Open thread: Senate bailoutmania! Update: Bailout passes, 75-24
posted at 7:02 pm on October 1, 2008 by Allahpundit
The vote’s set for 7:30 ET on C-SPAN, assuming the windbaggery on the floor is finished by then. It should pass with 70+ votes, three of which will come from McCain, Obama, and Biden. Will it pass the House on Friday? All signs point to … no:
House Majority Leader Steny Hoyer said Wednesday he was “personally disappointed” that the Senate added a package of tax breaks to the bailout bill.
However, Hoyer said he had spoken to House Minority Whip Roy Blunt “four or five” times on Wednesday and expressed hope that they could come to an agreement on the bill.
Tapper delved into this a bit further earlier today:
While the Senate will pass its version of the rescue bill with more than 70 votes, according to Senate sources, Senators have taken the partisan bickering over the rescue bill and added a stalled disagreement over a separate issue — “tax extenders,” or extending various tax relief provisions that are due to expire — into the mix…
But some conservative Democrats have expressed serious concerns about the fact that extending these tax cuts is not being paid for in the budget. Adding the provision may attract House Republicans, but it could alienate these fiscally-conscious Democrats, causing them to abandon the 140 House Democrats who voted for the bill to join the 95 who voted against it…
The implication: not only will Boehner need to provide the entire 13-vote margin that the bill lost by on Monday, but also that the addition of the unpaid-for “tax extenders” could cause up to 17 Democrats who voted for the bill Monday to walk. If not more.
Will the Senate bill clear the House? Will the economy be rescued? Will your humble correspondent succeed in his reckless gambit to hold onto his retirement portfolio until the bailout passes and the market spikes, whereupon he’ll duly unload his shares before the S&P inevitably tanks? Tune in tonight for episode one!
Update: The bailout clears its first hurdle, 75-24, and an anxious blogger lowers the revolver pressed to his temple. Tomorrow night: Russian roulette, as Palin takes the stage against Biden and the House tries to choke down this fat, greasy piece of pork. If it doesn’t? Expect Pelosi to come back with a third iteration of the bill even less palatable to conservatives than this one was. Something’s going to pass soon; we might as well get the best deal we can.
Check here soon for the roll of glory reluctance!
Blowback
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Senator Hutchison:
After writing to you last week, I am very disappointed to see you have decided upon yourself not to represent your constituency tonight. The will of the people has overwhelmingly been expressed against this pig bill. Yet you voted for it. It is a shame that you failed to execute your representative role in Washington, even though 85% or more of the American population opposes this bill. It is even more of a shame that you can not accept the responsibility that you deserve here. Congress created these GSEs and then did nothing to reign in their abuses. You and the other members of the Senate sat and watched as they destroyed this nation financially, and then you had the gall to offer them $700 billion dollars of our money. Shame on you. You no longer deserve my support.
Years of stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three steps:
Common Sense Plan.
I. INSURANCE
A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.
B. In order for a company to accept the government-backed insurance, they must do two things:
1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures and ruined lives.
2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.
C. This backstop will cost less than $50 billion—a small fraction of the current proposal.
II. MARK TO MARKET
A. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.
B. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.
III. CAPITAL GAINS TAX
A. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.
B. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to
stand up, speak out, and fix this mess.
paulsur on October 1, 2008 at 11:31 PM
They were a bigger mortar.
Old Hippie Vet on October 1, 2008 at 11:31 PM
Linked on Instapundit, this story reports on the push for a European version of a bailout.
From the article:
Who knew that Old Europe was capable of such free market capitalism? Not that I expect that sentiment to carry the day, but I found that quote interesting.
BryanS on October 1, 2008 at 11:31 PM
Lucky you. I’m in CA — no hope (or is it soup?) for me!
Y-not on October 1, 2008 at 11:32 PM
UH-1H, The Cobras were the 1C, as I recall.
Janos Hunyadi on October 1, 2008 at 11:34 PM
Earlier I read an article from the Telegraph about the financial crisis in Europe and I just read scanned the article you linked to. I am reminded of Ron Paul saying that we may be seeing the beginning of the end of Western Civilization.
flyfisher on October 1, 2008 at 11:35 PM
Sure… but to the tune of 500 billion?
Skywise on October 1, 2008 at 11:37 PM
Don’t know, but it was enough to cause NR to collapse.
Vashta.Nerada on October 1, 2008 at 11:38 PM
That’s ok. Our new Middle Eastern overlords will allow us infidels to pay tribute, and our new Chinese overlords will allow us to learn the benefits of communism with Chinese characteristics.
BryanS on October 1, 2008 at 11:38 PM
Old Hippie, Janos,
Welcome Home, Brothers.
I was with the Mobile Riverine Force, Mekong Delta. We were Navy guys that gave guided tours to the 9th Inf., SEALS, Green Beret and ARVN.
Janos, It still pisses me off that Kerry said in his book that Cobra gunship pilots average age was 19 and that they “killed civilians for sport.”
Huey’s and Cobra guys saved my bacon more than once. Thanks.
Star20 on October 1, 2008 at 11:39 PM
WTF are you talking about? I provided anecdotal evidence regarding the reality of the credit crunch. There are lots of other commenters here providing similar reports.
Just as an FYI, I got my first job at 14, I’ve been working for 30 years since, pay ALL my bills and have never collected a penny of welfare or taken a handout. More than 15% of MY income goes to charitable contributions, I sent 2 kids to college, and am now working FT and in graduate school. Not that any of that has ANYTHING to do with my post, where i was looking for reasonable discourse on the necessity of the bailout.
So I ask again, WTF are you talking about? What part of my post asked for anybody to pay anything for me?
JustTruth101 on October 1, 2008 at 11:43 PM
When the House bill failed to pass, foreign leaders the world over strongly urged the US to pass a bill and fast. I would say a lot of foreign banks have quite a bit at stake in what happens here in the US.
BryanS on October 1, 2008 at 11:44 PM
100 isn’t much in either direction lately, and futures are thinly traded. Given what happened in the House on Monday, the market will likely discount the Senate vote and move up if the sense is that the House is going to pass the bill.
This bill isn’t a cure-all, though. I just hope it’s enough to keep the economy from deteriorating dramatically during the next 4 weeks, since Obama likely wins big if that happens.
dedalus on October 1, 2008 at 11:45 PM
I am streaming Mark Levin’s program from earlier tonight and he interviewed Jim DeMint (roughly 18 minutes into the program). Sen. DeMint’s theory is that China and Saudi Arabia have said they will not loan us any more money unless we buy back the securitized junk mortgages US firms have sold them. He believes the central motivation for the bill is to grant Paulson authority to buy up assets from around the world. He stressed that is only his theory, but it is the only thing that makes sense to him given the urgency of the Administration. That is in accordance with what Rep. Sherman from California has also claimed.
Assuming Senator DeMint is correct, shouldn’t the American people be told this? If he is right, shouldn’t Congress be told that before they are asked to vote on the bill?
flyfisher on October 1, 2008 at 11:45 PM
Globalization is why the US subprime crisis could become what it is now, a Western banking crisis (America and Europe).
There was a worldwide credit bubble. The most notable effect was in artificially boosting housing prices.
Now there is the opposite of a credit bubble. Everyone is worried that they can’t get a loan or they can’t get a checking account. They have become fearful. Many are grabbing all of their money and loans that they can and they are hoarding it. Banks are the biggest hoarders around. Meanwhile small businesses need credit to operate. They can’t get credit because so many banks are hoarding money.
Ford, GM, and Chrysler could all go bankrupt within months because their customers can’t get loans.
Last year subprime loans went bad in large numbers. Firebreaks were put up. They didn’t keep this fire from spreading.
Now the danger is bank runs. We already had two, Northern Rock (UK) and IndyMac (US). People pulling deposits contributed to the death of WaMu, and probably other banks that have recently failed. Hence, the expansion of FDIC insurance.
Just leave your money in the bank. It’s safe. The entire full faith and credit of the US stands behind it. It’s like when Jimmy Stewart explained where his customers’ money was in “It’s a Wonderful Life.”
Everybody calm down.
Capitalism depends on money. There is no money unless there is a banking system. The banking system is special. It’s not like software developers or car manufacturers. The banks are in every transaction in one way or another. Look at a dollar bill, or note of the Federal Reserve Bank. That’s why you need to protect the banking system.
In 2008, the US government needs $800 billion in new loans every so often. It sells bonds. Who buys the bonds? Banks, primarily. I guess China has stoped buying our bonds now, so it’s banks. Banks were incredibly important, now they are everything.
The banks are not going to make a lot of money out of this. They are going to get bigger, but their margins will decrease. The good times are over.
We need the banking system to have capitalism. If the banking system breaks down, everything goes down. That’s what caused the Great Depression. Ben Bernanke studied the history and is trying everything and more. He needs to get an award if he can see this through.
There is no simple solution to this. We just have to keep trying to stuff, keep working on it, and eventually the crisis will lift.
In the future, we should entrust more emergency powers to the Fed so Congress can’t roadblock this stuff.
By the way, the Great Depression killed off the conservatism of the time. Be wary.
This crisis is far more significant than anything an MBA studies, by the way. This is historical in nature.
indythinker on October 1, 2008 at 11:45 PM
Hard to find numbers, but Northern Rock alone had over E110 billion in mortgages and MBS paper.
Vashta.Nerada on October 1, 2008 at 11:46 PM
I meant, “can’t get their money out of their checking account.” Not enough time to edit.
indythinker on October 1, 2008 at 11:46 PM
As Pat Buchanan might say…lock and load my friend!
flyfisher on October 1, 2008 at 11:47 PM
Actually, 110 billion pounds sterling – can’t find that little ‘L’ thingy, either.
Vashta.Nerada on October 1, 2008 at 11:49 PM
BTW, WAMU sent me a credit card application today to transfer a credit card balance to them. (obviously sent last week)
I wonder if it’s still good…
Skywise on October 1, 2008 at 11:49 PM
And Welcome to you. I was in Quang Tri with the 3/5 Cav 9th Div. and then went to the 101st for sort time before I got an early out.
Old Hippie Vet on October 1, 2008 at 11:50 PM
If you were on those bullet magnet plywood boats, you saw more sh+t than I ever did, and it must have been Intense
Cobras were beefed-up Hueys–the Marines had their own version. Pilots were CWOs and Captains, and not nineteen. Co-pilots, like me, were the same age, early 20s to 30 or so.
It was the door gunners who were very young, Ours was 17 1/2–lied about his age, which you could pull off back then, weighed maybe 110 lbs, 115, and LOVED his .50 cal
and I understand……
Janos Hunyadi on October 1, 2008 at 11:51 PM
But weren’t part of our 700 billion meant to buy out the bad mortgages from Northern Rock?
Skywise on October 1, 2008 at 11:51 PM
Hey, severn percent solution dumb@$$…you want some more anecdotal evidence? Car sales down at Ford 34% whereas my bud said his dad’s car sales are only down 25% (his dad sells luxury cars, so it makes sense that his buyers would have better access to credit so he’s experiencing a lower rate of decline.)
So do you have anything to add or do you just come in and flame? Don’t wast my time or HA’s space.
JustTruth101 on October 1, 2008 at 11:55 PM
Call your congressman and hope someone in Congress supports us and not just themselves.
JIMV on October 1, 2008 at 11:55 PM
What would Captain Walker do?
Limerick on October 1, 2008 at 11:57 PM
WAMU was the dumbest bank ever. I have 2 credit cards with them, $5,000 each. They gave me one, a month later let me open a second account.
lorien1973 on October 1, 2008 at 11:59 PM
Common sense is the root of complex subjects but an education does not guarantee it’s recognition. That’s why elitists like yourself are so often wrong in spite of your perception of superiority. ;)
FloatingRock on October 2, 2008 at 12:02 AM
Mblockquote>WAMU was the dumbest bank ever. I have 2 credit cards with them, $5,000 each. They gave me one, a month later let me open a second account.
lorien1973 on October 1, 2008 at 11:59 PM
WAMU has never, EVER sent me ANYTHING before… I live in the midwest where WAMU doesn’t have any branches or local presence Obviously this was a hail mary pass…
Skywise on October 2, 2008 at 12:05 AM
Wooden Arrows pass with bail-out amendment.
At least posterity will have a name to recall THIS particular bail-out from all others, ‘WOODEN ARROWS’ feigning broken-arrow.
Jim DeMint and Mark Levin are discussing it tonight.
I’m with DeMint on this chicanery; the entire year has been one false story after another from Paulson to Congress. There is absolutely no reason to trust what Paulson is saying.
For Bush to have appointed Paulson is Bush’s fault; as if having appointed Paulson thereby excuses Bush from all the lies and ploys the Progressive Democrats are cramming down America’s throat. Bush is not excused for the appointment; Bush is not excused for believing Paulson; Bush is not excused for pushing Congress to endorse Paulson’s folly; and Bush is NOT excused for tampering with the POTUS election dragging McCain into this economic fiasco. Bush meant to warp the Republican Party into his own Compassionate Progressive likeness.
maverick muse on October 2, 2008 at 12:05 AM
Call your congressman and hope someone in Congress supports us and not just themselves.
JIMV on October 1, 2008 at 11:55 PM
I believe all of my state congressionals voted for the original piece of shit sans one brave woman, you will get no hope from Minnesota.
Bishop on October 2, 2008 at 12:06 AM
Oh look, just one more way that Obama and McCain are the same. Let me count the ways…
McCain-Feingold: check
Illegal immigration: check
“Living Constitution” judges: check
Embryonic stem cell research: check
Global warming: check
2nd Amendment: check
Populist views of economics: check
Voting “yea” on today’s bailout: check
I just got my absentee ballot in the mail today. It’s a shame there isn’t a “None of the Above” choice on it.
Send_Me on October 2, 2008 at 12:07 AM
That is all conspiracy theory. I don’t believe any of it except that China isn’t buying US Treasuries. After all, the yield is now very low. It’s not an immediate problem because plenty of other investors will buy the Treasuries.
The problem is that the market for mortgage backed securities has ground to a halt. There is no market clearing price. Banks can’t sell the MBS at the price buyers want to pay, because if they sell it, it is no longer a Tier 3 asset, and they have to apply it to the main part of their balance sheet, which could cause them to go broke or for the FDIC to seize them as a failed bank. On the other hand, buyers don’t want to pay more because the complex nature of the MBS is such that they just offer pennies on the dollar.
What this does is create a market by putting the best minds to work on figuring out how to value these MBS, and then putting monetary values on a number of MBS papers. Suddenly, buyers from all over the world will know how to value this stuff, and will be willing to pay more. Banks will be able to sell it at a higher price and protect their capital ratios. With the money banks get from buying it, they can use to bolster their capital ratios, which means they can lend.
With banks lending, capitalism will not take a dirt nap.
indythinker on October 2, 2008 at 12:07 AM
Whether phronesis is an elitist, I’ll leave to others. But your quote reminded me of one of Reagan’s:
“it’s not that liberals are ignorant; it’s just that they know so much that isn’t so.”
Some of his speeches are filled with a treasure trove of one liners about the elitist liberals of his day. They are so good, they stand the test of time.
BryanS on October 2, 2008 at 12:07 AM
‘
I meant “with the money banks get from selling it”
Oh for an edit comment function here at HA.
indythinker on October 2, 2008 at 12:08 AM
By the way, the owners of WaMu are not getting bailed out. They lost all of their investment in the company. Additionally, anyone who lent WaMu money, like other banks, will not get anything back.
The Paulson plan won’t change that.
indythinker on October 2, 2008 at 12:11 AM
Uh, why? If they are poor investments except for US Gov intervention, they will be poor investments after intervention as well.
This may get them some of them off of banks books, but WON’T create a market.
Just becaue the government overpays for a wrench (as they do with tools), it doesn’t mean I will overpay for one.
Romeo13 on October 2, 2008 at 12:13 AM
amazing those voting no most are up for relection in close races. The ones up for relection is safe seats voted yes.
Only a few like Demint and Shelby voted no because of principles. I would add Sessions to that list but not sure if his race is tight or not. Vitter also.
unseen on October 2, 2008 at 12:14 AM
All this business of being willing to lose a campaign in order to win a war applies to THIS LEGISLATION as much as to any other campaign abroad.
McCain needs to delineate for himself the dichotomy that exists juxtaposing this bill endorsement against being the Maverick Fiscal Conservative Reformer.
We all know that McCain is a great mediator and bipartisan statesman. What we are disappointed to find is that the fiscal conservative fell for the President who begged for help to save our Country First. Open the eyes, smell the coffee. Country First means DEFEAT this legislative enslavement of America’s free enterprise economy. Don’t get caught up in proving the wrong point as right in order to maintain your honor or integrity; because corruption does not abide virtue, it corrupts virtue.
maverick muse on October 2, 2008 at 12:14 AM
No offense, but I trust Jim DeMint. I certainly trust him over Paulson and sadly, even President Bush. He’s probably the best senator we’ve got on the conservative side. His theory may not be correct, but the very fact that he is willing to say on the record that he believes China and the Saudis have threatened us is a big deal. He isn’t a frivolous man. He wouldn’t say that on a national broadcast without cause. Not to mention, over the past 24 hours other congressman have said the same thing, also on national programs. If it isn’t true, why wouldn’t the Bush Administration squelch it before it becomes widely disseminated?
I will grant you he could be wrong. But he could also be right. There are many things about the way this has unfolded that pass the smell test.
flyfisher on October 2, 2008 at 12:15 AM
Skywise and Vashta.Nerada, Europe had their own real estate bubble. It has now popped.
indythinker on October 2, 2008 at 12:15 AM
That’s quite the soapbox you are standing on!
trailboss on October 2, 2008 at 12:16 AM
Flyfisher – Jim DeMint is wrong. If China tried to blackmail us, they would be making an incredibly foolish mistake. It would already be a campaign issue for McCain, since he can say we need to stop Obama from spending us to death.
China is not that dumb. Their plans for world domination are much more subtle and under the surface.
indythinker on October 2, 2008 at 12:17 AM
So your theories are more informed than Senator DeMint’s?
I agree the ChiComs would be foolish to blackmail us, but they don’t think like we do. Also, if they sense that we are about to go down the tubes, how can you be so sure they wouldn’t take the risk? We are broke, our dollar has fallen, we’re war weary, we’ve got a lame duck in the White House, we’ve got a serious energy problem, etc.
flyfisher on October 2, 2008 at 12:23 AM
Where are you seeing this idea from DeMint? I can’t find it anywhere.
trailboss on October 2, 2008 at 12:24 AM
Romeo13 – the nature of the assets in question is complex. It is not just “5% interest, compounded monthly, with such and such payments due….”
Banks like Fannie and Freddie bought individual mortgages from the mortgage places that had sprung up in strip malls all across America. They they bundled thousands of mortgages, some subprime, some prime, etc, into one “product.” They might have added student loans, credit card payments, mutual fund fees, and who knows what else. Then they took this massive chunk and paid Standard & Poors or Moodys to rate it AAA. They gave it the ratings gold standard.
Then they hacked up the “product” into all kinds of branches, or tranches. The tranches had a right to receive payments of a certain kind, and are often conditioned on other things beyond control, like whether another tranche got paid or what whether it will rain in London on Thursday (I exaggerate slightly).
There are tens of thousands of these “products” and tranches that have landed all over the place. They are huge and unwieldy. They can’t be easily split because of how the “products” were made and then split apart.
There are about a dozen people or so who know how to actually value this stuff. They can’t do the work, though, unless they have all the data they need. The Paulson plan will create a market mechanism to value and buy and sell these products.
indythinker on October 2, 2008 at 12:24 AM
I have a theory (as yet, not backed up by any kind of research whatsoever) that all great civilisations eventually fell due to Liberal self-destruction.
This could take the form of high taxation for schemes that prop up the feckless, or it might be Michael Moore-style self-hatred. Perhaps some civilizations fell due to a loss of appetite for self-preservation or mass-immigration resulting (with liberal assistance) in the the watering down of the dominant culture that made hem strong in the first place. Or maybe just a combination of facts.
Certainly the British Empire was lost after WW2 because the first socialist leadership got it into everyone’s heads that our empire was evil.
uptight on October 2, 2008 at 12:26 AM
China’s entire economic growth is dependent on US consumers buying their stuff. Their factories often don’t work unless American citizens are there to manage them. China is getting stronger, but they aren’t strong enough to blackmail us.
I do think Paulson should make a public statement about this, and also rebut any other rumors.
indythinker on October 2, 2008 at 12:28 AM
The empire was evil.
trailboss on October 2, 2008 at 12:29 AM
trailboss on October 2, 2008 at 12:16 AM
At least that soap box defines what does not exist though I wish otherwise.
maverick muse on October 2, 2008 at 12:30 AM
He discussed it with Mark Levin a few hours ago. You can listen here. The interview is roughly 18 minutes into the program.
And to Indythinker, I am just trying to make sense of all of this, just as you are. I certainly have no inside information. I’m not going to argue over the relative merits of Senator DeMint’s theory. I referenced his comments because I found them interesting and, if true, infuriating. He may be wrong, but I am unwilling to automatically dismiss his opinion.
flyfisher on October 2, 2008 at 12:30 AM
The FDIC has $45 billion in its fund.
If JP Morgan had not absorbed WaMu, the FDIC fund would now have zero.
With the Paulson plan, many bank failures are on the way. Without the Paulson plan, every bank is going to fail except for four or five banks.
indythinker on October 2, 2008 at 12:35 AM
I don’t disagree with you. Blackmail from the Chinese seems to make little sense. Then again, they play for the long term. Who knows how they see this? Remember, Paulson is well-connected to the Chinese. Also, our government would be totally broke if the Chinese and the Saudis stopped loaning us cash. Maybe they believe they have us by the short hairs. I just don’t know.
flyfisher on October 2, 2008 at 12:35 AM
Don’t doubt now that foreign entities owning our debts would not play to their own advantage. Argue as you like as to what would be to their advantage. That does not relieve the pressure during a global economic crunch to demand at least SOME repayment from the US before lending the US more. Particularly while China manipulates its own game of RISK making BBFE with Russia that just invaded Georgia and won’t leave. Particularly while bad press occurs regarding China exploiting the African nations into slavery. What all is going on internationally and/or at the UN as America grovels over Paulson’s Folly?
maverick muse on October 2, 2008 at 12:38 AM
How about this for the name of this thing:
H. R. 1424 As Amended; Paul Wellstone Mental Health and Addiction Equity Act of 2007
Does it create the Obama-Ayers Mental Hospital for the Criminally Insane?
indythinker on October 2, 2008 at 12:38 AM
OK, if you believe that, then we really do need the Paulson plan or the Chinese will do something to us. I hope you call up your Rep and ask him to vote for it.
indythinker on October 2, 2008 at 12:40 AM
You sound like you know your Stuff, indythinker, so I will take your advice and not pull most or all of my funds out of money market funds and stash it in closets and under the bed
My grandfather was in his mid-thirties when the worldwide Crash hit Europe. Germany got hit the worst, of course, but it was Very Bad everywhere: a rapid deflation as economies contracted, greately worsened and accelerated by trade barriers thrown up in a panic as governments tried to protect large employers in their countries
He lived another half-century, and told anyone who would listen to never, ever buy stocks. Govt-insured ‘money market’ savings accounts were the only Safe way to go, so as a result of all that consistent gloom-advice while I was growing up, I never bought a single share of stock
When he died, his suits had US and German currency in the pockets, and the rest of his funds were in savings accounts. The legacy of that one disaster………
Janos Hunyadi on October 2, 2008 at 12:44 AM
I emphasized the word “now” because if Senator DeMint is correct, that word may be key. If what I’ve read is correct, the initial version of the bill did not contain the foreign asset purchase provision. But according to Rep. Sherman, Paulson now says that President Bush will veto any bill that does not contain that language.
Is it possible that Paulson triggered a response from foreign governments when he started his Paulson Revere ride around Washington shouting the economy is falling, the economy is falling? Once word got out, wouldn’t it be logical for our lenders to essentially blackmail us? Think of it as a margin call from our Asian friends.
flyfisher on October 2, 2008 at 12:44 AM
KGB theory of what is happening to bring socialism to this country:
Stage 1: 15-20 years to strip a generation of its morality through the education system. Check.
Stage 2: 2-5 years to wreck the nation’s economy with bad policy. Check.
Stage 3: 6 weeks to destabilize the economy so that the following are scarce: capital, gas, food, jobs. [What happens if Pelosi kills the bill again?]
Stage 4: The government takes over to “stabilize” the country in its time of need, replacing freedoms with “stabilizing the economy.”
Freaky weird, I tell you…the video is from 1985!
JustTruth101 on October 1, 2008 at 9:56 PM
As with the fall of all great powers, the plans of the enemy were not hidden, but proclaimed out loud…
Time for another revolution….
jojostan on October 2, 2008 at 12:53 AM
Again, I never said I believed it. I don’t know what to believe. I think I am still against a bailout. But, if Senator DeMint’s theory is correct, this may be just as much of a foreign policy crisis as a financial one and it needs to be considered by all in that light. Without having seriously considered it, my first instinct would be to tell them to shove it. I suspect we are in for some level of calamity, regardless. It’s not the fault of the U.S. taxpayer that the ChiComs bought junk paper peddled by Goldman Sachs. Why borrow money to repay loans so we can continue to borrow? We need free market solutions and we need them fast!
Oh well, I am sufficiently depressed for one night. Thanks to one and all for a lively discussion.
flyfisher on October 2, 2008 at 12:55 AM
Supposing DeMint is correct, his theory is that the Saudis and Chinese are saying exactly what I would say to a borrower in that situation = Look, I’ve been saddled with these toxic investments, and before I can loan you any more money, I need you to take them off my hands.
Not exactly a Chicom conspiracy – it’s the result of our own overspending and indebtedness that this theory might be true.
trailboss on October 2, 2008 at 12:56 AM
Wow. Interesting story.
For context, the German hyperinflation in the 20s is different than what is happening now. Germany couldn’t pay the WW1 debts that the Allies imposed on it. In response, Germany printed money. A lot of money. The supply of Reichsmarks increased rapidly, and outpaced the demand for Reichmarks. This caused the prices of things as listed in Reichmarks to increase exponentially. The resulting economic chaos surely brought a lot of companies down. Companies can only make money reliably if the world around them is fairly stable. The US is fairly stable today. Germany in the 20s wasn’t. The US in the 30s wasn’t, either.
Here, the Fed is printing money. They are doing so at a measured pace. The key money supply indicator, M2, has remained relatively constant over the past year. Had the Fed not printed money, the money supply would have been down significantly and we would be in a steep depression already.
If the wheels come off, and M2 increases, we will here lots of dire talk about inflation. The news will constantly talk about inflation. As you know, that is not the talk now. If that ever happens buy gold, diamonds, commodities, and such.
The problem now is deflation. For example, commodities, stock prices, debt, and real estate are declining in value as measured in dollars. To combat deflation, you want to buy as much gold as you can.
The Federal Reserve is staffed by very smart people like Bernanke. They are wisely charting their course, avoiding both inflation and deflation.
By the way, money market funds can be federally insured. You may wish to check with the institution to see if it has ESF (Emergency Stabilization Fund) insurance. If so, you’re already covered. Most likely, it does have the ESF insurance.
indythinker on October 2, 2008 at 12:56 AM
I am wrong!!
I should have said The problem now is deflation. For example, commodities, stock prices, debt, and real estate are declining in value as measured in dollars. To combat deflation, you want to keep your money in dollars.
indythinker on October 2, 2008 at 12:58 AM
No ‘plan’ is needed. All that crap happens in the natural course of capitalist/democratic societies. It’s called making bad choices, and continuing to make them over time.
trailboss on October 2, 2008 at 12:59 AM
flyfisher – it definitely is a foreign policy crisis, too. This whole thing is caused by too much debt — govenrment debt, corporate debt, and individual debt.
Americans need to save more money. Just put some of your paycheck in a savings account, let it sit in there, don’t tap it, and watch it grow. If every American did that, we would not have this crisis in any shape or form.
indythinker on October 2, 2008 at 1:00 AM
If so it will probably look something like this.
FloatingRock on October 2, 2008 at 1:00 AM
We would also be immune from Chicom threats, if any, because banks could use their depositor’s money to buy all the government’s debt from the Chinese, should the Chinese start selling it. We would have so much wealth stored up, we could laugh at any threat.
indythinker on October 2, 2008 at 1:01 AM
Henry Paulson’s been a disaster as Secretary of the Treasury. He should’ve been fired weeks ago.
As late as May 2008 he was claiming the worst of the mortgage crisis had passed and that only “a few bumps” remanined.
Apparently those were Everest sized bumps.
But yeah all us financial ignoramuses should just shut up and fork over that $700 billion dollars without a murmur. Sure that $700 billion is an admittedly arbitrary figure, and most likely the U.S. will have to borrow it. But hey we have to do something. Even if it could very well mean surrendering more of our economic liberties for the promise of economic safety.
Fortunately we have to to the same politicians and great minds who got us into this mess working tirelessly to get us out of it. What could possibly go wrong?
Mike Honcho on October 2, 2008 at 1:03 AM
Regarding this issue, I do think one should put more weight on the opinions of those who have a decent understanding of economics and the financial markets both in theory and in practice. There are a number of people whose knowledge in these areas surpasses mine, and I take their counsel very seriously. On a complicated issue such as this, I don’t think it prudent to dismiss all knowledge and expertise due to extreme egalitarianism or populism. And I would hope that this would qualify as common sense, floatingrock.
phronesis on October 2, 2008 at 1:03 AM
Agreed on saving. I’ve been a Dave Ramsey fan for ten years. Where I depart from Dave is that I got totally out of stocks about a year ago, and I advised my relatives to do the same. My father-in-law didn’t listen and I have learned recently that he had lost more than $2 million since I gave him the advice. (I take no satisfaction. I want my wife to inherit as much as possible!) He trusted his Merrill broker to his detriment. The last I heard he was still in equities, trying to get the $2 million back. There is no telling what he’s lost this week.
flyfisher on October 2, 2008 at 1:09 AM
I know the context, indythinker: the hyper-inflation of the early 20s made Germany especially vulnerable when worlswide deflation hit suddenly in 1930. Civil servants had to take 20 % pay cuts and prices dropped, but the economy had essentially froze.
Some companies which had survived the crazy-inflation of the early 20s ( by using forgeign currency ) were forced out of business; new small businesses were cut down like wheat because of no credit and no customers with cash
Ironically, Hitler’s solution was to borrow and spend at a reckless pace–on the assumption that conquered assets in neighboring countries would pay the huge debt he incurred
Obama could invade Pakistan and seize their assets to pay off some of his debts…….
Janos Hunyadi on October 2, 2008 at 1:10 AM
Yep. That does keep you at the mercy of lenders. Well, I hope all works out for you.
csdeven on October 2, 2008 at 1:14 AM
This issue encompasses far more than economics alone.
FloatingRock on October 2, 2008 at 1:14 AM
Here in CA. A bank in the Netherlands, bought our bank. They named it RoboBank. Over a month ago, a friend told me that Wamu, Wachovia and Robo were going to fold. He was right about two, maybe three. I was the main courier for Robobank. But they cut out the Operation Center. That is where I went twice a day. I made great money. They also laid off 400 employees. It was sad to lose good money. I am still a courier and have a nice route. But over half the pay. But life goes on.
sheebe on October 2, 2008 at 1:18 AM
The Chinese are happy. Their waiting for an August payment.
When they get some cash on account they’ll start feeding our addiction to borrowed money again, especially since we now owe for an over charge penalty on our revolving card account.
Speakup on October 2, 2008 at 1:19 AM
SHEETS/BECK 08!!!
equanimous on October 2, 2008 at 1:24 AM
I agree with that. But some people believe this crisis won’t affect the mainstreet american economy in a signficant way and are basing their opinion on this belief. This belief is simply wrong, and those who hold it might very well change their opinion on the rescue if they had a better understanding of the issues.
phronesis on October 2, 2008 at 1:25 AM
My parents have been telling me since I was a little kid all they needed was one generation of teachers, journalists and politicians. The hippies of the 60′s have grown up and are in those very positions. We are being defetaed by the enemy within. Had it not been for liberalism forcing the banks to make high risk loans or get out of business/face redlining lawsuits/etc., we would not be in this mess.
JustTruth101 on October 2, 2008 at 1:30 AM
It is the duty of the patriot to protect his country from its government.
- Thomas Paine
MB4 on October 2, 2008 at 1:30 AM
The fact of the matter is that people are willing to vote for the next version of Mao Zedong, all because they want to get back at John McCain.
Poor form, y’all.
Sakaki on October 2, 2008 at 1:30 AM
This is what we know for sure about the bailout into socialism you are shilling for…..even the “experts” cannot guarantee that this will work. Every single person who has a hard on to pass this bill ALWAYS ends with the caveat that they “cannot guarantee this will work”.
We KNOW for a fact that a free market approach will work. They (congress) don’t want the free market approach because their buddies are the ones whose tits are in a wringer and they are desperate to shore up the failures because those are the people they are beholding to.
And no matter what you say or how much you scream the sky is falling, those entities that will go after this 700 billion have already FAILED. So the tax payers money is going to failed enterprises.
Why is that?
csdeven on October 2, 2008 at 1:34 AM
Yup, and they are denying the evidence right in front of them. All they have to do is have a conversation with a neighbor trying to finance a car, home or education loan, to talk to a small biz owner. My bosses own a mid-size firm that’s been in biz since 1973 and employ about 200 people. He describes the situation as “cash-starved.” All overnight travel at our company is nixed: daytrips only. If we miss out on a contract or two, so be it. We’ll make a little less money, sales people will get a little less in commission and bonus, so our “economic output” shrinks a little.
The car sales go down, same thing to their folks, their economic output shrinks a little. This will add up. This is not really all that hard to understand.
i think the conspiracy is that the democrats are trying to tank the economy to get Obama elected. I have only circumstantial evidence, however, on that charge.
JustTruth101 on October 2, 2008 at 1:37 AM
Some, maybe. However most seem to believe that while there is a problem, the correct solution is to actually solve the underlying causes while allowing the market to adjust as necessary. And if that’s not sufficient, instead of adopting inferior socialist policies, proposed by many of the same crooks who’ve actually caused this mess, boost the free market by cutting taxes and so forth. It doesn’t take an economist to realize that capitalism is superior to socialism.
On the flip side of the argument, some of those advocating this bailout are trying to avoid responsibility for their own mistakes. For example, some who bought homes, (even with conventional loans), near the height of the real estate bubble hope this bailout will stabilize home prices, which need to go down, (it sounds like they have in some areas, but in other areas they still require a lot of adjustment). And a commentator at MichelleMalkin.com yesterday stated that she was too old to work and her SS check wasn’t enough so she relied on her investments in the stock market to pay the bills.
So it cannot be fairly stated that ignorance is exclusive to only one side of this issue.
But, as you’ve agreed, there are other aspect of this issue aside from economics. Some people think our government is already too powerful and squelching of freedom and liberty. It shouldn’t be surprising, considering America’s history, that some people place freedom and liberty above profit and greed. People have died for freedom and liberty.
FloatingRock on October 2, 2008 at 1:57 AM
The sad fact is that some people would gladly adopt a subset of his policies hoping to temporarily preserve their financial status.
FloatingRock on October 2, 2008 at 2:04 AM
As a Libertarian, I am definitely not thrilled about this bailout. But if it doesn’t happen, a lot of “innocent bystanders” are going to get hurt by it. A good analogy would be that of a major car accident on a major freeway: You might not have caused the accident or even been involved in it, but you’re still screwed and not going anywhere until they clear the wreck.
Dagnar on October 2, 2008 at 2:17 AM
How true. Since the government is supposed to be us, what a sad state we’re at as a country.
Entelechy on October 2, 2008 at 3:09 AM
Cheer up, the worst is yet to come.
- Mom
MB4 on October 2, 2008 at 3:21 AM
Congressmen are like diapers. You need to change them often, and for the same reason.
- Pete McCloskey
MB4 on October 2, 2008 at 3:23 AM
What good fortune for governments that the people do not think.
- Adolf Hitler
MB4 on October 2, 2008 at 3:24 AM
Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.
- Groucho Marx
MB4 on October 2, 2008 at 3:25 AM
Men have become the tools of their tools.
- Henry Thoreau)
MB4 on October 2, 2008 at 3:27 AM
It could probably be shown by facts and figures that there is no distinctly American criminal class except Congress.
- Mark Twain
Suppose you were an idiot and suppose you were a member of Congress. But I repeat myself.
- Mark Twain
MB4 on October 2, 2008 at 3:32 AM
What do you expect when the only choices for our next president are US Senators.
Oh Sarahhhh…Oh Sarahhhh…..
percysunshine on October 2, 2008 at 6:40 AM
Well, that sure solved it. CNBC this morning is talking about how they don’t think this will “unfreeze” the credit markets and we are going to have a 9 month deep recessin and unemployment is going above 7%.
I wonder when it is that we are going to find out who this money is going to by NAME?
CC
CapedConservative on October 2, 2008 at 6:45 AM
So Obama voted for extending tax cuts for the wealthy – the ones he said he was going to cut?
Hmmmm….
And Obama agreed to raise the insurance limits on deposits to $250,000? Obama helping the rich? Isn’t $250,000 the magic number that Obama says are the undertaxed, evil rich?
Hmmmm…is Obama a hypocrite – why did he vote to help the “rich”?
albill on October 2, 2008 at 6:49 AM
Welcome to slavery.
Pcoop on October 2, 2008 at 6:51 AM
I’m so excited…. I understand they are going to have Sergeant William Schumann (Old Shoe) give a speech to the recalcitrant members of the House…. I can’t wait.
CC
CapedConservative on October 2, 2008 at 6:53 AM
I posted on another board yesterday that I thought China might be behind the “crisis”. The American people have a gut reaction that is usually right and neither Congress or the President have made a solid case for this emergency bailout. There has to be something they are not telling us.
But if China is going to demand payment on their debt purchases, sell off US assets, and not invest in US, I can see the emergency.
huckleberryfriend on October 2, 2008 at 7:00 AM
I’ve seen it said more than once that the money is headed directly out of the United States. It appears you agree with that. At the end of the day, we are going to have exactly what we have now with a trillion dollars less money. I’ve experienced disappointment before… burned the fuel to go fishing 60 miles offshore and didn’t catch any fish. The price tag was just $999,999,999,500.00 less.
CC
CapedConservative on October 2, 2008 at 7:07 AM
This bill is nothing more than the original bill, with an added 300 PAGES of pork!
The Senate was always going to pass the original bill, and with these “sweeteners”, heck. . .more freebies the merrier.
But there is no reason that this bill should make it though the House where the “other” one failed.
This bill is terrible. And no one is talking about the totally UNRELATED crap that has been mushed into it: Such as the sweeping and expensive “Everyone’s gotta have mental health coverage” socialized psychiatry and psychoanalysis bill that has simply been plotzed into this economic bailout bill.
This must be rejected. The House cannot pass it. And I would strongly support every Republican in the House, even those who voted FOR the prior bill, to vote against this one.
Talk about a “crap sandwich.” This just has extra helpings of crap added.
seanrobins on October 2, 2008 at 7:35 AM
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