I don’t know if have much fight left in me. I am now reading the novel Choke (same author as Fight Club, an all-time favorite), the transition to this book seems appropriate at the moment.
We are spinning around in circles wolfing down the information we are fed and I think we are slowly, painfully moving in a more productive direction. But it is going to cost us dearly, talk a while and we don’t really understand how to fix it or prevent it from happening again.
It’s not enough for Wall Street to be reinvented. Of the 5 big investment banks, Bear and Lehman are now gone, Merrill was bought by BofA and Morgan and Goldman decided it was better to be a commercial bank.
Still no answers yet.
And old habits die hard – commercial banks don’t want assets valued at market value just yet because it might hurt their books before the bailout.
The SEC has been MIA and Paulson and Bernanke are moving in on their turf.
Members of the economic far left and far right don’t like the $700B bailout without answers either:
From the left
“This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything,” said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington. “It’s almost amazing they can do this with a straight face. There is clearly skepticism and anger at the idea that we’d give this money to these guys, no questions asked.”
From the right
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”
Perhaps, the dialog for a solution can finally begin. The Brookings Institute released a brief: A Brief Guide To Fixing Finance
It’s all pretty basic but lays it out cleanly.
- Policy makers need to set priorities – the problem is too vast to fix at once.
- Know What Went Wrong Before Beginning to Fix Anything
- Act In Our Own Interest, While Consulting with Other Countries
- Principles To Guide More Permanent Reforms
They recommend these reforms should be:
- First, financial instruments and institutions should be more transparent.
- Second, financial institutions should be less leveraged and more liquid.
- Third, financial institutions should be supervised more effectively, with greater regard for systemic risks.
Is gagging better than choking?
Tags: Ben Bernanke, Henry Paulson, Lehman
Glad the Brookings is still going. But, do the Washington folk consider what Brookings says? If I read the Brookings analysis you cite correctly, the root of this cycle is found in the tension between an affordable, but desirable, life style for the sub-prime crowd and acceptable profits for the lending industry. It will indeed be challenging for anybody to come up with something that works since the solution to either may be anathematic to the other. Seems we are exercising the only solution we have come up with so far, that of guaranteed government bailouts. The distasteful part is that the lending industry seems to have taken advantage of the scheme.
It seems we are mostly convinced that the free and un-regulated market is the most efficient market for lending, while the effort to avoid leaving the less credit worthy out of the main stream only works when the government intervenes. I admire and therefore subscribe to the Brookings’ level headed approach of establishing priorities in whatever the government does and especially now. I hear Paulson saying we can’t wait and maybe we can’t, but we likewise cannot afford to dispense with a full discussion. We know that some of our leaders will undoubtedly ignore the best interests of the country in favor of their own special interests and that alone requires vigilance and deliberation. I am glad Paulson blew the whistle, but beware of a “bum’s rush” which will most likely leave us with new and amazing effects as yet un-described. Stay in the discussion guys and include your national representatives and candidates. It is irresponsible to not participate.
Jonathan, by now I am expert at both .
I agree most with this statement:
Know What Went Wrong Before Beginning to Fix Anything
Before we start this bailout, we have to understand how we got into this mess. And then we can begin to help unwind the hugse asset bubble. However, I don’t think Paulson and Bernanke know what really went wrong. And I don’t think they know how to fix it.
When is the investigation? Isn’t there always an investigation?
I have listened as much as I can to try and understand hy this “bail out” is good for the tax payer. So far all I have heard is that if the bail out doesn’t happen the consequences will be dire-worse than what the administration wants. I just have to conclude let em fall. I am beginning to think they want the bail out so Wall Street doesn’t suffer. I am really concerned about this suffesion coming from an administration that doesn’t seem to vet much of anything fully. It seems that no other point of view of cach of information is of any use to them.
I wholeheartedly support this bailout. It guarantees an even more spectacular crash down the line, and more hardship for everyone. It is obvious that all this has not been enough to jar folks away from their sitcoms. Perhaps mass unemployment and their children growing gaunt from hunger will convince them to spend less time shopping and watching TV, and more time being involved in the real world around them. Thus, next time a bunch of fancy-pants Harvard types try to pillage a generation’s worth of value via private equity LBOs and the securitization of everything and nothing, they might be stopped and jailed for the good of all.
De-regulation coupled with policy mandates maintained by a shrewd and well funded lobby. Home ownership percentage increases at the cost of actual equity in the home in markets that always go up! Peter Orzag, formerly of the Brookings, presciently stated that the expectation of this cash back stop ($700B), makes it almost neccesary for continuity of the market place (fair and orderly-as the saying goes)
-pass the plan, the assets do have a value, the plan should also be limited as to time initially very brief- then make the reforms required to fully privatize fannie & freddie and reduce mandates for mortgages-
-The government will probably make money over the long run- because….well…..prices always go up(after they go (all the way) down)
After lots of reading, here and elsewhere, I am still at a loss as to what the Secretary wants to fix with all this money and how he is going to do it, but apparently it will happen. Recent past history tells us this will not be over so soon and it won’t be the last time for a bailout in this collapse. A lot of the pundits are saying this is not a fix, but just a stop gap. Whatever, it seems the pigeons are home to roost. Tighten your belts guys.
I like this PLAN :)The Birk Economic Recovery Plan
I’m against the $85,000,000,000.00 bail out of AIG. Instead, I’m in favor of giving $85,000,000,000 to America in a “We Deserve It Dividend”. To make the math simple, let’s assume there are 200,000,000 bona fide U.S.Citizens 18+. Our population is about 301,000,000 +/- counting every man,woman and child. So 200,000,000 might be a fair stab at adults 18 and up..So divide 200 million adults 18+ into $85 billion that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a “We Deserve It Dividend.” Of course, it would NOT be tax free.So let’s assume a tax rate of 30%. Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam. But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00. What would you do with $297,500.00 to $595,000.00 in your family? Pay off your mortgage – housing crisis solved. Repay college loans – what a great boost to new grads. Put away money for college – it’ll be there Save in a bank – create money to loan to entrepreneur Buy a new car – create jobs Invest in the market – capital drives growth Pay for your parent’s medical insurance – health care improves Enable Dead beat Dads to come clean – or else Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces. If we’re going to re-distribute wealth let’s really do it…instead of trickling out a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President. If we’re going to do an $85 billion bail out, let’s bail out every adult US Citizen 18+! As for AIG – liquidate it. Sell off its parts.Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up.Here’s my rationale. We deserve it and AIG doesn’t. Sure it’s a crazy idea that can “never work.” But can you imagine the Coast-To-Coast Block Party! How do you spell Economic Boom? I trust my fellow adult Americans to know how to use the $85 Billion “We Deserve It Dividend” more than I do the geniuses at AIG or in Washington DC . And remember, The Birk plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
Ahhh…I feel so much better getting that off my chest. Kindest personal regards,
T. J. Birkenmeier, A Creative Guy & Citizen of the Republic
PS: Feel free to pass this along to your pals as it’s either good for a laugh or a tear or a very sobering thought on how to best use $85 Billion!!
I am sure most of us who are interested in the current US economic situation, particularly the housing situation and mortgage blunders, have heard the President’s address to the nation—September 24th 2008—which took about twelve minutes to explain to the nation as to what happened and what the feds should do to possibly correct it. The gist of his address, as I understood, was help us to help you.
That’s all fine. As I’ve responded to many blogs regarding the very subject of the economy, our current situation began brewing over a decade ago. Of course, he did not waste any time to stress the latter, because he was not the Commander in Chief then. Am I to understand that in the past eight years of his presidency nobody in his administration could foresee this problem coming? And now that it has occurred and everything is surfaced up they knew that potential problems existed a decade ago? He just told the nation why. Money was plentiful, people spent, spent and spent, credit approval standards were low, financial institutions made loans left and right, Freddie and Fannie got fatter and became gigantic dollar bombs waiting to go off. And, indeed, they did, along with many other smaller institutions.
Here is the point: I am not quite confident if this $700b taxpayers’ money to be a success in terms of stimulated economy. This may cost each taxpayer $2,000 – $3,000 (figures are rough, maybe more). I know the situation is critical. What if it doesn’t help? Some folks can’t afford to part with this kind of money, it’s hard for them as it is, although the contributing taxpayer will be repaid.
The president’s address was simple and straightforward. He said that this is not normal economic circumstances. His reasoning was logical, but then again, name one politician that has sounded illogical when addressing the nation. I personally have mixed feelings about this massive bailout, but if it works, then I’m one happy camper. We’ve suffered enough in the past 30 months or so.
I expressed my view, as above, in a blog, yesterday and today—September 25th 2008—I heard the Congress has indeed given the President the green light for his $700b bailout.
Latest victim: Washington Mutual? Just heard it on the news while writing this.
“I expressed my view, as above, in a blog, yesterday and today—September 25th 2008—I heard the Congress has indeed given the President the green light for his $700b bailout.” Better listen again. My sources say you are 1/2 right. The Republicans 86’d the plan and WAMU did indeed implode, but I wouldn’t characterize it as a victim unless shooting itself in the foot makes it a victim. Other than that I have no news and still have no idea what we are fixing with the 700 billion $ except something we can’t mention because it so horrible. Does anybody have any real idea what is going on?
Latest victim: Washington Mutual? Just heard it on the news while writing this.