Free money everywhere...from republicans??

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I still don't see, aside from the fact that there is a commander and chief in the white house who happens to be republican (and has no real control of this, its of course the house, senate, and the federal reserve working together) how this is a republican bailout.

Here's a snippet from a recent NPR radio show that indicates how far away from reality the economy has gotten:

Other estimates I have seen put credit default swap instruments at $70 trillion or more. It is a house of cards.

Bush has certainly thrown his support behind it. And Bernanke, a Bush appointee, is in charge of the Fed right now. Henry Paulson, the Secretary of the Treasury, who organized these massive bail-outs and is now pushing for even more, is a Bush appointee. How the hell is that NOT a Republican bailout?

What do you think of the level of involvement that Barney Frank and Chris Dodd had in the Fannie Mae Freddie Mac bailout? Either fortunately or unfortunately this seems like it has bi-partisan support and if anything more republicans than democrats who are furious and would rather not see these. With regard to the credit crisis particularly and its causes, many still blame Greenspan for leaving interest rates low for so long - guy was with the fed reserve for ever.

He isn't going to Nationalize the businesses--only give them enormous amounts of money.

Nobody forced Lehman and other investment banks to buy mortgage-based securities, nobody forced CEOs to invest shareholder's money on derivatives they, sometimes by their own admission, do not understand, nobody forced anybody (including people who bet they could forever refinance their mortgage) to bet that house prices would continue to rapidly rise forever, nobody forced banks to come up with mortgage-based securities (which happened after deregulation), nobody forced (private) ratings agencies to classify them as safe, etc.

To me, it looks like the culprits are the following:

1. Bankers and CEOs that made bad investing decisions (bad for shareholders, at least)
2. A Fed that allowed bubbles to form with artificially low interest rates, and that failed to burst them early on by gradually raising them (cf. the dot com bubble)
3. Individuals that took loans they could not repay to buy houses that they could not afford.
4. Regulators and a government that were asleep at the wheel (not just Bush, also Congress) and did nothing to prevent any of this.

To me, the government should do the following: If a bank is not too big to fail, let it fail. Otherwise, nationalise it giving shareholders whatever it would be worth if left at the tender mercies of the free market (which if they're failing, can't be much), fire senior management, appoint managers with experience in solvent private banks to fix them with public money (or we can wait for mountains of gold to fall out of the sky to magically pay for it), and auction it off in a few years. Shareholders must be taken to the cleaners, due to moral risk - if you tell someone that, if they gamble and lose money, you will bail them out, they will just take much bigger risks (as they cannot lose), then you will have to bail them out. Anything other than taking shareholders to the cleaners guarantees that this will happen again (the burned hand is very effective about teaching the dangers of fire - I'm skeptical that regulations will be nearly as effective at curbing investors' stupidity and excesses as losing money). For exactly the same reason, individuals that took mortgages they could not afford should not be bailed out, only people who had some unforeseeable change in circumstances (a major accident, for example) should be helped, the rest should be left to sort it out with th bank.
It looks like the US is going to borrow another $700 billion (about $2,300 per man, woman and child living in the US) from the Chinese, Brazilians, Russians and Saudis.



It is, but is not clear (to me at least) whether the entire company is worth anything near that sum.



QFT. Beyond the present crisis, the US really needs to put its house in order - the government can't operate normally without heavily borrowing from abroad (let alone bail out anybody), and neither can the private sector; the best 'solution' politicians could come up with when the first signs of recession appeared was to borrow 1% of GDP from China and send everyone a cheque; both presidential candidates promise more spending without any at all credible plan of how it is going to be paid for (other than borrowing from abroad); until very recently elected politicians were just burying their heads in the sand, leaving an unelected financial elite in charge of the mess which it partially created. This is not sane, or sustainable, or respectable.

Maybe so. But Republicans always find everything more reassuring and comforting if they can find some angle by which they can attribute blame to Clinton.

No, you're a leftist who believes your government shouldn't be nationalising banks. I think I made that clear, Orwell, and I'm sure you'll appreciate the difference now I've clarified further.

I get the impression that the reasons you, and certain others, think it's a bad idea is because you don't get a chance to feel smug when a few rich bankers get a figurative kick in the bollocks. Also, that it's being implemented by the Bush administration. I strongly suspect that if they'd let Bear Stearns, Fannie, Freddie, and AIG go under you'd still be complaining. But just think for a minute... where do you think we'd be, now, if that had happened? Do you have some masochistic desire to be finishing your education on a diet of grass clippings and cockroaches?

Whenever people look at a common resource - the airwaves, the air, the ocean, natural resources - and want to share the profit with the whole population, right-wingers scream, "socialist!" "communism!" Socializing profit is seen as morally wrong.
And yet, when there' s a failure of that common resource - oil spills, electric grids going down, banks collapsing en masse, the government cleans it up. Somehow, the socialization of risk is ok.

Socialized profit = evil. Regulation to prevent common risk of privatized resources = evil.
Socialized risk = necessary.

How is this a balanced way of running our economy? How is this a fair playing field? Why do we have an economic system that rewards greed and the making of a quick buck at the expense of the common good?

You've made no such clarification, you just accused me of being leftist as though it were some type of a slur.


I think it's a bad idea because there is no accountability for the massive screw-up. I regard it as hypocritical given other stances held by the Republican party. I don't want to see banks fail, but I also don't want to see the government continue to dig my generation into deeper and deeper debt in an attempt to patch up the mess created by failed monetary policy.


I'd be worried as hell to see banks collapsing, but I wouldn't be complaining that it was the government's fault except about the poor monetary policy that led to these problems, and that type of policy is hardly unique to the Bush administration.


You think the collapse of a couple banks and mortgage firms would lead to some terrible depression? Hm, but you don't patch an old cloak with new cloth. Stopgap measure like this will only delay the inevitable and make the crash worse when it does come.

And tell me, between the two of us who is the leftist? You are arguing for nationalization of banks in an attempt to control the economy; and in some other things you are coming off as more Keynesian than Keynes himself.

If anything, opposing the nationalism is more of a fiscally-conservative stance IMO.

A couple of banks and mortgage firms in the world's largest economy, and one of the world's largest insurance firms, you mean? Yes, I think it could.

I won't try to deny that our economy is in rather a rough patch right now. I just don't think that nationalizing any business that fails is the appropriate response.

How's this for some leftism: as soon as our economy is on the upturn again, I say jack up taxes to unprecedented levels, cut spending down to the bone or lower, and continue until we're finally out of debt. Once that's accomplished, we might be able to get started on some reasonable economic policies that are actually sustainable. But we need to somehow dig ourselves out of this hole and get a clean start before anything we do is going to work long-term.

You realize though that the tax idea would specifically cause record unemployment, cause our GDP to crash, and yes - we maybe could pay our way out but at diminishing return every year and there wouldn't be much of a country left to speak of once the paying up was done. This is part of why people are up in arms with the Obama tax plan of increasing the $250,000+ per year from 39% to 50%. I could see maybe if he made a special case for all business entities - s-corps, partnerships, sole proprietors, where the balance sheet sheerly flows through to the individuals and when personal level profit is barely being made; he would need to increase the netting effect of expenses such as payroll and if anything put policies in place that would make it so that making jobs and growing the business would cut the taxes down lower and lower. GDP relies on jobs, it relies on trade, it relies on the consumer buying.

Nobody's suggesting that. Your government let Lehman Brothers go under, didn't they? Normally I'd agree that companies should be allowed to fail, but the stakes are so high at present that some companies can't be allowed to sink if that's at all possible. If all those firms had gone down, the economy of the western world would grind to a halt. At times like this you need to be a realist, not a zealot of economic dogma.

Freddie Mac and Fannie May are government-sponsored enterprises. People invested in them with the full knowledge that the government is almost obligated to bail them out if they get into trouble (almost, because it's de facto, not de jure).