No, not my (non-humble) opinions - Paul Krugman's:
[E]arly on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong. Time for a Swedish solution.
Only a certain kind of person gets a contract that can't be unfairly changed.
Click embedded cartoon to see all of Darrin Bell's panels.
Tim Geithner and all the professionals think that they are indispensable, that what they do is too difficult for those of us who are not "masters of the universe."
[T]he Treasury will hire four or five investment management firms, matching the private money that each of the firms puts up on a dollar-for-dollar basis with government money.I am so sick of taking haircuts for the people who did this, the ones who were once known as the smart money. Yeah, as if.
Risk-taking institutional investors, like hedge funds and private equity funds, have refused to pay more than about 30 cents on the dollar for many bundles of mortgages, even if most of the borrowers are still current. But banks holding those mortgages, not wanting to book huge losses on their holdings, have often refused to sell for less than 60 cents on the dollar.To break that impasse, nationalize the failed banks and lend directly. Let the failures fail without killing the credit markets. No moral hazard. Temporary socialism. Once the markets are healthy again, we can reap any profits for all this risk we're taking on as insurer of last resort.The result has been a paralyzing impasse. Banks, unwilling to sell their loans at fire-sale prices, have had less capital available to make new loans. Mortgage investors, unable to leverage their investments with borrowed money, have been unwilling to pay more than fire-sale prices.
To break that impasse, the government’s crucial subsidy is meant to provide investors with the kind of low-cost financing that has been utterly unavailable in today’s credit markets.
Instead of moving to nationalize failing banks, Obama should follow Duhbya's obviously successful gambit with Lehman Brothers and let some big banks fail. Yep, that's what free market fundies John "Don't know much about economics" McCain and Richard Shelby have to say.
Of course, the problem from the center is that Obama's policy of sucking down endless capital infusions for the benefit of executives whose epic fails caused these problems is foolish, too.
I wasn't very far ahead of the curve, but in the fall, when I heard that the bailed out banks were using their free money for acquisitions instead of loans, I asked the question: If the problem in the economy is that credit is drying up, why not cut out the middle man, nationalize failed banks, and make the responsible loans ourselves?
Some people deserve to go broke. There are ways to make sure they do without screwing all the rest of with a decade-long depression.
Every year at Annual Town Meeting, we pass an article that authorizes the Treasurer with the approval of the Selectmen to borrow in anticipation of revenue to meet short-term cash needs. In all the years I've been going to TM, this has been controversial once, when some bad feeling spilled over from another article. But what if there were no loans to be had?
The town would miss payroll, furlough workers, and wait for liquid tax receipts to come in. The suddenly unemployed workers would tighten their belts, and you can bet they wouldn't pay their taxes on time.
The private sector is even more sensitive to the absence of credit. Its ex-employees would be holding onto every dime, too.
Writ large, California is already in this situation.
State Treasurer Bill Lockyer issued a statement a day earlier saying because of the national financial crisis, California "has been locked out of credit markets for the past 10 days."The crisis is picking up speed, and that's not good. When the Bushists tell me the sky is falling, I'm skeptical. But they aren't the only people pulling fire alarms these days.
Because Ron Paul is an acolyte of Ayn Rand's pure and simple-minded economic libertarianism, he cannot conceive of a government intervention in the market that would help the aggregate economy. He has a touching faith that the free market will always provide the best of all possible economies.
It's bunk, and the current crisis proves it. The market, freed from rules restraining the leverage of capital and keeping risk visible, inevitably corrects itself with a nasty recession. Paul won't admit it, but he is willing to countenance a depression in order to save his worldview.
Paul is right about one thing: Real estate has been overpriced, and the resulting bubble is the proximate cause of our current financial situation. What he doesn't seem to understand is that, just as easy credit causes markets to overshoot, lack of credit kills markets and businesses that would otherwise be solvent and very useful to sustained economic activity.
The bad thing about a bailout is that it does not punish the guilty, those who have caused the bubble. The good thing about a bailout - one that works, anyway - is that it prevents nasty damage to the economy that all of us rely on to make our lives.
The brief history of this bailout:
McCain says, "Me, too," about Obama's FDIC insurance increase. McCNN leads with McCain.
Incredible.
So, why is $250,000 of FDIC deposit insurance an obvious idea? CNN doesn't bother to say, but the goal is to prevent a bank run. We're already in a deeply dry credit market. A run could not only kill banks that are basically healthy, it could also tighten credit even further as more and more people and institutions flee risk into cash or T-bills, where they are no longer loanable to stimulate business activity.
McCain to Congressional Republicans:
"Please, puh-leez, do not make a deal. I really, really don't want my bail revoked. Mississippi wants me, but I can't go back there."
Which is exactly why McCain's craven introduction of Presidential politics into the credit crisis was the opposite of everything he claimed it was.
After years of making political hay out of war, among a thousand other cynical ploys, it takes a breathtaking amount of sheer gall to say this:
The senator from Arizona also accused Obama of seeing the economic crisis as a "political opportunity."Meanwhile, the turmoil in credit markets is making the vast amnesiac middle of American voters think, "Oh, right, the Republicans have screwed up the economy big time. Maybe we shouldn't give them another shot at doing even more looting."
Duhbya's threat to veto $1.7 billion in loan guarantees for actual people, when he was thrilled by the $29 billion bailout of the holders of bad paper at Bear Stearns is proof of all that anyone needs to know about Republicans.
Here is at least one piece of the supposed synergy between Bank of America and Countrywide. I still wonder whether BoA is also keen to hide its own, separate exposure.
In pretending to be a reporter (though not pretending to be unbiased), I've described the way John Edwards has outlined the problems facing the middle class and his proposals for helping improve their (our) job prospects. Should I say that this is the last in a series and hope for a Pulitzer? Sure, when the ice cap melts, uh, when the ice cap refreezes, ok, when hell freezes over.
What does JE say about his other goals after good jobs? Goal number 2 is a secure retirement. For this, he proposes:
