Don't Panic 32 comments
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I have a feeling I know what President Bush is going to say in his address to the nation tonight, but the single biggest message has already been sent, thanks to his decision to schedule the last-minute broadcast coming on the same day as John McCain announced he was suspending his presidential campaign to try to wrestle the bailout to the ground. The message is the same as the one sent by Hank Paulson over the weekend, when he asked for unprecedented power and unaccountability in structuring the bailout fund. And the message is not one that politicians should be sending:
Panic!
I just went to see Tony Blair speak at the World Business Forum in New York, and he said that it's important to recognise crises when you see them, and then to treat them as such. At the same time, he added, it's equally important to "remain absolutely calm".
I have to give the edge to the Democrats, here -- not just Chris Dodd but Barack Obama as well. They clearly appreciate the severity of the situation, but at the same time they aren't trying to use scare-bully tactics to push through ill-thought-through emergency legislation which could have decades-long repercussions.
What's truly astonishing to me is that the markets, at this highly nervous and volatile time, seem to be more grounded than the Administration. When politicians say that the economy is in peril and that we need $700 billion just to keep our heads above water, that's normally a sign to run for the exits. But so far, that hasn't happened: They, like the Democrats, appreciate that there probably is a sensible solution to this crisis, if we tone down the rhetoric and work together.
McCain's statement, in this context, was truly unhelpful. This is panicky, not constructive:
It has become clear that no consensus has developed to support the Administration's proposal. I do not believe that the plan on the table will pass as it currently stands, and we are running out of time.
This strikes me as a profound misreading of the public's mood, a bit like Rudy Giuliani's decision to try to extend his second and final term as mayor on the grounds that only he was qualified to do the job. America does not want to elect a politician who can't help construct a bailout package without abandoning a foreign-policy debate. Nor should it.
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This article has 32 comments:
There is no panic on 'main street'. The equation is simple as it was in the 1920's: The now very large percentage of have-not's have little to lose and the now very small percentage of have's have much to lose. The lesson of history is that populism only conquers capitalism during these extreme imbalances. Congress is getting the message that it is time to deflate, massively, and we'll work this out on the streets.
What a bunch of junk.
No mention of Countrywide, IndyMac the other terrible mortgage originators and RMBS issuers.
It's time to throw out the Paulson Plan and come up with something new - and just as big in my view.
The Administration is telling the Taxpayers "Your life or your Money"
The Administration is telling the Taxpayers
"Your life or your Money"
This catastrophe/(gov) is making capitalism look bad
1. irresponsible borrowing... no accountability
2. irresponsible lending.... wait *remove risk by having the gov. guarantee these loans via Fannie/Freddie
gov. is the problem, not the solution. The gov. should suspend all spending programs including its own salaries to cover the 700 Billion.
bring on the depression... teach gov. a lesson
This catastrophe/(gov) is making capitalism look bad
1. irresponsible borrowing... no accountability
2. irresponsible lending.... wait *remove risk by having the gov. guarantee these loans via Fannie/Freddie
gov. is the problem, not the solution. The gov. should suspend all spending programs including its own salaries to cover the 700 Billion.
bring on the depression... teach gov. a lesson
oh yeah, know this plan is going to pay MORE THAN what these lenders hold on the notes NOW.... What???
www.ft.com/cms/s/0/83b...
I'd rather see $25B go to a company that employs a neighbor here in the Rust Belt than see a nickel to go the blood suckers in Manhattan or DC.
Free Market Solutions... I'll go buy a Toyota, that was made in the USA!
AND it didn't need a Gov. loan to do it!
I'm NOT against Joe six pack, I am against him needing my money
the Switchboard number is...
202-224-3221
that is all I ask... is it too much? I think a candidate would win on that platform...
give me 4 years in the white house... no 2nd term needed to shake things up.
Here's a question for you who welcome a depression....
when the house next door goes into foreclosure is your place worth more?
Also, I sure hope you have a drawer full of cash to purchase that new Toyota cause those lovely 0% interest days are going away....so long to trading your car in after 3 years.....but you're right, a Toyota will be a wise choice...it will run for 6 no problem..
but look at the bright side, with a serious recession you shouldn't see $4 gas anytime soon....
The only real danger of this trillion dollar bailout is the very real possibility of inflation...but then again, maybe you'd prefer to be underwater on your mortgage for 5 years...
wake up!
I am so sorry, but capitalism, especially of the US cowboy capitalism persuasion favored by Regan, Thatcher and of course the corporate elite, has been looking bad and ineffective to the majority of the world well before this current crisis. One only need look at the decades of failed IMF capitalist "free market" policies foisted upon many countries in the third world, especially in South America, to see the utter failure of the economic model. That same failure is now coming home to roost in the US.
It was interesting this past weekend to watch Zakaria's weekly TV show where the foreign panelists noted this final clear failure of the US economic model as they noted that many leaders will no longer even be looking at the US model as an option. And then the second half of the program is an interview with the originator of the economic model that is now the primary economic model being followed world wide, the model of state guided capitalism of Lee Kuan Yew.
2. Bernanke calls himself a student of financial crisis. Give me a break.
3. The strategy is to scare the Congress 40 days away from the elections. The Congress cronies think that 1+1 equals 3.
4. 700 Billion pays for 1400 projects of 500 million dollars. That is about 1400 new NBA stadiums. Instead, we are going to give the money to people that wear Armani suits and drive Porshes. The same people that created money from thin air.
actually, I'm one of the FEW that rent and didn't buy during the 'Greenspan' era of 0% interest as I thought real estate here is in a 'bubble' and it would burst and prices come down...
and I'm debt free with 30k in money market account.
I have a Ford diesel and Honda 4cyl for vehicles... paid cash...
I'm ready for the crap to hit the fan
you go and print this money... inflation always works
I don't want a depression, BUT I will take it BEFORE I sell my freedom to a socialistic society! Give gov. this authority and it never ends.
If they can't see it coming, they can't fix it in 2 days with a blank check
Things of this nature have been suggested elsewhere on seeking alpha site. I'd like to think it couldn't happen, but then again...
Don't panic!
For the record (for those that haven't been paying attention for the last 60+ years:
America is NOT a free market.
We are a highly regulated, manipulated, socialized market.
If anyone suggests that we have a free-market system, please send me a note so I can pass along some reading recommendations.
There are numerous flaws with our current system, not the least of which is manipulation of incentives by more than a few government agencies. Reform is needed, but oddly enough the reform is to get government further REMOVED from tinkering with incentives and creating poor signals of proper/improper investment choice, and work to increase market transparency (we live in an information age, so this shouldn't be so hard).
Problems today include:
1) GSE models (government's fault; flawed; read former Governor Poole's comments on the GSE problem)
2) Allowing TBTF firms - read Alan Greenspan's confirmation hearing and try to internalize all that William Proxmire had to say to the "Maestro". If only we had listened to poor, ignored William.
3) FHLB System - a disaster waiting to happen
4) US Government gtys - like FHA - are you serious? Shoot it
5) Cash basis accounting, not GAAP
6) Of course, the FRB's "fine tuning" operations. Read Friedman. Not that I am a monetarist, but I agree with the "remove the punch bowl" philosophy, which isn't today's FRB (bring back Volker!!!)
7) FDIC insurance - should be paid for as a direct adjustment to amount the CUSTOMER decides they want to insure. Adjustment to rate. No insurance = higher rate; more insurance = lower rate. Make the customer responsible for his/her risk taking
8) Bank ratings - CAMELS? How about rating risk management, disclosure, concentrations, etc. Make them public. Assess higher fees for higher risk.
9) Regulatory arbitrage - not the rules, but the Agencies. Under GLBA, functional regulators created. Congress screwed up. Don't allow "Divide and conquer." Bring the regulators under one roof. Keep the state charters. Push insurance to the FRB. Keep supervision separate from the FRB. Similar to Paulson's plan. Reform needed, but perhaps more regulation isn't, just recalibration.
10) Etc...I could go on and on, but you would get bored, and it's 1:30am.