This is what free markets DO, ladies and gentlemen; they punish bad investors. This is what you so-called leaders used to tout as the great strength of the markets. What changed your tune? Have you no faith? Have you no courage to wait through a bad market (which ain’t so bad today anyway)? Do you actually have the discipline to “buy and hold” during a down market? Or are you a bunch of panic-stricken hypocrites scrambling for a prettily packaged welfare check? And yes, I am well aware that the phrasing of that last question reveals my sympathies.

Not every national problem requires a federal solution.

Steve Z on September 30, 2008 at 5:22 PM

I have a feeling plan B is going to look at lot like plan A. It seems the markets can play chicken too.

The government really had to take over Fannie and Freddie, being responsible for something they do not have control over is not going to work. I think they should faze them out myself. I know that is what McCain said to do. But in order to do that the market has to stabilize enough for long enough to allow the privatization of their assets. I also think the government is going to have to really look at those books before they know just what they are dealing with.

This was the main problem with Fannie and Freddie. They were supposedly backed by the Government, but had wide latitude to function as private businesses, including having publicly-traded shares. Lots of private upside potential, no downside risk, because good ol’ Uncle Sam would pick up the pieces. A prime target for abuse and corruption, whose chickens have come home to roost.

The Government taking over Fannie and Freddie is probably a good thing. If taxpayer dollars are on the line, the Government gets to regulate it. Fannie and Freddie could become home-mortgage lenders of last resort, but then the Government sets the criteria for qualification–no ifs, ands, buts, or maybes.

If a private bank wants to make a risky loan, it loses money if it goes south–that’s how capitalism works. The worst of both worlds is private bankers making profits on risky loans, while depending on Uncle Sam to bail them out when it goes south.

On another point, there’s an interesting article by peter Robinson on National Review about why the markets went up today:

http://corner.nationalreview.com/

The three big events of the day? In the view of your humble correspondent:

1) That the sky still hasn’t fallen. When the market closed just a few minutes ago, the Dow Jones Industrial Average had risen nearly 500 points, or just shy of five percent.

2) That it has become impossible—simply impossible—to dismiss opponents of the bailout as mere hayseeds and (what to a lot of people amounts to the same thing) House Republicans. See, to name just one example, this column by Harvard economist Jeffrey Miron.

3) That as a matter of practical politics, overwhelming support has emerged for what is widely being called “Plan B,” namely, the use of the FDIC to backstop commercial banks, on which (as quite distinct from investment banks) our system of payments and credits actually depends. The broad outlines of such a plan—increasing the deposit insurance level while giving the FDIC additional discretion to help wobbly banks—are in very little dispute.

If Hank Paulson, Harry Reid, and Nancy Pelosi were serious about doing something useful in a hurry, they could have “Plan B” on the president’s desk by tomorrow evening.

If it involved less taxpayer money than Plan A that was voted down yesterday, this might sail through Congress with broad bipartisan support. But why didn’t Paulson think of this earlier, instead of getting both parties and the markets all freaked out over his original plan?

RJL;

You do not know that. The rise of the dollar and the fall of the euro does not show anything yet.

Terrye on September 30, 2008 at 4:48 PM

True it varies, but when the dollar is up across the board, Pound Sterling, Euro, Yen and Canadian dollar, it’s a good sign.

Thanks, I will resume lurking now.

JDA says Wells Fargo unit joins finance group

“JDA Software Group Inc., which makes back-office software for businesses, said Tuesday that Wells Fargo Foothill, a unit of San Francisco-based Wells Fargo & Co., has joined a group of banks that have agreed to lend JDA money to help the company complete an acquisition.

The Scottsdale, Ariz.-based company is buying i2 Technologies Inc., a Dallas-based company that makes software for managing companies’ supplier relationships. JDA said in August that it has agreed to buy i2 for $346 million in cash.”

WHAT?! A bank lending money to a business?! How can that be?! I though the sky was falling!?!

You do not know that. The rise of the dollar and the fall of the euro does not show anything yet. These things are volatile, changing on a daily basis. The dollar is also up because the Europeans are hoarding dollars, that can mean a stronger dollar, but it can also mean even tighter credit.

But that can reverse itself just as quickly. Look at oil, up..down…up…down..up. In less than a week.

The government really had to take over Fannie and Freddie, being responsible for something they do not have control over is not going to work. I think they should faze them out myself. I know that is what McCain said to do. But in order to do that the market has to stabilize enough for long enough to allow the privatization of their assets. I also think the government is going to have to really look at those books before they know just what they are dealing with.

But this is not socialism. I do not know what people call it that. The government spent a lot of money in the Gulf Coast after Katrina and now Ike, but that does not mean it has nationalized the Gulf Coast.

I think it is also true that there is simply no private buyer large enough to get the job done. I guess we could see if the Saudis are interested. Or maybe we could sell a larger chunk to China.

McCain needs to come up with a plan and including the Clintons would be a GREAT idea. Bill can glad hand the Democrats and McCain can get the Republicans support. We need solutions, not party politics as usual. But unfortunately, we do need to play the blame game because the Democrats are doing this and the American public is sucking up the sound bites. The American public needs to see McCain whap Obama upside the head on the economy in the next debate. He needs to feed back the Democrats 2004 words about Fannie Mae and Freddie Mac.

He thinks the problem started with the characterization of the bill as a “bailout”, when the taxpayers would purchase tangible assets and could profit from their resale when the market stabilizes. He objected strongly to the idea that this bill would socialize the credit markets. Instead, it allowed the only player with enough liquidity to trade it for real assets.

If the government becomes a player in the credit markets, its called socialism. However, if government is the only player in the pool, geez, I think we’ve moved somewhere to the left of socialism. Now Fannie/Freddy have had status as GSEs playing in the market for decades so this is not a surprise. But now that these GSEs have substantially failed under circumstances where the public was lead to believe the GSEs were being adequately overseen, it is tough to argue that what is needed is MORE liquidity. The government does not exist to make markets, but to preserve market stability. The government from Fannie and Freddy to the SEC on up and down, failed to preserve a functioning mortgage market. By the time the U.S. goverment becomes the only player who can “rescue” a market, the market ceases to exist. A market where the only major player is a government is a house of mirrors, a third world banana state unworthy of private investment.

Now we just need to get Jim Kelly to agree to run for Congress (I’ve been told he’s been close in the past).

The dollar is not up so much as the euro is down. The Europeans are having the same credit problems and bank failures we are and their euro is in free fall.

Terrye on September 30, 2008 at 4:23 PM

Well that shows that we are handling it better without a $700 Billion gift/bailout to Wallstreet than whatever the Europeans are doing.

The dollar is not up so much as the euro is down. The Europeans are having the same credit problems and bank failures we are and their euro is in free fall.

The markets are up because they expect the government will take action by the end of the week. That is what the analysts are saying.

That is how this whole thing has worked thus far: up when they think there is hope and down when hopes are dashed. The market has been doing this for days. I have noticed however, that for people who choose to believe there is no problem the up market has a lot more validity than the down market does.

Neither of these men are jokes. As for reaching out, when you are minority and there is a crisis, you can either reach out or you can be run over. That does not mean you have to be a pushover. No one is saying that.

Blah, blah, farking blah. Who cares?

ManlyRash on September 30, 2008 at 2:15 PM

My sentiments exactly! This just reminds me of how McCain has the Jurassic Park of the Beltway surrounding him. What good does this do when the McCain camp is AWOL on hard hitting ads?

How much better could it get?

And while Congress fiddles, the markets are…

now up over 4% in the S&P 500 and Nasdaq. Maybe they don’t WANT the bailout, or have figured out another plan.

Steve Z on September 30, 2008 at 2:56 PM

Yeah, that other plan is called the “Free Market Plan”.