To save the US economy - Republicans turn to a tribunus plebis??!

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Ah, that's somewhat different from a liberal. Libertarians do share some issues with liberals, but there are some real differences as well. I had thought that Ragusa was referring to the "New Democrats;" they are much more pragmatic than true liberals, like myself, and supported deregulation as much as the Republicans did.

I'm more of a Nader-type liberal, which represents a far less popular type of liberalism here in the US, one which has wanted more government oversite rather than less.

http://www.nader.org/

 

I thought I had explained the difference in political terminology between Europe and the US, several times even. When we Europeans speak about liberals and you yanks dont think it fits toss it around as in Europe liberal is on the right side of the political spectrum. If you study politics there there is no such thing as libertarianism among the classical isms. What Americans call "real" conservatism we call liberalism and what you call liberalism we, well to be honest we call that liberalism as well as the democrats can't really be called socialists but you should get the point. Discussions would be much easier if we shared one set of political terminology. As I see it and as I have been thought the economical political spectrum goes from socialism on the left to the liberalism on the right but I think here is the snag for many people on "moral" questions such as abortion or various other social issues the line is from the liberal on the left to conservative on the right. Liberal is, at least around here, the philosophy of basically the state minding things as little as possible. This is all a tangled mess though so it is no surprise that people sometimes get confused especially considering the fact that most politicians are all over the place with their opinions. This is all quite off topic though.

Chandos, you seem to be what we here in Europe would call a social democrat (democratic socialism) as am I. In most Western European countries power shifts between social democrats on one side and liberals and conservatives on the other. Sadly Social democracy never caught on much in the states so your divide is between liberals and conservatives where both parties firstly have no big ideological differences when it comes down to the basics and secondly a lot more weight is put on social issues (abortion, gay marriage, religion, race issues) maybe because that is where the big differences are between the two parties.

 

Chandos,
Morg it right. A neo-liberal is an advocate of an barely regulated or unregulated laissez-faire free market. You find those in the GOP ('government is the problem') as much as in the Democratic Party.

Many Libertarians are in that sense even more hardcore and go into the direction anarcho-capitalists. They're more on the Ron Paul wing of the GOP or in the Libertarian party. What is confusing things is that in the public discourse in the US the term 'liberal' is abused, mainly on the right. We Euros, of course, use it right The neo-liberal's archetypical antagonist in Europe would be the social-democrat.

 

Ok, back to the issue, now it seems like everyone wants to jump on board. The Treasury Department (read the White House) want's to be able to buy up loans and securities on non-housing related items (like cars, big-screen TVs, etc.) while some liberal groups and democrats (but I don't know how wide-spread it is) want to extend it to buying these things right from the tax-payers. What, is the Fed going to forgive all debt in the US with a wave of it's magic want entitled 'Taxpayers' Dollars'? Personally, I almost want to say let AIG and Fannie Mae and Freddie Mac and all the others go under. Why is the US economy so heavily based on loans (aka debt) anyway?

Also, I'm still waiting to hear confirmation or contradiction that the Clinton Administration passed regulation requiring banks to extend loans to poorer families.

 

Well, you won't find any of those here any longer, not after the meltdown. The deregulation movement has been pretty much discredited, now that the American taxpayers are about to own the country's largest insurance company. The principle of deregulation was not a bad idea on the surface, but in practice it appears that oversite is badly needed.

Regarding the term "liberal:" it does appear to be used very differently here than it is on the other side of the pond. Sorry for the misunderstanding. But most everyone understands that conservative pundits and talkingheads have little credibilty once they start tossing the "liberal" tag around. When they use the term "liberal" or "liberal groups" (whatever those are supposed to be) the term becomes fairly meaningless.

 

AS for the mortgages on housing and real estate, the solution is simple:

1: Buy these mortgages to keep the financial institutions afloat. Pay better then the hedge funds, but not so generous as has been suggested in this thread. 70 cents on the dollar will keep them afloat but make the execs think their policies through more carefully.

2: Claim these assets by whatever means necessary. Evict the squatters, arrest the drug dealers, put the addicts into rehab, whatever has to be done.

3: Recondition the properties for whatever use is needed. If the house is re-salable, do it. if it needs to be demolished, do so and sell it as a vacant lot. Most of the goal will be to recover the money spent on the buy out. Hell, you could even hire unemployed people to work on fixing the places, thus creating more jobs!

 

Paulson didn’t ask for oversight the 700 billion dollar bail because it would have 'presumptuous' of him, as if asking for the money in like a day with virtually no debate is supposed to be normal.

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Far from avoiding “presumption,” Paulson’s plan released last weekend explicitly denied any review at all of his actions:

Ah, indeed: The proposal didn't mention congress, and thus didn't explicitly exclude congress - which presumably means Congress was to have a significant role Now congress is iirc only two more weeks in session before the elections, which means the administration can pressure them on blessing Paulson's plan before time runs out, because, after all, the US are in a crisis, and time is of the essence! Don't think! Vote! Never mind that apparently the administration has been sitting on this for weeks (and that certainly has nothing, nothing at all to do with the coming election). Imminent threat! Urgency! And Bernanke warns of recession if bailout is not approved. Don't think! Vote!

So the plan is to save the American economy, but without the price to pay for bubbles? Isn't this how a free market works, cycles of boom and bust?

The most cynical take of Paulson's plan I heard so far is this one, that is basically a screw-up-and-get-richer scheme:

The derivatives market is an overinflated bubble. A large part of it is sliced and diced mortgages. The problem is: What is the mark-to-market value of the derivatives? Obviously the financial sector wants the highest value possible. The financial sector already pulled the profits from the mortgages at the front. Those who didn't yet do not have the patience or time to wait for the mortgages to extinguish themselves in the traditional manner. Until the derivatives are valuated the public will not know whether the financial sector is ill-liquid or insolvent. Considering the panic, it's probably the latter.

If I were a Wall Street banker I would push for the Paulson Plan because it will pay triple.

1. First, I already collected up front on the securitization of credit.
2. Second, I get as much for my bad paper as the outgoing Republicans can take from the treasury.
3. Third, the Democrats after their ascent to power will bail out struggling homeowners. Of course, I will have taken my money and re-purchased the bad paper for a realistic, rock bottom price from the Treasury just in time for the Struggling Home Owners Act of 2009 or 2010 and cash in on it again.

Sadly, I find it entirely plausible.

 

This entire thing sickens me. I am ashamed of the President and Congress for even considering such a massive bailout. I purchased a house I could afford. I got a mortgage I could afford to pay. I didn't make stupid investments in securities that were risky. Now my taxes are going to be used to fix everyone elses greed and idiocy.

I want to be clear, when I say greed I'm not talking about the "mythical fat cats" on Wall Street only. They are being demonized as the public and media love to demonize somebody. The people really to blame are the public that made stupid and greedy homebuying decisions rather than prudent ones.

If I was in charge, I would let it all rot. The way I see it the following would happen. There would be a lot of foreclosures. I don't consider foreclosures that bad of a thing. Yes, people lose their houses, but that means they move into something they can afford (like an apartment). Real estate prices go down and new people purchase the foreclosed properties and hopefully they do it a lot wiser. The people who lose value on their homes, but don't sell will suffer a paper loss, but a paper loss is better than a real loss. We may lose some banks and investment houses, but nature abhors a vacuum and new banks and investment houses will fill the void.

I am disgusted.

 

The fat cats are responsible for giving out loans to people who could not afford it though. The greed is everywhere but for once I kinda agree with you that people should take responsibility for their actions. It seems to that Mr Average Stupid Joe will have to take responsibility while the demonized Fat Cats will walk unscathed away probably even with a profit.

 

Snook,
aiming at pushing the economy, the Fed is responsible for lowering the interest rates to an extent that the so-called 'Fat Cats' were able to make extremely cheap offers for loans and credits to the 'little people'. Unlike in America, in Europe the central bank's goal is monetary stability, period, a thing the ECB inherited from the Deutsche Bundesbank that produced the rock stable Deutsche Mark (a result of the German trauma of the 1923 Weimar Republic galloping inflation). In America, basically everybody believed in the cheap money, and that affects not only the little people who made unwise decisions. There were a lot of unwise decisions being made all over the board.
I's not just the mortages: Bad credit card debt is another big piece of the problem. The average 'revolver' contributed as well to it as the mortage taker. The huge structure of bubble debt created by unlimited trading of derivatives rests on consumer defaults. This is not just a few reckless home buyers. What about financing for consumer products? To put it quite pointedly: It's a nation that collectively has made a point of living beyond their means and that manifested itself in their economy.

I have written before that this is socialism. I withdraw that. Socialism is public ownership of the economy. What is being socialised are losses, but that's about as much as the American taxpayer's is involved. He is not at the negotiating table.

Paulson's bailout will not even be fully administered by the Treasury because they don't have the man- and brainpower to do so. Paulson will, he has to, enlist the aid of the wreckers who conjured up the mess in the first place. He will retain Wall Street firms as advisors to decide just how to cut deals to value and mop up Wall Street's dubious paper. There are to be no limits on executive compensation for the firms that get relief, and no equity share for the government in exchange for this massive infusion of capital. Keeping in mind that these firms still represent their shareholders and their interests that's a sobering prospect. Under Paulson's plan they regulate themselves, and take care of their profit interests (accounting firms conducting the more profitable consulting business as well was one of the things that led to conflicts of interest that led to the accounting scandals) much more direct and effective than it would be possible through lobbying. Better still, they get their debt paid for by the taxpayer, and even write the taxpayer a bill for this courtesy. I'd say that's an opportunity too good to turn down.

What I see in this is is not Socialism but, if anything, a step towards Italian style corporatism (to give you the idea).

 

Ragusa, in that article, they specifically call it a contingency plan, i.e. they drew it up before the s**t hit the fan because it was possible that it would. Can you imagine proposing this two months ago?

"Yes, Americans are paying record prices for gas and we're just getting into hurricane season in the Gulf, but we also want you to approve the total buyout of these companies in case they go bad, by taxpayer dollars, of course."

I actually imagine Congress would have passed it then, because they have just as many friends on Wall Street and in banking as anyone else in politics.

Here, we agree 110%. It can't be said more clearly. The American economy became based on debt, that debt was intentionally extended to as many people as possible (reasonably or unreasonably), and our society has glorified living beyond your means. We've even developed a huge industry around getting people out of debt (started several years ago). THEY MADE A PROFIT! Greed has become the national sin, not because everyone did it, but because enough of us did. I say let it crash and burn! If at all possible, make sure the lenders crash and burn as much as the borrowers.

I'm just glad my family lives by the old principle: 'Neither borrower nor lender be.' If we don't need to get a loan, we don't. Houses are one thing, but that's it. No loans on cars, none on furniture, none on appliances, etc.

 

You are exactly right, Ragusa. In fact, there are many who share your view of how this administration operates. The power of fear appears to be the means of persausion for this bunch:

http://www.msnbc.msn.com/id/26858746/

I still have a bad feeling about this bailout. Again, GWB is sticking the taxpayers with another huge bill to pay. Countdown quickly to November, when these guys can take a hike....

 

You forgot to include the Democrat controlled Congress in your list of who is sticking it to us taxpayers.

 

this is maddening! You mix up who's beating you now with who has done bad things to you before. It's not so that because of the latter the one beating you right now is better. Stop thinking in those us-vs-them templates. It'll lead you nowhere. In fact, your line is utterly silly.

Yes, there is bipartisan responsibility for this. So what? There is is the responsibility of the party that ruled the last eight years on top of it. Now who is to blame? The one who made silly decisions first, nine to sixteen years ago, or the one who lived with them for eight years, did nothing but in many cases topped the Democratic decisions and deregulated further? You overlook that Paulson's bailout bill is a Republican creature, and a particularly sleazy and questionable piece of legislation.

If the D's let themselves be suckered into voting for it, only then they too will have to bear co-responsibility for the Paulson bill. Naturally, if they vote against it they will be accused by the R's to be responsible for the mess, because they hindered the Republican saviours from doing their job! Bah. From an R point of view they have responsibility anyway. Awesome electioneering material.

 

See I completely disagree with you on this. It wasn't the R's who bought things they couldn't afford. It wasn't the R's that loaned money to people who couldn't afford to repay the loans. It wasn't R's that repackaged the loans and sold them as investments. Lastly, it wasn't R's that then bought these investments without understanding them and realizing how risky they were. Who was it, it was all sorts of people.

Now I will agree with you that it is an R that proposed this bailoutapalooza, but if it passes it will be a D and a R joint issue.

As to the madness, silliness, and Us vs. Them mentality comments; forum rules prevent me from responding.

 

Do you not you think that a sitting government has a responsibility to govern? If that's not the point, what do you need a treasury secretary for, or secretary for the Economy or whatnot? What I bemoan is an unwillingness to govern over the financial markets. While that applies to the D's before, I have stressed that neo-liberalism had/s bipartisan support as long as it appeared to work, so it certainly applies to the R's as well.

I may get you wrong, but you make it sound as if the current crisis either was an accident for which is nobody responsible, or of course something the R's inherited from Clinton - and for which anyway, R's bear no responsibility what-so-ever. Sorry, but I do not buy that. They inherited it seven years ago. The R's then had the chance to do something in those last seven years, but they decided that would not be necessary. The housing bubble didn't come out of the blue. I have been reading about it coming two years ago, if not earlier. But the attitude was clearly that the holy market would fix itself. On the part of the R's and the administration to not regulate was a conscious decision. And for that the current administration has nobody to share the responsibility with.

I think this is a good image: They were in the driver seat, but refused to steer, relying on that the vehicle would find the way on it's own. Alas, it didn't. It hit a wall. Damned be the previous driver!

 

Ragusa, what you're forgetting is that there were attempts to do things about it (for example by McCain and Co. in 2005), but they got shot down. In the 2005 case, the vote was a party-line split, with Dems voting against and Reps voting for. Guess who won. Now I won't say for a second that the Reps have no responsability, but to say that they've sat on it for seven years is total bull. On top of that, your claim that the Dems are only the ones that got us into it, and that they haven't done anything since isn't holding water, either. The Dems are the ones that want to expand this buyout bill to the general public.

 

The Repulicans controlled The Congress AND the Presidency until the mid-term elections in 2006. I'm not sure what you are arguing here....

 

But it was government deregulation of the housing and mortgage industry that made all of this possible. The majority of the deregulation took place between 2001-2003, when both the White House and Congress were in Republican hands. I will concede that no one put a gun to people's head and made them sign the loans. The people who were flipping houses for quick profit I don't feel sorry for in the least. But other people were genuinely suckered into these lousy deals, and perhaps these loans would not have been made if there were better oversight like there was prior to the deregulation.

Just think about it: Why did it take this long to have a subprime mortgage crisis? It was because prior to 2003 there were regulations that effectively prevented people with low income and/or poor credit histories from borrowing the amount of money required to buy a house. It's not that lenders just so happened to all become sleazy and unscrupulous all at the same time. The laws changed, and lenders changed their practices to make the most money from the rules that were in place at that time, just as you'd expect in a free market economy. From that standpoint, this isn't solely the lenders fault either, as this was enabled by poor policy decisions. There's plenty of blame here to go around.

If it was in 2005, it would be the Republicans that would win a vote split down party lines. They controlled the House and Senate at the time.

 

Aldeth, I don't think it was the Reps' deregulation that did it. This was going on for much longer than that. It seems to have been the Clinton administration that started it and then the loan companies realized they could make real money on a housing bubble doing this and get away with it. Deregulaiton just didn't fix anything.

The vote wasn't an exact split, there were some Reps that voted against it, you'd have to look it up to see exactly, but it was heavily party-decided.