What is it with market worshipping pundits? Sebastian Mallaby in 2007:
Rather than seeing hedge funds as sources of dangerous financial fires, in fact, it is more accurate to see them as the financial system’s benevolent fire fighters — and to let them have the tools they need to do their jobs well.
Hedge funds as "benevolent fire fighters?" Yay! The totally super awesome unregulated hedge funds saved the economic day!
Hmmmm…not so much. But never fear! Sebastian, again, worships at the Keynesian altar today:
The bailout is often seen as a commando operation, in which you take out the bad-loan enemy and imprison him in a government vault. But it is also a hearts-and-minds operation, in which you persuade wary financiers whose territory you have invaded to trust you and work with you.
The key question is whether Treasury purchases of bad loans will encourage hedge funds and other investors to dive in themselves.
Holy head up yer ass…Stop trying to boost your book sales and be honest with yourself and your readers, for hell’s sakes.
Here’s a reality check: jobless claims are up, groceries cost more, health care expenditures are insane, senior citizens are panicked about their retirement savings and increasing costs of everything with their diminishing fixed income pool, food banks are swamped, and we’re about to enter heating bill and heating oil tank fill-up hell.
UPDATE: Oh, frabtacular joy. eCAHN says George Bush will address us at 9:35 ET.
(Video from The Daily Show to make up for inflicting Mallaby on you this early. H/T CalculatedRisk.)
Related posts:
- Froomkin’s Sins of the Village
- Village Surprised by Support for Public Option
- It Takes The Village To Raze the Economy: Some Notes On Krugman and the Return of Keynes
- Sesame Street: Tackling Tough Economic Times Together
- Jobless Rate Hits 26-Year High: Does Obama Have an Economic Team? Where’s Their Jobs Program?
Spotlight
Support this site!
Subscribe to the newsletter
Advertise on Firedoglake
Send
us your tips
Make us your homepage
About Firedoglake
Advanced search
Zed?
We are witnessing the formation of the real Bush Legacy. Mission Accomplished Indeed!
Morning Christy,
bwaahahahahah
Honestly. The man write a “let’s just trust the hedge funds to save the day” column this morning. I want what he’s clearly smoking…
I’m curious what people think of David Sirota’s post from yesterday: http://www.ourfuture.org/blog-…..on-bailout.
McCain sabotaged the bailout agreement yesterday for his own shallow, political reasons. But should we hope it will give us the opportunity to get something a little better than what we would have settled on?
Sorry, my inner cynic must still be sleeping and my naive inner optimist seems to be running the show so far this morning.
Never fear, W’s making a statement at 9:35.
doing their jobs means making money off of everyone else
just what the doctor ordered according to them
What Mallaby wants isn’t Keynesianism, which advocates for major infrastructure projects and lowered interest rates, it’s good-old-fashioned kelptocracy. We currently have the latter, but not the former, as the residents of Minneapolis know full well.
Actually, we could use a healthy dose of spending on big infrastructure projects. It would put people to work and provide purchasing power for all those lovely tchotchkes coming over from China.
Oh god. Not enough coffee in all the world…
Heaven Help US
Fired up the laptop because I just heard Chuck Todd *chortle, chortle* tell the newsbabe that pshaw, if McCain doesn’t show up at the debate there won’t be an empty chair, we just won’t cover it.
I mean really. This is exactly when we must see these candidates under stress…I am sick to death of the MSM pulling back from stories because “it might affect the election” so that it does affect the election!
Dodd was hot this morning on Imus, must listening if WABC ever gets their shit together and puts it up on their webpage. McCain stunt a 3-hour diversion that has angered Republican Senators even more than Democratic Senators said Dodd. McCain campaign in panic….
Another one? Should I take notes? Will he tell us how Obama tried to run the meeting and get something accomplished? I almost wish he’d just keep his mouth shut and stay out of it like he’s done with other disasters.
McShame and Lieberman to the rescue
http://www.youtube.com/watch?v=aKNSstnq4sg
We should blast the networks/media to cover Ole Miss tonight…whether McCain shows up or not.
btw, I would love your take on the Mallaby column from today if you have time to read it. His constant “ooh, the hedge funds are too awesome” refrain may tout his book theory, but it seems really hollow, disingenuous and utterly ginned up and cobbled together with really flimsy string to me.
This financial chaos is the price we pay for the last 8 years of malfeasance & incompetence.
W cried wolf twice (9/11, Iraq), so everyone thinkk he’s crying wolf now.
W grosly mismanaged 3 disasters (9/11, Iraq, Katrina), so everyone expects he’ll mismanage this one.
I got to clean apt as have old friend coming & it’s really a mess. Sitting in while I finish coffee & see W & market opening.
GOP leaders not including President Bush or Pat Paulson have come up with their own bailout plan. To be entitled The Real McCain (designed by Lieberman, Two Graham’s and Sarah Palin) the plan focuses primarily on tax cuts, capital gains tax cuts, death tax tax cuts and a tax cut to benefit offshore corporations (b/c job creation overseas is good for America). No pork or earmarks.
No sweat — if anyone else wants to give it a read and comment, please do.
Dodd called the House Republican plan an ambush. Said the Rep in the morning meeting never brought up anything about this.
Forget Godwin’s law. All of these bailout plans, all of “media” economic pundits, they’re like Hitler in his bunker sending out orders to armies that no longer exist. Watching the last couple of weeks reminds me of nothing so much as the movie Downfall. Their world was falling apart and yet they played the same petty, vicious games, indulged the same small jealousies right up to the end.
Is there a way to file a class action lawsuit to take down all MSM stations and programs. Next Sunday isn’t ABC going to broadcast a McShame townhall this F**kin BS
he isn’t saying the Republicans are playing games with this is he? they would NEVER do such a thing
I still hate Imus. He is even worse than Killer Joe. Imus is a stealth neo-con but Joe lets his neo-con freak flag fly.
Past performance, and all that.
Hedge funds as “benevolent fire fighters?” Oh, Christy — and here I am, with not a hanky or Kleenex(tm) in sight…I’m crying..I’m laughing so hard…and after what the hedge funds have done to the prices of commodities over the past year? OMG.
Have I mentioned that Dodd this morning on Imus was absolutely livid about McCain’s campaign grandstanding?
Anyone note the irony of the congressional Rs picking this moment to revolt from their prez after sticking to him like glue for 8 years?
Morning Joe reporting McCain on cap hill this morning, went from McConnell’s office to Boehner’s office. This is theatre to drag things out so McCain can duck the debate.
Here’s the part that I think reveals what the shock doctrinists want:
They want the government to take mortgage-backed securities that are polluting the balance sheets of investment firms away from those firms under conditions where those securties can then be thrown back into the market well below the mythical “true” value. My problem is that these vehicles are so contrived that it is hard to imagine any real value at all. The games being played with these securities have been compared to a game of Old Maid. The investment banks and hedge funds have been having a lot of fun and booking a lot of profit selling these securties back and forth to each other. Someone finally pointed out to them that the “values” have been marked up beyond anything realistic and now those who are holding them have the “Old Maid”.
Mallaby’s solution is to reset the prices down to unrealistically low amounts and deal again.
The ideas that I have seen tossed around where the government is buying actual mortgages rather than securities and then resetting those mortgages at a low rate and realistic revaluation of the property looks like the way out. It worked for FDR.
Prez up.
I’m putting my faith on the 6 of clubs…keeping the whole house strong. Who needs bearing walls of wood or steel?
Dodd replied to Imus they hadn’t heard from McCain for months. Imus clearly expecting a similar response asked about Obama. Dodd said he’d already talked to Obama that morning. That Obama talked with both Dem and Republican Senators on a daily basis.
Short prez: legislative process is messy, but we’re gonna do it.
Bsahahahaha.
Shrub seems to be unable to keep himself from smirking.
Did Bush just say that the plan is realllllly big and that everyone is working reallllly hard??
President Bush is is turning his office upside down in search of his lost magic wand.
Once he finds it, he’ll wave it and things will be all better.
-G
Situational principles.
-G
Mallaby’s theory is that if the government buys crap, this will somehow entice hedge funds into buying crap. This is only true if hedge funds can buy crap at prices lower than the government and then sell it to the government. But why would crap holders sell to hedge funds at lower rates when they can sell their crap to the government at higher ones?
Did anyone count the number of words uttered by the decider. Absolutely awe inspiring, wow, two thumbs up, a real confidence builder. /s
I think McCain is looking like a fool and a coward.
I don’t see how he thinks ducking the debate benefits him. It’s not like he’s on the Finance Committee. But then again, he is “an old fighter pilot” as he is fond of reminding us.
And the Democrats couldn’t see the ambush coming? Geez!!!
Did The Decider just give a speech 15 minutes ago?
Col Jack Jacobs re-air on Imus at this link
Yeah he likes to fly his planes into missles
Anyone note the irony of the congressional Rs picking this moment to revolt from their prez after sticking to him like glue for 8 years?
Republican don’t do irony. It’s campaign strategy.
Oh, honey, I fear. Every time he opens his pie-hole, someone needs to file a toxic waste report.
Mallaby’s theory sounds like crap.
To call it a “speech” is really stretching it. Weird doesn’t begin to describe the tone, and it was…maybe…4 minutes, tops? (And I’m being generous on time with that.)
They’re like Germans being for Hitler up to May 7, 1945 and against him after May 7, 1945.
Agreed.
Jacobs: politicians already running for their next term when they take the oath of office…they’ve been asleep at the switch…nobody in Washington paying attention…nobody on Wall Street either, in general.
Decider Guy: “Republicans and Democrats will come together.”
Lucy and Charlie Brown once again.
Jacobs: naked shorts are terribly destabilizing. $70 trillion market in insuring credit swaps. buying ins on stuff you don’t own. Contributed to this disaster. Also excessive leverage. Institutions borrowing way in excess of their ability to pay it back…must be brought under control. Disappointed that everything blew up over political nonsense.
All the politicians are interested in are getting re-elected.
Not very tuned in to things this week, but I gotta tell you that when I check in here, my head does a 360 and my mouth screams, “WTF?” Is McCain running for the presidency or is he auditioning for a Keystone Cops revival? I want every media outlet to play, over and over again, the clip (if there is one) of McCain saying he doesn’t really know much about economics. Ya think??? Of course, he can see the Treasury Building as he flies over DC, so . . . .
This is a crisis of confidence at the end of the day, numbers notwithstanding.
Leadership has been lacking. What we need.
Oh gosh Cheney cancels trip to NM and WY to help with negotiations. How many super heroes can DC accomodate at any given time
Guess he’s trying to look like a leader.
oo, bringing in the goon squad
Golly, I feel soooooo much safer now.
My string of comments above re Jack Jacobs comments on Imus….
When you have people like Karen Tumulty describing McCain’s coming to town as “inserting himself”…when you have people like Imus saying why aren’t they already at work this morning…when you have Dodd going ballistic on the Imus Show…and then the MSM says oh, well, ho-hum, if McCain doesn’t go to Ole Miss and Obama does, we just won’t cover it…. talk about a disconnect.
we’ll have to check in with the public health officials, but i’m pretty sure it’s a pandemic.
here’s another quote from 2007:
my bold.
What we are seeing is multiple implosions. The Bush Administration is going kerblooey. So is the McCain campaign. Palin. Ditto the Republican party. The economy. The financial system.
It’s hard to keep track of the madness because each of these keeps finding a way to upstage the others for about 5 minutes before something else happens.
Please, I beg you. Never again use the words “McCain” and “inserting himself” in the same sentence. Blergh.
my bad. forgot the link.
WaPo newslet re Bush speechlet:
President Bush said key negotiators will “rise to the occasion” and pass a bailout bill to address the U.S. financial crisis. “We are going to get a package passed,” Bush said in a televised message just now that aimed to reassure the markets. “We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan.”
“Any time you have a plan this big, that is moving this quickly and requires legislative approval, it creates challenges,” Bush said in brief remarks. “Members [of Congress] want to be heard, they want to be able to express their opinions…There are disagreements over aspects of the rescue plan, but there is no disagreement that something substantial must be done.”
Key negotiators on Capitol Hill thought they were close to a deal yesterday, which sent the Dow surging over 300 points yesterday, but after the market closed, Republican lawmakers emerged from a White House meeting saying they had not reached an agreement.
–Sara Goo
Super heroes to the rescue
http://www.youtube.com/watch?v=UUg4R0xkgms
Thanks Christy.
digg
Boner rethugs thought they could pull another 1993 stunt and jam up the House Dems in the election. Na-ga-na-work….
[that work better for you, Christy?]
Agree.
Thank you.
Oh, and the House Dem plan is lipstick insurance on a pig.
But this is all working out nicely for Sarah Palin….
Oh I know! someone said something similar the other night and my stomach actually churned
eeeuuwwww
Check out Bob Schieffer last night on The Daily Show. Since he’s a moderator of one of the debates, he has to try to stay neutral, but when Stewart asks him about McCain’s strategy in threatening not to debate, Schieffer can only laugh. And laugh. And laugh.
ooops, mean the house Republican plan not the house dem plan. sheesh.
Since President cluster just said “we” will have a deal done, my guess is we won’t have a deal done on Monday.
Is that, like, a sexual reference?
Funny, after watching the news fairly closely yesterday, I felt a certain sense of frustration. Yes, that kind. Like there was all this sweet talk, kissing and a little hugging which led to nothing substantially fulfilling, satisfying.
So WaMu is the largest bank in the country and was purchased overnight for $2 billion. $700 billion is 350 “largest banks.” Where does the number come from, $700 Billion?
That darned Conventional Wisdom can certainly come back to bite, can’t it?
is it over? what did he say?
He’s trying to control the message, so when failure occurs, he will be able to lay it in the Dems’ lap or get them to cave in to his demands …
Perhaps McCain will shake things up today by firing Caribou Barbie while blaming Democrats for forcing her on the ticket.
Hi Christie – McCain got there before chimpy, Bush To Address Americans On Crisis – McCain Gets There First
He said there is no disagreement that something substantial has to be done. It’s a really big problem and they are working really hard.
It was genius.
Read the Mallaby piece. It certainly panders to the average American’s naivete about hedge funds, their managers and the financial world in general.
My impression is that the average Joe Sixpack and his wife and his wife who support the “free markets” and Bush/McCain believe the patriotism swill they hear from the Republicans. They really believe that the financiers consider “Country First” re the implications of their investment decisions.
Nothing could be further from the truth.
Remember the term “vulture investors”? That’s who these guys are. American companies/swmall investors are just the carrion they feed on.
The telling phrase in Mallaby’s piece was “thus ultimately facilitating the efficient allocation of the world’s capital”. There is no “American capital” to these folks — just yours and mine…..and their sole purpose to get their hands on ours.
The rapacious greed and nauseating consumerism among many in the worldwide financial community is apparently not clear to most ordinary citizens. It is stunning to me that people do not see that one of the mechanisms at work here is the maintenance of exceutive lifestyles that are often amoral in their excess.
It’s hard to sympathize with the current crisis or to trust that even the banks/funds will, unfettered, operate in their own best interests. For example, Lehman could have been bought months ago in toto had there not been demands for monetary guarantees for those at the top.
I’ll come down from my soapbox now. However, since I no longer live in “that world” and have to confront normal America every day, can get kind of worked up.
The Tooth Fairy?
You think maybe Boehner … might be afraid of a present from Darth Cheney?
I am being serious when I tell you the folks at Treasury said they pulled it out of their ass.
Yep, Dubya has a gift for stating the obvious …
finally. somebody revolts against bush. although, i was hoping it would be the Ds.
Bush’s latest kickback checks must have bounced.
I’m just shaking my head…
Cheney used to be a Rep, and his job has often been to knock heads in the House when the GOP side got uppity. My first impression of this is that, for Cheney to cancel travel plans, (1) they really were blindsided by the House GOP last night, and (2) they’re pretty pissed about it. It’ll be interesting to see how this plays out.
Did he say “hard work”? He’s always loved that phrase.
He’sprobably curious about what it feels like to do it.
worth another round of calling for this one, i think.
They need more than DC superheroes. They need Marvel Superheroes.
Badwater, W has never been curious about one single thing.
But they wanted a really really big number. They must have really really big ass*ets.
Where does $700 billion Come From? I mean, the number is out their ass. I heard that from a friend who used to run events at a hotel. “Where am I gonna get another ballroom, from out of my ass?”
So it is not just the number but the dollars too are coming from out their ass? Because I think we ran out of $700 billion in Iraq, another $700 billion they pulled out of their ass. If China is not giving it to us, are we just printing it?
New post up.
christy – thank you for this thread.
Here’s the nub of Mallaby’s article:
“But the fear of hedge funds is overblown, based more on ignorance or simplistic caricatures than on actual knowledge. Many of the proposals for new regulation are so vague as to be impossible to evaluate or are poorly suited to address the supposed problems at issue. And even the most serious cause for concern — that hedge-fund operations might generate a “systemic risk” for the financial system as a whole — is neither limited to the hedge-fund sector nor best addressed through regulation of it. Rather than seeing hedge funds as sources of dangerous financial fires, in fact, it is more accurate to see them as the financial system’s benevolent fire fighters — and to let them have the tools they need to do their jobs well.”
His point is well taken: regulations should not be based on ignorance or simplistic characticatures but if the funds are are completely secret, how can they be regulated? This captures in my mind the essence of the “trust us” approach to free market ideology. In the past, regulations were often based on fears of “corners” or attempts to corner a market. The problem with hedge funds and secrecy is just that they are secret as to the government and possibly even for those who “invest” in them. Faith that these funds can operate as “fire fighters” can come only from an ideological conviction. Mallaby does not and probably can not explain how these funds work to accomplish this and can point to no example where they have ever done so. We are probably about to find out how these things work the hard way.
I made Mr. ReddHedd sit down and walk me through some basics last night on all of this mess — because I was really struggling to wrap my brain around all of it. Econ is NOT my forte, but it is a huge interest of his. So when I woke up this morning and read this Mallaby op-ed, I had to post on it.
Jeebus, anyone who is trying to sell “hedge funds” as the miracle economy cure at this point needs serious help…
“Faith based hedge funds” — love it.
Dems already caved. They forgot to mention that if Wall Street needs a loan, we need to pull out of our two Middle East Occupations and slash the Pentagon’s budget. It’s the wingnuts in the House who are stonewalling.
Mallaby begins by telling us that the Poor Bankers have been beaten up enough. Pay no attention to that man behind the curtain. (If they can escape with a few million dollars or ten – that’s peanuts). Those poor guys will be laughed out of the Yacht and Racquet Clubs if they don’t have some millions!
Exactly. And it’s come to light over recent ,months that some of the internal risk management controls at the more succesful investment banks were “compromised” for the sake of profits.
Being regulated, whether by internal controls or oversight, just depends on the integrity of the players.
FWIW, iirc, Bernanke testified that the FED estimated that $700 billion was 5% of the total.
Now that’s a steaming pile of crap if I’ve ever seen (or read) one.
There are many villains in this mess, but hedge funds are front and center.
From $4/gal oil to short selling the investment banks out of existence, their unchecked greed is a root cause of our problems.
Because of their size and use of leverage, they can gang up and short sell almost any company (that is, any company not formerly run by Paulson) out of existence.
If it wasn’t all so painful, it would be funny; the investment banks enabled the hedge funds to become gigantic by extending them leverage, then the hedge funds turned around and ate them.
If I don’t see you later, I hope you have a happy, satisfying beautiful autumn day.
Thanks, you too! It looks increasingly like we are going to have a humongous rainstorm here, judging by the dark, ominous clouds piling up outside. But The Peanut only has a half day of kindergarten, so I’m sensing a popcorn-filled movie bonanza for the two of us this afternoon, punctuated by bouts of coloring and some cookie baking, if she gets her way. *g*
Rainstorms are such a wonderful excuse for a mother/daughter indoor escape from the world.
I’m going down the hill to visit my mom this morning. Taking her some of the stew I slow-cookered yesterday.
Maybe I’ll bake some cookies this afternoon too.
Take care.
Constituents are raising hell. We don’t want the bailout. Dems wish to run out the clock. Repubs want to:
1. stand opposed (vote no) for the sake of their blue collar constituents.
2. make a new plan that will be perceived to benefit constituents – reduction of capital gains taxes.
3. give their candidate McCain credit for designing a plan.
Dems don’t want to make a plan. It will get shot down no matter its merits.
They don’t want the responsiblity of fixing the Republicans mess and getting tarred with it when it fails.
There has been no creative thinking on the part of the dems. Franks and Dodd jumped right in to tackle the project as it was presented. No thinking outside the box. This is how dems get screwed.
I meant to ad that in the past, I think now the long dad past, government regulations used to be based on government studies of the industry to learn about the problems. That is, Congress or the Federal Trade Commission (formerly the Corporation Commission) would study a problem, find out things were working or not, and then pass laws, create agencies or commissions, which would pass regulations designed to ameliorate the problem. Think Ferdinand Pecora, the feisty layer from NYC, who cross examined the Wall Street Bigshots in Congressional hearings the 1930’s and got the evidence that set the groundwork for the Securities Act and the Securities and Exchange Act. The FTC studied the public utility industry for 10 years and its reports cover 80 volumes. That was even before the Senate and the House had their own committees do their own investigations and then came the Public Utility Holding Company Act of 1935. The New Deal was based on information and the pealing back of the secrecy and ignorance which had previously ruled and ruined the markets in 1929. No laws could be made in such a climate in a modern industrial economy. As Holmes said, “the life of the common law is experience.”
As usual, late to the party, but this guy is a good one.
Another one of those economic ‘deep thinkers’ that has all the answers but has never had a real job in finance.
Sorta like the Nobel prize winning economic a-holes whose ‘theories’ almost caused meltdown in the late nineties.
Hedge funds are the next disaster in waiting. They are blatantly manipulating markets to the downside and causing ‘regular’ investing to be put on hold.
Just like you put swimming on hold if you see sharks in the water.
then my thanks to mr. reddhedd too. but you don’t have to be the expert on everything…. just giving us a place to discuss an op-ed like here and/or current events is great and much appreciated.