Tuesday, September 23, 2008


That's what the Treasury bailout plan is. High-grade, all beef, thinly sliced baloney. I like the editor's comment in the San Francisco Chronicle today: Henry Paulsen is not our king. Although I'm not sure he understands that. I also agree with the Senator I heard this morning on NPR (can't recall whom), who said, "Just because God made the world in 7 days doesn't mean we have to do this in 7 days."

Mr. Paulsen doesn't seem to have grasped the concept, basic to our democracy, of "checks and balances." Not to mention, "accountability" and "transparency."

I'm particularly annoyed when the Treasury and the Fed insist that the housing market won't recover unless Congress passes the plan as it stands. The implication is that the housing market will recover if it does pass the plan - and that's baloney, too.

The housing market isn't crashing because of tight credit - mortgage credit isn't that tight. The housing market is crashing because the huge backlog of foreclosed homes, on sale at fire-sale prices, is driving down real estate values. It's going to continue to crash as long as that condition exists - in my personal opinion, about another year and a half. Only major bargain hunters, who plan to stay a long time, want to buy a house that will be worth less than they paid for it in 6 months; and until we've finished the fire sales, that condition will continue to exist.

This is classic Bush administration propaganda: ride the fear. Only we can save you. We can't restrict executive compensation on bailed out firms or companies won't play with us. If that's really true - then don't bail them out. Let them fail. These yoyos are in this position because they are incompetent. They don't deserve huge payouts to go away and do it again somewhere else.

I am beginning to get sufficiently torqued with all of these idiots - who are in this position because they allowed their greed to overcome their common sense - that I think we should let them fail, and pick up the pieces as best we can. It won't be any worse for the people who are being foreclosed; they're already losing their homes. The rest of us watching our houses drop in value also won't see any change; see above, the housing crash cannot be affected by this crap, and they're lying to us.

This is the Bush administration's attempt to get monarchical powers for the Treasury secretary as well as the Presidency, and it should be blocked. Write your congressman; call your senator. Oppose this. I have.


  1. The Bush strategy with respect to the credit crisis has a familiar ring.

    Whenever a real calamity occurs, use the fear and loathing inspired by that event are evoked to propose and justify an agenda only loosely related to the cause of the event.

    After 9/11, Bush & Company used our fear and anger (revenge) to inspire an invasion of Iraq. Iraq had nothing to do with 9/11, and everyone knew it (or should have--it was obvious!). But off went the Congress and supported the preemptive strike. That has caused a thousand more problems than it solved (removing Saddam).

    Also, following the security crisis, Homeland Security was created (a boondoggle if there ever was one--"yellow alert," anyone?), and search and seizure and habeas corpus were abridged in the name of "security."

    Now, Wall Street wants a bail-out. What exactly would money earmarked for saving these renegade trading companies do? Where would it go? Who would get it? Certainly, as with most of corporate America these days, the lion's share would go--as it increasingly has--to the top 1% of the major shareholders and management teams. These are executives who approved the ultra-risky packages of investments which eventually endangered their bottom line (and everyone who had been seduced into buying the stuff)--they created the problem in the first place. But true to form, the Bush team wants the U.S. taxpayer to pay these same carpetbaggers with money the Federal Government doesn't have. Here we are, piling up debt just to pay off the unnecessary war and the tax giveaways to the rich, and we're being asked to approve even more debt to pay these crooks!

    And it really is just that simple. The web of interconnectivity--so "complicated" and "difficult to understand" ("just trust me") that we can't have it laid out for us in plain English--upon which our banking industry depends for the confidence of its participants--and the regulation which was designed to prevent this having been shoved through the Republican Congress in the 1990's--is by no means as dire as Treasury would have us believe. Yes, it's a lot of money, but the underlying assets haven't evaporated. Those properties--both residential and commercial--will appreciate again, over time, and these temporary liquidity problems can be solved, albeit after an unsettling shakedown occurs, in which many of those same executives and major shareholders have taken a (well-deserved) scalding bath. You could even make the argument that those firms should absorb these adjustments, in order to clean out the corruption and greed which led to the excesses.

    Why our government--run by supply-siders and supposedly anti-big government and laissez-faire policy wonks--now thinks we need to "give" these guys a break is a mystery. Aren't banks and insurance companies supposed to stand or fall on their performance? Why should we prop up bad business? Chrysler and GM and Ford, which once provided jobs for hundreds of thousands of Americans, were allowed to sink. What's different about Morgan Stanley and Merrill Lynch?

    The "lesson" in capitalist markets is that boom and bust are natural cycles. Keynesian economics suggested that these could be soft-pedaled in the interests of continuity and social justice. But saving a few rich bigwigs from personal hardship doesn't match that description. I don't see why the likes of Barton Biggs--Morgan Stanley's head investment guru--should not have to share some of the pain, since he helped engineer it. Why should he have six houses, ten cars, 100 suits, a personal plane, and enough cash on hand to live a thousand properous lives, and the full faith and generosity of our government as an ultimate safety net for his misdeeds?

    Finally, what motivation would there be for financial executives not to engage in the same behavior in future, in the belief that all their mistakes would be covered by the tax payer?

  2. Curtis, as you know, I don't always agree with you; but this time, we are right on the same page.

    Furthermore, no one has mentioned the real reason Henry Paulsen hasn't given Congress any detailed explanation of what he'd do with all that money: he doesn't know himself. He has no clue how to fix this, but he thinks if we'll just write him a big enough check, he'll come up with something.

    One of the legends of the Depression was the banker standing on the street corner selling pencils and singing "Brother, can you spare a dime?" Frankly, right now I'd like to see some of that. These guys have caused our current problems, and by God, I want to see them share some of the pain.

  3. This evening, on the Jim Lehrer New Hour, two Congressmen from across the aisle were interviewed, each gleefully6 touting the anticipated "compromise" which will grant the 700 billion which the Treasure Secretary has demanded.

    Most astonishingly, no one dares either to describe what might actually happen if they don't go through with it, or what might happen if they do. They speak in a vague way about "catastrophe" on "Main Street"--credit would get so tight that business could not get loans, and no one would get a home loan, and the economy would "come grinding to a half." But no one explains just how this could come about.

    The real risk, it appears, is to the firms themselves, and their respective re-insurers. Merrill Lynch might crumble into bankruptcy. But in what way would this spell doom for the American economy? Mortgages are falling like flies, but, except for the people thus disadvantaged, the actual affect on the day-to-day economy is minimal.

    How much hurt would our nation feel if the brokerage houses and banks had to fess up and make good on their IOU's? Bankruptcy is the route that most businesses take when there are no escapes. Why not let this process proceed? The FDIC regs are in place, and people stand to lose no more than they risked in the first place, which is what capitalism is supposed to be about. The re-shuffle may be painful, but in the end, it's a lot more healthy than more irresponsible borrowing and staving off the inevitable with bigger IOU's.

    I mean: No one is talking actual events here, just fantasy. Who is going to point out that the emperor has no clothes?