Readers Dean and Dwight wrote to tell me that CNBC is reporting that Senator Shelby (R-Alabama, and the ranking member of the Senate Banking Committed) came out of the White House waving the University of Chicago organized letter from economists objecting to the plan and said there was no agreement.
Given the apparent momentum to have this wrapped up by the end of the weekend, unless he is ready to filibuster, I think this is just noise, but stay tuned.
Update 5:50 PM. My initial cynical take may have been wrong. From MarketWatch (hat tip reader fredw):
President Bush was unable to seal a deal between Republicans and Democrats on his $700 billion mortgage rescue plan, officials said. “It was not a negotiating session,” said House Democratic Leader Steny Hoyer. The two presidential candidates, Sen. John McCain and Sen. Barak Obama, attended the meeting but left the White House without talking to reporters. A revolt among House Republicans appears to have emerged as the key stumbling block. Hoyer said that some plans have recently been put on the table that even Treasury Secretary Henry Paulson hasn’t seen. “On our side, there is a consensus on how to go forward, we’ll have to see if that consensus can grow,” Hoyer said. It was up to Bush to talk to Republicans, he added.
The House Republicans are apparently unwilling to risk the wrath of voters for the greater good of the financial services industry.
Update 8:10 PM: Dodd is trying to spin the House Republican revolt as positioning on behalf of McCain, as opposed concerns about the plan and fears of voter backlash. From the New York Times:
Looking tired and annoyed, Mr. Dodd complained that late complications were making the episode sound more like “a rescue plan for John McCain,” the Republican presidential candidate, than one for the country’s financial system.
It does no good, Mr. Dodd said, “to be distracted for two or three hours by political theater.”
The senator was apparently alluding to a growing revolt by conservative Republicans, and the fact that Senator McCain has not yet endorsed the plan, whose concept runs contrary to the policy positions he has taken for years.
Obama was more conciliatory:
Shortly afterward, Mr. Obama said in an interview on CNN that he was confident that a deal would be reached “eventually,” but he said, “I think there’s still some work that needs to be done….
The impression that much remains to be done was only reinforced by Mr. Dodd’s comments. After saying he still hoped for a deal, the senator said it was important to take “whatever time it takes” to arrive at a good arrangement, since the effects will be felt for “years and years to come.””
The account suggests that the deal broke down not over particulars, but over House Republican objections to the scale of the intervention.
Update 8:15 PM (hat tip Ed Harrison). Reuters gives more insight into why things broke down, and the charge that McCain was a spoiler may have some validity:
Democratic congressional leaders told party members on Thursday that a White House meeting to try to reach a deal on a financial market bailout package went badly, two Democrats said.
Rep. Brad Sherman, a California Democrat, told reporters after a party caucus meeting that it looked like Republican presidential candidate John “McCain and the Republican caucus are blocking this bill.”
McCain announced on Wednesday he was suspending he presidential campaign to return to Washington to work on the deal. He participated in a meeting at the White House with Democratic rival Barack Obama and key administration and congressional players in the negotiations.
Sherman said Democratic lawmakers were told that dealbreakers for the White House include mortgage bankruptcy reform and limits on the pay of the executives of companies that would sell assets to the U.S. Treasury under the bailout proposals.
“Bankruptcy reform is a dealbreaker for the White House” and so are corporate executive pay limits, Sherman said. “On more than one occasion, the statement was made that if we put that in the bill, the president will not sign it,” he said.
Rep. Allen Boyd, a Florida Democrat, said McCain’s visit to the White House threw the negotiations over the bailout package into disarray.
“What’s he done? This did not help matters … it just makes it much more complicated,” Boyd said. “McCain has come in and tried to play the hero.”
I have been a huge opponent to this bill, but the notion that McCain would try to gamble with the financial system to score points stinks to high heaven. So the Fed will do some heroic interventions, probably including a rate cut (this was under consideration but has now probably moved to being a certainty) to counter the dashed expectations. If there is not a complete systemic collapse, McCain will claim to have been a hero even thought it was the House Republicans, not any move in the Senate, that was the main obstacle.
In Venezuela, they say that a politician is someone who will get in front of a mob and call it a parade.
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A Shelby fillibuster is our last hope. I have been emailing and faxing him daily.
what else is a filibuster for?
Or the Republicans have to stretch it out long enough for McCain to skip the debate and claim he brought everyone to the table.
it seems to be significant, a photo op press conference with all media, suddenly canceled after a half hour delay.
just speculating, but would not be surprised if the executive branch had tried to lever obama more than tolerable.
bodes well.
We’ve really entered the realm of high drama at this point…hoping Tyaresun is correct, but knowing there’s a good chance not.
Is it Shelby that wants a porky pig rider or it Paulson wanting non-accountability? You have to give them both credit for adding more chaos to this retardation, as money market solvency hangs in the balance!
The thing is, these 200 economists that have no clue; do they as a collective voice have a plan on the internet???
Who are these peoplefrom Chicago? Isn’t that where Obabmas economic dude is from?? Poloitics here??
Forget the heated debate over whether failed bankers should be forced to disgorge their bonuses. That’s chump change. The real problem with the plan, many economists argue, is that it attempts to be something that’s a contradiction in terms: a free-market bailout. By scooping up securities with no strings attached, it fails to give financial firms the right incentives to get healthy. “It may not refloat the system,” says Raghuram G. Rajan, a former chief economist of the International Monetary Fund who is a professor at the University of Chicago Graduate School of Business. Adds Rajan: “We should be putting more capital into the well-capitalized entities, not the people who made the biggest mistakes.”
****DC Area Protest for 9/27******
the folks at FedUpUSA are planning a protest:
http://www.tickerforum.org/cgi-t…-www? post=62255
UPDATE: Thursday 4:00 pm
OK, we have a verbal go ahead from the Capital Police. They have been most helpful in fast tracking the permit. I will have final approval in the AM, but make plans to be there.
Right now, I need anyone local to DC to get in touch with me to do a little planning.
Most importantly, please get the word out to any and all websites, blogs etc that we will be rallying in DC this Saturday on the West lawn. We have the area from 10:00am to 6:00 pm.
Even if the bill has already been voted up or down, we need to make our voices heard!
Where is Cox?
Haven’t seen him since Tuesday. Is Wall st holding him hostage?
Obama’s love of markets and his desire for “change” are not inherently incompatible. “The market has gotten out of balance,” he says, and it most certainly has. Many trace this profound imbalance back to the ideas of Milton Friedman, who launched a counterrevolution against the New Deal from his perch at the University of Chicago economics department. And here there are more problems, because Obama–who taught law at the University of Chicago for a decade–is thoroughly embedded in the mind-set known as the Chicago School.
He chose as his chief economic adviser Austan Goolsbee, a University of Chicago economist on the left side of a spectrum that stops at the center-right. Goolsbee, unlike his more Friedmanite colleagues, sees inequality as a problem. His primary solution, however, is more education–a line you can also get from Alan Greenspan. In their hometown, Goolsbee has been eager to link Obama to the Chicago School. “If you look at his platform, at his advisers, at his temperament, the guy’s got a healthy respect for markets,” he told Chicago magazine. “It’s in the ethos of the [University of Chicago], which is something different from saying he is laissez-faire.”
“There is no bipartisan deal at this time,” Boehner said in a statement. “There may be a deal among some Democrats, but House Republicans are not a part of it.”
That is key, because House Speaker Nancy Pelosi (D-Calif.) has said she won’t bring up the bill in the House unless a substantial number of Republicans, possibly a majority, agree to vote for it.
http://thehill.com/leading-the-news/no-deal-on-bailout-says-house-gop-2008-09-25.html
A filibuster would be a very slim probability given that the bill has a majority of the majority democrats and a minority of the republicans. Shelby as head of the banking committee could embolden those who favor more oversight and regulation to demand more concessions from Paulson.
I notice from this and other blogs that the current “solution” to the “problem” might be inadequate.
Well, i personally do believe most of the readers of this blog believe that there was a lack of funding during the 1929-crisis. As a matter of fact, your current chairman of the federal reserve has been known to advocate dropping of funds via helicopter in a “delivering funds to a crisis”
Now, is this 700 billion bailout a helicopter dropping? Yes, yes, it will not find the right, “honorable” recipients of the money.
But be as it might be, if the problem is leverage. Perhaps, just perhaps, 700 billion dollars could be the right path to wander upon.
Since once upon a time you where given a plastic card with magic powers, and after that, a loan was not a loan but “mere” equity. That ought to mean, one would only really need a silly way to give people money. Perhaps via a tax rebate? A large one, this only to keep the current system working :)
Filibuster only works if you have 41 senators on board. A group of 60 senators can vote for cloture and cut off the filibuster. So it’s not just up to Shelby.
This is Shelby’s moment, there is no second act. If all else fails he still has the courts.
Obama has a healthy respect for free markets? Are you kidding me? His website reads like a Soviet 7-year plan on EVERYTHING.
So he’s from Chicago – big deal. I lived there for 15 years. Yes, that Chicago – home of Mayor Daley and 50 of the most tax and spend corrupt aldermen in the nation.
Trust me – all they know is corruption, insider deals, and redistribution of wealth.
Take a look at the schools there and tell me they don’t have their heads way up their asses.
Curious?
The House has passed and sent to the Senate a major military bill that includes a pay raise for soldiers and money for the Iraq war.
Quick Senate passage and President Bush’s expected signature, are designed to protect lawmakers from election season charges that they do not support the troops. The $612 billion bill permits the Pentagon to give military personnel a 3.9 percent pay raise.
To win Bush’s signature instead of a veto, Congress dropped a ban on private interrogators at detention facilities and what amounted to congressional veto power over a security pact with Iraq.
“DaddieMac said…
A filibuster would be a very slim probability given that the bill has a majority of the majority democrats and a minority of the republicans. Shelby as head of the banking committee could embolden those who favour more oversight and regulation to demand more concessions from Paulson”
If it were not for the immanent election do you think that a majority of Democrats and a minority of Republicans would be in favour?
I don’t think so.
The Democrats would be beating the Republicans over the head with the soggy end on the arm they had just ripped from the Republican shoulder. They think they have a good chance of winning the election and don’t want to be seen as the party to stop a reasonable deal in the circumstances.
They also don’t know, just like the Republicans, just how bad the situation is. They are concerned that if they win the election they might inherit the whirlwind.
The Republicans would be of one voice. They were complicit in this for the last eight years. They know the Emperor never had any cloths. But for sure they themselves are not going before the public naked. They will pretend that they are shocked by the information that they have now been presented with by Herr Paulson. They are in panic and running.
All I see is the Democrats trying to acttually addresss the problem while while the Republicans sole and only intention is to torpedo the Democrats any way they can and the HELL with the country.
Considering the Republicans are literally evicerating this country and it’s future, anyone that still supports them cannot simultaneously be a fully sane person.
The Democrats suck, but the Republicans are DEATH TO AMERICA.
Far too much wandering about in the trees.
The new Republican Plan for the crisis, breaking RIGHT NOW … more tax cuts for the rich and less regulation.
I swear to god, that is what is being reported as I type this.
Stop the bailout.
Save the Country
hmm, the dow was up on hopes that the plan was near done
A possible point of view.
The $700 is not about staving off a crisis.
After all a crisis can be engineered.
It is about H Paulson getting a bag load of cash to buy up what’s left of the American Financial Services ILLDUSTRY.
Once H Paulson has achieved want he wants the Chinese will have carte blanch to buy up what’s left of the productive sector. And then the Citizen gets to eat the (?) sandwich.
FYI, the post has been updated. There is a little more news on why things went off the rails.
Every report I’ve seen on TV says that the number of calls, letters and emails to members of the congress and senate are enormous and are running 99 to 1 against the bailout. This is a very salient issue with voters. Could it be that the beast is finally awakening from his long slumber?
Only members in districts safely Democratic or safely Republican dare vote for the measure. Are there enough safe seats to cobble together a majority?
If this thing gets passed, the American people will have gotten a bi-partisan screwing.
This is political, and this is the last 6 weeks of the election cycle. The issue is one of the top political issue of the decade and it is moving fast. Of course we expect McCain and Obama to weigh in (as much as they would prefer not to), and McCain is acting more like a typical republican than Bush/Paulson. This will draw some political lines that the democrats (who otherwise are a shoe in for a landslide in November) would rather not deal with right now.
Good for McCain. If the republicans can kill this, he deserves to draw some attention from Obama.
If the Rebublicans were backing this, and Obama was running to get credit for killing this, I would vote for him instead.
This bailout is a rare political event: It is galvanizing people who will switch their votes on a single issue, like civil rights did for blacks in the 60s.
“In Venezuela, they say that a politician is someone who will get in front of a mob and call it a parade.”
Thank you Yves – I haven’t laughed (like the Buddha you understand) like this all week long…
Sorry, but when I find myself agreeing with southern republicans, well, I’ve either grown up, or I’m dreaming a scene from the Matrix.
This bailout is either for 100% of the people or against 100% of the people be they republicans or democrats.
McCain is correctly moving towards his bipartisan roots.
But he still won’t get my vote.
These past few weeks have made me more hopeful of the American public than before. Still half sleeping, yes, but making themselves heard. I hope that makes a difference to the yaks who are running your country.
I think a revival of a large middle class intelligentsia needs to happen in order to combat the blatant mis-representation on the Hill and the dumb-down media. Education is key. Any thoughts?
Matthew Dubuque
Hmmmmm. We may have a key phrase here that leaked out. I’m not sure….
Yves’ update to this post states re: Bankruptcy cramdowns:
“On more than one occasion, the statement was made that if we put that in the bill, THE PRESIDENT WILL NOT SIGN IT,”
Now as I recall, if Bush does not SIGN a bill it becomes law after a certain time period. I know that is true in several states…
The fellow quoted here (Sherman) did NOT say Bush would VETO such a bill.
I may be wrong. I may be grasping at straws (in fact I am…), but the statement Bush will NOT SIGN such a bill could provide him a face saving way to allow it to be enacted into law.
Just a thought.
Stranger things have happened.
Matthew Dubuque
mdubuque@yahoo.com
“”What’s he done? This did not help matters … it just makes it much more complicated,” Boyd said. “McCain has come in and tried to play the hero.””
Was McCain ever a hero?
And if he was whose hero was he?
“In Venezuela, they say that a politician is someone who will get in front of a mob and call it a parade.”
Is Congress the mob?
jdr said…
“Education is key. Any thoughts?”
Yes.
For the current crisis (contrived or otherwise) it is too late to imagine that the American public can be educated.
Surely that is for another time.
It is now for those that are educated to see what is and call it by its proper name.
FACISIM
To all those against this bill I ask: what would *you* do? To compare this situation to the S&L crisis is to compare a mole on your butt cheek to fully mestatisized cancer. One cannot isolate the "sick" institutions from the healthy, 'cause they are all sick. The people are sick. The whole country is sick. The last 40 years of GDP has been fuelled by credit-induced ether. It's waaaaay too late to cut the sick parts out now.
Do you guys really wanna run the bubble in reverse, play this out and see where it goes? Really?
You may get your wish….
“I think a revival of a large middle class intelligentsia needs to happen in order to combat the blatant mis-representation on the Hill and the dumb-down media. Education is key. Any thoughts?”
I’m going to tell you a little secret…
media = wall street
shhhhhhhh don’t tell….
I have often believed that school children, in addition to reading, writing and arithmetic, need to be taught critical thinking media skills. I was working on such a project when the internet bubble burst.
I started with my child. I’m happy to teach others.
>The House Republicans are apparently unwilling to risk the wrath of voters for the greater good of the financial services industry.
========
Yves – I hope that's not your comment. That's the most ridiculous thing I have ever heard. The house republicans are FEELING THE HEAT on this. Shelby and the other conservatives are true heroes for preventing this bill from going through. I doubt "the wrath of voters" has very much to do with it
“To all those against this bill I ask: what would *you* do?”
Have regulators put any insolvent entity into receivership, and contribute cash for 100% of the equity. This would wipe out shareholders and equity comp of management. This would also recapitalize the banks so the can lend. Wiping out bondholders and other unsecured lenders to financial institutions would also be good, but I’d want to know if it would screw up money market funds bad enough to cause a dislocation. If so, I’d give them a pass. But not the shareholders or equity comp of management.
Wiping out management and investors in incompetent financial institutions is the only way to police them. The UK went down the road of destroying most of its industries in order to help its finance industry. This hurt the middle class, and increased income and wealth disparity. It is unhealthy for a democracy to operate that way.
“save the markets”
OR
“save the people”
They are the foreigh markets calling in their loans? otherwise, WHY WOULD ANYONE WITH HALF A BRAIN GIVE PAULSON 100% AUTONOMY????
Anyone? Thoughts?
SlimCarlos said…
“To all those against this bill I ask: what would *you* do? “
Well Slim,
I would get Congress to give me $1T on the following conditions.
1 The window is open to any financial institution on the soil of the USA providing they come forward with a TRUE Balance Sheet (or is that Balance S**t) with in one calendar month.
2 Any Financial Institution availing of the $1T will have to accept the judgement of the giver on exactly what equity stake the giver decides.
3 All transactions from the $1T will be reported to congress within one month of the donation.
4 etc
5 etc.
6 You can fill in the blanks
You have defined it correctly Slim “The whole country is sick”
What makes you think that giving H Paulson $1T will cure the patient?
Sorry meant to say:
Are the foreign markets calling in their loans?
otherwise WHY WOULD ANYONE WITH HALF A BRAIN GIVE PAULSING 100% AUTONOMY WITH 700 BILLION AT HIS BECK AND CALL?????
Yves…
While your intelligence is radiant, I fear you have lapsed into tendentious polity.
I see nothing in your reports that couldn’t just as plausibly mean that McCain and the Republicans in revolt have measured the temperature of the people and are seizing the moment to do well (votes) by doing good (kill a shameful excrescence of theft [the bill]).
Why do you assume McCain is pusillanimous rather than supporting the Republicans because BOTH (i) he believes its the right thing to do; and (ii) he believes he’ll score big populist points?
Notice I have said nothing about my politics either. People read into things.
Nor did I SAY that the possibility I outlined above is necessarily correct.
My point is that I don’t understand why motives are imputed in the absence of evidence, leaving only actions by which to judge them, which actions at least in this case are sufficiently ambiguous to support more than one theory.
I suppose taking your time and talking things out when enacting new laws was a thing of the past. I don’t see any geniuses in the group so let them try to think things through longer than a week. If they are so worried, they can close the markets down for week, nobody trusts anyone in transaction anyways.
Also, as I am semitic…
The enemy of my enemy is my friend. Whatever the reasons for their actions, if they can kill this, that’s great.
Yves,
This bloomberg article says BBT’s CEO is against Paulson’s TARP bailout plan, as a handout to incompetent banks. Bloomberg
It is dead on. A handout to the corrupt and/or incompetent institutions subsidizes massive bad behavior. If a bank is insolvent, the regulators should seize it and contribute cash for all equity, wiping out shareholdres, equity comp for mangement, and maybe even bondholders (as long as that won’t hurt the money market funds and consequently cause problems with they’re buying Main Street commercial paper, credit card receivables, etc).
Fred55 – this is on my ipod at the moment;
bye bye miss american pie
took my chevy to the levy and the levy is dry
and good old boys are drinking wiskey and wine
saying this could be the day when I die…
cheers;
Abbott_Of_Iona said…
“What makes you think that giving H Paulson $1T will cure the patient?”
That’s the new Bushthink! It’s really quite simple.
Bin Laden attacks you? Go attack Saddam.
You have gange green in your foot? Chop off your arm.
See how simple it is?
fred55
I’m not sure what you mean at all.
McCain is a dullard.
The only way he can get media attention is to follow the spotlight.
He is a bad actor looking for hte limelight.
He is not the President.
George W Bush is (God help us).
Why is everything that George W Bush does a crisis?
>> >> "To all those against this bill I ask: what would *you* do?"
>> Have regulators put any insolvent entity into receivership, and contribute cash for 100% of the equity.
The whole country is insolvent!! A graph posted here the other day says it all: total credit market debt is 3.5x the GDP. Can the financial historians out there dig up a comparable amongst industrialized nations?
And note that GDP is largely ephemeral — folks giving each other haircuts, etc. Once the denominator starts to plunge, this ratio will head higher again.
Or compare total debt as a function of export earnings, which is what you'd all be doing if the US was on another continent and spoke Spanish. Instead you twiddle bits about how the Swedish approach is superior. Jeez! You guys are way too clever for your own good.
The US is toast economically speaking. This bill sucks and will lead to massive inflation. But as Krugman once said: inflation may be bad for you, but it tastes sooo good.
McCain has said repeatedly that he knows squat about economics (and presumably finance) and has said he takes his advice from Phil Gramm. In other words, he has made a point of not educating himself.
He (or his advisors) seemed to have realized late in the game that this bill is a way for him to burnish his rather questionable maverick/independent thinker credentials. From everything I can tell, he swooped on this late in the game, opportunistically.
If he had been leading an opposition or playing a role in formulating an alternative, that would be a different matter.
So slimcarlos;
you agree the foreign investors are calling in their $$$$?
Bienvenidos!
McCain & Palin, four more years, four more years! Go get um tiger!
>> You have defined it correctly Slim “The whole country is sick” What makes you think that giving H Paulson $1T will cure the patient?
I agree — it won't cure the patient. But it will provide some morphine to ease the pain on his deathbed.
i suspect we’re the same age and comparable life experience.
academically, jimmy carter was probably the smartest modern president (possibly tied with wilson) and certainly in terms of math most able to quickly learn microeconomics and macroeconomics etc.
i wouldnt want to be led by him.
reagan and truman (so i dont indicate any political bias) were, frankly, dumb academically but were not afraid to have about them those far brighter than they.
leadership is not about academic brilliance and is about instinct for judging what advice is best.
phil (wendy) is shameful. we agree.
but given what you right, if mccain has reasonably started to accept counsel from, say, shelby, or the university of chicago, or anyone but gramm, that is a very good sign…
who said, “when the facts change, sir, i change my mind?”
keynes?
so economists pride fecklessness? it has a high expected utility? is it fecklessness or flexibility or expedience?
(your counterargument should be: its great if, arguably, in a crisis mccain found the right advice…but life is not made up of crises, but of normal days…so we should choose a leader who can do well in normal times, too, and without this crisis perhaps he would have bumbled along w/ gramm advice…)
(im playing with you, affectionately)
>> But as Krugman once said: inflation may be bad for you, but it tastes sooo good.
Correct: Inflation is like ice cream — it may be bad for you, but it tastes soo good.
Time to get onto the streets. We are all paying for this (globally) and yet we have no control over the form of the bailout. Anger is not strong enough a word.
Global free markets without global governance or accountability inevitably results in what we are seeing. The failure of communism did not by default mean that free market capitalism triumphed.
For a big picture academic assessment on the possible scenarios that we are facing see the link below. The global scenarios sketched out have their origins origins in work done by the Tellus Institute and Stockholm Environment Institute.
http://www.gtinitiative.org/perspectives/taxonomy.html
Is it possible the Dems want to back the deal and so when W goes off into the sunset everything pre Jan 2009 is his / GOP disaster? I don’t really trust most politicians to do the right thing other than get re-elected. If I remember right Goldman Sachs has well placed bets on both parties, QED good connections to save them. Finally since the deal I think now rides on a piecemeal distribution the Dems will get their cut of the pie come Jan especially if they might get prez and Congress. I hope we vote out 90% of incumbents.
Yves,
I love your blog. Read it daily. Thank you.
But, McCain is a hero…in many ways. He is doing the right thing. Somehow I feel that if it were Obama who did what McCain did, you would be very supportive. In this case your political preferences are prevailing over your usually excellent judgement. The bailout is being pushed right before the election. How can a responsible cadidate not try to uderstand and influence something he have to deal with as a President?
To all those panicking that it’s Paulson or Gotterdamerung (sp?), just read Yves post:
http://www.nakedcapitalism.com/2008/09/bailout-we-dont-need.html
Called a bailout we don’t need. Sounds sufficient to me. Also maybe fire Paulson to just wipe out any more links to Wall Street
“To all those against this bill I ask: what would *you* do? “
I saw this suggestion elsewhere or maybe here in the comments: Government price controls on the securities that are supposedly “mis-priced”. Let the banks carry them to maturity (instead of the taxpayers) and write off the losses over that time rather than forcing them to mark to market. What could be simpler?
Damn all you economists!. First of all you deserve some if not most of the blame for this cluster f*ck. You developed the arcane instruments that got us in this trouble. Then you sign some silly document that Sen. Shelby keep using to justify stalling any real action.
I hear the new Repub proposal is just more tax breaks, deregulation, and MBS insurance (CDSes!@?!)
Please just stop! Shut your mouths and go away. Haven’t you done enough damage?
>> Let the banks carry them to maturity (instead of the taxpayers) and write off the losses over that time rather than forcing them to mark to market.
How can you carry a loan as though it were performing when it stops performing? How does this restore confidence?
SlimCarlos said…
“Or compare total debt as a function of export earnings, which is what you’d all be doing if the US was on another continent and spoke Spanish.”
Nestor Kirchner, president of Argentina, speaking of neo-liberalism to the IV Summit of the Americas in 2005:
“…no sólo es una mentira sino que, además, resulta una trampa mortal. Trampa que primero atrapa y afecta a los débiles, pero que luego de un modo u otro, también termina llegando a los poderosos.”
“…not only is it a lie but a death trap. A trap that first traps and affects the weak, but then later, in one way or another, also arrives to the powerful.”
“How can you carry a loan as though it were performing when it stops performing? How does this restore confidence?”
Some people believe there are enough money controlled by stupid investors that, if the accounting rules say the dodgy debt has real value, the banks can offload the dodgy debt at favorable prices, raise new equity or debt on favorable terms.
>>How can you carry a loan as though it were performing when it stops performing? How does this restore confidence?
Knowledge that all future write downs would be orderly restores confidence. This gives the carrying bank more time. The government would control the prices to ensure the write downs occur periodically over the life of the security.
“Knowledge that all future write downs would be orderly restores confidence. This gives the carrying bank more time. The government would control the prices to ensure the write downs occur periodically over the life of the security.”
You are assuming there is enough dumb money out there that buys based on what the accountants say, rather than based on their own indpendent judgement on value.
@ Downsouth:
Trusting you really are from down south (!), aren’t you amused by the american-centric conceit amongst the chattering classes here? The attitude here seems to be that as long as you get the *right* plan, and maybe hunker down for a bit, everything will be alright. To these folks I suggest taking a trip down to BA. One can even now see that Argentina used to be one of the world’s richest countries, with grand boulevards and beautiful squares.
Alas, grass now pokes through the sidewalks and slums press up against the highway to the airport.
Is this because the braintrust there did get the right plan? Or is it because the country lived beyond its means and just went plain broke?
http://www.thestreet.com/_yahoo/video/strategysession/10439420.html?cm_ven=YAHOOV&cm_cat=FREE&cm_ite=NA#10439420
Correct: Is this because the braintrust there failed to get the right plan? Or is it because the country lived beyond its means and just went plain broke?
>>You are assuming there is enough dumb money out there that buys based on what the accountants say, rather than based on their own indpendent judgement on value.
Perhaps you are mistaking the idea. This paper would not trade at the price controlled levels, but it isn't trading now so this is nothing new. It would sit on the banks balance sheet at price controlled levels until it was written off completely or until the price control (which would be a minimum trading price) was below true market price where the market would function again.
If you mean no one would thereafter invest in participating banks, I'd have to agree on that and so the idea is a poor one. Apologies for not thinking the idea through.
McCain may not know economics but he is getting better advise than Obama.
The democrats are screwing up on oil and screwing up the bailout, but they will still win unless Obama screws up.
As I indicated above, the revolt is strictly the doing of the House Republicans. McCain is there just for the photo op. Calling him a leader in this case is an utter joke.
From the New York Times, which has a detailed account:
But once the doors closed, the smooth-talking House Republican leader, John A. Boehner of Ohio, surprised many in the room by declaring that his caucus could not support the plan to allow the government to buy distressed mortgage assets from ailing financial companies.
Mr. Boehner pressed an alternative that involved a smaller role for the government, and Mr. McCain, whose support of the deal is critical if fellow Republicans are to sign on, declined to take a stand.
So Matt Duboque, must be a lonnggg time since high school civics, hey? If the President does not sign an Act of Congress, it does _not_ become the law of the land. The non-act has even acquired a name: the pocket veto. This action is specifically taken so that the Congress does not even have an opportunity to override an actual veto, and as such a non-signing is an even more decisive rejection.
As far as I can tell from the summaries of the Faux Bailout Summit in the media, specifically at the NYT and http://www.politico.com, MCains’s role in this bungle-o does him no credit. This Summit was meanigless to begin with, beyond the very slim possibility that Paulson and Bush hoped to recruit the two candidates to publically sell the corpose to the American people. If McCain instigated this complex photo-op, and there are statements that he did, he’s a grandstanding camera pig. Once there, he said and did nothing, neither endorsing the plan, proposing an alternative, nor even asking relevant questions. So far as I can tell, this was an attempt to get the Democrats to overreach or commit to something he could slam them for: the didn’t bite.
I’ll wait for the historian’s to chew this one over, and it will be a moment for the books that they will get their teeth into. The good news is that the bungle significantly impedes any bailout legislation. The bad news, though, is that Barney Frank seems to have completely lost his mind, spine, wallet, and party card, having been swallowed down whole by Paulson with nary a back tooth or whisker left of the guy. He’s a sad sack clearly way, way, way, out of his league; pitiful.
As far as I’m concerned, this was an enormous FUBAR by the Bush administration (i.e. Paulson). They never should have presented the original Paulson plan. Emboldened by the unfettered power that Bush was given by Congress and the American public after the last national crisis (9/11), the administration must have been fully confident that they would receive similar treatment this time.
It’s the only way I can explain the ludicrous hubris that was the original plan.
Of course, Paulson’s plan has failed spectacularly, attracting the ire of not only Democrats, but Republicans and the usually apathetic public. But the backlash, so severe because of the absurdity of the plan, has now effectively paralyzed our political system.
There are dozens of alternative proposals out there that could be used, of varying effectiveness, and of varying price tags. But good luck trying to convince the public at this point that any bailout plan is a good bailout plan.
FD – I am and remain an Obama supporter but as far as I’m concerned, this past week’s events has done nothing but shown me that both the candidates are tools. That in the end, our political system is driven by only one axiom: “winning above all else.” We had an opportunity here for true bipartisanship (which both candidates pretend to embrace), in the form of a unified rejection of the Paulson plan, but then a collaborative effort to present an alternative to the public, and explain the alternative as such, a true alternative (not just Paulson Lite).
Neither man stepped up to the opportunity. Shame on them.
Re: As I indicated above, the revolt is strictly the doing of the House Republicans. McCain is there just for the photo op. Calling him a leader in this case is an utter joke.
>> Say it Sister, say it loud and praise be! Don't hold back honey!