Tuesday, September 23, 2008

The Fake Crisis Update

These are my favorite links of the day. We're at the point where there is a good possibility that this won't happen after all. People weren't that fooled by the White House demand for an immediate response. See the last link...


An Open Letter to the U.S. Congress Regarding the Current Financial Crisis

As an economist and investment manager, I am concerned that the plan advocated by Treasury is essentially a plan to bail out the bondholders of financial institutions that made bad lending decisions, with little help to homeowners that are actually in financial distress. It is difficult to believe that the U.S. government is contemplating taking on the bad assets of these institutions at probable taxpayer loss and effectively immunizing the bondholders (and shareholders) of these companies.

While it is certainly in the public interest to avoid the dislocations that would result from a disorderly failure of highly interconnected financial institutions, there are better ways for public funds to accomplish this, other than by protecting corporate bondholders while homeowners remain in distress.


There Is No Crisis-Summary

[Summary: Chris Bowers makes some really good points about the lack of a case either to pursue the bailout in the first place and the need to rush into it in the second place. Bush would seem to want to give his corporate buddies one last handout and was just faced down on that very issue.]


German Politicians Wary of US Financial Rescue Plans

A growing chorus of German politicians questioned over the weekend whether the unprecedented US rescue package meant to inject liquidity into the financial system would help to stem the crisis which has sent world markets into a tailspin..."I have doubts whether that method is really the most clever one," Michael Meister, deputy parliamentary leader of Chancellor Merkel's conservative Christian Democratic Party (CDU) told business daily Handelsblatt...Meister suggested that the $700 billion bailout by the US government could lay the fundaments for the next crisis. He compared it to the massive slashing of interest rates by the US Federal Reserve in the aftermath of the terrorist attacks of Sept 11, 2001 which he said had sowed the seeds for the current turbulence in capital markets...Much like Chancellor Angela Merkel, Meister urged more regulation of financial markets. It is important to think about measures such as banning speculation on falling shares rather than using taxpayers' money, Meister said..."I don't think it's appropriate that we use taxpayers' money in Germany to intervene in the markets," he added.


Paulson: I Didn’t Suggest Oversight In The Bailout Plan Because That Would Be ‘Presumptuous’

[Summary: The lying sack of shit, Paulson, argues that his proposal of last week was just a first draft and that he wasn't actually trying to cram unconstitutional shit down the nation's throat. It's as if he imagines the whole nation has forgotten the exact wording of the plan he offered last week.]


House GOP rises up against Cheney

House Republicans rose up en masse against their vice president on Tuesday morning to blast an administration proposal that would grant Treasury historic authority to start buying hundreds of billions of dollars in devalued mortgage-related assets, according to members present.


Dodd Financial Rescue Mark

[Summary: This comes via Brad DeLong's blog on economics and Scribd, this is an alternative plan to the Paulson blank check and absolute authority conjob. I'm not in love with the proposal, but it's far better than Paulson's idiocy.]


The Bailout Plan: Welcome to Economic Shock and Awe

In the course of selling us on buying, the market-worshippers shredded the modern social contract, the hard-fought consensus that had emerged since the New Deal, which ordered our political priorities, and expressed both our communal concern for the most vulnerable members of society and our disapproval of huge inequalities. We were now supposed to believe that all could be left up to the soulless, self-correcting calculus of supply and demand. Government involvement was an anachronism, regulatory oversight an impediment.

The last few weeks have demolished that notion. In the battle over the proper role of government, the forces of the Right, the high priests of the church of the Free Market -- including Bush, Paulson, and the Masters of Wall Street -- have suffered a monumental defeat. So why are we allowing them to dictate the terms of their surrender?


Chris Dodd Stares Down Paulson

So there was "Goldman" Hank, holding a gun on the economy and staring Congress down. "Give me the 700 billion, or the economy gets it!" he threatened. For two days it looked like he was going to get away with it, 700 billion dollars to spend on the Wall Street gang, the boys who'd already shot the economy up so bad it was in danger of bleeding to death.

Then Marshal Dodd came swinging through doors, shotgun in hand, and said "not so fast Hank. Put the gun down, and back away from the economy. We're going to do this my way."

For a moment calm reigned, then from off one side came a high pitched squeak, "you just put down that gun Dodd," said Bush as he leveled his blunderbuss "the Veto" at Dodd, "and you let my good friend Hank walk away with the money or I'll use this gun." He swivelled and instead of aiming it at Dodd, put its muzzle right against the economy's head. "I'll do it. Don't think I won't! I've killed an economy before!"

Hand still on the trigger, Dodd glanced over at Reid. The old man's fighting days, some said, were long gone. Dodd hoped Reid had one big fight left in him. If he didn't, the economy was done, and Paulson would get away, scot-free.