Bailout: Failing and Beyond Rediculous Now
The more Hank Paulson and Ben Bernanke talk, the more apparent it becomes there is no plan for dealing with the financial crisis. For example, Paulson says the Troubled Asset Relief Program (TARP) is no longer going to buy troubled mortgage assets. Instead, he wants to use the second installment of $350 billion to buy up student loans, auto loans, and credit card debt. Secretary Paulson says the “illiquidity” (AKA not being able to buy things you can’t afford) in these sectors is “creating a heavy burden on the American people”.
So let’s recap. We’re abandoning the TARP, which had a modest hope of not being a total taxpayer wipeout because the Treasury would own tangible assets, like houses. In its place, we’re securing the debt of kids running up 6 figure student loans for degrees in Under Water Basket Weaving and people who’ve maxed out their credit cards buying HDTVs and lattes at Starbucks. But is this financial crisis really an illiquidity problem?
It seems to me credit has been a little too liquid and giving more crack to the addict won’t help. After all, isn’t that how we got to no document mortgages in the first place, which started this chain reaction?
The more they flail about, the more I think we can’t bail our way out of this mess. Either tax rates will hit astronomical levels or bread is heading for $100 a loaf as the Fed printing presses flood us with worthless dollars. It will be painful, but taking our lumps might be the best path now.
Archived in: BailoutsNovember 12, 2008 at 9:42 pm | Trackback
18 comments
Amen. I haven’t been able to wonder if the current ‘crisis’ level of illiquidity is really remarkably low, or actually normal and healthy, which may just seems remarkably low compared to all to vast and ridiculous freeflowing lending which had been going on (does anyone know of a source of actual numbers on this?).
I hesitatingly support the idea of the government doing what it can to make sure a recession doesn’t become a depression, but if/when it crosses into trying to force the banks to continue doing what got us here, you’ve gone too far. Lower levels of available credit and it becoming harder to buy things you can’t afford is not a problem - its the solution, albeit not a painless one.
Do what you can to make sure the economy doesn’t crash… do what we can to make sure this level of stupidity never happens again (although, you know what they say - make something more foolproof and they’ll just make a bigger fool), but for heaven’s sake lets not try to recapture the lending excesses which got us here.
Well, fredct, here’s where you made some other idiot statements, then disappeared rather than stand and sefend them.
http://www.nerepublican.com/in.....-the-foot/
“Its not temporary? NYC is in permanent decline? Please. When the national economy recovers, so will Wall St and NYC. And then we can add that one to your prediction that the Dems would never nominate anyone but Hilary Clinton to your pile of… um… genius.
The conservative public - and too often republican politicians pandering to them - are like a doctor who only prescribes one course of treatment no matter the disease. And the public has caught onto the quackery. Lower taxes are not the one and only prescription no matter the disease.” [snip]
Now you’re doing it again. There is a photo of you next the definition of dithering fool in the dictionary.
Paulson is doing nothing but covering for the over leveraged bankers with taxpayers dollars. Let the system crash.
I have a life and a demanding job, VW, sorry I can’t stay around to argue back and forth with you ad infinitum. I know you miss me.
As far as your only sentence on topic - yes, yes he is. But allowing the system to crash would be very painful for tens of millions of Americans who had nothing to do with the problems. We could do that - and I respect those who would make that argument. The problem is that many of those tens of millions of Americans vote and would vote out anyone who allowed it to be so.
No fredct, it will be painful for those who shirked their financial responsibilities by putting everything on the credit card, who bought a house they knew they couldn’t afford, who didn’t save a dime for the tough times that always come along.
Yes, fredct, the grasshoppers in life, who believe the summer is eternal, and the socialist government is there to bail them out.
While Obama and the progressive Congress are busy rebuilding the sand houses on the beach and putting GM and Ford cars in the driveways, the tsunami of entitlements is ready to crash down wiping out all that is there. Those debts are due and the money isn’t available.
Do we start the presses? Do we tax the unborn? What is your favorite poison? I’m in favor of taking away YOUR entitlements.
It would be painful for those who lose jobs when their financial institutions go under because of the actions of other divisions they were not involved with. It would be painful for people who lose their jobs in completely unrelated industries because of the contraction of the economy. It would be painful for the small business owner on the corner who’s customers cut down on shopping because of their job losses. It would be painful for the homeowner with the fully paid off house which has its value decline drastically.
Lets not pretend that it only hurts those who are maxed out on their cards, bought too large of a mortgage, or didn’t save.
And the fact is that because of the nature of a democracy, the government will always be responsive to the demands of the public, even when you don’t agree with their sentiment.
Now I started this out agreeing with OP that the way the treasury is headed is concerning, seems inappropriate, and seems to be wishing to continue what got us here in the first place. If you wish to argue that nothing at all should be done, I respective those ideals, but in the real world it would just never happen.
This all started with the government screwing around with social engineering to make things “more equal” and fairer. Didn’t that work out swell.
You cannot name anything those balloons touch that has worked; everything costs more and winds up corrupted.
535 smart ass economists in congress who couldn’t get a job in the private sector if their lives were on the line. If any of those lawyers sitting were any good, they would be defense lawyers making large figures. Don’t tell me about public service, it’s the public trough that draws them.
The people that get burned are those that didn’t prepare. Those that lose their jobs by connectivity, who were prudent will weather this downturn. Will it be difficult? No, for they weren’t riding that big pig; their life style doesn’t have to change all that much.
For the ones that will fall off that pig, they be living in rental housing and learning to grow food in small plots. Vegheads will find out that that diet comes up short on calories for hard work. Can you say LIFE STYLE CHANGES tootsie!
Good by Chablis and “In Touch” rag.
VW,
You are being way too hard on ole’ fredct. All he wants is “fairness”. “Fairness” is a good thing. Iwant some, too. I have been paying my mortgage, and my rising real estate tax bills, on time, even thought I occasionally have to “reallocate” funds from other places. I have worked on the premise that “the sherriff isn’t knockin’ at the door” for my whole life, and never stiffed anyone (banks, credit cards, etc). Since I played by the rules, Fredct wants me to bite the bullet and watch the “po’ folks” who “just didn’t understand” get handouts for stupidity. The handouts come FROM ME, and I say to fred, STFU.
PS: It is PAINFUL for me to watch these idiots be given taht which they DID NOT EARN AND DO NOT DESERVE!!! Sorry for the rant; I promise to be a good Messiah Adorer in the future.
the following is blatently stolen from Wizbang, courtesy of Steve Schippert. Fredct, your “painful” is really my “tough luck, pal” IMHO!!!
“Jim Manzi at The Corner on National Review Online makes a critically important observation about whether or not it is fair to bail out or allow bankruptcy to ensue.
Is this fair to the people who work at GM and will now have a deal changed after the fact? Well, when people sold parts to GM on credit, or employees (individually or via union negotiations) entered into labor contracts with GM, they undertook counterparty risk. That is, they were taking, in part, a bet about whether GM would actually be able to pay them what they are owed. This is also true for pension payments, which are simply deferred compensation, as much as it is for deferred payments on credit terms for parts. To act now as if they should be protected from this risk is to treat them as children.
Read it all for full constext, but that paragraph hits at the heart of the (free market) matter and warranted repeating here.”
Way to entirely misunderstand the point I was actually making. You’ll fit in great around here codekey. Where exactly did I use the word fair? or anything like it? My idea of fairness aligns much more with yours. The people who were involved in the irresponsible lending - from CEOs to workers - deserve the consequences of their actions, up to and including the loss of their jobs, collapse of their companies and beyond.
My only points otherwise are the following:
1) Lets not pretend that the only people who would be hurt are only those that had to do with the lending. Nothing more. I’m not saying that makes it unfair. I’m not saying that makes it wrong. Just stating that fact.
2) Any democratic government who’s response to a financial crisis was to do nothing would be out on their asses at the earliest opportunity. Again, I’m not saying that’s right, I’m not saying whats fair. It just is.
fredct, you have to start by admitting that the Congress is responsible for this mess is two ways:
1) By not exhibiting correct oversight of the banking and insurance AND the US Treasury. They dropped the ball there.
2) Not ripping the throats out of the Senators and House members that were complicit in the manipulation of the laws to allow Alt A and sub-prime loans and the over leveraging of the markets.
3) Allowing illegal immigrants to get mortgages with no backgrounds and no way to pay for the loans. When the interest jump came so did the jingle mail.
From 200 to 2005, it was all Democrats. After 2005 the RINO’s got into the cesspool too. When you start blaming the Goddamn politicians, then you’ll have some currency to spend, until then you are flapping in the wind as part of the problem.
That #3 is actually part of #2 with the scumbags looking to buy votes, legal or not.
I think you’re right, fredct, in that many people that played no role in the malfeasance would be hurt. However, I’m just not sure an infinite bailout is an option either. Now the cities have their hands out for TARP cash too. I don’t think hyperinflation is a great way to go by just running the printing presses 24/7 either. At some point, we have to restore some discipline.
Bailouts which include subtle controls and interventions by bureaucrats in the companies being bailed, is a feature of fascist corporatism.
I don’t know if fred is right that a democratic process would punish officials who failed to protect large blocs of workers/investors/business people…if he is, then we’re pretty far gone already.
There is only a small space between this kind of protectionism and nationalization. Frankly, I think lots of Americans are ready for it, and we’re off on the same trajectory that Britain followed beginning in the 1930’s.
One more thing. GM and others will be bailed with an amount of cash that will last them less than two months. Their problem is their idiotic business model, which ultimately effects cash flow. Unless they change drastically…which I suspect would happen only through bankruptcy, the $26 Bil will allow GM to produce updated versions of the Vega…FoMoCo is doing much better, and Chrysler is a mangy dog, stripped by the Krauts of everything useful and left to rust. Revenge exacted from Americans by the depradations of the French.
That’s about right for those bucks to collect in the golden ‘chutes and the brass to jump. Great theater, timing is everything, right fredct.
Sorry for the delay. I know you missed me again. Been very busy again.
VW,
1) Certainly
2) Yes, although I think you said the key word. It was ‘allowed’. Sometimes people say it was forced, but the law specified in those discussion (CRA) doesn’t even apply to some of the most guilty parties (AIG, investment banks, etc). The means to do it was created, but people running multi-billion dollar banks are still supposed to be intelligent adults. Turns out they were all mindless lemmings. Blaming Fannie, Freddie, & legislation for the mess is akin to blaming a gun manufacturer for a murder (something I disagree with, even though I know some liberals support). Its true they provided the means, but its someone else who lost their path to commit the act.
3) Yes, 3 is part of 2. Offering no-doc loans is almost certainly stupid to legals, illegals, whomever.
So I agree the politicians were complicit, but no law passed forced anyone to be irresponsible with billions of dollars. The market participants did that themselves by tricking themselves into believe they could insure away all risk and that housing prices would never drop no matter how insanely high they became.
OP, I agree. Sometimes innocent people have to be hurt. An infinite bailout just hurts us all more quietly, as you said up top, and doesn’t allow the situation to ever resolve itself. The political reality is that the government has to do some things to help through hard times, but they also need to understand they can’t do everything.
Lastly on GM, I think the same goes. If there’s a reasonable plan that would allow them the time to turn it around, fine… but as someone said on one of the 24 hour news channels once (I forget who and which one), its Uncle Sam, not Uncle Sucker. You don’t get unlimited handouts just to piss it away. Lets see a long term plan that a bailout can work - like was successful with Chrysler in the past.
Item GM and Ford:
Fire all the brass, no parachutes. Let the UAW bailout the companies via ESOP. The unions have the workers best interests at heart so they will do the right thing.
In a pigs ass.
Read something like this recently…the auto companies are benefit distribution systems that just happen to also make cars. A bailout with an intractable UAW means that the rest of us will end up underwriting ridiculous benefit packages for union members. If that’s the case, time for a revolution.