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US Bailout bill, TARP, and economists' and journalists' reactions
September 29, 2008 11:00 AM   Subscribe

Following the recent preciptious downturn in the US banking sector, a compromise draft bill is going to a vote in Congress today. The text of the bill [110-page pdf]; The Wall Street Journal's summary of the bill; an open-for-comments public analysis of the bill at publicmarkup.org. Some questions answered and unhappy acceptance from economist and NYT columnist Paul Krugman; a strenuous rejection from Nouriel Roubini; via same, an IMF study of 42 banking crises from 1970 through 2007; further criticism from Nomi Prins for Mother Jones.
posted by cortex (654 comments total) 49 users marked this as a favorite

 
As of now, 207 yeas versus 226 nays.
posted by letitrain at 11:04 AM on September 29, 2008


That bill failed ... and The Market has begun its descent ...
posted by aldus_manutius at 11:04 AM on September 29, 2008




20+ margin, cor
posted by bonaldi at 11:06 AM on September 29, 2008 [1 favorite]


The Market has begun its descent

Welfare Traders.
posted by DU at 11:06 AM on September 29, 2008 [2 favorites]


FYI, they are voting in the House right now, and things look iffy.

The vote is happening against the backdrop of Citigroup's buyout of Wachovia's banking unit and the imminent demise of large midwest bank National City.

Dow Down 4.30% Nasdaq Down 5.95%

Also, the shorts on financials return in full force at the end of this week. The ^VIX is 41.32, an extraordinarily high level which is often an indicator of market bottoms.

Regardless of your position on the bailout, everyone has to agree that the public reaction to the bailout indicates an almost universal distrust of any person or company involved in finance, as well as a total lack of faith in the administration and congressional leaders to do the right thing, whatever that may be, and not screw the public.
posted by Pastabagel at 11:09 AM on September 29, 2008 [8 favorites]


I'm really glad McCain rushed back to DC to make sure something would get done.
posted by ryoshu at 11:09 AM on September 29, 2008 [15 favorites]


Can you blame us, Pastabagel? What's your take on the bill, if you've had time to digest it?
posted by Mister_A at 11:10 AM on September 29, 2008


Get tired of all the failed attempts at a bailout post, Cortex?

And it looks like its going down in flames. We share a floor with Marcy Kaptur's office here in Toledo, so she had better have been right or I might just have to walk over there and have a word. (Like I'd know what to say...)
posted by cimbrog at 11:10 AM on September 29, 2008 [1 favorite]


Come back with a real nordic style nationalization and we'll talk.

This chicken shit money trough for those that caused the problem in the first place is unacceptable.


I can't imagine anyone will hold strong, but I could just be a cynic. After seeing the treasury department tell these assheads how to bypass all of the limitations they're setting up on exec pay and the like, I've lost what little faith in the system I had to begin.


At least the new Colonization is fun, even if it does inspire broad swathes of liberal guilt as I try to figure out how to interact with the natives.
posted by Lord_Pall at 11:12 AM on September 29, 2008 [4 favorites]


That's the largest fall in point terms on the Dow ever.
posted by bonaldi at 11:12 AM on September 29, 2008


It is an old maxim and a very sound one, that he that dances should always pay the fiddler. Now, sir, in the present case, if any gentlemen, whose money is a burden to them, choose to lead off a dance, I am decidedly opposed to the people’s money being used to pay the fiddler…all this to settle a question in which the people have no interest, and about which they care nothing. These capitalists generally act harmoniously, and in concert, to fleece the people, and now, that they have got into a quarrel with themselves, we are called upon to appropriate the people’s money to settle the quarrel.
A. Lincoln, 1837
posted by Kirth Gerson at 11:13 AM on September 29, 2008 [92 favorites]


Oh shit.
posted by Mister_A at 11:14 AM on September 29, 2008


I've never seen c-span.org go down--guess lots of folks are watching the vote online.
posted by MrMoonPie at 11:15 AM on September 29, 2008


Bill, I love you so, I always will.
I look at you through the passion eyes of Money.
But am I ever gonna see my wedding day, honey?
I was on your side Bill, when you were bailing.
I'd never scheme or lie, Bill, but now you're failing.
Golden parachutes won't carry me 'till you marry me Bill.
posted by It's Raining Florence Henderson at 11:15 AM on September 29, 2008 [3 favorites]



Weeeeee!


Broke now, I'll be broke later, and broke I'll always be. Twiddle dee dum, twiddle dee dee, the poet's life for me.
posted by bukharin at 11:16 AM on September 29, 2008


Five bucks if one of you other mods deletes this one ...
posted by jbickers at 11:17 AM on September 29, 2008 [5 favorites]


Wow, looks like we're in for a rocky time.
posted by sebas at 11:17 AM on September 29, 2008


Is it just me or is it starting to get really fucking cold in here?
posted by seanmpuckett at 11:17 AM on September 29, 2008


It's a good thing I'm kind of fat. I can live off that...for a while, anyway.
posted by you just lost the game at 11:17 AM on September 29, 2008 [6 favorites]


FYI, they are voting in the House right now, and things look iffy.

They tried to get more yes votes and held voting open a bit, but no go. It's dead.

NPR
: Bill failed 226 to 207 --- 141 Dems said yes, 94 no .... 66 GOP yes, 132 no
posted by Tehanu at 11:17 AM on September 29, 2008


The bailout vote didn't pass the House.
posted by Nelson at 11:18 AM on September 29, 2008


MrMoonPie: "I've never seen c-span.org go down--guess lots of folks are watching the vote online."

Am I the only one getting a big white nothing from house.gov right now?
posted by Plutor at 11:18 AM on September 29, 2008


Again ... the vote is over. FAIL.

Fasten your seat belts, return your trays to the upright position ... and pray that we have a free and fair election here in The Land of The Free and The Home of The Brave ...
posted by aldus_manutius at 11:19 AM on September 29, 2008


Am I the only one getting a big white nothing from house.gov right now?

No. For half an hour or more now.
posted by Tehanu at 11:19 AM on September 29, 2008


Yeeehaww.

The voting is still open, and if they can twist 11 arms it'll pass. I wish I had some more cash to invest* right now.

*by invest I mean gamble.
posted by delmoi at 11:19 AM on September 29, 2008


We're fucked.
posted by Optamystic at 11:20 AM on September 29, 2008


Why the bill might not have worked. Let's see if they make some changes and try running it up the flagpole again.
posted by exogenous at 11:20 AM on September 29, 2008


ryoshu, McCain could have fixed it if he hadn't had to do that damn debate!
posted by cjorgensen at 11:20 AM on September 29, 2008 [2 favorites]


> We're fucked.
posted by Optamystic at 2:20 PM


You did that on purpose, right?
posted by you just lost the game at 11:22 AM on September 29, 2008 [1 favorite]


cortex: There are many open threads that you could have posted this in. Please don't do this here.
posted by milarepa at 11:22 AM on September 29, 2008 [10 favorites]


Ooops, the vote already failed. My mistake.

I think the democrats should write a bill that they can agree on. "Festoon" it with all kinds of democratic prerogatives -- a stimulus package, unemployment insurance, foreclosure modification by bankruptcy judges, etc. They should also go for a Swedish style nationalization rather then a "bailout". The main reason for not doing so was that it would be politically unpalatable, but since this bailout is also a no-go they might as well try that.
posted by delmoi at 11:22 AM on September 29, 2008 [2 favorites]


Should I take my money out of National City?
I've been considering switching to a credit union or something of the sort - I'm not suggesting a run on the banks or anything like that - but I've used Nat City for freaking ever and I'm wondering what will happen if it fails.
posted by Baby_Balrog at 11:23 AM on September 29, 2008


Does anyone know where to find a list of the votes? (house.gov is toast...)
posted by equalpants at 11:24 AM on September 29, 2008


I hear you, but then it'll get vetoed, delmoi.
posted by Mister_A at 11:25 AM on September 29, 2008


The reason this thread will probably survive, where others haven't, is that it doesn't suck.

From the CNN website:
Bush acknowledged that many voters were opposed to helping out Wall Street with tax dollars, but said there is little choice to move forward with the plan. He said most if not all of the tax money spent to buy distressed mortgage-backed securities should be recouped when the Treasury sells them in the coming years.
Now, what I honestly don't get on this spin is that if these are such good investments that people will make all or most of their money back, why don't the banks just hold on to them? Why make the taxpayer buy what no one else wants?
posted by cjorgensen at 11:25 AM on September 29, 2008 [6 favorites]


I think the democrats should write a bill that they can agree on.

Absolutely! They are the majority in Congress, for one thing. For another, the GOP is going to be under pressure from their corporate masters to take whatever they can get.

If these guys really need the money so badly, make them earn it. For once.
posted by DU at 11:26 AM on September 29, 2008 [1 favorite]


cortex: There are many open threads that you could have posted this in. Please don't do this here.

Genial hurfing and durfing so far aside, metacommentary can go into the metatalk thread that spawned this post in the first place, please.
posted by cortex at 11:26 AM on September 29, 2008


Nat City shares are down 50+% as of a few minutes ago., Baby_balrog.
posted by Mister_A at 11:26 AM on September 29, 2008


I've been considering switching to a credit union

Credit Unions have also been failing. I think U.S. Bank is pretty good.
posted by delmoi at 11:27 AM on September 29, 2008


We were in uncharted territory even if the bailout passed. What's more uncharted than uncharted?
posted by athenian at 11:27 AM on September 29, 2008


Republican strategists have been recommending this for a week: vote down the Bill, calling it the "Obama-Bush plan".

Having in large measure created the problem, and haing supported the Bush Administration which also bears heavy responsibility for it, they're now going to make political hay by trying to blame Democrats and Obama for the bail out.

This is yet another example of the cynical lack of leadership and responsibility-avoidance that epitomizes the modern Republican Party.
posted by orthogonality at 11:27 AM on September 29, 2008 [9 favorites]


Where's McCain right now? I hope that immediately after the debate (or on Saturday morning at worst) he returned to Washington. Of course seeing as it failed if he was there it doesn't look good for his bi-partisanship. Maybe now that the vote failed we can get over the politicing and actually find a solution to this. Or is that too optimistic of me?
posted by ob at 11:27 AM on September 29, 2008


"Should I take my money out of National City?
I've been considering switching to a credit union or something of the sort - I'm not suggesting a run on the banks or anything like that - but I've used Nat City for freaking ever and I'm wondering what will happen if it fails."
Baby_Balrog

If you have more than $100,000 you might want to shift it, otherwise leave it alone.

That bank fails on a Friday it opens on a Monday with a new name. Your cash will still be on hand.
posted by cjorgensen at 11:28 AM on September 29, 2008


We were in uncharted territory even if the bailout passed. What's more uncharted than uncharted?
posted by athenian at 1:27 PM on September 29 [+] [!]


Fucked.
posted by WinnipegDragon at 11:28 AM on September 29, 2008 [5 favorites]


Can you blame us, Pastabagel? What's your take on the bill, if you've had time to digest it?
posted by Mister_A at 2:10 PM on September 29


I trust no one. I say pass anything that allows the government to profit from the buyout and mandates some congressional oversight. There's no time to do the bill right, it's too complex and too massive to slap together even in a week.

So we need to elect Obama. After watching the debates, I'm convinced that McCain is arrogant and incompetent enough to fuck this up catastrophically. If you don't want to vote for Obama because he's black or muslim, here's a deal. Vote for him anyway, and you can just direct all your racist hate at me by proxy.

The day after the inauguration, convene a panel to completely rewrite the whole goddamn thing from start to finish, with gruesome limits on CEO bonuses, mandating market transparency, new accounting rules, etc. This will take months. Get the people who disagree the most, get them in a room, and set them arguing. Publish the arguments in Congressional reporter or federal register so we can get everyone who's anyone on the record. Addd to the bill a provision that if the govt loses money on these assets, a tax on banks and their CEO's will be levied until the govt is made whole.

Simultaneously with convening this panel, launch SEC, IRS, and FBI investigations of every single trader or lawyer who ever touched a CDO, credit default swap, or mortgage derivative. Investigate them as if they were al qaeda. Prohibit any travel outside of the U.S. for all of these people. Audit the current and former CEO, CFO and board member of every one of the thirty largest banks from 2002 to the present, including an audit of their family members. I'm convinced that most of these people had no fucking idea what they were trading or whether the thing they were trading was real or fraudulent.

All trials should be broadcast on television, and all documents posted to the internet.
posted by Pastabagel at 11:28 AM on September 29, 2008 [141 favorites]


I hear you, but then it'll get vetoed, delmoi.

I doubt bush would veto it at this point. What choice does he have? He's been warning the country for days and if he said no now, he'd be fucked.

I hope the democrats had a backup plan for when the house republicans screwed them. They knew it was a possibility and if they didn't then they would really be pretty pathetic.

Of course, we already know they're pretty pathetic, so yeah.
posted by delmoi at 11:28 AM on September 29, 2008


If you have less then $100,000, you can safely leave your money in National City. It's FDIC insured. It will be fine.

Taking your money out of National City will, bluntly, help kill them if they are not already going to die.
posted by cavalier at 11:29 AM on September 29, 2008


HURF DURF BAILOUT DEFEATER!
posted by Astro Zombie at 11:29 AM on September 29, 2008


Having in large measure created the problem, and haing supported the Bush Administration which also bears heavy responsibility for it, they're now going to make political hay by trying to blame Democrats and Obama for the bail out.

Which ought to prove to anyone that they're perfictly willing to destroy the U.S. economy if they think it'll win them some congressional seats. Disgusting behavior from a disgusting bunch, not that anyone should be suprised.
posted by delmoi at 11:30 AM on September 29, 2008 [1 favorite]


...that allows the government to profit from the buyout...

I, for the first time ever, wrote to all three of my congress critters and told them to make sure we get this, at least out of the deal. It's the most important provision in the whole thing, if you ask me. We need to have a stake in these companies that we are saving.
posted by Mister_A at 11:30 AM on September 29, 2008


I was surprised to see that 2/3 of the GOP rejected the bill, which their president endorsed. Once again I find myself completely confused by all this.
posted by Vindaloo at 11:30 AM on September 29, 2008


So we need to elect Obama. After watching the debates, I'm convinced that McCain is arrogant and incompetent enough to fuck this up catastrophically.

Dude, he's already fucked it up!
posted by delmoi at 11:31 AM on September 29, 2008 [9 favorites]


Okay, I don't usually watch the DOW, but I'm refreshing the CNN page about once every minute or two and the damn thing is jumping up and down by 100 points. Is that normal?
posted by cimbrog at 11:31 AM on September 29, 2008


Official vote tally.
posted by MrMoonPie at 11:32 AM on September 29, 2008 [1 favorite]


Addd to the bill a provision that if the govt loses money on these assets, a tax on banks and their CEO's will be levied until the govt is made whole.

Actually the bill that just got defeated had something close to that. If the government didn't recoup the money within five years, the president would be required to submit a proposal to tax the 'financial services industry' to recoup the money.
posted by delmoi at 11:33 AM on September 29, 2008


The current Emergency Economic Stabilization Act vote tally comes at 207 for the plan, 226 against, with one vote remaining. A total of 218 votes were needed to pass the vote.


Dow was down by 750, is back up to down by 500, but appears to be sinking again. Everything is getting pounded, even stocks that should be rising like BRK B and A. Some stocks are just in freefall, and it doesn't make sense that they are. (AAPL down close to $100, ACAS below $25, ADM closing on $20...it's crazy.)
posted by dejah420 at 11:34 AM on September 29, 2008


cimbrog: Um, no.
posted by raysmj at 11:34 AM on September 29, 2008


Okay, I don't usually watch the DOW, but I'm refreshing the CNN page about once every minute or two and the damn thing is jumping up and down by 100 points. Is that normal?

Normal is over.
posted by bonaldi at 11:34 AM on September 29, 2008 [8 favorites]


Republicans live on CNN - blaming a speech by Pelosi I didn't hear for being too partisan. Poor delicate Republicans, they don't like all that horrible partisan speechifying.
posted by athenian at 11:35 AM on September 29, 2008 [4 favorites]


Investigate them as if they were al qaeda.

As is always the case, in times of trouble we must consult with James Earl Jones, and once again he has the answer:

"Let them contemplate this on the Tree of Woe. Crucify them."
posted by aramaic at 11:35 AM on September 29, 2008 [11 favorites]


With this bill failing the pressure to compromise with a Republican leadership that had only 66 Yea votes at risk seems to be lifted. Now there will be increased pressure to come up with a solution which should reduce the risk of a Republican filibuster in the Senate or a Presidential Veto.

The result would seem to be increased likelihood of the Dems drawing up a plan that satisfies the Democratic base (equity position, draconian compensation restrictions) rather than a compromise package that really suits neither party's political agenda.

The short term will be massive bloodletting on wall street and in people's 401k but each bank failure and each massive hit to people's retirement should reduce reluctance to come to a solution.

Of course the most likely solution is that the Democratic leadership will cave even further...
posted by vuron at 11:35 AM on September 29, 2008


PANIC! DISCO! BUY! SELL!

Sure wouldn't want to be a trader on Wall St right now. Lot of emotions in either direction.

"The Federal Reserve declined to comment on the market's decline." I hope the AP writer smiled when he/she wrote that.
posted by cavalier at 11:35 AM on September 29, 2008


Actually the bill that just got defeated had something close to that. If the government didn't recoup the money within five years, the president would be required to submit a proposal to tax the 'financial services industry' to recoup the money.

Yes, so the Republicans don't like it because it's Communist and the money men don't like it because they have to pay the cash back eventually. Dead in the water, then, surely. Expensive and even more useless than it was last week.
posted by bonaldi at 11:35 AM on September 29, 2008


I'm looking out my window at work at the other skyscrapers (such as they are here) and briefly imagined people jumping out the windows. It was not a pleasant feeling.
posted by cimbrog at 11:37 AM on September 29, 2008 [1 favorite]


Oh, for heaven's sake. The failure of this shitty bill to pass will not trigger the Zombie Apocalypse. It is to be hoped that it will trigger the creation of a decent plan, with bottom-up as well as top-down relief, accountability, and the potential for the government to break even or turn a slight profit over time.
posted by Sidhedevil at 11:39 AM on September 29, 2008 [11 favorites]


Some stocks are just in freefall, and it doesn't make sense that they are. (AAPL down close to $100, ACAS below $25, ADM closing on $20...it's crazy.)

Apple is only down about 2-3% on the actual bailout failure, but their stocks were just downgraded by analysts today on the economic outlook, as well as based on polls of how much people are interested in buying their overpriced machines, as well as the fact that RIM's (makers of the blackberry) earnings were terrible the other day. Apple is down a total of 16% today.
posted by delmoi at 11:39 AM on September 29, 2008


If the government didn't recoup the money within five years, the president would be required to submit a proposal to tax the 'financial services industry' to recoup the money.

That's some pretty weak-ass shit, just like all the other "compromises" in this bill — ooh, they can spend infinite money at the price of their choosing only $350bn at one go instead of $700bn! That's showing 'em!
posted by enn at 11:39 AM on September 29, 2008


Republicans live on CNN - blaming a speech by Pelosi I didn't hear for being too partisan.

Seriously. It strikes me as extremely tone deaf that the House GOP leaders have apparently decided to go with that theme. I'm reminded of when Gingrich got hammered for implying that he was taking a hard line on the budget shutdown because Clinton ignored him during a flight to Israel.
posted by lalex at 11:41 AM on September 29, 2008


Oops. I just got a page.

(Peers at cell phone)

Gotta go, guys. Apparently, the Zombie Apocalypse has been declared. Shit. I hope I turned my stove off.
posted by Astro Zombie at 11:41 AM on September 29, 2008 [17 favorites]


AAPL was downgraded today by…someone. That's probably why it's off more sharply than everyone else.
posted by oaf at 11:41 AM on September 29, 2008


Oh, and fuck Paulson for coming up with such a shitty, DOA plan at the last possible minute. I mean, if they had floated this a month ago they would have had time to debate, and likely things wouldn't have gotten nearly as bad as they have.
posted by delmoi at 11:42 AM on September 29, 2008 [7 favorites]


skyscrapers...briefly imagined people jumping out the windows.

It didn't happen during the 1929 depression and it's not going to happen now.

Something else you're not going to see? People walking around wearing barrels instead of clothing.
posted by Sidhedevil at 11:42 AM on September 29, 2008 [24 favorites]


Heavy traffic on House.gov has completely fried the system. Just like dealing with a hangover, the only sure-fire cure is going to be time. Wait for the uber-eagers to satiate and then check.
posted by indiebass at 11:42 AM on September 29, 2008


"If after five years the government has a net loss, the president will be required to submit a legislative proposal to seek reimbursement from the financial institutions that participated"

Good luck with that.

FWIW, I think of this bailout like chemotherapy. It's bad, really bad, it makes you really really sick. If you are weak, it can kill you. And still there is no guarantee that the cancer won't get you anyway. The alternative to chemotherapy just provides the comfort of having a more or less known outcome, and not having to go through chemo.
posted by Xoebe at 11:42 AM on September 29, 2008 [2 favorites]


...if they had floated this a month ago they would have had time to debate, and likely things wouldn't have gotten nearly as bad as they have.

Agreed, delmoi. They did this on purpose. It's almost like they wanted something violent to happen in order to frighten the populace into acquiescence with any crazy plan. Why would they think such a thing would work...
posted by Mister_A at 11:44 AM on September 29, 2008 [5 favorites]


ob, Where's McCain right now?

Got me, but he's scheduled to be in Iowa tomorrow. Have to see if he makes it.
posted by cjorgensen at 11:45 AM on September 29, 2008


FWIW, I think of this bailout like chemotherapy.

A good bailout would be chemotherapy.

This plan was Laetrile.
posted by Sidhedevil at 11:45 AM on September 29, 2008 [4 favorites]


I think the democrats should write a bill that they can agree on.

Absolutely! They are the majority in Congress, for one thing. For another, the GOP is going to be under pressure from their corporate masters to take whatever they can get.


Uh, if the planetmoney Twitter feed is to be believed, the GOP is the reason this bill didn't pass the House. Let's not pretend it was principled Democrats taking a stand. Of course, maybe we should wait for more official figures.
posted by adamdschneider at 11:45 AM on September 29, 2008


Question for Astro Zombie: Is this going to be an apocalypse for zombies, or by zombies, or both? I'll hang up and wait for your answer.
posted by Mister_A at 11:46 AM on September 29, 2008 [3 favorites]


Kill Bill
posted by Blazecock Pileon at 11:46 AM on September 29, 2008


It didn't happen during the 1929 depression and it's not going to happen now.

Yeah, but I've got a view of the Mayor's offices here in Toledo. Never know when someone's gonna go flying out a window, there. Coffee mugs, at the least.

Intellectually, I know this isn't necessarily the end of it all. In fact, it might be for the better. But there's enough uncertainty to make one nervous.

And, in case you haven't heard, the Zombie Apocalypse is on.
posted by cimbrog at 11:49 AM on September 29, 2008


Uh, if the planetmoney Twitter feed is to be believed, the GOP is the reason this bill didn't pass the House. Let's not pretend it was principled Democrats taking a stand. Of course, maybe we should wait for more official figures.

66 democrats voted against the bailout. The democrats could, in theory, pass a bill without a single republican vote.
posted by delmoi at 11:50 AM on September 29, 2008


Wait a minute--APPLE might lose money if I don't mortgage my kids future by foregoing single payer healthcare? OK, never mind, I reverse positions entirely. Nothing is too good for billionaire CEO Steve Jobs.
posted by DU at 11:50 AM on September 29, 2008


With public opinion so deadset against this bill I was kinda surprised that it even got that many yea votes. Basically nobody who is in a district that is even somewhat at risk is going to sign on and there are way too many Republican representatives that have drunk freely from the "free markets cure all ills" flavored kool-aid to get many of them signed onto a plan. Further even if you can convince Republicans in extremely safe conservative districts they fear being attached to this bill will force them to face those nasty Club for Growth primary fights in 2 years.

Thus you basically had the Democratic leadership that is a afraid that a collapse on their watch will come back and bite them in the ass in terms of votes in November and a handful of Republicans who probably felt like this deal was a good as it's going to get (and who are likely heavily supported by all sorts of financial institutions). Needless to say this was a fragile coalition at the best of times.
posted by vuron at 11:50 AM on September 29, 2008


I was surprised to see that 2/3 of the GOP rejected the bill, which their president endorsed. Once again I find myself completely confused by all this.

We're in an election season, so it's important that the GOP have some way to blame the Democrats for not doing anything to solve the problem. And the media will go along with it, too.
posted by Blazecock Pileon at 11:51 AM on September 29, 2008 [1 favorite]


Is this going to be an apocalypse for zombies, or by zombies, or both?

It is going to be an apocalypse of the zombies, by the zombies, and for the zombies. Or at least that's what Zombie Abe Lincoln said.
posted by Sidhedevil at 11:51 AM on September 29, 2008 [4 favorites]


Your money in your bank is insured, assuming you don't have more than $100k. The problem isn't really your deposit, it's your employer who needs to borrow money (lines of credit, etc) to finance current and ongoing operations. This is a problem because money will be harder to get and more expensive in the future without a bailout (and it really isn't a bailout, but that's what everyone is calling it. The banks that would be bailed are are mostly already defunct now.)

It's also a problem in that credit cards and other types of consumer debt are going to be harder to get and more expensive when you do get them, so that will slow the economy. What is looming is that all "harder and more expensive" is likely to mean "prohibitively expensive" in the cases of a great many people which will cause a sever recession as people stop spending.

On top of all of this is the broader downstream problems. We are destroying staggering amounts of value in 401k accounts and in pensions. That's real money that affects real people's lives. If people were basing their retirement future on better performance than the market has returned over the last 10 years (which is 0% excl. dividends) they are going to hurt. The government is going to have to make up that difference.

So one way or the other, the government is going to have to shell out a lot more money. This way, the government gets something that could potentially be worth money.

Interesting anecdote for the people saying the banks get what they deserve:

Apple Computer Down 17.25%
Goldman Sachs Down 14.34%
posted by Pastabagel at 11:51 AM on September 29, 2008 [3 favorites]


66 democrats voted against the bailout. The democrats could, in theory, pass a bill without a single republican vote.

They could, and though it would be noble, it would also be stupid.
posted by billysumday at 11:52 AM on September 29, 2008


You know what really pisses me off? The Mets. WTF.
posted by poppo at 11:53 AM on September 29, 2008 [4 favorites]


Official vote tally.

That is a fascinating list to pick over. Tancredo and Waxman...for. Kucinich and Musgrave...against.

Kline (conservative GOP, southern Twin Cities suburbs): for
Bachmann (conservative GOP, northern Twin Cities suburbs): against

Lots of entertainment there for anyone who enjoys cherry-picking odd pairs of people who aren't normally on the same side of a vote. Or odd pairs on the opposite side of a vote.
posted by gimonca at 11:53 AM on September 29, 2008 [1 favorite]


Let's not pretend it was principled Democrats taking a stand.

From what I've been hearing, most of the nays from the GOP were to try to saddle Dems with An Issue. I say make it into an opportunity. Bush already got on TV to tell us our heads would explode if we didn't invade Iraqbail out poor-decision-making CEOs, so he can't veto...right? I mean, if it's so OMGVITAL, then they can accept a few tiny transaction fees, oversight or regulation.
posted by DU at 11:54 AM on September 29, 2008


Hmm. Contract for the current hjob I'm working on ends a week from now. Really not looking forwards to job hunting in the current enviroment.
posted by Artw at 11:55 AM on September 29, 2008


Got me, but he's scheduled to be in Iowa tomorrow. Have to see if he makes it.
posted by cjorgensen at 2:45 PM on September 29


He gave a speech earlier today which was bullish (I just saw it on MSMBC). It was given before the vote, and by the tone of his speach it seemed like he was convinced that it would pass. So egg-on-the-face time I think, but it'll be interesting to see how his campaign spins this.
posted by ob at 11:55 AM on September 29, 2008


Yes, the Democrats can not pass the bailout without significant Republican support or the Republicans will use it as a club to bludgeon them with for the next 40 years. This has to be bipartisan or nothing.

For the record: I think the bailout plan is awful. If we're going to get into this kind of business, we should be using the swedish model and just nationalize the problem banks temporarily until the credit issues are resolved. The only thing more awful than the currently proposed bailout plan might be doing nothing at all. I'm not sure.
posted by Justinian at 11:55 AM on September 29, 2008 [1 favorite]


Further even if you can convince Republicans in extremely safe conservative districts they fear being attached to this bill will force them to face those nasty Club for Growth primary fights in 2 years.

Who do you think the Club for Growth is? I seriously doubt they would oppose this bailout.
posted by delmoi at 11:57 AM on September 29, 2008


I think the democrats should write a bill that they can agree on.

I must admit that I'm a bit confused with all this. Maybe it's that I'm Canadian. But when I read your message, then this:

"The House GOP leadership blamed Speaker Pelosi (D-CA) for the defeat of the $700 billion financial intervention bill." (Currently on the c-span front page).

And combine it with this:
Bill failed 226 to 207 --- 141 Dems said yes, 94 no .... 66 GOP yes, 132 no

It's like I stepped right into the twilight zone. Nearly 2/3rds of Democrats say yes... Over 2/3rds of the Republicans say no...

Which obviously mean that it's all the Democrats' fault and that they should write a bill they agree on?

A bill which, had it been left to the Democrats alone, would have passed?

Seriously? How is it not the GOP that killed the bill?
posted by splice at 11:59 AM on September 29, 2008 [4 favorites]


Uh, if the planetmoney Twitter feed is to be believed, the GOP is the reason this bill didn't pass the House. Let's not pretend it was principled Democrats taking a stand. Of course, maybe we should wait for more official figures.

Here's the official vote tally, also linked by MrMoonPie upthread. That's just a vote count. It's not the full story, which is more than numbers. What we do know (and in this case it is indeed based on an NPR reporter's comment and not the House clerk) is that there was an attempt to find more votes from both sides of the aisles at the very end, and that it didn't work out. I think both parties are feeling significant contention within their own ranks on this. The numbers suggest that too. Democrats skewed yes and Republicans skewed no.

Every Congressional tracking site, .gov and non that I know, seems overwhelmed with traffic.
posted by Tehanu at 11:59 AM on September 29, 2008


splice, do not expect logic or honesty to be any part of the GOP message.
posted by wendell at 12:01 PM on September 29, 2008 [1 favorite]


Apple Computer Down 17.25%

Apple got downgraded today. RIMs earnings were terrible and less people are interested in Macs and iPhones. Yeah, that's probably due to skipping luxury items in a time of crisis, but still, people should stop pointing to apple as an example of a "normal" company. Google is down "just" 7% Amazon is down 8%, Berkshire is down 1.85%.
posted by delmoi at 12:02 PM on September 29, 2008


so do i say fuck jimmy stewart and empty my savings now?
posted by ruthsarian at 12:03 PM on September 29, 2008


It didn't happen during the 1929 depression and it's not going to happen now.


Well, almost.


The British do love their trains.
posted by Kirth Gerson at 12:04 PM on September 29, 2008 [1 favorite]


Further even if you can convince Republicans in extremely safe conservative districts they fear being attached to this bill will force them to face those nasty Club for Growth primary fights in 2 years.

Who do you think the Club for Growth is? I seriously doubt they would oppose this bailout.
posted by delmoi at 11:57 AM on September 29

The Club for Growth came out with press release bashing this bill so I hardly think that they were big supporters of it. Now whether they were against it in public and for it in private is another question entirely.
posted by vuron at 12:04 PM on September 29, 2008


Apple is getting what it deserves. Now make some new Macs, fuckers.
posted by bonaldi at 12:04 PM on September 29, 2008 [3 favorites]


People speak of this Zombie Apocalypse as if it's a bad thing.
posted by booticon at 12:05 PM on September 29, 2008 [1 favorite]


Which obviously mean that it's all the Democrats' fault and that they should write a bill they agree on?

A bill which, had it been left to the Democrats alone, would have passed?

Seriously? How is it not the GOP that killed the bill?


the GOP did kill the bill, but that's only because the Democrats allowed them to have a say in the first place.

That the GOP is blaming the democrats for making them vote against it is laughably idiotic. I mean, the GOP house leadership said earlier that the bill was absolutely vital for the U.S. Economy, now they're saying they couldn't vote for it because Nancy Peloci gave a speech that was too mean to them for fucking up the economy. If these idiots are willing to tank the U.S. Economy because they got offended by a speech, it ought to prove to anyone they're absolutely not capable of governing.

The democrats can negotiate with themselves and come up with a bill they all like, and pass it. The senate republicans wouldn't dare vote against it, and the president wouldn't dare veto it (IMO) since they backed this deal so strongly.

The democrats claim they have what it takes to lead the nation, they ought to do it.
posted by delmoi at 12:07 PM on September 29, 2008 [15 favorites]


Apple Computer Down 17.25%

I've been reluctant to play the stock market, but at those irrationally low prices, it might be a good time to get some.
posted by Blazecock Pileon at 12:07 PM on September 29, 2008


their stocks were just downgraded by analysts as well on… the fact that RIM's (makers of the blackberry) earnings were terrible the other day.

This is kind of bizarre, considering that RIM's earnings are down due to strong competition from the iPhone.
posted by designbot at 12:08 PM on September 29, 2008


I doubt bush would veto it at this point. What choice does he have? He's been warning the country for days and if he said no now, he'd be fucked.

You mean he'd have to live in poverty?

Or no one would ever vote for him again?

Or the Saudis would not speak to him any more?

What does fucked mean WRT Bush, and how does that relate to people who are losing their homes or retirement funds?
posted by Kirth Gerson at 12:09 PM on September 29, 2008 [1 favorite]


And it's one, two, three, what are we paying for?
don't ask me I don't give a damn, next stop is the Paulson plan.
And it's five, six, seven, open up the pearly gates,
well, ain't no time to wonder why, whoopee we're all gonna die!

Okay, I got that out of my system.
posted by djeo at 12:09 PM on September 29, 2008 [12 favorites]


I blame this on the Cubs. For them to do well is a sign of the apocalypse.
posted by dances_with_sneetches at 12:10 PM on September 29, 2008


ruthsarian: It's Mr Potter who's in trouble, not Bailey Savings and Loan.
posted by athenian at 12:12 PM on September 29, 2008


I doubt bush would veto it at this point. What choice does he have? He's been warning the country for days and if he said no now, he'd be fucked.

All his rich friends would hate his guts forever, just like the rest of the country.
posted by delmoi at 12:12 PM on September 29, 2008


Something else you're not going to see? People walking around wearing barrels instead of clothing.

Dammit! I had my fashion line all lined up for the Fall.

Oh well, gotta go now, some zombie is knocking at my door.
posted by effwerd at 12:13 PM on September 29, 2008


This is a good example of why it seems like economic systems and political systems should be distinguished from one another. There's so much partisan politics in this bailout discussion - I'm very pessimistic that enough, or any, legislators can do what is actually in the best interest of the economy right now.
posted by lunit at 12:14 PM on September 29, 2008


>I blame this on the Cubs. For them to do well is a sign of the apocalypse.

the Zombierano Apocalypse?
posted by xbonesgt at 12:14 PM on September 29, 2008


Something else you're not going to see? People walking around wearing barrels instead of clothing.

...and nobody is going to be vagabonding by boxcar with a polka dotted handkerchief tied to the end of a stick that is slung over their shoulder.

but honestly, how hilarious a sight would that be? Super hilarious.
posted by clearly at 12:20 PM on September 29, 2008


Finally the House does something I approve of.
posted by Capt Jingo at 12:22 PM on September 29, 2008


Meanwhile in China.
posted by philip-random at 12:22 PM on September 29, 2008


Everybody keeps saying Bush wouldn't dare veto it. What does he care? He's only on the job for a couple more months anyway, and every Republican running for reelection has been running away from this administration as fast as they can as it is. So they don't care. Why wouldn't Bush just veto it out of spite?
posted by penduluum at 12:23 PM on September 29, 2008


The democrats can negotiate with themselves and come up with a bill they all like, and pass it. The senate republicans wouldn't dare vote against it,

It is to laugh. Maybe some of them, but in general, they would vote Yea on the Zombie Apocalypse Authorization Act if they thought there was a political upside to it.
posted by emjaybee at 12:23 PM on September 29, 2008


Addd to the bill a provision that if the govt loses money on these assets, a tax on banks and their CEO's will be levied until the govt is made whole.

Hilarious. As if there was a possibility for the government to turn a profit. Sure that's why private capital isn't interested, it's because there's oodles of cash to be made. Virtual gold mines.

If...
posted by BigSky at 12:24 PM on September 29, 2008 [1 favorite]


This morning, before the bailout package failed, Apple was down by as much as 17% on the analyst downgrades. Besides the reasons mentioned by delmoi, one of the analysts cited Apple's virtual absence in the sub-$1000 market.

Delmoi is right that this is not a "normal" company and this was also not a "normal" day for them.
posted by lalex at 12:24 PM on September 29, 2008


Watching the DOW tank, I'm thinking I had better be prepared to have my parents move in with me. Isn't it supposed to be the other way around with my generation?
posted by cimbrog at 12:24 PM on September 29, 2008


Ben Bernanke wants my teeth for the Federal Reserve.
posted by mazola at 12:26 PM on September 29, 2008 [3 favorites]


The Democrats could not lead a horse to water, let alone get it to drink. Their numerical advantage looks good on paper but when it comes to actually doing something, they seem woefully incapable.

I wish there was a credible third party that could command enough votes to make the two existing parties at least have to pay attention, but I don't see that happening. Instead we get intra- and inter-party finger pointing and name calling and nothing gets done.
posted by tommasz at 12:26 PM on September 29, 2008 [3 favorites]


Sure, my life's savings is in serious jeopardy, but I just feel bad for all those zombies... ::sniff::
posted by LordSludge at 12:27 PM on September 29, 2008


The dow is falling off a fucking cliff.
posted by bonaldi at 12:27 PM on September 29, 2008



Apple got downgraded today. RIMs earnings were terrible and less people are interested in Macs and iPhones. Yeah, that's probably due to skipping luxury items in a time of crisis, but still, people should stop pointing to apple as an example of a "normal" company. Google is down "just" 7% Amazon is down 8%, Berkshire is down 1.85%.
posted by delmoi at 3:02 PM on September 29


First there really isn't any reason it's down so much other than hedge funds selling everything and anything to satisfy third-quarter redemptions of their investors.

Second, it was the hedge funds that drove these things up in the first place. What is notable is that it took from May 9 to July 3 of last year to go from 106 to 127 for the first time, and we just undid that in 4 hours. That which takes months or even years to build up can be undone in hours or days.
posted by Pastabagel at 12:28 PM on September 29, 2008


I wish there was a credible third party that could command enough votes to make the two existing parties at least have to pay attention, but I don't see that happening. Instead we get intra- and inter-party finger pointing and name calling and nothing gets done.

It's why I voted Green in 2000.
posted by Tehanu at 12:28 PM on September 29, 2008


The Dow just dropped another 150 points in the last 10 minutes.
posted by monju_bosatsu at 12:29 PM on September 29, 2008


Someone needs to close the stock market and declare a bank holiday. Everyone needs a few days to think about this without OMG DEATH looming over them.
posted by Alison at 12:30 PM on September 29, 2008 [4 favorites]



We're down 725 now...
posted by bukharin at 12:30 PM on September 29, 2008


delmoi, the nature of the house makes this very kind of bill very difficult to pass late in an election year, there going up for a vote this November. Why do you think most of the Republicans voted against it, they didn't believe that they were going to have the kind of political cover they needed to survive. Its not so much the democratic party but they're individual members who are like I am not going to hand this campaign issue to my opponent in October .
posted by Rubbstone at 12:31 PM on September 29, 2008


Apple got downgraded today....Apple was down by as much as 17% on the analyst downgrades...etc.

Apple Takes Hit as Investor Confidence Slips -- "Shares of Apple were pummeled on Wall Street Monday due to investor concerns that sales growth of Mac computers, iPhones and iPods could slow as consumers spend less. Two brokerages covering the company -- Morgan Stanley and RBC Capital -- downgraded their ratings on Apple shares, pouring fuel on the fire."
posted by ericb at 12:32 PM on September 29, 2008


It's why I voted Green in 2000.

Admitting this: really brave or really stupid?
posted by rxrfrx at 12:33 PM on September 29, 2008 [1 favorite]


Taking all of my money out of my retirement may have seemed like a bad idea five months ago, but today I feel a financial wizard.
posted by MegoSteve at 12:33 PM on September 29, 2008


"Someone needs to close the stock market and declare a bank holiday. Everyone needs a few days to think about this without OMG DEATH looming over them," Alison.
Yeah, that would calm people down.

Besides, if you close the markets I can't buy!
posted by cjorgensen at 12:33 PM on September 29, 2008


a musical interlude.
posted by philip-random at 12:34 PM on September 29, 2008


Someone needs to close the stock market and declare a bank holiday. Everyone needs a few days to think about this without OMG DEATH looming over them.

No kidding. Does anyone know what time the house is going to try voting again?
posted by delmoi at 12:34 PM on September 29, 2008


Which obviously mean that it's all the Democrats' fault and that they should write a bill they agree on?


Here's how it works. Every GOP House rep wants the bill to pass. But they all want to be able to vote against it and run against it.

They thought the Dems could get enough votes to pass it. But *magically* not enough Dems showed up to vote.

But the GOP miscalculated and they will get blamed. They have played and won so many games of chicken up to this point they figured they could win one more. It was the only move they had. . .

This is a dagger in McCain's heart. How he recovers from a blow like this is anyone's guess.
posted by Ironmouth at 12:34 PM on September 29, 2008 [13 favorites]


It's why I voted Green in 2000.

And how do you feel that's working out for you, champ?
posted by Sidhedevil at 12:36 PM on September 29, 2008 [17 favorites]


I'm investing in bindles and canned pork & beans.
posted by ltracey at 12:36 PM on September 29, 2008 [2 favorites]


NYSE Circuit Breakers. It takes a 10% drop to even trigger a temporary market close.
posted by ewagoner at 12:36 PM on September 29, 2008


Admitting this: really brave or really stupid?

Really depends what state the commenter is from to even matter
posted by poppo at 12:37 PM on September 29, 2008




The house isn't going to vote again today; they are taking tomorrow off for Rosh Hashanah.
posted by RussHy at 12:37 PM on September 29, 2008


"Taking all of my money out of my retirement may have seemed like a bad idea five months ago, but today I feel a financial wizard," MegoSteve.

Me, I'm upping my contributions today to my 401(k). Of course, it would have been cool if I could have slid my losses into a Money Market account prior to the bigger losses. But if I had done that I think I'd be moving back into the market today.
posted by cjorgensen at 12:37 PM on September 29, 2008


To set the record straight, aapl was downgraded before the open. It opened at 119. It's at 103. There is no point in trying to find a fundamental explanation for trading today, because it is largely irrational.


Someone needs to close the stock market and declare a bank holiday. Everyone needs a few days to think about this without OMG DEATH looming over them.
posted by Alison at 3:30 PM on September 29


Fuck that. I'm going on margin to buy me some options! GOOG JAN 09 800s, BABY!

(kidding)
posted by Pastabagel at 12:38 PM on September 29, 2008 [2 favorites]


I'm investing in bindles and canned pork & beans.

I'm investing in bindles futures.
posted by RussHy at 12:38 PM on September 29, 2008 [6 favorites]


This is good news to me and people of my faith. It means that it's only a matter of time until Ziggy Stardust comes down and plays the guiiitaaarrrr!
posted by milarepa at 12:40 PM on September 29, 2008 [6 favorites]


They thought the Dems could get enough votes to pass it. But *magically* not enough Dems showed up to vote.


Uhhhhhh......I count a total of 433 votes and 1 abstention.

How many people are in the House, again? 435?
posted by spirit72 at 12:40 PM on September 29, 2008


I love metafilter because even in the midst of a massive economic meltdown I still pick up esoteric little facts like the proper word for hobo stick sacks. I never even knew they had a proper name.
posted by shiu mai baby at 12:40 PM on September 29, 2008 [9 favorites]


I'm hardly shocked that Apple is taking a beating. With the threat of a credit implosion looming consumers and businesses are not going to be buying the various Ipods, Iphones and Macbook Airs that Apple is selling. Several of those product lines are essentially Veblen goods and given a likely downturn in the economy Veblen goods typically don't sell quite as well as they do when everyone is flush.

TBH though I imagine the entire tech industry is going to start feeling significant pressure in the next couple of quarters. If businesses can't get loans to meet payroll I seriously doubt they are going to be replacing desktops, servers and applications for their business either. Combined with what will almost certainly be weak sales in the consumer electronics sector and I would anticipate a large number of computer and electronics manufacturers getting hammered in the near term.
posted by vuron at 12:40 PM on September 29, 2008 [3 favorites]


The Zombie Apocolypse Will Not Be Televised ...
posted by ElvisJesus at 12:42 PM on September 29, 2008


Here's the Pelosi speech that so affected those poor, frail Republicans.
posted by athenian at 12:42 PM on September 29, 2008 [2 favorites]


I'm confused by the official vote tally linked to above, namely by this fact;

"BILL TITLE: To amend the Internal Revenue Code of 1986 to provide earnings assistance and tax relief to members of the uniformed services, volunteer firefighters, and Peace Corps volunteers, and for other purposes"

That doesn't seem to be the bailout bill.
posted by Narin at 12:42 PM on September 29, 2008


RussHy writes "The house isn't going to vote again today; they are taking tomorrow off for Rosh Hashanah."

So it's the Joos fault? Roy Blunt, Republican House Whip: bailout failed because of the Jewish Holidays.
posted by orthogonality at 12:43 PM on September 29, 2008


Oh yeah and .... privetizing Social Security was a good idea why?
posted by ElvisJesus at 12:44 PM on September 29, 2008 [3 favorites]


So the Romney / Biden debate on thursday should be very interesting.
posted by R. Mutt at 12:45 PM on September 29, 2008 [5 favorites]


This is good news to me and people of my faith. It means that it's only a matter of time until Ziggy Stardust comes down and plays the guiiitaaarrrr!

More like the year of the Diamond Dogs.
posted by philip-random at 12:46 PM on September 29, 2008 [1 favorite]


This isn't a rock and roll bailout bill ... it's GENOCIDE!
posted by Astro Zombie at 12:47 PM on September 29, 2008 [3 favorites]


So the Romney / Biden debate on thursday should be very interesting.

Be fair. That will only be because Palin will have suspended her campaign to work on the crisis herself.
posted by effwerd at 12:47 PM on September 29, 2008 [2 favorites]


So if everything turns out okay, who's gonna round up all these damn zombies?
posted by cimbrog at 12:47 PM on September 29, 2008 [1 favorite]


Uhhhhhh......I count a total of 433 votes and 1 abstention.

Let me explain--if a certain number of Republicans refused to vote for the bill, a certain number of Democrats would vote against it too. The idea is to force the vote to be bipartisan so that each party would take equal responsibility for an unpopular but necessary measure. The Republicans gambled that the Dems would vote for passage anyway--they lost the gamble.

Now the world will blame the GOP for the evaporation of billions of dollars from the stock market today.
posted by Ironmouth at 12:47 PM on September 29, 2008 [2 favorites]


Well, as she said to Katie Couric, health care reform is all about job creation. And that ain't not bad.
posted by proj at 12:48 PM on September 29, 2008


Hahahah Barney Frank is awesome. He said he'll say nice things about the Republicans if they vote yay on the bill in order to offset their feelings being hurt by Pelosi.
posted by afx114 at 12:49 PM on September 29, 2008


Narin writes "I'm confused by the official vote tally linked to above, namely by this fact;"

Short answer: to circumvent Republican parliamentary maneuvers used to delay new legislation, the bailout was an amendment to a House amendment to a Senate amendment to a bill that was in limbo, because the House and Senate versions weren't reconciled.
posted by orthogonality at 12:49 PM on September 29, 2008 [4 favorites]


RE: blame the Cubs... The Cubs lost to Philadelphia in 1929
posted by robot at 12:49 PM on September 29, 2008


Ha ha, Barney Frank's response to the GOP leadership.
posted by lalex at 12:50 PM on September 29, 2008 [3 favorites]


Boehner, Boehner your bailout's a mess.
posted by milarepa at 12:52 PM on September 29, 2008 [1 favorite]


Because of the Jewish Holiday? Wow, the Jews really do get blamed for everything. The next headline is going to say that the bill failed to pass because of the lack of bi-partisan cooperation as promised by John McCohen.
posted by ob at 12:52 PM on September 29, 2008 [2 favorites]


Actually, after 2PM it takes a 20% drop of DJIA to trigger a NYSE halt. We're at 5.6% right now.
posted by a robot made out of meat at 12:53 PM on September 29, 2008



The 3rd Infantry Division’s 1st Brigade Combat Team has spent 35 of the last 60 months in Iraq patrolling in full battle rattle....

Now they’re training for the same mission — with a twist — at home.

Beginning Oct. 1 for 12 months, the 1st BCT will be under the day-to-day control of U.S. Army North, the Army service component of Northern Command, as an on-call federal response force for natural or manmade emergencies and disasters, including terrorist attacks.

posted by Huplescat at 12:53 PM on September 29, 2008


PANIC IN DETROIT!

And maybe some other places too. Anyway, I agree with whoever said that the Republican house members wanted the bill to pass but didn't want to vote for it. Now they are being tarred with a brush broad enough to cover Sen. McCain, the disingenuous cockbag plutocrat hypocrite who brought these fuckers into it in the first place.
posted by Mister_A at 12:53 PM on September 29, 2008 [1 favorite]


Sorry, 2:30PM.
posted by a robot made out of meat at 12:54 PM on September 29, 2008


Short answer: to circumvent Republican parliamentary maneuvers used to delay new legislation, the bailout was an amendment to a House amendment to a Senate amendment to a bill that was in limbo, because the House and Senate versions weren't reconciled.

Wow.
posted by delmoi at 12:55 PM on September 29, 2008


Ironmouth, how do you think it will play out for the average American voter? I mean, it's established that most people hate the bailout, and see it as a giant boon to the overcompensated CEOs of Wall Street -- House Reps on both sides of the aisle were saying that their phones were ringing off the hook with irate members of their constituency.

I see the GOP spinning it as, "Oh look how concerned we are for Main Street*! We stood up to those spendy Democrats, because we know that this pain today would be far exceeded by the passage of this bailout!" ... or some other fairly inaccurate statement.

I ask because I am still a little freaked out that W is finding more friends in the Democrats than his own party, so I'm having a hard time fully understanding the myriad aspects of this crisis.

* God, how I wish the Main Street/Wall Street political meme would die, already. John, Barry: that goes for the both of y'all. And your running mates.
posted by shiu mai baby at 12:56 PM on September 29, 2008




Orthogonality writes "Short answer: to circumvent Republican parliamentary maneuvers used to delay new legislation, the bailout was an amendment to a House amendment to a Senate amendment to a bill that was in limbo, because the House and Senate versions weren't reconciled."

Now I feel stupid.
posted by Narin at 12:57 PM on September 29, 2008 [1 favorite]


shiu mai baby, one thing to consider is that Bush has only his reputation at stake, not future political office. Not so for the house republicans, who must stand for re-election every 2 years. Thus, the president is freed to take a slightly less unprincipled stance on things, if the urge moves him. Plus he is scared shitless and wants the grown-ups to solve this one.
posted by Mister_A at 12:58 PM on September 29, 2008


Now they’re training for the same mission — with a twist — at home.

Are you suggesting something with this?
Okay, I know what you're suggesting. I just don't want to believe it at the moment.
posted by cimbrog at 12:58 PM on September 29, 2008


By the way, if you want to see some real circuit-breaker-free fun, stay up late and watch the overseas markets, particularly Asia. Considering it's their money we need to finance our collective ongoing operations, it will be interesting to see their reaction to all this.
posted by Pastabagel at 1:01 PM on September 29, 2008


PANIC IN DETROIT!

Actually there was a $25 billion dollar bailout for the automakers that was in the queue to get passed as well. I guess that's now non operative.
posted by delmoi at 1:01 PM on September 29, 2008


Well, right now the person who's taking the biggest political hit is John "HERE I COME TO SAVE THE DAY" McCain, largely because he made the mistake of having his surrogates brag
about how he made it pass
before it actually passed.
posted by Sidhedevil at 1:01 PM on September 29, 2008 [2 favorites]


Fed Pumps 630 Billion Into Financial System

Those are just the ordinary loans they do every day. Except twice as much as usual today.
posted by delmoi at 1:02 PM on September 29, 2008


As long as my grocery store still carries bread and meat I ain't worried.
posted by Vindaloo at 1:03 PM on September 29, 2008


Sidhedevil, that article states that Kerry was also out big-upping Obama's role in the bailout.
posted by you just lost the game at 1:03 PM on September 29, 2008


Hey the markets are closed. Tomorrow should be pretty entertaining.
posted by delmoi at 1:05 PM on September 29, 2008


The house isn't going to vote again today; they are taking tomorrow off for Rosh Hashanah.

Please tell me that you're fucking kidding on this one...
posted by VicNebulous at 1:11 PM on September 29, 2008


You know what really pisses me off? The Mets. WTF.

Damn right.

Something else you're not going to see? People walking around wearing barrels instead of clothing.

I'm wearing a barrel right now. Because of the fucking Mets.
posted by languagehat at 1:12 PM on September 29, 2008 [15 favorites]




FiveThirtyEight:

"Among 38 incumbent congressmen in races rated as "toss-up" or "lean" by Swing State Project, just 8 voted for the bailout as opposed to 30 against: a batting average of .211.

By comparison, the vote among congressmen who don't have as much to worry about was essentially even: 197 for, 198 against."
posted by clearly at 1:13 PM on September 29, 2008


An interesting bit from the (still early) Washington Post article on the failure:

This comes at a crucial time, the end of the third quarter, when firms will be seeking to rollover short-term debt, said Brusuelas. Given the seizing up of the credit markets, if Congress does not come up with a plan it may be increasingly difficult for many firms to find short term financing to meet immediate debt requirements and basic payroll obligations.

I recall from an earlier thread that Mutant pointed out tomorrow is the simultaneous end of the month and of the quarter, which means banks, financial companies, and everyone else is going to have to put out their quarterly reports with more details than anyone's had so far. I didn't realize that short-term debt might be rolling over as well; if that means what I think it means... this seems like the moment when the crisis spreads from the financial markets (where it's just destroying pensions and retirement funds) to the broader economy.

What happens if companies aren't able to roll that short-term debt over and continue using to finance operations? That spells layoffs or other pain in the employment market, yes?

(iminurmefi nervously checks her emergency fund balance, kicks herself for not having replenished it sooner, hopes her company doesn't rely on any short-term financing but has no real clue if it does)
posted by iminurmefi at 1:13 PM on September 29, 2008 [4 favorites]


Holy shit. Touche Artw.
posted by clearly at 1:14 PM on September 29, 2008


And how do you feel that's working out for you, champ?

About as well as for everyone for voted for Gore, it turns out. My one Green vote in a red state wasn't exactly the deciding factor in that race.
posted by Tehanu at 1:15 PM on September 29, 2008


I'm wearing a barrel right now. Because of the fucking Mets.

Do season tickets in their brand new stadium really cost that much? Maybe you should switch your team. I hear the Brewers offer a reasonably priced stadium experience.
posted by clearly at 1:16 PM on September 29, 2008 [1 favorite]


Why did the market have to plunge?
What's with the DOW's frantic reelings?
The Republicans tell us it's quite simple:
"Nancy Pelosi hurt our feelings."

Next time I am in a wicked mood
And set out on some dirty dealings
If I am caught, I'll just explain
That Nancy Pelosi hurt my feelings.

I think I'll get a pistol soon
And try my hand at crimes and stealings
And why not! I have my resons:
Nancy Pelosi hurt my feelings!

And the murder they pin on me?
Ratted out by a stoolie's squealings?
Did the squealer happen to mention
That Nancy Pelosi hurt my feelings?

There's no limit to the evil I do;
It's a house of crime built without ceilings.
And why? Why do I commit such wrongs?
Because Nancy Pelosi hurt my feelings.
posted by Astro Zombie at 1:17 PM on September 29, 2008 [38 favorites]


Looks like the DOW dropped 777 points today. Largest point drop in history, according to MSNBC. All because Pelosi was mean to the Republicans.
posted by RussHy at 1:19 PM on September 29, 2008


they are taking tomorrow off for Rosh Hashanah

What? I was told they're taking tomorrow off for My Birthday!

The Politicians have lied to me again.

How today is going to get spundited (a word I just invented, a combo of spun & pundit) is anybody's guess. Or who's going to win the "battle of perceptions". Should be interesting, like a Horror Porn movie like "SAW" is "interesting".
posted by wendell at 1:20 PM on September 29, 2008 [2 favorites]


Well, according to John McCain, the bailout vote failed because the Democrats were mean to the Republicans.

They sure showed them!
posted by elfgirl at 1:21 PM on September 29, 2008


The house isn't going to vote again today; they are taking tomorrow off for Rosh Hashanah.

I think I just figured out the new bailout plan:
Shmita (Hebrew: שמיטה, literally "release"), also called the Sabbatical Year, is the seventh year of the seven-year agricultural cycle mandated by the Torah for the Land of Israel, and still observed in contemporary Judaism.

When the Shmita year ends, personal debts are considered nullified and forgiven.

The current Shmita year began on Rosh Hashanah of the Hebrew year 5768, and extends until 29 Elul 5768 (September 13, 2007–September 29, 2008).
posted by designbot at 1:22 PM on September 29, 2008 [11 favorites]


...the person who's taking the biggest political hit is John "HERE I COME TO SAVE THE DAY" McCain

Okay now you've done it. I'm now having waking nightmares about some kind of zombie John McCain / Andy Kaufman hybrid.
posted by rokusan at 1:24 PM on September 29, 2008 [2 favorites]


I smell a rat. Every single Republican who has been interviewed has blamed the vote on Pelosi's partisan speech. They knew this was going down and had their sound bites ready.
posted by RussHy at 1:24 PM on September 29, 2008 [3 favorites]


The largest point drop in history, but then again the DOW has risen to such XBox hugeness that it was only (only? ha!) 7%. I don't think things are going to be getting better all of a sudden, but the lack of an explosive crash is somewhat reassuring. The barrel-wearing, window-jumping zombie apocalypse can wait for another day, it seems.
posted by cimbrog at 1:24 PM on September 29, 2008 [1 favorite]


Oh that Nancy and her sassy mouth.
posted by athenian at 1:25 PM on September 29, 2008 [2 favorites]


Monday, September 15, 2008: "The fundamentals of our economy are strong" -- John McCain.

Monday, September 29, 2008: Dow Jones Suffers Largest Point Drop In History.
posted by ericb at 1:25 PM on September 29, 2008 [2 favorites]


Sidhedevil, that article states that Kerry was also out big-upping Obama's role in the bailout.

Yes, but McCain was much more "I'M SAVING EVERYBODY! OBAMA'S JUST ON THE SIDELINES!" so he's going to catch more fallout.

They both deserve fallout, in my opinion, because this was a shitty, shitty bill.

My prediction: A new bill will be drafted, it will be marginally less shitty, it will pass by a big margin on Thursday or Friday, and by Friday the Dow will be back around 11,200.

If I'm wrong, barrels will be worn looser this season.
posted by Sidhedevil at 1:26 PM on September 29, 2008


Now you people should finally understand why I'm so pro-gun.

I can go to the range and vent some frustration and blow off some steam at paper targets.

What? What'd you think I meant?

posted by quin at 1:26 PM on September 29, 2008 [1 favorite]


All because Pelosi was mean to the Republicans.

Now do you see why she didn't stand up to them before this? Turns out she was holding this country together by the thread of an oversensitive elephant's shorthairs. Now, I hope all of you who called her "weak" will apologize.
posted by wendell at 1:27 PM on September 29, 2008


CNN can't keep up with the drop. The big red box on the top of cnn.com still reads "Ending a tumultuous session, the Dow falls more than 600 points."

I mean, I guess 778 is "more than 600", but I still don't think that's quite right somehow.
posted by rokusan at 1:28 PM on September 29, 2008


CNN.com hasn't kept up with much of anything lately.
posted by wendell at 1:30 PM on September 29, 2008 [7 favorites]


I didn't realize that short-term debt might be rolling over as well; if that means what I think it means... this seems like the moment when the crisis spreads from the financial markets (where it's just destroying pensions and retirement funds) to the broader economy.

The quarter end means everyone pads their holdings in a process known as "windows dressing". Buy stuff that did well inthe quart to make it look you had them all along, sell the dogs to make it look like you didn't.

Banks are hoarding cash, mutual funds want to show how smart they are by selling out of financials and having larger cash positions, etc. No one is lending any money to each other in other words, so there is some exacerbation of the problems due to quarter-end window dressing. I don't know how much it accounts for, but given all the actual bad news, the markets were probably going to tank anyway.
posted by Pastabagel at 1:31 PM on September 29, 2008 [2 favorites]


Meanwhile in Ireland, the ISEQ fell 13%, with my bank down 40%. Zombies here too.
posted by fcummins at 1:31 PM on September 29, 2008


I'm flabberghasted, and you don't often get a chance to use a word like that so I'll repeat it: flabberghasted. I was certain that the bought and paid for Congresscritters would give their owners everything they asked for. Guess the financial sector hasn't been keeping up with those "campaign contributions".

I'm not too optimistic though. Remember FISA? First it looked, for a brief fleeting moment, that the Democrats in the House [1] might actually stand up to Bush, but then it turned out they were just toying with us and they gave him his wish list. Wanna bet this goes the same way?

Still, for a brief, fleeting, moment I get to imagine what life would be like if the entire government weren't intent on kowtowing to both Bush and their corporate owners.

For the people worried about this, let me ask you this: if the economy really is in such bad shape that holding out the inevitable corporate welfare for the thieving fuckers who got us into this mess in the first place for even a few days will rock it to its foundations then how strong is the economy anyway? If the thieving CEO's have really weakened our economy to that degree I figure it might be a good idea to hold off a few months and find out how deep the rot goes. Let the CEO's miss a few yacht payments.

Actually, let me put it even more strongly: I would rather let the economy burn than pay for one single golden parachute. I would rather see the entire economy tumble than give one penny of tax money to any CEO. Because from my POV it looks a lot like they're trying to hold the economy hostage. "Give us a trillion bucks or we'll crash the economy!" Fuck 'em. We the people are already screwed, how much worse could it really get if we refuse to give in to their demand for a trillion? I say let the Dow fall until they're willing to lose their obscene "compensation"

[1] I'm increasingly convinced that there aren't any real Democrats in the Senate.
posted by sotonohito at 1:32 PM on September 29, 2008 [8 favorites]


House votes down bail-out package
posted by chuckdarwin at 1:32 PM on September 29, 2008


FTSE closed before the vote. Tomorrow's going to be carnage in London.
posted by bonaldi at 1:34 PM on September 29, 2008


On the positive side:
Prices for crude-oil futures are plummeting on fears the U.S. economy is going headlong off a cliff—and is going to drag down Europe and Asia with it. Crude futures closed at $96 a barrel in New York; two months ago, crude was at $147 and ”superspike” analysts were elbowing each other to call $200 oil first.
posted by smackfu at 1:35 PM on September 29, 2008


"Representative Darrell Issa, a Republican, said he was 'resolute' in his opposition to the measure because it would betray party principles and amount to 'a coffin on top of Ronald Reagan’s coffin.'"
posted by ericb at 1:36 PM on September 29, 2008


Actually, let me put it even more strongly: I would rather let the economy burn than pay for one single golden parachute.

You're a nutter.
posted by smackfu at 1:36 PM on September 29, 2008 [9 favorites]


Bottom-up bailout (as in, bail out the people who actually hold bad mortgages, not the people who profited off bad mortgages) would address the issue without providing golden parachutes.
posted by Sidhedevil at 1:38 PM on September 29, 2008 [4 favorites]


> I'm investing in bindles and canned pork & beans.

I'm investing in bindles futures.


I'm investing in bindle-backed securities and collateralized bindle obligations, with a hedge of bindle default swaps and both short and long positions on bindle future derivatives.
posted by rusty at 1:39 PM on September 29, 2008 [26 favorites]


"Road to Nowhere" just came on my internet radio station (the awesome KROQ2 80s station). Seems so appropriate to reading this thread.....

Also I heart Astro Zombie.
posted by emjaybee at 1:39 PM on September 29, 2008


So wait, is no one actually pleased about this? The US gov't, assuing is finally does start buying shitty assests, will get them for cheaper than they would beginning today. This Wall Street friendly bailout will get less friendly. As screwey as the political process was, didn't the Republicans serendipitously do something anti-corporatist?
posted by FuManchu at 1:39 PM on September 29, 2008


I would rather have a golden parachute than not have a golden parachute.
posted by clearly at 1:40 PM on September 29, 2008


We are now officially in what economists call, in the jargon of their trade/social science, "hell in a handbasket" territory. I believe the directors of the National Bureau of Economic Research made that declaration upon a quorum vote this afternoon.
posted by raysmj at 1:40 PM on September 29, 2008 [1 favorite]


Now, what I honestly don't get on this spin is that if these are such good investments that people will make all or most of their money back, why don't the banks just hold on to them? Why make the taxpayer buy what no one else wants?

The short answer: A bunch of greedy people borrowed short-term loans on long-term investments. Rather than sit on a mortgage for 30 years collecting 5% APR, the mortgage companies sold a bunch of paper that was "almost as good as t-bonds" for short-term profit.

But then, the market delivered a harsh reality check. Rather than something "almost as good" as t-bonds, you had something with an uncertain yield, uncertain costs, and with no one buying, no practical liquidity. Lets be clear here. Foreclosures are less than 2%, and if you sit on a mortgage-backed security, you probably will make money. Whether that's better than a savings account remains to be seen.

This most certainly isn't caused by Mr. and Mrs. Smith defaulting on their $250,000 starter mortgage.

It's caused by banks defaulting on their $250,000,000 short term loans because they got greedy during the housing boom.
posted by KirkJobSluder at 1:40 PM on September 29, 2008 [3 favorites]


I liked this summary from the FT:

If you owe the bank $10, it’s your problem. If you owe the bank $10m, it’s the bank’s problem. If you and a million others owe the bank $10 each, it’s still your problem – but it’s also the bank’s problem. If the bank then sells to an investor the $10 you owe, it ought to be the investor’s problem. But if you have a problem repaying the $10 – and so do a million others – it’s both the investor’s problem and the bank’s problem. Your problems and the investor’s problems mean the bank now owes another bank $10bn. That is both banks’ problem. But if neither bank will pay the $10bn it owes the other, it can quickly turn into a $700bn systemic problem. And if the government then owes the banking system $700bn, it’s your problem.
posted by athenian at 1:41 PM on September 29, 2008 [71 favorites]


How today is going to get spundited (a word I just invented, a combo of spun & pundit) is anybody's guess. Or who's going to win the "battle of perceptions".

Every single Republican who has been interviewed has blamed the vote on Pelosi's partisan speech. They knew this was going down and had their sound bites ready.


Okay, but I don't see how this story's going to help them. Especially those R-boys who like Issa who opposed it 'on principle'. Principle, yeah, but if you'd talked nice, said ple-e-eze and batted your eyelashes, Ms. Pelosi...
posted by wendell at 1:41 PM on September 29, 2008


McCain's Share of The Blame?
"Sen. John McCain and his campaign believe he ought to have gotten credit -- some credit -- for its passage. McCain, today:
'I put my campaign on hold for a couple days last week to fight for a rescue plan that put you and your economic security first. I fought for a plan that protected taxpayers, homeowners, consumers and small business owners.

I went to Washington last week to make sure that the taxpayers of Ohio and across this great country were not left footing the bill for mistakes made on Wall Street and in Washington.

Some people have criticized my decision, but I will never, ever be a president who sits on the sidelines when this country faces a crisis. Some of you may have noticed, but it's not my style to simply "phone it in."'
Said Steve Schmidt, McCain's chief strategist, on Meet the Press:
'What Senator McCain was able to do was to help bring all of the parties to the table, including the House Republicans, whose votes were needed to pass this.'
So if McCain wanted credit for passage, should he share some of the blame for its defeat?

Two thirds of half Republicans voted for its defeat...after a weekend of telephone call diplomacy from McCain.

Nancy Pelosi may have given a partisan speech, but she was able to get most of her Democrats on board...."
posted by ericb at 1:41 PM on September 29, 2008 [3 favorites]


Well, there's still time to get in on my pyramid scheme: I am building a great pyramid from which to throw you fuckers into the trans-dimensional horror that is Shub-Niggurath, the Black Goat of the Woods with a Thousand Young. Iä Shub Niggurath! Iä Bernanke!
posted by Mister_A at 1:42 PM on September 29, 2008 [7 favorites]


I'm going to target the luxury hobo market. Big canoes for paddling around lakes of whiskey, empty boxcars, and cigarette tree pruners.

Also stew - hearty, hearty stew.

I mean, the 5% I've been saving for a down payment for a first home purchase is now 10% too low to actually buy anything. Might as well invest it wisely.
posted by robocop is bleeding at 1:43 PM on September 29, 2008 [1 favorite]


I get the part about Bush being abandoned by his own party, and the enemy-of-my-enemy aspects that have sort of thrown W and the Dems together, even though it makes my brain hurt. The part I'm still not understanding is how not passing a hugely unpopular bill is going to hurt the GOP, and McCain by extension (even though he was in support of it, at least in theory).
posted by shiu mai baby at 1:43 PM on September 29, 2008


Sen. John McCain (R-Ariz.) and his top aides took credit for building a winning bailout coalition – hours before the vote failed and stocks tanked.

The rush to claim he had engineered a victory now looks like a strategic blunder that will prolong the McCain’s campaign’s difficulty in finding a winning message on the economy.

Shortly before the vote, McCain had bragged about his involvement and mocked Sen. Barack Obama for staying on the sidelines.

“I've never been afraid of stepping in to solve problems for the American people, and I'm not going to stop now,” McCain told a rally in Columbus, Ohio. “Sen. Obama took a very different approach to the crisis our country faced. At first he didn't want to get involved. Then he was monitoring the situation.”

McCain, grinning, flashed a sarcastic thumbs up.

posted by tapeguy at 1:44 PM on September 29, 2008


Astro Zombie, big ups. Calvin Trillin better be looking over his shoulder at The Nation. (His Deadline Poet works are behind a pay wall, sadly.)
posted by sacre_bleu at 1:44 PM on September 29, 2008


"A GOP staffer wrote into National Review’s Rich Lowry and acknowledged that [Rep. Barney] Frank was right: 'Rich – I’m afraid Rep. Frank has a point on this one. Some feelings on the GOP side were hurt, so they voted against the economic well-being of the country?'"
posted by ericb at 1:44 PM on September 29, 2008 [1 favorite]


Pastabagel, I'm not thinking so much of financial companies or mutual funds--I was struck by the sentence

difficult for many firms to find short term financing to meet immediate debt requirements and basic payroll obligations.

If I'm parsing that right (and the authors of the article aren't making it up), then this isn't an issue about hedge funds or mutual funds not being able to do window dressing, it's about non-financial companies not being able to borrow the cash to keep operating. Obviously, they won't just shut down tomorrow if they can't roll over their short-term debt, but I would think that would imply that they would need to take immediate cost-cutting measures.

That seems to me like a much, much bigger issue than we've seen before, where banks were just refusing to lend to each other. If banks start refusing to lend to regular companies (who haven't needed to roll over that short-term debt up until now), it becomes a much bigger problem than just stocks going down, no?

I read the Economist and have been following the news but I admit I'm not an expert in finance, so I'm hoping someone will come and correct me (soothe me!) if I'm wrong.
posted by iminurmefi at 1:45 PM on September 29, 2008 [1 favorite]


Okay, but I don't see how this story's going to help them. Especially those R-boys who like Issa who opposed it 'on principle'. Principle, yeah, but if you'd talked nice, said ple-e-eze and batted your eyelashes, Ms. Pelosi...

I think you overestimate the mendacity and partisanship of republican supporters.
posted by KirkJobSluder at 1:46 PM on September 29, 2008


Actually, let me put it even more strongly: I would rather let the economy burn than pay for one single golden parachute.

Well, that's something, I guess. The financial equivalent of "kill them all and let God sort them out." It's really hard to fight with such a reasoned, nuanced viewpoint, so I won't bother.
posted by malocchio at 1:46 PM on September 29, 2008 [3 favorites]


'What Senator McCain was able to do was to help bring all of the parties to the table, including the House Republicans, whose votes were needed to pass this.'

This highlights why McCain is so dangerous as a candidate. It isn't that all his ideas are bad necessarily, it's that he has absolutely no ability to move his ideas forward. He is grossly incompetent. This came up in the debates as well, when he talked about fighting runaway spending his whole career. And yet spending has spiralled out of control throughout his entire career. It's not enough to be for or against something, John. You have to be able to follow through and achieve the objective.

John, you might as well sit on the sidelines if all you do on the field is fumble.
posted by Pastabagel at 1:46 PM on September 29, 2008 [5 favorites]




Others who were touting McCain's "leadership" on this bill:
“[T]his bill would not have been agreed to had it not been for John McCain. … But, you know, this is a bipartisan accomplishment, a bipartisan success. And if people want to get something done in Washington, they just watch John McCain.” — Former Massachusetts governor Mitt Romney, 9/29/08

“Earlier in the week, when Senator McCain came back to Washington, there had been no deal reached. … What Senator McCain was able to do was to help bring all the parties to the table, including the House Republicans.” — Senior adviser Steve Schmidt, 9/28/08

“But here are the facts, and I’m not overselling anything. The fact is that the House Republicans were not in the mix at all. John didn’t phone this one in. He came and actually did something. … You can’t phone something like this in. Thank God John came back.” — Sen. Lindsey Graham (R-SC), 9/28/08

“Before John McCain suspended his campaign yesterday, the situation that we’re looking at today looked very different then. After he showed leadership and called for bipartisanship, for us to partisanship aside and tackle this solution head on, here we are.” — Spokesman Tucker Bounds, 9/25/08
"If the McCain campaign was willing to take credit for the success of the bill, does McCain also deserve credit for its failure?"
posted by ericb at 1:48 PM on September 29, 2008 [3 favorites]


"Let the economy burn" and "fund golden parachutes" ARE NOT THE ONLY TWO CHOICES, folks.
posted by Sidhedevil at 1:48 PM on September 29, 2008 [5 favorites]


And if the government then owes the banking system $700bn, it’s your problem.

I guess I'm unclear about the government's, i.e. taxpayer's "obligation" to "repay" here.
posted by Blazecock Pileon at 1:48 PM on September 29, 2008 [1 favorite]


I would rather have any color parachute than a seat cushion that doubles as a flotation device.
posted by strangeleftydoublethink at 1:48 PM on September 29, 2008 [7 favorites]


I'm not too optimistic though. Remember FISA? First it looked, for a brief fleeting moment, that the Democrats in the House [1] might actually stand up to Bush, but then it turned out they were just toying with us and they gave him his wish list. Wanna bet this goes the same way?

Still, for a brief, fleeting, moment I get to imagine what life would be like if the entire government weren't intent on kowtowing to both Bush and their corporate owners.


What the hell are you talking about? It was the republicans who jammed up this Bill, and frankly it had almost all of what democrats wanted in a bailout: including the most important piece, the equity stake for "taxpayers" (which is now the term we're using for the government, for whatever reason).
posted by delmoi at 1:48 PM on September 29, 2008


> Also stew - hearty, hearty stew.

Mr. McGuire: I want to say one word to you. Just one word.
Benjamin: Yes, sir.
Mr. McGuire: Are you listening?
Benjamin: Yes, I am.
Mr. McGuire: Gruel.
posted by you just lost the game at 1:48 PM on September 29, 2008 [2 favorites]


I'm still not understanding is how not passing a hugely unpopular bill is going to hurt the GOP...

I'm not sure how unpopular it really is. People don't want their retirement funds to dissipate in an instant, and that is what's happening right now. Wachovia essentially ceased to exist today. Lots of bad things are happening. Couple that with the idea that people don't want to get shafted into footing the bill for huge exec bonuses, and maybe it looks like this bill itself was hugely unpopular. The really unpopular bill, though was the initial proposal with no oversight, etc. The giveaway bill was unpopular, but this one couldn't have been that unpopular as no one saw it til today.

Economic devastation is also unpopular.
posted by Mister_A at 1:52 PM on September 29, 2008


Your money in your bank is insured, assuming you don't have more than $100k. The problem isn't really your deposit, it's your employer who needs to borrow money (lines of credit, etc) to finance current and ongoing operations.

Exactly. To put this in perspective, I am a partner in a small consulting firm. About 30 employees. We have hundreds of thousands of dollars going out the door every month in the form of salaries, insurance payments, taxes, etc. We also make hundreds of thousand in fees from our clients. Just like in nearly every business of our size, sometimes the salary payments need to be made a few days or weeks before the checks for our clients arrive. To permit that to happen, we have a line of credit from the bank. We borrow from it when we need to cut paychecks, and pay it back a few days later when some cash comes in. We've been doing this for 8 years, and it has been considered a pretty low risk way to make some good money by the banks. Nearly all businesses around our size do the exact same thing.

What I'm starting to see is the banks calling in and canceling their lines of credit. So far, it has happened to firms smaller than ours, who are in a riskier position than we are. But if this crunch continues, it could happen to us as well. In which case, some of the people who work at my firm today would probably need to look for other jobs. Which they won't all find. Because if this is happening to my company, it's happening to countless other companies as well.

So I guess my message is: If you're opposed to the bail out, but count on a job at a small to medium sized business for the money you live on, you ought to re-think your position. Companies like mine are very vulnerable to a sudden suspension of lines of credit. And if those go, so does many of the good jobs we all count on.
posted by centerweight at 1:52 PM on September 29, 2008 [29 favorites]




Dibs on the leg.
posted by Meatbomb at 1:52 PM on September 29, 2008 [1 favorite]


If you're opposed to the bail out

And here's another one for the "THESE AREN'T THE ONLY TWO CHOICES" file:

"Opposed to THIS bailout plan" does not mean "opposed to all bailout plans."
posted by Sidhedevil at 1:53 PM on September 29, 2008 [1 favorite]


smackfu Why am I a nutter? I mean, from my POV the economy is already a massive clusterfuck: 40+ million Americans have no real access to healthcare. Minimum wage won't buy you the necessities. The corporate "compensation" system is so messed up that a bunch of frat boy CEO's get over 600 times the money that the people who actually do the work get. Somehow I'm a nutter for not wanting to give the greedy, move it overseas, put all the money in an account in the Bahamas to avoid paying taxes, thugs a free trillion bucks?

If we went with Sidhedevil's proposal I could get behind it. But right now Wall St. is basically saying "give us a trillion dollars or we'll crash the economy" and I say "let's not pay blackmail money". Let 'em sell a few yachts to pay off their own debts for a change.

Sidhedevil wrote ""Let the economy burn" and "fund golden parachutes" ARE NOT THE ONLY TWO CHOICES, folks."

They're the only two choices we've been offered by Wall St., Bush, and their bought and paid for Congress critters. Between those choices I chose "let the economy burn" and I'd like someone to tell me why that's bad.

A third choice would be nice. Something to strip the CEO's of their ill gotten gains, forbid them from ever serving on a board or owning stock again, and shoring things up might be nice. But we haven't been offered that. Bush and Wall St. have said "give us a trillion or the economy burns" and I'm saying, "ok if that's my choices I chose not to reward you fuckers"

Why is that so wrong?
posted by sotonohito at 1:53 PM on September 29, 2008 [5 favorites]




I'm going to target the luxury hobo market. Big canoes for paddling around lakes of whiskey, empty boxcars, and cigarette tree pruners.

I believe you are referring to the Big Rock Candy Mountains.

In the Big Rock Candy Mountains there's a land that's fair and bright
Where the handouts grow on bushes and you sleep out every night
Where the boxcars are all empty and the sun shines every day
On the birds and the bees and the cigarette trees
Where the lemonade springs where the bluebird sings
In the Big Rock Candy Mountains

posted by clearly at 1:54 PM on September 29, 2008 [1 favorite]


Gruel is for the hobo proles ("hoproles?"). Stew will be the cornerstone of the French Laundry of the future (third cardboard box round the back, near the dumpster).
posted by robocop is bleeding at 1:55 PM on September 29, 2008


When I got into my job this morning, the DJIA was down 200 points, and I was like "damn"

Then, when I came back from lunch, the DJIA was down 600 points, and I was like "da-yum"

Finally, I get off work and come to the school's computer lab, and the DJIA closed at 778 under. and I was like:"oh shit"

I hope hope hope that the huge-ass number (DJIA) that nobody can figure out will resonate with the other 48% of Americans who might vote for McCain, and that they'll look into their economic plans, maybe change their minds.

Anyway, time to put on the ska, that always cheers me up.
posted by hellojed at 1:55 PM on September 29, 2008


Apple Computer Down 17.25%

I've been reluctant to play the stock market, but at those irrationally low prices,


How is that irrational? Apple don't make many computers any more (their Pro lines used by people to make money, I mean), they mostly make consumer goods. Expensive lifestyle accessories. It seems very reasonable to believe that, for the next few years, anyway, people aren't going to be buying a new iPod/iPhone/iMac every time one hits the market.
posted by rodgerd at 1:55 PM on September 29, 2008


"The part I'm still not understanding is how not passing a hugely unpopular bill is going to hurt the GOP, and McCain by extension"

Polls suggest that while the bailout is unpopular, doing nothing is even less popular.
posted by athenian at 1:55 PM on September 29, 2008


The really unpopular bill, though was the initial proposal with no oversight, etc. The giveaway bill was unpopular, but this one couldn't have been that unpopular as no one saw it til today.

There wasn't enough differentiation made in the PR for this bill versus the original "GIVE PAULSON A BLANK CHECK" scenario.

Now that one draft has failed, they can go back and polish the turd some more, then give the New Improved Dow-Hemorrhage-Stopper Bill another try, and I guarantee you it will sail through.

That's cynical, because I wish they would come up with an actually useful bill instead of some variation on this turd, but I don't see that happening.
posted by Sidhedevil at 1:56 PM on September 29, 2008 [1 favorite]


Damn, I've got to log off and head for home now. Could someone up in the front of the class take my tape deck and hit record when Mutant gives his lecture on What the Fuck Just Happened?
posted by cimbrog at 1:56 PM on September 29, 2008 [3 favorites]


I think based on the typical quarterly end concerns and the fact that Wednesday will be the soonest that another vote can be scheduled the market should be extremely volatile tomorrow. Likely big big swings in almost all of the markets as people try to find some sort of quality investment to shelter in. Of course there is also a chance that some money that has been waiting on the sidelines will start to think that prices are getting low enough that it's worth risking capital in order to reap a big dividend down the road.

Hopefully Mutant or someone like him will chime in with some predictions concerning short term interest markets as they seem to be a major concern in regards to "main street".
posted by vuron at 1:57 PM on September 29, 2008


A financial noob question:

I was watching CNBC at the closing bell and the Dow was down 500-odd. The breaking news ticker at the bottom said "Dow closes off day's lows" and the talking head was expressing relief that there wasn't a huge sell-off at the end. I walked back in at 4.30, and the number was 777, not 500-odd. Is it unusual to be that far off?? Why does it take that long for the real number to be calculated?
posted by Combustible Edison Lighthouse at 1:58 PM on September 29, 2008


"I will never, ever be a president who sits on the sidelines when this country faces a crisis. Some of you may have noticed, but it's not my style to simply "phone it in."
posted by granted at 1:59 PM on September 29, 2008 [3 favorites]


> "Among 38 incumbent congressmen in races rated as "toss-up" or "lean" by Swing State Project, just 8 voted for the bailout as opposed to 30 against: a batting average of .211.

Shays from CT voted for it. I guess he figured not pissing off the majority of Greenwich, CT was in his best interest.
posted by mrzarquon at 1:59 PM on September 29, 2008


They're the only two choices we've been offered by Wall St., Bush, and their bought and paid for Congress critters. Between those choices I chose "let the economy burn" and I'd like someone to tell me why that's bad.

Do you even know what the differences are between Paulson's 3-page plan and the Democrats 110 page plan that was just voted down today? Here's a hint: Restrictions on golden parachutes for one.
posted by delmoi at 2:00 PM on September 29, 2008


Metafilter: Hopefully Mutant will explain it for us.
posted by cimbrog at 2:01 PM on September 29, 2008 [22 favorites]


Assume for the moment that I think a great many income-producing assets are wildly devalued at the moment. They may become more devalued, but on the whole let's say I think the true value is notably higher than feared at present.

How then do I, J.Random Investor, make money here?
posted by aramaic at 2:02 PM on September 29, 2008


So Congress can work on the weekend, I have to work tomorrow, and the financial markets are open, but Congress can't work on a holiday? How does that work?

If something's broke, and it's an emergency, and it's your job to fix it, do you really want to take a day to go golfing before it's fixed?
posted by cjorgensen at 2:02 PM on September 29, 2008


Here are some UK financial experts webchatting about what's going on.
posted by athenian at 2:02 PM on September 29, 2008 [1 favorite]


Not the Kwik-E-Mart song

Speaker of the House: I think what we're saying is you're like a member of the family now.
Banker: I feel that way, too. You see:

Whether lobbyist, PAC, or kickback
Or a Swiss bank account bribe,
There's no influence I've used
Which I'd rather proscribe

When I first arrived on the hill you were all such jerks
But now I've come to looooooove your quirks
Paulson with his eyes so bright,
Pelosi with hair like Frank Lloyd Wright,
Obama can philosophise
McCain's adept at spinning lies,
Bush is a delightful fella
Sorry 'bout the cake that wasn't yellow
Bush: Heh heh, that's OK.

Who needs the bailout plan?
Now things get more tricky, man
Oh, won't you rhyme with me?
Who needs the bailout plan?
Obey: The House is bailout plan,
Kucinich: They made Bush bailout plan,
Boehner: Let's hurl a bailout plan,
Bush: The bailout plan is really... doh!

All: Who needs the bailout plan?
GOP: Not meeeeeeeeeeeeeeeee...
All: Forget the bailout plan,
Goodbye to the bailout plan,
Who needs the bailout plan?
GOP: Not me.

posted by crapmatic at 2:02 PM on September 29, 2008 [2 favorites]


So I guess my message is: If you're opposed to the bail out, but count on a job at a small to medium sized business for the money you live on, you ought to re-think your position. Companies like mine are very vulnerable to a sudden suspension of lines of credit. And if those go, so does many of the good jobs we all count on.

But that still doesn't explain why taxpayers need to give free money to investors who are behaving irrationally, dumping stock and closing off credit. It's not clear that giving free money to wealthy investors will change the irrational behaviors in the market. So far, the government tried to do this with Fannie Mae and Freddy Mac and there hasn't been much of any calming effect.

Ultimately, the economy will recover on the foundation of businesses that are doing exactly what you're doing, i.e. low-risk, solid return. And investors will return to that.

The only reason that your business — any business — would not have a line of credit now is because of irrational behavior in the market. It's not obvious that a bailout will really fix that irrational behavior. It seems likely, even, that a bailout will exacerbate or prolong market chaos.
posted by Blazecock Pileon at 2:03 PM on September 29, 2008 [3 favorites]


So I was just listening to NPR, and they had this Democratic Georgia Congressman on, and he was talking about how he voted for the bill, even though many of his constituents were against it. The host said "you were overheard saying that you may lose your seat over this vote, but it's more important to the future of the country that this bill passes, is that true?" The guy said yes, that was true, but he hopes that in time, people will see that this bill was necessary. Just then the host interrupted him and told him that (obviously the interview was taped) that the bill had just been defeated in the House. The guy goes, "Oh my God..." and doesn't say anything for about five seconds. The host was like "are you still there" and the guy recovered and talked about finding a solution, but his voice was all shaky and he was trying to get off the line.

And that was when I shit my pants.
posted by billysumday at 2:03 PM on September 29, 2008 [38 favorites]


Finally, I get off work and come to the school's computer lab, and the DJIA closed at 778 under. and I was like:"oh shit"

The S&P 500, which is actually a better over-all indicator was down even more,.
posted by delmoi at 2:04 PM on September 29, 2008


How many people are in the House, again? 435?
There's a vacancy due to the recent death of Stephanie Tubbs Jones from Ohio.
posted by MrMoonPie at 2:04 PM on September 29, 2008


Well, I'm not worried. If there was something to worry about, John McCain would suspend his campaign!
posted by jamstigator at 2:05 PM on September 29, 2008 [1 favorite]


Why is that so wrong?

Maybe you want to read this. It might possibly give you some clues.
posted by rodgerd at 2:05 PM on September 29, 2008


Actually, let me put it even more strongly: I would rather let the economy burn than pay for one single golden parachute. I would rather see the entire economy tumble than give one penny of tax money to any CEO. Because from my POV it looks a lot like they're trying to hold the economy hostage.

This is incredibly stupid.

Actually, let me put it even more strongly: Do you have a defensible home, at least a few weeks' worth of stored food and water, at least one firearm with at least 200 rounds for each, and a generator or alternative source of power? Because, if not, from my POV it looks like you're trying to get yourself held hostage, all to punish people who aren't actually going to be punished, because they really do have all of that shit. Plus armed bodyguards. And a personal helicopter.

Bush and Wall St. have said "give us a trillion or the economy burns" and I'm saying, "ok if that's my choices I chose not to reward you fuckers" Why is that so wrong?

Screw you, baby! If my choice is between just the bathwater or you AND the bathwater, then I choose not to reward you, fucker! Why is that so wrong?
posted by vorfeed at 2:06 PM on September 29, 2008


So how does the Fed slosh report reflect on this? It looks like the slosh fund has been wound right in recently, both in terms of the slosh available and the duration...
posted by 5MeoCMP at 2:06 PM on September 29, 2008


If I'm parsing that right (and the authors of the article aren't making it up), then this isn't an issue about hedge funds or mutual funds not being able to do window dressing, it's about non-financial companies not being able to borrow the cash to keep operating.

YES. That is precisely the big-picture problem. No one cares all that much beyond the traders if the market has a technical correction. The problem here is that banks are being very tight about lending money. We have to get the banks lending again, and the way to do that is to take the poisonous ultra-colossal mortgage-derivative risk off their books so they can put on more ordinary business and consumer lending risk.

This is a big problem in another aspect because the US economy is consumer driven, and consumer spending is based primarily on debt. How many people are still paying for the iPod or Playstation they bought last year? If it is more expensive for consumers to borrow, some consumer won't borrow, and the reduction in spending means less revenues, which means cost-cutting, layoffs, etc.

But it isn't as if Americans have been living the high-life these last eight years. Wal-Mart is america's largest retailer, which implies that however good the economy was the last few years, consumers have felt the need to hunt for discounts. What percentage of people were barely afloat over the last few years? Most of those people are going under or will have to make painful changes to their lives. And when they go under, they most definitely won't be spending, and the government will have to borrow to cover their assistance, healthcare etc.
posted by Pastabagel at 2:07 PM on September 29, 2008 [9 favorites]


Assume for the moment that I think a great many income-producing assets are wildly devalued at the moment. They may become more devalued, but on the whole let's say I think the true value is notably higher than feared at present.

How then do I, J.Random Investor, make money here?


You would make money by purchasing those assets, or shares in those assets, which you believe to be devalued, and then selling those shares at a later date, when the market value has increased.
posted by penduluum at 2:10 PM on September 29, 2008


I'm trying to keep up with this thread and I hope this wasn't already posted here but a few days ago NPR did a story (with TAL) on the near-collapse of commercial paper. My very-uneducated guess is that this is what we're in for.

As a small business owner this shit is terrifying.
posted by photoslob at 2:11 PM on September 29, 2008 [3 favorites]


One time, I lost a five dollar bill my dad gave me. When I told him my sob story he gave me another and told me to be careful with it. I blew it on candy.

Now I run a bank.
posted by Foam Pants at 2:11 PM on September 29, 2008 [24 favorites]


You would make money by purchasing those assets

I failed to be sufficiently specific: how do I acquire $1 worth of mortgages? Or $10. Or $100.
posted by aramaic at 2:12 PM on September 29, 2008


So the Romney / Biden debate on thursday should be very interesting.

Is this the same Mittens who co-founded private equity fund Bain Capital?
Not that private equity in general or Bain in particular played any role in the crash, but he'd still be a politically disastrous replacement for mooselips.
posted by atrazine at 2:13 PM on September 29, 2008


By the way, does anyone know why SKF went up to day with the short selling ban still in place? (until Oct 2nd! Should be a fun day)
posted by delmoi at 2:14 PM on September 29, 2008


Also, the general consensus is that National City fails next, which kicks off a wave of regional (i.e. medium sized) bank failures.

Again, your accounts will end up at some other bank and in a worst case get covered by the FDIC, however the economic price to pay for all these banks is significant. A large competitive market means lower prices. Smaller markets dominated by a few very large players means higher prices.

The market in this case is the money market. The price is the cost of borrowing money. We are going to end up with a banking system dominated with a few huge players and a myraid of tiny community banks who are surviving only because they weren't really lending anyone money to being with.
posted by Pastabagel at 2:15 PM on September 29, 2008


For those comparing failing economies during an election, the TSX gave up the last two years of gains today. The Dow only gave up a year or so.
posted by GuyZero at 2:16 PM on September 29, 2008


I know - we'll give the executives their golden parachutes but we'll fool them so their ripcords aren't attached to anything.
posted by dances_with_sneetches at 2:17 PM on September 29, 2008


Bush and Wall St. have said "give us a trillion or the economy burns" and I'm saying, "ok if that's my choices I chose not to reward you fuckers" Why is that so wrong?

Have you never heard the phrase "don't cut off your nose to spite your face?"

Call your Congresscritter and tell him or her you want a new bill, a good bill, fast.
posted by Sidhedevil at 2:17 PM on September 29, 2008 [2 favorites]


I failed to be sufficiently specific: how do I acquire $1 worth of mortgages? Or $10. Or $100.
posted by aramaic at 5:12 PM on September 29


There are finds forming as we speak to do just this. Look into distressed asset funds, or mortage-backed securities funds. They may require a hefty investment however.
posted by Pastabagel at 2:18 PM on September 29, 2008 [1 favorite]


Today obviously could've been really bad if the short selling ban wasn't currently in place. I'd expect that little temporary ban definitely gets renewed sometime between now and Oct 2nd to prevent speculators from nuking what little confidence investors still have in the sector.
posted by vuron at 2:20 PM on September 29, 2008


You would make money by purchasing those assets, or shares in those assets, which you believe to be devalued, and then selling those shares at a later date, when the market value has increased.

True -- or you could come over to the Dark Side of the Force and sell short buy put options on companies that you feel are still wildly overpriced and overleveraged and likely to fall further...or buy put options on the Dow/Nasdaq/Russell/S&P... You're basically betting* that the stock price of a specific company or an index will drop by a certain amount within a certain period of time.

*the word "betting" chosen on purpose -- this is speculation, not investment.
posted by Asparagirl at 2:21 PM on September 29, 2008 [1 favorite]


I failed to be sufficiently specific: how do I acquire $1 worth of mortgages? Or $10. Or $100.

MBB is an ETF (which is a like a mutual fund you buy and sell like a regular stock) that's supposedly backed by mortgage bonds, but obviously you have to get super leveraged if you want to roll like a hedge fund (it's only fluctuated a few percentage points in the past year)
posted by delmoi at 2:22 PM on September 29, 2008 [1 favorite]


How is that irrational?

It isn't like the fundamental value of strong companies changed much. Apple, as one example, will still have the intellectual capabilities of its workforce. They still have a wide range of products they are selling now, at various prices to meet different markets (not everyone needs a Mac Pro, for example, so that's why they make iMacs and Mac Minis; and not everyone needs a 32 GB iPod Touch, so they make Nanos, etc.). They still have an R&D department working on bringing years-long projects to market. They have a lot of money in the bank, and the US is not the only market it sells to. So unless things get really bad, like nuclear bad, and despite election year politics that aim to blame the Democrats as much as possible, it seems like a safe bet that the fundamentals of successful tech companies will keep them strong for years to come.
posted by Blazecock Pileon at 2:25 PM on September 29, 2008 [1 favorite]


Holy crap, photoslob, that's exactly what I had been worried about when I read the initial article about companies needing to roll over short-term debt at the end of the quarter (Sept 30, tomorrow).

Except way more terrifying. Thanks, NPR!
posted by iminurmefi at 2:27 PM on September 29, 2008


pastabagel for president
posted by Cranberry at 2:30 PM on September 29, 2008 [2 favorites]


I failed to be sufficiently specific: how do I acquire $1 worth of mortgages? Or $10. Or $100.

Aha. Funny you should ask; I was just kind of (and regrettably) being a jerk before with that non-answer answer (so: sorry), but this is something I actually sort of know something about. I have a fair amount of money invested with a mortgage broker. He takes my money, loans it to somebody as a mortgage, handles all the actual legal stuff involved with that, and then I get the monthly payments minus his (unbelievably low) fee. Interest rate on those mortgages is a flat 10%.

Now because I'm not going through any other parties, just me-to-lender-to-borrower, there are certain conditions. He absorbs a lot of the risk, but if any of those borrowers default, he gets the property, which he has to attempt to sell in order to pay me back. Also, because the interest is just a no-frills 10%, as the principle gets paid down the investment becomes a lot less desirable on my end; simple math. And of course until the mortgage gets paid off I have absolutely no way of getting at that money; it's impossible to become quickly liquid, should I ever need to. And finally, the big one for you (since you're interested in investing small amounts), I have to put up a fairly large chunk of cash to begin with. Like, all of a mortgage. The smallest I've ever done at one time was $10,000.

I got started on this by my grandparents. And basically as long as I don't spend the principle, I keep rolling over that same investment into new mortgages. My dad does it now too, with much more significant amounts of money. Basically, his retirement fund. And because the loans are small, and because the broker has such a good relationship with his clients, we've never had a default (and only about 3 missed payments in a row) over the course of our time investing, which is ... 15 years? Maybe 30, 40 mortgages once my dad moved his money there. Some of them we split; I put in some money, he puts in some money, we divide the payments as they come in. But the tax situation with that becomes very complicated very quickly.

If you want to invest smaller amounts of money, there are ways. Some lenders that attract investors at a much larger rate than ours will sell you shares of mortgages, or shares of packages of mortgages (less risk, but less potential reward). I don't have much experience in this, so I can't really tell you where to go, but I know it's possible. Financial advisors, or even just more educated people here, might be able to give you more info. But that's basically how the process would work for you.
posted by penduluum at 2:31 PM on September 29, 2008 [7 favorites]


Call your Congresscritter and tell him or her you want a new bill, a good bill, fast.

no offense, Sidhedevil, but this will have absolutely no impact whatsoever.
posted by Hat Maui at 2:31 PM on September 29, 2008


Pastabagel for president! I can write her/him in, right? ;)
posted by Lynsey at 2:32 PM on September 29, 2008


does anyone know why SKF went up to day with the short selling ban still in place?

As the price of a basket of financial stocks go up/down, the ETF known as XLF goes up/down. SKF tracks the inverse of that, so it goes down/up. As I understand it, new shares of SKF are (were) only created in blocks or batches, and the way that ProShares (the company that owns and runs SKF) creates the new shares is by making or swapping out puts or shorts on financial stocks.

But now that no one can open up new shorts on US financial stocks anymore, no new SKF shares can be created because ProShares can't do their magic to make them anymore. (The existing shares of SKF that were already floating around in the marketplace are unaffected.)

So, suddenly, an ETF that was supposed to very closely mirror an index (the XLF) -- and no more than that -- is now trading at a premium in its own right, because it has become a desirable "stock" and also has a limited supply going forward. Weird, huh?

([no financial stocks shorting] until Oct 2nd! Should be a fun day)

I bet this gets extended.
posted by Asparagirl at 2:33 PM on September 29, 2008


It isn't like the fundamental value of strong companies changed much.

A company is only as strong as its market and if (say) 10% of Apple's market just evaporated then there is some justification to a lowered share price for AAPL. Customers can't spend money they don't have.
posted by GuyZero at 2:34 PM on September 29, 2008


And see? They've already done so.
posted by penduluum at 2:34 PM on September 29, 2008


Pastabagel for president! I can write her/him in, right? ;)

You realize he was a Mitt Romney supporter, right?
posted by delmoi at 2:35 PM on September 29, 2008


By the way, if you want to see some real circuit-breaker-free fun, stay up late and watch the overseas markets, particularly Asia. Considering it's their money we need to finance our collective ongoing operations, it will be interesting to see their reaction to all this.
posted by Pastabagel at 1:01 PM on September 29 [+] [!]
--------------

*raises hand*

As of yesterday the media pundits & investors in Taiwan seemed fairly confident that the bailout bill would pass. Boy are they in for a shock.
posted by fatehunter at 2:35 PM on September 29, 2008


Ironmouth, how do you think it will play out for the average American voter?

The gig is up for the GOP. If you saw the Boehner presser and the ashen faces of the Republican House leadership, they knew they were going to eat the sell-off.
posted by Ironmouth at 2:36 PM on September 29, 2008 [1 favorite]


no offense, Sidhedevil, but this will have absolutely no impact whatsoever.

Quite the opposite. This is usually what makes congress people vote.
posted by Ironmouth at 2:37 PM on September 29, 2008


Luckily I've been primarily in cash for the last year-and-a-half. But tomorrow, I'm going all in to help save my country; I'm buying Detroit auto and residential builder stocks. Buy when there's blood in the streets, that's what I always say.

But, seriously, the fact that our country is run by kindergarteners is as scary as anything going on in the markets. The rest of the world has to be thinking that we have lost our fucking minds over the last decade.

I understand the "make the motherfuckers pay" argument against rewarding incompetence on Wall Street. I really, truly do; truth is, I actually agree with it. But Pyrrhic victories help no one. Congress may have won the battle and lost the war.
posted by Benny Andajetz at 2:39 PM on September 29, 2008 [1 favorite]


I wrote: Call your Congresscritter and tell him or her you want a new bill, a good bill, fast.

Hat Maul wrote: no offense, Sidhedevil, but this will have absolutely no impact whatsoever.

As opposed to posting here?

Astonishingly enough, elected officials do listen to constituent concerns when they come in in large enough volume. Especially this close to elections.

Water, stone, you do what you can, etc. Of course it's more fun to stockpile tuna for the Zombie Apocalypse, but there it is.
posted by Sidhedevil at 2:39 PM on September 29, 2008


DJIA at close of 19th January, 2001: 10,587.59
DJIA at close of 30th September, 2008: 10,365.45

!
posted by topynate at 2:40 PM on September 29, 2008 [6 favorites]


launch SEC, IRS, and FBI investigations of every single trader or lawyer who ever touched a CDO, credit default swap, or mortgage derivative. Investigate them as if they were al qaeda. Prohibit any travel outside of the U.S. for all of these people.

Well, I guess Mutant better stay in Amsterdam and the UK, then...

(And your jeremiad forgot to include the rating agencies, companies like Moody's and Fitch and Standard and Poor's, who surely deserve some of the blame here. Hell, my mattress and my hairdryer have better warning tags on them than some of those CDO's did.)
posted by Asparagirl at 2:40 PM on September 29, 2008


Also, because the interest is just a no-frills 10%, as the principle gets paid down the investment becomes a lot less desirable on my end; simple math.

At the risk of derailing, why does the investment become less desirable to you as the principal gets paid down? You get 10% on whatever amount is outstanding, and the rest is in your pocket. If you leave it there (or worse, spend it!) then the amount of your money that's not earning 10% is increasing, but there's nothing stopping you from investing it again. Except, perhaps, that you can't find a good place to get 10% on small amounts of, say, only a few mortgage payments. Is that really the only problem?
posted by spacewrench at 2:40 PM on September 29, 2008


You know what really pisses me off? The Mets. WTF.

On the other hand, it's a good day to be a Brewers fan.
posted by drezdn at 2:43 PM on September 29, 2008


God, how I wish the Main Street/Wall Street political meme would die, already.

I agree. I can't believe I just watched a Republican surrogate say on CNN: "The pain of Wall Street has now trickled down to Main Street and Church Street."

Oh, fuck, now we have an amended right-wing meme with the addition of ye olde "trickle down" and "Church Street."
posted by ericb at 2:44 PM on September 29, 2008 [2 favorites]


"The pain of Wall Street has now trickled down to Main Street and Church Street."

Why is it always pain, and never profit, that "trickles" down? (It never trickles down,either, but that's a different issue...)
posted by Benny Andajetz at 2:47 PM on September 29, 2008


You know, the republicans could have come out and owned the no vote. Just said it wasn't a good idea, or whatever. Instead they've claimed they voted against it because Nancy Peloci was too mean to them. People's retirement portfolios probably dropped an average of 7-9% today. Anyone with a retirement account is going to be livid. They could at least come up with a decent excuse, but what kind of voter is going to be able to handle losing real cash money, and lots of it because house republicans had a fit of pique?
posted by delmoi at 2:47 PM on September 29, 2008 [7 favorites]


Pastabagel for president!
You realize he was a Mitt Romney supporter, right?


Hey, if Pastabagel can fix the economy, I'll wear whatever goofy underwear he prescribes for four years, happily.

(It would be a heck of a lot more comfortable than the auto-reamer the previous administration installed anyway.)
posted by rokusan at 2:48 PM on September 29, 2008


"Main Street and Church Street?"

Or "Main Street and Martin Luther King Drive" as Maxine Waters said in her pro-TARP comments today?
posted by Sidhedevil at 2:49 PM on September 29, 2008 [1 favorite]


I'm investing in bindles and canned pork & beans.

I'm investing in bindles futures.

I'm investing in bindle-backed securities and collateralized bindle obligations, with a hedge of bindle default swaps and both short and long positions on bindle future derivatives.


I'm just buying a whole mess o' bindles. If things are as bad as they seem, the whole bindle market is about to collapse, and the bindle entrepreneurs who sell bindles direct to the people will be much better off than the bindle fatcats left holding worthless pieces of paper based on speculation over the bindle.

it's fun to say bindle
posted by Rhaomi at 2:50 PM on September 29, 2008 [3 favorites]


I would rather have any color parachute than a seat cushion that doubles as a flotation device.

Regarding parachutes of any color --- with the impending loss of jobs in our economy we'll likely see a spike in purchases of Richard Bolles' classic job hunting book 'What Color Is Your Parachute?'
posted by ericb at 2:50 PM on September 29, 2008


At the risk of derailing, why does the investment become less desirable to you as the principal gets paid down?

The payment is the same every month. When the borrower owes $20000 on the mortgage, and he pays, let's say, $400 a month, a lot more of that payment is going to be interest than when he owes $2000 and he pays $400 a month. He's paying principal back faster the smaller the loan amount is, because his per-month payment never changes. /end derail

posted by penduluum at 2:50 PM on September 29, 2008


delmoi I think the "compromise" (read: surrender) bill is, while not quite so terrible as Paulson's original powergrab, still completely unacceptable. It still put the discression entirely in the executive, and Bush has demonstrated, over and over, that he simply cannot be trusted.

From my POV the entire thing looks like one last "loot the treasury" run before Bush gets kicked out come Jan 21.

Frankly I'm puzzled as to the entire "bailout" thing anyway. The people we're bailing out have yachts, country club membership, in many cases private jets. Let 'em sell off a mansion or three before they come demanding my tax money.

I've got a lot of both class warriorism and, I'm honest enough to admit, class resentment going. I see it as the thieving fuckers who have, for the past several decades been insisting that they really are worth 600 times what I get paid, showing that they're incompetent parasites, just as I've always thought they were, and now demanding that my taxes go up (and up, and up) to pay for their stupidity and greed.

If we must, and I still don't understand why we must, shore up a lot of bad investments to prevent the whole thing from falling apart, I can go along with it. I won't like it, because I still say the people owed money from the bad investments can take it out of the hide of those oh-so-valuable billionaire CEO's, but if we've got to I suppose we've got to. But if the deal doesn't include stripping the CEO's who got us into the mess of all their wealth, banning them from being on a board ever again, etc then I'm not interested in paying a trillion bucks to do something I don't want to do in the first place.

If the situation really is as bad as all the people here claim it is then gutting the thieving thugs who got us into the mess shouldn't be too high a price to pay for getting out, should it? I mean, they say "ZOMG if we don't do this we'll all die" and I say, "ok if we're going to do this let's at least make the bailout conditional on gutting the boards who screwed us". I want them financially ruined, their families destitute, and their only future employment opportunities limited to burgerflipping. Then I'll grudgingly support a bailout. But if the board of AIG gets to live in comfort I won't support a bailout.
posted by sotonohito at 2:51 PM on September 29, 2008 [17 favorites]


My problem with the TARP is that it is less likely to work than other plans might be. In recent years, Sweden-style prop-ups have worked better than Mexico-style bailouts.

I agree that something needs to be done. I disagree that this is the right something. I imagine that a something that is more or less like this will be pushed through after all of the "no" voters' constituents take a look at their 401ks after today's Wall Street bloodbath.
posted by Sidhedevil at 2:52 PM on September 29, 2008


Why is it always pain, and never profit, that "trickles" down?

Good point. Isn't it piss that trickles down and shit which flows downhill?
posted by ericb at 2:52 PM on September 29, 2008


Don't you worry about the bailout, let me worry about blank.
posted by turgid dahlia at 2:57 PM on September 29, 2008 [6 favorites]


If you don't favorite me your golden parachute will fail. Or something.
posted by ob at 2:58 PM on September 29, 2008 [1 favorite]


The best example of trickle-down economics is my family, who owns several Regan-era BMWs. 20 years later, we finally can experience the luxury cars we were promised 20 years ago.
posted by hellojed at 3:01 PM on September 29, 2008 [5 favorites]


I'm investing in bindles and canned pork & beans.

I'm investing in bindles futures.

I'm investing in bindle-backed securities and collateralized bindle obligations, with a hedge of bindle default swaps and both short and long positions on bindle future derivatives.

I'm just buying a whole mess o' bindles.


WalMart just came out with a whole line of cheap Chinese bindles. I'm ruined! Congress should pass a law to protect the domestic bindle industry.
posted by RussHy at 3:02 PM on September 29, 2008 [3 favorites]


“Why wouldn't Bush just veto it out of spite?”

True. His first few months in office were a complete disaster catastrofuck on a scale of which this country had never seen, then it was one godawful thing after another, I think there was maybe five minutes there when some actual work was accomplished, then another bumper cars on a water slide in total darkness with fireworks being shot off and dogs in your hair and pianos being spontaneously generated and crashing and inanimate objects becoming sentient and screaming and trying to steal your keys and tumbling in the gyre schizophrenic extravaganza, why should his last few months be any different? Maybe he can kill another couple thousand civilians in the process? Just, y’know, for the effort.


“ ‘It's why I voted Green in 2000.’
‘Admitting this: really brave or really stupid?’ “

Why?
Let me explain: ...no, wait, it would take too much space. Let me sum up: It’s better to have more choices than just ‘Coke’ and ‘Pepsi’ and it’s worked just fine here in Illinois.
And it’s still working well in fact.
posted by Smedleyman at 3:03 PM on September 29, 2008 [7 favorites]


You realize he was a Mitt Romney supporter, right?

Was is the operative word. Which of our current slate of candidates hasn't made a mistake, amirite?
posted by Lynsey at 3:04 PM on September 29, 2008


Sotonohito: while I agree the bankers could use a kicking, making the financial support conditional on receipt of the kicking makes takeup of the support less likely.

I am not an economist, nor do I play one on TV, but I see a lot of economists here in Europe - so not Rep/Dem partisans or caught up in the US election for the most part - saying that it's a necessary thing, and I'm inclined to believe them. Here's the former chief economist of the European Bank for Reconstruction & Development talking about what might happen next:

"If the markets fear that the nays have thrown their toys out of the pram for the long term, the following scenario is quite likely:
  1. The US stock market tanks. Bank shares collapse, as do the valuations of all highly leveraged financial institutions. Weaker versions of this occur in Europe, in Japan and in the emerging markets.
  2. Credit Default Swap spreads for banks explode, as will those of all highly leveraged financial institutions. Credits spreads generally take on loan-shark proportions, even for reputable borrowers. Again the rest of the world will experience a slightly milder version of this.
  3. No US bank will lend to any other US bank or any other highly leveraged institution. The same will happen elsewhere. Remaining sources of external finance for banks, other than the facilities created by the central banks and the Treasuries, will dry up.
  4. Banks and other highly leveraged institutions will try to unload assets at fire-sale prices in illiquid markets. Even assets not viewed as toxic before will become unsaleable at any price.
  5. The interaction of a growing lack of funding liquidity and increasing market illiquidity will destroy the banks’ business models.
  6. Banks will stop providing credit to households and to non-financial enterprises.
  7. Banks will collapse, both through balance sheet insolvency and through liquidity insolvency. No bank will be safe, not even the household names for whom the crisis has thus far brought more opportunities than disasters.
  8. Other highly leveraged financial institutions collapse on a large scale.
  9. Households and non-financial businesses revert to financial autarky, among wide-spread defaults and insolvencies.
  10. Consumer demand and investment demand collapse. Unemployment shoots up.
  11. The government suspends all trading in financial stocks until further notice.
  12. The government nationalises all US banks and other highly leveraged financial institutions. The shareholders get nothing up front and have to wait for an eventual re-privatisation or liquidation to find out whether they are left with anything at all. Holders of bank debt get a sizeable haircut up front on the face value of the debt and have part of the remainder converted into equity that shares the fate of the old equity.
  13. We have the Great Depression of the 2010s."
posted by athenian at 3:05 PM on September 29, 2008 [1 favorite]


I’m thinking I’ll pull a few grand out of the bank today or tomorrow. Just to have in my pocket. Just in case.
(or am I an idiot?)
posted by Smedleyman at 3:05 PM on September 29, 2008


Smedleyman:

Do you need a high-quality American bindle?
posted by RussHy at 3:08 PM on September 29, 2008 [7 favorites]


> Regarding parachutes of any color --- with the impending loss of jobs in our economy we'll likely see a spike in purchases of Richard Bolles' classic job hunting book 'What Color Is Your Parachute?'

That book is a useless piece of shit. I'll sum it up for anyone who might consider buying it:

"Do you know anyone you can hit up for a job? If yes, ask them for a job. If no, go around and introduce yourself to people until you find someone who has a job available. Then, ask them for it."

/ derail
posted by The Card Cheat at 3:12 PM on September 29, 2008 [9 favorites]


> The people we're bailing out have yachts, country club membership, in many cases private jets.

not quite, not as I understand it anyway. We'd be bailing out folks like me, who have just seen their 401k's go right down the toilet in the past two weeks, thanks to the folks who have the yachts and country club memberships and private jets. Those guys need to be, I dunno, charged with criminal negligence or fraud or something.
posted by xbonesgt at 3:13 PM on September 29, 2008


Do you need a high-quality American bindle?

Don't listen to him! We have stew! Piping hot stew! The sooner you order, the less rat-per-spoonfull (RPS).

We also have tophats with the top coming off.
posted by robocop is bleeding at 3:14 PM on September 29, 2008 [9 favorites]


American? Pfft. Whaddo I look like a sucker? Gimme a Chinese knock off, friend. And put some extra lead in it so it’ll slide easy, chum.
*ducks the railroad dick*
posted by Smedleyman at 3:14 PM on September 29, 2008


Be aware when you vote - and of course you are registered, right?
Is it necessary to point out that a Democratic president is helpless without a Democratic controlled Senate and House? The problem right now is the Senate with a majority of maybe one when many bills require a 2/3 majority.
posted by Cranberry at 3:15 PM on September 29, 2008 [3 favorites]


BTW, bindlestiff is more fun than plain bindle. Watch out for the yard bulls when you hop a rattler.
posted by Cranberry at 3:18 PM on September 29, 2008 [2 favorites]


> 13. We have the Great Depression of the 2010s."

You forgot:

14. Profit!

Oh. Right.
posted by The Card Cheat at 3:18 PM on September 29, 2008 [5 favorites]


What I'm starting to see is the banks calling in and canceling their lines of credit. So far, it has happened to firms smaller than ours, who are in a riskier position than we are. But if this crunch continues, it could happen to us as well. In which case, some of the people who work at my firm today would probably need to look for other jobs. Which they won't all find. Because if this is happening to my company, it's happening to countless other companies as well.

According to some (*), the Swedish "bailout" forced between 40,000 and 60,000 smaller companies into bankruptcy, mainly due to banks pulling existing credit lines whether the credits were bad or not. Relative to the population, that would be about 1.3 million to 2.0 million companies in US terms, and, say, 10 million jobs.

(* there's no shortage of bitter crackpots around from that time who's sworn to Some Day Get Their Revenge On The Evil Bankers Who Did This To Them, so finding truly accurate numbers is a bit difficult...)
posted by effbot at 3:20 PM on September 29, 2008


We'd be bailing out folks like me, who have just seen their 401k's go right down the toilet in the past two weeks, thanks to the folks who have the yachts and country club memberships and private jets.

Yes, we're bailing you out by giving money to people with yachts and country club memberships and private jets. It's kind of like how we're always bailing out the poor by cutting taxes on the rich.
posted by enn at 3:24 PM on September 29, 2008 [3 favorites]


robocop is bleeding: "The sooner you order, the less rat-per-spoonfull (RPS)."

Are you joking? I'd pay good scrip for a decent-sized rat in my stew.

Just hold the plague, please.
posted by Rhaomi at 3:24 PM on September 29, 2008 [1 favorite]


American Investor: Who needs the bailout plan? I doooooooooooooo!
posted by chemoboy at 3:29 PM on September 29, 2008 [3 favorites]


Is the crisis real? from Talking Points Memo. I'm halfway through the linked video, and Elizabeth Warren's

Also, for those who have been most vocal in expressing the "WE MUST ACT NOW OR ELSE RISK OUR WHOLE ECONOMY!" line - and I think that includes President Pastabagel, right? - this article from Friday's WaPo is more evidence in the "Actually, the liquidity crisis seems limited to a few banks, so perhaps killing this absurdly huge bailout isn't such a bad idea" pile:

Smaller Banks Thrive Out of the Fray of Crisis

"Banks throughout the United States carried on with the business of making loans yesterday even as federal officials warned again that their industry is on the verge of collapse, suggesting that the overheated language on Capitol Hill may not reflect the reality on many Main Streets...many smaller banks said they were actually benefiting from the problems on Wall Street...

Dunkelberg, a professor of economics at Temple University and chief economist for the National Federation of Independent Business, added that a recent survey of that group's members found that only 2 percent said getting a bank loan was the great challenge facing their businesses. "If you can't get a loan, my advice is to go see your local community bank," Dunkelberg said.

Smaller banks, by contrast, make few mortgage loans, and their lending is fueled by deposits, rather than borrowing. That has insulated them from the troubles on Wall Street. "We're drowning in liquidity because people are pulling money out from other places and depositing it with us," said Peter Fitzgerald, chairman of Chain Bridge Bancorp in McLean. "Our bank has benefited tremendously."

"The banking system did need to slow down," Fitzgerald said. As it does, riskier customers are being turned away. At the same time, banks that overextended are now forced to turn away even good customers. The challenge for Chain Bridge, he said, is identifying the worthwhile customers. The bank has plenty of money to make good loans, he said.

posted by mediareport at 3:29 PM on September 29, 2008 [5 favorites]


We'd be bailing out folks like me, who have just seen their 401k's go right down the toilet in the past two weeks, thanks to the folks who have the yachts and country club memberships and private jets.

To be fair, we'd still be bailing out those folks with the yachts and country club memberships. It's just that we're also crossing our fingers that they bail out folks like you.
posted by Blazecock Pileon at 3:30 PM on September 29, 2008 [1 favorite]


Quite the opposite. This is usually what makes congress people vote.

cite please. find me one, just one, example where phone calls from constituents made a significant difference in a piece of legislation.

As opposed to posting here?

i didn't assert that posting here would have any impact. you asserted that calling one's congressperson was a means to a more favorable bailout bill. it is that notion that i take exception to. i'll be happy to be disabused, if you can find a cite or make an argument as to why you think my phone call will matter in the slightest.
posted by Hat Maui at 3:32 PM on September 29, 2008


I like this comment from the BBC:

To make things worse, this has all come at the most awkward possible moment in the American political cycle, when normally powerful institutions do not have the normal range of tools of persuasion at their disposal.

You're supposed to be on your best behavior around election time boys. Knives back in the bags. Now, meanwhile back in Belarussia...
posted by fcummins at 3:36 PM on September 29, 2008


Is it necessary to point out that a Democratic president is helpless without a Democratic controlled Senate and House?

Not entirely true, Cranberry. If anything, Obama's record has proven that he is extremely skilled at working with colleagues on both sides of the aisle. Sure, it's not as easy to get things passed when you don't hold the majority in both parts of Congress, but I think terming it as "helpless" overstates the situation a bit. And anyway, electoral-vote.com's projections give a definite favor to the Democrats on both sides.
posted by shiu mai baby at 3:37 PM on September 29, 2008


For the record, my rep, Barbara Lee (D), Oakland voted no. She showed some real spine and courage of conviction in going against Paulsons's folly. You may remember Barbara Lee as the sole House vote against the Iraq war. I will be voting for her return to the House in November.
posted by telstar at 3:44 PM on September 29, 2008 [1 favorite]


i didn't assert that posting here would have any impact. you asserted that calling one's congressperson was a means to a more favorable bailout bill. it is that notion that i take exception to. i'll be happy to be disabused, if you can find a cite or make an argument as to why you think my phone call will matter in the slightest.

Two of the Reps who voted yes today are in close elections. The rest are not. Voter calls and letters have been strongly against a bailout or at least the early versions people heard of, and I think that's why it failed today.
posted by Tehanu at 3:47 PM on September 29, 2008


now we have an amended right-wing meme with the addition of ye olde "trickle down"

I've actually been wondering this as I've watched attitudes toward the crisis. Among the more ideologically pure free marketeers, where are the supply-siders who like to talk about trickle-down economics? Is it that they genuinely believe the "don't interfere" directive overrides the supply-side principle if it comes down to a choice between the two?
posted by weston at 3:48 PM on September 29, 2008


Flight to (ine|e)quality.
posted by Ritchie at 3:49 PM on September 29, 2008


Wall Street is not a casino. If Wall Street was a casino we'd have like 25,000 credits in the machine right now becuase we just hit 777. Wild cherry! Wild cherry!
posted by geoff. at 3:49 PM on September 29, 2008 [2 favorites]


DOW today: 10,365.45
DOW on January 22, 2001 when GWB took office: 10,578.24.

Yet another example of 8 years with nothing to show for it.
posted by afx114 at 3:51 PM on September 29, 2008 [2 favorites]


We also have tophats with the top coming off.

Will we have cameras?
posted by mwhybark at 3:52 PM on September 29, 2008




GuyZero: "It isn't like the fundamental value of strong companies changed much.

A company is only as strong as its market and if (say) 10% of Apple's market just evaporated then there is some justification to a lowered share price for AAPL. Customers can't spend money they don't have.
"

It's even worse, right now customers won't spend money that they do have because they're afraid that they won't have a job in the near future. I'm worried that retail for everything but essentials is going to dry up completely for a while until this gets sorted out.
posted by octothorpe at 4:02 PM on September 29, 2008


A friend just emailed me to say his brokerage has put a margin call on Comerica, 5/3, Key Bank and National City.
posted by photoslob at 4:02 PM on September 29, 2008 [1 favorite]


I have one question: who makes money if this thing doesn't pass till Friday?
posted by Marie Mon Dieu at 4:03 PM on September 29, 2008 [3 favorites]


Heckuva job, Bushie!
posted by kirkaracha at 4:04 PM on September 29, 2008 [1 favorite]


find me one, just one, example where phone calls from constituents made a significant difference in a piece of legislation.

How about this one?
posted by Sidhedevil at 4:07 PM on September 29, 2008


WE WON!!! HOORAY!!! TARP IS RIPPED TO SHREDS!

Dammit, I needed that tarp for my lean-to.
posted by synaesthetichaze at 4:08 PM on September 29, 2008 [1 favorite]


Smedleyman: don't feel like an idiot. I have a few thousand in cash laying right next to my bed. It's, like, my adult security blanket. When I was watching the market tank today, I confess, I stroked my wad (throw those puns!) and muttered, 'Yessss, my precioussss...'
posted by jamstigator at 4:08 PM on September 29, 2008 [1 favorite]


Yet another example of 8 years with nothing to show for it.

I got an aneurysm. That has to count for something.
posted by clearly at 4:09 PM on September 29, 2008


The only reason that your business — any business — would not have a line of credit now is because of irrational behavior in the market. It's not obvious that a bailout will really fix that irrational behavior. It seems likely, even, that a bailout will exacerbate or prolong market chaos.

I can't disagree with this assessment, nor the argument that among the many options for rescuing our economy, the current form of the bailout isn't the most fair, nor likely to be the most effective. I'm not an economist; I build software for a living.

Rather, my story was directed at those who seem to be saying "let Wall Street burn" without realizing that if it burns, my business and others like it will come down with a nasty - perhaps even fatal - case of smoke inhalation. If that's OK with you, then there is nothing in my argument that will be persuasive. But if it isn't... I guess I'd advise you to stop cheering the fire and get behind some solution that will help put it out. Or at least reduce it to a manageable smolder...
posted by centerweight at 4:12 PM on September 29, 2008 [1 favorite]


To make things worse, this has all come at the most awkward possible moment in the American political cycle, when normally powerful institutions do not have the normal range of tools of persuasion at their disposal.

It just happens to also be the time when normally powerless citizens have an abnormal amount of influence on the institutions' pet legislators. I say we should use it for all it's worth. Push them to straighten out the system that they've twisted so grotesquely for the benefit of their corporate sponsors.
posted by Kirth Gerson at 4:15 PM on September 29, 2008 [3 favorites]


Heckuva job, Bushie!
You know, when I read the line about him apparently shouting at McCain "this sucker is going down", I realised that Bush must once again be getting that huge sinking feeling he gets right before something he's fucked up implodes.

We all know the horror of impending doom, because we've all been there, but he has done it time and again, from his oil company days right up to running the free world.

There must come a point where it that "oh shit, here it comes again" dawns on him, and he is once more utterly powerless to rectify things. It's a freewheel descent into chaos from then on. This time, "this sucker is going down" was it.

Here we go.
posted by bonaldi at 4:18 PM on September 29, 2008 [2 favorites]




If the bailout doesn't happen, and we revert to chaos/depression, when it all settles down - will I be able to afford to buy a house again?

By the way, I wrote my congressman (a California Dem) and asked him not to support the bill. Turns out he listened.
posted by jabberjaw at 4:21 PM on September 29, 2008


I guess I'd advise you to stop cheering the fire and get behind some solution that will help put it out.

I'd posit that getting behind a solution just for the sake of doing something has not worked out well for this country over the last eight years. I'm not sure how many more second chances we'll get.
posted by Blazecock Pileon at 4:25 PM on September 29, 2008 [1 favorite]


Rather, my story was directed at those who seem to be saying "let Wall Street burn" without realizing that if it burns, my business and others like it will come down with a nasty - perhaps even fatal - case of smoke inhalation.

centerweight, read that WaPo article I linked above. Here's another quote:

"We collect money from local savers, and we lend it in the local community," said William Dunkelberg, chairman of Liberty Bell Bank in Cherry Hill, N.J. "We're doing fine. There are 9,000 financial institutions out there, and most of them are small and most of them are doing fine."

There are now many, *many* economists who are saying that the danger of fatal smoke inhalation is being overstated - remember, this bailout is being proposed and will be managed by friends and former co-workers of the very people who created the pathetic mess. Bottom line seems to be that small businesses like yours will still be able to get credit if the bailout of the few big crooked banks is stopped.

Oh, and this: "and Elizabeth Warren's" should have been followed by, "...part has been fascinating."
posted by mediareport at 4:27 PM on September 29, 2008 [1 favorite]


I don't know about the rest of you, but I'm kind of looking forward to the Zombie Apocalypse.
posted by The Light Fantastic at 4:28 PM on September 29, 2008


At the risk of derailing, why does the investment become less desirable to you as the principal gets paid down? You get 10% on whatever amount is outstanding, and the rest is in your pocket. If you leave it there (or worse, spend it!) then the amount of your money that's not earning 10% is increasing, but there's nothing stopping you from investing it again. Except, perhaps, that you can't find a good place to get 10% on small amounts of, say, only a few mortgage payments. Is that really the only problem?

Yes. You're beginning to grasp the difference between IRR and NPV.

RIM's (makers of the blackberry) earnings were terrible the other day.

This is kind of bizarre, considering that RIM's earnings are down due to strong competition from the iPhone.


No. They weren't "terrible" and they most certainly weren't down. RIMM's earnings were in-line with expectations (maybe just a hair light on EPS, but in-line or ahead of consensus elsewhere). And they sure as shit weren't terrible-- 88% revenue growth, 79% OP growth, 83% sub growth, 79% unit sales growth. The stock sold off because management gave disappointing gross margin guidance (forecasting a drop from 50%ish to mid-40ish) attributable to a weak dollar impacting USD component costs, single-sourced components, increased co-marketing spend, new products, and (possibly) production delays. Whether that has anything to do with the iPhone is a judgment call, but the market becoming more competitive and price-driven is good news for absolutely none of the smartphone manufacturers.

I've been reluctant to play the stock market, but at those irrationally low prices, it might be a good time to get some.

Tell me, by what measure is the selloff in AAPL "irrational"? How would you value the shares?

It isn't like the fundamental value of strong companies changed much. Apple, as one example, will still have the intellectual capabilities of its workforce. They still have a wide range of products they are selling now, at various prices to meet different markets (not everyone needs a Mac Pro, for example, so that's why they make iMacs and Mac Minis; and not everyone needs a 32 GB iPod Touch, so they make Nanos, etc.). They still have an R&D department working on bringing years-long projects to market. They have a lot of money in the bank, and the US is not the only market it sells to. So unless things get really bad, like nuclear bad, and despite election year politics that aim to blame the Democrats as much as possible, it seems like a safe bet that the fundamentals of successful tech companies will keep them strong for years to come.

You don't know much about valuing companies, but thanks to (mostly) efficient markets, the odds are about even that you'll be able to convince yourself otherwise in a few days/months/years. That said, AAPL is a high multiple stock with fundamentals at risk of deteriorating , and operating leverage is a double-edged sword. Even if you capitalize the R&D and strip the cash from the ratios, the share price still implies a whole lot of big-spread growth. And while selling to overseas markets is nice, the global consumer has caught the same cold as the US consumer. As to your final argument, well, it's the same argument that people were making after Sun, Cisco, Microsoft, and Intel took their first haircuts, circa late 2000.
posted by Kwantsar at 4:30 PM on September 29, 2008 [3 favorites]


Dammit, I needed that tarp for my lean-to.

Can I interest you in a nice barrel? Or something in a bindlestiff?

Remember, barrel is the new black!
posted by Sidhedevil at 4:31 PM on September 29, 2008 [2 favorites]


DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A
TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD
CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION
DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST
PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY
REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY
KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE
1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS
AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES
OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY
LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON
WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT
NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO
WALLSTREETBAILOUT@TREASURY.GOV SO THAT WE MAY TRANSFER YOUR COMMISSION FOR
THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH
DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE
FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON
posted by stenseng at 4:33 PM on September 29, 2008 [13 favorites]


YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

That's been posted already, except with attribution.
posted by delmoi at 4:45 PM on September 29, 2008 [1 favorite]




YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

That's been posted already, except with attribution.


Ok. (sent to me in an email by my buddy Adam who sends me funny stuff.)

Happy?
posted by stenseng at 4:49 PM on September 29, 2008


Tell me, by what measure is the selloff in AAPL "irrational"? How would you value the shares?

I'd look at the variety of what a company sells, the profit margins they build into those products, the value of current intellectual property, the value of the future product pipeline, and their creation of new markets to sell to. Maybe those really are bad measurements. You're the expert.
posted by Blazecock Pileon at 4:49 PM on September 29, 2008


Just because I'm sure I'm not the only ignoramus that didn't know what a bindlestiff is:

bin·dle·stiff (bndl-stf) n. A hobo, especially one who carries a bedroll.
posted by photoslob at 4:49 PM on September 29, 2008


That Paulson, he's a good yegg, a real Johnson.*






*Paulson is neither a good yegg nor a real Johnson, except for the purposes of my very obscure hobo joke.
posted by Divine_Wino at 4:59 PM on September 29, 2008


I'm hesitant to post this, because I know how foolish one can look when warning of a disaster that may or may not come to pass (in fact, it would be irresponsible to create undue concern). But I'm fortunate enough to work with people who understand the intricacies the credit markets far better than I could ever hope to, and I've been lucky enough to hear their take on this over the past 18 months. Everything they've talked about for the past 18 months is either coming true or already has.

I can understand the anger and frustration. But I think the blame encompasses a great number of people, from the homeowners who took on too much debt, to the banks who made imprudent loans and the investment professionals who repackaged and leveraged that debt, from the appointed regulators who failed at their task, to the Congress and White House whom we ultimately entrust to protect us from malfeasance. They all share in this mess, but we've all seen benefit from the economy that was allowed to borrow beyond its means.

When the crisis started to become apparent last summer, I still had a belief that the inevitable decline would be contained to a reasonable level. I've worked on an equity desk for over 15 years, and we've seen our share of problems over the years...LCTM, the dotcom bubble, 9/11, etc. We've always muddled through somehow, and things turned out more or less okay. But we are not facing the usual market correction this time; the gutting of Glass-Steagall eventually exposed us all to risk of pandemic proportions.

There has been a lot of discussion about dealing with the problem from the ground up; by simply purchasing the foreclosed homes which are at the root of the problem. While this may have been a legitimate scenario befoe we arrived at the crisis stage, I think it now is simply too little and too late - we have leveraged ourselves beyond our ability to maintain. Through the use of leverage, a small amount of capital can be used to maneuver a much greater amount of capital in much the same manner that a physical lever works. In our case, the fulcrum (which is little more in reality than good faith) has shifted, as faith in the system has collapsed. The same amount of capital that was used to provide leverage is no longer enough to support the obligations that have been placed against it.

We've seen that the lack of faith has created enormous demands to financial institutions, and not only with banks and investment houses, but with insurers like AIG who had their hand in propping up the unsustainable debt instruments. But we are now in risk of the calamity spreading beyond financial institutions and into the greater economy. The commercial paper market is already falling apart, which will have disastrous consequences as major (non-financial) companies lose their ability to conduct day-to-day financial transactions such as paying rent or making payroll. It doesn't take much effort to foresee the dire consequences that can arise.

This is why we saw a broad-based sell-off of drastic proportions across the board today, and why it wasn't limited to the financial sector. It's already too late for much of Wall Street, but maybe we can salvage some of the economy before it collapses. I think the odds of doing so decrease with each day that passes, as more and more capital is destroyed. The markets will simply not wait for us to make up our minds.

I'm not convinced that the bailout will be big enough or drastic enough to forestall economic calamity, but we have to start somewhere, and I doubt that the endless bullshit that happens in Washington is really going to present us with a much better package. We need to restore both capital and faith into the financial markets as quickly as we can, otherwise I'm afraid that today's market action will hardly even be noteworthy in the aftermath. I'd rather have an imperfect bill today than even a perfect one in a month or two.

Maybe I've truly drank the Kool-aid...I'll let everyone else be the judge of that. But those of you that were against today's bill can thank the House Republicans for its defeat, and take a good look around at the strange bedfellows that you've made. Frankly, I hope that you're right...but I'm terrified that you aren't.
posted by malocchio at 5:00 PM on September 29, 2008 [12 favorites]


Hobo signs.
posted by WPW at 5:01 PM on September 29, 2008


Greed. How did we get to the stage where we routinely give executives eight-figure fucking signing bonuses, and nine-figure golden parachutes? How can any business hand out billions of dollars in bonuses on top of already inflated salaries when they've overseen huge losses for their clients, and call that rational?

Get out the pitchforks already.
posted by maxwelton at 5:05 PM on September 29, 2008 [1 favorite]


They all share in this mess, but we've all seen benefit from the economy that was allowed to borrow beyond its means.

Who are you calling "we?"
posted by enn at 5:09 PM on September 29, 2008 [3 favorites]


OK so... here's my forecast:

This thing will swing like hell's pendulum for another 2 weeks, eventually some jerk will say i'm out of here and a better jerk will come in with some semblance of clarity. Only after said jerk returns will there be a real plan.

Given my limited understanding of the situation, this is as close as i get. The area of my expertise is actually looking for patterns in the sky and applying them to patterns here on Earth.
posted by phylum sinter at 5:10 PM on September 29, 2008




“I'll be happy to be disabused, if you can find a cite or make an argument as to why you think my phone call will matter in the slightest.”

I remember back in Sept. of 2008 when there was this bailout bill on the floor and there was a big push by some talking heads for people to call their GOP representatives Apparently the bill got stopped.

There’s no question it makes a difference. It’s the most common method of expression to one’s congressional representative. Yet only about 1 in 5 Americans have done it.

Oh, sure, it seems like pissing on a raging fire. But every little bit helps. Politicians do get big money donors, and it might look like they have the upper hand, but the bottom line is they do that in order to have the money to be able to convince people to vote for them.
If people say they want ‘x’ or they’re not going to vote - either the politician goes for it or he’s out of office.
Hell, it’s not like you’re the only guy that feels a certain way about it. So if enough people decide to pick up the phone...

-----
jamstigator -yeah, I’d feel better if it were gold.
posted by Smedleyman at 5:19 PM on September 29, 2008


Karl Rove's porcine visage, on 50-inch plasma, in my living room, "appalled" by Pelosi, by her "partisanship". this from Karl Rove. the Swift Boat guy, Katrina's guy. it's Pelosi's fault, not the Republicans, because "she gave them no reason to vote for the bill".

seriously.

my TV must be defective; I'm watching unfold this bizarro twist that would make even that crazy old paedophile, Lewis Carroll, shit his pants in envy. that meanie Nancy girl said mean things about the Republicans hence they switch their position out of fucking spite? and this from the party that spent the last 8 years depicting the opposition as unpatriotic?

a Republican administration can not convince their own congressional delegation to do anything, so they have to rely on the opposition, the bill eventually is sinked by Bush's own party and it's the Democrats fault?

and the "liberal media", the prison bitch of the GOP at least since the Ken Starr lynch mob impeached a President for having his cock sucked by a very willing woman of legal age, the "liberal media" simply repeats the spin?

George W. Bush faces the more savage congressional revolt in memory, and it's Mean Nancy's fault?

and for the record, I'd like to tell my many Democratic friends over there that at this point you should wish for a safer Congressional majority but besides that, let McCain deal with this mess -- why send Obama over to the Oval Office to become the new Herbert Hoover? there's no money to implement health care anymore anyway. let McCain deal with two wars and a Depression. really. Roe v Wade is a very big price to pay, but still.
posted by matteo at 5:23 PM on September 29, 2008 [3 favorites]


I just found the radio interview billysumday was referring to above.

NPR: Congressman Who Backed Bailout Aghast At Failure
http://www.npr.org/templates/story/story.php?storyId=95187247

You can skip about 2 minutes in -- the clip is only 3:16 long. The pregnant pause after he says, "Oh my God" is priceless.
posted by sdodd at 5:27 PM on September 29, 2008 [6 favorites]


Sorry, linked.
posted by sdodd at 5:28 PM on September 29, 2008 [3 favorites]


I'm pretty sure a bindlestiff is a hobo who robs other hobos. He stiffs them from their bindles.
posted by sciurus at 5:36 PM on September 29, 2008


The most frightening thing, at least to me, is that money market funds are starting to freeze withdrawals as they're starting to see runs.

Businesses large and small use money funds to hold their operating capital. When these funds freeze, the companies have to borrow money over the short term.

If banks stop loaning to other banks and then banks stop loaning to companies, and if the money funds are frozen... these companies won't be able to access their own capital or bridge capital. And they may just spontaneously fail, or at the least severely curb their operations to save money.

And all this could happen in the next 48 hours. The "screw Wall Street" sentiment will change in a hurry if companies are conducting "emergency" layoffs of hundreds of thousands of workers.

Maybe the $700B was just a band-aid without proper oversight. Maybe it's missing elements that would help us not just flush the $700B down the toilet. Maybe it should require equity in companies, or that all debt be purchased using reverse auctions. But it was something. Not doing something is akin to not giving first aid to someone bleeding on the street because a medikit is not as good as a Trauma 1 emergency room.

I'm afraid the opportunity has passed. I hope it hasn't, because the alternative is something I only have faintly seen in my lifetime. No one will escape it, not the gloaters with their puts on financial firms or those who wave their gold bars and their gold standard with glee or those overseas who are deluded into thinking they're isolated from the economic entanglements of the global financial system.
posted by dw at 5:39 PM on September 29, 2008


Son, we live in a world that has bonds and those bonds need to be bought by men with balance sheets. Who's gonna do it? You? You, Lieutenant Fuld?

I have a greater responsibility than you can possibly fathom. You weep for Bear Sterns and curse the short sellers; you have that luxury. You have the luxury of not knowing what I know: that Lehman's death, while tragic, probably saved firms and that my existence, while grotesque and incomprehensible to you, saves markets.

You don't want the truth because deep down in places you don't talk about at parties you want me buying bonds, you need me buying bonds. We use words like TSLF, PDLF, Super SIV. We use them as the backbone of a life trying to defend something. You use them as a punchline.

I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom I provide and then questions the manner in which I provide it. I would rather you just said "thank you," and went on your way. Otherwise, I suggest that you pick a sub-prime option arm bond and pay par.

Either way, I don't give a damn what you think you are entitled to.

From The Big Picture
posted by thewittyname at 5:41 PM on September 29, 2008 [2 favorites]


If I was more of a bastard, I'd go back to all the economics threads over the past few years where some, including me, but most notably Malor, offered the opinion that the rot was deeper and the shitstorm was going to be bigger than most people imagined, and a fairly large contingent of people said 'No, you're crazy or stupid or both THE ECONOMONY IS STRONG shut up shut up lalalala'.

But I'm not that much of a bastard. Nobody likes i-told-you-so-ers.
posted by stavrosthewonderchicken at 5:43 PM on September 29, 2008 [7 favorites]


matteo writes "Karl Rove's porcine visage, on 50-inch plasma,"

Jesus, you're one of the rich.
posted by orthogonality at 5:48 PM on September 29, 2008 [1 favorite]




On Monday, the Dow finished lower than when George W. Bush assumed the presidency: 10,587.59 on January 19, 2001 compared to 10,365.45 at its close on September 29, 2008.

NASDAQ, the American stock exchange, too, was lower now than it was when Bush took office: 2770.38 on January 19, 2001 compared to 1983.73 on September 29, 2008. The dollar exchange with the Euro was lower than when Bush was elected: 1.068 on January 19, 2001 compared to .695 on September 29, 2008.

Some things have risen, but not the good economic indicators. The Consumer Price Index was at 175 on January 19, 2001 and 219 by September 29, 2008. Unemployment, meanwhile, stood at 4.2 percent when Bush came into power. Today, it is at 6.1 percent.
We're also down a few amendments to the Bill of Rights, to boot.
posted by scody at 5:52 PM on September 29, 2008 [12 favorites]


Wow. Just listened to the clip from NPR. Wow.
His "Oh my God" almost moved me to tears. It just felt so human, so frail and tiny and frightened and apolitical. It sounded like a mixture of fear, exhaustion and the deep, deep sadness that so many of us have felt over the past 8 years. The sadness that comes with the realization that the country has become a gutter-drunk, and as much as we love it, we are going to have to let it hit bottom before it will let us help it into recovery.

There's a saying in A.A.: "Carry the message, not the alcoholic."

Hopefully this will enable us to get a rescue bill that's better for the country (which i guess would be like rehab?)
posted by mer2113 at 6:03 PM on September 29, 2008


We could ride this out short-term by issuing tulip-based securities, until the next bubble kicks in.
posted by Devils Rancher at 6:08 PM on September 29, 2008 [6 favorites]


Well, now Obama can say truthfully: if you had a market position, you are probably not better off now than you were 8 years ago. Just like the worker bees.
posted by fourcheesemac at 6:13 PM on September 29, 2008 [1 favorite]


Jesus, you're one of the rich.

funnily enough, that TV is a gift from Secretary Paulson.
posted by matteo at 6:16 PM on September 29, 2008 [3 favorites]


Jesus, can this get any more emotional? "Oh my god!" "Oh my god!" "OH MY GOD!"

Whatever. Once you get your breath back, these links might at least give some of you liberal types who've drunk the kool-aid a bit too quickly something to think about:

There Is No Crisis Requiring a $700 Billion Bailout, Part II
There Is No Crisis, Says Top Economist, and Former IMF/Fed Reserve Official
The Danger of Wall Street Blackmailing Us Back Into a Bad Bill has an interesting prediction:

Now that this bill has failed, the real risk is that banks will pile on the pressure. Since just not lending to each other has not been sufficient, the next step is to severely tighten credit to consumers and businesses. They will claim that this is because they just can't afford to lend. We need to make sure this doesn't happen.

The Agonist on "Paulson's Panic"


Jesus, you've got MyDD, Kos, Firedoglake and a host of other intelligent political and economic types from across the spectrum against this moronic giveaway, and this thread is still full of exactly the kind of fear-mongering that's gotten in the way of thoughtful analysis of the situation for two weeks now. Some Congresscritter sighs "Oh My God" and you all get the heebie-jeebies.

For fuck's sake already, calm down.
posted by mediareport at 6:21 PM on September 29, 2008 [18 favorites]


athenian Well, with less vitriol I think the reason we need to make the bailout conditional on gutting the boards is because if we don't it'll never happen. They got us into this mess, and if we're bailing out anything it needs to be the *institutions* necessary to the economy, not the board members who so throughly screwed things up.

But if, as Bush so desperately desires, we give 'em a trillion and put off actually fixing the problem until later we will find that later never comes.

I argue that, not even so much punitively, but purely as a matter of national economic self defense we need to, at an absolute minimum, force ever board member and upper level executive from every failing institution, to divest themselves of all voting stock in all corporations, to ban them from buying voting stock for at least ten years, and to ban them from holding any executive position or sitting on any board for a minimum of ten years.

Then we need to slam down some massive regulation. Every corporation in the failing sector should be required to keep every detail of its finances open, all corporate meetings must be recorded and broadcast on the net, all memos, email, etc must be open. If their screw ups are going to cost us a trillion dollars then I think it behooves us to take steps to prevent this from happening again.

I also think that, given the demonstrated incompetence, thievery, and general evil, that the billion dollar executives have been exhibiting that we can now agree that salaries as big as they were getting did not, in fact, attract the best people. If the companies are so hard up that they need my tax dollars let's cap all executive "compensation" (salary, benefits, everything) at $170,000 per year. If its good enough for US Senators it should be bloody well good enough for any company taking tax dollars.

Those are, I think, the absolute minimum conditions that anyone should be talking about before we give away a trillion tax dollars. Its the minimum I'd settle for if I were in any position to do anything but gripe on the internet.

What I *WANT* is their heads on a pike (figuratively speaking). I think we should strip every one of the high level executives of all possessions, auction off every single thing they own, and give 'em five thousand dollars to live on while they look for jobs flipping burgers. I'd like to see them get "CORPORATE THIEF" tattooed across their foreheads so that everyone they meet knows what they did to us and knows not to trust them with anything. But I'll settle for what I outlined above.

But it won't happen. The good old boy network won't let anyone responsible actually pay any penalty, nor will it cut off the billions flowing to upper management. After huffing and puffing for a while Congress will cut the blank check Bush is demanding and while there may be a few symbolic calls for restraint, or re-regulation, they'll be purely at the president's discretion, or they'll be phrased in such a manner that they can be safely ignored, and of course one of Bush's wonderful signing statements will strip away any provisions for fixing the problem. And then 20 years from now (if we're lucky) we'll get to do it all over again.
posted by sotonohito at 6:26 PM on September 29, 2008 [10 favorites]


Food for thought: "Research shows that the only people who use Game Theory in real life are psychopaths and economists."

The economists begging for a bailout, and warning of another great depression, are the same ones who brought you here in the first place. And they did that by not actually having any clue about what was really happening. I cannot trust them to be right this time, when they got it so wrong before.
posted by Vindaloo at 6:30 PM on September 29, 2008


Do not mistake me, at least, mediareport. I think the fact that this bill did not pass is, on balance, a very good thing.

Pass or not, though, The Troubles are far from over. America, depending on the outcome of the election, may just emerge stronger (in a real sense, not the blustery chest-beating Bushite self-deception), but the pain's going to be real as well, for Americans and the rest of us.

Forest fires are good for forests. But everything has to die in the fire, first.
posted by stavrosthewonderchicken at 6:31 PM on September 29, 2008 [1 favorite]


Wow. Well, I do not know what to think. I go back and forth as to whether the bailout is necessary to prevent the next great depression, or whether it's just driven by the storm and drama of more market manipulation. It's hard to get away from that thought when the parallels to the run up of fear and emergency right before the elections gave us the PATRIOT Act and then the Authorization for Use of Military Force Against Iraq Resolution two years later. And then the constant manipulation of public opinion with the Terrorist Threat Colors for years afterwords.

But those were so clearly bullshit, at least to me. I'm less certain this time. Perhaps their theater has gotten so much better that it's finally taken me in. But I suspect the truth is that Bush has cried "Wolf!" one time too many, and while we at last remain seated warm inside, thinking "fool me once, won't get fooled again"; the wolf really is breathing outside the door, about the blow down the house.
posted by cytherea at 6:33 PM on September 29, 2008 [1 favorite]


Live blogging the Treasury Conference Call on the bailout.

Surprise, surprise, the Treasury Department held a conference call this evening for analysts and special interests on the bailout bill. But wait? Was this posted on the Feds website? No it wasn't. You, the taxpayer, just get the bill. You have no right to know what's going on behind the curtain.

You can download a torrent for the call here.

Dig how happy the Feds are that the "restrictions" are nothing more than cosmetic fluff and they in all actuality are about to get their paws on the better part of a trillion dollars and they're going to share it with the folks on the line. (Again, that's not you. You don't count.)
posted by dejah420 at 6:37 PM on September 29, 2008 [5 favorites]


Whatever. Once you get your breath back, these links might at least give some of you liberal types who've drunk the kool-aid a bit too quickly something to think about:
Banks throughout the United States carried on with the business of making loans yesterday even as federal officials warned again that their industry is on the verge of collapse.
Oh, well, so long as people are still doing business on the verge of collapse, I suppose we don't have to worry about that silly collapse anymore.

I mean, my car is still driving just fine as it speeds toward the edge of the cliff. Isn't that proof that there's nothing to worry about?
posted by designbot at 6:41 PM on September 29, 2008 [2 favorites]


Here's another link to go with mediareport's don't-let's-be-so-quick-to-panic collection.

Is Purchasing $700 billion of Toxic Assets the Best Way to Recapitalize the Financial System? No! It is Rather a Disgrace and Rip-Off Benefitting only the Shareholders and Unsecured Creditors of Banks

From the headline y'll might think it's from the Daily Worker, but it's not; it's Nouriel Roubini.
posted by jfuller at 6:43 PM on September 29, 2008 [3 favorites]


But everything has to die in the fire, first.

That's simply not true. The forest fire ecology analogy kind of works, but not in the way you have it:

Plants have many adaptations to fire. In chaparral communities in Southern California, some plants have leaves coated in flammable oils that foster an intense fire. The heat will cause their fire-activated seeds to germinate and capitalize on the lack of competition in the burnt landscape. Other plants have smoke-activated seeds and/or fire-activated buds. Serotinous cones of Lodgepole pine (Pinus contorta) are sealed with resin until fire melts it away and releases the seeds...Because their stationary nature precludes fire avoidance, plants span the range from fire-intolerant species to fire-tolerant to fire-resistant species

Ok, so the banks with huge credit default swap losses are fire-intolerant, see...
posted by mediareport at 6:45 PM on September 29, 2008


When described as a "bailout," the public opposes it. When the principles of the bill are described without using the word "bailout," they support it.

Translation: "If only we'd thought to call it rain, we could've pissed on them with impunity!"

Also, he's wrong.
Do you favor or oppose the proposal for the federal government to purchase up to $700 billion in assets from finance companies?

28% Favor
37% Oppose
35% Not sure
Rasmussen, 21 September
posted by enn at 6:46 PM on September 29, 2008 [1 favorite]


I was waxing poetic. I have a weakness for that.
posted by stavrosthewonderchicken at 6:47 PM on September 29, 2008 [1 favorite]


dejah420: Are you sure that's legit?
posted by delmoi at 6:49 PM on September 29, 2008


I know, I know. But I was a biology major.
posted by mediareport at 6:49 PM on September 29, 2008 [1 favorite]


enn: I'm not sure you're aware of this, but more then two polls have been done. Often times, when polling comes out on new things, they disagree.

In any event, the current bill is much better then the original Paulson plan.
posted by delmoi at 6:51 PM on September 29, 2008 [1 favorite]


Anyone hear Peter Defazio on NPR just a minute ago?
posted by docpops at 6:52 PM on September 29, 2008


No. Why, what did he say?
posted by bonaldi at 7:01 PM on September 29, 2008


Forest fires are good for forests. But everything has to die in the fire, first.

No: everything which grows rapidly under normal conditions at the cost of being vulnerable to abnormal conditions has to die in the fire, leaving room for the slower growing but hardier plants to survive.

There are 8000 banks in America. If there are dozens, hundreds, or even thousands of them that have been irresponsibly buying too many too-risky investments, then the way to make that less likely to happen in the future is to let them go bankrupt, reserve any bailout money for their FDIC-insured creditors, and keep the money supply steady so that the thousands of more prudent banks out there can make the profits they deserve by taking up the lending slack.

To complete your metaphor: Trying to prevent even small forest fires at all costs, because of an inability to see a larger picture than "destruction is bad", just leads to huge forest fires when the accumulation of undergrowth becomes too great. Likewise, can a responsible bank survive economically in an environment where its competitors earn greater profits by taking reckless risks but don't have to take the corresponding losses when the risk-taking backfires? I hope we don't have to find out.
posted by roystgnr at 7:02 PM on September 29, 2008 [6 favorites]


dejah420: Are you sure that's legit?

—delmoi

I'm listening to the torrent. It sounds legit. Existing golden parachutes will not be touched. Fixed link for live blog.
posted by cytherea at 7:05 PM on September 29, 2008 [1 favorite]


enn: I'm not sure you're aware of this, but more then two polls have been done. Often times, when polling comes out on new things, they disagree.

Yes indeed. That's why it's silly to quote a single poll (which used warm and fuzzy words like "secure") to categorically claim that all of the other polling that says people don't like the bailout is wrong. Which was my point.
posted by enn at 7:05 PM on September 29, 2008 [1 favorite]


If nothing else comes of this, now that I as a taxpayer own a partial share in AIG, I hope the government opens up the observatory of the AIG Building to the public once again. I think I'm going to call my congressman about this.
posted by A dead Quaker at 7:08 PM on September 29, 2008


No:

I don't understand. You say 'no', then seemingly go along with and extend my little metaphorical sally. I am confused. Perhaps the problem is the word 'everything'. Let's agree to alter that to 'much', if it helps.
posted by stavrosthewonderchicken at 7:13 PM on September 29, 2008


Delmoi, it seems to be. I wasn't on the call, because I got the news too late to dial in, or I would have recorded it myself. However, it doesn't appear to be faked, in that it sounds like many other similar calls I have listened to, and the vocabulary and language used is that which is commonly used in those circles, and not often used outside of them. It would be hard to fake that.

It looks an awful lot like a smoking gun to me, but then, I may still be in shell shock from looking at my equities valuation after today's nose dive.

I believe the American tax payer is about to be fleeced, and I think the Treasury isn't even trying to hide it. This is one of the biggest power and treasure grabs in modern history, and they're using the same techniques that the Rovians have always used; fear and immediacy. Do it NOW or we're DOOMED. But behind closed doors, they're laughing their collective ass off at the stupid proles.

Don't get me wrong; my investments have taken a huge hit. If I had to sell now, I would be in worse shape than I was in 2000. But I'm also a long term, blue chip, "dividend aristocrat" investor. Eventually those investments will regain value. I hope. I hope that my hold and wait stand doesn't turn out to be quixotic. I think those companies will survive.

I think it's possible that *my* company will not. I think it's quite possible that my company will be out of business in about a month. Between the consumer pressures caused by gas and grocery costs going through the roof, and now my venture capital deciding to hold cash instead of funding a manufacturing facility and ad campaigns, I don't have any room to maneuver around an 80% increase in material costs. Frankly, when the economy is crashing, handmade soap is hardly a priority to most consumers.

The Fed bailout, as proposed, and as discussed in the teleconference I linked above, does nothing to help small businesses like mine, because it does nothing to address the pressures that the average citizen is facing; 100% increases in fuel costs, rises up to 100% in the grocery checkout, rises in costs of clothes, and property taxes, and so on and so on.


As a country, we would be better served by taking that 700 billion and dividing it equally among every taxpayer in the country. That gives everyone a couple hundred thousand that they can go put in their local credit unions, local banks, their own businesses, other businesses, etc. Let the folks with mortgage troubles buyout their own mortgages.

But giving the better part of a trillion dollars to the idiots who made the mess in the first place is just insanity.
posted by dejah420 at 7:15 PM on September 29, 2008 [21 favorites]


cytherea said: I'm listening to the torrent. It sounds legit. Existing golden parachutes will not be touched. Fixed link for live blog.


D'oh! Thank you cytherea.
posted by dejah420 at 7:19 PM on September 29, 2008





> From the headline y'll might think it's from the Daily Worker, but it's not; it's Nouriel Roubini.

(woops, cortex scooped me on this one in the original fpp, a mere 426 comments back.)

posted by jfuller at 7:24 PM on September 29, 2008


Incidentally, does anyone have an informed guess as to the unemployment numbers that are going to be released on 3 October? I've heard 6.5 (up from 6.1) but can't recall where at the moment.
posted by enn at 7:26 PM on September 29, 2008


Some Congresscritter sighs "Oh My God" and you all get the heebie-jeebies.

Panic won't help. But there sure as shit is reason to be very worried. And plan.

Why? At this point we have to pay our blackmail, our ransom. It's where we are.

We HAVE to bail these fuckers out. It's too late to let the market decide. Because THERE IS NO GOD DAMNED MARKET ANYMORE.

If the banks totally fail becuase the top 6% decide to move ALL their money they will take what little assets you have and they will take down what little future reserve you MIGHT of had. Forget SS, Medicare, Medicaid, all that shit. It's gonna all go down the hole or get eaten up via hyper inflation. And I give that about 60% chance of happening. With a bail out we MIGHT just save some of that. Without it? Forget it. It's gone.

The all-mighty "market" has been effectively rigged for the last 20 years and got irreversibly rigged in the last eight. We got a gun pointed at us and we're gonna pay. I've talked about this before and knew this shit was gonna happen.

Unless you got rid of the dollar, had a shit load of assets, precious metals, or valuable commodities hidden under your bed, and/or removed ALL your debt, you are pretty fucked my friends. At least in terms of the so-called American Dream. That shit is over for the "average" American. Not the worst thing, by all means. But most of you don't really know the implications of it by half seeing as how most of you have come of age during the illusion of easy credit and know nothing else.

No. You won't starve. Cities won't burn down. But about 25% of you will be laid off with in 2 years and it will take another three to five to get only about half of those jobs back. So if you're over 35 you won't be "retiring" at 65. Most of us won't be retiring at all. Not as our parents knew it.

the only silver lining is that it's happening to just about everybody who ain't very rich. So we won't feel like losers. Or is that a silver lining?
posted by tkchrist at 7:27 PM on September 29, 2008 [3 favorites]


I believe the American tax payer is about to be fleeced, and I think the Treasury isn't even trying to hide it. This is one of the biggest power and treasure grabs in modern history, and they're using the same techniques that the Rovians have always used; fear and immediacy. Do it NOW or we're DOOMED. But behind closed doors, they're laughing their collective ass off at the stupid proles.

As a country, we would be better served by taking that 700 billion and dividing it equally among every taxpayer in the country. That gives everyone a couple hundred thousand that they can go put in their local credit unions, local banks, their own businesses, other businesses, etc. Let the folks with mortgage troubles buyout their own mortgages.

Thank you, dejah420. You've put words to a bunch of jumbled feelings and notions that have been distracting me all day. Somehow or other this Joe Strummer track seems appropriate right now.
posted by philip-random at 7:29 PM on September 29, 2008


But behind closed doors, they're laughing their collective ass off at the stupid proles.

No. They are scared shitless. Because most of them are about to be cut loose by either their corporate masters or their constituents and they KNOW it. The party is over for most of them, too.
posted by tkchrist at 7:36 PM on September 29, 2008 [2 favorites]


At this point, there's the chance that perfect good banks fail because customers lose confidence in large numbers.
posted by drezdn at 7:41 PM on September 29, 2008


It's the strangest thing. I've read through this entire thread, and the whole time I've had this song running through my head...

"We'll meet again...don't know where, don't know when..."
posted by you just lost the game at 7:45 PM on September 29, 2008


For fuck's sake already, calm down.

Let me get this straight -- you believe that this crisis has been manufactured by the banks, which are purposely not lending in order to get a governmental bailout, and you believe that they are willing to take this all the way to the point where they "severely tighten credit to consumers and businesses"?

And you're telling people to calm down? What you are describing is a deeply ill economy, one which could collapse as surely as one with an authentic bank crisis could, if not more so, especially if we're so busy with the "no help for the rich! let's have a class war!" bullshit that we forget who it is that always loses the class war. Hint: it's not the rich.
posted by vorfeed at 7:45 PM on September 29, 2008 [8 favorites]


As a country, we would be better served by taking that 700 billion and dividing it equally among every taxpayer in the country. That gives everyone a couple hundred thousand

What? Divide 700 billion among the population and you don't even come close.

(700 * 10^9) / (300 * 10^6) = 7 / 3 (10^3), or a little over 2000 bucks.
posted by spiderwire at 7:47 PM on September 29, 2008 [4 favorites]


I'll take it.
posted by fourcheesemac at 7:51 PM on September 29, 2008


I believe the American tax payer is about to be fleeced, and I think the Treasury isn't even trying to hide it. This is one of the biggest power and treasure grabs in modern history, and they're using the same techniques that the Rovians have always used; fear and immediacy. Do it NOW or we're DOOMED. But behind closed doors, they're laughing their collective ass off at the stupid proles.

I have to say, I came away with a very different impression from that recorded call. It sounded to me that, while the bill isn't significantly different from the original Paulson plan, and the CEO compensation stuff in the TARP (what's that an acronym for?) is, in fact, just fluff, they were genuinely trying to save the economy. Of course, I'm not in finance, and didn't understand everything they were talking about, but that much came through to me from the tone of their voices. But I'd really like to hear the response of someone with more experience weigh in on the tape. Hopefully this will get picked up somewhere.

As a country, we would be better served by taking that 700 billion and dividing it equally among every taxpayer in the country. That gives everyone a couple hundred thousand that they can go put in their local credit unions, local banks, their own businesses, other businesses, etc. Let the folks with mortgage troubles buyout their own mortgages.

Perhaps my math is wrong, but wouldn't that be a couple thousand per tax payer? That might pay for a vacation, but I don't think many would be able to pay off their mortgage.
posted by cytherea at 7:52 PM on September 29, 2008 [1 favorite]


2000 bucks = 2 months rent. That's a start.
posted by philip-random at 7:53 PM on September 29, 2008 [1 favorite]


what's that an acronym anagram for?
posted by cytherea at 7:56 PM on September 29, 2008 [2 favorites]


cytherea writes "Existing golden parachutes will not be touched. Fixed link for live blog."

Forget the parachutes for now (the result will be that people with parachutes will it tight until they use the parachutes, but won't be willing to take a new job with a company that can't offer one.)

This is the kicker, and it's a doozy for Main Street:
"Q: Jeff, didn't catch firm name: Is there any way to ensure the purchased dollars are actually re-lent back into the system? will that be mandated?

A: No provision for that.
If this is a liquidity crisis, if the problem is that business lines-of-credit are drying up, that tells you this bailout isn't about fixing that.

Uh-oh.
posted by orthogonality at 7:58 PM on September 29, 2008 [3 favorites]


Let me get this straight -- you believe that this crisis has been manufactured by the banks, which are purposely not lending in order to get a governmental bailout, and you believe that they are willing to take this all the way to the point where they "severely tighten credit to consumers and businesses"?

Well like a friend said to me the other night (on his way to Japan at the time), if it is all one huge organized crime, it's a fucking masterpiece of evil; all the more so because we pretty much have to buy in to some kind of bail out (more money for the bad guys) ... or else.
posted by philip-random at 7:58 PM on September 29, 2008


Yep, you're right...couple of grand. I got carried away with my zeros. It'd be 5,000 to every tax payer, or 2000 to every citizen.
posted by dejah420 at 8:00 PM on September 29, 2008


TARP = Troubled Assets Relief Plan.

t[...] hey were genuinely trying to save the economy.

That's not what I got. I think they were genuinely trying to keep things as close to being the same as they were. Keep the power where the power was.

Even if everything crashes to hell, the U.S. will generally continue to do a damned sight better than children in Haiti who are forced to eat mud to stave off hunger pangs. Just a little perspective.
posted by illiad at 8:03 PM on September 29, 2008


D'oh. [...] they were
posted by illiad at 8:05 PM on September 29, 2008


When the housing market was up, everyone said "It'll stay up!" despite all evidence to the contrary. Now that the credit markets have seized up, the same people are now saying, "It'll fix itself!"

If the economy goes down in flames, it's going to be because the same people that took all the handouts of free money are now screaming, "IT'S MAH MONEY!" when the bill came due. It's amazing how it's always someone else's fault.

Even if you were one of the prudent ones, have you just now reached the limits of your discipline? You tighten your belt before the crisis, but now that we're at the edge of the precipice, the mantra is, "Let it all burn"?

The obligation of responsibility applies more heavily now. Checking out while everything is falling apart is just as reckless as cashing in when everything was blowing up.
posted by spiderwire at 8:11 PM on September 29, 2008 [1 favorite]


When the housing market was up, everyone said "It'll stay up!" despite all evidence to the contrary

All I saw were posts about how the bubble was going to burst any day now.
posted by smackfu at 8:12 PM on September 29, 2008


spiderwire: You seem to be arguing a logical fallacy. "Something must be done. This is something. Therefore this must be done".

Just because something needs to be done doesn't mean that the bailout proposal in question should be passed. Perhaps a better bill is required, one with actual teeth. Perhaps problem banks should just be nationalized by being recapitalized by having 51% of their equity bought at cheap prices. Whatever. But the fact that there is a serious problem doesn't mean that we should just automatically pass whatever shit gets shoveled our way by Paulson. Congress has a responsibility to make sure that what gets done is reasonable and effective.
posted by Justinian at 8:15 PM on September 29, 2008 [2 favorites]


Well like a friend said to me the other night (on his way to Japan at the time), if it is all one huge organized crime, it's a fucking masterpiece of evil; all the more so because we pretty much have to buy in to some kind of bail out (more money for the bad guys) ... or else.

Yeah, I agree... but the thing is, at this point, it may not really matter whether this is a gigantic scam or not. Even if the banks are the hostage taker rather than the hostage, we may still see a collapse, especially if we decide to call their bluff. Hostages don't always get shot "because we didn't get our money"; sometimes they get shot "because we were out of options". As this whole thing goes on, and the market becomes less and less liquid, the bailout becomes more and more important, and the banks have fewer and fewer other options.

If this really is a scam, it may be that we are already past the point where the banks can call back their bluff without incurring catastrophic losses; if so, and the government continues to refuse to pay, they may very well be willing to pull the entire system down with them, "manufactured" crisis or not.
posted by vorfeed at 8:16 PM on September 29, 2008 [2 favorites]


spiderwire: You seem to be arguing a logical fallacy. "Something must be done. This is something. Therefore this must be done".

I'm saying that people don't get to have it both ways. If you're a prudent person, you're always picking up after the people who aren't. It makes no sense to say, "Well, I was responsible when things were going well, but now, fuck it!"

Not getting a new house and fueling the bubble was a sacrifice; bailing out people who did is a sacrifice. They're no different. It may be a bit more salient now, but you still have to do both or you're no more responsible than anyone else.

Just because something needs to be done doesn't mean that the bailout proposal in question should be passed. Perhaps a better bill is required, one with actual teeth.

First, even talking about the bill itself would be a step forward. I'm saying that "IT'S MAH MONEY" is a meaningless argument, and that's what much of the response in this thread amounts to.

Second, as to the bill itself, I'm with Krugman -- it may not be the best bill, but we don't have a lot of choice at the moment. And it beats the asinine GOP proposal. That sucks, but there it is.
posted by spiderwire at 8:28 PM on September 29, 2008


All I know is that one way or another I'll be dressed as a hobo come Halloween.
posted by furtive at 8:38 PM on September 29, 2008 [3 favorites]


[...] but you still have to do both or you're no more responsible than anyone else.

spiderwire: although I don't agree with the logic in your argument, I'll go along with it right now because I want to raise perhaps the most salient point behind being prudent. How do the prudent get to see the greedy punished, and if being prudent doesn't net you any ability to say "I worked hard for my assets, was financially responsible, so you can suffocate in your own greed" what's the point of even being prudent?
posted by illiad at 8:46 PM on September 29, 2008 [1 favorite]


if being prudent doesn't net you any ability to say "I worked hard for my assets, was financially responsible, so you can suffocate in your own greed" what's the point of even being prudent?

Being prudent is not about schadenfreude. It's about taking care of yourself and your family. Part of that necessarily involves taking care of society, especially when, as in America, your own well-being depends on society to a large extent.

I mean, if you're entirely off the grid, you have your shelter, food, and water needs taken care of for the rest of your life, and you can defend all that from those who are "suffocating in their own greed", then go ahead and laugh, Ted Kaczynski. Otherwise, you're just hastening your own demise, and that isn't prudent at all.
posted by vorfeed at 8:58 PM on September 29, 2008 [1 favorite]


The way I see it, why put taxpayers on the hook for 700 billion dollars when you can put them on the hook for 700 billion dollars and bleed the markets of 1.5 trillion dollars at the same time.

Good work boys!
posted by mazola at 8:59 PM on September 29, 2008


All I know is that one way or another I'll be dressed as a hobo come Halloween.

I am going as a bindle.
posted by clearly at 8:59 PM on September 29, 2008 [1 favorite]


We HAVE to bail these fuckers out. It's too late to let the market decide. Because THERE IS NO GOD DAMNED MARKET ANYMORE.

Calm down.

Just because something needs to be done doesn't mean that the bailout proposal in question should be passed. Perhaps a better bill is required, one with actual teeth.

The democrats need to give up on the republicans, frankly. They didn't want to vote for the bill, so they ought to figure out what they need to get those extra 60 votes from the democrats and just pass something. Maybe they will suffer electorally for it, but I doubt they would lose their majority.

They should nationalize the banks. See what happens. Who knows what will happen but it's better then nothing.
posted by delmoi at 9:02 PM on September 29, 2008 [1 favorite]


Being prudent is not about schadenfreude.

I never said it was, and I'll thank you for not equating being pissed off about having to save a large group of assholes from their own disgusting greed with being the Unabomber. Real classy response to an honest question.

Given the tone of your response, I won't ask you anymore genuine questions.
posted by illiad at 9:03 PM on September 29, 2008 [1 favorite]


Apologies to spiderwire. I thought it was he who replied. My response applies only to vorfeed and his dickishness.
posted by illiad at 9:05 PM on September 29, 2008


The decision-making process of not only Congress, the Bush Administration, economists and financial-industry whiz kids, but also of each of us, is so convoluted with non-essential information and biases that it is likely impossible for any of us to determine the actual outcome of today's vote to any degree of accuracy.

We fear another Great Depression. We detest the continued madness of individual greed on a corporate level. We have no sympathy for the fools who bit off more than they could chew when they bought homes, and hate them for taking money out of our pockets in order to fix their mistakes.

We have a vision of the U.S. economy resting upon the broken shoulders of financial giants. We do not, cannot trust our government, especially when it comes to money. We believe in a free market, but we believe in regulating those who will clearly take advantage of us. We see a future of hope on the horizon, but a field of land mines between here and there.

We are Republican. We are Democrat. We are conservative, liberal, Libertarian. We have change we can believe in; we have country first; we have foreign leaders rearing their heads.

We have educations. We have jobs. Perhaps we don't. We have bills to pay. We have money to make, money to lose, retirements, college funds, children, aging parents.

So much stuff clouding the reasoning and rationality of an entire nation. Stop and think, what do we know for sure about how this "bailout" plan will affect the nation? Filtering every piece of information out, what do we know will actually happen?

Only that it will take at least $250 billion government dollars and give it to some corporate schmucks.

We don't know how they're going to spend it. We don't know if the other $450 will be given to them. We don't know that they will pay it back.

We don't know that they will lend more money, or hire more employees. We don't know if CEOs will learn their lessons.

We don't know that it will be any easier for millions of small businesses to get loans. We don't know that the money will be used responsibly. (We can gather that stocks might rebound, since they declined so much, but stock fluctuations are overall rather unstable.)

We can speculate, we can filter it through our experience, the advice of "experts," our ideology, or our political leanings. Through it all, we know only this much for sure: $250 Billion (capital "B"). Given to idiot financial corporations.
posted by jabberjaw at 9:08 PM on September 29, 2008 [4 favorites]


Why is silver still in the shitter?
posted by Balisong at 9:13 PM on September 29, 2008


I never said it was

Sorry, but "I worked hard for my assets, was financially responsible, so you can suffocate in your own greed" is schadenfreude. Specifically, being just fine with watching other people suffer, because "they deserve it".

I'll thank you for not equating being pissed off about having to save a large group of assholes from their own disgusting greed with being the Unabomber. Real classy response to an honest question.

I didn't call you the Unabomber. In fact, if you'll read that again, you'll see that I said the exact opposite. I said that unless you are the Unabomber, which I assume you are not -- that is, living on your own with absolutely no connection to society -- letting other people "suffocate in their own greed" only comes back to haunt you. Given the connected nature of the economy, we're all in this together. In this case, having the "greedy punished" means that it's very likely you'll suffer, too. Thus, it is not prudent to do so.

Given the tone of your response, I won't ask you anymore genuine questions.

Given the tone of your response, you weren't asking a genuine question.
posted by vorfeed at 9:16 PM on September 29, 2008 [4 favorites]


So, anyone got any good "Surviving A 21st Century Great Depression" links for us normal folks out here? Should I be analyzing my neighbors to determine their juiciness levels in case I have to eat them? Should I be converting dollars into silver/gold/rarities? Is there a list of prudent steps a rational person should be taking NOW, just in case this turns into a worst case scenario and the world plunges into a deep depression?
posted by jamstigator at 9:17 PM on September 29, 2008


My neighbors are boney.

:(
posted by mazola at 9:20 PM on September 29, 2008 [7 favorites]


Is there a list of prudent steps a rational person should be taking NOW, just in case this turns into a worst case scenario and the world plunges into a deep depression?

If you don't have enough food, water, and emergency supplies to make it on your own for at least a week, and preferably a month or even two, that'd be a good place to start. The plus side is that it'll come in handy for normal emergencies, too.
posted by vorfeed at 9:21 PM on September 29, 2008


Sorry, but "I worked hard for my assets, was financially responsible, so you can suffocate in your own greed" is schadenfreude. Specifically, being just fine with watching other people suffer, because "they deserve it".

No. Schadenfreude is enjoying the suffering of others. I take zero enjoyment in the suffering of others, even the assholes who "deserve" it. However, I shed no tears for them. They dug their own hole, and I'm pissed off that I'm expected to pull them out of it, despite the sacrifices I made to keep myself out of those holes.

I went back and read what you wrote, and it's pretty clear to me you intended to be insulting. Hide behind semantics if that makes you feel better. And the question was asked out of genuine interest, so whatever.
posted by illiad at 9:25 PM on September 29, 2008 [1 favorite]


Not getting a new house and fueling the bubble was a sacrifice

No, it wasn't. It was a responsible way to avoid losing money when the bubble popped, getting foreclosed upon when hard times or adjusting mortgage rates hit, or even bankruptcy when that house turned out to be impossible to unload except at collapsed prices.

The only way not getting a bubble-priced new house will become a sacrifice is if misguided attempts to prevent people from "Oh noes! Losing their homes!" have enough political clout to have most of the money we saved by that decision taxed or inflated away.
posted by roystgnr at 9:25 PM on September 29, 2008 [1 favorite]


Damn Zombies ate my economic future!
posted by Balisong at 9:29 PM on September 29, 2008


God bless my CSA, my wife who demands we can our own food and my bicycles. All that's missing is defense and a way to take my house off the grid.

Personally I am very glad that the company I work for carries no debt (that I know of) and so long as people keep coming we'll stay in business.

And to all those folks who are demanding that CEOs auction off their personal possessions to cover their mistakes remember; there's no-one who will buy a half-million dollar yacht except another CEO. And these folks have become, over the last long while, not the engine that drives the economy but the Pilots who stand at the ass-end of a very large tanker-ship sized economy aiming it towards that bright horizon in the hopes that the world is actually round. They've fooled themselves, and the vast majority of us, into believing that if we didn't have them the economy would grind to a halt. And that they won't do the job of keeping the economy going if they are not richly rewarded for their pains.

Greed baby.
posted by Sam.Burdick at 9:30 PM on September 29, 2008 [1 favorite]


When the housing market was up, everyone said "It'll stay up!" despite all evidence to the contrary.

No we didn't.

Now that the credit markets have seized up, the same people are now saying, "It'll fix itself!"

We're different people, actually. It's the people who said "this overreaction will correct itself" before, and were right, who are still saying "this overreaction will correct itself" now with the most consistency.

What is the difference between "I don't want to make a profitable loan because I'm afraid I can't turn around and sell it to someone else" and "I want to buy an unprofitable stock/home because I think I can turn around and sell it to someone else"? It looks like a bubble in the opposite direction.
posted by roystgnr at 9:31 PM on September 29, 2008 [2 favorites]


(Shakes fist to sky) Damn You Adam Smith!!
I can't wait to privatize social security for all the baby boomers.
posted by Balisong at 9:36 PM on September 29, 2008


stavros: yes, my only objection was to the word "everything". And yes, you should have said "much" instead of "everything"... but I should have said "Not exactly" instead of "No", so let's not beat ourselves up about it. ;-)
posted by roystgnr at 9:36 PM on September 29, 2008


This "It's the only game in town folks, so if you know what's good for you, you'll pay up right now." line of thought is ridiculous and insulting.

How do the prudent get to see the greedy punished, and if being prudent doesn't net you any ability to say "I worked hard for my assets, was financially responsible, so you can suffocate in your own greed" what's the point of even being prudent?

Amen. Otherwise you are just economic slaves to the good ole USA, Inc. Moral lines are being crossed in this "crisis" and a helluva lot of people are instinctually balking at a 700 billion dollar (and it's sure to go higher) bailout. And it's a bailout, not an investment.

Maybe people understand that it will hurt them if they don't support the bailout and if the bailout isn't passed. Maybe they are willing to pay the cost in suffering because it just doesn't sit right with their conscience and their sense of fairplay. Maybe, just maybe, the people understand more about this than you think they do. They do.

If the American people can shoulder the burden of the blood that has been spilled in Iraq, if they can shoulder the country's descent into torture and secret prisons, if they can shoulder a greedy and dehumanizing healthcare system, and if they can shoulder the deceit that emanates continuously from the goverment, the media, and corporations, they will survive 700 billion not being given to greed mongers on Wall St.

In the end something will be passed or "ordered" that will help unfornunate Wall St. and the rank and file will be screwed as usual. But there is absolutely no inability on the part of alot Americans to see the possible financial disasters in their future. Perhaps they are just saying no because of the inherent unfairness of it, and there is no shame in that.

Perhaps the people aren't as scared as they should be for a very good reason.
posted by TrolleyOffTheTracks at 9:40 PM on September 29, 2008 [6 favorites]


"We Are Under Martial Law! As Declared By The Speaker Last Night! Rep Burgess"

Whoa - what's that middle part there? What? *ch-chick*

It isn't the Martial Law you think it is.

Oh, so no big deal?
posted by Smedleyman at 9:40 PM on September 29, 2008


I wrote my congressman (a California Dem) and asked him not to support the bill. Turns out he listened.

Lisa, I would like to buy your rock.
posted by rokusan at 9:42 PM on September 29, 2008 [5 favorites]


I take zero enjoyment in the suffering of others, even the assholes who "deserve" it. However, I shed no tears for them. They dug their own hole, and I'm pissed off that I'm expected to pull them out of it, despite the sacrifices I made to keep myself out of those holes.

Ah, I see. You take zero enjoyment in their suffering, yet you're not only unwilling to move a hand to help, you're actively pissed off at the very idea, even though helping them might avert harm to yourself in the long run. I don't buy that. Prudent people don't screw themselves in order to do something they take zero enjoyment in, and last I checked, they were also able to swallow their pride and help others, especially when it may be in their own best interest to do so.

I went back and read what you wrote, and it's pretty clear to me you intended to be insulting. Hide behind semantics if that makes you feel better. And the question was asked out of genuine interest, so whatever.

"Intended to be insulting", definitely. "Equated you with the Unabomber", no. And "I didn't say what you claimed I did" is not "semantics", not when I really didn't say what you claimed I did.

You're not the Unabomber, but IMHO you're half the reason why we're in this mess to begin with: yet another "prudent", "hard-working", "sacrificing" American who just doesn't seem able to admit that much of their success is built on common ground, and thus on a whole lot of the very same crap you're so disapproving toward. Yes, much of the country have been idiots and assholes, but you know what? What happens to them also affects you. When the economy is largely based on idiocy and assholery, and the economy is also where you're getting all your food, maybe it's not so smart to just let the idiots and assholes get what's coming to them.

Once again: unless you really are off the grid, you probably haven't got a chair, so maybe you shouldn't be OK with stopping the music just so you can watch all the other people fall down... right before you do. Someone who was truly prudent would be first in line to keep this from wrecking themselves and their families, even if it did mean missing out on the chance to say "I worked hard for my assets, was financially responsible, so you can suffocate in your own greed". I'm not saying this particular bailout is the only possible way, but you seem opposed to the very idea of helping these people at all, and quite frankly, that's as greedy and short-sighted as any adjustable-rate mortgage out there... and just as harmful to you in the long run.

"Screw you, I've got mine" only works when you really have got yours, and very, very few Americans do. I sure as hell don't, and that's why I'm not willing to buy into your revenge fantasy at the possible expense of the very same economy which allows me to have shelter and food. The funniest thing is, many of these very same rich assholes do have theirs, and would love nothing more than for your kind of self-centered nonsense to wreck the economy so that they can come 'round to pocket all of the pieces.
posted by vorfeed at 10:03 PM on September 29, 2008 [6 favorites]


Interesting There could be a major sell off tomorrow, not because of the underlying fundamentals but because the big banks and hedgefunds need to sell by the end of the quater. Krugman thinks there could be a run on hedge funds.

Tommorow might be a real buying opportunity.
posted by delmoi at 10:08 PM on September 29, 2008


If the real risk to "Main Street" (ugh) is banks ceasing lending activity to small borrowers -- small businesses who need lines of credit for payroll, especially -- if that's really the gun that's to our collective heads, why don't we go at that problem directly?

It seems like there's a sort of Gordian Knot solution here. The banks fucked up, and the bankers obviously want a bailout. Most people don't want to bail them out; they'd prefer to watch the bankers drown. Except that most people don't want to drown with the bankers, for obvious reasons.

So rather than extending credit to banks, why not extend it directly to small lenders? The Treasury frequently lends money to big banks, but it's become pretty obvious that "too big to fail" banks are part of the problem. I don't see why we should necessarily include them as part of the solution, if the hatred for them is so great that a good many people would rather go broke than help them (illogical, perhaps, but unsurprising -- America has never been fond of hostage takers: "millions for defense, not one cent for tribute" and all that).

If the worst predictions do seem to be coming true, and the banks do start tightening up on lines of credit to the SMB market, rather than bailing out the banks, why not open up lines of credit from the Treasury direct to borrowers? Or if not truly 'direct', than at least through as few middlemen as possible?

The issue at hand is a lack of credit. The government has an essentially infinite supply of credit, limited only by the will of citizens to allow its use. The citizens don't want that credit extended to banks, but presumably want it extended to the small businesses that actually employ people and produce things. The solution seems straightforward. Loan money, via as direct a path as can be devised, from the Treasury to employers. The nationalization of one failing bank would make quite the loan servicer.

The problem really isn't that Wall Street is imploding; the real scary concern is a liquidity crisis that would create widespread unemployment when employers suddenly can't make payroll, and the whole economy seizes up as a result -- not just the sick parts of the financial industry, but productive, wealth-creating parts of the economy.

Bailing out the banks seems like a bad goal to have in mind. The goal should be the insulation of other sectors -- where the fundamentals perhaps still are strong -- from the controlled demolition that desperately needs to occur.
posted by Kadin2048 at 10:11 PM on September 29, 2008 [14 favorites]


Sorry, but "I worked hard for my assets, was financially responsible, so you can suffocate in your own greed" is schadenfreude. Specifically, being just fine with watching other people suffer, because "they deserve it".

This is actually not correct if you factor in game theory. After all, if you acquiesce once, then what's to stop someone from doing the same thing again? Standing up for yourself even when it's "irrational" at that particular moment may be rational in the long run.
posted by delmoi at 10:12 PM on September 29, 2008 [1 favorite]


Balisong: "Why is silver still in the shitter?"

Because most of the high-powered Wall Street set are secretly werewolves? Makes about as much sense as anything else I've seen on the news today.

And it would go a long way towards explaining all the evil.
posted by Rhaomi at 10:25 PM on September 29, 2008


Standing up for yourself even when it's "irrational" at that particular moment may be rational in the long run.

The prison example - when someone who can beat you to a pulp, takes your shit, you have to fight for it, even though you cannot win. You will get beaten to a pulp, but the alternative is to announce to the entire prison "This guy's stuff is free for the taking! He lets you have it!". Getting beaten to a pulp sends the message "if you want to steal from this guy, you're gonna have to earn it with some bruises. His shit probably aint worth all that anyway".

Picking a fight you can't win is an investment.
posted by -harlequin- at 10:29 PM on September 29, 2008 [1 favorite]


Ah, I see. You take zero enjoyment in their suffering, yet you're not only unwilling to move a hand to help, you're actively pissed off at the very idea, even though helping them might avert harm to yourself in the long run. I don't buy that.

I don't buy that not helping the assholes will harm me in the long run. I'll take that gamble, thanks. And given that I don't buy into the fear, I see nothing wrong with letting them sink under the weight of their own greed and lack of prudence.

Throughout all of this you maintain that "we're all in this together" but I call bullshit. I'm not convinced, and the evidence at this point is not strong either way.
posted by illiad at 10:30 PM on September 29, 2008


This is actually not correct if you factor in game theory. After all, if you acquiesce once, then what's to stop someone from doing the same thing again? Standing up for yourself even when it's "irrational" at that particular moment may be rational in the long run.

Sure, this is why tit-for-tat is a winning strategy. But it can lead to spirals in which neither side will cooperate, which is exactly what illiad seems to be saying -- "these guys don't play fair, so neither will I". Each move in the defection spiral makes perfect sense in the short term, but in the long run it may not get you anywhere. This is why tit-for-tat with forgiveness is sometimes the superior strategy. An occasional "gift" of cooperation after defection breaks these spirals when they occur, while still allowing for the punishment of poor behavior later on.

In short, I am not saying that we should give in every time, but THIS time, I think we need to, in order to ensure that there will still be a game this coming Thursday turn.

I'm a tit-for-tat type, myself, but not when the potential cost of defection is this tremendous, and certainly not when the possibility exists of defecting later, after the immediate possibility of harm has been taken care of. I'm not saying we have to reward these assholes with retirement condos in Belize or whatever; in fact, I think we should look to taking away most of their candy in the relatively near future, but in the short term, I think we could really use a lot less of the spiting of the facing with the cutting of the nozing.

on preview: yeah, less of exactly that. Nothing says "I'm a prudent person" like "I'll take that gamble, thanks," right?
posted by vorfeed at 10:36 PM on September 29, 2008 [2 favorites]


Balisong: "Why is silver still in the shitter?"

Rhaomi: Because most of the high-powered Wall Street set are secretly werewolves? Makes about as much sense as anything else I've seen on the news today. And it would go a long way towards explaining all the evil.


Actually, I think it's got more to do with whatever Society are up to. And it's been going on since at least 1989.
posted by philip-random at 10:36 PM on September 29, 2008


"Intended to be insulting", definitely.

Also, dickishness confirmed. My radar still works. \o/
posted by illiad at 10:37 PM on September 29, 2008


Game Theory? Hmmm?

Didn't that get America (and the whole world) into the Cuban Missile Crisis, still the closest we've ever come to full-on nuclear annihilation? But it didn't get us out? That was accomplished via compromise, and finally, a sliver of trust.
posted by philip-random at 10:43 PM on September 29, 2008


Kevin Drum has suggested that limits on executive compensation (especially retroactive) would be unconstitutional. So why not rev up that tax rate a little bit? I'm pretty sure that if you put all income above, say, $500,000 taxable at 85% (including Capital Gains), you'd get a bunch more Democrats in the House on board.
posted by one_bean at 10:45 PM on September 29, 2008 [1 favorite]


As a country, we would be better served by taking that 700 billion and dividing it equally among every taxpayer in the country. That gives everyone a couple hundred thousand that they can go put in their local credit unions, local banks, their own businesses, other businesses, etc.

Ebert, of all people, wrote about an earlier version of that plan the other day:

Money for nothin' and cars for free

"I get a lot of goofy e-mails. Occasionally one seems to almost make sense. This one was titled "The Birk Economic Recovery Plan," by one T. J. Birkenmeier. I don't have any idea who that is, but it doesn't much matter. I am fascinated by the plan. See if you can find a flaw."

Looks like at least 15 MeFites couldn't.

(But I guess this could be solved simply by transferring the money to some suitable european country where the word "billion" means what it's supposed to mean.)
posted by effbot at 10:48 PM on September 29, 2008


Kevin Drum might want to actually read the Fifth Amendment, and not quote the ridiculous Megan McArdle about anything. One thing I hope can change in the post-2008 crash era is that we stop listening to people who talk out of their asses, who really don't know much of nothing about anything but are paid by elite institute (say, the once-proud Atlantic Monthly) to state them anyway. It's a reflection of the stupidity of Wall Street and the US Govt. We need a whole new elite class, or maybe 3/4th new. Anyone know how to go about getting that?
posted by raysmj at 10:58 PM on September 29, 2008


Congress has a responsibility to make sure that what gets done is reasonable and effective.

Is there any sign that the majority rejected this because they thought it wasn't reasonable or effective?

I just stumbled upon this little article, from six months ago:

Could an economic lesson from Sweden work in the U.S.?

"Sweden's successful crisis management may offer a road map for U.S. officials. But the Swedish cleanup wasn't cheap. It cost the public an estimated 6% of annual economic output; an equivalent bill for the U.S. today would be nearly $850 billion. And Sweden was able to implement a free-spending government rescue only because of a broad political consensus that is difficult to imagine amid the hyper-partisan atmosphere of a U.S. presidential election year."

Indeed.
posted by effbot at 11:06 PM on September 29, 2008


Sure, this is why tit-for-tat is a winning strategy. But it can lead to spirals in which neither side will cooperate, which is exactly what illiad seems to be saying -- "these guys don't play fair, so neither will I". Each move in the defection spiral makes perfect sense in the short term, but in the long run it may not get you anywhere. This is why tit-for-tat with forgiveness is sometimes the superior strategy. An occasional "gift" of cooperation after defection breaks these spirals when they occur, while still allowing for the punishment of poor behavior later on.

I'm all for forgiveness and cooperation, but the problem in this instance is that the opponents are not of equal size.
posted by TrolleyOffTheTracks at 11:12 PM on September 29, 2008


Throughout all of this you maintain that "we're all in this together" but I call bullshit. I'm not convinced, and the evidence at this point is not strong either way.

The "evidence is not strong either way" that banks are failing? Or is the "evidence not strong" that you, and your boss, and the guy who runs the grocery store all have money in the bank, and probably also lines of credit? Look at this comment again for a very, very good example of why we are in this together, by definition, due to the very nature of American business. We're a credit-based society, plain and simple. If that system starts to fail, you will be affected by it even if you don't personally have credit, simply because everyone else does. For example, I know for a fact that my own small business works as described in that comment (a small-business line of credit from a local bank is used to pay our salaries, and is in turn paid off when we make sales), which means I won't be getting my salary if our bank stops lending. And we won't have many sales to fall back on, either, because many of our customers operate on the exact same model, and they will all rein in spending in order to pay salaries. If I don't have my salary, it won't matter that I was prudent and don't have any credit card debt or ARMs, because I will soon be unable to pay on my mortgage (a normal 30 year fixed rate, not a stupid one), nor for rent, my electric or gas bill, or for food or water. If our bank goes, so goeth I, prudent or not. Thus, at this point, I don't care what it takes so long as we save that bank, and all the other banks like it.

As for you, if many people aren't getting paid, and thus many people aren't buying or selling, how long do you think there will be good food at that grocery store, or gas at the gas station, or electricity/gas to run your heat this winter? We are in it together, in as much as the economy must keep running if we are to survive as a nation and as individuals. That's what happens when you de-localize everything: you don't get to play the "whatever, let 'em hang" game for long before you end up hanging yourself. Punishment is one thing, as is Kadin2048's triage idea, but the whole "we can just let an entire sector of the economy die, I'm not convinced that it matters to me" argument is dumb, especially when that sector is banking.

Also, dickishness confirmed. My radar still works. \o/

As if "everyone who isn't as 'prudent' as me can suffocate in their own greed" isn't dickish? Or the "radar" thing, or "real classy response"? Come on. I did my best to respond to you with the same dismissive tone you used against others.

You pretty clearly understand the concept of "they were asking for it", except when it applies to you, in which case it's "oh oh vorfeed is so mean to me". Well, too bad so sad, maybe you shouldn't have dug your own hole, eh?
posted by vorfeed at 11:15 PM on September 29, 2008 [1 favorite]


Kevin Drum might want to actually read the Fifth Amendment, and not quote the ridiculous Megan McArdle about anything.

Okay let me re-state then. Wouldn't it be much easier / better / appealing to start taxing golden parachutes instead of trying to limit them? You know, asking those who will benefit the most from the bailout to help pay for it a little more?
posted by one_bean at 11:18 PM on September 29, 2008


I'm all for forgiveness and cooperation, but the problem in this instance is that the opponents are not of equal size.

No, they're not, but if you stab Goliath in the knees and then he crushes you beneath his dying bulk, can you really say it was a good move? Maybe you ought to do something quick to get out of the way, so you can use your sling from a safer distance later on...
posted by vorfeed at 11:19 PM on September 29, 2008


Nice graphic from the NY Times on how the House voted.
posted by one_bean at 11:34 PM on September 29, 2008 [3 favorites]


You know, asking those who will benefit the most from the bailout to help pay for it a little more?

And they woudn't find loopholes, put the funds offshore, then have Megan McCardle and Co. argue that anything one could do about such problems would be unconstitutional, and then have a blogger at a magazine with similar deep roots in America's pre-empire past, only of a somewhat different ideological slant, agree with her and suggest that one of the amendments in the Bill of Rights says something it doesn't? That would be most helpful.
posted by raysmj at 11:39 PM on September 29, 2008


No, they're not, but if you stab Goliath in the knees and then he crushes you beneath his dying bulk, can you really say it was a good move? Maybe you ought to do something quick to get out of the way, so you can use your sling from a safer distance later on...

But I haven't stabbed goliath in the knees. He's dying under his own weight. Why should I rush in and attempt to prop him up when there is no definitive evidence that this will benefit me...
posted by TrolleyOffTheTracks at 11:44 PM on September 29, 2008 [2 favorites]


We need a whole new elite class, or maybe 3/4th new. Anyone know how to go about getting that?

*raises hand*

Me, me, me! Pick me!
posted by ryanrs at 11:46 PM on September 29, 2008


I don't really understand a lot about this - i cant see why the government didnt just build people affordable homes in the first place or draft legislation in their favour.
posted by sgt.serenity at 11:47 PM on September 29, 2008


So, anyone got any good "Surviving A 21st Century Great Depression" links for us normal folks out here?

Here's a really, really good book. And, thanks to the anti-capitalist mores of the hippies who produce it, you can get a brand new copy for just $10. Be sure to check out the table of contents, which includes such New Depression essentials as:
Collectives
Corporate Downsizing
Dumpster Diving
Food not Bombs
Hitchhiking
Non-monogamous Relationships
Shoplifting
Squatting
Unemployment
and, of course, Pie Throwing.

And lots and lots of other stuff that Czar Paulson doesn't want you to know about.
posted by kaibutsu at 11:53 PM on September 29, 2008 [8 favorites]


But I haven't stabbed goliath in the knees. He's dying under his own weight. Why should I rush in and attempt to prop him up when there is no definitive evidence that this will benefit me...

Again, see above. It's because Goliath fronts much of the money which runs all the jobs, and the jobs are what keep the grocery stores going. If you're gonna fight giants, you need to eat...
posted by vorfeed at 11:58 PM on September 29, 2008


Two of Oregon's Democratic Congressmen voted no, at least partially in response to floods of calls to their offices and websites from constituents.
posted by Cranberry at 12:13 AM on September 30, 2008


It doesn't matter whether you stabbed Goliath or not. If you're in the vicinity when he falls, it's going to shake things up.
posted by philip-random at 12:45 AM on September 30, 2008


Again, see above. It's because Goliath fronts much of the money which runs all the jobs, and the jobs are what keep the grocery stores going. If you're gonna fight giants, you need to eat...

Not everyone in this country is middle class or upper middle class. There are a very large number of working poor and lower middle class. Typically they live from paycheck to paycheck. They have no savings to speak of. They have no equity in the homes they might own. They have not saved and cannot save for their retirement. They fight this country's wars. They bear the brunt of inadequate health care. ECT. ECT. ECT. ECT. ECT........

I think they will suffer but will survive like they always do. Solidly middle class and upper middle class will suffer much more, because they are not used to it, but they will adjust after awhile.

However none of this has come to pass has it? Just lot of fear floating around quite violently and some people giving voice to it. Just alot of "You will be homeless, you will be destitute, and you will have no job prospects for years upon years."

Stop being controlled through fear. If the worst comes to pass, people will find a way.
posted by TrolleyOffTheTracks at 12:55 AM on September 30, 2008 [2 favorites]


Dimitry Orlov has been here before.
posted by adamvasco at 1:01 AM on September 30, 2008 [1 favorite]


Over an hour in, the UK stock exchange is stable, oscillating between a 0.25% up and 0.25% down. Paris CAC down 1%, DAX in Germany a bit less. This is calmer than a lot of people had expected.
posted by athenian at 2:12 AM on September 30, 2008


Yeah, Korea closed only a smidgeon down a few hours ago, too. That was a relief. We'll see how it goes tomorrow.
posted by stavrosthewonderchicken at 2:35 AM on September 30, 2008


Over an hour in, the UK stock exchange is stable, oscillating between a 0.25% up and 0.25% down.

There hasn't really been any new bad news from the finance sector yet, has it? (who's next in line after Bradford & Bingley?)
posted by effbot at 2:42 AM on September 30, 2008


Well, Alphaville is reporting rumours that the Lloyds/HBOS deal might be revised or even fail, sparked by sharply diverging share prices this morning (HBOS down, Lloyds up). But construction sector shares are up, suggesting that traders think the real economy impact in Europe might not be so bad after all.
posted by athenian at 3:18 AM on September 30, 2008


Indian markets went down before recovering. Some mixed movement in rest of Asia. Your turn, Europe.

Also, I wuz here.
posted by the cydonian at 4:53 AM on September 30, 2008


Gosh I'm getting to this thread so late, no sense in reviewing the market events of yesterday other than to say (and it's clearly an understatement) we saw a broad sell off which seemed to originate in financials (the S&P 500 Financial Index was off some 16%), spread into energy (the S&P Energy Sector Index declined almost 11%).

Overall, the S&P 500 dropped almost 9%, hardly surprising as financials and energy comprise almost one quarter of the listed companies contained in this index (financials with 85 and energy with 40); I'm not sure what that shakes out as in terms of market capitalisation, but these are very, very large companies so their declines would definitely rattle the index.

The one, sole winning stock out of the entire S&P 500 yesterday was Campbell Soup! So soup isn't just good food, at times it can be rather good for your portfolio as well. And, of course, food is one of those defensive stocks we all hear about in times like these.

So if you think a bear market or full blown recession is imminent load up on your sin stocks now!

That market rout aside (btw, in 1987 The Dow dropped 22% in one day so as exciting as this was we have seen worse), what is concerned now are the interbank lending markets. We're starting to see these markets seize up again with repo rates approaching those last seen during the Bear Sterns excitement.

Also concerning LIBOR hit an all time high of 6.88% this AM in London, indicating banks reluctance to lend to each other, regardless of counterparty credit rating.

Worsening conditions in the interbank markets are driving speculation The Fed may cut, in attempt to add further liquidity to the markets. News here in Europe is mixed, with BOE expected to cut and ECB standing firm.

On the plus side, US Equity futures are trading up this AM, with the Dow and the S&P 500 looking to move up about 1.5% and 2.2% respectively as of 12PM BST.

Interesting times.
posted by Mutant at 5:11 AM on September 30, 2008 [14 favorites]


Wow, Mutant. Thanks for that.
posted by shiu mai baby at 5:20 AM on September 30, 2008


Congressional Martial Law Explained

Congressional Martial Law Declared

Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,”

"When Bill Clinton left office eight years ago, he made a handful of executive pardons during his last days in office that the Republicans called shady. Now, George W. Bush is leaving office and is requesting unfettered and unreviewable power for his Secretary of the Treasury and other officials to reconstruct the American economy, effectively granting criminal immunity to those who caused the current meltdown of our economy by fraud, insider trading and other illegal behavior."
posted by nickyskye at 5:50 AM on September 30, 2008 [1 favorite]


Ok, so am I understanding this right? The LIBOR and TED spread show that banks are not lending to each other because they don't trust the credit ratings of other banks. This is the real crisis, not bad paper (although it certainly exists).

Don't the banks create those credit ratings? They are shutting off liquidity based on rumour and churning guts, thus increasing the likelihood of banks and other businesses failing?

I'm no economist, and my pension, opportunity to ever retire and all of that went up in smoke a couple years ago (I fail capitalism, apparently), but do the folks running this know as little as I do, or are they vicious, immoral greedy bastards willing to screw 99% of us? Because it looks, from here, like stupid panic or psychotic selfishness.
posted by QIbHom at 5:56 AM on September 30, 2008


Stop being controlled through fear. If the worst comes to pass, people will find a way.

Ah, yes. "people will find a way"... because not doing anything about a completely avoidable meltdown before it happens is the only alternative to being "controlled by fear".

I fully agree that people will find a way, as they always do. This is a natural fact. It also involves a lot of suffering and dying, possibly personal, which should be quite obvious. Personally, when suffering and dying brings few benefits and is avoidable, I tend to want to go out of my way to avoid them, especially if all it means is higher taxes out of a paycheck I'm not even going to have if things go south. If that's being "controlled by fear", then so fucking be it; I'm very much afraid of living in a lawless breakdown of American society, mostly because I have some idea of what that would probably entail, rather than an assumption that "we'll adjust after a while". Such a bloodless phrase, that, how very nice for the people who'll lose everything.

And those poor people who "won't suffer as much"? Many of them don't even live where they can get good food, so I hope they like squirrel and dog.
posted by vorfeed at 6:30 AM on September 30, 2008 [3 favorites]


Thinking back to high school, the smartest kids in the class never wanted to be businesspeople, did they?
posted by Shepherd at 7:02 AM on September 30, 2008 [1 favorite]


So is the lack of "sky is falling" panic in Europe and really most non-North American markets a sign the bail out was not the be all and end all, or is it a sign of hope a revised package will be delivered?
My guess now? Rate cuts all over followed by some worrying inflation (dare I say Stag?) as the cost of doing business (esp. credit and energy costs) rises without corresponding growth.
If this does come to pass, it will be interesting to see if wage inflation remains contained (via now toothless unions and outsourcing/off-shoring) keeping a cap on the inflation problem.
posted by bystander at 7:07 AM on September 30, 2008


Incredible. I just had a wealthy Republican co-worker say she blamed Pelosi for the bill not passing, since the Speaker couldn't get the entire Democratic caucus to vote for it: "Maybe she shouldn't be speaker". I pointed out the President's failure on the GOP side of the aisle, but she merely shrugged. Republicans make their own reality, I guess.
posted by longdaysjourney at 7:17 AM on September 30, 2008 [3 favorites]


Be sure to check out the table of contents, which includes such New Depression essentials as:
...
Non-monogamous Relationships


What the fuck do "Non-monogamous Relationships" have to do with anything?

Also, I'd like to thank Mutant and a few others for contributing solid information amid the fearmongering and bickering.
posted by languagehat at 7:26 AM on September 30, 2008 [1 favorite]


Kevin Drum might want to actually read the Fifth Amendment, and not quote the ridiculous Megan McArdle about anything.

McMagan, LOL. The other day she was telling people at the Atlantic that the government was going to have a hard time borrowing money because the intrest rates for treasuries was so low now and "who would want to loan us money?"

Think about that for a while.

Oh, and the salary caps are for companies that participate in the bailout.
posted by delmoi at 7:27 AM on September 30, 2008


The simultaneous rejection of the bailout and a corrupt ruling class

Greenwald pretty much sums up why I felt encouraged by the fact that the bill wasn't passed.
posted by sotonohito at 7:47 AM on September 30, 2008 [3 favorites]


What the fuck do "Non-monogamous Relationships" have to do with anything?

Because, comrade, when we privatize our sexual energies we are practicing petty-bourgeois values and behaving like rightist kulaks! It is only by collectivizing and rationalizing our erotic impulses that we can enter a new period of communitarian plenty! By expanding access to the means of production of sexual gratification we can increase the potential for social economic growth without alienating the worker from her labor!

Okay, I don't know. I'm just reading Stalinist Values: The Cultural Norms of Soviet Modernity and thought it funny. Communists stopped advocating for an egalitarian re-evaluation of familial structure after the early 1930's anyway because the family was perceived to be a tool for the inculcation of Soviet values, so it doesn't fit. But I would imagine that non-monogamous relationships would enable one to survive an economic meltdown as long as one did adopt a forward-thinking attitude toward capitalistic exploitation of one's personal resources, IYKWIMAITYD.

Also, this is a bookmark comment.
posted by winna at 8:20 AM on September 30, 2008 [1 favorite]


What the fuck do "Non-monogamous Relationships" have to do with anything?

w-w-wait a minute. The list was

Collectives
Corporate Downsizing
Dumpster Diving
Food not Bombs
Hitchhiking
Non-monogamous Relationships
Shoplifting
Squatting
Unemployment
and, of course, Pie Throwing.


and out of those, you picked 'non-monogamous relationships' as the outlier?

I think the point of the mentioned book was the idea of a Great Rethinking -- that when society collapses, or even if you choose not to participate in the given culture on purpose, there are avenues and pathways down which other people have explored and which merit consideration. For instance, forming collectives, or learning to hitchhike, or squatting; these are practices that have attracted others, have plusses and minuses, and so forth.

Of these, 'Corporate Downsizing' and 'Pie Throwing' seem like standouts from the theme. Polyamory may not follow directly from the collapse of organized capitalism, but in the context of a Great Rethinking Of What To Do Next, you have to list relationships near the top.
posted by felix at 8:22 AM on September 30, 2008


Non-monogamy is more fun when pie is involved.
posted by neroli at 8:26 AM on September 30, 2008 [3 favorites]


Can someone with some knowledge on this whole affair comment on the behavior of world markets yesterday/today. Thanks.

Also, if this is such a dire situation why the hell does Bush give Congress a small number of days to try to get a bill passed when it would appear they have been planning this for some time. I don't know enough economics to judge whether the bailout is necessary or not, but the way Bush rolled this out to Congress definitely leads me to think this is some kind of power grab.
posted by batou_ at 8:30 AM on September 30, 2008


Tommorow might be a real buying opportunity. -- delmoi

Indeed, so far it's been a run. But catch CNN's take:

Stocks are trading higher... the Dow added 260 points an hour into the session. Today's bump came after President Bush urged lawmakers to try again to pass a bailout bill.

If I tried to pull that kind of correlation vs causality crap on MeFi I'd have my head handed to me.
posted by rokusan at 8:43 AM on September 30, 2008 [1 favorite]


You're assuming a causal relationship between your logical failures and our handing you your head.

And for that, I'll be handing your head to you.
posted by Ryvar at 8:57 AM on September 30, 2008 [2 favorites]


FDR, First Inaugural Address:
I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our people impel. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself--nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.
This bit applies now:
Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
posted by kirkaracha at 9:15 AM on September 30, 2008 [15 favorites]


longdaysjourney: Incredible. I just had a wealthy Republican co-worker say she blamed Pelosi for the bill not passing, since the Speaker couldn't get the entire Democratic caucus to vote for it: "Maybe she shouldn't be speaker". I pointed out the President's failure on the GOP side of the aisle, but she merely shrugged. Republicans make their own reality, I guess.

According to the NYT graphic that one_bean posted above, not one Representative from Arizona (the state where John McCain should hold a small amount of influence) voted yes on the bill. McCain's home state unanimously said NO to the bailout. I don't want to hear any more crap about how the bill failing is the democrats' fault.

Whether the bill failing to get past the House is a bad thing is an entirely different discussion. Personally I'm unnerved but relieved. Now we wait and see what shenanigans occur later this week.
posted by djeo at 9:18 AM on September 30, 2008




FDR is kind of awesome.
posted by Artw at 9:38 AM on September 30, 2008


I don't want to hear any more crap about how the bill failing is the democrats' fault.

The phrase, it takes to two to tango comes to mind, and then it gets me thinking: that's what's really going on here, some kind of tango. There's a lot of weird sexual energy between these two "concerned parties" that needs to get burned off before an equilibrium can be reached.
posted by philip-random at 9:41 AM on September 30, 2008


Apple's up $5. I guess people like that stock "overpriced".
posted by Blazecock Pileon at 9:42 AM on September 30, 2008


The phrase, it takes to two to tango comes to mind, and then it gets me thinking: that's what's really going on here, some kind of tango.

I wouldn't dispute that at all. The pols that be have definitely turned out to play political football with this whole mess and both sides have some legitimate claim to the blame/praise for the bill failing to get past the House yesterday.

It's this GOP, "it's all the dems fault because ..." meme that's got me upset. Two thirds of the Rs voted 'no' to the bill while two fifths of the Ds voted 'no' (133 red nays vs. 95 blue). The last time I checked 2/5 is a significantly smaller percentage than 2/3. Someone's mother needs to smack them in their lying mouth when they try to pull this garbage.
posted by djeo at 10:00 AM on September 30, 2008


John McCain: Economic Disaster [video | 02:55].
posted by ericb at 10:03 AM on September 30, 2008


They are shutting off liquidity based on rumour and churning guts, thus increasing the likelihood of banks and other businesses failing?

Well, not exactly rumor. The problem is that none of the lenders know just how bad everything is going to get, so they're all being very conservative about extending any of their own risk by lending money out to someone else. This unfortunately creates a self-fulfilling, self-sustaining prophesy. As I said in a previous post on the subject, it's a bit like playing cards with a group of gamblers that refuse to ante up, causing the game to come to a standstill.

And as we've seen today, the day after the largest drop (dollar-wise) in stock market history, that it's up 200 points at start of market. Why? Because everyone knows it's not the end of the world like the Republicans had painted it out to be. It's bad, sure. I don't think you'll have trouble getting anyone to concede that the economy is in really bad shape. But the real question is, just how bad are the current securities?

A lot of this is chicken-and-egg: I doubt most mortgages are junk, but a very large chunk of people simply won't be able to fulfill their current obligations. Simple as that. Do these people want to foreclose? Most likely not. Maybe I'm just an optimist, but I'd bet most people would happily take smaller payments right now to trade for an extra 5 or 10 years on their house payments, if the fucking clueless banks would just offer them the option.

But if people start thinking things are looking grim, you'll see that ripple up the corporate ladder. Pretty soon, you'll start hearing executives talking about reducing bottom-line expenditures by... say... cutting workforce. Well great. An extra 10 years to pay your mortgage isn't going to help if you're unemployed. Turns out that one of the most valuable (and expensive) commodities during this crisis is perception, but I don't think it's the kind of thing you can just throw dollars at--even if it's 700 billion of them.
posted by Civil_Disobedient at 10:08 AM on September 30, 2008 [2 favorites]


“While that guarantee is more than adequate for most families, it is insufficient for many small businesses that maintain bank accounts to meet their payroll, buy their supplies, and invest in expanding and creating jobs.

Wouldn't this provision only be important to bring up if he was expecting mass bank failure?
posted by cimbrog at 10:09 AM on September 30, 2008


So -- because it makes sense to me -- can someone tell me what the problem is with Dave Ramsey's proposal? (Warning: PDF)
posted by fiercecupcake at 10:17 AM on September 30, 2008


Am I alone in being confused as to why Obama would want to raise the FDIC insurance ceiling? What does this have to do with either interbank lending or distressed borrowers? What percentage of the population has over $100,000 in a checking account? Or does the FDIC insurance cover investment accounts too?
posted by PigAlien at 10:30 AM on September 30, 2008


Am I alone in being confused as to why Obama would want to raise the FDIC insurance ceiling?

Small businesses usually have all their money with a single bank... often a single account. They're often-times the hardest-hit by the $100k ceiling. Some small towns, as well. This would allow them to stay on their feet should the shit hit the fan... at least keep the lights on for another month or two. Sometimes that's what makes the difference.

You were probably thinking something along the lines of, "Why should we help out these thousand-aires?" but honestly, the folks with tens of millions of dollars don't keep it in savings accounts. Raising the cap isn't going to help out the rich folks, it's going to help out the small businesses that employ a not-insignificant portion of the workforce in America.
posted by Civil_Disobedient at 10:36 AM on September 30, 2008 [2 favorites]


Thank you, CD, after I posted my comment, the whole small-business angle kinda occurred to me. Makes sense, but I certainly was not worried about helping 'thousand-aires'. I was thinking more that the FDIC is meant to be a guarantee that people don't lose everything, not a guarantee that they lose nothing. Having the FDIC limit at $100,000 probably already covers 99% of the population. Like you said, the very wealthy don't have their money in checking accounts, and the ones who do are hopefully smart enough to have less than $100,000 in any one account. I really don't see the point of any of it, though, small business or otherwise, as people can set up multiple accounts without limit, as far as I am aware.

I suppose some businesses might have a need to have more than $100,000 in a single account? Perhaps someone who gets paid a $150,000 check? They'd have at least $150,000 in a single account until the check cleared and they could re-allocate the funds? With millions of small businesses, I can't assume this never happens. Perhaps it even occurs frequently, but does it happen so often that Obama should make it an issue when it seems there must be far larger issues? Maybe it does - its an honest question.
posted by PigAlien at 10:46 AM on September 30, 2008


Is today's rise simply on the hope that a bill will be passed on Thursday? What happens if there's no bill on Thursday? It seems like this market is moving on nothing but hope and disappointment. Do the fundamentals even matter, or are we in 100% speculation territory here?
posted by afx114 at 10:57 AM on September 30, 2008


@ PigAlien: Also, I think (but do not know) that the increase of FDIC insurance will help individuals (not just small businesses) who invest their savings in banks (i.e. savings accounts, money market accounts, CDs) as opposed to investing their money into stocks.

Believe it or not, not everybody is capable of properly investing in stocks; sadly, the market kind of depends on that fact. When the market appears as unstable as it does now, people still need to put their money (retirement, savings, college fund) somewhere. $100,000 just isn't as much money as it was 1980, and won't take everybody through retirement.

We can't exactly expect regular folks to continue infusing their life savings and retirements into an unstable market. On the other hand, mattresses just can't comfortably fit more than $100,000 under them, unless we start making bigger bank notes.
posted by jabberjaw at 10:58 AM on September 30, 2008


Apple's up $5. I guess people like that stock "overpriced".

1. Are those summary quotes? I never used that word, so I don't know why you linked to my comment.
2. I never said that AAPL was mispriced-- I said that it was a "high multiple stock with fundamentals at risk of deteriorating."
3. As I write this, AAPL is up 6.5%. The S&P is up 4.2%. AAPL's beta is 1.24. So you have 130 bps of alpha on a one-day trade. Which is:
4. Hardly the stuff of "I told you so"s-- especially when my comment was less a remark on the future direction of the shares, and more a defense of the rationality of the selloff and then-current price.
posted by Kwantsar at 10:59 AM on September 30, 2008 [1 favorite]


Thanks, CD. I don't disagree with you - there are bad debts out there, but it still smells like something very close to panic, if it isn't. Perception is making things worse, but no one seems to know if that perception is valid, and won't for some time.
posted by QIbHom at 11:06 AM on September 30, 2008


We're a credit-based society, plain and simple.

That's the problem.
posted by ryoshu at 11:16 AM on September 30, 2008 [2 favorites]


We're different people, actually. It's the people who said "this overreaction will correct itself" before, and were right, who are still saying "this overreaction will correct itself" now with the most consistency.

Let's put it this way: in both cases there's a failure of proper risk analysis. The reason you don't invest in a bubble is because it has to blow up eventually; you might make money in the short term but you don't know when to cash out, so the smart move is to not roll the dice.

Likewise, letting the crisis fester because "well, we'll just keep working until we get a better bill" only works if there's no crash -- and right now that crash would be catastrophic. We might get a marginally improved policy if we wait, but the difference between those two bills is miniscule compared to what we're risking.
posted by spiderwire at 11:19 AM on September 30, 2008


So -- because it makes sense to me -- can someone tell me what the problem is with Dave Ramsey's proposal? (Warning: PDF)

Let's see:
1. Insuring the bad mortgages (in a sense "guaranteeing" the mortgages under Full Faith And Credit) would lower the chances that banks will write down the mortgages themselves, and it would also be a bigger giveaway than what was proposed yesterday.

2. Rewrite any delinquent mortgage to a 6% fixed? If interest rates rise, where would be the incentive to pay your mortgage if your rate was above 6%?

3. The idea the backstop would cost "less than $50B" is hilarious, considering that well over 10% of mortgages are delinquent.

4. The elimination of the Mark To Market rule may not be so bad, but I always fret at getting rid of rules that are meant to protect markets and consumers in the name of keeping things from failing. And the worry I'd have here is that it may encourage banks to NOT write off bad loans -- which is exactly what got Japan into its mess.

5. Eliminating the cap gains tax? Awful idea. It'd just reinflate the bubble. And we're already having trouble with inflation between rising costs and the money the Treasury is printing just to keep things running. I'm not even sure dropping cap gains would even help; it may just hurt, considering that people who actually are still in the black would sell out and take the tax writeoff. As is, people and institutions are head-long into a flight to quality and converting to cash.

Ramsey's proposal looks like a bunch of right-wing ideas mashed together into a "plan." None of them seem to solve anything. In fact, they all seem to prolong the crisis.
posted by dw at 11:23 AM on September 30, 2008 [2 favorites]


1. Are those summary quotes? I never used that word, so I don't know why you linked to my comment.

Here is what you wrote, verbatim: ``Tell me, by what measure is the selloff in AAPL "irrational"?'' That is, your implication is that the APPL selloff is rational, i.e. you argued the stock was overpriced and that yesterday's trading was a correction to its price.

2. I never said that AAPL was mispriced

You didn't say it but you did imply it (probably more to push me around than to have an actual view on the subject, but that's okay).

I said that it was a "high multiple stock with fundamentals at risk of deteriorating."

I don't disagree with this, but your view that yesterday's trading was rational appears to be wrong. So: I told you so.
posted by Blazecock Pileon at 11:32 AM on September 30, 2008


A little levity via Flickr
posted by educatedslacker at 11:38 AM on September 30, 2008


I think the trick for getting out of this crisis is that banks need to get rid of bad debt. And the choice we should be giving them is either write it off yourself, or accept the government help with some painful strings attached (e.g. reverse auction the debt, put restrictions on executive pay and golden parachutes, only take on debt if it's bundled with preferred shares). Or maybe we try the nationalization gambit, though I don't know how that'd get signed by this president, much less survive a Coburn-Inhofe Oklahoma Tag Team Filibuster in the Senate.

Longer term, we need to get more daylight into the markets. The opacity of the markets is what's creating this increasingly nasty crisis of confidence.

I still hold out hope we can hold this to a 2-3 quarter recession and return to 2% growth by 2012. But right now I think our risk of a deflationary spiral in the two years is the highest it's ever been. And while I think we could probably live through some austerity to get ourselves out of inflation/stagflation and come out ahead, I don't think we could make it through deflation without the US dragging the entire world down into the hole of a brutal depression that could make the Great Depression look short and easy.
posted by dw at 11:39 AM on September 30, 2008


We're a credit-based society, plain and simple.

That's the problem.


Well, yes, but solving it with a banking crash works about as well to fix the problem as cold-turkey would for a heroin-based society. For one thing, if you think we have a credit problem now, let the system crash and then see how much credit ordinary people need once the top 2% really do own everything, not just 95% of everything. As I said above, these huge banks would probably love for us to break the system, because once they're done eating each other through mergers, the last megabanks left standing will be the only ones who might have enough capital left over to buy up everything else.

I think credit is a symptom of the disease, not the cause... the core problem is a society and an economy based on consumption and production as ends, rather than as means. We have more than enough money to guarantee high quality of life for every American, but unfortunately, we have forgotten what quality of life actually means...
posted by vorfeed at 11:42 AM on September 30, 2008 [3 favorites]


Thanks, dw, that was just what I was looking for. ;]
posted by fiercecupcake at 12:02 PM on September 30, 2008


Quite the opposite. This is usually what makes congress people vote.

cite please. find me one, just one, example where phone calls from constituents made a significant difference in a piece of legislation.

As opposed to posting here?

i didn't assert that posting here would have any impact. you asserted that calling one's congressperson was a means to a more favorable bailout bill. it is that notion that i take exception to. i'll be happy to be disabused, if you can find a cite or make an argument as to why you think my phone call will matter in the slightest.

posted by Hat Maui at 5:32 PM on September 29
Just one, huh? Ok, here's one cite: McClatchy. This DailyKos article has more details and a few other links.

Here's a juicy nugget (from the McClatchy):
Members voted to please the folks back home, not their leaders in Washington or the titans of Wall Street.

Calls matter... getting involved matters. This is no guarantee of a significantly better bill, but with out the calls we may have been stuck with Monday's version of the bill.
posted by hambone at 12:19 PM on September 30, 2008


Am I alone in being confused as to why Obama would want to raise the FDIC insurance ceiling? What does this have to do with either interbank lending or distressed borrowers?

Higher FDIC limits probably encourage people to keep more of their money in the system.

Rumor has it that there was in fact a run on WaMu -- a slow run of people/businesses who had more than the FDIC limits drawing down to them. I'd guess that depositors in this class are pretty important to stability of a bank. Having a higher FDIC limit puts what's probably a good chunk of these depositors inside the safety zone, which might keep them from panicking and pulling out, which might keep a bank from becoming significantly or critically undercapitalized. It also allows banks to lend more even if they're adequately capitalized, which keeps the credit flowing.

And if people understand it, it looks to me like it does all of this *before* putting a single treasury dollar into the hole, though of course it ultimately means more is on the line. I think it's a pretty interesting idea.
posted by weston at 12:35 PM on September 30, 2008


“but I don't think it's the kind of thing you can just throw dollars at--even if it's 700 billion of them.”

Perhaps if we fired the dollars out of some sort of air cannon. Wielded perhaps by a Goliath?
(really, I have no clue. I go to work. They cut me a check. That’s about my extent of financial knowlege. My wife's the smart one.)

“Money for nothin' and cars for free”

Under the Smedleyman plan, everyone over the age of 18 in the U.S would recieve $425,000. Of course, the price tag is $85 trillion and our GDP (last year) was about $13.5 trillion...but if we’re getting the Circuses, we might as well vote ourselves the Bread, man.
posted by Smedleyman at 12:41 PM on September 30, 2008


Importantly, the idea of raising the FDIC protection cap has another significant upside: it's something that the Democrats believe the Republicans want, so it's an enticement for them to come back to the negotiating table.

Since every other Republican idea is prima facie Palinesque ("cut capital gains, that will solve the problem! Less regulation! Electric bike fnord hello monkey butter"), might as well try this.
posted by felix at 12:43 PM on September 30, 2008


Under the Smedleyman plan, everyone over the age of 18 in the U.S would recieve $425,000.

This is a fantastic idea, though in the interest of cutting down that $85t to something more manageable, and to help ensure that we don't end up with hyperinflation that sends a loaf of bread up to $500, I'm going to suggest that the only people who are eligible are Metafilter members with an "N" in their username.

This is a completely fair distribution and we should run with it immediately.
posted by quin at 12:47 PM on September 30, 2008 [1 favorite]


Hear, hear, quin! That's $425,000 per "N," right?
posted by enn at 12:53 PM on September 30, 2008


Here is what you wrote, verbatim: ``Tell me, by what measure is the selloff in AAPL "irrational"?'' That is, your implication is that the APPL selloff is rational, i.e. you argued the stock was overpriced and that yesterday's trading was a correction to its price.

No. In my view, AAPL is (given current information) rationally priced somewhere between $90 and $150. I can build a completely credible model defending either of those valuations, and I wouldn't have to tweak very many assumptions to get from one number to the other. In fact, I bet that I could get to $300 without assuming anything patently ridiculous.

You didn't say it but you did imply it (probably more to push me around than to have an actual view on the subject, but that's okay).

No, really, I didn't. As far as pushing you around, it's pretty obvious that you were making it up as you were going along, and the fact that you hold the ridiculous belief that today's trading somehow invalidates my view and validates yours is evidence that you're not as well-grounded in these matters as you think you are.
posted by Kwantsar at 12:55 PM on September 30, 2008


I'm going to suggest that the only people who are eligible are Metafilter members with an "N" in their username.

I'm Kirth GersoN, and I endorse this plan.




posted by Kirth Gerson at 12:59 PM on September 30, 2008




No. In my view, AAPL is (given current information) rationally priced somewhere between $90 and $150.

Now you're changing your story. Good luck to you.
posted by Blazecock Pileon at 1:12 PM on September 30, 2008


Forget about AAPL, look at GOOG today.
posted by birdherder at 1:27 PM on September 30, 2008


Forget about AAPL, look at GOOG today.

Almost all of that drop occurred in the last four minutes of trading.
posted by oaf at 1:34 PM on September 30, 2008


Looks like it's back over $405 in the aftermarket. The NASDAQ is looking at those late trades.
posted by malocchio at 1:37 PM on September 30, 2008


I'm going to suggest that the only people who are eligible are Metafilter members with an "N" in their username.

I approve of this, but not the $425,000 per "N" add-on, which strikes me as inflationary.
posted by languagehat at 1:41 PM on September 30, 2008 [1 favorite]


I'm so glad I didn't go with my first username choice, dirigiblema.
posted by dirigibleman at 1:47 PM on September 30, 2008 [1 favorite]


I heard V.V. Chari, an econ prof at U of MN today on the radio say that one of the big reasons for the current credit crunch was the gutting of personal bankruptcy laws. Before the change, bankruptcy judges could restructure debt letting the person keep their house and even mandating changes in payment terms. This was in response to a caller questioning why the bailout doesn't go to individuals with failing mortgages in order to shore up existing bundled mortgage packages, the trickle-up approach. Is this true about the bankruptcy law changes?
posted by Mental Wimp at 2:02 PM on September 30, 2008


I'm going to suggest that the only people who are eligible are Metafilter members with an "N" in their username.

Sorry guys but none of you would qualify since you only have the letter "n" in your names, not "N". Letter of the law, and all that.
posted by effwerd at 2:16 PM on September 30, 2008


The "N" is silent.
posted by dersins at 2:30 PM on September 30, 2008


Hmmm....wondering if sceNted kNife of graNNy is taken yet; it would totally be worth $5.00

I've been trying to read everything I can about this bailout proposition and I'm feeling a bit mulish today-- feet planted and ears back. The idea that the Republicans bailed out on this bill urged on them by a Republican Administration and a Republican apointee makes me think they want the Democrats in a state of panic on Thursday-- willing to do whatever it takes to pull the Repubs in. It should be whatever the Democrats want, but leave it to the Democrats to snatch defeat out of the jaws of Victory. Here is what this Democrat wants: First, a sound spanking administered to all those advocates of Voodoo Economics. Second, I don't want Paulson in complete charge of handing out money as his whimsey takes him. Third, I want a bipartisan board board to oversee the bailout-- specifically people who are not tied into the banking industry. Fourth, I want all forthcoming decisions to be be fully disclosed and all parties responsible to be held accountable for any inappropriate actions.

Who on earth would have the knowledge to make good decisions without first putting time in the banking world? Could we get some Economics professors? To be exact, some Ivory Tower Elitists?
posted by Secret Life of Gravy at 2:59 PM on September 30, 2008


I don't want Paulson in complete charge of handing out money as his whimsey takes him.

Especially since it's buried in a footnote somewhere in the plan that Paulson's title immediately changes to Minister for Life of Hookers and Blow.
posted by scody at 3:16 PM on September 30, 2008 [2 favorites]


I approve of this, but not the $425,000 per "N" add-on, which strikes me as inflationary.

Agreed.
posted by Civil_Disobedient at 3:37 PM on September 30, 2008


Calls matter... getting involved matters. This is no guarantee of a significantly better bill, but with out the calls we may have been stuck with Monday's version of the bill.

Also -- House of Representatives' Web Site Overwhelmed
"The servers hosting the Web sites of the House of Representatives and its members have been overwhelmed with millions of e-mails in the past few days, forcing administrators to implement the "digital version of a traffic cop" to handle the overload -- for the first time ever."
posted by ericb at 3:55 PM on September 30, 2008


I'm going to suggest that the only people who are eligible are Metafilter members with an "N" in their username.

Once again, Rakim and I get fucked!

And I "A'int No Joke." But at least I "...Is "President."
posted by ericb at 4:00 PM on September 30, 2008 [1 favorite]


Minister for Life of Hookers and Blow

Just to put this bailout in perspective, I don't think there exists $700B worth of blow.
posted by ryanrs at 4:22 PM on September 30, 2008 [1 favorite]


Now you're changing your story. Good luck to you.

No, I'm not. Valuation is a range. Ex-post, I suppose you can say it's a number, but ex-ante it's the product of a collection of sensitive assumptions.

My story, which is not changing, is that the selloff in AAPL shares was completely rational, and that the shares are more or less appropriately valued. They were rationally valued two days ago, they were rationally valued yesterday, and they are rationally valued today. I don't really have an explicit view on the shares. I can say that as a long-only investor with a well-defined process that I dislike paying 20x forward earnings for an economically-sensitive consumer discretionary stock that is cum-downgrades. But that's my process. The world offers about 3,000 investable companies in my view, I can only own a small fraction of them, and AAPL doesn't make the cut. On average I will miss 1445 above-median performers in a typical year.

Now (and remember my nod toward efficient markets earlier in the thread) I realize that $6 billion in volume today both agreed and disagreed with me, and this could indeed be the buying opportunity of a lifetime in AAPL shares. But as far as I can tell you have no rational basis for your opinion other than a love for the company-- in fact, your argument as it's presented suggests that you may have fallen prey to the behavioural finance trap of anchoring. Your arguments in this comment would be no less true if the market cap of the company corrected from $500 billion to $410 billion!

And, really, if Monday's selloff (-18%) was "irrational", and AAPL on Tuesday regained less than half of what it lost (8%), how is today's price movement evidence that Monday's movement was irrational? If the shares had sold off 11.5% on Monday and closed even on Tuesday, would that be rational?
posted by Kwantsar at 4:23 PM on September 30, 2008 [2 favorites]


Will you at least concede that hating Microsoft is rational?
posted by ryanrs at 4:29 PM on September 30, 2008


C'mon, emails don't really overwhelm web servers, do they?

For some reason, amidst all this howling, this is what bothers me.
posted by wemayfreeze at 4:46 PM on September 30, 2008


>Minister for Life of Hookers and Blow

>>Just to put this bailout in perspective, I don't think there exists $700B worth of blow.


On the other hand, if one assumes an average global price of $110 or so sexual services, that's enough money to pay for sex with every single person on the planet!
posted by stavrosthewonderchicken at 5:16 PM on September 30, 2008 [1 favorite]


And, really, if Monday's selloff (-18%) was "irrational", and AAPL on Tuesday regained less than half of what it lost (8%), how is today's price movement evidence that Monday's movement was irrational?

Other than the stock price, what changed about this specific company as an entity between last Friday and today? Nothing. This particular company has the same programmers, same software, same hardware, same cash reserves, the same profit margins — at least until the next conference call provides evidence to the contrary.

As for the percentages, I suspect most tech companies would have been happy to gain 8% back between yesterday and today. As near as I can tell, most did not.
posted by Blazecock Pileon at 5:17 PM on September 30, 2008


But, Stavros, down the corner, US$10 gets you a blow job. I'd hate to see just how much sex US$110 would get you around here.

Then again, there is something reminiscent of anal fisting without lube going on, and that would probably cost more than a blow job.
posted by QIbHom at 5:28 PM on September 30, 2008


Solar panels for every house in the USA.
Mortgage now include electricity.
posted by phoque at 6:27 PM on September 30, 2008


includes
posted by phoque at 6:28 PM on September 30, 2008


I don't think there exists $700B worth of blow.

You're not hanging with the right people. It's nearly a natural law: If there is any amount of money, there is an equivalent amount of cocaine.
posted by elwoodwiles at 6:34 PM on September 30, 2008


The LIBOR overnight rate has gone nuts.
It implies banks think there is a reasonable chance that a bank that looks OK today will be broke within 24 hours.
posted by bystander at 7:39 PM on September 30, 2008


Wile E. Coyote Government

Some of you are getting the fear pretty good right now. Well, don't worry. The fun won't end any time soon. Perhaps you like to imagine new varieties of collectivist legislation to ram down the throats of those evil, evil Republicans, or perhaps you favor a scenario where some Road Warrior type shit is going down. That's cool.

No matter how well the economy "stabilizes", you will still have doom hanging over your head for a bit longer; a little more opportunity to nurse those dreams.

In the cartoon the final boulder is foreign debt. Not that we're on the threshold of some elegant solution, but even if we were, there's more to fret over yet.
posted by BigSky at 8:04 PM on September 30, 2008


Other than the stock price, what changed about this specific company as an entity between last Friday and today?

Their market. Or at least, the outlook on their market. And that's going to be a big part of their financial picture even if everything else internal stays the same.

I'm a big fan of Apple's products but I think the argument is fair that if the nation or world hits a long rough patch, people will less inclined to buy premium items and less inclined to replace their existing purchases more quickly. It isn't a watertight argument (I don't think Apple products are quite the luxury/status/fasion items some analysts think they are, and I can think of several ways in which Apple might choose to respond to a squeezed consumer market), but it's also a pretty reasonable bet.

So, more or less, the fluctuations are based on general bets about the consumer economy plus a few assumptions about Apple's market. Not unreasonable.
posted by weston at 8:20 PM on September 30, 2008


Forget about AAPL, look at GOOG today.

NASDAQ claims that's due to "erroneous orders routed to Nasdaq from another market center", and has cancelled a bunch of orders and raised the closing price.

Could have been some nervous trader panicking after stumbling upon their 2001 index, of course.
posted by effbot at 11:15 PM on September 30, 2008 [1 favorite]




Wow lots of very curious stuff going on.

And I don't mean Monday's selling - although some of us were talking about it at University and one of the researchers casually mentioned the curious coincidence of The Dow dropping one point for every billion of the bailout plan - ha ha very odd don't read too much into it. Interesting though.

And not the fact that the ratings agencies are starting sovereign downgrades in response to banking bailouts in other countries - Iceland got downgraded by both S&P and Fitch yesterday, while Moody's put the nations credit rating "on review", which is generally a sign they're gonna change it and odds are we won't see an upgrade.

No, the thing that I've found very curious is what I'm calling A Tale of Two Yield Curves.

A Yield Curve is nothing more than a chart showing the various Yields investors receive for loaning funds (i.e., purchasing bonds, bills or notes) for various Terms or maturities.

Investors can lend money (i.e., purchase debt) to ether the US Government (via buying T-Bills or Treasuries) or the private / corporate sector (purchase bonds offered by these entities).

Yield curves are wonderful tools, given how the human brain is wired to interpret data, look for patterns. Rows of numbers on a screen? Difficult, dense to perceive sometimes. Graph those same rows? We've just translated data to information.

We find the US Government yield curve in particular a very, very powerful tool to understanding what's currently happening - and what might happen - in the economy. I keep a set of useful links in my profile and one that I advise people to look at every day is the US Government Securities yield curve. This is the financial equivalent of bedrock; everything else is price relative to US Government Securities. Everything.

So how do things look now?

Well, we've got two yield curves we can analyse - the aforementioned US Government Securities yield curve and what we might call The Private Yield Curve; in other words, the rates on debt issued NOT by the US Government but by the private sector, in this case, banks. Let's look closer.


The US Government's Yield Curve looks like this:

Fed Funds Rate is at 0.5%
The Three Month T-Bill (aka 13 week) is now trading at about 0.90%
And the Ten Year Note (another US Treasury security) is now trading to yield about 3.827%

And taking a look at the The Banks yield curve we see:

Overnight LIBOR is trading at about 6.875%
Three Month LIBOR trading at about 4.05%
10 Year Swap Rates are trading at about 4.46%, however we're hearing rumours that nobody is doing deals in this market.

So in spite of massive and coordinated Central Bank interventions across much of the G20, we see sharp differences between interest rates and liquidity when comparing the Government and Private sectors.

Seems that as balance sheet deflation continues - various structured products held on balance sheet at financial institutions are being marked to market - banks are increasingly reluctant to lend to each other. They simply must hold onto whatever cash they've got to maintain regulatory capital ratios.

As cash is withheld from the interbank markets, bids are either non existent for structured products or falling far short of fair value.

Very curious events going on here. They have to meld these two yield curves; these sharp divergences are historic, we've almost never seen such sharp and pronounced differences in the past.
posted by Mutant at 1:14 AM on October 1, 2008 [6 favorites]


C'mon, emails don't really overwhelm web servers, do they? For some reason, amidst all this howling, this is what bothers me. --- posted by wemayfreeze

That quote bothered me too, but it is possible if the email server and the web server are the same machine (likely, but bad architecture for something important) or if the combined traffic load of the two on the same network overwhelmed the router connecting them to the internet (less likely).

Modern email, full of listservs and virus checking and spam processing and whatnot, is a heavy load, often a bigger task for the poor machines than serving the website.
posted by rokusan at 1:59 AM on October 1, 2008


They simply must hold onto whatever cash they've got to maintain regulatory capital ratios.
So how about relaxing the capital requirements for a period? Requiring only half the usual for the next 6 months, three quarters for the following 12 months etc. and central banks potentially guaranteeing the shortfall if things go pear shaped?
I am trying to find a solution that hits at the heart of the problem (banks reluctant to lend due to reduced solvency, as I see it) that is more palatable than just handing over some cash to recapitalise them.
posted by bystander at 4:36 AM on October 1, 2008


Nobel Prize winner Joseph Stiglitz on why the bailout as proposed needed to go down:

Henry Paulson's Shell Game:

The administration is once again holding a gun at our head, saying, "My way or the highway." We have been bamboozled before by this tactic. We should not let it happen to us again. There are alternatives. Warren Buffet showed the way, in providing equity to Goldman Sachs. The Scandinavian countries showed the way, almost two decades ago. By issuing preferred shares with warrants (options), one reduces the public's downside risk and insures that they participate in some of the upside potential. This approach is not only proven, it provides both incentives and wherewithal to resume lending. It furthermore avoids the hopeless task of trying to value millions of complex mortgages and even more complex products in which they are embedded, and it deals with the "lemons" problem--the government getting stuck with the worst or most overpriced assets.

Finally, we need to impose a special financial sector tax to pay for the bailouts conducted so far. We also need to create a reserve fund so that poor taxpayers won't have to be called upon again to finance Wall Street's foolishness.

If we design the right bailout, it won't lead to an increase in our long-term debt--we might even make a profit. But if we implement the wrong strategy, there is a serious risk that our national debt--already overburdened from a failed war and eight years of fiscal profligacy--will soar, and future living standards will be compromised.

posted by mediareport at 5:39 AM on October 1, 2008 [1 favorite]


Senate to Vote Today on the Bailout Plan

Lesson From a Crisis: When Trust Vanishes, Worry

**

For what it's worth, and after much reading and thought the past two weeks, here's my take: the Bush administration, by explicitly and loudly proclaiming that failure to pass the "bailout plan" will result in the economic catastrophe, has already effectively spooked the markets. In retrospect, one wonders if it was wise to telegraph set up such a stark "choice" out into the world, but subtlety (or, frankly, honesty) has never been the administration's strong suit.

If the current plan, as I understand it, is passed this week, I'm not convinced it does more than buy us six months worth of time--at which point the same set of economic problems (of freezing credit lines, teetering banks, and an over-stretched financial market) will likely re-surface once again. So while I do think the plan, despite all its significant faults, should probably be passed to avert short-term disaster, I also think the long-term prospects of this plan now solving the mess we're in are in fact quite weak.

To wait for a better plan that really gets to the root problems, i.e. one that nationalizes much of the banking system the way the Swedes did, is probably not politically realistic at this time. And this lack of political will may indeed prove fatal. Nevertheless, I think the debate on this topic the past week or two has been good for the nation as a whole.

Assuming some plan passes this week, future historians may look back and see our failure to come up with the best plan, and our passing of an inferior plan, as something that simply delayed the inevitable "correction" in the marketplace. But we will have to wait for history to pass that particular judgement, and I sincerely hope I'm wrong.
posted by ornate insect at 7:33 AM on October 1, 2008 [2 favorites]


Apple's up $5. I guess people like that stock "overpriced".

Lol. And it's down $5 today. Apple is underperforming this terrible market. Look at Apple compared to NASDAQ for the past three days. Apple has done much worse. Of course it went up a little along with everything else, but it's gone back down to where it was Tuesday (Tuesday pre-vote). Furthermore, It's gone down $60 in the past month, a $5 dead cat bounce is nothing to be proud of. I'm sure it will get back up to $120-130 once the bailout passes but come on. The question is whether it outperforms or underperforms the market.

Oh, and with respect to GOOG, someone on the messageboards was complaining that he had an order for GOOG at $325 or something canceled. The problem was he sold the shares right away fro $405, and that became a short sell.

Other than the stock price, what changed about this specific company as an entity between last Friday and today? Nothing.

This can't be serious. If the credit crunch happens, apple will be just as fucked as everyone else. If it doesn't, it won't be. It doesn't matter how good the company is, the overall economy really will impact how much money it makes for investors. Duh.
posted by delmoi at 7:43 AM on October 1, 2008


Anyway with respect to the bailout deal itself, I'm disappointed that they tried to get it passed by making it "more republican". The stuff they added isn't too bad: FDIC insurance cap increases, a cutback in the AMT which was starting to affect the middle class (those making over $100k year, I think) and tax cuts for business. The tax cuts are idiotic, and will cost a total of $145 billion over the next few years.

I would liked to have seen some goodies for democrats added, especially an increase in the amount of time people can draw unemployment benefits. This actually passed in the house and senate and Bush vetoed it. We have a 6.1% unemployment rate and in September 8,000 jobs were cut (based on data from a private company). The estimates had been $60k. Those people are going to have trouble finding work and increasing their unemployment benefits would be good for the economy (not to mention the people themselves!)

If this credit crisis actually materializes it's going to be a pretty big problem.

One interesting tidbit: the energy bill that had tax credit for alternative energy like wind and solar got attached to the senate bailout bill (I believe), so my solar energy stocks are up, even while the rest of the market is down today.

Oh, and as I was writing this post, Apple dropped another 50¢
posted by delmoi at 7:54 AM on October 1, 2008


Well, now this is very, very interesting - the SEC has just been granted authority to relax FAS 157.

I wrote about FASB 157 last January, mentioning how it's implementation was causing "... large portions of the balance sheets at many institutions are being sharply marked down. "

It will be interesting to see how much of 157 they pull out of current accounting standards, and how - totally curtail, mark to market in some cases / for some assets, or even mark to matrix (which is done for many assets / asset classes, is well established and my personal favourite for Level 3 assets). Very interesting.

Once this entire thing got politicized we saw this coming, but still. Step backwards in some ways.


bystander -- "So how about relaxing the capital requirements for a period?"

Yes indeed, an interesting idea. I'm not really a regulatory person, so I don't know the precise answer, however it does seem plausible. I do know that these ratios have been established at current levels for a reason and as of a result of quantitative impact studies, but I'm not sure why in a crisis the regulators wouldn't sharply reduce these requirements. Perhaps that's a card Bernanke, et al haven't played yet? That being said, I'm not sure that current activities (injecting the system with cash) economically aren't the same on some level.

In any case, regulatory capital, is intended to prevent systemic bank failures, where the collapse of one institution spreads to others and in the process takes down otherwise solvent enterprises. Valentine and Ford (1999) covered this topic in detail in Readings in Financial Institution Management: Modern Techniques for a Global Industry . Since they do such a better job than I of explaining the topic, a relevant excerpt:
Regulatory capital requirements are a means to limit the risk exposure of the government and the taxpayers that stand behind it ...
and
... regulatory capital requirements protect the economy from negative externalities caused by bank failures, especially systemic risk. Regulatory capital requirements, along with the safety net, help protect the financial system and real economy from the destructive effects of contagious bank runs on solvent, but illliquid banks.
It is a fascinating topic, and hopefully one that someone reading this thread will have more detailed knowledge of, and be able to answer your question better (I only know why capital ratios are mandated and how much they are in various domiciles; I'm not one of the guys or gals that designed that part of the system).


"I am trying to find a solution that hits at the heart of the problem (banks reluctant to lend due to reduced solvency, as I see it) that is more palatable than just handing over some cash to recapitalise them."

I definitely agree this would be more palatable; effectively making them use what funds they already have.


mediareport - thanks for posting this. Nice commentary. But I don't understand why preferred shares keep being touted? As I mentioned before when we were looking the proposal over, preferred shares typically lag common in pricing changes to the upside and, with few exceptions, preferred shares are non voting.

I'd much rather the public hold 51% of voting (common) stock of any entity receiving taxpayer funds, and if (new?) management doesn't perform after getting the cash they asked for, throw the bastards out. Repeat as needed.

I honestly don't see what the problem is here. In banking you're fired in a heartbeat if you don't make your numbers (I'm exaggerating a little, but you get the idea). Why shouldn't this same practice apply in this case?
posted by Mutant at 8:20 AM on October 1, 2008 [6 favorites]


Here's an article about a potential hedgefund apocalypse. Interestingly some of the best funds are up 50% this year.
posted by delmoi at 8:44 AM on October 1, 2008


Okay, I'm no economist but after reading the failed House bill, I don't see what the big deal is. There are certainly problems but there aren't many.

My biggest issues are with Sections 115 and 119. The graduated authority granted in 115 doesn't really seem like it provides enough inconvenience in escalating the amount of available funds. And 119 details homeowners rights and if I'm reading it correctly, it's basically saying "nothing new here, move along." There are some amendments to existing codes that I didn't look into yet but I would be glad to know if I'm reading this incorrectly. If not, they should focus on correcting these issues before adding on sweeteners.

Section 134 is what I'm calling the "pound of flesh" section which basically says after five years, the president will craft legislation to exact any negative balance resulting from the act from the financial industry. And there is plenty of oversight and review built in, though a potential point of contention here would be who to appoint as the Inspector General for the TARP.

This isn't the three page Paulson plan anymore. This isn't about throwing 700 billion down the drain or rewarding anyone for failed policy. I've been skeptical ever since McCain pulled his suspended campaign stunt. And the way the House Republicans acted on Monday, I thought those suspicions were further justified but after reading the bill and listening to all sides of this issue, I don't see any reason to have such stubborn, abstract reasons to oppose this as both the Dems and the Reps who voted no have expressed.

Ultimately, we should really look at this act as an interim solution. At any point in the future, working from the reports delivered in fulfillment of the act, we can revisit the act and amend what is needed. Has anyone else read the bill and can they point to anything in particular that they think is just wrong-headed and potentially harmful?
posted by effwerd at 9:10 AM on October 1, 2008






This isn't the three page Paulson plan anymore. This isn't about throwing 700 billion down the drain or rewarding anyone for failed policy.

That's right. The problem is Paulson proposed this idiotic 3 page plan, and really poisoned the political environment. I bet millions of Americans don't even realize how much the plan has actually changed.
posted by delmoi at 9:42 AM on October 1, 2008


ornate insect In my more paranoid moments I wonder if the plan wasn't *intended* to only last six months. Stick Obama with a resurgent economic problem so the Republicans can shriek about how Democrats are terrible for the economy, put us another trillion in debt to push back any chance at social spending, etc.
posted by sotonohito at 10:04 AM on October 1, 2008


so the Republicans can shriek about how Democrats are terrible for the economy
As they did in the adverts they bought before the vote on the bill slamming the Democrats. How bad at math do you have to be to not be able to work out you're about to kill the bill anyway?

Oh, right, bad enough to spend 8 years destroying your nation's economy.
posted by bonaldi at 10:21 AM on October 1, 2008


, I don't see any reason to have such stubborn, abstract reasons to oppose this as both the Dems and the Reps who voted no have expressed

There are two reasons for any elected official to vote against it:

1. It's always easier to say "No" than "Yes". That way you're not on the hook for it. Most businesses are run in the same manner... conservatively (one might say cowardly, but I digress). Which kinda makes sense since the personality traits of CEOs and politicians tend to overlap. It's easier to just wait things out and "see what happens" then to actually make anything happen directly. Reaction instead of action.

2. It is very easy to take the populist NO HANDOUTS mentality that gets the voters all riled up.

Thankfully, it looks like this was actually a pretty good thing, because now all the talk is about how glad people are that the government is being "responsible" and not making "snap decisions" at the barrel of a gun. Then a week later the very same bill (or at least, something very close to it) will pass.
posted by Civil_Disobedient at 10:26 AM on October 1, 2008


sotonohitoYou are not paranoid since they are are to get us. Perhaps just not realistic enough.
posted by pointilist at 10:27 AM on October 1, 2008


My biggest issues are with Sections 115 and 119. The graduated authority granted in 115 doesn't really seem like it provides enough inconvenience in escalating the amount of available funds.

Yes, and keep in mind that under both the original and revised (failed) plans, there is no limit on the amount of money that can be spent. There is only a limit on the amount that can be held at one time; Paulson can spend $250bn, sell the stuff for pennies on the dollar, and turn around and spend another $250bn, without even hitting up Congress to up the limit. He can do this ad infinitum. He can easily spend $700bn, or $1tn, or $2tn, this way without even bothering with the graduated authorization. Calling it a "$700bn bailout" was always a misnomer.

Section 134 is what I'm calling the "pound of flesh" section which basically says after five years, the president will craft legislation to exact any negative balance resulting from the act from the financial industry.

That's a total punt. "Uh, yeah, we can't figure this bit out so we're going to let someone else fix it when we're safely ensconced in board seats back home." What are the chances there is going to be the political will in five years to impose a penalty on the industry against what will no doubt be its strong efforts to squirm out of it? Either the economy will have recovered and nobody will care anymore and this part will be quietly amended away, or the economy will still be fucked, in which case nobody's going to want to hit the financial sector with additional penalties.

And there is plenty of oversight and review built in, though a potential point of contention here would be who to appoint as the Inspector General for the TARP.

I don't find the oversight very convincing myself. Somebody will write reports and send them to Congress. Then, as per Sec. 116(b)(3), the TARP gets to either (a) fix the identified problems, or (b) not fix them. And of course Sec. 119 limits judicial review considerably.

Most troubling of all is the complete discretion that Paulson has as to pricing, which requires that we trust him (and his as-yet-unknown successor) to put aside his not-inconsiderable conflicts of interest and price assets fairly. I don't know about you but I didn't find his initial "Make me GOD OF MONEY pls kthxbye" plan and general approach so far to be terribly inspiring of trust.

This is being spun as "damn fool populists are pandering to the rubes," but there were plenty of other reasons to block this bill. There is no shortage of criticism from highly qualified experts linked to throughout this thread (in contrast with my entirely amateur commentary here). And we've been told the last — what? — three, four, five? — I've lost count — bailouts are totally necessary or things will get worse, and they've all gone through, and things have gotten worse, and we've been met each time with newer and bigger bailouts and gloomier and doomier counter-scenarios. The skepticism you're seeing is hardly unfounded.
posted by enn at 11:08 AM on October 1, 2008 [2 favorites]


Yeah, preview, I know.

sotonohito- You are not paranoid since they are out to get us. Perhaps just not realistic enough.
posted by pointilist at 11:10 AM on October 1, 2008


George Soros makes an interesting point I hadn't read before, which also explains why "just help people renegotiate their mortgages" isn't as simple to do as it sounds. The key is the securitization of mortgages; maybe THAT is the root cause and reforms should be directed there.

Soros suggested prohibiting mortgage companies from charging fees on foreclosures. Many companies are quick to foreclose because they no longer own the loan itself, which has likely been turned into a security. Instead, these companies make money by charging delinquent borrowers during the foreclosure process.

A personal anecdote I heard yesterday supports this -- a friend's husband wrote their mortgage check for $100 too little by accident, and got a call immediately questioning "Are you going to be able to keep the house?" She couldn't understand why they were so quick to jump to the worst-case scenario, but this makes a lot of sense from Soros' perspective.
posted by msalt at 11:12 AM on October 1, 2008 [2 favorites]


Soup and Tasers, that's where the smart money's going.
posted by neroli at 12:52 PM on October 1, 2008


cimbrog: I'm looking out my window at work at the other skyscrapers (such as they are here) and briefly imagined people jumping out the windows. It was not a pleasant feeling.

Sidhedevil: It didn't happen during the 1929 depression and it's not going to happen now.


You're right, no one jumped out of any of the skyscrapers outside my window.
They just tried to jump off the fucking bridge outside my window.
posted by cimbrog at 1:03 PM on October 1, 2008


Paulson can spend $250bn, sell the stuff for pennies on the dollar, and turn around and spend another $250bn, without even hitting up Congress to up the limit.

Yes, but every one of those transactions will be posted online and eventually evaluated as to their efficacy. It's also why I wanted greater barriers to increasing the available funds. Nonetheless, if the program turns out to be useless, it should be reevaluated and amended, just as it says in the act.

[Section 134 is] a total punt. [...] What are the chances there is going to be the political will in five years to impose a penalty on the industry against what will no doubt be its strong efforts to squirm out of it? Either the economy will have recovered and nobody will care anymore and this part will be quietly amended away, or the economy will still be fucked, in which case nobody's going to want to hit the financial sector with additional penalties.

Yes it is, but it at least gives us some measure of recourse just in case. The worst case scenario you describe is merely cynical speculation. I don't mind a wary attitude but not if it's merely obstructionist.

I don't find the oversight very convincing myself. Somebody will write reports and send them to Congress. Then, as per Sec. 116(b)(3), the TARP gets to either (a) fix the identified problems, or (b) not fix them.

So what you're saying is that you don't trust Congress to pass this bill in good faith? I wasn't wholly reassured by Section 116 either but at some point we're going to have to trust Congress with implementing whatever plan we arrive at, and I seriously doubt it will be some tightly bound perfect solution. As long as these kind of mechanisms are in place, we are, in theory, protected from a completely futile endeavor.

Most troubling of all is the complete discretion that Paulson has as to pricing, which requires that we trust him (and his as-yet-unknown successor) to put aside his not-inconsiderable conflicts of interest and price assets fairly.

Well, from what I remember there were measures in place to ensure mitigating conflict of interest. I'll have to look over the bill again to see.

I don't know about you but I didn't find his initial "Make me GOD OF MONEY pls kthxbye" plan and general approach so far to be terribly inspiring of trust.

I don't find any of this very inspiring of anything but contempt but I don't think my emotional reaction should have exclusive bearing on my opinion of public policy. Again, the best I'm hoping for is that this works out as an interim solution. I'm also fairly certain no one is selling this as a Fix the Economy Act. More is going to have to happen but this plan appears to be an adequate, though flawed, solution to the immediate crisis.

Now, there is certainly an argument to be had on whether or not failure to act will actually precipitate the kind of crisis most pundits and experts have been presenting in the media but I think the government is in the perfect position to implement an immediate plan and adapt as needed to make the plan work better as we understand the problem more. And when the problem has the possibility of such far-reaching ramifications, I think it's a better idea to bet on the conservative approach than the daring one. I mean, it would be nice to really see if this causes a complete economic meltdown but I don't think it's good public policy to make such a bet.
posted by effwerd at 1:25 PM on October 1, 2008


effwerd While I agree that we shouldn't let gut feelings interfere with policy making, I don't think its at all wrong to observe that a) the Bush administration has screwed up every single thing its done, and b) Paulson's initial plan should be used as grounds for keeping him away from any actual plan.

I think Congress would be well advised to craft a plan that places exactly zero discretion, decision making, or power, in the hands of the Executive branch. Especially Paulson. I'd make that part of the language of the bill "Whereas Treasury Secretary Paulson has demonstrated criminal incompetence coupled with a naked desire for unseemly power he shall not be involved in the dispersal of funds herein authorized" or something similar.

Because if anyone from Bush's Executive branch gets to decide how the money is spent, we can kiss it all goodbye. If anyone Bush appoints is involved I'm opposed to the bill, period.
posted by sotonohito at 1:41 PM on October 1, 2008


C'mon, emails don't really overwhelm web servers, do they?

No. But many web sites don't provide email addresses, but provide email forms instead. When those forms are posted, they may create email messages without exposing the email address to the user who filled out the form.
posted by me & my monkey at 1:45 PM on October 1, 2008


Yes, and keep in mind that under both the original and revised (failed) plans, there is no limit on the amount of money that can be spent. There is only a limit on the amount that can be held at one time; Paulson can spend $250bn, sell the stuff for pennies on the dollar, and turn around and spend another $250bn, without even hitting up Congress to up the limit. He can do this ad infinitum. He can easily spend $700bn, or $1tn, or $2tn, this way without even bothering with the graduated authorization. Calling it a "$700bn bailout" was always a misnomer.

That is really incorrect. If Paulson spends $250 billion and then sells it for "pennies on the dollar", he'd only be able to re-spend those same pennies. If I buy stuff on a credit card with a $2,000 limit, and then sell it on ebay for a profit, I can "spend" an infinite amount of money. If on the other hand, I end up taking a loss on everything I sell, I can still "spend" a lot of money but at the end of the day I've only actually lost $2,000.

So your argument is either misleading and pointless, or completely delusional.
posted by delmoi at 1:52 PM on October 1, 2008


So your argument is either misleading and pointless, or completely delusional.

Quite possibly all three. But I'd like to see the language that leads you to your conclusions. I conclude from Sec. 115(a)(1):
Effective upon the date of enactment of this Act, such authority shall be limited to $250,000,000,000 outstanding at any one time.
that this doesn't work like a typical appropriation, where he gets a budget to work with, but that it's a limit on the total price of assets currently held, not money spent. Sec. 115(b) would seem to support this reading:
The amount of troubled assets purchased by the Secretary outstanding at any one time shall be determined for purposes of the dollar amount limitations under subsection (a) by aggregating the purchase prices of all troubled assets held.
That section would be meaningless and unnecessary under your reading.
posted by enn at 3:05 PM on October 1, 2008


Either the economy will have recovered and nobody will care anymore* and this part will be quietly amended away, or the economy will still be fucked, in which case nobody's going to want to hit the financial sector with additional penalties.**

* We can afford to not enforce the penalties
** No one can afford to pay them anyway

This argument seems short-sighted: you're postulating that either we won't need to enforce the penalties or we won't be able to.

I'm more concerned with these two scenarios:

(1) We inject a ton of capital but don't sufficiently alter the market structure that's incentivizing overleverage, so the $1T that needs to go toward reducing bad debt instead turns into another $30T of unsecured investments. Some liquidity frees up in the short term but the system risk stays high and we face a bigger crash next time.

(2) Five years down the line, the "recovery" provisions are used or repurposed as a political weapon by a hostile President or Congress, much like the sunset provisions in the Bush tax cuts: it gets factored into budget calculations and somehow not repealing the time limits that were agreed to (and used to justify the original budget) becomes a "tax hike."
posted by spiderwire at 3:34 PM on October 1, 2008


mazola: "My neighbors are boney.

:(
"

Soup!
;)
posted by =^^= at 3:55 PM on October 1, 2008


Yes, Mutant. You've picked up on an extremely important point - maybe THE point. Keep following the 'real' yield curve - govvies are a good approximation under normal conditions, but we left normal for dead some time ago. Right now govvies are little more than a theoretical abstraction when referencing the real economy. Where credit IS available, it's at nothing like the rates your traditional curve would suggest. The front-end (short rates) are hugely distorted - light years from the real world.

What this tells you is that (1) short rates are actually (surprise!) well over long rates, and this is not a good thing for banks trying to recapitalise, corps trying to borrow or economies trying to dig themselves out of trouble, and (2) the transmission mechanism for the traditional central bank policy response (ie cutting rates to steepen the curve) is, very unfortunately, busted. Everything Paulson, Bernanke and Co are doing is aimed directly at correcting the anomaly you've just described. Fix that, and all else falls back into line.

There's a wonderful chart doing the rounds showing Baa corp spreads over govvies for the past 100 years (for the uninitiated, a benchmark for market pricing and perception of corporate credit risk). We've taken out three generational highs - beyond 70's stagflation, the 87 crash, the 98 Asian crisis / Russian default / LTCM unwind ad infinitum - and now stand at levels not seen since 1934. And that's with sovereign - sovereign! - CDS ticking higher. I'll see if I can dig up an online version. Only leaves us one target, one all-time high to aim for ... and I won't do the market equivalent of Godwinising the thread by mentioning the year.
posted by bookie at 5:54 PM on October 1, 2008


It's after 9:00 PM EST , October 1st, 2008 and the sky is still in place. Amazing.

Which economist said what? What talking head said which? Please link more contrasting opinions and beliefs because I am just about to be convinced.

Hello???
posted by TrolleyOffTheTracks at 6:13 PM on October 1, 2008


Passed the Senate, 75 to 24--official vote tally forthcoming.
posted by MrMoonPie at 6:34 PM on October 1, 2008


Nays: Allard, Barrasso, Brownback, Bunning, Cantwell, Cochran, Crapo, DeMint, Dole, Dorgan, Enzi, Feingold, Inhofe, Johnson, Landrieu, Nelson (FL), Roberts, Sanders, Sessions, Shelby, Stabenow, Tester, Vitter, Wicker, Wyden -- my source is comments in fark.com of all places.
posted by birdherder at 7:10 PM on October 1, 2008


Official tally.
posted by MrMoonPie at 7:18 PM on October 1, 2008


The NYTimes has a good hour-by-hour account of when things went south here.
posted by smackfu at 5:30 AM on October 2, 2008


The goal in this war is to win the hearts and minds of the American taxpayers.

"The President wants to do it, the Wall Street people want to do it, the Senate wants to pass the bill, it'll be good for the economy, comon people, let's do it! OR ELSE!!!"

There is too much talk about the "downturn in the housing market" and not enough talk about the unregulated mortgage-backed securities and credit derivatives,

there is not enough talk about banks selling mortgage-backed securities to each other, taking fees and profits off the table, and leaving other suckers holding the mess; phony numbers and rotten accounting, highly-leveraged-ness and obfuscated confusion...

Because of course, if they were discussing that, we American taxpayers would say, "My GOD --- the bankers did WHAT!?!??!" and we would absolutely refuse to pony up the dough, and might even ... ... ...

=== ===

If the Dow goes from 14,000 to 10,000 to 6,000, so be it. We all know that the stock market is gambling, and often in gambling, you lose.

Oh, and: anyone who puts more than $100,000 in a commercial-bank cash checking account deserves to lose it all! Who does that?
posted by shipbreaker at 11:27 AM on October 2, 2008


The goal in this war is to win the hearts and minds of the American taxpayers.

This rant reminds me of an old joke:

A Texas Aggie comes home one night to find his wife in bed with another man. Angry, he goes to the dresser, pulls out his gun, and points it to his head.

His wife sees this and starts laughing.

The Aggie says, "What are you laughing at? YOU'RE NEXT!"
posted by dw at 2:46 PM on October 2, 2008


If the Dow goes from 14,000 to 10,000 to 6,000, so be it. We all know that the stock market is gambling, and often in gambling, you lose.

Yes, and thanks to the 401k replacing the traditional pension plan for most workers, millions of people were essentially forced to gamble their own retirements.
posted by scody at 3:05 PM on October 2, 2008


Unlike old-school union members whose retirement savings were gambled away by CEOs and corporate raiders.
posted by GuyZero at 3:13 PM on October 2, 2008


False equivalency. A 401k (or 403b) is, by definition, dependent on the whims of the market -- it's a feature, not a bug. This is not the same thing as a pension plan being raided.
posted by scody at 3:22 PM on October 2, 2008


Unlike old-school union members whose retirement savings were gambled away by CEOs and corporate raiders.

Says who? I've met hundreds of them travelling around, driving expensive RVs, on their boats, etc.
posted by msalt at 3:23 PM on October 2, 2008


My point was just that pension plans are not guaranteed any more or less than 401k's are. This article on pension failures is from 2004, but it's still relevant. 401k plans are not guaranteed but that doesn't make them gambling.
posted by GuyZero at 3:30 PM on October 2, 2008




It just passed, and the DOW dropped a few hundred points in the hour or so before it was voted on, after running up all morning.
posted by delmoi at 10:59 AM on October 3, 2008


Roll-call vote.
posted by MrMoonPie at 11:23 AM on October 3, 2008


Edge of the Abyss
posted by homunculus at 11:56 AM on October 3, 2008




It just passed, and the DOW dropped a few hundred points in the hour or so before it was voted on, after running up all morning.
posted by delmoi at 1:59 PM on October 3


There's an old wall street adage: "Buy on the rumor, sell on the news."
posted by Pastabagel at 1:35 PM on October 3, 2008




For the record, my rep, Barbara Lee (D), Oakland voted no. She showed some real spine and courage of conviction in going against Paulsons's folly. You may remember Barbara Lee as the sole House vote against the Iraq war. I will be voting for her return to the House in November.

That was me on Monday. What a fool I was, once again.
posted by telstar at 12:47 AM on October 4, 2008


That was me on Monday. What a fool I was, once again.

Why do you say so? The fact that this planet-sized turd (so big that there are little porkbarrel turdlets orbiting around it) is being presented as an unpalatable slightly-better-than-armageddon choice doesn't make it any less execrable.

Even if it did end up in Mad Max action for a few years, letting the whole goddamn craptocracy collapse might have been a better choice than robbing the treasury and the taxpayers to soothe the booboos of the Wall Street gamblers.

As it stands, we'll never know, and it's Bend Over Time™ again. I continue to wonder how much you Americans are willing to take of the ol' metaphorical governmental uninvited anal intrusion. It's quite astonishing!
posted by stavrosthewonderchicken at 4:55 AM on October 4, 2008 [1 favorite]


Uh, stav, the point was that she voted Yea this time.
posted by languagehat at 6:20 AM on October 4, 2008


Has anyone seen a good summary of the final bill? The best I could find was this wikipedia article. Maybe I'll just suck it up and try to read the damn thing.

House vote results.
posted by exogenous at 6:51 AM on October 4, 2008


Uh, stav, the point was that she voted Yea this time.

*makes woobly wavelly hand motions around his head to indicate he's not sure what's going on, but softly, so as to be apologetic for being a big stupidhead, kinda like a Sarahwink*

I really McCained myself right in the Palin with that one, then!
posted by stavrosthewonderchicken at 7:54 AM on October 4, 2008 [1 favorite]


I don't know if this is the right thread or not, but MeFite bailout wonks, please comment on This American Life's reportage that Sweden-style equity language is, in fact, in the bill, as a discretionary option for the Secretary to excercise.
posted by mwhybark at 10:44 AM on October 4, 2008


Now Wall Street may shun $700bn bail-out

"But Wall Street analysts believe the addition of so many terms to the bill might deter potential participants. One of the least attractive elements is a section designed to curb executive pay at banks that participate in the bail-out package. These include limiting stock-related pay and banning 'golden parachutes' for executives."
posted by homunculus at 3:16 PM on October 5, 2008


Yes, and thanks to the 401k replacing the traditional pension plan for most workers, millions of people were essentially forced to gamble their own retirements...A 401k (or 403b) is, by definition, dependent on the whims of the market -- it's a feature, not a bug.

Do you know of a 401(k) plan that doesn't offer among its choices a fixed-interest or government bond fund? If so, that plan is probably in violation of Sec 404(c). If not, you probably don't know what you're talking about.
posted by Kwantsar at 4:48 PM on October 5, 2008


60 Minutes: A Look At Wall Street's Shadow Market
posted by homunculus at 6:22 PM on October 5, 2008


Niall Ferguson: The End of Prosperity?
posted by homunculus at 6:34 PM on October 5, 2008


Do you know of a 401(k) plan that doesn't offer among its choices a fixed-interest or government bond fund? If so, that plan is probably in violation of Sec 404(c). If not, you probably don't know what you're talking about.

Don't be an ass. Of course every plan offers a fixed-interest fund -- and every fixed-interest fund that's ever been in any plan I've ever been in has offered a return at or below inflation (hell, the fixed-rate fund in my own retirement plan is currently returning less than a 9-month CD at my bank). Which is why, in my experience, enrollees in retirement plans are so strongly urged not to put all (or even most) of their eggs in that particular basket until they're close to retirement -- because by themselves, such funds won't earn enough to keep up with the cost of living. Hence the millions of people with 401k's or 403b's who have concluded that putting varying portions of what they've got in their plans into stocks is the only long-term option they've got.
posted by scody at 7:21 PM on October 5, 2008


Of course every plan offers a fixed-interest fund

So, then, millions of people were not essentially forced to gamble their own retirements, right?

enrollees in retirement plans are so strongly urged not to put all (or even most) of their eggs in that particular basket until they're close to retirement

As long as the cost of equity is greater than the cost of debt, this is probably the right approach to take.

because by themselves, such funds won't earn enough to keep up with the cost of living.

Well, they certainly have. Do you think that corporate bonds have negative real rates of return?

Hence the millions of people with 401k's or 403b's who have concluded that putting varying portions of what they've got in their plans into stocks is the only long-term option they've got.

A link to Daily Kos, where the writer thinks "defined contribution" and "deferred compensation" are the same thing. I'll pass, thanks.
posted by Kwantsar at 8:01 PM on October 5, 2008


If you know something about how a 3.0% rate of return over several decades is enough for all of us to meet our retirement goals, I'm sure I'm not the only one who's all ears, Greenspan.
posted by scody at 8:25 PM on October 5, 2008






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