bad hammy wrote:I note that my Representative, one of the most liberal in the land - the only member of Congress to vote against the 9-15-2001 resolution authorizing Bush to use "all necessary and appropriate force" against anyone associated with the terrorist attacks of September 11 - switched from a no vote on the bailout to a yes. Her quoted reason: "We should be honest about the fact that we don't know whether or not this bill will work. And we must be honest about the fact that we can't afford to risk the potential consequences of inaction. I spoke with our California state treasurer this week (before California asked for a $7 billion hand from the Feds to cover a short term credit crunch) and he assured me that people will suffer greater pain, including cuts to critical state-funded services, if we don't do something to stop the hemorrhaging. That is why I will support this bill today."
One of the most liberal? I thought that fact was incontrovertible. That's like saying that Eugene, OR is one of the most track friendly cities in the land. Hasn't she in the past written letters to people in which she has addressed them as "comrade"? I'm not saying that liberal is a bad thing, because I am one myself, but if she's not the most liberal, who is?
Double R Bar wrote:Some economists are now saying the market will rebound around October 23. Of course it won't gain everything it has lost, but at least will not drop. Can you imagine the market going under 5,000? Let's hope not.
Hey, it might happen today. It is already under 8000 and dropping fast.
paulthefan wrote:I was on record last year that we were headed for 8k, we have a 50-50 chance of being below 6k one year from now. but be advised paulthefan has been paulthebear all his life.
Now, this is interesting. I have been lonewolfthebull (forgive the mixed metaphor) all my life and it has worked out pretty well. Maybe the secret is to have a long, long life because in the long, long run the US economy recovers.
Closer to home, the lead article in todays local newspaper revealed that one of our few local high-profile billionaires, literally a "self-made" success, famous for investing in his own company and for his philanthropy was forced to sell "most" of his three billion dollars worth of company stock, which turns out was bought on margin. The 60% drop in stock price last week precipitated a margin call he could not meet.
As Gomer Pyle used to say, "Surprise, suprise, surprise."
I know, a sad story but since he "earned" 25 mill last year, do not expect to see him on the soup line anytime soon.
Please understand, I am not gloating. He is genuinely a "nice guy" that I have known since he was a young landman hustling oil leases trying to make five bucks an acre. Just an example of stuff happens.
I am a big Paul Krugman fan and I was delighted to hear the news today. But I don't know that his winning the Nobel Prize is going to convince anyone who isn't already convinced that his view of things is right.
tandfman wrote:I am a big Paul Krugman fan and I was delighted to hear the news today. But I don't know that his winning the Nobel Prize is going to convince anyone who isn't already convinced that his view of things is right.
No doubt. I looked at some of the comments associated with his most recent colomn (>800 online last I looked) and many are critical.
Just a few reasons this latest plan to have the government buy bank stock may not be such a good idea:
Jeffrey A. Miron wrote:In any event, government ownership of banks has frightening long-term implications, whether or not it alleviates the credit crunch.
Government ownership means that political forces will determine who wins and who loses in the banking sector. The government, for example, will push banks to aid borrowers with poor credit histories, to subsidize politically connected industries, and to lend in the districts of powerful members of Congress. All of this is horrible for economic efficiency.
Government pressure will be difficult for banks to resist, since the government can both threaten to withdraw its ownership stake or promise further injections whenever it wants to modify bank behavior. Banks will respond by accommodating government objectives in exchange for continued financial support. This is crony capitalism, pure and simple.
Government ownership of banks will not be a temporary expedient. Politicians can swear they will unwind the government's position once "economic conditions improve," but no one can enforce this promise. The temptation to use banks as a political tool will be permanent, not temporary, so government ownership will continue for decades, or forever.
Worse yet, government ownership of banks sets a precedent for ownership in every industry that suffers economic hardship. Some might argue that banking is "essential," but many industries -- autos, steel, computers or agriculture -- will make similar claims when it is their turn to demand a bailout. Thus banking will be only the first victim in an enormous expansion of the government's role. This again will have disastrous consequences for economic efficiency.
The Ayn Rand people think this is "The Road To Fascism"
(hey, I don't ask for their e-mails, but I'm somehow stuck on their list!)
<<The Ayn Rand Institute
The Road to Fascism
October 16, 2008
Washington, D.C.--The government has announced that it plans to use $250 billion to buy ownership stakes in various U.S. financial institutions. According to the New York Times, nine major U.S. banks have already been forced into the program. “The chief executives of the nine largest banks in the United States . . . were each handed a one-page document that said they agreed to sell shares to the government, then Treasury Secretary Henry M. Paulson Jr. said they must sign it before they left. . . . ‘It was a take it or take it offer,’ said one person who was briefed on the meeting, speaking on condition of anonymity because the discussions were private. ‘Everyone knew there was only one answer’”--even though at least one institution, the relatively healthy Wells Fargo, wanted to say no.
According to Yaron Brook, executive director of the Ayn Rand Center for Individual Rights, “In herding banking executives into a room and making them an offer they couldn’t refuse, the Paulson regime took its latest and most disturbing step yet on the path to state control of the economy.
“If fascism means coercive state control over nominally private property, then there is no more chilling sign of creeping fascism in America than government’s encroachment on the lifeblood of the U.S. economy--its financial institutions. While the government assures us it will be a ‘passive investor,’ merely funneling cash into the banking system rather than dictating how banks function, this is a lie. Not only does the money come with strings attached--such as restrictions on executive compensation, dividend payments, and the types of investments banks can make--but politicians are already promising a web of further controls. As John McCain recently noted, ‘We will not merely inject billions of dollars into companies and walk away hoping for the best. We will require that those companies be reformed and restructured until they are sound assets again, and can be sold at no loss--or perhaps even a profit--to the taxpayers of America.’
“The Paulson shakedown is the latest in a rapid-fire series of government bailouts and interventions over the last several months. Our leaders claim that this virtual takeover of markets is economically necessary. But it was government control of financial markets that spawned the financial meltdown in the first place: an inflationary boom brought on by the Fed’s easy-money policies, a campaign to promote home ownership that encouraged risky loans, regulations that pushed banks to become dangerously over-leveraged, etc., etc. The response to the crisis should be to restore freedom and to disentangle government from the economy. Instead, the same mentality and the same central planners that created the financial crisis are being given far wider reign to manipulate and distort markets. We must tell our government to reverse this fascist course--now.
### ### ###
Yaron Brook is executive director of the Ayn Rand Center for Individual Rights. He is a regular contributor to Forbes.com and a contributing editor of The Objective Standard. His articles have been featured in major newspapers such as USA Today, the Houston Chronicle, the Chicago Sun-Times, the Providence Journal and the Orange County Register. Dr. Brook is often interviewed on radio and is a frequent guest on a variety of national TV shows, having appeared on the new Fox Business Network, FOX News Channel, CNN, CNBC, and C-SPAN. Dr. Brook, a former finance professor, lectures on Objectivism, capitalism, business and foreign policy at college campuses, community groups and corporations across America and throughout the world.
For more information on Objectivism’s unique point of view, go to ARC’s Web site. The Ayn Rand Center is a division of the Ayn Rand Institute and promotes the philosophy of Ayn Rand, author of “Atlas Shrugged” and “The Fountainhead.”
gh wrote:The Ayn Rand people think this is "The Road To Fascism
Cool - fascist socialism (or socialist fascism).
I read that the reason for the forced sale of stock amongst the nine banks was to remove any 'stigma' associated with the program, which would in turn prompt smaller banks to enter the program if their financial situation so dictated.
Pego wrote:Anybody that equates some state controls and regulation with a totality has no idea, what a real totality is like.
Actually, I do not know what you mean by totality.
A totalitarian regime (fascism, communism).
Of course we do not live in a pure totalitarian regime. However, we have developed certain totalitarian characteristics since 9/11. The federal government forcing banks to issue and sell shares to the government might fall into that category. I'm not sure this is a good idea or not, but it is on the surface rather heavy-handed.
bad hammy wrote:Of course we do not live in a pure totalitarian regime. However, we have developed certain totalitarian characteristics since 9/11. The federal government forcing banks to issue and sell shares to the government might fall into that category. I'm not sure this is a good idea or not, but it is on the surface rather heavy-handed.
The only banks being forced to do anything are those close to insolvency. Those banks have billions of dollars in obligations to their account holders and other lenders, so of course the government should intervene ... just like the courts would intervene if somebody owes you thousands of dollars and won't pay up, possibly forcing him to sell assets or garnish wages to pay you. Pumping billions of dollars into the troubled banks might be a bad idea, but that isn't a totalitarian measure.
The other banks that aren't quite in such bad shape have the option to accept the government's money or not. If they don't like the terms they can refuse the money.
But I agree that some totalitarian measures have been adopted since 9/11, like the warrantless wiretapping of phone conversations.
A good article and spells out some of the similarities and differences between these two times of "financial distress". Interesting to note "history does not repeat itself ...". Who first said "history repeats itself" - Thucydides? What did Hegel say about it and what did Marx (Karl not Groucho) do to that statement? (I recall an article by Stephen Gould about 10-15 years back, talking about some of this).
Mortgage Backed Securities are like boxes of chocolates.
Criminals on Wall Street stole a few chocolates from the boxes and replaced them with turds. Their criminal buddies at Standard & Poor rated these boxes AAA Investment Grade chocolates. These boxes were then sold all over the world to investors. Eventually somebody bites into a turd and discovers the crime. Suddenly nobody trusts American chocolates anymore worldwide.
Hank Paulson now wants the American taxpayers to buy up and
hold all these boxes of turd-infested chocolates for $700 billion
dollars until the market for turds returns to normal.
Meanwhile, Hank's buddies, the Wall Street criminals who stole all the good chocolates, are not being investigated, arrested, or indicted.
Mama always said: 'Sniff the chocolates first, Forrest'.
lonewolf wrote:Hank Paulson now wants the American taxpayers to buy up and hold all these boxes of turd-infested chocolates for $700 billion dollars until the market for turds returns to normal.
Um . . . I think I see a flaw in this strategery.
Um..that quote is attributed to Forrest Gump, a fictional character. I cannot vouch for the origin, authenticity, validity or wisdom. Early on, I DQ'd myself as not competent to calm the currently troubled economic waters.
I believe the universal reaction has been "no shit, Sherlock!"
I've noticed that a lot of exponents of free-market theory (which is a fallacy as there's no such thing) seem to have no problem with government subsidy or tax breaks. Strangely, that's not interference in the free market.
Not a chance, both she and Greenspan understand that the free market works when participants assume responsibility (losses) for their actions (risks). That is Rand101. Im sure a true Rand disciple could tell us how we could have stopped the looting of the banks over the last 10 years as executives sucked them dry of cash while filling the till with bad debt.
paulthefan wrote:Not a chance, both she and Greenspan understand that the free market works when participants assume responsibility (losses) for their actions (risks). That is Rand101.
They wrongly assumed that the participants would assume responsibility. In a regulatory environment where there is little or no accountability, they aren't held responsible. Executives rape the company and walk away with millions, and the shareholders can't do anything to stop it (because the board can ignore shareholder resolutions). If you get paid 5 or 10 years of salary for screwing up in your job, where is your incentive to perform with competence and responsibility?