For what its worth, I'm now solidly against the bailout plan. I am confident the Federal Government has a role to play in the banking crisis, but this plan is not it. It's defeat is an encouraging event in American politics. The voters were heard.
I am disappointed in the Democrats, majority of whom supported it. What a chance Obama has lost to show leadership and provide a contrast to McCain.
9 comments:
First, what do you so dislike? I frankly am completely uninformed about the deal. For some reason the news outlets think it is very important I know it will $700 billion, but I'm not clear at all about what it does.
Second, a meta-question, do you feel like you have the necessary information to have a reasoned opinion on this? Part of the reason I know so little about it, is that I think it is very much like the body armor debate. I know so little about the topic, that I can't imagine after a lot of study I could have a legitimate opinion on whether it makes sense to buy body armor.
It starts with distrust and loss of faith in the officials pushing the plan. I'm not a Bush administration fan, but I would have been willing to believe the Secretary of the Treasury and the head of the Fed were competent professionals. Paulsen's plan though, seriously. The plan Paulsen originally put forth :
A. Had an air of desperation and extreme haste.
B. Gave him as an individual mind boggling power.
C. Is a transfer of public wealth to save private companies that is so huge it better be direly needed.
Most economists I've read say we are not on the verge of another Great Depression. A recession like the 80's sure, but not the Great Depression. Of course, I'm sure they didn't think so when they got the Great Depression, either, and I wouldn't want to be the guy who could be blamed if it was another Great Depression, so lots of pressure on Paulsen. I think he totally freaked.
So he either panicked and lost his head, or is a dangerous egomaniac, or wants to bail out his Wall Street golfing buddies.
The Congress put some oversight in there, but still, I have no faith in the place it came from.
Essentially he could have done anything with the money, but it seemed he was saying he was going to buy up mortgage backed securities. Not the mortgages, mortgage backed securities. And not get equity in the companies. Again, I'm not an economist, but there are several different models from our own past, and there is the so called Swedish model.
One suggestion is to buy the mortgages themselves, and let the financial institutions dangle. During the Great Depression the Home Owners’ Loan Corporation purchased and refinanced delinquent mortgages. It was as lenient a lender as it could be, foreclosed when it had to, and had sold everything back off and closed down 15 years later. Sounds great, although I don't think there was a pyramid scheme built on top of the mortgages that led to a credit crunch when the mortgages lost value.
Sweden experienced a similar problem, got equity in the corporations it bailed out, essentially nationalizing them. This will terrify Matt, I suppose, but part of the program were explicit rules about the government having to sell off their ownership when the banks were solvent again.
What I've read about the S&L bailout sounded similar to the Swedish Solution, and government did dutifully sell off its ownership when the time came.
So if we are going to bailout, I strongly suspect the current model isn't the best one.
On top of that, as Matt has argued, we might need a recession. A credit crunch, at least for consumers, would be a good thing, as I argued in the "House of cards" post. I read that, get this, FEWER credit cards are being mailed out. Yippee!! So if we don't have to avert a Great Depression, if what they are trying to head off is a painful recession but not dramatic Depression, I don't see this haste to push through something so momentous.
Oh MY God. Do you need more evidence these people are nuts. The bailout didn't pass, so they tag on unrelated tax regulation to try and coax Republicans to vote for it? How about modifying the plan to one that voters don't find stupid and infuriating?
A. Had an air of desperation and extreme haste.
Josh, the haste is one of the really good things in this plan. Move fast to unstick money is what no one did in 1929.
B. Gave him as an individual mind boggling power.
Yes, this is the Worst Thing Ever.
A recession like the 80's
That would be the '70s.
So he either panicked and lost his head, or is a dangerous egomaniac, or wants to bail out his Wall Street golfing buddies.
Like I said, you and I are both against the plan, but I don't think there is a panicking bone in Paulsen's body. He knows what he's doing. He may be wrong, but he knows what he's doing.
One suggestion is to buy the mortgages themselves,
You can't really do that, no one owns them.
Sweden experienced a similar problem, got equity in the corporations it bailed out, essentially nationalizing them. This will terrify Matt,
Of course, and while the rest of you will say it bugs you, you have no idea what real dread it gives me. Governments, and bureaucracies in general, do not relinquish power, authority or money.
Do you need more evidence these people are nuts
No.
Josh, the haste is one of the really good things in this plan. Move fast to unstick money is what no one did in 1929.
OK, he's a dangerous egomaniac not to be trusted. And we're fucked.
Sigh.
OK, he's a dangerous egomaniac not to be trusted. And we're fucked.
Yes, he is indeed a government bureaucrat. Welcome to the truth.
Matt sed,
"You can't really [but the mortgages themselves], no one owns them," and later, "Governments, and bureaucracies in general, do not relinquish power, authority or money"
while Josh had already noted,
"the Home Owners’ Loan Corporation purchased and refinanced delinquent mortgages. It was as lenient a lender as it could be, foreclosed when it had to, and had sold everything back off and closed down 15 years later."
{brain whizzering sounds}
Not picking on you Matt, just trying to see if these sound incompatible to you, and if not, why?
James,
Sorry I'm only just now getting to this, it's been a busy few days with me starting school back up.
You asked me to explain:
"You can't really [but the mortgages themselves], no one owns them," and later, "Governments, and bureaucracies in general, do not relinquish power, authority or money"
Josh pointed out that Sweden (I think) had something similar and their agency sold everything back and shut down.
I suppose it has happened in the history of the world, but I challenge you to find five instances of agencies, taxes or authorities founded or imposed by the U.S. federal government that was ever recinded. I'm giving you from 1785 to 2008. If you find five I'll be surprised, but the exercise should prove to you that the chances of re-privatizing these authorities are basically exactly zero.
Start with Prohibition and you only have four to go.
I'll try to come up with a couple more, but Josh mentioned two within his own post, one of which I then quoted in my comment, both of which are directly analogous, though not identical, to the very situation we're discussing of banks and home loans. So, with your prohibition gimme, we're at three out of five even before we get started.
1. Prohibition
2. Home Owner's Loan Corp (great depression foreclosures
3. Resolution Trust Corp (S&L bailout)
I understand your point in general, and it is no surprise given your general wariness of government power, but I still wonder if Josh's two positive examples don't strike you as any kind of counter to your claim?
4. Airline Deregulation Act
That one just came to me. One to go... :)
Post a Comment