- Ezra says it's possible that the next bailout could be a 'Left' bailout, if the Dems're prepared to shitcan "bipartisanship" and go it alone.
- Krugman congratulates himself (fair enough), reminds us how our govt is "bananas."
- The American Scene, much to its credit, shows itself and by extension its "Grand, New" vision for conservatism, to be analogous neither with the "Wall Street" nor "populist" branches of the Grand Old Party.
I have heard strong arguments - mostly from Left and Center-Left - on both sides of the failed bill. I am not sure just how possible Ezra Klein's proposed all-Dem bill will turn out to be, but, with Krugman, I think the need to do something - something soon - helps put in context the toothlessness of the Frank-Dodd plan. Democrats need a new frame for the bill just as much as they need new language. Obama's unwillingness to address the issue in a full-frontal fashion on Friday night is plenty understandable, but it resulted in a "missed opportunity" for a "teachable moment" with the country on this issue. That may or may not be justified, and I'd love to know what you readers think on that issue. The argument exists that we should save Stimulus Package 2 and tougher re-regulation of the markets for January, when we'll have stronger majorities in both houses, and, one would assume, President Obama.
More immediately, Obama's inability to steer the domestic policy conversation resulted in forty minutes of conversation about earmarks Friday night. Let's be honest, Hillary or Edwards would've sliced McCain's face off (figuratively) if they had a half-hour to debate the economy with the Maverick. For whatever reason, BHO has proven weirdly incapable on this score. It doesn't make me doubt his progressive bona fides, his sympathy with (the absurdly over-evoked) "Main Street," and it doesn't keep me from supporting his candidacy enthusiastically - but it exasperates me to no bleeping end.
11 comments:
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I badly wanted to watch Obama tie the noose of Phil Gramm around Mc's neck and watch the whole show go down. It was wildly frustrating. I think he listened to the pundit-sphere a little too much, and refrained from his eliteist proffesorial style. Which pisses me off because I like it when smart people are in charge. At least, I think I do.
I'm effing tired of the whole situation. I feel like the financial markets have a gun to our head; its almost that visceral. Either bail them out or they'll "respond" by selling, and the Dow drops another quadrillion points, economy in the shit can, and thats that.
Jason
In revisionist fantasyland, the House Dems embrace the Swedish model and a more reality-driven dollar amount and pass it along party lines. When it inevitably stalls in the Senate, play it up as an electoral issue - "conservatives are impeding a necessary and reasonable piece of legislation to fix the economy. You either peel away the extra votes you need or you promise to get those extra seats from the ballots of angry voters. If those 60 Senate votes materialize, what does Bush do at that point? Seriously - what does he do?
I, of course, know that nothing like this will remotely happen.
And what an ugly coalition that stopped the bailout from happening - I do not want to be on the side of free-market fundamentalists again. If the goal is to get bipartisan support - in effect, getting some of those free-market folks to vote for a bailout - it makes things far, far worse. It's far easier to pick up those 95 dem votes, and they can do it by doing the right thing.
Now I'm babbling on about things I only know the most basic sort of facts. But I'm all for injecting liquidity into the commercial paper market.
Dennis Kucinich says:
“The $700 billion bailout for Wall Street, is driven by fear not fact. This is too much money in too a short a time going to too few people while too many questions remain unanswered. Why aren't we having hearings on the plan we have just received? Why aren't we questioning the underlying premise of the need for a bailout with taxpayers' money? Why have we not considered any alternatives other than to give $700 billion to Wall Street? Why aren't we asking Wall Street to clean up its own mess? Why aren't we passing new laws to stop the speculation, which triggered this? Why aren't we putting up new regulatory structures to protect investors? How do we even value the $700 billion in toxic assets?
“Why aren't we helping homeowners directly with their debt burden? Why aren't we helping American families faced with bankruptcy? Why aren't we reducing debt for Main Street instead of Wall Street? Isn't it time for fundamental change in our debt based monetary system, so we can free ourselves from the manipulation of the Federal Reserve and the banks? Is this the United States Congress or the board of directors of Goldman Sachs? Wall Street is a place of bears and bulls. It is not smart to force taxpayers to dance with bears or to follow closely behind the bulls."
(h/t to the Progressive: http://www.progressive.org/mag/comment2908.html)
It's about time I saw Jason on here. Ever since Portland in July of '08 I've wanted to press his "pundit-sphere".
Dean Baker says:
The main cause of the economy's weakness is not insolvent banks and lack of credit; it's the loss of $4 trillion to $5 trillion in housing equity as a result of the bubble's partial deflation. Families used their equity to support their consumption in the years from 2002 to 2007, as the savings rate fell to almost zero.
With much of this equity now eliminated by the collapse of the bubble, many families can no longer sustain their levels of consumption. The main reason that banks won't lend to these families is that they no longer have home equity to serve as collateral. It wouldn't matter how much money the banks had, they are not going to make mortgage loans to people who have no equity.
And house prices are not going to come back. This is like Pets.com. We are not going to get the price of $200,000 homes in central California back up to $500,000.
The main problem in recovering from the recession will be finding ways to boost demand other than household consumption. In the longer run, this will mean reducing imports and increasing exports. In the short-run, we will have to rely on government stimulus to help spur growth and reduce unemployment. The Democratic demands for stimulus were not extraneous to the legitimate goal of a bank bailout bill. Fiscal stimulus must be central to any serious effort to boost the economy.
The weakness of the banks contributes to the downturn, but they are not the core of the problem. We would still be facing a recession even if all our banks were flush with cash. Hence the hype about the urgency of the bailout was an invention. It would be good to get our banks in order, but it also would be good to send $100 billion to state and local governments to support infrastructure projects and other spending.
How do we go about getting the banks in order? Almost every economist I know rejects the Paulson approach and argues instead for directly injecting capital into the banks. The taxpayers give them the money and then we own some, or all, of the bank. (That's what Warren Buffet did with Goldman Sachs.)
(h/t, Huffington http://www.huffingtonpost.com/dean-baker/the-bailout-round-ii-adul_b_130418.html)
I just read some of the comments to the American Scene link you posted - they're definitely not on board with that new vision.
Wobs,
Yes, you're right that the American Scene guys are getting piled on. I dunno if I feel sympathetic with them at all..but I think there's a chance that either a) we'll be dealing with the likes of 'em more in the future b) or they'll be subjects of a hilarious "remember those freaking guys" thread on the blogs of tomorrow.
At least two of those lads are ex-assistants to yr man David "Bobo" Brooks, which of course does nothing to inure 'em to me.
This is what makes the Edwards downfall hurt the worst.
I'm guessing that I am out of my depth here, or at least not using the right words, but doesn't labor traditionally call for more demand-side economics at this point? Hasn't supply-side completely failed? It was a risky experiment that did not work.
Seems to me that this whole crisis is a failure of supply-side. Wall Street still need people to by things, but having taken away or downgraded their jobs, the only way Wall Street had to get money to people so they could keep buying things was to loan it to them. This is pretty fucking sweet deal for Wall Street, but we all knew it was going to collapse one day. It had to.
Maybe people are calling for a return to putting money in the hands of people through jobs (Jobs! Jobs! Jobs!, as my good friend Tom Chamberlain would say), through government works (don't we have an infrastructure crisis in the US?), and through trade barriers that protect American industries and jobs. Maybe people are saying this, but I'm not reading it.
(If this i what Lex has been linking to, I apologize. Tough week at work has limited me to the paper and the same ol' blogs).
Even our buddy Peter DeFazio, who voted "no" is only advocating for an finance tax to stop high volume, speculative trading. As if the problem was a few rogue speculators driving up the cost of housing until it burst. How 'bout calling for a repeal of NAFTA and the reindustrialization of America?
(As always, I reserve the right to repudiate or completely contradict these comments later).
I did some really easy math a little while ago and calculated that $700 billion would pay everyone's mortgage payment through the end of the Bush administration. So, no, I don't like the plan.
That said, I think it's irresponsible not to support it. The other issues (including the loss of equity) will have to be addressed, but Dean Baker not withstanding, there clearly is a deeper liquidity problem.
Let's accept Baker's analysis of the reasons that home owners can't get loans. Now, replace 'equity in their home' with 'a balance sheet full of worthless mortgage securities.' I take it you see my point.
The housing bubble is a problem, and its bursting was enough to put significant pressure on consumer spending. That's what had been dragging the economy down and slowing or stopping growth over the last year or two.
This is a different problem, and it arises out of the fact that there was a second bubble -- a bubble in leveraged debt instruments -- which has now burst as well.
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