I'm not particularly fluent in the language of political theater, but I get two clear messages from today's testimony. Paulson is the grown-up, telling Congress what to do: I need literally unimaginable sums of money, he's saying, because everything we've tried so far hasn't worked, and when your bazooka fails, it's time to start packing a rocket-launcher. And Bernanke is the poodle, basically pointing to Paulson and saying "what he said" -- following by example, you might say.
I have no idea whether this is the best way to get Congress to fall in line. This, for me, is the key part of Bernanke's testimony:
Despite the efforts of the Federal Reserve, the Treasury, and other agencies, global financial markets remain under extraordinary stress. Action by the Congress is urgently required to stabilize the situation and avert what otherwise could be very serious consequences for our financial markets and for our economy.
Translation: This is no time for Constitutional checks and balances: we all need to give up our cherished independence and support one leader in this time of crisis. And that leader must be Hank Paulson. I've done it; you should too.
The problem is that legislators, with good reason, tend to get brushed the wrong way when they're told that they're not in charge. They're the only elected officials in the room, and Paulson himself admits in his testimony that the actions of unelected technocrats have been woefully insufficient thus far.
As we've worked through this period of market turmoil, we have acted on a case-by-case basis... These steps have been necessary but not sufficient.
More is needed.
This sounds very much like "something must be done, this is something, so support me in doing it". It's a risky tack to take, especially in an election year when politicians like to show themselves to be leaders, rather than the followers of unelected officials whose policies to date have clearly failed.
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BTW, a bazooka IS a rocket launcher.
bylo
Challenge utterly EVERYTHING concerning the power of the purse. Take as much time as needed, obtain as much perspective as possible -- TO HELL WITH THE ADMINISTRATION'S CALLS FOR ACTING QUICKLY!
So, where are the ceilings? $700B MY ASS!! THIS WILL BE TRILLIONS, JUST LIKE IRAQ!
Fiscal policy discipline;
Redirection of public spending from subsidies ("especially indiscriminate subsidies") toward broad-based provision of key pro-growth, pro-poor services like primary education, primary health care and infrastructure investment;
Tax reform – broadening the tax base and adopting moderate marginal tax rates;
Interest rates that are market determined and positive (but moderate) in real terms;
Competitive exchange rates;
Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by low and relatively uniform tariffs;
Liberalization of inward foreign direct investment;
Privatization of state enterprises;
Deregulation – abolition of regulations that impede market entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions; and,
Legal security for property rights.
The widespread adoption by governments of the Washington Consensus was to a large degree a reaction to the macroeconomic crisis that hit much of Latin America, and some other developing regions, during the 1980s. The crisis had multiple origins: the drastic rise in the price of imported oil following the emergence of OPEC, mounting levels of external debt, the exogenous rise in US (and hence international) interest rates, and -- consequent to the foregoing problems -- loss of access to additional foreign credit.
These are your words. The last seven words (....whose policies to date have clearly failed.) in the sentence say alot. I gues your moto is: if at first you don't succeed try try try try try again. What makes you think this try will work?
...JUST LIKE IRAQ, PATRIOT ACT, RECORD SPENDING, ETC. If you buy this bull$hit about "mandatory bailout" you deserve hell, and not to worry, it's coming!!!
I guess it is risky. When an ex-CEO of one of the financial institutions responsible for this mess says he wants unlimited power to fix things (and help out his buddies), the whole country ought to be saying "WAIT!!". Maybe he knows how to do things, but how much can you trust him? Congress has every right and responsibility to ask for controls/safeguards over what we the taxpayer will end up paying for. Just because these two Bush Administration's minions pull a Chicken Little act doesn't mean we have to do something stupid.
The financial institutions require a recyclable program and TARP money will serve to provide the start up of short term equity in order to hasten the process of cleaning house and helping to transition to a green “renewable” economy instead of laundering cash for gold, or other such offerings of lucrative so called ready assets that serve nothing more than to remain dust free in the vaults they are stored in.
As the market and economy recover,the value of the collateral should increase therby off setting some of the cost of the economic aid.
One should listen carefully to what is being said before expressing an opinion.
The proposal before the Congress is effective.It will liquify financial institutions and with slight lag the economy.It willcontribute to a major stock market rebound.
Are you joking???? If it's so good, why do they want to dump them on the taxpayer? At a price that bails them out.
Why just GS and MS? If you bail these out, why not make Hank Greenberg (AIG), Dick Fuld (Lehman) and Jimmy Caine (Bear Stearns) whole on their losses as someone said elsewhere? Their only mistake was not to last a few extra weeks.
There is an invisible hand revealed when "all" is turned down for the sake of Congressional oversight. That just revealed that this is a grasp for power, all else is irrelevant if one cannot compromise with the simple premise of oversight.
Um, half the country are indeed utter deadbeats and scoundrels that the rest of us have to carry, but they aren't bankers and they aren't on wall street. Finance pays the US treasury a trillion dollars a year in taxes, personal and corporate, on top of everything they earn for themselves. And without them everyone will be oh about 5 times poorer. We throw away every year on health care what they are asking for as a capital sum, once, and at least half of which will be returned by the assets bought, maybe all of it. And they can't see the trade being offered to save their lives.
"Here is a third of the income of the Federal budget forever, please spend 5% of one year's worth to save the golden goose" - waaa waaa no fair, I am supposed to be able to tax you blind to buy votes from deadbeats, you can't have a single dime of your own taxes back when you need them!" They are just morons...
What does that "mean" exactly?
Does it mean we (the thugs) want the power to fix this or we want Congress to have the power? I say again, when asked if Congress could give less (I think around 150B was tossed around) and re-evaluate in December (presumably after a new administration), Paulson said, "that would be a grave mistake".
I DEMAND TO KNOW WHY SHARING OVERSIGHT WITH CONGRESS WOULD BE A GRAVE MISTAKE!
He's a salesman, and is trying to sell the American public their own right leg.
Congress: For the first time ever, TELL THE BUSH ADMINISTRATION NO!
Can't thank you guys warmly enough...
He created this financial WMD while running Goldman, now he wants power to keep himself out of jail and in control.
I hope, with great sincerity, that Goldman Sachs burns to the ground, along with Morgan Stanley and the rest of the pirates of Wall Street. If "Finance" as practiced on Wall Street could be accompanied by that old fashioned notion of "Fiduciary Responsibility" that would be another matter. But the pirates of Wall Street package trash, wink and nod it into AAA tranches and then sell it for commish, go and buy themselves Maseratis, and then whine about paying taxes. It's all funny money, but you guys get to keep yours because you got to use it first. And when you can't make a payment, dad comes to Congress for a Trillion or so to make it all right. $65 Billion in bonuses to the pirates for a job well done. All lies, just one long string of lies.
Pirates of Wall Street: Go to jail. Burn. Starve. I'm not taking this crap anymore.
New debt taken on by the US financial sector is still above the previous years now we are one year into this credit crisis.
Here are some facts:
At the end of 2007 Q2 total debt was 14998.1 billion US$
At the end of 2008 Q2 total debt was 16507.5 billion US$
That is above 1.5 trillion in new debt so this 700 billion rescue plan will not work. You see: total debt in the US financial sector expands exponentially above 10% a year at the moment of writing.
The Hank Paulson clown says: We have to take this toxic debt from the balances of the banks.
But this so called 'toxic debt' is only old debt like for example mortgate debt from 2004 or 2005. At that point in time I knew it would grow toxic and at this point in time I know the new 1.5 trillion debt will grow toxic in the future...
The Americans; they are just as stupid as they are obese!
Here is the source link that gives the above mentioned facts:
www.federalreserve.gov...
Commercial real estate and credit cards are next.
Paulson and the FED know this, but play dumb. 9 months ago, Paulson was saying that houses weren't overvalued...
You say, quote:
Finance pays the US treasury a trillion dollars a year in taxes, personal and corporate, on top of everything they earn for themselves.
Unquote.
So JasonC, why don't you back that up?
As far as I know reality, the US financial sector is only about 20 to 21% of the US economy.
And they would cough up about 40% of government intake?????
So, as a matter of fact; the US financial sector is taxed twice as hard as the rest of the US economy?
You are a funny guy Jason (or whatever your real name is)!
This stock market is becoming more of a Ponzi Scheme everyday.
Now Mr "Sound and solvent" is telling us that the sound and solvent system needs to be bailed out to the tune of $700 billion (and counting).
Mr Paulson clearly has no idea what he is talking about. Either (1) he was just plain wrong about everything he said and really doesnt understand the markets at all; or (2) he doesn't understand leadership and the need to maintain at least a shred of credibility in order to lead.
A coach can't meet his team in the locker room at halftime when they are down 50 points and claim that they are winning. The players will quite justifiably figure the coach is a moron.
Well Coach Paulson told us the subprime issue was contained, that FNM/FRE were fine, the financial system was solvent -- and we could all look at the score board and know that simply wasn't true.
And now he wants us to give him dictatorship powers to spend at least $700 billion of OUR money however he sees fit?
How stupid are Americans to even consider this plan?
Apparently we are all dumber than brinks, because we are considering it. And we still have the same out of touch coach running the team. Really embarrassing.
So we read the plan. First, we are naming Paulson as defacto Emperor, with zero check and balance. Paulson plans to bail all his crony Wall Street buddies out of bad positions-- taxpayers who earned $50K last year (maybe) are asked to bail out traders who made millions. Common sense tells you the banks cannot be made better off than they are now unless the Treasury deliberately OVERPAYS for whatever assets (meaning the taxpayer loses).
And when the dust settles: the plan solves nothing! Homeowners are still unable to pay their mortgages. The U.S. has another trillion in debt (I am speaking NET of the eventual payments on the mortgage debt), and has no way to pay for it -- we aren't getting a penny of extra revenue.
And in the end, the most reckless and irresponsible members of society (those who took out liar loans and those who sold them) are rewarded with a huge bailout -- paid for by those who acted prudently.
How does the U.S. compete globally when we reward our worst players and bench our better/average players? This is the opposite of a meritocracy -- it will make the U.S. far less competitive in world markets going forward.
And this anti-meritocracy is already spreading. Car companies that are run by people who cannot design a decent car and staffed by overpaid union labor are already lining up for more handouts. Airlines are close behind.
Whenever a company does something galactically stupid, the taxpayers will foot the bill. Over time, we will continuously transfer wealth from the responsible and prudent to the stupid and reckless.
Arguably, the government needs to do something at this point -- but there is nothing intelligent about Hank Paulson's plan. Henry Paulson should be fired
Therefore future comments made by JasonC are to be taken with a little grain of salt I just guess...
How this bears on the current fiscal crisis is hard for me to say. I would not have injected it into the thread. I think that perhaps wyostevens meant to imply that an administration that was surprised by the difficulty of a war might also be flummoxed by a fiscal crisis. One could also argue that an administration that fought hard to turn things around before will be up to the next challenge.