# Market bail-out **URL:** \ **Category:** Great Debates\ **Created:** [September 19, 2008, 5:12pm UTC](https://boards.straightdope.com/t/market-bail-out/464333 "2008-09-19T17:12:34Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![RyJae](https://avatars.discourse-cdn.com/v4/letter/r/9d8465/32.png) [@RyJae](https://boards.straightdope.com/u/RyJae)\ **Post date:** [September 22, 2008, 12:41am UTC](https://boards.straightdope.com/t/market-bail-out/464333/21 "2008-09-22T00:41:25Z")
Blaming it on either party is the most blatant form of bias you can possibly achieve. Both parties put us here neither can pretend like it was all the fault of the others. And both parties have the supporters for this stupid bailout and both parties have the dissenters. Although if it does pass I do hope it includes some of the things Democrats want added (caps on CEO pay, state help with health care deficits etc) ---
**Author:** ![SmartAleq](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/smartaleq/32/163_2.png) [@SmartAleq](https://boards.straightdope.com/u/SmartAleq)\ **Post date:** [September 22, 2008, 3:18am UTC](https://boards.straightdope.com/t/market-bail-out/464333/22 "2008-09-22T03:18:36Z")
Bias? BIAS? Good merciful crapcakes, [the same asshole who’s demanding a trillion dollar blank check RIGHT THIS MINUTE](http://www.prospect.org/csnc/blogs/beat_the_press) with NO OVERSIGHT or LEGAL RECOURSE for anything they do with it or else the WORLD ECONOMY WILL COLLAPSE is the same goddamned REPUBLICAN cheerleader who’s been insisting all along that everything’s just friggin’ fine with the economy. You know, the same friggin’ genius who less than a year ago said it was just peachy keen to reduce capitalization of the FMs? That guy? You know, the TREASURY SECRETARY appointed by Bush–you know, the Republicans? Those guys? Phil Gramm, of the Gramm-Leach-Billey act, the one that made the whole subprime mess possible–remember him? You know, the Republican financial advisor to the Republican presidential candidate? That guy? It’s biased to blame them for what they did and it’s bias to blame them for what they want to do now, is it? Really? Or is “bias” just another goddamned Republican code word like “liberal?” The kind of code word that really means “won’t let me do what I want,” or “has standards and won’t do things that would gag a maggot?” Is that it? Just as it’s not bias to tell a liar that he’s lying and the things he says are lies, it ain’t bias to point to the people who did something and say “this is YOUR goddamned FAULT.” Or were you just doing a Monty Python riff, you know “Please, please! This is supposed to be a happy occasion! Let’s not bicker and argue about who killed who.” At least it looks like Pelosi found her balls and is saying [“thanks but no thanks”](http://blogs.abcnews.com/politicalradar/2008/09/obama-picks-up.html) to Paulson and Bush. Just for the record, this is what Obama’s calling for in order to pass this bailout bill: > [@](#): > > **o No blank check.** If we grant the Treasury broad authority to address the immediate crisis, we must insist on independent accountability and oversight. Given the breach of trust we have seen and the magnitude of the taxpayer money involved, there can be no blank check. > > **o Rescue requires mutual responsibility.** As taxpayers are asked to take extraordinary steps to protect our financial system, it is only appropriate to expect those institutions that benefit to help protect American homeowners and the American economy. We cannot underwrite continued irresponsibility, where CEOs cash in and our regulators look the other way. We cannot abet and reward the unconscionable practices that triggered this crisis. We have to end them. > > **o Taxpayers should be protected.** This should not be a handout to Wall Street. It should be structured in a way that maximizes the ability of taxpayers to recoup their investment. Going forward, we need to make sure that the institutions that benefit from financial insurance also bear the cost of that insurance. > > \*\*o Help homeowners stay in their homes. \*\*This crisis started with homeowners and they bear the brunt of the nearly unprecedented collapse in housing prices. We cannot have a plan for Wall Street banks that does not help homeowners stay in their homes and help distressed communities. > > **o A global response.** As I said on Friday, this is a global financial crisis and it requires a global solution. The United States must lead, but we must also insist that other nations, who have a huge stake in the outcome, join us in helping to secure the financial markets. > > **o Main Street, not just Wall Street.** The American people need to know that we feel as great a sense of urgency about the emergency on Main Street as we do the emergency on Wall Street. That is why I call on Senator McCain, President Bush, Republicans and Democrats to join me in supporting an emergency economic plan for working families – a plan that would help folks cope with rising gas and food prices, save one million jobs through rebuilding our schools and roads, help states and cities avoid painful budget cuts and tax increases, help homeowners stay in their homes, and provide retooling assistance to help ensure that the fuel-efficient cars of the future are built in America. > > \*\*o Build a regulatory structure for the 21st Century. \*\*While there is not time in a week to remake our regulatory structure to prevent abuses in the future, we should commit ourselves to the kind of reforms I have been advocating for several years. We need new rules of the road for the 21st Century economy, together with the means and willingness to enforce them. You know what? If agreeing with Obama on this is being biased, then bias must be a pretty good thing, and one hell of a lot better than the alternative. Fine, I’m biased then, as well as being liberal–neither one is a swear word the way the shitty Republican administration has tried to make them out to be. From now on I guess “liberal” means “smart” and “biased” means “right.” See, guess us Dem types can make newspeak too. ---
**Author:** ![RyJae](https://avatars.discourse-cdn.com/v4/letter/r/9d8465/32.png) [@RyJae](https://boards.straightdope.com/u/RyJae)\ **Post date:** [September 22, 2008, 3:49am UTC](https://boards.straightdope.com/t/market-bail-out/464333/23 "2008-09-22T03:49:54Z")
> [@SmartAleq](#): > > Bias? BIAS? Good merciful crapcakes, [the same asshole who’s demanding a trillion dollar blank check RIGHT THIS MINUTE](http://www.prospect.org/csnc/blogs/beat_the_press) with NO OVERSIGHT or LEGAL RECOURSE for anything they do with it or else the WORLD ECONOMY WILL COLLAPSE is the same goddamned REPUBLICAN cheerleader who’s been insisting all along that everything’s just friggin’ fine with the economy. You know, the same friggin’ genius who less than a year ago said it was just peachy keen to reduce capitalization of the FMs? That guy? You know, the TREASURY SECRETARY appointed by Bush–you know, the Republicans? Those guys? Phil Gramm, of the Gramm-Leach-Billey act, the one that made the whole subprime mess possible–remember him? You know, the Republican financial advisor to the Republican presidential candidate? That guy? It’s biased to blame them for what they did and it’s bias to blame them for what they want to do now, is it? Really? > > Or is “bias” just another goddamned Republican code word like “liberal?” The kind of code word that really means “won’t let me do what I want,” or “has standards and won’t do things that would gag a maggot?” Is that it? Just as it’s not bias to tell a liar that he’s lying and the things he says are lies, it ain’t bias to point to the people who did something and say “this is YOUR goddamned FAULT.” Or were you just doing a Monty Python riff, you know “Please, please! This is supposed to be a happy occasion! Let’s not bicker and argue about who killed who.” > > At least it looks like Pelosi found her balls and is saying [“thanks but no thanks”](http://blogs.abcnews.com/politicalradar/2008/09/obama-picks-up.html) to Paulson and Bush. > > Just for the record, this is what Obama’s calling for in order to pass this bailout bill: > > You know what? If agreeing with Obama on this is being biased, then bias must be a pretty good thing, and one hell of a lot better than the alternative. Fine, I’m biased then, as well as being liberal–neither one is a swear word the way the shitty Republican administration has tried to make them out to be. From now on I guess “liberal” means “smart” and “biased” means “right.” See, guess us Dem types can make newspeak too. No BIASED is not LOOKING at EVERYONE involved SINCE the START of DEREGULATION biased IS blaming ONE party FOR the MISTAKES of BOTH. blaming GRAMM alone FOR the BILL because IT bares HIS name IS ridiculous. WHEN it WAS supported BY none OTHER than OBAMAS current ADVISER and CLINTONS Treasury SECRETARY. Robert RUBIN. Yeah SHIT goes BOTH ways. Okay enough talking like that it is hard too do. Bottom line SmartAleq, both parties are at fault. The bailout plan proposed is stupid, the bailout plan Obama proposed is stupid, they all suck. ---
**Author:** ![Leaper](https://avatars.discourse-cdn.com/v4/letter/l/4bbf92/32.png) [@Leaper](https://boards.straightdope.com/u/Leaper)\ **Post date:** [September 22, 2008, 4:10am UTC](https://boards.straightdope.com/t/market-bail-out/464333/24 "2008-09-22T04:10:10Z")
> [@SmartAleq](#): > > This whole bailout is getting kinda spooky–first Paulson and Bernanke [drag Congressional leaders into a closed door meeting](http://www.nytimes.com/2008/09/20/washington/19cnd-cong.html) where they basically say “hey, if we don’t move on this like yesterday the whole world is gonna go kablooey!!” > > So the scare is on, the “gotta do it right now” push is on Ignoring the merits of the plan for now, do you not believe that something must be done now? If so, you don’t seem to share the opinions of most of the economists I’m reading. (Just wanted to clarify that.) > [@](#): > > Phil Gramm, of the Gramm-Leach-Billey act, the one that made the whole subprime mess possible–remember him? (From another post, same author) Okay, here’s one of the reasons I’m so confused about this whole thing. Investor’s Business Daily is saying that the above mentioned act [is a GOOD thing, and the only reason this whole situation isn’t worse!](http://ibdeditorial.com/IBDArticles.aspx?id=306716557967194) (So does [this guy](http://www.marginalrevolution.com/marginalrevolution/2008/09/did-the-gramm-l.html), but he’s just some random blogger I have no idea of. Then again, I don’t know much about Investor’s Business Daily either.) Can someone please explain to me why this is wrong? ---
**Author:** ![Throatwarbler\_Mangrove](https://avatars.discourse-cdn.com/v4/letter/t/8c91f0/32.png) [@Throatwarbler\_Mangrove](https://boards.straightdope.com/u/Throatwarbler_Mangrove)\ **Post date:** [September 22, 2008, 4:11am UTC](https://boards.straightdope.com/t/market-bail-out/464333/25 "2008-09-22T04:11:44Z")
> [@](#): > > Easiest way to bottom out home prices? Glut of empty homes. It was going to do it on it’s own. But like every good political fellow, it was decided the best way to fix something was throw wads of cash at it. That cash only plugged a leak, the water is just going to flow over the top now. There’s something to be said about this. It is emblematic of how deeply rooted the housing mania in the US and much of the developed world is, that at this point, otherwise reasonable people still think house prices are something that need to be supported. There’s nothing intrinsically good about high house prices. In a free market, price is simply the information used to direct supply and demand. “High” house prices are no more desirable than high oil prices, or high prices for any commodity, in so much as they benefit those who have it, at the expense of those who need it, and they direct the market to either supply more or demand less. A healthy price for housing is one that appreciates at the same rate as inflation. I don’t need a deep understanding of credit default swaps to get that, but no politician will have a hope of being elected if he were to state that simple truth. ---
**Author:** ![SmartAleq](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/smartaleq/32/163_2.png) [@SmartAleq](https://boards.straightdope.com/u/SmartAleq)\ **Post date:** [September 22, 2008, 6:13am UTC](https://boards.straightdope.com/t/market-bail-out/464333/26 "2008-09-22T06:13:56Z")
I apologize for the caps, I’m more than a little upset about the current mess. That being said, I stand behind my assertion that the Republicans bear the greatest percentage of blame for this situation. **Leaper,** it depends very much on what you consider “a good thing.” [The Gramm-Leach-Billey Act](http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act) removed regulations and safeguards set up after the Great Depression which were enacted to prevent banks from offering investment, commercial banking, and insurance services. Once those restrictions were removed, the very easiest ways for banks to get into those areas was to merge or otherwise acquire an existing firm that already did that stuff. The consolidation/merger frenzy went on with no oversight or regulation whatsoever until you have something like two corporations controlling the majority of the world’s financial traffic, lending and borrowing from themselves in the biggest masturbatory frenzy ever seen outside a bukkake video. The Commodity Futures Modernization Act, also written by Gramm, allowed for a greater scope of commodities to be traded and sheltered certain types of speculations from regulation, paving the way for the Enron fiasco and the bilking of California out of billions of dollars by way of manufactured energy shortages. The same act also allowed the new megabanks to package and sell dodgy financial instruments that have no easily established value, such as bundles of subprime mortgages. Many, many interesting things happened along the way–[this is one of the most comprehensive breakdowns written in plain English I’ve ever read](http://www.dailykos.com/story/2008/9/21/75335/6687/799/605351)–and at the end of it all we have a very few companies controlling most of the economy, which are “too big to fail.” If they fail, everything fails. One good example is, say, worker’s comp. If the insurance company that’s responsible for paying out on permanently disabled people’s claims goes tits up, the state they reside in has the obligation to pick it up and keep paying–if that insurer is the size of AIG and it goes tits up, many millions of people who each need thousands of dollars a month of care that the insurance company is obligated to pay out are dumped onto the state, which runs out of money in the fund every state keeps up for such cases and the patients get dumped onto Medicaid. We still end up paying for them, but the government doesn’t get the premiums the insurance company got to offset the claims–so we get jacked several times over on the same transaction. We pay the insurance premiums, we pay for the tax breaks they get, then we pay anyway for what the insurance company was obligated to pay for but didn’t because they failed. So if you consider unfettered, unregulated profit chasing and mergers to be a good thing, then the GLBA was a good thing. If, on the other hand, you don’t find our current situation to be a load of fun then it’s not a good thing. I guess if I were a CEO of one of the banks that ended up on top after all the mergers, I’d probably be kissing Gramm’s ass like a friggin’ savior. The redundant employees of all those merged companies who found themselves unemployed as a result of the deregulation of banking institutions might have a different view of the matter. Likewise, anyone who pays taxes right now is probably feeling like Gramm needs more brickbats and fewer kisses. The way the economy is right now, we unfortunately have to bail these bastards out, just the way we bailed out the S&L’s. There’s too much out there–estimates on the value of the total market in credit default swaps range from a conservative 45 trillion (3 times the US GDP) to as high as 70 trillion dollars last year, which is more than the GDP of the entire world. So yeah, somebody has to bail these dickheads out but I don’t see why it’s all our problem, especially since Paulson’s saying he plans on letting foreign banks have a cut of this bailout pie too. At least Obama’s trying to get the rest of the world to take on some of the blame along with some of the bill considering they’ve benefited from all this chicanery as well. He also wants to get some transparency and some accountability in exchange for our money–one of the major problems with credit default swaps is that there’s no way to track them, no agreed on way to value them and no consensus on who gets to pay the check. Bush and his cronies want to keep it all a big secret and get a blank check that we don’t even get to see who’s on the “payable to” line. We’re supposed to just keep paying market value for these crazy ass instruments that nobody can even conclusively say have any worth at all–the market value is whatever the market will bear and if the market collapses it’s all worth precisely dick. So, since we have the money to give these pukes to keep the world economy afloat, it only makes sense to at least get something out of the deal. Like some regulations to knit back up the Glass-Steagall protections Gramm screwed us out of to protect us from having to do this again. Or some renegotiations of the shitty ass mortgages so there won’t be so much defaulting going on, which further degrades the “market value” of those credit default swaps we’re buying with our 700 billion bucks. Something, anything, to keep this from being yet another assrape with options to get it again whenever they get a stiffy… ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [September 22, 2008, 8:23am UTC](https://boards.straightdope.com/t/market-bail-out/464333/27 "2008-09-22T08:23:36Z")
Blogging economists seem to be almost universally against the plan: This is a boring post. I basically scoped the top of this list of economic Blogs: > **[26econ.com - This website is for sale! - 26econ Resources...](http://ww16.26econ.com/category/economics-blogs/?sub1=20231009-1016-3362-9bcd-c418ecac7dfa)** > > This website is for sale! 26econ.com is your first and best source for all of the information you’re looking for. From general topics to more of what you would expect to find here, 26econ.com has it all. We hope you find what you are searching for! Calculated Risk: [Against plan](http://calculatedrisk.blogspot.com/2008/09/krugman-cash-for-trash.html) Brad DeLong: [Against plan](http://delong.typepad.com/sdj/2008/09/no-deal.html). Freakonomics: No opinions cast on Sep 19-21. Tyler Cowen at Marginal Revolution: Against, but linked to a contrary view. > **[A defence of the Paulson plan - Marginal REVOLUTION](https://marginalrevolution.com/marginalrevolution/2008/09/a-defence-of-th.html)** > > It’s always worth hearing from both sides, in this case Nadav Manham: This \[the purchases of the Paulson plan\] has the effect of modestly increasing the stated book value of these financial institutions.  More importantly, with the toxic waste... Contrary view, from a seeking Alpha member: [VERY Preliminary Paulson Plan Devil’s Advocacy](http://investorsconsigliere.typepad.com/the_investors_consigliere/2008/09/very-preliminary-paulson-plan-devils-advocacy.html) "I think it could work IF it acts as a catalyst for future positive events rather than being seen as the end in itself, AND if the Treasury, acting as a self-interested capitalist on behalf of taxpayers, exerts the pitiless leverage befitting a rescue financier. " That seems like a fairly tepid recommendation. Krugman notes that the bailout might not work anyway, if it doesn’t increase capital levels. James Hamilton at Econobrowser: Against, “Before the taxpayers are asked to commit such sums, we are owed a coherent and compelling explanation of why this kind of problem is never going to occur again.” [http://www.econbrowser.com/archives/2008/09/paulson\_bailout.html](http://www.econbrowser.com/archives/2008/09/paulson_bailout.html) University of Chicago economist Luigi Zingales, linked by Gregory Mankiw with props to Tyler Cowen: Against. " Do we want to live in a system where profits are private, but losses are socialized?" [http://faculty.chicagogsb.edu/luigi.zingales/Why\_Paulson\_is\_wrong.pdf](http://faculty.chicagogsb.edu/luigi.zingales/Why_Paulson_is_wrong.pdf) Mankiw links approvingly to “Why You Should Hate the Treasury Bailout Proposal”. > **[Why You Should Hate the Treasury Bailout Proposal | naked capitalism](https://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html)** > > A mere two weeks ago, the Fannie/Freddie rescue was called “the mother of all bailouts” by some commentators. If the plans of the Administration come to fruition, it will shortly be surpassed by the $700 billion mortgage rescue plan proposed by Hank... Summary by Market Movers: "What has happened to the vibrant heterogeneity of views and voices in the blogosphere? Among finance and economics blogs, I can’t think of a single one which thought that the short-selling ban was a good idea, and I also can’t think of a single one which has any enthusiasm whatsoever for the Paulson bailout plan. Jack has a good roundup of the incredibly wide range of voices which are highly skeptical of what’s going on here. " [http://www.portfolio.com/views/blogs/market-movers/2008/09/21/why-the-blogosphere-has-turned-on-paulson](http://www.portfolio.com/views/blogs/market-movers/2008/09/21/why-the-blogosphere-has-turned-on-paulson) Many Economists Skeptical of Bailout: [http://www.gather.com/viewArticle.jsp?articleId=281474977454994](http://www.gather.com/viewArticle.jsp?articleId=281474977454994) Barry Ritholtz of Big Picture: Links approvingly to Krugman. [http://bigpicture.typepad.com/comments/2008/09/krugman-we-are.html](http://bigpicture.typepad.com/comments/2008/09/krugman-we-are.html) ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [September 22, 2008, 8:43am UTC](https://boards.straightdope.com/t/market-bail-out/464333/28 "2008-09-22T08:43:25Z")
I should also link to Paul Krugman’s column, [Cash for Trash](http://www.nytimes.com/2008/09/22/opinion/22krugman.html?hp). > [@Paul Krugman](#): > > …I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future. ---
**Author:** ![RyJae](https://avatars.discourse-cdn.com/v4/letter/r/9d8465/32.png) [@RyJae](https://boards.straightdope.com/u/RyJae)\ **Post date:** [September 22, 2008, 11:48am UTC](https://boards.straightdope.com/t/market-bail-out/464333/29 "2008-09-22T11:48:51Z")
Well said **SmartAleq** and we cannot forget the other finger on hand of deregulation the Commodity Futures Modernization Act. That bit us in the ass trying to find out why the cost of oil was rising. With the repeal of laws in place some since the Great Depression, all in the name of “the free market will decide”. And when they go broke who pays, oh yeah the very same people it could do without. The free market decided they couldn’t survive, so go away already. ---
**Author:** ![SmartAleq](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/smartaleq/32/163_2.png) [@SmartAleq](https://boards.straightdope.com/u/SmartAleq)\ **Post date:** [September 22, 2008, 4:07pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/30 "2008-09-22T16:07:22Z")
Yeah, I feel that “invisible hand” up my ass pretty much all the time these days… 😛 I really can’t recommend [this article](http://www.dailykos.com/story/2008/9/21/75335/6687/799/605351) too highly–it’s long, but there’s so much information in there and it ties the strings of history together to give a truly comprehensive picture of how this mess happened and even more importantly, it has some very smart steps to stop it happening ever again. One of the things I pulled out of it was a fabulous method to save mortgage defaults–the Home Owner’s Loan Corporation, first used during the Depression. [This article](http://firedoglake.com/2008/09/19/how-to-bail-out-ordinary-mortgage-holders-and-not-just-banks/) goes into more detail about how it works, but the gist is this: > [@](#): > > What the government should do instead is set up a Trust to buy mortgages at a discount, then reset them to 20, 30 or 50 year fixed mortgages with a reduced face amount. If the house is later sold, half of the increase goes to the government, so that taxpayers make a profit. The mortgage cannot be paid off before the end of its term so that financial scavengers cannot come around and, as they did over the last ten years, say “get rid of that mortgage, and take ours. It’s better. Honest!”, because we know that when they say better, they don’t mean better for the mortgage holder. The mortgage is attached to the property and is transfered to any new buyer. And the mortgage cannot be removed from the property, and any new mortgages attached to the property are junior to the government mortgage. > > End results: > > a) a floor is set for mortgage prices. (Whatever discount the government is buying at. Probably 60% to 70%, but it should be based on what the long run price was in the area before the housing bubble.) This ends the confidence crisis in these securities, because there is now a market price—what the Trust will pay. > > b) It helps homeowners stay in their homes. > > c) It gets rid of overly complex mortgages and puts in their place a dead simple mortgage that anyone can understand. > > d) It punishes lenders, which they deserve, for making loans they should never have made. > > e) While it does keep homeowners in their homes, it doesn’t let them off scot-free either. In exchange for a good mortgage they can service, they give up some of the future profits on sales in their houses. > > f) The government will almost certainly make a long term profit on this. This is important, because it’s not fair for people who aren’t underwater on mortgages to spend hundreds of billions or trillions bailing out those who are without some expectation that in the end it won’t be more than just a transfer of wealth to them and to investors and banks. > > This bailout can be done right. It’s up to Democrats, who appear to be in danger of stampeding into a hasty decision, to stand firm and make sure it’s done right. The last two times they didn’t stand firm and do things right, we got the Patriot Act and the Iraq War. This is too important for Democratic fecklessness. Too important for them to just give the Bush administration whatever it wants. > > If they do give the administration what it wants, then Wall Street and the Banks just got bailed out, no help goes to ordinary people and you get stuck with a trillion dollar bill. Taxpayers get all the toxic assets, but Wall Street, who paid themselves more in bonuses in 2007 then 80 million Americans got in raises, keeps the profits. > > Democrats need to stand up for ordinary Americans and do the right thing. I like this because it addresses the problem at the ground level–if a homeowner elects to take the bailout there are consequences for both the owner and the lender, but they aren’t too onerous. The homeowner gets to keep the house, has a chance to build equity and profit on the property, and gets to pass along a rock solid fixed rate mortgage to the next buyer (which, if interest rates go up can be a huge selling point for the house.) The lender gets the interest money, but has to service the entire loan themselves, which is something every lender SHOULD do but few actually do. This means they have to accustom themselves to a steady income stream rather than getting big cash infusions when they bundle and sell mortgages–this encourages them to be sensible about their expansion and daily business practices. Since the house gets discounted, they take a hit financially for having made a crap mortgage sale in the first place, which is fair. And the taxpayers who footed the bill get a cut when the house sells, which is also fair. One of the reasons I like Obama’s economic plan is that it’s a bottom up plan rather than a trickle down plan. We’ve seen how well making rich people richer works–it just encourages them to play ever more risky and stupid games with the economy in order to get more (because in our culture having the most money means you win, no matter that you derive no more pleasure or benefit personally when you make obscene amounts of money than when you make merely ridiculous amounts of money.) Making the poor and middle class richer is less expensive overall, it encourages saving and financial planning on a personal level and keeps the economy moving at the base level where it’s really needed. With higher aggregate wages we can go back to requiring ten or twenty percent down payments on houses and cars, something you just can’t do in a stagnant economy where nobody’s making more than just enough to get by. We need to get off this endless credit carousel and get back to a more solid footing–there’s something wrong when interest on credit is the main moneymaker in an economy, rather than actual goods and services. And above all we absolutely NEED to get more regulation into the world financial system. If we’re going to have a global economy, and like it or not we are going to have one, we need to work with other countries to strengthen and enforce uniform rules on these gigantic global megacorps. Close the tax havens, make it less profitable to outsource to other countries by bringing their standards of living up to the point where there are no huge pools of virtual slave labor available for exploitation–just normal competitiveness. Force the corporations to deal with the fact that their free ride is over and if they want to survive they’re gonna have to deal with the new rules or go under. The free taxpayer buffet is closed! We have to make this stick or we’re cataclysmically fucked, and we can’t be railroaded into signing this blank check that literally enslaves us to the Treasury Department, we just can’t. ---
**Author:** ![5\_time\_champ](https://avatars.discourse-cdn.com/v4/letter/5/278dde/32.png) [@5\_time\_champ](https://boards.straightdope.com/u/5_time_champ)\ **Post date:** [September 22, 2008, 4:36pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/31 "2008-09-22T16:36:37Z")
Ya know if the **Bush Bailout of the Banks** bill passes there is one silver lining in this. I don’t ever want to hear the goddamned Republicans, conservatives, right-wingers or whatever you want to call them, whine about _gubamint in the solution to the problem, it IS the problem_. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [September 22, 2008, 5:23pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/32 "2008-09-22T17:23:34Z")
If the government is the solution here, it’s only solving a problem it had a hand in making. This isn’t a Republican problem. This isn’t a problem with capitalism. It’s a problem with the unholy marriage of capital and government. One of the root causes of this problem was the push by lawmakers in both parties to make homeowning easier. Fanny and Freddie have always been understood to have the weight of the government behind them, which built false confidence in the securities they held. Lawmakers pushed for the easing of rules for purchasing homes, the U.S. offers a mortgage interest tax deduction to encourage home ownership, etc. If you want to blame Republicans, you need to explain why Chris Dodd was the biggest recipient of lobbying funds from the mortgage industry. The fact is, all these people looked the other way. Their constituents clamored for looser credit, and their lobbyists wanted to give it to them. When those two interests coincide, politicians can’t help themselves. The last attempt to reign in Fanny and Freddie came up in 2005, sponsored by John McCain. The bill was defeated mostly by Democrats. But over the history of these agencies, both Republicans and Democrats have been in the driver’s seat, and both parties did damage. And let’s not forget that when assigning blame here, it’s not just the evil CEOs who made out like bandits on this. The real estate speculators who benefited from the boom in house prices caused in part by cheap credit made a fortune. And a lot of those speculators were individuals. Also, a significant part of the blame has to go to those people who took out home loans they couldn’t afford, and to those who bought homes on good faith, then walked away from the mortgages when the home values declined below the mortgage value. A certain Congresswoman did this TWICE. So rather than pointing fingers at the other side in typical hysterical partisan fashion, and trying to blame the ‘rich’ and solve the problem on the backs of the rich, it might be more productive to think about this as if Republicans and Democrats didn’t exist - just the problem. One of the issues I’d have with the bailout scheme is that Paulson is completely unwilling to discuss the consequences of not acting. At least in public. He’ll only offer vague generalization that it will be ‘very bad’. So he wants a blank check and ultimate power because the problem is so great that nothing short will suffice, but he’s not willing to explain what the consequences would be if he doesn’t get the power. I understand that having the Treasury Secretary issue a terrifying statement of risk might not be good for the markets, but there has to be some way of getting the information across so people can make better decisions. Part of the problem here is that the people who are getting the information behind closed doors (the members of the house and senate), are the people who were part of the problem. They have a great vested interest in deflecting the blame, and are probably more likely to approve this than they would be if their hands were completely clean. If they give total control to Paulson, they can wash their hands of it all. If Paulson’s house of cards comes down in a year, they can say, “Hey, don’t look at us. We had no choice but to turn this over to him, and he screwed up.” Paulson’s providing huge cover for these people. That’s a dangerous motivator. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 22, 2008, 5:44pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/33 "2008-09-22T17:44:24Z")
I’m sorry to say that my side of this is making it sound like investors have gotten off scot-free. I don’t think AIG and Lehman shareholders think so. I have no problem with investors taking a bath, that’s what risk is all about, but let’s not pretend it hasn’t happened. How well the other investors make out depends on how the price is set for the mortgage instruments the government is buying. Too high and we get ripped off. Too low and we’ll probably make money in the long run, but it might not help the balance sheets of the institutions we’re buying them from enough. No one is writing a check for $700 billion today. **RyJae** , obviously you don’t care if the entire financial system melts down, so long as those nasty homeowners get their’s. The foreclosure market drives down the prices of all homes, which leads to more foreclosures, which drives it down some more. The median sales price in my county has fallen by 30%, not actually from that big a drop but because low cost homes, which get foreclosed more often, are a much bigger part of the sales. If the bailout involves a moratorium on foreclosures and the renegotiation of government owned loans, it might do wonders in stopping the collapse of housing prices, improving the economy, and actually making this deal profitable for the American taxpayer. ---
**Author:** ![Lantern](https://avatars.discourse-cdn.com/v4/letter/l/d26b3c/32.png) [@Lantern](https://boards.straightdope.com/u/Lantern)\ **Post date:** [September 22, 2008, 5:55pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/34 "2008-09-22T17:55:37Z")
> [@](#): > > If you want to blame Republicans, you need to explain why Chris Dodd was the biggest recipient of lobbying funds from the mortgage industry. Is there is a list of the top recipients of lobbying funds from the mortgage industry with party affiliation? I mean Dodd may well be the top recipient but if ,say,8 out of the top 10 are Republican then that would tell a pretty clear stor In general it’s probably the case that Republicans were relatively friendlier towards financial deregulation and the financial innovations that helped bring about the crisis. Fannie and Freddie may have gotten caught in the crisis but they weren’t the prime movers behind sub-prime loans or mortgage-backed securities. This crisis was created mainly by the private sector. It’s an age old story which goes back centuries to an era when governments were much less interventionist: financial innovations, crazy risk taking with leverage, asset-price bubbles followed by the inevitable bust. The reason why a lot of financial regulation exists is because of the hard-won lessons of past disasters. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [September 22, 2008, 6:00pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/35 "2008-09-22T18:00:00Z")
> [@Sam\_Stone](#): > > If the government is the solution here, it’s only solving a problem it had a hand in making. > > This isn’t a Republican problem. This isn’t a problem with capitalism. It’s a problem with the unholy marriage of capital and government. One of the root causes of this problem was the push by lawmakers in both parties to make homeowning easier. Fanny and Freddie have always been understood to have the weight of the government behind them, which built false confidence in the securities they held. Lawmakers pushed for the easing of rules for purchasing homes, the U.S. offers a mortgage interest tax deduction to encourage home ownership, etc. The tax deduction and Fannie and Freddie have been around for quite a while without causing any problems. You’ll need to find a more recent root cause to convince anyone. And ownership improves the quality of schools and neighborhoods because owners stick around longer and have more invested in the community. Encouraging home ownership fosters many of the qualities Republicans say they are for. > [@](#): > > If you want to blame Republicans, you need to explain why Chris Dodd was the biggest recipient of lobbying funds from the mortgage industry. The fact is, all these people looked the other way. Their constituents clamored for looser credit, and their lobbyists wanted to give it to them. When those two interests coincide, politicians can’t help themselves. Which year? I bet a Republican got most of the money when they were in control. Even so, big deal. Lobbyists have been shoveling money at representatives for years. Need to find a better cause also. As for loser credit, the interest rate drop that fueled the bubble was done by Greenspan to get the economy in better shape for your hero Mr. Bush, and to cover up how the tax cuts for the rich were not helping. Not dropping rates would have slowed the bubble and caused a recession sooner, but it probably would have been milder. The cuts were designed to stimulate demand through consumer borrowing, which is what you need to do if you want economic growth without giving consumers any more money. > [@](#): > > The last attempt to reign in Fanny and Freddie came up in 2005, sponsored by John McCain. The bill was defeated mostly by Democrats. But over the history of these agencies, both Republicans and Democrats have been in the driver’s seat, and both parties did damage. So, lack of regulation was an issue. Definitely true, and it is nice that McCain is now for it after he was against it. But you need to convince us that a totally unregulated F&F would have behaved better than the unregulated mortgage companies like Countrywide that got us into the mess first. > [@](#): > > One of the issues I’d have with the bailout scheme is that Paulson is completely unwilling to discuss the consequences of not acting. At least in public. He’ll only offer vague generalization that it will be ‘very bad’. So he wants a blank check and ultimate power because the problem is so great that nothing short will suffice, but he’s not willing to explain what the consequences would be if he doesn’t get the power. I understand that having the Treasury Secretary issue a terrifying statement of risk might not be good for the markets, but there has to be some way of getting the information across so people can make better decisions. Interviews with people at Paulson’s meeting with Congress said he did just that. Telling the real story to those who can do something is more useful than panicking the markets worse than they are already. > [@](#): > > Part of the problem here is that the people who are getting the information behind closed doors (the members of the house and senate), are the people who were part of the problem. They have a great vested interest in deflecting the blame, and are probably more likely to approve this than they would be if their hands were completely clean. If they give total control to Paulson, they can wash their hands of it all. If Paulson’s house of cards comes down in a year, they can say, “Hey, don’t look at us. We had no choice but to turn this over to him, and he screwed up.” Then you support Pelosi’s efforts to but some controls on it? ---
**Author:** ![Lantern](https://avatars.discourse-cdn.com/v4/letter/l/d26b3c/32.png) [@Lantern](https://boards.straightdope.com/u/Lantern)\ **Post date:** [September 22, 2008, 6:05pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/36 "2008-09-22T18:05:22Z")
BTW while I think everyone agrees that the current plan needs a lot more oversight and that it gives Paulson a ridiculous amount of power I don’t understand some of the other criticisms of the plan. For example the idea that there is no potential upside for tax payers. As I understand it the logic of the plan goes something like this: banks own a lot of mortgage-based securities whose current market value is a lot less than what they are worth because of the general financial panic and because everyone is trying to sell them at the same time. In a few years time when things cool down they are likely to be worth a lot more. So for example let’s say banks have securities which are selling for 20 cents to the dollar but which would be worth 60 cents to the dollar a few years from now. The governments steps in and buys them for 40 cents and sells them a few years later for a profit. Meanwhile the 40 cents that the banks receive today lets them recapitalize their balance sheets and survive the crisis. So there is an upside for taxpayers but the bailout does help banks as well. Of course all this depends on the price that is actually paid for the securites and also the “true” market value which no one knows. Still I don’t think it’s correct to say there is no potential upside for taxpayers with the current plan. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [September 22, 2008, 6:05pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/37 "2008-09-22T18:05:56Z")
I started off backing the bill. Then I saw that Paulson would be getting an enormous unchecked power. Oversight is the base of the problem. Yet they want to remove it . That is not good. I have no reason to believe or trust him. With 3/4 s of a trillion dollars targeted, those who could filter a percentage off would make tons. Those in charge like Paulson were behind the problem and made a fortune causing it. Tomorrow they will be good guys operating for the American people. I am skeptical. This is a repub problem. they have pushed for dereg since Reagan. They have been consistent in that. An occasional dem who takes campaign money from the big shots is not the same as repubs who actually believed and fought for it. This is in their lap. I do hold Clinton partially responsible because he signed the Enron Loophole Gramms bill gutting Glass/Steagall. His money man Rubin was aggressively for it too. I hope Greenspan gets the blame too. I suspect he knew the dangers of his deeds. Somehow this bill reeks like the Patriot Act. These bills were ready way too fast. He has a plan today when 2 days ago Paulson said all was well. And like the Patriot it has to be agreed to quickly to keep us safe. Do not add or subtract from this bill, we know what is good for you. Fuck them. ---
**Author:** ![SmartAleq](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/smartaleq/32/163_2.png) [@SmartAleq](https://boards.straightdope.com/u/SmartAleq)\ **Post date:** [September 22, 2008, 6:15pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/38 "2008-09-22T18:15:10Z")
[QUOTE=Sam Stone] So rather than pointing fingers at the other side in typical hysterical partisan fashion, and **trying to blame the ‘rich’ and solve the problem on the backs of the rich** , it might be more productive to think about this as if Republicans and Democrats didn’t exist - just the problem. [/QUOTE] Bolding mine. Nope, I have a problem with this–the rich are the ones who’ve benefited more than anyone else from the credit default swap market that’s brought us to this mess. The middle class has experienced either flat or declining income over the past decade while the top one percent of earners have seen their net worth increase exponentially–and where did that money come from? You can point fingers all you want at “irresponsible homeowners” but the fact remains that when you deregulate the market to the point where ridiculous mortgage offerings are possible and are even considered to be desirable you’re setting up a situation where lenders are going to aggressively pursue and hard sell potential borrowers into taking on more than they can reasonably afford and under ridiculously unfavorable terms. It’s no different from an unscrupulous mechanic selling framus rod replacements to people who don’t know squat about how their cars work–sure, it would be nice and optimal if everyone knew there was no such thing as a framus rod but it ain’t so and pointing at the person who got shafted by the crooked mechanic is akin to blaming the rape victim because she doesn’t wear a burkha and should “know better” than to walk around unguarded. People rely on professionals to know their shit and be advisers and the mortgage industry abdicated that responsibility and railroaded unaware buyers into disadvantageous loans in order to maximize their own profits, pure and simple. They got mega-fucking-rich doing this. As to taking homeowners to task for defaulting, well what the fuck else CAN they do? The bankruptcy laws have been changed such that regular folks can’t just declare bankruptcy and restructure out from underneath their debt so they just walk away. I find it ironic that megacorps can go bankrupt in a hearbeat and dump all their obligations on us but we can’t do the same to them. Right now, Senator Barney Frank is my hero–here’s (in part) a couple of his suggestions for fixing this situation in a more equitable fashion: > [@](#): > > The middle class has really been under assault. Since President Bush has been in office, nearly 6 million Americans have slipped into poverty, median family income for working Americans has declined by more than $2,000, more than 7 million Americans have lost their health insurance, over 4 million have lost their pensions, foreclosures are at an all time high, total consumer debt has more than doubled, and we have a national debt of over $9.7 trillion dollars. > > While the middle class collapses, the richest people in this country have made out like bandits and have not had it so good since the 1920s. The top 0.1 percent now earn more money than the bottom 50 percent of Americans, and the top 1 percent own more wealth than the bottom 90 percent. The wealthiest 400 people in our country saw their wealth increase by $670 billion while Bush has been president. In the midst of all of this, Bush lowered taxes on the very rich so that they are paying lower income tax rates than teachers, police officers or nurses. > > Now, having mismanaged the economy for eight years as well as having lied about our situation by continually insisting, “The fundamentals of our economy are strong,” the Bush administration, six weeks before an election, wants the middle class of this country to spend many hundreds of billions on a bailout. The wealthiest people, who have benefited from Bush’s policies and are in the best position to pay, are being asked for no sacrifice at all. This is absurd. This is the most extreme example that I can recall of socialism for the rich and free enterprise for the poor. > > In my view, we need to go forward in addressing this financial crisis by insisting on four basic principles: > > (1) The people who can best afford to pay and the people who have benefited most from Bush’s economic policies are the people who should provide the funds for the bailout. It would be immoral to ask the middle class, the people whose standard of living has declined under Bush, to pay for this bailout while the rich, once again, avoid their responsibilities. Further, if the government is going to save companies from bankruptcy, the taxpayers of this country should be rewarded for assuming the risk by sharing in the gains that result from this government bailout. > > Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should: > > a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue; > > b) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and > > c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies’ stock goes up. Why in hell should the rich bastards who caused this mess with their unbridled greed be allowed to get off scott free? And why, if this is such a total emergency, is Paulson balking at the very reasonable requirements we taxpayers are asking for, of accountability, transparency, a share of the profit if/when this is turned around, reasonable accomodations for individual homeowners to restructure their mortgages on better terms to reduce the risk of default? Could it be that it’s a manufactured crisis? A forced emergency calculated to stampede Congress into writing a blank check with no bottom to it? We did this after 9/11 and look what that got us–trillions lost in Iraq along with countless lives, warrantless wiretapping, the rescinding of _habeas corpus,_ the reworking of _posse comitatus_ to allow American military forces to be used against the American people on American soil–nope, there comes a time to draw a line in the sand and acknowledge that we’ve been fooled multiple times with the same tactics but there has to be an end to the politics of fear and I sure as shit hope this is it. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [September 22, 2008, 6:20pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/39 "2008-09-22T18:20:07Z")
> [@Lantern](#): > > Is there is a list of the top recipients of lobbying funds from the mortgage industry with party affiliation? I mean Dodd may well be the top recipient but if ,say,8 out of the top 10 are Republican then that would tell a pretty clear stor In general it’s probably the case that Republicans were relatively friendlier towards financial deregulation and the financial innovations that helped bring about the crisis. > > Fannie and Freddie may have gotten caught in the crisis but they weren’t the prime movers behind sub-prime loans or mortgage-backed securities. This crisis was created mainly by the private sector. It’s an age old story which goes back centuries to an era when governments were much less interventionist: financial innovations, crazy risk taking with leverage, asset-price bubbles followed by the inevitable bust. The reason why a lot of financial regulation exists is because of the hard-won lessons of past disasters. Top 10 recipients of money from Fannie Mae and Freddie Mac: 1. Chris Dodd (D) 2. John Kerry (D) 3. Barack Obama (D) 4. Hillary Clinton (D) 5. Paul Kanjorski (D) 6. Robert Bennett (R) 7. Tim Johnson (D) 8. Kent Conrad (D) 9. Tom David (R) 10. Kit Bond (R) Three Republicans, Seven Democrats. The top five are all Democrats. If you add in PACs and individual contributions from employees of those firms (although I’d question whether employee contributions amount to influence), the numbers look a little more balanced, but Democrats still collected 57% of all monies donated by Fannie and Freddie. Source: [OpenSecrets.Org](http://www.opensecrets.org/news/2008/09/update-fannie-mae-and-freddie.html). ---
**Author:** ![SmartAleq](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/smartaleq/32/163_2.png) [@SmartAleq](https://boards.straightdope.com/u/SmartAleq)\ **Post date:** [September 22, 2008, 6:21pm UTC](https://boards.straightdope.com/t/market-bail-out/464333/40 "2008-09-22T18:21:06Z")
Crap,[forgot the link](http://www.sanders.senate.gov/news/record.cfm?id=303313)to Sanders’ article… [Previous page](https://boards.straightdope.com/t/market-bail-out/464333.md?page=1) [Next page](https://boards.straightdope.com/t/market-bail-out/464333.md?page=3)