I have precisely no interest in bailing out investment bankers and hedge fund managers, per se. It's not that I have anything against them; I just don't think that spending a ton of money to rescue very wealthy people from the consequences of stupid choices that have put us all at risk is a worthwhile goal for government. By the same token, though, I am not interested in punishing them per se either. I am interested in making sure that ordinary people have as much protection as possible from the economic troubles that lie ahead.

This sort of talk suggests that there is something illegitimate in hostile or punitive action aimed at bankers, etc.

There may be pragmatic reasons why it is not expedient at present to proceed against them - but there is no reason to apologize if such motives are one's agenda.

Good post. I think everyone needs to read and answer point 5.

Who predicted this disaster two years ago? New York University economics professor Nouriel Roubini.

Has Roubini, who actually described what was going to happen back in 2006, been asked to comment on the 700 billion bailout by the Congress, the Treasury or any of the presidential campaigns? No.

And what does Roubini have to say about the bailout? It's fucking rubbish:

"The Treasury plan (even in its current version agreed with Congress) is very poorly conceived and does not contain many of the key elements of a sound and efficient and fair rescue plan. Like in my 10 step HOME plan many other economists and commentators (Charles Calomiris, Raghu Rajan, Kotlikoff and Mehrling, Luigi Zingales, Martin Wolf, Barry Ritholtz, Chris Whalen and twenty others whose views have been featured this week in the RGE Monitor group blogs) have presented ideas that would have minimized the cost to the US taxpayer of a resolution of this financial crisis. It is a disgrace that no professional economist was consulted by Congress or invited to present his/her views at the Congressional hearings on the Treasury rescue plan. Specifically, the Treasury plan does not formally provide senior preferred shares for the government in exchange for the government purchase of the toxic/illiquid assets of the financial institutions; so this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the firms; with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession. The Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown."

It's sickening that Pelosi and Barney Frank, and even Obama, are getting sucked into this mess. What's wrong with Democrats? Both politically, as well in terms of policy the proposed solution seems really fucked up.
____________________________________________

http://market-ticker.denninger.net/archives/2008/09/24.html

I think whatever restrictions Congress puts on the plan will be roundly ignored by the administration. Bush will use one of his signing statements to claim they are infringing on his constitutional power as President or some other rubbish. He will spend out the money however he sees fit before the courts have a chance to overrule him.

Listen, kids; the recession boat has sailed. We are gong to have high unemployment and a serious downturn whether we donate $700 billion to the "Buy a New Yacht For All Hank's Friends" Plan or not. If you are concerned about the real economy, what you should do is use the Federal Reserve to subsidize credit to existing financial institutions that are not involved in the secondary markets based on non-performing real estate loans or, if you are in a real First New Deal mood, charter and capitalize new banks that will provide cheap credit for real investment and well collateralized consumer loans. Any money that you shovel into the existing system of cross-owning Bank Holding Companies that sprouted like noxious weeds after 1998 will amount to throwing money down a hole without knowing how deep that hole is.

Let me reiterate this: if you care about the real economy, enact a plan that will target credit and lending to the real economy. Let the Wall Street firms drown in their own fictional accounting and pixis-dust risk models. Once they have collapsed, go in and loot the corpses of well-performing assets, enact comprehensive re-regulation, then sell those assets and the "bridge" banks that you set up to lend to main street through the crisis back to the private sector. That will address the short term problem of credit contraction and clear the ground for rebuilding a conservative, sustainable, well-regulated, privately owned credit intermediation system like we used to have.

Dealing with this problem becomes *very* easy as soon as we think about it in terms not set by those who created it and want to be protected from the consequences of their own greed and stupidity. A massive bailout of the existing firms under existing management would be like throwing the entire treasury into propping up stock prices in early 1930 and putting people with names like "Dawes" and Insull" in charge of it. It might have achieved an inflationary recovery from the initial downward lurch of the Great Depression, but it would have a.) charged taxpayers for two generations to subsidize the speculative greed of a narrow coterie of operators in the late 1920's and b.) left intact the regulatory environment that allowed them to create the bubble in the first place - which they would surely have done in short order.

Grow up, become educated in the issues at stake here, and don't simply accept the definition of the problem being peddled by the people who created it.

the draft bill in pdf

I hope that this results in the re-regulation of banking and finance to make certain that nothing similar ever happens again. The lessons of the Great Depression were forgotten over time and the regulations that came out of it were repealed or weakened. This despite the S&L crisis.
Wall street, once they've pocketed our money, will use part of it to lobby an all-too-compliant Congress to not tie their hands with excessive regulations. It remains to be seen whether or not Congress listens to them. I'm not optimistic.

There have been a number of studies that suggest that the enormous salaries payed in the finance industry have a serious distorting effect on the economy more broadly, not merely morally, but materially. A case in point is this morning's NY Times article on salaries in AIG's finance unit in London,which sucked up most of the group's profit, leaving nothing for reinvestment (or anything _really_ strange like dividends for the shareholders of this public company) -- and according to the article, it's these massively overpaid idiots that brought AIG crashing down on all our heads as they maximized salaries and bonuses at the expense of anything remotely resembling prudence.

A series of unrelated comments.
1. mmc has noted the real problem. The passage of any bill is amended by a set of signing statements such that it becomes license to do whatever the Bush administration sees fit to do.

2. The most charitable interpretation of Paulson's actions over the last year have been that he was hoping to cover the whole thing over and prevent this administration from taking any action. Paulson has known that this crew would screw it up. Any other interpretation suggests that he is a typical GOP thug.

3. Given that the credit markets are "stuck" over the uncertainty in the value of various assets it seems that a number of large financial institutions must fail. Confidence can return to the markets only when they have been cleansed of the parties responsible for this mess.

Even if you pump in all the money and bail out the banks, its putting money on a bandaid. The problem is we don't have enough good paying jobs. They've all relocated to China or some other third world country and even working two of those dwindling service jobs Joe Sixpack can't make it. Thats why bailing out the investor class is wrong. They are the ones who championed these policies and they showed 0 pity for the littleman when his factory closed down or home was foreclosed. They were told go get job retraining. So its wrong to make the littleman bail out the investor class to keep him in his penthouse. And when he's bailed out by the taxpayers, he'll continue funding all of those rightwing government haters who rail agains regulation and unions. Life just aint fair.

I have nothing against bail-outs per se, and I'm not very knowledgeable about economics. Nonetheless, I am not convinced about this bail-out in this form. Bush and his republicans team have NEVER run anything competently, they've never been straight up about anything, and they've always run every crisis for maximum political and ideological benefit for themselves. In what way is this not a final gigantic feeding at the trough for their base, combined with a final push to bankrupt the government in order to preclude any new social spending for a decade? The latter was their stated goal a decade or so ago, and the former is clearly their long-standing preferred practice. How are you sure that they've changed now?

The size of this thing is barely comprehensible, and we are rushing it through with even less thought than went into invading Iraq and passing the Patriot bill. As an example of the size of this thing, you gave scary statistics about 10% of the workforce losing their jobs, but if we wanted to spend $700 billion and simply wanted to minimize hurt, if we assumed that 20 million people were to lose their jobs, we could give each of those people $35,000. Why must the solution involve pouring manna from heaven onto the very people who caused the problem in the first place? Can't a fix work by trickling up to Wall Street from people making personal economic decisions about what matters to them? After all, a major part of how America got to be an economic power house in the first place was how phenomenally it built up its middle class.

Who predicted this disaster two years ago? -aris (4:07)

Do you have a link? Or can you tell me when Roubini wrote this? Thanks.

In all actual honesty I don't think there's really any time left to us to forestall a "severe downturn." With that, let's stop beating around the bushes and call this monster by it's name: Depression.

We will put $700 billion USD into the markets on the "wing-and-a-prayer" assumption that the banking community will start lending again. They'll give us $700 billion USD worth of debt, take the cash, and use it to either pay off another $700 billion USD in their own debt, or they'll buy another $700 billion USD worth of someone else's debt on the insane belief that what didn't work the first time will obviously work the next. Or worse yet, investors will smell this influx of capital, and gather 'round the scent of fresh meat like packs of starving hyenas.

Hey---if my bank was in dire straits and Uncle Sammie wanted to give them the ability for me to get my cash, mightn't it not be in my family's best interests to cash in all the chips now? No one pays attention the FDIC being sorely underfunded; no one on the 'Hill or the 'Street takes into consideration that a good many people have shifted into "bunker-mentality" mode and are laying in extra food items for the coming winter. Here's the dead giveaway that it's happening: Walk into a grocery and note that the 25-pound bags of flour and sugar are sold out---and that the stores charge more per-pound on a 25-pound bag than they do on the smaller 5-pound bags, which usually cost the most per-pound. Look at how often the butchers have to refill the cooler sections reserved for family-packs of beef, pork, and chicken.

Note that the shelves where they keep the big cans of soup, and the boxes of powdered milk, and the caned goods, and the frozen veggies---are all getting a bit thinner in what's actually on the shelves.

Department stores---the supplies on socks, sweats, and thermal underwear is getting thinner, earlier. People are getting ready to go with a lot less heat in their homes this winter. Snowshovels are selling out---in September, for crying out loud---while snow-blowers are moving like SUVs. Candles are sold out; battery stocks are unusually low.

Hardware---you can't find insulation-strip anywhere; plastic sheeting for paint-cloths are drying up (no one paints in the winter, but you can cover a drafty window with it. Tell me---how many Coleman lanterns do you find in an area that should have 20 or 30 of them in stock this time of year?

The point may seem jumbled, but it's really very simple---people are stocking up and getting ready. As they lose trust in the Bushylvanians, they also lose trust in all of the institutions that have profited from the Bushylvanian methodologies of profit-before-people.

$700 billion USD will not stop a run on deposits, and placing extreme emphasis on the severity of the financial crisis merely makes it look all the more worse, on a minute-by-minute scale.

In truth, I personally do not believe that there is any amount of money, whether $700 billion or $700 billion-trillion-buhzillion, that will stop this train-wreck from happening. It is the logical conclusion of the Bush administration's suicidal economic policies---and you cannot clean up a train-wreck of this magnitude before it happens....

I care much, much less about what happens to him than about what happens to small business owners, construction workers, families whose home values are dropping just when their paychecks are cut, kids whose parents lose their jobs, and seniors whose retirement plans go up in smoke.

That's all well and good to be sure...however, this presumes that these comparative outcomes aren't connected. They are.

No, I'm not saying that one causes the other necessarily, but I am saying that it is NOT a coincidence that we see both simultaneously. There is a deeply-imbedded culture now in Washington and Wall Street of very rich, powerful people who do whatever the hell they want without fear of accountability or retribution. That absolutely has to change.

It makes perfect sense to me to ensure enforcement of serious accountability measures in any bailout package. To do otherwise is to pretend that how we get ourselves into these messes doesn't even matter.

Yes, it's perfectly good to set up a bucket brigade to put out the fire in the barn, but can we at least make sure no one leaves the lit lantern lying around in it next time, in the first place?

Bush really left a nice pile for the next guy. catch bin laden, pull out of iraq (doesn't the funding stop on january 20th?) and now take ownership of a 250 billion and promised more bailout.

then his last great move is trying to pull the Stalinist of all tactics by boxing in your opponent in some sort of public confession.

the only hope is that Obama utterly destroys McCain. With McCain there truly is no hope of adult supervision either. It would truly be awful and most people are now realizing this.

Tell me---how many Coleman lanterns do you find in an area that should have 20 or 30 of them in stock this time of year?

Happens every year -- camping season, followed by hurricane season.

Paul Krugman: ""Sufficiently not awful".

House republicans have included an insurance requirement on those with home mortgages which looks to enrich their ins. buddies and may or may not be something that needs to be forced on mortgage holders. One person said their current payment increased $100 for new ins. which was totally unexpected and raised their monthly payments to barely within reach. If homeowners are already having trouble making payments then anything increasing their monthly payment is not productive...agreed?

There is no mention of confiscating holdings or the huge profiteering of wall street personnel over the past years that lead to this crisis. People walking away with $45 and $50 million while their companies are being bailed out should be forced to return such profits and their holdings seized as part of this "bail out deal". Desperate emergencies brought about while some greatly profit is unfair to those asked to cover for them. Losing a luxury plane is not going to cover it. Giving up several of their mansions will help. Wall street has plucked us for years while those involved reaped millions in bonuses and profits. They retire while the rest of us suffer an economic depression??? Something wrong here.

Re: Punishment - Do you think things got this bad because people were following the rules?

Bwahahaha!

A lot of the big names that recently went down in flames have been hit with stiff fines. One of the big mortgage lenders (WaMu?) had a great little scam going where they had pet property appraisers who purposely over-stated the value of homes so buyers had to take out bigger loans. Appraisers who didn't play got fired. If you don't think Ken Lay should have been let off with a pat on the head, you don't really mean you're not interested in punishment.

Alternate suggested reading: Check out NY's State's Attorney General's website. It will give you an idea of how many laws have been broken.

Also, re the Depression: Guess what? We've already got developments that have become ghost towns and tent cities popping up in this country. These are not signs of a healthy economy. I'm not sure why we need to consider the last one though. This one won't look anything like it.

Happens every year -- camping season, followed by hurricane season.

DXM, there are no hurricanes where I live, but the stuff is still selling out, just the same. And as for camping, I haven't seem many people doing that this year, what with the gas prices. I HAVE seen several stores packing up their camping gear for the year, though, and it's pretty telling when no one buys a $300 Alpine tent that's been marked down 80% since Labor Day....

Really good post, Hilzoy. Thanks.

"lot of information is out in the open, and lots of people, many of them not otherwise sympathetic to the administration, are very scared. "

What nonsense, there is very serious doubt that this crisis affects other parts of the economy, and I can cite chapter and verse of a number of economists who point to history and data comparing this economy to other crisis. Over 200 economists, many of them award winning have expressed serious doubt about this bill. For instance, University of Chicago show that our capital equipment is as productive as ever in our history.

Progressives, prone to guarantee just about everything with government insurance, jumped in fright, right on cue, producing the Social Security trust fund for use by Wall Street, just as they have been engineered to do.

Hilzoy, who is hysterical and has no clue simply jumps on th necessity because Pelosi is scared, but I have news, Pelosi is just as clueless.

I have another group of economists I monitor who are alarmed at the bailout and show that this will simply cause further instability as market power gets ever more concentrated and transactions stop.

Bottom line here, and I have been pointing this out for many months. Big wigs, like Bill Gross at Pimco, Buffet, Soros, Paulson and many others have played this up for months, creating a psychological need for government insurance when they could have made their own adjustments years ago.

In other words, these (mostly guys!) said, lets play Hilzoy and Pelosi for fools, they haven't a clue.

"Bail out Plan"
TARP
"The Fund"

I don't like these names.

If we call it Wealthcare, we are being true to the crisis.

Because, if we don't pass it, we won't have any wealth to care for.

So...can we agree on, at least unofficially, to call this beast Wealthcare?

I am not insinuating that it's only the wealthy that we are caring for, but the wealth of our economy.

If we don't pass Wealthcare, god will strike us all dead.

*May* see more than 10% of the workforce unemployed? The U6 is already over 11%. Expect to see 20%.

you have a link? Or can you tell me when Roubini wrote this? Thanks.

Read this http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?_r=2&pagewanted=print&oref=slogin&oref=slogin" rel="nofollow in the New York Times.
____________________________________________

I suggest everyone move to washingotn, a huge chunk of the money or the freed up fungible funds will be coming back to Washington to employ lobbyists and PR hacks to warm us up for the next bailout!

We can now all get jobs lobbying for more corporate welfare.

We can now all get jobs lobbying for more corporate welfare.

Somehow, the notion of walking around DC with an elephant pin on my lapel and a great big target painted on the back of my skull just doesn't have any appeal. Once this is all sorted out, I think historians are going to finger K Street as holding the lion's share of the blame for this nightmare.

ABC news is stating that Congress has agreed on a bailout bill, to be voted on Monday. According to ABC, the .pdf version found HERE is the bill that will be voted on.

What the world sees floating to the surface has been taking place semi-out-of-site for 8 years and planned for over 30 years.
Bushcon is doing everything they can to slow the release of the really bad news.
Bushcon has looted everything.
What will bushcon do when the people choose not to pay for more bushcon looting?
1000's of people are in jail for much less blatent fraud.

Matt,
I have another group of economists I monitor.

And they have names, presumably.

aris - Thanks.

I'm against the bailout, but I think it is a done deal. Politically, there is no way any member of Congress is really going to have "allowed" (I put that in quotes for a reason) a total economic collapse. It's not going to work, but the cost, politically, of inaction is way too high for these guys. It's over - we're f*cked again.

Here is why we need a bailout....it's amazing

http://www.youtube.com/watch?v=H5tZc8oH--o

Here's a link to the actual article containing the Roubini quote cited by aris. It should be noted that this is two days old (8/26), so I don't know whether any of his concerns are addressed in the new version.

V-e-e-rry Interesting... and hopefully for us, not stupid. Note in point #5, Matt's apparently reasonable point about executive pay controls. So then, why did so many opponents of such controls say, institutions that needed just wouldn't accept the deal etc?

Thanks for a thoughful post, Hilzoy. I see entirely too much cavalier talk about this crisis. Although "The Answer Was Orange" has a good point that a depression now won't look so much like the Great Depression, I think that people don't remember anymore how bad it can get.

My dad turned eighty-five today and we talked a bit about his experience of living in Los Angelses during the Great Depression. He remembers standing in a relief line with his mom and three siblings to get a few groceries and a pair of shoes for each of the kids. The line was four deep and stretched for ten blocks.

Pass the bill. Lets not do this again.

It's telling to see the major players reactions to this mess:

Bush - It's somebody else's fault. (Did we expect anything more?)

McCain - Vote me for President or this old man gets it (he's holding a gun to Uncle Sam's head)

Obama - We have to do something and it needs to protect Main St.

Now, honestly, the reaction that scares me the most is probably Obama. Mostly because I figure he's going to be President, and I don't exactly seeing him saving Main St, at least not yet. I agree with much of what is stated above. Paulson's plan gives a whole bunch of taxpayer money to the people that created the mess. It's time for Main St and the Federal Gov to write off Wall St and protect the American people from the consequences. We need to let them go broke.

gina wrote:
"Here is why we need a bailout....it's amazing"

Yes, it is amazing how right wing talking points can suddenly become so popular. We've already talked about this - the CRA didn't cause this. If you think it did, you're only comfortable with one news source - Faux News.

If I hear the term "Main Street" one more time...

I'm not sure what I'll do. Hmm..maybe climb a tree and bark at the moon? Any other suggestions?

BTW, Hilzoy--thanks for the fantastic post yet again.

Thanks for looking at this from an adult perspective. The Depression was a very severe shock to the nation and to individuals. My grandfather committed suicide when his small-town bank failed. My mother's next door neighbor in a nice part of LA shot himself and his wife because of business losses. People jumped out of windows oin Wall Street. Many, many people suffered in those years.

Now we have deposit insurance and unenployment and various other cushions. Preventing another crash should be an important objective for those Boomers wanting to retire in the next few years, even if it saves a few hedge fund managers along the way. The Dems cut the cost of what the current Admin can execute by half and included taxpayer and mortgage protections. Better a deal than no deal and down 1000 points tomorrow.

The Reagan era ends this week. RIP

"House republicans have included an insurance requirement on those with home mortgages which looks to enrich their ins. buddies and may or may not be something that needs to be forced on mortgage holders. One person said their current payment increased $100 for new ins. which was totally unexpected and raised their monthly payments to barely within reach. If homeowners are already having trouble making payments then anything increasing their monthly payment is not productive...agreed?"

This happened to me before the fucking crisis. ON the most recent bill. The fix was in my friends and their will be someone's hide on my wall for this trust me.

If you really want to understand the origins of this economic crash, read 'Day of Reckoning' by Friedman, a Harvard economist, written in 1989. It chronicles the Reagan administration's economic policies of massive debt, deceit, and lack of forethought about the consequences to future generations. It foretells the current crisis with uncanny accuracy. It could have been written today.

My opinion is that the government should close all the banks for several days. During that time it should assess the economic stability and strength of the banks, and combine those likely to fail with those that have the strength to absorb them. Second, the Treasury should allow borrowing directly through itself, thereby making credit available for business' that need loans to survive. Thirdly, corporate executives who have profited from shady deals, 'creative' accounting, law breaking and greed should be forced to pay back to the public the bonuses they have received as well as some percentage of the salaries they have received. No one gets to take home a severance bonus from a company going bankrupt or being absorbed. Send a message! If you have a money party at the expense of the People, then YOU pay the tab, NOT the taxpayer.

With this SCOTUS and people being meaner after 30? years of Social Darwinism brainwashing, if we go into depression we could end up with camps, not public works projects.

An excellent post, as usual, Hillzoy. But one thing hasn't been discussed at all, and that is how very fragile our economy and life styles are if there were to be another Great Depression. (Which is why we have to do whatever comes along to stave things off until after the election and work for Obama, because with a McCain or Palin Administration we'll have one.)

There were a number of (non-governmental) safety nets in place when the last Crash occurred that just aren't there any more.

We grew things. We still had a lot of people living and working on family farms who might have suffered, badly, but who could still supply themselves with food and other necessities -- and many urban people had families on farms that they could return to.

We cooked things -- from scratch. The whole frozen foods industry did not start until the 1930s. The idea of 'prepared foods' didn't really exist except for some canned goods. Even when I was growing up, I remember trips to small butcher shops to get food my mothers would cook. I'm still a pretty good 'from scratch' cook, but I don't do it often enough. The point of 'from scratch' cooking is that it is stretchable, expandable. That can get people through tough times, but most of us don't even remember how to do this.

We made things for ourselves. Not just necessities, but things we could barter to stretch times. Ironically, both my wife and I had grandfathers whe were furniture makers, craftsmen. They had it better during the depression than most people. And many of our grandmothers knew how to sew clothes from scratch. Etc, etc.

We made things to sell, usually in labor intensive factories. Those jobs are now gone abroad, most of them. We are a 'service economy' not a producing one.

We had other labor-intensive jobs. People made livings as repairmen, as telephone operators (my 'other mother's' daughter was one during my lifetime, the kind that asked "Numbah pleeaze?" Her job ceased to exist in NJ when I was about 8, fortunately she was getting married anyway.), as foot messengers -- which I was, as file clerks and telephone operators at big companies. Very few of these jobs still exist. (A friend of mine is involved in finding jobs for the elderly, and the vast majority of the jobs she gets are as home attendants or sales clerks.)

The definition of 'necessity' has grown. We forget one moral of the famous Liberty Magazine poll in 1936 that predicted that Landon would beat Roosevelt, because the poll was conducted by telephone. The majority of voters didn't have phones. Forget cell phones that take pictures, play music, and supply the internet. They didn't have telephones -- they weren't a necessity. They had radios, still cheap to build, not televisions, not computers.

etc., etc. I'm not trying to say we should be panicing. I think we'll survive, and I think that -- for the most part -- the changes I've listed are for the better.

Let me say what I AM saying in an analogy. I've lived in Suburban New Jersey, Manhattan, and Brooklyn almost all my life. For me 'bad weather' has been, at worst, an inconvenience. I am not capable, emotionally, of understanding what it is like to live in New Orleans, or the hurricane belt of Florida, or the earthquake and forest fire region of California, or the flood-rsiking banks of a river. I can't feel what it would feel like, several times a year, to know that I could lose everything I owned from a natural disaster.

Economically, all of us are living in New orleans, but we've been spared a hurricane for a few decades. But we better learn what it feels like, so we can be sure we don't lose everything.

Tell me---how many Coleman lanterns do you find in an area that should have 20 or 30 of them in stock this time of year?

Did you check the section where you bought your tinfoil hat? Seriously dude.

And Hilzoy's post reminds me of something that Kevin Drum would have driveled out of his mealy-mouth.

Get real. We are heading into a deep recession or depression or whatever you want to call it whether you like it or not. Don't throw gas on the fire in the form of a giant handout to the criminals who got us into this mess. And yes: they are criminals. They knew what they were doing. And they still know what they're doing: they are trying to rip us off.

Latest Gallup poll shows Obama with an 8 point lead over McCain, 50% to 42%.

http://www.gallup.com/Home.aspx

Thanks for looking at this from an adult perspective. The Depression was a very severe shock to the nation and to individuals. My grandfather committed suicide when his small-town bank failed. My mother's next door neighbor in a nice part of LA shot himself and his wife because of business losses. People jumped out of windows oin Wall Street. Many, many people suffered in those years.

Geezus. Keep watching those old Hollywood movies and don't trust that drunk Thomas Mitchell to deposit the cash.

Have you noticed that several huge lending corporations have already failed utterly and yet nobody has killed him or herself because of it?

The world would be a better place if some people *did* kill themselves occasionally because of their miserable corrupt failure. George Bush, Condi Rice and Don Rumsfeld, for starters. I'd pay to watch them set themselves on fire and slowly fry.

It's over - we're f*cked again.
Posted by: inthewoods on September 28, 2008 at 7:41 PM | PERMALINK

You are correct, unfortunately. The system has to change, and of course, it never will as long as the Neo-fascist corporate theocrats run our government. And as long as Diebold, E.S.& S, and Sequoia are the ones who are counting the votes after they disappear without a trace into the blackhole of their 'proprietary' software and electronic circuitry, it will never change. Why do you think that the Repigs have always acted during the bu$hCo. maladministration like they will never be out of power? Because they never will. The writing is on the wall and no less than a revolution from within (of course, non-violent and legal) is going to change the pre-determined outcome. Regime change begins at home!

My mother's next door neighbor in a nice part of LA shot himself and his wife because of business losses.

News flash: your mother lived next to a homicidal nutcase and is LUCKY that the depression happened when it did.

ddt,
I'd pay to watch them set themselves on fire and slowly fry.

On a rent-to-own TV you will. This isn't an event you'd be able to pull out the popcorn and watch. Bilateral monopoly, man. You hurt the beast, it hurts you back worse. That's the cycle, can't escape from it.

Being an Old Guy, I keep thinking that we'll wish that we had all of that money for food when the house of cards inevitably falls down.

Of course, there is no doubt that in return for passing this bailout bill to convert Wall Street losses (but of course not profits) to socialism the controllers of the Republican Party will forgo use of the filibuster and other parliamentary tactics to frustrate progressive legislation during Obama's first year. They will be conciliatory and cooperative. Yup, no doubt.

Cranky

Thanks, Jim for the essay. And any time you wanna shake and bake come on out to CA. The San Andreas is just a few miles down the road. I only hope we don't get The Big One or even a Mini-Big One any time soon.

Sure makes me glad I took those two years of Home Economics now. Do they even teach that anymore?

Chilling thoughts, though. I have a full garage of stuff I've sorted for a yard sale, now I'm thinking maybe I should hold on to it all.

Man has this been a long month.

gina @ 7:45,

I watched this video when it was first making the rounds. I followed up on some of the core claims via Lexis. It's bullshit. Nothing in the law required banks to make risky or loss-making loans. Nothing. The whiz kids in the private sector, with a little help from politicians paid, essentially, to look the other way, built a system that allowed lenders to profit from selling loans, even if the borrower had no realistic possibility of repaying the mortgage. The business models built around this flakey framework lost enough money to break the bank. That's it in a nutshell. Very sorry, but there's nothing more to the story that we all now have the misfortune to be living through.

This was not caused by government interference or regulation. Gina, the people who made that video want you (well, actually the people you are paid to troll at) to believe government intervention was at fault. They are desperate to change the subject, so they are lying to you, and they would happily continue to lie to you in a cardboard box.

I'm normally pretty patient, but when I read crap like this, I do wonder whether what this nation needs isn't a retread on its political system.

This bail out plan will not stop the coming recession. If will however, provide some life-rafts for First Class before the ship of state goes down.

Roubini did predict the systemic crisis that would occur in the financial markets several years ago (however, old posts at his website are only available to subscribers. You can sign up for a preview at http://www.rgemonitor.com/)

Here is a nice NYT article on him
http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

Here is his current take on the bailout.

http://www.rgemonitor.com/blog/roubini/253783/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

Although you may think we need to do "something", this bailout will do little to resolve the crisis, but a lot to bail-out those most responsible.

Contact your representative. This plan needs an extreme do over if we want to have anything to show for our 700 billion investment.

It may be a pleasant thing to scream on the internet, but stop and use your brain for a second and think what a complete freeze up of the credit system would mean...

Done now? No ATM, no credit cards, no paycheck; a breakdown of essential services; hoarding, shortages, inflation; unemployment, crime, and general nastiness. And the cost to unfreeze the system? Several times more than $700 billion, of that you can be sure.

Let the FBI pursue the fraudsters in the financial industry. Let's have war-crimes trials for them. Let's institute tight new regulation. Let's raise the upper-income tax brackets by 50%.

But let's not just stand idly by while the circus tent collapses.

Who is in charge of the bailout is entirely up to Congress - the Constitution doesn't say that the Treasury secretary has to get his hands on every dollar that passes through the government. It is the legislature's job to make the laws, and the executive's job to execute them. Contra Bush (November 2000), the executive neither makes nor interprets the laws (according to the Constitution).

Is Paulson such a public hero that there is overwhelming demand for making him financial czar as a proxy of Bush? I think there would be wide support for minimizing the role of anyone in the Bush administration.

It isn't the lack of capital that is grinding the commercial paper market and other sources of funding to a halt - it is the loss of trust and the failure of some of the money market funds to settle on demand and "breaking the buck". This bailout bill does jackshit to restore that lost confidence.

Fuck Wall St. - let them eat their capital. It's time for a revolution and if it takes complete economic collapse, then bring it on....

Roubini did predict this a couple of years ago

NYT write-up on Roubini
http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

His current views on the revised plan:

http://www.rgemonitor.com/blog/roubini/253783/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

You may think we need to do something "right away", but this current plan will do little more than provide life boats for first class as the ship of state goes down. We are heading into a recession, this plan wont stop that. There are however, far better ways to spend 700 billion dollars so that the majority of people will benefit. (On a side note, I just read that the cost of all of the New Deal programs during the depression only cost $500 billion in today's dollars. Those programs built the infrastructure of this country! What will the country get from this plan other than Bush and Paulson's vague assurances that it will boost confidence).

This plan needs a major do-over. I urge you to contact your representatives and ask them to vote against the plan.

By God, I am jumping out my window right now......

OK, done that, and no I do not have an ATM, nor a credit card, nor a job. So, I am not hysterical, my life would not change on bit due to a recession or depression.

What did Keynes say? "In the short run we are all still here"

Let the thing go, lets ride the roller coaster and restructure.

Prup you're being alarmist. We also have things we can sell now. Look around these things weren't there in 1929. There's alot of shit that can be sold if need be. The food system sucks and should be decentralized but it is. There is a movement with a huge revenue growth to be tapped into in sustainable living that provides long term growth. Sure the system has been corrupted by short term speculation but there is a future for the American economy. The Fundamentals sure aren't strong, they can't be with as much centralized control over the market. However, America for all its' faults is the place people want to be even after 8 years of Bushco.

The depressioin will only come if McCain decides to start dropping bombs on central asia.

What the hell is going on at Intrade.com? The chances of the bailout passing are now listed at 19.9% down in the last few hours from 63%. And, as I recall, down from 90+% yesterday. Apparently, people are betting heavily in the last 24 hiurs that it won't pass. Why?

So if you email Matt Stoller these days, does he even bother to respond? Or do you just get a spew of invective punctuated by "Hell NO!" and "Where's my pitchfork?!"

I summarize Hilzoy thus: History happens in ways we don't like, but we've got to deal with the way it is, not the way it might have been.

I disagree with those who think depressions are not now possible, or wouldn't be nearly so bad as they used to be.

I find the view of people who understand these problems (and Krugman and Bernanke are perhaps chief among them), to be persuasive, something needs to be done pretty quick if you folks enjoy having a job.

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Christ, Hilzoy, it's like Kevin and his pseudo-center-left gullibility never left.

You don't happen to remember any of the research from the last eight years about how people who are primed to think of dramatic/traumatic events (9/11, war, chaos) tend to vote for more harsh, violent, and authoritarian candidates, responses, and policies, do you?

Because that's exactly what *you* are doing with this sentence: "Finally, while we're considering the possibility that we might be facing an economic depression, it might be a good idea to recall the last one."

The same goddamn thing.

Want to tell me how it's not intended to have the same goddamn purpose? To scare a skeptical audience into doing what it's being told by people who claim they know what they're doing?

Want to tell us how that's any better?

So if you email Matt Stoller these days, does he even bother to respond? Or do you just get a spew of invective punctuated by "Hell NO!" and "Where's my pitchfork?!"

I don't know about Stoller, but Sirota told me that Brad DeLong is as big a liar as Andy Natsios.

THAT 700 billion's shot a wild hog's ass. YOU kan just kiss the memory of That 700 billion good bye. Turn it to a profit down the road---THIS IS down the road.

Oh and call Pelosi @1-202-225-0100 and DEMAND IMPEACHMENT.

If it's so bad, if it's so disastrous, why is the Dow remaining stable? Investors aren't predicting the worst, so can it be so bad?

pieta: They are the ones getting the 700 billion. Its U who PAYS the 700 billion. They're looking good and U&I ain't.

I don't want to sound like an alarmist, and I only have a lay knowledge of economics, but aren't all the signs of Depression here?

Factors like rising national debt, rising unemployment, huge amount of imports, exporting jobs overseas, increased gap between rich and poor (what is it now--something like 21 percent of all the wealth is in the hands 1% of the population?)--aren't these telltale signs?

I mean how much more do we need to spell out that the so called: "Trickle Down" theory is a joke and half?

Is this massive scale "bail-out" just putting band-aid on a bullet wound? I sure hope it's a mighty good band-aid!

Goodness--I sure hope we all put our thinking caps on real soon to come up with creative ways to
improve the economy.

(Hint: It starts with a vote for Obama/Biden).

the Dems are not "Getting sucked into this mess" -- they are willingly, knowingly, compl,icitly participating in the looting of the US treasury.

The depression will follow REGARDLESS of whether this so-called bailout has ANY effect.

There is a goddamn good reason the bill is being shoved down the House's throat without giving ANYONE but the elite committee of crooks we laughingly call legislators, an opportunity to read it or participate in the so-called "negotiations". THEY ARE SELLING US OUT AGAIN.

Otherwise, of COURSE they would invite leading economists to comment; the actions would be carefully considered.

The proposed bill does nothing but provide suggestions without mandate of limitations. In substance, it isn't different than the one originally submitted by the Bushies.

WE ARE FUCKED and quite frankly, ALL members of congress, either house, up for re-election this year may as well update their resumes.

Shorter Hilz:

Give into financial blackmail.

Meanwhile, just how big of a conflict of interest does Paulson have with some of his bailouts, especially AIG?

Think what you like of this bailout, I saw some things to really like during the last week. First, and foremost, Obama came out early with a simple and understandable list of objectives the bill would have to meet. He probably talked with the House and Senate Leadership about this--in any case they soon were all on the same page and kept this unity from beginning until now (hopefully the end). Good news: Obama leads Democrats, Democrats are organized, get the job done, and get Repubs to sign off on it. Assuming this all comes together.

Second: The Republican never did come up with a unified message and their Presidential Candidate screwed the pooch in every way. He never did read the bill and never exerted any leadership.

The Democrats led, the Republican followed. Attention James Dobson: It's like the R's have been gelded--much better now!

Think what you like of this bailout, I saw some things to really like during the last week. First, and foremost, Obama came out early with a simple and understandable list of objectives the bill would have to meet. He probably talked with the House and Senate Leadership about this--in any case they soon were all on the same page and kept this unity from beginning until now (hopefully the end). Good news: Obama leads Democrats, Democrats are organized, get the job done, and get Repubs to sign off on it. Assuming this all comes together.

Second: The Republican never did come up with a unified message and their Presidential Candidate screwed the pooch in every way. He never did read the bill and never exerted any leadership.

The Democrats led, the Republican followed. Attention James Dobson: It's like the R's have been gelded--much better now!

LOOK at for what it IS. Bush has a budget for next QUARTER of 654 billion. ALL this is is a 105% mark up in the QUARTERLY budget. THAT means , NEXT QUARTER == another 700 billion. (just like the war, that's all)

Hilz. here’s a bailout idea with teeth — let’s start some fraud investigations, potentially leading to trials, against CEOs.

I’ll bet I could make a “conspiracy to commit fraud� case against the CEO of any company that deliberately marketed liar’s loans.

Let the FBI pursue the fraudsters in the financial industry. Let's have war-crimes trials for them. Let's institute tight new regulation. Let's raise the upper-income tax brackets by 50%.

Let's share whatever it is your smoking, bro'.

It may be a pleasant thing to scream on the internet, but stop and use your brain for a second and think what a complete freeze up of the credit system would mean... No ATM, no credit cards, no paycheck; a breakdown of essential services; hoarding, shortages, inflation; unemployment, crime, and general nastiness.

Um, that's just life as usual for a lot of us. And up until very recently, the same pricks who are now screaming "crisis" were telling us that the status quo was just fine.

Seriously, anybody who buys into the "WE'VE GOT TO DO SOMETHING NOW OR ELSE ITLL BE LIKE THE GREAT DEPRESSION OR WORSE" is worse than a retard. But leave it for some Obsidion Wings dipwad to peddle some unity-style bullcrap at us.

Wrong URL for my first post.

Here you go on Paulson ">conflict of interest

roubini, along w/mish, is among the econoblogs i check regularly.

they' been predicting for some time a major l shaped recession (ie, the line goes down and stays there, not coming back up into a u-shape).

This IS typical Bush, cronyism and porkbarrel, pure and simple.

Factors like rising national debt, rising unemployment, huge amount of imports, exporting jobs overseas, increased gap between rich and poor (what is it now--something like 21 percent of all the wealth is in the hands 1% of the population?)--aren't these telltale signs?

Uh...actually, 70% of the wealth is in the hands of the top 10% of the wealthy in this country, while the bottom 40% of the population share 2/10ths of 1% of the wealth.

And that's a figure from 1998, 10 years ago. It's gotten worse since then.

That's the point I keep trying to make: sure, the size of this beast is attributable to funny money games on Wall Street, but the whole mortgage meltdown - that was a direct consequence of too few people having too much of the money supply. Consumer economies cease to function when this happens. So bailout or no bailout, the economy is going to remain very ill unless wages for the majority of workers go up and taxes on the very wealthy go up. Republicans are and have always been the sworn enemies of a progressive system of taxation, and above all else, hate what they call the "death tax". But all of these are designed to prevent the situation we now find ourselves in, where wealth has become too concentrated in too few hands. The long term fix for this economy is higher wages and higher taxes on the wealthy. If we don't do those things, we'll be in the same boat we were in circa 2003, when most people in the country had already reached the point where they had no discretionary spending capacity and were maxed out on unsecured credit lines. If we don't get more into their hands, it's not like anyone is going to start buying anything again anytime soon.

By the same token, though, I am not interested in punishing them per se either.

This is a theme that echoes across the internets everytime another of the Bush administration's activities comes to light, and I for one am very interested in punishing them. They have radically changed the nature of our country, the democracy and our culture, and it's not alright that such a precedent gets set. Because I think there's a deterrent value to holding people accountable for their behavior. How could anybody in their right mind think that voluntary compliance (rules which you may follow, or not, according to your whim) is a good idea in a nation of more than 300 million people?