People are rightfully angry. We are going to borrow more and direct the money into institutions we don't understand, who've been irresponsible.
Voting "No" is a "no-brainer" for the hard-working tax payers. Let the rich suffer for once. "It won't affect me". Let them fail. Direct the money to the people.
The person who I hold in most highest regard, my wonderful, magnificently smart wife has told me many valuable truths, but the best of them today is "If you're faced with a problem, you'd better have the right solution before you complain." A more tightly focused version of the Japanese "Before you fix the blame, fix the problem." In truth there are many versions of this but the heart of them is the same.
DAVID LEONHARDT writes in his Sept 30 article "Lesson From a Crisis: When Trust Vanishes, Worry"
In 1929, Meyer Mishkin owned a shop in New York that sold silk shirts to workingmen. When the stock market crashed that October, he turned to his son, then a student at City College, and offered a version of this sentiment: It serves those rich scoundrels right.
A year later, as Wall Street’s problems were starting to spill into the broader economy, Mr. Mishkin’s store went out of business. He no longer had enough customers. His son had to go to work to support the family, and Mr. Mishkin never held a steady job again.
Frederic Mishkin — Meyer’s grandson and, until he stepped down a month ago, an ally of Ben Bernanke’s on the Federal Reserve Board — told me this story the other day, and its moral is obvious enough. Many people in Washington fear that the country is starting to spiral into a terrible downturn. And to their horror, they see the public, and many members of Congress, turning into modern-day Meyer Mishkins, more interested in punishing Wall Street than saving the economy.
My first point and question: If Barack Obama is not elected President then we will not see progressive change in the country. I absolutely agree that this crisis is not a partisan issue... it is far deeper than that, and has been decades in coming. However, I think we can see that this is not only a crisis but an opportunity for progress. How does the Democratic party act in a tactically smart manner? I am reading that the senate are making changes as we speak.
We, the Democratic Party and clearly Barack Obama, cannot be seen to be taking a back seat, or to be conceding ground to the Republicans. I am concerned that we are giving concessions to get votes to to precisely that. This economic crisis has become THE issue of the campaign, and likely will be for the next 4 weeks.
cont...
It’s not enough to say that markets could freeze up, loans could become impossible to get and the economy could slide into its worst downturn since the Great Depression. For now, the crisis has had little effect on most Americans, beyond their 401(k) statements. So to them, the specter of a depression can sound alarmist, and the $700 billion bill that Congress voted down this week can seem like a bailout for rich scoundrels.
Mr. Bernanke and his fellow worriers need to connect the dots. They need to use their bully pulpits to teach a little lesson on the economics of a credit crisis — how A can lead to B, B to C and C to Depression.
I'm often frustrated by the Dems. I feel that they.. We.. have a great message but terrible ways of saying it. Its what I see with the current crisis and the bailout. Firsly, the word itself is terrible. People are selfish. Why SHOULD WE BAIL OUT WALL ST.? Good point. We shouldn't. Its not a gift, or a loan. Its a purchase. We can be smart or dumb with the process. The smarter we are, the better the outcome.
I have a feeling that the people voting in congress, particularly the senate banking committee have been shown some particularly sobering and catastrophic numbers, and even worse predictions. If "We, the people" had this information, we might even be asking more to be done immediately. Why might this information be being withheld? Its not a state secret per se. Well, because this is a crisis of confidence, at the moment contained within institutions. If it spreads to the public en masse, banks will fall and the FDIC will be overrun.
cont...
Why are we talking about the Depression, anyway?
Almost no economist thinks that even a terrible downturn would look like the Depression. The government has already responded more aggressively than it did in Herbert Hoover’s day. So a Depression-like contraction — a 30 percent drop in economic activity — is highly unlikely. The country is also far richer today, which means that a much smaller portion of the population is living on the edge of despair. No matter what happens, you’re not likely to see shantytowns.
I've read the basis of the alternatives. Essentially changing accounting rules or insuring the risky assets. I have a question. "Where's the beef?"
I can understand how the bailout (actually a rescue purchase if you want to be technical) works. "We" buy real property linked securities. That capital is freed up to lend. Money can start to move again.
The alternatives need.. VERY QUICKLY.. to get VERY SPECIFIC about HOW they work, and why its a better way than the most tangible method. Show how accounting rules changes are not rearranging deck chairs on HMS Titanic Market Failure.
The "Do Nothing" crowd need to get specific about how bad they believe it will get. How little credit will move around. The "So What" crowd need to explain how we can move from a credit culture to a pay-as-you go culture (although I'm extremely skeptical that we can even imagine such a thing... remember we had money lenders aka credit ever since we've had money.)
cont...
But the Depression is still relevant, because the basic mechanics of how the economy might fall into a severe recession look quite similar to those that caused the Depression. In both cases, a credit crisis is at the center of the story.
At the start of the 1930s, despite everything that had happened on Wall Street, the American economy had not yet collapsed. Consumer spending and business investment were down, but not horribly so.
In late 1930, however, a rolling series of bank panics began. Investments made by the banks were going bad — or, in some cases, were rumored to be going bad — and nervous customers besieged bank branches to demand their money back. Hundreds of banks eventually closed.
The conventional wisdom is that a bill much like the failed bailout, but with face-saving additions is coming. Talk is that people have gone on record to vote no, to provide political cover for their reelection, but that more votes, enough to pass, will be gained by changes in the bill.
There has been talk of an entirely democratic solution with a full Dem whip effort. I don't think that is likely at this point. Its going to be a more bipartisan measure. A half measure that no one loves, in other words.
It's unlikely that any of the alternatives have a chance, unless they are written and proven to the congress AND public NOW. That's just political reality.
cont...
Once a bank in a given town shut its doors, all the knowledge accumulated by the bank officers there effectively disappeared. Other banks weren’t nearly as willing to lend money to local businesses and residents because the loan officers at those banks didn’t know which borrowers were less reliable than they looked. Credit dried up.
"If a guy has a good investment opportunity and he can’t get the funding, he won’t do it," Mr. Mishkin, who’s now an economics professor at Columbia, notes. "And that’s when the economy collapses." Or, as Adam Posen, another economist, puts it, "That’s when the Depression became the Great Depression." By 1932, consumption and investment had both collapsed, and stocks had fallen more than 80 percent from their peak.
My last thought is a little hopeful. We're not giving a blank check in this purchase. Its large, yes, but limited, and we have a chance to make better legislation with full control of congress and the executive. Progressive legislation that fixes the root causes. We need to win, however to do so, and we can have a New-New Deal
Please, also, if you are against this bailout, and don't believe that we're really in trouble, read this article. It's one of the best written pieces in the last weeks news elucidating the problem, which as I've said, has been explained terribly.