Bailout Deal Reached…

|

It's all over but the details, which kind of matter:

Congressional leaders from both political parties said today they had agreed to the outlines of a proposed $700 billion bailout of U.S. financial markets, with limits on executive pay and help for homeowners in distress.

The agreement came a few hours ahead of a meeting called by President George W. Bush with House and Senate leaders, along with presidential candidates John McCain and Barack Obama this afternoon.

Lawmakers said many of the final details were still being hammered out, and that the deal still needed input from the Bush administration, but that the map for the largest government move in the U.S. financial system since the Great Depression had been drawn.

"We are prepared to act expeditiously on a plan with our colleagues that will allow us to send a very strong message to the markets," said Sen. Christopher Dodd, D-Conn.

The Dow Jones Industrial average was up about 240 points after the deal was announced.

Sen. Bob Bennett, R-Utah, said lawmakers had a deal "that will pass the House, pass the Senate, be signed by the Senate and bring a sense of certainty to the markets."

Good luck hammering on the details, fellas! There's no upside here at all except perhaps this one: It likely means the end of any major new spending initiative under President McCain or Obama (or Barr!). And maybe all this new spending will mean bringing the boys and girls home from Iraq sooner rather than later.

Then again, this bailout might just make it tougher to make Bush's tax cuts "permanent." Or free markets free.

More here.

Sens. McCain and Obama have issued CYA statements, but both are behind a plan, which likely means the one just agreed-to, though worse (given that they're running for president, they'll be grandstanding all the way to the finish line):

"Inaction is not an option," McCain said yesterday in Freeland, Michigan. "We must pass legislation to address this crisis." At the same time, he said the bailout represents "an unprecedented sum," and "that money can't simply go into a black hole of bad debt."

Obama said the government should get a stake in any company that benefits from the bailout.

"If taxpayers are being asked to underwrite hundreds of billions of dollars to solve this crisis, they must be treated like investors," the Democratic presidential nominee said in Clearwater, Florida.

I don't want to be treated like an investor here. That means I could lose even more money, especially if the government is managing my money.

McCain is pushing a proposal to cap the salary of any executive at any company that benefits from the bailout at $400,000, "the same pay as the U.S. president's."

You know, isn't it about time we think about cutting the pay of the nation's CEO, rather than worrying too much about how much dumb jamucks at Lehman Brothers are making? I mean, really, the past eight years have been nothing short of disastrous, with Bush spending like a drunken sailor and regulating like, like, like, Capt. Queeg (?) or something (all that's left is for Bush to start complaining about his frozen strawberries). And the war. And the prescription drug plan. And civil liberties. And…

More here.

Advertisement

NEXT: Rocket to Russia

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. USSA: United Socialist States of America

  2. Too bad about the tax cuts: I heard spending had been reduced in order to offset them. Just kidding!

  3. Link in name

    From the AP via Yahoo!:

    ‘Under the proposal, the government would provide insurance to companies that agree to buy frozen assets, rather than purchase them directly as envisioned under the administration’s plan. The firms would have to pay insurance premiums to the Treasury Department for the coverage.

    “The taxpayers haven’t done anything wrong,” said Rep Eric Cantor, R-Va., adding that rather than require them to bear the cost of the bailout, the alternative “pretty much puts the burden on Wall Street over time.”‘

    Operative words being ‘pretty much’.

  4. It likely means the end of any major new spending initiative under President McCain or Obama (or Barr!).

    Surely you’re not that naive, Nick.

  5. Dont give me that do goody good bullshit.

  6. The Dow Jones Industrial average was up about 240 points after the deal was announced.

    Junkies always feel better after another fix of blow medicine.

    No need to quit just now, I feel great. Tomorrow. Yeah tomorrow I’ll deal with the real problem. It’ll be easier then. This time I really mean it. *nods off*

  7. Great now I can forget about sending in my mortgage payment for the next few months. I will include a note that tells my lender to be on the lookout for a Treasury Dept check to cover my missed payments. Oh and to hell with paying off my truck as well, they got almost all their payments already anyway so missing a few shouldn’t affect them anymore than hitting tax payers with $700 billion will affect the tax payers.

    What a load of crap this whole deal amounts to.

    What I wonder is why no one asks if $700 billion is going to make or break our economy then what does the $500 billion the Feds have spent on average for the past 20 years mean to our economy. Money is money and whether it is spent bailing out greedy CEOs or pissed down the drain by our politicians in the end the bill still ends up at the same place.

    Seems everyone is in agreement that the CEO’s head should roll etc. What I can not understand is why we allow the CEO’s we call Congressman to basically put us $500 billion in the hole yearly and yet we keep sending them back to Washington.

    Perhaps we should amass a large contingent of anger armed citizens at the next State of the Union address to storm the basturds and dispatch them one and all. 100,000 pissed of tax payers fed up with this BS government could easily overrun the Capital Police. Of course we would have extensive carpet cleaning bills from all the politicians shitting themselves when they realized their time was up.

  8. Sen. Bob Bennett, R-Utah, said lawmakers had a deal “that will pass the House, pass the Senate, be signed by the Senate and bring a sense of certainty to the markets.”

    You don’t get much more certain than dead.

  9. But if they cut the presidential salary, no one will even want to be the most powerful person on earth!

  10. There’s no upside here at all except perhaps this one: It likely means the end of any major new spending initiative under President McCain or Obama

    AHAHAHAHAHAHAHAHAHAHAHAHAHHAHAHAHAHA!

    *wipes tears, bangs head on desk*

  11. Great, now I have to go home and explain to my 5 year old why her grandparents already spent her taxes. They could at least do a little more in return than send that $25 birthday card every year.

  12. At that salary cap, I expect the average age of executives at such firms to plummet.

    Anyone older will have a little capital, and if you’ve got a couple million bucks you can make more than $400 grand a year by just opening and running a couple of Dunkin’ Donuts franchises or something.

  13. The Dow Jones Industrial average was up about 240 points after the deal was announced.

    Which illustrates the mostly hack nature of financial reporting these days.

    The Dow actually went up about 300 pts over yesterday’s close when the deal was announced, then retracted a bit. It had already been up over 200 pts most of the day.

  14. Well, if the stock markets are happy, it must mean the economy is going to be Ok. Right? The only indicator of economic health that matters is that little number next to DJI, right?

  15. Hey Nick, last I looked Congress had something to do with spending. But it is all Bush who spent like a drunken sailor. Congress had nothing to do with it. Further, the prescription drug plan was wildly unpopular and shoved down the throats of an unwilling public committed to small government. Uh huh.

    Come on Nick. You can write better than this shit. I want a reason to hate this plan, but it has got to be better than whining. Please explain why it is that doing nothing will not affect the economy the way Paulson claims. Explain exactly why it is all scare tactics. I am not being flippant. I would like to know and would think Reason ought to be a place to get an answer. There are smart people on other blogs and in other publications who are giving good reasons why not to do this bailout and how there are other solutions. It is too bad Reason, a publication dedicated to the free market, isn’t one of them.

  16. There’s no upside here at all

    Well, as a laid-back optimist, I’ll have to point out the silver lining here. To all those people around here that complain about not getting laid: you’re about to get fucked!

  17. US Out of Economy NOW!

  18. At that salary cap, I expect the average age of executives at such firms to plummet.

    You say that like it’s a bad thing.

  19. Not only is this a clusterfuck (as expected), but hammering out a deal this fast means that McCain will probably make the debate; and that means zero chance Obama might take a chance and debate Barr. Bummer.

  20. Hey Nick, last I looked Congress had something to do with spending. But it is all Bush who spent like a drunken sailor. Congress had nothing to do with it.

    The following is a complete list of Bush vetoes of Republican Congress passed spending bills.
    .
    .
    .
    .

    The POTUS is often referred to as the leader of their party. Don’t blame Georgie though. He had nothing to do with it.

  21. Congressional leaders from both political parties said today they had agreed to the outlines of a proposed $700 billion bailout of U.S. financial markets, with limits on executive pay and help for homeowners in distress.

    Great. Just frickin’ great. Not only am I bailing out guys who earn 8 figures, I’m going to save yuppies who just haaaad to have that great Craftsman up in Madison Park with the high ceilings and hardwood floors so they took the interest-only loan. Thanks Democrats. Thanks Republicans. I knew I could count on the both of you to come to a bipartisan agreement. You both get to take turns on me in a financial gang-bang. Dopn’t worry, though, there’s plenty of me to go around.

  22. “Please explain why it is that doing nothing will not affect the economy the way Paulson claims.”

    Please prove that our plan to improve your lives by force or the threat of force *won’t* work.

  23. That’s politics bitch.

  24. It likely means the end of any major new spending initiative under President McCain or Obama (or Barr!).

    Why? Obama (and I guess McCain) were promising all kinds of new deficit spending anyway. Why should this make any difference?

    McCain is pushing a proposal to cap the salary of any executive at any company that benefits from the bailout at $400,000, “the same pay as the U.S. president’s.”

    Well, you get what you pay for. And by all available evidence, $400K doesn’t get you much of an executive. I’m sure a migration of talent out of these banks is just what they need. This will drive out not only the CEOs, but damn near everyone in senior management as well, as their pay gets cut as well, and their prospects disappear.

  25. It likely means the end of any major new spending initiative under President McCain or Obama (or Barr!). And maybe all this new spending will mean bringing the boys and girls home from Iraq sooner rather than later.

    Ohh, but that’s where you’d be wrong.

  26. US Out of Economy NOW!

    Its a quagmire.

  27. John –

    Like you, I want to hear more about how and why the bailout as currently proposed won’t work. However, this being Reason, isn’t the burden on those who would argue as to how and why the bailout is necessary? So far, I haven’t heard anything very persuasive yet.

    I’m not trying to be flippant here: I would appreciate any links to arguments as to why the bailout makes sense and how it should work.

    Thanks.

  28. It likely means the end of any major new spending initiative under President McCain or Obama (or Barr!).

    HA! On the contrary. The agrument as it currently stands is that deficit spending like this is an “investment.” Didn’t you hear them?

  29. I’m sure a migration of talent out of these banks is just what they need. This will drive out not only the CEOs, but damn near everyone in senior management as well, as their pay gets cut as well, and their prospects disappear.

    You’re talking about the guys that pissed away billions to trillions of dollars right? It’s a bad thing that these guys would leave because?

  30. JB: short answer is that this bailout plan is nothing more than an attempt to fix housing prices at their current levels. I’m pretty sure the history of government trying to do similar things is not very positive.

  31. “If taxpayers are being asked to underwrite hundreds of billions of dollars to solve this crisis, they must be treated like investors,” the Democratic presidential nominee said in Clearwater, Florida.

    Put on hold for 20 minutes then condescended to?

    Look on the bright side, Dee: with this much voila money being invented, our mortgage payments are going to be, like, half a gallon of milk.

  32. I’m sure a migration of talent out of these banks is just what they need. This will drive out not only the CEOs, but damn near everyone in senior management as well, as their pay gets cut as well, and their prospects disappear.

    Yeah, it’s not all bad.

  33. I think this bailout is going to have a significant effect on my bar tab one way or another.

  34. I wish the GOP still controlled Congress so we could all pretend that which party was in the majority mattered.

  35. I don’t know why everyone treats investment bankers like they’re some brilliant omnipotent beings. I went to school with a bunch of guys who went that route, and I’ll tell you what – they might be mildly clever, but they are not so smart that their actions should not be suspect.


  36. I don’t know why everyone treats investment bankers like they’re some brilliant omnipotent beings. I went to school with a bunch of guys who went that route, and I’ll tell you what – they might be mildly clever, but they are not so smart that their actions should not be suspect.

    I believe it. What I always think when people say banks won’t be able to get the top people anymore is:

    If the “top people” got us to this point, maybe it’s time to see how the “second-from-the-top” people will handle the responsibility. Or hey, maybe even the “second-from-the-bottom” folks. They’ll work cheap, and they’ll knock off at 4:00 to hit the bars instead of staying late to develop risky new investment vehicles.

  37. they might be mildly clever, but they are not so smart that their actions should not be suspect

    Take Jeffrey Skilling who referred to himself as “fucking smart”.

  38. HOLD ON THERE, HOSS. THE URKOBOLD IS GOOD FRIENDS WITH SKILLING AND HAPPENS TO KNOW THAT YOU ARE TAKING HIS STATEMENT OUT OF CONTEXT. SKILLING WAS TALKING TO ELIOT SPITZER AT THE EMPEROR’S CLUB WHILE THEY WERE BOTH ENJOYING A COUPLE OF PRIMO WHORES AND SAID “I’M FUCKING SMART” AFTER SPITZER TOLD SKILLING THAT HE DIDN’T LIKE CONDOMS.

    HONESTLY, THE URKOBOLD DOESN’T KNOW HOW THE FACTS CAN GET SO TWISTED.

  39. I don’t know why everyone treats investment bankers like they’re some brilliant omnipotent beings.

    But, Reinmoose, they make made a lot of money (before they got sacked)! They were so smart, they skipped b-school just to make more money! They were the only ones who could afford the really good downtown Manhattan apartments! Surely omnipotence can’t be far behind?

    But, ever since the Real Estate gods failed me, I really don’t know what to believe in anymore.

  40. So, does this mean that I really am going to get 40 acres out of this deal? You can keep the damn mule.

  41. Doesn’t sound like they have a deal yet.

    Devil is always in the details and it sounds like some pretty radically different ideas are still floating around as part of the package.

    In other words, a post like this that speculates on the final consequences is a bit premature…although I understand the impulse give the premature press ejaculation conference/announcement.

  42. Hey, they released some video of the final negotiations today:

    http://www.youtube.com/watch?v=P-cje17OGnQ

  43. I found this post on another blog that gives an interesting take on why the deal isn’t so bad for libertarian principles.

    http://musefree.wordpress.com/2008/09/22/why-the-bailout-isnt-that-bad-for-libertarianism/

  44. I’ve been thinking about this for a while, and I think that Congress should vote to give the $700 billion to one individual, one person who can serve as a symbol for all of America. That individual, of course, would be me.

    As I accept this money and live my life in the manner of a Greek god, America will be inspired and its confidence will be restored. The economy will bounce back completely on February 1, 2010, when I broadcast a message from my vacation home. . .on Mars.

  45. Neu–No, the deal itself is the devil. The details are just lower demons climbing Hell’s corporate ladder.

    Class B fuck-ups will be printing up giving 700 billion smackers to Class A fuck-ups to whom it doesn’t belong. Why give a damn about the details at this point and how is this not necessarily a Bad Thing™?

    Shuffle the deck chairs all you want. We are SO fucked.

  46. David Broder says that not wanting to send Pro Libertate to Mars is deeply unserious.

  47. I don’t know why everyone treats investment bankers like they’re some brilliant omnipotent beings

    Good fucking question. I’ve worked with these guys and most of them have no clue what they are doing. Now the real animals (and I mean that in the most negative sense) are the traders on the Exchange floor but we won’t go into that. Boiler Room had a lot of truth to it, too.

  48. I don’t know why everyone treats investment bankers like they’re some brilliant omnipotent beings

    I went to b-school with a bunch of these guys and they are smart, but not extraordinarily so. No smarter than the guys that went into consulting or corporate finance. The big distinguishing characteristic is that they love money (and Gordon Gecko). Love it. They’re also the biggest fair weather capitalists in the world. They don’t mind capitalizing on the losses of others and making big money off of it, but the second it’s their industry and it effects they the world is doomed. DOOMED I tell you.

  49. And so one more brick was added to the wall between decisions and consequences.

    It likely means the end of any major new spending initiative under President McCain or Obama (or Barr!).

    This is a joke, right? You think Obama’s going to cancel all his Hope and Change? It just means he’s going to raise taxes on the middle class even more than before.

    A $65 billion-a-year health plan
    $15 billion in green energy spending
    $85 billion in tax cuts and credits
    A $25 billion-a-year increase in foreign aid
    $18 billion a year in education spending
    $3.5 billion for a national service plan

    The tax cuts are obviously the first to go, then maybe they cut foreign aid (hey, Obama’s already letting his half-brother starve in Kenya). The rest is untouched.

  50. joe,

    There you go again, distorting the facts for your own obscure political ends. Congress will not be “sending me to Mars”. Rather, I will spend some small portion of my $700 billion on developing an Earth-to-Mars transportation system and building me a nice domed area near Olympus Mons, all in time for my 1/1/10 broadcast.

    You left out completely my intention to live as a Greek god, up to and including using my funds to build a giant mountain in Florida called, um, Mount Olympus. Can’t we put aside out political differences and do this thing for the good of our economy and for the American soul? In November, which I’m dedicating to seeking revenge upon my enemies, I will buy the Red Sox and move them to Puerto Rico.

    Where do I put my $700 billion, anyway? I’m thinking a bank would be a bad idea for some reason.

  51. Pro,

    Well, obviously the first prirority would be to commission the building of a $1 billion mattress to hide the rest under.

  52. Sure, mock the investment bankers all you want. They’ve earned it.

    But capping compensation at $400K means you won’t be able to attract the B Team, or even the C Team. There are many, many other places in our economy where good executives make much more than that; the banks simply won’t be able to compete for talent at all.

  53. TallDave,

    Good idea. Have a million for your trouble.

    Okay, I’m going to buy Disney World and turn it into a giant fortress–Fortress Libertate. And I’ll keep my money in there, guarded by thousands of enhanced killer Roombas.

  54. ProL, we’re willing to talk…but you’ll find we don’t bow down to everyone who has a bag of tricks.

  55. My loan officer (35 years experience, but never made it to senior management) says his younger colleagues can’t find their ass in a dark closet. As the oldsters retire or get pushed out, the quality of loan decisions will deteriorate further. He attributes it to banks hiring unqualified second or third tier trainees under “diversity” programs for the last decade, too, but that is probably too anectodal.

  56. TallDave,

    The sheer size of this bailout and the shameless rush to enact is has certainly doomed us to larger government after Obama wins.

    Now, when Obama says, “I need $X billion for Hope Scheme 052,” there’s no one left in Washington but Ron Paul and a few similar holdouts with the moral authority to tell him No. If anyone else tries to tell him No, he can say, “Oh, sure, you had $700 billion when Wall Street bankers needed it, but none for ordinary Americans, right?”

    They just handed the auto companies $25 billion and it wasn’t even newsworthy. That’s because compared to Bush’s spending and bailout schemes, the goalposts on what constitutes a debatable extension of government power and government spending just got moved way, way, WAY back.

  57. I just looked up megalomania: “Psychiatry. A symptom of mental illness marked by delusions of greatness, wealth, etc.” So, if the government gives me $700 billion (how, by check?), then no one could call me a megalomaniac, because I’d actually have greatness and wealth, as well as lots of et cetera.

    This is a great plan. Shoot, my consumer confidence is greatly increased just talking about it.

  58. RC,

    Then have their compensation be tied to out of the money options. If you’ve fucked your company to the point where the government has to bail your ass out, you don’t deserve to make that much. There are a lot of really good CEOs that make a lot less than that in cash and make their money in options. That way your success is tied to that of the company. If you fix the problem and do a good job, you make a grip of money. If I’m the one in rowboat and you’re holding onto a plank, I make the rules, you don’t.

  59. guarded by thousands of enhanced killer Roombas.

    I hate it. I miss Lupe.!!!

  60. creech,

    It has more to do with the fact that these companies had to hire a shitload of people during the salad days, so the hiring criteria was significantly lowered. Once the shit hit the fan and the money dried up, the good people went on to other more lucrative businesses, because they could. The people that couldn’t get better jobs were the turds.

    Fluffy,

    Yeah, apparently they wanted $6B earlier this year, but saw an opening to get $25B with all of the crap in the air.

  61. I hate it. I miss Lupe.!!!

    “What do you expect, Mother? I’m HALF MACHINE!”

  62. Most of the world doesn’t know about the 65 Trillion Dollar Credit Swap Defaults still looming. It dwarfs the mortgage crises.

    It is on http://coinage.me. where the flaws are articulated in detail unlike anything you see on the news, and a detail solution is provided to fix the foundation. Which everyone else seems to lack.

    Many people only see the appearances they do not see the fundamental flaw in the system itself.

  63. Hey! Always Sunny day, remember?

    Oh, fuck it.

    “I no does Buster anymore!”

  64. In other words, a post like this that speculates on the final consequences is a bit premature…although

    The final consequences will never be final. They will tweak, adjust, fix, reorganize, rework and make corrections to this process the whole way- and at every step, they will deny that the plan is faulty, and keep assuring us that but for this plan, we would all be living in the dust bowl, standing in soup lines and selling pencils on the street corner.

  65. I have a cunning plan. Let’s fake a communist revolution, nationalize everything, default on all of our debts, then have a counter-revolution, give everything back, but somehow forget to unrepudiate our debts.

  66. Epi –
    We’ll have more Always Sunny to talk about tomorrow, Amen.

  67. McCain is pushing a proposal to cap the salary of any executive at any company that benefits from the bailout at $400,000, “the same pay as the U.S. president’s.”

    What a fucking moron.

    Whatever happened to the phrase “rags to riches and back again”? Why are we concerned about CEOs at all? They don’t deserve anything, as far as I’m concerned. If they don’t know enough about their company to know its own deviant business practices, they didn’t deserve to be at the top in the first place.

  68. Let’s fake a communist revolution, nationalize everything, default on all of our debts, then have a counter-revolution, give everything back, but somehow forget to unrepudiate our debts

    You want us to be 20th-century Russia?

    We’ll have more Always Sunny to talk about tomorrow, Amen.

    Excellent point.

  69. I read the article, but I’m not clear on this point:

    Will the government be purchasing the mortgage-backed assets and reselling them later? Or will they merely be providing insurance for private firms/individuals that do so, funded by premiums that those firms/individuals pay?

    If it’s the later, then it’s probably not a big deal. The private buyers will probably only be willing to buy at a significantly discounted rate, so the firms that are selling these assets will still take significant losses (as they should). But they’ll at least get some money for them now. If they still go out of business, at least creditors would be getting more cash, and fewer mortgage-backed securities, with the bankruptcy settlement. And we won’t have this “Credit Crunch to End the World” that some are predicting. And the taxpayers shouldn’t be on the hook for too much in that case.

    If it’s the former, then there’s much more risk of a serious problem.

    If the companies with these bad assets are so desperate to get something for them quickly; they should sell them at a super-discounted rate, take their losses, and avoid such bogus deals in the future. This is especially true if taxpayers are buying them (though unfortunately, that may be the one case where such companies won’t have to take too much in losses).

    Another thing: If the goal here is to avoid a credit crunch in the short-term, increasing the deficit to fund this thing would seem to undercut that goal. If the government has to borrow more money, that creates more competition among borrowers.

    It seems they would need to increase taxes (at least temporarily) to get this thing to work even in the short term. Although, I wouldn’t trust them when they say “the tax increase is temporary” unless there is a sunset provision in the bill to increase them – which would automatically put tax rates back down in a few years.

  70. Jerked off on a rock, hatched by the sun, eaten by a crow, and shat on the windshield of humanity.
    That’s what every congressman and senator who is voting for this insane package is, was, and forever will be.
    Fuck them all

  71. Sure, mock the investment bankers all you want. They’ve earned it.

    But capping compensation at $400K means you won’t be able to attract the B Team, or even the C Team. There are many, many other places in our economy where good executives make much more than that; the banks simply won’t be able to compete for talent at all.

    This may be a joke I’m missing, but look at this way:

    The difference between an NFL starting quarterback and and AFL2 starter is

    1) the difference between being the 90th+ and the 99.9th+ percentile in talent.

    2) the difference between about $500 per game over $300,000 per game.

  72. Episiarch,

    Not at all. I was thinking maybe a week of communism. The beauty of this plan is that the countries of the world will be so relieved when we go back to a liberal government and economy, that they will not notice all of our defaults.

  73. JB Allen,

    I haven’t found a good defense of it other than the dire effects of not acting.

    I may not like Democrats or many members of Congress of either party but I don’t think that when push comes to shove they want the country to go down in flames for their own political benefit. Further, it is well neigh impossible to get something big through Congress on short notice.

    Maybe they are all just looking to steal money for their rich buddies. Or maybe just maybe Paulson and Bernake, unlike the entire staff of Reason, are not talking out of their asses when they say this could be 1933 if we don’t do something and Congress knows that or at least believes it.

    Yes this bailout sucks and is totally infuriating. But, there is such a thing as a lesser of two evils.

  74. Can we get a list of congresspeeps that voted against this? The people who won’t later be saying, “I’ve made a huge mistake.”

  75. If our government is so smart, staffed with brilliant economists and thoughtful leaders, how come we’re getting this hastily cobbled-together bailout package and not something more well thought out? I mean, this is the regulatory state to which I’m supposed to cede unreviewable authority?

    The possibility of this type of crisis–if there really is one of the scope being suggested–was known months ago. No plan? No strategy? Nothing other than a shocking and scary spending spree, that seems to reward the bad actors while screwing taxpayers? Doesn’t this absolutely prove the case that we can’t trust the government to regulate economics at this level? Can’t limit our blame to either party–they’re both jumping in head first.

    This increasingly unlimited and interventionist government will trash our economy more than a bunch of bad loans, mark my words.

  76. There’s no upside here at all except perhaps this one: It likely means the end of any major new spending initiative under President McCain or Obama (or Barr!).

    Bwahahahaha!!!

    On the contrary, this greases the wheels. No amount of spending is “too much” now. All perceived limits have been shattered…

  77. Kolohe,

    And as Kurt Warner continues to prove, sometimes you’re better off with the AFL guy than the highly touted 1st round pick that likes to party hard.

  78. Yey, the Super Rich may continue to breathe easy while the common man stays poor wondering how to keep food on the table for anotther week. What a pathetic joke. No wonder the US is the laughing stalk of the world!

    Jiff
    http://www.privacy.es.tc

  79. Actually, in the market sense, I think executive compensation is totally out of whack. Are they returning value anywhere near their compensation? Most of the time, no. Look at an executive like Barry Diller who has made billions but hasn’t improved the value of his company. That’s typical. This whole cult of personality crap when applied to companies and to the government is a blight on our society.

    That said, the government has no business meddling in this area, and really, really has no business interfering in contracts.

  80. Oh, we can stop the discussion on the salary cap issue. Salary cap: big deal. There are 1000s of different pathways for compensation that aren’t “salary”.

    So, now that we’ve established that the salary cap will be utterly meaningless, can we go back to talking about how any government involvement is a bad idea?

  81. “The possibility of this type of crisis–if there really is one of the scope being suggested–was known months ago. No plan? No strategy? Nothing other than a shocking and scary spending spree, that seems to reward the bad actors while screwing taxpayers? Doesn’t this absolutely prove the case that we can’t trust the government to regulate economics at this level? Can’t limit our blame to either party–they’re both jumping in head first.”

    Because no one ever faces the truth until they absolutely have to. The fact that they lived in denial for so long tells me that it really is that bad. If it were an easy fix, then they wouldn’t have ignored it. Politicians only ignore things that are really bad and then only act on them when they absolutely have to.

    I don’t care about the bankers involved. They will meet their reward in hell. But I do care about the rest of the country and the economy. Maybe we are all fucked and the intervention will end in a depression anyway. But, I would rather gamble on being able to avoid that than do nothing and know that that will happen. I can’t see how we can have huge numbers of banks fail without enormous economic cost.

    To answer Cavanaugh’s question about why Main Street should give a rats ass about Wall Street; well, their pensions are paid by annuities that depend on Wall Street. Their jobs are at companies that depend on Wall Street for capital. Those are two pretty good reasons to give a rat’s ass.

  82. Oh, going back to my post here, this is precisely why we’re going to get overloaded with new spending, programs and outlays than ever before.

    When we dump $700+ billion to save a bunch of Wall Street execs and their errant firms, this will be proof that we have the money, the will and the authority to meddle in quite literally every other aspect of “The Market” (which Republicans seem to agree isn’t ‘working’). This $700b is mandate for far reaching government authority. We love you Nick, but sorry, this means exactly the opposite of spending and government restraint.

    We’re Europe, get over it.

  83. Paul, absolutely right.

    And any appeal to free market ideology will be a joke from now on, given how easily the Republicans shedded their supposed core beliefs when they were no longer in the interest of their patrons.

  84. They will meet their reward in hell.

    I’m an atheist, so from my perspective, they’ll continue to live in 20,000 sq foot mansions, drive Ferrari’s, Mazerati’s, and eat at the finest restaraunts with government-guaranteed returns on their investments. There is no hell waiting for them. Only more hookers and blow.

    But I do care about the rest of the country and the economy.

    So do I, which is why I’m so adamently against any government involvement in this situation.

    their pensions are paid by annuities that depend on Wall Street. Their jobs are at companies that depend on Wall Street for capital. Those are two pretty good reasons to give a rat’s ass.

    Precisely, which is why I don’t want risk nationalized. I always have my 401k’s play hard ball in the markets. If I wanted a safe rate of return, I’d have it in a savings account at 2.5%. I take these risks for a reason. Quit telling me I shouldn’t be allowed to.

  85. One last thing, before we put too much blame on bankers, how about a little scorn for every dumb ass out there who bought a house they couldn’t afford hoping to flip it for money? The older I get the more I realize that big events don’t happen because of the actions of a few bad apples. They happen because of the combined actions of a lot of bad apples and a for lack of a better term societal zeitgeist going in one direction. For the last 40 years or so, this country has been slowly tearing down any sense of morality or obligation beyond self realization. It used to be there was a sense of shame and immorality to taking out loans and not paying them back. Now you do that and you are a victim or if you can’t get a loan a victim of racism or some such.

  86. We’re Europe, but without the vacations. I guess we’ll have the nationalized healthcare and $12/gallon gas shortly.

    Say, why not just join the E.U.?

  87. I think now is a good time to reflect on a bit of wisdom I gleaned from a book recently.

    “Good evening, [America]. I thought it time we had a little talk. Are you sitting comfortably? Then I’ll begin… I suppose you’re wondering why I’ve called you here this evening. Well, you see, I’m not entirely satisfied with your performance lately… I’m afraid your work’s been slipping and… and well, I’m afraid we’ve been thinking about letting you go. Oh, I know, I know. You’ve been with the company a long time now. Almost… let me see. Almost ten thousand years! My word, doesn’t time fly? It seems like only yesterday… I remember the day you commenced your employment, swinging down from the trees, fresh-faced and nervous, a bone clasped in your bristling fist… “Where do I start, sir?”, you asked, plaintively. I recalled my exact words: “There’s a pile of dinosaur eggs over there, youngster”, I said, smiling paternally all the while. “Get sucking”. Well, we’ve certainly come a long way since then, haven’t we? And yes, yes, you’re right, in all that time you haven’t missed a day. Well done, thou good and faithful servant. Also, please don’t think I’ve forgotten about your outstanding service record, or about all of the invaluable contributions that you’ve made to the company… Fire, the wheel, agriculture… It’s an impressive list, old-timer. A jolly impressive list. Don’t get me wrong. But… well, to be frank, we’ve had our problems too. There’s no getting away from it. Do you know what I think alot of it stems from? I’ll tell you… It’s your basic unwillingness to get on in the company. You don’t seem to want to face up to any real responibility. To be your own boss. Lord knows you’ve been given plenty of opportunities… We’ve offered you promotion time and time again, and each time you’ve turned us down. “I couldn’t handle the work, Guv’Nor”, you wheedled. “I know my place”. To be frank, you’re not trying, are you? You see, you’ve been standing still for far too long, and its starting to show in your work… And, I might add, in your general standard of behavior. The constant bickering on the factory floor has not escaped my attention… nor the recent bouts of rowdiness in the staff canteen. Then of course there’s… Hmm. Well, I didn’t really want to have to bring this up, but… Well, you see, I’ve been hearing some disturbing rumors about your personal life. No, never you mind who told me. No names, no pack drill… I understand you are unable to get on with your spouse. I hear that you argue. I am told that you shout. Violence has been mentioned. I am reliably informed that you always hurt the one your love… the one you shouldn’t hurt at all. And what about the children, its always the children who suffer, as you’re well aware. Poor little mites. What are they to make of it? What are they to make of all your bullying, your despair, your cowardice and all your fondly nurtured bigotries? Really, its not good enough, is it? And its no good blaming the drop in work standards on and management either… though to be sure, the management is very bad. In fact, let us not mince words… The Management is terrible! We’ve had a string of embezzelers, frauds, liars and lunatics making a string of catastrophic decisions. This is plain fact. But who elected them? It was you! You who elected these people! You who gave them the power to make your decisions for you! While I’ll admit that anyone can make a mistake once, to go on making the same lethal errors century after century seems to me nothing short of deliberate. You have encouraged these malicious incompetents, who have made your working life a shambles. You have accepted without question their senseless orders. You have allowed them to fill your workspace with dangerous and unproven machines. You could have stopped them. All you had to say was “No”. You have no spine. You have no pride. You are no longer an asset to the company. I will, however, be generous. You will be granted two years to show me some improvement in your work. If at the end of that time you are still unwilling to make a go of it… you’re fired. That will be all. You may return to your labors.”

    and a nugget of truth for people who are saying “just this once it’s ok.”

    “An inch. It’s small and it’s fragile and it’s the only thing in the world worth having. We must never lose it, or sell it, or give it away. We must never let them take it from us.”

  88. “Precisely, which is why I don’t want risk nationalized. I always have my 401k’s play hard ball in the markets. If I wanted a safe rate of return, I’d have it in a savings account at 2.5%. I take these risks for a reason. Quit telling me I shouldn’t be allowed to.”

    You can take whatever risks you want. But when someone else’s dumb ass behavior ensures that you and about 200 million other people go down with them that is a problem. You can’t just let the economy go into depression and say “that is the market”. You think you can because you don’t give a shit and are looking to score political and ideological points. But the rest of us live in reality. Reality is that some things are a lesser of two evils.

  89. “The people who won’t later be saying, ‘I’ve made a huge mistake.'”

    Those who vote for this bill will later say, “it was a wonderful bill but [name of other party] messed it up/implemented it badly/added the wrong amendments,” etc.

  90. Apparently, Pro L, that would be socialism, and modern Republicans won’t stand for it!!!111!!!!!!1!

    Fuck it, I take back everything I said about the EU, I’ll take their brand of market control. I could use six weeks of holiday per year.

    Reality is that some things are a lesser of two evils.

    And that’s where we disagree. We’re taking the greater of two evils: Permanent and massive government meddling in the economy.

    The lesser of two evils is some banks go down the tubes, and some yuppies lose their Craftsman in Madison Park, and are forced to downsize. I’m told housing will be very cheap if we don’t do anything about this crisis– by Henry Paulson himself. I’ve yet to hear a convincing argument as to why that’s a bad thing… unless you’re flipping houses. My heart bleeds.

  91. Fannie Mae Eases Credit To Aid Mortgage Lending
    E-MAIL Print Single-Page Reprints Save Share
    LinkedinDiggFacebookMixxYahoo! BuzzPermalinkBy STEVEN A. HOLMES
    Published: September 30, 1999
    In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

    Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

    In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

    ”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

    Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

    In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

    ”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

    http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1

    From the NYT in 1999. We did this to ourselves. As far as tax payers bitching about this, why the hell didn’t anyone say anything when they were doing this? No that would have been racist. Your economy is only as good as the society that runs it.

  92. Those who vote for this bill will later say, “it was a wonderful bill but [name of other party] messed it up/implemented it badly/added the wrong amendments,” etc.

    Agreed. I was just trying to work some Arrested Development in there. Maybe I shouldn’t have flip-flopped from Episiarch’s Always Sunny day, and instead just taken my shirt off at WaMu (before they take mine off).

  93. In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

    But the mandate is to increase home ownership among minorities and low income consumers. They did that, right? So what’s the problem here?

    Oh wait.

    So a corporation took to heart a social message as their primary mission instead of profit. Had they spent more time wondering about profit, they wouldn’t be in this mess. But nooooo, they had to do the right thing for the community. They had a mission higher than profit. Their mission was divine, it was inspired, and it was… *wait for it* sustainable.

    I can only hope that sometime down the road in ten, twenty, fifty years, the pendulum will swing back and someone will slap the palm of their hand to their forehead and say “Oh, that’s why putting profits first isn’t such a bad thing!”

  94. If we have to be socialists, let us at least be relaxed socialists, comfortable in our superior wisdom, nodding sagely at our slow, inexorable decline.

    To be Europe, we need someone to be the United States, to prop us up and stuff.

  95. To be Europe, we need someone to be the United States, to prop us up and stuff.

    Dude, we have Canada for that now.

  96. With all due respect to our Canadian comrades–join us, brothers!–I don’t think they’re quite the economic juggernaut the U.S. is. Well, was.

  97. I don’t think they’re quite the economic juggernaut the U.S. is

    I thought it was our juggernaut status we are trying to mitigate with government intervention.

    Just sayin’

  98. On the contrary, this greases the wheels. No amount of spending is “too much” now. All perceived limits have been shattered…

    Only as long as the Chinese are interested in buying our T-Bills. The real fun starts the moment that stops.

  99. I’ve said this elsewhere, in a different context, but another solution to this problem is to make a slight change to our name: United States of Am?rica. The umlaut projects toughness and security. It will restore confidence to such extremes as to usher in a dramatic growth period without end. Am?rica!

  100. “The lesser of two evils is some banks go down the tubes, and some yuppies lose their Craftsman in Madison Park, and are forced to downsize. I’m told housing will be very cheap if we don’t do anything about this crisis– by Henry Paulson himself. I’ve yet to hear a convincing argument as to why that’s a bad thing… unless you’re flipping houses. My heart bleeds.”

    I’m afraid it’s alot more serious than that. The mortgage meltdown is only one aspect of what is turning into a financial meltdown on a global scale and, if I understand this correctly, what is really scaring the financial world is the growing worthlessness of credit default swaps (CDS’s). As money moves around the world and countries (sovereign funds)/companies invest in one another, these countries/companies wanted some kind of hedge or insurance should their investments turn sour. This insurance resulted in the development of CDS’s where a country/company could buy insurance on an investment from athird party company should that investment turn turtle. Unfortunately, there was no clearinghouse for these CDS’s where transactions were transparent so nobody really knew how many of these agreements each company was liable for. IIRC, AIG had insured upwards of $400 billion of these CDS’s alone (the entire CDS market is around $62 trillion). Even more unfortunately, they weren’t prepared for a mass downturn of investments ala the current environment so when these companies tried to cash in their CDS’s, lo and behold those companies which had insured the investments didn’t have the cash reserves to pay out, aka, they were way overleveraged. So now, global foreign investment is slamming on the brakes and there’s alot of foreign bagholders who have been financing our deficits who are ticked off and wary of investing in overseas markets (not just the US)now due to credibility/transparency issues. Throw in the opaqueness of world CDO holdings and their current value, the MBS meltdown, massive leveraging and other factors I’m sure I don’t know about and you have a global run on credibility and “payability”. I believe this is what is currently going on, somebody please correct me if I’m wrong.

  101. Reason furthers the electoral triopoly by refusing to mention Chuck Baldwin.

  102. I work in the mortgage business and I am currently involved in distressed mortgage workouts. Presently, the distressed assets being purchased – mostly by hedge funds – are whole loans where there is direct ownership of the asset. These loans are being bought at 40 – 70 cents on the dollar and homeowners are being offered modifications or refinances where the balance of their loan is being reduced relative to the underlying value of the property. The process is slow but the mess is slowly being worked out.

    The main problem is that 2/3rds of the bad assets are in securities where there is no direct ownership of the underlying asset. Their structure is amazingly complex and ownership is extremely vague. Governing these securities are PSA’s (pooling and servicing agreements) which greatly limit the workout of these assets and why they are currently trading at less than half the cost of whole loan pools – 10 – 30 cents on the dollar.

    A solution, though very un-libertarian, would be to blow away the PSA’s thereby allowing holders of the securities to workout and refinance loans.

    The end result should be to increase the value of the securities to the 40 – 70 cent value of whole loans which is what most people expect the Fed’s to pay for these “toxic” assets and it would be handled without gov’t dollars.

    My two cents.

  103. One thing I didn’t mention is if the gov’t buys these assets at a reasonable price – 60 to 70 cents on the dollar – they could see a very nice return on their investment in 2 to 3 years.

  104. One thing I didn’t mention is if the gov’t buys these assets at a reasonable price – 60 to 70 cents on the dollar – they could see a very nice return on their investment in 2 to 3 years.

    Occam’s razor says they won’t. Evar. If all it took was an entity to purchase the pad paper for 60 to 70 cents on the dollar (which seems to high to me– but anyhoo) then a combination of domestic and foreign firms would be jumping on it now.

  105. err *bad paper* sorry

Please to post comments

Comments are closed.