Five Bailout Questions (Not Including, What The F@&!ing F@&!?)

Friday, while I was over here asking (and trying to answer) five questions about the short-sell ban, CFA Nicole Gelinas over at the City Journal was doing the same about the bailout, in what functions as a decent short primer on the many problems with what's been a-going on down Washington way. A sample, addressing one of the biggies: Why do we think this plan will do what's promised, that is, jumpstart credit markets?

Three. How will this plan restart the now-moribund credit markets? Secretary Paulson figures that by taking bad assets off financial institutions’ books and giving them cash equivalents instead, the government can entice them to start lending again while encouraging private investors to put new money into those institutions. But the bailout can’t change the fact that the primary infrastructure through which America has exported its private debt to the world—securitization—is now severely weakened. Nor can the bailout change the fact that many potential investors in financial institutions may now believe that these firms’ business model is broken. It will take more to fix that perception than erasing bad debt—the defining symptom of that broken business model. Lending institutions likely need time—months, maybe years—to figure out what went wrong, before private capital can replenish the banks’ coffers. Plus, lenders must reassess the credit risk behind all manner of potential borrowers, and they need to re-price that risk as well, charging some borrowers much higher rates than in the past and refusing credit to some applicants altogether. These tasks, too, will take time, and unavoidably reduce access to credit.

In not-unrelated news, one of the great warning voices about the coordination problems with wild credit creation, Austrian economist and libertarian luminary Ludwig Von Mises, would be 127 years young today, were he still alive at this hour.

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  • ||

    lenders must reassess the credit risk behind all manner of potential borrowers, and they need to re-price that risk as well, charging some borrowers much higher rates than in the past and refusing credit to some applicants altogether.

    That's crazy talk! Nobody should walk away from a bank without a loan; this is America, by golly.

  • ||

    I really hope the economy doesn't turn around until that house I have my eye on finally gets cheap enough. Black-bottomed saltwater pool, people!

    It's dropped $120,000 in the last 12 months... only a $100K more and we'll swoop in and pick the flesh from their foreclosed-on bones.

  • Ludwig von Mises||

    I tolt you zoh.

  • ||

    It's dropped $120,000 in the last 12 months... only a $100K more and we'll swoop in and pick the flesh from their foreclosed-on bones.

    I saw my landlord at the gym and she actually tried to get me to buy my condo off of her. I didn't bite but I was thinking "drop a few pounds and maybe I can get my rent reduced another way".

  • Boston||

    Ep,

    You? or Her?

  • ||

    Boston,

    He has a very fragile body image. Tread lightly.

  • ||

    You? or Her?

    Her. I am in fantastic shape. But she's packed on a few since I first met her. A shame, because she's cute and pretty wealthy.

    He has a very fragile body image. Tread lightly.

    I'm like Dennis only smarter.

  • Boston||

    She's rich, she's probably got other characteristics...

  • Dagny T.||

    I really hope the economy doesn't turn around until that house I have my eye on finally gets cheap enough.

    It is kind of fun to watch the realm of the affordable creep closer. Nice places in Seattle used to be minimum $350,000. Now there are some respectable options in the $200,000 range.

    He has a very fragile body image.

    Incontrovertible evidence that you spend too much time at Feministing sites? Use of the phrase "body image." ;-)

  • ||

    "Oh, so it's just coincidence that Zoidberg here is desperately poor and miserably lonely? Pulease..."

  • Johnny Nowhere||

    She's rich, she's probably got other characteristics...

    huge tracts of land, perhaps?

  • ||

    Incontrovertible evidence that you spend too much time at Feministing sites? Use of the phrase "body image." ;-)

    Well, that and the fact that he's projecting. It can be both that and that I am basically Dennis at the same time, right?

  • Boston||

    For your information, it's because he's hideous

  • Dagny T.||

    It can be both that and that I am basically Dennis at the same time, right?

    Absolutely. Which means you needn't fight the urge to do classy, exotic, fancy things to the rich landlady. And your face does look kind of fat, now that you mention it. =P

  • ||

    ||
    ||

    ... you missed the biggest & most obvious 'Bailout' question:

    WHERE does the Federal Government get this $700+ Billion from ??

    _______

    Does Paulson, Bernake or Pelosi have $700B stashed in a desk drawer somewhere ?

    The feds are already heavily in debt both short & longterm. If they borrow even more... that further reduces liquidity in the markets-- which is what they are supposed to be curing in the first place. Makes no sense.

    The true source of the $700+ Billion
    will, of course, be Bernake's unlimited ability to create Dollars out of thin air... and hand them to the U.S. Treasury.

    We will cure Wall St woes by inflating (debasing) the U.S. Dollar even more. Cure is worse than the disease.

  • ||

    But she's packed on a few since I first met her. A shame, because she's cute and pretty wealthy.

    She can't be very wealthy, or you wouldn't be worrying about a few extra pounds.

    It is kind of fun to watch the realm of the affordable creep closer.

    And apparently, Our Masters are determined to put a stop to this. If they can't maintain overinflated housing prices on the front end, they will emplty your wallet to pay for the bailout on the back end.

  • ||

    And your face does look kind of fat, now that you mention it

    Great, now I can't eat for two days.

    "You know what dude, hear me out for a second, okay? Now technically, that stain did appear to me. Also I am familiar with carpentry and I don't know who my father is. So, am I the messiah? I don't know, I could be, I'm not ruling it out."

  • Dagny T.||

    If they can't maintain overinflated housing prices on the front end, they will emplty your wallet to pay for the bailout on the back end.

    But, R C, thinly disguised price controls are For The Children! And also for Main Street!

    Great, now I can't eat for two days.

    Nothing but good things, buddy. Starvation is very attractive.

    "Does that make me gay? Am I gay for God?"

    (I think some people on the previous threads today were a little gay for God themselves.)

  • Bingo||

    Epi is working on his heroin chic image. Traditional features of attractiveness be damned, we got a counter-culture movement here!

  • Naga Sadow||

    You're my hero, Epi. Bringing the heroin chic style to the masses!

  • Naga Sadow||

    Damn! Bingo beat me to it.

  • ||

    Epi is working on his heroin chic image

    Look, I get real thin and then get jacked back up. It gives me something to do and the illusion of self-control. I need my illusions, dude.

    "Dress a little nicer though, 'cause you look like shit."

    I think some people on the previous threads today were a little gay for God themselves

    Yes, that always happens. Which is why I usually avoid those, but I was stupid today. I know it's stupid when I'm getting Kierkegaard-ed.

  • Dagny T.||

    I need my illusions, dude.

    "Only now it's 'allusion' with an A. So if you guys want to put an allusion in there somewhere, like Poe or something... Don't do Poe, 'cause I'm doing Poe."

    I know it's stupid when I'm getting Kierkegaard-ed.

    Not a total wash, though, since you managed to invent a new verb.

  • ||

    "WHERE does the Federal Government get this $700+ Billion from ??"

    They got some big ass printing presses for sure.

  • ||

    BTW, I LOVED the CSI episode where they seized a counterfeit money printing set-up - and one million in counterfeit bills, and congratulated themselves for "saving the whole economy of the Miami area!!!"

  • ||

    Not a total wash, though, since you managed to invent a new verb.

    Gaard'd!

    You've got to keep it pithy if you want it to catch on with the kids.

  • ||

    "Dude, you are a total re-gaard."

  • Dagny T.||

    Gaard'd!

    It's really too bad this word didn't come in time for Talk Like a Pirate Day. There's always next year.

    "Nietzsche-ed" would probably only elicit a "Gesundheit!"

  • ||

    "Only now it's 'allusion' with an A. So if you guys want to put an allusion in there somewhere, like Poe or something... Don't do Poe, 'cause I'm doing Poe."

    Ok, what is this from? It sounds familiar but I can't place it.

    "Dude, you are a total re-gaard."

    I like it. I will steal it from you. You can thank me later.

  • ||

    "In heaven, all the interesting people are missing."

    Nietzsche'd!

  • Dagny T.||

    Ok, what is this from?

    An Arrested Development reference that you missed? Impossible!

    "I grant you Magic Sanctuary."

  • SIV||

    That was a nice market drop. the House Republicans might actually be earning their paychecks today.

  • Jerry||

    The September Surprise bill has failed in House. You can't fault Republicans for being politically ingenious.

  • ||

    Is anyone watching the vote?

    The bailout will fail the House unless the dems can change 20 more votes, and it doesn't look like they can!


    http://latimesblogs.latimes.com/laland/2008/09/live-blogging-h.html

  • ||

    Black-bottom saltwater pool. So, so close...

  • Dagny T.||

    Nietzsche'd!

    What would being Kant'd, or Sartre'd entail?

    And, more importantly, would popularizing hip catch phrases based on various philosophers hasten or stave off the decline of Western Civilization?

  • robc||

    Bailout failed in House!!!

    For now.

  • SIV||

    Sugarfree:
    If you were a special collections librarian you could smuggle the down payment home in your lunch box.

  • ||

    I heard that failure was imminent. I'll offer up a qualified WAHOO!

    My joy is tempered by the knowledge that it's gonna pass in some form or another.

  • ||

    An Arrested Development reference that you missed? Impossible!

    Remember when we discussed alcohol and these shows? What's my name again?

    would popularizing hip catch phrases based on various philosophers hasten or stave off the decline of Western Civilization

    It doesn't matter, the world is a dream. You've been Descartes-ed!

  • ||

    SIV,

    We've got the down payment on the price we want to pay.

    They are just flippers that got stuck. They bought it in 2005 for $420 and put it on the market right before the bubble popped for $699, having done zero capital improvements.

  • ||

    What a great time to get back to the basics. Let's all revisit a great mind at www.mises.org. Everyone else (statists) is just paddling with slotted spoons on the river of denial.

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