jerseyhoya wrote:She did (technically).

but didn't she keep the money that was allocated for it?

jerseyhoya wrote:She did (technically).

LOL. I don't begrudge the governor of a state taking federal money even if it is for something monumentally stupid. But...she flopped on it AND, more importantly, she kept the money that had been earmarked for the bridge. Whatever, that's fine. But, don't freaking lie to me.

Trent Steele wrote:

jerseyhoya wrote:She did (technically).

LOL. I don't begrudge the governor of a state taking federal money even if it is for something monumentally stupid. But...she flopped on it AND, more importantly, she kept the money that had been earmarked for the bridge. Whatever, that's fine. But, don't freaking lie to me.

Well, they aren't. So you should be good.

Good point about Barney Frank. I'll be waiting to hear what he has to say about the proposal.

Robert Reich weighs in on the deal. He doesn't like it, but he thinks it's going through--so Congress should set some terms:

1. The government (i.e. taxpayers) gets an equity stake in every Wall Street financial company proportional to the amount of bad debt that company shoves onto the public. So when and if Wall Street shares rise, taxpayers are rewarded for accepting so much risk.

2. Wall Street executives and directors of Wall Street firms relinquish their current stock options and this year's other forms of compensation, and agree to future compensation linked to a rolling five-year average of firm profitability. Why should taxpayers feather their already amply-feathered nests?

3. All Wall Street executives immediately cease making campaign contributions to any candidate for public office in this election cycle or next, all Wall Street PACs be closed, and Wall Street lobbyists curtail their activities unless specifically asked for information by policymakers. Why should taxpayers finance Wall Street's outsized political power - especially when that power is being exercised to get favorable terms from taxpayers?

4. Wall Street firms agree to comply with new regulations over disclosure, capital requirements, conflicts of interest, and market manipulation. The regulations will emerge in ninety days from a bi-partisan working group, to be convened immediately. After all, inadequate regulation and lack of oversight got us into this mess.

5. Wall Street agrees to give bankruptcy judges the authority to modify the terms of primary mortgages, so homeowners have a fighting chance to keep their homes. Why should distressed homeowners lose their homes when Wall Streeters receive taxpayer money that helps them keep their fancy ones?

My initial reaction to #1 was "that's too close to socialism for me to feel comfortable with." Then again, if we're bailing these fuckers out from the consequences of their bad judgment, that's socialism's ugliest face. So why not at least get something of value out of it?

I hope the Democrats dig in on this. They can win it on the politics, and the crisis offers an opportunity to get some very useful reforms, as Reich discusses in #4. But they'll probably wimp out as usual, since that political donation money enriches them as much as, or more than (given they hold majorities) Republicans.

C'mon guys: prove Ralph Nader and PtK wrong...

#3 might hurt the Dems more than the Repubs, though it's not necessarily a bad idea. I think it'd be ruled unconstitutional under the current dumbass ontology that equates money with speech.

And I've not read from anyone who "likes" the deal. McCain doesn't like it, I don't think Obama likes it, Cato doesn't like it,

http://www.cato-at-liberty.org/

Heritage is lukewarm at best, and on quick reading doesn't seem all that far off of what Reich wants.

http://www.heritage.org/Research/Econom ... wm2069.cfm

Alas, American Enterprise seems to have been caught off guard. Stupid Straussians never did understand the free market anyway.

jerseyhoya wrote:

Trent Steele wrote:

jerseyhoya wrote:She did (technically).

LOL. I don't begrudge the governor of a state taking federal money even if it is for something monumentally stupid. But...she flopped on it AND, more importantly, she kept the money that had been earmarked for the bridge. Whatever, that's fine. But, don't freaking lie to me.

Well, they aren't. So you should be good.

Did she ever tell congress, "Thanks, but no thanks."?

No. Is that what they're saying in the ad?

Mountainphan wrote:IBD's Disspelling the Deregulation Myth:

OK, we'll say it if no one else will: Thank heaven for Gramm-Leach-Bliley. If you've been listening to the fulminations from Congress and the campaign trail, you know that we're talking about the 1999 law that dismantled the Depression-era barriers between commercial and investment banking.

Democrats largely supported it at the time, and one of their own, Bill Clinton, signed it. Now they frame it as a Republican bill that helped send the nation on the path to perdition.

In this respect, Gramm-Leach-Bliley has turned out to be smart policy indeed. By repealing the rule against banks owning investment firms, it has led to at least two crucial mergers — JPMorgan Chase absorbing Bear Stearns and Bank of America merging with Merrill Lynch. Morgan Stanley may be the next investment house to find shelter in a well-capitalized commercial bank.

You can spot the theme here: By taking down an outmoded firewall, the law is helping the financial industry cope with a once-in-a-lifetime crisis. Far from being the cause, this instance of deregulation, or whatever you call it, is part of the cure.

I sent this to my mom, who is a world reknown economist... here is her response:

"...It's the ideology of deregulation more than any single thing that led to
today's financial crisis. The Gramm Bill that repealed Glass Steagall was
a clear signal to Wall St. that anything goes, the foxes were now guarding
the chicken coop, that government and the regulators were not to be
feared, and that if markets rewarded behavior, that behavior must be good.
Markets rule, markets are efficient, markets are never wrong, there is no
such thing as a bubble. If the market says your dinky apartment is worth
$5,000 a month and there is someone out there willing to pay it, then
that's what it's worth -- and will always be worth that much or more. Rent
control just gets in the way of markets making smart people rich, and who
cares where ordinary people are going to live. Let the social workers
figure that out -- that's not the job of the market. This is what they
mean by "market fundamentalism". As Joe Stiglitz said, the fall of Wall
St. is to market fundamentalism what the fall of the Berlin Wall was to
communism.

But back to your question. Alan Greenspan is an acolyte of Ayn Rand and a
libertarian. Certainly did not believe in the efficacy of regulation. He
was the head of the Fed and a cheerleader for market fundamentalism during
the build up of the stock market bubble and the housing bubble. Despite
Glass-Steagall, he still had many arrows in his quiver for letting the air
out of the bubbles before they grew too big. But he chose not to use them.
He could have insisted on a clearing house for credit default swaps (a
kind of insurance policy in case a corporate bond that you bought -- that
is, a loan that you made since that is what you are doing when you buy a
bond -- goes bad and can't be repaid). This is a $70 trillion dollar
market insuring $40 trillion in actual assets -- it's like everyone in
America bought two fire insurance policies for their one house. What the
heck was going on? Clearly, a lot of this was some form of gambling. But
there is no clearing house and no one knows exactly who owns this $70
trillion dollars of insurance, who is on the hook to pay (that is, who the
counterparties are) when these bonds go bad as theyare now. That's what
happened to giant insurer AIG -- it made tons of money on the fees
(insurance premiums) it collected with these credit default swaps, but it
didn't actually have the assets to make good when lots of these bonds
failed at the same time. Some of the buyers of these bonds were money
market funds -- supposed to be safe as money -- and they thought they were
safe because they purchased insurance in the form of a credit default swap
from AIG. No one knows who else is on the hook to pay out on this type of
insurance and how much they are likely to owe. So no one is willing to
provide capital (that is, buy stock) in companies like Lehman Bros. that
just went bankrupt. Not even the Sovereign Wealth funds of places like
Dubai want to own a piece of Wall St now.

Okay -- so my general point is that the Chairman of the Fed has many tools
at his disposal and the latitude to invent others as needed. Just witness
Ben Bernanke in the past couple of weeks. Greenspan didn't even do the
simple things, like insist on transparency and a clearing house so that
government regulators like himself could know who owns what and what the
dangers are, could have seen that AIG was writing insurance in the form of
credit default swaps, basically on the assumption that very little was
likely to go wrong, and not prepared for a worse case scenario.

And who is buying those credit default swaps? It's banks and pension funds
and all kinds of financial institutions buying those new-fangled
mortgage-backed securities (a kind of bond) based on mortgages to people
who couldn't afford them to buy houses with sky-high prices that couldn't
be sustained. Everyone (except me and Dean and a few of our friends)
professed to be surprised that there was a housing bubble and that it
burst -- didn't think it was possible, didn't know it was going to happen.
So why were they buying insurance against defaults on these securities? By
the way, the shareholders of AIG have been virtually wiped out in the
nationalization of AIG (govt now owns 80%, shareholders left with only 20%
of what they had before). But the buyers of this credit default swap
insurance, who were gambling on the market, are the ones being saved.
Should they be saved? You would like to punish them as well for turning
the US financial system into a Las Vegas casino. But that's daddy's
pension fund and my money market account they were gambling with. If they
go down, so do we. Neither of us would have any retirement left. so what's
our choice? We have to save them.

So that's another thing that Greenspan could have done. He could have
required financial institutions that were buying up assets (bonds are
assets to the people who own them and will collect interest and eventually
get their principal back and liabilities to the homeowners and others who
owe money on them -- my mortgage is an asset to the bank and a liability
to me)to hold reserves against them. That way, if some debtors defaulted
and did not pay back the interest and principal on the bond, the bank or
insurance company would NOT go bankrupt, but would have enough reserves to
absorb the losses. But he didn't.

Another piece of this story -- and here the Gramm bill that repealed Glass
Steagall is part of the story -- is that investment banks, hedge funds and
others were buying fancy financial instruments (fancy kinds of bonds) --
collatoralized debt obligation (CDOs), structured investment vehicles
(SIVS), derivatives -- with borrowed money. They used money borrowed at
low interest rates (we have had low interest rates for more than a decade
in this country) and put it into risky, fancy financial instruments that
paid much higher rates of interest. Before the repeal of Glass Steagall,
there were limits on how big this house of cards could be. Generally, the
ratio of borrowed funds to assets was around 12. Financial institutions
could borrow up to 12 times the amount of equity they had. That has been
relaxed. When Lehman went bankrupt, it had a ratio of about 30. It had $1
of equity for every $30 it owed. It used the borrowed money to buy risky
assets that paid high rates of interest. But when some of those risky
assets went bad, Lehman couldn't absorb the losses and pay back the money
it had borrowed to buy those assets. It needed more equity -- that is, it
needed to raise capital. But it couldn't find anyone who wanted to invest
in Lehman, buy shares in the company, give it more capital. And that's
because no one (probably not even Lehman) knew exactly how much of these
risky assets Lehman -- in its various departments and global operations --
actually owned and how much they could be on the hook for.

Greenspan could have issued rules specifying a limit of borrowing to
equity, but he didn't believe in regulation. He favored the general
relaxation of rules in financial markets that repeal of Glass Steagall
facilitated.

Greenspan could have warned against the housing bubble, told people they
were foolish to buy houses at these inflated prices. He could have
insisted on institutions that make mortgage loans requiring reasonable
down payments and careful credit checks (no more liar loans) for
mortgages. Bernanke has done this now, after the horse is out of the barn.

The problems are even deeper, of course. With so much money to be made on
Wall St. and foks in finance getting so rich and skimming so much out of
the economy, we had a terrible misallocation of resources. We failed to
invest in infrastructure -- farmers and steel mills need freight trains
and track and trucks and highwayst in good repair to move products to
market. But Wasll St. fianciers? There was money galore for speculation,
but not to invest in manufacturing capacity. National health care? Those
making the decisions don't need it. We need to dig our way out of this if
we are going to have a rising standard of living and a chance for a decent
life for ordinary people in this country.

There's more -- but I'm out of time. I worry that the rescue package being
jammed through congress might not work, but agree we need to do something
or we will end up where we were in 1929.

..."

Philly the Kid wrote:I sent this to my mom, who is a world reknown economist... here is her response:

"...It's the ideology of deregulation more than any single thing that led to
today's financial crisis. .....
But back to your question. Alan Greenspan is an acolyte of Ayn Rand and a
libertarian......
Okay -- so my general point is that the Chairman of the Fed has many tools
at his disposal.....
Another piece of this story
..."

indeed the acorn, ahhh, does not fall far from the tree

I don't know what's more poetically beautiful--the fact that Ptk's mom is a world-renowned economist, or the fact that her reply was (edited, to boot) 1,495 words

I just can't believe it took someone two hours to make that joke.

As is often true with PtK's missives, I read the first two grafs with interest, then got a little bogged down, then skipped ahead to see just how long this was gonna go, and then gave up in despair.

dajafi wrote:I just can't believe it took someone two hours to make that joke.

Honestly, it was so damn long that I didn't even bother reading any of it when I clicked this thread earlier.

I'm just picturing the e-mail.

Dear Mom

Can you write a 1500 word essay on the financial crisis that I can post on a Phillies message board?

Love,
PTK

Dajafi,
I don't think it's a little bit scary. Certainly not worth soiling your pants over. It MAY stink, but not in the *damn that dirty Bush, screwing us over again* way either.

I'm still working my way through this but I think Reich's closer to it than Krugman. It's like this, I was cool with Lehman/AIG/Bear bailouts because the employees and the shareholders suffered. Now we're bailing people out, and I'm not sure they've paid much of a penalty. So that's what Reich's trying to do, figure a way to take away some upside since the downside has been removed for a lot of these people.

That's the reason nobody likes it, but it doesn't necessarily make it a bad idea - a bunch of people got us into this mess, and if there's nothing done at all, they won't pay any penalties and might get us in this mess again. The problem is that if you take away upside and regulate the crud out of Wall St. you take away a lot of very valuable ideas that have helped society (spare me you hippie liberals). So there really isn't a great solution.

The bottome line though from a "crap yer pants" sort of thing is that Hank Paulson is a very very smart person and I am reasonably sure, isn't evil, so there's not much to be scared of. But you certainly don't need to LIKE it.

Thanks, jeff.

My concern now is that the government won't use the leverage they have to update the regulatory system and at least send the signal that extremely risky behavior won't be rewarded, even if society can't actually punish it. I guess we'll see.

I know you can't do this, and it's entirely irrational, but I want to see some people led away in handcuffs. But if we can't do that, then I think we should at least insist that any company getting a government bailout must require all its executives fly coach.

dajafi wrote:Can someone with a deeper understanding of macroeconomics than I (Werthless? drsmooth? Floppy? jeff?) explain to me why this proposed bailout deal isn't crap-yer-pants scary?

I don't find it scary. I find it tawdry. It cheapens our federal governmental system by practically requiring it to abet the financial gangsters behind this latest 'risk-free leverage' variant.

So maybe the only thing left to do is require teaching the ramifications for free markets zealots in schools henceforth.

and I'm talking about grade schools. by Bill O'Reilly. With one of his favorite toys protruding from one or more of his orifices.

Belief-based economic systems - that is, the economic systems of our civilized world - probably have not begun to descend to the lowest common denominator at which they may still function 'adequately' (somewhere above the point at which we are all advised to pack loaded concealed automatic weapons). But the descent ain't pretty for the consent-based political systems obliged to apologize for them.

Oh yea, & I was haranguing some suspenders-sporting financial friends the other day about the tech available to begin taking simple steps towards greater transparency in financial markets, and they were almost rolling their eyes, until I lent them this link to the opinion of wild-eyed lefty/Barrons editor Thomas Donlan:

Barrons Editor Thomas Donlan wrote:Week of the Living Dead

... the amount of liabilities are unknown, possibly unknowable. The pack of banks and private-capital firms that turned on American International Group last week could attest to that. In only a couple of days of free access to the books, they found unfunded liabilities mismatched with unpriced assets for a vulnerability reaching nobody-knew-how-far beyond $80 billion. They wouldn't risk their capital against AIG's liabilities, knowing that the books of many other financial firms, possibly including their own, would look no better....

....Listen carefully to the cries of "chaos" on Wall Street: Some of those shouting loudest are trying to make others pay for bankers' and borrowers' mistakes. Finding no others willing to step up, the Fed and Treasury are becoming the nation's stand-in speculators.

The Treasury will borrow to buy mortgages and the Fed will print money to buy Treasuries. The danger is that they are igniting a great inflation to stave off a great depression. If so, this week will enshrine President Bush with President Carter, and Ben Bernanke with G. William Miller...

....To avert further capital destruction, it's important to take an audit of the capital that remains. By regulation, by law or by the reasonable demand of investors seeking information, companies should open their books to continuous public scrutiny. Every weekly or daily financial report that would go to the CEO or the CFO also should go out to investors on the company Website....

The emphases are mine.

For those unfamiliar with Donlan, he calls for the application of regulation or law to the activities of financial markets about as frequently as the Cubs win World Series.

I'm pretty sure the only reason I might enjoy having a beer with this SOB is the chance to drink him under the table. But I will ever give him credit for writing what he believes; and in this specific instance, for making a suggestion I agree with.

The problem is that there's no guarantee of justice here, poetic or otherwise.

Meanwhile, watching McCain on 60 Minutes... the close-up does him no favors. Frankly, he looks exhausted and older even than he is.

I think I've concluded that his "bipartisan cred" really is far superior to Obama's, certainly at least since Obama joined the Senate. That he's trying desperately to wriggle free from Bush and the former congressional leaders is the clearest sign of just how badly Obama has to screw up (or just how racist a small but determinative chunk of the electorate really is) not to win.