175 Comments

1. a Duoist:

Smiles from politicians who believe in regulating human nature because they fear it. Their smiles reflect their relief: they’ve managed to pull out a few more fangs and claws of the human animal.

Oct 3, 2008 - 3:37 pm 2. Pascal:

As long as the poison remains in the system, the bailout ameliorates the pain while permitting its deadliness to continue.

Oct 3, 2008 - 3:41 pm 3. mika2k1:

Roubini Sees `Silent’ Run on Banks, Urges `Triage’: Audio

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a5Gfs29Ih8VI

Oct 3, 2008 - 4:02 pm 4. Bonzo:

So
Happy Together?

How is the weather?

Oct 3, 2008 - 4:12 pm 5. Bonzo:

Wretchard, I have Flashblock, and did not see your link before I posted. Sorry for the duplicate video. (I was showing a friend how to post HTML).

lol.

Oct 3, 2008 - 4:14 pm 6. American Muslim:

The only hope for mankind is Islam.

Pray that President Obama will move swiftly to replace the Satanic Constitution of the United States by Allah’s (swt) holy Sharia.

America’s corrupt and oppressive political and economic systems are finished. Embrace Islam now and live in peace in submission to the will of Almighty Allah (swt).

Your grandchildren will be Muslim.

Allahu akbar!

Oct 3, 2008 - 4:16 pm 7. slade:

The Bailout doesn’t matter.

It was a necessary Time Out to global markets.

What matters is the steps taken during the next six months.

As the focus is dispersed among presidential campaigns, the missiles in Pakistan/Afghanistan, and who knows what from the jittery jihadists looking for opportunity.

Focus and priorities.

The things we do worst.

Oct 3, 2008 - 4:21 pm 8. Al_Batross:

since I have no children, my grandchildren will be spared that dreadful fate.

Oct 3, 2008 - 4:21 pm 9. Al_Batross:

sorry, referring to American Muslim’s threat there (strongly suspect him of being a McCain supporter really)

Oct 3, 2008 - 4:22 pm 10. Richard Moorton:

I think the bailout is too little, too late. When the full extent of the deleveraging debt throughout the Western world becomes clear, it will be horrific.

The good news is that Asian banks appear to have been much more responsibly run and are in much better shape than ours (or so I read). Whether that will save them in a meltdown is beyond my ability to surmise.

And this for American Muslim. It is much more likely that your grandchildren will be Christian.

Deo gratias.

Best,

Richard Moorton

Oct 3, 2008 - 4:30 pm 11. Habu:

Wretchard.
Any chance of you using the color coded warning system when you feel a thread is going bad?

You know ..a comment by you in amber means beware, if you’re working on a piece that you’ve already invested 30 mins in STOP now because I may turn this thing off before you can end the next wo ……..

Oct 3, 2008 - 4:30 pm 12. Xixi:

There are so many politicans to vote against this November.

Oct 3, 2008 - 4:33 pm 13. trangbang68:

Hey Al Ameriki, your mama will be what? That kind of depraved behavior doesn’t sound like something the Big pedophile in Hell( God curse his rancid soul) would have approved of.

Back to the subject at hand; looking at the four flushing, lowlife mediocre lying gasbags holding the paper it is a guaranteed failure before the ink dries.

Oct 3, 2008 - 4:35 pm 14. rab:

This bailout is a “get out of jail free” card for Barney Franks, Chris Dodd, Charles “gasbag” Rangel, Dingy Harry Reid, and many others on the left side of the aisle.

Look what happened to Bernie Ebbers, Ken Lay (deceased), Shilling, Adelphia creeps, Rep. Cunningham,
and many others.

Why are the bailout “heros” immune to the prosecutor? They are donkeys!

Oct 3, 2008 - 4:48 pm 15. Kentucky Packrat:

The US has just created instant 10% inflation. M2 (the measure of “easily accessed cash and near-cash” ) in the US (as of now) is around 7.7 trillion. The Treasury is going to insert $700b of new cash into M2 by buying this debt. That’s either Weimar style inflation, or (worse) stagflation.

Oct 3, 2008 - 4:48 pm 16. Habu:

I would comment on the bill but given that I understand it is as thick as the New York telephone book, that I haven’t read it, that the experts can’t explain exactly what they’ve developed and that the effects won’t be fully felt for months in the future I’m not sure I’m qualified to say much about it…no wait this is a blog, you don’t have to know sh*t about what you’re commenting on , you can just say anything. Well, no you can’t do that either.

Lets see, ok , here’s my comment. It was passed by the House of Representatives today and signed into law by the President. There.

Can anybody give me the internet address of the bill so I can at least look at part of it?

In the end do we even know the final dollar number and what the bill will do?

Wait, I’m picking up signals from the Mothership. Yes, a bit louder please…ok, yeah…and then what? No way ! Wow, ok then

The Mother ship just told me I won’t personally be getting a penny from this bill.
Darn. Well at least I got to talk about the bill no one knows anything about.

Oct 3, 2008 - 4:51 pm 17. RWE:

BAD! The people responsible will reap the benefits and everyone else will pay the bill!

IT IS INCREDIBLE THAT INSTEAD OF TAX BREAKS FOR WOODEN ARROW MAKERS THAT THE BILL DOES NOT CONTAIN A REQUIREMENT FOR AN INVESTIGATION AND A SPECIAL PROSECUTOR!

FRANKLIN RAINES – Former Chairman and CEO of Fannie Mae. He was in charge when the Republicans tried to get Fannie Mae to meet normal bank standards. Raines works for the Obama Campaign as Chief Economic Advisor

TIM HOWARD – Former Chief Financial Officer of Fannie Mae. He was responsible for the unique accounting practices of the company. Howard is also a Chief Economic Advisor to Obama

JIM JOHNSON – Former executive at te now failed Lehman Borthers and later forced to leave his position of Fannier Mae CEO. Johnson is Senior Obama Finance Advisor and was selected to run Obama’s Vice Presidential Search Committee

Oct 3, 2008 - 4:54 pm 18. RWE:

HABU: Go to http://www.thomas.gov

All of the bills are there.

Oct 3, 2008 - 4:57 pm 19. Habu:

RWE

Many thanks. Your best guess please. How long will it take me to read it so that I can have an INFORMED opinion?

Oct 3, 2008 - 5:21 pm 20. Zim:

They’ll be back to the trough, this ain’t over. We have allowed the pigs a new way at our wallets and our freedoms.

I’m never voting for another incumbent.

Oct 3, 2008 - 5:22 pm 21. ricpic:

If you have anything, anything at all, you spend your whole life trying to protect it from the lefty vandals. How many, like me, are facing potential destitution as we enter our first full fledged diversity depression?

Oct 3, 2008 - 5:35 pm 22. Habu:

OK, I’m cook’n now. I’ve chosen:

TITLE V–ADDITIONAL TAX RELIEF AND OTHER TAX PROVISIONS
Subtitle A–General Provisions

SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN.
*********************************************

So let me drill down and see what I can say about this section.
*********************************

OK let’s begin with a small dilation of SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN.

here:

SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN.

(a) In General- Paragraph (2) of section 4161(b) is amended by redesignating subparagraph (B) as subparagraph (C) and by inserting after subparagraph (A) the following new subparagraph:

`(B) EXEMPTION FOR CERTAIN WOODEN ARROW SHAFTS- Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly–

`(i) measures 5/16 of an inch or less in diameter, and

`(ii) is not suitable for use with a bow described in paragraph (1)(A).’.

(b) Effective Date- The amendments made by this section shall apply to shafts first sold after the date of enactment of this Act.

Well straight away one can see that as outlined in part B (i) that the diameter set at 5/16th or less is an abomination, obviously the work of a filthy Arab or perhaps a neo Nazi. Arrows need a minimum of 13/32nds to be effective, so this part is judged BAD. In observing the exemption for wood over laminated arrows I see an anti American Indian prejudice. I believe we need a SPECIAL PROSECUTOR to investigate

(now more reading and then a return, smok’em if ya got ‘em)

Oct 3, 2008 - 5:39 pm 23. RWE:

Habu: Your first problem will be figuring out the correct bill number to find it on Thomas. Thomas is the first website I ever visited; it was duty-related.

And as for developing an INFORMED opinion, I spent 4.5 yrs in that big 5 sided place and there are people there who THAT IS THEIR JOB relative to congressional direction – and they never attain that exaulted status.

The only way to understand any bill is to read both it AND the underlying supporting documentation developed by the congressional staff that basically describes “What the Congress MEANT to say was…” – and for this, the biggest bank heist in history, they will never allow that to get out.

I wonder if Heritage.com has an analysis? Will check

Oct 3, 2008 - 5:42 pm 24. programmer:

ricpic asks:

How many, like me, are facing potential destitution as we enter our first full fledged diversity depression?

programmer asks: If not too personal, how is the signing of this bill contributing to your destitution?

In my very unsophisticated view, the general result should be a loosening of credit, companies continuing to produce goods, a general rise of the stock market over time, all that sort of thing…

It appears that you have experienced some immediated bad effects, how so (again, if not too personal)?

Oct 3, 2008 - 5:42 pm 25. Habu:

What amazing luck. I founnd an area that tops wooden arrows. Here:

Subtitle B–Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008

SEC. 511. SHORT TITLE.

This subtitle may be cited as the `Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008′.

Here I can say immediately and with a high degree of confidence that the late Paul Wellstone wasa mental case. Enough said.

But wait there’s more !

Oct 3, 2008 - 5:44 pm 26. fred:

My greatest concern is that we have not broken the addiction for statist solutions and social engineering. What Bill Clinton and Janet Reno did in 1995 injected the 1977 Community Reinvestment Act with aggressive steroids. All of this has come undone at a time when the next President of the United States is going to take statism and social engineering to the next level. The country’s appetite for this kind of thing is eroding the unique heritage we received from exceedingly wise and learned men.

Wait ’til change and hope arrive. You’ll know what I mean.

BTW, why isn’t anyone checking out his management skills and property management oversight skills back in da hood?

Oct 3, 2008 - 6:05 pm 27. Habu:

wow hiddden bonanza:
……………………………….

TITLE II–BUDGET-RELATED PROVISIONS

SEC. 201. INFORMATION FOR CONGRESSIONAL SUPPORT AGENCIES.
SEC. 202. All CONGRESSMEN BECOME MILLIONAIRES AT DAWN ON MONDAY OCTOBER 5TH USING SPECIAL RESERVE CLAUSE OF WOODED ARROW PRIVISO.
SEC. 203. ANALYSIS IN PRESIDENT’S BUDGET.
SEC. 204. EMERGENCY TREATMENT.

Check out SEC 202 !!

SEC. 202. All CONGRESSMEN BECOME MILLIONAIRES AT DAWN ON MONDAY OCTOBER 5TH USING SPECIAL RESERVE CLAUSE OF WOODED ARROW PRIVISO.

I think this part is bad.

SCORE SO FAR BAD-2 GOOD-0

Oct 3, 2008 - 6:11 pm 28. Bonzo:

I noticed that when the ‘bailout’ was announced before it was first voted down, the big winners were Russia and Europe.

The bailout sucks, I hate it. I hate even more the pork thrown in. It seems to me that as bad as America see’s things ‘they’ ‘over there’ don’t even have sand to stand on.

Oct 3, 2008 - 6:11 pm 29. Habu:

Lets look at this in a positive light.

John McCain was for this bill and his runniing mate Sarah Palin is behind him and I’m RIGHT BEHIND Sarah on this deal.

Oct 3, 2008 - 6:19 pm 30. Habu:

programmer,

you asked about destitution. well i’m probably older than you are and i have concerns too.

i have no debt, own a place in Montana and one in Florida and through some good luck , hard work and inheritance have seven figures of cash in the bank(s).I have most of my teeth and not enough hair. I started buying gold at around $300 and ounce years ago.The last fifteen years of my working life (I’m 61)i was a stockbroker. i hated it. I retired at 59 when the inheritance kicked in. I have no heirs.
should i buy an eco friendly car?

Oct 3, 2008 - 6:31 pm 31. Knight:

I am in grief for my country. This bailout is as anti-capitalism as Hugo Chavez or his buddies, the Castro brothers. An investigation with a special prosecutor should have been mandatory, beginning with Fannie Mae, Freddie Mac (Jamie Gorelick – again!), the Congressional Oversight committees, the behavior of the FDIC and the silent bidding processes of bank takeovers with leaks, Goldman Sachs personnel – past and present, in short – it is not a $700B bailout – last time I looked it was over $800B and growing. Damn them.

Oct 3, 2008 - 6:36 pm 32. fred:

I see no evidence that the nation has lost its appetite for statist social-engineering, and that the administration taking power in January will be taking this trend to a higher level. It does not portend well for the nation.

Oct 3, 2008 - 6:41 pm 33. 2164th:

Objectively, how much more of a political and leadership failure could their be than that of the past eight years?

How do you measure that? Turn back the clock and imagine reading this on a blog:

BlOGGER MAKES PREDICTION:

dated, September 2000

Here is my prediction for 2008:

1. The US will have a $10 trillion deficit.

2. We will have 20 million illegal immigrants and hardly a federal response.

3. Bin-Laden will kill three thousand in NYC, take down the WTC, successfully attack the Pentagon and will never be caught.

4. We will be in two land wars in Asia and the Middle East. We will spend $700B bringing Ddemocracy to Iraq.

5. The US will be importing $700B per year for imported oil.

6. Venezuela will be conducting war games in American waters with Russian war ships.

7. Venezuela will enter into $4 Billion in weapons deals with Russia.

8. We will have a $200 billion trade deficit with China.

9. China will steal US technology at will and have men doing space walks.

10. North Korea will have a nuclear weapon.

11. Iran will be building a nuclear weapon, and the Iranian president will be making deals with Nicaragua and Venezuela.

12. Chinese influence will spread through Latin America and there will be Chinese industrial parks at both ends of the Panama Canal.

13. All major Wall Street Investment Banks will collapse or be taken over or merged with other banks.

14. A street hustler from Chicago, born in Kenya, to a black Muslim father and some radical American hippy, and who sat in a black liberation church for twenty years, whose claim to fame was a community organizer would get the nomination to be POTUS because a Republican President demoralized his party and 70% of the American people.

15. At the end of his term, this Republican president will have to go hat in hand to a Democratic House and Senate to ask for a $ 700 billion authority to recapitalize the American financial system.

Oct 3, 2008 - 6:46 pm 34. AZM:

W -
Thinking about the “bailout” as good or bad raises the issue of evaluating what problem it is intended to fix/prevent/mitigate. It seems that we are talking about a “bailout” because we are looking at a systemic failure. Here’s an interesting document on failure in complex systems. It’s written from a Healthcare persepective but I think it applies very nicely to the current situation.

http://www.ctlab.org/documents/How%20Complex%20Systems%20Fail.pdf

Oct 3, 2008 - 6:47 pm 35. programmer:

Habu,

The rationale for my question was strictly informational. ricpic seemed to infer that he had suffered immediate monetary consequences of the bailout, which all political implications aside, seems somewhat different from what I am observing in my area of middle America. Other than me standing on a corner with a sign saying, “Will program for food (or if that is too much, will program for free).”, I haven’t seen any credit shortage, massive layoffs, etc. People are still filling their SUV’s with gas, going to movies, eating out in large numbers. I was wondering if this is just a regional thing and other areas are experiencing more immediate reprecussions. AND with my absolute ignorance of things economic, my naive expectation is that flooding money into financial institutions will boost the money supply, since banks don’t like to set on money, they like to lend it; for a consideration, of course. Now, this huge amount of debt will either be paid off by taxes or inflation, nicht wahr, so long term effects can be deletorious to one’s financial stability. Whoops, I just realized I am way out of my comfort zone of 2 + 2 = 5, for all exceeding large values of 2.

Oct 3, 2008 - 6:56 pm 36. trangbang68:

Zim
I was telling my wife an hour ago, every incumbent in Congress should be kicked to the curb. At least the new thieves will take a little while to case the joint before they steal the silverware; the new incompetents can’t do much damage for a while.

Oct 3, 2008 - 7:00 pm 37. bobal:

Pelosi gets some stuff her Samoa operations, but not sure what.

Oct 3, 2008 - 7:07 pm 38. Pascal:

Fred +1

Oct 3, 2008 - 7:11 pm 39. Joshua:

American Muslim: Pray that President Obama will move swiftly to replace the Satanic Constitution of the United States by Allah’s (swt) holy Sharia.

And here I thought the whole BS Obama-as-Muslim meme was finally dead. Guess I was wrong – not only is it still alive, but now, apparently even at least one actual American Muslim has fallen for it!

Oct 3, 2008 - 7:18 pm 40. Habu:

programmer

free advice..take the time to learn the basics of investing. in my first fifteen years of worklife I made a huge amount of money but like you I didn’t know what to do with money so I just spent it. had I simply invested 10,000 when i started working for the government i could have retired earlier than I did.

I am working on a sceenplay about how a lower level gov’t employee working under cover and going to secret places can just make a bundle under the table. It was all taught to me by coworkers.

But the point is that you need to learn about investing. it’s not brain surgery and there are ways to make money. I don’t know how old you are but you have to allow compounding of money to get working for you NOW becasue huge inflation is coming…and it will erode your purchasing power at a time when few are getting even cost of living increases…do this look up the Rule of 72 for an explaination of whats up with one area of money.

I’m sorry you’re all going through this. I can imagine how scary it must be.

Oct 3, 2008 - 7:20 pm 41. RWE:

An old friend of mine bought stock in IndayMac at $19.00 and then again when it got to $6.00.

Then came Schumer and his big mouth. Although the feds had worked out recovery plan for that bank Schumer said it was in trouble and that started a run on the bank. So much for my friend’s $10K of investment.

However, there is some recent good news. After dropping rapidly, the Indymac stock tripled in value and then even went up again.

It’s now up to $0.19 a share…..

But the worst thing about all of this is not the considerable impact on my own investments – all that investment “income” I paid taxes on last year and the year before and the one before that is gone more than twice over – but the fact that this is all the result not of the unfettered free market as is being charged but of deliberate actions by people who not only will go unscathed but are taking credit for the “rescue.” And the almost certain next President of the U.S. was right there in it, and will be elected in part because of it shows teh need to “throw the bums out.” Right! Wrong bums, though. And as a result his various guilty-as-sin advisors will most assuredly be placed in positions of even greater power.

Maybe we screwed up when we eliminated all that welfare in the 90’s. The layabout class and their political masters will always find a way to separate us from our money and try to make us feel guility about being able to keep any of it. Was probably easier and cheaper to just pay them off in installments.

Some good news, though. Just got an e-mail that the military surplus rifles I ordered from the Civilian Marksmanship Program will be here on Monday!

Oct 3, 2008 - 7:31 pm 42. Alexis:

The mainstream media seems to have done a full court press in favor of the bailout. They were beating the drums very hard.

From afar, the whole package looks like banditry, with the American economy held hostage by major banks until Uncle Sam bails them out. It is as if the big banks went on strike against ordinary Americans until enough businesses pleaded with their congressmen to cough up the dough.

This time around, Uncle Sam paid the Dane. But the problem with paying the Dane is that the Dane always comes back for more swag. What’s keeping future speculators from extorting the American taxpayer again and again and again? The value of our currency could get sucked dry if Uncle Sam keeps on bailing out speculators who have found a way to socialize their risk while privatizing their profits.

Is there any limit to these bailouts? If we face a choice between decisively defeating al-Qaeda and bailing out the finance industry yet again, will we cave in to the financiers yet again? If we face a choice between repairing or upgrading our transportation grid and bailing out the financiers yet again, will we let our roads and bridges fall apart lest our financiers learn about moral hazard?

Our politicians came under intense pressure from the mainstream media and an apparent sudden constriction of credit, as if we had been hit from a bankers’ strike. Enough politicians caved in to the pressure to pass the demanded bill. If I smell weakness, chances are that I’m not the only one smelling it. So are the wolves.

Oct 3, 2008 - 7:48 pm 43. programmer:

Habu writes:

in my first fifteen years of worklife I made a huge amount of money but like you I didn’t know what to do with money so I just spent it.

programmer responds:

You must have known me in my younger days. Thanks for the excellent advice. The part about learning the Rule of 72 and how to invest should be carved in stone above the entrance to every school in our country. Young men and women should never be allowed to graduate until they can balance a check book, demonstrate the ability to forego instant gratification (I know, fat chance), and show a savings account with a positive balance to the principal.

However, it is too late for me. I am older than you and am probably, unless I win the lottery, as financially stable as I am going to get, which by the way is not shabby. I probably qualify to be a member of the BC, based on the requirements of the drive-by troll of a few nights before. To paraphrase a SNL character, Software has been berry, berry good to me. Persistence can sometimes make up for initial lack of knowledge.

Oct 3, 2008 - 7:49 pm 44. Tony:

There is a meme perpetrated by massive phone calls to Congressmen’s lines, that MOST Americans are against this.

Most Americans see Wall Street like the plumbing or roof of their house, it’s just supposed to work. When it breaks, every 20 years or whatever, it costs a lot and you fix it.

Then it works again, for as long as possible, you hope. Like your car, for example, or your washing machine or vacuum cleaner.

Isn’t Life grand?

Oct 3, 2008 - 7:54 pm 45. programmer:

RWE says:

Some good news, though. Just got an e-mail that the military surplus rifles I ordered from the Civilian Marksmanship Program will be here on Monday!

programmer says:

It cracks me up that UPS vans all over the United States are pulling up to houses, carrying boxes marked DCM up to the porch, ringing the door bell and leaving. Is this country great, or what? May I inquire what the M designation is? (M-1, M-14, M-16(?))?

Oct 3, 2008 - 7:57 pm 46. Lifeofthemind:

@RWE,
It strikes me as essential that your friend and thousands of others should have a right to sue Charles Schumer and seek civil redress for damages. He did not act prudently in his official capacity to protect his constituents. He acted recklessly to protect his friends, deflect attention from the true culprits who created the instability and to advance his own political interests. It would thrill me if a States District Attorney also brought him before a Grand Jury. The Priveleges clause in the Constitution does not give Senators and Representatives blank checks that cover anything they may do. Schumer’s communication that destroyed the bank was not speech as I see it that is protected by Art. I sec. 6 “… They shall in all Cases, except Treason, Felony and Breach of the Peace, be privileged from Arrest during their Attendance at the Session of their respective Houses, and in going to and returning from the same; and for any Speech or Debate in either House, they shall not be questioned in any other Place. …”

Oct 3, 2008 - 8:02 pm 47. Lifeofthemind:

@Alexis,
The tipoff on this plan was twofold. First there is no effort to eliminate the conditions that created this disaster to begin with. The first rule of holes states that when you are in one; stop digging. The plan neither repealed the CRA, nor restricted the regulations that subjected banks to pressure by Acorn. Second it was endorsed by Barney Franks and the other leaders of the Democratic party who created the problem in the first place.

The reasonable expectation should be that in 6 months the same collection of community activists and backroom mortgage brokers will be generating more toxic waste that bankers will be looking for ways to palm off on what are known technically as suckers.

Oct 3, 2008 - 8:13 pm 48. Tony:

Yo Prog,

Now that you brought it up, and to just to consider slightly lighter topics …

for all those people who always wanted an M-14 for Christmas, and now the only ones you can find have like a million rounds shot through them …

Anyone care to recommend the common hunting rifle most like the ol’ 7.62 or 30.06 semi-auto guns – M1=M14 family?

Sorry to go OT, but it’s a relief to do so, ain’t it?

Oct 3, 2008 - 8:18 pm 49. programmer:

Tony,

Quick knee jerk reflex on my part:

One of the best semi-auto hunting rifles I ever owned was a a Model 100 Winchester in .308 (7.62).

For a picture follow the link:

http://www.gunbroker.com/Auction/ViewItem.asp?Item=111073313

They can still be found at gun shows, online, etc. I swapped mine off in a fit of insanity (this is by the way, a regularly recurring malady that I suffer from).

For more info, see:

http://www.chuckhawks.com/winchester_100_rifle.htm

I could talk for hours about this little gun, but bandwidth issues prevent.

Oct 3, 2008 - 8:27 pm 50. Charles:

I don’t know whether the bailout is good or bad in the short or long term.

I can say what is conventional wisdom.

Conventional wisdom is that the 700 billion will stop the system risk now at play. The 700 billion is supposed to bring the lending system back to normal. Its stopped now. Already car sales nationwide are off by 1/3 because fewer people can get loans. If the credit system frees up — more people will get loans. If not then car sales fall further with cascading effects. Same goes for other high ticket items like housing and anything else you can think of. Cascading effects set in when big industries and small have to lay off workers because their businesses have died. And this causes other industries to fall because of falling demand. And so on.

These cascading effects were what happened after 1929 when interbank credit conditions were similar.

Conventional wisdom is that the slowdown will last anywhere from 3 months to 3 years.

The fall off in economies world wide will cut the cost of oil imho to the $50-$70 range. (But if things really go south –then oil prices go to $30.)

The world is flooded with dollars. That has been the chief means of quantifying the growth in wealth for the rest of the world for the last 10 years.

The USA can’t do that anymore. In order to raise the wealth of the rest of the world –what the USA has to do is become energy independent. Chopping off dependence on foreign energy would chop in half the current account deficit the USA is running with the rest of the world.

The result of this would be that the value of the dollar would rise dramatically–enriching other countries with great dollar holdings. (But killing the US export industry now enjoying a boom.)

For the next half dozen years the appetite for foreign adventures is going to go down. This goes for the US as well as Russia. In the US it will because the economy and tax revenues are down. In Russia it will be because oil revenues are down.

That’s conventional wisdom.

Has the USA been aggressive enough with its monetary intervention? I frame the question that way because I read earlier in the year some comments by the Japanese finance minister during the years of the Japanese meltdown in the early 90’s. the Japanese experienced a real estate collapse in 1991. Their stock market was 36000 at the time. Today their stock market is at 11,154.56.

The Japanese finance minister said the Japanese made a mistake by injecting money into the system piecemeal as companies collapsed. He said they should have got out in front of the whole process with a very big government monetary intervention.

So does the this weeks 700 billion count as piecemeal or very big government monetary intervention. (relative to the problem at hand.)

If someone was interested in researching the question they would examine the size and frequency of Japanese government monetary interventions in the 90’s –and then scale them to current US efforts.

This will give some indication of the depth and the duration of the slowdown ahead.

Oct 3, 2008 - 8:41 pm 51. Wadeusaf:

The biggest difference between this bill and the Immigration reform act is, um, one was supposed to fix a people problem and the other was supposed to fix a monetary indiscretion.

The biggest similarity is that neither accomplishes what it sets out to do without serious bribery, graft and cronyism, also known as amendments and riders. What a load of horse manure this bill is, with apologies to the genuine stimulative effects of real manure.

I can hear the committee session form here, I’ll see you two steel fuel rebates and raise you a clean renewable energy bond issue. maybe a quiver or two of arrows supplied with barbed arrowheads tax exempt for the next fishing junket at tax payer expense. That large sucking sound is your wallet’s contents being called to the wild.

Oct 3, 2008 - 8:52 pm 52. sanchmo:

WARNING: ON-TOPIC COMMENT FOLLOWS…

I say bad, because I don’t think it will work, and I’ll think we’ll be asked again next year for another $500B to throw at it.

During the asian financial crisis of the 1990s, Japan’s real estate bubble burst, Japan flooded the economy with cash to no avail. Why? The banks just used the money to flee to safety.
http://georgewashington2.blogspot.com/2008/09/in-90s-japan-officials-flooded-economy.html

The European Central Bank and the Fed have already pumped hundreds of billions into market in the past week and a half. No improvement, but the banks are buying up a lot of those safe T-bonds that the central banks ust issues to raise those billions.
http://ftalphaville.ft.com/blog/2008/09/26/16372/tilting-at-windmills-central-bank-edition/
http://market-ticker.denninger.net/archives/595-Bernanke-PROVED-Paulson-Plan-Bankrupt.html

So the Fed issues notes to raise billions, uses those billions to buy bad debt at “hold to maturity” prices (otherwise, no financial institutioin would sell), and then the sellers of the bad debt buys up the notes.

End result: Taxpayers pay interest to investors for the privilege of shifting the risk from the investors to the taxpayer.

Oct 3, 2008 - 9:09 pm 53. Charles:

Investor Business Daily gives another variation on conventional wisdom. (The NASDAQ in 2000 looked like the Dow in 1929 and has tracked it since.)
http://www.ibdeditorials.com/IBDArticles.aspx?id=307927474219610

Oct 3, 2008 - 9:10 pm 54. Craigicus:

It isn’t a bailout. It is a lubrication of the gears to keep things from seizing up.

It was a global industry that traded in these toxic packages. That industry serves all the rest of us. No matter where you were in this economy, you gained due to the boom times.

So to help buy up these toxic packages, possibly at a loss, is not giving money away. This was the universally understood and non-controversial lesson from The Great Depression.

The U.S. taxpayer will really suffer if we don’t eliminate the chance of stiction in the gears of our mighty engine of commerce.

Keep the moolah moving or breathe in a vacuum.

Oct 3, 2008 - 9:13 pm 55. Eggplant:

Any of you finanical wizards out there have a guess at what the Dow Jones Industrial will bottom at? A few days ago Cramer was saying it could go under 8400.

Oct 3, 2008 - 9:42 pm 56. fred:

The essential problem is one that I hope is not repeated in the future: that persons not credit worthy had money handed to them, en masse. Prior to Janet Reno putting the CRA on steroids in 1995 there were at least some attempts at decent underwriting standards. It was far from perfect, but at least it kept the worst of the barbarians outside the gates. The risks were manageable. But after 1995 the risks were not manageable. You couldn’t diversify them away and you could not bury them in securitization.

I have some folksy remedies for the problem of affordable housing, but they would piss off the extremists on the Left and the Right, as I would violate their cherished tenets. But I will say this: owning a home is not a right. You have to earn it, which means you should save the 20% down payment. Zero down mortgages are a disaster. Everyone knows it. Even people who were not poor were using those kinds of mortgages to flip homes and game the system. I would not eliminate the option for zero down, because sometimes there are people who would indeed do it responsibly. I believe VA loans don’t require a down payment. I was eligible for a VA loan, but my wife and I saved up a down payment and we lived in apartments for years after we got married before we bought our first home (and a new one)in 1999. We went the route of the traditional, prime rate, 30 year mortgage.

The best way to help the poor and working poor is to combine both private and government efforts to encourage and build more rental units. If you increase the supply of rental housing, you will decrease the monthly rent cost. And that means people have AN OPPORTUNITY (if they take it)to be thrifty and save for a home down payment. If they don’t do it, then they obviously don’t want it enough. But at least we make it possible to have the opportunity, and those who want it will do what it takes to get it done.

Oct 3, 2008 - 9:43 pm 57. Leo Linbeck III:

The answer, as is usually the case, is “it depends.”

As has been pointed out by many BCers, this is a crisis of confidence. So, the ultimate question is whether the bailout will restore confidence. Hard to tell; lots of mixed noise right now, so it’s hard to detect a stable signal.

There is still a lot of weird stuff still happening. This week, the State of Texas sold 30-day commercial paper. CP is short term, unsecured, general obligation debt used to provide working capital for the state. Because it is the debt of a state, it is ultimately backed by the taxing power of state government, plus any assets the state may own (in the case of Texas, there are a lot of oil and gas royalties). Moreover, as we saw today in California, it is likely that the liquidity of a state will be supported by the Federal Government.

In other words, this Texas CP is probably, at the end of the day, equally safe as US Treasury Bills, which are also 30 days obligations. In addition, interest on State of Texas commercial paper is tax exempt to the buyer, while T-Bill interest is taxable.

So, this week, here were the interest rates for these two instruments, on a “taxable equivalent” basis:

US T-Bills: 0.12%
State of Texas: 6.54% (tax exempt rate of 4.25%)

This is absurd. These two instruments have almost identical terms and risk profiles, but one is priced more than 5,000% higher than the other. How can this be?

Simple: every asset type is being converted into Treasuries. All of them. Stocks, bonds, commercial paper, real estate, mortgages, CMBS, CDOs, VRDNs, munis, commodities, the whole shootin’ match. And the reason for this mass conversion is the fear of losing principal.

To make matters worse, this flight to quality causes all asset classes to become correlated; this means that there are no longer benefits to diversification, which relies the notion that assets will move independently of each other, at least to some extent. So no correlation means increased risk. For everyone. Which feeds the panic.

At the end of the day, will the bailout stop this panic? Only if it restores trust in assets other than Treasuries. It might, but that is far from certain. Its success will be highly implementation-dependent, which is not a comforting thought given the fact that the Federal Government is managing the implementation.

On a more positive note, once all of these assets are moved into Treasuries, they can be reinvested in more productive assets, which will help economic growth longer term. Once people have moved their money to safety, it is unlikely that they will automatically move it back into the same assets, opening up the opportunity for improved capital utilization, which will help productivity long term.

Rather than predict whether it will work, perhaps it would be more useful to determine how to tell if it is working. IMHO, the key indicators to watch are:

LIBOR – this is the rate at which banks lend to each other. Three-month currently at 4.33%. Has been as high as 5.25%, and as low as 2.54% in the past 52 weeks. This is a stunning range. If it drops, and starts to stabilize, that is a good sign. Banks won’t be comfortable lending to businesses if they’re not comfortable lending to each other.

Credit spreads – this is the difference between the interest rate of a bond and the interest rate on a Treasury instrument with a similar maturity. Credit spreads for investment grade corporate debt are over 300bp, vs. a five year average of about half that.

Productivity – a measure of overall efficiency of the economy. If annual productivity continues to increase in the 4-5% range, we can power through these problems. If productivity starts to flag, we’re headed for trouble, first a recession, then inflation.

A crisis of confidence is a crisis of trust. But trust, once lost, is very difficult to regain. After all, once you’ve stopped trusting me, what can I say to make you trust me again? “Trust me”? But you don’t trust me, so anything I say is untrustworthy, including my commitment to future trustworthiness. Negative recursion is a bummer.

Will the bailout cut this Gödelian knot? Maybe, maybe not. But I wouldn’t bet against the resilience and creativity of the American people.

L3

Oct 3, 2008 - 9:50 pm 58. JFSanders:

It is going to take 5% of US GDP to fix 5% of non performing mortgages????

I am sitting here drinking single malt whisky for the first time in a very long time. I can’t believe we have let it get this bad.

Someone said “It is too early to start shooting and too late to fix it with a vote”

I am too mad to be indignant. Going to bed.

Jim

Oct 3, 2008 - 10:03 pm 59. sanchmo:

Fred wrote: “If you increase the supply of rental housing, you will decrease the monthly rent cost”

The supply of rental units is already increasing. They are those foreclosed houses that are being purchased by those people who were not fooled by too-good-to-be-true promises of “just-add-debt” instant wealth.

Of course, the second that someone who has proven an aptitude at managing wealth seems to be rewarded for his/her decades of thrift and saving, the congress-critters will step in to take their hard-earned wealth away, so that we can all rest peacefully at night knowing that an army of job-secure beaurocrats are protecting everyone’s right to own their own home. And the cycle starts again.

Oct 3, 2008 - 10:04 pm 60. Leo Linbeck III:

Oh, one more point.

All of the pork shoved into the bailout bill demonstrates the fundamental unseriousness of the current Congress, and their complete lack of awareness of the trust-based nature of this crisis.

If your truck drives my truck off the road and into a ditch, and you stop and offer to help, I might be pretty skeptical in the first place, but my trust in you certainly does not increase if you start grabbing stuff out of the back of my truck and throwing it into yours.

It’s the trust, stupid.

L3

Oct 3, 2008 - 10:06 pm 61. Mad Fiddler:

Dear American Muslim,

The Shining One is unlikely to allow anyone to worship another god than his own self.

Oct 3, 2008 - 10:12 pm 62. mac:

Yes, it’s a crisis of confidence all right.
Whatever confidence I had in elected officials of either party is gone. They’ve conclusively shown they don’t give a damn about debasing the currency and taking money out of my hard-working, lifelong saver pockets and giving it to bankers. Bankers who got way in over their heads making loans to people who were too lazy to work hard enough to save the down payment on a house so they could get it the old-fashioned, properly financed way. (BTW, if you can’t afford 20% down for a house, you can’t afford to maintain it anyhow so you might as well continue renting).

Our elected officials have been stampeded into this pork-laden blivet due to fear, stupidity and venality. People like me will pay the price for their malfeasance the rest of our lives in higher taxes and lower living standards. They stole from productive savers to give to the very rich and the very poor. I couldn’t be more disgusted with them and I plan to make that known at the upcoming election.

Oct 3, 2008 - 11:31 pm 63. Gaffe Prices:

Bad, in more ways than one.

1) the reasoning was built on the false premise that Banks were unable to lend money now because of the coming to light of this scandal.

In fact what the proponents of the bill actually were saying is that banks were not lending money right now (extending credit). Notice, it’s not that banks could not led money right now, they simply would not lend money now because they were waiting to see how a bailout might help their situation, and credit as a secondary issue.

Subtle, I know. But the point is that capital had not dried up. The freeze in lending resulted from the arbitrary decision simply not to lend money right now, for the above reason. Had capital in fact really dried up as a result of the rude awakening of yet another government slush fund of malfeasance and bribery, and the two year cover up that worsened the fallout? I don’t think so. Once fire broke out in the public view, then other factors came into play to help exaggerate the point (Stock Market drops and rises, 700 pts down, 500 up the next day), I can see the direct relationship of Frannie Mac and feddie Mae to Banks and lending, but to “Wall Street”?. Sure there’s greed on Wall Street, but what direct relationship did that have to what went on as per executive orders from, first the Carter administration, the Clinton admin. and specifically, Jamie Gorelicks Justice Dept’s extortion of private capital to potential deadbeats? to the tune of 5% of moftgage holders.
I say banks could lend money to folks all during the last few weeks, they just didn’t want to.

2) Bad timing. All the usual Congressional shenanegans in the Bill. Any true independent should have stood his ground and said we will deal with this matter after the election, despite what party leadership says. Incumbent Dems in Senate voted agsinst it for obvious reasons and in the House, the bill is an incumbents nightmare. Easy to rail against the 700 billion when you back to district to campaign, coz you voted no, and blame Bush economy etc instaed of those responsible. Lots of Dems saw the expediency of this. Our People should have kept saying No No No. Not Now. No way No how.

3) the 700 Billion: Paulsons office said the figure was “picked out of the air”. No process to establish the cost.

Good. In one respect:

1) by buying the bad paper, the value of the assets can return to their real value, you just have to evict the squatters in there now. Is our compassionate govt policy capable of this kind of “cruelty”? Can it reverse couse like that? The “good intentions” of this vote buying scheme with private capital are truely criminal. And require prosecution. And what have these rules changes done to render the application of the law impotent in pursuit of justice, in these cases. Its all out of whack now. The Bill only skews it worse in the wrong direction. And we all know why. So the good effect of the govrnment boost in capital is effectively nullified.

Oct 3, 2008 - 11:35 pm 64. Fletcher Christian:

American Muslim; I have no children, so my grandchildren won’t be slaves to Satan AKA Allah. My sister’s grandchildren will be whatever they want to be; that’s the way we do things over here. If my sister has any female grandchildren, they’ll get to keep all of their anatomy, too.

And your grandchildren will be dust, ash and smoke drifting on the wind – as will you, and a few hundred million of of your idolatrous brothers in Satan.

Haven’t you got it yet? You have no friends here. Many in the West are almost hoping that your “brothers” will commit another, and even worse, atrocity – so that we have an excuse to kill you all. Every last filthy, perverted, violent, intolerant, neck-chopping one of you.

Oct 4, 2008 - 12:15 am 65. ian:

A few thoughts:

This is beyond disgusting. I am furious with all the extra crap they threw in. This has to be the most irresponsible thing I have seen yet from Washington. That picture of Pelosi and Hoyer tells me all I need to know.

I don’t see how this is going to work. OK, lets say the government ends up holding the paper on lots of these bad loans. What will happen when the people in these houses (who paid $750K for a $300K house) decide to walk away? Or simply decide to quit paying? Is the government really going to evict people? I doubt it.

What are they going to do going forward? This doesn’t even begin to address this question. The rot in Fannie Mae and Freddie Mac and the complicity in congress are being papered over in the media. To listen to Frank talk about how he will hold hearings is astounding. What if this does work – for now? What will prevent this from happening again? For the life of me, I cannot understand why McCain isn’t making anything of this.

Oct 4, 2008 - 12:20 am 66. slade:

Our politicians came under intense pressure from the mainstream media and an apparent sudden constriction of credit, as if we had been hit from a bankers’ strike. Enough politicians caved in to the pressure to pass the demanded bill. – Alexis

The Japanese finance minister said the Japanese made a mistake by injecting money into the system piecemeal as companies collapsed. He said they should have got out in front of the whole process with a very big government monetary intervention. – Charles

Is the credit crunch/crisis real or manufactured?

Dividends for the top 20 banks totaled $40B for the previous fiscal year. Leveraged at 10:1 (reasonable and much less risky than 30 or 40:1), that’s $400B that can be injected as monetary stimulus. And that’s just the top 20 banks, out of 8000 or so.

Recalling that exercise with the fate of $1M over the next ten years, scale that back to a more reasonable $100,000 to $200,000 and you get some sense of how livid the 50-60 year old demographic is right about now. Even if you own your home, it will be impossible to live off interest alone without digging into principal.

Oct 4, 2008 - 3:23 am 67. I'm Just Plain Dumb:

How can bailing out foriegn investment banks be good?

How can increasing our national debt at this point in time by nearly 10% be good?

How can blowing away money to sustain incorrect market pricing be good?

How can giving stuff away to the people who will just piss it all away be good?

How can all of this temporary ’stablizing’ of the ecomonic situation just to push it beyond the Nov election and not solve the core problems be good?

How can leaving control to the same people that brought us to this disasterous dance and have already date raped us be good?

The market needs to be real, not manipulated. I vote bad.

Oct 4, 2008 - 4:19 am 68. RWE:

Programmer:
They don’t leave them without an adult signature. They send them by FedEx Overnight. And I ordered a couple of M1 Carbines, genuine WWII vintage.

Tony: I have a beautiful WWII .303 Enfield (Big 5 Sporting Goods in Santa Barbara, $69)and a 1965 vintage 7.62 Enfield (Roses in Orangeburg SC, $100). With either one if you encounter an intruder who is not armed you can just beat them to death with it.

Lifeofthe mind:
Yeah, that’s what I said. Sue him! But my friend says that he has been told Schumer has immunity. Note that it was a California bank, and Schumer is from NY. None of his constituents got hurt. In fact I would not be surprised if a NY bank or two got placed in an advantageous position as a result of his intemperate outburst.

In WWII a Congressman announced publicly “Don’t worry about our subs. The Navy tells me that the Japanese don’t’ realize how deep they can dive and are not setting their depth charges deep enough.” And that was quite true, but it was somewhat unwise to announce that. When they did not string him up right then and there, that proved that Congressmen can get away with anything.

Oct 4, 2008 - 4:52 am 69. DanM:

Haven’t had time to completely read through the thread, but… Everyone knows that THIS BILL the Senate attached the Bailout language to was ALREADY passed. It was attached to an already passed bill to make procedural rules correct for the Senate to move it back to the house..

Oct 4, 2008 - 5:24 am 70. DanM:

And no, I’m not agreeing with the bailout bill, just reminding everyone that the original bill was already passed by BOTH houses before the bailout amendment was attached… If this hadn’t been done by the Senate, there would be no constitutionally viable means for them to “jumpstart” this pile….

Oct 4, 2008 - 5:27 am 71. Iconoclast:

The bill is bad, because the problem is not that banks are not lending; the “problem” is that the banks are no longer lending to the uncreditworthy. Put another way, the problem is not primarily liquidity, but solvency.

The end of stupid lending is is a sign of progress, painful to be sure, but necessary. The root of the problem (see generally Ron Paul) was excessive credit creation. Further credit creation digs a deeper hole to get out of. The bigger they blow the bubble, the bigger the pop.

The bill is best seen as a means for those who made bad investments, primarily foreigners, to loot the Treasury before the ship really goes down, as defaulting commercial and consumer loans and defaulting state and local governments drag down the regional, more domestic banks.

The People cannot live beyond their means forever, no matter how many lies Congress tells them.

Oct 4, 2008 - 5:33 am 72. Doug_S:

I think Wall Street learned an important lesson from Al Gore, a panicked public is great for business if your business is getting money from Washington. They all said to themselves “monitary panics occur in any free system, the next time one occurs we all get on the same page, keep saying it is the end of the world, belly up to the trough and let the taxpayers take all our losses.

No one gave me any convincing reason why the cost of lending should not go up after a period of lax excess, why credit should continue to be extended freely, and why any downturn will turn into a depression.

Oct 4, 2008 - 5:37 am 73. CPT. Charles:

Lurking on the bottom shelf of this desert cart was this lovely:

http://tiny.cc/KxuB1

It won’t have any immediate impact but if the wrong man gets in the WH, he’ll have a in-place framework to take eco-fascism to the next level. While I understand the anger towards incumbents, I’d focus more on pols in the hip pocket of the enviro-freaks…oddly enough, that describes the vast majority of dems.

Just a guess, but I suspect that wasn’t the only goodie inserted, just waiting for BHO to unwrap and plug in.

Oct 4, 2008 - 6:38 am 74. mika2k1:

The bill is best seen as a means for those who made bad investments, primarily foreigners, to loot the Treasury before the ship really goes down
==

Exactly!
But what you’re missing is that without the foreigners there is no ship of state, and I can guess that the foreigners made that point clear.

GS and the China connection:
http://www.americaneconomicalert.org/view_art.asp?Prod_ID=2470

On a side note,
In my universe, the terrorists connected to this scheme would be lined up against the wall and shot dead.

Oct 4, 2008 - 6:50 am 75. CornFuzed:

Why is this not true? The Skeptical Optimist , Steve Conover at http://www.optimist123.com/ , makes the following point:

House members have been taking turns at the mike. THEY STILL DON’T UNDERSTAND THAT TAXPAYERS WILL NOT BE THE SOURCE OF THE RESCUE FUNDS. This is NOT a good omen. This is an emergency. Maybe we need some help from Dora the Explorer.

Most of the Congress members still think the bill would give the Treasury Secretary “the power to spend $700 billion of the taxpayers money.”

Not one of them understands that the bill would, instead, give the Treasury Secretary the power to sell T-bonds a few billion at a time to BOND BUYERS WORLDWIDE — then BUY THE BONDS BACK a few months later. Taxpayers would not be involved; buying bonds is a voluntary action on the part of the buyer; selling bonds is also voluntary.

ANY taxpayer who would choose not to be involved in that process would remain free to opt out, by simply DOING NOTHING. The federal government is NOT going to send out the army to collect money from ANYONE who chooses not to buy a T-bond.

After the rescue, the Treasury Secretary would be able to buy bonds back from BOND SELLERS WORLDWIDE. If the Treasury “makes a profit” on its rescue of the private sector, it would be able to buy back more bonds than it sold originally; if it “incurs a loss” it would be able to buy back fewer bonds than it sold originally. AGAIN, THE TAXPAYERS ARE NOT INVOLVED IN THAT PROCESS.

Why is that such a difficult message to communicate to the members of Congress?

I bet Dora the Explorer could explain it to our kids, something like this…

1: Sell a bond;
2: Use the money to prevent a deep recession (if there’s still time);
3: Buy the bond back.
WE DID IT, WE DID IT, WE DID IT!

Oct 4, 2008 - 7:09 am 76. 3Case:

Bad. The people who wrought the problem rendered the solution; solving a critical problem caused by a command economy structure with another command economy structure.

Oct 4, 2008 - 7:17 am 77. CornFuzed:

still cornfuzed mr 3Case, I’m sure both of us create problems and render solutions all the time, I cant agree with your analysis.

Oct 4, 2008 - 7:25 am 78. Ex-fetus:

What Pascal said.
Lack of money wasn’t the problem. The problem was nobody wanted to buy and sell money out of the fear of getting screwed. I never did hear any theory as to how screwing the taxpayers out of 700 Billion was going to fix the problem. Maybe because it won’t. It will make those that lost their “golden parachutes” happy. Since most of that parachute consisted of stock options, worthless stocks make for a rough landing.
The 700 billion will prop up stock prices for a while, so the net affect is to replace those “golden parachutes” with “golden whoopie cushions”. Oh boy, how thrilling!
Meanwhile the timing was fortunate for Obama;
http://docs.justia.com/cases/federal/district-courts/pennsylvania/paedce/2:2008cv04083/281573/13/

It seems that Obama is NOT a natural born American citizen. He is hiding his birth certificate because it is not a birth certificate, but a registration of birth certificate.
Witness have his very pregnant mother flying off to Kenya and coming back home non-pregnant with a babe in arms.
So a federal Judge has ordered Hawaii to release the original document. Obama is fighting that, of course.
We will see how that turns out. In the meantime, Obama’s eligibility to run for President is in question. That fact is being kept out of the news cycle by the MSM having the great financial robbery of ‘08 to fixate on. So while the MSM is watching 700 billion being stolen, the ballsy crooks are trying to steal America. Hey, why steal a chunk when you can steal it all?
I would say only in America, but this sort of thingie happens in the turd world all the time.

Oct 4, 2008 - 7:33 am 79. American Muslim:

The entire world demands that Barack Hussein Obama be the next President of the United States. If you Islamophobes and racists oppose him, you will suffer the consequences of your actions.

Embrace Islam now and live in peace in submission to the will of Almighty Allah (swt).

Your grandchildren will be Muslim.

Allahu akbar!

Oct 4, 2008 - 7:47 am 80. 3Case:

CF,

Being human, I am entirely capable of being wrong regarding the bailout. I hope that I am. However, I believe we got to this spot via ad hoc central planning and that the bailout is more of the same. That said, please reread my first sentence.

Oct 4, 2008 - 7:58 am 81. slade:

DanM – good point and my understanding too about procedural rules, which means focus on the “attached” $700B and let go the “tax revenue” part of the bill (that’s another debate.)

“I’m just plain Dumb”: love the handle – is it trademarked? I feel like the bumper sticker “Don’t follow me. I’m lost.” I was “hell no agin it”, then I saw the wave transformation in media reporting in two weeks from “WTF?” to “gotta get er done – Main St IS Wall St – and Paulson flunked Dale Carnegie”, then I was “sorta fer it” to repair credit/trust, then I (re)read about the Japanese crisis of the 1990’s (see Charles – excellent sound-byte synopsis) which was prolonged because the Japanese opted for the piecemeal approach (not completely unlike the one I’ve been advocating of let the banks fail in an orderly fashion and sell them off in the normal manner) with some 20-20 hindsight suggesting that recession would have been shortened by huge immediate capital infusion – a Big Kitchen Sink.

My personal view – right now – is that the markets must be returned to stability ASAP – don’t care anymore if the “crunch/crisis” is real or manufactured. Once that happens, it’s house-cleaning time. There’s an old Rita Rudner joke: Dreamers build castles in the sky. Psychotics live in them … [picture a prolonged Rudner pause] … My mother cleans them.

Well that’s probably an inappropriate place to insert humor but there it is. For those who are sitting in front of your first glass of single malt whiskey in years – you/we will be best served if we discipline ourselves to deliver the – I’ll call it revenge – for this egregious corruption of public service that was intentionally spilled into the global arena, by clean-sweeping Congress until they can pass the white glove military inspection. I used to post that Americans were tolerant of a certain level of graft/corruption to grease the wheels. No more. Party over. My tolerance meter just tanked. You get one term. If I smell anything, you’re nothing but a brief page in history.

In other words, we’ll give you your “rescue” in 2008. But watch your back. Remember the American taxpayer in 2010 and 2012.

Oct 4, 2008 - 7:59 am 82. 3Case:

AM,

Have your brethren in arms cease scuttling between caves in women’s garb and come out to stand against us in the open, only then will your hypothesis be truly tested…or is it that Almighty Alllah wants them dressed like girls?

Oct 4, 2008 - 8:04 am 83. mika2k1:

slade,

There’s a price to be paid for fleecing investors, and the US will pay that price. Not one politician from the two party oligarch system that should remain standing after this. Not one.

Also, if America doesn’t take immediate measures to cut its $1.4 trillion per year in military welfare programs and invest that money in reducing oil imports thru green energy projects, America’s ability to borrow, its life support system, will soon be excised and the oxygen removed.

Oct 4, 2008 - 8:37 am 84. Habu:

Good morning ..
Well after reading some of the comments I missed after I signed off last evening I am encouraged.

Somehow the Civilian Marksmanship Program came up..that’s a positive in my word. I hve been a gun collector for years and that Enfield .303 can be made into a beautiful hunting rifle. Of course it’s action is one of the best ever.

A couple of observations. Whatever you buy will eventually fail. It’s not a bad idea to talk to local gunsmiths about what they see and what is the general malady on that particlar weapon. Firing pins are alwats a good extra part to buy but as LL III said about another topic, “it depends”

My last purchase was a Springfield Armoury XD 45. I like it so I bought a second one for a parts backup while the new parts arrive…but what if Shumer and Obama out law this or that…get the stuff NOW.

For those of you who believe a revolution either regional or nation is possible get ammo. The prices have already skyrocketed in anticipation by may,many gun owners that a ban will trip a confrontation. Get a 1000 rounds per weapon. If you don’t believe any suchrevolution is possible then at least hedge and make friends with a gun owner you can hide behind or so that if you are killed your corpse can be used as a redoubt as has always occured in conflicts.
OOps amber alert light coming on ….

Oct 4, 2008 - 8:52 am 85. Habu:

INFLATION IS COMING…whats the collective wisdom of when it will arrive (on little cats feet?) and how high it can reach?

Just as a starting point I say we’ll see 20% within 15 months….other guesses.

I know one thing I’m damn glad I saved my Gerald Ford era WIN button. For those who have forgotten that was Whip Inflation Now ..and to that end you’ve got to check this out on youtube

http://tinyurl.com/23y3vd

200% in 2 years.
400% in 28 months

Oct 4, 2008 - 9:00 am 86. Pascal:

Habu.

I also recall Ford became disillusioned at how little impact his WIN buttons had on inflation.

So he took to wear his button upside-down as NIM.

Then someone pointed out what nim means.

nim 1
tr. & intr.v. nimmed, nim·ming, nims Archaic To steal; pilfer.

Bottom line Habu: you don’t have to wait for inflation to kick in to wear your WIN, I mean NIM button.

Oct 4, 2008 - 9:15 am 87. slade:

There’s a price to be paid for fleecing investors, and the US will pay that price. – mika2k1

We always do, M. Those “bright shiny objects” come in all colors don’t they? What’s the story with the Canadian banks, BTW?

RE: “fleeced investors”. Pure BS. Those investors were chasing high returns on questionable securities. Heart not bleeding for any of them.

Whatever your preferred forensics paradigm, it looks like we are back in the “Rosie the Riveter” phase of the cycle where we have to start the drum beat for the resilience and creativity of the American people.

Oct 4, 2008 - 9:33 am 88. Habu:

Paschal

Point too good. You’ll get a time out if you keep that up.

O/T I liked the OJ verdict. Too bad it took 13 years.

Will we get an INFLATION BAIL OUT BILL? The Fed freezes every man , woman , and childs account, closes all ATM’s on days of the week that have vowels in them. Will it solve the problem , hell no, but it’ll be a chance to go back and fix that wooded arrow problem they’ve created.

Plus I think we all know deep down in our hearts the it WAS rock and roll that took us down the road to hell. Songs like:

http://tinyurl.com/3mfqf8

I mean the “Greatest Generation ” had inspiring ,uplifing, morally straight songs like:
http://tinyurl.com/3e6ngr
http://www.youtube.com/watch?v=Vrlp1vlRKa0

second choice a bit updated, yeah a bit.

Oct 4, 2008 - 9:42 am 89. mika2k1:

RE: “fleeced investors”. Pure BS. Those investors were chasing high returns on questionable securities.
==

I’m sure they’ll remember that sentiment on the next purchase of US treasuries.

Oct 4, 2008 - 9:48 am 90. Mad Fiddler:

A friend who has occasional flashes of insight points out that in many ways, maintaining credibility of credit with foreign investors transcends the issues of tidying up abuses among domestic lenders, borrowers, and investors. It can be argued that the foreign purchasers of “commercial paper” have had to make their purchases based on faith much more than domestic buyers. And after all, when I buy a car, and the dealership sells my contract to a third party, the whole set of transactions is based on the presumption that my contract will be paid, and all parties satisfied. If that becomes a chancy proposition, the whole system is imperiled.

He further points out that our relations with foreign investment communities has bearing on our access to ports, treaties, markets – the entire range of trade with other nations.

The criminal behavior of Rains, Gorelick, Johnson, and others in deliberately committing to millions of loan contracts they knew to be of dubious value, simply to multiply their short-term bonuses, needs to be vigorously investigated and prosecuted. But those prosecutions are not a legislative issue. We need to have some elected officials and law enforcement people with the courage to pursue them.

Or even some congressional reps bold enough to point out that Rains behavior is just as corrupt and destructive as the oft-cited CEO’s who gut their corporations while accepting millions of dollars of compensation.

p.s. to American Muslim: You really are delusional if you think writing a few lines of text to insult and intimidate the infidel actually accomplishes your aim. In fact, your arrogance and hostility can do nothing but harden our hearts and make us more certain and confident adversaries.

Oct 4, 2008 - 9:53 am 91. peterike:

McCain has got to drop the gentlemanly Senate friendliness crap and beat Obama about the head and ears with his complicity in the Fannie scandal. I also think McCain and Palin need to get off the “greedy lenders” schtick alone, and spread it to “corrupt government officials.” They should not let a single speech go by without saying “in a McCain administration we will prosecute the people responsible and put them in jail, EVEN IF THEY ARE HIGHLY PLACED GOVERNMENT OFFICIALS.”

The public is angry at Washington in general, but McCain has his “maverick” status and Palin, for goodness sake, is the ultimate outsider. It would be a credible threat and I think people would rally to their side if they were explicit about it, because people are furious. Too bad Palin let the most-watched debate go by without making such points.

Still, there’s time to hit the key states with a wave of advertising. One theme and one theme only: the McCain administration will clean house, PUNISH those responsible, and they will not get away with their ill-gotten gains. This would resonate. Why is Team McCain too dense to get it?

Meanwhile, Philip Berg is my hero. Can you imagine the reaction if Obama is declared not eligible for the Presidency? And my god, if this is true, how deep is the duplicity and corruption of both parties that this has been left to lie unexplored for this long?

In the wee days of my youth, I was very into Birch-esque conspiracy theories, the whole Bilderberger thing, the Rockefellers rule the world, one-world-government, all that stuff. As I matured, it all came to seem paranoid and, even more so, impossible to pull off in any practical sense. Too many people involved. As I got older still, I began to understand the concept of hive thinking, and how you can have a conspiracy-of-thought without actual conspirators-in-the-flesh. Not everybody has to get handed a brown envelope with cash to do what you want. Weak minded ideologues will happily sell their souls for free, just to feel better about themselves, and to feel important.

So now I’m back to wondering if those conspiracy theories weren’t right all along.

Oct 4, 2008 - 10:09 am 92. Konyok:

Habu,

Am I overly simplistic in thinking that the 700b addition to the money supply is of a smaller order of magnitude than the amount of M3 lost during the financial crisis; and that it is secured, however circuitously, to tangible assets, ie. the properties financed by the rotten MBS derivatives?

My greatest fear remains structural deflation. I don’t know if it can be staved off by neo-Keynesian spending, which certainly can lead to an inflationary spiral when things get back to “normal.” But, I don’t see many parallels between our current situation and the 70’s.

Oct 4, 2008 - 10:25 am 93. slade:

I’m sure they’ll remember that sentiment on the next purchase of US treasuries. – mika2k1

Mat, I hope they do. Prudent investing it used to be called. But it’s your tone. You act like USA “invented” fleece. Google the 1997 Asian Financial Crisis. And stop poking your Canadian finger in our face.

We’ll out of it in two years and I don’t intend to suffer your sniping that long.

Oct 4, 2008 - 10:51 am 94. Habu:

mika2k1:

As one of the cadre of brokers doing the fleecing (and hating myself for it but everybody has their price) I have to say that it wasn’t always the investor.

When you’ve got an old couple sitting in front of you looking to invest a couple of hundred thou you naturally go through the “know your client” checklist . Then if it can be finessed into their portfolio you might mention “bonds” (BTW they always fit in any portfolio to some degree) and then you mention XYZ Mutual funds HIGH YIELD yin- yang fund, well you can see them perk up …HIGH YIELD….BONDS..it’s like heaven for them.
Those folks are not being greedy they’re trying to protect what they’ve got, but salesmen are glib SOB’s if ever a group existed, Congress included. You know they have no idea what you’re saying. It’s all in broker argot but you make the sale. Now they have 100k of HIGH YIELD xyz bond fund getting them three to five times what a CD would get them ..until it blows up. Suddenly you’re unreachable. It wouldn’t matter anyway cause you’ve followed the “procedure”outlined in Rule 405, Know your client.

That is why even if you diversify with mutual funds you need to know about investing. At least the minimums.

Are there greedy investors, yes, but as they say in the market. “Bulls make money and bears make money and pigs get slaughtered”.

If, as a broker you do this successfully for about four or five years you walk into the office on January 2nd knowing you’ve already made 100,000k plus just from the mutual fund trails. Then you just continue to pile it up. Sweet. All done legally. Ethics? On Wall Street? They don’t know the word.

Oct 4, 2008 - 10:52 am 95. Boghie:

None of the four candidates know what they are talking about…

Everybody is worried about Palin’s foreign affairs experience, the biggest worry right now is that nobody on any ticket has any experience in ‘Fed Type’ economics.

And, you wouldn’t expect them to.

However, when asked what the government would cut if necessary they didn’t even have the courage to provide some examples. They haven’t even looked at the problem. Maybe if they cannot attain the credit ‘necessary’ to fund their campaigns…

Oct 4, 2008 - 10:53 am 96. Derek:

The bailout or whatever it’s called isn’t going to ’solve’ anything. All it will do is buy time.

Someone referred to a silent run on banks. Is that a problem? A noisy one is, because people can’t withdraw their money, panic ensues.

Someone somewhere is going to have to swallow the trillions of bad debt that the US and European banks have on their books. What causes a disaster is everything coming due at the same time. If this actions can spread things out a bit, it will accomplish what it needs to do.

We are in for a slowdown no matter what happens. Auto companies sales are down by +20%. Construction is almost dead. Firms that have been poorly managed, and there are legion, will fail in the next year. Some of my larger clients can only be described as profoundly stupid, and deserve to go, and will. My challenge is to not get in too deep with anyone so I don’t lose. The last many years of 5% growth has deepened the layers of watchers and parasites on real production and wealth creation. They need a pruning.

Derek

Oct 4, 2008 - 10:53 am 97. Pascal:

I don’t see many parallels between our current situation and the 70’s.

Well, don’t keep what you know a secret Konyok. Make a list of financially dependent things that you think are the same today as in the 70s, and another list where it’s different. Then let the rest of us add or move items. Then you can argue with us how we’re wrong and you are right.

Oct 4, 2008 - 10:58 am 98. Konyok:

Meanwhile, back at the ranch …

The NY Times is trying to sanitize Obama’s relationship with Bill Ayers:

http://www.nytimes.com/2008/10/04/us/politics/04ayers.html?_r=1&pagewanted=2&bl&ei=5087&en=80352c05b6d4b135&ex=1223265600&oref=slogin

Maybe I’m too optimistic, but I think that ANY linkage is toxic to The One. Now that the Times has opened the door, I expect to see more coverage in our local dailies tomorrow and Monday.

Oct 4, 2008 - 11:02 am 99. Eggplant:

slade said:

“Whatever your preferred forensics paradigm, it looks like we are back in the “Rosie the Riveter” phase of the cycle where we have to start the drum beat for the resilience and creativity of the American people.”

It was a different world from 1939-1969. America was the only nation left standing after WW-II, i.e. Europe, Russia and China were bombed out wrecks. Our economic infrastructure had been recently transformed from agrarian to hyper-efficient industrial by WW-II. We were also self sufficient in petroleum, iron and copper. Very important, we had accepted a brain transplant from Europe where much of Europe’s intelligensia had fled to America from the Nazis.

Most of those bets are now off. Our nonrenewable resource base in the continential U.S. was been largely depleted. Much of our manufacturing infrastructure was shutdown after becoming noncompetitive against Japan, South Korea and China. We allowed our knoweldge base to dwindle, e.g. too many kids got law degrees rather than degrees in engineering and science. Worst of all, we lied to ourselves by saying we were maintaining our economy as a “knowledge or service industry”. In truth, we maintainined our standard of living on credit by spending down the equity previously created by our fathers and grandfathers.

Our current crisis is a consequence of all of these factors. Simply saying that we need to go back to Rosie the Riveter doesn’t hold up. Where’s the factory for Rosie to work in? Where’s the steel for Rosie to rivet? Where’s the energy to drive Rosie’s rivet gun? Does Rosie even know how to use a rivet gun? Is Rosie willing to work for wages only slightly better than those of a Chinese industrial slave?

We’ve dug ourselves into a deep hole. That hole is going to get a whole lot deeper if the Messiah gets elected President and pursues a socialist agenda. Quite frankly, I don’t know how we’re going to get out of this hole. I guess the first thing we need to do is stop digging…

Oct 4, 2008 - 11:12 am 100. Konyok:

Pascal,

The 70’s was when the baby boomers began buying adult stuff. Simplified definition of inflation: too many dollars chasing scare stuff. Inflation is growth.

The 20 oughts are when the baby boomers begin thinking about cashing out and preparing for retirement. Simplified definition of deflation: too much stuff chasing scarce dollars. Deflation is shrinkage.

Somebody made a brilliant observation a few days ago that he had been skeptical about the strong economy of the last few years because he didn’t see a “killer app” fueling it. I think he’s right. When demand falls or remains constant, deflation becomes a danger. That’s what happens when a bubble bursts.

Our progressive friends offer a transition to “green” energy as the next killer app. The big problem with that is that alternative energy is intrinsically less efficient than hydrocarbons, thus decreasing demand for the 10,000 other things in our economy.

(BTW they are saying that Adam Gadahm was killed in Pakistan. Celebratory ham sandwich, anyone?)

Oct 4, 2008 - 11:15 am 101. mika2k1:

We’ll out of it in two years and I don’t intend to suffer your sniping that long.
==

Slade, what you have here is a terroristic operation of the 1st order, pure and simple. If I sound brusque, it’s because the seriousness of the situation is simply not reflected in America’s public conversation. It’s as though you’re all hypnotized zombies silently walking in whatever direction is chosen for you. Wake up, man!

Oct 4, 2008 - 11:25 am 102. Habu:

peterike

I just read the complaint filed by Mr. Berg. He is now a Hero Hall of Fame nominee.

I just read the complaint filed by Mr. Berg. He is now a Hero Hall of Fame nominee. The Supreme Court should immediately reach down and take this case. If they do not they are derelect in their duty because it is within there jurisdiction. Currently it is filed in the UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. That won’t cut it with a month to go.

Perhaps you know but why has it taken this long , and why didn’t the Republican Party file this? That pis*es me off it took until August for this to get filed by anyone. And it does not appear to be on anyones radar which is also shameful. The Supreme Court needs to act now.

In that light simply send a donation to HABU, Bank Austria Cayman Islands Ltd, Grand Cayman. I will make sure all the after expense money is used , every penny will go toward this fight.

Oct 4, 2008 - 11:27 am 103. peterike:

Somebody made a brilliant observation a few days ago that he had been skeptical about the strong economy of the last few years because he didn’t see a “killer app” fueling it. I think he’s right.

The next killer app is American oil, gas and coal.

Meanwhile, where is the politician willing to stand up and say it’s time to re-patriate parts of our manufacturing base? No, not the heaps of junk made in China, but the computers, telecom equipment, airplance parts and other strategic assets. Yeah, so maybe a Cisco router ends up costing a company 20% more. So what? Tell the CEO to take less money.

Oct 4, 2008 - 11:27 am 104. mika2k1:

Habu, what happens when the US loses its credit rating. What then?

Oct 4, 2008 - 11:27 am 105. Leo Linbeck III:

The goal should be to provide stability and liquidity to the financial system, not to help owners of non-performing loans, or the borrowers under those loans. There is a way to accomplish this within the framework of the bailout plan, and all it takes is one simple addition to the program, one that the Treasury can implement on its own. To explain how this would work, an example is needed.

The risk embedded in the financial system, the source of instability, is balance sheet leverage of financial institutions. To see how this works, let’s consider three banks of similar size.

Bank X has a balance sheet with $1B of assets, $900M of liabilities, and $100M of equity. This gives it a 10% leverage ratio.

This is a perfectly acceptable ratio, but there is a problem. Bank X holds $50M of subprime mortgage assets. Let’s say those assets are performing within expectations, which is to say that there are defaults of a few percent on the total portfolio. This is OK because those assets are also earning a few percent more in interest, so the bank will, in the long run, be OK.

But the current market for subprime mortgages is awful. There are few buyers, and these packages are being sold for 50% of principal value. The mark-to-market rules had required (and may still require) that the bank take an immediate write-down of $25M. This means the bank’s new balance sheet is $975M of assets and $900M of liabilities (it still owes what it owes), leaving it with $75M of equity (let’s ignore taxes for the moment). This gives the bank a new leverage ratio of 7.7%, too low for comfort.

So Bank X has a choice: it can raise $22.5M of new equity (to get to $97.5M), or sell assets worth $225M, to get assets to $750M. Either of these paths (or a combination) gets the bank back to a 10% leverage ratio.

Problem is that you can’t raise equity in this environment, and is everyone is selling every kind of asset, so Bank X has to sell a lot more assets to get back to a reasonable leverage level. Until it does that, it can’t really lend any more money, so businesses who rely on banks for credit (i.e. most small businesses) can’t get the funds they need to operate or grow. Still, most of its assets are good assets (only 5% subprime loans, and those are OK), so it should be fine and shouldn’t be punished by the market turmoil, a punishment that trickles down to all of its customers.

Now, consider another bank, Bank Y. Bank Y also starts with $1B of assets and $100M of equity, but $200M of those assets are crappy subprime mortgages. Because those mortgages have high default rates, they are really worth only $100M. This means that Bank Y, in reality, is bankrupt – its $100M of equity is wiped out by the $100M of losses. And, of course, it should be because any bank that ended up with 20% of their assets in crappy subprime loans deserves to fail, and their shareholders deserve to be flushed.

Finally, consider a third bank, Bank Z. Bank Z is like the others, but with $500M of subprime mortgages worth $200M. Bank Z is not only toast, but after wiping out its $100M of equity, it has $200M less assets than liabilities – it’s double toast. That means the lenders to Bank Z are in a world of hurt too – the $900M worth of loans to Bank Z – many of them from other banks – are now worth $700M. That loss of value puts further pressure on the other banks, and starts a cascading effect that can cause systemic failure.

I should add here that there is little evidence that there is little evidence that the rot is so deep that it will cause a full-blown failure, but that is the fear which is locking up the system, particularly inter-bank lending that is critical to the smooth functioning of the financial industry.

——

With me so far? So let’s look at the bailout.

The current bailout envisions the US Treasury buying these subprime loans to help the banks get stable again. So let’s say the Treasury comes in buys all subprime assets for 70% of their principal, which is better than the “market” price of 50%; for all other assets it will pay 100%. This means Bank X gets $35M for its subprime portfolio, a loss of $15M, resulting in a decrease in equity to $85M. This means assets need to drop to $850M, so Bank A needs to sell another $100M of assets to the government, and use the $135M of new cash to pay off liabilities, and everything is more or less hunky-dory.

Bank Y gets $140M for its pile of subprime garbage. This leaves Bank Y with $40M worth of equity, which is certainly better than bankrupt. The shareholders are bailed out, even though the book equity has fallen by 60%. Bank Y can reorganize, sell off another $400M of assets, and continue functioning as a smaller company.

Bank Z is still toast, but the UST ends up having to purchase Bank Z’s subprime assets for 80% of value ($400M) to keep the rot from spreading to other banks. This means that the worst assets at the worst banks will cost the Treasury more, if they want to keep the problem contained. That is why, at the end of the day, the bailout will probably cost more.

So, at the end of all this, the Treasury has a huge pile of garbage, and will have to hold and service this garbage itself. It has not only recapitalized the banks, but it has loaded the taxpayers with huge liabilities for a long time.

——

So what else can we do, you may ask? What can the Treasury do differently?

Here’s a suggestion: add the following criterion to the Treasury’s procurement rules:

“The Treasury will not purchase any asset with a credit rating less than AAA.”

What this means is that the Treasury will not buy the worst assets from the bank, but will instead purchase the best assets. Here’s what could happen.

Bank X sells $150M of its best assets. The bank currently lends at about 5%, so these loans pay interest of $7.5M per year. But the treasury can borrow at about 3% (or less). So the Treasury borrows $175M and pays it to Bank X for its best assets. The $7.5M of interest is offset by an interest cost of $5.25M, so the Treasury makes a profit of $1.25M per year.

This transaction is great for Bank X; it just sold its loans for a $25M profit, which offsets the $25M forced writedown on its subprime assets. So it’s equity is back to $100M, and its assets are down to $850M, and it has $25M more cash as well. This means that Bank X has the ability to now make new loans of $150M, so it’s bank in the lending business. And if its subprime mortgages actually perform well, as it expects, it will recover the $25M loss over time.

What happens to Bank Y? Bank Y does a similar thing. It sells $500M of good assets for $550M. The Treasury makes $8.5M per year off of that transaction. Bank Y now has $500M of assets and $50M of equity, so it is solvent again. Of course, $200M of its assets are subprime mortgages, but it has written them down dramatically. Still, Bank Y continues to own and service its bad mortgages. It is not off the hook. It has to fix what it broke, and if it can’t, further writedowns will come. But that’s the way it should work.

Finally, what about Bank Z? Bank Z is still toast, as it should be. Its $500M of good assets are bought by the Treasury, leaving it with $500M of bad assets worth $200M. It has liabilities of $450M, leaving a deficit of $250M. What happens next depends upon who the liabilities belong to. If they’re insured deposits, this is a typical bank failure where the FDIC steps in a transitions the deposits to another, better capitalized bank. If they are interbank loans, those loans get haircut and pushed back to the other banks. They will have to take losses, which may require further delevering, but they can continue to sell good assets.

The risk is that, at the end of the day, the total amount of losses overwhelm the banking system. But consider this: the $700B bailout is based upon a “worst case” assumption of 5% of all mortgages failing – this is how much equity would need to be replaced. But if the mortgages pay 5% and the government will lend at 4% (borrowing at 3% and keeping 1% for its own benefit), purchasing 20% of the best mortgages would generate $700B of private surplus, enough to wipe out the losses from subprime and put the entire system back on a sound footing.

Crucially, this approach would virtually eliminate moral hazard. Borrowers would still have to pay back their loans, and lenders would still have to suffer the consequences of those bad loans, and their shareholders with them. The government would only buy the very best loans, so the public would take the least risk. And the borrowing capacity of the US Government would be leveraged to allow a delevering and recapitalization of the financial system.

——

Sorry for the long post, but this has been something I’ve wanted to get into writing for a while. The chances of something like this happening are next to zero, but I hope it illustrates there are always alternatives, even when things look locked in.

Thx for your patience.

L3

Oct 4, 2008 - 11:30 am 106. NahnCee:

Am I the only one seeing a conflict of interest in continuing to pour billions of dollars into Iraq, Afghanistan and Pakistan, when we evidently NEED those billions back home here in America? Is it apples and oranges and the dollars we’re spending on the War on Terror somehow don’t equate to the dollars we will be spending on propping up Wall Street and paying off people’s mortgages so they can stay in their homes?

It seems to me that America’s budget is like a gigantic water tower where the spigot marked “WOT” has been gushing at full-flow for years now. The water level is creeping down because the influx of new water from taxpayer contributions at the top can’t keep up with the outflow (including the Iraq spigot) at the bottom.

Now we’re adding another enormous spigot labelled “Wall Street / Main Street bail out”. Will this be a one time bucket-full or will it be an on-going outflow similar to the war-one? My guess is that in some form it will be on-going, at least for several years.

Surely we need to start thinking about curtailing our activities in the Middle East while we tend to urgent current problems here in America. BTW, I wonder if the reason Bush has been pushing this bail-out so hard is because he’s hearing from presidents and prime ministers around the world that if America goes down, there will be a domino effect from everyone involved in the Amerian stock market, leading to immediate chaos and pretty-quick starvation. Bush is the only Republican that I can see pushing for the bail-out … and it makes me wonder what he knows that Thompson or Guiliani or McCain don’t know.

So if Iraq wants us to stay in their sandbox, then they need to be paying for the privilege. Ditto Afghanistan. And every other country that is enjoying the protection of American troops and armament for free. Either that, or we need to start thinking about how to pull out to save our own economy, while at the same time providing for on-going homeland security.

Oct 4, 2008 - 11:33 am 107. Habu:

Boghie:

You would however expect a 30+ year member of the Congress and a member of the Senate Judiciary Committee to know AT LEAST the order in which the three braches of government are listed in the U.S. Constitution.
Biden didn’t even know that.

Oct 4, 2008 - 11:47 am 108. MaggieTheCat:

Fletcher Christian

Amen to that!!

RWE

You left out Jamie Gorelick.

MTC

Oct 4, 2008 - 12:00 pm 109. slade:

Eggplant – I was being sarcastic with the Rosie the Riveter line.

Oct 4, 2008 - 12:04 pm 110. Habu:

Konyok:
I don’t think deflation is agreat consideration at this point. I do think economic history clearly shows that when a government pumps the amount of money into an economy that we have seen inflation is the eventual result.

There’s always room for a new chapter in economic history to be written. In other words, I don’t know. Wish I could provide even a reasonable guess but things are global, and in big time flux.

However if you’ll send a donation to:
HABU
The Bank of Nevis Ltd
P.O. Box 450
Main Street
Charlestown
Nevis West Indies

I promise to work on it.

Oct 4, 2008 - 12:09 pm 111. mika2k1:

Habu, if you knew alQaeda had a plan to destabilize and destroy America by secretly blending a whole lot of nasty toxic debt into other kinds of securities, giving the stuff the AAA rating and selling it to unsuspecting investors worldwide, then a few years later, after all this toxic debt virally infects the whole world’s financial system, they set the debt to crush, industries and countries collapse, — what would you do, if you had the perpetrators in gun sight?

Oct 4, 2008 - 12:11 pm 112. Habu:

NahnCee:

You’re getting perilously close to the amber light coming on and this thread going away.

We’re talking about the bailout of wooden arrows and the dead Paul Wellstone being an idiot or whatever that section said.

The WOT is another thread, maybe. Yes, have we strayed from the original thread, sure. And we are all having it marked down and placed in our permanent record.

But great question. The answer is probably,maybe,who knows.

Oct 4, 2008 - 12:16 pm 113. Habu:

I also think we need to look to the right and:

Support Pajamas Media;
Visit Our Advertisers

I know when I send flowers it’s always FTD.

Support capitalism, it is the way.

Oct 4, 2008 - 12:18 pm 114. Konyok:

Habu,

All things held equal, you are right. Governments increase spending with fiat money and crowd other consumers out of the market. Too much money, too few goods and inflation results.

However, all things are not equal. The Western World is in a unique historical situation – there is a shrinking population of citizens, therefore shrinking demand. (I think that we can safely discount Europe’s muslim denizens – halal butchers may be prospering, but net demand for capital goods is shrinking.) The Japan, Inc. that we feared so much 20 years ago is in a decade long recession as it’s immigrant free population declines.

The only historical analogs for Europe’s decline are the Black Plague and the Thirty Years War.

Oct 4, 2008 - 12:23 pm 115. Habu:

mika2k1:
If AQ destabilized our economy in that fashion I’d do what was done in what was it..”Fat Greek Wedding” I’d spray some windex on it the go eat a giant cholestrol filled burger with onion rings.

NO seriously I’d do what any serious Senator or Congressman would do …punt the problem to someone else and go to an Embassy Party or get ready for Kwaanza

Oct 4, 2008 - 12:25 pm 116. mika2k1:

NO seriously I’d do what any serious Senator or Congressman would do …punt the problem to someone else and go to an Embassy Party or get ready for Kwaanza
==

And there it is in a nutshell. America got the government it deserves.

Oct 4, 2008 - 12:28 pm 117. Habu:

Well I need to give myself a time out.
Life is just too damn short to spend any more time today on this thread … you may have noticed the deterioration in my level of concern.

Have a great day folks..If the sky starts to fall I’ll come back inside and give you an alert if you just send a donation to:

HABU
blah,blah
blah blah

Oct 4, 2008 - 12:30 pm 118. Konyok:

Nahncee,

I think that maybe a lot of the WOT spending was an attempt to fend off deflation. All of the goodies distributed in Iraq and Afghanistan are purchased here and from our allies.
But, this liquidity crisis will definitely mean a drastic rethink of those policies.

Oct 4, 2008 - 12:30 pm 119. Habu:

Last word:

“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance. — Cicero , 55 BC

Oct 4, 2008 - 12:33 pm 120. mika2k1:

Cicero , 55 BC
==

And 15 years later they sack Judea to pay for the Colosseum.

Oct 4, 2008 - 12:40 pm 121. Mel Williams:

The bailout buys time for prayer to work. Prayer that needs devaluing assets (properly, in my mind) to appreciate.

Fat chance.

Oct 4, 2008 - 12:41 pm 122. Mark:

Mr. Berg’s civil action continues to raise the question, “Are American’s being denied their right to vote for an eligible candidate.”

Indeed, inquiring minds need to know. The question and the action, as well as the DNC attempt to dismiss the case, need to go viral.

http://docs.justia.com/cases/federal/district-courts/pennsylvania/paedce/2:2008cv04083/281573/13/

If Sen. Obama cannot produce proof, the campaign goes poof, and no one’s to blame but the goofs of the DNC. Hillary’s supporters tried to get traction on this issue. Maybe citizen Berg can get it.

Oct 4, 2008 - 12:49 pm 123. newscaper:

On the previous thread someone quoted:

“We need somebody who’s got the heart, the empathy, to recognize what it’s like to be a young teenage mom. The empathy to understand what it’s like to be poor, or African-American, or gay, or disabled, or old. And that’s the criteria by which I’m going to be selecting my judges.”

So neither law nor more objective, ordinary notions of fair play and the facts, should ever trump those who presumably “deserve a break” regardless of the actual merits of their case.

I believe it was Ayn Rand who perceptively wrote about government and views like the above:

“The opposite of mercy is justice.”

Oct 4, 2008 - 12:52 pm 124. myna:

We should lodge a class action lawsuit against Barney Franks, Chris Doddd, Nancy Pelosi, Harry Reid and whoever involved in this mess.

It is time for people to take action against these despicable politicians.

Oct 4, 2008 - 12:58 pm 125. Mark:

About the bailout:

Wikipedia has an informative entry re. the Community Reinvestment Act.

Rather than say to taxpayers, ‘We are going to tax you billions to support lenders who are a credit risk,’ Congress achieved its social engineering ends by pretending it could, without real cost, have banks make loans that could then be securitized. Is not what we are seeing the bill coming due?

You can’t fool the market forever. But if you are bankers you can at least take advantage of the cluelessness and ideological goofiness of Congress, which the bankers did, making money while they could, which shareholders demand.

Oct 4, 2008 - 12:58 pm 126. Pascal:

Mika;

I think you just had a Joe Biden and Dennis Prager moment combined.

Oct 4, 2008 - 1:15 pm 127. mika2k1:

LOL! Yes. We just need to correct Habu’s typo to 55 CE.

Oct 4, 2008 - 1:54 pm 128. cedarford:

Bailout is not good or bad, just necessary.

It is infuriating, though.

I liken it to people being upset that a raging forest fire is near them. And they have to spend huge sums to have local and state people’s overtime, and lose beautiful old growth trees bulldozed for firebreaks. When, they reasonably say – that ” better regulation” of people in the fire zone could have prevented 3 of 4 fires that merged into the big conflagration.
They may be right, properly infuriated ..but still..fuck ‘em all, they still have a forest fire that will burn everything down, including them..if they don’t react and stop it – and give up just sitting back, trying to figure out who is to blame.

That said, it is galling to realize that even if you were fiscally conservative and didn’t play the “house-flipping game’, didn’t believe in “regulation-free” government, and opposed no money down 350K homes for illegal aliens or high school dropouts – you will get screwed.

But we have the government and system we deserve.

1. Some Ruling Elites may pay, but only the few in the private sector that committed securities fraud. Most of the developers, finaciers, house-flippers in the early phase of the pyramid scheme locked in their profit and will stay rich while taxpayers cover the “victims” left holding the bag when the Ponzi scheme blew up.

2. Politicians of both Parties will escape significant punishment. They will cover for each other. Charlie Rangel and Barney Framk will not be ousted from their safe districts, not will the Reaganite “deregulators” like Phil Gramm ever pay a cent.

3. Voters put up with DC becoming a den of lobbyist corruption enriching the lobbyists, their clients, and politician’s families. Republicans and Dems alike both gorged like pigs at the trough.

4. Voters cherished political beliefs – in any Party – ought to be strongly reconsidered and reflected on. Democrats should consider if factories and education help more people raise their lot than Villas and other unsustainable government-subsidized consumerism. Republicans face the biggest crisis, as they not only have to repudiate Bushism’s many philosophical failures but face the truth that some central tenets of Reaganism – “Any government regulation and oversight is bad, let unfettered free markets rule!” are malignant and cancerous when left to the discretion of bribing, rapacious greedy people. Libertarians face the truth that that their position that real estate speculators and people owing as much 5th Amendment property as “God gives them” is the pinnacle of what America is all about – is farcical. Their beloved “heroes” in the Kelo Case are almost all “house-flipper” people that bought multiple homes on little or no money down, and who extorted taxpayers.

5. The American public will have to learn to accept that people, even common people, will have to be punished for poor choices – because the alternative is that they will pay to “make those poor choice people whole, again”.
Yes it sucks to be a local dentist couple who went from 2 million in paper profits on 8 homes they owned in a shell LLC to the guy writing passionately and in deep pain “wondering how he will afford college for his kids” unless he gets some help (meaning taxpayers that have less means generally than the two professionals)
Yes it sucks that a black social worker up from welfare a decade ago is “on the verge of losing her sacred 1st home” – a waterfront property worth over 400K she bought just a year ago. Who will pay to keep her “in the home she loves”??
Yes, it sucks to be someone that invested conservatively and lived within their means being put on the tap for yet another bailout of Ruling Elites and their more than complicit “victims”

The question is if America can be fixed structurally such that we don’t decline as a nation….populated by people convinced that hard work, savings, and living within means is now a sucker’s game rigged by Ruling Elites and their “milk the stupid Americans for Gov’t goodies” constituencies.

(If it was up to me, the Board of Lehman Bros, Barney Frank, Chris Dodd, Dick Armey, Phil Gramm, Dubya, Maxine Walters, Charlie Rangel, Alan Greenspan, and Chrisopher Cox would be marched up against a wall and shot as examples to the rest of them.)

Oct 4, 2008 - 2:04 pm 129. wretchard:

Since a large component to maintaining system stability is keeping up trust and faith in the system, any electoral efforts to clean up the political sewer should reap a financial benefit. First, it lessens the possibility of further malfeasance; second it increases the probability of efficient management; third, it should attract resources into the system. One of the reasons why investors put their money in the US was the belief (was it mistaken) that its political institutions were less dubious than China’s.

If people like Barney Frank can stand expect to be re-elected then Abandon Hope All Ye Who Enter Here.

Oct 4, 2008 - 2:30 pm 130. bobal:

There seems to be some confusion as to whether Obama’s motion to dismiss has been denied, or not.

HERE

Berg needs to sharpen up his legal writing, his original filing being quite messy.

Oct 4, 2008 - 2:40 pm 131. peterike:

Bobal, interesting link. Even if it goes forward, I don’t see the wheels of justice working fast enough to make any decisions before the election. Not to mention there will be massive Democratic interference with this to slow it down or get it thrown out.

Though this does bring to mind: what if Obama is found to be undeniably NOT eligible for the Presidency AFTER he is elected? Does Biden become President? Do we re-vote? Or what if it’s discovered after he is sworn in? I am convinced the Democrats would never impeach him, even were it proven he is in violation of the Constitution.

This could bring about quite a crisis. Is this another black swan in the works? Is it a deliberate one? If we end up with an unconstitutional President in office, then where are we?

Oct 4, 2008 - 2:56 pm 132. Habu:

The sky did not fall
The grass was not clipped
My hammock grabbed me
And that was just it !

Agent Starling, what are the first priciples? What is it he wants?

I must, like Hannibal Lechter return to some first priciples. Aristotle belived we should live a life of eudemonia. This is outlined in his Nicomachean Ethics. They are very important to understanding mankind.

Then I would return to Aristotles sixfold classification of governments found in his Politics. Another must reading to understand where we are today.

Politics http://tinyurl.com/54eukg
Nicomachean Ethics http://tinyurl.com/5yozqf

I have been summond to dinner.

Oct 4, 2008 - 3:29 pm 133. mika2k1:

Excerpt from Atlas Shrugged:

“Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion — when you see that in order to produce, you need to obtain permission from men who produce nothing — when you see that money is flowing to those who deal, not in goods, but in favors — when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you — when you see corruption being rewarded and honesty becoming a self-sacrifice — you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit a country to survive as half-property, half-loot.”

Oct 4, 2008 - 3:42 pm 134. slade:

This thread strikes me as a fishing expedition – to take the temperature of the American people.

The complicated part is that it is half economics and half geopolitics.

With a presidential election thrown in for good measure.

Oct 4, 2008 - 3:46 pm 135. Leo Linbeck III:

No system established by human beings can be expected to maintain trust and faith at all times. The US system is quite remarkable for having survived this long. But all monopolies eventually become thoroughly corrupt, and the Federal Government is no exception.

The Founders tried to establish a system where the States were the main organs of government; the Federal Government would therefore be kept in check by limiting its power.

Still, I don’t think we’d want to throw out the baby with the bathwater by starting over. Here is one possible approach.

A movement to rein in the Federal Government by passing two amendments to the Constitution. These amendments would

1. Eliminate the gerrymander. This would abate the radicalism that results from the current district boundary setting process.
2. Limit total Federal spending to 20% of the three-year moving average of GDP. This would both cap the resources of Washington while also giving it a built-in incentive to grow the economy.

Given the systemic problems in Washington, this cannot be accomplished through the normal amendment process. Instead, two-thirds of state legislatures would have to call a Constitutional Convention to consider these amendments. This has never happened, but there’s no time like the present to give it a try.

Perhaps there is enough anger to organize the kind of grassroots movement needed to make this happen.

L3

Oct 4, 2008 - 4:20 pm 136. slade:

3. Term limits for Congress and the Supreme Court.

Oct 4, 2008 - 4:31 pm 137. RWE:

Peterike:

We end up with Biden as President and almost assuredly with Hillary as VP – until the inevitable tragic plane crash.

Of course the Biden plane crash could happen BEFORE HizMessiah buys the political farm and then Hillary comes in and waddaknow, that birthright thing turns out to be more than the ravings of a nutcase……

And by the way, note how fast and hard they dropped the Clinton Passport Inquiry back in 1992. The fear was that he had renounced his U.S. Citizenship back in his European Protest days. They sealed the records and funny how nobody has looekd into that any more.

By the way, Habu is indisposed at present but requests that any donations or investment contributions be sent in his name directly to the Civilian Marksmanship Program, details at http://www.odcmp.com

Oct 4, 2008 - 4:36 pm 138. Eggplant:

Slade, you’re too subtle for someone as slow witted as myself.

Oct 4, 2008 - 4:53 pm 139. slade:

Nada Eggplant. It’s the digital context that trips us all up.

Oct 4, 2008 - 5:26 pm 140. slade:

Or you were just channeling your inner Cro-Magnon man.

::))

Oct 4, 2008 - 5:32 pm 141. RWE:

Fox News Channel has a special on right now on How We Got Into This Mess.

Pretty much as I thought, complete with legislation by Carter and Clinton, the Repubs attempt to fix the problem and the Dems opposition – except they also pointed out that Chris Dodd, Dem chairman of the banking committee, got a sweetheart loan deal with Countrywide, one of the worst offenders. I had forgot that.

I suppose that there will be a dozen books out over the next year explaining it all – and probably one of them that gives the real details. But by that time it will be too late.

Oct 4, 2008 - 5:46 pm 142. buddy larsen:

From John Mauldin’s eletter, re what gov’t intervention can lead to internationally –”beggar thy neighbor” behavior such as Smoot-Hawley and its helpful nudge toward WWII:

(open quote)

“Nouriel Roubini tells us that there are 800 billion dollars deposited in US banks by foreign counterparties. Up until this week, if you were a foreign operation, would you rather be in large money-center US banks or European banks? Tough choice, but on balance you would pick the US. Then this week Ireland decided to simply insure every deposit in Irish banks, no matter the size. Predictably, money started flowing from all over Europe into Ireland. National banks and finance ministers are furious with Ireland.

However, Ireland may have no choice but to backstop its own depository institutions to keep them from losing deposits and becoming insolvent from a bank run by corporations acting in their own best interests. Belgium, The Netherlands, and Luxembourg each took 49% of their respective parts of Fortis Bank in return for a massive injection of capital, declaring the bank too big to fail – also wiping out a lot of already diminished shareholder equity. Europe has its own quite serious problems.

But what if the various countries, one by one, decide to guarantee deposits in order to protect their own banks? If you are an international corporation, especially if you are outside the US, do you want your $10 million in Europe or the US if Europe guarantees your deposits with no limit? Could we see silent runs on US banks?

I think it is about an even chance that the government will have to guarantee for a period of time (say 6 months to a year) every bank deposit, regardless of size, in the US.

That is a staggering thought. The potential will be large for almost-insolvent banks to pursue risky behavior to try and work their way through problems. If such a policy is pursued, tight controls must be administered so risky banks do not offer high CD rates in order to garner assets. The FDIC must closely monitor such activity. Perhaps such guarantees should be for existing depositors and not new customers. Insolvent banks and those on the edge must be shut down quickly in such an event, to prevent risky behavior.

(close quote)

Oct 4, 2008 - 5:55 pm 143. Ex-fetus:

“So now I’m back to wondering if those conspiracy theories weren’t right all along.”

Anyone that doubts the existence of conspiracies needs to read the Church committee reports;

http://www.aarclibrary.org/publib/contents/church/contents_church_reports.htm

Without wading thru it yet again, IIRC, it was found that the CIA had almost 8,000 unauthorized ‘conspiracies’ in progress at the time of the investigation. That is just the CIA. By the time you throw in another hundred or so spy agencies, plus all the industrial espionage going on and you have millions of conspiracies in progress EVERY single day. What is hard to believe is that so few of them are every exposed.

AS far as .308 rifles I like this;
http://www.geocities.com/awatters2002/m1a/
Not a home defense weapon, but as part of a neighborhood watch program, it’s a welcome addition.
Full auto kits are available and the switch isn’t to bad. Not that you want a full auto today, but once the cities are burning and millions of Americans are wandering around looking for something to eat, the ATF will have better things to do then looking for full auto weapons. Meanwhile, I don’t think having the kit in your closet is illegal. Don’t know for sure, but I have never heard of anyone getting busted for having one and I bought mine over the counter.

Oct 4, 2008 - 6:09 pm 144. buddy larsen:

@RWE: “I suppose that there will be a dozen books out over the next year explaining it all – and probably one of them that gives the real details. But by that time it will be too late.”

I’m looking forward to the book that explains to me how i managed to think i knew what was happenin’ in the world –up until a couple months ago when the world said “ha, fooled ya!”.

Oct 4, 2008 - 6:21 pm 145. buddy larsen:

Mark Steyn with a little window dressing from The Corner.

Oct 4, 2008 - 7:22 pm 146. RWE:

Buddy: I can’t say that I had it all figured out – but when I looked around my own neighborhood and see the million dollar plus homes that were built over the last 4 years and never sold. And the $300K plus homes that were never finished and sit in weed covered lots in an “exclusive” new development where the signs have fallen down. And at the older houses that sat for sale until the owners gave up. And at the large new condo complex where there is a suspicious lack of traffic – and which I understand is populated in a very limited fashion and even then largely by the relatives of the owner.

And when I read that in Miami they had 20,000 new unsold condos a year ago and were projected to have 50,000 now.

Well, I ain’t really surprised. All that money had to come from somewhere, and where is it now? Not producing wealth. Not even paying off the loans; could not be, no way.

Oct 4, 2008 - 7:31 pm 147. buddy larsen:

RWE, no, i wasn’t aiming that at you –it’s my own judgement that has got me so dispirited. I’ve been thinking hard on it awhile now, and it boils down to “ok, these numbers look weird, but someone somewhere smarter than i must be keeping an eye on all this, so why worry?” Followed by the realization that this is pretty much the intellectual standard of a 14 year old –meaning that’s about the age i quit learning.

Oct 4, 2008 - 7:43 pm 148. Paul:

Was the Bailout a good idea? Depends on what happens next.

If we had a chance of electing a pro growth President and Congress, I wouldn’t be too concerned. Some program like Newt’s pro growth proposal could ignite the economy and we likely would be fine.

A lot of people perhaps were not aware that after 911 the percentage of income paid in federal taxes had fallen from a post WWII high of around 23 percent at the height of the dot.com bubble to a post WWII low of around 16 percent. In terms of today’s economy, that would be the equivalent of a swing of about a trillion dollars a year in revenue. That is why we went form a surplus to $450 billion deficit in about 18 months. Aggressive Tax cuts under Bush reduced that deficit to about $150 Billion last year despite a huge increase in spending.

But now facing an iminent recession, Mc Cain can’t even bring himself to criticize the enormous tax increases proposed by Obama. The Bush Tax cuts expire in 2010 so we are almost sure of a big tax increase in a recession, with Mc Cain hardly talking about that tax increase anymore. Add that to Cap and Trade controls, probably some populist inspired misplaced draconian regulations on Wall Street, and an attitude that “we must do something about Health Care” and we have a disaster with or without Obama. Of course the disaster will be bigger, much bigger under Obama.

With Obama we face a Marxist takeover; with Mc Cain judging from the policiies expoused in the two debates – Socialism Lite.

Oct 4, 2008 - 8:49 pm 149. 3Case:

“If people like Barney Frank can stand expect to be re-elected then Abandon Hope All Ye Who Enter Here.”

Oh…Come on now, Wretchard!!…You did 4 years in the Commonwealth!! Frank will sail to reelection. Listening this week down at my local diner, I can say that if Chris “Friend of Angelo” Dodd were standing this year a tomato can would give him a good run for the seat…the enmity toward him cuts across age and demographic boundaries from what I can see and is quite open.

Oct 4, 2008 - 8:57 pm 150. mika2k1:

it’s my own judgement that has got me so dispirited.
==

It’s not so bad, Buddy. At least now you’ve learned who are the real commies.

Oct 4, 2008 - 9:01 pm 151. Dave:

It’s those G-D Republicans!! If twelve more had voted to pass the bill last Monday, we wouldn’t be in this mess now with a pork-laden law. It certainly could not be due to the 95 SAINTED DEMOCRATS who voted against it.

Sarcasm off.

The Democrats have a majority in both houses of Congress. If Pelosi/Reid had wanted to pass the bill, there is nothing the Republicans could have done about it.

Oct 4, 2008 - 9:21 pm 152. mika2k1:

Dave,

They had 8 years and did nothing. Well, actually they did something. They looked the other way.

Oct 4, 2008 - 9:31 pm 153. buddy larsen:

But everybody was making money, and there’s no way to argue with numbers y’know. Risk is invisible –tho plenty were warning of it –just look at Greenspan’s testimonies. It’s like the difference between your having insurance and not –no way to tell just by looking at you.

Oct 4, 2008 - 10:40 pm 154. buddy larsen:

Remarkable timing –in view of the Sandler’s certain understanding of the situation. Almost as if they had an idea about when Lehman Bros (Geo Soros a major shareholder) would finally hold that one Auction Rate Securities auction too many.

Oct 4, 2008 - 11:22 pm 155. yarassouloulah sy:

thanks

Oct 5, 2008 - 2:03 am 156. weSwinger:

@Charles – your analysis is spot on.
Liquidity in our economy is normally like oil in a machine to keep it running smoothly . . . in this case it is water on a fire. Even after the dot-com crash in 2000 and the 9/11 follow on, credit kept flowing. This was different; a specific industry crisis. Problem is, the banking industry is what keeps the rest of the economy rolling.

Those who say that we can figure out something better are not the necessary players. I am sure they are right. There have been several plausible and better plans offered by BC’ers. We just don’t have a seat at the table. I am particularly irritated by Newt Gingrich, who didn’t have the stomach to take the spanking Clinton and company gave him, and stay in the House, where he might have done some real good once Bush got elected.

@RWE – I feel your pain, but this is a national problem. We enjoyed our real estate boom while it lasted. We now have to take the de-leveraging medicine and pay our bills. If that note is held by a foreign institution, well, that’s globalization and free trade for you. As far as a “bailout” goes, the investment banking business has taken a huge hit and several banks have gone under or been taken over at fire sale prices. Some “bailout”.

@Lifeofthemind – put pressure on your Senators and Representative to not reward the culprits here. There is a problem though – and that is the skill set required to administer this program will provide employment to some of the financiers who were working at the investment and commercial banks in the secondary mortgage market. It is likely that they have learned the basic lessons of “no free lunch” and “you can’t lend the same dollar 50 times” and, especially “there is no new paradigm”. But they will need extra scrutiny. Is the current group of political miscreants, Frank, Dodd, OBAMA &co. up to the task? I don’t think so either. But if this bill hadn’t gone through, who would have been punished? Not them.

@Sanchmo – have you looked at the returns the banks are getting on the T-bills they’re buying? I didn’t think so. Those returns are not the business they are in, it is just a place to park their cash until the market corrects.

@L3 – well thought out administrative plan. You should apply for the job with Mr. Paulson.

Bottom Line – support, but in the subjunctive mood. I wish it were different.

Oct 5, 2008 - 2:35 am 157. 3Case:

From Spectator.org re: the first vote on the bailout

Democrat Leaders Played to Lose
By The Prowler
Published 9/30/2008 12:50:21 AM

House Speaker Nancy Pelosi ordered her Majority Whip, Jim Clyburn, to essentially not do his job in the runup to the vote on Monday for the negotiated Wall Street bailout plan, according to House Democrat leadership aides.

“Clyburn was not whipping the votes you would have expected him to, in part because he was uncomfortable doing it, in part because we didn’t want the push for votes to be successful,” says one leadership aide. “All we needed was enough to potentially get us over the finish line, but we wanted the Republicans to be the ones to do it. This was not going to be a Democrat-passed bill if the Speaker had anything to say about it.”

During the floor vote, House Majority Leader Steny Hoyer and House Democrat Conference chair Rahm Emanuel could be seen monitoring the vote on the floor, and gauging whether or not more Democrat votes were needed. Clyburn had expressed concerns, says the leadership aide, of being asked to press members of the Black and Hispanic caucuses on a bill he was certain those constituencies would not want passed.

“It worked out, because we didn’t have a dog in this fight. We negotiated. We gave the White House a bill. It was up to the Republicans to get the 100 plus votes they needed and they couldn’t do it,” said another Democrat leadership aide.

Emanuel, who served as a board member for Freddie Mac, one of the agencies that precipitated the economic crisis the nation now finds itself in, had no misgivings about taking a leadership role in tanking the bill. “He was cheerleading us along, mothering the votes,” says the aide. “We wanted enough to put the pressure on the Republicans and Congressman Emanuel was charged with making it close enough. He did a great job.”

Pelosi and her aides have made it clear they were not going to “whip” or twist the arms of members who did not want to vote, but they also made no effort to rally any support for a bill they attempted to hijack over the weekend.

Further, according to House Oversight Committee staff, Emanuel has received assurances from Pelosi that she will not allow what he termed a “witch hunt” to take place during the next Congressional session over the role Fannie Mae and Freddie Mac played in the economic crisis.

Emanuel apparently is concerned the roles former Clinton Administration members may have played in the mortgage industry collapse could be politically — or worse, if the Department of Justice had its way, legally — treacherous for many.

Oct 5, 2008 - 4:12 am 158. nobozons:

Just stop paying federal income taxes in response to this obnoxious bill.

Oct 5, 2008 - 6:59 am 159. slade:

The complicated part is that it is half economics and half geopolitics.

I have no idea what mushy tired part of my brain produced that sentence. I was trying to note weSwinger’s point that sharp thinking and a sophisticated technical skill set will be required to perform the financial surgery of restoring credit while removing bad assets and bad banks – in an environment of global competition.

And the only piece on the board representing the interests of the American taxpayers is a Congressional Oversight Committee.

To pick up on Buddy’s point, the bill itself almost doesn’t matter. That giant sucking sound is the gasp of indignation at the scope of the graft leading to the here and now. The price of stupidity. And the realization of how long the recovery will take.

Oct 5, 2008 - 7:25 am 160. buddy larsen:

Slade is right about the gasping indignation over the time value of our own stupidity –the whole thing would be sickening enough even if we were immortal and hadn’t just thrown away (by our acceptance of a corrupt congress) an irreplaceable 5 or 10 or 50 years of work.

Oct 5, 2008 - 7:48 am 161. Leo Linbeck III:

weSwinger,

Thx for the thought, but I’m afraid I’m not qualified to work for Mr. Paulson on this bailout. I am not a lawyer, an investment banker, management consultant, Ivy League graduate, Goldman Sachs alum, former Congressional staffer, or Barney Franks’ lover. Plus I’m over 30, have a love of history and an appreciation for representative democracy. My CV wouldn’t even make it through the computerized resume filter.

No, I’ll work the other side of this mess, work fewer hours and make more money, which will be invested in growing businesses and worthy charities, leaving me time to spend with my family and get the most out of my exclusive Belmont Club membership.

L3

Oct 5, 2008 - 9:15 am 162. Bob Murphy:

@Tony
Try a Ruger Mini-14. They come in 5.56mm NATO and are very rugged, reliable, compact.
Civilian rifle but draws heavily on Carbine, Garand, M-14 systems.
But they aren’t particularly accurate. Good for built-up areas.
For longer distance go get a match grade M-14 from Springfield Armory. They don’t call it an M-14 but it is one.
Very, very accurate.
Better yet if you can still find one, get the Hechler & Koch semi auto version of the G-3 in 7.62mm NATO. Or its CETME “Sport” equivalent.
The G-3/CETME has MUCH lower recoil than an M-14 and a straight line stock and that means less time to get back on target.

Oct 5, 2008 - 6:42 pm 163. Bob Murphy:

@Fletcher
“And your grandchildren will be dust, ash and smoke drifting on the wind – as will you, and a few hundred million of of your idolatrous brothers in Satan.”
Calm down, lad.
You seem as bloodthirsty as them.
Pacem in terris (but keep your powder dry).

Oct 5, 2008 - 6:53 pm 164. 3Case:

Springfield Armory M1A Scout Squad .308

3Case’s rule for M-14s: Be very conscious of your sightweld.

Oct 5, 2008 - 8:16 pm 165. buddy larsen:

i agree –.308 is the one, on balance of performance and availability.

Oct 5, 2008 - 8:36 pm 166. buddy larsen:

further reading on F&F

Oct 5, 2008 - 10:48 pm 167. Fletcher Christian:

Bob; quite. I am peaceful by nature; but I watch my own country (the UK) taken over, little by little, by an utterly alien ideology and I shiver. And it is characteristic of most Western countries that they tolerate, and tolerate, and tolerate – until a certain, unpredictable, point is reached and then we snap. And then, God help anyone who stands in our way for He is the only one who can.

I will illustate the point. I believe this little scene was enacted in 2006. Picture a law-abiding, white, British-descended male going about his lawful business – which happened to be waiting in line for a machine dispensing subway tickets. He was having a little trouble with the machine; something to do with crumpled currency and the machine having trouble with it. Cue obvious Moslems in traditional dress, one of whom proceeds to knock this man to the ground, yelling “Out of my way, infidel slave!” and get his own ticket.

Victim of this assault goes to the local police, insisting that the perpetrators of the assault be arrested – there were many witnesses and CCTV coverage of the event. Not only do the local police not investigate the assault, they threaten to arrest the complainant for “hate crime” if he persists in making a fuss.

Which Islamic hellhole did this occur in? London. I estimate that the mosque-burnings will start within five years; and I will be cheering on the burners. I won’t say “arsonists” for I believe that their actions will be justified. Britain is not beyond hope. Not quite yet.

Oct 6, 2008 - 2:26 pm 168. NahnCee:

Fletcher – obvious Moslems in traditional dress don’t seem to do that too much here in America. Guy they knock to the ground could very well have a gun, and obvious Moslems know he’d be acquitted (or not even arrested) for having perforated them in self-defense.

You really should try it. You’d like it.

Oct 6, 2008 - 8:56 pm 169. Fletcher Christian:

NahnCee; I agree with you – but I only have one vote. Other things that could be tried include actually enforcing the regulations on immigration, not to mention the laws we already have against incitement to murder, arson and riot. One of the worst laws ever passed in the UK was the Human Rights Act – it was the typical bad law passed with good intentions, and should be repealed – right now. It’s being used by all sorts of undesirables to avoid the proper penalty for their crimes.

Unfortunately, I think that none of this will happen except as a response to widespread civil unrest, and after a very large lurch to the Right – which may well be undesirable for other reasons; some of the policies of the BNP are little different from those of Hitler.

I have been called racist, and to my face. I am not. Islam is not a race. Instead, it is the largest death cult in history – and, sooner or later, history is where it will be and nowhere else. Why not now?

One thing I am completely unable to have my views altered about; British-born converts to Islam are traitors, by definition, and should be treated as such, in the traditional way; “you will be taken hence to the prison in which you were last confined and from there to a place of execution where you will be hanged by the neck until you are dead and thereafter your body buried within the precincts of the prison and may the Lord have mercy upon your soul”.

Oct 7, 2008 - 12:01 am 170. Bob Murphy:

@Fletcher
Can you now understand why America has a 2nd Amendment?
Sometimes the words just stop or become totally irrelevant.
Have you ever heard the old saying, “An armed society is a polite society?”
Ain’t it wonderful!

Oct 7, 2008 - 11:06 pm 171. Fletcher Christian:

Mr. Murphy; once, we had a country whose total annual death toll to homicide was less than that of one city in the USA. Once, we had a country where people could, and did, leave their doors open when they went to work.

And that is because once, we had a country largely in agreement as to the desirable shape of society, and respectful of authority; and we also had authority figures worthy of that respect.

We now have none of those things, and the lack of the first paragraph directly follows on the lack of the second. Guns have absolutely nothing to do with it.

Oct 7, 2008 - 11:39 pm 172. Bob Murphy:

That was also true of many places in the US, Fletcher.
My concern in the case of the UK is that you now have a large and rapidly growing minority that is inimical to everything you believe in and a police force and legal system that will not protect you from them.
And you are denied the opportunity to defend yourself in any effective way.
That is why so many Englishman are doing a cut and run to the ex-colonies. And the problem thus gets worse.
And you have no practical means to change the course of events because your class betters run the show.
And even they are powerless against the EU’s unelected aparatchik aristocracy.
So what is the solution, Fletcher?
What do you really think you can do to restore the rule of law, if anything?

Oct 8, 2008 - 12:23 am 173. Fletcher Christian:

Bob, a few things that could be done: Repeal the Human Rights Act, and having done that expel all convicted foreign criminals and rabble-rousing clerics from the country; make it illegal to provide prayer facilities in places of work; ban halal slaughter; ban the building of new mosques, or conversion of buildings to same; crack down – heavily – on immigration; remove all leisure facilities of any sort from prisons and fire any warders found smuggling in drugs. Also leave the EU and repeal all the legislation that it has foisted upon us.

The trouble is that none of that is going to happen – at least not until blood has run in the streets. I don’t have an answer. I am not sure anyone has one.

Oct 8, 2008 - 3:29 am 174. Bob Murphy:

@Fletcher
Most of those suggestions sound sensible. You owe it to yourself to communicate them to your local Member.
At least that much.
What a mess.

Oct 8, 2008 - 3:16 pm 175. Expressions:

The bailout was bad, really bad. The liberal illuminati passed a bill that saved the crooks on Wall Street, and Mainstreet has to pay for it. That was not only bad, it was wrong.

Oct 25, 2008 - 11:16 am

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