the truth got out — they would all be hanging from lampposts by next weekend. So they browbeat the constitutionally elected representatives of our country with threats that would make the 9-11 fearmongers proud: “”When you listened to him describe it you gulped,” said Senator Charles E. Schumer, Democrat of New York. “We have never heard language like this,” said my old pal Chris Dodd, chairman of the Banking Committee.

    I’ll tell you what language wasn’t heard from these bogus “leaders”: None of these “statesmen” told that glorified crook, “Look, Mr. Paulson, if the government is going to commit a trillion dollars to bail our your buddies, we’ll do it right here in the legislature, according to the Constitution — but don’t hold your breath. In fact, shut up or we’ll send you a subpoena.”

    No, our elected representatives, who are notoriously ignorant regarding economics, let themselves be herded like sheep, guaranteeing that all the guilty parties will prosper, while the taxpayer and anyone else holding mere paper money suffers. No one wanted to take the blame for telling the truth.

    So no one is telling the truth, since no one will ask the trillion-dollar question.

  84. #85 dan
    September 21, 2008

    Happy Equinox everyone!

    Ron Paul also predicted that it would get colder in the months following November; but is anyone listening?

    Seriously, how could you not see this coming? Housing “values” doubling every 4-5 years. When you see a certain contingent popping up in TV infomercials the gig is up, and only the suckers are going to be buying from that point on.

    As for this expectation that the government should somehow “see it coming”….. you mean the same government that saw Pearl Harbor coming? Or Germany invading Poland? Or Sputnik? Or 9/11?
    They are in the business of reacting to what is happening today, in order to manage the electoral concequence of tomorrow. In politics, prescience does not pay all that well.

  85. #86 sailor
    September 21, 2008

    “An interesting idea. So far as I can see, it would implement the line I’ve been taking, that a rescue of some sort was necessary, but the government (hence taxpayers) should get an appropriate degree of control in return. Any chance the Dems in Congress will press for something like this? Thought not!”

    Well it depends on you and everyone else here. Call you reps and tell them no blank check. Strict conditions; the public get something for what it pays for, and no CEO’s of companies who accept part of the bail out can earn big bucks.

  86. #87 Moses
    September 21, 2008

    I see the crazies have taken over the thread… Especially JCR who pulls shit out of his, out-right lies, and has less sense than a potato when it comes to economics…

    See you in a saner thread, maybe one over-run with crazy death-cultists. Not one taken over by the gold-bugs with their wackaloon pre-1930′s economic theories.

  87. #88 Neil B
    September 21, 2008

    This is some real interesting medicine, take a look:
    http://www.moonofalabama.org/2008/09/solution-declar.html#more

  88. #89 John C. Randolph
    September 21, 2008

    Fuck you too, Moe.

    -jcr

  89. #90 John C. Randolph
    September 21, 2008

    Neil,

    The problem with simply canceling all credit swaps contracts is that for every one of those contracts, at least one party doesn’t deserve the consequences of the contract being cancelled. Not to mention that it does nothing to address the underlying problems of inflation and overvalued assets.

    -jcr

  90. #91 Oskar Kennedy
    September 21, 2008

    When things get REALLY bad, the only reliable asset is ammunition.

  91. #92 The Cheerful Nihilist
    September 21, 2008

    OK. The hilarity of this thread has gone on long enough.

    As most of you claim to be versed in Darwin’s notion of evolution, I am surprised that no one as of yet has brought up Marx’s similar notion of economic evolution, i.e., that capitalism will eventually evolve into socialism.

    (I’m not sure one thing can evolve “into” something else, but I’m too lazy to think of a way to phrase it differently.)

    As an American taxpayer, I’m glad that my government now owns a majority share of AIG. Manchester United is a pretty good futbol team.

  92. #93 foxfire
    September 21, 2008

    @ jcr # 72:

    A free market requires profit and loss to sort out where resources should be invested. By interfering to shelter investors from losses, the government encourages dangerous choices, such as writing loans without due diligence to find out if the borrower can pay them, or whether the property mortgaged is worth the amount of the loan.

    YOWZAAH! Capitalize the profits and socialize the losses! In your excellent post #72, could I add under your item 3:

    3) Fannie Mae and Freddie Mac, which are government-created companies whose purpose is to churn loan paper in the greatest possible volume.

    Freddie and Fannie were created in the 30′s, then some genius decided to let them become “privatized” (become real corporations with stockholders), I forget when (the ’70′s?). Only F&F got to keep their preferential treatment ala rates and gained the Constitutional “rights” of a U.S.corporation (freedom of speech)so they could lobby and make political contributions. In short: F&F became quasi-governmental corporations who could lobby and contribute to political contributions.

    And GUESS WHO dreamed up the concept of packaging mortgages and reselling the package. Of course there was an objective of helping first-time buyers in the creation of F&F.

    But zero down, with no income check does not a good mortgage make and we segue into your #4 (Countrywide is on your side). But that’s OK with F&F, they just repackage it with good mortgages and ship off the result to Investment Banks and Hedge funds or whatever….

    Hey jcr, do you have an opinion about that stupid Market-to-book FASB ruling (so nobody knows what the assets are worth)? I’m only kinda coming to understand how THAT contributed to this mess.

    Question about

    The right thing to do here is to let the people and institutions who made the bad bets take their losses, let the market reprice these assets at a realistic level, and stop trying to keep the bubble inflated. Right now, the government has their 1929 game plan in hand, and they’re following it all over again.

    The problem with this is that banks have stopped lending to one another and commercial paper is frozen so sound small-businesses can’t get a loan to continue their daily operations (much less bigger sound non-financial businesses). We gotta do something in the next week to free-up the dollar flow and settle small investors who want to take their money out and hide it under the mattress. Ya can appreciate gold for its beauty and commercial value and ya can’t eat it.

    @ Raven # 52,

    I generally agree with your comments and I think you are dead-wrong on this one.

    a) Paulson *knows* how this stuff works

    b) It wasn’t an accident that Morgan Stanley (as opposed to Goldman Sacks) cried foul on naked short selling and it wasn’t an accident that the Brits led the way to shut *down* the short sellers, the U.S. following the Brits “lead” (and the Germans, and the French…yadda)

    c) It wasn’t an accident that Frannie and Freddie were nationalized and their top brass kicked out (guess how many more mortgages will be “repackaged”)

    d) It wasn’t an accident that AIG is *not* a bailout. U.S. taxpayers have an 80% (O.K. 79.99%) *first choice* equity ownership in the corporation (including the profitable insurance piece) *plus* an interest rate that is almost usurious (8.5% + LIBOR-”London Inter-Bank Offer Rate. The interest rate that the banks charge each other for loans (usually in Eurodollars”)

    e) The thought that ego might just be worth more than money. Paulson can be just another greedy F#@K or he can be the guy who saved the planet’s economic system. I’m betting on Paulson…. for the next two weeks anyway ;-)

  93. #94 John C. Randolph
    September 21, 2008

    Scott,

    It seems to me that any statute that says actions of the government may not be reviewed by the courts has to be unconstitutional on its face.

    This is something else that’s bugged the hell out of me for a long time, is the habit the congress has of voting for unconstitutional legislation and just counting on the court to be their backstop.

    Whenever a law is found to be unconstitutional, that should be a major scandal, and it should ignite a very serious national debate. It should not be considered a routine fuck-up.

    -jcr

  94. #95 Kel
    September 21, 2008

    YOWZAAH! Capitalize the profits and socialize the losses!

    This happens all the time in Australia with farmers. Every time there is a drought or a flood, the government steps in and helps out those poor farmers. Yet when things do well, the farmers get all the profits. No loans, just charity, charity for those who happen to be fairly well off.

  95. #96 freelunch
    September 21, 2008

    Hey jcr, do you have an opinion about that stupid Market-to-book FASB ruling (so nobody knows what the assets are worth)? I’m only kinda coming to understand how THAT contributed to this mess.

    Lower of cost or market was an accounting requirement in many areas long ago, but it didn’t apply to as many assets as we saw this time. Realistically, it appears to me that most of the loans that were impaired would have been properly marked to market under the old banking regs and GAAP. Still, I don’t understand those who defend the the banks by saying that the banks wouldn’t be in trouble if they were allowed to lie about the value of their loans. I wonder how much it would have affected these banks if the SEC proposal to replace GAAP with international accounting standards.

  96. #97 John C. Randolph
    September 21, 2008

    Foxfire,

    The problem with this is that banks have stopped lending to one another and commercial paper is frozen so sound small-businesses can’t get a loan to continue their daily operations (much less bigger sound non-financial businesses).

    Well, it’s not quite frozen. Companies that have existing lines of credit can still access them, and those that want to increase their credit lines will have to pay higher rates (which is entirely appropriate, given the shortage of lenders in tough times.)

    Nevertheless, I’d say that’s an argument for emergency funding for those businesses, not for the banks. Better yet, I’d like to see people who are pulling their money out of banks look for viable businesses to back. One of the consequences of the bubble has been far more capital invested in banks than in (say) manufacturing businesses.

    As for your question about the FASB, you’ll need to tell me which ruling you’re referring to. The FASB issues a lot of them.

    -jcr

  97. #98 Eamon Knight
    September 21, 2008

    Whoever wins the election is going to be in for a world of pain and hard work, if they take the job seriously.

    This occurred to me a while ago. You’ve got: Iraq (which can’t end well, the only choices being: complete fucking disaster, or not-quite-complete fucking disaster. Either way: many dead bodies), looming world oil shortage, harbingers of climate change, now the credit mess, and who knows what next year. Even in the most optimistic scenario, the next four years ain’t gonna be pretty, and the Prez will get blamed because….that’s what people do. In short, a single-term presidency which will be considered a failure. So I sort of perversely wish Obama doesn’t get elected, ‘cuz he seems like a decent guy who deserves better, and it would really give the racists a boost if the first black presidency turned out so badly.

    Of course, McSame and Hockey Mom get in, it could be much worse. If McCain’s heart gives out mid-term, I give Western Civilization about six months before Palin starts WWIII over some Bible verse.

  98. #99 John C. Randolph
    September 21, 2008

    Predictable result:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=arSYa87HCb9U&refer=home

    Inflate the money like crazy, and eventually the forex market’s going to react. A trillion for a war, a trillion for a bailout, trillions in future pension and medical care payouts, all of which will be paid for with inflation. (IOW, we all pay for it by losing purchasing power of the dollars we have.)

    -jcr

  99. #100 Miko
    September 21, 2008

    Clicking ‘find’ over and over reveals that many others have already mentioned the phrase “federal reserve” and I’m in a hurry, so I’ll just add the following analogy: talking about the current collapse without talking about the Fed is like talking about evolution without mentioning natural selection.

  100. #101 raven
    September 22, 2008

    foxfire:

    I generally agree with your comments and I think you are dead-wrong on this one.

    a) Paulson *knows* how this stuff works

    Well disagree but you won’t convince me. I had hardly heard of Paulson a week ago. He has been all but invisible.

    I read some of his public comments. They were cosmically stupid. He says his bailout plan will help insure high house prices. Well excuse me, when in the hell was it ever the governments job to set the price of houses? And why are high house prices good. So everyone can take out Home Equity Loans and spend it while house prices keep going up. This is perpetual motion machine economics and it is what got us into this mess. What next high gas prices because high prices are always good?

    Millions of people saw this coming years ago. Tens of millions saw it coming months ago. Paulson didn’t even figure it out until wednesday when 1 major bank a day was going BK. So he cobbles a plan together in a few days that supposedly will prevent the second Great Depression. It is highly dubious at this late date that a makeshift barely existing plan will even work. I’ve even read the draft. It is short because there is no plan, Paulson wants a blank check because he doesn’t know what he is going to do. With no judicial appeal. I’m not even sure that is constitutionally legal.

    The available plain as day evidence is that Paulson is dumb. Or maybe he was just hibernating or something. The results speak for themselves. The US is in for a rough patch and it may be very rough. And Paulson was First Mate while the captain was, well, hell, where was Bush?

    It is really a mistake to let the people who got us into this mess, try to get us out. Best to put together some First Stringers and spend the time to do it right rather than tossing a trillion dollars (which we don’t have) at it and hoping.

  101. #102 John C. Randolph
    September 22, 2008

    Raven,

    Paulson works for the financial industry. His stint as the treasury secretary is a brief diversion in his career. His actions make far more sense when you realize that his interest is in helping his colleagues, not the suckers who are holding dollars.

    -jcr

  102. #103 Scott from Oregon
    September 22, 2008

    “Millions of people saw this coming years ago. Tens of millions saw it coming months ago. Paulson didn’t even figure it out until wednesday when 1 major bank a day was going BK. So he cobbles a plan together in a few days that supposedly will prevent the second Great Depression…”

    Exactly. I have no idea what happens up the chain from the housing bubble, but after living in Tokyo while they inflated their housing and then watching it pop later on, our housing bubble was as obvious as Dolly Parton’s, ummmm… false eyelashes.

    Paulson and Bernanke and just about everyone in Washington minus a few, kept denying there was a bubble and are still denying that housing is over-inflated by double in some places.

    Open up the federal reserve and look inside. Put their faces on posters and take a hard look at them while you walk away from your over-inflated condo…

    The curtain is drawn back folks. The Wizard is just a goofy guy…

  103. #104 raven
    September 22, 2008

    Paulson works for the financial industry. His stint as the treasury secretary is a brief diversion in his career. His actions make far more sense when you realize that his interest is in helping his colleagues, not the suckers who are holding dollars.

    Yeah, I know. Goldman Sachs, one of two WS big firms left standing. As many have pointed out, he didn’t show up until 3 had imploded and GS and Morgan were next in line.

    I know where his interests and personal money lie. But he has bosses to, ultimately the voters/taxpayers. His office is supposed to be a service to the people, not a position to distribute billions to his buddies on WS.

    If the USA has really gotten so far into crony capitalism and economic fascism, we will probably go down. And deserve it. The UK, Rome, the Soviets, a long list of former empires have come and gone.

    I’m always rattling on about Death Cults destroying the USA and heading on back to the Dark Ages. Oops, maybe I got that right. Unfortunately, I’m on the boat too and can’t easily get off.

  104. #105 Anne
    September 22, 2008

    The problem with this ponzi scheme is that we have a debt-based economy. So this money is all being “created” based on the premise that the US economy will continue to grow in such a way as to pay back the loan with interest.

    That is not going to happen in my lifetime. Housing prices are not going to recover. The entire economy has been fueled by the housing bubble, cheap home equity loans, and cheap oil. Now we have a burst bubble, no equity, and rising oil prices (overall, not just this week).

    What seems even weirder is the idea that we are lending money to foreign countries to offset this current crisis, while at the same time we owe foreign countries money. I’m no economist, but this seems like a circle jerk to me…without the happy ending.

  105. #106 John C. Randolph
    September 22, 2008

    . But he has bosses to, ultimately the voters/taxpayers.

    Well, not really. Yeah, the president can fire him, and the voters can pick someone who will can him next year, but as far as accountability goes he has nothing to lose if he fucks us over some more.

    Of course, it goes without saying that he’s operating light-years outside of what his office should be doing, which is to manage the finances of the federal government. What he’s asked for is basically to become the financial dictator of the country, with no recourse to the courts.

    -jcr

  106. #107 John C. Randolph
    September 22, 2008

    The entire economy has been fueled by the housing bubble, cheap home equity loans, and cheap oil.

    The housing bubble doesn’t fuel the economy, it drains it by siphoning off productivity into construction that would otherwise go into producing other goods and services. The inflation flowing into the market through the mortgage loans caused malinvestment (ie, building more houses than we need), and that’s what has to be corrected.

    This could all be over in a year or two, if the congress had the guts to let the liquidation happen. One upside to liquidation is that those who kept their powder dry and have savings to spend would get the change to buy a house for a very good price. I wouldn’t mind buying a house myself, but I’m sure not going to do it until the prices have come down at least another 30% from where they are now.

    -jcr

  107. #108 Scott from Oregon
    September 22, 2008

    “The housing bubble doesn’t fuel the economy, it drains it by siphoning off productivity into construction that would otherwise go into producing other goods and services. The inflation flowing into the market through the mortgage loans caused malinvestment (ie, building more houses than we need), and that’s what has to be corrected.”\

    Ummm, it indeed fueled the ecomomy, but it did it as a false economy. All those folks who bought cars on home equity loans… Went out to dinner. Ran up their credit cards and then refinanced… All those home improvement shows and the great Home Depot rise to power…

    Without that mania, we had???

    It absolutely fueled the last eight years.

  108. #109 Emmet Caulfield
    September 22, 2008

    There’s a similar situation brewing in Ireland. A long-lived property bubble has burst and the banks, like many all over the world, are heavily invested in the US sub-prime mortgage market, albeit indirectly. They followed grossly irresponsible lending practices for many years, and are now reaping the whirlwhind. The run on the banks is so bad that the government has outlawed short selling of bank stock.

    The next step is a government bailout like this one. It’s only a matter of time.

    I saw the bubble for what it was and stayed out of the property market. Now the banks, who made obscene profits for years, and the members of the public who took out ridiculously large mortgages, to buy sheds at palace prices, are going to be bailed out by the government at the expense of taxpayers like me who were responsible and perspicacious.

  109. #110 Craig
    September 22, 2008

    To follow up on #25′s request for poll Pharyngulation:

    The site of Aftonbladet is: http://www.aftonbladet.se/

    The poll is below the article titled “Tvingades fly från spöken” (Forced to flee from ghosts)

    The poll question is “Tror du på spöken?” (Do you believe in ghosts?)

    Ja = Yes
    Kanske = Maybe
    Nej = No

    Currently the results are:

    Ja (44.7 %)
    Kanske (19.1 %)
    Nej (36.2 %)

    with 26166 respondents.

  110. #111 foxfire
    September 22, 2008

    First of all @ #87 moses wrt #79 jcr: what do you *not* understand about trying to make a point? And how could you possibly “spin” # 79 into that diatribe. I second jcr’s #89.

    Moving on. @ #96 freelunch and # 97 jcr:

    With respect to the FASB thing, I’m wondering how these financial institutions could *not know* what their underlying assets are worth. For example: Bought the house at “X”$ The current value is “Y”. If X is>than Y hen I move later. I know this is simplistic, but can’t one just present worth a future value without the insanity of a *not* Free Market(jcr)?

    The thing that clued me in (actually clued my husband in, but he doesn’t do blogs)is when we tried to pay down our mortgage bigtime about 3 years ago and the bank couldn’t find it. We ended up having to pay the old (higher) interest rate for a month until the bank figured out where it (our morgage)was. When we pay this sucker off, the title company *will* be in the room.

    @raven #101: your point is well taken:

    And why are high house prices good. So everyone can take out Home Equity Loans and spend it while house prices keep going up. This is perpetual motion machine economics and it is what got us into this mess.

    Same kinda shit that leads humans to think that their tribe can “win” by out breeding the other tribe. Henseforth the devotion to breeding (Birth Control = Evil).

    And what do I know – not much and caring about the future, anyway.

  111. #112 John C. Randolph
    September 22, 2008

    Foxfire,

    The tricky thing about valuing assets is that you don’t really know for sure what something’s worth until you sell it. Most businesses will value their inventory at their cost, not at the price that they’re hoping to get when they sell it.

    If you want to price a security like a mortgage note, the value depends on many things, not the least of which is the level of risk. In a market where the price of real estate is rapidly falling, and borrowers who had been making their payments can suddenly go into default, it’s really hard to know what those assets are worth. The way to find out is to sell them at auction and see what you get.

    -jcr

  112. #113 Emmet Caulfield
    September 22, 2008

    Anders @#25, Craig @#110

    Visst har jag röstat “nej”.

    Disappointing result for a poll in Sweden, regarded as one of the least woo-infested countries in the world, but Aftonbladet is a tabloid rag. I wonder what the result would be if Dagens Nyheter ran the same poll?

  113. #114 Nick Gotts
    September 22, 2008

    As an American taxpayer, I’m glad that my government now owns a majority share of AIG. Manchester United is a pretty good futbol team. The Cheerful Nihilist

    Well, it has become traditional for England’s best football teams to be owned by corrupt foreign billionaires, so Paulson’s simply an addition to their ranks!

  114. #115 Nick Gotts
    September 22, 2008

    As long as we have the Federal Reserve, we will continue to have a series of bubbles, crises, and bailouts – jcr

    Bubbles and crises are a fundamental feature of capitalism. Tulipomania, 1636-7, is generally reckoned the first. The term “bubble” comes from the “South Sea Bubble” of 1720. You “libertarians” are so parochial.

  115. #116 Nick Gotts
    September 22, 2008

    Well it depends on you and everyone else here. Call you reps and tell them no blank check. Strict conditions; the public get something for what it pays for, and no CEO’s of companies who accept part of the bail out can earn big bucks. – sailor@83, replying to a comment of mine.

    Well, I agree with the sentiment of course, but the MP for Aberdeen South (Scotland) unfortunately doesn’t get a vote on this issue!

  116. #117 Blackblade
    September 22, 2008

    As someone, I can’t remember who, wrote a long, long time ago …

    If you owe the bank $2,000 more than you have, you have a problem. If you owe the bank $20,000,000 more than you have then THEY have a problem.

    Now, the banks owe each other some insane, incalculable amount and WE ALL have a problem.

  117. #118 Peter Ashby
    September 22, 2008

    UncleFroggy the end for you comes when OPEC comes good on its threat to sell oil in Euros instead of dollars. The dollar then goes into freefall and the Chinese sell all your debt to whoever will buy further making the dollar resemble Zimbabwe’s currency. Will Texas or California be the first to flee the Union do you think?

  118. #119 negentropyeater
    September 22, 2008

    I tell you, this is quite the most formidable blackmail of the century. Bush, Paulsen and Bernanke are threatening the whole world of a complete chaos if congress doesn’t approve their rescue plan.
    But actually, the $700 billion (or a fraction of that) should come from the pockets of the shareholders and management of the same financial institutions who over the last decades have accrued insane profits and dividends by pumping money in order to artificially grow the economy beyond its capacity.
    Instead, they are proposing to take over toxic waste from those same institutions at a higher price than what it’s worth and pump new money to pay for it, which will mean higher inflation, lower Dollar, and losses for the treasury.
    Unbelievable !

  119. #120 Ompompanoosuc
    September 22, 2008

    Thought I would throw this idea out there….
    Instead of giving a trillion dollars that we don’t have as a corporate bailout, divide it up amongst households making less than $x (this number should be more than my household income ;-)) and let it trickle UP.

    Wouldn’t this approach strengthen the remaining financial institutions instead of propping up the ones that failed?

  120. #121 raven
    September 22, 2008

    Not to be overwhelmingly cheerful this morning but things long term aren’t looking so good for the USA.

    1. We used to invent and manufacture a lot of goods, cars, computers, trains and consumer goods etc.. That went overseas to cheaper labor.

    2. So then we were a service economy. A lot of that went overseas as well as services aren’t extremely fungible (transferable) but more than we thought.

    3. No big deal. We will just be the bankers and financial services to the world, a gigantic Switzerland. Well, that worked for a while and then it smashed into a brick wall.

    What is left is the largest science tech sector in the world, a powerful military, and an efficient large agriculture sector.
    The fundies are attacking the science part with everything they have. Which fortunately so far is just a bunch of lies. But Palin is one of them and thinks the world is 6,000 years old and routinely censors science that is inconvenient for her. Someone who thinks god is going to show up in her lifetime and angels and demons roam the world has no interest in science and she knows none and cares less.

    The military is based on a strong economy (logistics) and a hi tech edge. It is bled out and exhausted but probably not irrepairably damaged. Agriculture is OK.

    I guess we can end up as the mercenaries and breadbasket to the world or something.

    The culture wars and religious fanatics are a sideshow. Without a well functioning economy we are in big trouble. It is all amusing for the fundies to run around trying to sneak mythology into kids science classes and take their condoms away. Without a well functioning economy, they will end up broke, hungry, and homeless. Economics and competent political leadership is the real big story.

  121. #122 foxfire
    September 22, 2008

    @ raven #121: I take back everything I said in disagreement. Hey, good morning…the Fed just made Goldman Sacks and Morgan Stanley *real* banks. So now they can go buy up Mayberry….

    Cognitive dissonance *sucks*. Well, I won’t be running right out to vote Sandra Dee into the White House.

  122. #123 MikeM
    September 22, 2008

    Sarah Palin reminds me a lot of Clarence Thomas. This is exactly what the GOP has been doing since the late 1980s: They bring in someone young who they are 100% certain is very conservative, but who doesn’t really have a track-record yet. That way, when it comes time for approval (from the voters, from the Senate, and so forth), those voting can’t really oppose on the basis of track records.

    That has gotten us people like Roberts, Thomas and Scalia; Brown; Rice.

    Sarah Palin fits right in. We know JUST how she’s going to vote, but we can’t really prove it.

    People don’t care about the “Rape Kit” scandal, or “troopergate”, or her views on abortion. They just know she’s tough and pretty and talks like a character in a Coen Brothers movie, and by golly, she’s funny. And she’s a mom! Wow! Don’t you dare attack her, you sexist bastard! I bet you’re racist, too!

    Blech.

    If we elect McCain, we’ll get just what we deserve.

    I’m somewhat tempered in my views because I understand that the next president is extremely screwed. I want Obama to win, because I think he’s way more qualified than McCain… But what president can save this country now?

    I’ve read a theory that the GOP does not want to win in 2008, and the more I think about it, the more sense it makes.

    On a more practical level, okay, we just socialized risk. What are we going to say if, say, GM, Ford and Chrysler all get together on the same weekend and tell Congress, “If we don’t get a bailout in the next 3 weeks, we’ll all go under at the same time. Alternatively, we’ve all had offers from Chinese companies for buyouts. To preserve this industry, we will accept these buyouts, but we’d prefer to remain domestic. Can you give us a $200B bailout?”

    What would Congress do?

    What if it was Chevron pulling the same tactic?

    Why doesn’t Main Street deserve the same bailout?

    We look way, way more like China today than we did 1 year ago. Mr Bush may have “torn down that wall”, in a manner of speaking.

    This world is vastly different today than it was in January 2001. I will never vote for McCain, or Sarah Thomas (intentional error here).

  123. #124 Longtime Lurker
    September 22, 2008

    O, Scott, your hero worship leads you to failure.

    WHO in Washington stood up and declared this a bad thing? Ron Paul. Who else? Noone.

    In 1999, Byron Dorgan said, “In ten years this could lead to the failure of the banking industry and lead to massive future taxpayer bailouts”

    http://www.mlive.com/forums/grandrapids/index.ssfartid=130593

    Do you really think libertarianism is the answer to this meltdown? Foolish, naive ideologue… I bet you think you’re a sophisticated freethinker.

    Forget gold, I am putting my money in rice!

  124. #125 windy
    September 22, 2008

    @119:

    I tell you, this is quite the most formidable blackmail of the century.

    Actually, these bailouts have happened in a lot of developed countries over the last couple of decades. Most of them found no other way than to pay up, but apparently there were some important differences:

    Sweden eventually shelled out 4 percent of its gross domestic product, or 65 billion krona, to rescue ailing banks. That is slightly less, in terms of the national economy, than the minimum of $700 billion, or about 5 percent of GDP, the Bush administration estimates a similar move will cost in the United States. But enough was recouped through sales of distressed assets and bank shares that were sold later, that the cost ended up being less than 2 percent of GDP.

    @123:

    What are we going to say if, say, GM, Ford and Chrysler all get together on the same weekend and tell Congress, “If we don’t get a bailout in the next 3 weeks, we’ll all go under at the same time. Alternatively, we’ve all had offers from Chinese companies for buyouts. To preserve this industry, we will accept these buyouts, but we’d prefer to remain domestic. Can you give us a $200B bailout?”

    As it happens they are “only” asking for a $50 billion loan.

  125. #126 Scott from Oregon
    September 22, 2008

    “O, Scott, your hero worship leads you to failure”.

    Ummmm, I own my home, I have savings tucked away and I consider myself a rather happy and healthy person who has led a rather good life. I do not worship Ron Paul at all. I just give kudos where kudos is due. I give kudos to Dennis Kucinich for standing up and asking for impeachment. When people do what I think is th eright thing to do, I praise them for it.

    “Do you really think libertarianism is the answer to this meltdown?”

    Ummm. no. I think a smaller federal government, a restructuring of the money supply, a giant contraction in overseas military adventurism and a return to the basic Bill of Rights are all prudent and desirable things.

    I don’t like local libertarianism but I think a shift in that direction on the federal stage would help out immensely.

  126. #127 Randy Stimpson
    September 22, 2008

    Ompompanoosuc @ 120 said

    Instead of giving a trillion dollars that we don’t have as a corporate bailout, divide it up amongst households making less than $x (this number should be more than my household income ;-)) and let it trickle UP.

    I could go for some trickle up. I am willing to bet that almost everyone who can’t pay their mortgages also has a pile of credit card debt and that they are paying like 29.9% interest on that borrowed money. That’s obscene. Credit card companies should only be allowed to charge a maximum of 12% interest. They should not be allowed to raise the interest rate on existing debt. And if there is debt at more than one rate on the card the debt should be rotated out in the order that it was acquired, rather than the lowest interest rate debt first.

    Putting a 12% cap on credit card debt would put hundreds of dollars a month in the hands of many struggling homes owners that could keep them from going into foreclosure.

    If there is one thing that Bush is really good at it’s taking money from oridnary people and passing it to corporations. I think we need some turn about.

  127. #128 windy
    September 22, 2008

    Glenn Greenwald hereby gets a link. He makes the scaremongering link too.

    Greenwald writes:

    “Other countries are debating it. The headline in the largest Brazilian newspaper this week was: “Capitalist Socialism??” and articles all week have questioned — with alarm — whether what the U.S. Government did has just radically and permanently altered the world economic system and ushered in some perverse form of “socialism” where industries are nationalized and massive debt imposed on workers in order to protect the wealthiest. If Latin America is shocked at the degree of nationalization and government-mandated transfer of wealth, that is a pretty compelling reflection of how extreme — unprecedented — it
    all is.”

    I don’t get the “unprecedented”, since like I said above, this wouldn’t be the first government bailouts of banks.

  128. #129 Ichthyic
    September 22, 2008

    I could go for some trickle up.

    sounds like a refreshing beverage, indeed.

    caffeinated?

  129. #130 Ichthyic
    September 22, 2008

    @Scott…

    of all the inane things you post, I could excuse it all (hell, it’s easy enough to ignore at this point) if you:

    SIMPLY STOP PUTTING “UMMMMM” into your rants.

    Holy crap, do you even have the slightest idea how annoying that is?

    Here’s a tip:

    never consider any career that involves public speaking on your part.

    seriously.

  130. #131 Ichthyic
    September 22, 2008

    some important differences

    not AFAICT.

    after the Savings and Loan scandals in the late 80′s, the feds set up a “corporation” to sell the “bad” assets purchased from those institutions.

    anyone recall what the name of the “corporation” was?

    Now, for those that recall that, if you look at the things that lead to the S and L scandal, many of the same egregious “errors” also lead to the current fiscal mess.

    hmm, wasn’t that bailout in the 80′s enough to teach the average american taxpayer about the foibles of deregulating lending institutions in this country?

    obviously not. It all sounded so great on paper…

    now we all get to pay, AGAIN, for stupidity and greed.

    wheee! privatized profits and socialized risk!

    I do hope nobody wonders at this point why I’m getting the fuck outta dodge, as if there weren’t a thousand other reasons.

    now, is there someone who knows anything about refinancing a home mortgage in the current climate?

  131. #132 Kanaio
    September 23, 2008

    Isn’t greed one of the seven deadly sins? If the churches would spend less time on Creationism and more time on the virtue of temperance they might do some good. A few years ago I was at a Unitarian service and the minister went on extolling the idea of abundant supply and amassing huge wealth, with no mention of sustainability, habitat protection, biodiversity, carrying capacity, or depleting natural resources. All of which seemed at odds with this idea of abundant supply. I shot her a skeptical look, which registered my objection, but failed to get her to rethink what was coming out of her mouth. I regret not speaking to her afterwards.

    Home ownership was once one of the foundations that supported community cohesion. It has now become a commodity and reflects our current social issues and values. Now amid the urban sprawl the average person, who is not speculating and just wants a place to live, cannot afford a home without taking on such huge debt that default is inevitable in any kind of downturn of the economy. Where I live, too many locals cannot even afford to rent and have taken to the beaches only to be kicked off. Someone said the Feds want to keep the home prices up? #$*&^%%$ We have developers packaging ridiculously expensive luxury homes as green homes. I kid you not. Complete with culturally sensitive labeling. If these homes are green, I’m a blue Hawaiian.

  132. #133 negentropyeater
    September 23, 2008

    anyone recall what the name of the “corporation” was?

    RTC : Resolution Trust Corporation

  133. #134 negentropyeater
    September 23, 2008

    Ichthyic,

    Remember that in the Savings and Loan crisis, the government had to bail out those institutions because the deposits were federally insured. But in this case the government does not have to bail out the debtholders of Bear Sterns, AIG, or any of the other financial institutions that will benefit from the new $700bill Paulson RTC.

  134. #135 windy
    September 23, 2008
    some important differences

    not AFAICT.

    Did you read the article I linked to?? There was one difference right in the bit I quoted. Sweden did not let the banks off the hook and the government was able to retrieve some of the bailout money later. This doesn’t seem to be a part of the current US plan.

  135. #136 Nick Gotts
    September 23, 2008

    windy@135,
    According to a story on the BBC website (
    http://news.bbc.co.uk/2/hi/americas/7630802.stm), there are some signs that Congress may try to alter the bailout:

    “Among the proposals circulating on Capitol Hill, the one gaining most political traction is a limitation on executive bonuses.

    Some Democrats also want the government to take an ownership stake in any firm that gets a bail-out”.

  136. #137 amk
    September 23, 2008

    Chris Dodd has an alternate plan, see here and here. Both via Greenwald again.

  137. #138 David Marjanovi?, OM
    September 23, 2008

    What I don’t get is why the Fed, the national bank, is a private corporation, but that’s another topic…

    As most of you claim to be versed in Darwin’s notion of evolution, I am surprised that no one as of yet has brought up Marx’s similar notion of economic evolution, i.e., that capitalism will eventually evolve into socialism.

    “Similar”? Marx’s brand of woo is development, ontogeny, not evolution. That’s only called “evolution” when referring to Pokémon.

    Please!

  138. #139 negentropyeater
    September 23, 2008

    Anyway, it looks like opposition to the $700 billion plan proposed by Treasury Secretary Henry Paulson September 19 has coalesced quickly, from both ends of the political spectrum. I think there are going to be MAJOR modifications to the plan, IF it goes ahead before the end of this week. In any case, government should force bank capital up, not just socialize the bad loans.

    BTW did anyone notice, there is a certain analogy with the Iraq war, this kind of tactic is becoming a habit for the Bush administration :
    they want us to sign up for a financial war of choice, ie spend hundreds of billions on the theory that preemption will avert the mass destruction of banks.

  139. #140 Ichthyic
    September 23, 2008

    I think there are going to be MAJOR modifications to the plan, IF it goes ahead before the end of this week.

    I’m of mixed feelings about this; on the one hand, this REALLY needs some work, and I applaud efforts to keep this from being railroaded through under the “panic” flag.

    OTOH, the delay is interfering with my ability to refinance a particular home mortgage, and is thereby delaying my exodus from this accursed land.

  140. #141 John C. Randolph
    September 23, 2008

    Chris Dodd has an alternate plan,

    Chris Dodd’s plan is still a bailout, and it would still be funded by massive inflation.

    The right thing to do here is clear: real estate and mortgage notes are priced far higher than they’re worth, and any intervention to try to prop those prices up will only prolong and worsen the crash. Worse than that, by protecting banks and borrowers from losses, you give them a very strong incentive to take risks in the future.

    -jcr

  141. #142 John C. Randolph
    September 23, 2008

    Remember that in the Savings and Loan crisis, the government had to bail out those institutions because the deposits were federally insured

    Not exactly. The FDIC had to pay back the depositors, but there was no legal obligation to keep the institutions afloat. Whether keeping the insolvent S&Ls operating made sense from a practical standpoint is still much debated. Personally, I’d have let the S&Ls go out of business.

    Insulating businesses (and their investors) from losses is bad for the market, just like an addiction to pain killers. Pain serves a purpose: it’s your nervous system saying “don’t do that, it’s bad for you.” Losses serve the same purpose in the market. They’re a vital part of the information flow.

    -jcr

  142. #143 negentropyeater
    September 24, 2008

    jcr,

    strange that this time I have to agree with you ;-)

  143. #144 John C. Randolph
    September 24, 2008

    What I don’t get is why the Fed, the national bank, is a private corporation,

    Because the bankers were very clever, very patient, and devious as hell. If you want to read up on the history of the Fed, and how it was created without drawing the attention of the press or any public debate, there’s a book by G. Edward Griffin about it:

    http://www.amazon.com/Creature-Jekyll-Island-Federal-Reserve/dp/0912986212

    If you want to get a quick synopsis of what the Fed is, who owns it, and how it inflates the currency, this video covers it in about 45 minutes:

    http://video.google.com/videoplay?docid=6507136891691870450

    -jcr

  144. #145 Nick Gotts
    September 24, 2008

    Interesting poll from Rassmussen on the Paulson bailout plan as currently formulated:

    http://www.rasmussenreports.com/public_content/business/general_business/only_28_support_federal_bailout_plan

    Of those who have a definite opinion, there’s a clear majority against (37% to 28%) – but many still undecided. Of particular note, the divide between “investors” (those owning $5000 or more in stocks/shares/bonds, making up 62% of those interviewed) who are evenly divided, and the rest, who are strongly opposed. In other words, it’s in large part a class issue. I’d be surprised if the correlation between investment income and support for Paulson didn’t hold within the two groups were broken down more finely, but there’s nothing to say that in the report.

  145. #146 negentropyeater
    September 24, 2008

    Obviously, the more money you’ve got tied up in the market, the more favourable you are going to be to the bailout plan. Did you see how the Dow was plunging last Friday before they anounced this plan ?
    Guess what will happen if they have to pull it off the table, the Dow will go way below 10,000 points, if not 9,000 in a few days…

    So in the end, this plan is just there to artificially maintain the Dow above a certain level, but what for ? Why not just let it slide down. Let those who should lose, lose. And then start from a clean page and a more realistic basis, with proper regulation and the right business models.

    I just don’t get it, what are they trying to save ?

  146. #147 Nick Gotts
    September 24, 2008

    negentropyeater,
    There’s (at least) two questions here:
    1) What are “they” trying to save.
    2) What will happen if they just say “OK, no rescue plan, you [the banks] are on your own”.

    Now the answer to (1) depends to some extent on who you mean by “they”, but so far as all the influential politicians, officials, bankers etc. are concerned, a general answer is: the current status quo and their own position therein. I’d think that’s pretty much common ground here. As for (2), you, and jcr, both seem convinced (correct me if I’m wrong) the answer is some immediate pain – particularly for those primarily responsible – then a brighter tomorrow. If I agreed with that, I’d agree with your opposition to any rescue plan. Trouble is, I don’t think the pain would be restricted to those deserving it. If credit suddenly becomes much harder to get, this will hit non-financial firms: most sizeable ones rely on regularly rolling over loans. They will start laying people off and reducing supply orders, many of those laid off will become unable to pay their mortgages or other debts, more banks and other firms will go down, and there you have a 30s-style slump or worse – and not just in the USA. Now (anyone), why wouldn’t this happen? I’m genuinely eager to be persuaded – I hate these scumbag bankers like poison.

  147. #148 negentropyeater
    September 24, 2008

    Nick,

    the real question is whether it’s preferable that this happens suddenly and enables a new deal and without favoritism, or over a long and protracted depression with the dangers of cronysm added to it. Because be certain of one thing, it’ll be either one or the other.

  148. #149 Nick Gotts
    September 24, 2008

    negentropyeater,
    Why do you consider it certain?

  149. #150 SC
    September 24, 2008

    Naomi Klein’s take on today’s Democracy Now!:

    http://www.democracynow.org/2008/9/24/naomi_klein_now_is_the_time

  150. #151 negentropyeater
    September 24, 2008

    Because I don’t see how it can be avoided. There’s just no solution. The debt problem is simply too huge, growth stimulation (monetary and consumption) has come to an end, plus we have the boomers all in retirement now, we have an energy crisis, carbon emissions need to be reduced, hundreds of millions in China and India entering into the development curve…
    It’s just going nowhere, it’s the conjunction of factors that make this moment so precious. The way I’m thinking, it’s like, it’s best to let the whole thing take its course naturally, without trying to artificially delay things.
    Out of this crisis can surge a great deal of creativity to fundamentally rethink the way we organize our society. We cannot continue anymore with this notion of growing the economy by pumping money and forcing consumers to consume always more and more on credit. That model is dead. Injecting another $700 billion, just gets us nowhere.

    I mean, look at what you are saying, “if credit suddenly becomes harder to get…”, but you do realise, don’t you, that the ease with which it has been to get credit has been what has gotten us in this mess in the first place ?

  151. #152 Nick Gotts
    September 24, 2008

    negentropyeater,
    Yes, I do realise the ease of credit is a major cause of the mess – but if you’re a doctor faced with a barbiturate addict in the throes of withdrawal, you give them an instant injection of their drug, even though it’s the root cause of their problems, because if you don’t they will probably die. You may be right that there’s no way to avoid a disastrous crash, but you may be wrong (the fact that you don’t see how it can be avoided is not conclusive) – and the plausible consequences of such a crash are horrendous, up to and including global nuclear war. I think we have a moral duty to try to avoid one, unless it can be shown that this is not possible.

  152. #153 negentropyeater
    September 24, 2008

    Nick,

    and the plausible consequences of such a crash are horrendous, up to and including global nuclear war.

    As I wrote in my comment #139, these are the known tactics of the Bush administration, same as with the Iraq war, or any preemptive war (Iran ?) in order to push their choice they promiss huge catastrophes and devastations if we do not follow their recommendations, but there’s just no evidence that the vast majority of Americans will be better off by following their recommendations than not. Bank shareholders certainly, but that’s not the vast majority of Americans, or is it ?

  153. #154 Nick Gotts
    September 24, 2008

    neg,
    I’m not relying on what the Bush regime says – I’m looking at what happened last time.

  154. #155 Nick Gotts
    September 24, 2008

    neg,
    Additionally, you’re saying a 30s-style slump is inevitable, but that the Bushites are crying wolf. Well I suppose it’s possible that it’s inevitable but the Bushites don’t realise this – is that what you’re saying?

  155. #156 negentropyeater
    September 24, 2008

    I’m saying that a severe economic recession is inevitable, but its socio-economic and political consequences will not necessarily be the same as with the great depression.

    The bailout plan is more of the same, it postpones any attempt at solving fundamentally the credit problem and actually makes it worse, and it’s again a net money transfer from the working classes to the owners of capital.

    Crickey, think about it, we’re talking of about $10,000 per household ! You would think that the average American would see the fruits of that investment, but the way they are planning to inject that money in the system, within a few years time, 90% of it will have been absorbed by the 5% richest in the country. This is probably the most unfair program of overt wealth distribution I have ever witnessed.

  156. #157 Ichthyic
    September 24, 2008

    So in the end, this plan is just there to artificially maintain the Dow

    In case it hasn’t been mentioned yet, the Dow is only what, 30 companies?

    It’s an archaic index that’s really rather irrelevant at this point. There are many indices that are far more useful:

    http://quotes.nasdaq.com/aspx/marketindices.aspx

    OTOH, I’m sure you really were referring to the market at large?

    if so…

    /pedant

  157. #158 negentropyeater
    September 24, 2008

    Ichthyic,

    It’s an archaic index that’s really rather irrelevant at this point.

    irrelevant isn’t the right term.
    The correlation between the DJIA, allthough it includes only 30 stocks, and the index representing the total real market capitalization of the NYSE (ie “the market”) is actually very close to 1. It so happens that the portfolio in the DJIA is a fair enough representation of the overall status of the American private corporate sector.
    So it’s not the perfect index, there are better ones, but it’s far from being irrelevant. And an index is like a language, what counts is whether it’s used. Everybody in the world who is investing money knows that the DJIA is hovering around 11,000 points right now. The other ones on that table you linked to, well, it’s like swahili.

  158. #159 Nick Gotts
    September 24, 2008

    neg,

    First, I thought we’d shifted to whether any “rescue package” would be a good idea, rather than the Paulson/Bernanke scam specifically – e.g. Dodd’s plan, or the idea mentioned upthread of making banks in trouble issue more shares which the government would buy (at a price it set) if no-one else wanted them.

    Second, no, the socio-political consequences won’t necessarily be the same as those of the Great Depression, and a crash could open up big opportunities – but do you really want to risk it? This is millions, possibly billions of lives we’re talking about. Whatever happens now, this is an opportunity to smash the neocon and “free market” ideologies, which will be enormously discredited – look at the total disarray in the Rethuglican Party for a start. If Obama keeps his head (literally and metaphorically), he’ll win – and have a healthy majority in both houses. He’ll also be forced by circumstances to take a radical line. If there’s too bad a crash now, however, the chances are he’ll be in for one term and then the Rethuglicans will be back.

    (Of course, since neither you nor I nor anyone commenting here has the slightest influence on government or Congress, we could, for now, just sit back and enjoy watching Bush and his cronies squirm!)

  159. #160 amk
    September 25, 2008

    Sarah Palin on the financial bailout needs to be linked.

    I do believe the GOP has found a politician even more stupid than Dubya!

    Some of the comments from S,N!:

    “You know, I don’t think this woman could pass a Turing test, much less a debate. She literally sounds like a Markov text generator. Perhaps that’s okay for a VP, and some day we will elect Mark F Cheney.”

    “I swear to God this output would have gotten you a D- if you were asked to write a natural language interface in a 1980′s comp. science class.”

  160. #161 Ichthyic
    September 25, 2008

    Sarah Palin on the financial bailout needs to be linked.

    best comment:

    moose lips sink ships

    LOL

  161. #162 Ichthyic
    September 25, 2008

    . It so happens that the portfolio in the DJIA is a fair enough representation of the overall status of the American private corporate sector.

    that must be why they just recently decided to add their first major food corporation to it, right?

    frankly, I don’t find your argument very convincing.

    the Wilshire 5000 has been considered a much more important index for quite some time.

  162. #163 Ichthyic
    September 25, 2008

    …So it’s not the perfect index [gross understatement], there are better ones, but it’s far from being irrelevant.

    in the sense of it being an accurate reflection of the market, it IS irrelevant, and that’s not just my opinion, but the opinion of every market professional I’ve ever heard speak on the issue in the last 10 years.

    OTOH, it’s still a valuable marketing tool, so one could say it retains its relevancy in that sense.

    that’s about it, AFICT.

    are you saying you actually rely on the dow to decide which stocks you will trade and when?

    fascinating.

    Even when I first started trading online years ago, I was using NASDAQ(s) and the S&P 500, and I have such a small portfolio that it would hardly seem to matter really.

    It simply doesn’t make sense to utilize an index that relies on such a small subsample of corporations, and is so far behind the times on which corporations actually reflect important bits of the economy. hence, why i mentioned that they just (very recently) finally added a major food corporation to it.

    Do you see some reason that the Dow is still a valuable index in comparison to any of the much larger ones, aside from marketing considerations?

    And an index is like a language, what counts is whether it’s used.

    and if that language, when translated, is found to contain misused words?

    again, if you want to use that analogy, there are far more “accurate” languages. AFAICT, this particular argument breaks down to an argumentum ad populum.

  163. #164 Ichthyic
    September 25, 2008

    …thinking about it more, it’s not one of those things I’m particularly interested in debating, given how small my portfolio is.
    :P

  164. #165 bullet
    September 26, 2008

    P.Z.: Maybe you should look at Warren Buffet and Steve Forbes and what they’re saying before taking financial lessons from a blogger.

    We wouldn’t accept that from creationists, and this is no different. Listen to the guys who know what the fuck they’re talking about.