Posted on 09/23/2008 1:00:36 PM PDT by mathprof
A key quote in this morning's Senate hearing about the Paulson bailout is worth repeating. This comes from Ohio Sen. Sherrod Brown, a Democrat:
"Like my colleagues, my phones have been ringing off the hook. The sentiment from Ohioans about this proposal is universally negative."
Not "overwhelmingly negative." Not "deeply suspicious." Not "extremely upset." Universally negative.
I'll state the obvious: Members of Congress aren't generally in the habit of passing historic and spectacularly unpopular legislation five weeks before election day. Republicans in Congress hate this bill, and I'm unconvinced the Democrats in Congress will take a bullet, figuratively, for the most unpopular president since the final days of Nixon.
(Excerpt) Read more at latimesblogs.latimes.com ...
For my money (I’m an MBA), it never made economic sense. Thank God it now also makes no political sense.
This is one the President should never have stepped behind. He could have hung the Democrats out to dry with it, had he only stayed even neutral. Still, there is an upside. Given he is so very unpopular, this extremely unpopular idea is now linked to him and every Republican can step away, hurling rhetorical stones as they go.
Hopefully, most of them will land on Democratic heads, of course.
Yeah well it’s too bad you peasants don’t have a say.
Vote Obama this fall and have a nice day. :D
(/sarcasm)
I say, let the real estate speculators fail and the oil companies drill. Cheap real esate and cheap oil sounds good to me.
I'm with Shelby, et al on this thing. The economy is screwed for the next year no matter which route the government takes.
Rather get the divorce of Wall St & DC over with, the sooner the better.
the problem for democrats is that they can’t think of a plan that doesn’t involve a bailout since it is their philosophy. But they need to do something about this problem and there is a conservative alternative coming up.
“Members of Congress aren’t generally in the habit of passing historic and spectacularly unpopular legislation five weeks before election day.”
Well thank God there is at least that holding this thing up. I called my congressman yesterday (he’s on the finance committee). I called again today. I called his OTHER office today and let them hear me roar. I hope you are all calling your congressmen!! I’m in Texas. Their office told me their phones were ringing off the walls with disgusted constituents. MAKE YOUR CALLS TODAY!!! Their numbers are online! Google!!
Capitalism and private enterprise are what makes America great. Not government intervention in the private sector.
I am hoping that since Bush suggested the bail out, that Congress will NOT give it.
THAT WAY . . . if Obama somehow gets elected, he will be forever remembered as the President of the second great depression and it will take three to four years for us to pull out of the depression (unless George Soros foots the bill for his pal Obama), OR, if McCain gets elected he can shake up Washington with some “drum roll please” common sense!
It’s a win-win for Republicans, either way. Obama will not be able to Socialize the USofA because he’ll be too busy trying to find his cue-cards to tell us about the Thousand Dollars he plans to give each working family.
80% of the American people dio not support this bailout, that means only 20% do.
Let the chips fal;l where they may.
This is just a plan to bailout Paulson’s wall street friends.
Solvent companies will step in and buy this companies assets up cheap, just as it should be.
It’s a tough world!
Sen. Brown is a “Progressive”. He would KNOW what the CPUSA website says for sure. No Wallstreet Bailout without a Mainstreet Bailout.
As far as the ‘bailout’, if there were even ONE Republican that this could be hung around, the Dems would make him the poster child.
Sorry to burst your bubble, but CONgress can’t “fix” this. No one can. The bubble was blown too big in too many different directions, and debt service cannot be sustained.
Just suppose this passed - what does that do ? It buys 700 billion worth of bad mortgages, CC debt and/or student loans. Then what ? People are still foreclosed upon because they can’t afford their home, their luxury car, their 5 figure CC debt etc etc.
Debt levels must contract in order to be affordable, ergo credit must contract. The process is extremely painful and the good will be hurt along with the bad.
There is, however, no alternative. Do what they will, the Treasury cannot print trillions and trillions of dollars to pay off bad debt, because they are taking money away from people who already cannot pay their bills. Should they do this and print, then welcome to Weimar. Do you think THAT will be pleasant ?
Let CONgress leave town and do nothing. It won’t change the final outcome and the taxpayers of this nation and all those who depend on the dollar will thank them.
Banks will fail, we’ll need to expand the FDIC balance sheet to handle it, and stop the games and the lying. Make the banks mark to market and restore trust in balance sheets - no more Level 3 accounting games.
Agree. I think this has already filtered through the markets in terms of a “panic,” and it won’t do much more damage to let it go. Time to let the market work.
It likely is, but that isn't the whole reason. If the Dems could afford to let Wall Street sink slowly into the Atlantic, they'd go off to their cocktail parties and not even wonder about the damage.
Thing is, this is about their portfolios and the money train they've built up. They don't want to have to admit they're totally sold to big-money interests, because then they'd have to admit that the lobbying problem is on their side and hardly at all on the other. This would be ultimately catastrophic.
Of course, after all is said and done, there's also the added attraction of being able to justify nationalizing the economy and then getting to seat themselves at the head table, where the pickings are always tastiest.
Those of us on the servant's benches will have to fight the dogs for the scraps, but that would be where we belong, in Democratic minds long inured to high-living off the proceeds of institutional socialism.
I called my congressman’s office this morning...I had to call three times before finally getting thru...
MISH’S Global Economic Trend Analysis
http://globaleconomicanalysis.blogspot.com
Open Letter To Congress On The $700 Billion Paulson Bailout Plan
http://globaleconomicanalysis.blogspot.com/2008/09/open-letter-to-congress-on-700-billion.html
Dear Congress
Treasury Secretary Paulson is asking you to rush through a $700 billion package because “were literally maybe days away from a complete meltdown of our financial system”.
Paulson states that it must be done quickly and that it is better than the alternatives. Fed Chairman Bernanke agrees.
The first question Congress should ask is how would Paulson or Bernanke know?
It was only a month ago Paulson was reiterating to anyone who would listen how sound our banking system is. The fact of the matter is that neither Paulson nor Bernanke saw this coming, yet now Congress is supposed to trust they now “know” the solution.
Problem Defined
Before one can work out a solution, the first step is to identify the problem. The problem is not a lack of liquidity, it is not a lack of trust, it is not lack of consumer confidence, it is not subprime lending, and in fact the problem is not housing at all.
The problem is consumers and corporations are deep in debt with no way to service that debt.
Attempts to bail out banks and brokers at taxpayer expense will do nothing but add to consumer debt, weaken the US dollar, and literally waste $700+ billion dollars that can and should go to more productive uses.
What Caused The Problem?
The Fed
Congress
Fractional Reserve Lending
The Treasury
The root cause of this problem is the Fed micromanaging interest rates, the Treasury cheerleading every step of the way, and Congressional sponsored spending that went wild. The critical issue that ties everything together is fractional reserve lending allows banks to borrow money (credit really) into existence with insane amounts of leverage.
To top it all off, Greenspan slashed rates to 1% fueling the biggest global housing bubble the world has ever seen. Congress needs to figure out a way to eliminate the Fed.
Fed Uncertainty Principle
I kindly ask of you to please read the Fed Uncertainty Principle
http://globaleconomicanalysis.blogspot.com/2008/04/fed-uncertainty-principle.html
written April 03, 2008 before any hint of this meltdown occurred. Here is Corollary Number Two.
Uncertainty Principle Corollary Number Two:
The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.
Why The Paulson Solution Fails
The Paulson solution fails because it does not help consumers or businesses service debt, it does not create any jobs, it increases the national debt, and it encourages more reckless lending by banks. Attempting to bail out banks on the back of cash strapped consumers is simply doomed to fail.
If printing money was the solution to all problems, Zimbabwe would be the most prosperous country in the world.
The Barney Frank Non-Solution
“We’re going to be buying up a lot of mortgage paper” said House Financial Services Committee Chairman Barney Frank.
Sadly, that will not do a single thing in and of itself to stop foreclosures. All that will do is bail out banks and brokers at taxpayer expense.
Barney Frank also stated We should be more willing to write down the mortgages. Well become the lender. The government will wind up in a controlling position so that we can reduce the number of foreclosures.
Congress needs to ask “How much extra will Barney Frank’s proposal cost taxpayers?”
Were does the madness end?
As stated earlier the problem is not housing in the first place, and besides, taxpayers who pay their mortgages on time should not be subsidizing those who don’t!
Banks Need To Recapitalize
Paulson wants to recapitalize banks so they can keep lending. Ironically, one of the problems is lending. The US has been on a credit binge to such an extent that I have to ask what more do we need? More Pizza Huts? More Home Depots? More Houses? More Nail Salons? More Car Dealers? What?
What is the urgent need to lend still more?
We are in this mess because of too much reckless lending. We do not need more lending, we need more saving!
Paulson’s idea that more lending is needed is ass backwards. Paulson’s proposal cheapens the dollar, and discourages the one thing that is desperately needed: saving.
Alternatives Discussed
In the mad rush to push through this package, Paulson states it is better than the alternatives. That is an interesting statement because no alternative have even been presented to Congress, let alone discussed.
Shouldn’t there be a discussion of alternatives before doing a mad dash to sign a $700 billion package?
Paulson is attempting to hoodwink Congress to pass his plan without any discussion of alternatives. I believe the Paulson proposal is the worst of all solutions in that it bails out banks at the expense of the taxpayer and the taxpayer gets virtually nothing out of the deal: no jobs, no tax relief, no health care.
Paulson claims that taxpayer will benefit by the bailout indirectly because once the government owns the debt, servicers will be more willing to negotiate terms. Once again, it will be taxpayers on the hook for any negotiation granted. Paulson conveniently ignores this cost as does Barney Frank.
Taxpayer Gets Nothing From Current Bailout Proposals
The taxpayer gets nothing for this bailout $700 billion. Actually the taxpayer gets a negative benefit because the Paulson and Frank proposals will cheapen the US dollar, increase the deficit, and ultimately cause prices of imported goods to rise for everyone, while saving a relative few.
The solution is to address the recapitalization of banks in a fair way that does not jeopardize the taxpayer but instead puts the onus of responsibility on banks making reckless lending.
Recapitalizing Banks
Banks are undercapitalized. They need funding badly. Here is what I propose.
Reduce the capital gains tax by 50% for any investor willing to cash out stocks and invest in 5 year bank CDs.
Eliminate the difference between long term and short term capital gains.
Eliminate taxable interest on savings accounts, CDs, and US treasuries.
The above would promote saving rather than speculation and provide a big boost in government revenues as well. Stock prices will not be affected over the long haul by these measures.
Jobs, Jobs, Jobs
I am a libertarian. I do not believe in makeshift government proposals. However, I would rather get something than nothing for $700 Billion. Paulson’s proposal scores a big fat zero in terms of providing jobs or any real economic stimulus.
It is no secret that infrastructure in the US is decaying and needs to be fixed. A collapsing bridge in Minnesota is one key example. And what out our aging energy grid? Instead of giving $700 billion to banks that deserve to go under, I would rather give half that for jobs programs.
To create as many jobs as possible at the least cost Congress needs to scrap the Davis-Bacon Act. It would be better to create 3 construction jobs at $12 an hour than 1 job at $36 an hour. The idea here is to get as most bang for the buck and create as many jobs as possible for the money spent.
Waste In Iraq
We need to admit the mistakes in Iraq. The public never supported this war and the public was correct. The war in Iraq easily cost $1 trillion dollars if you count future medical bills. That is $1 trillion dollars that could have been spent right here in the US.
I propose we declare the war won and get out, totally and completely. Offer returning veterans first crack at any infrastructure rebuilding jobs. It is the least we can do to those who are likely going to be emotionally if not physically scarred for the rest of their lives fighting a war that never should have been fought.
Congressional Spending
Congress needs to admit its own role in this mess. Congress passed hundreds of programs to make housing more affordable. They all failed including the biggest failure of all: Fannie Mae and Freddie Mac.
It should not be the role of Congress to promote housing vs. renting. The very act of doing so creates an artificial demand for housing. Ownership society madness culminated with many financially unqualified to buy a house buying house anyway because Congress and the White House promoted the idea.
Congress is also directly responsible for deficit spending and that weakened the US dollar. Indeed there was virtually a panic out of dollars for this reason. Adding another $700 billion to the deficit as Paulson is asking you to do is adding insult upon injury. Don’t do it.
Instead balance the budget. It can be done.
Who Am I?
Who am I to suggest what Congress should do? I am nobody. However, this nobody and a bunch of fellow nobody bloggers and bunch of nobody fund managers who I respect all saw this all coming 3-4 years ago. Paulson did not, Bernanke did not, and almost everyone in Congress did not.
So the choice Congress needs to make is who to believe. Congress can believe Bernanke and Paulson who have been totally wrong about everything for years, or Congress can listen to people who not only understand what is happening but predicted it.
Desire To Believe
You desperately want to believe that Paulson and Bernanke are telling the truth. You have for years put your faith and trust in them. It is a very difficult thing to do to admit you are wrong.
However, it is critical that you look at the simple facts for what they are.
The fact is Paulson is grasping at straw in a tornado. So is Bernanke. Problems cannot be cured by printing money, and problems cannot be on the backs of already overburdened consumers.
No problem is fixed by madly and blindly rushing into solutions where no alternatives are discussed. You now have alternatives.
I will also offer one more alternative but it is not from me. I kindly ask Congress to consider An Open Letter to the U.S. Congress Regarding the Current Financial Crisis
http://www.hussmanfunds.com/wmc/wmc080922.htm
by John P. Hussman, Ph.D., an economist and investment manager whose opinion I trust.
Hussman too has an opinion as to how to address this issue without impacting the taxpayer. For the record, I have no idea what he might think of my proposal.
However, between the Hussman proposal and mine, I am sure there is fertile ground for further discussion and for doing something other than what I believe to be the worst possible alternative, the proposal submitted by Treasury Secretary Paulson.
No problem is too big that a solution has to be rushed into without considering the alternatives. I ask that you consider these alternative proposals either over an extended session or by letting the next Congress tackle the issue.
Heaven help us if recess is more important than taking the time to seriously consider all reasonable alternatives.
Sincerely
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
President Bush should have hung those responsible “out to dry”. For those that remember the savings and loan “rescue” it is “Deja vue” all over again.
The American taxpayer and our children and their children will be enslaved with a national debt that can be paid back only with many many years of high taxes and a diminished standard of living. This “bailout” if enacted will be a “TRUMPETED EXCUSE” for years, allowing taxes to be raised!!
And if the Dimorats are elected financially it will be "Katey Bar the Door" on our incomes in terms of raised taxes. The economy must be allowed to grow unfettered by artificial government intervention in the name of “Social Engineering” Mr Biden got one thing correct in his statement about “Patriotic duty” IT IS ALL TAXPAYERS PATRIOTIC DUTY TO CLEAN OUT WASHINGTON AND ENACT TERM LIMITS ON LEGISLATORS!!! In so doing incentive for personal gain will be removed and the UNITED STATES OF AMERICA WILL BE RETURNED TO THE PEOPLE. Yes, PEOPLE, we who pay the taxes and make this country great!!
This is the time for another revolution, however this one won't start in Boston! Man it feels good to rant. :-) :-)
This guy wearing a very expensive-looking suit walks into a bar. He’s shod in shoes that must have set him back your car payment, silk sox and suspenders (no, I’m sorry—`braces’). His hair was slicked back so it was like a mirror.
And he had a parrot on his shoulder, a big one with red and blue feathers.
But the man acted like a zombie. The parrot was nudging him with its beak and appeared to be whispering in his ear. The parrot nudged him and the man staggered over to the bar and sat down on a stool.
The bartender wasn’t sure what to think at first, but the bird was well behaved and the guy, he ain’t sayin’ nuthin’, so he throws his bar rag over his shoulder and says, “Hey he’s a real beaut. Where’d you get him?”
And the parrot replies, “Wall Street. There’s thousands of `em there....”
NAFTA passed even though 80% of the public was against it.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.