Stiglitz: Bailout Blues

Joseph Stiglitz hopes we can tread water until a new administration takes over:

Bailout Blues, by Joseph E. Stiglitz, Project Syndicate: It doesn’t take a genius to figure out that the United States’ financial system – indeed, global finance – is in a mess. ...

As global markets plummet, ... Congress ... may rescue Wall Street, but what about the economy? What about taxpayers, already beleaguered by unprecedented deficits, and with bills still to pay for decaying infrastructure and two wars? In such circumstances, can any bailout plan work? ...

[T]he rescue plan that was just defeated ... remained critically flawed. First, it relied – once again – on trickle-down economics: somehow, throwing enough money at Wall Street would trickle down to Main Street, helping ordinary workers and homeowners. Trickle-down economics almost never works...

Moreover, the plan assumed that the fundamental problem was one of confidence. That is no doubt part of the problem; but the underlying problem is that financial markets made some very bad loans.

There was a housing bubble... That bubble has burst. House prices probably will fall further, so there will be more foreclosures.. The bad loans ... have created massive holes in banks’ balance sheets, which have to be repaired. Any government bailout that pays fair value for these assets will do nothing to repair that hole. ...

We could do more with less money. ... The Scandinavian countries showed the way two decades ago. .... By issuing preferred shares with warrants (options), one reduces the public’s downside risk and ensures that they participate in some of the upside potential.

This approach is not only proven, but it also provides both the incentives and wherewithal needed for lending to resume. ...

At the same time, several steps can be taken to reduce foreclosures. First, housing can be made more affordable for poor and middle-income Americans by converting the mortgage deduction into a cashable tax credit. ... Second, bankruptcy reform is needed to allow homeowners to write down the value of their homes and stay in their houses. Third, government could assume part of a mortgage, taking advantage of its lower borrowing costs. ...

There is a growing consensus among economists that any bailout based on Paulson’s plan won’t work. ...

But it is impossible for politicians to do nothing in such a crisis. So we may have to pray that an agreement crafted with the toxic mix of special interests, misguided economics, and right-wing ideologies that produced the crisis can somehow produce a rescue plan that works – or whose failure doesn’t do too much damage.

Getting things right – including a new regulatory system that reduces the likelihood that such a crisis will recur – is one of the many tasks to be left to the next administration.

Comments

[im1dc]

AMEN

[Julio]

"At the same time, several steps can be taken to reduce foreclosures. First, housing can be made more affordable for poor and middle-income Americans by converting the mortgage deduction into a cashable tax credit. ... Second, bankruptcy reform is needed to allow homeowners to write down the value of their homes and stay in their houses. Third, government could assume part of a mortgage, taking advantage of its lower borrowing costs. ..."

FINALLY! someone is talking about the right things.

[robertdfeinman]

One of the commonplaces in this discussion is that part of the crisis has been caused by people walking away from their homes because they are worth less that the outstanding loan(s).

Nobody has noticed that auto loans are structured like this and its fine with the borrowers. As soon as you drive out of the showroom your car drops in value and you frequently owe more than you borrowed. Even if this isn't true immediately it will be so after it depreciates. This doesn't trouble anyone because the utility of the item purchased with the loan remains the same. I still get to drive it to where I want to go.

The same thing is true with homes. Whatever the nominal value might be at the moment, this is of no concern to me as long as I can continue to live in the residence and get the expected utility out of it. The problem is not the "value" of the home, but the size of the mortgage payments.

Under normal conditions mortgage payments had become a problem only when a person suffered some sort of economic reversal - job loss, illness or divorce most commonly. What is different this time is that future mortgage payments not only ballooned, but did so in unpredictable or disguised ways. Floating rates, for example, are unknowable.

So, once again, the framing of the issue is done so as to put the blame on the householders rather than the banks which pushed loans which put people in unstable financial situations. The "solution" follows the framing. Rather than forcing the banks to renegotiate the loans into more stable forms, they are bailed out because of the homeowners "walking away" since the value has declined.

No one is "walking away", they are being thrown out on the street just as they always are when they can't meet the payments. A little honesty would go a long way, but, of course, that would put the blame just where big business doesn't want to see it placed.

That the pols eagerly go along shows the problem.

[Mary]

Professor Stiglitz, many thanks for your repeated efforts to educate the public and provide an alternative solution to the mess of greed. You are a mighty voice.

[anne]

Julio:

"At the same time, several steps can be taken to reduce foreclosures. First, housing can be made more affordable for poor and middle-income Americans by converting the mortgage deduction into a cashable tax credit.... Second, bankruptcy reform is needed to allow homeowners to write down the value of their homes and stay in their houses. Third, government could assume part of a mortgage, taking advantage of its lower borrowing costs...."

FINALLY! someone is talking about the right things.

[Thank you Austan Goolsbee...oops.]

[Patrick]

$700 billion ... and it probably won't work.

Seen the unemployment numbers today? Misery is a booming business.

The good news is that the Republicans will go the way of the Whigs ... but what a price to pay.

[anne]

Robert:

"No one is 'walking away,' they are being thrown out on the street just as they always are when they can't meet the payments."

[Alex Tolley]

I agree with everything Stiglitz says in this piece. The real question is why is Congress so keen to do 'something", but not the "right thing"? It's all panic, hasty action, rather than thoughtful. The Fed has been juicing liquidity by other means, so at least part of the immediate problem is being addressed. What's wrong with debating this a little longer and getting a good solution, rather than rushing out messy bills that may not do much other than save the banks at taxpayers cost?

"The United States invariably does the right thing, after having exhausted every other alternative." - Winston Churchill

If only.

[Julio]

rdf,

Right on point.

Housing is not just an investment.

[lonesome moderate]

"There is a growing consensus among economists that any bailout based on Paulson’s plan won’t work"

Really? How is this possible, when there was what seemed to be an overwhelming consensus among economists that we had to pass the bill immediately?

[anne]

Remember the significant number of Representatives from Districts especially effected, especially Districts with significant numbers of people of color, who voted against the House rescue plan, also that the employment problem that we are building was not and could not have been tolerated politically in Japan and Japan quickly resorted to New Deal style spending to prevent a significant increase in unemployment.

[Noonan]

Can someone please explain why we should want to reduce foreclosure? Why should someone who never had any equity in their home and can't afford to make interest payments be allowed to live there? They never owned the house nor do they now.

[Kerala Marxist Gun Club]

Leverage doesn't kill capital
Capial kills capital

[im1dc]

robertdfeinman,

Kudos & Dittos.

[anne]

"Can someone please explain why we should want to reduce foreclosure?"

Me, I say the heck with 'em; kick the heck out and beat up a few neighborhood children if they turn up to watch. Pound 'em, trash 'em. I even have my Red Sox bat, Manny signed. Pound 'em.

[macburger]

Getting things right – including a new regulatory system that reduces the likelihood that such a crisis will recur – is one of the many tasks to be left to the next administration.

This assumes that everyone agrees on what is the cause of this crisis.

Right now, what is going on in the bailout is an attempt to cover up this mess, so that when the next administration tries to set up a regulatory system, theses issues will not be addressed.

Yes, everyone says regulation can wait - but what should happen before the bailout, is an agreement on what was the cause. Anyone who believes that the required regulation will simply follow is being an idiot.

Bushco and Republicans are again playing you all for suckers.

[anne]

"Bushco and Republicans are again playing you all for suckers."

And, Democrats, like the majorities in Congress among others, have been doing what precisely?

[im1dc]

The Dow INDU is down 325 points as I type this.

I can't be sure what that means but I suspect stock buyers are worried that tonight Congress will pass the larded up $700 'Rescue Package' that now includes tax cuts, tax credits for solar/alternative power, tax cuts for Rum producers, etc.

Tax cuts for Rum producers?

What has that got to do with this Credit Crunch Crisis?

I think the LESSON IS CLEAR: Never, never, never TRUST a sitting member of Congress or the Senate.

[anne]

Tax cuts for Rum producers?

http://www.machaon.ru/pooh/chap2.html

1926

Winnie-The-Pooh
By A. A. Milne

...In Which Pooh Goes Visiting and Gets Into a Tight Place

EDWARD BEAR, known to his friends as Winnie-the-Pooh, or Pooh for short, was walking through the forest one day, humming proudly to himself. He had made up a little hum that very morning, as he was doing his Stoutness Exercises in front of the glass: Tra-la-la, tra-la-la, as he stretched up as high as he could go, and then Tra-la-la, tra-la--oh, help!--la, as he tried to reach his toes. After breakfast he had said it over and over to himself until he had learnt it off by heart, and now he was humming it right through, properly. It went like this:

Tra-la-la, tra-la-la,
Tra-la-la, tra-la-la,
Rum-tum-tiddle-um-tum.
Tiddle-iddle, tiddle-iddle,
Tiddle-iddle, tiddle-iddle,
Rum-tum-tum-tiddle-um.

Well, he was humming this hum to himself, and walking along gaily, wondering what everybody else was doing, and what it felt like, being somebody else, when suddenly he came to a sandy bank, and in the bank was a large hole.

"Aha !" said Pooh. (Rum-tum-tiddle-um-tum.) "If I know anything about anything, that hole means Rabbit," he said, "and Rabbit means Company," he said, "and Company means Food and Listening-to-Me-Humming and such like. Rum-tum-tum-tiddle-um.

[anne]

A bear with a tax cut, I am like all "hooray."

Tra-la-la, tra-la-la,
Tra-la-la, tra-la-la,
Rum-tum-tiddle-um-tum.
Tiddle-iddle, tiddle-iddle,
Tiddle-iddle, tiddle-iddle,
Rum-tum-tum-tiddle-um.

[anne]

http://www.machaon.ru/pooh/chap4.html

1926

Winnie-The-Pooh
By A. A. Milne

...In Which Eeyore Loses a Tail and Pooh Finds One

THE Old Grey Donkey, Eeyore, stood by himself in a thistly corner of the forest, his front feet well apart, his head on one side, and thought about things. Sometimes he thought sadly to himself, "Why?" and sometimes he thought, "Wherefore?" and sometimes he thought, "Inasmuch as which?"--and sometimes he didn't quite know what he was thinking about. So when Winnie-the-Pooh came stumping along, Eeyore was very glad to be able to stop thinking for a little, in order to say "How do you do?" in a gloomy manner to him.

"And how are you?" said Winnie-the-Pooh.

Eeyore shook his head from side to side.

"Not very how," he said. "I don't seem to have felt at all how for a long time."

"Dear, dear," said Pooh, "I'm sorry about that. Let's have a look at you." So Eeyore stood there, gazing sadly at the ground, and Winnie-the-Pooh walked all round him once.

"Why, what's happened to your tail?" he said in surprise.

"What has happened to it?" said Eeyore.

"It isn't there!"

"Are you sure?"

"Well, either a tail is there or it isn't there You can't make a mistake about it. And yours isn't there!"

"Then what is?"

"Nothing."

"Let's have a look," said Eeyore, and he turned slowly round to the place where his tail had been a little while ago, and then, finding that he couldn't catch it up, he turned round the other way, until he came back to where he was at first, and then he put his head down and looked between his front legs, and at last he said, with a long, sad sigh, "I believe you're right."

"Of course I'm right," said Pooh.

"That accounts for a Good Deal," said Eeyore gloomily. "It explains Everything. No Wonder."

"You must have left it somewhere," said Winnie-the-Pooh.

"Somebody must have taken it," said Eeyore.

"How Like Them," he added, after a long silence. Pooh felt that he ought to say something helpful about it, but didn't quite know what.

[im1dc]

BTW, for those who pay attention to such things, please remember that when you see and hear Billionaires on TV talking about what needs to be done to resolve the Credit Crunch Crisis they ARE TALKING THEIR BOOK.

This includes Mayor Bloomberg and Warren Buffet.

The ROOT CAUSE of the current ECONOMIC problem lies with the implied ASSUMPTION that people and institutions expect to earn above market returns ad infinitum.

For example 8% per annum. Sounds reasonable, right?

Do the math.

Then do the math for 12% , 15% and 20%.

REALISTIC expectations do not currently exist.

Adjust yours.

Be aware and beware.

[Doug]

Anne - witness the Palin bashing all over the blogs today. They're ready to crucify her.

[im1dc]

Last nights Charlie Rose interview with Warren Buffet is up at: http://www.charlierose.com/shows/2008/10/1/1/an-exclusive-conversation-with-warren-buffett

and Barry Ritholtz's Big Picture blog.

Hat tip to Barry Ritholtz.

[lonesome moderate]

"Can someone please explain why we should want to reduce foreclosure? Why should someone who never had any equity in their home and can't afford to make interest payments be allowed to live there? They never owned the house nor do they now."

One reason is that many of these people could easily afford to pay market rents for their houses, or could handle a mortgage as large as anyone else would pay for the house. The mortgage holders kick them out anyway--I'm not sure why, but it appears to be largely because the mortgages have been securitized, leading to a situation where nobody can make common sense decisions.

[im1dc]

In the video Warren Buffet says he would "hand Paulsen a blank check" to invest in America.

Warren Buffet this week invested $3 Billion each in GE and GoldmanSachs.

SoT Paulsen is the former CEO of GoldmanSachs.

Buffet says in the video he has "done business" with both GE and GoldmanSachs for decades.

IMO, Buffet is saying I trust Paulsen to make me money.

He is not saying Paulsen will make Average Americans money.

Accordng to Buffet unplugging the constipated Credit Markets will 'trickle down' to Main Street, save jobs, etc.

Warren want us to trust him. After all many do.

That is an updated version of the dictum "What is good for General Motors is good for America".

God save us.

[Tonstant Reader]

Anne:
I just fwowed up.

[im1dc]

Stiglitz has company, a voting member of the Democrat Party in the House:

"Democrat's criticisms resonate for some party members"

By Ken Dilanian, USA TODAY

WASHINGTON — Last week, Rep. Brad Sherman of California...
skipping
I'm opposed to the bill because I read it," says Sherman, who represents suburban Los Angeles. An accountant and a graduate of Harvard Law School, Sherman chaired a California business tax appeals board before winning election to Congress in 1996. He has served 12 years on the House Financial Services Committee.

The Almanac of Americans Politics says Sherman's voting record "has been notably more moderate" than other Los Angeles County Democrats.

"If we do nothing, we will not have a meltdown," Sherman says. "And yet I think there are things we can do that can make things better. And I would swallow hard and accept Paulson's proposal if it had all the controls and modifications that it needs."

Sherman's No. 1 concern, he says, is that the bill would allow foreign banks to transfer toxic assets to their U.S. subsidiaries and unload them on American taxpayers. The bailout at first only applied to U.S. banks but was expanded to include foreign banks with U.S. operations.

Paulson defended that change Sept. 21 on ABC's This Week. If a foreign bank in the U.S. is "clogged with illiquid assets, they have the same impact on the American people as any other institution," he said.

Sherman wanted a cutoff date that would have prevented foreign banks from selling Treasury distressed assets they dumped into their American subsidiaries after the bill was announced. But House Speaker Nancy Pelosi, D-Calif., and Financial Services Chairman Barney Frank, D-Mass., told him that was unacceptable to the Bush administration, he said. Pelosi spokesman Brendan Daly was unable to offer a response Wednesday last night.

"What they're saying is, we have to pass a bill now, and if we don't, there will be blood in the streets and Democrats will be blamed," Sherman says.

http://www.usatoday.com/news/washington/2008-10-01-sherman_N.htm?loc=interstitialskip

Call your Congressperson, if you haven't already, and demand that they vote NO tonight. Please.

[anne]

http://www.nytimes.com/2008/10/03/business/03naysayers.html?ref=business&pagewanted=print

October 3, 2008

A Curious Coalition Opposed Bailout Bill
By DAVID M. HERSZENHORN

WASHINGTON — Senators who voted against the $700 billion financial rescue plan are one of the most curious coalitions of lawmakers ever to share common ground.

It included arch-conservative Republicans like Jim DeMint of South Carolina, liberal Democrats like Russ Feingold of Wisconsin, and Bernard Sanders, independent of Vermont, who is regarded as the Senate’s resident socialist....

[anne]

That was why the immediate bashing of Republicans when the House vote failed, completely ignored which Democrats had voted against the sort-of-almost-like-rescue and why. The 95 Democrats who voted against the legislation needed to be heard, but were ignored both by the leadership and remarkably by analysts as well. Democrats have the majority, an important majority in the House, but Nancy Pelosi failed to understand what was happening.

[Hal]

The easiest and best solution that could be implemented at once is for the government to do what Warren Buffett did: inject capital into the needy institutions in return for preferred stock paying a nice dividend that can be redeemed at a future date when the corporation has got itself in order.It would be a faster, cheaper and better solution. That is probably why it will not be done by this administration.

[paine]

stig at his lamby pie plays wolf best

i agree with it ...err except for the bail out
i say block the bail
and in january do stigs bottom upppers for home owners:

"First, housing can be made more affordable for poor and middle-income Americans by converting the mortgage deduction into a cashable tax credit. ... Second, bankruptcy reform is needed to allow homeowners to write down the value of their homes and stay in their houses. Third, government could assume part of a mortgage, taking advantage of its lower borrowing costs."
and do em
immediately and retro actively

more/s needed of course

a balance trade dollar policy

and a huge payroll tax cut
for starters

[anne]

"That is probably why it will not be done by this administration."

No; Democrats could pass legislation as they saw fit now and the President would almost surely sign and Democrats have Congressional majorities. Enough with looking past the Democratic leadership.

[paine]

"Leverage doesn't kill capital
Capial kills capital"

a pig knows that
kerala always votes for the wrong cp
but your gun club trog-com down with all florish
prolly has no upside
ie
hasn't got answers ...even for nepal

[anne]

Tax cut (Democratic tax cut) on rum producers fails to save us, but I am the more contented for cut anyway.

[paine]

Enough with looking past the Democratic leadership

anne i agree but if its just
we want full credit i don't care
if however
its further proof besides ob's advisers
that the dlc or neo dlc or under cover rehabed dlc
still rules the party .....

read up on fdr's and the dem congos
game playing from december of 32
till his inauguration in march 33
the nation suffere a long aweful winter waiting
while hoovers bank plan
could be co opted by the new deal

[paine]

anne the prog wing of the party
actually disgraced itself
by splitting its vote too

the dems have prolly 60-70 left prog house members
they crumbled on war funding and they crumbled here

[anne]

Paine, please reference the winter of 1932-1933.

[paine]

"Sherman's No. 1 concern, he says, is that the bill would allow foreign banks to transfer toxic assets to their U.S. subsidiaries and unload them on American taxpayers. The bailout at first only applied to U.S. banks but was expanded to include foreign banks with U.S. operations"
now that shows how the core elites of our two prty system
are internationalists
looking out for our trans nats foreigm colleagues

hence summers phrase
stateless elite

better branded as
elites without a country

sure
they may "run " the north hemi's various nation states
they just down care about their people

[paine]

anne its my ex wife and my daughter
both of whom
have moved on to better and brighter virtual quarters
who do the digging and retrieving in my environment

like shaby churchill i really on others to bring me xeroxed nuggets

btw

you are a pleasing data trove yourself
but any narrative on the transition
like the recent pop selling retelling
of the first 100 days
gives parts of the pattern
enough i suspect
for a bright bulb like you
to catch the gimmicks uber-gestalt

[paine]

hal
problem with that plan
the outfits take the lead
uncle needs to cease these institutions now
willing or not
and run em as gubmint deputies
nationalize the strong ones not the weak

sweden let those foul wallenbergs off the hook
because they didn't need no stinking state equity partner
they had foreign friends...

[paine]

"IMO, Buffet is saying I trust Paulsen to make me money"

IMO your O is correcto

[paine]

"many of these people could easily afford to pay market rents for their houses"

EXACTAMENTE

[paine]

SPOT ON

Hat tip
im1dc says

isn't it a cap tip these days ???
btw sounds like me calling stig joe
sense when would a big mouth big time hack
like ritchy brother
give two shits about
your ...hat tip in marks comment cage ??

[anne]

http://angryarab.blogspot.com/2008/09/if-i-had-enough-funds-to-assist.html

September 30, 2008

"If I had enough funds to assist the American economy, I would do all that I can." *

* Nuri Al-Maliki - http://ap.google.com/article/ALeqM5jaCk5jgsruLSTI-HuXoqIor1JrlgD93GF46G0

-- As'ad AbuKhalil

[Oops.]

[paine]

"The real question is why is Congress so keen to do 'something", but not the "right thing"? It's all panic, hasty action, rather than thoughtful."

great passage

first it is the right thing for the bill's ultimo sponsors
and its a bums rush job
so we can't find stuff like ...
foreigners get bailed too

[anne]

These are serious matters, the Democratic leadership from the time Senator Clinton gave over campaigning has been no leadership. Legislation has been abandoned on much promised matters, the rescue legislation is an Administration notion that leading Democrats simply adopted with no concern for fundamental supporters.

A tax cut for rum producers has somehow become more important than extending health care insurance to 3.8 million needy children not for $700 billion but for $7 billion and this at a time when when employment and wages and benefits are becoming more problematic and 22 states are cutting services.

I am not impressed.

[anne]

The vote on extending health care insurance for needy children was repeatedly promised by Democrats, then conveniently forgotten by leadership especially when a show of such faith might have been effective. What I do not find is that leadership has had the least of such ideas, and I do not understand why.

[anne]

Even this day, we are warned in the New York Times warns us not to become Japan, but as Krugman understood in the 1990s we might need to become Japan in just such a circumstance. I suppose however that tomorrow can be useful for casting about blame on a job market weakening the entire years and threatening much before.

Where is Democratic policy? Where is Austan "Magic Guy" Goolsbee.

[anne]

Better and corrected, Where is Austan "Chicago Guy" Goolsbee?

[anne]

By the way, if the intimation is that waiting for a Democratic President and increased Congressional majority is the current strategy, the reason not to even keep a repeated promise to vote on stronger protection against wage discrimination, then there is too much duplicity to support the Democratic leadership. The sense I have is this leadership is precisely what we have and will have.

[Doug]

Meanwhile the crucifixion of Sarah Palin to commence in a few hours...

[anne]

How about not being a creep, or is not being a creep possible, or am I missing something about creepdom?

[Obama will Save Us]

Anne Dear. Obama will save us. Just you wait and see.

Obama will provide progressive leadership. Just you wait and see.

[Julio]

Stiglitz:

"But it is impossible for politicians to do nothing in such a crisis. So we may have to pray that an agreement crafted with the toxic mix of special interests, misguided economics, and right-wing ideologies that produced the crisis can somehow produce a rescue plan that works – or whose failure doesn’t do too much damage."

Anne:

"Tax cut (Democratic tax cut) on rum producers fails to save us, but I am the more contented for cut anyway."

paine:

"anne the prog wing of the party
actually disgraced itself
by splitting its vote too"

Bob Dylan:

"The sweet pretty things are in bed now of course
The city fathers they’re trying to endorse
The reincarnation of paul revere’s horse
But the town has no need to be nervous
...
Mama’s in the factory, she ain’t got no shoes
Daddy’s in the alley, he’s lookin for food
I’m in the kitchen with the tombstone blues"

[anne]

http://www.bobdylan.com/#/songs/tombstone-blues

1965

Tombstone Blues
By Bob Dylan

The sweet pretty things are in bed now of course
The city fathers they're trying to endorse
The reincarnation of Paul Revere's horse
But the town has no need to be nervous

The ghost of Belle Starr she hands down her wits
To Jezebel the nun she violently knits
A bald wig for Jack the Ripper who sits
At the head of the chamber of commerce

Mama's in the fact'ry
She ain't got no shoes
Daddy's in the alley
He's lookin' for the fuse
I'm in the streets
With the tombstone blues

The hysterical bride in the penny arcade
Screaming she moans, "I've just been made"
Then sends out for the doctor who pulls down the shade
Says, "My advice is to not let the boys in"

Now the medicine man comes and he shuffles inside
He walks with a swagger and he says to the bride
"Stop all this weeping, swallow your pride
You will not die, it's not poison"

Mama's in the fact'ry
She ain't got no shoes
Daddy's in the alley
He's lookin' for the fuse
I'm in the streets
With the tombstone blues

Well, John the Baptist after torturing a thief
Looks up at his hero the Commander-in-Chief
Saying, "Tell me great hero, but please make it brief
Is there a hole for me to get sick in?"

The Commander-in-Chief answers him while chasing a fly
Saying, "Death to all those who would whimper and cry"
And dropping a bar bell he points to the sky
Saving, "The sun's not yellow it's chicken"

Mama's in the fact'ry
She ain't got no shoes
Daddy's in the alley
He's lookin' for the fuse
I'm in the streets
With the tombstone blues

The king of the Philistines his soldiers to save
Puts jawbones on their tombstones and flatters their graves
Puts the pied pipers in prison and fattens the slaves
Then sends them out to the jungle

Gypsy Davey with a blowtorch he burns out their camps
With his faithful slave Pedro behind him he tramps
With a fantastic collection of stamps
To win friends and influence his uncle

Mama's in the fact'ry
She ain't got no shoes
Daddy's in the alley
He's lookin' for the fuse
I'm in the streets
With the tombstone blues

The geometry of innocent flesh on the bone
Causes Galileo's math book to get thrown
At Delilah who sits worthlessly alone
But the tears on her cheeks are from laughter

Now I wish I could give Brother Bill his great thrill
I would set him in chains at the top of the hill
Then send out for some pillars and Cecil B. DeMille
He could die happily ever after

Mama's in the fact'ry
She ain't got no shoes
Daddy's in the alley
He's lookin' for the fuse
I'm in the streets
With the tombstone blues

Where Ma Raney and Beethoven once unwrapped their bed roll
Tuba players now rehearse around the flagpole
And the National Bank at a profit sells road maps for the soul
To the old folks home and the college

Now I wish I could write you a melody so plain
That could hold you dear lady from going insane
That could ease you and cool you and cease the pain
Of your useless and pointless knowledge

Mama's in the fact'ry
She ain't got no shoes
Daddy's in the alley
He's lookin' for the fuse
I'm in the streets
With the tombstone blues

[ken melvin]

I submit that without the housing bubble the economy would have collapsed 5 years ago.

[anne]

We could of course go round to 1884, and “We are Republicans, and don't propose to leave our party and identify ourselves with the party whose antecedents have been rum, Romanism, and rebellion.”

Me, I am all rum, Romanism, and rebellion.

[ken melvin]

"... Why should someone who never had any equity in their home and can't afford to make interest payments be allowed to live there? They never owned the house nor do they now."

Because they ran out of other people to sell the damned things to.

[anne]

"I submit that without the housing bubble the economy would have collapsed 5 years ago."

Actually; I would argue quite the reverse that the economy would have been stronger absent the housing bubble, for the housing bubble artificially soaked up funds that could and would have been better invested, but more later.

[anne]

Where domestic investment spending has gone since 2002, has been bothering me. I need to think this through.

[ken melvin]

"Sherman's No. 1 concern, he says, is that the bill would allow foreign banks to transfer toxic assets to their U.S. subsidiaries and unload them on American taxpayers.

Caveat emptor, eh?

[ken melvin]

Anne :

In 03, they couldn't give it away. No industry - no investment. No quick return - no utility. No taxes - no infrastructure.

[Bruce Wilder]

anne: "Democrats have Congressional majorities"

Not in the Senate.

They are able to organize the Senate, because Joe Lieberman voted with the Democratic Caucus. But, Senator Lieberman supports the Administration and Senator McCain's candidacy.

[paine]

"Me, I am all rum, Romanism, and rebellion"

I'LL DRINK TO THAT !!!!

[paine]

BW

STAR SHIP LOG SUPPLEMENTAL:

and the dems need 60 votes to blow off
the filler buster roo

to me here's enough to sludge to sink em

they could block this admin bail
and the war budeget as well

that the peace wing progs in the house
didn't bolt the leadership line on both
and bolt en massif
is a disgrace
to their obviously
mis labeled caucus
they should have broken the house leadrship
by threatening to bolt the party caucus
and throw the house into a new leadership vote
that's hard ball

[paine]

lieberman alone
that muppet from bridgeport
has more power in the senate
then the entire prog caucus
(~ 70members
with even a couple com-chairmen )
has in the house

nb barn hen frank

[paine]

anne
you stray into crowding out voodoo land
(viewed full cycle vs full cycle)
you well know
domestic productive investment was poop this decade
and not for lack of availible funds inside and or
around the big corporations

the lot bubble created wealth effect
credit powered consumer demand
as a pro temp
by product

[OhNoNotAgain]

Anne,

"By the way, if the intimation is that waiting for a Democratic President and increased Congressional majority is the current strategy"

That is exactly the strategy, as far as I can tell. I'm not sure if they could do much, anyways. As Bruce indicates, you can pass bills all day in the House and they'll never make it past the Senate. And, as much as you'd like to make this about the Democratic leadership, I believe that the issue is more the virtually lock-step nature of Republican voting in both houses. Their entire reason for existence during the Bush administration has been to block anything that doesn't jive with what the Republican party and Bush administration wants. This bailout bill is the first time since the 90's that I've seen the Republicans actually start to splinter, and I think that it bodes well for the future.

And, for the record, I thought that this was funny as hell:

"Me, I say the heck with 'em; kick the heck out and beat up a few neighborhood children if they turn up to watch. Pound 'em, trash 'em. I even have my Red Sox bat, Manny signed. Pound 'em."

[Bruce Wilder]

paine: "they could block this admin bail
and the war budeget as well

"that the peace wing progs in the house
didn't bolt the leadership line on both
and bolt en massif
is a disgrace"

Nancy Pelosi, Speaker of the House, is also one of its most progressive members. Way back when, she offered a way forward, when she backed an ex-Marine, Jack Murtha as Majority Leader. The DLC backed the winner, Steny Hoyer.

As longtime ranking Democrat and sometime Chairman of the House Defense Appropriations subcommitte, Murtha knows how to write a Defense Appropriations bill that would hamstring the Administration. He offered to do this. The majority chose to acquiesce, rather than fight.

The "peace wing" don't know how to butter their own bread.

[BJ Feng]

I guess you haven't been watching too closely if you think this is the first time Republicans have splintered. The party started splintering as soon as George W. Bush proposed the Medicare D plan. I was against the plan, but I was caught offguard as many other conservatives were. George Bush had enough goodwill then to get that plan through. But after 8 years, conservatives (not all Republicans are conservatives, and not all conservatives are Republicans) are now wise to his ways, and are willing to stand up and say no. This is very difficult because the president is usually the leader of his political party. He dictates the direction of the party, and George Bush has clearly decided to take the Republican party in the direction of Democrats, a direction that the majority of Americans disagree with.

If the crisis were not so serious, and the plan did not have so many safeguards for taxpayers, I would be with the Republican dissidents in their opposition. The financial sector is different from other sectors. If a GM fails, Americans can still buy good cars elsewhere. There will be extra negative effects as laid off workers won't be able to consume as much as they did before, but not to the same degree. Financial institutions are levered, they also act as a conduit between savers and borrowers. That's why there are so many regulations that they have to obey. Clearly the regulations have to be reworked, but first things first. We have to heal the financial sector first, and make sure the participants bear the vast majority of costs.

[BJ Feng]

One thing that is very dangerous and absolutely cannot be allowed to pass is reforming bankruptcy laws to allow judges to unilaterally lower mortgage payments or lower the amount of principle owed. If a deadbeat borrower can screw lenders just by declaring bankruptcy, just think of the terms lenders will demand to make a mortgage. Anne and I, and a great number of you are both lenders and borrowers. We lend through our investments in bond mutual funds, and receive very low cost mortgages that allow us to borrow at lower rates than Neiman Marcus, or Chesapeake Energy, and far lower than GM or Ford. However screwing lenders who did nothing wrong other than to trust a person with their money will make it impossible to get an affordable mortgage!

Should deadbeats be thrown out? Absolutely! They made a promise to pay, and fully understood that if they couldn't pay their monthly mortgage, they would have to sell their home. I cannot believe this is even being considered, and shows the poor judgment of Barack Obama and others who support this view. Allowing a judge to modify the terms will add risk and uncertainty to the equation. Lenders will demand compensation for bearing the additional risk, the responsible people who can and do pay their mortgages will be punished thanks to a stupid policy.

The vast majority, well over 90% of the people who have mortgages are paying their mortgages and can afford their mortgages. There are many more who DID NOT PURCHASE A HOME, choosing instead to save up for a time like this when home prices are more reasonable. Now you would punish the prudent, and reward reckless behavior and reckless borrowing. Sorry, but I believe in justice. Perhaps it's my own experience with friends during the real estate boom. They look out exotic mortgages to speculate on real estate. They were smart and understood they could walk away if things didn't turn out well, one gave a 10% down payment and another didn't even take out a single penny to get that home!!! I'm sorry, but they should not be rewarded. Do speculators make up the majority of those facing foreclosure? Probably not, but whatever the reason, people need to be responsible. They need to understand what they can afford and what they can't. And if they overextend, then they bear the consequences, it's a value lesson, and one that we must continue to teach.

[Julio]

And the Typo of the Day goes to:

B. J. Feng:

"...allow judges to unilaterally ... lower the amount of principle (sic) owed."

Another giveaway to Wall street.

says...

"Me, I say the heck with 'em; kick the heck out and beat up a few neighborhood children if they turn up to watch. Pound 'em, trash 'em. I even have my Red Sox bat, Manny signed. Pound 'em."

Talking about Democrats here, right?

[OhNoNotAgain]

"One thing that is very dangerous and absolutely cannot be allowed to pass is reforming bankruptcy laws to allow judges to unilaterally lower mortgage payments or lower the amount of principle owed."

You've got it backwards. It's actually a better deal for the banks. It keeps the home-owner in the home and making payments, which is quite a bit better than foreclosure, especially when such foreclosures are happening in the thousands, taking down the value of every non-foreclosed home in the area. Do you really think that banks would prefer to foreclose on an underwater mortgage instead of re-working the terms of the mortgage ? We're not talking about a situation where a judge is reducing the principal on a mortgage that isn't underwater, so you can dispense with that fantasy.

And another thing I find fascinating is how afraid folks like yourself are of the "little guy" getting one over on the poor, poor banker. The banker is going to give out whatever terms he can in order to close on the mortgage. If he wants to stop selling mortgages because he's afraid of what the bankruptcy judge will do, then he should perform due diligence on the borrower or get out of the mortgage business.

[wjd123]

After the house voted last week, the leader of the black caucus said that he could deliver the twelve votes the democrats were looking for if they could deliver bankruptcy reform to him. Reform that in my opinion makes eminent sense because it would limit foreclosures, stimulate the economy, and help preserve asset prices.

Obama has promised that his administration will be a bottom-up administration putting the law back on the side of the little guy. Getting bankruptcy reform as part of the bailout bill is his chance to show leadership. Get together with the democratic congressional leaders and see if reform can be done despite republican obstruction.

How hard can it be. It's the very bankers we are bailing out that are pushing not to have bankruptcy reform included in the bill. They want to be bailed out, but they don't want to help bailout Main Street. How is it that the very people who brought the country to the abyss, the very people who are asking the taxpayers for $700 billion to buy up their mistakes can get away with being so arrogant at the very time people are so angry with them?

If the democrats are the party that will fight for Main Street then this is their chance to show some resolve. The republicans are in no political position to block helping Main Street without handing Obama a winning campaign issue.

By giving into the banking lobby on the bankruptcy reform issue, democrats look weak. Obama by not championing the reform issue is sending a message that his administration will be a small "r" administration and not a robust capital "D" one.

This bailout bill is a sign, an omen of what type of legislation we will get from his hand-across-the-aisle Administration. It dosen't look very bottom-up to me.

[rufus]

"If the democrats are the party that will fight for Main Street then this is their chance to show some resolve. The republicans are in no political position to block helping Main Street without handing Obama a winning campaign issue.

By giving into the banking lobby on the bankruptcy reform issue, democrats look weak. Obama by not championing the reform issue is sending a message that his administration will be a small "r" administration and not a robust capital "D" one."

"How hard can it be."?

Next to impossible when you do not have the votes to over ride a veto