Should the U.S. taxpayer bail out these two sinking ships, or whould we impose strict market discipline and take our lumps?

The point is moot because the government has already decided the taxpayers are going to bail the mortgage behemoths out.  I'm posing more of a philosophical question here.

http://www.latimes.com/news/nationworld/washingtondc/la-fi-qanda8-2008sep08,0,7402339.story

This link links to a little summary of what the two institutions do and how they got in trouble.

I'm against bailouts.  It might be painful in the short run, but taking our lumps is better in the long run.

It's a catch-22.

Default, and you've declared economic war on the rest of the world.  China loaned Fannie and Freddie hundreds of billions (and combined with other sources of international capital, the total is well into the trillions), and they expect to be paid back. 

(Fannie and Freddie borrowed the money from the rest of the planet in order to loan it out to banks, by buying the banks' mortgage-backed securities.  The banks, in turn borrowed the money from Fannie and Freddie in order to loan it out to unscrupulous idiots who lied about their incomes, and the unscrupulous idiots were lying because unscrupulous mortgage originators told them to lie about their incomes, and forge appraisals, and all the other shenanigans that artificially propped up the housing market.)

The institutions were insolvent. 

Problem is, if they defaulted, you're looking at about a trillion dollars and change of FNM/FRE bonds being worthless. 

In a free market, well, them's the breaks.  Read the fine print (fine print?  It's on the front page of the prospectus for every security these companies issued!).  These are private institutions.  Their obligations were not in any way, shape, or form, guaranteed by the US government.  It said so right in the prospectus.  An "implicit" guarantee is sorta like Social Security -- it's no guarantee at all.

Problem is, China, as well as the other nations who have lent Fannie and Freddie that trillion bucks, would be pissed.  They're not particularly interested in a free market -- and in a free market, we could have stuck 'em with a $1.3T loss, and they could have just as freely decided not to sell us anything.  That's solve the problem of the trade deficit -- because there'd be no computers, no clothes, and no TVs on the shelves at Wal-Mart.  The riots would start a few days later.

In the face of a mutual-assured-economic-destruction scenario, they did the only thing they could do - save the value of the bonds by nationalizing the companies.  The preferred stock and common stock is effectively wiped out (diluted by around 80% to be precise), but the bonds survive. 

Now that Fannie and Freddie are effectively nationalized, their bonds are backed by the US government.  Their prices went up, because instead of depending on whether or not homeowners are going to make their mortgage payments, they're now obligations of the Federal government, who will make good on Fannie and Freddie's bonds because it has thousands of well-armed government agents whose job it is to make sure we all pay our "fair share", even if the homeowners mail back the keys. 

That's the ugly part. 

The good part is that for at least a day or two, it's worked.  Mortgage rates are down -- because the world is willing to lend money to Fannie and Freddie again, the two GSEs can loan money to banks, and the banks can loan money to people trying to snap up "bargains" in real estate.  It might even work over the long term. 

The Fed's problem (as opposed to Treasury's problem) is that it can only act on the short end of the yield curve -- adjusting the prime lending rate.  Recently, that's been like pushing on a string, because rates are about as low as they can go without sparking massive inflation.  Because nobody's been willing to lend capital for the long term, mortgage rates have remained high, and housing values have continued to deteriorate.  If (and I stress if) the nationalization of Fannie and Freddie works, Paulson will have found a way to do what Bernanke couldn't -- lower rates at the long end (30-year bonds backed by 30-year mortgages) of the curve, and as a bonus for any suffering mortgage holders out there, he'll also temporarily (and artificially) inflate the real estate market by a few points.

If it doesn't work, of course, we'll be even worse off when it all comes crashing down.  But for now, they've bought themselves (and us) another few months, during which they can pray for a miracle.

It's a crappy solution to the problem, but it's the least-crappy solution that was available to them at the time.

I think you got it summed up, Foo. 

I know a few people who bought sub-prime and lost.  I knew next to nothing about the market 10 years ago, but I was remember wondering what sane loan officer would offer those guys a mortgage.  Then it all fell into place as the politicians kept boasting about the record-high levels of home ownership.  So the government was borrowing money from the communist Chinese, jumpstarting loans for unqualified people, and calling it "the ownership society." 

One couple I know was looking at foreclosure when they managed to sell the joint in the nick of time!
::)

It's not like I could've afforded a mortgage....I mean really afforded it.  I already made that mistake with education; I wasn't gonna get sold up the river on a scam sub-prime!

So the great red empires of the east couldn't destroy us with communism, so they'll destroy us with the "free market."  If you want to defeat the enemy, sing his son!
:D

More and more it seems our great prosperity of the past quarter century was built on illusion. 

Its not just that the creditor nations will be pissed but that the entire world economy could go down the toilet.  Paul Krugman did a short piece on this today.  He has been predicting this bubble bursting for some time, warning that things could get very dicey.  In this essay he opines that the takeover is necessary but questions if it will be enough.  The bigger issue is that this administration has been so blinded by its free market ideology that it ignored all the warning signs and refused to take a practical approach.  Lets face it, the free market was never free and capitalists don't want it to be.  Adam Smith recognized that back in 1776.

What pisses me off is that the CEOs get "boocoo" bucks while us taxpayers get stuck with the bill.



Cat

It's a catch-22.

Default, and you've declared economic war on the rest of the world.  China loaned Fannie and Freddie hundreds of billions (and combined with other sources of international capital, the total is well into the trillions), and they expect to be paid back. 

(Fannie and Freddie borrowed the money from the rest of the planet in order to loan it out to banks, by buying the banks' mortgage-backed securities.  The banks, in turn borrowed the money from Fannie and Freddie in order to loan it out to unscrupulous idiots who lied about their incomes, and the unscrupulous idiots were lying because unscrupulous mortgage originators told them to lie about their incomes, and forge appraisals, and all the other shenanigans that artificially propped up the housing market.)

The institutions were insolvent. 

Problem is, if they defaulted, you're looking at about a trillion dollars and change of FNM/FRE bonds being worthless. 

In a free market, well, them's the breaks.  Read the fine print (fine print?  It's on the front page of the prospectus for every security these companies issued!).  These are private institutions.  Their obligations were not in any way, shape, or form, guaranteed by the US government.  It said so right in the prospectus.  An "implicit" guarantee is sorta like Social Security -- it's no guarantee at all.

Problem is, China, as well as the other nations who have lent Fannie and Freddie that trillion bucks, would be pissed.  They're not particularly interested in a free market -- and in a free market, we could have stuck 'em with a $1.3T loss, and they could have just as freely decided not to sell us anything.  That's solve the problem of the trade deficit -- because there'd be no computers, no clothes, and no TVs on the shelves at Wal-Mart.  The riots would start a few days later.

In the face of a mutual-assured-economic-destruction scenario, they did the only thing they could do - save the value of the bonds by nationalizing the companies.  The preferred stock and common stock is effectively wiped out (diluted by around 80% to be precise), but the bonds survive. 

Now that Fannie and Freddie are effectively nationalized, their bonds are backed by the US government.  Their prices went up, because instead of depending on whether or not homeowners are going to make their mortgage payments, they're now obligations of the Federal government, who will make good on Fannie and Freddie's bonds because it has thousands of well-armed government agents whose job it is to make sure we all pay our "fair share", even if the homeowners mail back the keys. 

That's the ugly part. 

The good part is that for at least a day or two, it's worked.  Mortgage rates are down -- because the world is willing to lend money to Fannie and Freddie again, the two GSEs can loan money to banks, and the banks can loan money to people trying to snap up "bargains" in real estate.  It might even work over the long term. 

The Fed's problem (as opposed to Treasury's problem) is that it can only act on the short end of the yield curve -- adjusting the prime lending rate.  Recently, that's been like pushing on a string, because rates are about as low as they can go without sparking massive inflation.  Because nobody's been willing to lend capital for the long term, mortgage rates have remained high, and housing values have continued to deteriorate.  If (and I stress if) the nationalization of Fannie and Freddie works, Paulson will have found a way to do what Bernanke couldn't -- lower rates at the long end (30-year bonds backed by 30-year mortgages) of the curve, and as a bonus for any suffering mortgage holders out there, he'll also temporarily (and artificially) inflate the real estate market by a few points.

If it doesn't work, of course, we'll be even worse off when it all comes crashing down.  But for now, they've bought themselves (and us) another few months, during which they can pray for a miracle.

It's a crappy solution to the problem, but it's the least-crappy solution that was available to them at the time.


I completely agree with your analysis, but I favor short term chaos over long term decline and encroaching socialization of the economy.

The riots and bloodshed are coming down the line eventually.  We might as well get it over with, because the longer we wait, the bloodier it will get.

Its not just that the creditor nations will be pissed but that the entire world economy could go down the toilet.  Paul Krugman did a short piece on this today.  He has been predicting this bubble bursting for some time, warning that things could get very dicey.  In this essay he opines that the takeover is necessary but questions if it will be enough.  The bigger issue is that this administration has been so blinded by its free market ideology that it ignored all the warning signs and refused to take a practical approach.  Lets face it, the free market was never free and capitalists don't want it to be.  Adam Smith recognized that back in 1776.

Indeed, but it's not just this administration.  The entire world has been under the sway of the Chicago Boys for the past quarter century.  The chattering class has drilled it into everybody that freedom for capital and freedom for human beings are one in the same thing, and it just ain't so.
::)

Bob Herbert did a really good piece in today's paper, which I can't link to because my paper picks it up from the NY Times, but it was about all the stuff liberals have accomplished over the years.

Lets face it, the free market was never free and capitalists don't want it to be.  Adam Smith recognized that back in 1776.


Oh, us capitalists (those who deal to mutual benefit, without fraud, and without coercion) want it to be.  There just aren't enough of us left in the market (and there are none of us left in government) to make a difference.  We shrugged :)


The chattering class has drilled it into everybody that freedom for capital and freedom for human beings are one in the same thing, and it just ain't so. ::)


In fairness (and I speak as a one of them Chicago-school dudes), there was tons of evidence of that hypothesis up until around the late 90s.  China is the first nation that's managed to get economic prosperity with limited economic freedom and no political freedom, and surprised just about everyone in the process.  The US is trying to "catch up" to China, but its attempts to maintain economic prosperity while eliminating political and economic freedoms are failing pretty miserably.

I'll put that down to the difference between Chinese culture (which values stability above all else) and Western culture (which values progress - be it technological or social - above all else).  It remains to be seen wether the Chinese experiment will work, but it's pretty clear that the American experiment is over, and it failed.  We were given a republic "if we could keep it", but after 200 years, we discovered that we couldn't keep it.  Security over liberty and all that rot.  Fun while it lasted, though. 

Oh, us capitalists (those who deal to mutual benefit, without fraud, and without coercion) want it to be.  There just aren't enough of us left in the market (and there are none of us left in government) to make a difference.  We shrugged :)

In fairness (and I speak as a one of them Chicago-school dudes), there was tons of evidence of that hypothesis up until around the late 90s.  China is the first nation that's managed to get economic prosperity with limited economic freedom and no political freedom, and surprised just about everyone in the process.  The US is trying to "catch up" to China, but its attempts to maintain economic prosperity while eliminating political and economic freedoms are failing pretty miserably.

I'll put that down to the difference between Chinese culture (which values stability above all else) and Western culture (which values progress - be it technological or social - above all else).  It remains to be seen wether the Chinese experiment will work, but it's pretty clear that the American experiment is over, and it failed.  We were given a republic "if we could keep it", but after 200 years, we discovered that we couldn't keep it.  Security over liberty and all that rot.  Fun while it lasted, though. 


We couldn't keep the republic because the world's rich and powerful thought it bad for their interests.  So we got talked out of it like a second rate three card monty dealer bamboozles a suburban bumpkin.

Maybe Plato was right...the masses are asses, too driven by passions and pettiness.  Maybe we need Philosopher-Kings.  Sure would hate to think it's come to that...
:(

Oh, us capitalists (those who deal to mutual benefit, without fraud, and without coercion) want it to be.  There just aren't enough of us left in the market (and there are none of us left in government) to make a difference.  We shrugged :)

In fairness (and I speak as a one of them Chicago-school dudes), there was tons of evidence of that hypothesis up until around the late 90s.  China is the first nation that's managed to get economic prosperity with limited economic freedom and no political freedom, and surprised just about everyone in the process.  The US is trying to "catch up" to China, but its attempts to maintain economic prosperity while eliminating political and economic freedoms are failing pretty miserably.

I'll put that down to the difference between Chinese culture (which values stability above all else) and Western culture (which values progress - be it technological or social - above all else).  It remains to be seen wether the Chinese experiment will work, but it's pretty clear that the American experiment is over, and it failed.  We were given a republic "if we could keep it", but after 200 years, we discovered that we couldn't keep it.  Security over liberty and all that rot.  Fun while it lasted, though. 


Problem is, you Chicago Boys got it wrong because you believe that in the good old days capitalists did believe in a free market, but that's a myth.  Businessmen have always tried to gain control over the market by hook or crook, and through conspiracy (price fixing, secret deals etc), which is what Adam Smith recognized.  It has always been, as Arthur Schlesinger put it, a battle between the business community and the rest of us over control of the state.  And as he put it, the STRUGGLE is what insures democracy.

Problem is, you Chicago Boys got it wrong because you believe that in the good old days capitalists did believe in a free market, but that's a myth.  Businessmen have always tried to gain control over the market by hook or crook, and through conspiracy (price fixing, secret deals etc), which is what Adam Smith recognized.  It has always been, as Arthur Schlesinger put it, a battle between the business community and the rest of us over control of the state.  And as he put it, the STRUGGLE is what insures democracy.


Absolutely...

Problem is, you Chicago Boys got it wrong because you believe that in the good old days capitalists did believe in a free market, but that's a myth.  Businessmen have always tried to gain control over the market by hook or crook, and through conspiracy (price fixing, secret deals etc), which is what Adam Smith recognized.  It has always been, as Arthur Schlesinger put it, a battle between the business community and the rest of us over control of the state.  And as he put it, the STRUGGLE is what insures democracy.


Chicago boys or not, we know that maintaining liquidity in the markets is essential to a modern financial economy, whether it be socialist or capitalistic.  The fundamental reason why the "crash of '29" led in the extended Depression is because overnight, markets froze up and liquidity vanished.  Without liquidity, money is not loaned, not invested, does not produce.

One of the reasons why the "Crash of '87" turned out to not be such a catastrophe is that the Fed met that same day and decided to open up the lending windows and gunned the money supply.  This calmed fears of lack of liquidity and the credit markets stayed intact and we did not see an economic meltdown.

Federal regulators, legislators, and fed executives have tough choices to make here.  Allowing major institutions en masse to fail will certainly result in a depression-era economic depression.

Failure of any ONE institution is not a big deal and if it were just left at that I would say "tough noogies".  But today, on a global scale, we are facing the potential collapse of the entire banking system and so thoughtful measures must be taken.  Of course, the stockholders of the failed institutions (like Freddie, Fannie, Lehman, Wamu) MUST NOT be bailed out and their stock will be rendered useless.

My main concern right now is not whether or not some govenments (not just USA) backing of liquidity is warranted, but one more of "is the problem so big that even that will not allow markets to recover?"  If it is not, then we are in for a depression-scale economic problem in the near future.

The liquidity markets are a huge confidence game, and I fear that much of the confidence is gone.  If that point is reached the case the whole system could collapse in a matter of days.

It would seem that the influence of the Chinese government was involved here.  Much like how we're funding the Iraq occupation by borrowing money from China, the American government didn't want Fannie Mae or Freddie Mac to fall because of the following....

"At the end of June, Chinese commercial banks held a total of 24 billion dollars in the mortgage-backed debt of Fannie and Freddie, with Bank of China alone holding over 17 billion dollars, according to the China Daily."

Source: http://afp.google.com/article/ALeqM5jz8wMzTCkcs4VucBYBOSpkTbsNvA

So, basically, American tax dollars are propping up Chinese investments.  We're being sold out to China and Saudi Arabia (in the oil market).

I wish that, if I missed a house payment, the government would prop me up...

Chicago boys or not, we know that maintaining liquidity in the markets is essential to a modern financial economy, whether it be socialist or capitalistic.  The fundamental reason why the "crash of '29" led in the extended Depression is because overnight, markets froze up and liquidity vanished.  Without liquidity, money is not loaned, not invested, does not produce.

One of the reasons why the "Crash of '87" turned out to not be such a catastrophe is that the Fed met that same day and decided to open up the lending windows and gunned the money supply.  This calmed fears of lack of liquidity and the credit markets stayed intact and we did not see an economic meltdown.

Federal regulators, legislators, and fed executives have tough choices to make here.  Allowing major institutions en masse to fail will certainly result in a depression-era economic depression.

Failure of any ONE institution is not a big deal and if it were just left at that I would say "tough noogies".  But today, on a global scale, we are facing the potential collapse of the entire banking system and so thoughtful measures must be taken.  Of course, the stockholders of the failed institutions (like Freddie, Fannie, Lehman, Wamu) MUST NOT be bailed out and their stock will be rendered useless.

My main concern right now is not whether or not some govenments (not just USA) backing of liquidity is warranted, but one more of "is the problem so big that even that will not allow markets to recover?"  If it is not, then we are in for a depression-scale economic problem in the near future.

The liquidity markets are a huge confidence game, and I fear that much of the confidence is gone.  If that point is reached the case the whole system could collapse in a matter of days.


I have no problem with this, but it is not what I was addressing.
It would seem that the influence of the Chinese government was involved here.  Much like how we're funding the Iraq occupation by borrowing money from China, the American government didn't want Fannie Mae or Freddie Mac to fall because of the following....

"At the end of June, Chinese commercial banks held a total of 24 billion dollars in the mortgage-backed debt of Fannie and Freddie, with Bank of China alone holding over 17 billion dollars, according to the China Daily."

Source: http://afp.google.com/article/ALeqM5jz8wMzTCkcs4VucBYBOSpkTbsNvA

So, basically, American tax dollars are propping up Chinese investments.  We're being sold out to China and Saudi Arabia (in the oil market).

I wish that, if I missed a house payment, the government would prop me up...


Nor do I disagree with this.  As I said in another post, the basic problem began with the out sourcing of out manufacturing sector and the assault on the middle and working classes.

While I agree that outsourcing labor is a concern, forcing me to subsidize foreign investments through tax money is an even bigger concern for me.

Chicago boys or not, we know that maintaining liquidity in the markets is essential to a modern financial economy, whether it be socialist or capitalistic.  The fundamental reason why the "crash of '29" led in the extended Depression is because overnight, markets froze up and liquidity vanished.  Without liquidity, money is not loaned, not invested, does not produce.

One of the reasons why the "Crash of '87" turned out to not be such a catastrophe is that the Fed met that same day and decided to open up the lending windows and gunned the money supply.  This calmed fears of lack of liquidity and the credit markets stayed intact and we did not see an economic meltdown.

Federal regulators, legislators, and fed executives have tough choices to make here.  Allowing major institutions en masse to fail will certainly result in a depression-era economic depression.

Failure of any ONE institution is not a big deal and if it were just left at that I would say "tough noogies".  But today, on a global scale, we are facing the potential collapse of the entire banking system and so thoughtful measures must be taken.  Of course, the stockholders of the failed institutions (like Freddie, Fannie, Lehman, Wamu) MUST NOT be bailed out and their stock will be rendered useless.

My main concern right now is not whether or not some govenments (not just USA) backing of liquidity is warranted, but one more of "is the problem so big that even that will not allow markets to recover?"  If it is not, then we are in for a depression-scale economic problem in the near future.

The liquidity markets are a huge confidence game, and I fear that much of the confidence is gone.  If that point is reached the case the whole system could collapse in a matter of days.


That's what has me so spooked.  Is this just the tip of the iceberg?  Lehman Bros. now in hot water...who's next?

The jig is up on voodoo economics.  We've been living in a giant Ponzi scheme in which our economy was propped up by capitalists trading money back and forth.  Now the center cannot hold. 



So, basically, American tax dollars are propping up Chinese investments.  We're being sold out to China and Saudi Arabia (in the oil market).

I wish that, if I missed a house payment, the government would prop me up...

By George, I think he's got it!

Chicago boys or not, we know that maintaining liquidity in the markets is essential to a modern financial economy, whether it be socialist or capitalistic.  The fundamental reason why the "crash of '29" led in the extended Depression is because overnight, markets froze up and liquidity vanished.  Without liquidity, money is not loaned, not invested, does not produce.

One of the reasons why the "Crash of '87" turned out to not be such a catastrophe is that the Fed met that same day and decided to open up the lending windows and gunned the money supply.  This calmed fears of lack of liquidity and the credit markets stayed intact and we did not see an economic meltdown.


For that matter, J.P. Morgan (the man after whom the firm was named) was there in 1929 to shore things up.

The real problem is that we may have run out of liquidity.  Last year, we had Ben Bernanke promising to throw money out of helicopters...

http://www.bullnotbull.com/gallery/images/g-helicopter-big.jpg

...in the form of interest rate cuts, if that was what it took.  But what happens when people realize Ben's just printing dollars that aren't worth the paper they're printed on?  Well, people stop laughing and buying stocks when Ben throws money out of the helicopter... but they keep laughing, they're just buying commodities, which will at least retain their value... 

http://home.roadrunner.com/~mgol1/Idiocracy_Money.jpg

...while the dollar doesn't.  So we have currency devaluation.  Which is what we saw through the first half of 2008.  But what happens when the rest of the planet says "print all you want, we're not buying it"?

http://www.pbase.com/image/77389068/original.jpg

Probably something like that.  Institution after institution falls, no matter how many times Paulson wraps bungee cords around 'em in an effort to shore 'em up on the backs of the US taxpayer.

If we're lucky, it ends like this. 

http://failblog.files.wordpress.com/2008/06/fb135.jpg

No "soft landing", but a deep global recession, after which we all get up, dust ourselves off, say "Hey, I meant to do that!" and go back to work. 

If we're unlucky, it ends like this.

http://media.serious-internet.biz/serious_internet/images/lulz/2008/04/19/b203d3e6e5676ab75d30e0c6e8b537ce_640x480.jpg

and we all end up eating microwaved roach feces for the rest of the century.

Hell if I know where we end up.  Once upon a time, Sunday was the day when you didn't have to watch the financial news, because it had all come out on Friday afternoon.  Last quarter, you at least knew where you stood by Sunday afternoon.  This weekend, we waited until midnight EST to find out WTF happened on a Sunday emergency trading session. 

Madness?  Blasphemy?  I'm outa cliches here.  But this sure as hell ain't SPARTAAAAAAAAAAAAAAAAAA...

Great post, Foo Bar.  I still side with the idea of letting the market clear things, so that the short term is painful, but the long term results are better for the dollar and will encourage banks to be more careful.

If we keep bailing out the big wigs, they'll keep taking ridiculous risks.

Great post, Foo Bar.  I still side with the idea of letting the market clear things, so that the short term is painful, but the long term results are better for the dollar and will encourage banks to be more careful.

If we keep bailing out the big wigs, they'll keep taking ridiculous risks.


Painful for whom?  For how long?  You can bet your sweet azz that the fat cat bankers who've been swapping worthless mortgages for 10 years aren't going to suffer.  Why rob a bank with a G-U-N when you can do it with an MBA!
::)

I think that the REAL winners in all of this will be those who have actual cash... greenbacks... to buy these presently-devalued securities.

Let's remember that while the mortgage securities have problems because the underlying loans are in default, they are secured against physical assets... the houses and land for which the loans were made.

Many of these financial instruments are trading at maybe 10% to 20% of face value.  Yet the underlying land and buildings have not been devalued anywhere near that much.

What we are seeing now if a feeding frenzy... driven by complete lack of confidence in the markets... that is causing a "fire sale" of assets.  It is a great buyer's market for the well-monied investor.

Let's remember that some of the richest people in the 1970's were Japanese businessmen who bought up real estate after the big earthquake in Japan in 1927.  Those old geezers bought up every square foot of rubble they could, and then over the next 4-5 decades (and a world war) made out like bandits.

One man's financial meltdown is another man's windfall.

Its unbelieable.  Some of these executives should go to jail.  Seriously.  Dick Fuld of Lehman turned away several offers to buy the company and/or assets.  He refused the sales and held Pep Rallies for the employees telling them "everything is okay and we are going nowhere."

Stan O'Neal from Merrill Lynch drove the company into the ground.  Even though John Thain lied about everything being okay, he finally sold out to Bank of America.

And that jackass at AIG.  Another one.  Should go to jail.  Stock is now $4.  They are teetering on going under and the Government (well we the tax payers) MUST bail them out.  AIG cannot go under.

Painful for whom?  For how long?  You can bet your sweet azz that the fat cat bankers who've been swapping worthless mortgages for 10 years aren't going to suffer.  Why rob a bank with a G-U-N when you can do it with an MBA!
::)


They'll certainly feel it if the government doesn't bail them out.  Obviously, the effects are always harshest on the poor and the working class, but that's inevitable.

What I'm saying is that, if we don't accept the consequences today, we will suffer far worse in the long run by postponing them via bailouts.  The larger the national debt gets, the harder we will fall by the end of all it.

Now here's one that galls me.  Over the weekend, the Reverend Barney Frank was talking to a reporter about the Fed's takeover of Fannie and Freddie.

The interviewer asked ol' Barney what he thought about any Golden Parachutes that the Fannie/Freddie execs would get on the way out, AND HE WAS FRIGGING JUSTIFYING THEM.

WTF?  Hell, I am a republican and I would be castigating any Golden Chutes for those wankers.  Yet here is a Democratic senator, defender of the middle class and liberal of liberals, and he is JUSTIFYING paying these shmux tens of millions of bux.

I wonder who is contributing to HIS campaign funds? ???

They'll certainly feel it if the government doesn't bail them out.  Obviously, the effects are always harshest on the poor and the working class, but that's inevitable.



Fuddat! It's only inevitable if we say it is.  It's time for a little Howard Beale action around here, "I'm as mad as hell, and I'm not going to take this anymore!"
http://www.inthe00s.com/smile/15/usa2.gif

Now here's one that galls me.  Over the weekend, the Reverend Barney Frank was talking to a reporter about the Fed's takeover of Fannie and Freddie.

The interviewer asked ol' Barney what he thought about any Golden Parachutes that the Fannie/Freddie execs would get on the way out, AND HE WAS FRIGGING JUSTIFYING THEM.

WTF?  Hell, I am a republican and I would be castigating any Golden Chutes for those wankers.  Yet here is a Democratic senator, defender of the middle class and liberal of liberals, and he is JUSTIFYING paying these shmux tens of millions of bux.

I wonder who is contributing to HIS campaign funds? ???


Frank also has a penchant for young male pages.  He has a lot in common with Mark Foley in that respect.

Fuddat! It's only inevitable if we say it is.  It's time for a little Howard Beale action around here, "I'm as mad as hell, and I'm not going to take this anymore!"
http://www.inthe00s.com/smile/15/usa2.gif


Well, I admire your ambition, but the whole of human history would side with my assumption.  The only times where this isn't true are during things like the French Revolution.  I mean, I guess we could go that route, but it would be very bloody.

Fuddat! It's only inevitable if we say it is.  It's time for a little Howard Beale action around here, "I'm as mad as hell, and I'm not going to take this anymore!"


I was gonna say Howard Roark, but that was about architecture, not economics.  So if we're gonna have a guy whose first name begins with "H", how about Hank Rearden?  I'd sure rather deal with him than Hank Paulson.

Which brings us to Francsisco D'Anconia's Money Speech, which really oughta be read in its entirety.  Grab a beer, sit back, and read it aloud, like dialogue, imagining your favorite dramatic actor's voice. 

(Go on.  I'll wait.)

(No, really, I'll wait.  Stop reading this, and go read that link.  Come back when you're done.)

(That's better.)

Now that you're back, Alan Greenspan (yes, the Alan Greenspan) was a contemporary of Rand's.  One of her inner circle.  Wrote essays that were published in her non-fiction books.  If you read the entire tome of Atlas Shrugged (and yeah, I know it's long, and she needed an editor, and you can skim a lot of it if you like, but it's worth it, especially if you follow Greenspan's positions when he was part of the Fed, his self-imposed silence between his resignation and his book publication, and everything he's said in public since then), and you see how things end up in the book, you'll see why I think Greenspan was D'Anconia.

I'm not going to spoil the ending, but I am going to say that there's a lot more to D'Anconia's character than meets the eye in this speech.  Or rather, that there was a lot more going on during Greenspan's tenure at the Fed than meets the eye.

No one wants another Great Depression, but we can't prevent it anymore.

And usually, it does this every September and October.

Phil Gramm, who recently "resigned" as McBush's economic adviser, was the co-author of the legislation that deregulated the financial markets and of the Enron loophole, which is partly  responsible for the high cost of energy.  There is a bill in the senate to reintroduce regulation (by Bernie Sanders) and on in the house to prevent Fannie and Freddie CEO's from getting their 25 mill. golden parachutes (by Peter Welsh, our lone Vt rep).  My finance guy says that at least some investments should be safe.  We shall see.

The recent failures of investment banks and the AIG should be a stake driven into the heart of Milton Friedman's ideology.  We need to clean up the mess and get back to the Keynesian principles that made this country strong. 

If some of youse guys don't want to admit the propaganda we've been fed for 30 years is rubbish, I understand. 

The recent failures of investment banks and the AIG should be a stake driven into the heart of Milton Friedman's ideology.  We need to clean up the mess and get back to the Keynesian principles that made this country strong. 

If some of youse guys don't want to admit the propaganda we've been fed for 30 years is rubbish, I understand. 


Hey, Comrade, nothing in capitalism predicts sentences like this:

"Morgan Stanley -- one of the two last independent, U.S.-based investment banks -- is negotiating with the Chinese government for a fresh infusion of funds into the beleaguered investment bank"

  - CNBC, as of 17 Sep 2008 | 10:37 PM ET

...That's not what you'd be reading if the Austrian/Chicago schools were in charge.  Unfortunately, it's not the kind of thing you'd be reading if the Keynsians were in charge either.  We're in uncharted territory here.

Now, if you disillusioned commies wanna lord it over us disillusioned capitalists that you really did sell us the rope with which you'd hang us, well, then you'd get my wholehearted (albeit begrudgingg-g-*gggaaaaaaak!*) agreement.  :)

The real punchline is that China's government is about as ideologically pure with respect to Marx/Lenin/Stalin/Mao's communism as the USSA is to vonMises/Friedman/Rand's ideals of capitalism.  The bad guys of the statist factions won.  The good guys of the individualist factions lost.  Sucks to be us, and I'll see y'all in the camps.

Hey, Comrade, nothing in capitalism predicts sentences like this:

"Morgan Stanley -- one of the two last independent, U.S.-based investment banks -- is negotiating with the Chinese government for a fresh infusion of funds into the beleaguered investment bank"

   - CNBC, as of 17 Sep 2008 | 10:37 PM ET

...That's not what you'd be reading if the Austrian/Chicago schools were in charge.  Unfortunately, it's not the kind of thing you'd be reading if the Keynsians were in charge either.  We're in uncharted territory here.

Now, if you disillusioned commies wanna lord it over us disillusioned capitalists that you really did sell us the rope with which you'd hang us, well, then you'd get my wholehearted (albeit begrudgingg-g-*gggaaaaaaak!*) agreement.  :)

The real punchline is that China's government is about as ideologically pure with respect to Marx/Lenin/Stalin/Mao's communism as the USSA is to vonMises/Friedman/Rand's ideals of capitalism.  The bad guys of the statist factions won.   The good guys of the individualist factions lost.  Sucks to be us, and I'll see y'all in the camps.


Hey, it's like I always say, comrade Foobie, "Life is just like the movies, only everybody's ugly and the bad guys win!"
:P

Hey, it's like I always say, comrade Foobie, "Life is just like the movies, only everybody's ugly and the bad guys win!"
:P


You and I are closer to agreement than either of us would ever admit in a bar.

I was just thinking that the current situation is just like Atlas Shrugged, except that there is no John Galt, there is no Galt's Gulch, and the prime movers all died and were replaced by looters and moochers 30 years ago.

Either that, or the Gulch is real, and we were all born 30 years too late.  The last thing any of us will see is Wyatt's Torch fading into the distance as the train goes into the tunnel.

Y'all really need to grind your way through all 900 pages of that infernal tome.  (Tell y'all what.  If y'all promise to buy (or pirate!) a copy (or e-book) of Atlas Shrugged between now and election day, I'll gladly make my way through 1000 pages of any book(s) that Maxwell thrusts upon me, at least if TCP/IP connectivity is available between now and election day.  Election day's arbitrary, and the vote doesn't matter.  I'm just not entirely convinced we'll have access to electricity, let alone TCP/IP connectivity, by the end of the year.)

The recent failures of investment banks and the AIG should be a stake driven into the heart of Milton Friedman's ideology.  We need to clean up the mess and get back to the Keynesian principles that made this country strong. 

If some of youse guys don't want to admit the propaganda we've been fed for 30 years is rubbish, I understand. 


Well, despite my libertarian leanings, I would agree that Friedman was somewhat full of it.  I'm not exactly a Keynesian economist, but I do agree with the general idea of having the government regulate things in favor of individuals, as opposed to favoring corporations like the Fed Reserve does.