An editor once proposed a picture book titled "They Must Know What They're Doing or They Wouldn't Be Where They Are," featuring the captain of the Titanic, the designer of the Edsel, LBJ running the Vietnam war and other disaster-prone people in high places.
Add Henry Paulson to the list. After pushing Congress into a panic to let him buy toxic mortgage assets, Bush's Treasury Secretary today said maybe not, announcing the plan is on hold.
At a news conference, Paulson said the $700 billion will be used instead to bolster the financial markets and, in turn, make loans more accessible for creditworthy borrowers:
“During times like these with a slowing economy and some deterioration in credit conditions, even the healthiest banks tend to become more risk-averse and restrain lending, and regulators’ actions have reinforced this lending restraint in the past.”
Four federal agencies, including the Federal Reserve and the FDIC, joined in by issuing a statement practically begging banks to step up: “Lending to creditworthy borrowers provides sustainable returns for the lending organization and is constructive for the economy as a whole.”
Paulson's turning on a dime is analogous to what the Bush Administration might have done five years ago if, after getting Congress to authorize invasion of Iraq and starting the shock and awe, they suddenly decided to stop and bomb Iran instead.
No wonder, in the face of all this fumbling, the stock market keeps going down, waiting for a signal about where all this confusion is heading.
The naming of Obama's Treasury Secretary, along with a clear statement of intentions about the financial markets, gets more urgent with each passing day.
Showing posts with label $700 billion bailout. Show all posts
Showing posts with label $700 billion bailout. Show all posts
Wednesday, November 12, 2008
Thursday, October 02, 2008
The Decision to Go Over a Cliff
Congress is facing a Butch-and-Sundance moment tomorrow in the debate over hurtling into the unknown as relentless mercenary forces close in.
The Senate has thrown them some goodies to slow down the stampede but essentially left the $700 billion cost unchanged--in fact, adding $150 billion in reduced taxes to the ransom.
In the House showdown, it will still be an odd coalition of liberals and conservatives controlling the swing votes. “The bailout legislation that the Senate is sending back to the House," says Texas Republican Joe Barton, "is a fraternal twin to the one I voted against on Monday."
Virginia Democrat Bobby Scott insists there are "a lot of things we can do at virtually no cost to the taxpayer" rather than "a $700 billion purchase of worthless assets," citing mark-to-market accounting to expand lending capacity, net worth certificates to give banks confidence in lending money to other banks and a counterpart of the Home Ownership Loan Corporation of the Great Depression, "which, when the dust settled, we protected all the mortgages, prevented foreclosures, and ended up making a profit."
If Congress were not in panic mode, members could consider still other approaches such as Paul Krugman's plan "centered on purchases of preferred stock and takeovers of failing firms--basically, a plan clearly focused on recapitalizing the financial sector, with nationalization where necessary."
But with the hot breath of voters only a month away, House members will be deciding less on the merits of the rescue bill than calculation of the odds of their own chances at the polls.
On further thought, for taxpayers this may not be like Butch and Sundance, who somehow managed to survive their free fall, but more like Thelma and Louise.
The Senate has thrown them some goodies to slow down the stampede but essentially left the $700 billion cost unchanged--in fact, adding $150 billion in reduced taxes to the ransom.
In the House showdown, it will still be an odd coalition of liberals and conservatives controlling the swing votes. “The bailout legislation that the Senate is sending back to the House," says Texas Republican Joe Barton, "is a fraternal twin to the one I voted against on Monday."
Virginia Democrat Bobby Scott insists there are "a lot of things we can do at virtually no cost to the taxpayer" rather than "a $700 billion purchase of worthless assets," citing mark-to-market accounting to expand lending capacity, net worth certificates to give banks confidence in lending money to other banks and a counterpart of the Home Ownership Loan Corporation of the Great Depression, "which, when the dust settled, we protected all the mortgages, prevented foreclosures, and ended up making a profit."
If Congress were not in panic mode, members could consider still other approaches such as Paul Krugman's plan "centered on purchases of preferred stock and takeovers of failing firms--basically, a plan clearly focused on recapitalizing the financial sector, with nationalization where necessary."
But with the hot breath of voters only a month away, House members will be deciding less on the merits of the rescue bill than calculation of the odds of their own chances at the polls.
On further thought, for taxpayers this may not be like Butch and Sundance, who somehow managed to survive their free fall, but more like Thelma and Louise.
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