Feldstein and Stiglitz on the Stimulus Package

Comments

[Bubble Meter]

Both these guys are proposing to prop up the housing bubble, rather than let the free market correct the problem. Homeowners are not the victims of the housing bubble. Renters are the victims, because we've been priced out of buying affordable homes for almost a decade now. Furthermore, these guys are proposing that renters pay (via their tax dollars) for the mortgages of irresponsible homeowners.

[Lee A. Arnold]

Letting the "free market correct the problem" sounds like putting 2.5 million homeowners out on the street. As I understand it, both Stiglitz and Feldstein appear to endorse a partial sweetener to the banks in return for a write-down of the mortgages to reflect existing market prices. This sounds like a way to making the financial system work for the people, instead of the horrible bailout of the political donor class. What no one will say is that much of this can go "off budget," i.e. be money from the printer.

[ed]

The stage is set for a sharp depreciation of the US dollar. With the economy in recession a weaker dollar will have no effect in the inflation rate as business and labor will have no pricing power. The export sector is what will save the US economy going forward.

[Bubble Meter]

Lee A. Arnold says...
Letting the "free market correct the problem" sounds like putting 2.5 million homeowners out on the street.

Nice appeal to emotion fallacy there, but your wording is intentionally misleading. No, they won't be "out on the street." Instead, they will rent. Their empty homes will go into foreclosure. Then, someone else—likely a renter who has no home of his own—will buy the home. It's not like houses are being torn down. The same number of housing units will still exist. The only difference is that the irresponsible people will lose ownership and the responsible people will gain ownership.

If someone paid an inflated price for a house, why should other people—who have no house of their own—have to bail them out? People who support homeowner bailouts want the Have Nots to bail out the Haves. It's the opposite of Robin Hood.

[Markel]

Interesting to propose a "Homeowner Chapter 11," emphasize the usefulness of bankruptcy to airlines and auto companies, then seamlessly segue into a suggestion that the government prop up the banks' terrible balance sheets--without a hint of irony. There are clearly a number of major banks that need have their losses recognized immediately, and go into bankruptcy and seizure. Only then can recapitalization work. The fact that no one is making this point demonstrates that cognitive capture of economists by the financial industry is total and irreversible.

Oh, and using the stimulus to send more people into the military? Yes, you can really position people for the future by bringing them home dead, maimed, or psychologically damaged.

[Patrick]

They are decidedly NOT proposing to prop-up the housing bubble. They are proposing an orderly work-out of the losses. The reason this is better than letting it all come crashing down should be obvious:

1) it prevents enormous amounts of misery and social dislocation.
2) it provides a measure of certainty and stability to financial markets - sure they are going to take more big losses, but there will be a process by which it will happen and everyone will know who is on the hook for what.
3) it avoids an undershoot that would make things worse than they really need to be.

There's a larger issue though. In my opinion it's likely that much of the new housing in the exurban asteroid belts around Phoenix, LV, LA, San Diego, etc. is probably effectively worth $0 considering the energy diet of the future, the likelihood of much reduced consumption in the future (including autos), and the huge cost of maintaining the sprawling infrastructure of roads, sewers, water, etc. to keep the suburban sprawl functioning. As it is, entire sub-divisions are ghost towns. Does it make sense to have a cram down for the last 2 families in the sub-division when their taxes will be insufficient to maintain the required infrastructure? I don't think so. In these cases, it would make more sense to buy them out and let them move to a more sustainable area. Then the houses could at least be salvaged for scrap.

[Lee A. Arnold]

Blaming homebuyers for creating a housing price bubble to the detriment of renters who then couldn't afford a house, overlooks the fact that those renters trying to buy would have been driving up the prices, too, by adding their own demand. Indeed many of the new homebuyers probably had been renters. There's also the fact that not all homebuyers were irresponsible, some were misled. Anyway they will all be out on the street looking for a place to rent, and you'd better have 2.5 million rental units ready. The sudden dislocation of that many families will cost the economy a lot more.

[jalrin]

To be fair, I think the military stimulus suggestion is more about speeding up the repair of worn out military equipment and base facilities that are going to need to be done anyway even after the Iraq pullout that Obama is thankfully committed to. This is the same idea as a lot of the civilian stimulus projects: do things you are going to do anyway now when we need the stimulus instead of waiting to do it.

[Rental Chump]

You'd better watch what you say Bubble Meter. If there is one type of person consistently maligned on this blog, it is those of us who chose not to buy a house or take on an unsustainable burden of debt over the last five years. Savers aren't economic stimulators, so the macro modelers don't like us. We made the dangerous but correct prediction that prices of stuff like houses might actually go down when everybody else ran out of money. That makes us deflators. We're worse than the greedy Wall Street pigs in the eyes of the macroeconomists, because we kept and still keep our money in our pockets. That puts innocent people out of work by sending the economy into an endless downward spiral. I'd advise you to get with the program quick Bubble Meter. Go out and buy that house. Savers are the root of all macroeconomic evil. By not buying that house for three times what it cost five years ago you are putting yourself and the entire country, indeed the entire world at risk. Don't worry about the house continuing to go down in value because there will still be plenty of other repulsive savers/renters out there to call on to prop up the price of your American Dream through Stiglitz/Feldstein type programs. Its the one thing liberal and conservative economists can agree on.

[mmckinl]

Markel says...
Interesting to propose a "Homeowner Chapter 11," emphasize the usefulness of bankruptcy to airlines and auto companies, then seamlessly segue into a suggestion that the government prop up the banks' terrible balance sheets--without a hint of irony. There are clearly a number of major banks that need have their losses recognized immediately, and go into bankruptcy and seizure. Only then can recapitalization work. The fact that no one is making this point demonstrates that cognitive capture of economists by the financial industry is total and irreversible.

Oh, and using the stimulus to send more people into the military? Yes, you can really position people for the future by bringing them home dead, maimed, or psychologically damaged.

Posted by: Markel | Link to comment | January 07, 2009 at 07:42 PM

~~~~

A great post ....

[Markel]

The rental comment makes no sense. Renters who did not buy drove up the price? And what happens to the foreclosed houses from people flooding the market--do the vaporize, or become, say, rentals?

Anyway, neither economist noted that home prices and even transactions have still been far above historical norms. This is not the place or time to prevent overshoot. And I still need clearer explanations of why I will be compensating banks for bad loans, in return for nothing. Why?

[John V]

This is rather strange from Stiglitz and Feldstein:

Referring to the Tech and then Housing Bubbles, Stiglitz says:

America has been sustained on artificial bases now for a long time. And now all we're doing right now is repairing the current problems...we aren't thinking about about what's gonna replace what had given...uh...whatever energy the economy had before the collapse.

He never quite comes around to saying what caused the bubble because...quite frankly...I don't think he wants to acknowledge that issue because his view of economics simply doesn't permit the explanation of monetary policy. What I found disturbing however was that his mind was think deliberately about what "we're gonna do" to replace the bubble. That reasoning implicitly justifies the growth from the bubble. To me, that's faulty economic thinking.

Then Feldstein interjects and to point out the consumer spending bubble that has also popped. He points out that spending had been quite high these last years but is now contracting because people have lost a lot of "wealth" from stocks and home equity. Again, this justifies the bubble's gains. He then warns that the negative savings that had fueled spending is being turned into savings ("savings is creeping up" and will go higher...and that THAT is a problem...or as he says "A drag on the recovery". Sheesh.

Stiglitz then that this conundrum is "the fundamental macroeconomic problem" because this savings is good in the long run but bad in the short run.

I think it's the fundamental macroeconomic problem alright...meaning a fundamental problem with macroeconomics.

Macro misses the forest for the trees.

I understand that there's a fuzzy round about Keynesian macro logic to inducing spending to get economic activity moving to improve economic growth so THEN people can save and invest but I think it misses the point of what really is good for the economy....kind of like how a beer is good for the lush in the short run.

[Lee A. Arnold]

Rental Chump, I didn't buy a house and I probably never will. Also, macroeconomists are very much in favor of savers.

[Lee A. Arnold]

John V, stop embarrassing yourself intellectually and do your homework, for God's sake. Stiglitz has written about the origin of the bubble several times. Try here:

http://www.realclearpolitics.com/articles/2007/08/how_the_bubble_started.html

[John V]

Well, Sorry, Lee.

I didn't have a link to Stiglitz's article at my disposal. Hardly embarrassing.

[B Feng]

Sounds like Stiglitz and company want to follow the path of Japan which STILL hasn't recovered from its property bubble of the 1980's. Remember what all the economists were saying? It couldn't happen here because we're not stupid enough to delay the inevitable. We would allow the markets to function and take the pain immediately instead of dragging on the process and hiding the losses through artificial means.

But now when it's time to take our medicine, some find it too harsh. Let's try to reinflate the bubble, let's try to keep those who couldn't afford their homes in those homes.

In case some of you missed it, over 50% of the homeowners who've had their mortgages modified default AGAIN in just a few months. Why? Because they know they'll never see a penny from the sale of that home so it's just a rental to them. So if the mortgage is higher than what a real rental costs, then they should (and do) just walk away and rent instead. And if some government officials are stupid enough to allow them to live in that home, rent free for a few more months, then so be it, but don't expect homeowners to be as stupid as the government officials. They understand that it's useless paying a mortgage for 15-30 years if there is no upside and rent is cheaper elsewhere. The smart thing to do is walk away and rent until more money can be saved to buy another home sometime in the future. Alas, if only Shelia Bair and her cadres were as smart, logical, or sensible.

[Lee A. Arnold]

John V, I googled "Stiglitz cause of bubble." EVERYTHING is at your disposal.

says...

John V:

If you can't even be bothered to use Google to check things out, and can't figure out why you should be embarrassed for making false assertions (routinely), then you should just slink away.

Your concern troll act gets old fast.

[Lee A. Arnold]

B Feng, that article says around 50% of modified mortgages see further delinquency; about 33% default; that the main cause 6 months ago was bad loans and the main cause now is job loss. You didn't get the facts straight, and your psychologizing as to why all this happens is unsupported and unreal.

[Bruce Wilder]

There's something almost creepy about the way Feldstein and Stiglitz approach reasoning about the problem -- I agree with other commenters about that.

I, too, would like to see more concern about people, owners and renters, and less (or none) about banks. I don't see why any Federal money needs to be spent from the $350 billion in remaining TARP funds, compensating banks or other investors for mortgage losses. (Keep in mind that the Federal government is on the hook for some fairly substantial amount of Fannie and Freddie stuff, as it is. Plus, the Federal Reserve, acting on its own nickel with no input from Congress, has chosen to implement the original TARP idea of spending $700 billion buying up toxic crap.)

This "keep people in their homes" imagery, when used to justify a gift -- and that's what it would be -- to banks . . . it just makes me sick. Part of the elite corruption that's destroying this country, methinks. But, it is also just bad, bad policy.

We should be thinking about how to transition some fairly large number of people back to renting, while helping them rebuild their financial savings. I'd know that they were in touch with reality, when they start talking about some kind of Restructing Vehicle that could own, and, where feasible, rent foreclosed houses, or otherwise act to prevent destruction of good housing, or, where necessary (in the older cities of the rustbelt) to destroy surplus housing in an orderly. (The last may seem horrifying to some here, but it's a serious need -- in some former industrial cities in Ohio and Michigan, cities really need someway to close up shop on some streets, where there aren't enough people to live, and the alternative is a dangerous abandonment.)

Maybe as many as 5% of all households should probably be helped to rent, instead of owning. A period of low-rent, to allow recovery from the struggle to keep up an excessive mortgage, would be a god-send to some families.

[Bruce Wilder]

The other point that I found somewhat creepy was near the end, when Feldstein said that he feared that after 2 years, they would find that there was nothing to keep the economy functioning, nothing to replace the expedient of adding trillions to the national debt. Stiglitz agreed.

This is a very troubling frame. Essentially, they are saying, first there was the tech bubble, then the housing bubble, and now comes the bailout/stimulus bubble. And, after that the deluge, I guess.

This stimulus and the continuing bailout really shouldn't be just another bubble, should it? Shouldn't that be obvious?

Where's the determination to force adjustment? Why weren't Stiglitz and Feldstein talking about what the necessary adjustments are, and how they might be made?

Instead, we get Marty's weird plan for homeowner debt peonage.

Creepy.

[Lee A. Arnold]

Bruce Wilder, I don't like the bailouts any more than you do. But I think part of the immediate problem is the administrative complexity of doing anything other than keeping the current players (bankers, brokers) in place, doing what they already know how to do. Another part is that house equity IS savings, and helping people to hold onto that is ultimately a good thing.

[Enzo O]

One thing I find incredibly disconcerting in Feldstein's plan is the idea that people would voluntarily sign up for recourse loans in exchange for mortgage write downs.

Why would anyone sign up when you can walk away? Is there something I'm missing?

[calmo]

Well, if we ain't all on yer case today John V.
..let's try to remember the workin IT over and not workin somebody over...says calmo...lookin for a bashin prolly.
So many thoughtful comments otherwise, why not fasten upon Markel's:[like this]
Anyway, neither economist noted [in the Charlie Rose format, somewhat entertaining and sadly, somewhat less instructing, this "noting", yes? Misty, a huge advantage...so mo betta than Rosie...tisso.] that home prices and even transactions have still been far above historical norms. This is not the place or time to prevent overshoot.[calmo needing some clarifying: do note the abundance of vacant houses at abundantly high prices beside the low wages...that overshoot?] And I still need clearer explanations of why I [ non-shareholder, non-stake holder, prudent investor, exemplary indefatigable moral hazard instructor --but sadly, perennial loser in reparations] will be compensating banks for bad loans, in return for nothing. Why? [because, if the banks collapse, as Kashkari told the Senate Committee member, the entire system will collapse. you have a big heart and can carry these infractions this one time just so long as those associated with the bad loans are not using Mercedes on their daily commute with the understanding that regulations will be put in place to ensure that there is no repeat. ] Because.
As me pappy used to splain to me...in those difficult toddler years: power had no use for reason.

[Bruce Wilder]

Lee A Arnold: "But I think part of the immediate problem is the administrative complexity of doing anything other than keeping the current players (bankers, brokers) in place, doing what they already know how to do. Another part is that house equity IS savings, and helping people to hold onto that is ultimately a good thing."

"administrative complexity"? What's complex about, "you're fired" or "you're bankrupt, buh bye!"?

$6 to $10 trillion in home equity has disappeared, along with maybe $1.2 to $2 trillion in mortgage value. Tell me why Feldstein wants to "split" the loss with the bank, and tie the homeowner into a recourse loan?

What's gone is gone. It was a bubble. It might as well not have existed.

Home equity is at a low ebb, and that's a serious problem, but we're not going to accomplish anything by replacing it with Treasuries.

[BJ Feng]

I agree with Bruce on this one. What is the benefit of tying borrowers to these homes? Why not just let them walk away and let the banks take the loss, the ENTIRE loss, which can be offset by their usual profits over time. That's what the TARP funds are for, to tide the banks over and make sure they're solvent long enough to make back what they've lost in bad loans. The truly bad banks can be taken over by the FDIC and merged/sold to stronger banks.

The borrowers who are defaulting have very little of their own money invested. The best way to help them is to allow them to walk away and start saving for their next home purchase, hopefully under more reasonable circumstances.

Again, these foreclosures aren't the kind we've seen in the past. Borrowers were essentially given a call option because they put little to zero down, the lenders are the ones who are getting screwed. They should have to pay for their foolishness by foregoing years of future profits to write off these loans and paying interest on TARP money. Check your news reports, the TARP has actually made taxpayers $8 billion at the expense of big bad Wall Street. Liberals should be celebrating, Wall Street is getting the shaft!

"New Hampshire Republican Sen. Judd Gregg estimated that the [TARP] program has had a gain of about $8 billion in the past three months. "The TARP, for all its warts, has involved using tax dollars to invest in assets that will have a return to the taxpayer," Sen. Gregg said. "In fact, the estimate to date is that the TARP has actually had a gain of about $8 billion, while recapitalizing the financial system. With this type of stimulus, there will be little, if any, long-term increase in the debt."

[ken melvin]

Don't know, but all economists I know outside of academia work for banks.

Feldstein's implying that the banks are waiting to see how much Uncle's going pick up, i.e., wanting to make their best deal. Clean slate appeals to me.

[Markel]

Bruce, everything you complain of is, to me, symptoms of cognitive capture. Nobody is presenting your critiques in the public debate.

We do not seem to have learned anything from the last few disasters. During the bubble, during the buildup to Iraq, the "serious" people conducted closed-loop discussion where they nodded sagely and exchanged received ideas and conventional wisdom. Outside critics were dismissed as rude hecklers. When the hecklers proved correct, and the elites an epic fail, everyone pretends the hecklers never existed. "Everyone" thought Saddam had WMDs. "No one" predicted the current mess.

An ossified elite that resists ongoing pressure to change slowly often ends up snapping in half very quickly.

[Patrick]

Markel:

"Why ... compensating banks for loans"

Necessary evil. The financial system is bankrupt, literally. Right now, the Fed is filling the void, but that can't last forever. Without functional banks and credit the economy doesn't work very well, or at all. I share your concern about moral hazard though. TARP is a disaster. The bailout should have been a triage to weed out and euthanize zombie institutions, then a Scandinavian style temporary nationalization. It would have been much cheaper in the long run than this disorganized, idiotic, ineffective response.

Based on recent posts at CalculatedRisk, the financial system is in for another shock as a CRE crash starts wiping out smaller regional banks. So maybe Treasury will get a chance at a do-over.

Though, to be fair, I suppose the US Treasury probably didn't and probably still doesn't have the horses to pull of a Scandinavian style rescue after 8 years of the Bushies dumbing down public institutions. But, after all the layoffs on Wall St, there might be some capable people looking for work.

[halbhh]

Again one hears that foreclosures are a source of trouble, and need to be solved.

But....foreclosures help drive down house prices back to levels where new families can afford to buy a home, levels where buyers will become interested, levels where new home sales can pick up and the housing industry have a chance and a hope of recovery, and all the related industries.....

And....foreclosures stimulate the economy, since in many cases they mean that households then have a larger available discretionary amount of money since renting costs less than the crushing house payments they escaped.

So, foreclosures help bring us closer to some recovery and help increase discretionary spending.

[Markel]

"Why ... compensating banks for loans"

Necessary evil

Patrick, you contradict this statement with the rest of your post, which I agree with. I have no qualms about throwing banks into bankruptcy, nationalizing them, and then recapitalizing them. This way, I get a clean, solvent banking system out of the deal, with money to lend. What we have now is quite different.

I have said this before, and I will say it again, until I hear it reflected by one of our wise circle of noted economists. You cannot successfully recapitalize a banking system by making fixed and specified asset contributions when the system has unspecified and indeterminate liabilities.

[halbhh]

Markel, since the future balance sheets are going to remain unknown precisely as they depend on the general economy, the idea was of course that after many bad actors (Countrywide, Washington Mutual) left the stage, then the remaining players would be the less-bad actors (think of Wells Fargo for instance), and the idea was of course to save the less-bad actors to prevent a bigger psychological panic in the nation and a more rapid and sudden spiral, etc. -- to buy time for other measures, monetary and fiscal, to do their work.

Perhaps you'd prefer to see only the best banks survive and become the new banks for most people. That would indeed be a nice situation if there was a way to get there without an overwhelming panic. One possible means here and now would be to "invest" more in the soundest medium sized banks (if there are any!), and perhaps further actions to support moves such as where Wells Fargo beat out the weaker Citigroup in taking over a large bank recently.

[Larry]

Here's my stimulus "speech"

My Fellow Americans

American consumers have carried the world economy forward during recent years. We were able to do this because we were willing to borrow money, using our credit cards and our houses to pay for ever more goods and services. Producing those goods and services meant jobs and incomes for people everywhere, as well as tax revenues to pay for government. We were willing to borrow and lenders were willing to lend because we all came to believe that the value of our homes, which had steadily increased in many places for 25 years or more, would continue to increase, and to do so much more quickly than the overall economy. Lenders, and the financial system surrounding them, accepted loans with smaller and smaller down payments, to borrowers with less and less ability to repay, using higher and higher appraisals.

Then something changed, beginning in late 2006. Home values stopped going up and instead began to fall across the entire country. And in only a few months, our economy began to break down. The effects were first visible in the financial system. Banks and other institutitions could no longer borrow money using mortgages as collateral. Hundreds went out of business and many others had to shrink, resulting in many layoffs. And now the crisis has spread into the rest of our economy and to the rest of the world. Sales are down everywhere. Slow sales along with extremely tight credit has forced factories, shippers and retailers to lay people off, because there is no longer work for them to do and because working capital is no longer available. Each round of layoffs lowers sales even more, producing another round of layoffs, creating a downward spiral with no bottom in sight.

It's my job to figure out how to stop the spiral, and to find a new balance that gets people working again in a growing economy. Here's how we're going to do it.

Since American consumers are going to be busy paying down credit card and mortgage debt, your government is going to step in to replace their spending. You probably noticed that the government was already running a tab before the crisis began. Well that tab is about to get bigger. Over the next two years, we're going to borrow money to cover the spending gap. The amount needs to equal the spending shortfall and comes to about 7% of our economy, or $2T. That's a large amount of money, but we believe that any less will not stop the spiral.

One of the big things this spending buys us is the time that we need to find the new balance. Time for each of us to adjust our personal situation, whether by paying down debts, by restructuring a mortgage, or maybe by finding a new job. Time for companies to adjust to less activity in real estate and more activity in other markets. Time for the financial system to rebuild its balance sheet, moving resources into sectors with real growth potential, such as energy and health care.

We are using the following principles to pick places to put the additional money:

- Protect existing local and state government services and jobs
- Buy now things that we would have bought later anyway
- Help unemployed workers pay their bills and find work
- Help homeowners avoid foreclosure
- Fund research in areas that will grow fast in coming years
- Build/rebuild infrastructure that will pay us back with improved productivity
- Use the rest of the money to cut taxes for low and middle income households and to match our corporate tax rates to those of our European competitors.
- To Congress: Ixnay on the earmarksay.

Our three highest priority infrastructure projects are:

First, we will rebuild our power grid, with the goals of preventing major outages such as we experienced in the Northeast in 2003, and making it possible to move electricity across long distances - from where production is cheap to where consumers and companies need it.

Second, we will rebuild our telecommnunications grid, with the goal of providing Internet service to everyone in the US that is comparable or better than our economic competitors around the world.

Third, we will work with owners to insulate and weatherize homes, businesses and other buildings that can most benefit, helping them save energy costs and protect the environment.

But let us understand that even with time, it will be very difficult for our economy to grow as fast as it did while we were getting deeper and deeper into debt. Living within our income, individually now and soon as a nation, will mean slower growth and less disposable income for awhile. In addition, rather than leave the debt for our children to deal with, we're going to clean up our mess. Paying down that debt - as we will have to do after the crisis is past - means that we'll all have to accept some changes.

One is that we'll work a little longer before we retire. When Social Security was first established, the retirement age was set equal to the average lifespan, in those days, 65 years. Since then our lives have grown to average 76 years, but retirement age has barely budged. Starting in 2011, each year we will increase the eligibility age for full benefits by 3 months, or 1 year every four years. This will lower Social Security and Medicare expenses because each of us will spend a slightly shorter period receiving benefits. We will use the tax revenues from these emeritus workers strictly to repay the Social Security and Medicare trust funds to ensure that we can keep paying their benefits.

Another encouragement to continue working and help us pay our debts is that those of you who work past the later retirement age will receive a monthly bonus when you finally do hang up your spikes.

We will also means test Social Security and Medicare. Social Security benefits will scale down starting with private income over 100k, and be eliminated at 150k. Medicare premiums will start to increase at 150k, and at 250k will fully cover the pensioner's pro rata share of the program.

Another change is that we're going to pay a bit more to drive. Starting in 2011, we will increase the gas tax each year by .25. We'll return half of the money to taxpayers through a tax credit and devote the rest to replenishing the Social Security and Medicare trust funds. Economists and other experts have consistently recommended this approach over "cap and trade".

[Markel]

Perhaps you'd prefer to see only the best banks survive and become the new banks for most people. That would indeed be a nice situation if there was a way to get there without an overwhelming panic.

That's where we're going anyway, unless the national economy dissolves, so let's go there. For examples of how, see FDR, Sweden and an IMF study or two.

Also, we should focus on facilitating the startup of clean new banks in 2009.

[ken melvin]

Bon dit - Larry.

So far Baker's the only one to speak to the role of inflated assets. I wonder why.

[anne]

"American consumers have carried the world economy forward during recent years."

Interestingly enough, American growth generally lagged growth in other countries through the Bush Presidency, while we were actually busily destroying or assuring the destruction of several unfortunate countries during these years, but what is always needed is to point out that we are America and we carry the world forward because we are America and that is what America does because we are America the world carrier.

Now, let us devote ourselves to smashing Social Security and Medicare for the sake of world carrying or world destroying or whatever.

I get it.

[Lee A. Arnold]

Bruce, it's your reference to "some kind of Restruct[ur]ing Vehicle that could own, and, where feasible, rent foreclosed houses, or otherwise act to prevent destruction of good housing,..."

I'm trying to figure out how all that works without creating another, rather large, government bureaucracy.

Without it, foreclosure returns the properties to the banks. I don't think the financial industry should get that windfall either.

I should point out that I also don't think the taxpayer should pay for any of it. It should slowly be moved off-budget and forgotten, like the S&L bailout. Money is party a fiction, and in some cases you can close the book.

We need a complete revamp going forward, because as both economists said, (and as we all have written here many times,) the economy has been running on bubbles. Pretty soon the rest of the world is going to be able to avoid dollars.

We all know that the crooks at the top and the political donor class have benefitted at the expense of everybody else, and that they are crowding around the Democrats now. The rest of us may have to form a new political party and vote out the entire Congress in the next election.

[John V]

Again, Lee:

I didn't google Stiglitz before commenting. I went on what he said in the video. My bad.

That ONE sentence aside, the a big chunk of the rest of what I said was eerily similar to a lot of the criticisms put forth by Bruce.

If you prefer to sift through my posts to find something unequivocally wrong or carelessly said and then dwell on that at the expense of the rest, by all means, go ahead.

But don't think that it isn't clear that that is what you are doing.

Do keep in mind however, that if that is your standard, you'll spending quite a bit of energy scolding a lot of people (fellow social democrats), which would leave little time for anything else.

But somehow, I don't think 100% factual accuracy by all posters is your top concern....or anywhere near the top.

[anne]

I get confused so easily, but possibly there is an explanation that even can understand that shows why American corporate taxes are supposed to be higher than European taxes after all the years of conservative tax cutting and lacking a host of social programs that Europeans take for granted? Now, if the problem is military spending and corporations are being taxed so much more than in Europe because of defense I need the evidence since conservatives never ever mention military spending when complaining about relative tax rates.

So, how did Republicans leave our corporations supposedly paying more than French or German or Swedish corporations?

[anne]

What is interesting by the way, is that corporate taxes as a share of government revenue have steadily declined over 60 years, so why precisely do we need to lower corporate taxes to better compete with the French and what is really universal French health care insurance or free education and the like?

What has increased in terms of tax share over time is the payroll tax, but conservatives are bent on smashing Social Security and Medicare anyway and evidently Obama has been gotten to as well.

[Bruce Wilder]

LAA: "I'm trying to figure out how all that works without creating another, rather large, government bureaucracy."

Calculated Risk: Speculators or Investors?quoting Bloomberg: "Robert Arnold, a real estate investor who rents out a dozen homes near Orlando, Florida ... bought an Orlando foreclosure in June for $60,000, about a third of its appraised value, and spent $20,000 repairing it. Four months ago he rented it for $950 a month....

“Most of the houses I buy are junkers, but with a little work they become cash cows,” Arnold said."

[John V]

Arnold Kling comments on the Feldstein/Stiglitz video.

[Lee A. Arnold]

Bruce, fallacy of composition. What works for one, doesn't necessarily work for 2.5 million. Notice that the bank (presumably the holder of the foreclosed property) gets a third of its value -- why should that be?

[vorpal]

Great comment Bruce.

http://tinyurl.com/9nnz8v

I thought I was the only one able to distinguish signal from noise. You proved me wrong.

[vorpal]

Great comment Bruce.

http://tinyurl.com/9nnz8v

I thought I was the only one able to distinguish signal from noise. You proved me wrong.

says...

--- "administrative complexity"? What's complex about, "you're fired" or "you're bankrupt, buh bye!"? ---

Another gem. The people running the country are so sophmoric it blows my mind. That's why I'm kicking back and enjoying the show...like George Carlin and H.L. Mencken. It's the only same thing to do.

[calmo]

Markel, with this:So, foreclosures help bring us closer to some recovery and help increase discretionary spending. which seems more than obvious to those who have "saved" instead of "invested" in the housing market over these last several years, are we (I mean not-too-sloppy you) failing to identify, to distinguish, the vested players, those IBs on down to the local flippin Louie...players who are now demonstrating adequate reasons for making this distinction: they have power and we have...complainin keyboards...so far.

Try this (so important to do this with a histrionic (co-parenthetic) partner): should you continue in this vein...of doubting our good intentions (our impeccable accounting has already lost its luster)[not for want of our good intentions, but ... because you (ungrateful wretches) doubted us (philanthropic giants in a period of unprecedented prosperity] total system collapse --which we have so far valiantly postponed with ground-breaking actions, will nonetheless ensue.
Thanks a lot.

[Lee A. Arnold]

Calmo, exactly the question that no one here wants to engage. The keys are the "short term/long term" distinction and the fallacy of composition. Letting a few homeowners default should concern no one but them. Letting 2.5 million default, in the middle of one of the worst recessions we have ever seen, could be really stupid because it might hurt everybody else, e.g. the Great Depression. Commenters here think it won't happen, or shouldn't matter. Stiglitz and Feldstein are way ahead of them.

[Lee A. Arnold]

Larry, doing much of anything to Social Security is not a good idea. (1) It is not in much trouble, if any at all. (2) Ending it means reducing payroll taxes, which are dedicated to it, so there would be little reduction in projected deficits. (3) Means-testing it will create another government bureaucracy, fighting endless moral hazard. (4) Cutting-off wealthier recipients won't make much of a dent and will turn it into a politically-insupportable welfare system. (5) And reforming Social Security lets the Bush Tax Cuts get away with the Trust Fund. As it stands, Social Security is just about the most efficient social program in the U.S. About the only "reforms" necessary might be those suggested by Robert Ball. The medical system, on the other hand, needs lots of work. See:

http://www.youtube.com/watch?v=Tts2uTWt6e8

[Bruce Wilder]

I think it (2.5 million defaults or whatever) will happen, or should happen.

But, as a matter of policy, I think the return of house prices to "normal" should be facilitated, not resisted. And, I don't think the banks should be subsidized; they should take the full hit; if, to preserve a banking system, we have to nationalize and re-capitalize, fine, but I would never consider Feldstein's suggestion of "splitting the loss" with the banks and condemning home "owners" to debt peonage.

I think there are administratively feasible regimes available. I would commission Fannie and Freddie to do a domesday appraisal of every mortgaged house in America projecting a January 2010 "normalized" price, based on local incomes and historic price trends. Create a specialized, expedited "home mortgage bankruptcy" procedure, as an alternative to foreclosure, under which mortgage principal and terms can be adjusted or, as circumstances warrant, a transfer of home ownership can happen, with, maybe, a rent holiday for the occupant/former owner. Use the domesday book to calculate an "normalized" value for MBS, and let Fannie, Freddie and the banks report their holdings on that basis (but not that basis alone, continue traditional, parallel financial reporting). Make the information available to investors in MBS.

Create a Resolution Trust Corporation to be a buyer of homes foreclosed thru the "home mortgage bankruptcy" program. That should put a floor under house prices -- but a low floor, somewhat less than the estimated domesday target price, and create an option for unoccupied homes. The RTC should be authorized to consolidate and demolish the worst of surplus housing, in cooperation with local municipalities and civic groups; trading houses with people left stranded in mostly abandoned neighborhoods, etc., where cities are shrinking (Detroit, Youngstown, Cleveland). The RTC should sell or sign management agreements with private investors or non-profit civic groups, interested in providing rental housing.

[anne]

No, no, no, no, no.

Social Security is not an entitlement, how I detest the term, but a public insurance program in which we all share and in all sharing there is both the moral base for the insurance program and there resides the political support that prevents Social Security being seen as an easily demeaned welfare program.

There is not the slightest problem with Social Security which has a massive and growing surplus and will have for another decade and a surplus beyond that will last decades longer and possibly indefinitely.

[anne]

"The Stimulus and the Somme" *

Notice by the way the rottenness in comparing an effort to prevent the suffering of a recession to a World War battle that was bloody beyond compare. Imagine comparing protecting lives with destroying lives, but such is wild conservatism.

* http://econlog.econlib.org/archives/2009/01/the_stimulus_an.html

[anne]

http://www.nytimes.com/2005/04/18/opinion/18herbert.html

April 18, 2005

A Radical in the White House
By BOB HERBERT

Last week - April 12, to be exact - was the 60th anniversary of the death of Franklin Delano Roosevelt. "I have a terrific headache," he said, before collapsing at the Little White House in Warm Springs, Ga. He died of a massive cerebral hemorrhage on the 83rd day of his fourth term as president. His hold on the nation was such that most Americans, stunned by the announcement of his death that spring afternoon, reacted as though they had lost a close relative.

That more wasn't made of this anniversary is not just a matter of time; it's a measure of the distance the U.S. has traveled from the egalitarian ideals championed by F.D.R. His goal was "to make a country in which no one is left out." That kind of thinking has long since been consigned to the political dumpster. We're now in the age of Bush, Cheney and DeLay, small men committed to the concentration of big bucks in the hands of the fortunate few.

To get a sense of just how radical Roosevelt was (compared with the politics of today), consider the State of the Union address he delivered from the White House on Jan. 11, 1944. * He was already in declining health and, suffering from a cold, he gave the speech over the radio in the form of a fireside chat.

After talking about the war, which was still being fought on two fronts, the president offered what should have been recognized immediately for what it was, nothing less than a blueprint for the future of the United States. It was the clearest statement I've ever seen of the kind of nation the U.S. could have become in the years between the end of World War II and now. Roosevelt referred to his proposals in that speech as "a second Bill of Rights under which a new basis of security and prosperity can be established for all regardless of station, race or creed."

Among these rights, he said, are:

"The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.

"The right to earn enough to provide adequate food and clothing and recreation.

"The right of every farmer to raise and sell his products at a return which will give him and his family a decent living.

"The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad.

"The right of every family to a decent home.

"The right to adequate medical care and the opportunity to achieve and enjoy good health.

"The right to adequate protection from the economic fears of old age, sickness, accident and unemployment.

"The right to a good education."

I mentioned this a few days ago to an acquaintance who is 30 years old. She said, "Wow, I can't believe a president would say that."

Roosevelt's vision gave conservatives in both parties apoplexy in 1944 and it would still drive them crazy today. But the truth is that during the 1950's and 60's the nation made substantial progress toward his wonderfully admirable goals, before the momentum of liberal politics slowed with the war in Vietnam and the election in 1968 of Richard Nixon....

* http://www.feri.org/common/news/details.cfm?QID=2088&clientid=11005

[anne]

There we have Franklin Roosevelt and here we have a contemporary wild conservative who would liken moral economic support to the destructiveness of a most terrible World War battle.

"The Stimulus and the Somme" *

* http://econlog.econlib.org/archives/2009/01/the_stimulus_an.html

[Markel]

calmo, I did not make the comment you discussed.

And on another note, something like this

I would commission Fannie and Freddie to do a domesday appraisal of every mortgaged house in America projecting a January 2010 "normalized" price, based on local incomes and historic price trends

is the answer to this:

Markel, since the future balance sheets are going to remain unknown precisely as they depend on the general economy,

We are flying completely blind and pitching money into a black hole not because the sun has gone out but because we'd rather not power up the flashlight. It is difficult but not impossible to estimate the actual scale of mortgage losses. We know we're looking at $2T-ish. We can make projections for future home values (conservative or optimistic, as our preference may be) and future defaults. Get on with it, deal with it. There is no other way. Because we can't stop the sun from coming up anyway, and revealing the full depth of the hole in all its awful glory.

[kthomas]

2.5 Milllion people on the street? Now that would be something else!

Let them. The political consequences of this is what I've been waiting for, with glee.

[Lee A. Arnold]

Anne, Kling's article is a classic case of the phony "futility thesis," one of the tropes analyzed in the book The Rhetoric of Reaction by Albert O. Hirschman, who documents, with examples from the 18th century to the present, the typical rhetorical postures of this type of ideologue, which almost always center upon one of three principle arguments:

"(1) the PERVERSITY thesis, whereby any action to improve some feature of the political, social, or economic order is alleged to result in the exact opposite of what was intended; (2) the FUTILITY thesis, which predicts that attempts at social transformation will produce no effects whatever--will simply be incapable of making a dent in the status quo; (3) the JEOPARDY thesis, holding that the cost of the proposed reform is unacceptable because it will endanger previous hard-won accomplishments."

Note that they never need pertinent facts, while the "Battle of the Somme" avoids the obvious confirmation of Godwin's law.

In addition to Kling's other silliness he writes that since "500 people have meaningful input, and the stimulus is almost $800 billion, then on average each person is responsible for taking more than $1.5 billion of our money and trying to spend it more wisely than we would spend it ourselves." --More shamefully, embarrassingly bad thinking, on a few different levels.

[anne]

Lee Arnold:

"Kling's article is a classic case of the phony 'futility thesis,' one of the tropes analyzed in the book The Rhetoric of Reaction by Albert O. Hirschman, who documents, with examples from the 18th century to the present, the typical rhetorical postures of this type of ideologue, which almost always center upon one of three principle arguments...."

Interesting, and unknown to me till now.

[calmo]

Sorry Markel to miscue you and the also-not-as-sloppy-as me, halbhh (more or less the correct manually registered concatenation of characters, but not cutanpasted character string...such is my response to miscues)...for that quote.

This looks like my view (somewhat):
"We are flying completely blind and pitching money into a black hole (our money into the wrong, the same wrong pockets...compounding my embarrassment...not helpin the highly missed "confidence") not because the sun has gone out (whateva itiz that keeps you goin...distinguishes you from that very non-bouncing dead cat over there) but because we'd (damn collective pronouns screw you) rather not power up the flashlight. (make a step, call that bluff about the sky falling, let em know that if the flashlight don't work, you got matches and mo)."
The pragmatism of this: "Get on with it, deal with it. There is no other way." wins me over...I'm only good for so long bein recognized as "patient" ...until that ferments to "complacent" ...and then "complicit".

Thank you for this lil inspiration.

[Larry]

@anne - Interestingly enough, American growth generally lagged growth in other countries through the Bush Presidency

We lagged vs newly fast-growing developing nations, but not against our developed peers such as Germany and Japan. The "carrying" part is measured by the current account deficit. Then you started to babble.

I get confused so easily

We love that about you.

why American corporate taxes are supposed to be higher than European taxes after all the years of conservative tax cutting

American corporate income tax rates have held steady through the Bush years. He preferred (mistakenly in my view) to cut rates on individual capital income. Most European countries have cut their rates.

corporate taxes as a share of government revenue have steadily declined over 60 years, so why precisely do we need to lower corporate taxes to better compete with the French

We'd be better off eliminating corporate income taxes entirely while at the same time dumping special treatment for dividend and cap gains. You can think of it as the "retiree income enhancement" program in that their investment income would increase, but their taxes wouldn't. All other investors would pay higher taxes...The other benefits are to get rid of the dead-weight loss from the accounting and tax-avoidance behavior that corporations exhibit and also to get rid of much of the (corruption-generating) motivation for corporations to lobby for special tax treatment.

@Lee A. Arnold - doing much of anything to Social Security is not a good idea.

As of yesterday, Obama officially disagrees. Note that I'm not proposing to abolish it. It's just one more example of us living beyond our means as a nation. By trimming it a little, we may be able to pay for it without deluging ourselves with higher taxes to pay back the money we've borrowed from it.

Means-testing it will create another government bureaucracy, fighting endless moral hazard.

Why?

Cutting-off wealthier recipients won't make much of a dent and will turn it into a politically-insupportable welfare system.

It already is a welfare system. It just doesn't look like one. But we've transferred huge amounts of money from low income taxpayers to higher income seniors.

The medical system, on the other hand, needs lots of work.

Agree that the medical system is a much bigger problem.

[anne]

http://www.nytimes.com/2009/01/04/books/review/Boot-t.html?ref=books&pagewanted=print

January 4, 2009

The Monstrous Anger of the Guns
By MAX BOOT

THE SOMME
The Darkest Hour on the Western Front
By Peter Hart

Anyone who has ever visited the tiny village of Thiepval (population 98) in northern France can appreciate the enormity of the Battle of the Somme. Thiepval is the site of a towering triangular memorial commemorating more than 73,000 British and Commonwealth soldiers who fell in the area, most of them during the Allied offensive between July 1916 and November 1916, and who have no known grave.Gazing at all those names makes for a sobering experience, especially when you realize they represent just a fraction of the overall losses in the battle. British forces suffered 131,000 dead and 288,654 wounded. Of those, 19,240 were killed in the first 24 hours. The French suffered an additional 204,253 casualties, while on the other side the Germans had between 450,000 and 600,000.

No wonder, then, that the Somme has occupied a hallowed place in British memory — comparable to Gallipoli for Australians or Gettysburg for Americans, but on a much bigger scale. This was the costliest battle that the British Army has ever fought.

For most of us today, the bloodlettings of World War I are refracted through the despairing work of Robert Graves, Wilfred Owen, Siegfried Sassoon and other soldier-writers. As Peter Hart notes, the contemporary view of the Somme "can be brutally summarized in just five words: 'the pity of it all.' Politicians are portrayed as Machiavellian, but simultaneously weak, generals are stupid, soldiers are brave helpless victims and war poets — war poets are the latter-day saints made flesh." ...

[Max Boot, I should note, seems to be about as much a war lover as I can imagine.]

[John V]

Lee,

I see Kling using #1 and #2 of the 3 theses you point out.

I also don't see him using them in error.

Perversity and futility are two very worthwhile concerns when looking at the prospects of certain policies. They are not wrong-headed concerns in and of themselves.

To simply spot those theses in what Kling is saying is not the same as saying he is misusing them.

One could also say (and see it very often) that liberals use of sort "conflation of concept/result" thesis whereby there is a conflation of intent and pending result when describing the merits of a policy as if what they are attempting to do is obviously what will happen and that the absence of the policy in question will result in the opposite of what they want to happen.

On that token, the thesis is also often put forward that criticism of the policy in question is the same as criticism of the intent.

The difference between these two sets of theses is that the theses you point out are often a truly valid reason to oppose a policy while the theses I point out are purely defensive conjecture and rhetoric that demeans opposition on the grounds of non existent malicious motives while avoiding the real substance of the disagreement. A plea to emotion of sorts.

[anne]

"It already is a welfare system. It just doesn't look like one. But we've transferred huge amounts of money from low income taxpayers to higher income seniors."

The wild conservative lies will never stop, sort of the lie that Republicans used in claiming that Social Security was of no benefit to African American men since the supposedly have shorter life-spans. The need is to lie about Social Security as a public insurance program and destroy the program in undermining support.

I get it, I understand wild beyond conscience conservatism.

[Lee A. Arnold]

Larry,

There is no evidence that we will be "deluging ourselves with higher taxes" to cover Social Security. Look at the Trustee scenarios and compare them with actual conditions.

It isn't a welfare system because there is no means testing.

The money isn't transferred between income levels -- it's a political promise to do the same for every generation, and it is completely transparent.

[Lee A. Arnold]

John V,

Perversity and futility aren't really arguments, they are the judgements from arguments. Kling isn't providing actual evidence for any argument. It's just a complaint from ideology, in fact the ideology of deregulative foolishness that got us into this mess. He is complaining that (1) if the banks are waiting to see what the government will do, then the government is the problem, and (2) because some big stimulus hasn't worked, another big stimulus of another kind won't work. Neither one of these necessary follows, in fact they border on nonsense. He adduces no additional facts, and he does not make a proof.

[Larry]

@Lee - "There is no evidence that we will be "deluging ourselves with higher taxes" to cover Social Security."

The question isn't whether the system is insolvent. It's where we're going to get the money to make all the payments. You say "the trust fund", but the trust fund has been loaned out. We'll have to pay it back starting in about 10 years (if we do nothing now.)

It isn't a welfare system because there is no means testing.

You know, you're right. I meant to say that it was regressive...

[Lee A. Arnold]

Larry,

The Trust Fund for 8 years has disappeared into the Bush Tax Cuts, 2/3 of which benefitted the people OVER the payroll tax cap level. See here:

http://www.youtube.com/watch?v=Tts2uTWt6e8

In other words, over the last 25 years, payroll taxes were increased three or four times, and ONLY income taxes have been cut. The payroll tax surplus (the Trust Fund) has been used to help cover the shortfall caused by the income taxes. Sound fair to you?

Also, you ought to define what is "regressive." Social Security payouts give more to the richer than the poorer ("regressive," which is only right, because the rich paid in more,) but NOT to the full percentage that they paid in: the payouts are skewed downward (i.e. are also "progressive") and so the poorer are benefitted a little extra. This set-up helps to give Social Security its long political stability. Ask any current retiree, rich or poor. Even the very richest often say: leave Social Security alone. Because you never know where you will end up in life, and the present system is structured to give the whole society a floor of living expenses with the least social stigma and the most comity.

[John V]

Lee,

He is complaining that (1) if the banks are waiting to see what the government will do, then the government is the problem

Well, not exactly. He's saying that banks are not reacting the way policy makers like Paulson and Bernanke would like or expect because the actions government is taking are helping produce a self-fulfilled prophecy of sorts in the form of a "credit freeze". Banks are hesitant to lend to eachother and the system cannot bring itself to function somewhat how it did before. There is a lot of uncertainty in calculation and valuation and the actions of bailouts and subsidies and guarantees are actually dragging out the market adjustment process...which would be very painful. It would seem that the idea is not let that happen for fear of a collapse but the prolonged pain and uncertainty is exacerbating the incentive problem for banks to behave as Paulson and Bernanke would like. It creates a vicious cycle of perversion and yes, futility, to a certain extent because the interventions are helping provoke what it's trying to fix.

[BJ Feng]

Lee, Social Security taxes cannot be cut because SS is a retirement plan. If you cut SS taxes, then you should also cut SS benefits. The theory is that you get back what you put in, well if you put in less then you should get back less.

The problem is with spending and using SS surpluses to fund further spending. We have to cut spending as soon as economic conditions improve.

Stop spreading the deregulation myth. The banks were regulated as well as Freddie and Fannie. But you can't make lazy, incompetent regulators into hard-working, smart regulators by adding more regulations. These dumbasses will continue doing nothing but holding useless meetings and writing irrelevant reports.

Nothing Bernanke or Paulson do can make banks and investors go back to the foolish reckless lending of the past, at least not so soon. Banks are no longer lending to the people who are defaulting now and investors are refusing to buy the subprime crap of the past. Thus loan volumes have to drop. They will continue to drop no matter how much money Bernanke or Paulson give them, there aren't enough solid borrowers who want to borrow. A firm like Microsoft will have no trouble borrowing money, but they don't need to. Only the GMs of the world need the money, and if you need the money, then you're a risky borrower.

[Lee A. Arnold]

John, it won't fly. The credit freeze was already here. Already, nobody was lending. And by nearly universal observation, government policy has had little effect. But the claim that the credit freeze is now being caused by government policy, or by the expectation of additional government policy, is unwarranted by any fact in evidence so far. The further conclusion that therefore no other government policy can work, is nonsense in any case.

[Lee A. Arnold]

BJ, as long as you realize Social Security benefits should never be cut. As to your implicit contentions that, banks being regulated, everything else was too -- or that regulators failed through being lazy -- I leave it, as Mencken once wrote, "to the sober enquiry of competent psychologists."

[John V]

Lee,

The credit freeze started with the Bear Sterns affair. What would have happened if the government had not intervened and allowed Bear Sterns to be subject to the market mechanism? We'll never know. Paulson and Bernanke were working from the prior that such an event could not be allowed to happen or the whole system would fail. Were they right? We'll never know.

From there, if you look at what is happening and not happening (to the chagrin of Paulson and Bernanke), you'll widespread hesitation and uncertainty that is being exacerbated by the prolongation of hesitation and uncertainty from government action stop a credit freeze...which is helping cause and/or sustain a credit freeze.

Banks don't know what to think right now. They are not using the bailout money to resume normal operations because they are hoarding it for their balance sheets...because there is no operating market to calculate values.

I'm sure a market economist could explain it better than me but that's about the best I can do to convey this.

[Lee A. Arnold]

No, it started with mortgage defaults in the subprime crisis. Bear Stearns started looking like trouble and the credit crunch started. The government didn't step in on Bear Stearns for about another year.

[reason]

John V.
Yes you are right of course, we should have gone to Great Depression II in a couple of months rather than waiting.

[ken melvin]

Some how the inability to learn the idiocy of war from WWI and psychiatric screening of the comments go together.

[Chris]

Bubble Meter and Rental Chump are right on the money.

What has to happen is the liquidation of this ridiculous amount of debt, whether it is home mortgages, bonds based on these spurious mortgages, or derivatives that used these securitized mortgages as collateral, etc.

It means some nasty few years, for many people and businesses, but it's the best long-term solution. These bailouts only prolong the slump, and I doubt it even makes things easier for people anyway considering the entities being bailed out are the banks and hedge funds who created this mess, and who still are firing employees anyway and not loaning any of the bailout money they receive (and then have the gaul to ask for more). Pres. Barry should do nothing. That would be a significant change from current government policy, and that's a change I can believe in.