Democrats & Liberals Archives

No Bailout Without Safeguards

I’m all for preventing the failure of big financial markets, but I agree with this guy in saying that the deal as it currently stands is the wrong way to go about it. The current version of the bill basically asks Congress to grant over seven hundred billion dollars worth of taxpayer money to the Executive branch, with absolutely no strings attached. I’ve heard of business friendly policy, but this is ridiculous.

Not just a little ridiculous, very ridiculous:

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.

Will it even do the job? The process here describes no penalties no strings being attached for this huge infusion of capital, just the Government overpaying for bad assets, in a way that may not even do the good intended for it to do.

This is a government that doesn't know how to wisely invest the taxpayer's money. They congratulate themselves on having saved millions and billions on regulation, and when the collapses resulting from that deregulation seem poised to plunge us into financial purgatory, their solution is to give away hundreds of billions of dollars without a dimes worth of accountability for anybody. Penny-wise, pound-foolish.

It's time to go back to the drawing board and come up with a better plan, where there are consequences for the business failures and where the government is accountable for its missteps. And it's time to elect the people who prevent the financial meltdowns, rather than those who wait for the catastrophes to actually do something about corporate malfeasance.

Posted by Stephen Daugherty at September 21, 2008 12:14 PM
Comments
Comment #263773

This scares the crap out of me

Posted by: Stephen Daugherty at September 21, 2008 2:14 PM
Comment #263775

There is also this:

Democratic lawmakers, who control both houses of the U.S. Congress, said they would put the bailout in place quickly, but also want changes such as more oversight, limits on executive pay at participating firms, and assistance for homeowners.

There is no way that those in charge of those firms that need bailout should reap any reward. They need severe salary cuts and no bonuses before we do anything for them.

And yes, no oversight, no judicial review, and all decisions in the hands of one man? Are we that stupid?

Posted by: womanmarine at September 21, 2008 2:16 PM
Comment #263777

Robert Reich says, no bailouts without conditions.

Posted by: Stephen Daugherty at September 21, 2008 2:23 PM
Comment #263778

From Housing Wire, an industry publication:

In various published reports, Paulson is quoted as saying that “it pains me tremendously to have the American taxpayer put in this position but it is better than the alternative.” That alternative, adminstration officials have repeatedly asserted, is the collapse of much of the American financial system; it’s an approach that has certainly shocked Congressional officials into considering the proposal. Many, however, are now beginning to come to grips with the sort of absolute power that’s really being sought by administration officials.

“He’s asking for a huge amount of power,” said Nouriel Roubini, an well-known economist at New York University. “He’s saying, ‘Trust me, I’m going to do it right if you give me absolute control.’ This is not a monarchy.”

Indeed, Paulson is reaching for unchecked power here — the proposal sent to Congress on Saturday stipulates that “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.”

A number don’t like it at all:

“I don’t know how this plan solves the pricing issue, or how the Treasury plans to acquire these assets,” said the manager, whose fund is targeting the purchase of roughly $1 billion in distressed mortgages. “And even if they can overcome pricing hurdles, and learn the due diligence side of the business, they’re still in a catch-22 over pricing.”

That catch-22, various sources said, may be the most critical part of the Treasury’s plan. Should the Treasury buy low, in the interest of protecting taxpayers? Such an approach would leave selling institutions in the undesirable position of taking huge losses; one bank executive suggested to HW that “if the Treasury wants to buy everything up at 20 cents, they’d better be ready for a whole lot of bank failures.”

Or should the government buy high, a move that would protect bank capital but put taxpayers in the position of absorbing enormous losses? Neither option is a good one, HW’s sources say. Buy low, and make the credit crisis worse than it already was; buy high, and put the economy on a crash course with Japanese-style inflation.

Another source waxed darkly philosophic about the proposal’s broader import.

“It’s amazing to me that in 8 years, one administration can so thoroughly undo over 200 years of work laid by our founding fathers, and can do it while looking straight into a camera and saying ‘we’re talking billions of dollars’ without saying ‘we’re talking about mortgaging America’s future, combined with causing a mild bout of hyperinflation’,” said the source, an attorney representing mortgage creditors, who asked not to be named in this story.

Should these people be given power over a popsicle stand, much less be given unprecedented power to give away taxpayer dollars?

Posted by: Stephen Daugherty at September 21, 2008 2:32 PM
Comment #263782

Stephen,
Hopefully the proposal by Paulsen is just an opening position for a negotiatio, albeit an extreme position. Of course, there is no way the American people are going to literally give anyone a blank check, with no oversight or transparency. That’s not an option.

For anyone who has never read it, I would strongly urge you to read Naomi Klein’s book, “The Shock Doctrine: The Rise of Disaster Capitalism.” We are at one of those points right now where the government may take advantage of disorientation to force through exloitative changes and loss of rights which no citizen would approve under ordinary circumstances.

An election is coming in six weeks. There is no reason to cooperate with a Republican agenda. It must be an American agenda, and represent the interests of all Americans- yes, even Democrats- otherwise, no deal.

Here is Obama’s take on the situation:
http://my.barackobama.com/page/community/post/amandascott/gGg9zm

I realize action has to be taken quickly. However, actions today have long term consequences. This economic disaster will probably continue for years. As it is, the enormous debt threatening to swamp the county has other implications that haven’t even been considered.

Paulsen wants to bail out the big institutions.

It’s not that simple.

Posted by: phx8 at September 21, 2008 3:43 PM
Comment #263783

You got it Stephen D., the Constitutional issues surrounding this bailout are stacking up higher than the $10,000 bills they are asking for.

Taxing future generations through national debt without representation?

Blank checks issued to the Executive Branch without Congressional hearings and up or down votes of both houses of Congress, the representatives of tax payer’s interests (Constitutionally speaking).

The fair and equal doctrines violations and the duplicitous precedent of exempting CEO’s and Shareholders bankrupting corporations from paying back what they owe, vs. individual bankruptcy in which individuals must pay back their debts?

The violation of non-for-profit laws in which the Federal Government, the ultimate not for profit institution engages in the purchase and resale of mortgage debt instruments (at a profit even according to some government officials in the last 72 hours.)

And if anyone thinks government officials are going to sit on more than a half trillion dollars of real assets, and not fall victim to hundreds of potential scams, criminal bribes and deals, and enormous lobbying pressures to sell those assets at particular below market prices to special interests, needs to have their head examined for political history education.

Posted by: David R. Remer at September 21, 2008 3:47 PM
Comment #263784

Wikiality much, Stephen? However, I agree that posting links to youknowwhere to support an argument is “Not just a little ridiculous, very ridiculous”.

I don’t think this deal is going to happen. If it does, then government really is the problem, not the solution. I don’t know how W can top this one in his remaining 120 days, but I’m sure he’ll try.

Posted by: ohrealy at September 21, 2008 3:48 PM
Comment #263785

phx8, NEVER underestimate the power of ignorance by your Congressional representatives in matters of high finance and economics. They have proven time and again to be demonstrably and woefully ignorant of such matters.

They are relying upon the ‘expertise’ of Hank Paulsen, Ph.D. Ben Bernanke, and the likes of Phil Gramm, doctorate in economics, to guide them just as they relied upon intelligence ‘experts’ regarding Iraq. Remember how well that went?

Posted by: David R. Remer at September 21, 2008 3:52 PM
Comment #263786

David,
If this deal happens, the national debt would jump to 11.3 trillion dollars. The GOP conservative philosophy would take advantage of the onerous debt which we will have to destroy Social Security and Medicare/Medicaid, among other things. The GOP is conducting class warfare of a most despicable nature.

It’s funny, I’ve noticed several people lately saying ‘if McCain wins, I’m leaving the country.’ Part of it is despair, of course. Part of it is the realization that if McCain actually wins, and if Americans actually approve of continuing to do what we’re doing, well, what’s the point? If the majority of the country is that gullible and that stupid, then I suppose the country will get what it deserves. Or continue getting, I suppose…

That’s not a very productive attitude, though, and it’s worth remember that Obama is doing his best to deliver an optimistic message, and spread an attitude of confidence. He’s a good candidate. We’ll know in six weeks, one way or another.

Posted by: phx8 at September 21, 2008 4:03 PM
Comment #263787

Yep, 11 trillion, which is what I wrote here at WB would be the national debt level when Bush left office. I wrote that back in 2005, I believe.

One major hurdle exists however for the White House and Fed Reserve on this issue: The little passage in the U.S. Constitution which states: “No money shall be drawn from the treasury, but in consequence of appropriations made by law; “

‘Made by law’, of course, refers to passage by both houses of Congress and signed by the President. Paulsen and Bernanke are arguing this must happen in days, not months. It is without doubt, a brazen attempt to do yet ANOTHER end run around the Constitution in deceiving and fleecing the American tax payers.

Republicans know they are on the hook for this debacle. They will stop at nothing to mitigate these consequences, including tossing the Constitution out the Window, to keep from shouldering the legacy for the worst economy since the Great Depression.

But the really scary thing is, Congress might just give the Republicans a hail marry pass catch on this one, knowing that their reelection bids are on the line too, should cascade failure occur between now and Nov. 4. Which of course would mean the end of our Constitutionally based democratic republic, giving it no more value or worth than toilet paper.

Posted by: David R. Remer at September 21, 2008 4:14 PM
Comment #263792

Just in from Ralph Nader:

William Greider put it best yesterday when he called Treasury Secretary Henry Paulson’s upcoming bailout of Wall Street: “All sugar for the villains, lasting pain and damage for the victims.”

Yep!

Posted by: David R. Remer at September 21, 2008 4:35 PM
Comment #263800

It seems like a good time for Democrats to develop a spine. Reid and Pelosi need to demand the GOP take responsibility for what is happening. The GOP needs to make it clear to the country that this bailout is not a bailout of individuals who defaulted on their mortgages, for whatever reason, nor is it a bailout of Fannie Mae or Freddie Mac. This is a bailout of large, for-profit institutions which went bust in an unregulated securities market, a market with no regulatory oversight whatsoever, thanks to the GOP philosophy of deregulation and privatization.

Posted by: phx8 at September 21, 2008 5:43 PM
Comment #263803

phx8 -

Personally, I have considered leaving the country…but I would still wait around awhile even if McCain wins. While I do own a house overseas, I still have to wonder if my military retirement would be worth the paper it’s printed on. That’s one thing that might keep me from leaving.

The other thing that might keep me from leaving is the knowledge that, if the U.S. enters a depression, this would spread worldwide, and it would surely be followed by civil unrest and war.

Given a choice, I don’t want to leave. I just hope I still have that choice in the years to come.

Posted by: Glenn Contrarian at September 21, 2008 6:47 PM
Comment #263804

Bush cries and cries for money for his imperialism. The Democrats give it to him and maybe get a paltry minimum wage increase, or a few more dollars for the vets and then start beating their chests about how much they’re doing for us. Beating their brainless, spineless, blue-dog chests.
Don’t even think about nationalized rent control because those private equity groups still have to have their scams continue. Is it a proven fact that when the working poor have more money, they can stimulate the economy? Forget about removing the cap on Social Security. That’s “class warfare.” Forget about a price freeze for food at the supermarket. We need to lose weight anyway.
Need I continue? Does a “clean bill” mean that an economic recovery is “dirty?”

Posted by: Stephen Hines at September 21, 2008 6:55 PM
Comment #263807

Does a “clean bill” mean that an economic recovery is “dirty?”

Apparently what it means is that there will be no accountability for fault or how that money is used. In other words the elite class get a free ride on us and we will not be allowed any input as to what form that free ride will take.

Posted by: RickIL at September 21, 2008 7:21 PM
Comment #263812

Are the Democratic posters here seriously trying to suggest that this is all the fault of Republicans, that no Democrats whatsoever have contributed to the problem themselves?

If so, the partisanship has reached truly outsized proportions—and the financial meltdown is starting to look little like Orwell’s war between Oceania and Eurasia. Just a political football to be kicked around in an never-ending game of seeking partisan advantage.

There is so much blame to go around in this financial crisis that it’s actually incredible.

Even IF (and even though I reject the idea) that this is a all attributable to Republican polices, then WHERE have the Democrats been on this issue?

Did they foresee the meltdown? What bills did they author that failed to pass over Republican opposition? What have Harry Reid and Nancy Pelosi tried to do about it? Nothing is what, and that’s because they’ve had their noses in the trough the same as everybody else.

Posted by: Loyal Opposition at September 21, 2008 9:28 PM
Comment #263814

Greedy corporte Republicans and feckless Democrats. Pelosi is supposedly opposing the move to clean out the US treasury, and move it into private hands. We’ll see. This will probably qualify as the largest transfer of public wealth into private hands in history.

The overseas markets are up big. Apparently the foreign banks like HSBC and USB are counting on a bailout too, courtesy of the US taxpayer.

Remember, this isn’t about making good on subprimes loans that went bad, or Fannie Mae, or Freddie Mac. Various markets go up and down, which causes pain, but not worldwide financial crisis. In this case, when the real estate market went down, a commodoties market crapped out.

This is a bailout of large, for-profit institutions which went bust in an unregulated securities market, a market with no regulatory oversight whatsoever, thanks to the GOP philosophy of deregulation and privatization.

Posted by: phx8 at September 21, 2008 9:52 PM
Comment #263815

Are the Democratic posters here seriously trying to suggest that this is all the fault of Republicans, that no Democrats whatsoever have contributed to the problem themselves?

YES! WAKE UP YES! And none of us are too happy to be in the position of saying “I told you so”, either.


Posted by: Max at September 21, 2008 10:55 PM
Comment #263816
This will probably qualify as the largest transfer of public wealth into private hands in history.

Perhaps—or perhaps its also the largest transfer of private wealth into public hands in history. I sense that Democrats may be a bit confused here—in many ways, this is exactly what they always say they want. For the government to take over and regulate private industries. If the problem here is mainly one of liquidity (an open question) then the government might actually MAKE money here. I don’t think that’s the most likely scenario, but we can’t totally discount it.

The executives and stockholders can’t be enjoying this at all. Are they really who is being bailed out here, or is it more anybody with a mortgage, retirement account, etc?

Nancy Pelosi doesn’t like it? Can you say “conflict of interest?” She is in neck deep with AIG, to the tune of upwards of a half a million dollars.

Posted by: Loyal Opposition at September 21, 2008 11:16 PM
Comment #263817

Loyal O,
During the S&L debacle, the government did recoup some of the losses, so the net loss was only $85 billion to the taxpayers. Heh. Imagine using the word ‘only’ with ‘85 billion.’
Anyway, I saw some pundits throwing out the idea of the government making money from the bailout, and it’s not impossible, but there are some very negative possibilities too.

For example: In the 90’s, the Japanese experienced a real estate crash, and the ensuing recession lasted 15 years. To put their stock market experience in American terms, imagine the DJIA at 30% of its 2007 peak at 4,259… in the year 2026.
(source: The Oregonian, 9/21/2008).

We’re about to take on so much debt in addition to what’s already there, that we will handicap the next generation’s chances of living better than their parents. That’s a truly shameful legacy.

There are plenty of Democrats to blame, Loyal O, plenty of Blue Dog Democrats and feckless spineless Dems, but yes, the primary blame, the lion’s share of the blame falls upon the GOP. Bush and the Republican Congress inherited a pretty good situation from Clinton, and they made a complete hash of it. Since the Democrats won the midterms in 2006 there have been some improvements, but the GOP has also set records for filibusters. The GOP has done everything possible to block action in Congress. Very little is getting accomplished because the GOP has chosen to be obstrucitonist, and occasionally Bush vetoes a bill. That’s the choice the GOP made. It’s not illegal. That’s what Republicans chose to do.
What we see today is a direct result of GOP policies and philosophy.
It is what it is.

Posted by: phx8 at September 21, 2008 11:53 PM
Comment #263818
Since the Democrats won the midterms in 2006 there have been some improvements, but the GOP has also set records for filibusters. The GOP has done everything possible to block action in Congress.

But which of these filibusters had anything to do with reform of financial institutions—something, even a single bill—that could conceivably have headed off or even lessened the current financial crisis?

There’s nothing, and you can’t point to anything, and that’s because Democrats were just as deeply invested in the status quo as anybody.

Posted by: Loyal Opposition at September 22, 2008 12:25 AM
Comment #263819
Even IF (and even though I reject the idea) that this is a all attributable to Republican polices, then WHERE have the Democrats been on this issue?

Translates to:

If you knew I was breaking the law, it’s your fault for not stopping me, even though I wouldn’t let you and we didn’t know the consequences would be so bad.

Please.

Posted by: womanmarine at September 22, 2008 12:43 AM
Comment #263820

Womanmarine, right. As if Fannie Mae’s upper echelons weren’t staffed with a bunch of Democratic cronies , and as if Democratic legislators didn’t have the power to propose reform once they assumed control of Congress. The “I” in “I was breaking the law” includes tons of Democrats, and if you don’t know that it’s because you’re refusing to see this through anything but a warped partisan lens.

Posted by: Loyal Opposition at September 22, 2008 12:52 AM
Comment #263821

Loyal,
YOu make a good point, so hats off. Pelosi did push through a FHA housing & mortgage reform bill in December 2007, but it was not filibustered.

Both Dems & Reps were involved with Fannie Mae, including Davis. However, the issue with Fannie Mae is a sideshow… Had the problem never gone beyond a decline in real estate and, say, the failure of Fannie Mae and Freddie Mac, this would not have been as bad as the S& L debacle. What turned a decline into a catastrophe was an unregulated, unsupervised commodoties-type market that tanked.

It’s interesting that, for the first time I can remember, I actually agreed with some talking heads on tv that I usually consider complete idiots… Maybe I’m becoming more idiotic, and just don’t know it… Anyway, the idea of taking hundreds of billions, and maybe even trillions, of dollars of taxpayer money and bailing out private, for-profit entities just because they screwed up is just about intolerable. This has to be one of the most disgusting episodes of stupidity, greed, and sheer incompetence in American history.

Posted by: phx8 at September 22, 2008 1:13 AM
Comment #263826

phx8 et al

I already left the country.We and our savings moved to the Phillippines last Feb. Outside of concern for my union pension and SS our savings is secure here in PI banks. They went through a major bank shakeup in the nineties.It was rough but their response was very strict regulation. The result is the major banks here had very little exposure to Lehman and AIG. Most of their investments are domestic. Pretty shameful that a country famous for corruption has a better managed financial system than what the neo-cons have given us.

Posted by: bills at September 22, 2008 3:50 AM
Comment #263837

phx8

Maybe I’m becoming more idiotic, and just don’t know it… Anyway, the idea of taking hundreds of billions, and maybe even trillions, of dollars of taxpayer money and bailing out private, for-profit entities just because they screwed up is just about intolerable.

I find this whole situation to be more intolerable with each passing day. What really bothers me is the idea that this must all be rushed through. Imo there is something innately irresponsible with the idea of not examining wrongdoing before committing to such a huge giveaway of taxpayer money. I am not by any means convinced that we can trust these people to do what is right, good or proper. It seems a lot like going to the guy that just robbed your house and asking him for a loan so you can replace what he stole from you. We need to examine long term consequences closely before committing to knee jerk short term bailouts of private entity screw ups. I think maybe it is time the wealthy shoulder a lot of the burden of their irresponsible misdeeds, right along with the rest of us.

Posted by: RickIL at September 22, 2008 7:50 AM
Comment #263838

Loyal Opp, a rare event has occurred. You and I agree entirely on something. The Democratic support of special interest lobbyists in the process has been an unmitigated disaster for this country along side the GOP’s support of same.

Both the Democratic Party officials and GOP officials attending BOTH Conventions this year had their secluded parties with lobbyists, funded by lobbyists, during their Conventions.

Democrats voted for the Gramm-Leach-Bliley Act right along with Republicans, and that was the seminal piece of legislation that brought us to where we are in this crisis.

They will argue they didn’t count on losing the majority status in the Senate and therefore control of the whole legislative process which was needed to pass new oversight and regulatory laws to constrain the carte blanche effects of the Gramm-Leach-Bliley Act.

But, the argument, while having a modicum of persuasive capacity, nonetheless speaks to gross negligence by Democrats voting for the Gramm-Leach-Bliley Act, in protecting the interests of American tax payers.

Posted by: David R. Remer at September 22, 2008 8:00 AM
Comment #263839

LO

The “I” in “I was breaking the law” includes tons of Democrats, and if you don’t know that it’s because you’re refusing to see this through anything but a warped partisan lens.

Look at it this way LO. If there was currently a democrat president sitting in the big house, republicans would would be shaking fists and screaming total unequivocal appall at his malfeasance. They would be demanding answers and would surely have impeachment proceedings underway. Once again: The buck stops at the top. Sorry dude, this situation was born with the Gramm bill and reached adulthood under Bush, there just is no getting around that.

Posted by: RickIL at September 22, 2008 8:10 AM
Comment #263841

I have been doing a bit of reading this morning and it appears to me that this whole process is turning into a circus of investors all lobbying for a piece of the bailout pie. Now we have investment banks changing status just so they can get a share. I am wondering how long do they have to wait after getting their piece to revert back to investment bank status. What a bunch of worthless parasites! I want to know what the hell I can get out of this, besides suffering at their malfeasance. Who is going to lobby for me? How about bailing out all those folks who have faced foreclosure. Lets bring their mortgages up to date and give them a fresh start. I am sorry folks but this whole process is getting stinkier and stinkier with each passing moment. I am sending notice to all of my representatives just how I feel about all this bull. I urge anyone who is tired of being played by these people to do the same.

Posted by: RickIL at September 22, 2008 8:47 AM
Comment #263842

LO-
We can single out the “reforms” that your party favored and initiated in explaining how we got to this position. The Orwellian part of this is how you try to shift the blame or otherwise absolve yourselves of Responsibility. It doesn’t seem to matter what happens in the real world, Republican policies must always look double plus good.

You wanted the free market, now you have it. And now your party is chickens*** enough to blame the people you’ve bullied into following your lead. Admit it: when you let corporations endebt people on a permanent basis, push them into loans they can’t afford as an industry practice, the economy suffers. When you let people tie the markets in knots with brilliant financial schemes trying to get something for nothing, how can you not expect collapses and bubble bursts? When you help create a situation where CEOs who screw up still make money, what do you expect, responsibility?

There are Democrats, unfortunately, who are invested in the status quo. But the party and its members aren’t. The Republicans cannot say the same. There may be a mote in the Democratic Party’s eye, but there is a redwood tree in the Republican Party’s eye.

So, if you’re done trying to shift the blame, tell me what you think of a seven hundred billion dollar bailout that not only lacks oversight, but outright prohibits it?

Posted by: Stephen Daugherty at September 22, 2008 8:51 AM
Comment #263844

LO,

You can’t seriously be arguing that Democrats are against regulation and oversight? That we haven’t been asking for it like crazy?

Someone above said this is what Democrats have wanted all along, so why aren’t they happy? This is not what Democrats want. We have no interest in bailing out an Enron bunch of crooks, taking everyone’s money and consolidating it into a bunch of corporate thieve’s pockets. Make no mistake, I may believe this a more of the Republican’s fault, but this is a national tragedy, and when it comes time to pick up our pitchforks and torches and march on Washington regular folks from both parties will be in attendance.

Posted by: Max at September 22, 2008 10:26 AM
Comment #263846
We can single out the “reforms” that your party favored and initiated in explaining how we got to this position.

No, you can only keep talking about the Gramm-Leach-Bliley Act, as if diversification in financial industries has absolutely anything to do with the existence of bad mortgage-backed securities.

The fact is that Democrats taking this line do not even understand the first thing about the financial crisis—far simpler, isn’t it, to just bring up a deregulation act passed nine years that had to do with totally different matters and thereby pretend that it’s all the fault of Republicans. Like I said before, why not blame the fact the Miami Dolphins won the 1974 Super Bowl?

How convenient to just IGNORE that Fannie Mae, a quasi-governmental agency run primarily by Democratic cronies, was backing up all of this bad paper. How convenient to ignore that one of the chief culprits actually headed Barack Obama’s VP search.

Posted by: Loyal Opposition at September 22, 2008 10:36 AM
Comment #263848

Nevermind that it was the Democrats that forced, by law, that these institutions give out a percentage of loans to unsound borrowers. That couldn’t have had a thing to do with it, nor could the fact that the jobless rate increased right about the same time that the minimum wage went up.

I wonder when we will ever see a real free market in the US?

Posted by: Jimmy James at September 22, 2008 10:40 AM
Comment #263849

What’s more, the Gramm-Leach-Bliley is actually HELPING us overcome this crisis.

How ironic that it would be blamed for causing the problem in the first place when it’s one of the few lifelines we have here. Once again, Democrats prefer partisan zeal to a a genuine examination of the facts.

Gramm-Leach-Bliley is dramatically decreasing the amount of bad debt that taxpayers will have to cover by allowing private institutions to merge and take on that debt and liability themselves.

Bear Stearns, when it failed, merged with JP Morgan. Wachovia is about to merge with Morgan Stanley. Bank of America is going to buy and merge with Merrill Lynch.

All of this would have been ILLEGAL under the Glass-Steagall Act, leaving the American taxpayer to clean up Fannie Mae’s mess all by themselves.

So Democrats can just keep preying on the economic ignorance of the public by senselessly claiming that diversification in financial companies is the problem here, but that doesn’t mean that they have any idea what they’re talking about.

Posted by: Loyal Opposition at September 22, 2008 10:45 AM
Comment #263850

The greatest theft in history. An admission that capitalism is broken. And it’s by this bunch of Bush cronies.

Do NOT give Bush money with no strings attached - it is insanity. We must structure this deal so that the American people are able to recoup and profit from their investment. This cannot turn into a handout that robs from the poor to pay the rich. That just about sums up the Bush administration.

Posted by: Max at September 22, 2008 10:53 AM
Comment #263851

Meet Jim Johnson.

Fannie Mae’s CEO of 8 years, and managing director of Lehamn Brothers (another financial institution that just failed) for 5 years.

He walked away from Fannie Mae with 21 million dollars in personal compensation.

Who did Obama ask to lead his VP search?

The very same Jim Johnson.

Who incidentally was also a big donor to both Obama’s senatorial campaign, and who has personally raised between $200,000 and $500,000 for Barack Obama’s presidential campaign.

When you talk about politicians being in bed with these corrupt Wall Street fat-cats, don’t forget what politicians you’re talking about.

Posted by: Loyal Opposition at September 22, 2008 10:59 AM
Comment #263855

The problem, I say again, was not with Fannie Mae, or Freddie Mac. The problem is that firms leveraged those mortgages in an unsound, unregulated market, and everyone lost their shirts in the deleveraging.

The talk about who was more corrupt at Fannie Mae is a distraction, because private institutions are demanding the American taxpayer immediately give them $700 billion, no questions asked.

I think not.

Don’t be distracted.

For the record, the Glass Steagall passed on a party line vote, with the GOP in favor, and the Democrats against it. The legislation went back for amendments, and passed Congress in its final form with a veto proof majority. Since it was veto proof, Clinton signed it.

And magically allowing investment banks Goldman Sachs and Morgan Stanley become commercial banks is outrageous. Investment banks gamble. Those two organizations payed significant roles in creating the leveraging that cause this disaster.

What a sorry country.

Posted by: phx8 at September 22, 2008 11:12 AM
Comment #263856
The problem is that firms leveraged those mortgages in an unsound, unregulated market, and everyone lost their shirts in the deleveraging.

Right, but the leveraging was not something made possible by bank mergers and diversification—are you ever going to bother to explain how that could be the case, or will you finally just admit that you don’t understand the issue yet?

The problem was one of bad paper, borrowing and loaning against bad paper, and nonexistent liquidity once the housing bubble burst. You have to look at why these bad mortgages existed in the first place—you can’t just pretend that that isn’t the key ingredient here and continue to spin a fantasy about how Phil Gramm caused all of this nine years ago.

And when you do actually consider the source of the problem, you’re looking straight at Fannie Mae.

Even the Village Voice gets it, and they’re about as far to the left as it gets. This is actually one of the BEST articles on the topic I’ve seen anywhere, and even though it comes from a far-left source, I’d recommend it to everybody as an important starting point.

Village voice article here.

Posted by: Loyal Opposition at September 22, 2008 11:36 AM
Comment #263857

L.O. -

You’re so worried about one of Obama’s advisers, so here’s a list of SEVEN of McCain’s TOP advisers…including two for Fannie Mae.

• One: Campaign manager Rick Davis is a major telecommunications lobbyist.

• Two: Senior foreign policy adviser Randy Scheunemann recently faced scrutiny over his foreign lobbying on behalf of the Republic of Georgia, which has been embroiled in a military conflict with Russia.

• Three: Senior adviser Charlie Black was a foreign lobbyist for dictators in Zaire and Angola in the 1980s, fodder for the liberal group MoveOn.org.

• Four: Frank Donatelli, the Republican National Committee’s liaison to the McCain campaign, has had clients including Exxon Mobil.

• Five: Economic adviser Nancy Pfotenhauer has lobbied for corporate giants like Koch Industries.

• The final two lobbyists are McCain’s congressional liaison, John Green, and national finance Co-chairman Wayne Berman. They both lobbied for Fannie Mae, the troubled mortgage giant.

Posted by: Glenn Contrarian at September 22, 2008 12:09 PM
Comment #263859

When my house is on fire I really don’t care who is driving the fire truck as long as they save my home.

For years elections have, for many, been the means to express their interests in many more areas that just our national economy. Elections have centered on issues such as gun control, abortion, prayer in school, gay rights, socialized medicine, minimum wage, school vouchers, affirmative action, illegal aliens and on and on. Important issues all, and worthy of being considered when one votes.

Today…right now, we face gigantic economic issues requiring monumental decisions. Unlike all the issues above, which can be undone by future voters and congresses, the paths we choose in the next few days can not be undone. We simply can’t afford to get it wrong.

And yet, many writers here spend their time blaming each others parties. The truth is that both parties and the people who placed them in power are all partly to blame. For me, all the other issues have paled in comparison to this one over riding reality…we are a nation and world in great peril.

I have removed my political hardhat and will try to glean from those running for high office the candidates, regardless of party, who are best equipped, personally, to achieve successful solutions on this one issue alone. Without success in restoring our financial house all else matters little.

I have only to look at three people running for three offices…President, senator, and congressperson who will most directly and immediately affect our financial future. For president I must choose between Mr. Obama and Mr. McCain, and neither in my opinion have the background and experience to give me much confidence in their personal ability to resolve our financial issues. Both will be relying on their chosen advisors and the sense of congress.

Mr. Obama is focusing primarily on higher taxes and more government social spending. Mr. McCain is focusing on keeping taxes static with little additional government social spending. Both promise more honest and accountable government but I don’t trust either of them on this. With all the other issues being discounted by me, I am left with only one choice, and if I were voting today that vote would go to Mr. McCain. Who knows, by November I may change my mind.

Posted by: Jim M at September 22, 2008 12:37 PM
Comment #263860

LO-
Fannie Mae and Freddie Mac are GSM’s. Private investors backed the mortgage debts. There’s legitimate arguments to be made that their structure was just a recipe for trouble, but this crisis did not start with them.

Additionally, Fannie Mae hasn’t been a government agency since 1968, and Freddie Mac never was an agency to start. Bother were privatized to take their liabilities off the Federal Budget, as part of Johnson’s Bush-like attempt to avoid having to raise taxes by dishonesty in Budget accounting.

As for the mergers, they’re not good things, in the long run. The fewer the participants in the market, the more important each becomes to economic stability, and the worse the failure of each becomes. Would we be in a position now where investment banks were considered too big to fail, if they hadn’t grown to that size by merger and acquisition?

The whole point of the anti-trust regulations of Glass-Steagall was that they kept many players in the game, players whose failures would be more minor. The market was more robust and stable with greater competiton.

In addition to the market share problems, there’s a reason to keep certain companies separate. A stockbroker looking at a company with bad fundamentals will look at that company with different interests at heart than a finance company that has to judge whether to keep lending and issuing bonds for a company.

Another part of the deregulation mess deals with the securitization of debts. You folks allowed all kinds of new-fangled financial instruments to come to pass, but didn’t provide good means for determining their worth, or preventing banks from overleveraging themselves with it. You also allowed bank-like institutions to be set up that weren’t regulated like banks.

For a market to work, you have to have good information, a good idea of what the finances in front of you mean. The net effect of Republican deregulation has been to increase uncertainty about all these things. It helped some make some money, but it has set up one bubble after another.

For the market to work, there should also be enough competition and companies with unconflicted interests that we can let companies falter and fail as the market punishes them, rather than find ourselves having to prop up a bad business in hopes of avoiding a national economic meltdown.

You talk about Jim Johnson. But what about Phil Gramm, Carly Fiorina? What about the team of lobbyists that the GSM crowd recognized as their own? Obama may have a little dirt on his face from Johnson, but McCain’s wallowing in the mud with those people.

You still haven’t really commented on the bail-out. It doesn’t seem you want to. No Democratic administration ever had to shell out so much money to bail out a company. Nor did any Democratic Administration ask for such sweeping, unchecked powers for the executive to essentially give taxpayer money to businesses.

Worse yet, this only works if we pay more for these bad mortgages than they are actually worth, and the liquidity problem is the problem. When did the Republican Party become such a bunch of communists?

Posted by: Stephen Daugherty at September 22, 2008 12:37 PM
Comment #263861

Rick Davis, McCain’s Right Hand Man headed an advocacy group for Fannie Mae and Freddie Mac, opposing their further regulation.

Senator John McCain’s campaign manager was paid more than $30,000 a month for five years as president of an advocacy group set up by the mortgage giants Fannie Mae and Freddie Mac to defend them against stricter regulations, current and former officials say.
Posted by: Stephen Daugherty at September 22, 2008 12:43 PM
Comment #263862

Jim M,
I share you sentiment that action needs to be taken quickly. I’m inclined to give Paulsen leeway to work. However, asking for $700 billion with no strings attached- and I mean, none- is simply unacceptable. Furthermore, it’s not always just about big corporations, contrary to what the Bush administration would have everyone think. $700 billion can go a long way towards doing just about anything, and the total cost of the bailout is already shaping up at $1.8 trillion.

So, quick action? Sure. But it also needs to be a good decision. Virtually no one, regardless of their politics, is willing to go along with Paulsen’s proposal.

LO,
I think you are making good points, and it gives me something to think about. Others have already replied, but I will just say again, there have been downturns before, and it was the leveraging that transformed this downturn into a possible catastrophic collapse of the financial system; that the leveraging crossed walls that once existed because of the Glass Steagall Act; and while, like I said, you make some good points, at heart this is a problem caused by deregulation and a lack of oversight, and some very poor financial decisions by large corporations who were motivated by greed.

Posted by: phx8 at September 22, 2008 12:51 PM
Comment #263863

A few questions for all of you, based on some of the thoughts I’ve been having…

Does the urgent push for this 700 Billion Dollar Bailout remind anyone of a “pre-emptive strike” against what they’re claiming is certain to become a “mushroom cloud” on our economic horizon?

Does this bailout feel a lot like Shock Doctrine to you, the way it does to me?

Doesn’t the push for this bailout remind you of how they made Congress panic previously, and thus give them everything they wanted, such as with the Patriot Act, and the Iraq War? It all seems uncomfortably familiar to me.

Why can’t all trading and selling be temporarily halted to prevent a complete meltdown –- just long enough to buy a little time so the entire issue can be looked at carefully and thoroughly – maybe even until after the election?

If they had the time to pick through this carefully and wound up with the decision that the government absolutely must purchase all of these bad loans and debts, shouldn’t they be bought at a percentage of their face value in the exact way the private sector would?

Can anyone give me a good reason we should place our trust in Paulson? Didn’t he come directly from Wall Street to the Treasury at Bush’s behest?

Haven’t Republicans and Wall Streeters always wanted the chance to destroy every last bit of New Deal domestic programs? And won’t this bailout deplete so much taxpayer money that there won’t be any left to maintain those programs?

Would it disturb you to see all our domestic programs die, and our infrastructure continue to rot, and allow ideas like developing clean and sustainable energy, or improving education for our children, or the chance of getting affordable national health care become talked of like those things are unnecessary luxuries — just so that the greedy and rapacious fat cats on Wall St are allowed a chance to recover at all costs?

Hasn’t Paulson been dead wrong about every other prediction that he’s made regarding what was going to happen? Didn’t he claim during the past year that what is happening now wasn’t going to happen? And now he’s suddenly the great expert we should all trust so much? An economic savior who needs no oversight, and should never be held accountable?

Why is anything with a hint of socialism abhorrent when it comes to helping the poor, but suddenly more than acceptable when it comes down to saving the rich?

Finally, why should American taxpayers be made to foot the bill to save foreign banks?

LO:

Are the Democratic posters here seriously trying to suggest that this is all the fault of Republicans, that no Democrats whatsoever have contributed to the problem themselves?

Yes, it is overwhelmingly the fault of Republicans, with an assist from Blue Dog Democrats, also known as Republican Lites.

RickIL:

I find this whole situation to be more intolerable with each passing day. What really bothers me is the idea that this must all be rushed through. Imo there is something innately irresponsible with the idea of not examining wrongdoing before committing to such a huge giveaway of taxpayer money.

Exactly. This rush for a bailout makes no sense to me either.

I am not by any means convinced that we can trust these people to do what is right, good or proper.

The way they’ve handled everything so far makes me believe that they are entirely untrustworthy. Indeed, as everyone connected with the Bush administration has been for the past eight years.

I have been doing a bit of reading this morning and it appears to me that this whole process is turning into a circus of investors all lobbying for a piece of the bailout pie. Now we have investment banks changing status just so they can get a share. I am wondering how long do they have to wait after getting their piece to revert back to investment bank status. What a bunch of worthless parasites! I want to know what the hell I can get out of this, besides suffering at their malfeasance. Who is going to lobby for me? How about bailing out all those folks who have faced foreclosure. Lets bring their mortgages up to date and give them a fresh start. I am sorry folks but this whole process is getting stinkier and stinkier with each passing moment. I am sending notice to all of my representatives just how I feel about all this bull. I urge anyone who is tired of being played by these people to do the same.

Spot On, and Well Said!

Posted by: Veritas Vincit at September 22, 2008 12:51 PM
Comment #263864

Can you trust a Wall Street veteran with a Wall Street bailout?

Posted by: Veritas Vincit at September 22, 2008 1:07 PM
Comment #263869

VV to answer your question only if you are wall street.

I agree 100 percent with you on the shock doctrine theory. This is just another scam to drown the government in the bath tub of debt.
Until the biggest share of the 39 billion these firms gave out in bonus last year is returned I say let them businesses go under. The fact is if we as a people didn’t see this coming, The businesses themselves didn’t see it coming and the regulators didn’t see it coming then perhaps a depression to rival the great depression is what we need in this country. Sometimes it’s shame on us and the education of a depression may just be what we need to get our heads out of this republican/conservative mindset of deregulation, business uber alles, and starve the beast the country is in. We have lived with this gilded age mindset for years and are now reaping what we sow.

This problem is a free market problem and should not be solved by the government. A live by the sword die by the sword approach if you will. Until such time as the size of these corporations can be an issue for debate why would we keep feeding them and allowing them to grow and take the economy down next year or the year after? If by shear size a failure of one or two of these companies can take down the economy why would we want to allow this to continue?

Another problem I have with this crisis is the timing. Whoever is elected in November will effectively have their hands tied when trying to put their own agenda for this country into place. Lets take the hit now, as it won’t taste any better after festering a few more years. With the repubs spinning this as the dems fault you can just imagine the lies and hypocrisy should Obama win the presidency.

Posted by: j2t2 at September 22, 2008 1:56 PM
Comment #263872

Can anyone give me a good reason we should place our trust in Paulson? Didn’t he come directly from Wall Street to the Treasury at Bush’s behest?

No, we should not trust this man. He is nothing more than a wall street exec who is part of the problem, who just happens to head up the treasury department. He is one of the players in a game in which our assets are expendable.

You have presented a valid list of concerns and questions. I see no value in rushing into this thing. Let wall street suffer for awhile. I am concerned that the Bush admin is once again using fear mongering to rapidly perpetuate this whole thing in efforts to avoid liabilities. From what I understand this bailout would provide no guarantee of success. Turns out we may have to turn around and do the same thing a few months down the road. The way I see it is we as working class folks are already suffering the effects of inflation and have been doing so for some time now. Big deal, no matter what happens here we are still going to be at the lower end of the gene pool. The added tax burden will insure that we are still going to continue to suffer the effects of stagnation and inflation. Not to mention you can throw away any hopes of progress in social programs. The only ones who are really going to see any immediate relief here are the wealthy who otherwise may have to think twice about buying their wife that new Lexus for Christmas because, well they have an open space in their 6 car garage. We do need to take whatever time necessary to insure that this thing is done properly with the strictest of oversight. We simply can not automatically trust these unscrupulous people to do right by us. After all they do have a past which would indicate otherwise.

Posted by: RickIL at September 22, 2008 2:14 PM
Comment #263874

I’m a little freaked by whats going on, but people come on - get a grip.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Republicans slurped from this trough, while Democrats were gulping.

You guys want conditions? You guys want “oversight”? Why? Because this went so well?

OFHEO’s mission is to promote housing and a strong national housing finance system by ensuring the safety and soundness of Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).

The US has gone through an unprecedented period of regulating what doesn’t need to be regulated while not regulating what needs to be regulated. In other words, complete ineptness.

We have no worries - this problem will 100% be botched. No question. Thus, if it is going to be botched then better to have it botched with LESS government intervention.

Heck, let an investment banker take his crack at trying to turn this problem around. That person has better odds of succeeding than Congress that is for sure. I mean Barney Frank has been wrong at every single turn for the past 10 years in financial services.

I mean McCain is no rocket scientist that is for sure, but at least we have a quote from 2005 that makes some sense,
“For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac…and the sheer magnitude of these companies and the role they play in the housing market…If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie and Freddie pose to the housing market, the overall financial system, and the economy as a whole.”

The Democrats have no authority to discuss economics (and education) based on their track record - period.

Posted by: MT Cross at September 22, 2008 2:19 PM
Comment #263875

j2t2

Lets take the hit now, as it won’t taste any better after festering a few more years.

As much as I hate to say it, I agree. Do we take the hit now and recover faster. Or apply historically expensive band aids and spend decades recovering all for the sake of preventing a temporary hitch in the consumer society.

Posted by: RickIL at September 22, 2008 2:21 PM
Comment #263881

MTCross-
McCain says he has concerns. But he voted for the weakening of the laws governing banks and financial institutions, and his advisors voted and lobbied for much of the free rein that allowed this to go on.

Now you can say, Democrats are responsible for part of this, but if you sit down and think about it, your logic here is that you will vote for the people who were committed to this, who are committed to the ideology that brought this on rather than the people who, in their weakness, went along with it.

Democrats, during the last thirty years, had essentially followed the Republican lead. In the era of Reagan politics, that was the fashion.

It no longer is. Sooner or later, the younger generation, a generation not so enchanted with Reagan’s conservative will come to dominate politics.

One step forward in this regard will be a vote for Obama. He’s got no stake in maintaining the status quo. McCain does.

Posted by: Stephen Daugherty at September 22, 2008 3:01 PM
Comment #263882

LO-
I hate to do this to you, but I think your candidate has just run over your argument, put the car in reverse, and backed over it.

Guess who McCain wants as head of the SEC?

Posted by: Stephen Daugherty at September 22, 2008 3:09 PM
Comment #263883

A lot is happening, and it’s happening fast…
The dollar tanked, and I mean tanked. Commodoties, including oil, jumped up. It will be a wonder if this whole “fundamentally sound” economy doesn’t tank as well. Convincing foreign governments to fund the US debt should be fun. No one will trust us not to inflate our way out of debt.

Looks like a deal on the bailout. The package will include oversight and mortgage relief. Fair enough.

Now we’ll get to see if it works. I think Paulsen plans on re-inflating the collapsed leveraged markets. He could do this a couple of ways… should be interesting…

Posted by: phx8 at September 22, 2008 3:39 PM
Comment #263887

MT Cross:

I mean McCain is no rocket scientist that is for sure, but at least we have a quote from 2005 that makes some sense,

“For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac…and the sheer magnitude of these companies and the role they play in the housing market…If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie and Freddie pose to the housing market, the overall financial system, and the economy as a whole.”


That sounds pretty good now in retrospect I agree, however, McCain did nothing more than give lip service with these comments. And in fact, he had previously been opposed to establishing an independent regulatory agency to regulate Fannie and Freddie. Back on July 1st, 1992, McCain was opposed to the Federal Housing Regulatory Reform Act which would have created an independent regulatory agency within the Department of Housing and Urban Development to oversee the activities of Fannie and Freddie. The Senate vote was #137 if you want to look it up.
McCain voted: No.
Joe Biden voted: Yes.

From the NYT link provided by Max in the Center Column:


Incensed by the advertisements, several current and former executives of the companies came forward to discuss the role that Rick Davis, Mr. McCain’s campaign manager and longtime adviser, played in helping Fannie Mae and Freddie Mac beat back regulatory challenges when he served as president of their advocacy group, the Homeownership Alliance, formed in the summer of 2000.

Davis is McCain’s TOP Advisor and was the PRESIDENT of this advocacy group.

Furthermore:

Mr. Davis did draw Mr. McCain to a 2004 awards banquet that the companies’ Homeownership Alliance held in a Senate office building. The organization printed a photograph of Mr. McCain at the event in its 2004 annual report, bolstering its clout and credibility.

McCain appeared at an awards banquet to bolster the “clout and credibility” of an advocacy group whose sole purpose was to “beat back regulatory challenges” to Fannie and Freddie.
As usual, McCain was paying public lip service to one thing (being concerned about the regulatory structure of F & F), while his actions show him and his closest associates to be supporting another stance entirely.

Posted by: Veritas Vincit at September 22, 2008 4:03 PM
Comment #263888

phx8:

I think Paulsen plans on re-inflating the collapsed leveraged markets.

Do you really trust Paulson to know what needs to be done now — after knowing he played a part in helping to create some of the problems on Wall Street in the first place?

He could do this a couple of ways… should be interesting…

Care to elaborate a little more? I’d appreciate it since you seem to know a lot more about these things than the average person.

Posted by: Veritas Vincit at September 22, 2008 4:25 PM
Comment #263892

VV,
My knowledge is pretty seriously out of date. These young whippersnappers have invented all kinds of dad-blamed DERivatives while I wasn’t paying attention.

I think Paulsen will be able to use the money anyway he sees fit, and most likely he will use it to re-liquify the credit default swap market. Paulsen could be a real bastard about this. I don’t trust him. Goldman Sachs always had the reputation of being the smartest of the smart guys, and Paulsen was CEO of the firm. He will start making offers for derivates at rock bottom prices. The sellers will be in a tremendously difficult position. Since there is no market, no one knows what they buy and sell for. Paulsen will BE the market, and even worse for the sellers, he will control the underlying securities, the mortgages. If I understand this, he can make almost any underlying security whole with the $700 billion… or not. Sellers desperate for liquidity and facing ruin will either sell or face bankruptcy, at which point Paulsen could buy the company’s assets anyway… or not.

If Paulsen gets his $700 billion, I would really not want to face him as a seller.

Will it work? Who knows? Paulsen offers no guarantees.

I know about Shock Doctrine. What has happened to the American taxpayer at the hands of the GOP is disgusting, and I hope the GOP gets rode out of town on a rail in November. In the meantime, if Paulsen has someone providing insight (basically looking over his shoulder), then I say go for it.

Posted by: phx8 at September 22, 2008 4:55 PM
Comment #263895

phx8, thank you for sharing your thoughts.

Posted by: Veritas Vincit at September 22, 2008 5:18 PM
Comment #263897

VV,
You’re welcome. I’m trying. I did want to mention that the world of finance will look very different after the dust settles. With Goldman Sachs and Morgan Stanley essentially becoming commercial banks, the world of indpendent investment banks is gone. The CEO of Bank of America, Lewis, probably saw the future when he acquired Countrywide and Merrill Lynch. Without the Glass Steagle Act, financial corporations will merge into a few huge entities which cover everything- commercial banking, investment banking, and brokerage. Insurance may merge into the pot, too. Most likely the trend will spread to international firms too, since they’re all interconnected and interdependent anyway, but that will take more time, and besides, the EU DOES have some standards, and the US does not meet them right now.

Posted by: phx8 at September 22, 2008 5:32 PM
Comment #263902

phx8

The CEO of Bank of America, Lewis, probably saw the future when he acquired Countrywide and Merrill Lynch. Without the Glass Steagle Act, financial corporations will merge into a few huge entities which cover everything- commercial banking, investment banking, and brokerage. Insurance may merge into the pot, too.

The direction of merge seemed to be underway even before this all came to a head. With respect to these institutions being to big to fail, where will that leave these new large financial entities. Will their size literally guarantee protection for these institutions at our expense forever. I was of the impression that we were better off with a lot of smaller firms. That way if a few happened to go under it would be no real risk to the whole. It seems almost like we are shaping a sort of financial oligarchy. Would putting all this financial wealth in the hands of only a few very large entities give them even more leverage in manipulating congress? The only good I have seen come out of this so far is that I have gotten quite an education on the workings of national and international finance the last few days. I hope a lot of others have too. I think from here on we all have a responsibility to be very aware, very critical, and very skeptical of the people who manage our countries money.

Posted by: RickIL at September 22, 2008 6:11 PM
Comment #263906

RickIL,
“… I have gotten quite an education on the workings of national and international finance the last few days.”

That’s the truth!

“… We are shaping a sort of financial oligarchy.”

Capitalism eventually results in oligopoly and monopoly.

The problem with these mega financial corporations is that, as commercial banks, they will be able to access Federal Funds, and be protected by the FDIC. I don’t think that will work. I suppose they will have to be very heavily regulated, sort of quasi-governmental organizations.

Meanwhile, the conservative GOP is making noises like it will not vote for the bailout. Nobody likes this deal, and no one is going to look good voting for it, no matter what happens, so the Democrats should make it clear: Either Bush and Paulsen convince the conservative GOP to get on board, or forget it. No deal. Let them take the heat for what is happening.

Posted by: phx8 at September 22, 2008 7:05 PM
Comment #263907

Henry Paulson’s proposed bailout of the financial crisis is a “Financial Weapons of Mass Destruction” misleading ploy.
In interviews on the Sunday talk shows (NBC, FOX, ABC) Henry Paulson stated that there are no guarantees for the American taxpayer that the bailout will be a permanent cure for the present crisis and that there are no guarantees that taxpayers will not end up losing the entire $700 billion dollars, and that the bailout will come before any reform of the corruption plagued financial system is in place.
He also stated that if the bailout is not approved, negative results will imperil every American financially.
In a recent previous interview before that, the same Henry Paulson stated: “The economy is sound.”
Remember Bush’s “Weapons of Mass Destruction” in Iraq? Americans were misled then!
Henry Paulson’s proposed bailout is a “Financial Weapons of Mass Destruction” ploy that misleads Americans today.
Henry Paulson should not be trusted; he is trying to pull Bush and every corrupt individual and agency involved in bad behavior out of the quicksand pit, in complete disregard for the American taxpayer.
Americans are being misled, again!
Fool me once, shame on you!!
Fool me twice, shame on me!!
Wake up, America!!
$700 trillion to “reward” bad behavior is not the smart thing to do.
$700 trillion of new money poured into stable lending institutions to strengthen prudent lending for qualified home buyers and qualified small businesses; save social security; provide the auto industry with a low interest loan to build fuel efficient vehicles and provide new jobs and energy independence; save the health care programs; and provide new infrastructure jobs that will bolster the economy is the answer.
With my plan, there is no risk for taxpayers and they share in the benefits.
Bush’s misinformation of “Weapons of Mass Destruction” cost American taxpayers one trillion dollars and over 4,000 American lives, and 30, 000 American troops injured or maimed for life.
Bush and Henry Paulson’s “Financial Weapons of Mass Destruction” will cost American taxpayers $700 billion dollars.
And that’s just the beginning of what will be a “financial black hole” that will bring a financial disaster worse than the “great depression” and will further weaken our foreign and military standing in the world.
Our homeland security will be seriously jeopardized.
Under John F. Kennedy, American astronauts placed an American flag on the moon..
Under Bush’s administration, Bush has placed a Chinese flag on U.S. soil.
The Iraq war money, one trillion dollars, was loaned to the U.S. by China, and the $700 billion bailout money will be loaned to the U.S. by China.
If America is going to borrow from China, at least borrow to implement permanent financial stability that will allow for the full repayment of Chinese loans to America, allowing us to remove the Chinese flag from American soil, and that will also allow America to concentrate on eliminating the $10 trillion dollar national debt.
Both the Bush Administration and Congress (both republicans and democrats) are to blame for this crisis because of the lack of oversight.
Both McCain and Obama are part of Congress.
We must be realistic; the proposed Bush/Paulson bailout will handicap the effectiveness of any new presidency and will be disastrous for taxpayers.
The future of every American student is being compromised with the Bush/Paulson bailout.

Posted by: steve johnson at September 22, 2008 7:32 PM
Comment #263911

What amazes me the most, is conservatives are always thumping the drum, warning of the collapse of the US under socialism.

And now socialism is exactly what they want, because it’s for the benefit of their own kind.

I don’t ever want to hear that we can’t fund social security or universal health care again. This is a WHOPPER of a hairball coughed up by 30 years of trickle out republican failed economic policy.

Whatever happened to personal responsibility and ownership society? I say we give the conservatives the best of both worlds, they can have their socialism and personal responsibility too. PULL all the voter registrations and if you were registered republican in 2000 or 2004, you get to fund this entire bailout. If you were democrat or independent, you get to high the Bush voters to clean your house. They’ll be needing second jobs to pay their tax bills.

Posted by: AweStruck at September 22, 2008 7:44 PM
Comment #263912

Interesting take from Kos.

Posted by: Veritas Vincit at September 22, 2008 7:59 PM
Comment #263915

Matthew Yglesias at ThinkProgress essentially says that the CRA argument is BS.

the timeline is ludicrous. The Community Reinvestment Act was passed in 1977. Are we supposed to believe that CRA was working smoothly throughout the Carter, Reagan, Bush I, and Clinton years and then only under Bush II did overzealous anti-”redlining” enforcement come into play, perhaps a result of Dubya’s legendarily close relationship with ACORN? Or maybe overzealous enforcement back in the late 1970s is somehow responsible for a real estate blowout that only materialized 30 years later? It doesn’t even come close to making sense.

The real problem, he says, is the financial trickery that came after the fact.

Posted by: Stephen Daugherty at September 22, 2008 8:45 PM
Comment #263922
Capitalism eventually results in oligopoly and monopoly.

Only if individual liberty is no longer protected and government holds more control over our lives than it needs.

Even RickIL sees this when he says

Would putting all this financial wealth in the hands of only a few very large entities give them even more leverage in manipulating congress?

They would only gain from manipulating congress if congress had enough power for it to be a target.

But, now we just have to deal with the fact that the Republicans want business to control government and Democrats want government to control business. Either way, when it all gets right down to it, does it really matter? The end is the same…

Posted by: Rhinehold at September 22, 2008 10:20 PM
Comment #263923

Rhinehold-
I really wish folks would get out of the habit of speaking for the Democrats before they speak for themselves.

In this country, businesses incorporate and operate according to rules and always have. The dawn of the industrial age made businesses all the more powerful, and the potential harms that could come to individuals and society as whole from abuses of that power became greater.

To put it plainly, Democrats are looking for a balance between the interests of business, and the interests of the public. Republicans have simply assumed, as matter of ideology, that they are one and the same.

We subjected corporations to the law after the Stock Market Crash, after FDR got into office. for the next thirty or forty years, America’s heavy regulations did little to prevent it from growing into one of the world’s premier economies.

What it boils down here is not that all regulation is good or necessary, or that the government needs to control everything; rather, it doesn’t hurt to have some traffic laws in our economy so investors and consumers don’t get run over, and we don’t get pile-ups

Posted by: Stephen Daugherty at September 22, 2008 10:30 PM
Comment #263926
I really wish folks would get out of the habit of speaking for the Democrats before they speak for themselves.

I prefer to let their actions speak for them, those are more trustworthy than words, especially these days when so few actually place any import on them, even the supposed leaders of both parties.

In this country, businesses incorporate and operate according to rules and always have.

No one says that they don’t or shouldn’t.

To put it plainly, Democrats are looking for a balance between the interests of business, and the interests of the public.

That will be the day.

Republicans have simply assumed, as matter of ideology, that they are one and the same.

I could care less what Republicans think.

We subjected corporations to the law after the Stock Market Crash, after FDR got into office. for the next thirty or forty years, America’s heavy regulations did little to prevent it from growing into one of the world’s premier economies.

No, just the blocking of much of what FDR *WANTED* to do did that. It was a balance because progressivism was checked. But when the end result of both parties is the same thing with just different paths, we will eventually get there. It’s all just a matter of time.

What it boils down here is not that all regulation is good or necessary, or that the government needs to control everything; rather, it doesn’t hurt to have some traffic laws in our economy so investors and consumers don’t get run over, and we don’t get pile-ups

You can SAY that Democrats just want government checking on business, making sure it runs right. But then you constantly look for ways to get involved, make business do what you want. Democrats insisted that banks take on more high risk loans, made it a law. Developed organizations to guarantee those loans. Used the fact that those loans were getting made as a reason to gain more political power. Democrats want to now use that brilliant thought process to involve into healthcare even more. By entering into the free market instead just regulating it as government should, it creates an unfree market. And then use that inequity to control more and gain more power…

Just a different way to the same end.

Posted by: Rhinehold at September 22, 2008 10:50 PM
Comment #263942

Rhinehold-
Check a few comments up. Yes, Democrats pushed for more loans to be made to folks. But it wasn’t the existence of sub-prime loans that cause the problem, nor did it all start with Fannie Mae and Freddie Mac. These are all nice, convenient ways to disregard the real cause: the poorly regulated methods by which the risk of all this was kept off the balance sheets of these banks.

One aspect of this is that in a number of cases, there were financial institutions at work which looked like a banks, walked like a bank, and quacked like a bank, but for certain reasons weren’t considered banks, and weren’t regulated as such.

Another aspect of this was the laundering of the credit rating. They took debt of questionable character, and through some kind of process made it seems sterling. But like a gilded turd, it was still crap underneath.

Yet another aspect of this mess were the complex derivatives market that was used to inflate prices.

And on top of that were the opaque mortgage securities.

The bad loans played this part: they put a load on the system that all these other factors made it ill-suited to carry. But there wouldn’t have been as many bad loans had there been better regulation of the methods by which risk in mortgage lending could be defrayed. They would have been forced to make fewer loans, and kept them better loans, But then, that’s the idea; the failure to measure risk appropriately is the nexus of the problem.

That’s why I emphasise the responsibility of deregulation.

You can pull your partisan griping, but the mechanics of this failure come from Republicans. They pushed and passed the laws that made this possible. And now, with the help of willing messengers like yourself, they want to focus the blame on the other party.

Fannie Mae, even as a privatized corporation, has been around for decades now, and only now is needing to be bailed out. I know that as a libertarian, you would like to take this moment to blame the government intervention, but this only happened now. Why? Because regulators before that point were much stricter about matters, and certain kinds of institutions were not allowed to merge.

The Free Market ain’t free, and never has been. And never should be. A market is defined by its rules: what has value, what doesn’t. How goods may be exchanged, contracts entered into and enforced, corporations in their chartering, their operation… If it weren’t for the bodies of laws and regulations, our economy would simply be a mess.

Posted by: Stephen Daugherty at September 23, 2008 1:40 AM
Comment #263952
You can pull your partisan griping, but the mechanics of this failure come from Republicans.

Now I’m being the one who is partisan because I blame both parties while you attempt to say the Democratic view of attempting to control the American people through law and regulation had no part to play in this at all?

Astonishing

I know that as a libertarian, you would like to take this moment to blame the government intervention

Government has its place in regulation and enforcing a free market. There hasn’t been a free market for decades, especially after the mismanagement of the Democrats and Republicans. Why, now we have over 90% of all mortgages being controlled by our federal government. Socialism much?

The problem has been the Republicans, trying to avoid altering a system where their constituents are making money so that they can gain more power (read: control over American lives) and the Democrats trying to alter the system in a way that attempts to force ‘fairness and equity’ among us all so that they can gain more power (read: control over American lives). The result is that both parties are trampling all over individual rights and placing more power over Americans at the hands of an entity that has the legal right to use force against us.

The end result, no matter who is doing it or what their intentions are, is that we are, and haven’t been for a long time, a free people. This isn’t likely to change no matter which Republicrat gets elected.

The Free Market ain’t free

Then you aren’t using the correct term. Right now it isn’t, but it should be. But that does NOT mean an absence of government regulation, we need government to check against fraud, prevent monopolies from putting it out of balance, etc. But we don’t need the market manipulated by people looking to make a buck or force their ideology onto others.

Posted by: Rhinehold at September 23, 2008 8:38 AM
Comment #263956

Rhinehold said: “Why, now we have over 90% of all mortgages being controlled by our federal government.”

That is a gross overstatement. The people employed by Fannie Mae and Freddie Mac are servicing those mortgages, and they are not government employees.

The government is in control of financial management side of these corporations, for the time being, but, not its operations.

We don’t know yet what the final disposition of these corporations will be.

It is a far more complex and fluid situation than your comment implies. It is not like GS12’s are now managing 90% of American mortgages. Just ain’t so.

Posted by: David R. Remer at September 23, 2008 9:13 AM
Comment #263964

I’m sorry David, but when over 50% of the mortgages are held by Fannie Mae and Freddie Mac, and they are now ‘owned’ by the government, and the you throw in the number of FHA and VA loans that get written every year, that adds up to over 90% of all mortgages currently in existence in the US.

What that means and how it may affect people may be up for debate, but to say the government is not in control of those mortgages is to bury your head in the sand.

Posted by: Rhinehold at September 23, 2008 9:57 AM
Comment #263986

Rhinehold-
Frankly, I don’t like these bailouts, and likely for many of the same reasons you don’t. I think something might be necessary, but obviously not something like the plan we’ve got up there right now being suggested by Paulson and the others.

These people bitched and whined for years to get their industries regulation and they pay us back… hell, they don’t pay us back, they ask us for a bunch of money!

My question would be, who do you believe more, on a regular basis? Whose positions do yours resemble most?

You can blame Democrats for the mismanagement, and I’m sure there’s been some, but when did all this crater? On whose watch? Who contributed the legislation to the mix that brought this all about? The Republicans want you to believe that Democrats are to blame as well, because then there’s less incentive to change, to vote Democrats in. It’s a trick they’ve used often, especially on your Demographic.

But the truth is, Democrats don’t let things go the way the Republicans do. And they are not as warm to the idea of bailing these guys out after the fact.

The trouble is, many of your colleagues define regulation as an intrusion onto the free market. Anything that could affect prices, anything that could affect a business’s bottom line is treated as a market manipulation.

That’s where the Republican’s vision of things starts getting in the way of meaningful regulation.

What you got to wake up to is that many people have hijacked conservative politics for corrupt purposes, and done their absolute best to paint the alternative with those terrible, anti-capitalist terms.

What Democrats, Republicans and Third Party folks of good conscience have to figure out now, is a way to reach out to each other and govern together.

Posted by: Stephen Daugherty at September 23, 2008 12:49 PM
Comment #263988
when did all this crater? On whose watch? Who contributed the legislation to the mix that brought this all about?

On the Democrats and Republican’s watches. Part of the problem can be laid directly at the feet of Andrew Cuomo. Other parts can be laid at the congresses and presidents from the late 1990s to today, both Republican and Democrat. Dodd said today that he has held 62 hearings on the issue. 62, and nothing done in the last 2 years that might have helped stave this off? There is history of Bush and McCain combined saying over 30 times between 2001 and 2006 that something needed done about Fannie Mae and Freddy Mac. Yet neither party did ANYTHING of substance. Or anything that has worked.

But the truth is, Democrats don’t let things go the way the Republicans do. And they are not as warm to the idea of bailing these guys out after the fact.

And neither do any Libertarians and a lot of Republicans. Less than 20% of the people think this is the right idea. Way to be out there in front…

The trouble is, many of your colleagues define regulation as an intrusion onto the free market. Anything that could affect prices, anything that could affect a business’s bottom line is treated as a market manipulation.

And they are wrong. But many of your colleagues see market regulation as a way to enforce policy direction. Anything that they can do to result in the desired outcome is ok, irregardless of the long term effects of doing so.

Does that make it right?

What you got to wake up to is that many people have hijacked conservative politics for corrupt purposes, and done their absolute best to paint the alternative with those terrible, anti-capitalist terms.

I’ve never denied that, I speak out against it as a matter of fact. But what does that mean? Should I embrace the other extreme that your party pushes when they are in control?

What Democrats, Republicans and Third Party folks of good conscience have to figure out now, is a way to reach out to each other and govern together.

Or better yet, quit trying to control everything so much that you have to look to the government to fix everything. Some things need to break in order for something better to come out of it.

Not something I hear either side talking about, for different reasons. One wants their power to control the market for political enforcement, the other wants their power to control the market in order to squeeze out the most efficient means of earning profit.

No one is looking out for the individual, the guy who avoids these issue by working hard, not speculating, not getting in over the heads on bad loans and busting their hump to get over the crushing taxation that we all have to deal with.

Which is really sad IMO.

Posted by: Rhinehold at September 23, 2008 1:06 PM
Comment #264222

S.D., “When did the Republican Party become such a bunch of communists?

I guess when communism became in their interest. What happened to self reliance. The national Review had better investigate, but I bet we are just going to get weeks of finger pointing.

Posted by: ohrealy at September 24, 2008 8:05 PM
Comment #265507

Picture the Monopoly guy logo on a card you pick up while playing monopoly.
Bank’s errors in your favor. Get Congress to extort 700 billion from the taxpayers.

Posted by: Stephen Hines at October 1, 2008 10:10 PM
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