We have a bailout plan

No cash for trash.

The government’s job is to protect the rights of its citizens, not to prop up failing financial sectors. Markets drop because of lost value of commodities. If we can’t bear the risk of our own investments, soon the freedom to choose where to invest will be taken from us.

Also, these failing markets are in large part due to overregulation. So the solution is to give the government *more* control over the banking industry?

“over regulation”? Eh, more like bad regulation.

In some cases the bad regulation took the form of removing regulations that stopped borderline (and some not so borderline) fraudulent activities. Those regulations should have been left in place.

In other cases the bad regulation took the form of requiring some REALLY dumb practices that certainly helped pave the way for this “crisis”.

The regulations which essentially forced banks to provide sub-prime mortgages was combined with the removal of regulations that required “honest” treatment of some of the mortgage assets, and all that was expanded into a giant mess by opening up a multitude of different ways in which firms could increase their leverage (debt).

And then, along comes the bailout and pushes a bunch of cash into the problem to “get credit moving again”. That’s like putting some stop-leak into a brake line that is gushing brake fluid – it will only slow down the destruction, and in the real world, will cause many, bad unintended consequences.

I’ve emailed all my reps and senators several times on this issue and phoned twice. The way this is feeling though, I think it’s going to get hammered through anyway.

Alexis DeToqueville’s words might just apply:
“I, too, am in my fifties, and I recall an entirely different America while growing up and as a young man than what we have forced upon us today. I truly pray for a vast National Revival, we must return to our roots, found only in JESUS, or we will fall into Godless European style Socialism.”

The CRA (Community Redevelopment Act) mandated that banks had to make loans to people with bad credit, under penalty of fines if the banks didn’t comply. People like MCain and Pelosi own thousands of shares in some of these investment banks that are being bailed out….

I’m really discouraged and disillusioned about the whole situation. How is the Republic not dead when we embrace statism like this? The bailout is as big a move to Socialism as the New Deal.

If it would permanently flush out the demonrat members of Congress, what is likely to be no more effective than a $700B colon cleansing might be worth it.

Occasionally in our history the federal government has effectively stepped in to stabilize the economy that has suffered from financial manias and panics. This started in the Washington administration when the Treasury under Hamilton took over the bankrupt states debt obligation incurred during the Revolutionary War. Hamilton later stepped in during a panic related to federal debt obligations. The federal government during some- usually rare- times has the savvy and resources to avert looming financial disasters.

Just now the economy, even with the bailout, bids fair to tip over into a recession. This bailout most probably will prevent a steep recession or worse, as happened during the Great Depression when the national government and Fed sat on their hands, leading to a the Great Depression, exacerbated by Roosevelt’s policies, that lasted for ten years.

Once this necessary bailout deals with the immediate financial meltdown, then the government can deal with the compromised credit market regulation that is attributable mainly to Democrats along with a few spineless Republicans in the sentimental interest of “affordable” housing, especially for those perennial “victims”, the poor and minorities.

NO, Trying to prop up overinflated values is futile. Someday the economy will have to take the hit. Now is better than later.

No, wait!! I have a better idea. I have a half-baked get rich quick idea. Maybe you guys want to bail me out if I go belly up!

Looks to me like the House Republicans hold more power than they did prior to McCain’s sharing his spotlight with them last week.
That cold work to the good of any final bill.
Speaker Pelosi may have overplayed her partisan hand, or rather, mouth.
Or is she the only player in DC allowed to be partisan?

#10 Susan,
Well, I got this from a website on quotes, so it might have been edited by the blog owner. I don’t agree with the part of about “revival” but I do not doubt that the U.S. may be headed down “socialism road” if we are not
careful, especially if Obama wins!!

I listened to Rush Limbaugh today and thinks that all of this “legislation push” is tied to politics, specifically to get their man elected so that we can live in an Obama
nation! Strange how those 2 words resembel another word found in the Bible when God is displeased with His people!

Well, the Congres in its wisdom has voted against the bailout. My guess is that given the seriousness of the credit-market meltdown this will be a pyrrhic victory that bids fair to precipitate a deep recession or worse. The problem is that the meltdown was caused mainly by the Democrats and a few spineless Republicans who allowed a lowering of mortgage credit standards in the interests of “affordable” housing. The bailout plan was designed to plug the hole in the boat and pump out the exceedingly dangerous financial waters, followed by an effort to reform the compromised credit-market standards.

Hoover, the Fed, and the Congressional conservatives back in ‘29-’32 period sat righteously on their hands, ushering in the Roosevelt era that exacerbated matters, precipitating the ten-year pleasures of the Great Depression. Don’t kid yourselves that this is not a very real financial crisis. Ironically, the Democrats for the most part have a better understanding of the depth of the crisis than the many righteous and financially naive Republicans in the House.

What could easily happen next is a combination of some sort od a bank run and a decsion among those with capital in produvtive companies to find save havens, especially gold. The Wall Street Journal tomorrow will record the gory details.

Well, my congressman was one of the small number of Republicans who supported that monstrosity of a bailout. I’d love to know why. I called up and asked and the staffer basically said that he felt that the crisis warranted the intervention. I asked if my congressman was going to release any rationale or defense of his choice. He isn’t.

I have a hard time imagining that the bailout can be defended from an economic point of view. Paulson and Bernanke don’t even come close to defending it with a solid case. As is often the case, the more economic detail that gets thrown in, the more muddled causes and effects can become, but this one stays pretty clear even to the expert-level. Simplify it down to the dummy-level most politicians use, and it really does become a DUH situation. With the relative obviousness of the economics, the strong opposition from the public, and the general economic principles that Republicans are SUPPOSED to uphold, it should be a slam dunk.

This is one of those things that really drives home to me that I really don’t care much about “experience”, and this applies to both Obama and Palin. I can’t remember who made the quote, but someone said he would rather be governed by the first 200 names out of the phone book, or something like that. I tend to agree.

#22 tODD,
Thanks for catching that. Guess I better be more selective about what site I use for quotes next time!

I think part of the problem must have something to do with this idea that finance is a sector of the economy. It is not. It is not in the same way that mathematics is not a science. Math is the language of science, or the operating system, or however one wants to say it. Selling debt does not count as “doing something.”

tODD @ 28: Who knows whether Pelosi & Co. had the votes last Thursday, when they announced that they had a deal in principle and there was no need, after all, for McCain to come to town. They must’ve thought they did, to have made such a pronouncement, and to have excluded House Republicans from negotiations up until that point in time.

I suspect that the bill that was up for vote today got a lot closer to passage than any bill that would have come up last week. We still don’t really know what effect either McCain or Obama had on the debate. The vote was a bipartisan defeat for leadership of both parties, as Pelosi lost 95 of her own Democrats. Is it a bad thing? In the short term — apparently so, as the market tanked about 7 or 8 % today. In the long term, not so sure, as we may have saved capitalism for another day. Plus, they are still negotiating a revised bill, reportedly, so perhaps we may yet get a more reasonable and balanced approach which injects liquidity into the market without extracting the last bits of market capitalism which has made our economy what it is today.

Pelosi, of course, couldn’t keep her big mouth shut before the vote. She had to mouth off about how all of this economic turmoil was ENTIRELY the fault of the “unpatriotic” Republicans, and this $700 bln was just a downpayment on what would have to be done to rescue us from this Republican mismanagement. How bipartisan of her, just before she asks for Republican votes to pass a bipartisan rescue package. She is the most moronic and deeply partisan Speaker in U.S. history, and her Congress has accomplished less than any other Congress in history. We need Pelosi to go out on the campaign trail, away from D.C., if we are ever to accomplish anything in a bipartisan fashion.

tODD @ 31: I never said anything about McCain’s “stunt”. You are the one who has insisted it was a stunt.

Reportedly, McCain was successful to the extent that he helped the Democratic Congressional leadership realize that the House has some Republican members whose ideas need to be considered if you want to pass a bill with “bipartisan” support. I suspect they got a lot closer to passing a bill today than they would have if they had tried to pursue the initial effort last week. Unfortunately, Pelosi was unable to corral the votes of 95 of her own members for a plan that never was going to be that popular with Republicans.

Today, Obama stated: “After this immediate problem, we’ve got the long-term fundamentals that will really make sure this economy grows”. How, exactly, is that statement different than McCain’s statement that: “The fundamentals of the economy are strong but these are very, very difficult times. I promise you, we will never put America in this position again. We will clean up Wall Street”? I wonder if Obama’s statement will get the scrutiny that McCain’s did?

Nancy will no doubt perform her lapdance of pork to stimulate the ardor of recalcitrant demonrats to pass what will by then be an $800B bailout bill without the need for RINO support.

Then it will be up to George and his veto power, which he has demonstrated as effectively as his ability to pronounce “nuclear”.

Pelosi insists on fully 20% of the entire bailout to go to the radical leftist Alinsky-Cloward created and inspired vote-fraud organization ACORN that Baraq Hussein Obama was so involved with in the past.

No wonder it was voted down!

Anon (@37), the ACORN language was stripped from the bill that was voted on. You’ll have to find a different reason to justify why it failed.

Even though everybody knows that reason is: John McCain wasn’t bodily in D.C., but instead was at the debate in Mississippi, rather than Leading.

I hope MCCain remembers to bring along his financial expert sarah palin. we know that she is a financial expert because her house is near a bank.

I was an English major in college. I am certainly not UNeducated, but I feel quite so when trying to understand the financial situation in which our country finds itself. What would be really beneficial for me is someplace I can go to read about what happened/is happening/might happen that doesn’t contain the MSM tendency towards hype and hyperbole. Every news site I’ve visited this afternoon is preaching doom-and-gloom, end-of-the-world-scenarios, or at least leads with headlines screaming “THE DOW FELL OVER 700 POINTS”, with little actual text to say why, and what the consequences are, and what the average ordinary working folks should expect.

I realize what’s happened today is dramatic and startling and cause for high emotions on all sides of the room. But someone somewhere has “just the facts, ma’am”, don’t they? Any suggestions?

tODD @ 36: Or, if Pelosi HAD attended the debate, and then stayed out of town.

You want facts? Here are some facts:
Credit has become tighter and tighter over the last year or so. With the failure today to do anything about it, credit will continue to get tighter if not disappear altogether. Major banks around the world will continue to fail. No businesses will be able to get money to operate – businesses on wall street or on main street. There will be disappearing supplies in stores of food and everything else because businesses cannot operate to provide those supplies. No people will get mortgages or car loans or loans for anything else. Credit cards for everyone may be cut off because credit card companies cannot get money to loan to cardholders. Besides that, everyone’s college and retirement savings are being slashed. The elderly who depend on this are being impoverished. We are headed directly for another great depression.
I have always registered to vote as an independent but had conservative republican sympathies. But if this is what the republican party stands for, if their idiology is more important than reality, I want no part of it.

Don (@33), I know I’ve been insisting that McCain’s “suspension” of his campaign was a “stunt” — and I still maintain it is.

But you seemed rather intent on saying it wasn’t a stunt, asking me to wait a few days to see the results of what McCain had done, since there was no evidence that he’d done much of anything other than strike a majestic political pose and Look Presidential, a Real Man of Action. Also, you used the word “consensus” several times.

Well, those few days are past now, and McCain’s not back in D.C., his campaign’s not suspended, and there’s no consensus. So … all that grand political theater that I claimed had no other purpose — what do you claim its purpose was?

If you say it was merely to get the House Republicans to the table, then you have to explain why, first, they ultimately bailed on the bill, in contrast to all your talk of “consensus” being reached. You’d also have to explain why McCain was needed to get them to the table, since you’d also pointed out how Pelosi and the Democrats were intent on having everyone buy in to the bill (because no one party wanted to be blamed for pushing it through).

I haven’t actually heard anybody here make an argument that it wasn’t a stunt, of course. The arguments have just moved on to blaming Dems in other ways (for instance, somehow Pelosi’s giving a partisan speech forced — forced, I say! — the House Republicans to vote against a bill they liked, apparently because mean Nancy hurt their feelings! Now that’s putting country first!).

Or there’s your argument that Pelosi is to be blamed for getting 60% of the Democrats to vote for the bill, but somehow Republicans are not to be blamed for only having one-third of their party vote in favor. Different standard?

Mind, barring an honest-to-goodness collapse of the economy, I’m fine with the bill not passing, at least for now. I just think McCain’s gambit backfired on him in several ways (Obama called his bluff, leading him to the debates in spite of his promise; and McCain got nothing out of all his time in D.C. anyhow).

As for your Obama quote, I’ll bet you aren’t even aware of the context of it, because you probably saw the eight-second contextless clip the right-wing blogs are circulating. Am I wrong? Well, the only context for it I could find was here:

“We don’t just need a plan for bankers and investors, we need a plan for autoworkers and teachers and small business owners,” Obama said. “I have said it before and I’ll say it again: we need to pass, after this immediate crisis is over, an economic stimulus plan. Right now. For working families – a plan that will help folks cope with rising food and gas prices, that can save one million jobs by rebuilding our schools and our roads, and help states and cities avoid budget cuts and tax increases. A plan that would extend expiring unemployment benefits. For those Americans who have lost their jobs and have been working hard to find a new one, but haven’t found one yet. That’s part of the change we need.

“And then after this immediate problem, we’ve got the long-term fundamentals that will really make sure this economy grows. Change means a tax code that doesn’t reward the lobbyists who wrote it, but the American workers and small businesses that deserve it. As president I am going to eliminate capital gains taxes for small businesses and start-ups. That’s how we’ll grow our economy and create the high-wage, high-tech jobs of tomorrow.”

He’s not talking about the economy now. He’s talking about what would happen given his economic stimulus plan.

I don’t disagree with the idea that it is an investment. But if the investment was really as risk free as Kudlow’s analysis there would be other non-gov’t buyers. Hey wait there have been other non-gov’t buyers of assets that really are worth the risk – like Citigroup and JP Morgan Chase and Bank of America. These three banks managed to raise capital and buy the assets of their struggling competitors. This is how it is supposed to work.

We have also learned that, at least in the case of AIG pasted gov’t bail outs have discouraged private companies from lending or buying into companies because they are worried their investments will be voided if and when the gov’t takes over:

“By Sunday, K.K.R. and the Texas Pacific Group made it clear would not come to the rescue, worried that A.I.G. might be taken over by the government, wiping out their investments. Goldman Sachs also balked.”

http://www.nytimes.com/2008/09/18/business/18insure.html?dbk

I am just astounded that the very same congress that thinks it is just two risking to let people invest a measly 4% of their social security taxes in T-bills thinks it is a safe bet to invest billions and billions of dollars in the very “distressed” assets that are causing the problems.

Joe, the problem is how many more times can one major bank bailout another one? There is a limit to that, but unfortunately no limit to the number of distressed banks.

Joe @ 51: The comment “I am just astounded that the very same congress that thinks it is just two risking to let people invest a measly 4% of their social security taxes in T-bills thinks it is a safe bet to invest billions and billions of dollars in the very “distressed” assets that are causing the problems” is as succinct a statement as I have seen as to the nonsensical view that we should pursue this bail-out because the government stands to make money. Maybe, we should reduce social security taxes and apply the “profits” from this bail-out towards resolving the social security crisis. 🙂

Joe I don’t disagree with the idea that it is an investment. But if the investment was really as risk free as Kudlow’s analysis there would be other non-gov’t buyers.

Some buyers have come forward. Lone Star a few months ago, probably rashly, paid 22 cents on the dollar for $35 billion of distressed Merrill paper, though only the government has the resources to deal with the systemic problem. Should the Congress not pass this bill, there is real danger of a catastrophic seizure in the credit markets that would cause a deep and serious recession or worse.

Carl, Michelle Malkin is a fair political pundit but doesn’t know beans about economics. She is listening mainly to some far out libertarians who have no conception of the gravity of the ongoing meltdown in financial markets. This Chicken Little argument will pale if the House continues on this course and we end up with at least a deep recession.

That comment by Harry Reid (#58), that’s not a stunt, right tODD? Cause only Republicans do “stunts”, Democrats are just plain good politicians.

“Should the Congress not pass this bill” – why does it have to be this bill? This bill assumes that there is no money to lend, but in reality there is money just no incentive to lend it? There are other ways to encourage lending then having the federal gov’t buy up the paper.

JSH – “Joe, the problem is how many more times can one major bank bailout another one?”

I hate to sound like the grumpy old man of the group but not every bank should be bailed out. In fact, some of them need to fail in order to correct the problems.

“I hate to sound like the grumpy old man of the group but not every bank should be bailed out.”

Actually, Joe, you sound like the over 200 economists on the opposing-the-bailout list, including 24 from my alma maters… not that I’m biased. 😉

Don, you asked (@56), “Who says a consensus hasn’t been reached?” Well, you have, unless you’ve decided to move the goalposts, as they say.

In defending McCain from my calling his actions a stunt, over on the entry “Summit degenerates, but a new plan emerging”, you said (@19 there), “Good leadership is about bringing people together and helping them to reach consensus, not haranguing them into falling into line.” You also talked about (@27, ibid.) “the key leadership ability of being able to encourage consensus by making sure all parties get a chance to get their ideas on the table and have them be heard, then move people together.”

Now we all know that McCain’s original claim was that he was going to stay there “until this crisis is resolved.” Clearly, that didn’t happen, but that was the definition of “consensus” that was made clear: consensus around a resolution, not merely the existence of a majority in one way or another!

Now you’re trying to tell me that a rejection of a bill to solve the crisis (no matter what I myself may think of that bill) is “consensus”? Please. That’s clearly not what we were talking about.

Are you honestly claiming that the point of McCain’s stunt was to reach “consensus” whereby a bill was not passed, and the crisis remained unaddressed by Congress? Because that would be in plain contrast to McCain’s stated goal in pulling his stunt. (Never mind that he then went to the debate in contrast to that goal, anyhow.)

“McCain is, despite your intimation to the contrary, back in D.C. working on this issue. At least he’s trying.” Really? Care to cite a source on that? I found a piece [1] datelined “Columbus, Ohio” that noted that “McCain boarded his Straight Talk Air charter plane, where he sat in front, separated from reporters by a brown curtain, without making a comment on the bill’s defeat.” Later, it noted “McCain still plans to travel to Des Moines, Iowa; whether he will return to Washington, D.C., to deal with the aftermath of the bill’s defeat remains unclear.” He may have returned to D.C. after the debate, but he clearly didn’t stay there, in spite of his earlier promise.

And your complaints about my “sniping and criticising [sic]” not being directed at “the Democratic leadership” have really missed the point. Over and over, I’ve noted that I likely agreed with the House Republicans — in terms of bailout particulars, especially, but also in a desire not to rush headlong into a stupid, expensive agreement. I have no complaint about the Republican (or Democratic) Congressmen’s actions as far as this bill goes.

What I find annoying, however, is McCain’s ridiculous stunt — which, I hope I have made clear at this point, seems to have little to do with the actual bill or any consensus thereon. It was beyond ridiculous for him to pretend that he had to “suspend” his campaign to deal with this crisis, including the plea to delay the debate. That was completely unheard of, and completely useless. The latter was made all the more obvious by the fact that McCain himself attended the debate in spite of his pledge to remain until the crisis was resolved. And then, of course, by his continuing his campaign in later days, when the bill utterly fell apart. That was a stunt unparalleled in this campaign so far, and I’m calling him on it.

I’m not saying nobody else has engaged in stunts. Of course they have. But not all stunts are equal — McCain’s was certainly designed to grab headlines, and I fully intend to give him all the attention for it he deserves.

To summarize, because you really haven’t been getting it in all I’ve written here: my beef is not with the negotiations over the bill, it is almost entirely with McCain’s ridiculous stunt about “suspending” his campaign (which he never did in a meaningful way to begin with, and which he later completely failed to pretend he even cared about).

[1] “McCain Campaign Blames Obama, Democrats After Bailout Bill Defeat”, by Michael D. Shear and Paul Kane, Voices.WashingtonPost.com, 9/29/2008 2:26 ET

Anon (@62), I’m having trouble pinning down a quality source on the removal of the ACORN language from the bill, but for now, I did find this: “[Boehner’s] giving Republicans credit for stripping the bill of funding for trial lawyers, Big Labor, ACORN and increasing taxpayer protections” [1] I imagine you will find that source more authoritative than I would. Perhaps it will suffice.

I cannot find any information on when the language was removed, though based on Google News searches, it seems to have been in the last couple of days.

Hopefully my presenting you with this information will mean you are not so quick next time to tell me to use Google myself to find any sourceless fact you use when I ask you where you got it.

[1] “GOP Leadership Touts Bailout Reforms”, by Amanda Carpenter, TownHall.com, 9/29/2008

David Brooks in a NYT column today is very incisive on this:

And let us recognize above all the 228 who voted no — the authors of this revolt of the nihilists. They showed the world how much they detest their own leaders and the collected expertise of the Treasury and Fed. They did the momentarily popular thing, and if the country slides into a deep recession, they will have the time and leisure to watch public opinion shift against them.

House Republicans led the way and will get most of the blame. It has been interesting to watch them on their single-minded mission to destroy the Republican Party. Not long ago, they led an anti-immigration crusade that drove away Hispanic support. Then, too, they listened to the loudest and angriest voices in their party, oblivious to the complicated anxieties that lurk in most American minds.

The American people I fear get the leaders they deserve.

Carl, this populist argument that the evil people on Wall Street, especially the bankers, are the root cause of the problem ignores the basic Christian understanding that all people are fallen. This allows Pinkerton to write a jeremiad against Wall Street that glorifies Main St. and come up with a foolish government program to provide 3.5% mortgages to the good American people, a modern version of a chicken in every pot.

Hank Paulson and Ben Bernanke, working with Congress, have come up with a plan that could help the credit markets that are becoming by the day badly seized up. I trepresends the best, though undoubtedly imperfect, plan that attack the loss of confidence in credit markets that could lead us into a deep recession or worse.

Too bad that the Republicans in Congress who bear the most responsibility for the fiasco yesterday have most likely handed the election on a silver platter to Obama and put the country on a dangerous economic course to boot.

Having said all this, my guess is that enough Republicans and Democrats who voted against the financial rescue plan will come to their senses and reverse the vote later this week.

Carl, this populist argument that the evil people on Wall Street, especially the bankers, are the root cause of the problem ignores the basic Christian understanding that all people are fallen.

Peter, your statement is a red herring; it implies no one should be punished because everyone is guilty. We’re talking about the kingdom of the left here; not the kingdom of the right.

One of the signers of a letter opposing the bailout is Jeffrey A. Miron, senior lecturer in economics at Harvard University. In another post, I quote some of Miron’s commentary, “Bankruptcy, not bailout, is the right answer”:

“The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

“The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company…

“Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.”

Peter — it is unfair and unreasonable to lay the defeat of the bill at the Republicans’ feet. Opposition cut across party lines. Democratic leadership claimed they had the votes, but didn’t whip them. Pelosi is famous for her disciplinary approach to whipping Democratic votes her way for every kind of liberal proposal, but for an issue that she claimed was the most important one of the year, and was crucial to the well being of the American economy, she did not require Democrats to fall into line. She lost 95 Democratic votes, and she only needed 13 of those votes to pass the bill. The Democrats control Congress, and they couldn’t get it done.

I also think the jury is still out on whether this bail-out, at least as proposed, is in the best interest of America long-term. I believe there were a lot of principled “no” votes yesterday, those who were listening to their constituents and understood that this issue is not as clear cut as the Wall Street crowd would have us believe.

As for immigration, that’s a canard as well. There were amnesty proposals on the table that were utterly unfair to those who have been trying for years to gain legal residency in the U.S. Those proposals needed to be opposed, as a matter of principle and support for the rule of law. You can’t disregard your principles and your sense of rectitude because you are afraid you might lose some votes. Unfortunately, the opposition often does, but we do not do well when we try to be like them.