September 2008 Archives
Please call or e-mail them to tell them to keep voting no!
Why should they keep voting no?
At this stage, I think the bailout complicates matters enormously, because the immediate problem is
1) Preventing further runs on banks and money market funds by extending deposit insurance.
2) Reviving the interbank market by placing the Fed as counter party and paying interest on loans.
3) Keep working capital loans rolling over until solvency can be assessed and workout recaps can be facilitated.
That's much more important at this stage.
The biggest problem with this bailout package it that it addresses the wrong problem with unspecified consequences.
It has be sold as protecting the people from the financial meltdown.
If it is posed as first the need to protect transaction deposits, and second to protect lending for current business operations and thus employment, then there are clear solutions that do not require a great deal of congressional for action.
The first problem is resolved by removing the deposits insurance cap and support for money market funds -- now done.
The second is to restore interbank lending by introducing now the interest on gross reserves (Bernanke has already requested this) and unifying the discount and Funds rate to have the Fed become guarantor of the market.
To restore short term lending to business, restore real bills lending at the discount window, increase the insurance fund to allow FDIC to aggressively resolve troubled insolvent banks, rather than fixing troubled assets
This should prevent the meltdown that Paulson is worried about.
Then the problem of the overall capitalism of the system can be approached later, hopefully with a Swedish style rescue. (Naked Capitalism Blog: Why The Bailout Bill Will Not Solve the Credit Crunch (And What Could)).
Unfortunately, Doing Something!!!! is clearly taking precedence over Doing Something That Might Actually Work.
Use this Who Is My Representative link (or Project VoteSmart) and call your representative right now. The bailout as it's current proposed is a bad idea that will only make things worse in the long run. The only measure worth taking is to protect depositors by increasing FDIC insurance limits. Everything else in the "Paulson Plan" is expensive snake oil (at best) and transfer of wealth by order of the government.
As for the proposed 'work-outs' for 'distressed' home-debtors? Tell your representative that those who borrowed more than they could afford, and those who lent indiscriminately to those people, the message needs to be: "Too Bad!!!". They took a gamble and they lost. This is classic Moral hazard, and it's wrong.
Finally, the Framers of the Constitution knew that jealousies among the branches of the federal government would slow the federal decision-making process, redounding to the benefit of the people and their liberty. As important as the Bill of Rights is, the structure of government is just as important for its bias against hasty government action.
Put aside what you think of the substance of the bailout issue as you see an example of the constitutional structure at work:
A big shout out to The Cato Institute!
Dear Cato,
Thank you so much for all your hard work on opposing the bailout. This is a political crisis not an economic crisis, and the congress and the admin are not going to give up:
While many of you may be popping champagne bottles tonight in honor of the bailout plan that never was, we need to realize that this is only one step. The bailout is by no means dead. Having dealt with the legislative process before, here is my speculation about what may happen in the coming days, and the options that Congress has before it. (From a contributor to the Naked Capitalism Blog).It was a battle won, not the war; not a strategic but a tactical victory.
You may feel at times like a voice in the wilderness, but you have no idea how important you really are. PLEASE keep up the great work!
A very grateful supporter,
The Charters Of Dreams.
Dear Readers of The Charters Of Dreams, please consider giving a tax deductible contribution to the Cato Institute. The Cato Institute is a 501(c)(3) educational institute.
Finally — it's not over. We need to give the credit and banking markets a chance to clear the bad debts off their balance sheets. Sign the petition and call your representative today.
Arnold Kling (once of Freddie Mac and who co-edits EconLog) explains the housing bubble and gives a brief history of Fannie and Freddie. He explains that it was no surprise (at least to him) that we’d end up in this kind of mess. He then discusses if there any method to the bailout madness, and he blasts the Paulson plan as highly vulnerable to corruption, manipulations and abuse, and he offers some clear headed alternate solutions.
Here he is talking with Will Wilkinson of The Cato Institute on Free Will: Financial Apocalypse Explained -- See the videos segments below:
The Naked Capitalism Blog calls it:
As with Iraq, the fear card worked.
"Congressional leaders and the Bush administration last night struck a historic accord to insert the government deeply into the nation's financial markets, agreeing to spend up to $700 billion to relieve Wall Street of troubled assets backed by faltering home mortgages.
Negotiators emerged from a marathon session in the Capitol about 12:30 a.m. to announce that they had reached agreement on a proposal to give Treasury Secretary Henry M. Paulson Jr. broad authority to organize one of the biggest government interventions in the private sector since the Great Depression.
Full details of the plan were not immediately available. Lawmakers said their staffs would continue working through the night to commit them to paper.
Sen. Richard C. Shelby (R-Ala.), the senior Republican on the Senate Banking Committee, who has refused to participate in the talks, said a "critical mass" was forming behind the measure because lawmakers fear that their failure to act would cripple financial markets. The House is expected to vote on the plan as soon as today, with the Senate following as soon as Monday." (Lawmakers Reach Accord on Huge Financial Rescue, Washington Post, 09 . 28 . 2008).
Much of the blogosphere is up in arms because of the provision in Senator Dodd’s financial bailout bill that might funnel profits from the bailout plan to ACORN Housing (related to the disreputable activist group ACORN), and other more reputable service organizations.
I have read Dodd’s proposed statute and in some respects, it is far worse than has been reported. Senator Dodd has placed a loophole in the bill that is explicitly designed to siphon off tens or hundreds of billions of dollars to the Housing Trust Fund and the Capital Magnet Fund even if there are no net profits in the $700 billion venture.
Hat tip to Jim Lindgren over at the Volokh Conspiracy.
You know, it would be easier for me to believe this was a crisis, if the people in charge were acting like it was a crisis, instead of just an opportunity for graft. Then again, to some of these people, everything is just an opportunity for graft. (from Instapundit.com)
A dark cloud of Big Government descends over Washington D.C.— use this Who Is My Representative link and call your representative right now (& go to the middle of this post to sign the petition).
The political classes of both parties said that in the face of this unimaginable crisis they would take the weekend – imagine that, a whole weekend! – to create a Solution. The Solution must now be implemented immediately before we can even fully understand what it is. This is a classic “rush to judgment” so that we may not notice that the Solution aims to destroy the fundamental ideals of individual freedom, accountability and responsibility that our nation’s Constitution was meant to defend.
I dissent and ask that you communicate your own dissent. (From I Dissent, No Bailout by Kenneth D. Peterson, Jr. Chief Executive Officer of Columbia Ventures Corporation, a private equity investor in Washington State).
Think Kenneth Peterson is exaggerating? Forbes is also alarmed:
In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.
It's not based on any particular data point, a Treasury spokeswoman told Forbes.com Tuesday. We just wanted to choose a really large number. (Bad News For The Bailout, Brian Wingfield & Josh Zumbrun, Forbes.com).
The last week has been a dark one for freedom in America. While most of us pay our bills on time and are prudent with our finances, some folks who made bad economic decisions are asking for and getting a bailout. This is not right, and the American people deserve better.
What we don't deserve is to inherit the bad debt of a few people on Wall Street that mismanaged money and then asked the federal government for someone else to pay for it. The taxpayers are now on the hook for $700 billion and what's worse, this intervention in the market will not solve the problem in the financial sector.
FreedomWorks recruits, educates, trains and mobilizes hundreds of thousands of volunteer activists to fight for less government, lower taxes, and more freedom, and -- not surprisingly -- has come out strongly against the bailout:
First, history has demonstrated that bailouts simply don't work. From Japan in the early 1990's to the New Deal in the 1930's, bailouts prop up failing enterprises, punish prudent businesses and taxpayers, and do not fix the underlying problems in the economy.
Our current economic crisis has its roots in nearly a decade of inflationary Federal Reserve policy, market distortions from the 'implied' government guarantee to Freddie Mac and Fannie Mae, and a wildly inaccurate signals from obsolete, government-chartered ratings agencies. These policies underpinned the housing market bubble, yet the bailout does not address any of these broken public policies (From FreedomWorks Opposes $700 Billion Wall Street Bailout).
Remember — this is the same administration that rushed into invading Iraq, and now they're rushing into this. There's little time left. Remember Congress's vote 5 years ago to authorize force against Iraq? They regretted that, and they — and we — will regret this if they don't put more thought into it.
Sign the petition now:
Now, if you're scared and worried, as you should be, you may be thinking "well, the bailout is a bad idea, but the alternative is worse," banking industry expert, Bert Ely, who has a stellar track record in predicting crises and calling false alarms says that the banking industry can handle this mess internally and does not need subsidies. Check out this post from the Naked Capitalism Blog:
"Banking Expert: Bailout Not Necessary, Industry Can Take Losses," and also see:
- "The Real Reason for the Rush?" and,
- "New IMF Study of Banking Crises Contradicts Bailout Bill Premise and Details," and finally,
- "Economists not keen on GOP bailout." That's an understatement.
The Naked Capitalism Blog and The Big Picture blog are two of the best economic blogs out there, and they're giving extensive attention to the problems in the credit markets.
Finally, if you're confused about what the hell happened, here's a couple of expert resources that give helpful, simple and straightforward explanations. It's a great starting point for trying to get a handle on what's happened, see:
- Constructing a Financial Perfect Storm" featuring Jagadeesh Gokhale, and
- A Simple Explanation of What Went Wrong.
Again, use this Who Is My Representative link and call your representative right now, and God help us.
The longer format appears to be working for Obama, who tends to be long-winded. He hasn't been forced to give a quick answer yet.
He's on message, hitting his talking points on the contrasts with John McCain on taxes, his plans for health care and energy independence. He seemed to cover more ground than McCain whose main points were about cutting government spending.
Actually — that's a good thing! Obama "covers more ground" because Obama has a lot of spending plans. MaCain's plan is simpler: cut spending. Obama's economic liberal streak was on full display tonight.
Score one more for McCain (it almost makes me want to vote for him):
Obama spoke as well as he usually does, which is quite good. However, McCain was much stronger than I think most people expected.
From his clear-headed focus on spending cuts and not raising taxes on ANY American (as contrast to Obama's wealth redistribution and economic growth killling scheme) to his "educating" Obama on foreign policy.
It's too bad, about the foreign policy part — Obama basically has his head screwed on straight over Iraq, but his smart and brave "no vote" was five years ago now; going forward, Obama doesn't sound at all like he has the better handle on foreign policy issues:
While there's plenty of blame to go around for both the GOP and the Democrats — the Democrats are getting a well-deserved shellacking.
The IBD has an excellent front page summary of the 1990s Democratic roots of the Fannie Mae and Freddie Mac disaster.
October 1992, Republican Rep. Jim Leach of Iowa warned of potential danger that Fannie Mae and Freddie Mac posed to the economy:
In remarks later reported by the Washington Post, Leach warned that Fannie and Freddie were changing "from being agencies of the public at large to money machines for the stockholding few."
Leach's prescient comments went unheeded — indeed, Congress spent the next decade and a half avoiding the alarms going off around Fannie and Freddie. Until, that is, it was too late.
Led by top Democrats, including Rep. Barney Frank in the House and Sen. Chris Dodd in the Senate, Congress not only did nothing about the growing risks at Fannie and Freddie, it in essence doubled down on their risks.
The Democrat-led Congress of the early 1990s eased capital limits on the two mortgage lending giants, letting them use enormous leverage — 2.5% of assets at Fannie and Freddie, vs. 10% for banks — to expand lending to low-income, minority communities.
Before Obama can talk about how he'll fix the current credit crisis, he'll have to explain not only how he failed to see it coming but also how Fannie & Freddie contributions to his career did not cause him to look the other way.
Why should he have seen it coming and why might he have looked the other way? Simple: over the course of his short service in the Senate, Obama was a top recipient of Fannie Mae and Freddie Mac Campaign Contributions. Sen.Chris Dodd, chairman of the Senate banking committee, was the top recipient:
Jim Henley is livid:
This loathsome bailout plan is a slap in the face to anyone who believes in either free-market principles or social justice. William Greider calls it “a historic swindle.” Paul Krugman says, “No Deal.” Radley Balko decries it. Arnold Kling says, dueting with Luigi Zingales (pdf), “the government officials making these decisions are seeing things from the perspective of Wall Street, which is kind of like seeing the auto industry from a Detroit viewpoint or seeing the movie industry from a Hollywood viewpoint or seeing elections from a Washington viewpoint.” [...]
If libertarians fail to oppose this bailout, they stand revealed as the hypocritical apologists for corporate power their detractors have always accused them of being.
Because I live in New York City, each beautiful, clear, sunny, Indian Summer September day, my thoughts lightly, easily, and naturally enough turn to — Nuclear Terrorism!!Each year, the Copenhagen Consensus employs over 50 economist and 5 economic Nobel Laureates to prioritize the world's most pressing problems.
Sure to further vex radical socialist environmentalist & their fellow global warming alarmists, the Copenhagen Consensus has turned it's attention to global conflict and transnational terrorism, which it now includes in it's top 10 list.
The good news is that transnational terrorism is not expensive to address. The bad news is there's currently a lack of international cooperation & motivation:
A fellow blogger posted some poignant memories in Memories of New York City, September 11, 2001 - Out of a Clear Blue Sky. However, I want to take a different focus on this day.
One story that really came to the fore after the towers fell was the story of a young Frenchman named Philippe Petit.
On the early morning of August 7th, in 1974, Philippe stepped out on a wire illegally rigged between New York's twin towers, then the world's tallest buildings. After nearly an hour dancing on the wire, he was arrested, taken for psychological evaluation, and brought to jail before he was finally released.
While the story made headlines at the time, this remarkable achievement and all that it stood for was largely forgotten until after September 11, 2001.
Ric Burns, in his American Experience: New York: The Center of the World, extensively documents, I believe for the first time, Philippe Petit Great Poetic feat.
I'm not sure if the new film Man On A Wire was inspired by Ric Burn's treatment of Petit, but -- I wouldn't be surprised: Burns did an excellent job:
I found this interesting -- and, as you'll see -- ultimately ironic post by Ron Chusid The Useful Idiot on the Liberal (ill)Values Blog. It's titled Why We Latte Drinking Liberal Elitists Can Vote Democratic:
(Obama Palin and the Press. © Copyright 2008 Daryl Cagle - All Rights Reserved, www.politicalcartoons.com).
The stunning popularity of Sarah Palin has thrown Ron Chusid The Useful Idiot into such paroxysms of outrage that he's skipped his usual Friday roundup of what's happening on cable TV to convert his Liberal (ill)Values blog into a 24 hour cheap, tawdry, propaganda & smear machine (which is a refreshing improvement as it's now not pretending to be anything but that).
*(Be sure to give us your opinion at the end of this post!)
I had an interesting and polite discussion with someone on the TruthDig site, about Clinton (Hillary) threatening to "obliterate" Iran.
Someone took the opportunity to go off-topic and make the standard progressive appeal for social justice and fairness. His plan for the betterment of us all:
- a financial plan for reparations should be prepared, with every family of these two victimized groups receiving at least one million dollars, so they can be financially uplifted and they can build businesses and create dignified jobs . . .
- a similar economic uplifting plan for poor Americans, of all backgrounds should be devised and implemented . . .
- all this compensation for both groups should be borne by well-to-do Americans, not as charity, but as an overdue duty, especially the wealthy ones. And the cost of this reparation plan can be easily born by the government at less than one year cost of the Iraqi war. So, it’s doable . . .
- My sense of justice tells me that this is the minimum that can be done to heal the wounds of the past, and to start this nation on the path of healing and rebirth. Though I do not belong to one of these two victimized groups, nor I am a victimizer, being a recent immigrant myself (30 years), I am willing to accept a special tax to help finance this plan if necessary. However, I think the financial aspect of the project is the least problematic. The problem will remain with creating a noble political and social good will and sincerity to attempt to right great historical wrongs (Fadel Abdallah, comment on TruthDig, Robert Scheer's column "Clinton Threatens to ‘Obliterate’ Iran.")
I responded to Mr. Abdallah with the story of Bob Beamon:
