US politicians pass an important threshold with negative House bailout vote

by JS O’Brien

I am in my 50s.  In my lifetime, I have seen partisan politics become increasingly bitter, increasingly childish, and increasingly focused on personal, political wins at America’s expense.  When the chairman of the Federal Reserve and Warren Buffet tell me that the American financial system needs an influx of capital in order to keep from collapsing, I tend to believe they believe it, and if they believe it, given their level of expertise, I would generally take their advice.

Today, American politics passed a threshold.  If anyone thought that our politicians, especially in the GOP, still care more about America than their own re-election campaigns; if anyone thought they still had a core of political courage that could, in extremis, overcome their own, petty rivalries; if anyone thought there was still a kernel of greatness in an American political landscape that produced the likes of Thomas Jefferson, Alexander Hamilton, James Madison, and Abraham Lincoln, I doubt they still believe today.  Their OWN PRESIDENT, their PARTY LEADER, came to the House Republicans and told them that this is a grave crisis, and even then they scuttled the agreement.

America is badly, deeply broken.  I’ve resisted this conclusion for some time.  Naively, I have believed that there were still enough politicians and leaders (I almost choke over that word) and freakin’ patriots to come together at a time of crisis and do what has to be done, odious as that may be, to do what’s best for all of us.

Ask not what your country can do for you, but what you can do for your country.  How naive those words sound now.  How … utterly laughable.  How cynical we’ve become.

Today, I learned that my Uncle, a man who fought at Tarawa and Leyte and flies the US and Marine flags every day, is dying of bladder cancer.  I have shed many tears this morning, but perhaps it’s fitting that, as he dies, the US I once knew dies with him.

49 replies »

  1. There is so much pain that comes once naivete is shed and incredulity wears off. You have written, more eloquently than I began to, my very sentiments. Signs proclaiming “Country First” become breathtaking in their cynical instrumentality, their disdain for the critical faculties of the citizenry. Granted, it would seem that a good share of the citizenry left such thinking skills at the door when Sarah Palin was ushered in, but perhaps the magnitude of this crisis — and this utter folly — will finally shake this electorate to its core and inspire people to do what they still can to shore up a semblance of democracy in this country.

  2. And J.S. — you have my deep sympathy for your uncle’s illness. Maybe it is a better thing that someone who has served his country as he has will not be here to see what it makes of itself in the months and perhaps years ahead.

  3. There’s no doubt that we’re broken. As you know, I’ve been more cynical on this front than you for awhile.

    But I’m baffled. From what I’m hearing (from pretty reliable sources) the public opposition to this bill was massive. So it winds up killed off by Republicans who voted in accordance with the public will.

    Not that the public is smart enough to know what’s good for it, I fear. The other people who are really happy right now are the hard left types I correspond with. Very smart folks, and tickled silly that what they see as a bad bill went down.

    Today is a day of strange bedfellows….

  4. I’m not baffled. American history is full of instances when legislators voted against the public will, in an act of political courage, because they knew the electorate didn’t understand, and because they felt they needed to do their best for that electorate, even if they suffered for it.

    And, Slammy, I would maintain that you are actually more of an optimist than I.

  5. You have got to be kidding me.

    “I would generally take their advice.”

    I wouldn’t.

    This is an obvious heist of taxpayer money. It’s going to the biggest peddlers of fraud on the planet right now. Bush is for it. Does that not sound any alarms in moronville?

    I mean, this is clearly a bipartisan con job robbing the nation to give to the fraudulent, decadent, bloated shysters of Wall Street.

    Fuck them.

    The absolute worst thing would be to reward them for setting up an unaccountable system designed to hide risk from investors. They should fail, and fail big.

    If the “economy” is the issue, then removing their overarching shadow from it would be a good start. I can’t believe the flimsy reasoning people have used to turn off their brains and basically green light a classical fascist “corporate state” where profits are privatised, yet losses are made the public’s problem. Mussolini would be proud, today, that so many are so easily duped.

  6. Love the site, love Mr. O’Brien’s posts, but you are dead wrong here. This bill was stopped by an idiot House Republican caucus and for all the wrong reasons, and I think God they did. I’m not sure they’re going to come up with a good solution, but this deal stunk. Wall Street is going to hurt, and so is America, but we would have been hurting handing over $700b without real limits. This was a terrible deal, and I cheer those who stopped it. It might even be bad for Obama, which leaves me torn in two. But if you can’t see what’s happening with “Goldman Hank’s” proposal here, then I don’t know what to tell you.

  7. The naivete shed is replaced by what? Sheer stupidity? For the last eight years this administration has lied to us, killed our children and 1000’s of children in other countries, cost us dearly in every respect of decency around the world while lining the pockets of their cronies. Now they tell us its dire if we dont shell out billions to the very pirates and criminals that helped create the mess? Excuse me if I think a bit more thought aught to go into the bailout to figure out how its actually going to work.

    Im sorry about your uncle, but its laughable that you would consider anything the President says as anything but suspect.

  8. *Sorry, that’s THANK God…

    And since when is Warren Buffet the champion of the left? He just bought a huge stake of Goldman Sachs… Can you be any more financially interested in the outcome of the bailout than that?

  9. You’ve spoken words I’ve silently felt. I suspect many feel this way, but, in this political climate, do not utter them for fear of being labeled “unpatriotic.”

    The phrase “the fall of Rome” keeps rolling through my mind …

  10. Oh, it’s going to get very painful soon. For all the horror unleashed by the financial services sector, they’re about to stop paying taxes and go insolvent wholesale. Now, in the UK, they supply 40% of the tax take. In the US, I think it’s about 25%.

    Unpalatable as the rescue package may appear, it’s going to hurt significantly more NOT to have passed it.

  11. First, my condolences concerning your uncle, JS.

    I would disagree about trusting the chairman of the Fed, mostly because i know enough to know that Fed policies have been instrumental in inflating bubble after bubble that are all breaking together now. I’ve also learned enough to know that the masters of the universe saw this coming months ago. In fact, many people saw this coming a long way out. Some hid their knowledge for reasons unknown and some were ignored because they spoke unpleasant truths. I also know that a large number of economists smelled something rotten in this bill, but – to my knowledge – no independent economists were consulted in the drafting of the legislation or the ‘debate’ over it.

    The “nays” almost certainly voted nay for all the wrong reasons. And i agree that the job of leaders is to do the right thing and explain why it was the right thing if the right thing contradicted the wishes of their constituents.

    And it is just as clear that something must be done, though this is one of those cases where doing the wrong thing for the sake of doing something could be devastating.

    Things to consider include what borrowing $700+B to buy “toxic assets” would do to the “good faith and credit” of the United States. We are utterly dependent on borrowing money, and there’s nothing to say that these toxic assets wouldn’t do to our credit what they’ve done to the credit of multiple investment banks.

    I’m with Stirling Newberry on this one. What we need is a short-term plan to stop the bleeding so that long-term fixes can be debated and applied. But i fear that our politicians cannot/will not put aside their fetishes, petty differences and party politics for the good of the nation. I’m only in my mid thirties, so i’ve never really known anything but the current level of bullshit.

    I think Dr. Denny was right in his first phrasing. I think that the Republic was gone in all but name some time ago. What we are seeing now is the falling of an empire. But my cynicism is deeper than most.

  12. I do sympathize with you, JS. My problem, though, is that there was never any attempt by the media to explain what exactly the consequences of not bailing out Wall Street would be. I kept asking that question all throughout the past two weeks.

    You had people calling in opposition to the bill, but they did not have the information necessary to make an educated decision on what to believe. Rather, the media spent all of its time debating how the bailout could be positioned. I doubt there are enough people in America who’ve taken economics courses to know what’s really going on.

    As for Bush being a proponent and suspecting the bill because of that, reminds me of the boy who cried wolf.

  13. Steve:

    I hear you. But you’d think, wouldn’t you, that at least a few Americans are well-enough educated to have heard of the stock market crash of 1929 and how that hurt a lot more than the fat cats.

    You’d think.

  14. Steve: Even if the press was of a mind to educate the public it couldn’t. First, we’re talking about issues of tremendous complexity. And second, our educational policies over the past few decades have rendered most of the population ineducable.

    Which, interestingly enough, is precisely what those policies were intended to do….

  15. Oh, so you have faith in the chairman of the Federal Reserve, a criminal cabal that has managed to devalue the U.S. dollar by 97% since 1913? LOL! Let me explain something to you: The patriots DID come together today, you coward, and they helped throw the moneychangers out of the temple. This “bailout” was nothing less than a bald-faced ROBBERY on the part of shameless, morally bankrupt vampires whose only goal is to empty the U.S. Treasury while they still can. We protested on Wall Street last week, and if the House tries to revote this garbage, we will do worse than protest–I promise. Sic semper tyrannis, my friend….

  16. Take a deep breath. This was not America breaking. This was America working. A profoundly unpopular (and unwise) piece of legislation was defeated by an elected body; that’s called democracy.

    Politicians are supposed to be worried about getting re-elected. That isn’t cynicism. That’s accountability.

    There was more going on here than cynical political maneuvering or ideological blindness on the GOP’s part. You should remember that this was a bi-partisan uprising. The roughly two-thirds of Republicans who voted against the bailout were joined by roughly one third of Democrats. This victory for the people who thought Congress should be saving Main Street not paying off Wall Street was the result of grassroots pressure from across the political spectrum.

    Does Congress need to do something to mitigate this crisis? Sure, but doing something doesn’t mean doing anything, and it certainly doesn’t mean doing th wrong thing. That’s what this bill was: the wrong thing. The American public knew it and rightfully called on their elected representatives to stop it. If you have contempt for politicians in general and the GOP in particular, well I can’t blame you, but don’t have contempt for the popular will.

  17. The real crime here was we were going to pay 700B to restore the same broken system we had before. We PROVED it didn’t work.
    So, the 700B would just ENABLE the whole thing to happen again.
    There was not only NO ACCOUNTABILITY on where this money was going to end up, and NO ACCOUNTABILITY for afterwards….going forward. We were just going to all cross our fingers and HOPE it helped and HOPE everything would go better on Take 2 – Financial Boogaloo.

    So letting the same people who brought us this mess design the fix, allocate the money, hide the salami, and sail the ship after the bailout is just stupid. All so we can be right where we were – on the brink of wholesale slaughter.

    I want to know about what is going to happen with Goldman Hanks first proposal; that he be made Lord of All That He Surveys. What the hell was that? Shouldn’t it be a crime? The blatant THEFT was so naked and obvious, and not a word or recrimination. I knew that whatever was going to save us, it wasn’t that.

  18. not a word in the press about Goldman Hanks trying to Knight himself as the Finance Czar.
    But how about the blatant thievery in the original bill? Shouldn’t it be illegal to TRY to steal .7 TRILLION?

    What about some Nightly News coverage of the Lobbying Blitzkreig that has been going on the last week. Think GoldmanSachs only heard about it when everyone else did? No TV news coverage. No national outrage. Wet blanket thrown on the important aspects of the story….but the drama and other handwringing get;s played up. Typical Corporate Keep Em Guessing media. It;s all about the Froth…..keeps you from seeing.

  19. John Brown:

    Although your anger is very evident, threatening will get you nowhere. Trying to pull something else at Wall and Broad will only cause you personal grief and major jail time. Protesting at the NYSE is a futile exercise anyways, as the exchange is just the place where prices are discovered, not set. Also, have you run quantitative studies on the devaluation of other currencies, done your own analysis, and not accepted what some publication has said. You’ll find that all currencies have lost most of their value, some more than others. Also, with the exception of the British Pound, the USD is the oldest currency in circulation, so it has had more time to devalue.

    This panic has had the most advanced warning of any panic ever in the history of mankind. I remember about a year ago, right on this site, mentioning the possibility of such a black-swan event, and getting blasted. I tried to educate the readers what they could do to protect themselves, and got blasted with major invective and personal attacks. I know that advice is only worth what you pay for it, but anyone heeding what I said wouldn’t have lost a dime.


  20. Sorry, JS, I’m with the majority on this one. It’s not clear how great the crisis is, and it’s certainly not clear how throwing $700 billion with no strings attached to Wall Street’s sharks is supposed to help. But it’s very clear that we’re being told to panic by people, especially Bush and his coconspirators, who have so richly earned our disbelief and disrespect. The doctors have a saying: “First, do no harm.” You can see how throwing nearly a trillion dollars at a hazy problem might be harmful.
    Best to your uncle. Bladder cancer can be very treatable, and if your uncle got through Tarawa, he’s probably still got a lot of fight in him.

  21. David Brooks at the N.Y. Times sums it all up very nicely in “Revolt of the Nihilists”:

    The conservative Republicans whose deregulatory philosophy got us into this fix failed to take responsibility today for what they have wrought. It would have been one thing if they had proposed a credible alternative to the plan voted down. But their solution — eliminate capital gains taxes — is so cynical and downright creepy it makes my skin crawl. I’m not sure how eliminating capital gains taxes is supposed to help companies that have no longer have any capital gains. But of course, solving the problem was never the point.

    So the nihilists have won.

  22. To all:

    I can’t answer each thing posted. Some are from people who have clearly lost rational function, and need to exercise that frontal lobe a bit more. Others deserve individual answers, but I don’t have the time.

    Let me first point out a logical disconnect: because you don’t trust an individual, institution, or what have you does NOT mean that everything said, put forward as policy, etc. is a bad idea. It means you should be cautious, but it doesn’t mean you should immediately discount the veracity of all things. To do so is the famous “knee-jerk” reflex we see from both right and left, and it’s this same ideological knee-jerk that caused House Republicans to vote against this bill, yesterday.

    Evaluate a proposal based on solid knowledge and research on a subject if you can. If you can’t (and I can only scratch the surface because I understand only a bit about economic function at this level), you have to go with what little you actually know, match that up with what you’re hearing, and make the best decision you can.

    A second misconception I’m seeing here is the idea that this is only a bailout for the wealthy. It’s not. It’s a bailout for all of us, if it works. I’ll need to make a separate post on that.

  23. Warren Buffet. Worth FIFTY TWO BILLION.. in stocks. If the market loses too much, he loses a lot. I call that “ulterior motive”. How much will you lose if the market adjusts 2500 points? Me? I’m out of the market, I pulled my investments when it went from 14,000 to 12,000. I knew this was coming back in Feb. when the news was talking about this.

    What did your leaders do over the past year to reinstate the regulations they removed that allowed this? caused this? ENCOURAGED this?

    The Federal Reserve was created in 1913. In 1929 one of the private owners of the Federal Reserve supposedly started a rumor in the news papers that banks were over extended on their loans and couldn’t back their deposits. There was a run on banks, and it turned out that the rumors were true. The markets crashed and the Government intervened. The Federal Reserve started buying up banks left and right. No more competition and the private bankers of the Reserve now owned a lot of real estate. Oh, and they also manged to get all of our gold confiscated. Don’t they still own most of the nation’s gold to this day? Didn’t they sell all that gold to Saudi Arabia in the 80s, as the price was topping out.. then bought it all back once the price plunged and the Arabs needed cash?

    Bad mortgages are about 20% of this “bad debt”. That means the banks have been making a habit of making “bad loans”, or buying devalued assets. The banks have been repackaging loans/debt and selling it to each other.. each taking a chip of the potential profits off that lump of debt. Selling the same debt over and over eventually means you have 20 to 30 years (in terms of mortgages) to _break even_ on what you bought. .. they can’t hide that any more, they’ve burned up most of the value by reselling it over and over. THAT is what they want to dump on us. They want US to hold those notes for 30 years to “break even”.. basically, a 30 year interest free loan, except they also want us to take the risk on everything that will likely default, too.

    The bill did nothing to protect Americans from the bad debt, but put all the risk on them. The Republicans refused to allow protections for real people and, as is their nature, only wanted to protect the institutions that they feed from. Those institutions are broke and that wasn’t addressed in the bill either. How can it be acceptable to turn over a trillion dollars when it only clears some columns on some spread sheet but does nothing to fix any of the problems?

    The definition of insanity has often been described as doing the same thing over and over and honestly expecting different results.

    This “bailout” might have been able to stabilize the economy.. but there are a LOT of things that could do that. Creating more debt and effectively helping steal more wealth from the middle class doesn’t seem like a reasonable path to me. .. do you realize that many of the banks in other nations that are being “bailed out” are giving up 49% of their stock to the Government? Why aren’t we DEMANDING protections for helping the ruling elite? …. because the ruling elite are making the proposal.

    Most of your elected representatives have 10s of millions tied up in the STOCK MARKET. They lose a LOT more than you and I when this fails. Ulterior motives, again.

    Our leaders aren’t interested in fixing this. They just want to find a way to cover their asses. If that’s not the case, why are so many economists deriding the bailout? Why are so many “experts” saying “this is nuts! this isn’t going to fix the problem, and it’s just putting massive risk on the tax payers!”?

    I fully understand how this bailout, if it worked, would have been a temporary help for us, and not just the wealthy. But the wealthy gain the most and the current system is not “good for us”, it’s good for the wealthy. We need to fix the system.. I don’t know how much more clear I can be. This bailout would not have done that.

    Good things come from adversity, but not much good ever comes from a spoiled brat.

  24. Wow. I don’t usually dignify long-winded posts with a read, but right on, Savantster. The wrongheadedness of saying, “Well, Warren Buffett says it, so it must be true!” cannot be overstated. Come on JS. You’re better than that.

  25. Charles:

    Warren Buffet will do just fine without stocks. Market volatility is wonderful for those who know how to play it. Large fortunes are made on market volatility (and I should know, since I was around and working in firms doing modified Black-Scholes stock option valuations when volatility made millionaires out of nincompoops).

    Credit markets are frozen. Payrolls will not be made. Capital equipment will not be bought. We’re facing a meltdown, and I, personally, don’t believe the words “Great Depression II” are at all overstating.


    There was a time when wooden ships might have their hulls so badly damaged that they couldn’t be repaired by the on-board carpenters at sea, so a sail would be bound around the hull to reduce — but not stop — the influx of water. The crew might then be able to pump and bail until the ship could be brought into dry dock to fix it. I would agree with anyone who says that those who punched that hole in the ship should drown, but that doesn’t mean that I want to drown with them, and I might need them to man the pumps.

    Two questions for you: (1) How will the credit markets unfreeze if the underlying assets cannot be valued because there is no (artificial) federal market, risk cannot be assessed, and lenders are holding onto cash to meet as-yet-undetermined cash demands from their own lenders? and (2) exactly how long can we take on water without a partial hull patch until we can get this thing into dry dock?

    BTW, you mustn’t leave out the role of FASB and the credit rating services here. I would give the idiots at FASB more than a little bit of the blame, since they allowed bad assets to be parked overseas and off the balance sheets. There’s a lot of blame, and punishment, to go around.

  26. For 1), the banks were lending before the proposal was voted on. There is a difference between frozen and tight. Yes, things will be tight.. and it will cause companies to use their cash on hand instead of borrow money for things like payrolls.. isn’t that what they should be doing in the first place? How does a company making 2 or 3 billion a year need to borrow a billion to pay bills? That doesn’t make sense to me. What it allows for is playing accounting games to make things look better on paper, and the drive to make things look better on paper is what caused this meltdown in the first place.

    2).. there is nothing stopping the Federal Government from loaning money to corporations that need it. If the big banks screwed up and can’t cover their papers, that’s their problem. They lose out on real interest from real loans that they could be making if they hadn’t been busy trying to game the system. If they never suffer for their poor decisions, when will they change how they do things? How much more do we toss at them the next time they do this to us?

    I don’t know how long we can wait. But I know we don’t need to just toss $700 billion over the hedge and hope it all works out in the long run. .. The market is up 350 points on speculation today.. it’s holding and banks are probably lending again (although in tight fisted maneuvers). … spend a week drafting a plan that minimizes the risks to the tax payers, make sure we get something for our efforts.. after all, aren’t the banks asking us to make VERY high risk loans? I know when I want a loan, I have to pay out the nose.. let the banks do the same.

    A cash giveaway, as was initially proposed by Paulson, is a disaster waiting to happen. He literally could have given himself a billion dollars and NO ONE could have said BOO about it. That wreaks of a scam to me. Not to mention all of the conflicts of interest.

    I’m with ya.. let’s patch this puppy up. but don’t do it by flaying the crew and stapling their hides to the holes… use the sail.

  27. Charles: Not that JS needs me to defend him, but it needs to be pointed out that he did NOT say we should automatically listen to Buffett because he’s rich. To quote, well, you: “you’re better than that.”

  28. Savanster:

    First off, not all companies “make” $2 to $3 billion per year. Profits in that range are exceedingly rare. Even revenues amount to only 673 companies in the entire US with $3 billion or more in revs, and only 899 with $2 billion or more. Most companies are much smaller, and they use accrual accounting. In accrual accounting, profits depend on booking revenue that will come (account receivable) against money you will pay (accounts payable). That’s a much more accurate measure than cash accounting. The issue, though, is that it’s often true that there are considerable accounts payable that haven’t produced cash, and a business has to borrow short term to meet its cash obligation accounts payable, some of which are payroll. If it can’t do that, it’s in deep trouble. Many, many profitable businesses have failed because of cash flow issues, and this will simply increase the number that fail.

    Small business will be hit awfully, awfully hard. Big businesses will do better. They can delay accounts payable, for instance, because they have the clout to do that, further straining small businesses/vendors who are not getting paid. But even big businesses will do things that aren’t optimal. For instance, if cash on hand would normally be used to buy new capital equipment, a company will have to retain that cash to make payroll. If cash would normally be invested in medium-term instruments that provide funding for other businesses, those investments will have to be curtailed.

    The whole thing is connected, Savanster. It’s not as if hurting the big boys doesn’t hurt everyone else and, in many if not most cases, hurt everyone else worse.

    As for #2, how does the Federal Government lend directly to anyone? Through what mechanism? Where is the infrastructure, the loan officers, the underwriters, etc? They’re all in the banks.

  29. JS:

    Funny that you brought up the Black-Scholes. Back in the 70’s, I had an old HP-65 programmable calculator that I had programmed with the Black-Scholes equation and did all the entries by hand every night of options that I was looking at. Let me tell you, that gave me a huge edge. Boy, have things changed in 30 years…..Now, I can do thousands of options in a matter of seconds, but then again, so can every one else.

    On a personal level, I was thinking about your uncle, and somehow, it really got to me last night. I know what it’s like dealing with cancer. Please keep me updated.


  30. *head explodes*

    Okay, not that Warren Buffett gives a rat’s ass what anyone on this blog thinks, but here goes… do some of you truly not understand how wealthy this man is? So the US economy tanks. So “he loses a lot.” So he’s down to, what, only a few billion? He’s a frugal man who made his own shitload of money, grew it into an unbelievably enormous shitload over the last fifty years due to his acumen and his consistent investing strategy, is now giving most of it away (except for the $5 billion he just dropped into Goldman Sachs), and still has more money than most of us can even comprehend. And will, no matter what happens. And he’s 88, for the love of God. And he’s NOT running for office. Think about it for a nanosecond. What ulterior motive does he truly have to terrify the general public with lies about the dire state of the economy?

    As far as competence goes, let’s see. Let’s completely ignore his phenomenal success at growing his own wealth, because he’s obviously a selfish, evil capitalist. Berkshire Hathaway (which he’s run since the early sixties) has had tons of capital, minimal debt, and consistently good returns for, oh, forty years now. Wait, isn’t that as long as he’s been running it? And if you or I or Joe Blow had some money in BH, don’t you think that by now we’d be justifiably confident in Buffett’s judgment?

    Jesus, people. Get a grip. Panicky paranoia helps nothing. There are plenty of lying scumbags to mistrust for all the right, researchable, rational reasons. Mistrusting someone just because they’re successful… I hope none of you apply that rationale to choosing a doctor. Or an attorney. Or a broker.


  31. If Buffett doesn’t care about anything, why did he move in on Goldman? I mean, either he cares or he doesn’t. You are never too rich to care about money, at least Buffett isn’t. That’s why no one is richer than he is.

  32. Charles:

    Buffet has gone on record many times about why he buys companies. He doesn’t care much for cash. He finds it boring. Running companies is his entertainment. I completely grok that. Parking cash in an interest-bearing account is called … retirement.

  33. You steal $700 they call you a felon.

    You steal $700 billion and they call you what?

    A hero?

    A messiah?

    Why isn’t anyone talking about JUSTICE?

    How about prosecuting the greatest purveyors of fraud, possibly in the nation’s history?

    “Let’s Play “WALLSTREET BAILOUT” by Ohio Rep. Marcy Kaptur:

  34. jon:

    I’m greatly in favor of prosecution to the max if we can find the right statutes to do so, and I feel strongly that an Obama-led Justice Department will do more for Americans in this area than a McCain one. Ex-post facto laws are, quite rightly, illegal in this country, so we can’t prosecute immoral, unethical, but not illegal, behavior.

    I’m also in favor of a complete review of federal criminal law regarding behavior in financial markets, upping both monetary and prison sentences substantially, applying many more criminal statutes to behavior in law firms, accounting firms, credit rating agencies, and the like.

    I think a lot of people should spend a lot of time in stir at maximum security prisons with tattooed cellmates named “Animal.”

    But that doesn’t solve the immediate problem, does it?

  35. Yes, I understand that a lot of companies aren’t rolling in dough and need to borrow short term, and I’ve seen nothing in any of the press releases that implies banks aren’t willing to make those short term loans. What I’m reading most is that banks aren’t willing to lend to each OTHER. Seems like there’s a serious problem when the standard becomes lenders lending to other lenders.. and now they are afraid to do that because they all know the others are cooking the books.

    How do we put an end to that? How do we restore confidence in an utterly broken system? By tossing a trillion dollars at it so it can pretend it doesn’t make bad choices?

    The system used to grow long before everyone and their brother figured the Stock Market was a free money machine. That seems to be the attitude today, just pop some cash in and you’re gonna have plenty of money to retire on. That mentality is so pervasive that the War Criminal and his party tried to get our Social Security vested in there instead of being held by the Government. As we see now, the Market IS a gamble, just like going to the casino. In this case, the brokers are the house, the only ones going to make money no matter what.

    I realize it’s all connected. I also realize that it will hurt everyone to straighten out this mess. But the fundamental question remains. Toss a trillion dollars at it with no plan or mandate to fix things, or suffer a little now while we sort out exactly what is wrong and fix it so we can avoid this kind of crap in the near and moderate future.

    And the Federal Government can loan directly to the public through mechanisms like Freddie and Fannie, can’t they? Don’t those two have people that were supposed to be looking over loans and only taking good paper? They have a trillion in bad debt because they stopped doing that, but there are people there doing that work. .. and why can’t we contract out to banks to give the loans for us, but according to strict guidelines? Don’t give the banks the money, pay them a small fee to do the paper work for you. Apparently those bankers aren’t running their own loans, so have them run the Government’s under strict guidelines. ….. and don’t we have paperwork processors in things like FEMA? Isn’t this a Federal Emergency of sorts? Don’t people submit tons of paperwork for small loans when a flood hits? Or tornado? …. implying that the government doesn’t have personnel or mechanisms to help this, slow as it might go, I think is to obfuscate just what resources we actually have on hand. But, I must admit, I don’t know exactly how that works since I didn’t contact FEMA when I was hit with 60″ of flood water in my house, I was made whole from my insurance.. unlike most people I know, I didn’t go looking for a way to profit from my disaster, I just wanted to be made whole and stopped taking money once everything was replaced. But, as I understand it, it’s a simple matter to fill out your small business loan app and return it to FEMA for approval.

    Let me ask it this way. What, short of tossing a trillion dollars over the fence, do you think can be done to fix this?

  36. “What ulterior motive does he truly have to terrify the general public with lies about the dire state of the economy? ”

    I think the underlying point is, no one wants to “lose stuff”, and for the very rich, they don’t want to lose money. It’s simple human psychology.

    And neither I nor most of those opposed to this bill/bailout are saying “do nothing”, we’re saying “if that’s all you got, do nothing”. I would like to see a plan that protects tax payers, shores up the economy, and punishes those responsible.

    No golden parachutes. Cap CEO pay. Take a serious stake in the company so that if it recovers (and most will) the ones “shoring them up” can get some return on our investment. Do SOMETHING that makes sense.

    Giving Paulson $700,000,000,000 and NO accountability or oversight is -insane-. Yet, that’s what he asked for and what the Shrub thought was ok. And, part of why a lot of those Republicans were against what the Dems/majority were proposing is because it put too many restrictions on the money. An entire segment of our elected officials seem to think this robbery was cool.

    I’m saying, take some time. Write this up the right way. Put REGULATIONS in it, OVERSIGHT, transparency, protections for the little guy. Hell, 20% of this mess is mortgages, and it seems like not one Republican is willing to try and keep those people in their houses? keep the home values stabilized? just help the “big guys”? Belief that the ruling elite knows best is exactly what got us here. Now is time to put the shackles back on the beast, and the proposed bailout was not even close to reasonable in that regard.

    And, I DO support letting it ALL go to hell if the right-wing refuses to open their eyes and see and admit that it’s THEIR deregulation and “free market” bullshit that caused this. It’s Enron all across the board, it seems.. and the Republicans are content to let that continue. Not me. I’m tired of the top 1% sucking up all the wealth through a rigged game and letting millions die in the streets. It’s time to change the way we do business in America.

  37. Right. Regulate, oversee, fix. But in the process, let’s try to keep our heads. Let’s try to sort the reliable, proven experts from the gibbering idiots and the grasping liars.

    And as far as basic human psychology goes, Savanster, here’s the most basic suggestion I can offer: base your evaluation of Buffett – or ANYONE – on at least a cursory examination of their actions in the past (which you haven’t really done, and which is so, so easy for as well-documented a life as his). He is about the challenge, the theory, and the practice of business. Look it up. Think about it.

  38. Savanster:

    Look, man, if banks won’t lend to each other, they CAN’T lend to anyone for the most part, OK? Banks borrow money to lend money. That’s what they do. When they’re conserving cash to meet their own borrowing obligations (and that includes obligations to depositors, who are lending their money to the bank), and other banks won’t lend to them, they can’t lend to anyone. Now, I’m not sitting here with a bunch of financial data service monitors in front of me, but I’m watching the TV news shows and have been since yesterday, and I’ve seen a parade of businesspeople, market analysts, bank analysts, etc. say that credit is just not flowing. I have heard no one say that it is. Either they’re all lying (and Bernanke, too), and no one is telling the truth, or credit really is frozen, even short-term paper which is most of what we’re talking about here, and presents most of the short-term danger.

    You say it’s OK to “suffer a little” now. Do you understand the risk? We’re not talking about dominoes or billiards. We’re talking a nuclear chain reaction. Businesses fail, consumers stop spending, more businesses fail, more consumers stop spending, stocks crash, the housing market crashes, more and more securitized loans stop performing so there is less and less credit, so more businesses fail, the housing construction industry comes to a standstill, and all those jobs are lost, so they quite spending … Am I making sense, here?

    Savanster, I appreciate your input, but I get the sense that, because there’s a big, gaping hole in the side of the boat, you want to talk now about how to better construct boat hulls so this kind of thing doesn’t happen again, and how we should punish the naval architects and the like, and I agree that it’s important to do that. But not NOW. Now, we need to act. There’s no time. No one knows exactly how much time there is before we reach a tipping point into a very deep recession, and I find this bloody brinksmanship maddening.

    And, BTW, there’s a difference between companies that actually interface with customers and sell loans and those that buy loans. No, Fannie and Freddie and FEMA can’t replace bank infrastructure, even if they had legal authority to do so which, in most cases, they don’t.

    Finally, no one is talking about “tossing a trillion dollars over the fence.” The proposal is to buy mortgage-backed assets from the banks that currently hold them. Those assets are worth something, though no one knows how much. Chances are, if the assets are held long enough, the market will recover and they can be sold for something approaching what was paid for them, though there may still be a loss (once again, there are just too many variables). By doing this, the US government will be removing debt from financial institutions’ balance sheets, allowing them to borrow (remember, you have to borrow to lend) against the value of their shareholders equity — and a shareholders’ equity that can be trusted. That should go a long way toward freeing up the credit markets, but there will still likely be much pain before the economy recovers.

    What would I suggest as a better alternative for right now … right this minute? I don’t have one. I don’t think anyone does. The House Republican leadership put forward an insurance scheme that requires premiums taken from money the lenders don’t have. I personally don’t get why insuring bad loans would cost less than buying the things.

    The issue is, how can the lending organizations borrow money to lend. That’s it in a nutshell as far as I can tell. I don’t see how they can do that with their current balance sheets. They have to offload the bad debt if they are to borrow, and lend, again.

    Long term, I’ve been giving what we should do a lot of thought, and expect to post on that. But for now, we have to patch the damn boat.

  39. Wow, and i thought that i tended towards long-winded…

    Very true, JS, “…for now, we have to patch the damn boat.” And i think that patching should be what the deal is about, with a firm commitment to fix the boat as soon as enough water is bailed out that we can get to the leak.

    My proposal: a smallish, immediate plan to restore confidence. One month for this Congress to debate, table and vote on a long-term plan. If they fail before election day, another bundle of money is injected that should last until January (and gives Paulsen the authority he originally requested for that time period); and if this Congress fails, they don’t get to play with any money as lame-ducks.

    Let’s make the congress work for votes this time. For all the bad that is in this, the timing is perfect for making our politicians (i won’t say leaders, because we don’t really have any of those) show us what they do for our votes, rather than telling us what they will do.

  40. Lex:

    Sometimes, an issue is to big to get into a sound bite.

    From what I understand, a smallish plan won’t do it. In order to make a market in the bad assets, there has to be a whole lot of money. Otherwise, the credit markets are still frozen.

  41. JS,

    True, but there seems to be significant disagreement about whether or not a big plan will do the trick. My point was to get things started (slow the leak) so that real fixes could be designed and debated. Besides, the Fed can pump money into the market all day long if it so borrows against our future…it has been for a while, and i’ve read reports that it unleashed over $600B during the wrangling over Paulsen’s plan. All the other bailout moneys (AIG, etc) appeared out of thin air without consultation with anyone.

    And $700B isn’t really a whole lot of money at this scale, which is something that doesn’t get talked about enough…that figure is a nice round one tossed out to get things started. Most estimates put the cost far higher. Which still leaves the issue of where a bankrupt nation gets hundreds of billions of dollars.

    And it was an outline, not a soundbyte. But whatever, i’m pretty much to the point where i don’t care…not about our politics, not about our economics, not about our petty little culture wars.

    Perhaps only Defoe or Brant would be capable of depicting this nation, worshiping at the feet of Saint Grobian. A ship of state populated by human inhabitants who are deranged, frivolous, or oblivious, passengers aboard a ship without a pilot, and seemingly ignorant of their own direction. How’s that for a soundbyte?

  42. Sorry Lex. I didn’t mean that what you said was a soundbite. I was responding to the “long winded” comment. Perhaps I could have been more succinct.

    I’m at the limit of my data, here. I have no idea how much money it will, or should, take. I don’t think anyone does.

  43. Galbraith said this week we should give them 200 billion now, see how it goes for a couple of months, and then decide.



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