Are you watching?

By now we all know about the bailout of the robber barons who brought death into this world and all our woe. They and the government – which are looking more and more like a single entity – are being rewarded beyond any of their wildest dreams for their staggering failure and incompetence while we are being asked to pay. I really don’t think the ramifications are clear to most people: we are giving the Treasury Department free reign to do anything it likes with as much money as they want, with no oversight or accountability.

You’ll find in the bailout plan this hair-raising gem:

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

You have to read that a few times. This verges on the totalitarian. There will be a semi-annual review by a congressional committee with no power of enforcement, and that’s it. We are giving the Treasury Department everything, on faith, despite the economic maelstrom they themselves helped to create. It is wholly unprecedented and looks like it will go into effect with little or no debate, in the Patriot Act tradition. Krugman asks some simple questions: Does the public have no say in this matter? Are we not owed an explanation about how this will work? No answers yet.

Meanwhile, what about the rest of the nation’s needs? How do we fight a two-front war and provide services as usual and hand the thieves a trillion dollars or more? What about the effect of increasing the national debt and flooding the system with dollars? No one seems to be going there, at least not in the US media. Remember what happened in Germany in the 1920s?

From one of my favorite commentators:

Today’s reported potential infinite bailout of all and any portends, if adopted, is the largest increase in dollars outstanding since the Jurassic Age. It closely models actions undertaken regarding the production of currency liquidity seen in the Weimar Republic….

The only conclusion is that when the smoke clears and the advertised actions have been adopted, nothing more dollar negative than this has ever occurred due to the potential expansion of T bills and therefore dollar supply explosion.

The Times of London raised the question but no one seems to be particularly worried about it. Perhaps we should be.

THE US Treasury’s $700 billion (£380 billion) plan to bail out the banks could undermine the dollar, economists warn. The plan, details of which were unveiled yesterday, will seek congressional approval to raise the total amount the US government can borrow from $10.6 trillion to $11.3 trillion.

It also gives Hank Paulson, the US Treasury secretary, immunity from legal challenge under the plan. The US Treasury will buy mortgage-related securities “from any financial institution having its headquarters in the United States”, draft legislation said. Securities issued before September 17 will be eligible for inclusion.

Word of the proposals created a mood of euphoria in financial markets on Friday. But analysts warned of the risks.

Tim Bond of Barclays Capital, while conceding that the rescue was necessary to avoid the risk of depression, said: “The volume of fresh government borrowing and the fast expansion of the Fed’s balance sheet are both negatives for the dollar, carrying a potential risk of increased inflation.”

Other economists also think that the dollar could be undermined. Kenneth Rogoff, former chief economist at the International Monetary Fund and now a professor at Harvard, said: “It is hard to believe that the dollar will continue to stand its ground as the crisis continues to deepen.”

At this point, would McCain or Obama or Palin or Clinton make a difference? Hard to say. If it were up to me, Obama wouldn’t be my first choice. His ties to Wall Street may be as worrisome as McCain’s ties to the deregulation architects. However, the very distinct possibility of a Palin presidency tips the scales in Obama’s favor. Drastically. Maybe on election day it will all boil down to the lesser of two evils (which most elections usually are anyway). And I think it’s pretty easy to determine which is the greater and which is the lesser.

The Discussion: 36 Comments

In 1929 and on up through 1932 bank after bank in the USA quickly folded as depositors rushed to withdraw savings while the federal government under Herbert Hoover stood aloof to let the market correct itself and speculators receive their just deserts rather than act responsibly by infusing federal funds into the system. Today, no matter how much we may dislike it, through this housing bubble the point has come again when the government needs to bail out major institutions and stop the financial boil and – let’s face it – no one else in the Administration and none from a Democratic majority Congress had anything of substance to offer except Chairman of the Federal Reserve Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr.

“Going back a long time, maybe a year ago, Ben, as a world-class economist, said to me, ‘When you look at the housing bubble and the correction, if the price decline was significant enough,’ ” the only solution might be a large-scale government intervention, Mr. Paulson said. “He talked about what had happened when there had been other situations historically.”

For a terse and balanced review of the men and their actions see the article in today’s New York Times, http://www.nytimes.com/2008/09/21/business/21paulson.html?

Or, dither and dawdle for public participation, weep and moan about possible abuses and ignore the painful fact that as quoted in the main article quoted by Richard, “the rescue was necessary to avoid the risk of depression.” I add the rescue need be immediate.

One good consequence of all this to The Peking Duck, a seeming return to sobriety and a more discriminating mind for at least one: Richard, initially higher on Obama than a teenager on his first good toke, now says “If it were up to me, Obama wouldn’t be my first choice. His ties to Wall Street may be as worrisome as McCain’s ties to the deregulation architects.”

September 21, 2008 @ 10:55 pm | Comment

Scott, I respectfully ask you to show me where I was ” higher on Obama than a teenager on his first good toke.” Please, put your money where your mouth is. I once put up a post, Obama for President (or something like that), but I was not “high.” Ever. Soon after I put up another post about my serious doubts about Obama, which I have expressed many times ever since. If you think I was ever giddy about Obama, you have to prove it. Until then, I have to say you either misunderstood or you’re exaggerating. Or worse. The only thing I may have ever been truly jubilant about was Obama’s rhetorical gifts, his ability to move people through words, which I still think are magnificent.

In case of doubts, see here and here and elsewhere, including the present post.

I also think that in this early post I stated my feeling, which still pretty much holds.

I think I’m resigned to the sad fact that anyone who manages to get elected president has to be in bed with Big Business to some degree. I now find myself attracted to the two I find the least deeply entrenched in the bed, Edwards and Obama. I can’t say I know what Obama stands for (can anyone?); I just know he has the power of communication and an apparent decency and honesty and forthrightness that I find a healthy antidote to the stammering, near-insane jabbering and undisguised selfishness we’ve had to endure from our current president these past 6.5 years.

Hardly high as a teenager on whatever.

September 21, 2008 @ 11:10 pm | Comment

The
Money Masters

September 21, 2008 @ 11:10 pm | Comment

Gordon, I saw that video – I think it makes some very valid points, but unfortunately it has a conspiracy-theory tone that will cause people to think it’s akin to a “911 conspiracy” video. And I agree with its basic premise, that the Fed is a shadowy, little understood and potentially disastrous institution that somehow straddles being private sector and being government (as did Fannie and Freddie). But convincing people that this is so is an arcane and torturous mission that is doomed to fail.

September 21, 2008 @ 11:23 pm | Comment

[…] –The Politico: Exclusive: Foreign banks may get help –The Peking Duck: Are You Watching? […]

September 22, 2008 @ 1:17 am | Pingback

Even as Richard cautions that there are some things about Obama he doesn’t like, referring to him as the lesser of two evils and admonishes others not to rely on polls, Richard can still predict with the extravagance of a hop-head:

“No question about Obama being elected, that’s a given” – September 17 @ 1:33 p.m.

“More Obama threads and his inevitable victory to follow” – September 15 @ 10:14 a.m.

“Over the past few days my admiration and respect for Obama has grown a hundred-fold” – September 2 @ 7:17 p.m.

Hundred-fold? Not giddy? And your hate of Republicans increases by how much Richard?

By the way, the Chairman of the Federal Reserve working with the Secretary of the Treasury used his offices to make a necessary, immediate and laudable financial decision to avoid the probable repeat of the ’30’s Depression (or am I exaggerating?). Of course no disinterested person wants to see mismanagement awarded, we commonly despise managers obscenely rewarded without regard to their management legacy, we know that greed is not good and harms the commonweal, but these issues can be addressed in the luxury of time the immediate crisis does not allow.

September 22, 2008 @ 1:40 am | Comment

Just copied from the AP, Economics Writer:

“WASHINGTON – Treasury Secretary Henry Paulson said Sunday that the nation’s credit markets remain frozen and Congress must move quickly to pass a $700 billion bailout package for financial firms. But key Democrats said the legislation needs changes to provide better protections for taxpayers and homeowners in danger of losing their homes.

“‘The credit markets are still very fragile right now and frozen,’ Paulson said in an interview on NBC’s Meet the Press. ‘We need to deal with this and deal with it quickly.'”

No matter how tempting it is for politicians to grandstand (Democrats in the lead this time) for their most endangered of species, working-class Americans, to dither and dawdle over this measure means we go into deeper trouble and ever faster.

September 22, 2008 @ 2:28 am | Comment

I am no expert, so my 2 cents is probably worth just that…it seems to be that some form of government intervention/bail -out is needed – but it absolutely must be combined with real oversight and some form of “bail-out” for the American taxpayers who will be shouldering this burden.

It’s absurd for the architects of this disaster to be given a blank check to fix their own screw-ups. And I don’t get why it’s okay to let these guys bail themselves out with gold parachutes while ordinary Americans wonder how they are going to make their mortgages.

September 22, 2008 @ 3:18 am | Comment

*annoying kid in simpsons impression*

HAHA!!!

What did I tell you guys? Everything I’ve been saying came true. And more are going to come true. You fools just wait. No one bothered to read the patriot act, and no one is going to bother to read this.

And how did I know this was going to happen? It’s all in the Bilderberg group’s plan. Everything is going EXACTLY according to their plans. LOL. Go ahead and keep on thinking that I”m just a conspiracy theorist. I’m just telling you that I read all this crap before it happened. Declassifed gov. docs are laughing at all of you. And soon you are going to be killed. Trillions stolen from the pentagon. Trillions!!! It’s all going to come together and Richard, you are going to the CAMPS!
Oh wait, you are in China. I guess it’s just going to me then.

BTW, lookup DOUBLETHINK richard.

September 22, 2008 @ 4:13 am | Comment

No need to get excited, extrapolate and be surprised. Just read the following recipe and you can predict anything that will happen next. It’s the same old story again. Nothing new here.

http://www.shambhala.org/business/goldocean/causdep.html

September 22, 2008 @ 6:30 am | Comment

Scott, saying his victory is inevitable is not saying anything about Obama at all. I think it is inevitable, whether I want him to be president or not. If you want giddy I can oint you to some other blogs. But nice tru, combing through the sight looking for giddiness! If that’s the best you can come up with… I mean, do I ever say I adore the guy and am in second heaven over him? I think the closest I came to that was after his nomination speech, a masterpiece. But I have never been giddy about Obama’s policies or platform or much else. Sometimes enthusiastic and more often cautious is how I would describe it. Read into it what you like. Just as you’re reading what you want into the bailout:

By the way, the Chairman of the Federal Reserve working with the Secretary of the Treasury used his offices to make a necessary, immediate and laudable financial decision to avoid the probable repeat of the ’30’s Depression (or am I exaggerating?).

Yes, you are exaggerating. That isn’t really the word I would use – more like fantasizing. Necessary and immediate, true. Laudable? Hardly.

September 22, 2008 @ 7:41 am | Comment

What Hillary said.

This too.

September 22, 2008 @ 8:10 am | Comment

@ Scott: Richard and I disagree at the deepest levels on many things political, but I do know that he has had his doubts about Obama for quite some time and he has expressed such. In fact, if I recall correctly, he chastised me to some degree for my strong criticisms towards John McCain.

@ Richard: I agree, the documentary has a hint of being a conspiracy theory and I’m not a subscriber such things, but as you noted there is a great deal of truth the material presented. Sadly, I think few people actually realize the power the Fed has and the lack of power or oversight the government has over it.

September 22, 2008 @ 8:42 am | Comment

Scott, I couldn’t agree with you more. This was a necessary bailout. There is some scope for improvement in the bill to reign in the treasury’s powers, but it needs to be done fast.

On Thursday we got very close to a financial meltdown. Company treasuries and individual investors had started to panic and withdraw money from the money markets. Money markets hold over 3 trillion dollars in short term funds. Once the withdrawals start, many money market funds would start breaking the buck (can only repay investors less than par), because not everybody can sell assets at the same time. Companies would be forced into bankruptcy and the economy would grind to a halt. Lots of companies use the overnight funds from the money markets to keep them running. Employees would go unpaid and factories would close. Therefore the govt had no choice but to insure all money market funds (like the FDIC insures bank deposits) to avert a run on money market funds. Once this process starts, it is very hard to reverse. I think we are very lucky to have Hank Paulson and Ben Bernanke at the helm at this crucial hour.

About the dollar, I think the credit crunch is good for the value of the dollar. Lots of dollars are disappearing from the economy due to deleveraging. Estimates are something like 2-3 trillion dollars have disappeared from the economy due to about 500 billion in bank capital losses. Only a fraction of that is being added into the economy due to the bailouts. Also, the credit crunch crimps consumption in the US and thus helps reduce the trade deficit. I am a lot more positive about the dollar than I have been in years. Of course this means almost any other assert is likely to lose value (gold, stocks, bonds, real-estate, emerging market stocks, bonds etc.) In short I would bet the dollar would be higher against euro, pound and the yen in the near future, unless those countries have an even stronger credit crunch than the US.

September 22, 2008 @ 11:07 am | Comment

Gordon, thanks; I am no Obamamaniac and never was. I support him and think he’s one of the best communicators I’ve ever seen. On the other hand…

MT, I never said the bailout wasn’t necessary. But the government owes us a lot of answers before we simply accept it with no debate.

I think we are very lucky to have Hank Paulson and Ben Bernanke at the helm at this crucial hour.

Amazingly similar to the comments I get here on China posts from my Chinese friends, about how lucky they are to have the CCP in charge, and even how lucky it was for China that they had the wherewithal to massacre some citizens back in 1989, because it was ultimately for the benefit of all of us blah blah blah.

Looking at how we got here and what the costs will be, I don’t feel lucky at all right now. There will be temporary euphoria and maybe a surge in the dollar’s strength. We saw that after the Fannie Freddie takeover. Then the next blow strikes, way deeper than the first (Merrill then Lehman then AIG, etc.) and we realize we’re stuck in the same hole only way deeper. But if you feel lucky, more power to you. Meanwhile, ultra-liberals like Newt Gingrich are not at all convinced we should jump into this bailout, no questions asked. Many of the leading economists on the left-center and right are equally skeptical.

William Greider, long one of my heroes, puts it >pretty succinctly:

Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: Dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses — many hundreds of billions, maybe much more. What’s not to like if you are a financial titan threatened with extinction?

If Wall Street gets away with this, it will represent an historic swindle of the American public — all sugar for the villains, lasting pain and damage for the victims. My advice to Washington politicians: Stop, take a deep breath and examine what you are being told to do by so-called “responsible opinion.” If this deal succeeds, I predict it will become a transforming event in American politics — exposing the deep deformities in our democracy and launching a tidal wave of righteous anger and popular rebellion. As I have been saying for several months, this crisis has the potential to bring down one or both political parties, take your choice.

Interesting that you have so much trust and faith in the present administration, MT. Looking at their actual track record, what is it that makes you feel so lucky and safe? From another great blogger:

Hurry! Hurry!»

Bush and Paulson say congress needs to rush and give them a blank check — no time to think about it, change anything, or scrutinize anything.

It seems strange to me that they didn’t bolster their rhetoric by providing congressional leaders with a list of all the times congress and the American people decided to swallow their skepticism and give the Bush administration the benefit of the doubt, and then everything worked out fine. It’s a really long list, so spelling it out in detail would surely convince a lot of people. Like remember when some folks said Bush’s math was wrong and his tax cuts would lead to large deficits? Idiots! Or those who warned that occupying Iraq might be kind of hard? Morons! If you can’t trust George W. Bush with an unlimited grant of authority then who can you trust?

Yes, these are the people I trust blindly and unconditionally. They are so trustworthy, we don’t even need to monitor them, and they of course should not have to answer to any higher power such as the courts (they can be such a nuisance). Again, glad you feel so lucky. Enjoy.

September 22, 2008 @ 12:07 pm | Comment

Richard,

I think we agree on more than we disagree. I agree with you that the bailout shouldn’t be a blank check (esp, considering we don’t know who the treasury secretary would be in a few months). But the gravity of the circumstances require fast action, even if the bill is not perfect.

The excesses which caused the crisis occurred mainly from 2003-2006, when both Paulson and Bernanke were not in charge. So it is unfair to blame them. (I would blame Greenspan mostly). Also, Goldman which Paulson headed during that time did okay in this crisis. Compared to their predecessors they are competent.

I won’t argue with you that the Bush administration in general is incompetent. They somehow they managed to get Paulson and Bernanke appointed (possibly thanks to Harriet Myers debacle?)

I am not claiming (as you seem to be alleging) that the crunch would get better after this bailout. It is likely to get worse before it gets better (requiring possibly more bailouts). But without action on Friday (regarding insuring money market funds), the financial system would have ground to a halt, with consequences similar to the great depression (25% unemployment, massive capital destruction etc.)

And finally, comparing this to Tiananmen Square is pretty silly. The plan has to be passed by elected representatives; there is vigorous debate on the topic; and nobody is coercing anybody let alone killing. Let us discuss stuff without hyperventilating.

September 22, 2008 @ 1:02 pm | Comment

yeah

September 22, 2008 @ 3:09 pm | Comment

I’m sure that those who strongly are in favor of the Bush blank check are heavily invested in equities. For everyone else, those who did not take out a mortgage on a house we could not afford, those who are not maxed out on credit cards, those of us who actually have to perform our jobs well in order to be paid a reasonable salary (as opposed to CEO’s with their obscene salaries regardless of performance)…we will be one’s to foot the bill for decades as the Wall Streeters and the big campaign financiers get rewarded by dumbass “W” again. Actually that would make us the dumbasses……again!

September 22, 2008 @ 4:14 pm | Comment

Mt: And finally, comparing this to Tiananmen Square is pretty silly. The plan has to be passed by elected representatives; there is vigorous debate on the topic; and nobody is coercing anybody let alone killing. Let us discuss stuff without hyperventilating.

I think you missed my point. The crisis is not like Tiananmen Square, not in any way, shape or form . The reaction – “We are so lucky we had great leaders in power to take strong action that seemed horrible at the time but was necessary – is what I was referring to. The praise of all-knowing leaders. That is exactly how you sounded, whether you meant to or not: I think we are very lucky to have Hank Paulson and Ben Bernanke at the helm at this crucial hour.

Just because someone worked for Goldman doesn’t mean a thing about his competency. Ever see Robert McNamara’s resume? Meanwhile, I don’t blame Paulson or Bernanke for the catastrophe, only the system in which the lines between government and mega-big-business blur, and in which fuck-ups are rewarded beyond all imagination and the man on the ground penalized. It’s like a giant wet dream for the Wall Street Journal editorial board.

Meanwhile, I appreciate your clarifying your position on this. And I still think it’s hopelessly naive to trust these guys. Time will tell.

September 22, 2008 @ 4:58 pm | Comment

“… brought death into this world and all our woe. ”

If only they’d done it in blank iambic pentameter, maybe I’d be able to forgive them.

September 22, 2008 @ 6:28 pm | Comment

I didn’t write that line, I must confess.

September 22, 2008 @ 6:50 pm | Comment

You totally got it from a movie.

September 22, 2008 @ 7:29 pm | Comment

Heh. Good find.

September 22, 2008 @ 11:01 pm | Comment

Socialism for the rich is a nice expression for what is going on right now. Capitalism is something different.
Perhaps those libertarians and gold-lovers are right. If you give government the power to print money, it will use it.

September 23, 2008 @ 9:53 am | Comment

Who to blame? Who to blame? Naught other than Thuggish Republicans, the Evil Rich, Capitalists, all identifiable by Greed, License and Inhumanity, and from the Wikepedia entry for Chris Dodd, Senator from Connecticut, Democrat, and head of the Senate Committee on Banking, Housing, and Urban Affairs responsible for overseeing such matters:

“The United States Senate Committee on Banking, Housing, and Urban Affairs has jurisdiction over matters related to: banks and banking, price controls, deposit insurance, export promotion and controls, federal monetary policy, financial aid to commerce and industry, issuance of redemption of notes, currency and coinage, public and private housing, urban development and mass transit, and government contracts.

“In June 2008, the committee chairman, Christopher Dodd, was linked to troubled subprime mortgage lender Countrywide Financial. Published reports revealed Dodd had received mortgages on favorable terms owing to being a ‘FOA’–a Friend Of embattled Countrywide head Angelo Mozilo (Angelo R. Mozilo).”

September 23, 2008 @ 9:11 pm | Comment

To hell with all of them, Scott. But the deepest, hottest section is reserved for the Republicans, of course.

Not sure where you got that quote from, but it’s not from Wikipedia’s entry on Dodd. Maybe from their entry on the BHUA Senate Committee… Next time offer a link.

Know what? It looks like everybody is linked to the mess in one way or another. The one single most important factor is not one person. Clinton, Greenspan, Dodd, Bush, Raines, Graham and countless others can be implicated but no one perpetrator wins the sweeps. No, the single (though not the only) culprit is deregulation, a word we hardly knew in America until the Age of Reagan, nurtured to some extent by Clinton and made into a religion by Bush and his advisors, scum like Grover Norquist. So Chris Dodd got favors from Countrywide. Oh, I see – that means he’s to blame for all the chaos.

Scott, I thought you were smarter than that. Just today I was talking with a reader over lunch about the cast of characters in here and he said you were a troll. I said I disagreed, but now I am wondering if he’s onto something.

Tell us, is there any evidence that Dodd is THE one to blame for the mess we are in? Is McCain saying that or Bush? Because it sure would take a lot of heat off of their party (and what a “party” it’s been!). Anything, aside from your mislabeled Wikipedia entry? Just askin’.

September 23, 2008 @ 9:27 pm | Comment

Testing to see when replies post.

September 23, 2008 @ 10:42 pm | Comment

Another post lost to the ether, so again.

Rather than be thought one of the fabulists who post here this is the link from Wikepidia,

http://en.wikipedia.org/wiki/United_States_Senate_Committee_on_Banking,_Housing,_and_Urban_Affairs

Tell me something new, Richard, because I never implied nor can a reasonable person infer I meant “THE one” is responsible for this fiasco nor do I share the simple dichotomies many here love to indulge in throwing blame, least of all will I blame a generic type. In time will come the articles in The Atlantic Monthly or New Yorker properly explaining the genesis and sequence of all this.

Again, I had referred to the excellent NPR analysis explaining how a doubling in the money supply prompted banks and investment organizations to offer seemingly secure return on mortgage investments and so loosened then virtually discarded vetting of mortgage applicants, literally giving money away. Those people – characterized as “hard working Americans” or “working class Americans” by persons who are neither – who’ve bought houses beyond their means at mortgages they can ill afford now are forced into foreclosure, but should they be relieved of their imprudence at the expense of the rest of us? The Federal government is now unavoidably obliged to prop up the Macs and prevent major institutions at the head of the domino chain from collapsing, a fact I acknowledge.

I’m not a troll in your cast of characters. I’m real, I can be found. A difficulty of such blogs as yours is that topics run so quick and hot that later corrections and comments are lost, quips becoming favoured over arguments.

September 23, 2008 @ 11:07 pm | Comment

Well Scott, you name only ONE person in your opening sentence: Who to blame? Who to blame? Naught other than Thuggish Republicans, the Evil Rich, Capitalists, all identifiable by Greed, License and Inhumanity, and from the Wikepedia entry for Chris Dodd, Senator from Connecticut, Democrat, and head of the Senate Committee on Banking, Housing, and Urban Affairs responsible for overseeing such matters: And then you talk only about him. So maybe you did imply something but weren’t aware of it.

Yes, I know why the government has to perform some sort of bailout. But I also know the one Paulson put forward on Sunday was outrageous and unacceptable, and am happy to say Republicans were as outraged over it as Democrats. About whether it will work – that is being heatedly debated and I am skeptical for a number of reason you can find outlined in many of the threads below. But if you heard on NPR that it’s the best plan, you’ve won me over.

Those people [victims of subrime fraud]- characterized as “hard working Americans” or “working class Americans” by persons who are neither – who’ve bought houses beyond their means at mortgages they can ill afford now are forced into foreclosure, but should they be relieved of their imprudence at the expense of the rest of us?

The loans were written in a misleading manner that hid the risks of rate increases. These people were scammed. They were cheated and fooled. They were told by the mortgage companies they could buy these homes and pay for them with no money down and the contracts were deceptive and have been condemned by just about everyone. I am not saying we should pay all of them their money back or bail them out – but you are smearing them. I believed what my broker and mortgage company told me when I signed my loan – it was incredibly complex and I hardly understood a word of the 100 pages or so of fine print they went over with me. Luckily that was in 1991 when we had better protection.

The Federal government is now unavoidably obliged to prop up the Macs and prevent major institutions at the head of the domino chain from collapsing, a fact I acknowledge.

Yeah, maybe we have to bail out the very architects of our misery. But do we have to let them go unpenalized? Do we have to pay for their golden parachutes? Do we have to make those overseeing the bailout unaccountable to no one, not even the courts? I know you love that idea, Scott, but to a lot of us common folk it sounds like a big wet dream for the robber barons – steal the people’s money and play with it like kids in a vast candy store, and when you lose it all demand the people pay you for your screw-up and reward you with tens of millions of bonus dollars while robbing the people of their hopes and dreams. Everyone is getting dragged down in this. Except those who set up the entire house of cards.

Meanwhile, my argument stands: America is entering a phase far more dangerous than I had ever imagined and we’ve only just started. Some nice upswings in the stock market or a rosy report here and there are meaningless. This is the down cycle. One thing all my friends here are saying, and you are too, Scott (if you are really in China), is it’s the best time in history to be working in China and getting paid in RMB. Agree?

September 24, 2008 @ 12:03 am | Comment

Richard, Richard, Richard;

I name one “person”, pointedly a Democrat and head of the very organization responsible for overseeing “…federal monetary policy, financial aid to commerce and industry…public and private housing”, etc. (Christ! Do I have to repeat it again?) in the opening sentence as an element of responsibility that does not belong to the bogeymen “Rethuglicans” and familiars blamed in this thread by many who post here. Richard, the rest of my post then moved on but your thought obviously did not.

Borrowers were not mislead, scammed or cheated. They typically bought into a variable rate mortgage with little or no collateral on the premise the value of their properties would increase above and beyond the loan interest, and this despite the experience of the dot.com bubble and warnings about grossly over-valued real estate. I am not smearing them even as I have little sympathy for their predicament now and especially because they have little or no investment in the properties. They, the borrowers now in deep shit in even bigger houses, become “working class Americans” or “hard working Americans” while those of us living within our means through economy and habit are – what?! Yes, we’ll pay and pay and pay and pay for this.

I never, never, never said or implied that those responsible – when they are identified and it will cut well across party lines – should walk out with a slight admonition and a big bonus package. Now why would I, whom you do not know and by my comments cannot fit the sleazy categorization you try to slip over me, think otherwise if not to discredit me?

Again, did I say or imply the situation was anything but dire? And support quick implementation of the Secretary of the Treasury and Chairman of the Federal Reserve’s recommendations? I found that action “laudable” and, again, you ridiculed laudatory as my fantasy.

Richard, you can look at the source of my posts and see where I travel and you should also know that most of my time is in mainland China. Well, can’t you?

Postscript: No, I’m not paid in RMB, too many difficulties. ‘Nuff said about that.

September 24, 2008 @ 12:37 am | Comment

By the way, I never said I heard on NPR it was the best plan. I said (why must I repeat myself unless you choose to willfully misunderstand?) the NRP anlysis of this loan fiasco was the best popular analysis and understandable, well before (need I capitalize “before” for emphasis?) last week’s events and the Treasurer and Chairman of the Fed’s recommendation.

September 24, 2008 @ 12:44 am | Comment

Do you guys think that:

a) Congress should postpone the recess to discuss the financial deal in detail?
b) Congress will/will not postpone the recess?

I see a disagreement in the US as to what role Congress should take in this (e.g. pick over it in detail, reject/approve/delay it pretty much as it stands, etc).

September 24, 2008 @ 1:20 am | Comment

I accept your invitation to comment although the head of the line should perhaps be reserved for Richard as one of the “lot of us common folk”.

a) Every day wasted wastes the US financial markets. The situation does not allow preambles; action is needed and needed now, right now.
b) Congress will not postpone the recess no matter what reason is given for not postponing the recess; most will plead they want to “confer” with their constituents.

September 24, 2008 @ 1:27 am | Comment

I’ve heard the excuse in b) before. I’m surprised they keep using it – it’s barmy! I read an article quoting the House leader as saying they’d work through the weekend and into next week if necessary – perhaps they will stuff it through in part to avoid delaying the recess.

September 24, 2008 @ 2:37 am | Comment

The Warning

“Without restrictions on the size of (Fannie Mae, no. 1 US buyer of home mortgages, and Freddie Mac, no. 2) balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for homeownership,” Alan Greenspan, April 5, 2006, urging limits on the size of the multi-billion dollar portfolios held by the mortgage giants which finance nearly half of US mortgages.

The Attempt

“NEW YORK (CNN/Money) – The Bush administration and some Republican leaders in Congress are pushing for tighter regulation on mortgage financing firms Freddie Mac and Fannie Mae, according to a published report.

“The Wall Street Journal also reported Wednesday that the administration and leading Republicans in both the House and Senate want to take out a provision in current legislative language calling for the firms to spend millions on affordable housing programs.

“The administration wants legislation to be much tougher in regulating the two federally chartered mortgage financiers than a current bill that sailed through a House committee on a 65-5 vote.” – CNNMoney.com, June 15, 2005

The Failure

The attempt at regulation did not pass Congress with the consequences we see today.

“(T)he single (though not the only) culprit is deregulation” – Richard, September 23, 2008

Oh do I agree.

September 24, 2008 @ 6:54 am | Comment

I’m not getting sucked into this argument any more with you Scott because, as my friend said yesterday, you love to derail and take over threads, the most classic example being the post about things people love about Beijing, if you remember. The one where you made fun of people in “the Jing”? You’re doing the same here in your typical condescending way. You said earlier in another thread how we needed to push through Paulson’s plan immediately. That plan was the closest thing I’ve ever seen to fascism in Ameria, and I don’t use that over-used word frivolously. And you loved it. Don’t worry about my discrediting you – you’ve done that all by yourself. And borrowers were misled about the loans – maybe they were stupid about it, or lacked the sophistication to understand the fine print, but they were unquestionably misled. Had they understood what might happen, had they been warned properly about the inherent risk of ARMs, would they have enthusiastically signed on the dotted line, thus in effect flushing their savings down the toilet and ruining their hopes for years to come?

Anyway, as I said, I’m not going to get anywhere with you and most readers here know that. I strongly urge any reader who believes I am being too tough on Scott to go back to this thread to see how he loves to position himself as all-knowing, and then superciliously cut down those who call him on his BS. (My own comment there, #60, was quite prescient.) Really, it’s important you go back to that thread and see how Scott behaved in the very first group of comments. As I reread it now, I wonder how I could have been so stupid yesterday to defend you and say you weren’t a troll.

September 24, 2008 @ 9:52 am | Comment

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