The bill has failed. Good. It deserved to die. There are two considerations at this point. The first is to get through the next three months. Paulson, in testimony admitted that all 700 billion wouldn’t be spent right away. So give him 150 billion and only that, to him. While I doubt he exactly "needs" it, he and Bernanke must not be given an excuse for engaging in a fit of pique now that their pet bill went down, and "proving" that disaster would occur without it. (Note: read the transcript myself and he never admitted 150 billion would be enough, updated post. For a better 3 month solution read here.)
The next step is to start working on defining what a good bill would look like for January. I am going to reference myself and Stirling Newberry on this and list what I consider essential in a good bill meant to help both Main Street and Wall Street.
The January Bill
1) Buy up mortgages at a discount and give people new fixed rate mortgages. The government shares in further house appreciation (only fair since it bailed the homeowner out). This stabilizes mortgage prices and helps people and banks both. It is essentially identical to what FDR did with the Home Owners Loan Corporation (HOLC), and we know how to do it. Initial price tag? Probably around 20 billion.
2) Use the FDIC (the folks who take over failed banks) to take over failed mutual and money market funds, make sure the investors get as much money back as possible, liquidate the funds in an orderly fashion (or keep them operating if necessary) and if they are kept alive, kick the people who screwed them up to the curb and change how they do business.
3) Declare a national emergency, with judicial review (unlike Paulson’s seizure of ultimate power) and use the authority to review all purchases of banks, to institute oil rationing if necessary (or simpler procedures like "every street now has a 55 mile an hour speed limit, if it is normally higher). Also allows release of oil from the reserve, if necessary.
4) Expand the safety net such as food stamps, employment insurance, welfare and so on. We know this is going to get worse no matter what we do, so why aren’t we taking care of ordinary people?
In addition to this, the bill must include the necessary regulatory and tax changes to ensure that this does not occur in the future. I have listed the bare necessities after the jump.
I) All income over 1 million dollars a year from any source, including bonuses and options, to be taxed at 90%. As long as executives know that in 3 years they can make enough money so they never have to work again and will still be filthy rich, they will never manage their companies or the financial sector for the long term.
II) No loan can be sold more than two steps beyond origination.
III) No security can be more complex than the underlying transaction. We need to make sure that this situation where no one can value or even understand the instruments at the heart of this problem never happens again. Mortgages are simple contracts, no derivative based on them should be more complex than they are.
IV) Forbid any credit default swaps going forward and start unwinding the ones that currently exist. It’s fairly clear that the people buying it used it to offload default risks they knew were too high for them and the people who sold them didn’t understand the risks they were buying. In particular, no default insurance for banks. You loan the money, you are responsible for it.
V) End to end leverage of no more than 12 times. No borrowing one place, then getting more leverage somewhere else, then creating a security based on that money, then using that security to borrow again, and other such idiocy.
VI) No leveraged security can be used as collateral. The ratings agencies are not allowed to give any leveraged security more than a B rating.
VII) Simple mortgages which can be understood by anyone with a grade 8 education. If it can’t, it can’t be sold, and a judge is permitted to set it aside if it was sold anyway.
VIII) Banks may only sell the portion of a mortgage which is equal to what 30% of the median value of earned income in a zip code can finance. If they want to make loans beyond that level, that portion stays on their books and cannot be offloaded on anyone else. Mortgages should be based on what people can afford, and so, ultimately, should housing prices. If we want to modify this we can allow some modification based on an individual’s income, but not full modification. After all, the question still remains whether the sort of people who live in that community will be able to buy and afford the house.
IX) Bankruptcy law fixes. ‘Nough said.
X) Insure money market funds (not everything, just money market funds and maybe mutual funds) and regulate them. Allow banks to use money market holdings to meet reserve requirements. This allows an increase in the money supply and a new source of money, which is necessary since there isn’t actually enough money in the world to pay back all these debts.
XI) Pay for all this with progressive taxation. A 10% surcharge on those with incomes in the top 1% is a good start, but I would suggest just raising income tax levels starting at about $250,000, closing loopholes and taxing capital gains income at the same level as other types of income.
None of this should be particularly controversial. This is what a good bill looks like. It helps set a floor on housing prices, which are the underlying problem for many banks, it punishes the banks that failed but makes sure that people get as much money back as possible, it forces a revaluation of securities so we actually know where we stand and it makes the necessary regulatory and tax changes so that this doesn’t all happen again. It also bills the people being bailed out (that would be the rich) for cleaning up their mess.
Related posts:
- $11 Billion and Counting
- Financial Regulation Reform: Give Us Your Talking Points
- Study: Public Option Saves the $200 Billion
- CBO: We Didn’t Really Score the Finance Committee Bill; $44 Billion, Millions of Uninsured Americans Ignored
- The Next Big Taxpayer Bailout? IMF Could Get Hundreds of Billions for European Banks
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Ian,your plan is far better than what was proposed. Here is hoping that something (at least better) is headed our way
Dugg!
((( Ian )))
This is a great plan, I wonder if the Dems will cave in to Boner’s Buddies who are obviously holding out for more corporate welfare at the cost of the citizenry …
The bill failed Cool!
Dugg!
Thanks Teddy … Dugg!
I’ve set up the digg, so go give this the attention it deserves.
Those are great ideas. Can anything be accomplished along those lines while Republics still have some power?
European banks are feeling some pain too.
http://money.cnn.com/2008/09/2…..2008092818
Today was the DOW’s largest one-day point drop ever. Tell Bush his legacy has been found.
Thanks and Dugg!
My proposed XII: Make sure that Mean ole Nancy Pelosi isn’t allowed to make any more speeches which might possibly damage the incredibly delicate sensibilities of the Republican “men” and “women”.
My I suggest that anybody now or who thinks they might need a bailout later open their books now to the government and an independent accounting firm so that we can know ahead of time what will be needed rather than trust Paulson’s best guess?
Also all the Hedgefunds need to open their books.
Yes, I was excited when I heard the bill failed, but it was followed by a “now what?”
I think the plan outlined above is a good starting point. Let’s pass something small to get us through the Bush term and then there’s a chance we could actually get a good bill — just a chance though.
And let’s hope Bush doesn’t use this “crisis” as an excuse to declare martial law…
PTL, it makes sense, it’d work, it’ll never see the light of day, unless Congress really gets hammered by voters and starts working for US!
I’d like to append 4.VII a)mortgage terms/conditions be delivered several days before close of escrow to enable borrowers to read the contract boiler plate at home instead of under pressure of closing and b) tighten closing cost estimates and add penalties. My brokers fee on a refi was 50% higher than the est.
Screw the food stamps..it’s what divided the middle class and drove some to fascism. I long for those high calorie commodities, kept the farmer busy and filled the stomach.
No golden parachute for the bushies…. aww what a farkin shame.
Don’t forget Dubya has his feelings hurt too. Hope he doesn’t decide to cheer himself up by starting another war.
no kidding, help the people that got stabbed by the criminal lenders first. After they are covered, then allow the dregs of this banking society to come begging. Then remind them that we have to have free health care, new bridges, new public transportation, a lot of new schools, a solar, wind, geothermal energy infrastructure that will have to go ahead of any bailout.
Look at some of the other sites today. They are screaming bloody murder about how the GOP defeated this. It was conservatives and progressives that defeated this. Representatives that for whatever reason chose to defeat a criminal enterprise in the making. Notice how so very few seemed to be doing it for the right thing though. Shows you how corrupt 90% of congress is.
thanks for having a post that confronts reality. It is the first one I have seen since the vote!
Ian,
This is way to much to hope for. The dems are as much in the tank to the Street as the rethugs are.
But a girl can hope, I guess.
The Decider really doesn’t care one way or another so long as he gets to ride his bike everyday.
I could quibble with a couple of details, but your plan is so much better than the failed bill, that I say, “Up or down vote, right now”
You’re mixing too many things together here, and I don’t think your oil rationing proposal is a good idea. We do need to reduce oil consumption. We can subsidize more fuel-efficient vehicles and heavily tax gas-guzzlers; we can raise taxes on oil, lower other taxes to make up for it and target help to people who are hit hard by this.
But I’m old enough to remember the attempts of the 1970s, the half-mile long gas lines, the odd and even days; they mainly succeeded in getting Ronald Reagan into the White House.
This is the way to go – $150B now to shut them up and see you in January. But it will only work if there is enormous organization on the ground to pressure the new group to do the right thing. Considering that there would also be enormous and well-funded pressure from the other side to hand over billions with no strings attached, it’s worth thinking about how our side will be able to bring the requisite pressure to bear especially AFTER an election.
5) or XII)-
Undo anything Phil Gramm had a hand in.
Don’t forget Dubya has his feelings hurt too
feelings? georgie?
guess I’ll just have to take your word for it.
Undo anything Phil Gramm had a hand in.
self-moderating mode switched to “On”…
I don’t think the answer lies in buying the mortgages, I think the answer lies in buying up the houses in imminent danger of falling into foreclosure. Max. purchase price is not less than $500,000 – and in no case will a price greater than 80% of the most recent purchase price be paid. Pick a point in time – like mid-2004, and set that timeframe as the basis for comparable values to be paid in the buyout plan. Put the deeds in the hands of the taxpayer, and give the owners the option to rent them with the prospect of buying them back through rents paid over time. This approach takes the inventory off the market – putting a floor under the housing market. Absent a floor under the housing market, it will spiral downward, and foreclosures and walk=aways will increase.
so will the greedy bastards be mollified with “only” 150 billion?
Yes a 777 point drop in the Dow gives us leverage also since the GOP didn’t all support this bill Bush can’t claim that we caused the crash.
Well he will claim it anyway, but McCain leading the House GOP against the White House Deal when Bush met with Obama and McCain at the White House is not going to help make that false meme fly with voters.
Plus David Letterman told EVERYONE that McCain blew him off to fix the economy then showed McCain doing a news interview instead, Dave got’s a big regular American audience.
Polls show people trust Obama more than Bush and McCain to fix the economy.
foregoing should have said not MORE than $500,000
Tweety blaming McCain for failure.
This is the most bizarre statement on the subject I’ve heard so far.
This is what makes me nervous. The class war gets fractured (we start turning on each other) and we have people saying no to food stamps for strange reasons, when we know that increasing them is one of the two best ways to get the economy to grow. It’s going to take Roosevelt-level leadership (I don’t see any of that laying around) plus a ton of funding to get done what Ian is talking about. I’m not saying don’t try but I am saying it’s a good idea to realize what would be ahead of us.
Except he already owned that record. The previous record drop was over 600 points on Sept. 17th, 2001. I do believe the Dow is now lower than when he took over in January of 01.
fire paulson. we need someone who an be trusted not to self deal.
McCain will say “When I was in prison, I thought mostly about economic issues. I was a POW. Did you know?”
Ian Welsh just a wonderful piece of work this year.
I have a laundry list for the economy recovery top is get the hell off of OPEC and keep our capital at home.
He wants a legacy of the top ten drops. It’ll be untouchable.
reinstate glass-steagall
Oh, and Sirota is right. Watching CNN during the vote count the correspondents were acting as if their hair was on fire. And I don’t think they really had a grasp of the fundamentals of the problem. They really were freaking out. And this is the network that the “liberals” watch according to some stupid poll.
Well, Paulson said that’s what he needed – $50B/month. It depends on how desperate they are. Frankly, I think the plunging Dow will scare us into compliance b/f Paulson’s Crew feels the need to deal. Thanks in part to the hysterical media, we’ll all be begging them to take our money, no strings attached, by Wednesday morning.
I’m pretty confident Bush could have led the country to ruin a lot sooner if he hadn’t spent so much time on vacation.
The GOP lost Tweety? Maybe Tweety was serious after debate when he called McCain a Troll. I’m sure that comment was directed at us to get our approval.
I wonder what Sarah will say:)
These suggestions seem so sensible – and even I can understand them. I read an article by Ted Rall “Save People, Not Bankers” that had this opening:
His article is also easy to understand. Is anybody forwarding these ideas to Congress?
Are gas stations in the South still running out of gas and having long lines?
R’s party arguments are absurd:
-McCain: I showed leadership and got the bill passed (like you won the debate during a “suspended” campagin when you are not even goind at the time.
- R party house: Pelosi made a mean speech. What are they so weak that they tank the country over a hurt feeling.
- R supporter: Ummm, its somehow the Democratic Party’s fault.
Handcuff fitting time.
Sarah: We have banks in Alaska too.
Looks great. Put in some poison pills to negotiate back from, like repealing the Patriot Act and FISA. Or maybe universal health care. Renew laws to regulate media consolidation. Restore habeas corpus.
Or maybe more on topic: graduated income tax, no loopholes.
Well, we need to get Freddie and Fannie back on track and say no to bailin’ out the government every time it gets greedy and screws up with OUR MONEY! (applause)
Mr. Moneypants Paulson is on the teevee. He needs a crew to pull another heist. He has got tools in his toolkit to get what he needs, but he needs more tools. It is either $700 billion or slip into financial panic…or no more 401k’s…or no more mortgages for minorities…or no more debates.
Good he is telling the truth – look around you: its Ronald Regean’s legacy.
Thanks for Glass-Stengal repeal Clinton as well. You know they have framed your pens that signed that in their wall of fame to the big bankers office.
i have one problem with this plan. i don’t want to wait until january. now, with elections just around the corner we have a bit of leverage. in january we will have none.
seriously – how many people here think this bill would not have passed, in it’s present form if this was sept 2007 instead of 2008?
McCain soon to give statement. Place your bets as to what he will say…
blame democrats
blame Obama
blame Obama/democrats
accepts responsibility for failure
calm the markets/people
work in a bi-partisan manner
suspend his campaign
…..
thanks for the post. Good plan. I was hopeful when some Democratic Congresional leaders asked why not go with $100 to $150 billion for time being to patch things together until after election asap in new administration. I do not remember either Paulsaon or Bernanke ever being able to explain why that wouldn’t work (but to be honest that proves nothing since P & B were able to explain very little about anything in their testimony). But then that idea folded for some reason.
Some comments:
1) A commenter (wigwam?) claims to have calculated reasonable figure for mortgage buyout. If my memory correct: 10 trillion in mortgages, 1% to 1.5% distressed, $100 to $150 billion mortgage buyout cost. That seems like a bargain compared to P&B plan
2) Are some of your regulatory ideas workable? How would you define complexity? Do we need a mortgage securities market at all? Why not just get rid of it? Or define several standard contracts that strictly specify the type of securites that can be traded (that is how exchanges do it, and more line with how things work in Grand Economic Theory)? I think standard contracts would make your margin limits more operational.
3) James Hamilton at Econbrowser suggests transparency, and wants a centralized clearing house to record contracts transacted and collatoral. Maybe that could replace some of your restrictions, and it would deal with hidden systematic (especially endogenous systematic risk created by hidden networks of positions)
September 21, 2008
Paulson bailout
James Hamilton
http://www.econbrowser.com/arc…..ilout.html
4) I like the idea of getting rid of swaps. That is just an unregulated insurance market, and went the way of all unregulated insurance market in recorded economic history (life, fire, hosptal and accident, you name it): it blew up. There is no hope for it. Just get rid of it. If it is needed, then should be regulated as strictly as any other insurance market.
5) Nice piece that breaks down risk spread into components -helps explains the TED Spread, which is the mystery wonk number often trotted out to justify fears of immediate catastrophe if nothing done.
September 28, 2008
Understanding the TED spread
James Hamilton
http://www.econbrowser.com/arc…..ing_t.html
Anyway, the plan is interesting and your discussion highlights some of the issues involved in the crisis.
Can I suggest we ask just how do we intend to pay for this withot printing money and tanking the Dollar? Ending the war now instead of January would sure save a lot of money.
700 Billion – 100 Billion – it does not matter. The likely amounts here are in multi-trillion. Its like picking how we want to go down the tubes.
One thing is for sure we are not having a fire sale for SWF’s. The choice is to inflate the hell out of money it would seem.
Yes, absolutely. That’s been one of the top stories on all the Atlanta stations, and probably still would be if not for today’s Congressional Theater.
You have to admit that it is far superior to the one that was mercifully defeated today.
Before or after she speaks.
Ian,
Nice academic approach but I was just told that the money I am to receive from selling my business, in now in limbo. It seems that the buyers credit line in now frozen by their bank due to the vote. I did my due diligence so I know their balance sheet is solid.
I was in the organic food business for 20 years and now all that I worked for is frozen.
I agree with wanting to punish the thieves in Wall St. But by allowing this flawed plan to fail it froze the credit markets.
If you want to send me my money I would appreciate it.
He will say all of the above plus we must cut taxes and deregulate more:)
Just how bad is it?
I like the buying up mortgages idea–it goes to the question of the underlying value of the instruments in the Big Shitpile. If the underlying assets are sound, then buying up the securitized asssets is a no brainer, either for uncle sam or for anybody else.
Whatever happens, the Republics must not be allowed to escape blame. It’s their policies and their people that caused this.
i think there is the natural wish to believe that the dems would actually behave responsibly come january. i submit there is no evidence for that position and tons of counter evidence. kicking the can is irresponsible of us. it may be that nothing good happens until january or even later – but we should not be building in a delay. we need to be fighting this battle right now – as ian is doing with his post (except for the january part).
we know from experience how long it takes for our voices to be heard. we can’t wait around while all the deep pocket lobbyists are writing their own plans with the dems.
+ End the war and cut defense spending
4.1 Sliding scale starting at 90% and reaching 100% tax at 5 million.
hell yes.
Adding to the list:
- shrub needs to resign immediately. With the hubris of his two page non-plan and his fearmongering, he still failed totally here, once again. If there was any concept of personal responsility left, he should quit and leave the country. I hope he cowers under his desk for the 3 months.
Personally, I think we should come up with a solution to save the economy and the underlying contracts (mortgages) and not the banks that caused this mess. Buy the assets from the banks (both good and bad assets) and, instead of funding those asset purchases with taxpayer funds, do so with assumption of liabilities — good depositor liabilities. Transfer these assets (after retiring some of the worst assets into special purpose vehicles for tender-loving-care, so to speak) to resolution trustcos which could be shored up by the treasury on an interim basis, subject to future capitalizations and Ian’s otehr measures. Eventually these trustcos can be re-privatized, but not for a long while.. meanwhile, we can hire unemployed bankers at GS7 pay grades to chaperone the funds. The failed banks just get smaller, retaining primarily risky liabilities (not tied to depositors) and risky assets.
Meanwhile, in further consideration of any valuation gap between the Transferred Assets – Transferred Liabilities (assuming that value is positive), the government will issue to the banks a novel form of security.. I came up with this in the shower last night: TOILETS – Transitional Obligation-Impaired-Loan-Elimination Treasury Securities. TOILETS are designed to be worse-than-worseless securities specifically structured to be jammed down the throats of the worst and most corrupt failed banks. TOILETS are callable on the treasury, at steep discounts for the failed assets they will replace, up to a fixed-percentage of future Federal budget surpluses (in other words, not one red cent until the national deficit is cleared, and then only in pieces, subordinated to every conceivable current Federal budget). In other words, until they help to fix the economy, they get nothing. This’ll defer the drain of the bailout on the treasury until a future when we can afford to pay it.
TOILETS are a triple entendre – they’re worth about as much as toilet paper (like the assets they will replace), they will likely cause the organizations we force to accept them to go down the toilet, and they ironically reflect the national opinion that those organizations flushed us all down the proverbial toilet. They also incentivize responsibility behavior, in that they will only be worth SOMETHING in the future if the economy drastically improves. And, by the way, we should mandate the CEOs of these cancerco’s get paid in TOILETS.
Any cancerco refusing this deal will be rigorously investigated for illegal acts and their officers will be rigoursly prosecuted (all stick, not carrot).
There. I know this is a fantasy revenge scenario, but, hey, given the national mood…
90% tax on income over 1 million isn’t going to pass. Which is a good thing. It would create a lot of disincentives for not just the non productive activities that you decry, but also productive activities.
I think the proposed transaction tax has some merit. We do need to fund the stabilization activities.
We do not need Congress or treasury deciding prices. That type of control or planned economy leads to shortages and gives rise to a black market pretty quickly.
there are no more investment banks, just hedge funds.
glass steagall separated commercial and investment banks. now they are all bank holding companies.
Fed Injects Additional $630 Billion Into Financial System to Stoke Lending
And will probably start cutting interests rates. Can’t keep Paulson/Bernanke/Bush down.
Blame is important – we have seen that if there is no down side
- golden parachute
- no criminal trials
then it will NEVER get better. THERE IS NO DOWNSIDE FOR THESE PEOPLE.
Meanwhile our parents and I are FXCED
McCain believes that if you drill enough, you actually hit gas. No refining required. Palin explained it to him. Of course, she was speaking in tongues then.
I will definitely be tuning into Letterman to see if he has a few words to share about McCain’s role!
yes. but it is also the responsibility of the democrats – especially during the deregulate and privatize clinton years. and i’m not going to do what i condemn the Rs for doing – apportioning blame to everyone but themselves.
Dems could have the votes in the house (if they could bring Blue Dogs around) to just pass their own version. With all the panic, perhaps the Senate would feel compelled to go along.
Frame it as — We tried to be bi-partisan, but Republicans wouldn’t go along. We need something and we need something fast, so now we’re going to let the ‘adults’ talk and pass a strictly Democratic bill.
Maybe a pipe dream, but what the hell.
Hmmm I’m just looking for crazy talk her prepared statements before she speaks are McCain’s writers her interviews are her attempts to remember talking points and wing it.
I really do not think she has a clue.
This has to be used to clean house and put criminals in chains.
We also need to have DOJ toads purged as well as any other possible purges. Any crime is not tolerated and only flipping allowed is if you turn on the two levels abvove you.
i guess you’re right. i keep forgetting that
hah! give them $150 billion. if they take away paulson. it has an appealing ring to it.
do you have getting out of iraq on the list?
What happens for the next 1 trillion when construction people lose their jobs (to many houses and no public funds for construction), and finance/banking, then the general downturn for all?
Right. And adding the provisions (like food stamps, UI insurance and investment in quick-to-start infrastructure projects) will provide the economic recovery we need to help people purchase in the short run and regain their credit in the long run.
yes. that might be possible if done now. more difficult in january.
of course, i’m sure that both Ds and Rs would like nothing better than for us to put this on the back burner until after the elections. gives them more freedom of action.
Can we help the pension funds make payments until the market gets better should we nationalize private pensions that are in trouble?
IMHO, I would like to add an immediate withdrawal from Iraq and Afghanistan, as a way to improve the balance sheet of the US Government.
…and can we start the impeachment or at least start the trials by January 2009 at the latest.
Push interest rates LOWER then the Dollar will drop more!
ugh Issa on the teevee
Volunteering at the food bank today. Wanna guess how many new families want to sign up?
…I know a short congressman from Ohio that is ready to go & already has gross incompetence on the list.
May I add cancel the missile defense shield and what ever next generation weapons Bush was planing to buy. Just buy new stuff as the old stuff wears out.
McSame just attacked Obama for killing the deal by failing to “lead” when it was the rethugs who failed to come up with their promised 75 votes????? WTF?????
add:
Tax non-primary residence flipping at 99%, no more false demand.
Pretty tough for those not used to this, but stations adapted pretty quickly by taking the prices off the signs if they are out of gas. Social networking is filling in the info gaps, using tools like Twitter #atlgas hashtags. For those not into the social networks, the QT chain has been the most consistent for having gas, IMO. The independent stations have had the hardest time getting and keeping gas, which isn’t a bad thing because many of them have very poor access and/or traffic control to their pumps, causing as many problems as they would solve by having gas.
I am hearing the lines are anywhere from 15 minutes to a few hours, based on location, traffic control, and time of day.
Digg folks we have to push posts like this up to get the MSM and the Dems attention we have to push posts like this up to scare the GOP.
Its the Bizzaro world – just read the opposite and that is true.
R’s since 2006 have fit the 100% lie and hypocracy in everything they do.
Lets not lose site of the fact that they are the cause of all this as well.
You can’t be surprised, right?
O’s response was to try to calm fears and say that this is going to be a bumpy ride and McCain is going to attack Obama. Rinse and repeat.
That’s rough George. Can you wait to sell the business or can the buyer find another source of $?
Ian – Now is the time for US to get Your Plan into the right hands!
Can we identify a Key Player(s) who could Carry the Ball on this?
Why not put this in Obama’s Hands?
It’s decisive, effective, prudent action without over-committing resources until the Options in Detail can be studied out for the big January Bill.
He could do it Right Now and Calm the Markets.
Any word when they can expect gas? Also how is this effecting Southern Red states this can’t be good for McCain.
If the Surge was really working shouldn’t gas prices be cheaper?
Many people are losing $ today with the market tanking. And some of them are still happy a nasty irrational bill failed, like myself.
God being from NE I have heard Frank a number of times. The guy is quick an funny. Got what a devestating response against the R’s “mean speech” excuse.
He needs to call Insane onto the carpet about this. Now. This is beyond pathetic.
And shrub needs to resign immediately.
why waiting until january is a very, very, very bad idea:
from naomi klein’s shock doctrine:
my bold.
if we want change – now is the time to act.
Agreed.
Ian, I, along with many others, I know, cannot thank you enough for your posts.
Dugg. Thanks for the link.
Agreed and we have leverage, we have a majority in the House and Senate and ending the war could help pay for this bailout.
mcCain up now giving statement
“Senator Obama and dems injected unnecessary partisanship into the process”
Hmmmm okay.
I notice that he didn’t take any questions, rather just read the statement and left. how leaderly
Take the hypocray rule – just blamed Obama for his thing and would not even take questions.
You will see this rule applied three times tonight before the cock crows. hehe.
God I wish we could bypass the VP debate and go to the next Prez debate.
good.. its 5:10pm EST.. nobody’s going to pay any attention to it.
God is Palin off the wall.
I am against it, but we have to pass it for…scary thing, health care…no jobs, ummm let me wave my hands and see if the index card says something.
Even SNL could not make it as funny as it was.
Crazy. “Now is not the time to fix the blame.”
It never is. Except, he blamed Obama and the Democrats.
Why give Paulson ANYTHING? The FED seems to have lots of money:
http://www.nakedcapitalism.com/
Right now no matter what is proposed, the ‘fly in the ointment’ is Bush and the threat of vetoing anything he doesn’t like. In January, the markets may have worked this all out themselves.
http://www.rgemonitor.com/roub…..gh_as_ever
And this has got to be a laugher(in the crying sort of sense of laughing):
“A veteran Sacramento mortgage banker who has been lobbying Congress to pass the $700 billion bailout has been accused of defrauding 11 of his former branch managers and embezzling $879,000 from them in the collapse of his Folsom mortgage brokerage in 2007.”
“Courson, 66, is chief operating officer of the Mortgage Bankers Association of America in Washington, D.C. The industry group’s members include 2,400 companies and 370,000 people from the real estate finance world: mortgage companies and brokers, banks, thrifts and insurance companies.”
http://www.sacbee.com/111/story/1272933.html
I would prefer a Democratic bill. Forget any revote and just write a bill.
I am not sure the must have change now slogan is useful, however.
Any good bill probably will be vetoed. House GOP will prevent override. Some of the House GOP will not blink in the face of financial meltdown that may happen over next month. They are nuts -economic Endtimers.
It is also quite possible that the immediate Great Depression scenario is a big lie.
I’m with you. Write a real progressive bill instead of this sludge
Sold the business, am recieving staggered payouts for tax purposes.
Now I’m in linbo after 20 years of hard work.
I was a small business owner, not listed on any exchange, just an average business person.
but the dems are probably getting a ton of pressure from the financial industry types to write another bailout for them. we have to be counter pressure or i don’t think the dems are capable of writing anything that is not crap.
The Fed may be in more of fix than we know. I don’t have time to find link, but Brad Setzer has back of envelope calculations that say Fed is maxed out on its assets. Feds balance sheet may have to be expanded. That would require high profile public request and approval from Congress with unpredictable effects on currency exchange and maybe really bad reaction from foreign owners of US debt (China for sure, and Japan and Gulf States, I guess -or whoever, I cannot keep up with who are top US debt holders).
I agree with you 100%.
Yeah but I sure hope it rebounds
I sent a link to Ian’s post to Obama’s site:
I don’t know how often or if they read the “ideas” but it can’t hurt.
(I can’t tell if that link is going to work)
Ian – can I have your thoughts on Thom Hartmann’s plan.
I also have a couple of issues with the home mortgage thing, as well as the oil rationing issue, which, in some cases can be handled on a state by state level rather than a national level.
In the case of mortgages, foreclosures, etc., the “non-recourse” states are in much worse state since homeowners can just walk away from mortgages which depresses the value of homes in general.
Here in Maryland, we do not have non-recourse, which means that you cannot walk away from debt [i.e. “turn in the keys”] caused by a bad mortgage, the foreclosure rate is consequentially lower than in Florida and California, for example, where homeowners and especially investment property owners can play “jingle mail.”
The link didn’t work. I’m trying again:
http://my.barackobama.com/ideas
Totally agree. The majority of Dems voted for this piece of crap. I forget the figure, something like 194. That’s my hit list. Everyone on that list needs to see a pink slip come November. The trap didn’t work but not for a lack of trying on the part of the Dems. JHFC, if these people were any denser they’d be a singularity.
Yes, This is step 1.
Now about that federal Spending, and yes, we should focus on you DoD.
Its really hard to say when things will catch up because the gas supply not only has to overcome the true deficit of gas consumption, but also has to overcome the new habit of the locals maintaining a higher minimum of gas in their tanks.
On another topic: Suze Orman is now playing the fearmonger card, based on her new interview with Wolf Blitzer.
I’m afraid to ask.
I think it was a majority but not that high a majority or they wouldn’t have needed at least half the Rs on board. I think it was 144 or so Ds.
Not that that’s such an improvement but still…
with the fed putting in 630 billion it seems like there’s a chance.
If the buyer can’t come up with the money doesn’t the business revert to you through whatever legal mumbo jumbo hoops you may have to jump through?
wobblybits @ 112 …
Good thing we didn’t agree on a wager earlier today…I told you McCrazy would SOMEHOW turn this into “it’s all the Dems and Obama’s fault” politicizing.
140 to 95
FDIC converage for mutual funds? Are you proposing that FDIC insure the value of mutual funds? Or only insure against bankruptcy of brokers? For mutual funds, SIPC already exists for the case where your broker goes out of business (and the limit there is $500k, not $100k).
Insuring the actual value of mutual funds seems like a dangerous game to play. If you’re a broker, it introduces enormous moral hazard to buy incredibly risky stocks to make up the fund.
Yeah, I haven’t checked since the vote but however many are on that list are on MY list.
Again I agree.
professor foland – i’m not really sure, but i think that’s what happened on the 19th. as far as i can tell there may have been a big run on mutual funds on the 18th and that’s what was done (among other things). will get the links if you are interested.
The German Finance Minister is grilled about Wall Street siituation. Pretty interesting.
What everyone must keep in mind is that the Republicans who voted this down have their own plan — and it’s MUCH worse than what got voted down today.
Their idea of “compromise” will be to push the Democrats away from anything like what Ian’s proposing and more towards Paulson’s original plan. No real oversight, and above all not one red cent for accountability on the part of rich people.
for professor foland:
youtube
my previous comment
summary from hugh (see item 87 in hugh’s list)
thanks. another reason we can’t wait until january. from your link:
if we want our voices and priorities to be heard, we can not wait.
Not January but now doing it this way:
http://www.politico.com/arena/…..64125.html
The long lines in 1973 were cause by the Saudi’s cutting off the oil becuase of the US’ support for Isreal.
You have your cause & effect wrong.
I think you are talking about a facility to insure and stabilize money market funds, which are not mutual funds.
The Treasury has done nothing that since the announcement earlier this month, which has kept the money markets on edge. The dealy might because it has to be slightly less attractive than deposit insurance otherwise could be large movement of deposits from banks to money markets, which would complicate banking sector.
Naked Capitalism blog has kept tabs on it, and the progress can be followed there.
Yep. I’m scared.
are not money market funds a type of mutual fund?
I agree with everything in spirit, and most things in detail. I need to think more about the rest.
In particular, houses are worth no more than the loan amount that the people who want them can afford to service. If the govt. buys up a defaulted mortgage for more than market, the seller has to make up the difference in voting stock at current market value.
Having bought a mortgage, the government has three option. It should provide the homeowner with a rational refinancing option. Failing that, it must foreclose and sell or rent/lease the property, whichever make more economic sense.
Money market funds invest in short term debt (bonds, Treasuries, repurchase agreements) and a very highly regulated reqarding type of security they can hold and composition of portolio. I don’t think any kind of equity qualifies, and if some types of money market funds can hold such, I would imagine must be preferred or convertable. Everything has to have some bond type porperties.
from
http://en.wikipedia.org/wiki/Money_market_fund
Eligible money market securities include commercial paper, repurchase agreements, short-term bonds or other money funds. Money market securities must be highly liquid, and have a stable value.
Sorry the description of money markets was meant to be a reply to you.
Really great find
I have a dumb question. The Kritters are recessing for some Jewish Holidays. No disrespect, but that is respecting an establishment of religion. Plus everything else is open for business.
But if this crisis is so critical and panicky why the heck are they going into recess-or whatever. Remember Obama was supposed to suspend the debate because of the vote on Cash for GoldmanSachs. We have the press leaks predictng doom and gloom, but some religious holiday is more important than economic catastrophe.
My 153 for you
New Ian a couple of flights upstairs
All the plans under current consideration look like non-starters, DOAs.
This seems like a good time to get Ian’s Plan out there in circulation – the Solution may crystalize around it as people look for fresh alternatives.
It’s Timely, Sensible and Rational.
Need I remind anyone of the JP Morgan story: Morgan once asked his staff to develop a plan to takeover a competitor in time for a Thursday meeting – three days away – which shocked his people. Thursday comes and the exhausted staff tells Morgan that the plan’s not ready, it’s no where near perfect.
Morgan bellows back, “I didn’t ask for a Perfect Plan, Dammit! I asked for a Thursday Plan!”
Ian’s is a Great Thursday Plan.
Let’s get it to Barack!
Thanks. Excellent suggestion (from Charles W. Calomiris, Professor of Financial Institutions, Columbia), the government buys preferred stock in the troubled institutions to give them liquidity and the public protection.
Per the Wikipedia:
That is to say that the public gets the first crack at any profits, and the proceeds from a bankruptcy, if any.
also from wikipedia:
http://en.wikipedia.org/wiki/M…..rket_funds
Yes, but I think those are all through repurchase agreements, but maybe they can hold preferred or convertable stocks outright. I am not sure.
But I am pretty sure they hold them through repurchase agreements, so the value should not go up and down with value on stock market. Some one has agreed to buy them back at a future date.
This will sound crazy, but…
I keep hearing people talk about bailing out banks and bailing out people who bought houses they couldn’t afford. What about instead helping the economy by helping people who have good credit buy houses that they couldn’t afford because of the bubble. I have been saving for 5 years trying to buy a house, everytime I get ready the housing market is that much more expensive and I still can’t buy.
Helping people with good credit by offering rebates or down payments would put money into the market, keep prices higher, and help get things going again. Why are the only proposals designed to help the people who got us into this mess?
Even if not all of your recommendations were adopted, this one:
would go a long way toward setting some kind of financial sanity back in place.
Tell congress. That’s what they just killed.
The American people don’t want to foot the bill, even if it’s just taking out a loan, when they think it’s Wall Street who is to blame and who should pay to fix it. The American people might also not realize just what a big bet they just made — that the economy won’t dry up, blow away and take them with it.
Problem is, it costs money to buy up all those mortgages and somebody has to pay if you do buy them. If the people won’t, then I guess Wall Street has to. Can Wall Street afford much these days?
Maybe I’m not well enough informed, maybe I’m naive and have bad judgment, but it would seem to me we might just leave the toxic assets where they are and help those firms fix them. It’s new territory and we might botch it, but do even those who read this blog who are happily considering ‘nationalizing’ those firms (and there are many), really think America is ready for something like that?
There is one other idea I can imagine which *might* have a chance of working. Again, it involves using existing assets.
We could simply take those assets (nationalizing the assets, I suppose) from firms and place them with FDIC and/or Treasury and pay the firms for them as we can afford to. It takes them off the market and off their balance sheets. It gives government a chance and time to rehabilitate them by various means. It leaves those firms smaller and with no recourse to recouping their losses in any orderly way. It’s forceful and decisive, but entirely uncouth and not according to the rules of Capitalism or Democracy. It might not work, but if it does it would satisfy the beasties among us who like to be brutal. If we want we could take some set percentage of all the assets we appropriate as our ‘commission’.
One big problem, as I understand it, is in these CDOs there are both mortgages and other asses mixed together. If you want to take the mortgages out it might not be easy without ruining the package. Only people expert on these things could explain how it might work or why it can’t.
Another problem is that if it was hard for these firms to borrow money on shaky assets (as collateral), then how are they going to borrow on NO assets as collateral?
I see no reason to move the assets around this way. I say, leave ‘em where they are and fix/renegotiate them quick as possible.
This is amazingly close to what I just wrote…as a last-ditch effort. Your idea of handing the firms some TOILET paper in exchange for the assets is somehow appropriate and tragic.
Still, as I wrote, the question of how firms maintain liquidity, remains.
Please John McCain, for God’s sake suspend your campaign, pretend to try and save the economy and go away so America can be saved.
I think it shows poor judgment to show animosity by injecting even more partisanship when you’ve been telling people you are a leader.
Obama said we need to remain calm and see if we can still get through this.
McCain seems to be just throwing in the dice, er towel while Obama is trying to lead us to victory.
With all due respect, it’s obvious to me that you (and almost entire public “debate”) omits 50% of the problem: eg. a thorough top-bottom review of the mechanics of the US economy with a microscopically critical eye towards the perversions of federal government sponsored fixed economy passed off as free markets.
The US has become, effectively, a debtor nation. If Chinese/Russian (etc.) bonds/treasuries (etc.) were to be called in, we’d be completely, totally broke… Argentina on a massive scale.
The “smoke & mirrors” character of current Wall Street mess permeates almost every facet of US economy now. Offshore production, marketed through US biz masquerading as US productivity is overwhelming. Investment here at home is a trickle of USD investment flow.
In Bush’s short tenure, the entire global economy has morphed… largely out of the consciousness of avg. US Joe. 3rd world economies have become world class ones, many of them surpassing US in real production. And as a result of mis-trust of Bush (a gross understatement), the re-alignment of these economic powerhouses to the exclusion of US participation beyond consumerism… geez, US leadership is just a memory AFAIC.
The breadth and width to which these guys have fucked things up is mind boggling, and an accurate model defining it all is entirely absent from our population.
As I see it, this goes way beyond reorganizing financial doings… rather a thoughtful consideration and re-organization of our society is a more or less do-or-die necessity. More than WS’s meltdown, given the “everything’s ok” malaise enduced slumber w/ensuing dumbing down of the US public during these neo-con years, the capacity of US to actually execute what’s needed is, in my mind, very much in question.
Lo & behold, via The Big Picture, an upcoming Moyer’s interview w/Andrew J. Bacevich is posted, w/video & transcript, on this very subject.
The title & leadin:
Bacevich: The Limits of Power
Tuesday, September 30, 2008 | 12:30 AM
Is an imperial presidency destroying what America stands for?
Highly recommended.