New at Reason: Mike Flynn on the Secret History of the Bailout Bill

October 2, 2008

It's Christmas in October! To paraphrase Mencken, writes Mike Flynn, the bailout bill is neat, plausible, and wrong.

Read all about it here.

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|10.2.08 @ 5:44PM|#

That's about as depressing as one of Balko's drug war stories.

|10.2.08 @ 5:50PM|#

I can see it now.

There's an election coming up and we have a say in Wall Street firms decisions. But being the morally pure, uncorruptable people we are, we would never attempt to grease the skids in October to help the incumbents. That would be unthinkable. It would all become apparent to the electorate 6 months after the the votes are counted.

But I don't have a degree in economics so I'm probably underestimating the danger we all face (a recession, they happen and are not the end of civilization) and overstating the theorized dangers this all represents. Right?

Is America really this fucking stupid?

|10.2.08 @ 5:51PM|#

I can think of nothing scarier than the notion that the gov't sitting in on the board meetings of financial companies. Why shouldnt' they? After all, after this Bill passes, they will be major stakeholders in these companies.

And why shouldn't government bailout the pension liabilities of GM or Ford? Frankly, there is more justification for that, than the self inflicted damage of the banks and finance companies.

So fucked up. Reason.com is like an oasis of sanity in this mess.

|10.2.08 @ 5:53PM|#

J sub D

"Is America really this fucking stupid?"

American isn't (this whole bailout bs is very unpopular with most of the electorate), but yes, congress is that stupid.

|10.2.08 @ 6:07PM|#

American isn't (this whole bailout bs is very unpopular with most of the electorate), but yes, congress is that stupid.

90% of the congresscritters running for re-election will win another term. I ask again,

Is America really this fucking stupid?

|10.2.08 @ 6:25PM|#

IF they vote them in again, of course they are.

|10.2.08 @ 6:39PM|#

Under this plan, however, federal bureaucrats and their outside contractors would decide which assets to buy. They would ostensibly go from institution to institution, review the books, and say, "We'll buy this and that; you hang on to those." The government will be actively investing taxpayer funds in individual securities and then managing the portfolio until such time as it decides to sell.

And, the best part: Paulson and his minions will be actively seeking the worst assets, and paying a premium for them, to get them off the books without forcing the banks to recognize the true loss. Anybody who thinks these assets will ever be sold at a profit is nuts, or worse.

GILMORE|10.2.08 @ 8:44PM|#

J sub D | October 2, 2008, 5:50pm | #

But I don't have a degree in economics so I'm probably underestimating the danger we all face (a recession, they happen and are not the end of civilization) and overstating the theorized dangers this all represents. Right?

J sub -

No, shit is more fucked up than cyclical 'recession'.

If you want, i'll point you to a few indices that (added together) give an idea about the issue. But it takes a little experience to see the problem. Check this

http://economix.blogs.nytimes.com/2008/09/25/how-to-track-the-crisis/

TED spread is a good indicator of the problem level - also the case shiller index room to drop. We are probably going back to 2002 level asset values.

Paul|10.2.08 @ 11:30PM|#

Treasury expects to pay some unknown premium above any current market price for mortgage-backed securities (MBS).

Boo-fucking-ya...

we. told. you. so.

But it's all going to be profitable... or something. Where's my free goddamned pony?

*Cleaning the firearms*

Paul|10.2.08 @ 11:32PM|#

Some commentators have drawn parallels to the Savings & Loan bailout in the 1980s, when the government established the Resolution Trust Corporation to dispose of the assets of failed thrifts.

Comparitively, the Savings & Loan bailout was throwing small change into a shallow pond compared to this boondoggle.

Paul|10.2.08 @ 11:38PM|#

It was uncovered by the market, as analysts realized that much of the company's story was fiction. Markets with free flows of information are the best guard against meltdowns.

All hail short-selling. Oh, and those curmudgeons who keep pestering, "So, how do you make your money again?"

Alan Vanneman|10.3.08 @ 10:40AM|#

"There does seem to have been a comprehensive failure by the ratings agencies to appropriately analyze the MBS, but torts are a better way than new regulations to correct this."

By "torts" I suppose Mike means "trial lawyers," because only a bang-up trial lawyer could come up with a lawsuit--it would have to be a class-action job--that could actually collect some real cash from the rating agencies. Are the guys at Bear Stearns, FM1 & FM2, Lehmans, and AIG going to be able to collect? What about anyone who's owned stocks over the past year? Reason and trial lawyers together! Economic disaster makes stange bedfellows, I guess.