by Damozel | Via Balloon Juice, here's a piece at TIME by a professor of economics from the University of Illinois at Chicago and a master of financial mathematics from Stanford University who say no.
[T]he bailout is for mortgage-backed securities. In fact, some versions of these instruments are imaginary derivatives. These claims overlap on the same types of mortgages.... These are ridiculously risky claims with little value for society.....[H]edge funds are the main holders. The bailout will involve a transfer of wealth — from the American people to financial institutions engaging in reckless speculation — that will be the greatest in history....The government should not intervene. It should leave overleveraged financial institutions to default on their derivatives obligations and, if necessary, file for bankruptcy. (More at TIME...)
I guess whether you agree depends on whether you are willing to suffer the consequences.
At The Atlantic, Marc Ambinder says, "Apparently, utility companies had a tough go.... the credit markets are still essentially locked... too much is happening overseas to even begin to contemplate...and more bank failings are right around the corner."
Why should you care?
At Crooks and Liars, Nicole Belle answers:
As much as I didn’t like the bailout bill that lost on Monday, I do recognize that we must do something. For those screaming, “NO! Let them fail!” that’s all well and good for you, but the ramifications are far-reaching. How many of you own small business that rely on lines of credit to pay employees? Or are you employed by a small business owner who uses LOCs? How many of you have children who need a student loan to go to college? How many want to buy your first home or sell the one you have before it’s foreclosed upon?
All of these very common scenarios require loans and lending is at a standstill right now. Not to mention that lack of confidence in our fiscal situation is causing financial worries all over the world. It’s a poison pill, but I believe we HAVE to do it, or suffer the same scenarios that our parents and grandparents did during the Great Depression.
I said yesterday that I hope that the Democrats use this opportunity to do a progressive version of the Shock Doctrine (i.e., pushing for legislation that rather than works against individuals’ interests works for them)....The Republicans are going to fight any legislation, so let’s make the next bill as protective of taxpayers as possible. Forget trying to be bipartisan; Boehner, Blunt and Co. don’t understand the meaning of the word. Do the bill that should come from the Democratic Party and let the Republicans explain to the American people why they don’t care.
Can Dems build a better bailout, as she suggests?
At this very moment, House Democrats who voted against the bill are preparing to offer an alternative.
U.S. Rep. Peter DeFazio (OR-04), an outspoken critic of the Bush/Paulson bailout, along with Rep. Kaptur (OH-09), Rep. Scott (VA-03), Rep. Cummings (MD-07), Rep. Doggett (TX-25), Rep. Holt (NJ-12), Rep. Edwards (MD-04) and Rep. Hirono (HI-02), will introduce legislation today to address the failures in the financial markets.....DeFazio's plan is not in any way based on the Paulson/Bush plan. Instead of throwing taxpayer dollars at the program and crossing our fingers that the plan work, the measure will direct the Administration to take five simple steps, suggested by noted economist and former head of the FDIC, William Isaac, to re-regulate the markets and move America towards a healthy financial future. (Open Left)
My friends, though I'm as ignorant about economics as John McCain, Isacc's plan makes sense to me at a visceral level. Paulson's never did.
But then, I'm a free market agnostic. Maybe those principles used to work. But another definition of insanity is doing the same thing you always did when the circumstances have RADICALLY ALTERED and expecting the same outcome. .
Boztopia has assembled some progressive ideas for rebuilding the economy, One's an idea that emanated from---will this surprise you?---Richard M. Nixon.
Meanwhile, what can we conclude about the GOP and what it has to offer? At The Atlantic, Marc Ambinder reflects on the significance of yesterday's vote.
The Republican Party is in a near state of complete collapse. There is massive and public infighting. A total lack of confidence in the leadership. No real core idea. A weak national party. A President and White House apparatus with almost no influence whatsoever. A party that might have inadvertently sabotaged a bill it needed to -- and wanted to -- pass.
Yesterday's vote was cathartic in the sense that it clarified for people that John McCain, who still has a solid chance of winning this election, is really not the standard bearer of the Republican Party in function, even if he is associated with the party in brand...The House Republicans are desperate for the second coming of a Gingrich-like figure to lead their guerrilla army against whatever the future holds..
According to me, but not according to the Republican party, he won the primaries---he must have, mustn't he?---because he promised to be a different kind of Republican. Then he tried to say, "Um, no, I am the same." Then when the economic crisis made the Republicans look bad, he started trying again to convince America that he was a Republican maverick. Over to Newt!
John Amato says:
. I guess Newt Gingrich really is running things over there.
NBC’s Andrea Mitchell reported this morning that conservatives may have been taking their marching orders from former House Speaker Newt Gingrich, who “was whipping against this up until the last minute” — despite issuing a statement supporting the bill as the vote was taking place…read on
That’s very scary for a number of reasons…
In the meantime, McCain and Obama both seem to have come up with the same idea: increasing the FDIC deposit guarantee to $250,000. (Ambinder) At the moment, the two parties are squabbling over whose idea it was. (Ambinder)
I don't think Republicans want to be the ones who come up with the Big Idea. More from Crooks and Liars:
Of all places FOX & Friends announced to Sen. McCain that Sen, Obama had led the way on asking to increase the FDIC program up to 250K and what was HE going to do….And it gets better….
Q: Barack Obama already has a proposal to revive negotiations. He wants to increase the amount of money guaranteed by the FDIC of 100 to 250K . What would Sen, John McCain do? Well let’s ask him. Sen. McCain, your serve. Barack Obama has made a bold move.
(Silence and blinking from McCain) McCain: Uh, I, I uhhh talked with the President this morning….
He looked like he was not prepared for that. And then he was forced to admit that he did not save the day when he suspended his campaign last Thursday and went to DC to whip the Republicans to vote for the bail out. He was supposed to be the savior.
I really, really don't think that Republicans want to be responsible for solving this particular crisis, given the high potential for failure. But that's just my opinion. I can't think like a politician.
At any rate, Ambinder reflects that there is now optimism on the Hill, and why?
Negotiators get the sense that a substantial number of House Democrats and House Republicans are satisfied that they're on the record as having opposed the bailout.
Now that they've expressed themselves, gotten their joints cracked, they seem to be open to voting in favor of a tweaked package.
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Posted by: michael wong | October 01, 2008 at 12:08 PM