I know there are a lot of people on both the liberal & conservative sides who hate the idea of the Wall Street bail-out. I personally get sick to my stomach thinking about it. They fucked up, we have to pay for it. That doesn't sound right. The guy who ran WaMu for a week got over $10 million for doing what? Presiding over a major corporate collapse for a week. I'd take a few bucks, a cup of joe and some Cobra benefits for a week's work clearing out the trash for a week.
So, I will give bail-out haters their due. This just plain sucks.
No one should be surprised by Monday's global stock market dip. Tuesday's bump, thanks to bargan hunters, was great, but it didn't help the Credit market which is the real source of our issues. Eventually, things will work themselves out. Our response may help determine if things get better within the year or take a decade.
What folks are missing by actually caring about the reasons for the bail-out or by complaining about the elements of the bail-out is the harsh reality of the situation. The dullest, most back-water element to global corporate finance had a freaking asthma attack. Overnight loans between BFC's aren't happening. This has ripple effects to everything we do. They don't extend credit to each other, then companies don't loan money to us. They don't have liquidity to pay for capitol equipment or pay employees. Mortgage rates, car loans, credit cards, all this shit could feel the ripple effects. You think unemployment and foreclosures are bad now? Watch this shit drag out a few more weeks, then we'll see how those numbers look.
The bail-out is about fixing that.
And, if you don't think this is about helping "Main St" then you're wrong.
Yeah, it should never have gotten here. Yeah, this medication tastes horrible.
The longer this drags out the more concessions we will see to corporate lobbyists and conservative "deregulation" politicians. If you didn't like the plan that failed this weekend, you're probably going to HATE the one that is being proposed this week. And you'll loath whatever finally gets passed. You can't get what you really want in a Democracy. You simply have to hope that the compromise does what you need.
Meanwhile, the BFC's that survive this are going to get bigger and more powerful. Instead of correcting this imbalance between the rich and the rest of us, we're going to see it grow.
7 comments:
Ahhh, you just posted this to get my response. And no, I am not that narcissistic.
Again, you are correct that something needs to be done. You are again incorrect that this previous bill is what is required.
"We" didn't get us into this mess. 30 years of Republican deregulation is what got us here. Decades of Wall St bankers selling each other shit and calling it gold got us here. So why should they get anything out of it?
Let's scrap this 'Paulson" plan and do something that is useful to the country. Ok, so you can't get the Republicans to help actual Americans (why would they, they hate us anyway?) what about having the government handle themselves as a private entity would? Warren Buffet (your hero) dumped $5 billion into Goldman-Sachs in exchange for preferred stock and warrants on common stock. George Soros (he who controls all liberal blogging) has floated a similar plan but with the US government backing it.
How about just LOOKING at other plans? Heck, here's one starting through Congress right now...by the people who voted against the current piece of crap. The No Bailout Plan
I doubt that anything this spineless Democratic Congress will come up with is going to make me run into the streets dancing, but when, upon hearing the Bill had failed to pass I pumped my fist and said, "Yes!" you know there is something wrong. Our leaders have to do something but giving the people who presided over this disaster $700 billion and telling them to hand out cash like it was Christmas to the companies that got us here (and those that didn't....and foreign banks) is ludicrous.
Banks have been failing for weeks...months even. Stepping back and actually READING THE DAMN PLAN (Mr. McCain) might be a good idea. Examining other options might be a better one.
It's like this, if your Dad gives you money which you then loan to a friend. The friend blows it at the track on a horse named "Can't Lose" (which happens to have a broken leg). The friend comes back to you and asks for more money because, "He'll do better next time." You think your Dad is going to give anymore money to you?
Getting a bill passed (any bill) is not what we should expect from Congress. We should expect them to pass something that fixes the problem. The previous bill would not fix the problem...and that is why it needed to fail.
Now, back to the drawing board. Actually get a bill that all Democrats can vote for and give Mr. 26% the opportunity to veto it. Let's see the Republican party run away from that disaster.
Now see, those are the kinds of quality comments I've come to expect from you.
I live in the suburbs of a banking town. Our largest private employers are the banks & financial firms. Charlotte is actually the 2nd largest financial city in the US after NYC.
We're the home of BoA and Wachovia and a lot of brokerage houses have major centers here. Folks here have watched the implosion of Wachovia since it bought that stupid mortgage company and now we're holding our breath to see how many jobs will be lost because of it.
Our region has been largely spared the housing and mortgage crisis affecting the rest of the country. These events will likely change that.
All this is happening while we're having a regional gas shortage. The two aren't directly related. This just makes everything even more tense.
So, I'd like to think you're right that there's a better plan and that they will find it and act on it. How long shall we hold out? How many bad plans should be shot down? How many jobs should be lost? How many mortgages foreclosed?
Straw man arguments.
The jobs are already gone (or going fast) and the mortgages as well...nothing suggested so far is going to do more than prop up the companies for a time. Layoffs are inevitable at this point.
What we can do is minimize the pain by trying some trickl-UP economics. How about buying all those foreclosed or high interest mortgages? Say at 10% for a 30-year loan? It's not a great rate but it will be much less than some people with ARMs are handling and it will get people back into their homes, reduce the blight of empty houses, and maybe start adding stability to the economy.
We are a consumer economy so perhaps having the consumer able to spend AND save is a good idea.
This gets the $$ back into the banks in the way it was intended...slowly over 30 years. But that brings stability.
Overall what it does is supports those harmed in this disaster...the American people...not the banks and CEOs who got us into this thing.
I can't say I am too keen on BoA and JPMorgan/Chase/Whatever being the only two banks left, but, after this debacle calms down, there should be space in the market for smaller banks to start rising again. There are plenty of local and regional banks just waiting to fill the places left by the demise of WaMu and its ilk.
Thus capitalism, with proper regulations, triumphs.
BTW, last week I explained why I was unable to explain in detail why you were wrong. I am sad when I see friends who are just missing it. So I had to comment and maybe get you reading on the right track.
I'm just a giver.
I don't remember using a straw man argument. Hrmm...
You think I'm being unreasonable for wanting to see admittedly flawed legislation passed in a timely manner. My reasoning is all about strengthening faith in the market and helping the credit market stabilize.
I'd love to see something better proposed.
My problem is less to do with the fact that the bill got voted down. My actual problem is that they voted.
Say you're building an airplane. You've done the math and determine that your prototype is not going to fly. You then go "test" your prototype by pushing it off a cliff and watching it slam into the ground. This is not the way to build confidence.
The people in congress had to know that this bill would not pass. They know that the whole world is watching. So why crash your plane into the ground by actually having a vote on the dumb thing?
If the bill needs to be redesigned or modifed, then do it. But take care of that before pushing it to a vote. You know the world is watching and you have to know that when you vote down this bill that you're going to send wall street into a tailspin. So be smart and keep this thing under construction until you have something you can pass.
Here's a link to Soros' actual commentary in the Financial Times. It's good stuff.
Soros' Commentary
My correction - Mr. 22%
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