Home > Jay Bookman > Archives > 2008 > September > 24 > Entry
DEL.ICIO.USPaulson plan is Wall Street-centric
The Atlanta Journal-Constitution
Nobody knows if a huge taxpayer-funded bailout of Wall Street will stave off financial disaster. But without it, the odds of a collapse rise significantly.
So it’s not a question of whether to do it, but how to do it. And unfortunately, the proposal initially advanced by the Bush administration is seriously flawed, in large part because it reflects the same mind-set and attitude that helped cause the crisis.
For example, in his initial three-page proposal, Treasury Secretary Henry Paulson advocated giving himself unchecked authority to spend $700 billion in taxpayers’ money without any oversight or review whatsoever. The language of the proposal was stark:
“The Secretary is authorized to purchase … on such terms and conditions as determined by the Secretary …”
“The Secretary is authorized to take such actions as the Secretary deems necessary …”
“Decisions by the Secretary pursuant to the authority of this Act are nonreviewable … and may not be reviewed by any court of law or any administrative agency.”
In other words, to cure a situation worsened or caused by a failure to exercise oversight, the Bush administration proposed a solution in which oversight would be abandoned altogether. Reaction against that power grab was harsh and bipartisan, and in comments to a Senate committee Tuesday, Paulson denied he had ever contemplated taking such powers without oversight.
So that issue is settled.
Paulson and others have also tried to block attempts to limit executive compensation in firms that take advantage of the bailout fund. Paulson, for example, warned that such limits might discourage CEOs from taking advantage of the bailout.
“If we design it so it’s punitive and so institutions aren’t going to participate, this won’t work the way we need it to work,” Paulson said.
If you think about it, that’s a pretty incredible statement. The Treasury secretary — himself the former chairman and CEO of Goldman Sachs — is admitting that to preserve their exorbitant pay packages, corporate CEOs might bar their companies from participating in the bailout, even if doing so would endanger their companies’ continued existence and the nation as a whole.
Whatever the source, that is a damning indictment of the Wall Street culture. But it is particularly striking coming from an insider such as Paulson, and it reflects Wall Street’s belief that finance-industry executives have some God-granted right to extremely lucrative bonuses regardless of performance.
Just last year, Wall Street’s top five financial firms — including names such as Lehman Brothers and Bear Stearns — awarded $39 billion in bonuses at a time when stockholder value in those companies fell by $74 billion.
And amazingly, this current crisis hasn’t chastened the industry a bit. Over the weekend, news broke that eight former Lehman Brothers executives, along with 200 other “key” former Lehman employees, would be given $2.5 billion in bonuses from Barclay’s in a deal to purchase part of the bankrupt Lehmans. So while Lehman stockholders get little or nothing, the executives who helped run the company into the ground get a whole new round of bonuses.
Even some conservatives now agree that compensation must be addressed in the bailout. “Severance packages should be at risk,” the Heritage Foundation advises in its analysis of the bailout. “In order to ensure that incompetent executives do not benefit from their criminal mismanagement, the new RTC should be allowed to refer cases to the Justice Department for civil suits to recover bonuses or termination compensation received by those individuals.”
With his opposition to compensation limits, it’s clear that Paulson is seeing the crisis through the eyes of a Wall Street financier, which is only natural given his background. It was telling that in his prepared comments Tuesday, the Treasury secretary blamed the crisis on banks making bad loans and homeowners buying more house than they could afford, while saying nothing about the very considerable role that he and his former colleagues on Wall Street played.
That world view extends to Paulson’s argument that taxpayers should not be allowed to share in any benefits that the bailout produces for financial firms. To Paulson’s mind, that requirement might discourage firms from participating in the bailout.
However, if companies are healthy enough to decide not to participate, they didn’t really need the bailout in the first place. Once again, Paulson’s instincts betray him. As with the compensation question, he wants to protect Wall Street first, out of the mistaken if honest belief that by protecting Wall Street he protects the best interests of the country.
That is simply not true. If taxpayers are being required to cough up $2,300 for every man, woman and child in the country to finance this bailout, basic fairness requires that their direct interests be protected first. Fairness also requires that Wall Street be required to share in the pain.
In fact, we already have a useful and longstanding precedent for that approach. Under federal law, if you carelessly start a forest fire or range fire, the government has the right to bill you for the cost of bringing that fire under control. There’s no reason that same logic shouldn’t apply to those on Wall Street who have also been playing with fire for far too long.
.JPG)
-1.JPG)
Services »
Comments
By hillbilly ragger
September 24, 2008 7:51 AM | Link to this
There you go again, sounding rational, asking sensible questions.
Anyway, obviously, we need to pass this NOW NOW NOW!!!
…so Republicans can run against us on what we’ve passed.
By AJC/DNC Management
September 24, 2008 7:58 AM | Link to this
The same people the libs want to “oversee” the bailout:
When Fannie and Freddie started selling shares in pools of subprime mortgages, they were spreading serious, unrecognized risk throughout the financial system. With their implicit government guarantee, they were able to borrow huge amounts to fuel an explosion in subprime mortgage lending, and to pump up the housing bubble overall to even greater extremes. They even began buying and stockpiling shares in subprime mortgage pools sold by others, which greatly encouraged even more subprime lending. As AEI economist Kevin Hassett noted on Monday at Bloomberg.com, “As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments.” This was the tip of the iceberg of trillions in increasingly dubious mortgage related securities.
Barney Frank, KKKlinton, the whole socialist cabal fought tooth and nail to prevent reforms to Fannie Mae and Freddie Mac that would have prevented this.
Now the libs want to give them the keys to the jail they should be locked up in?
When are we going to learn America?
The democrats want the economy ruined so that they can get votes.
By Heather
September 24, 2008 8:01 AM | Link to this
Jay, You are absolutely correct.
No way in hell should Repubs be allowed to get away with this injustice.
By Mike S
September 24, 2008 8:11 AM | Link to this
Hey Paulson,
Let me see if I got this right. You come to me and ask me the “Taxpayer” to float you a loan to help out your buddies on Wall Street who made some bad investment decisions. Correct? My question to you is simple, what do you think I am *&^%$#@ NUTS!!!!?
By PRB
September 24, 2008 8:16 AM | Link to this
I’ll make a deal with the administration - You can have what you’re asking for, but no Republican can ever again say “this is the greatest democracy in the world.” Fair?
By hillbilly ragger
September 24, 2008 8:17 AM | Link to this
Dear American:
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 700 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with Mr. Phil Gramm, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transaction is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
Yours Faithfully Minister of Treasury Paulson
By Steve
September 24, 2008 8:21 AM | Link to this
The Treasury Secretary had the gall to say limiting payouts to executives who created this mess would be a “deal breaker”
Deal breaker!? We got no stinking deals. These aren’t their companies any more. How about we agree to limit their prison sentences for corruption, in return for…wait a minute, they have no say in this—they’re out! Talk about a bunch of greedy control freaks in denial. Paulson is nothing more than another inept manager made of the same cloth as those CEOs. If your guide gets you lost in the wilderness you don’t rely on him to find your way back. That’s just plain dangerous.
People you can leave a phone message with Reid, Pelosi, and your senators very easily. Be brief, be polite, but call. Google the names you want for the phone numbers. You don’t have to talk to anybody—the lines are busy. Just leave a message. No blank check bailout. The focus must be on behalf of the American taxpayer. This is a defining moment in history.
Seize the moment and take to the cyberspace streets. Yes, one voice (YOURS) does make a difference!
By BDAtlanta
September 24, 2008 8:24 AM | Link to this
Oh my!
Garrison Keillor rips McCain a new one and tears into the bailout…
Some say the tab might come to a trillion dollars. Nobody knows. And Mr. McCain has not one moment of doubt or regret. He switches from First Deregulation Church to Our Lady of Strict Vigilance like you might go from decaf to latte. Where is the straight talk? Does the man have no conscience?
It wasn’t their money they were playing with. It was yours. Where were the cops?
What we are seeing is the stuff of a novel, the public corruption of an American war hero. It is painful. First, there was his exploitation of a symbolic woman, an eager zealot who is so far out of her depth that it isn’t funny anymore. Anyone with a heart has to hurt for how Mr. McCain has made a fool of her. Never mind the persistent cheesiness of his attack ads. And now this chasm of debt and loss and the gentleman pretends to be shocked. He was there. He turned out the lights. He sent the regulators home.
http://www.salon.com/opinion/keillor/2008/09/24/mccain/
By GOPs got to go
September 24, 2008 8:24 AM | Link to this
Those foxes guarding that Wall Street Hen House have a lot of taxpayer blood dripping from their greedy little mouths. It has driven their “me first” blood thirst up to the number one priority yet again. I signed the internet petition last night for our loyal Republican Senators not to allow the Secretary of the Treasury more power than El Stupito Bush.
No congressional or judicial over sight? Is he on crack or just plain old insane? Did he bump his head too hard when Wall Street had that earth quake last week? Not only do I the taxpayer demand oversight, but I expect a healthy rate of return on my investment in Wall Street, interest to be paid directly back to my POA, Uncle Sam.
Everyone needs to call, write, email, or send a courier pigeon, whatever it takes to get the message across to Congress that we will not sign this blank check.
And just what is the rush for? It kind of reminds me of the rush to invade Iraq, and we all know how well that turned out for the American taxpayer. I have heard many so called experts over the last few days state the very same question. Hold you horses there Hoss, and think things through, listen to different opinions. Maybe give some money now and then come up with a better plan over the next month. I don’t know about the rest of you, but if I run into a really pushy salesman, the kind who tells you “You have to make a decision today, or the deal won’t be here tomorrow” it makes me suspicious. It makes me tell him to take a hike, sell it to the next bumpkin, dude. The only thing that doesn’t wait is death and taxes, and maybe we can file for an extension the tax thingy.
By Down in the South
September 24, 2008 8:27 AM | Link to this
I heard that Paulson himself is worth half a billion dollars. If this is so important to the country, I would invite him to poney up some money.
The Paulson plan would allow him to give his mother 50 billion dollars for an old pair of shoes and no one could ever challenge that expenditure. This is insanity.
By AJC/DNC Management
September 24, 2008 8:30 AM | Link to this
This is too simple to understand, I guess-
Paulson and Bernanke want oversight of the “bailout” becuase it is their responsibility to ensure that the economy of the United States does not falter. They are not lapdogs of big business, this is a childish concept that none of you can back up with any evidence. It is a comfort food theory for thumbsuckers.
democrats want control of the “bailout” so that they can lavish earmarks upon all of the hacks and community organizers that got us into this problem in the first place, just like they have for the last two decades. They want to increase their kkkampaign contributions. The failure of the United States economy would boost their standings in the polls, which is the only thing a democrat lives for. First chance they get, they will reward the deadbeats and choke the financial institutions to death.
Who do you trust?
By bearcasey
September 24, 2008 8:31 AM | Link to this
I have two words for the “Wall Street Weasels” and their governmet lackeys: “RUSSIAN REVOLUTION.” A few bolshevik firing squads would cure this prooblem. Yeah, “it can’t happpen here.” Keep telling yourself that!
By Suzanne
September 24, 2008 8:33 AM | Link to this
‘The Pirates of Washington Cove”, starring George Bush, John McCain and Henry Paulson. Guess which one’s heart is in the locked box? Neither one’s! They don’t have a heart!
Looking into this bill, you can easily assess that it is a robbery in progress without a weapon, except FEAR. The only thing the bankers and traders bring to the table is an empty money bag, looking to fill it. Yet they have the audacity to make demands on our money. This is insane! The republican scam artists really do believe that we are stupid. This ripoff won’t favor republicans or democrats which will result in the greatest bipartisan suffering since the depression.
Wake up America! This may be your final hour to once again make this “government of the people, for the people, and by the people.”
By AJC/DNC Management
September 24, 2008 8:33 AM | Link to this
What the libs do not want you to know:
The truth is that McCain is the only presidential candidate from either party who called for tighter regulation of the mortgage giants before the current crisis. On May 26, 2006, McCain signed on as a co-sponsor of the Federal Housing Enterprise Regulatory Reform Act. This bill, which would have established precisely the kind of oversight that Obama allegedly favors, was eventually killed by the Democrats. His official statement on that occasion shows that he was as prescient about the mortgage crisis as he was about the Iraq surge: “If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.”
By GOPs got to go
September 24, 2008 8:34 AM | Link to this
Ragger,
I nominated you for President but please do not plagiarize internet spam, albeit funny.
By Copyleft
September 24, 2008 8:35 AM | Link to this
Lack of oversight and accountability produced the current mess. And Paulson proposes a solution that has… get ready for it… no oversight and no accountability.
Boy, you’ve gotta hand it to these corporate tools for consistency, don’t you? No matter what the problem, they always offer the same solution.
By David
September 24, 2008 8:37 AM | Link to this
This is about politics, not economics.
Pass a trillion dollar bailout package, but make Wall Street and the wealthy pay for it by increasing their taxes. Bush will veto it, but it will paint the administration for what it supports, and few would blame the Democratic Congress.
By BDAtlanta
September 24, 2008 8:40 AM | Link to this
Looks like capitalism didn’t win the cold war after all. Socialism is the new new thing.
I want socialized health care next so I don’t have to move to Canada when I retire.
AJC/DNC, Where do you get that stuff you write? Is that Limbaugh or Hannity? Twisted
By Road Scholar
September 24, 2008 8:40 AM | Link to this
AJC/DNC: You state: “The democrats want the economy ruined so that they can get votes.” What is you basis for such a stupid and biased comment? It has been a Repub administration that has gotten us to where we are with this. It is a typically “Repub” industry that has gotten us to where we are today. And don’t hand me the cr*p that the Dem’s are in control of the Senate and House. Don’t state that Clinton is the cause; if you tax your memory, he had a repub Senate and House during his administration. A President doesn’t pass legislation by himself; he may veto it but the Senate can override it with 60 votes.
Our collective financial welfare as individuals and as a country is at stake.
By T
September 24, 2008 8:42 AM | Link to this
So, will Paulson be taking us out to dinner first? That would be the polite thing to do.
By Paul A
September 24, 2008 8:43 AM | Link to this
No way should the big guys on Wall Street win this one while the little guy is left carrying their garbage! The blame lies with large financial institution’s lending practices. They were reckless and unscrupulous in extending credit to these people who didn’t read the find print or didn’t understand what they were getting into. They literally sold the consumer down the river for that big commission they earned.
Greed, nothing more than greed!
By ByteMe
September 24, 2008 8:46 AM | Link to this
T: take-out Chinese food, of course.
By Paul
September 24, 2008 8:50 AM | Link to this
Wasn’t it just a couple days ago that McCain proposed an oversight board because he was opposed to giving the Treasury Secretary this much power? Didn’t his proposal also call for limiting executive pay to a few hundred grand, not millions?
Wasn’t he criticized here for being too quick, not knowing the facts, making proposals that didn’t address the problem because he couldn’t know the problems?
Couldn’t have had anything to do with the fact he’s the Republican nominee, could it? Especially when one considers his and Obama’s proposals aren’t all that dissimilar.
By T Rogers
September 24, 2008 8:51 AM | Link to this
At least they (Bush & company) haven’t figured out a means of linking anything short of complete worship of their ideas to terrorists. “If you don’t bail out a corporate exec making $50 million a year, you’re with the terrorists!”
The really sad thing is that while the above would make no sense at all to most Americans, a substantial portion of Bush’s refractory - 30% approval would agree unquestioningly.
Pavlov’s dog comes home to roost.
By ByteMe
September 24, 2008 8:52 AM | Link to this
Interesting tidbit from electoral-vote.com:
Rasmussen ran another poll on this yesterday. Now 44% oppose the bailout and 25% support it (was 37% - 28% a day earlier). What’s interesting is that support/opposition is pretty much independent of age, party, and ideology. One notable predictor, though, is education. People who didn’t graduate from high school are against it 43% to 22%, but people with graduate degrees are exactly evenly split. McCain supporters are against it 44% to 26% and Obama supporters are against it 46% to 26%. In short, opposition crosses every possible age, race, gender, ideological, and demographic line, with the exception of education. Congress had better watch out spending $700 billion of the taxpayers money and getting nothing in return when it is clear people really aren’t buying into the idea.
So why are people who have more education more likely to support this? Across every other way you slice the data, it comes up a loser, but when you have more education you’re more likely to support it.
I wasn’t polled, but I’m on the “no” side of the stats. I’d rather have a few dead bodies by the side of the road as a reminder to those who come along behind them that the stupid will be allowed to die. I’m willing to risk the deeper recession to ensure that the next secular bull market happens sooner and kicks a@@.
By AJC/DNC Management
September 24, 2008 8:53 AM | Link to this
What the democrats don’t want you to know:
Apparently Democrats in Congress aren’t satisfied with the billions of dollars that will be required to clean up their Fannie and Freddie mess. As the price for passing Treasury Secretary Hank Paulson’s asset-purchase plan, Democrats are pushing a plan to make it easier for borrowers to renege on their mortgage payments yet still keep their home.
Uh, isn’t that how we got here in the first place?
Duh.
By Tom
September 24, 2008 8:59 AM | Link to this
Scary and pathetic. McDunce and Palin. Half of the electorate revels in Palin’s total lack of intellectual qualifications. Added to McDunce, there exists a mad love of mediocracy in this country. The hillbillies shout, with great pride, “Sarah is one of us - she’s an ordinary person!” Yes indeed - utterly ordinary.
By Jennifer
September 24, 2008 9:00 AM | Link to this
Instead of spending $700 billion to bail out TAX AVOIDING Wall Street, why don’t they instead send it to every TAX PAYING citizen who makes under $250,000?
Stimulus anyone?
By Bosch
September 24, 2008 9:00 AM | Link to this
Let’s see - who came out with a kumbaya 12 point recovery plan almost the second this crisis broke? McCain.
Who met with top advisors and waited a few days to see how this is all being played out? Obama.
This is completely outrageous. I could’t agree with Jay more, and the funny thing is, this isn’t a Republican v. Democrat issue - it’s a middle class getting screwed issue. I think more people than not are seeing through this charade.
BUT BE PREPARED!!!
The Administration and John McCain will use this as a tool to promote the Democratically controlled Congress (and Barack Obama because he’s a Democrat) as a political ploy. They’ll use it as a means to promote the Dems as not caring about the middle class. If they don’t get their way, they’ll start using the fear factor and blaming the Dems without ANY admission of responsibility.
You know what’s coming.
DON’T FALL FOR IT PEOPLE!!!
By hillbilly ragger
September 24, 2008 9:01 AM | Link to this
GOP’s got, you write “please do not plagiarize internet spam.”
I didn’t—unlike the Luckotrool, who’s been asked nicely time and again, I did provide a cite via a link to the Intertoobz source. I’ll gladly give it again.
By JMW
September 24, 2008 9:05 AM | Link to this
I want to see a provision in this 700 billion dollar bill that says the rich will bleed like the rest of the common folk.
Add this to the bill: Every American that has a networth over one million dollars will have a flat tax due every year of 10% of their net worth. Do not tax the rich on profit or income- they always declare zero. Have the rich send 10% of their networth to the U.S. Treasury as TAX every year.
By hillbilly ragger
September 24, 2008 9:06 AM | Link to this
Bosch @ 9.00, true, McCain/Bush can try to do those things. I’ve no doubt that’s their plan to limp across the finish line to “victory” in Nov.
My gut tells me they’re out of political capital to pull it off.
By Bosch
September 24, 2008 9:08 AM | Link to this
McCain just can’t quit lying:
One of the giant mortgage companies at the heart of the credit crisis paid $15,000 a month from the end of 2005 through last month to a firm owned by Senator John McCain’s campaign manager, according to two people with direct knowledge of the arrangement. The disclosure undercuts a remark by Mr. McCain on Sunday night that the campaign manager, Rick Davis, had had no involvement with the company for the last several years
By GOPs got to go
September 24, 2008 9:08 AM | Link to this
As Forrest’s Mama always says,
“Stupid is as Stupid does”
and
“Life is like a box of Chocolates, you don’t always get what you want”…………….
Wall Street was stupid, but still wants to get the caramel nutty chew out of the box.
By BDAtlanta
September 24, 2008 9:11 AM | Link to this
AJC/DNC at 8:53
Apparently Democrats in Congress aren’t satisfied with the billions of dollars that will be required to clean up their Fannie and Freddie mess.
“Their” mess? Blame it on the Democrats? When it was a Republican congress that got rid of the oversight in the first place which led to this mess?
Look to Phil Gramm, your next Treasury Secretary, if you want to affix blame for this and Enron.
So AJC/DNC, you put other people’s writings in these blogs but you don’t source your stuff. What are you afraid of? That we will find out your source is Anne Coulter or Limbaugh, or some other nutcase?
By Bob M.
September 24, 2008 9:12 AM | Link to this
Everything the Rethuglicans have told us was a lie for the last eight years. What makes them more credible now? Super rich Paulson and all his buddies from the banking industry are trying to pull sleight of hand.
We need to slow the heck down here.
By JAY BOOKMAN
September 24, 2008 9:12 AM | Link to this
Management, last warning.
Cite the source of your borrowed material. Yes, I know, others cite borrowed material sometimes too.
You flood the thread with it.
By Paul
September 24, 2008 9:15 AM | Link to this
G’morning, Bosch
Aren’t the plans put forth by the candidates pretty darn similar?
It appears many people are not aware how a collapse of investor confidence could affect them. This is not an ‘us’ vs ‘them’ issue.
Wanda Sykes was on Leno last night. She was good - “what is it with this country? We won’t let rich people fail! If it looks like they’re gonna lose their money the poor folk have to bail them out!”
Elements of truth - but again, the spotlight on exec compensation (and I agree these guys should give it up - heck, I’ll even make a call for all the Congressmen and Senators who got campaign contributions from these companies or their employees ought to give it up, too) overshadows the overall impact on the economy.
By AJC/DNC Management
September 24, 2008 9:17 AM | Link to this
BDA: When you start to get even the most minimal grasp of what is happening and has happened with this mortgage crisis, get back with me.
Right now you are merely splashing around in the fever swamps.
Even the most hard coreof pinkkkos gave up on Gramm a week ago.
Dimwit.
By Bosch
September 24, 2008 9:17 AM | Link to this
hillbilly ragger,
My gut is starting to tell me the same thing. I’ve been very disappointed with the closeness of this election, there is no reason why Obama shouldn’t be ahead now by at least 30 points.
I don’t think this will set well with the American people, and the more that comes out in the media about the details, I think the American people won’t be fooled by this.
By LB
September 24, 2008 9:20 AM | Link to this
If the basic systemic problem is Liquidity, why not just divide the money as a Tax Rebate, and give every household $15,000. Shouldn’t take long for the dollars to Trickle Up and UnFreeze Wall Street.
According to Washington Post…”A $700 billion fund would push the total pledged to combat the crisis to $1.8 trillion, or $15,000 per U.S. household. The plan would cover both U.S. companies and U.S. subsidiaries of foreign companies and would even let the Treasury acquire assets from nonfinancial firms and assets not tied to mortgages if needed to promote market stability…”
By T
September 24, 2008 9:23 AM | Link to this
So, how are those McCain tax cuts going to workout?
By Bosch
September 24, 2008 9:26 AM | Link to this
Paul,
It’s about trust. Do you trust that McCain will follow through? I don’t. Why should we believe him now.
Why should I believe someone who touts the same failed policies of this administration - and now that there is a crisis - will suddenly have a “come to Jesus” moment and change his tune.
As the saying goes, “you can’t teach an old dog new tricks.”
By BDAtlanta
September 24, 2008 9:26 AM | Link to this
This is what you must remember: When you see all kinds of frightening data flit across the screen, when you hear all sorts of dour forecasts and prognostications and when you’re hammered by endlessly grim pie charts and downward-pointing arrows and scowling rich white men sitting before congressional panels, well, just remember you are simply in the realm of the gods, that the swirl of terrifying numbers is merely how they rearrange the furniture up there on Mount Olympus.
*In other words, it has absolutely nothing to do with your hopes and dreams or future tax bills or the price of a double latte at Dunkin’ Donuts. OK, it actually does — disastrously so — but it’s best not to think about it too much. Fair enough? *
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2008/09/24/notes092408.DTL&nl=fix
By Mitchell
September 24, 2008 9:28 AM | Link to this
Mr. Paulson earned a bachelor’s degree in English from Dartmouth and an MBA from Harvard. His educational footing in economics doesn’t align with the task assigned him.
Conflict of interest alone should prevent him from acting as arbitrator. Before coming to Treasury, Paulson was Chairman and Chief Executive Officer of Goldman Sachs. He joined Goldman Sachs in 1974 in the Chicago Office and became a partner in 1982. From 1983 until 1988, Paulson headed up Investment Banking Services for the Midwest Region and became Managing Partner of the Chicago Office in 1988. In 1990, he was named Co-head of the firm’s investment Banking Division, and in 1994 he rose to the position of President and Chief Operating Officer. In 1998, he was named Co-Senior partner, and with the firm’s public offering in 1999, became Chairman and CEO.
A dubious deed, indeed!
By Paul
September 24, 2008 9:39 AM | Link to this
Bosch 9:26
This is why it’s fun discussing with you!
Let’s see, McCain has been at odds with the administration, a lot. You brought up a ‘come to Jesus’ moment so I’ll repeat the earlier question - the road to Damascus example - conversions don’t happen?
You bring up trust - good point. A very good point in which many people will go with their gut (and I can’t help but reference those who lambasted the McCain campaign for saying it’d be about personality…). But the flip side is - how does Obama sway people on the ‘trust’ issue when he has a pretty thin record? My advice would be to demonstrate that the issues don’t have to go example to exact example - rather, look at the type of issues he’s aligned himself with and the overall concept of where he puts his emphasis.
That may be tough to pull off, especially when his supporters keep harping on the ‘experience’ factor (ignoring Carter, Clinton, or VP picks like Edwards) - especially the ‘foreign’ aspect.
Anywho, that’s what I’d do, said young Gerald McGrew, If I Ran the Zoo.
By hillbilly ragger
September 24, 2008 9:41 AM | Link to this
Bosch @ 9.17, you accidentally touched upon the problem—it’s in how the media will disseminate this information to the voting public.
Media ownership is such that the giants really do NOT want ordinary people to know just how badly they are being screwed. They want to provide just enough information to get people scared, and look to their “Daddy President” McCain (or, now, “Mommy Veep” Palin) to hug them and say “there, there, I can fix this!”
No, the media—at least the corporate owned variety—will be useless as t!ts on a bull here. Oh, they’ll report McCain’s team’s connection to the crap-pile, but they’ll make damn sure to “balance” the coverage with whatever Drudge-validated counterpoint the GOP has out there. These days they’re trying to tie overall campaign contributions to Obama and make out that this, somehow, is equivalent to the out-in-the-open influence peddling afoot with Team McCain.
At the end of the day it’s going to be about a choice voters must make—will they continue to allow blatant robbery, or begin to rein this in?
(And reining in, a bit, is about all any Democratic president and congress can really do, despite the Luckotrool’s assertions that some “Democrat cabal” double-secretly runs everything.)
By AJC/DNC Management
September 24, 2008 9:51 AM | Link to this
Jay: No problem.
I used to link EVERYTHING that I posted but then the AJC, in attempt to censor me, put some filter to work that rejects multiple links, and just like anything that a liberal touches, it does far more damage than it’s original intent.
It would be helpful if you removed this rogue filter, I’m sure that others agree.
By ByteMe
September 24, 2008 9:55 AM | Link to this
LB: the basic systemic problem is not really liquidity, it’s trust and asset valuation.
All these banking companies need to keep a certain percentage of their assets as cash reserves. If the asset values decline, then the expected loss comes against their cash reserve. Example: you have $8 billion in loans and need to keep a 12% reserve, you need to have $960 million in cash reserve. However, if those $8 billion in loans get revalued because of outside conditions (like the loans going bad) at $7 billion, the $1 billion needs to be made up in cash reserves, so the you need to quickly raise $880 million (the $1 billion less the 12%).
Right now, foreclosures or serious delinquents are running 4.50% and those past 30 days are 6.50% of all mortgages. That’s a lot of loans that are non-performing and in serious need to be revalued downward (more than double the pre-2000 levels for those numbers).
But… without selling the loan, you have no real idea what the loan is truly worth, so you keep revaluing it over time, which is why the banking groups keep coming back to the well for more cash.
By the government stepping in and buying the mortgages, they can provide a floor for those asset valuations and provide cash in return to banks by buying those assets for a certain reasonable value. So the banks can keep some of the loans in place by raising the extra cash by selling off other loans.
Right now, though, the devil is in the details about oversight and what taxpayers get in return for providing this relief.
By Richard
September 24, 2008 9:56 AM | Link to this
Get a grip.
The ‘firms’ who own these assets, expecting to sell them for a dollar or more on a dollar”, are sh*t out of luck aren’t they? Because the markets have spoken, and nobody in the private sector wants to buy their “assets” for a dollar, or 50 cents or 22 cents on the dollar. So why should American taxpayers overpay? Why should American taxpayers take this garbage off of the investment banks books, when the markets don’t want it? Paulson offering to overpay using my tax money is GOP socialism for the investment banks.
You’ve got to be kidding. The days of GOP crony capitalism are coming to an end.
By Ray
September 24, 2008 10:01 AM | Link to this
BDAtlanta,
Keillor is a gold plated, pompous liberal tur*. He doesn’t mention Mr. Butt Buster, Barney Frank, His Honor Christopher Dodd, the Demo chair of Fannie Mae, the Congressional Black Caucus (who pushed Frank and Slick Willy to “level the playing field” in the lending of money to people who couldn’t afford to pay it back). All in the name of votes, my friend, all in the name of votes. Keillor has been a liberal nitwit for all of his life….. just wish we didn’t have to listen to him on his publically (sp) funded radio show spout out his liberal BS, however that seems to be the norm lately rather than the exception.
By Bosch
September 24, 2008 10:03 AM | Link to this
Paul,
I would expect YOU of all people to use the road to Damascus example.
Sometimes I think you are just mocking me :-)
“look at the type of issues he’s aligned himself with and the overall concept of where he puts his emphasis”
Well, that’s what we ALL should do, right? I have looked at how he stands on the issues, McCain too.
Isn’t trust what any election is about? You’re not doing the job yourself, so you put your vote (your trust) into the person who you think will do the best job based on what they have said they’d do.
Some of what McCain has said, I like, I just don’t think he has the ability to carry out what he says, or I think that he’s lying through his teeth. I don’t trust him.
hillbilly ragger @ 9:41,
Couldn’t agree more. I’ve always thought it was interesting that when we talk about the “bad evil countries” the topic of state-controlled media is usually given as an example to demonstrate tyranny. When it’s just as bad here.
Now, I do think that the onset of the 24-hour/7 day a week news channels has hurt our country because of the constant onslaught of analysis, and they need the ratings, so they over exagerrate and go on and on, when a simple - in the case of this financial mess is concerned - a simple “This sucks and the administration is once again trying to screw the middle class” would pretty much suffice.
Although, I would add a sentence or two about how this is all a viscious cycle - politics and corporatism - the corporatists run this country only to benefit the upper echelons of said companies - and use the politicians to promote policies that favor such practices so they can continue to rape and ruin our country so they continue their financial prosperity.
You know, if I were in charge or the networks. And then after those three simple sentences we could move on to soccer analysis or cooking the perfect steak.
Reining it in? I don’t think most Americans care that much. They only pay attention when it hits their own fron yard, maybe this will and more people will start to wake up.
By JAY BOOKMAN
September 24, 2008 10:08 AM | Link to this
I don’t have that authority, Management. It’s an AJC-wide filter that can’t be turned on or off at the blog level.
And for your information, it wasn’t about you. It was about commercial spam.
By Yes We Can
September 24, 2008 10:11 AM | Link to this
Paulson’s (Bush’s and the bank lobbyists’ as well) plan not only robs the Treasury without any kind of oversight, it poisons the system for years to come. And it may—i.e., probably won’t—work.
This is the September Economic Surprise we’ve all be waiting for in October—but it’s happening now.
This is what Republican deregulation of all industries has done to the US economy.
If the Rethugs believe in the free market (like they’ve been chanting since Reagan), then we should let the free market do it’s stuff. No bail out for greedy institutions that took risks beyond anyone’s imagination.
By AJC/DNC Management
September 24, 2008 10:12 AM | Link to this
By LB September 24, 2008 9:20 AM According to Washington Post…”A $700 billion fund would push the total pledged to combat the crisis to $1.8 trillion, or $15,000 per U.S. household.
Yawn:
Taxpayers will not be left “holding the bag.” The government will buy these mortgage securities at 20 or 30 cents on the dollar and eventually sell them at higher prices.
How much higher, and how far into the future, no one knows. But even if the government doesn’t make a profit in the end, the loss will be nothing like the trillion dollars that fear mongers and doomsayers throw around.-Investor’s Business Daily
Unless, of course, we package up some nice fat earmarks to protect the deadbeats that don’t pay the mortgage that they signed up for.
By Jason
September 24, 2008 10:19 AM | Link to this
Congress should come up with its own plan and include more protections for tax payers.
Why should we be holding the bag, again and again, while the crooks, a.k.a. Wall Street types, get the money?
By professional skeptic
September 24, 2008 10:28 AM | Link to this
You hit the nail on the head with this one, Jay. If severe limits are placed on fat cat compensation, then we’ll see which banks really need the bailout vs. the ones looking for easy cash with no downside.
Here’s a good article in the NY Times on how Sweden handled a similar crisis back in the ’90s. If US taxpayers pay a premium for buying toxic assets, we should get an equity stake in the firms that take the bailout.
Stopping a Financial Crisis, the Swedish Way
By RW-(the original)
September 24, 2008 10:29 AM | Link to this
Anybody that can’t find the source of any excerpt that AJC/DNC-M puts on here barely has the computer literacy to even type in a comment.
Jay,
I try to put up links when I excerpt an article, but half the time your server eats the post and it never appears. I don’t recreate it on the off chance that it’ll show up in ten minutes or so. After a while there’s no point in continuing the discussion here. In fact this server is so bad you almost can’t have a discussion here with the delays and dropped posts. At least the way AJC-DNC-M does it his posts show up and the points can be debated. Is there any chance you can take your IT folks to task the same way you do the participants of your blog?
I’m gong to bail out for the day. See you all around happy hour.
By Bosch
September 24, 2008 10:32 AM | Link to this
And kudos to Warren Buffet.
I was thinking last night, why doesn’t some of these bajillionaires buy out some of this debt?
By Soothsayer
September 24, 2008 10:38 AM | Link to this
Just a reminder
By chagrin
September 24, 2008 10:46 AM | Link to this
Nice to see that some people are paying attention. Important to know that the de-regulation (this time) started under Clinton and was signed into law by him. The last time (the S&L mess) deregulation was started under Carter. Both times the Republicans took the ball and ran with it. The taxpayers took the hit. The point people for this bill are mostly Democrats. They are pushing for more Republican support so they have political cover. The only difference is that they want a piece for themselves. There are responsible people in both the Democrat and Republican “sides” that are trying to stop this. The leadership of BOTH PARTIES ARE IN ON IT. They represent the same people, and that’s not us folks.
By Soothsayer
September 24, 2008 10:47 AM | Link to this
The accomplishments of the Bush-Cheney administration are very few, if any, but its wrongdoings are numerous and comprehensive. This administration has been a virtual wrecking crew for anything it has put its hands on. Here is a summary of the twelve most glaring failures of this administration.
Just so you don’t forget.
By RealityKing
September 24, 2008 10:48 AM | Link to this
Let’s just give every one $2300 and let these CEO’s and their banks fail. Surely we’ll all be better off if our 110th Congress just goes home early this year…
By Soothsayer
September 24, 2008 10:52 AM | Link to this
How we got here
By lovelyliz
September 24, 2008 10:53 AM | Link to this
Did you ever think we would long for the days when corporate executive compensation was dependent on corporate performance? Even mega-rich sports stars assume some risk. If they don’t play well, if their team doesn’t win, they don’t get their bonus.
This bailout is sounding more and more like corporate welfare with the welfare kings driving off in their Bentleys that the American taxpayer paid for.
By T
September 24, 2008 10:55 AM | Link to this
By AJC/DNC Management
There are no real guarantees in the market. True, there must be faith in the American economy. However, I think most people just want to know what is being done with this money. Is it going to fix the problem or just go in someones wallet?
By Paul
September 24, 2008 10:55 AM | Link to this
Bosch
I challenge, question, point out alternate views but try to not mock. It rather strikes me as rude. I go back to the example of my sister when we were having a discussion - “I may not know the details you do but I know my impressions and my strong beliefs.”
The value of an idea is independent of the person who brought it forth.
You’ve brought up religious themes in the past so I thought it would be fun to look at the Damascus example - Saul, the killer of Christians, on the Damascus road and has a life-changing conversion. Then a big part of his problem became convincing others he was no longer what they thought.
That’s another area in which Obama could demonstrate ‘change’ - he has his tax plan, energy plan, etc. But a few straight answers (and he’s already had the questions) to ‘will this economic situation affect your planned programs’ would show his difference. ‘Course, his campaign and supporters have already played the ‘flipflop’ card numerous times with McCain and are deep into the ‘but he said this now says that’ game so it may be a little late. Which is one reason why I expressed concern when he began going down those roads.
your 10:32
Isn’t part of the problem they don’t know what the debt’s worth? As ByteMe said, revaluation and revaluation? Just another reason I think we could get hosed in this deal -
By Hillbilly Deluxe
September 24, 2008 11:07 AM | Link to this
I saw on TV last night that the FBI is investigating 26 firms on Wall Street. Surprising that no one has mentioned this. (Did I just dream I saw this?)
I don’t really think we should be rushing to bailout people who may be taking perp walks.
The fact they are trying to rush this thing through sends off alarm bells in my head. Long ago in business I was taught to create a sense of urgency when you are trying to sell something. If Joe Blow takes time to think about it he may decide he doesn’t need to buy it after all.
Small businesses go belly up everyday and nobody gives a damn. Wall Street and Washington have such an incestuous relationship. They are all in it together and they all look out for each other.
My view is that this if this bailout happens it needs to happen slowly and deliberately. I’ve heard a good many Congressmen on both sides of the spectrum advocate this approach. Usually if you get the same advice from people whose views are 180 degrees apart, you might want to take time to listen to them.
I think there needs to be a house cleaning at the SEC and the FED. These people are supposed to be the regulators.
By Shawny
September 24, 2008 11:07 AM | Link to this
There goes Bookman…”it is Bush’s fault”. The response to any crisis.
Let’s look at history, shall we. Decent article that looks at how we got in this mess, with origins dating back to the Home Mortgage Disclosure Act that led banks to lower rates so that more minorities could afford houses.
We have touted for years the ‘progress’ that has been made in getting people into houses that otherwise couldn’t afford them. But it is Bush’s fault, of course, if you are a hyper left partisan.
By ByteMe
September 24, 2008 11:08 AM | Link to this
Paul: to expound on the revaluation and revaluation: not only do the mortgage companies not know what their debt is work, there are derivatives and counter-party risk securities based on that debt that also is being revalued and those derivatives may total about $60 TRILLION, but no one knows for sure, because the market is completely unregulated (for now; I hope they fix this as well).
If the government gets these assets for a reasonable amount on the dollar (say, based on an 80% discount to the median county assessment value for other homes in the same neighborhood and provided they pass inspection), they could buy these mortgages, propping up the banks with that cash, hold the assets for a few years without worrying about asset valuation, and then slowly sell them off to investors or first-time homebuyers to get them off the books.
Unwinding this mess will take several years, but without some event that stops the assets from losing value, it’s hard to see how it’ll end well for numerous firms.
By ByteMe
September 24, 2008 11:11 AM | Link to this
argh. “debt is worth” not debt is work.
By Bosch
September 24, 2008 11:12 AM | Link to this
Paul,
You know I was joking right? Hope so.
“Coming to Jesus” is one of my favorite phrases.
“The value of an idea is independent of the person who brought it forth”
That would make a GREAT bumper sticker, but it would probably not fit on one, and cause alot of wrecks from people trying to read it.
I guess Obama doesn’t want to answer, “Well DUH! Of course this is going to affect my economic plan.” Sounds a bit non-presidential.
The debt worth? Hmpf. It’s all imaginary money anyway, right? I could get all transcendentalistic and say, “What is all this based on? Is all of this even REAL?”
By Paul
September 24, 2008 11:15 AM | Link to this
BytMe
[[Unwinding this mess will take several years, but without some event that stops the assets from losing value, it’s hard to see how it’ll end well for numerous firms.]]
So if it doesn’t end well for them, isn’t that what the ‘free market’ is all about?
:-)
I heard a pundit say the taxpayers got back all the money they put up in the S&L bailout. I haven’t taken the time to check the accuracy of that, but it’s an interesting proposition for how to handle this crisis.
An acronym I remembered from that same Econ 101 class: TANSTAAFL
‘There ain’t no such thing as a free lunch.’ Somebody, somewhere, pays.
By ByteMe
September 24, 2008 11:15 AM | Link to this
Bosch: he answered it with (paraphrased) “some of the programs I want to do will likely be delayed for several years.” At least he was honest, although vague as to which programs, but the same could be true of the bailout, which is still vague as to its costs.
By Shawny
September 24, 2008 11:16 AM | Link to this
Don’t forget who is dirty, when it comes to receiving money from Fannie and Freddie.
“how the democrats created the financial crisis”
By lovelyliz
September 24, 2008 11:24 AM | Link to this
Shawny
Are we talking about people like Rick Davis, John McCain’s campaign manager?
By ButtHead
September 24, 2008 11:28 AM | Link to this
I need to pick up some bad habits, like living way beyond my means, stealing shareholders money and wait for the government to bail me out. How stupid are we as a people to fund the lifestyles of the rich and famous with taxpayer money? All of the upper management of the failed agencies, especially the ones that got bonuses, should be in jail! We should put a cap on publicly owned company salaries, this may encourage people to work at NOT going public and growing their businesses at a sustainable rate. We also need to delay any bonuses that the criminals get for 2 to 3 years that way they do not fudge numbers get their bonuses and then run away or get fired. If they want the money they will wait until all of their accounting practices come out in the wash. Then we should also put in a clause that if they are caught cooking the books they repay any bonuses and go directly to jail, do not pass go do not collect $200.
By Soothsayer
September 24, 2008 11:29 AM | Link to this
Shawny @ 11:16:
So let me get this straight: one bill to supposedly regulate Fannie & Freddie in 2005 is the cause of the problems we have now? Give me a break.
Look at my post @ 10:52 for the real path to where we are now.
By Skeptic Tank
September 24, 2008 11:31 AM | Link to this
Anyone who read Jay’s blog yesterday, in which he quoted a Molly Ivin’s column dated September 23, 1998, knows EXACTLY how we got into this crisis in the first place. You can try to rewrite history, but facts are facts, no matter how much you try to fabricate alternative realities.
PS - It wasn’t the Democrats.
By JVA
September 24, 2008 11:33 AM | Link to this
Post pulled for failure to cite source.
By Soothsayer
September 24, 2008 11:34 AM | Link to this
Georgia’s new anti-predatory law signed; Ameriquest helps lead campaign against it and announces that it won’t do business in Georgia until law is changed. Standard & Poor’s refuses to rate Georgia mortgage securities, choking credit supply to state’s home buyers; law gutted within a year.
Whether you’re on the right or left—we didn’t just get here overnight. It’s been a long road paved with greed.
By CJ
September 24, 2008 11:38 AM | Link to this
Paul said, “I may not know the details you do, but I know my impressions and my strong beliefs.”
Spoken like a true conservative.
Speaking of flip-flops, Paul, The Official John McCain Flip-Flop List is now at 76 items (not that, relative to your impressions and strong beliefs, details matter).
By Goldie
September 24, 2008 11:39 AM | Link to this
Shawny @ 11:07 — and I say that John McBush is a big part of the problem because of how he says he’s all about “deregulation” and he has certainly voted that way for over 20 years. It’s not a “hyper left partisan” view when that’s what your guy says he’s all about — good ole Mr. Deregulation, just taking America over the cliff today!
By Soothsayer
September 24, 2008 11:47 AM | Link to this
“The difference between what we do and what we are capable of doing would suffice to solve most of the world’s problems.”
—Mohandes “Mahatma” Gandhi
By Paul
September 24, 2008 11:51 AM | Link to this
CJ
Sorry, CJ. That was a quote from my sister, quite a committed liberal.
So you’re taking the position that if Obama, also, changes position on any issue, he’s a ‘flip flopper’?
Rather scary position, to my way of thinking.
By lostindixie
September 24, 2008 11:52 AM | Link to this
I think ByteMe sees the giant house of cards we are under, but most of the others are stuck in the usual political bickering. The sub-prime loans and asset backed securities are the tip of the iceberg. If you want to understand the real problem then you have to try to understand the credit default swaps. Try Gretchen Morgenson’s article in the Feb. 17, 2008 edition of the NY Times titled, “Arcane Market Is Next To Face Big Credit Test”. Or you can read Daniel Amerman’s news story on September 17, 2008 at goldseek.com. Both are excellent primers on the subject and neither is written with a political slant.
By Bosch
September 24, 2008 11:54 AM | Link to this
ByteMe,
Yeah, your paraphrasing sounds a bit more “presidential” than mine.
:-)
CJ,
In all honesty, that was Paul’s response to me (using his sister as an example). That’s not a conservative thing, that could be used to describe many of us here.
By ByteMe
September 24, 2008 12:06 PM | Link to this
Paul: “So if it doesn’t end well for them, isn’t that what the ‘free market’ is all about?”
Yes, of course. But religious free-marketers are just as wrong-headed as religious socialists. They put their own religion before reality.
You notice you’re hearing mention of “credit markets freezing”. You also remember the sovereign wealth funds investing in Citigroup and others? How has that investment worked out? Turns out the BEST result before the latest market hiccup was -25% return. Fool me once, and all that. The SWFs are not happy campers and not interested in throwing more money at financials until the true asset losses come out. No one wants these assets now, so their value may indeed be $0 unless the government steps up. No one is lending much money without getting serious value in return (re Buffett got a sweet deal for his money if GS really doesn’t have much more to write down).
Small banks are fine. Small banks are making deals of, say, $5 million, without trouble, provided you pass the newly tightened lending restrictions that all banks are using. But that doesn’t get a big building built or a new shopping mall. Those are ventures too big for the small banks and there’s no one stepping up to take the place of the big banks until they feel like they will see their money again.
And that’s why freezing the credit market this way is bad for ALL of us. It’ll put people out of work, it’ll force state governments to raise taxes to cover the unemployment benefits and added stress on services (since most states cannot run a deficit).
What we saw with Fannie/Freddie rolling over was not the end of the problem, but the beginning of the unwinding of all that leverage built up over the past 3 years. Until the leverage is unwound, it’s not over. I think it’s 2010 before it ends.
I know this was long and rambling, but at least it was my own thoughts as opposed to a cut and paste from nowhere interesting. :-)
By Goldie
September 24, 2008 12:06 PM | Link to this
Bosch — about that “trust” issue you have with McBush: you know when George Will says that he’s unfit to be president, there just may be something to that feeling you’re experiencing.
By chagrin
September 24, 2008 12:07 PM | Link to this
Remember the Leveraged Buyouts of the 80’s? That was when a company was purchased by Corporate Raiders who “restructured” the company to leave one part debt free and the rest of the company with debt that would lead to bankruptcy. The pensions were part of that debt obligation. The debt free part of the company was then sold for a huge profit. I wonder how that would look on a national scale? Hmmmmmm……. Think about it.
By Nevermind
September 24, 2008 12:09 PM | Link to this
http://www.huffingtonpost.com/2008/09/22/dirty-secret-of-the-bailon128294.html
By AJC/DNC Management
September 24, 2008 12:10 PM | Link to this
By T September 24, 2008 10:55 AM By AJC/DNC Management There are no real guarantees in the market. True, there must be faith in the American economy. However, I think most people just want to know what is being done with this money. Is it going to fix the problem or just go in someones wallet?
T: I couldn’t agree more.
That is why I trust Paulson to oversee the mechanics of the buyout and it is also why I don’t trust the democrats having anything to do with it.
The democrats know that they have the full and complicit cooperation of the drive by media to lie and propagandize on their behalf, no matter what the magnitude or how horrendous the crime may be, and with this fraudulent cover up on their behalf, they are just as likely to bleed America out of another 700 billion.
By ByteMe
September 24, 2008 12:13 PM | Link to this
In my above comment, the -25% is a 25% loss screwed by strange hyphen wrapping.
@lostindixie: you read frontlinethoughts.com? That and Barry Ritholz’s blog provide lots of great info about what’s happening below the surface. Very scary stuff.
By Dusty
September 24, 2008 12:18 PM | Link to this
So the conclusion here: NOBODY TRUSTS ANYBODY.
If he is rich, he is a crook.
If he is poor, he caused the mess.
If he is a Republican, Libs say HE DID IT!
If he is a Democrat, Repubs say HE COULD HAVE STOPPED IT.
Save the world by stopping it. Indict everyone. Stop trust. Blame the other guy. AND…learn to enjoy poverty of mind, soul and the staples of life.
That is what will remain after this War of Defamation. Forgotten are the words our country once declared. IN GOD WE TRUST. Remember???
By Shawny
September 24, 2008 12:25 PM | Link to this
Goldie,
[“HOW did America wind up in its worst financial crisis in decades? Sen. Barack Obama explained it this way last week: “When sub-prime-mortgage lending took a reckless and unsustainable turn, a patchwork of regulators systematically and deliberately eliminated the regulations protecting the American people.”
That’s exactly backward. Mortgage lending took that “reckless and unsustainable turn” because of regulation - regulation driven by liberals and progressives, not free-market “deregulators.” ](http://www.nypost.com/seven/09242008/postopinion/opedcolumnists/houseofcards_130479.htm).
RTFA
By Algonquin J. Calhoun
September 24, 2008 12:25 PM | Link to this
Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes; and accordingly all experience hath shown that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same object, evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security.
The Declaration of Independence applies as much today as it did when written!
By CJ
September 24, 2008 12:26 PM | Link to this
I stand corrected, Paul. You did claim that was a quote from your “liberal” sister. Honestly, I continue to be amazed at how conservatives will, without a hint of irony, project their own thoughts and tactics onto others.
By Shawny
September 24, 2008 12:27 PM | Link to this
You know this Paul guy is kind of kooky, but I like his thinking.
By lovelyliz
September 24, 2008 12:29 PM | Link to this
The government will seize the assets ($$, cars, home, etc) of some minor league pot dealers and throw them in jail , but the current administration doesn’t even want to touch the bonuses of the executives who managed to unemploy tens of thousands of workers and make more thn a trillion $$$ in wealth disappear!!!!!!!!!
By Soothsayer
September 24, 2008 12:31 PM | Link to this
“As far back as 2004-2005 we were aware of questionable underwriting, potential fraud and limited documentation” in the home-mortgage industry, says Rodriguez. “These did not appear to be appropriately considered in the rating process.” What’s more, risk models used by the ratings agencies assumed continued home price appreciation that would allow marginal home buyers to refinance their loans when their monthly mortgage payments went up.
For the uninitiated CDOs are Collaterized Debt Obligations.
By Shawny
September 24, 2008 12:46 PM | Link to this
FINALLY, a major news agency points out the Obama/Biden hypocrisy!
They were for it, before they were for it, before they mocked it.
By Shawny
September 24, 2008 12:52 PM | Link to this
Top receipients of Fannie and Freddie.
1 - 4, no suprise, Dodd, Kerry, Obama, and Clinton. hmmmm….By Paul Williams
September 24, 2008 12:55 PM | Link to this
I don’t know the exact answer to this problem but I do know that the foolish and immature responses filling this blog suggest that many people have no idea of the magnitude of this crisis or its root causes.
I weigh my observations on a 30-year career as a CPA and a banker. Though I have historicaly been a very partisan supporter of the GOP, now is not the time for that. If our banking system collapses, our entire economy collapses, halting both business activity and social services. No one from any economic stratum will be spared.
While there are many factors involved in this matter, there are two primary issues. First, a major push for increased home ownership, led by the democrats, has led to decresed lending standards and billions of substandard home loans on the books of our country’s financial institutions. On the other side of the aisle, the GOP has contributed to a lack of oversight of the financial institutions that has allowed them to assume unacceptable levels of risk. At the same time, the FDIC and OCC has allowed their reserves to drop to levels which are a fraction of the likely need to rescue depositors in insured banks.
As a personal aside, the regulators have been majoring in the minor stuff and minoring on the major stuff while these risks grew to their current levels.
I hope and pray- without any prior evidence that the Congress is even CAPABLE of doing so- that the optimal amount of oversight will be connected to a bailout that cannot be avoided, and SOON. The average American has no idea how much their way of life is at risk right now.
FOOTNOTE- Joe Biden can talk all that he wants about how patriotic it is to pay more taxes, but Warren Buffet showed real patriotism today with his investment in Goldman-Sachs. Buffet is trying to increase American’s confidence at a scary time, and at great risk to himself. Patriotism is a voluntary effort, not a forced one. He is to be commended.
By @@
September 24, 2008 1:00 PM | Link to this
Having recently learned that he harbors leftist sentiments, I’m highly suspicious of Paulson’s insistence that this crisis be handled quickly.
Then to see Buffett invest in Paulson’s (former CEO of) Goldman-Sachs, I couldn’t help but recall an article I read at Stratfor (subscription only).
These 50-plus billionaires poured their own cash into the system so the government would not have to, according to Stratfor sources. This was kept out of the public eye but showed just how much control Putin has over the oligarchs. Moreover, it showed how different Russia’s current oligarchs are from the oligarchs of 10 years ago, who would have balked at the Kremlin’s authority.
However, Stratfor has learned more about the oligarchs’ financial transactions. Sources involved in the situation have said the oligarchs are not just pouring spare cash into the Russian system; they are sending billions upon billions of dollars. Many oligarchs are putting between 10 and 30 percent of their wealth into the markets to prop up their own companies, along with other firms — which props up the system. Furthermore, the oligarchs are not being treated equally; some are being pressured into giving much larger portions of their wealth than others. Their treatment seems to depend on their relationships with Putin, their firm’s ability to handle the current crisis, and their personal goals of impressing the Kremlin for favors in the future.
Then I find out that Buffett (Obama supporter) has promoted Mayor Bloomberg (Net Worth: $20 billion endorses OBlahMa’s entire economic plan) to oversee the government bailout?
Wiki: Post-Soviet business oligarchs includes relatives or close associates of government officials, even government officials themselves as well as criminal bosses who achieved vast wealth by acquiring state assets very cheaply (or for free) during the privatization process controlled by the Yeltsin government. Specific accusations of corruption are often levelled at Anatoly Chubais and Yegor Gaidar, two of the ‘Young Reformers’ chiefly responsible for Russian privatization in the early 1990s. According to David Satter, author of Darkness at Dawn, “what drove the process was not the determination to create a system based on universal values but rather the will to introduce a system of private ownership, which, in the absence of law, opened the way for the criminal pursuit of money and power.” In some cases, outright criminal groups in order to avoid attention assign front men to serve as executives and/or ‘legal’ owners of the companies they control.
Oh lawdy! OBlahMa may be America’s Putin.
By Nancy
September 24, 2008 1:10 PM | Link to this
Rove, Palin, Miers, Interior Department, Chevron, etc. The best way to get away with a crime is to do it while you’re with government.
Otherwise, you might be prosecuted.
By Bosch
September 24, 2008 1:19 PM | Link to this
Paul Williams,
Nice post.
I would add though that the working poor and lower class - their “way of life” won’t be effected too much, and they are much more resourceful and have a better survivor instinct.
By steve
September 24, 2008 1:39 PM | Link to this
Still too many pointing fingers at each other. CEO and other financial bigwigs may vote Repub or may vote Democratic. Neither you nor I know. The majority learned their shrewd accounting tricks at our Universities. Does that mean liberal professors taught them this and so are to blame also. Bottom line is WE ALL (you, me and everyone else) need to make our voices heard on this issue. Contact you congressperson and let them know your outrage with this “deal”. Demand THEY stand up against this as YOUR representative.
By Think
September 24, 2008 2:26 PM | Link to this
(letter I sent to Isakson, Chambiss and Price)
I am very disturbed by the so called “bailout” proposed by President Bush and being debated in Congress. I don’t see why my family is on the hook for these bad mortgages. Stupid and greedy people made profits lending to stupid and irresponsible people who don’t pay their bills. Yet, my family is being forced to pay for all of their stupidity to the tune of $12K to $15K. This is wrong and I don’t want to do it.
Beside the fundamental unfairness of passing costs of irresponsible lenders and borrowers to me and other taxpayers are other issues:
Won’t all of this debt lower the value of the dollar?
Won’t a lower dollar value make oil and other commodities more and more expensive?
Won’t the lower dollar make our country’s debt increasingly difficult to finance, causing increasing interest payments?
Won’t the creation of new debt and money, seemingly from whole clothe, just postpone and exacerbate the problem we have now. That being we are too much in debt in every sector of our society?
Finnaly. No offense sir, but you people in Washington have instilled no confidence in me that you know the difference between your collective asses and a hole in the ground when it comes to working your way through financial difficulties. I give you the national debt, the annual deficit, the unfunded liabilities of Medicare and Social Security, as well as the mandates to make these boneheaded loans as exhibits A,B,C,D & E in the case against your fiduciary credibility. The federal government doesn’t know what it is doing.
I do not trust the government to solve this problem and see it as another way to shift taxpayer’s money to wealthy financial interests and a power grab for Washington.
Let bad loans hurt the people who took them and the people who made them and not me and my fellow tax payers.
Stay out of the economy. Stay out of my wallet. Get you own house in order. Vote no on the bail out.
By Algonquin J. Calhoun
September 24, 2008 2:49 PM | Link to this
Republican Sen. Jim Bunning of Kentucky came out swinging during a hearing on Capitol Hill Tuesday, calling Treasury’s plan for the biggest financial bailout since the Great Depression “un-American.”
Like everything else George W. Hitler has done or proposed this bailout is un-American! It’s socialism for the very wealthy and the very dishonest. Put these bums into prison!
By mm
September 24, 2008 3:00 PM | Link to this
Management (aka SuperDuh),
You are a disgrace. You blindly support anything Bush does, right or wrong.
You don’t care that he is fleecing the tax payers to the tune of 700 billion dollars. Wants to give an ex CEO total control of almost a trillion dollars with no oversight, no challenges, no recourse.
You don’t care if he uses our tax money for corporate welfare, or if he blows it on another country like Iraq.
But you don’t want one thin dime to go to a tax paying individual.
Where is your outrage directed? At the wrong party as usual.
Did a Democrat do something bad to you when you were a child?
By susan
September 24, 2008 3:21 PM | Link to this
thank you Jay; you’re the BEST!!!
By Paul Williams
September 24, 2008 3:25 PM | Link to this
Bosch-
Unfortunately, I fear that the working class and lower class people may be affected even more than others due to the lack of reserve resources. If the banks fail, and credit resources literally freeze, small business won’t be able to obtain inventories or meet payrolls, and the lower end of the economic ladder will suffer as well.
I’m not even sure that public assistance checks will be honored at the banks. This is potentially bigger than what most of us have experienced in our lifetime. I hope that this is hyperbole, but fear that it is not.
By GodHatesTrash
September 24, 2008 3:33 PM | Link to this
Not surprising that Bookman’s League of Rightwingnut Dead-Enders are going to follow the GOP’s lead in flushing America straight down the toilet.
They are Armageddonists, American jihadists, terrorists - pure and simple-minded true believers in whatever nonsense and fantasy their prophet/profit, Dumbya, imparts upon them.
A half-wit would be a genius, nay, an Einstein in their midst.
Scared and stupid.
Boo!
By Pat
September 24, 2008 3:35 PM | Link to this
The hilarious part of this is … drumroll … Bush SPEAKS to us tonight about the mess he and his greedy thugs have created! Let us all wait with baited breath! Oh wait …
“Bush does not plan to dwell on how the problem developed,” say his spokesmen.
Now there’s a surprise! Wonder Why? It’s so infuriating that this ‘tard thinks people “just don’t understand” the seriousness of the crisis. No s_-for-brains, we just don’t trust the gang that made this mess with a blank check and no accountability!
Does he really think people believe anything coming out of the Oval Office? Do us all a favor, W. Pack up your crap, and sneak out of town in the dead of night with your tail between your legs - and take your sleazy buddies with you. Yes, you Cheney. Enough.
By Paul Williams
September 24, 2008 3:45 PM | Link to this
Algonquin J. Calhoun, mm, Goldie, and others:
I hope that more mature people than you will address this issue responsibly and swiftly. When you cannot address your political rivals without nicknames and accusations, you sound like grade school kids in the playground.
The current crisis is severe enough to require adults to deal with it.
By Darrel
September 24, 2008 4:07 PM | Link to this
This is such a good year to promote the “Unincumbent Party”. Yes, it is! Any name with that little letter “i” next to it will NOT get my vote this year! No matter which way the other way turns out to be, I’m voting straight “Unincumbent Party”. Now’s the time!
By Common Sense
September 24, 2008 6:40 PM | Link to this
Did someone hit AJC upside the head? Has someone knock out all his little knowledge?
AJC continues to blame the consumer, if you are in a business and you know the ratio of failure if you serve a certain client!
WHO’S FAULT IS IT? It is your fault for doing business with someone who fits the ratio of cannot pay you back!
WAKE-up America we need to go in a different way!
We have an intelligent candidate (Obama) we must not let this opportunity pass!
THE STAKES ARE TOO HIGH!
By Sal Mineo
September 24, 2008 7:11 PM | Link to this
I guess those who warned of a big black hole devouring the earth if we started up the hadryon collider were right, but with quantum physics, you never know where the cataclysm is going to appear.
Who woulda thunk it would start on wallstreet.
This is all Newtons fault and his stupid gravity.
By Sal Mineo
September 24, 2008 7:43 PM | Link to this
Palin/McCain 08: If politics makes strange bedfellows, then America just got short-sheeted.
Obama 08: America takes over.