Economics

Cars for Wall Street

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In an Entertainment Weekly interview, without actually using the phrase "moral hazard," Jon Stewart and Stephen Colbert offer a straightforward, funny explanation of the concept of a moral hazard:

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STEWART: We were in this huge credit crisis, out of money. Then the Fed goes, We'll give you a trillion dollars, and all of a sudden Wall Street is like, "I can't believe we got away with it!" Can you imagine if someone said, "I shouldn't have bought that sports car because it means I can't have my house," and the bank just said, "All right, you can have your house. And you know what? Keep the car." [He throws up his arms joyfully and shouts] "Yeaaaaah, I get to keep the car! Wait, do I have to give the money back?" "No, it doesn't matter." "Yeah, I'm gonna get another car! I'm gonna do the same thing the same way, except twice as f—ed up!"

COLBERT: The idea that Lehman Brothers doesn't get any money and AIG does reminds me very much of "Iran is a mortal enemy because they have not achieved a nuclear weapon. But North Korea is a country we can work with, because they have a nuclear weapon." The idea is, Get big or go home. How big can you f— up? Can you f— up so bad that you would ruin the world economy? If it's just 15,000 who are out of jobs, no. You have to actually be a global f—up to get any help.

Also quotable: Stewart on the media's coverage:

We've got three financial networks on all day. The bottom falls out of the credit market, and they were all running around. On CNBC I saw a guy talking to eight people in [eight different onscreen] boxes, and they were all like, "I don't know!" It'd be like if Hurricane Ike hit, and you put on the Weather Channel, and they were yelling, "I don't know what the f— is going on! I'm getting wet and it's windy and I don't know why and it's making me sad! Maybe the president could come down and put up some sort of windscreen?"

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  1. Say what you like about them but the truth is they are more reliable and honest than just about any “real” news anchor.

  2. What are they going to do when Obama is on the throne? “Today’s list of the top 10 hoarders and wreckers who are standing in Obama’s way?”

  3. +1 to Naga.

    It’s kind of sad.

  4. mitch,

    Does that mean we can start openly refering to Obama as a looter?

  5. Dow Jones Industrials down over five percent, 508 points today.

    It’s a good thing this isn’t 200 years ago, or I suspect torches, pitchforks, tar, and feathers would be the order of the day.

  6. Washington doesn’t need Obama added to their list of looters … they just gave a shitload of money to one of the biggest: AIG

    Today, the House Oversight Committee discovered that, just one week after the federal government bailed out insurance giant AIG, company executives went on a retreat to a luxury resort. The executives spent nearly $500,000 on manicures, facials, pedicures, and massages, among other things.

    (quote from ThinkProgress.com)(link to The Gavel)

    I’m not sure Stewart or Colbert could have made up anything more reflective of the bullshit that’s going on around us. I look forward to their take on this. Maybe SNL could do a skit about it, too. That way at least we could be amused by it, rather than incensed.

  7. Maybe the president could come down and put up some sort of windscreen?

    Only if you are white.

  8. The quote from Stewart is a pretty good example of his somewhat lacking comic abilities. Colbert is funny as hell, but as for Stewart, I say thee nay.

  9. The idea that Lehman Brothers doesn’t get any money and AIG does reminds me very much of “Iran is a mortal enemy because they have not achieved a nuclear weapon. But North Korea is a country we can work with, because they have a nuclear weapon.” The idea is, Get big or go home.

    Well duh, blackmail sucks. Does he, or anyone, have a better suggestion to the basic problem of blackmail in either situation? It’s not like the idea of “I will behave no differently towards someone, regardless of the consequences or their ability to threaten me” is necessarily logical either.

    It’s all very well to say that one has to stand up to blackmail in the short run to avoid long run problems. That doesn’t mean that I want to start a nuclear war over that principle, nor that I want to let other countries that want to get a piece of the blackmail action do so either.

    The only solution in the case of, e.g., Fannie and Freddie would be not letting them get so big in the first place. Complaining about the blackmail later is crying over a sunk cost.

  10. I saw a guy talking to eight people in eight different onscreen boxes

    Kind of like Hollywood Squares except they were in six boxes and were often entertaining.

  11. The quote from Stewart is a pretty good example of his somewhat lacking comic abilities. Colbert is funny as hell, but as for Stewart, I say thee nay.

    I dunno. The following line in bold really got an uncontrollable guffaw out of me:

    It’d be like if Hurricane Ike hit, and you put on the Weather Channel, and they were yelling, “I don’t know what the f— is going on! I’m getting wet and it’s windy and I don’t know why and it’s making me sad!

  12. I could swear that there were 9 boxes on Hollywood Squares.

  13. The quote from Stewart is a pretty good example of his somewhat lacking comic abilities. Colbert is funny as hell, but as for Stewart, I say thee nay.

    I’d give Stewart much more credit if he cut the baby talk and stopped elaborating on good jokes until he wrings all the funny out of them.

  14. Stewart’s first comment is completely valid, and true, except for the fact that his entire party line up until now, is that of a welfare state socialist (I am not hyperventilating, he has admitted this explicitly). I suppose one’s position that an individual is not responsible for his actions has an inverse proportional relationship with said individual’s wealth in this case, which is why this “crisis” has made strange bedfellows of principled conservatives and many liberals. Though the liberals seem to like the idea for more emotional and punitive reasons, as illustrated by Stewart and company.

  15. What are they going to do when Obama is on the throne? “Today’s list of the top 10 hoarders and wreckers who are standing in Obama’s way?”

    I’ve been saying for months that if Obama wins, Stewart takes a hiatus. TDS is nowhere near as funny as it used to be, and he could probably use a break to work on other things.

    Colbert… if Obama wins, expect O’Reilly to take the position of Limbaugh during the Clinton years. This should give Colbert ample fodder.

  16. I’ve been saying for months that if Obama wins, Stewart takes a hiatus. TDS is nowhere near as funny as it used to be, and he could probably use a break to work on other things.

    Meh, the Daily Show was awesome* during the Clinton administration (even post-Kilborn) and I’m sure they’ll manage during an Obama administration. Chris Rock says that as a professional he’d prefer Obama because making jokes about an angry old man is played out and unoriginal. I have no doubt Obama will leave them with plenty of material. Maybe they’ll go back to their roots and skip the moral outrage and go back to laughing at the ludicrousness of reality.

    * At its best I would say.

  17. “Does that mean we can start openly refering to Obama as a looter?”

    Might as well get started early – because once he becomes prez he will be looting your paycheck. Yeah, that jingle in your pocket is the only real change you’ll be seeing for a while.

  18. “Washington doesn’t need Obama added to their list of looters … they just gave a shitload of money to one of the biggest: AIG”

    Are you too thick to understand how the AIG deal was structured?

  19. Jasno,

    What will prove you wrong? For example, if JS takes 2-3 days off, or a week, does that prove you were right? Because EVERYONE KNOWS JS will take a short break right after the election. I assume your prediction is that he will take, like, 4 months off – or longer?

  20. So these guys are on SNL or something? I stopped watching after they got rid of Norm MacDonald.

  21. kablammo: I must be. Please explain the part of the deal where it says AIG executives can use $500,000 of the $84M to go party? Seriously. I must have missed that.

    Or, perhaps you can explain how your brain fails to comprehend what the “deal” was actually intended to accomplish. If you were capable of that much thinking, you would realize that the proper term is not “deal”, but rather “bail out” or “toss a life preserver to” or “keep above water” or “support with taxpayer dollars”. Note that none of the proper terms contain any illusion that spending half a million dollars on massages and strippers is a proper expenditure.

    Toad.

  22. And kablammo, you should get yourself some new buzz phrases. See, “that jingle in your pocket is the only real change you’ll be seeing for a while” is old and tired, like your man McCain. It was boring 2 months ago, and it’s still boring.

  23. To clarify, I predict they’ll have a new host for TDS by March.

    So, I ask you, who will it be?

  24. James, first try and wrap your brain around the difference between a liquidity problem and a solvency problem. Unless you’re really bad at math, $1 trillion in assets should be significantly more than an $85bn debt. AIG had a liquidity problem, not a solvency problem, mostly due to collateral calls on their CDS portfolio. And to be fair, as of Sept. 30 it was $61bn outstanding on the $85bn credit facility.

    What AIG got wasn’t a “bailout”, unless you’re foolish enough to consider it a “bailout” when a bank extends you a mortgage, requires you to pay it back, and charges you interest on the money. The Fed gave AIG a loan. Do you understand the concept of a “LOAN”? The government took a 79.9% stake in AIG to protect their (the taxpayer’s) interest, effectively diluting the shareholders (Greenberg himself lost something along the lines of $2bn). And speaking of interest, AIG is paying almost 12% on that loan. I can get a mortgage for about half that rate.

    If you read the financial pages, you’d see that AIG is already making moves to sell off units to repay that loan, retaining JPM and Blackstone to coordinate the sales. If AIG now wants to waste a little money on fancy vaccations, I really don’t give a shit – its just that much longer they’re going to have Uncle Sam as a controlling shareholder and be racking up interest with the Fed.

  25. So these guys are on SNL or something? I stopped watching after they got rid of Norm MacDonald.

    What a coincidence, I stopped after they hired Norm MacDonald.

  26. “that jingle in your pocket is the only real change you’ll be seeing for a while” is old and tired, like your man McCain”

    It may be old and tired, but its true. Or are you so gullible as to believe your boy obama when he says its only going to be on those of us making over $250k?

  27. So these guys are on SNL or something? I stopped watching after they got rid of Norm MacDonald.

    What a coincidence, I stopped after they hired Norm MacDonald.

    In that case, you both missed a good monologue, after Norm was fired and then was asked to come back and host the show. There might be video out there somewhere, but this Youtube clip has audio, and is still pretty good.

  28. What AIG got wasn’t a “bailout”, unless you’re foolish enough to consider it a “bailout” when a bank extends you a mortgage.

    It was a bailout. A bailout is not necessarily a direct subsidy, but government support of an institution struggling to repay its debts. The alternative, after all, was wiping out shareholders, probably most creditors and many jobs.

    And speaking of interest, AIG is paying almost 12% on that loan.

    Well, LIBOR’s backed up like crazy the past few days, and the loan’s rate is 3-month LIBOR +850 bps, which makes it 12.8% right now.

  29. I am a mortgage company owner who has decent connections on Wall Street and I am sure some people will be bailed out but there are many more people who were worth millions who are now broke and without a job.

  30. I’m just an old fart now, I guess. Conan isn’t clever & Stewart and Colbert aren’t even worth the time it takes to hit the remote and switch to another channel.

    Oh well.

  31. “It was a bailout. A bailout is not necessarily a direct subsidy, but government support of an institution struggling to repay its debts.”

    So by your definition the Fed has provided a “bailout” anytime a lender has accessed the discount window?

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