But isn’t this a gov’t based manipulation of stock prices? What about the banks that do not get a govt investment? Doesn’t seem fair to them and messes with the incentives built into free enterprise. And what’s next. Auto industry? Aren’t these socialistic practises?

Mr_Magoo on October 10, 2008 at 12:37 PM

Sure seems so to me. But we’re being advised by all our leaders that the alternative is unthinkable, and that once we get through this crisis we can remove the governments presence from these heretofore private organizations.

How are we to know??

btw, if it wasn’t for FDIC insurance, we’d never put our money into banks. We only do because we know the gov’t backs the banks. From the perspective of private, individual depositors, banks were quais gov’t entities in the same way that the GSE’s were– private ownership and gov’t gtee’s. My local bank is a dinky little place even smaller than the Burger King next door. Without the gov’t backing them, I wouldn’t even park my car there.

JiangxiDad on October 10, 2008 at 12:48 PM

Vashta.Nerada on October 10, 2008 at 12:57 PM

My wife is mad at me this time.

JiangxiDad on October 10, 2008 at 1:04 PM

HOPEFULLY, they will stand down later.

Mr_Magoo on October 10, 2008 at 12:57 PM

That’s the problem. We, the people, no longer think we can get our elected officials to do what we want. Under normal circumstances, we’d elect people in the future who pledge to remove the gov’t from those private sector entities they are buying into now.

But that’s our problem, the problem of the body politic, and not necessarily indicative of the notion that this type of intervention at this time is wrong.

Back in the days of Andrew Jackson, we had enormous economic difficulties, including depression, great conflict over the national debt and the idea of a national bank. The economy was worse than it is now, and yet our democracy and economy survived, and thrived. Our politics may be more divisive now, so it’s hard to say what the effect will be on future economic decisions.

JiangxiDad on October 10, 2008 at 1:14 PM

MB4 on October 10, 2008 at 1:11 PM

Thank you and Aengus for that Twain quote. Here is the one from TR I was thinking of in regard to the attempts to right the economy:

“It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”
Teddy Roosevelt.
“Citizenship in a Republic,”
Speech at the Sorbonne, Paris, April 23, 1910

JiangxiDad on October 10, 2008 at 1:22 PM

I’d say China has played this game stunningly.

Without hesitation, they focus on the fundamental necessity for a healthy, growing economy…cheap oil.

Saltysam on October 10, 2008 at 1:30 PM

sigh. There are certain advantages to one party rule. But like us, they won’t escape the end-result of increasing affluence and liberalization. Some time in the future, their own internal political opposition will remove their ability to move “without hesitation.” It’s apparently a cyclical thing–and this isn’t the first time China has gone through it. It took them roughly 150 years to begin to recover their former greatness. I sometimes wonder if there are lessons in that for us.

JiangxiDad on October 10, 2008 at 1:43 PM

Their increasing affluence and liberalization is a process of moving toward economic freedom and, perhaps, a movement toward more liberty.

The West is traveling in an opposite direction with their “affluence and liberalization”.

Saltysam on October 10, 2008 at 1:47 PM

That’s exactly what I mean about it being a cycle. They’re just at a different point than we are, but they’ll get there.

I kept this comment from some guy here. It’s what I’m talking about:

At about the time our original 13 states adopted their new constitution, in the year 1787, Alexander Tyler (a Scottish history professor at The University of Edinborough) had this to say about “The Fall of The Athenian Republic” some 2,000 years prior.
“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, (which is) always followed by a dictatorship.”
“The average age of the worlds greatest civilizations from the beginning of history, has been about 200 years. During those 200 years, these nations always progressed through the following sequence:
From Bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.”
Wade on July 4, 2008 at 4:51 PM

JiangxiDad on October 10, 2008 at 1:51 PM

Some guy is suggesting Paulson is about to nationalize Goldmand and Morgan, today or this weekend.

With the legislation’s main mechanism—an auction system to purchase bad mortgage-based securities—still weeks away from implementation, Paulson may have to inject capital into any number of financial institutions—even non-depository ones like investment banks, insurers and hedge funds.

“I don’t wish to spread alarm on the line people but the big issue confronting the market is I’m afraid the health and sustainability of Morgan Stanley (NYSE:MS – News) and Goldman Sachs (NYSE: gs),” Hugh Hendry, Partner and CIO at Eclectica, told CNBC. “It is unimaginable that they can be allowed to go, I suspect that they will be nationalized at some point today or over the weekend,” he add.

Some say the Emergency Economic Stabilization Act of 2008’s vague language gives Paulson almost unlimited power to intervene.

JiangxiDad on October 10, 2008 at 3:34 PM