On the eve of our annual day of excess, we are all suffering from the heartburn of years of greed and over-consumption that a ton of antacids won't cure.
In today's Times, Tom Friedman catalogues the gluttons: "People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made a fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so."
In the traditional celebration of plenty, Americans will be forced to give some thought to how much is enough as an outgoing government keeps pouring money into who-knows-where and to what effect while the incoming crew chafes at the bit with "new thinking" from some of the same people who championed the old.
As Americans sit down to turkeys with all the trimmings in Norman Rockwell settings, they are not living in that 20th century world of bounty and won't be for the foreseeable future.
The President-Elect managed to reassure the stock markets into gains this week, but our government may have to provide more than $7.76 trillion to rescue the financial system after guaranteeing $306 billion to Citigroup--as much as half the value of everything produced in the nation last year.
That's a lot turkey, yams and pumpkin pie.
Showing posts with label financial rescue. Show all posts
Showing posts with label financial rescue. Show all posts
Wednesday, November 26, 2008
Tuesday, September 30, 2008
Bailout Defeat: Blessing in Disguise?
Over the next days, with a show of guts, House Democrats could turn today's stunning defeat into victory by working on a revised version of the rescue bill, not to bring on board dissident Republicans, but members of their own caucus who felt it did not go far enough to protect homeowners and taxpayers.
Such a revamping might ease pressure on incumbents from both parties who fear voter retribution next month if they are perceived as bailing out Wall Street.
The possible permutations are many, but start with the negative take by Larry Kudlow on the National Review blog that "Democrats will come back with a new bill that includes all the left-wing stuff that was scrubbed from the bill that was defeated today in the House.
"As this scenario goes, the House Democrats need 218 votes, and they have to pick up a number of black and Hispanic House members who jumped ship because the Wall Street provisions, in their view, were too benign. So things like the bankruptcy judges setting mortgage terms and rates, the ACORN slush-fund spending, the union proxy for corporate boards, stricter limits on executive compensation, and much larger equity ownership of selling banks through warrants will all find itself back in the new bill.
"Of course, this scenario will lose more Republican votes. But insiders tell me President Bush will take Secretary Paulson’s advice and sign that kind of legislation."
On the more liberal end of the spectrum, economists like Paul Krugman see a 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."
Yesterday the Federal Reserve started pumping $630 billion into the global financial system, flooding banks with cash to add liquidity and help alleviate the credit crisis.
So, one way or another, for better or worse, the US government will have to act to avert disaster, and today's defeat by diehard Republicans may eventually open the way for measures that are better rather than worse.
Such a revamping might ease pressure on incumbents from both parties who fear voter retribution next month if they are perceived as bailing out Wall Street.
The possible permutations are many, but start with the negative take by Larry Kudlow on the National Review blog that "Democrats will come back with a new bill that includes all the left-wing stuff that was scrubbed from the bill that was defeated today in the House.
"As this scenario goes, the House Democrats need 218 votes, and they have to pick up a number of black and Hispanic House members who jumped ship because the Wall Street provisions, in their view, were too benign. So things like the bankruptcy judges setting mortgage terms and rates, the ACORN slush-fund spending, the union proxy for corporate boards, stricter limits on executive compensation, and much larger equity ownership of selling banks through warrants will all find itself back in the new bill.
"Of course, this scenario will lose more Republican votes. But insiders tell me President Bush will take Secretary Paulson’s advice and sign that kind of legislation."
On the more liberal end of the spectrum, economists like Paul Krugman see a 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."
Yesterday the Federal Reserve started pumping $630 billion into the global financial system, flooding banks with cash to add liquidity and help alleviate the credit crisis.
So, one way or another, for better or worse, the US government will have to act to avert disaster, and today's defeat by diehard Republicans may eventually open the way for measures that are better rather than worse.
Sunday, September 28, 2008
The Money Pit and Cat in the Well
After pulling an all-nighter, the low-approval gang in Washington this morning will give us their new, improved version of the $700 billion gamble nobody understands but practically all are sure is needed to keep the sky from falling.
The 1980s Tom Hanks movie, "The Money Pit," comes to mind as Congress and the Administration enthuse over the financial structure we're buying with a $250 million down payment that may or may not stand up until their successors move in next January.
House Speaker Nancy Pelosi congratulates the negotiators for "the great work they have done" to "insulate Main Street and everyday Americans from the crisis on Wall Street” while Treasury Secretary Henry Paulson gets up off his knees to celebrate "a deal which will work and be effective in the marketplace.”
But as the happy couple prepare for the Housewarming, the grumpy former tenant Newt Gingrich stands outside bitching that "it’s probably impossible, without the president getting a new secretary of the treasury, to get to a good deal...We’re taking an immediate tummy ache, and we’re in danger of turning it into cancer.”
So much for the mixed metaphors, but perhaps the most apt commentary might be that of a voice from the past, the 1960s Senate Leader Everett Dirksen, who may or may not have said, "A billion here, a billion there and pretty soon you're talking about real money."
Dirksen had all kinds of folksy anecdotes to warn about wild-eyed government spending, including the one about the schoolboy asked to figure out how long it would take for a cat that had fallen into a well 100 feet deep to get out if it climbed up one foot and then fell back two feet.
After reams of calculations, the answer was, "If you give me another 30 minutes, I'm pretty sure I can land that cat in hell."
Dirksen is long gone, but he may have a good sense of direction about where Washington spending was heading.
The 1980s Tom Hanks movie, "The Money Pit," comes to mind as Congress and the Administration enthuse over the financial structure we're buying with a $250 million down payment that may or may not stand up until their successors move in next January.
House Speaker Nancy Pelosi congratulates the negotiators for "the great work they have done" to "insulate Main Street and everyday Americans from the crisis on Wall Street” while Treasury Secretary Henry Paulson gets up off his knees to celebrate "a deal which will work and be effective in the marketplace.”
But as the happy couple prepare for the Housewarming, the grumpy former tenant Newt Gingrich stands outside bitching that "it’s probably impossible, without the president getting a new secretary of the treasury, to get to a good deal...We’re taking an immediate tummy ache, and we’re in danger of turning it into cancer.”
So much for the mixed metaphors, but perhaps the most apt commentary might be that of a voice from the past, the 1960s Senate Leader Everett Dirksen, who may or may not have said, "A billion here, a billion there and pretty soon you're talking about real money."
Dirksen had all kinds of folksy anecdotes to warn about wild-eyed government spending, including the one about the schoolboy asked to figure out how long it would take for a cat that had fallen into a well 100 feet deep to get out if it climbed up one foot and then fell back two feet.
After reams of calculations, the answer was, "If you give me another 30 minutes, I'm pretty sure I can land that cat in hell."
Dirksen is long gone, but he may have a good sense of direction about where Washington spending was heading.
Thursday, September 25, 2008
$700 Billion or Bust? Why?
The nagging questions are how the Bush Treasury Department arrived at that sacrosanct figure, why it's not negotiable and what's wrong with authorizing it in installments.
Sen. Chuck Schumer, who comes from a tradition of never buying retail when there's an alternative, asked Henry Paulson why it would not make sense to put $150 or so billion into the markets and see what happens but got a bristling rebuke:
"I think that would be a grave mistake," Paulson answered. "This is about market confidence and the tools to do the job," he added, insisting he needed the full amount to deal with unanticipated contingencies.
Unanticipated? That's an apt description of the entire mess that his Treasury Department was slow to recognize but now claims with absolute certitude that it knows how to clean up, but only if taxpayers commit an enormous amount to a lame-duck Administration, no questions asked.
But, to the credit of Congress, members are not responding meekly to the pre-election panic this time as they did to the 2002 resolution to invade Iraq, but are negotiating for oversight and transparency, executive pay limits and equity interest on taxpayers’ behalf as well as a provision to allow bankruptcy judges to revise mortgage terms.
Their constituents should be urging them to adjust the price tag too to keep from tying the hands of the new President and Congress by giving away the store now.
This morning, President Bush will be trying to make his last sale in office to Barack Obama and John McCain but, to the credit of both, there are signs that they won't buy in whole-heartedly.
Paulson has no sure way of knowing how much is needed to calm the credit markets but, like his leader, is stubbornly arguing that he should be the Decider, even though he will be long gone if and when he turns out to be wrong.
Sen. Chuck Schumer, who comes from a tradition of never buying retail when there's an alternative, asked Henry Paulson why it would not make sense to put $150 or so billion into the markets and see what happens but got a bristling rebuke:
"I think that would be a grave mistake," Paulson answered. "This is about market confidence and the tools to do the job," he added, insisting he needed the full amount to deal with unanticipated contingencies.
Unanticipated? That's an apt description of the entire mess that his Treasury Department was slow to recognize but now claims with absolute certitude that it knows how to clean up, but only if taxpayers commit an enormous amount to a lame-duck Administration, no questions asked.
But, to the credit of Congress, members are not responding meekly to the pre-election panic this time as they did to the 2002 resolution to invade Iraq, but are negotiating for oversight and transparency, executive pay limits and equity interest on taxpayers’ behalf as well as a provision to allow bankruptcy judges to revise mortgage terms.
Their constituents should be urging them to adjust the price tag too to keep from tying the hands of the new President and Congress by giving away the store now.
This morning, President Bush will be trying to make his last sale in office to Barack Obama and John McCain but, to the credit of both, there are signs that they won't buy in whole-heartedly.
Paulson has no sure way of knowing how much is needed to calm the credit markets but, like his leader, is stubbornly arguing that he should be the Decider, even though he will be long gone if and when he turns out to be wrong.
Wednesday, September 24, 2008
McCain's "Sky Is Falling" Move
In the face of plummeting poll numbers and after Barack Obama's phone call suggesting a joint statement on the economy, John McCain is going what Las Vegas gamblers call "all in" by announcing a suspension of his campaign, suggesting cancellation of Friday night's debate and rushing back to Washington to...do what?
Obama says no, thanks to the charade. “It’s my belief," he told reporters today, "that this is exactly the time when the American people need to hear from the person who in approximately 40 days will be responsible for dealing with this mess. It is going to be part of the president’s job to deal with more than one thing at once.”
The Senate debate over the rescue bill is in good bipartisan hands with veterans Chris Dodd, Richard Shelby et al, so it's unclear what the presidential candidates could add by their presence, except that which is definitely not needed--partisan posturing for political gain.
When the time comes for a Senate vote, McCain, Obama and Joe Biden will certainly be there but meanwhile the Republican nominee is showing, not presidential command (George W. Bush will playact that on TV tonight) but the desperation of a candidate who is tied to the eight-year failure of leadership that led to this mess.
That subject is better addressed to voters out on the stump than in the one place in America that calls for serious leadership now without Karl Rovian politicking on the part of the next occupant of the White House.
Obama says no, thanks to the charade. “It’s my belief," he told reporters today, "that this is exactly the time when the American people need to hear from the person who in approximately 40 days will be responsible for dealing with this mess. It is going to be part of the president’s job to deal with more than one thing at once.”
The Senate debate over the rescue bill is in good bipartisan hands with veterans Chris Dodd, Richard Shelby et al, so it's unclear what the presidential candidates could add by their presence, except that which is definitely not needed--partisan posturing for political gain.
When the time comes for a Senate vote, McCain, Obama and Joe Biden will certainly be there but meanwhile the Republican nominee is showing, not presidential command (George W. Bush will playact that on TV tonight) but the desperation of a candidate who is tied to the eight-year failure of leadership that led to this mess.
That subject is better addressed to voters out on the stump than in the one place in America that calls for serious leadership now without Karl Rovian politicking on the part of the next occupant of the White House.
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