Capital Markets

Bush: Why My "Unprecedented and Aggressive" Nationalization Is Necessary

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The worst president since fill-in-the-blank (I vote Richard Nixon) has made another blood-curdling speech about the economy this morning, this time in support of the forced partial nationalization of nine major banks.

Here are some of the president's un-bon (or just unbelievable) mots:

[T]he government's role will be limited and temporary…. [T]hese measures are not intended to take over the free market, but to preserve it. […]

We have a strategy that is broad, that is flexible, and that is aimed at the root cause of our problem.

Interrogative: Isn't one universally acknowledged "root cause of our problem" the credit and liquidity bath Americans have been swimming in for a decade, thanks in part to federal government easing of monetary policy, combined with the heavily politicized mortgage-holding-of-first-and-last-resort over at Fannie Mae and Freddie Mac? There is no doubt that we are indeed in a temporary liquidity crunch (for more on which, I highly recommend this Vernon Smith piece in the Wall Street Journal). But a "root cause" reaction to a crisis fueled by easy money would do something besides easing up the money supply, right?

Bush also claimed that "the program is carefully designed" (insert PATRIOT Act analogy here), and that it's aimed to "ensure fairness" in the markets, whatever that can even mean at this point. And the Treasury secretary also cried crocodile tears for the free markets:

"We regret having to take these actions," said Paulson. "Today's actions are not what we ever wanted to do—but today's actions are what we must do to restore confidence to our financial system."

And an ellipses-enabled couplet from the Wall Street Journal's story:

Some of the big banks were unhappy about the government taking equity stakes, but acquiesced under pressure from Treasury Secretary Henry Paulson in a meeting Monday. […]

Senior executives and advisers to some of the nation's leading banks pitched such a plan at various points earlier this summer but were rebuffed by officials at Treasury and the Fed, according to people familiar with the matter. Instead, Treasury initially marched ahead with a plan to buy distressed assets directly from banks.

These may seem in contradiction, but they're not: In any industry, and particularly one that faces as many regulations as the financial sector does, there are usually two camps: Those who want to rig government rules in their favor, and those who don't. One thing I've never understood about the Great Man theory of modern economic Cabinetry is the fetishization of Wall Street titans like Robert Rubin and Henry Paulson as Treasury secretaries. Yes, they "understand" Wall Street, but isn't that at some point part of the problem? That is to say, don't you think the perspective of a former Goldman Sachs CEO would be a little more investment bank-centric than that of, for example, an economist? Lee Iaccoca "understands" the auto industry, I suppose, but should he be the one crafting Detroit-oriented industrial policy and CAFE standards? Should Patricia Woertz write the farm bill, assuming that she doesn't already?

There are a whole host of conflict of interest concerns at play here, whether we're talking about Goldman or just the bizarre fact that the federal government–with all the political, not economic, needs–is now a major shareholder in nine competing financial institutions. But even if you toss that all aside we have the specter of a bunch of Wall Street bankers making emergency policy on behalf of (and sometimes over the objections of) a bunch of Wall Street bankers. Ya think they might be exaggerating a little the threat to the country as a whole if they aren't able to exercise whatever new power they invent tomorrow?

More lowlights from previous Bush speeches here and here. Recent reasonailia on bailouts here.

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  1. “The worst president since fill-in-the-blank (I vote Richard Nixon) has made another blood-curdling speech about the economy this morning, this time in support of the forced partial nationalization of nine major banks.”

    I vote Woodrow Wilson.

  2. “[T]he government’s role will be limited and temporary…. [T]hese measures are not intended to take over the free market, but to preserve it. […]”

    I can’t imagine this playing out any closer to The Road to Serfdom than this… Almost amusing.

  3. Bush had to destroy the free market in order to save it.

  4. James Buchanan got a bad rap. Everyone says that he let the South slip away, but he read the Constitution and didn’t see that he had the power to do anything else… so he didn’t do anything.

  5. Sometimes I wonder if the Harvard MBA is overrated.

  6. I remember: in the second Reagan administration, my father would look distractedly out the window and muse that he would live to see a two trillion-dollar federal budget.

    Guess what: that could be the budget deficit, next year.

    It is impossible to describe how fucked we are. That will be left to the historians.

  7. One thing I’ve never understood about the Great Man theory of modern economic Cabinetry is the fetishization of Wall Street titans like Robert Rubin and Henry Paulson as Treasury secretaries. Yes, they “understand” Wall Street, but isn’t that at some point part of the problem? That is to say, don’t you think the perspective of a former Goldman Sachs CEO would be a little more investment bank-centric than that of, for example, an economist? Lee Iaccoca “understands” the auto industry, I suppose, but should he be the one crafting Detroit-oriented industrial policy and CAFE standards? Should Patricia Woertz write the farm bill, assuming that she doesn’t already?

    Careful now Mr. Welch, you are wandering into looney liberal territory.

    What do you mean you have concerns about connected industry insiders being regulators?? Who else knows the industry well enough to “regulate” it without and shape policy than those who have made their livelihood in those industries?

    Conflict of Interests? HAHAHAHAHAHA!! What are you a fucking commie?

  8. DOOM
    DOOM
    … aw, screw it…

  9. B-b-b-but the DJIA is up today guys!

  10. [T]he government’s role will be limited and temporary…. [T]hese measures are not intended to take over the free market, but to preserve it. […] We have a strategy that is broad, that is flexible, and that is aimed at the root cause of our problem.

    Scary.

    I was thinking that if the feds own the banks, will that give them permission to snoop over my account? Will I have to justify the 4:00 a.m. ATM cash withdrawls? How hard would it be for them to take a look-see at, say, some agitator to look for something they don’t like?

    The Fed is starting to remind me of the world sized city/government in the Asimov universe called Trantor.

  11. James Buchanan got a bad rap. Everyone says that he let the South slip away, but he read the Constitution and didn’t see that he had the power to do anything else… so he didn’t do anything.

    I’ve wondered the same thing.

  12. History will show Jimmy Carter was worse.
    That isn’t to say Bush in’t really bad.

  13. “I was thinking that if the feds own the banks, will that give them permission to snoop over my account?”

    Wake up, kid.

  14. Government needs banking system so it can print money. Banking system needs government so it can print money. No wonder things get screwed up.

  15. I’ll say Nixon, too.

    Last decade, I tried to convince my parents that Carter was worse than Nixon, but my mom kept coming back to, “But with Nixon, there just wasn’t anything that you would put past him.”

    At the time I thought that was a pretty weak argument. After having lived through Bush, I now find that argument very compelling.

  16. Gallon of Milk: $650.-

    Loaf of bread: $478.-

    Total:$1128.- (or four unfiltered Pal Malls and half of a hershey bar)

  17. I’ll say Roosevelt (you can take your pick)

    Every time W opens his mouth on the economy the Dow drops 400 points. I wish that lame duck would just shut the fuck up already.

  18. I am certainly not an expert, but most reasonable analysis I have heard is that this is NOT the coming of the next Great Depression. But, if the government were to do nothing, “the economy would be bad”.

    My opinion is that the Fed’s should let everyone ride it out(do nothing, that is). My opinion is the stock market would not be happy, but it would get over it in a couple of years. Mortage rates would be high, and only available for the well-qualified (good income, 20% down). The economy would be like the 1970’s-it sucked, but we all survived.

    Anyone care to comment?

  19. kennedy, johnson, nixon, ford, carter, reagan, bush I, clinton, bush II

    life doesn’t get better than this

  20. Market Fundamentalist: Oh, if they just left the Market alone, we would be, like, living in paradise. Why can’t they see?

    Secular Skeptic; Because the Hand is invisible?

    MK: No, I mean see as in understand. Why can’t they understand?

    SS: Maybe the Market is just a human construct. Maybe it isn’t perfect.

    MK: Statist! Statist! ++++

  21. Anyone care to comment?

    Yeah, go fuck yourself.

  22. @Lefiti

    The market isn’t a human construct, it simply exists. Though I suppose you think natural rights are a human construct too.

    I would like to see my social contract now so I can burn it.

  23. Lefiti,
    Does it make you uncomfortable to agree with George W Bush so much?

  24. I wonder if Lefiti thinks gravity is a human construct too.

  25. I’d be willing to drop him on his head to see if it applies to him.

  26. Too late. Apparently someone already has.

  27. The funny thing about Edward/Leftiti is that he thinks Ron Paul was a kook for warning that the financial sector was unsound, and that the monetary policy pursued by Reagan, Bush, Clinton and Bush is unsound.

    Then, he turns around and blames market fundamentalists of the Ron Paul type for the failure of those same policies.

    No internal contradiction there. 😉

    I think Edward/Leftiti is in a bad mood because he wants the assett prices to keep going up. As I recall, he claimed to be a trust fund baby. I wonder what kind of a bath his meal ticket is taking in these times.

    No wonder he’s pissed off and looking around desperately looking for someone to blame.

  28. Just say NO to those who want to nationalize the banking system.
    http://nomedals.blogspot.com

  29. The problem with the Republicans is that they’ve abandoned their principles and the problem with the Democrats is that they’ve stuck with theirs.

  30. Ok, I’m one of the resident lefties here, and even I’m offended, especially since the banks the government are buying include ones that aren’t even in trouble! WTF? There’s nothing wrong with BoA, Citi, JP Morgan Chase, or Wells Fargo-in fact these are the “winners” in the current crisis, buying up the “losers” for pennies on the dollar. This move is offensive and retarded. I don’t get it.

  31. “Lefiti” — “Market Fundamentalist: Oh, if they just left the Market alone, we would be, like, living in paradise.”

    Betcha don’t have a citation for that.

  32. Wall Street had a nice little rally going on until Bush made his speech. Now the Dow is down 200-300 points.

  33. So is there ANYONE who doens’t think Bush is the Antichrist?

  34. “”””I was thinking that if the feds own the banks, will that give them permission to snoop over my account?”””

    They already have that. Judge Napalitano talks about how it works. See the video here
    https://www.reason.com/blog/show/124082.html

  35. The worst president since fill-in-the-blank (I vote Richard Nixon)

    James Buchanan. And I’m giving GWB the benefit of the doubt.

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