Senator Harry Reid: 'No One Knows What To Do'

Well, that's comforting. I'd much rather prefer the current administration's "everything is fine - the fundamentals of this economy are strong - this is just a small pothole" ;)

• The U.S. Congress is unlikely to pass new legislation to overhaul financial regulations this year because ``no one knows what to do,'' Senate Majority Leader Harry Reid said today.
• ``We are in new territory. This is a different game,'' Reid said at a briefing in Washington. Neither Federal Reserve Chairman Ben Bernanke nor Treasury Secretary Henry Paulson ``know what to do but they are trying to come up with ideas,'' Reid said. (well at least someone speaks the truth)
• Bernanke, speaking to lawmakers last night, called for a review of government regulations to address the current financial crisis, according to those who attended the meeting.
• White House spokeswoman Dana Perino said today the Bush administration is willing to consider a suggestion in Congress to have the U.S. buy distressed mortgages, (aha, my call that this would be the eventual action a year ago is coming closer to truth by the day)
• Congress is planning to adjourn Sept. 26 and other Democratic leaders have said they hope to avoid a session after the Nov. 4 presidential election. Reid said that Paulson ``recognizes that nothing is going to be done this year.'' ``It is a multitrillion dollar issue that's facing America and we can't do it on some timeline that is unrealistic,'' Reid said. (translation: gosh darnit we will not work past Sept 26th - we have districts to get back to and re-election campaigns to focus on. We don't care if the US financial system is crumbling! I need to get re-elected and that's job #1 - I have lobbyists families to feed!)
• Reed also called for a second economic stimulus package this year, saying if the federal government can put up billions to help companies such as AIG, it can afford to help out struggling Americans. (but we do have time to steal more money from your grandchildren)

So your government now owns Fannie (FNM), it owns Freddie (FRE), it owns AIG (AIG), it now is taking equities as collateral from banks in return to Treasuries (I wonder how that worked out this week) and last it will own mortgages directly instead of through the veil of Fannie/Freddie.

But other than that, the economy is fundamentally sound (never mind the inflation figures we've been distorting, the GDP figures we've been distorting, and the employment figures we've been distorting)

Yes... regulation is evil. It slows down the free market. Greedy human beings are best left to police themselves. :)

It's a fine mess we've gotten into.

As for the market, 1170 remains the break point on the S&P500. Below that level, it could be free fall. As we discussed Tuesday that level provided the bounce. And it's providing multiple bounces today. But we sit in 1165-1175 range for hours. With the "enforcement" of naked short rules tomorrow it will be another interesting day in the "no rules" corral. I wonder if we'll have any investment banks by the weekend.

Comments

[whidbey:]

The unintentional nationalization will be the latest addition to the basic banking course. The implications are not clear, but it will involve a swap of individual initiative for conformity. Sort of like Chinese banks, or maybe Japanese where there is never a flash of lightening or even a spark. No sure I was to survive into this brave new world.

2008 Sep 17 05:09 PM

[kurt walter:]

Harry Reid needs to retire from the Senate. Reid is in over his head.He and Pelosi are the 2 weakest congressional leaders in my lifetime.

2008 Sep 17 06:00 PM

[AlexS:]

Old Harry said we lost the Iraq war when we hadn't. Now he doesn't know what to do. I would suggest he resign. And take Barney and Nancy with him.

2008 Sep 17 06:01 PM

[Alan Young:]

I agree with the comments about Reid. He is an embarrassment.

However, it's clear that we are on a course of socializing our financial system, as laissez-faire capitalism has made a morass that even moderate regulation, a la New Deal, will not be able to fix. This isn't such a terrible outcome--many countries have done it in the last 50 years, to good effect.

But we'll need leadership that is comfortable with the idea of socialism to make it work. Hmmm.... any suggestions? Oh, here we are-- Bernie Sanders of Vermont, the only Socialist in Congress.

Funny how we're not hearing much from the Libertarians (much less the Republicans) these days about how it would be better to let all these Wall Street companies fail, and take all their investments down, rather than socialize the system. Ideology is a great song and dance, but money still talks.

2008 Sep 17 06:13 PM

[mlyn:]

We are losing the Iraq War be cause it's a sinkhole. Bush and Petraeus have just been playing with the American people about this surge: It's working or it's not working or we need more troops. They are buying time so that they can leave, and leave it for the next president to clean it up, get blamed for it . . . this country is done for.

www.moderateindependen...

2008 Sep 17 06:17 PM

[JohnAl:]

Aalan,

Since when were Freddie and Fannie creatures of laissez-faire capitalism? Government creations both and risk protected by government guarantees from their beginnings.

And there are plenty of libertarians calling for letting these companies fail. Try mises.org and lewrockwell.com, for starters, and then throw in Ron Paul for good measure.

2008 Sep 17 06:56 PM

[JohnAl:]

Hey Aalan,

Since when were Freddie and Fannie creatures of laissez-faire capitalism? Government creations both, and both protected from risk by government from their beginnings.

And there are plenty of libertarians calling for letting these companies fail. Try lewrockwell.com for starters and then add Ron Paul for good measure.

2008 Sep 17 07:01 PM

[HARM:]

"And there are plenty of libertarians calling for letting these companies fail. Try lewrockwell.com for starters and then add Ron Paul for good measure."

Amen to that --add me as well. The GSEs are a complete anathema to most Libertarians or objectivists. Perhaps Aalan is confusing "Libertarian" with "neo-con", or "big-government conservative" (aka, fascist).

That said, a number of libertarians and pro-free martketeers (myself included) do disagree with Libertarian "purists" who do not want *any* form of government regulation. I live in the real world and understand that some common-sense policing is necessary, given that men are not angels and that ideologically "pure" laissez-faire, anything-goes capitalism inevitably leads to the crap we're dealing with today.

Good regulation: anti-slavery, anti-child labor laws, anti-racketeering laws, trust-busting, patent law, FDIC insurance for retail depositors, unemployment insurance, anti-usury laws, anti-fraud laws.

Bad "regulation": socialism for the rich, too-big-to-fail bailouts, taxpayer backstops for quasi-private corporations (GSEs), lowering the FF rate to negative territory, tax subsidies for real estate speculators/flippers, price controls.

2008 Sep 17 08:29 PM

[SugarDaddy:]

The more I unwind all of my positions and see what I thought would happen, happen, I just think about moving to Belize or Cayman or Barbados and saying to hell with it all.

2008 Sep 17 11:04 PM

[rm:]

Harry Reid: "My favorite lobbyists don't know what to do!"

2008 Sep 18 10:54 AM

[Danny/The D...:]

Financial "welfarism" for the super-rich and social "welfarism" for those below the poverty line and "social-security/Medic... for the middle class. Oh, and lets not forget military pensions for those who haven't done a produictive day in their life (Eisenhower's words).

Who isn't at the trough? The system was designed for everyone to have a chance to "get their piece of the pie". Perhaps we need to start over and design a new system. Patching an old coat too many times isn't a reasonable answer.

2008 Sep 18 12:04 PM

[Will Rahal:]

I have been Bearish for a while.
As a frequent commentator here, I want to let you
know that I believe that a ST/IT bottom has been put in today.

2008 Sep 18 01:48 PM

[WAKEUP:]

Definition of "puppet": "A small figure of a person or animal, having a cloth body and HOLLOW HEAD, designed to be fitted over and manipulated by the hand." Socialism has been headed our way in the United States for many years. The creators of the puppet, George W. Bush, saw it coming, and that's why they created Puppet George W. Bush, to steal as much as possible from the taxpayers (that's you, and me) before the wave of socialism takes over. Ironically, they made the path to socialism easier by their actions. Simple, really, when you wipe away all the graphs and sqiggly lines.

2008 Sep 18 03:18 PM

[Reticent:]

A few DO have wise and logical solutions though we are forced to sit in reticence while those "up on the Hill" can't spell "mortgage" trip all over themselves and each other to have their latest idiocracies heard. Too tired to muster much more than, uhm, July 2007 I barely lifted my head from my desk when I matter of factly said "FNMA and FHLMC need ability to acquire individual loan amounts > current limits....without disregarding their multi billion $ AUS's." Then when Bush rolled out his "Economic Stimulus" deception, the first retort in my mind was "take that chunk of crazy$ and put it in a huge pool to refinance consumers and / or buy closed loans from institutions before this hiccup becomes a seizure and a failure"
There is not an oversupply of housing or incredible devaluation in prices or rampant fraud or flagrant disregard or any ONE thing that caused or feeds the frenzy. The window of opportunity to provide a swift and simple solution is light years passed. Now our bizarre ritual is incurable and as those with the ability to institute change refuse to admit to themselves and the world they havent a clue and certainly wont tap into the ideas of those that do, the worst is yet to come. Last one off Wall Street, turn out the light.

2008 Sep 18 11:31 PM