Barney Frank's Money Quote 34 comments
September 25, 2008
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From comments by Barney Frank last night, a deal has been reached by House and Senate Democrats to create legislation to pass the U.S. Treasury financial market rescue plan. Here is the money quote (literally):
There is conceptual agreement, including I think with Treasury -- people understand it's not going to be a straight $700 billion. [via Bloomberg]
While the market may end up impressed, depending on the final wording, there are at least two worrisome things in Frank's statement (or three if you hate the whole idea of a rescue plan):
- Frank says "I think" with respect to Treasury understanding that it's not going to be the amount of money it asked for. That "I think" rankles, because it suggests that Frank et al. think Treasury was high-balling Congress with respect to the amount of money it contemplates requiring. Granted, the $700 billion didn't come from a series of Fast Fourier Transforms, but any number materially below $700 billion is going to be taken poorly by the markets. (And no, I'm not arguing that $700 billion is some Platonic correct figure, merely that expectations are expectations, and pretending they don't exist is stupid.)
Tranching out the money -- committing to $700 billion, but doling out the money to Treasury in dribs and drabs -- is dodgy, depending on the number and the size of the tranches. Too many and you end up with what the private investing business calls "Newfie funding". It is when you fund something partway to the goal, then have to fund it again when the first money predictably runs out, and then again and again and again -- usually to the point that the company in question spends most of its time begging for money rather than doing business. It is common among dumb and unprofessional investors who don't trust their own instincts, and who don't understand that some things just take as much money as they take.
I expect oodles more detail today.
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'I'm not saying $700 Billion is a magic number, ... but anything less than $700 Billion will be a colossal failure!"
I'm getting sick of everyone crying doom and gloom. And I don't particularly care if short-term investors have their expectations dashed for engaging in speculation (as the author seems to imply we should be critically worried about).
Really, I'd prefer no plan at all --- it'll be painful but it keeps the basic forces of the market in place (those who made stupid decisions will get punished and those who were prudent may find rewards) --- but there are a dozen better plans than this bailout (including the National Bank idea which I've suggested along with many others). I don't know why Washington always manages to figure out the absolute worst idea to solve every problem:
Terrorism? Let's spent $1 trillion invading and rebuilding a country that had little to do with it.
Accounting scandals? Let's write the most impractical and cost-prohibitive accounting requirements into law!
Campaign finance issues? Let's write a bill that infringes on the 1st Amendment, makes it more difficult to beat incumbents, and still manages to keep the same corrupt forces in place.
Financial crisis? Let's just buy all the troubled assets from the people who made the reckless purchases to begin with!
I distrust everyone who says "WE MUST PASS THIS BILL OR FACE FINANCIAL RUIN!" If anything, I think I'm a lot better off now that housing prices have plummetted and I may realistically have an opportunity to own a home (also possible due to good credit).
All you have to do is google my name and you can read my warnings as early as June of 2005 in an interview with Mark Gilbert(Bloomberg-Lond... Gross and Rosenberg(ML)were quoted in the same article.
I am not gratified that these forecast. came into a fruition.
I have issued them ,hoping that the institutions ,the FED ,the Treasury and others would address them then in order to prevent financial calamity.
I did not issue the warnigs to gloat on the misery of other Americans.
If you are willing to take a chance on the potential megat contraction in the absense of the stability package ,clearly you do not understand the potential "pain" that would be inflicted on the citizens globally.
This is not the time to express vocal bravery ,this is the time to address potential calamity.
You should try to find old film clips reflecting the lives of the Americans during the Great Depression.
I continue to believe in the logic and the sanity.
Addressing the issues now,will bring unprecedented prosperity to all of the Americans.
I haven't seen much reasoning supporting the proposal. The only arguments I've heard are (1) UR STUPID FOR QUESTOING IT, (2) THE END OF THE WORLD!!!, and (3) we have to do this because of mark-to-market and the Feds will be getting a great deal on these assets.
The last one doesn't make much sense because if mark-to-market is the problem, hence the assets are theoretically "undervalued", then the financial institutions are not going to sell unless they (a) get paid a premium or (b) believe the mark-to-market book value is still an inflation over actual value.
Awesome WilliamBanzai7.
I'll second that --and nominate Jake Huneycutt for SEC Chairman.
Patrick.net, Calculated Risk or HBB?
First, we agree on addressing the issues and I think this is disagreement for the sake of disagreement.
Second, I don't give two $hits about what you've written, to whom you've spoken, and think your logic is attributable over -- we're equal as citizens and the only perspective that matters concerns that of the present financial debauchery and greed.
I've been following these matters far longer than the last month, hence my "vocal bravery" when I see the rich benefit at the expense of everyone else UNJUSTLY. You obviously settle for less.
What you call logic and sanity, I call roots of dictatorship, socialism, and the further divisiveness between those "with" vs those "without" of which only fuels "pain" globally to this second.
My problem is summed up in one two words:
ACCOUNTABLE TRANSPARENCY.
There is none, there hasn't been any, nor will there be any unless people demand it, which you have only spoken softly. Even in all your commentary, you don't have answers, except speculation which as good as those of us willing to take the chance on alternative when only the rich benefit.
There is more broken than a silly fiscal bailout, this is only the "battle of the moment" orchestrated by the "invisible hand" Ray Charles could see being yielded by the entitled (political and corporate).
Im in favor of nothing but pure fundamental capitalism. Any less is self preservation at the expense of the future -- the future I will beholden to.
Ive seen films of depression, my family came from it and my values are consistent with it. I'll take that risk watching those that don't share those values cascade back down to Mexico (or perish). Being simple, debt free and employed -- Ill gladly adapt and take that risk.
NO BAILOUTS FOR THE RICH!!!
This is just another example that the US isn't a capitalist country. Look at Amtrak train system. Overall, new enterprise is easily defeated in the US.
Barney frank is the worst example of a representative I have ever seen.
I say why vote?
Just hire them as consultants.
www.nytimes.com/2008/0...
Dear Paul,
Spare us your elitist attitude, latte sipping, cabernet sauvignon, Wall-Street high minded, "I'm richer and smarter than anyone" attitude.
It was the rocket scientist quants and MBAs and investment bank "Masters of the Universe" that just brought the world economy to its knees and the American economy to the brink of destruction. Whats worse is that they rail against the government and now come begging for help. You are a snob my friend. If it was not for your kind who thinks they "have the answers" and are so f$%king smart we wouldn't be in this god damn mess.
Economic philosophy of libertarians who short the market during a financial crisis.
Summary of a free market nihilist's philosophy:
"Bring on those waves of creative destruction: The bigger the financial collapse the better, I'm short the market!"
F
The Bailout
money.cnn.com/2008/09/...
I'll take that nomination for Jake Huneycutt for SEC Chairman and propose WilliamBanzai7 for Press Secretary.