Discomfort With The Bailout

[Nimue1995 1]

Youre wrong again. Just look at the Republican efforts to reign in FNMA/FRE that were blocked by the Dems and you know what youve said here is total BS.

Lol riiiight. The Republicans had control of both houses of congress and the Whitehouse for 6 years and it's the Democrats fault. hah! nice try.

[copernicus 0]

Lol riiiight. The Republicans had control of both houses of congress and the Whitehouse for 6 years and it's the Democrats fault. hah! nice try.

Try reading some actual history instead of left wing blogs. Or just listen to one of McCains more effective campaigners...Bill Clinton, telling the truth about his efforts to reform and the Dems blocking it.

[hblask 1]

This seems the exact opposite of conservative economic theory to me, the exact opposite of laisse faire. It's all fun and Milton Friedman games till Wall Street drops a trillion, then everyone comes crawling back to Keynes.

Friedman was opposed to the legislative environment that led to this mess. It really wasn't free market. There are two factors that led to this, neither of which is consistent to free market principles. First, the govt implicitly promised to insure any mortgages put out by these companies, while allowing them to keep the profits. This pretty much guarantees an environment where bad mortgages will become predominant. It'd be like writing the rules of football so that if you throw a hail mary and get a touchdown, you get 6 points. If the pass is incomplete or intercepted, you get to keep the ball anyway and are awarded a first down. What play should we call, hmmm, let me think. The second is that the govt *forced* some companies to write risky loans in the name of social fairness. This is essentially the same problem, but with the stick instead of a carrot, and to a much smaller degree.So that's one part -- how did we get here.The second part is what do we do now? Do we default on the govt's implicit backing of these loans? These were long-term business decisions made in a particular regulatory environment. At the time, it was a good call for these companies -- of course we'll go for the hail mary. Or do we tell these companies you were stupid to believe that we'd fulfill these promises, and the taxpayers don't care about your bad decisions? They've lived on a shady form of corporate welfare for a long time, is now when we tell them to step away from the trough?I'm marginally leaning toward the latter -- telling them to stop raping taxpayers. Lots of banks and financial institutions were smart and did the right thing through thick and thin. They should be rewarded and the bad businesses -- the ones whose business plans included corporate welfare -- should fail. There will be some short term pain, but I think the lesson to corporate America that we will bail them out for bad decisions is just too terrible to condone any longer.

[20TN40 0]

Think of it this way. It wasnt the companies making high risk investments that failed. It was the Government (us) forcing them to make high risk investments that failed. When we (the people) didnt do our part by endlessly pushing home prices up, it was up to us (the Government) to bail them out whilte they (the companies executives) took home multi-million dollar bonuses for following the orders of the Government (us).Got it? Or.....they were too big and the economy dug in too deep to let them fail.

Wait, more questions! How did the Government FORCE them to make high risk investments? And if there is no bailout.........what happens?

[BigDMcGee 3,352]

Friedman was opposed to the legislative environment that led to this mess. It really wasn't free market. There are two factors that led to this, neither of which is consistent to free market principles. First, the govt implicitly promised to insure any mortgages put out by these companies, while allowing them to keep the profits. This pretty much guarantees an environment where bad mortgages will become predominant. It'd be like writing the rules of football so that if you throw a hail mary and get a touchdown, you get 6 points. If the pass is incomplete or intercepted, you get to keep the ball anyway and are awarded a first down. What play should we call, hmmm, let me think. The second is that the govt *forced* some companies to write risky loans in the name of social fairness. This is essentially the same problem, but with the stick instead of a carrot, and to a much smaller degree.So that's one part -- how did we get here.The second part is what do we do now? Do we default on the govt's implicit backing of these loans? These were long-term business decisions made in a particular regulatory environment. At the time, it was a good call for these companies -- of course we'll go for the hail mary. Or do we tell these companies you were stupid to believe that we'd fulfill these promises, and the taxpayers don't care about your bad decisions? They've lived on a shady form of corporate welfare for a long time, is now when we tell them to step away from the trough?I'm marginally leaning toward the latter -- telling them to stop raping taxpayers. Lots of banks and financial institutions were smart and did the right thing through thick and thin. They should be rewarded and the bad businesses -- the ones whose business plans included corporate welfare -- should fail. There will be some short term pain, but I think the lesson to corporate America that we will bail them out for bad decisions is just too terrible to condone any longer.

thanks, this is a great answer..

[Zealous Donkey 0]

Probably won't make a difference in the long run......All the Democrats that blocked reform of Fannie and Freddie over the last 7 years should be voted out! And yes that would apply to any Republicans involved. Totally agree with Clinton that the Democrats blocked him and Republicans trying to clean up the mess.Clinton at 8:14 of following link.http://www.youtube.com/watch?v=_MGT_cSi7Rs...-to-reform.html

That link is awesome. I hope everyone on this site sees it.

[hblask 1]

That link is awesome. I hope everyone on this site sees it.

I agree, it is an amazing piece. It'd be interesting to see if someone could come up with video that gave an opposite impression. From all I've read, it appears not -- that the republicans understood the problem, and the dems did not (although I doubt it was as universal as the video portrayed). Of course, the Republican's solution was more attempts at micromanaging complex financial institutions rather than a few broad, fair rules that allowed companies to compete based on good business practices. But it was certainly a lot better than the nanny state ideas the Dems were tossing around back then.

[Zealous Donkey 0]

I agree, it is an amazing piece. It'd be interesting to see if someone could come up with video that gave an opposite impression. From all I've read, it appears not -- that the republicans understood the problem, and the dems did not (although I doubt it was as universal as the video portrayed). Of course, the Republican's solution was more attempts at micromanaging complex financial institutions rather than a few broad, fair rules that allowed companies to compete based on good business practices. But it was certainly a lot better than the nanny state ideas the Dems were tossing around back then.

I am sure you are right but do you think the poor regulator has been somewhat vindicated? He was taking quite a bit of abuse.

[nutzbuster 7]

That link is awesome. I hope everyone on this site sees it.

http://www.youtube.com/watch?v=_MGT_cSi7Rs...-to-reform.htmljust F-ING wow....

[hblask 1]

I am sure you are right but do you think the poor regulator has been somewhat vindicated? He was taking quite a bit of abuse.

Yeah, he seemed to be in a pretty bad spot, stuck trying to defend a system I'm sure he knew was flawed, but where everyone was trying to do their job the best they could.

[copernicus 0]

Wait, more questions! How did the Government FORCE them to make high risk investments? And if there is no bailout.........what happens?

Essentially they forced them to make "social" investments with their leverage to regulate and reduce the power of the financial institutions and to reduce liquidity by increasing interest rates/reducing money supply.if theres no bailout.?..take a look at the market indices...and thats without it being a definite no deal.This should also remind those who cry "but they had a majority, why didnt they do anything" lay blame on a particular party. Things are far more complex than having narrow voting control. the Dems are in power and if they vote as a block can do anything they want (other than unilaterally override a veto).

[JustDoIt 10]

QFT! You're hearing Cope's explaination of how it's not the free market's fault. It's those nasty government guys that held a gun to their heads forcing them to loan to anyone who was breathing. Riiiight! Not a chance. As I said before the anti-redlining legislation had about as much effect on this fiasco as throwing a rock into a stream and saying that's the reason the stream got dammed up. It's bs and they know it. But somehow someway they have to find a way to throw it back on anybody but the free-marketers and deregulation.

Educate yourself........start back in the Clinton Administration with Janet Reno.

[Yoda 1]

Ugh, freaking republicans. Way to get that bill passed. There goes the neighborhood.

[copernicus 0]

Ugh, freaking republicans. Way to get that bill passed.

sw?

[Pot Odds RAC 23]

Ugh, freaking republicans. Way to get that bill passed. There goes the neighborhood.

Yeah. Freaking Republicans. Ummm, who has the majority in the house?

[Sal Paradise 57]

"Ample no votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill."http://news.yahoo.com/s/ap/20080929/ap_on_...ancial_meltdown

[gobears 0]

If you're an incumbent in the house and in a close election with the knowledge that this bill is highly unpopular - do you vote with regards to what is currently best for the US or do you vote with regards to what helps your reelection chances the most?This could be the year for the challenger as they can just sit back and pound the incumbents on the economy plus their vote on this bill - I wonder how many seats will change hands after this November?

[Pot Odds RAC 23]

"Ample no votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill."http://news.yahoo.com/s/ap/20080929/ap_on_...ancial_meltdown

It was a Bi-Paritsan defeat.

[copernicus 0]

Prediction: they have a new bill that passes handily on Wednesday.Part of today's vote was not sticking their necks out if it wasnt necessary. The markets are showing its necessary. The House would love it if they could get the Senate to vote first. Frank is blaming the GOP. What an a$$clow.Uh oh....better make it Friday...Jewish holidays could stop progress for 2 days.

[Pot Odds RAC 23]

94 Democrats voted against the bill.Pelosi killed the stinking bill with a speech just before the Vote on the bill. 12 Republicans changed their vote at the last minute because of her partisan rant. That was essentially the margin that defeated the Bill.

[Pot Odds RAC 23]

Prediction: they have a new bill that passes handily on Wednesday.Part of today's vote was not sticking their necks out if it wasnt necessary. The markets are showing its necessary. The House would love it if they could get the Senate to vote first. Frank is blaming the GOP. What an a$$clow.Uh oh....better make it Friday...Jewish holidays could stop progress for 2 days.

Did you hear Pelosi before Frank spoke?She gave a "thank you" speech like she was accepting an Academy Award where she thanked all of the individuals who worked so hard to get a bi-partisan bill. Can she be any more clueless?Looks like an all time Record one-day sell-off for the DOW (-684.81 is the WOW. They just said Every stock in the market is down. Volume of 1.330 Billion Shares sold and 1.315 Billion of them at a "Down" Price.Those are IMPOSSIBLE numbers.Thank you Nancy.Whee!

[hblask 1]

Ample no votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill

At the risk of overstating this, I think this is a huge moment in political history. This is the kind of bill that in the past would've sailed through almost unopposed. Politicians on both sides of the aisle would've voted for this saying they "saved" the country by passing the bailout. Because so few people watch C-SPAN or news talk shows, people wouldn't have cared ("I think they saved us from the Depressions or something.... isn't it time for Monday Night Football?").But this time, cable and the internet made a huge difference. I saw at least three online petitions to stop the bill from going through. People who normally couldn't locate Washington DC on a map were intelligently discussing treasury instruments. Youtube videos discussing economics were getting hundreds of thousands or millions of hits. And most importantly, the public choice effect of Concentrated Benefit and Dispersed Cost was defeated. Soundly. I don't know that I can recall that ever happening before. Our modern connected world empowered people in a way that wasn't possible before.I don't care about this particular bill. I was opposed, but only mildly, and would've shrugged if it passed. But the way it went down in flames really thrills me.

[gobears 0]

I just read CNN's article on what Pelosi said before the vote was taken.I think the bill passes if Pelosi delivered a bi-partisan "we hate having to pass the bill but together we realize that blah blah blah" - that was not the time for a partisan speech.Also, eliminating the ability to short so many stocks hurts the market here since the shorts who normally would be providing a cushion by buying back their shares are already gone.

[Nimue1995 1]

Could someone give me the cliff notes on that video? My computer loads videos sooooo friggin' slow that I rarely try to watch any.Also H, would it be wise for me to get my lone goat bred this fall (even though she's 14) and maybe pick up a few chickens? Just wondering if we're headed for a barter economy. only half jk.

[CaneBrain 95]

Yeah. Freaking Republicans. Ummm, who has the majority in the house?

Not even one third of Republicans voted for it. The Democratic majority is not that big. They got more than half their people to sign on.