I still don’t quite understand how the bill is really supposed to help much. To the extent that Our Leaders have come forth with clear, lucid explanations of what exactly the problem is and how the bill solves it, it seems that there’s insufficient credit and this bill would sufficiently pump capital into the system.
Um, well, I thought the problem was excess liquidity in the first place. All that loose money from the upward transfer of capital needed investments so a lot of crap ones were created, little more than Ponzi schemes: investments that worth not anything too intrinsic, known or quantifiable but worth pretty much just what people believed them worth (yeah, yeah, I know, very appropriate for these rightist, fact-detached times).
So surely more liquidity can’t be a solution to a crisis created from excess liquidity, can it?
And allowing unsupervised hedge funds to own financial situations?
Second cause of this was the lack of oversight. Or rather, the pre-existing responsible supervisory instiutions, following Our Leaders, deliberately refused to do their jobs.
So even less regulation and supervision can’t be part of the solution either.
Kudos to the Dems for cutting out a chunk of crap from the original proposal from Our Leaders and tossing some crumbs to the populace.
Tragedy is that the Dems got played; The bill was stopped by a 100-odd party-bucking mavericky GOPers who can all paint themselves back home as the saviors of the Little Guys notwithstanding, of course, all the anti-Little Guy garbage they rubber-stamped for Our Leaders.
If you’ve got no money and no debt, then just go about your business normally. I think the smartest long-term positioning is to begin looking at the goods and services you can provide to other people in your community without involving long distance transport or complex supply chains involving multiple creditors and borrowers. In other words, try to make what you do as real as possible.
If you do have money, well, either sit tight through the “capitulation” or do some bottom feeding of favorite underpriced stocks in industries that provide real goods or services to real people, and that don’t need to borrow lots of money to do it. If you’ve got more than 100k in a single bank account, you might spread it out.
The reality of the (failed) bailout plan is so very different from the way people are thinking about it, though, that I thought I might offer some clarity. (I’m sure some of you will interpret this as additional obscurity, so ymmv.)
The main point of the original plan was for the federal government to buy distressed assets – like mortgages – from banks and other institutions. “Distressed” doesn’t necessarily mean these are bad assets, or that the mortgages won’t be paid back. It simply means these are debts that are selling way way below their longterm value. No one wants to pick up anyone’s mortgages because housing prices are going down, foreclosures are going up, and shareholders of banks don’t want them on the books.
So a package of mortgages that might be worth a million bucks in the long term if they’re all paid back is only getting, say, $200,000 on the market. That’s what’s shrinking the credit markets. So the Federal government wanted to buy all this credit at a higher rate, bail out the creditors, and take on the mortgages. In the best of worlds, the Treasury would have made money off all this. They’d be using what government has over business (time) to purchase depressed investments and wait out the decades it takes for them to earn out.
The deal almost went through until McCain made his highly publicized drop in to DC, accidentally highlighted the leftist underpinnings of any government intervention, and polarized the parties involved. He left, but the damage was done. (It may have failed without McCain’s help, but I enjoy blaming him.) America now saw the bill as an anti-populist bail out of banks. Call it socialism if you like but it was really just business. Democrats compromised by turning the investments into loan guarantees, but conservatives saw the whole plan as much too much like the way FDR got America out of the Depression last time: namely, socialism.
The bigger fact, though, is that even with a short-term bailout, the underlying mega-economy is in the dumps. Government can help lubricate the gears of the economy by utilizing its capacity to engage in longterm investing, as with the failed bailout bill. But this entire effort was really just a balance sheet adjustment. Unless we are also investing our time, energy, and remaining money in productive industries, education, and renewable resources, we will not have changed the real economy at all.
Here’s something to do with your money while the world goes to Hell.
Over dinner last night, i was trying to explain to a British friend why the majority of House Republicans fled the bailout bill compromise. Reading the polls, it’s easy to understand why those with the most hotly contested elections this November were the least eager to sign up for the bill. But, in surveying the wreckage, one fact became clear: the credit crisis was exacerbated by a credibility crisis.
It’s easy for Americans to look at President Bush–he of the 935 lies in the Iraq war runup–and Henry Paulson, the Goldman Sachs-bred Treasury Secretary–and say, “prove it” regarding the dire predictions of doom if a bailout doesn’t occur. As an American typically ignorant of the arcane ways of the financial wizards, what was missing for me in the scare talk last week was somebody who could put the danger in concrete terms: a businessman, say (as opposed to a financier), who could tell me how lack of credit would prevent him from stocking up on new inventory or meeting payrolls. An Administration marked by profound arrogance (hello, Mr. Cheney) sent a financier to Congress to demand unprecedented power for a financier, and the scare talk sounded familiar and empty. It’s the boy who cried Wolfowitz.
Somehow, if the danger is that real and that near, somebody with a shred of credibility and some real skin in the game has to stand up and tell us exactly what’s in the alleged abyss. The Administration’s failure to understand that fact is telling and profound.
Apparently the GOP’s attempt to blame House Speaker Nancy Pelosi immediately after the bill collapsed didn’t do much to calm anything down on Capitol Hill.
House Democrats may try to bring back the bill later in the week, but they say any additional votes will have to come from the other side. “We delivered 140 votes,” one senior Democratic aide said in an e-mail to Salon. “How about House Republicans go take a look at the Dow drop (largest point drop in history), Americans’ 401(k) and mutual funds, and then go find a dozen votes.”
That sounds flip, but it may actually be a pretty good read on how the legislation finally makes it past today’s impasse. Congress is gone for the next two days, and if the stock markets keep plunging, chances are a few members will reconsider their opposition to the bailout once they return. No lawmaker, no matter how safe his or her seat is, wants to be responsible for record stock market losses. If you think Congress is unpopular now, wait till you see the polling when voters realize they can never afford to retire.
Hey, did the GOPers get so mavericky?
A very useful analysis by Nate Silver’s very useful blog FiveThirtyEight.com confirmed my hunch after a quick scan of the House vote against the bailout this afternoon — almost everyone facing a tough reelection race voted no.
Even before his epic failure, Krugman doubted President McCain’s ability to lead through the economic crisis.
Hey! Does Palin have any wisdom to share? Does she know what’s going on? Does she understand the issues?