http://www.bloomberg.com/apps/news?pid=20601087&sid=aF7mM2z4swgU&refer=home
Excerpt from the article:
Congressmen, banking lobbyists and companies including American International Group Inc. have urged the SEC to place a moratorium on fair-value accounting, saying it forces firms to report losses that they never expect to incur. Federal Reserve Chairman Ben S. Bernanke and other proponents say a suspension would erode confidence that firms are owning up to losses.
``In the past couple of weeks, fair-value accounting has been under attack,'' JPMorgan Chase & Co. analyst Dane Mott wrote in a report today. ``Blaming fair-value accounting for the credit crisis is a lot like going to a doctor for a diagnosis and then blaming him for telling you that you are sick.''
Right - the point of financial statements is to give you an accurate picture of your company at any given time. If something is glaringly out of line, you have an opportunity to make it right. And, since everyone is using the same rules we can make a judgement about company's relative financial health.
If all you do is modify the rules of the financial statement so you can get a loan or entice shareholders, then you're not really creating an accurate picture of the your company's financial health.
This seems obvious to me...I think the people just want a quick fix or something so this will all go away.
The article indicates FASB and SEC probably won't change the rules. They'll recommend something called mark-to-model.
From investopedia:
http://www.investopedia.com/terms/m/mark_to_model.asp
The pricing of a specific investment position or portfolio based on internal assumptions or financial models. This contrasts with traditional mark-to-market valuations, in which market prices are used to calculate values as well as the losses or gains on positions. Assets that must be marked-to-model either don't have a regular market that provides accurate pricing, or valuations rely on a complex set of reference variables and time frames. This creates a situation in which guesswork and assumptions must be used to assign value to an asset.These assets are typically derivative contracts or securitized cash flow instruments, and most do not have liquid trading markets.
Mark-to-model assets essentially leave themselves open to interpretation, and this can create risk for investors. The dangers of mark-to-model assets occurred during the subprime mortgage meltdown beginning in 2007. Billions of dollars in securitized mortgage assets had to be written off on company balance sheets because the valuation assumptions used turned out to be inaccurate. Many of the mark-to-model valuations assumed liquid and orderly secondary markets and historical default levels. These assumptions proved wrong when secondary liquidity dried up and mortgage default rates spiked well above normal levels. Largely as a result of the balance sheet problems faced with securitized mortgage products, the Financial Accounting Standards Board (FASB) issued a statement in November of 2007 requiring all publicly traded companies to disclose any assets on their balance sheets that rely on mark-to-model valuations beginning in the 2008 fiscal year. This rule change will allow investors to identify the dollar value owned by each company that holds these types of assets.
http://www.investopedia.com/terms/m/marktomarket.asp
1. The act of recording the price or value of a security, portfolio or account to reflect its current market value rather than its book value. 2. In terms of mutual funds, a MTM is when the net asset value (NAV) of the fund is valued upon the most current market values.
1. This is done most often in futures accounts to make sure that margin requirements are being met. If the current market value causes the margin account to fall below its required level, the trader will be faced with a margin call.2. Mutual funds are marked to market on a daily basis at the market close so that investors have an idea of the fund's NAV.
Tuesday, September 30, 2008
Mark-to-market accounting (fair value)
The new 'big' thing that someone (Newt Gingrich?) is pushing to solve the economic crisis is to suspend 'mark-to-market accounting'.
Mark-to-Market accounting is also known as Fair Value accounting.
A corporation is required to enter the fair market value of their assets on the books.
Some want that rule suspended.
Newt Gingrich commentary on Forbes magazine.
http://www.forbes.com/home/2008/09/29/mark-to-market-oped-cx_ng_0929gingrich.html
From that commentary:
"Chief economist Brian S. Wesbury and his colleague Bob Stein at First Trust Portfolios of Chicago estimate the impact of the "mark-to-market" accounting rule on the current crisis as follows:
"It is true that the root of this crisis is bad mortgage loans, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market. What's most fascinating is that the Treasury is selling its plan as a way to put a bottom in mortgage pool prices, tipping its hat to the problem of mark-to-market accounting without acknowledging it. It is a real shame that there is so little discussion of this reality." (Emphasis added.)
If regulators on their own--or Congress, if regulators fail to use their discretion--can fix 70% of the financial crisis by changing the mark-to-market accounting rule, we should change the rule first before attempting to pass another reevaluated bailout package. "
I just saw the First Trust guy on CNBC with Erin Burnett and his take is that if the assets were valued at what the holder wanted it to be valued at, most of the problem would be taken care of. There wouldn't be a loss of value.
He said the key is that the holder of the asset doesn't HAVE to sell it so it can be valued at whatever they want it to be.
Erin was arguing the other side - that the people who hold the assets have been valuing their assets incorrectly the whole time and that's why we're in this mess, so why should we believe they can accurately value their assets now.
My opinion is that this would be a HUGE mistake. All you're doing is, once again, passing on the problem until later. We can't keep playing games with reality so things LOOK better than they are. If the mark-to-market valuation is GAAP (the accepted practice) and has been for awhile, then it should stay that way.
Your assets should be valued at what price you can get for them at any moment.
Yes, the value of homes went down - way down.
But, if you (investment bank or institution) had not made the strange assumption that home prices only go up and if you'd been less free-wheeling and if you'd had a more conservative amount of money in your reserve, you would have had enough capital to withstand the economic downturn of the market.
In any event - mark-to-market should NOT be suspended and once again I disagree with Newt Gingrich.
The reality of the Free Market system is that you will pay or sell by what the market will bear. If you can't sell your home today for the price you want to, then that's not the free market value and you're just fudging.
You can't be a free market conservative and fudge the numbers at the same time.
Some of the comments attached to the article are helpful in understanding the two sides. I come down on the side of value = free market value.
Mark-to-Market accounting is also known as Fair Value accounting.
A corporation is required to enter the fair market value of their assets on the books.
Some want that rule suspended.
Newt Gingrich commentary on Forbes magazine.
http://www.forbes.com/home/2008/09/29/mark-to-market-oped-cx_ng_0929gingrich.html
From that commentary:
"Chief economist Brian S. Wesbury and his colleague Bob Stein at First Trust Portfolios of Chicago estimate the impact of the "mark-to-market" accounting rule on the current crisis as follows:
"It is true that the root of this crisis is bad mortgage loans, but probably 70% of the real crisis that we face today is caused by mark-to-market accounting in an illiquid market. What's most fascinating is that the Treasury is selling its plan as a way to put a bottom in mortgage pool prices, tipping its hat to the problem of mark-to-market accounting without acknowledging it. It is a real shame that there is so little discussion of this reality." (Emphasis added.)
If regulators on their own--or Congress, if regulators fail to use their discretion--can fix 70% of the financial crisis by changing the mark-to-market accounting rule, we should change the rule first before attempting to pass another reevaluated bailout package. "
I just saw the First Trust guy on CNBC with Erin Burnett and his take is that if the assets were valued at what the holder wanted it to be valued at, most of the problem would be taken care of. There wouldn't be a loss of value.
He said the key is that the holder of the asset doesn't HAVE to sell it so it can be valued at whatever they want it to be.
Erin was arguing the other side - that the people who hold the assets have been valuing their assets incorrectly the whole time and that's why we're in this mess, so why should we believe they can accurately value their assets now.
My opinion is that this would be a HUGE mistake. All you're doing is, once again, passing on the problem until later. We can't keep playing games with reality so things LOOK better than they are. If the mark-to-market valuation is GAAP (the accepted practice) and has been for awhile, then it should stay that way.
Your assets should be valued at what price you can get for them at any moment.
Yes, the value of homes went down - way down.
But, if you (investment bank or institution) had not made the strange assumption that home prices only go up and if you'd been less free-wheeling and if you'd had a more conservative amount of money in your reserve, you would have had enough capital to withstand the economic downturn of the market.
In any event - mark-to-market should NOT be suspended and once again I disagree with Newt Gingrich.
The reality of the Free Market system is that you will pay or sell by what the market will bear. If you can't sell your home today for the price you want to, then that's not the free market value and you're just fudging.
You can't be a free market conservative and fudge the numbers at the same time.
Some of the comments attached to the article are helpful in understanding the two sides. I come down on the side of value = free market value.
The Economic Panic
Because I work from home I can hear all the financial people on CNN, FOX, CNBC, and Bloomberg (in the morning) imploring Americans to believe this really does affect them.
I'm pretty sure its just about all of them now. There was a time I heard from some economists that we should do nothing.
They think maybe the record drop in the dow yesterday might scare Americans, even if its not the market that's really at stake.
Apparently, the LIBOR score or rate (tied to commercal paper) is the key to the credit market, and its pretty high right now. The fed rate is high as well. Although one guy on Bloomberg said its not that high when compared to inflation and what rates were like in the early 80's when credit rates were 11 and 12 percent. He also notes that
Mark to market reform and the uptick rule. What are they? Some are saying that's what will make the difference in whether the bailout package will work. I guess its called a rescue plan now.
Another option Obama added is that the amount of deposits insured by the FDIC be raised from 100,000 to 250,000.
So far, I haven't heard of any new banks going down today.
Maybe the Congress stalling means the market will have to right itself.
I saw a Republican congresswomen yesterday who voted against the plan say she wanted the legislation to include sweeping economic reform. I can't remember specifically what she wanted, but it was a lot of traditional Republican ideas. Which tells me, its not going to help make things better.
I think the Democrats didn't vote for it (including my representative) because it wasn't enough of a help to regular folks. ? Maybe. Or, because people wrote in to say they were against it.
I should have written in and amended my prior comment. I had an idea, but if they couldn't get it done, then they'd have to compromise and I accepted the idea of the bailout. Again, my concern is that my company will be forced to let people go. It wouldn't be for a few months because we can hold out for a while. But, if it gets to the point my company is letting people go, then it really is a problem 'cause we're pretty conservative with cash.
The stock market drop yesterday was big for me. I don't have very much invested in the stock market relative to others, but I have a lot for me - I'm a regular middle class person who only decided to start saving a couple years ago.
I couldn't decide if I should wipe out the rest of my savings to buy more because everything is so low and I believe everything will rebound eventually,
Or, if I should sell my stocks at a loss and just get out so I have some cash to ride out the crisis when I don't have a job and am living on my savings, meaning I don't believe the market can recover in its current state.
I don't know what the right answer is.
I did nothing.
As I'm listening to Bloomberg, some of these financial people are finding silver linings. They're seeing signs that the market is going to try and recover on its own. But, they're equity investment people. They're probably rich.
I switched to C-SPAN Washington Journal just in time to hear a caller say "we're finding out we're just a bunch of losers trying to live off our kid's financial future" HA!
Hmmm...some other sentiments on Washington Journal:
1. Wall Street/Banks should not be blaming Main Street for the problem because they're the ones who pushed people into ARM loans without explaining it to people. They wanted to make their money and didn't care what happened later.
2. Everything that happened in the house yesterday can be attributed to the representatives being up for election in a few weeks.
3. We should start investigating from the top down; from the executive suite on down.
4. Congress needs more people who can explain things better to the constituents.
5. This problem started back in the Carter days (or the Clinton days depending on who's talking) when it became a priority to give high risk people loans via The Fair Housing Act or the Community Redevelopment Act. As I understand it, those bills were about making sure minority families were not discriminated against in home loans.
Sounds like there really is THAT much anger at the Congress.
To me, it seems like voting against this is the same as cutting off your nose to spite your face.
As I've said before, I'm not willing to risk losing my job just to show some anger at Wall Street.
On the Today show this morning - the report indicated that Democrats voted against it because they don't want to bail out the fat cats, and Republicans voted against it because they think it amounted to Socialism and was a threat to the Free Market system.
But, one of the things the Republicans want (maybe, a floated idea anyway) is a corporate tax holiday. Huh? That makes no sense to me and would make me be completely against the plan I think.
Aye yi yi.
I haven't even talked about the political aspect of all this - partisanship and Presidential politics.
I'm pretty sure its just about all of them now. There was a time I heard from some economists that we should do nothing.
They think maybe the record drop in the dow yesterday might scare Americans, even if its not the market that's really at stake.
Apparently, the LIBOR score or rate (tied to commercal paper) is the key to the credit market, and its pretty high right now. The fed rate is high as well. Although one guy on Bloomberg said its not that high when compared to inflation and what rates were like in the early 80's when credit rates were 11 and 12 percent. He also notes that
Mark to market reform and the uptick rule. What are they? Some are saying that's what will make the difference in whether the bailout package will work. I guess its called a rescue plan now.
Another option Obama added is that the amount of deposits insured by the FDIC be raised from 100,000 to 250,000.
So far, I haven't heard of any new banks going down today.
Maybe the Congress stalling means the market will have to right itself.
I saw a Republican congresswomen yesterday who voted against the plan say she wanted the legislation to include sweeping economic reform. I can't remember specifically what she wanted, but it was a lot of traditional Republican ideas. Which tells me, its not going to help make things better.
I think the Democrats didn't vote for it (including my representative) because it wasn't enough of a help to regular folks. ? Maybe. Or, because people wrote in to say they were against it.
I should have written in and amended my prior comment. I had an idea, but if they couldn't get it done, then they'd have to compromise and I accepted the idea of the bailout. Again, my concern is that my company will be forced to let people go. It wouldn't be for a few months because we can hold out for a while. But, if it gets to the point my company is letting people go, then it really is a problem 'cause we're pretty conservative with cash.
The stock market drop yesterday was big for me. I don't have very much invested in the stock market relative to others, but I have a lot for me - I'm a regular middle class person who only decided to start saving a couple years ago.
I couldn't decide if I should wipe out the rest of my savings to buy more because everything is so low and I believe everything will rebound eventually,
Or, if I should sell my stocks at a loss and just get out so I have some cash to ride out the crisis when I don't have a job and am living on my savings, meaning I don't believe the market can recover in its current state.
I don't know what the right answer is.
I did nothing.
As I'm listening to Bloomberg, some of these financial people are finding silver linings. They're seeing signs that the market is going to try and recover on its own. But, they're equity investment people. They're probably rich.
I switched to C-SPAN Washington Journal just in time to hear a caller say "we're finding out we're just a bunch of losers trying to live off our kid's financial future" HA!
Hmmm...some other sentiments on Washington Journal:
1. Wall Street/Banks should not be blaming Main Street for the problem because they're the ones who pushed people into ARM loans without explaining it to people. They wanted to make their money and didn't care what happened later.
2. Everything that happened in the house yesterday can be attributed to the representatives being up for election in a few weeks.
3. We should start investigating from the top down; from the executive suite on down.
4. Congress needs more people who can explain things better to the constituents.
5. This problem started back in the Carter days (or the Clinton days depending on who's talking) when it became a priority to give high risk people loans via The Fair Housing Act or the Community Redevelopment Act. As I understand it, those bills were about making sure minority families were not discriminated against in home loans.
Sounds like there really is THAT much anger at the Congress.
To me, it seems like voting against this is the same as cutting off your nose to spite your face.
As I've said before, I'm not willing to risk losing my job just to show some anger at Wall Street.
On the Today show this morning - the report indicated that Democrats voted against it because they don't want to bail out the fat cats, and Republicans voted against it because they think it amounted to Socialism and was a threat to the Free Market system.
But, one of the things the Republicans want (maybe, a floated idea anyway) is a corporate tax holiday. Huh? That makes no sense to me and would make me be completely against the plan I think.
Aye yi yi.
I haven't even talked about the political aspect of all this - partisanship and Presidential politics.
Monday, September 29, 2008
More notes on the bailout
A couple notes:
A lot of Democrats also voted against the bill. But, the Democrats didn't want to push them to vote for it when the Republicans were overwhelmingly against it or it would seem like a Democratic plan and the Democrats would lose the upcoming election.
The Republicans are using this opportunity to blame Pelosi for what they say was a partisan speech right before the vote, and by extension the partisanship of Democrats in general. Republicans were not solidly on board anyway and hearing Pelosi be partisan (they say) moved some of them back to no. Kinda childish.
Congress should not go home before this is resolved.
What next? Nobody knows. If we're on the brink of catastrophe, maybe its too late already. If the economy has been holding on by a thread for a while, just waiting for something, then I can only imagine the thread has broken now.
My analogy: We're all linked by a chain circle, treading water in a big lake called The Economy. Some of us may go down all the way to the bottom of the lake and drown through our own fault or the fault of the system. But everybody who is near that person also goes down whether they did anything or not. Further and further down the chain circle maybe some people are far enough away from the person who sunk to the bottom that they can stay above water, but it gets harder and harder.
This problem affects the credit markets, not the investment market - or at least not in the way regular people understand it.
Its credit - people can't get credit. If a company can't get credit, they can't continue growing and manufacturing and building and that means they contract. And that means I could lose my job. This isn't just about people's mortgages anymore.
The reason banks don't lend money is because they don't have as much extra money because the valuation of their mortgages is out of line with the amount loaned.
So, a bank doesn't have expendable capital.
So, a developer can't get money to build a building
And they don't hire general contractors to build the building
And they don't hire subcontractors to build the building
And the subcontractor fires me.
That's what I've been told and I'm willing to spend my 5k per taxpayer to make sure I have a job.
Maybe we can survive. Maybe the markets will right themselves. Maybe the people will find a way. Its entirely possible. I hope it happens.
If we wait too long, we'll know the answer.
The House is back in session on Thursday.
I don't understand why they're taking the Jewish New Year off, and why its two days.
I don't feel good about that.
Speaking of the Congress. If the members don't follow the leadership, what's the point of having leadership? Congress is partisan because people are either Democrat or Republican. But, they don't even follow the leaders of their partisan group. So, what are they?
i think idealogues are not statesmen, they don't understand compromise and working together. They shouldn't be part of government.
I hope I don't get sick to my stomach from the stress of this.
A lot of Democrats also voted against the bill. But, the Democrats didn't want to push them to vote for it when the Republicans were overwhelmingly against it or it would seem like a Democratic plan and the Democrats would lose the upcoming election.
The Republicans are using this opportunity to blame Pelosi for what they say was a partisan speech right before the vote, and by extension the partisanship of Democrats in general. Republicans were not solidly on board anyway and hearing Pelosi be partisan (they say) moved some of them back to no. Kinda childish.
Congress should not go home before this is resolved.
What next? Nobody knows. If we're on the brink of catastrophe, maybe its too late already. If the economy has been holding on by a thread for a while, just waiting for something, then I can only imagine the thread has broken now.
My analogy: We're all linked by a chain circle, treading water in a big lake called The Economy. Some of us may go down all the way to the bottom of the lake and drown through our own fault or the fault of the system. But everybody who is near that person also goes down whether they did anything or not. Further and further down the chain circle maybe some people are far enough away from the person who sunk to the bottom that they can stay above water, but it gets harder and harder.
This problem affects the credit markets, not the investment market - or at least not in the way regular people understand it.
Its credit - people can't get credit. If a company can't get credit, they can't continue growing and manufacturing and building and that means they contract. And that means I could lose my job. This isn't just about people's mortgages anymore.
The reason banks don't lend money is because they don't have as much extra money because the valuation of their mortgages is out of line with the amount loaned.
So, a bank doesn't have expendable capital.
So, a developer can't get money to build a building
And they don't hire general contractors to build the building
And they don't hire subcontractors to build the building
And the subcontractor fires me.
That's what I've been told and I'm willing to spend my 5k per taxpayer to make sure I have a job.
Maybe we can survive. Maybe the markets will right themselves. Maybe the people will find a way. Its entirely possible. I hope it happens.
If we wait too long, we'll know the answer.
The House is back in session on Thursday.
I don't understand why they're taking the Jewish New Year off, and why its two days.
I don't feel good about that.
Speaking of the Congress. If the members don't follow the leadership, what's the point of having leadership? Congress is partisan because people are either Democrat or Republican. But, they don't even follow the leaders of their partisan group. So, what are they?
i think idealogues are not statesmen, they don't understand compromise and working together. They shouldn't be part of government.
I hope I don't get sick to my stomach from the stress of this.
The 'bailout' didnt pass
Wow - what a weird time. The house is rejecting the bailout.
I think they're feeling scared of the anger from the constituency.
But, I do believe people don't understand how they'll be affected. They think only Wall Street is getting bailed out. But, they don't understand the trickle down factor. Trickle down doesn't work when it comes to giving money, but it sure as hell will work when its about taking money. If we don't spend money on the bailout, will we be spending an equivalent amount on unemployment benefits?
Well, we don't know for sure 700 billion is going to solve anything. We only know it at least gives us time to stop the panic. Maybe. The equity market wasn't reacting all that well anyway before the vote was taken.
Maybe this is the way it's supposed to work. I hope these people are right and I don't lose my job. The market could right itself.
I think they're feeling scared of the anger from the constituency.
But, I do believe people don't understand how they'll be affected. They think only Wall Street is getting bailed out. But, they don't understand the trickle down factor. Trickle down doesn't work when it comes to giving money, but it sure as hell will work when its about taking money. If we don't spend money on the bailout, will we be spending an equivalent amount on unemployment benefits?
Well, we don't know for sure 700 billion is going to solve anything. We only know it at least gives us time to stop the panic. Maybe. The equity market wasn't reacting all that well anyway before the vote was taken.
Maybe this is the way it's supposed to work. I hope these people are right and I don't lose my job. The market could right itself.
Saturday, September 27, 2008
They've figured something out!
We don't know what the plan is yet, but at this late hour, they just got it all worked out.
The staffs will be working tonight to get it on paper.
I turned on CCN to see if anything new had happened. And it had.
They look hopeful, happy, and tired. I'm optimistic.
It'll be interesting to see what the final plan is.
The staffs will be working tonight to get it on paper.
I turned on CCN to see if anything new had happened. And it had.
They look hopeful, happy, and tired. I'm optimistic.
It'll be interesting to see what the final plan is.
The First Debate
I am completely biased in favor of Obama.
I am disgusted by John McCain and everything he does.
1. Talking about the past over and over and over. And over and over again. We have moved to the 21st centrury, you know? I wish Obama would have had a come back for that. I can think of a few but they're not appropriate for a presidential debate. "Are you aware we're in a new millenium?" "Its a different world today than the past you keep referring to and the old rules no longer apply - other than the golden rule - do unto others as you would have them do unto you. As President I'll be keeping that in mind."
2. Continued references to Obama's supposed naivete (sp?) and that Obama doesn't understand. All I can say is a lot of swear words and then "Just because I don't agree with you doesn't mean I don't understand. I understand. I think you're fundamentals are all wrong."
3. Facial expressions - what an ass.
4. He rambled and repeated his talking point phrases reapeatedly. Endlessly. He was so boring and repetitive MFJ and I could hardly stand it. We realized that quite often we could talk over him and not miss a thing. Ugh.
5. He wouldn't look at Obama and didn't understand the rules of the debate. There was SUPPOSED TO BE INTERACTION!!! Mr. McCain you were supposed to direct rebuttal questions to Obama if you needed to. You didn't even know how to. You couldn't even adjust your tone, style, or content. You can't think on your feet.
6. His mocking tone while reenacting a supposed conversation between Obama and the leader of Iran. Ridiculous.
7. It doesn't matter how many times he's told the truth, or is rebutted. He doesn't change his story.
I can't remember one thing he did that I liked. Absolutely nothing. If he said something reasonably well it was policy I don't agree with.
I don't like the man and I don't like his policies. He's bad for me and bad for the country and bad for the entire planet. He's trying too hard to be something he's not. What a jerk!
As for Obama
1. He could never have lived up to my hopes for him. Given McCain's bad week, it would have been the best thing ever if Obama could have decisively won the debate. He didn't overwhelm McCain. I mean, he did in my opinion of course. But, realistically Obama wasn't flawless.
2. I wish he'd answered a couple of the questions more directly. His answer about putting some parts of his plan off for a little because of the current economic crisis was good, but it got buried at the end when Lehrer had to ask the question again.
3. I wanted Obama to have more quips. MFJ wanted zingers. The part where he said "you said this and you were wrong, you said that and you were wrong" etc. My recollection is he didn't remember the 'You were wrong" until the second thing he said.
My other issue is the debate format.
1. I think the candidates should not be able to say "you voted this way 400 times" or whatever. It doesn't help anything and it just makes people say "no I didn't" "yes you did" that's silly. It doesn't look good for Obama or McCain. If they want to bring up the person's record, it should be the moderator's duty to remind people of the truth. Yes, he voted against it, but its because there was an amendment on it. Like that. Obama tried to do that in one part of the debate, he commented that McCain didn't vote for troop funding when there was a timetable attached, and Obama didn't for troop funding when there wasn't a timetable attached. It wasn't about supporting the troops, it was about the timetable. I highlighted that part because its a good indication of the kind of person Obama is. He doesn't have to lie or twist the truth in order to serve some purpose.
2. I think the questions weren't very good. They should have been...
Do you believe in deregulation?
Do you believe in preemptive war? (The Bush Doctrine! HA! That would have been kind of funny if Lehrer had asked the same question Charlie Gibson asked Sarah Palin.)
What is the driving engine of the economy?
What role should religion play in the government?
Those are very good questions that would have elicited good information. The candidates can't just rumble along meandering through silly talking points. They have to give an answer. You'd think anyway.
Somehow the moderators think they're coming up with probing questions, but they're too general and its too easy for the candidates to switch the question around.
I think the moderator should require answers that make sense. They should be challenge the candidates when they make comments that are unreasonable given the information.
As much as I like The Newshour with Jim Lehrer, I didn't like the way this debate worked. They tried to have a good idea, but couldn't make it work if John McCain wouldn't do it. Obama tried to do it, but if one person isn't going to be part of the conversation its hard to include them.
Maybe Obama should have pointed out that the same way McCain is not looking at him and won't acknolwedge him and can't adjust to the new format of the debate is the same way he'll run his foreign policy...he'll ignore countries he doesn't care about and move along on his path no matter what's happening in the world.
I think Obama would make a wonderful president. He might not be perfect, but he's smart and he'll work toward policies that I agree with.
John McCain will get us into worse trouble than we're in now.
I'd like to also note he said in the debate that he was going to vote for the bailout plan...he just threw it off - he said "sure". I think he wasn't even paying attention to the question.
What an idiot - yeah - I dislike him so much I can hardly stand it. I don't like that his presence makes me so angry and frustrated. I need to find some peace. Its hard to be peaceful and calm when I think he's going to ruin the country.
I don't know how Obama can do it. I really don't. He has so much more patience and peace and calm than I do. I don't have the temperament to run for office.
Although, I'd rather be a Senator than a President. I like working in groups and brainstorming solutions and stuff.
I am disgusted by John McCain and everything he does.
1. Talking about the past over and over and over. And over and over again. We have moved to the 21st centrury, you know? I wish Obama would have had a come back for that. I can think of a few but they're not appropriate for a presidential debate. "Are you aware we're in a new millenium?" "Its a different world today than the past you keep referring to and the old rules no longer apply - other than the golden rule - do unto others as you would have them do unto you. As President I'll be keeping that in mind."
2. Continued references to Obama's supposed naivete (sp?) and that Obama doesn't understand. All I can say is a lot of swear words and then "Just because I don't agree with you doesn't mean I don't understand. I understand. I think you're fundamentals are all wrong."
3. Facial expressions - what an ass.
4. He rambled and repeated his talking point phrases reapeatedly. Endlessly. He was so boring and repetitive MFJ and I could hardly stand it. We realized that quite often we could talk over him and not miss a thing. Ugh.
5. He wouldn't look at Obama and didn't understand the rules of the debate. There was SUPPOSED TO BE INTERACTION!!! Mr. McCain you were supposed to direct rebuttal questions to Obama if you needed to. You didn't even know how to. You couldn't even adjust your tone, style, or content. You can't think on your feet.
6. His mocking tone while reenacting a supposed conversation between Obama and the leader of Iran. Ridiculous.
7. It doesn't matter how many times he's told the truth, or is rebutted. He doesn't change his story.
I can't remember one thing he did that I liked. Absolutely nothing. If he said something reasonably well it was policy I don't agree with.
I don't like the man and I don't like his policies. He's bad for me and bad for the country and bad for the entire planet. He's trying too hard to be something he's not. What a jerk!
As for Obama
1. He could never have lived up to my hopes for him. Given McCain's bad week, it would have been the best thing ever if Obama could have decisively won the debate. He didn't overwhelm McCain. I mean, he did in my opinion of course. But, realistically Obama wasn't flawless.
2. I wish he'd answered a couple of the questions more directly. His answer about putting some parts of his plan off for a little because of the current economic crisis was good, but it got buried at the end when Lehrer had to ask the question again.
3. I wanted Obama to have more quips. MFJ wanted zingers. The part where he said "you said this and you were wrong, you said that and you were wrong" etc. My recollection is he didn't remember the 'You were wrong" until the second thing he said.
My other issue is the debate format.
1. I think the candidates should not be able to say "you voted this way 400 times" or whatever. It doesn't help anything and it just makes people say "no I didn't" "yes you did" that's silly. It doesn't look good for Obama or McCain. If they want to bring up the person's record, it should be the moderator's duty to remind people of the truth. Yes, he voted against it, but its because there was an amendment on it. Like that. Obama tried to do that in one part of the debate, he commented that McCain didn't vote for troop funding when there was a timetable attached, and Obama didn't for troop funding when there wasn't a timetable attached. It wasn't about supporting the troops, it was about the timetable. I highlighted that part because its a good indication of the kind of person Obama is. He doesn't have to lie or twist the truth in order to serve some purpose.
2. I think the questions weren't very good. They should have been...
Do you believe in deregulation?
Do you believe in preemptive war? (The Bush Doctrine! HA! That would have been kind of funny if Lehrer had asked the same question Charlie Gibson asked Sarah Palin.)
What is the driving engine of the economy?
What role should religion play in the government?
Those are very good questions that would have elicited good information. The candidates can't just rumble along meandering through silly talking points. They have to give an answer. You'd think anyway.
Somehow the moderators think they're coming up with probing questions, but they're too general and its too easy for the candidates to switch the question around.
I think the moderator should require answers that make sense. They should be challenge the candidates when they make comments that are unreasonable given the information.
As much as I like The Newshour with Jim Lehrer, I didn't like the way this debate worked. They tried to have a good idea, but couldn't make it work if John McCain wouldn't do it. Obama tried to do it, but if one person isn't going to be part of the conversation its hard to include them.
Maybe Obama should have pointed out that the same way McCain is not looking at him and won't acknolwedge him and can't adjust to the new format of the debate is the same way he'll run his foreign policy...he'll ignore countries he doesn't care about and move along on his path no matter what's happening in the world.
I think Obama would make a wonderful president. He might not be perfect, but he's smart and he'll work toward policies that I agree with.
John McCain will get us into worse trouble than we're in now.
I'd like to also note he said in the debate that he was going to vote for the bailout plan...he just threw it off - he said "sure". I think he wasn't even paying attention to the question.
What an idiot - yeah - I dislike him so much I can hardly stand it. I don't like that his presence makes me so angry and frustrated. I need to find some peace. Its hard to be peaceful and calm when I think he's going to ruin the country.
I don't know how Obama can do it. I really don't. He has so much more patience and peace and calm than I do. I don't have the temperament to run for office.
Although, I'd rather be a Senator than a President. I like working in groups and brainstorming solutions and stuff.
Friday, September 26, 2008
Economic update
Wow - I worked in the office today and the sentiment against bailing out Wall Street is strong.
If only we could know the right way to turn.
Respected economists are on both sides of the fence. Nobody knows which is worse - to live with the results of no bailout, or to put a lot of money in the hands of the corporations who caused the problem in the first place.
I guess its a risk either way.
What many people are concerned about is that the behavior that caused the problem is going to continue unabated.
But, the behavior that caused the problem can't be legislated, right?
Greed, instant gratification. What are you gonna do about that? Punish people for being greedy? Punish people for not paying attention to loan documents or believing the lies they wee told?
I'm among the people who don't have a great deal of debt to speak of. I rent instead of owning, I owe on my car for another year, but zero percent interest rate, and I don't have any credit cared or tuition debt. I don't have unlimited savings. But, I have some flexibility. I won't be in trouble in the first month or so.
But, there are a lot of people who have debt and don't get paid too much and would be in trouble fairly quickly if jobs are affected. Should those people be sacrificed just so we can punish Wall Street?
And I think that scenario might apply whether we go ahead with the bailout or if we don't.
Maybe, if the Congress continues to take a long time figuring something out, then we'll have an answer anyway.
On the political side, it does seem weird that the Democrats are siding with Paulson/Bush and the people (what percentage of all people I wonder?) are against the idea of a bailout.
My impression is that most people don't want to bailout Wall Street and they're willing to live with the consequences.
I don't believe them. I think, once the consequences become obvious (assuming there are consequences) they'd complain and rail against the government who got us into this mess (job losses)
Truthfully, even if we give the money, they'll complain and rail against the government that got them into that mess too (more taxes).
We need to be clear about what's an immediate crisis to be solved, and what we can change once the immediate crisis has been averted. I don't think people are bringing that up enough.
Since I was in the office today I wasn't able to stay as up to date on the dealings of the day as I did earlier this week.
If only we could know the right way to turn.
Respected economists are on both sides of the fence. Nobody knows which is worse - to live with the results of no bailout, or to put a lot of money in the hands of the corporations who caused the problem in the first place.
I guess its a risk either way.
What many people are concerned about is that the behavior that caused the problem is going to continue unabated.
But, the behavior that caused the problem can't be legislated, right?
Greed, instant gratification. What are you gonna do about that? Punish people for being greedy? Punish people for not paying attention to loan documents or believing the lies they wee told?
I'm among the people who don't have a great deal of debt to speak of. I rent instead of owning, I owe on my car for another year, but zero percent interest rate, and I don't have any credit cared or tuition debt. I don't have unlimited savings. But, I have some flexibility. I won't be in trouble in the first month or so.
But, there are a lot of people who have debt and don't get paid too much and would be in trouble fairly quickly if jobs are affected. Should those people be sacrificed just so we can punish Wall Street?
And I think that scenario might apply whether we go ahead with the bailout or if we don't.
Maybe, if the Congress continues to take a long time figuring something out, then we'll have an answer anyway.
On the political side, it does seem weird that the Democrats are siding with Paulson/Bush and the people (what percentage of all people I wonder?) are against the idea of a bailout.
My impression is that most people don't want to bailout Wall Street and they're willing to live with the consequences.
I don't believe them. I think, once the consequences become obvious (assuming there are consequences) they'd complain and rail against the government who got us into this mess (job losses)
Truthfully, even if we give the money, they'll complain and rail against the government that got them into that mess too (more taxes).
We need to be clear about what's an immediate crisis to be solved, and what we can change once the immediate crisis has been averted. I don't think people are bringing that up enough.
Since I was in the office today I wasn't able to stay as up to date on the dealings of the day as I did earlier this week.
Thursday, September 25, 2008
Whose side am I on?
Aargh! Continued craziness.
So, I find myself agreeing with Lou Dobbs (in the last five minutes of his show today) when he said Congress has forgotten to even ask the question about whether we need a bailout or not.
The Democrats and the President seem to be coming to agreement about a bailout. There's a rogue group of House Republicans who are saying no deal.
I even agree with Neil Cavuto (on FOXNews no less) who is also wondering if we really need a bailout.
The House Republicans want a completely new package deal that would mean private money would swoop in. But, they'd need to include tax incentives, etc to make that work.
That doesn't sound very good because who has private money to add? Rich people. Who would get tax breaks? Rich people. So, on the very small face of it, I don't like it.
If my choice is between the House Republicans plan to use private money, and the negotiated Democratic plan, I'd have to choose the Democratic plan.
If my choice is for additional discussion to find a new plan (insurance and loans instead of purchasing the securities) or the negotiated Democratic plan, I'd have to choose more discussion.
I haven't been reading too much today - mostly I'm getting my information from a combo of CNN and FOXNews.
Its harder to work and read the news than it is to work and listen to the TV news. And, I gotta work - or I'll lose my job and be part of the people who have to get bailed out!!!
So, I find myself agreeing with Lou Dobbs (in the last five minutes of his show today) when he said Congress has forgotten to even ask the question about whether we need a bailout or not.
The Democrats and the President seem to be coming to agreement about a bailout. There's a rogue group of House Republicans who are saying no deal.
I even agree with Neil Cavuto (on FOXNews no less) who is also wondering if we really need a bailout.
The House Republicans want a completely new package deal that would mean private money would swoop in. But, they'd need to include tax incentives, etc to make that work.
That doesn't sound very good because who has private money to add? Rich people. Who would get tax breaks? Rich people. So, on the very small face of it, I don't like it.
If my choice is between the House Republicans plan to use private money, and the negotiated Democratic plan, I'd have to choose the Democratic plan.
If my choice is for additional discussion to find a new plan (insurance and loans instead of purchasing the securities) or the negotiated Democratic plan, I'd have to choose more discussion.
I haven't been reading too much today - mostly I'm getting my information from a combo of CNN and FOXNews.
Its harder to work and read the news than it is to work and listen to the TV news. And, I gotta work - or I'll lose my job and be part of the people who have to get bailed out!!!
What's going on now??? This is crazy
I'm confused.
I had understood the Republicans, Democrats, and the Administration had made progress in coming up with a plan. It was practically agreed to.
Then, they had the White House meeting.
CNN (The Situation Room) is reporting there was a lot of contentiousness in the meeting and there are Republicans who are not on board. Apparently Boehner (sp?) is now saying there is no deal. They say they've always had issues. But, others are saying it looks like they had a deal until McCain charged in trying to grandstand - suddenly, nobody's on board.
The New York Times, on the other hand, is reporting that all is well and there are no major obstacles to an agreement.
The headline in the NYT is Lawmakers Agree on Outline of Bailout
http://www.nytimes.com/2008/09/26/business/26bush.html?bl&ex=1222488000&en=dc46b31fe4e3931d&ei=5087%0A
Huh?
What the heck is going on?
And what is the deal the Democrats and the Administration have agreed to? I don't even know if I agree with it anymore.
I guess no one cares if I agree anyway.
I had understood the Republicans, Democrats, and the Administration had made progress in coming up with a plan. It was practically agreed to.
Then, they had the White House meeting.
CNN (The Situation Room) is reporting there was a lot of contentiousness in the meeting and there are Republicans who are not on board. Apparently Boehner (sp?) is now saying there is no deal. They say they've always had issues. But, others are saying it looks like they had a deal until McCain charged in trying to grandstand - suddenly, nobody's on board.
The New York Times, on the other hand, is reporting that all is well and there are no major obstacles to an agreement.
The headline in the NYT is Lawmakers Agree on Outline of Bailout
http://www.nytimes.com/2008/09/26/business/26bush.html?bl&ex=1222488000&en=dc46b31fe4e3931d&ei=5087%0A
Huh?
What the heck is going on?
And what is the deal the Democrats and the Administration have agreed to? I don't even know if I agree with it anymore.
I guess no one cares if I agree anyway.
More sadness and repetitive moaning from me
I'm sad about this...
The more I hear, the more I think we shouldn't do the "bailout".
Okay - I think my problem is that I'm listening to the television. When I read the blogs or read the newspaper, I don't feel quite so bad.
The CNN crowd (this Rick Sanchez guy is goofy in my opinion, I don't like his show) keeps talking about "the markets". Well, who ARE the markets? Yes, some is in pension funds and it seems the people who are nearing retirement have it the worst. But, for many people, they're not going to use the money in their pension funds for awhile and the crisis will pass eventually.
There are other ways. Friend J told me earlier today that he'd heard about people suggesting we give INSURANCE to the banks. They keep their bad loans but we'll insure them so we can get confidence back in the market.
Don't just give them money.
That's the same way we got into this problem in the first place.
Sigh - I'm going over the same territory again and again and again.
What kind of a country do we live in? This is crazy.
The more I hear, the more I think we shouldn't do the "bailout".
Okay - I think my problem is that I'm listening to the television. When I read the blogs or read the newspaper, I don't feel quite so bad.
The CNN crowd (this Rick Sanchez guy is goofy in my opinion, I don't like his show) keeps talking about "the markets". Well, who ARE the markets? Yes, some is in pension funds and it seems the people who are nearing retirement have it the worst. But, for many people, they're not going to use the money in their pension funds for awhile and the crisis will pass eventually.
There are other ways. Friend J told me earlier today that he'd heard about people suggesting we give INSURANCE to the banks. They keep their bad loans but we'll insure them so we can get confidence back in the market.
Don't just give them money.
That's the same way we got into this problem in the first place.
Sigh - I'm going over the same territory again and again and again.
What kind of a country do we live in? This is crazy.
The flow of Information isn't making sense
Here's what I don't understand....
John McCain is supposed to persuade Republicans to go along with the bailout. It appears, according to the CNN/FOXNews crowd, that the Democrats are characterized as being for the Paulson plan.
So, McCain is persuading Republicans to side with Democrats who are siding with the President.
Right?
Huh?
First - the plan isn't even the Paulson plan anymore. Why is it still being called that? The plan that Paulson put forward last week has morphed to include a lot of the provisions Democrats and Republicans on the Senate Banking Committee requested (which is the hearing I watched).
Second - if most of the country is against the bailout and people are calling their Senators and Representatives to register protest about the bailout, why is it a fait accompli that the bailout is going to happen?
Or - is it only Republicans who are protesting the bailout? The people I know who are against it are Democrats. I thought across the board the regular people against the bailout are both Democrats and Republicans - the middle class.
I think there's more to this story than I'm being told. It doesn't make sense as it comes across on CNN/FOXNews.
I'm not surprised, mind you, I just want to know where I can go to find out what I need to know.
I wish there was a network that didn't have an agenda.
Even CNN is kinda ridiculous. Their anchors have an attitude that implies an opinion. Its tiresome.
I wish someone was sitting inside the meetings in Washington and blogging about it every quarter hour.
John McCain is supposed to persuade Republicans to go along with the bailout. It appears, according to the CNN/FOXNews crowd, that the Democrats are characterized as being for the Paulson plan.
So, McCain is persuading Republicans to side with Democrats who are siding with the President.
Right?
Huh?
First - the plan isn't even the Paulson plan anymore. Why is it still being called that? The plan that Paulson put forward last week has morphed to include a lot of the provisions Democrats and Republicans on the Senate Banking Committee requested (which is the hearing I watched).
Second - if most of the country is against the bailout and people are calling their Senators and Representatives to register protest about the bailout, why is it a fait accompli that the bailout is going to happen?
Or - is it only Republicans who are protesting the bailout? The people I know who are against it are Democrats. I thought across the board the regular people against the bailout are both Democrats and Republicans - the middle class.
I think there's more to this story than I'm being told. It doesn't make sense as it comes across on CNN/FOXNews.
I'm not surprised, mind you, I just want to know where I can go to find out what I need to know.
I wish there was a network that didn't have an agenda.
Even CNN is kinda ridiculous. Their anchors have an attitude that implies an opinion. Its tiresome.
I wish someone was sitting inside the meetings in Washington and blogging about it every quarter hour.
Do we need the bailout?
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092403033.html
From WashingtonPost.com on 09/25/2008 by James K Galbraith
Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.
Is this bailout still necessary?
The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."
With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.
Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.
With this solution, the systemic financial threat should go away. Does that mean the economy would quickly recover? No. Sadly, it does not. Two vast economic problems will confront the next president immediately. First, the underlying housing crisis: There are too many houses out there, too many vacant or unsold, too many homeowners underwater. Credit will not start to flow, as some suggest, simply because the crisis is contained. There have to be borrowers, and there has to be collateral. There won't be enough.
In Texas, recovery from the 1980s oil bust took seven years and the pull of strong national economic growth. The present slump is national, and it can't be cured that way. But it could be resolved in three years, rather than 10, by a new Home Owners Loan Corp., which would rewrite mortgages, manage rental conversions and decide when vacant, degraded properties should be demolished. Set it up like a draft board in each community, under federal guidelines, and get to work.
The second great crisis is in state and local government. Just Tuesday, New York Mayor Michael Bloomberg announced $1.5 billion in public spending cuts. The scenario is playing out everywhere: Schools, fire departments, police stations, parks, libraries and water projects are getting the ax, while essential maintenance gets deferred and important capital projects don't get built. This is pernicious when unemployment is rising and when we have all the real resources we need to preserve services and expand public investment. It's also unnecessary.
What to do? Reenact Richard Nixon's great idea: federal revenue sharing. States and localities should get the funds to plug their revenue gaps and maintain real public spending, per capita, for the next three to five years. Also, enact the National Infrastructure Bank, making bond revenue available in a revolving fund for capital improvements. There is work to do. There are people to do it. Bring them together. What could be easier or more sensible?
Here's another problem: the wealth loss to near-retirees and the elderly from a declining stock market as things shake out. How about taking care of this, with rough justice, through a supplement to Social Security? If you need a revenue source, impose a turnover tax on stocks.
Next, let's think about what the next upswing should try to achieve and how it should be powered. If the 1960s were about raising baby boomers and the '90s about technology, what should the '10s and '20s be about? It's obvious: energy and climate change. That's where the present great unmet needs are.
So, let's use the next few years to plan, mapping out a program of energy conservation, reconstruction and renewable power. Let's get the public sector and the universities working on it. And let's prepare the private sector so that when the credit crunch finally ends, we'll have the firms, the labs, the standards and the talent in place, ready to go.
Some will ask if we can afford it. To see the answer, don't look at budget projections. Just look at interest rates. Last week, in the panic, the federal government could fund itself, short term, for free. It could have raised money for 30 years and paid less than 4 percent. That's far less than it cost back in 2000.
No country in this situation is broke, or insolvent, or even in much trouble. For once, Wall Street's own markets speak the truth. The financially challenged customer isn't Uncle Sam. He's up on Wall Street, where deregulation, greed and fraud ran wild.
James K. Galbraith is the author of "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too."
From WashingtonPost.com on 09/25/2008 by James K Galbraith
Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.
Is this bailout still necessary?
The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."
With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.
Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.
With this solution, the systemic financial threat should go away. Does that mean the economy would quickly recover? No. Sadly, it does not. Two vast economic problems will confront the next president immediately. First, the underlying housing crisis: There are too many houses out there, too many vacant or unsold, too many homeowners underwater. Credit will not start to flow, as some suggest, simply because the crisis is contained. There have to be borrowers, and there has to be collateral. There won't be enough.
In Texas, recovery from the 1980s oil bust took seven years and the pull of strong national economic growth. The present slump is national, and it can't be cured that way. But it could be resolved in three years, rather than 10, by a new Home Owners Loan Corp., which would rewrite mortgages, manage rental conversions and decide when vacant, degraded properties should be demolished. Set it up like a draft board in each community, under federal guidelines, and get to work.
The second great crisis is in state and local government. Just Tuesday, New York Mayor Michael Bloomberg announced $1.5 billion in public spending cuts. The scenario is playing out everywhere: Schools, fire departments, police stations, parks, libraries and water projects are getting the ax, while essential maintenance gets deferred and important capital projects don't get built. This is pernicious when unemployment is rising and when we have all the real resources we need to preserve services and expand public investment. It's also unnecessary.
What to do? Reenact Richard Nixon's great idea: federal revenue sharing. States and localities should get the funds to plug their revenue gaps and maintain real public spending, per capita, for the next three to five years. Also, enact the National Infrastructure Bank, making bond revenue available in a revolving fund for capital improvements. There is work to do. There are people to do it. Bring them together. What could be easier or more sensible?
Here's another problem: the wealth loss to near-retirees and the elderly from a declining stock market as things shake out. How about taking care of this, with rough justice, through a supplement to Social Security? If you need a revenue source, impose a turnover tax on stocks.
Next, let's think about what the next upswing should try to achieve and how it should be powered. If the 1960s were about raising baby boomers and the '90s about technology, what should the '10s and '20s be about? It's obvious: energy and climate change. That's where the present great unmet needs are.
So, let's use the next few years to plan, mapping out a program of energy conservation, reconstruction and renewable power. Let's get the public sector and the universities working on it. And let's prepare the private sector so that when the credit crunch finally ends, we'll have the firms, the labs, the standards and the talent in place, ready to go.
Some will ask if we can afford it. To see the answer, don't look at budget projections. Just look at interest rates. Last week, in the panic, the federal government could fund itself, short term, for free. It could have raised money for 30 years and paid less than 4 percent. That's far less than it cost back in 2000.
No country in this situation is broke, or insolvent, or even in much trouble. For once, Wall Street's own markets speak the truth. The financially challenged customer isn't Uncle Sam. He's up on Wall Street, where deregulation, greed and fraud ran wild.
James K. Galbraith is the author of "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too."
McCain on the Ecnomic Crisis
From Huffington Post by Sam Stein on 09/24/2008
When John McCain held an unexpected news conference mid-Wednesday afternoon he addressed the current economic crisis with direness previously unseen. His campaign would be suspended, he told reporters, in order to work on the bailout legislation in Congress. The debate scheduled with Barack Obama on Friday night, he added, could be postponed.
Observers, critics, even fellow Republicans, were left wondering: where did this sense of urgency come from? After all, it was this past Sunday that McCain hinted on 60 Minutes that he would support the bailout -- "we have to stop the bleeding" -- only to express deep criticisms on Monday and then admit he hadn't even read the three-page proposal on Tuesday.
"I have not had a chance to see it in writing," said the Senator. "I have to examine it."
The move permeated with political opportunism: an attempt by McCain to grab the leadership mantle he did not own and divert attention from poll numbers that were plummeting. Indeed, on Wednesday morning a Washington Post-ABC poll had McCain trailing Obama 52 percent to 43 percent among likely voters. The internals were even worse: 54 percent of white voters with economic anxiety favored Obama.
So McCain changed the script, announcing his imminent departure from the campaign trail. And Democrats in Congress were left (somewhat angrily) scratching their heads.
"We're trying to rescue the economy, not the McCain campaign," said Rep. Barney Frank.
"I'm delighted that John is expressing himself on this issue," said Chris Dodd, chairman of the Senate Banking Committee. "I have heard form Obama numerous occasions these last couple days. I have never heard from John McCain on the issue... I'm just worried a little bit that sort of politicizing this problem, sort of flying in here, I'm beginning to think this is more of a rescue plan for John McCain and not a rescue plan for the economy."
McCain's mixed messaging on the bailout proposal was not just bizarre. It was emblematic of his actions the entire week. Indeed, the Senator has been all over the map when it comes to addressing the current situation. When the market crisis originally surfaced, McCain - now infamously - was the one to declare that the fundamentals of the economy were strong. Later he would call the situation the worst since World War II.
Even his actions on Wednesday seemed either oddly calculated or at conflict with the image he was trying to present. It was, in fact, Obama who first proposed to form a unity front in addressing the issue, calling McCain at 8:30 in the morning to discuss the issuance of a joint statement. The call went unreturned for six hours. McCain's campaign would later claim he was huddling with economic advisers. But during that time he made a scheduled stop with Lady Lynn de Rothschild, a high society New York Democrat who recently endorsed his campaign. Rothschild did not return repeated request for comment.
At 2:30 the two candidates finally connected and agreed on the idea of a co-authored declaration of principles. But by the time Obama got back to his hotel room, McCain had already declared his campaign's suspension. If the idea seemed impromptu, it surely wasn't. The website PolitickerCO posted talking points that aides to the Arizona Republican had sent to one another to help manage the candidate's newly stated position.
And then, after McCain told late night host David Letterman that he could not make his scheduled appearance on his show because of urgency of the situation, he still managed to swing by CBS Evening News with Katie Couric, much to Letterman's dismay. That interview, a spokesperson for the station told the Huffington Post, had been arranged shortly after McCain had temporary halted his campaign - a curious move for a candidate who was asking his opposition to drop everything and get back to Washington with him.
"Clearly there was news today," said a spokesperson for the station. "We asked for an interview and he said yes."
In fact, the Senator is still scheduled to appear at Bill Clinton's Global Initiative event in New York on Thursday, before heading to D.C.
In essence, at the same time McCain was warning of the danger of inaction, he himself was not moving with haste. And there is some question - bordering on concern - about the role he would actually play once back in Congress. As one Senate staffer told the Huffington Post: "McCain's little gambit really runs the risk of mucking up the works, maybe even delaying a deal. This is complex stuff, he's had zero involvement so far."
And yet, by the time McCain arrives on Capitol Hill the contours of a bailout proposal may already be in place. On Wednesday evening, President Bush hinted that he was ready to acquiesce on several principles of the proposed legislation - to the enthusiasm of Obama. In the House of Representatives, meanwhile, Rep. Barney Frank declared that Democrats had reached an agreement on a plan and had the votes to pass it.
McCain, for all the dramatics, could prove irrelevant.
"We are pleased to report we are making bipartisan progress on a rescue proposal for our financial markets," said Chris Dodd and Sen. Chuck Schumer in a joint statement. "During these discussions, we have received significant cooperation and constructive feedback from the other side of the aisle -- with one notable exception. Apart from his unproductive criticisms made from afar, we have heard nothing from Senator McCain on these critical issues. Now is certainly not the time for him to inject presidential politics into these delicate discussions."
When John McCain held an unexpected news conference mid-Wednesday afternoon he addressed the current economic crisis with direness previously unseen. His campaign would be suspended, he told reporters, in order to work on the bailout legislation in Congress. The debate scheduled with Barack Obama on Friday night, he added, could be postponed.
Observers, critics, even fellow Republicans, were left wondering: where did this sense of urgency come from? After all, it was this past Sunday that McCain hinted on 60 Minutes that he would support the bailout -- "we have to stop the bleeding" -- only to express deep criticisms on Monday and then admit he hadn't even read the three-page proposal on Tuesday.
"I have not had a chance to see it in writing," said the Senator. "I have to examine it."
The move permeated with political opportunism: an attempt by McCain to grab the leadership mantle he did not own and divert attention from poll numbers that were plummeting. Indeed, on Wednesday morning a Washington Post-ABC poll had McCain trailing Obama 52 percent to 43 percent among likely voters. The internals were even worse: 54 percent of white voters with economic anxiety favored Obama.
So McCain changed the script, announcing his imminent departure from the campaign trail. And Democrats in Congress were left (somewhat angrily) scratching their heads.
"We're trying to rescue the economy, not the McCain campaign," said Rep. Barney Frank.
"I'm delighted that John is expressing himself on this issue," said Chris Dodd, chairman of the Senate Banking Committee. "I have heard form Obama numerous occasions these last couple days. I have never heard from John McCain on the issue... I'm just worried a little bit that sort of politicizing this problem, sort of flying in here, I'm beginning to think this is more of a rescue plan for John McCain and not a rescue plan for the economy."
McCain's mixed messaging on the bailout proposal was not just bizarre. It was emblematic of his actions the entire week. Indeed, the Senator has been all over the map when it comes to addressing the current situation. When the market crisis originally surfaced, McCain - now infamously - was the one to declare that the fundamentals of the economy were strong. Later he would call the situation the worst since World War II.
Even his actions on Wednesday seemed either oddly calculated or at conflict with the image he was trying to present. It was, in fact, Obama who first proposed to form a unity front in addressing the issue, calling McCain at 8:30 in the morning to discuss the issuance of a joint statement. The call went unreturned for six hours. McCain's campaign would later claim he was huddling with economic advisers. But during that time he made a scheduled stop with Lady Lynn de Rothschild, a high society New York Democrat who recently endorsed his campaign. Rothschild did not return repeated request for comment.
At 2:30 the two candidates finally connected and agreed on the idea of a co-authored declaration of principles. But by the time Obama got back to his hotel room, McCain had already declared his campaign's suspension. If the idea seemed impromptu, it surely wasn't. The website PolitickerCO posted talking points that aides to the Arizona Republican had sent to one another to help manage the candidate's newly stated position.
And then, after McCain told late night host David Letterman that he could not make his scheduled appearance on his show because of urgency of the situation, he still managed to swing by CBS Evening News with Katie Couric, much to Letterman's dismay. That interview, a spokesperson for the station told the Huffington Post, had been arranged shortly after McCain had temporary halted his campaign - a curious move for a candidate who was asking his opposition to drop everything and get back to Washington with him.
"Clearly there was news today," said a spokesperson for the station. "We asked for an interview and he said yes."
In fact, the Senator is still scheduled to appear at Bill Clinton's Global Initiative event in New York on Thursday, before heading to D.C.
In essence, at the same time McCain was warning of the danger of inaction, he himself was not moving with haste. And there is some question - bordering on concern - about the role he would actually play once back in Congress. As one Senate staffer told the Huffington Post: "McCain's little gambit really runs the risk of mucking up the works, maybe even delaying a deal. This is complex stuff, he's had zero involvement so far."
And yet, by the time McCain arrives on Capitol Hill the contours of a bailout proposal may already be in place. On Wednesday evening, President Bush hinted that he was ready to acquiesce on several principles of the proposed legislation - to the enthusiasm of Obama. In the House of Representatives, meanwhile, Rep. Barney Frank declared that Democrats had reached an agreement on a plan and had the votes to pass it.
McCain, for all the dramatics, could prove irrelevant.
"We are pleased to report we are making bipartisan progress on a rescue proposal for our financial markets," said Chris Dodd and Sen. Chuck Schumer in a joint statement. "During these discussions, we have received significant cooperation and constructive feedback from the other side of the aisle -- with one notable exception. Apart from his unproductive criticisms made from afar, we have heard nothing from Senator McCain on these critical issues. Now is certainly not the time for him to inject presidential politics into these delicate discussions."
Disgust and Disappointment
Somehow, according to the main stream media, this has now moved to Republican and Democratic proposals.
I don't understand when this happened. Christopher Dodd and Richard Shelby seemed to be on the same page.
John McCain is sneaky and dastardly. He called Bush and told him to have the meeting so FOXNews could talk about Obama not caring about the crisis and McCain is showing leadership - which they did.
John McCain is politicizing this sure as I'm typing this.
I'm so disgusted and frustrated.
And I'm sort of disgusted that the Congress and Administration are hell bent on doing a bailout.
Maybe we should move from a credit economy to a cash economy. This might be the time.
Remember after 9/11 when we were supposed to continue shopping so the economy could continue moving?
Remember when we went to Iraq and only the people (and their families) who volunteered for the National Guard or Army, Navy, Air Force, Marines had to pay the price?
Now we have an economic crisis and there's nothing Bush (et al) wants more than for the current economic system to continue. Conservative people don't like anything to change. They don't want to stop using oil and they don't want to stop using using credit to run the economy.
They believe our current system is the only system and we have to do everything we can to stop it from changing - no progress.
And, the sad part is - the one thing everyone seems to agree on is that we need to do something to fix this bailout. The idea of NOT doing something is too scary for them.
They don't want the American poeple to be, in the least bit uncomfortable by the vicissitudes of life.
That's why I'm disappointed and disgusted.
Once again, Conservatives don't want the American people to be uncomfortable because that means Conservatives will get blamed and won't be able to stay in power.
The thing that got us into this mess is the very thing that they're using to get us out. Credit.
Using credit, people were able to get what they wanted now instead of later. They abused it.
Now, the bailout uses credit, we'll mollify the financial markets now and worry about paying for it later.
We're getting the money for the bailout from a loan? from printing more money?
It seems to me that the people in the country who don't know how to delay gratification are the people who got us into this mess. They're also the ones who thought of the bailout.
First, I'm still not convinced doing nothing will devastate the ENTIRE country.
Second, I think the solution is about instant gratification (and mollification of the masses?).
Why don't we just tough it out? I'm willing to try. At least give us the opportunity to try.
I do think the poor and lower middle classes are the most vulnerable to toughing it out. But, we could give them some safeguards.
I don't understand when this happened. Christopher Dodd and Richard Shelby seemed to be on the same page.
John McCain is sneaky and dastardly. He called Bush and told him to have the meeting so FOXNews could talk about Obama not caring about the crisis and McCain is showing leadership - which they did.
John McCain is politicizing this sure as I'm typing this.
I'm so disgusted and frustrated.
And I'm sort of disgusted that the Congress and Administration are hell bent on doing a bailout.
Maybe we should move from a credit economy to a cash economy. This might be the time.
Remember after 9/11 when we were supposed to continue shopping so the economy could continue moving?
Remember when we went to Iraq and only the people (and their families) who volunteered for the National Guard or Army, Navy, Air Force, Marines had to pay the price?
Now we have an economic crisis and there's nothing Bush (et al) wants more than for the current economic system to continue. Conservative people don't like anything to change. They don't want to stop using oil and they don't want to stop using using credit to run the economy.
They believe our current system is the only system and we have to do everything we can to stop it from changing - no progress.
And, the sad part is - the one thing everyone seems to agree on is that we need to do something to fix this bailout. The idea of NOT doing something is too scary for them.
They don't want the American poeple to be, in the least bit uncomfortable by the vicissitudes of life.
That's why I'm disappointed and disgusted.
Once again, Conservatives don't want the American people to be uncomfortable because that means Conservatives will get blamed and won't be able to stay in power.
The thing that got us into this mess is the very thing that they're using to get us out. Credit.
Using credit, people were able to get what they wanted now instead of later. They abused it.
Now, the bailout uses credit, we'll mollify the financial markets now and worry about paying for it later.
We're getting the money for the bailout from a loan? from printing more money?
It seems to me that the people in the country who don't know how to delay gratification are the people who got us into this mess. They're also the ones who thought of the bailout.
First, I'm still not convinced doing nothing will devastate the ENTIRE country.
Second, I think the solution is about instant gratification (and mollification of the masses?).
Why don't we just tough it out? I'm willing to try. At least give us the opportunity to try.
I do think the poor and lower middle classes are the most vulnerable to toughing it out. But, we could give them some safeguards.
Wednesday, September 24, 2008
Update on Barack Obama and John McCain
So, about 6:30 pm George Bush called Barack Obama to Washington for a meeting with John McCain and congressional leaders to discuss the bailout.
Which of course, makes John McCain look like he's the right one because he gets Obama right where he wants him - not campaigning.
But, really, its George Bush helping John McCain politicize the crisis.
I'm sad. If I were in Barack Obama's position, I'd say "Oh Fine - you can be President, I'm going to live on a tropical island"
*****
I did learn (from FOXNews) that 700 billion is 5% of the outstanding loans in the country.
Which of course, makes John McCain look like he's the right one because he gets Obama right where he wants him - not campaigning.
But, really, its George Bush helping John McCain politicize the crisis.
I'm sad. If I were in Barack Obama's position, I'd say "Oh Fine - you can be President, I'm going to live on a tropical island"
*****
I did learn (from FOXNews) that 700 billion is 5% of the outstanding loans in the country.
George Bush speaks...
Before the president speaks...
It's not clear to me what the 'sides' are that the Democrats and Republicans are on. I mean, yesterday it seemed they were all trying to get some information and negotiate some things. They were doing it together. Now it sounds like they have separate plans or something. I think the media is twisting the story to make it easier for them to report and understand - us vs them.
And its not clear to my why the pundits think John McCain has to make some kind of choice. He is supposedly either going with the President and against some of the Republicans. Or, he will go with the Republicans that do not support the bailout and go against the President.
But, I thought the President's plan was already changed and morphing before our very eyes - that's what the negotiation was for. So, of course, no one will go with the President's plan. That makes no sense. Paulson has already agreed to modify his original plan so it includes oversight and a limit on executive compensation. I think the media is a step behind. Or am I?
Bush speaks...he looks scared and like a robot kind of.
Lots of bad things are happening in the economy.
Banks have restricted lending so people can't get loans (auto, home, car, credit card, inventory, tuition, etc.)
Because banks are holding assets and restricting credit - our entire economy is at risk.
With the bailout, banks can avoid collapse and resume lending which preserves the overall economy. People can get credit for their daily needs.
1. How did our economy reach this point?
for more than a decade a lot of money flowed into this country from abroad.
Large influx of money, and low interest rates, made it easy to get credit.
People borrowed for cars, new businesses, college tuitions, etc
In the housing market - easy credit and the assumption that home values will always rise led to bad loans.
There was a boom in home construction.
Number of houses increase
Now, demand is less than supply
Home values drop just when adjustable rate mortgages start adjusting.
many mortgage holders began to default
In the meantime...
Home loans are packaged togther and converted to mortgage backed securities and sold around the world.
Investors didn't ask questions.
Fannie Me and Freddie Mac bought a lot of them
Decline in housing market set off domino effect
value of homes decline
homeowners default on loans
Mortgage backed securities lose their market. Value is zero when no one wants to buy them.
Investment banks have large numbers of assets they couldn't sell.
They can't pay their bills.
Banks started holding on to their money
*****
If we don't fix the problem people will lose their jobs, banks might fail, America could panic, it will be harder to get credit.
We must not let this happen.
McCain and Obama and Congressional Leaders will discuss this tomorrow in Washington.
How would a rescue plan work?
remove risk posed by troubled assets including mortgage backed securities
free banks to resume flow of credit to families and businesses
taxpayers are protected
welcome participation by all institutions.
failed executives do not receive a windfall
a board oversees implementation
it should happen quickly
The government will buy the securities for a small amount of money and have the patience to hold the securities until their value goes up and sell them back for a higher price - or hold until maturity.
*****
My thoughts - he didn't look comfortable or happy. Kind of sad.
He didn't talk about the free-wheeling "greed is good" attitude of the investment bankers.
He ignored the fact that the banks created new securities to continue the party going long after it was over. He didn't mention deregulation as an issue.
I like my trickle up theory better.
But, I suppose its going to end up that the bill will pass. Everyone's getting the full court press.
America wants everyone to slow down and wait a little bit, but the congress people are already on automatic about 'we need to do something'.
Maybe we need to begin to FEEL the effects of doing nothing before we do something.
At this point, that's about the only thing that might convince me we should do this.
Maybe they should put this plan into place but not take the money and see what happens for a couple weeks. Yes, we'll lose money, but it sounds like most of America is willing to try and wait it out.
Ah - who am I kidding, people will panic. As a country, we don't know how to be calm. Somebody will think they're not going to get theirs so they'll go to the bank and take their money out and the rest of the people will panic and there really will be a run on the banks.
And, truthfully, the minute even one person lost their job they'd blame the congress for not putting the plan into action immediately.
It's not clear to me what the 'sides' are that the Democrats and Republicans are on. I mean, yesterday it seemed they were all trying to get some information and negotiate some things. They were doing it together. Now it sounds like they have separate plans or something. I think the media is twisting the story to make it easier for them to report and understand - us vs them.
And its not clear to my why the pundits think John McCain has to make some kind of choice. He is supposedly either going with the President and against some of the Republicans. Or, he will go with the Republicans that do not support the bailout and go against the President.
But, I thought the President's plan was already changed and morphing before our very eyes - that's what the negotiation was for. So, of course, no one will go with the President's plan. That makes no sense. Paulson has already agreed to modify his original plan so it includes oversight and a limit on executive compensation. I think the media is a step behind. Or am I?
Bush speaks...he looks scared and like a robot kind of.
Lots of bad things are happening in the economy.
Banks have restricted lending so people can't get loans (auto, home, car, credit card, inventory, tuition, etc.)
Because banks are holding assets and restricting credit - our entire economy is at risk.
With the bailout, banks can avoid collapse and resume lending which preserves the overall economy. People can get credit for their daily needs.
1. How did our economy reach this point?
for more than a decade a lot of money flowed into this country from abroad.
Large influx of money, and low interest rates, made it easy to get credit.
People borrowed for cars, new businesses, college tuitions, etc
In the housing market - easy credit and the assumption that home values will always rise led to bad loans.
There was a boom in home construction.
Number of houses increase
Now, demand is less than supply
Home values drop just when adjustable rate mortgages start adjusting.
many mortgage holders began to default
In the meantime...
Home loans are packaged togther and converted to mortgage backed securities and sold around the world.
Investors didn't ask questions.
Fannie Me and Freddie Mac bought a lot of them
Decline in housing market set off domino effect
value of homes decline
homeowners default on loans
Mortgage backed securities lose their market. Value is zero when no one wants to buy them.
Investment banks have large numbers of assets they couldn't sell.
They can't pay their bills.
Banks started holding on to their money
*****
If we don't fix the problem people will lose their jobs, banks might fail, America could panic, it will be harder to get credit.
We must not let this happen.
McCain and Obama and Congressional Leaders will discuss this tomorrow in Washington.
How would a rescue plan work?
remove risk posed by troubled assets including mortgage backed securities
free banks to resume flow of credit to families and businesses
taxpayers are protected
welcome participation by all institutions.
failed executives do not receive a windfall
a board oversees implementation
it should happen quickly
The government will buy the securities for a small amount of money and have the patience to hold the securities until their value goes up and sell them back for a higher price - or hold until maturity.
*****
My thoughts - he didn't look comfortable or happy. Kind of sad.
He didn't talk about the free-wheeling "greed is good" attitude of the investment bankers.
He ignored the fact that the banks created new securities to continue the party going long after it was over. He didn't mention deregulation as an issue.
I like my trickle up theory better.
But, I suppose its going to end up that the bill will pass. Everyone's getting the full court press.
America wants everyone to slow down and wait a little bit, but the congress people are already on automatic about 'we need to do something'.
Maybe we need to begin to FEEL the effects of doing nothing before we do something.
At this point, that's about the only thing that might convince me we should do this.
Maybe they should put this plan into place but not take the money and see what happens for a couple weeks. Yes, we'll lose money, but it sounds like most of America is willing to try and wait it out.
Ah - who am I kidding, people will panic. As a country, we don't know how to be calm. Somebody will think they're not going to get theirs so they'll go to the bank and take their money out and the rest of the people will panic and there really will be a run on the banks.
And, truthfully, the minute even one person lost their job they'd blame the congress for not putting the plan into action immediately.
Barack Obama responds to McCain
My first impression of Barack Obama's statement in response to John McCain is that this man will make a great President.
I wish he'd pick up on Schumer's idea more (if not mine, of course), but he's said that
1) he thinks its important to have the debate - its more important now than ever.
2) he did what he said in his conversation with McCain - staffs are preparing a joint statement.
3) he speaks daily to congressional leaders and Hank Paulson (twice today) so he's been involved in the negotiations even if it was from far away. He's told the people that his four points must be a part of the legislation and that he'll do anything they want him to do and if they want him to be there he'll be anywhere, anytime.
The chronology is
earlier - Republican Senator Tom Coburn (Oklahoma) suggested the joint statement about bipartisanship to Obama. He thought it was a good idea.
8:30 Obama called McCain
2:30 McCain called Obama back.
Obama suggested they put out a joint statement. McCain agreed. Then he also said they should suspend the campaign and postpone the debate. Obama said they should do the joint statement before they make any decisions about that.
Next thing we know - he's on television suspending his campaign and cancelling the debate.
Obama is great.
I wish he'd pick up on Schumer's idea more (if not mine, of course), but he's said that
1) he thinks its important to have the debate - its more important now than ever.
2) he did what he said in his conversation with McCain - staffs are preparing a joint statement.
3) he speaks daily to congressional leaders and Hank Paulson (twice today) so he's been involved in the negotiations even if it was from far away. He's told the people that his four points must be a part of the legislation and that he'll do anything they want him to do and if they want him to be there he'll be anywhere, anytime.
The chronology is
earlier - Republican Senator Tom Coburn (Oklahoma) suggested the joint statement about bipartisanship to Obama. He thought it was a good idea.
8:30 Obama called McCain
2:30 McCain called Obama back.
Obama suggested they put out a joint statement. McCain agreed. Then he also said they should suspend the campaign and postpone the debate. Obama said they should do the joint statement before they make any decisions about that.
Next thing we know - he's on television suspending his campaign and cancelling the debate.
Obama is great.
Convince us ...
I've spoken with some people I encounter during the day (okay - two people) and there's consensus that we don't want to bail out the Wall Street people. They took a risk and they lost. Let them fail.
I think we agree that although we'd expect tough times, the economy won't fall apart. The market will take care of things. There are still people with money; not everyone is leveraged to the hilt. Eventually the money will surface and deals will be made. The economy will rebuild itself.
I'm still nervous about saying that in case we end up with Hoovervilles (which we'll call Bushvilles) have to be setup around the country.
The key is that we aren't yet convinced. Please give us the information we need to be convinced if you can.
I think we agree that although we'd expect tough times, the economy won't fall apart. The market will take care of things. There are still people with money; not everyone is leveraged to the hilt. Eventually the money will surface and deals will be made. The economy will rebuild itself.
I'm still nervous about saying that in case we end up with Hoovervilles (which we'll call Bushvilles) have to be setup around the country.
The key is that we aren't yet convinced. Please give us the information we need to be convinced if you can.
Cancel the debate? Suspend the campaign?
Crazy, crazy election this year!
I think John McCain's idea to suspend his campaign, cancel the Friday debate, and fly to Washington to help with the bailout plan sounds suspiciously like George Bush skipping the Republican Convention so he can stay in Washington in case he's needed for Hurricane Ike response.
A lot of showboating. Ridiculuous.
Some of the people in Washington think having the candidates there would muddy the waters and bring too much politics to the search for a solution. I don't think Obama will do that, but I do think the mainstream media would.
http://www.huffingtonpost.com/2008/09/24/mccain-wants-a-time-out_n_128991.html
I think John McCain's idea to suspend his campaign, cancel the Friday debate, and fly to Washington to help with the bailout plan sounds suspiciously like George Bush skipping the Republican Convention so he can stay in Washington in case he's needed for Hurricane Ike response.
A lot of showboating. Ridiculuous.
Some of the people in Washington think having the candidates there would muddy the waters and bring too much politics to the search for a solution. I don't think Obama will do that, but I do think the mainstream media would.
http://www.huffingtonpost.com/2008/09/24/mccain-wants-a-time-out_n_128991.html
My plan for solving the economic crisis.
First, I know that the economic crisis we're in has many aspects. Often guests on C-SPAN or Bloomberg or CNN or The NewsHour or FoxNews or blog writers or economists are talking about just one aspect of the large problem. Understandably to some degree. The problem has so many interlocking parts its hard to talk about it with clarity. Most of us are getting a crash course in economic fundamentals so we can figure out what's going on. Unfortunately, the instruments the financial whiz kids have created are beyond standard economics and way beyond responsible financial planning.
So, while I understand there's a high probability that I'm forgetting something or missing some aspect of the crisis...I'm starting to think the government should get out of this bailout talk.
Buffet is buying some part of Goldman Sachs. The stocks are rising a little bit. We LOANED money to AIG, parts of the bankrupt companies are being bought by foreign banks.
I wonder if someone is panicking. The free market that the Republicans trust so much just might work if they weren't so afraid the rich people would lose money. The rich people's private money in the form of stock assets. But, you know what - that's the reality of gambling in the stock market.
Here's what I suggest:
1. Every bank should figure out how many of the people who have bad loans might be able to refinance. How many have the bad loans in primary residences vs second homes.
Some of the homeowners and banks might decide that even with special considerations given (extending the loan term or waiving refinance fees) a person still can't afford to live in the house they purchased. In that case, the government should buy the mortgage.
Otherwise, the banks should modify the loans so everyone gets to stay there.
2. The banks will have some loss in value because the loan they gave might be on a house that has lowered in value. Once they have a clear handle on what kind of loans they've made, the government can come in and LOAN them the capital they need to comfortably wait out the home price problems. That means they'd be back in shape for loaning additional monies with a more responsible attitude.
3. The banks and investment companies and people who traded mortgage backed securities and credit default swaps and all that, will just have to sit tight and wait for the market to go back up. Eventually, the benefit of the rewritten mortgages will 'trickle back up' to them and they can pay off those crazy debts.
The main point of Paulson's plan was to shore up investor confidence and get the credit economy moving again. I think this plan does that by 1) showing the government is willing to step in and lend money, or buy really rotten mortgages and 2) stabilizes the rest of the mortgage loans so they're value is based on fundamentals again, which will leave the banks open to lend money again.
This plan will cost the government much less money (only paying for really bad loans and maybe the cost of refinancing loans). The rest of the outlay is in loans that we'd receive back at some time.
Also, the 'fat cats' who got us into this mess are the ones who are last in line. Normally they get all the money and we have to wait for the 'trickle down' effect. This plan puts them last in line and they have to wait for the 'trickle up' effect. We don't have to punish them - their punishment is that they're last in line. That's fair.
That's my idea (which I'm going to send to my Senators and Representative [I also sent it to Chuck Schumer 'cause I liked his idea yesterday that we pay the 700 billion in increments which made me challenge my assumptions, and Richard Shelby because he seemed skeptical of the bailout. I tried to include Barney Frank and Christopher Dodd, but their contact forms don't allow anyone outside their state to send them an e-mail).
So, while I understand there's a high probability that I'm forgetting something or missing some aspect of the crisis...I'm starting to think the government should get out of this bailout talk.
Buffet is buying some part of Goldman Sachs. The stocks are rising a little bit. We LOANED money to AIG, parts of the bankrupt companies are being bought by foreign banks.
I wonder if someone is panicking. The free market that the Republicans trust so much just might work if they weren't so afraid the rich people would lose money. The rich people's private money in the form of stock assets. But, you know what - that's the reality of gambling in the stock market.
Here's what I suggest:
1. Every bank should figure out how many of the people who have bad loans might be able to refinance. How many have the bad loans in primary residences vs second homes.
Some of the homeowners and banks might decide that even with special considerations given (extending the loan term or waiving refinance fees) a person still can't afford to live in the house they purchased. In that case, the government should buy the mortgage.
Otherwise, the banks should modify the loans so everyone gets to stay there.
2. The banks will have some loss in value because the loan they gave might be on a house that has lowered in value. Once they have a clear handle on what kind of loans they've made, the government can come in and LOAN them the capital they need to comfortably wait out the home price problems. That means they'd be back in shape for loaning additional monies with a more responsible attitude.
3. The banks and investment companies and people who traded mortgage backed securities and credit default swaps and all that, will just have to sit tight and wait for the market to go back up. Eventually, the benefit of the rewritten mortgages will 'trickle back up' to them and they can pay off those crazy debts.
The main point of Paulson's plan was to shore up investor confidence and get the credit economy moving again. I think this plan does that by 1) showing the government is willing to step in and lend money, or buy really rotten mortgages and 2) stabilizes the rest of the mortgage loans so they're value is based on fundamentals again, which will leave the banks open to lend money again.
This plan will cost the government much less money (only paying for really bad loans and maybe the cost of refinancing loans). The rest of the outlay is in loans that we'd receive back at some time.
Also, the 'fat cats' who got us into this mess are the ones who are last in line. Normally they get all the money and we have to wait for the 'trickle down' effect. This plan puts them last in line and they have to wait for the 'trickle up' effect. We don't have to punish them - their punishment is that they're last in line. That's fair.
That's my idea (which I'm going to send to my Senators and Representative [I also sent it to Chuck Schumer 'cause I liked his idea yesterday that we pay the 700 billion in increments which made me challenge my assumptions, and Richard Shelby because he seemed skeptical of the bailout. I tried to include Barney Frank and Christopher Dodd, but their contact forms don't allow anyone outside their state to send them an e-mail).
Tuesday, September 23, 2008
Understanding the Financial Crisis - XI
WASHINGTON, Sept 23 (Reuters) - Following is Federal Reserve Chairman Ben Bernanke's testimony as prepared for delivery to the Senate Banking Committee on Tuesday and obtained by Reuters.
Chairman Dodd, Senator Shelby, and members of the Committee, I appreciate this opportunity to discuss recent developments in financial markets and the economy. As you know, the U.S. economy continues to confront substantial challenges, including a weakening labor market and elevated inflation. Notably, stresses in financial markets have been high and have recently intensified significantly. If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse.
The downturn in the housing market has been a key factor underlying both the strained condition of financial markets and the slowdown of the broader economy. In the financial sphere, falling home prices and rising mortgage delinquencies have led to major losses at many financial institutions, losses only partially replaced by the raising of new capital. Investor concerns about financial institutions increased over the summer, as mortgage-related assets deteriorated further and economic activity weakened. Among the firms under the greatest pressure were Fannie Mae and Freddie Mac, Lehman Brothers, and, more recently, American International Group (AIG). As investors lost confidence in them, these companies saw their access to liquidity and capital markets increasingly impaired and their stock prices drop sharply.
The Federal Reserve believes that, whenever possible, such difficulties should be addressed through private-sector arrangements--for example, by raising new equity capital, by negotiations leading to a merger or acquisition, or by an orderly wind-down. Government assistance should be given with the greatest of reluctance and only when the stability of the financial system, and, consequently, the health of the broader economy, is at risk. In the cases of Fannie Mae and Freddie Mac, however, capital raises of sufficient size appeared infeasible and the size and government-sponsored status of the two companies precluded a merger with or acquisition by another company. To avoid unacceptably large dislocations in the financial sector, the housing market, and the economy as a whole, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship, and the Treasury used its authority, granted by the Congress in July, to make available financial support to the two firms.
The Federal Reserve, with which FHFA consulted on the conservatorship decision as specified in the July legislation, supported these steps as necessary and appropriate. We have seen benefits of this action in the form of lower mortgage rates, which should help the housing market.
The Federal Reserve and the Treasury attempted to identify private-sector approaches to avoid the imminent failures of AIG and Lehman Brothers, but none was forthcoming. In the case of AIG, the Federal Reserve, with the support of the Treasury, provided an emergency credit line to facilitate an orderly resolution. The Federal Reserve took this action because it judged that, in light of the prevailing market conditions and the size and composition of AIG's obligations, a disorderly failure of AIG would have severely threatened global financial stability and, consequently, the performance of the U.S. economy. To mitigate concerns that this action would exacerbate moral hazard and encourage inappropriate risk-taking in the future, the Federal Reserve ensured that the terms of the credit extended to AIG imposed significant costs and constraints on the firm's owners, managers, and creditors. The chief executive officer has been replaced. The collateral for the loan is the company itself, together with its subsidiaries. 1 (Insurance policyholders and holders of AIG investment products are, however, fully protected.) Interest will accrue on the outstanding balance of the loan at a rate of three-month Libor plus 850 basis points, implying a current interest rate over 11 percent. In addition, the U.S. government will receive equity participation rights corresponding to a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders, among other things. In the case of Lehman Brothers, a major investment bank, the Federal Reserve and the Treasury declined to commit public funds to support the institution. The failure of Lehman posed risks. But the troubles at Lehman had been well known for some time, and investors clearly recognized--as evidenced, for example, by the high cost of insuring Lehman's debt in the market for credit default swaps--that the failure of the firm was a significant possibility. Thus, we judged that investors and counterparties had had time to take precautionary measures.
While perhaps manageable in itself, Lehman's default was combined with the unexpectedly rapid collapse of AIG, which together contributed to the development last week of extraordinarily turbulent conditions in global financial markets. These conditions caused equity prices to fall sharply, the cost of short-term credit--where available--to spike upward, and liquidity to dry up in many markets. Losses at a large money market mutual fund sparked extensive withdrawals from a number of such funds. A marked increase in the demand for safe assets--a flight to quality--sent the yield on Treasury bills down to a few hundredths of a percent. By further reducing asset values and potentially restricting the flow of credit to households and businesses, these developments pose a direct threat to economic growth.
The Federal Reserve took a number of actions to increase liquidity and stabilize markets. Notably, to address dollar funding pressures worldwide, we announced a significant expansion of reciprocal currency arrangements with foreign central banks, including an approximate doubling of the existing swap lines with the European Central Bank and the Swiss National Bank and the authorization of new swap facilities with the Bank of Japan, the Bank of England, and the Bank of Canada. We will continue to work closely with colleagues at other central banks to address ongoing liquidity pressures. The Federal Reserve also announced initiatives to assist money market mutual funds facing heavy redemptions and to increase liquidity in short-term credit markets.
Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global financial markets remain under extraordinary stress. Action by the Congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy. In this regard, the Federal Reserve supports the Treasury's proposal to buy illiquid assets from financial institutions. Purchasing impaired assets will create liquidity and promote price discovery in the markets for these assets, while reducing investor uncertainty about the current value and prospects of financial institutions. More generally, removing these assets from institutions' balance sheets will help to restore confidence in our financial markets and enable banks and other institutions to raise capital and to expand credit to support economic growth.
At this juncture, in light of the fast-moving developments in financial markets, it is essential to deal with the crisis at hand. Certainly, the shortcomings and weaknesses of our financial markets and regulatory system must be addressed if we are to avoid a repetition of what has transpired in our financial markets over the past year. However, the development of a comprehensive proposal for reform would require careful and extensive analysis that would be difficult to compress into a short legislative timeframe now available. Looking forward, the Federal Reserve is committed to working closely with the Congress, the Administration, other federal regulators, and other stakeholders in developing a stronger, more resilient, and better regulated financial system.
(1) Specifically, the loan is collateralized by all of the assets of the company and its primary non-regulated subsidiaries. These assets include the equity of substantially all of AIG's regulated subsidiaries.
Chairman Dodd, Senator Shelby, and members of the Committee, I appreciate this opportunity to discuss recent developments in financial markets and the economy. As you know, the U.S. economy continues to confront substantial challenges, including a weakening labor market and elevated inflation. Notably, stresses in financial markets have been high and have recently intensified significantly. If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse.
The downturn in the housing market has been a key factor underlying both the strained condition of financial markets and the slowdown of the broader economy. In the financial sphere, falling home prices and rising mortgage delinquencies have led to major losses at many financial institutions, losses only partially replaced by the raising of new capital. Investor concerns about financial institutions increased over the summer, as mortgage-related assets deteriorated further and economic activity weakened. Among the firms under the greatest pressure were Fannie Mae and Freddie Mac, Lehman Brothers, and, more recently, American International Group (AIG). As investors lost confidence in them, these companies saw their access to liquidity and capital markets increasingly impaired and their stock prices drop sharply.
The Federal Reserve believes that, whenever possible, such difficulties should be addressed through private-sector arrangements--for example, by raising new equity capital, by negotiations leading to a merger or acquisition, or by an orderly wind-down. Government assistance should be given with the greatest of reluctance and only when the stability of the financial system, and, consequently, the health of the broader economy, is at risk. In the cases of Fannie Mae and Freddie Mac, however, capital raises of sufficient size appeared infeasible and the size and government-sponsored status of the two companies precluded a merger with or acquisition by another company. To avoid unacceptably large dislocations in the financial sector, the housing market, and the economy as a whole, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship, and the Treasury used its authority, granted by the Congress in July, to make available financial support to the two firms.
The Federal Reserve, with which FHFA consulted on the conservatorship decision as specified in the July legislation, supported these steps as necessary and appropriate. We have seen benefits of this action in the form of lower mortgage rates, which should help the housing market.
The Federal Reserve and the Treasury attempted to identify private-sector approaches to avoid the imminent failures of AIG and Lehman Brothers, but none was forthcoming. In the case of AIG, the Federal Reserve, with the support of the Treasury, provided an emergency credit line to facilitate an orderly resolution. The Federal Reserve took this action because it judged that, in light of the prevailing market conditions and the size and composition of AIG's obligations, a disorderly failure of AIG would have severely threatened global financial stability and, consequently, the performance of the U.S. economy. To mitigate concerns that this action would exacerbate moral hazard and encourage inappropriate risk-taking in the future, the Federal Reserve ensured that the terms of the credit extended to AIG imposed significant costs and constraints on the firm's owners, managers, and creditors. The chief executive officer has been replaced. The collateral for the loan is the company itself, together with its subsidiaries. 1 (Insurance policyholders and holders of AIG investment products are, however, fully protected.) Interest will accrue on the outstanding balance of the loan at a rate of three-month Libor plus 850 basis points, implying a current interest rate over 11 percent. In addition, the U.S. government will receive equity participation rights corresponding to a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders, among other things. In the case of Lehman Brothers, a major investment bank, the Federal Reserve and the Treasury declined to commit public funds to support the institution. The failure of Lehman posed risks. But the troubles at Lehman had been well known for some time, and investors clearly recognized--as evidenced, for example, by the high cost of insuring Lehman's debt in the market for credit default swaps--that the failure of the firm was a significant possibility. Thus, we judged that investors and counterparties had had time to take precautionary measures.
While perhaps manageable in itself, Lehman's default was combined with the unexpectedly rapid collapse of AIG, which together contributed to the development last week of extraordinarily turbulent conditions in global financial markets. These conditions caused equity prices to fall sharply, the cost of short-term credit--where available--to spike upward, and liquidity to dry up in many markets. Losses at a large money market mutual fund sparked extensive withdrawals from a number of such funds. A marked increase in the demand for safe assets--a flight to quality--sent the yield on Treasury bills down to a few hundredths of a percent. By further reducing asset values and potentially restricting the flow of credit to households and businesses, these developments pose a direct threat to economic growth.
The Federal Reserve took a number of actions to increase liquidity and stabilize markets. Notably, to address dollar funding pressures worldwide, we announced a significant expansion of reciprocal currency arrangements with foreign central banks, including an approximate doubling of the existing swap lines with the European Central Bank and the Swiss National Bank and the authorization of new swap facilities with the Bank of Japan, the Bank of England, and the Bank of Canada. We will continue to work closely with colleagues at other central banks to address ongoing liquidity pressures. The Federal Reserve also announced initiatives to assist money market mutual funds facing heavy redemptions and to increase liquidity in short-term credit markets.
Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global financial markets remain under extraordinary stress. Action by the Congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy. In this regard, the Federal Reserve supports the Treasury's proposal to buy illiquid assets from financial institutions. Purchasing impaired assets will create liquidity and promote price discovery in the markets for these assets, while reducing investor uncertainty about the current value and prospects of financial institutions. More generally, removing these assets from institutions' balance sheets will help to restore confidence in our financial markets and enable banks and other institutions to raise capital and to expand credit to support economic growth.
At this juncture, in light of the fast-moving developments in financial markets, it is essential to deal with the crisis at hand. Certainly, the shortcomings and weaknesses of our financial markets and regulatory system must be addressed if we are to avoid a repetition of what has transpired in our financial markets over the past year. However, the development of a comprehensive proposal for reform would require careful and extensive analysis that would be difficult to compress into a short legislative timeframe now available. Looking forward, the Federal Reserve is committed to working closely with the Congress, the Administration, other federal regulators, and other stakeholders in developing a stronger, more resilient, and better regulated financial system.
(1) Specifically, the loan is collateralized by all of the assets of the company and its primary non-regulated subsidiaries. These assets include the equity of substantially all of AIG's regulated subsidiaries.
Understanding the Financial Crisis - X
Here's a nice description of the economic crisis. Its seems fairly straight-forward, but a little simplistic. Maybe the truth is that it really is that simple and all the rest of the stuff I'm trying to figure out is just distracting me from the real answer. I don't know. But, this was an interesting piece and, at the least, sheds light on one of the facets of the crisis.
http://www.pbs.org/newshour/businessdesk/2008/09/with-all-of-the-trouble-on-wal.html
http://www.pbs.org/newshour/businessdesk/2008/09/with-all-of-the-trouble-on-wal.html
What I saw in the last 30 minutes.
Ugh - I just watched about 30 minutes of television and saw a girl throw up on a guy in a cab (Worst Week) and the same guy go to the bathroom in a pot of goose being prepared for a birthday dinner (Worst Week) and a dead man's bodily 'sewage' burst out of his chest (House).
I never would have thought I'd prefer to learn about credit default swaps than watch an evening of television entertainment. But, its come to that. Sigh.
I never would have thought I'd prefer to learn about credit default swaps than watch an evening of television entertainment. But, its come to that. Sigh.
Understanding the Financial Crisis - IX
Henry Paulson is part of an administration that has shown repeatedly it can't be trusted. He is also a former chairman of Goldman Sachs - which is switching from an investment bank to a commercial bank.
Henry Paulson wants to get a large sum of money so he can be flexible while dealing with assets of all types. Each of the asset types might require a different type of solution. Paulson hasn't worked through what the solutions for each asset would be, but he wants to make sure he has immediate access to money and the freedom to do anything.
I feel he hasn't earned my trust. I think his administration is untrustworthy, and I think he's part of the culture that created the problem in the investment banks.
When I watch him in the Senate Banking Committee meeting, I get the feeling he's doing what he thinks is right. And he's frustrated that people want to pin him down. I don't think he's necessarily far off from what could be true - but he hasn't convinced me yet.
Schumer brought up a good point...why do they need all the 700 billion right now, this week? He's not going to spend it in the next couple months. Why not give him 150 billion and wait until maybe January or February to review where we're at and decide if more money is needed.
The point of this effort is to bring confidence back to the markets and grease the wheels of the economy.
As far as greasing the wheels, you don't need but a little bit of money to grease the wheels and then the market will generate grease of its own.
And confidence? The fact that we're still here today means somebody has confidence in something. At the very least they should have confidence that people don't want to lose money and its not in anyone's interest for the financial market to fail. Isn't that enough? If the government and the financial markets would just sit tight for awhile and recognize the cycle of the housing market - the price of houses will go up again at some point - they would get their money back.
I wonder if the big problem isn't the 'bad' mortgages itself, but rather what those 'bad' mortgages do to the institution's financial statements - which is what shareholders use to decide if they want to buy a share of the company. Maybe they're not trying to save the United States economy, they're trying to save their own stock prices from their own mismanagement.
Hmmm...maybe that is so fundamental and elementary I look stupid for saying it. Of course the financial statements are important.
But, is the importance because it reflects on the economy of the United States, or because it reflects on the company's share price and profitability? I think the financial institutions and the people who have a vested interest in maintaining our financial system would like us to believe the economy of the United States is at risk. In reality, though, maybe its just the company that's at risk. And in a free market, a company that has failed should be allowed to fail. I'm not sure I believe that, because I realize innocent people suffer when a company fails.
The bottom line is that I don't trust the economic advisors, administration, et al who to look out for my best interest. Its happened too many times that people have said they're going to do this to 'help' the American people and then years later we find out they were gaming the system.
Who's confidence are we concerned about regaining? It doesn't seem to be my confidence they care about.
Henry Paulson wants to get a large sum of money so he can be flexible while dealing with assets of all types. Each of the asset types might require a different type of solution. Paulson hasn't worked through what the solutions for each asset would be, but he wants to make sure he has immediate access to money and the freedom to do anything.
I feel he hasn't earned my trust. I think his administration is untrustworthy, and I think he's part of the culture that created the problem in the investment banks.
When I watch him in the Senate Banking Committee meeting, I get the feeling he's doing what he thinks is right. And he's frustrated that people want to pin him down. I don't think he's necessarily far off from what could be true - but he hasn't convinced me yet.
Schumer brought up a good point...why do they need all the 700 billion right now, this week? He's not going to spend it in the next couple months. Why not give him 150 billion and wait until maybe January or February to review where we're at and decide if more money is needed.
The point of this effort is to bring confidence back to the markets and grease the wheels of the economy.
As far as greasing the wheels, you don't need but a little bit of money to grease the wheels and then the market will generate grease of its own.
And confidence? The fact that we're still here today means somebody has confidence in something. At the very least they should have confidence that people don't want to lose money and its not in anyone's interest for the financial market to fail. Isn't that enough? If the government and the financial markets would just sit tight for awhile and recognize the cycle of the housing market - the price of houses will go up again at some point - they would get their money back.
I wonder if the big problem isn't the 'bad' mortgages itself, but rather what those 'bad' mortgages do to the institution's financial statements - which is what shareholders use to decide if they want to buy a share of the company. Maybe they're not trying to save the United States economy, they're trying to save their own stock prices from their own mismanagement.
Hmmm...maybe that is so fundamental and elementary I look stupid for saying it. Of course the financial statements are important.
But, is the importance because it reflects on the economy of the United States, or because it reflects on the company's share price and profitability? I think the financial institutions and the people who have a vested interest in maintaining our financial system would like us to believe the economy of the United States is at risk. In reality, though, maybe its just the company that's at risk. And in a free market, a company that has failed should be allowed to fail. I'm not sure I believe that, because I realize innocent people suffer when a company fails.
The bottom line is that I don't trust the economic advisors, administration, et al who to look out for my best interest. Its happened too many times that people have said they're going to do this to 'help' the American people and then years later we find out they were gaming the system.
Who's confidence are we concerned about regaining? It doesn't seem to be my confidence they care about.
Notes on Economic Crisis
I need to look at the history of Fannie Mae and Freddie Mac because people (often, Republicans) are talking about it as the core of the problem.
AIG got an 85 billion dollar loan
There's something called a 'credit default swap market' that Elizabeth Dole spoke about. I don't know what that is but it might have something to do with insurance.
One Senator said the root cause of the problem started with foreclosures.
We can enhance ability to modify loans so they don't get foreclosed on.
One Senator asked what we're doing about lowering home values (which he assumes is the bottom line problem).
Me: if its just that the home values have gone down, isn't that part of the market? We shouldn't do anything about that it seems.
Me: I'm not entirely clear why we have to act now or act at all. I'm not suggesting we don't, only that it hasn't been explained to me in a way I understand.
*****
I'm taking these notes as I watch the Senate Banking Committee have a hearing with Bernanke, Paulson, Cox, and someone else.
Here are two suggestions for a more efficient hearing meeting:
1. Don't have introductory statements. What's the point? They can have statements at the end.
2. If they absolutely must have introductory statements, can't we just assume that, as a whole, the Senators thank the hearing participants. Each one of them doesn't have to say it.
*****
Paulson speaks...
quickly enacting a program to stabilize our financial systems
to avoid frozen credit markets, and further failures.
Started with bad lending practices on the part of banks and borrowers.
We've now had higher foreclosure rates and now the impact on financial institituions.
Finally, last week our crdit markets froze.
Even regular companies had trouble with their normal operations.
Eveyr business requires money flowing through every day - to maintain normal business operations, sustain jobs, and to grow.
Previously we've worked on a case by case basis - AIG, Freddie Mae, Fannie Mae, Lehman Brothers.
Exectuvie compensation - F/F, AIG, CEO's were replaced, government got warrants for 79.9 percetn of equity, compensation
Congressional Charters started many years ago - root of problem with FF
Confidence steps:
more is needed
Fundamentally and comprehensively get at the root cause
Root caus e is the downturn in the housing market.
...then the financial companies can raise more capital.
Asset relief program...
Include provisions that provide transparency
Paulson presented a simple three page legislative outline...but congress will work on the oversight with Treasury together.
Bernanke -
Why proposal would make a positive difference...
why aren't they working? mortgage related securities rae held by insti.
there are two prices...fire sale price - hold to maturity price
becuase the securities rae complexities there is no active market for these securities so the fire sale price is much less than the maturity price.
institutions must value closer to fire sale price for accounting purposes.
leads to big writedowns and reduction in capital
without a market to determine hold to maturity price -
Under th treasury program, auctions can give the market good infromation about market price.
If the
Banks will have a basis to value the asset and they do
liquidity will come back to markets
removal from balance sheets and will .....???
credit markets will start to unfreeze
taxpayers should own assets at close to maturity prices
Cannot impose punitive measures would reduce participation in the program.
Establish reasonable hold to maturity prices.
Cox - SEC
Emergency to ban shortselling
make it eaasier for issuers to buy their own shares on the market
.????...daily short positions.
Okay - I'm getting lost...now...
I'm going to have to get the transcripts...Bernanke's information was interesting and Cox was talking about specifics that I couldnt' keep up with.
AIG got an 85 billion dollar loan
There's something called a 'credit default swap market' that Elizabeth Dole spoke about. I don't know what that is but it might have something to do with insurance.
One Senator said the root cause of the problem started with foreclosures.
We can enhance ability to modify loans so they don't get foreclosed on.
One Senator asked what we're doing about lowering home values (which he assumes is the bottom line problem).
Me: if its just that the home values have gone down, isn't that part of the market? We shouldn't do anything about that it seems.
Me: I'm not entirely clear why we have to act now or act at all. I'm not suggesting we don't, only that it hasn't been explained to me in a way I understand.
*****
I'm taking these notes as I watch the Senate Banking Committee have a hearing with Bernanke, Paulson, Cox, and someone else.
Here are two suggestions for a more efficient hearing meeting:
1. Don't have introductory statements. What's the point? They can have statements at the end.
2. If they absolutely must have introductory statements, can't we just assume that, as a whole, the Senators thank the hearing participants. Each one of them doesn't have to say it.
*****
Paulson speaks...
quickly enacting a program to stabilize our financial systems
to avoid frozen credit markets, and further failures.
Started with bad lending practices on the part of banks and borrowers.
We've now had higher foreclosure rates and now the impact on financial institituions.
Finally, last week our crdit markets froze.
Even regular companies had trouble with their normal operations.
Eveyr business requires money flowing through every day - to maintain normal business operations, sustain jobs, and to grow.
Previously we've worked on a case by case basis - AIG, Freddie Mae, Fannie Mae, Lehman Brothers.
Exectuvie compensation - F/F, AIG, CEO's were replaced, government got warrants for 79.9 percetn of equity, compensation
Congressional Charters started many years ago - root of problem with FF
Confidence steps:
more is needed
Fundamentally and comprehensively get at the root cause
Root caus e is the downturn in the housing market.
...then the financial companies can raise more capital.
Asset relief program...
Include provisions that provide transparency
Paulson presented a simple three page legislative outline...but congress will work on the oversight with Treasury together.
Bernanke -
Why proposal would make a positive difference...
why aren't they working? mortgage related securities rae held by insti.
there are two prices...fire sale price - hold to maturity price
becuase the securities rae complexities there is no active market for these securities so the fire sale price is much less than the maturity price.
institutions must value closer to fire sale price for accounting purposes.
leads to big writedowns and reduction in capital
without a market to determine hold to maturity price -
Under th treasury program, auctions can give the market good infromation about market price.
If the
Banks will have a basis to value the asset and they do
liquidity will come back to markets
removal from balance sheets and will .....???
credit markets will start to unfreeze
taxpayers should own assets at close to maturity prices
Cannot impose punitive measures would reduce participation in the program.
Establish reasonable hold to maturity prices.
Cox - SEC
Emergency to ban shortselling
make it eaasier for issuers to buy their own shares on the market
.????...daily short positions.
Okay - I'm getting lost...now...
I'm going to have to get the transcripts...Bernanke's information was interesting and Cox was talking about specifics that I couldnt' keep up with.
Understanding the Financial Crisis - VIII
The Republican Senator from Utah (not Orrin Hatch) on the Banking Committee said...
Our economy runs on credit
Credit is made available based on confidence
Confidence is maintained and risk taken when 1) collateral is worth it, and 2) cash flow is sufficient.
Right now the confidence is shaken and that's what they're trying to figure out - how to get confidence back.
Our economy runs on credit
Credit is made available based on confidence
Confidence is maintained and risk taken when 1) collateral is worth it, and 2) cash flow is sufficient.
Right now the confidence is shaken and that's what they're trying to figure out - how to get confidence back.
Understanding the Financial Crisis - VII
It makes sense to me that if the 'bad' mortgages are the problem we should buy the bad mortgages directly. When a mortgagee is not able to pay the current loan, the loan will be redefined so the homeowner can continue purchasing their home.
It would only be available to mortgagees whose primary residence is the one that has the bad mortgage.
Now, I've heard people talk about that. But, why aren't they pursuing it?
I think it makes more sense to buy the bad ones and it probably won't cost as much. I would imagine most of the mortgages are on the small side, right? If a person having trouble paying their mortgage is trying to pay a million dollar mortgage, I do think those people should only get a partial bailout. Their mortgage is split and the government will take over a portion of it, but not all of it.
In this case, the investment banks will use the free market system to bail themselves out. The market will take care of them. They get a mulligan because they don't have to pursue the problems.
Here's the thing...I think its not exactly just the mortgages that are the problem. They seem to be most concerned about the investment bank that holds the mortgage backed security. And who was taking risks on that? Rich people. Did pension funds also buy mortgage backed securities? (which I assume would affect the regular folk of America)
And the problem with the mortgage backed securities is that they're big bundles. Little bad mortgages are combined with big safe mortgages.
And is the real problem commercial development loans rather than residential homes? I want to know that.
Am I bailing out commercial developers?
The Treasury Department wants to have unlimited power and don't have details because they're trying to get this done fast so the financial markets will be stabilized. But stabilized for what? The stock market goes down? They're down already.
I don't really understand why this requires such a fast turnaround time?
And why would the Bush Admin say they'll veto the bill if the congress adds things about congressional review or executive compensation caps?
It seems suspicious. Transparency and not rewarding the wrong doers seems like the easiest thing to agree on in this crisis.
And where is President Bush? I guess its not the worst thing that he's allowing the Treasury Secretary to take the lead, but he made such a big deal about being in Washington when the Hurricane hit even though he didn't need to be there except for show. Why would he not at least put the same show on for this crisis?
It would only be available to mortgagees whose primary residence is the one that has the bad mortgage.
Now, I've heard people talk about that. But, why aren't they pursuing it?
I think it makes more sense to buy the bad ones and it probably won't cost as much. I would imagine most of the mortgages are on the small side, right? If a person having trouble paying their mortgage is trying to pay a million dollar mortgage, I do think those people should only get a partial bailout. Their mortgage is split and the government will take over a portion of it, but not all of it.
In this case, the investment banks will use the free market system to bail themselves out. The market will take care of them. They get a mulligan because they don't have to pursue the problems.
Here's the thing...I think its not exactly just the mortgages that are the problem. They seem to be most concerned about the investment bank that holds the mortgage backed security. And who was taking risks on that? Rich people. Did pension funds also buy mortgage backed securities? (which I assume would affect the regular folk of America)
And the problem with the mortgage backed securities is that they're big bundles. Little bad mortgages are combined with big safe mortgages.
And is the real problem commercial development loans rather than residential homes? I want to know that.
Am I bailing out commercial developers?
The Treasury Department wants to have unlimited power and don't have details because they're trying to get this done fast so the financial markets will be stabilized. But stabilized for what? The stock market goes down? They're down already.
I don't really understand why this requires such a fast turnaround time?
And why would the Bush Admin say they'll veto the bill if the congress adds things about congressional review or executive compensation caps?
It seems suspicious. Transparency and not rewarding the wrong doers seems like the easiest thing to agree on in this crisis.
And where is President Bush? I guess its not the worst thing that he's allowing the Treasury Secretary to take the lead, but he made such a big deal about being in Washington when the Hurricane hit even though he didn't need to be there except for show. Why would he not at least put the same show on for this crisis?
Monday, September 22, 2008
John McCain is not a good choice for President
John McCain is an idiot. A complete idiot. If elected, he will continue the disastrous - DI SAS TROUS - policies of George Bush, the same policies that have led us to this place.
So, John McCain (on the Today show this morning) says that history shows us that it makes things worse if you raise taxes during an economic crisis. He will not raise taxes in his administrations. Meredith Vieira points out that we have two wars we're paying for and this big bailout and something's gotta give. No, he stays firm...taxes will not help the problem.
He also says Carly Fiorina (sp?) one of his advisors, former CEO of Hewlett Packard, is a good businesswoman. Meredith Vieira points out that she was fired from her job and received a 45 million dollar golden parachute while 20,000 of the employees were laid off. McCain says he doesn't know the details of her leaving, but he thinks she's a good businesswoman.
*****
Barack Obama is not going to raise taxes on the regular folk, but he will raise taxes on the people who make the most money, and he'll close corporate loopholes. That will at least raise some money to offset all the crap that's being left behind by the Bush Administration.
*****
I don't understand why anyone would vote for John McCain, I really don't. What is he offering? And what are you willing to sacrifice to get whatever it is he's offering?
*****
I don't understand how people can't see that deregulation and this unfettered free market system can't work as long as humans are involved. Even a small percentage of greedy, lazy, unscrupulous people can wreak havoc on the sytem.
Unfortunately, a government has to create laws to protect us from the least among us.
So, John McCain (on the Today show this morning) says that history shows us that it makes things worse if you raise taxes during an economic crisis. He will not raise taxes in his administrations. Meredith Vieira points out that we have two wars we're paying for and this big bailout and something's gotta give. No, he stays firm...taxes will not help the problem.
He also says Carly Fiorina (sp?) one of his advisors, former CEO of Hewlett Packard, is a good businesswoman. Meredith Vieira points out that she was fired from her job and received a 45 million dollar golden parachute while 20,000 of the employees were laid off. McCain says he doesn't know the details of her leaving, but he thinks she's a good businesswoman.
*****
Barack Obama is not going to raise taxes on the regular folk, but he will raise taxes on the people who make the most money, and he'll close corporate loopholes. That will at least raise some money to offset all the crap that's being left behind by the Bush Administration.
*****
I don't understand why anyone would vote for John McCain, I really don't. What is he offering? And what are you willing to sacrifice to get whatever it is he's offering?
*****
I don't understand how people can't see that deregulation and this unfettered free market system can't work as long as humans are involved. Even a small percentage of greedy, lazy, unscrupulous people can wreak havoc on the sytem.
Unfortunately, a government has to create laws to protect us from the least among us.
What's wrong with the Paulson Plan?
What's wrong with the Paulson Plan?
I actually saw a good review of questions to be raised about this plan on Bloomberg this morning. Unfortunately, I wasn't thinking fast enough to write it down and listen with 100 percent clarity. It was a quick little report on The Starting Bell by someone named Katherine and I think she was relaying comments from Bill Pool. I would like to see those issues again, but I can't find them.
Other articles to review:
http://www.huffingtonpost.com/jared-bernstein/watching-history-unfold_b_128116.html
I actually saw a good review of questions to be raised about this plan on Bloomberg this morning. Unfortunately, I wasn't thinking fast enough to write it down and listen with 100 percent clarity. It was a quick little report on The Starting Bell by someone named Katherine and I think she was relaying comments from Bill Pool. I would like to see those issues again, but I can't find them.
Other articles to review:
http://www.huffingtonpost.com/jared-bernstein/watching-history-unfold_b_128116.html
Understanding the Financial Crisis - Vi
http://www.treas.gov/press/releases/hp1150.htm
Key points of the Paulson Plan...
1. Goal - promote market stability, help protect American families, and help protect the American economy.
2. The root cause of our financial system's stresses are distressed assets. This plan addresses that problem by removing the distressed assets from the system.
3. With the distressed assets out of the system, money can flow to and from households and businesses to pay for home loans, school loans, and investments that create jobs.
As of Saturday afternoon the plan is:
1. Treasury will authorize 700 billion in treasury securities to finance the purchase of distressed assets.
2. The primary distressed assets to be purchased are: residential and commercial related mortgage backed assets, which may include mortgage backed securities and whole loans.
3. The Treasury Secreatary (in consultation with the Federal Reserve Chairman) has the authority to include other debts to purchase in order to stabilize financial markets.
4. The timing and scale of the purchases will be at the discretion of the Treasury Department and its agents.
5. The price of assets purchased will be established through market mechanisms where possible (such as reverse auctions). The purchase price of the asset will be used to determine if the purchases have reached the cap of 700 billion.
6. The Treasury has two years from enactment of this bill to make the purchases.
7. To qualify, assets must have been originated or issued on or before September 17, 2008.
8. The qualifying institutions must have significant operations in the US.
9. The Treasury Secretary (in consultation with the Federal Reserve Chairman) has the authority to expand the categories of qualifying institutions that will be eligible.
10. The assets will be managed by private asset managers at the direction of the Treasury.
11. Treasury may sell assets or hold until maturity.
12. Borrowing in support of this program will be subject to the debt limit, which will be increased by 700 billion (the US debt ceiling will be increased to 11.3 trillion dollars)
13. Daily Treasury Statement will include borrowing information
14. Treasury will report to Congress three months into the program and every six months after that.
Key points of the Paulson Plan...
1. Goal - promote market stability, help protect American families, and help protect the American economy.
2. The root cause of our financial system's stresses are distressed assets. This plan addresses that problem by removing the distressed assets from the system.
3. With the distressed assets out of the system, money can flow to and from households and businesses to pay for home loans, school loans, and investments that create jobs.
As of Saturday afternoon the plan is:
1. Treasury will authorize 700 billion in treasury securities to finance the purchase of distressed assets.
2. The primary distressed assets to be purchased are: residential and commercial related mortgage backed assets, which may include mortgage backed securities and whole loans.
3. The Treasury Secreatary (in consultation with the Federal Reserve Chairman) has the authority to include other debts to purchase in order to stabilize financial markets.
4. The timing and scale of the purchases will be at the discretion of the Treasury Department and its agents.
5. The price of assets purchased will be established through market mechanisms where possible (such as reverse auctions). The purchase price of the asset will be used to determine if the purchases have reached the cap of 700 billion.
6. The Treasury has two years from enactment of this bill to make the purchases.
7. To qualify, assets must have been originated or issued on or before September 17, 2008.
8. The qualifying institutions must have significant operations in the US.
9. The Treasury Secretary (in consultation with the Federal Reserve Chairman) has the authority to expand the categories of qualifying institutions that will be eligible.
10. The assets will be managed by private asset managers at the direction of the Treasury.
11. Treasury may sell assets or hold until maturity.
12. Borrowing in support of this program will be subject to the debt limit, which will be increased by 700 billion (the US debt ceiling will be increased to 11.3 trillion dollars)
13. Daily Treasury Statement will include borrowing information
14. Treasury will report to Congress three months into the program and every six months after that.
Understanding the Financial Crisis - V
Wow - I've been way, way, way too nice about this. I assumed that the level of damage to our economy was so imminent and so disastrous that Paulson and Bernanke and Bush would present a solution I could trust was going to be responsible. I'm not stupid, I'm trusting. I am amazed by the level of incompetence and selfishness.
The devil really is in the details. I was happy to figure I had a general understanding of the idea that the government was going to buy loans from ailing financial institutions. There were questions, but I understand the basic concept.
Now that people are getting a chance to think about this and their voices are out there, I'm realizing that the details make this bailout a joke. I'm disappointed in myself for being trusting. I should have known better. I really should have.
Especially when I consider that my initial reaction was to let them fail. Let the institutions fail and it might be bad here for awhile but we have to get out from under this system and its best to do it all at once. I thought I was being too harsh and I figured there are regular people suffering hardship from this that I don't know about and I'm not showing empathy. And, truthfully, how an insurance company and a mortgage company and an investment bank were all failing seemed a bit odd to me. I don't know what the flow and connection is. So, its not responsible for me to advocate the failure of our economic system if I don't understand all the details. There you are. From radical to trusting.
Bernie Sanders is an Independent Senator from Vermont, he says "If its too big to fail, its too big to exist." And we should consider breaking up some of the large multinational corporations as well.
Up to a few weeks ago the Bush Admin was saying the fundamentals of the economy are strong and now they say wer're on the verge of economic meltdown.
Why did we not have enough money to repair our infrastructure (Katrina) and we don't have enough money to fight poverty, but we do have enough money to bail out the fat cats? Ridiculous. Outrageous.
There's a big push by the Bush Administration for congress to get this done really fast. Sounds similar to the big push by the Bush Administration before going into Iraq and before the Patriot Act and before the war powers act. It really is a disaster, but we don't have to be bullied into action. Congress better not be bullied.
Facts to know...
The Glass-Steagall (sp?) act in 1999 is the legislation that allowed the financial 'swapping' that has caused this economic problem.
Phil Gramm was an architect of the bill. Phil Gramm was McCain's primary economic advisor in the campaign before he had to resign because he said the country was a bunch of whiners.
Bob Rubin and Larry Sanders were the representatives of the Clinton administration who were helping create the legislation. They became a part of Barack Obama's economic team sometime in spring (I think).
Hillary Clinton has suggested that the solution is to just stop foreclosures. Stop them so people won't be forced out of their homes.
The devil really is in the details. I was happy to figure I had a general understanding of the idea that the government was going to buy loans from ailing financial institutions. There were questions, but I understand the basic concept.
Now that people are getting a chance to think about this and their voices are out there, I'm realizing that the details make this bailout a joke. I'm disappointed in myself for being trusting. I should have known better. I really should have.
Especially when I consider that my initial reaction was to let them fail. Let the institutions fail and it might be bad here for awhile but we have to get out from under this system and its best to do it all at once. I thought I was being too harsh and I figured there are regular people suffering hardship from this that I don't know about and I'm not showing empathy. And, truthfully, how an insurance company and a mortgage company and an investment bank were all failing seemed a bit odd to me. I don't know what the flow and connection is. So, its not responsible for me to advocate the failure of our economic system if I don't understand all the details. There you are. From radical to trusting.
Bernie Sanders is an Independent Senator from Vermont, he says "If its too big to fail, its too big to exist." And we should consider breaking up some of the large multinational corporations as well.
Up to a few weeks ago the Bush Admin was saying the fundamentals of the economy are strong and now they say wer're on the verge of economic meltdown.
Why did we not have enough money to repair our infrastructure (Katrina) and we don't have enough money to fight poverty, but we do have enough money to bail out the fat cats? Ridiculous. Outrageous.
There's a big push by the Bush Administration for congress to get this done really fast. Sounds similar to the big push by the Bush Administration before going into Iraq and before the Patriot Act and before the war powers act. It really is a disaster, but we don't have to be bullied into action. Congress better not be bullied.
Facts to know...
The Glass-Steagall (sp?) act in 1999 is the legislation that allowed the financial 'swapping' that has caused this economic problem.
Phil Gramm was an architect of the bill. Phil Gramm was McCain's primary economic advisor in the campaign before he had to resign because he said the country was a bunch of whiners.
Bob Rubin and Larry Sanders were the representatives of the Clinton administration who were helping create the legislation. They became a part of Barack Obama's economic team sometime in spring (I think).
Hillary Clinton has suggested that the solution is to just stop foreclosures. Stop them so people won't be forced out of their homes.
Sunday, September 21, 2008
60th Annual Emmy Awards
That was the most pathetic beginning to any awards show I've ever seen. I mean, after Oprah introduced the five hosts. I'm glad Phil Keogan didn't get nominated. Now he'll never have to be assoicated with such an awkward, boring, unfunny performance. Wow. Really bad.
And then, Jeremy Piven won again for Entourage. Three consecutive Emmy's? Is he really that good or are the Emmy voters lazy?
What a joke.
The truth is I don't care about the Emmy's anyway. People care too much and its kind of embarrassing.
If there was something else on, I'd watch it. I think I'll pop in a DVD and call it good.
And then, Jeremy Piven won again for Entourage. Three consecutive Emmy's? Is he really that good or are the Emmy voters lazy?
What a joke.
The truth is I don't care about the Emmy's anyway. People care too much and its kind of embarrassing.
If there was something else on, I'd watch it. I think I'll pop in a DVD and call it good.
CERN
And now, the superconducting, super collider. I understand its down for repairs for awhile.
But, I have some thoughts about this.
1. If you're a scientist that thinks this will create a black hole that will destroy the Earth, aren't you going to be doing everything you can to stop them from completing the project? If I truly thought it would end the world, I mean, that would make me crazy trying to tell them to stop.
2. That's what a lot of action movies are about...trying to stop people from doing things you think or know will end the world. Think Terminator. Is there a real life action movie happening right now?
3. What if the world really were sucked up into a black hole of our own making?
4. I think its great that we're doing all this research and stuff, but we're getting into scientific ideas that could change/damage/eliminate the world permanently if our hypothesis is wrong. Think Nuclear Bombs.
5. I don't know what the alternative is because its important to research. But, I hope someone is taking note of the cries from scientists who think this is a bad idea and addressing some of their concerns. 'Cause if those guys are right, well, its not like they'd be able to say "I told you so."
6. I'm reminded of stories in Star Trek where someone in the crew is convinced they're going to die if an action is taken. The captain thinks about it and then decides to do it anyway. So, the crew person turns back to their station and off they go. But, really, if you thought you were going to die if the captain turns right instead of left or something, wouldn't you go crazy trying to convince him not to? I'd be kicking and screaming.
http://www.sfgate.com/cgi-bin/blogs/sfgate/detail?blogid=15&entry_id=30262
http://ap.google.com/article/ALeqM5jCqnqRP6YAgUhtibUBZ3qqUI2GrwD93B8MNO0
But, I have some thoughts about this.
1. If you're a scientist that thinks this will create a black hole that will destroy the Earth, aren't you going to be doing everything you can to stop them from completing the project? If I truly thought it would end the world, I mean, that would make me crazy trying to tell them to stop.
2. That's what a lot of action movies are about...trying to stop people from doing things you think or know will end the world. Think Terminator. Is there a real life action movie happening right now?
3. What if the world really were sucked up into a black hole of our own making?
4. I think its great that we're doing all this research and stuff, but we're getting into scientific ideas that could change/damage/eliminate the world permanently if our hypothesis is wrong. Think Nuclear Bombs.
5. I don't know what the alternative is because its important to research. But, I hope someone is taking note of the cries from scientists who think this is a bad idea and addressing some of their concerns. 'Cause if those guys are right, well, its not like they'd be able to say "I told you so."
6. I'm reminded of stories in Star Trek where someone in the crew is convinced they're going to die if an action is taken. The captain thinks about it and then decides to do it anyway. So, the crew person turns back to their station and off they go. But, really, if you thought you were going to die if the captain turns right instead of left or something, wouldn't you go crazy trying to convince him not to? I'd be kicking and screaming.
http://www.sfgate.com/cgi-bin/blogs/sfgate/detail?blogid=15&entry_id=30262
http://ap.google.com/article/ALeqM5jCqnqRP6YAgUhtibUBZ3qqUI2GrwD93B8MNO0
Understanding the Financial Crisis - IV
I've been too kind. Here is what I question abou the Paulson Plan:
1. Why the hurry? Your plan says you'll spend the next 2 years buying toxic loans from institutions. If its going to take 2 years anyway, spend a few minutes giving me more information.
2. Such as, which loans are considered toxic?
3. What do I, as a taxpayer, get out of the deal?
4. Is there any consequence faced by the people who made foolish decisions?
5. How will you decide how much you'll give an institution for its toxic loan?
6. Who is going to do all the administrative work on this? Will you have a new department, or will the institution itself have to provide those workers? Would that mean they're picking the loans?
7. What kind of regulatory changes will be part of the deal?
I'm going to count on the Congress to find out some of these answers. After hearing Barney Frank and Richard Shelby this morning, I think they'll be able to hammer something out. The question is, will Paulson and Bush and Republicans support it? Will it get veto'd?
And, I figure that means there will be more fingerpointing. I'll try to pay attention so that I can know which side is really holding things up.
By the way - while watching Face The Nation this morning, I thought what everyone said sounded like they were going to hammer it out, so although questions might have passed through my mind, I didn't formulate them more fully because I figured Congress and Paulson were going to try to work it out.
It was after I read some stuff on Huffington Post that I got the idea that Paulson and Bush might be more sticky than I thought. Like, they might block things that involve anything more than what Paulson has presented.
So, these aren't my first impressions, but I agree with postings I've read that demand more from the plan and the Congress. I'm too trusting, I think.
1. Why the hurry? Your plan says you'll spend the next 2 years buying toxic loans from institutions. If its going to take 2 years anyway, spend a few minutes giving me more information.
2. Such as, which loans are considered toxic?
3. What do I, as a taxpayer, get out of the deal?
4. Is there any consequence faced by the people who made foolish decisions?
5. How will you decide how much you'll give an institution for its toxic loan?
6. Who is going to do all the administrative work on this? Will you have a new department, or will the institution itself have to provide those workers? Would that mean they're picking the loans?
7. What kind of regulatory changes will be part of the deal?
I'm going to count on the Congress to find out some of these answers. After hearing Barney Frank and Richard Shelby this morning, I think they'll be able to hammer something out. The question is, will Paulson and Bush and Republicans support it? Will it get veto'd?
And, I figure that means there will be more fingerpointing. I'll try to pay attention so that I can know which side is really holding things up.
By the way - while watching Face The Nation this morning, I thought what everyone said sounded like they were going to hammer it out, so although questions might have passed through my mind, I didn't formulate them more fully because I figured Congress and Paulson were going to try to work it out.
It was after I read some stuff on Huffington Post that I got the idea that Paulson and Bush might be more sticky than I thought. Like, they might block things that involve anything more than what Paulson has presented.
So, these aren't my first impressions, but I agree with postings I've read that demand more from the plan and the Congress. I'm too trusting, I think.
Political Language from the Right
I try very hard to be kind about the political choices people make. I don't mind when people have honest differences about policies and the role of government in our society.
But, I do mind the tactics and the language and the attitude of the McCain/Palin campaign. I mind very much.
If you want to hear some of the hate-filled language that right-wing Republicans listen to on talk radio, watch the segment on Bill Moyers Journal called "Rage on the Radio" (http://www.pbs.org/moyers/journal/09122008/profile.html).
Warning: If you listen, it will sadden you and you will be amazed that those people are on television and radio - that someone pays them to say those things.
That's what passes for political discourse in the right-wing so its no wonder the McCain/Palin supporters don't even realize how horrible they sound. In fact, they might think they're downright respectful in comparison.
I wonder how many parents who listen to right wing radio also complain about the hate filled lyrics in today's music? That would be interesting to know.
But, I do mind the tactics and the language and the attitude of the McCain/Palin campaign. I mind very much.
If you want to hear some of the hate-filled language that right-wing Republicans listen to on talk radio, watch the segment on Bill Moyers Journal called "Rage on the Radio" (http://www.pbs.org/moyers/journal/09122008/profile.html).
Warning: If you listen, it will sadden you and you will be amazed that those people are on television and radio - that someone pays them to say those things.
That's what passes for political discourse in the right-wing so its no wonder the McCain/Palin supporters don't even realize how horrible they sound. In fact, they might think they're downright respectful in comparison.
I wonder how many parents who listen to right wing radio also complain about the hate filled lyrics in today's music? That would be interesting to know.
Understanding the Financial Crisis - III
From the Oregonian (http://www.oregonlive.com/opinion/index.ssf/2008/09/the_economy_now_what.html)
"The root cause of Wall Street's crisis was excessive leverage used by investment banks, financial insurers and intermediaries, hedge funds and, yes, homebuyers."
"It [the crisis] dramatcially impairs the ability to get money back into the economy for businesses to grow and for jobs to be created. It impedes recovery in the housing market because mortgages are difficult to obtain and home values continue to decline. and the loss of confidence in the financial sector in general has caused the stock market to plummet"
"Congress must act now to ge the nation on the road to recovery. It must provide financial relief to the middle class and to the neediest among us. These regulations must include increased transparency so investors like the State of Oregon can understand the underlying risks we are taking and price it accordingly. Until then, any recovery is a long way off. "
Randall Edwards, Oregon's State Treasurer
*****
"It [the economic crisis] is the perfect storm; a combination of the housing crisis, investment bank turmoil and economic downturn that together are creating an incredibly challenging environment that will fundamentally change the financial services industry."
"Keep some important points in mind: First, though the housing crisis has affected virtually every bank in America, only 2 perent of the country's 8,500 commercial banks are considered troubled; the vast majority are sound and well-regulated."
"Second, there are fundamental differences between commercial banks, which are funded through customer deposits, and investment banks, which are highly leveraged and funded with wholesale market borrowings. Investment banks don't have the liquidity needed to survive a downturn like this and are vulnerable to the kind of shake-up experienced last week with Merrill Lynch and Lehman Brothers."
"The investment banks also have been largely self-regulated for many years, something that is clearly going to change. Remember, the true pupose of regulation is to protect the consumer and the investor - not individual companies."
Ray Davis, President and CEO of Umpqua Holdings Corp
*****
"The 30-year push to eliminate (government) regulation must end. Markets require clear rules and mechanisms to enforce those rules. Without rules and enforcement, crises occur and people lose trust in markets. Without trust, markets fail and the economy suffers. Government must play a vital role in restoring trust. One of the presidential candidates clearly understands this."
Bryce Ward and Ed Whitelaw, ECONorthwest.
*****
"...we are experiencing our worst financial crisis since the Great Depression. What happened? Very simply, financial innovation got ahead of regulation. "
"The problems we are having did not arise in the traditional banking sector (but) come from what is called the shadow banking sector. This is comprised of firms such as hedge funds that do just what banks do - they take deposits, they use the funds to purchase financial assets such as housing loans and they only keep a fraction of those deposits on hand as cash reserves. But these firms are essentially unregulated and hence subject to the same problems that tranditional banks faced before the 1930's."
"Re-creating the Resolution Trust Company, as we did in the aftermath of the savings and loan crisis, would be a useful step to take to remove the bad financial paper that is poisoning financial markets.
Over the longer run, it is essential the regulation be modernized. The most important task is to bring the shadow banking sector out into the sunlight, and to put it under the same regulatory structure and safeguards faced by traditional banks."
Mark Thoma, associate professor of economics at the University of Oregon
*****
"Lehman, Merrill, Fannie and Freddie as we knew them are gone. The nearly three-year decline in housing activity, widespread home price declines and soaring delinquency rates have decimated institutions that financed the orgy and or held the toxic mortgages.
The last year has show us why the Federal Reserve was created in 1913 to keep the system functioning: by adding liquidity, and seeking to prevent a collapse of the US economy. The Fed is buying time for orderly processes to wind down..."
"People will think differently about housing: Some who bought or built on the expectation of continuous double-digit price gains will never do it again. Credit will be tighter..."
John Mitchell, principal of M&H Economic Consultants of Portland
*****
"What sets this rolling financial crisis apart most from others is the interconnection between disparate entities (banks, insurers, invstment banks, hedge funds, etc.) on a global basis.
In additiona to the obvious capital loss associated with the broad decline in stock prices, the "pain" is being broadly felt in the sense that access to credit has become more scarce and costly. Clearly, more jobs will be lost. Connecting the dots is fairly easy: Construction, anything related to real estate, finance, autos, all will continue to shrink."
"But the biggest change will involve a dramatic re-calibration of risk in the system. We are going through that right now, and that's good news. The bad news is that at the end of the day, there will be less credit in the system and it will be more expensive. It is a prescription for slow economic growth.
George W Hosfield, CFA is Ferguson Wellman's chief investment officer and a principal of the firm.
*****
"Many great banks have failed over the cneturies, and although their loss seems staggering at the time, the consequences are very fleeting.
"Easy money always triggers the beginning of a financial cycle. The Federal Reserve deserves some blame in this instance for making the party too wild."
"Whether a financial crisis turns into a severe receission or depression depends on how the crisis affects everyday businesses across the country."
"Today the Federal Reserve stands ready as the lender of last resort to help banks that are funamentally sound but temporarily unable to continue with business as usual. The Fed has extended that umbrella to shelter some nonbank financial institutions. The result is that families and businesses with good credit histories and adequate income are still able to borrow."
"The Federal Reserve's easy money helped get the cirsis going. Piling on were politicians trying to increase home ownership, even among buyers without the resources or habits to support a mortgage. Adding to the problem were community activists insisting that banks weaken credit standards for poor people. Removing these stimulus factors will pretty much solve the problem for the next couple of decades."
Bill Conerly, Economic Consultant and author
*****
My thoughts - As I've mentioned in a previous post, I don't like the comment that the push to get more citizens in homes is the problem. You can't tell me that any legislation mandated companies put their own future at risk by granting loans to people who can't pay them back. Institutional greed created that problem.
The last two commenters didn't seem quite right to me. Mostly a gut reaction to the tone of their comments.
Some of the comments make me a little hopeful about what kind of economy we have a chance to create from this mess. Definitely a pull back from the craziness. That doesn't have to be a bad thing if we all pull back together. If companies don't have to continue meeting unrealistic shareholder demands then a slow growth model can be stabilizing. We can return to fundamentals and build an economy based on real resources and production and innovation. I wonder if its possible that more manufacturing will come back to the US?
Maybe that's a Pollyanna hope. Its entirely possible that the politics will ruin everything. I hope the regular people and businesses won't panic. But, according to Paulsen, that's why we're doing this bailout - to keep everyone from panicking.
Also based on these comments, I don't think the true fallout has happened yet. The next couple weeks will be telling. Last week things happened so fast nobody had time for a real reaction.
Next week the congress will be talking about the Paulsen plan and we might have a wait and see attitude.
After that we might see people making decisions based on what's happened. That will be the real test. What happened to the stock market? Not so important to our daily lives yet. What our companies decide to do to weather the storm? Very important to our daily lives.
I guess we'll just have to wait and see...
"The root cause of Wall Street's crisis was excessive leverage used by investment banks, financial insurers and intermediaries, hedge funds and, yes, homebuyers."
"It [the crisis] dramatcially impairs the ability to get money back into the economy for businesses to grow and for jobs to be created. It impedes recovery in the housing market because mortgages are difficult to obtain and home values continue to decline. and the loss of confidence in the financial sector in general has caused the stock market to plummet"
"Congress must act now to ge the nation on the road to recovery. It must provide financial relief to the middle class and to the neediest among us. These regulations must include increased transparency so investors like the State of Oregon can understand the underlying risks we are taking and price it accordingly. Until then, any recovery is a long way off. "
Randall Edwards, Oregon's State Treasurer
*****
"It [the economic crisis] is the perfect storm; a combination of the housing crisis, investment bank turmoil and economic downturn that together are creating an incredibly challenging environment that will fundamentally change the financial services industry."
"Keep some important points in mind: First, though the housing crisis has affected virtually every bank in America, only 2 perent of the country's 8,500 commercial banks are considered troubled; the vast majority are sound and well-regulated."
"Second, there are fundamental differences between commercial banks, which are funded through customer deposits, and investment banks, which are highly leveraged and funded with wholesale market borrowings. Investment banks don't have the liquidity needed to survive a downturn like this and are vulnerable to the kind of shake-up experienced last week with Merrill Lynch and Lehman Brothers."
"The investment banks also have been largely self-regulated for many years, something that is clearly going to change. Remember, the true pupose of regulation is to protect the consumer and the investor - not individual companies."
Ray Davis, President and CEO of Umpqua Holdings Corp
*****
"The 30-year push to eliminate (government) regulation must end. Markets require clear rules and mechanisms to enforce those rules. Without rules and enforcement, crises occur and people lose trust in markets. Without trust, markets fail and the economy suffers. Government must play a vital role in restoring trust. One of the presidential candidates clearly understands this."
Bryce Ward and Ed Whitelaw, ECONorthwest.
*****
"...we are experiencing our worst financial crisis since the Great Depression. What happened? Very simply, financial innovation got ahead of regulation. "
"The problems we are having did not arise in the traditional banking sector (but) come from what is called the shadow banking sector. This is comprised of firms such as hedge funds that do just what banks do - they take deposits, they use the funds to purchase financial assets such as housing loans and they only keep a fraction of those deposits on hand as cash reserves. But these firms are essentially unregulated and hence subject to the same problems that tranditional banks faced before the 1930's."
"Re-creating the Resolution Trust Company, as we did in the aftermath of the savings and loan crisis, would be a useful step to take to remove the bad financial paper that is poisoning financial markets.
Over the longer run, it is essential the regulation be modernized. The most important task is to bring the shadow banking sector out into the sunlight, and to put it under the same regulatory structure and safeguards faced by traditional banks."
Mark Thoma, associate professor of economics at the University of Oregon
*****
"Lehman, Merrill, Fannie and Freddie as we knew them are gone. The nearly three-year decline in housing activity, widespread home price declines and soaring delinquency rates have decimated institutions that financed the orgy and or held the toxic mortgages.
The last year has show us why the Federal Reserve was created in 1913 to keep the system functioning: by adding liquidity, and seeking to prevent a collapse of the US economy. The Fed is buying time for orderly processes to wind down..."
"People will think differently about housing: Some who bought or built on the expectation of continuous double-digit price gains will never do it again. Credit will be tighter..."
John Mitchell, principal of M&H Economic Consultants of Portland
*****
"What sets this rolling financial crisis apart most from others is the interconnection between disparate entities (banks, insurers, invstment banks, hedge funds, etc.) on a global basis.
In additiona to the obvious capital loss associated with the broad decline in stock prices, the "pain" is being broadly felt in the sense that access to credit has become more scarce and costly. Clearly, more jobs will be lost. Connecting the dots is fairly easy: Construction, anything related to real estate, finance, autos, all will continue to shrink."
"But the biggest change will involve a dramatic re-calibration of risk in the system. We are going through that right now, and that's good news. The bad news is that at the end of the day, there will be less credit in the system and it will be more expensive. It is a prescription for slow economic growth.
George W Hosfield, CFA is Ferguson Wellman's chief investment officer and a principal of the firm.
*****
"Many great banks have failed over the cneturies, and although their loss seems staggering at the time, the consequences are very fleeting.
"Easy money always triggers the beginning of a financial cycle. The Federal Reserve deserves some blame in this instance for making the party too wild."
"Whether a financial crisis turns into a severe receission or depression depends on how the crisis affects everyday businesses across the country."
"Today the Federal Reserve stands ready as the lender of last resort to help banks that are funamentally sound but temporarily unable to continue with business as usual. The Fed has extended that umbrella to shelter some nonbank financial institutions. The result is that families and businesses with good credit histories and adequate income are still able to borrow."
"The Federal Reserve's easy money helped get the cirsis going. Piling on were politicians trying to increase home ownership, even among buyers without the resources or habits to support a mortgage. Adding to the problem were community activists insisting that banks weaken credit standards for poor people. Removing these stimulus factors will pretty much solve the problem for the next couple of decades."
Bill Conerly, Economic Consultant and author
*****
My thoughts - As I've mentioned in a previous post, I don't like the comment that the push to get more citizens in homes is the problem. You can't tell me that any legislation mandated companies put their own future at risk by granting loans to people who can't pay them back. Institutional greed created that problem.
The last two commenters didn't seem quite right to me. Mostly a gut reaction to the tone of their comments.
Some of the comments make me a little hopeful about what kind of economy we have a chance to create from this mess. Definitely a pull back from the craziness. That doesn't have to be a bad thing if we all pull back together. If companies don't have to continue meeting unrealistic shareholder demands then a slow growth model can be stabilizing. We can return to fundamentals and build an economy based on real resources and production and innovation. I wonder if its possible that more manufacturing will come back to the US?
Maybe that's a Pollyanna hope. Its entirely possible that the politics will ruin everything. I hope the regular people and businesses won't panic. But, according to Paulsen, that's why we're doing this bailout - to keep everyone from panicking.
Also based on these comments, I don't think the true fallout has happened yet. The next couple weeks will be telling. Last week things happened so fast nobody had time for a real reaction.
Next week the congress will be talking about the Paulsen plan and we might have a wait and see attitude.
After that we might see people making decisions based on what's happened. That will be the real test. What happened to the stock market? Not so important to our daily lives yet. What our companies decide to do to weather the storm? Very important to our daily lives.
I guess we'll just have to wait and see...
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