OK, get over the horrible book aesthetics of yesteryear:
Looks like a relevant read (no pun intended on the author’s name).
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Filed under: books, offsite, political-economy
CEO Michael Hyatt’s blog post about “the wealth Wall Street can’t touch” is a great reminder of what really matters.
His title, however, reminded me of an editorial I ran across today. I wonder if we could take it further. Maybe Wall Street simply does not have the earth-shattering impact it wants us to think it has. Casey B. Mulligan, a professor of economics at the University of Chicago, says exactly this: “The non-financial sectors of our economy will not suffer much from even a prolonged banking crisis, because the general economic importance of banks has been highly exaggerated.” This certainly jives with what we are all experiencing, doesn’t it? We’ve seen the economy slowing for months and maybe years but no one has seen a sudden cataclysm that matches the stock market nose dive. In fact, today I heard a radio commercial for cadillacs assuring listeners that they had plenty of cash to loan. (I’m not sure I think that is a great thing, but there you go.)
This claim also reminds me of the fact that the Great Depression did not begin immediately with the stock market crash of 1929, but occurred later (after the government took steps to fix the economy. And the 1987 crash, Mulligan writes, didn’t cause a Depression despite being of similar proportions.
(I just saw this post by Robert Higgs telling of receiving another offer of credit and also finding it hard to find evidence that “no one is loaning.”)
I’m no independent expert on these matters, but this scenario does work with the hypothesis that the government lies. The first lie was that the economy is great when it was in fact in a recession with the financial sector especially ready to self-destruct. Then the second lie was that unless $700 billion was put at Paulson’s disposal we would have martial law on Monday.
Still I wonder if Mulligan’s scenario is too rosy. If America has been borrowing money to buy iPods, then that has to cost something.
Whatever it would cost, we can be pretty sure that the government is going to try to make sure that those most responsible don’t pay it. Better Main Street go to Hell rather than Wall Street lose its place in Mammon Heaven.
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Filed under: political-economy
U.S. May Take Ownership Stake in Banks
WASHINGTON — Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.
Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.
The Treasury plan, still preliminary, resembles one announced on Wednesday in Britain. Under that plan, the British government would offer banks like the Royal Bank of Scotland, Barclays and HSBC Holdings up to $87 billion to shore up their capital in exchange for preference shares. It also would provide a guarantee of about $430 billion to help banks refinance debt.
The American recapitalization plan, officials say, has emerged as one of the most favored new options being discussed in Washington and on Wall Street. The appeal is that it would directly address the worries that banks have about lending to one another and to other customers.
This is a dream, right? I’ll wake up and none of this will have happened.
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Filed under: political-economy
I was supposed to go to Nashville today, but Charis broke her arm. She had to go under general anesthetic and get the twice-broken bone set. She’s doing finr.
But I don’t have much time to write anything. And frankly, I don’t have much to say except to rant about the same things as yesterday and the day before.
It is easy to get real upset at the double standard, where SNL does all sorts of parodies and scores points on GOP-related person, but saying anything about Democrats, especially if true, results in immediate self-censorship without much notice.
Still that sort of thing can distract us from the real story, where a bunch of Goldman Sachs multi-millionaires get to give billions to their friends at the expense of everyone else.
As I said yesterday, I tend to see the election as a big distraction from the real story (especially as the two parties seem to be twins as far as I can hear from their alleged debates). But it is still worth nothing that Goldman Sachs has at least approached Obama. Again, why no investigation into these things?
The closest thing I’ve found to a real conflict-of-interest story is this story by the Telegraph. How does a lame duck President so widely hated get away with so much? I don’t get it. It is not like this is some great secret:
Goldman Sachs a Good Bet Posted Wed Sep 24, 09:20 am ET
Posted By: Mark Vickery
Perhaps more than any living person, Berkshire-Hathaway’s (BRK.A) Warren Buffett embodies the “when he talks, people listen” cachet of the old E.F. Hutton ads. Today, Buffett announced his firm is purchasing at least a $5 billion stake in elite Wall Street investment firm Goldman Sachs (GS). Reportedly, warrants to purchase another $5 billion of GS common stock have also been secured by Berkshire.Predictably, this has had a favorable affect on Goldman shares in the pre-market, up over 2% before the opening bell. This comes just days after Treasury Secretary Henry Paulson has announced a federal bailout program to rescue hard-bit Wall Street firms, of which Goldman is one on a lesser level than many of its peers.
In fact, Paulson was former chairman of Goldman Sachs, as was Clinton Administration Treasury Secretary Robert Rubin, who now appears to be a main financial advisor of presidential candidate Barack Obama. Buffett’s move seems to directly acknowledge the importance such a close proximity with former Goldman brass will have on which companies will most benefit from the Wall Street bailout.
The cronyism is so obvious, why no questions about it?
If Bush’s venture seems like a strange idea for “saving the free market,” it might be worth remembering what sort of business Bush has profited from.
Finally, here’s a great piece on what is going wrong with the economy and why the bailout can’t work.
ADDENDUM: My brother sent me a link to another piece about the crisis showing Bush’s own handiwork is involved.
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Filed under: Tumble
Is anyone else as angry as I am that the media is devoting so much time to the election? As if that is the story right now?
Well, I said yesterday that I felt like the world was trapped in an Ayn Rand novel. Today we learn that the person who will distribute the money is Neel Kashkari. You can’t make this up.
And then this is Bush today:
Bush emphasized that the program must be effectively designed and not rushed into action.
“It’s going to take awhile to restore confidence in the financial system,” he said. “But one thing people can be certain of is that the bill I signed is a big step toward solving this problem.”
Bush signed the bill into law after Congress approved it last week.
We don’t want anything rushed into action? We just got a Shock & Awe Bailout shoved through Congress and now we don’t need to rush? If we’re supposed to be so careful and cautious now, why not in the crafting of the bill?
In fact, according to this clip from Cspan, Congress was told there would be martial law without the plan.
In the meantime, now that the deed is done, those who betrayed voters are not willing to say that they voted as they did because they were scared out of their minds. And that is probably true since they waited until they got a load of pork handed to them. But they insist that the Bill was now “imporved” and that this was the result of years of “deregulation.” Right, that’s why Europe’s banks are tanking–because they were so infatuated with Reagonomics.
Back in July, Robert Novak pointed out the Goldman-Sachs cronyism that Paulson seems to be able to get away with. But has there been any sign of interest in the mainstream media since them now that the stakes have gotten far higher? The wonderfully-named Kashkari is from Goldman Sachs. Why hasn’t anyone in the press shown an interest in hard-hitting, follow-the-money journalism. Surely there is one reporter out there who isn’t so busy campaigning for Obama that he could try to investigate the story of the century?
It is not like it would be hard. Bloomberg reported, “Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.” That was the lead sentence in a story with the same headline. It mentions in passing, “ Paulson is a former chairman and chief executive officer of Goldman.” So is his appointment, Kashkari. But will anything be said about the propriety of this? What the frack is wrong with people?
In the meantime I reproduce below the stupid letter you get from turncoat Congressmen who voted for this pork-stuffed monstrosity.
October 6, 2008
Dear MR Horne:
Thank you for sharing your concern about the Emergency Economic Stabilization Act of 2008. As you know, this legislation was considered by Congress this week in order to stabilize the U.S. financial and credit markets. I appreciate hearing from you and welcome the opportunity to respond.
Like you, I am deeply troubled by the current economic situation in our country. Years of de-regulation of the financial markets, coupled with lax oversight by this Administration of these institutions, has had devastating effects on the lives of millions of Americans. While I do not support paying billions of taxpayer dollars to bailout an industry that made poor decisions, the risk of taking no action at all is too great to our economy, and to the financial stability of all Americans. For this reason I voted for the financial rescue package.
The Emergency Economic Stabilization Act of 2008 will unlock the credit market that is essential to both individuals and businesses. Without a properly functioning credit market, small businesses risk not making payroll and individuals will have increasing difficulty obtaining car loans, home loans, student loans, as well as other forms of credit upon which we all rely. This legislation will require the government to develop a plan to reduce foreclosures as it buys troubled financial assets, allows the government to purchase other types of mortgages to unfreeze the credit market, and allows the government to purchase certain troubled assets from pension plans to ensure individual retirement security.
The economic rescue package considered by the House is a vast improvement over the original proposal put forward by the Bush Administration. It will insulate the American people and Main Street from the crisis on Wall Street and protect taxpayers as we stabilize the markets. Without decisive action, experts believe the situation will only worsen, credit markets will freeze and Main Street will suffer. Working Americans will not be able to take out basic home and car loans, small businesses will not be able to make their payrolls, and credit card interest rates will soar.
Following the House vote, on Monday, the stock market plunged sharply, costing the American economy $1.2 trillion. Americans across the country instantly saw their 401ks, pension plans, and college accounts lose value, making the need to take decisive action even more clear. This legislation is not just a bailout of Wall Street; it is more importantly a buy-in so that we can turn our economy around and help hard working Americans.
The Emergency Economic Stabilization Act of 2008 considered by Congress includes great taxpayer protections by ensuring taxpayers are repaid in full with Wall Street making up the difference. Also, the bill gives taxpayers a share of the profits of participating companies and puts taxpayers first in line to recover assets if a company fails. A major concern I raised was the lack of oversight contained in the original plan proposed by the Administration. That is why I was happy to see the bill considered by the House includes strong independent oversight and transparency. Also, the legislation would help homeowners change the terms of their mortgages to forestall the two million projected foreclosures that could further cripple our economy by reducing the principle of the interest rate or lengthen of time to pay back the mortgage. Finally, the bill restricts the compensation of executives. The CEOs whose irresponsibility caused this crisis should not receive taxpayer subsidized golden parachutes.
I believe it was critical for Congress must act to prevent serious economic pain for more Americans. I am hopeful Congress can work in a bipartisan manner to pass a plan that will ensure the American people and Main Street are insulated from the crisis on Wall Street.
Again, I appreciate hearing from you. If I may be of further assistance to you on this or any other matter please do not hesitate to contact me.
Maybe when I have energy I will fisk this piece of garbage. If you feel inclined you can do so in the comments. I’ve run out of energy.
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Filed under: political-economy
Note: believe it or not I had a much longer post planned for this with all sorts or ranting. But I’m getting sick and need to get to bed so this will have to do.
It doesn’t have the same ring as “The Night of January Sixteenth,” but the recent event of the $700 billion “bailout” (or “investment”) honestly feel like we are stuck in the tragic portion of an Ayn Rand Novel. Rand’s best talent was her portrayal of lame bureasaurian suits as the villlains of her tales. With Paulson getting on his knee to Pelosi, it makes even her melodrama credible.
When the bill was defeated in accordance with the overwhelming majority of Congress’ constituents, Peggy Noonan called it “a repudiation of the political class.” True, and the subsequent war on the few Congressmen who actually voted according to the will of the nation was the political class’ repudiation of the people. Ultimately, it is not the voters who matter, but the people who pay the government to do what they want. ”When it is a question of money, everyone is of the same religion,” said Voltaire, and that is all the more true with politics: When it is a question of money, everyone is of the same Party. (And while I’m mentioning Voltaire, he also said, “In general, the art of government consists in taking as much money as possible from one part of the citizens to give to the other.”)
In this case (as in almost all instances of political takings, the ones getting to loot their fellow citizens are those who have always been wealthier and feel entitled to stay that way at the expense of others. All party brand dropped away and we were left with the Reactionary Elite v. Everyone Else. As one blogger summed up:
although those who support the bailout may call themselves Republicans or Democrats, they are reactionaries—reactionaries in the sense that they long for a world where entrenched wealth gets to keep it forever. After they destroy America, those who now are poor or middle class need but stand by and hope for a few handouts. They want a world of old Europe that our Founding Fathers fled and overthrew. Thanks to our Founding Fathers, there is no nobility in America, or permanent titles of privilege, or permanent grants of wealth. In America, many families have made great fortunes; and then their children and grandchildren have squandered their fortune. Contrary to popular belief, if you look back 100 years, there are great turnovers among those who constitute the wealthiest in America.
The bill passed we are told, because it contained “sweeteners.” Yeah. Like this one:
The bailout bill also gives the Internal Revenue Service new authority to conduct undercover operations. It would immunize the IRS from a passel of federal laws, including permitting IRS agents to run businesses for an extended sting operation, to open their own personal bank accounts with U.S. tax dollars, and so on. (Think IRS agents posing as accountants or tax preparers and saying, “I’m not sure if that deduction is entirely legal, but it’ll save you $1,000. Want to take it?”) That section had expired as of January 1, 2008, and would now be renewed.
Starting with the so-called Anti-Drug Abuse Act in 1988, the IRS has possessed this authority temporarily, with occasional multiple-year lapses. A 1999 internal report said the IRS had 126 “trained undercover agents” working in field offices at the time. This is the first time that such undercover authority would be made permanent.
Sens. Max Baucus (D) and Chuck Grassley (R) have been pushing to make it permanent for a while, claiming (PDF) in April that: “Undercover operations are an integral part of IRS efforts to detect and prove noncompliance. The temporary status of this provision creates uncertainty, as the IRS plans its undercover efforts from year to year.”
There’s another section of the bailout bill worth noting. It lets the IRS give information from individual tax returns to any federal law enforcement agency investigating suspected “terrorist” activity, which can, in turn, share it with local and state police. Intelligence agencies such as the CIA and the National Security Agency can also receive that information.
The information that can be shared includes “a taxpayer’s identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer’s return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return.”
That provision had already existed in federal law and automatically expired on January 1, 2008.
What’s a little odd is that there’s been little to no discussion of the IRS sections of the bailout bill, even though they raise privacy concerns. Treasury Secretary Henry Paulson said this week: “I will continue to work with congressional leaders to find a way forward to pass a comprehensive plan to stabilize our financial system and protect the American people by limiting the prospects of further deterioration in our economy.” He never mentioned the necessity of additional IRS undercover operations.
So what grave necessity was addressed by the Bill? The need for the Bush Administration to have complete power over who wins and who loses on Wall Street. In the aftermath of the Bill, the economy continues to unravel, and we suddenly hear that of this $700 billion, all sorts of agencies will be hired to help in spending it. Indeed, a whole new lobbying industry is developing around the office of the treasury; power attracts them like flies.
None of this had to happen. But given our fraud-as-policy financial system, it was a matter of when, not if. As one “fringe” economist wrote years ago:
At some point in the possibly near future, perhaps in the next recession and the next spate of bad bank loans, it might dawn upon the public that 1.5 percent is not very safe either, and that no such level can guard against the irresistible holocaust of the bank run. At that point, ignoring the usual mendacious assurances and soothing-syrup of the Establishment, the commercial banks might be plunged into their ultimate crisis. The United States authorities would then be faced with two stark choices. One would be to allow the entire banking system to collapse, along with virtually all the deposits and depositors in that system. Since, given the mind-set of American politicians, and their evident philosophy of “too big to fail,” it is certain that they would be forced to embrace the second alternative: massive, hyper-inflationary printing of enough cash to pay off all the bank liabilities. The redeposit of such cash in the banking system would bring about an immediate runaway inflation and a massive flight from the dollar.
That is exactly where we are headed. This bailout will only take this crisis and turn it into a real apocalypse. The only practical lesson I can see is that democratic cronyism creates a situation in which it becomes rational to bring about economic suicide. One can’t even accuse the looters of being selfish since they are so obviously arranging their own destruction.
A couple of points about GOP stuff: On the negative side, it becomes quite clear that war and international bloodshed have become the only real feature of Republican identity. One can demand all sorts of government intervention in the economy as was done in the Weekly Standard and by many at the National Review, and everything is just fine–just so long as you support the fruitless wars and troops abroad. Nevertheless, on the positive side, it was great to read Michelle Malkin, and to hear Rush Limbaugh, fight this thing. They have both annoyed me on occasion, but on this issue they were stellar and steadfast.
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Filed under: Tumble
In the first video, one of Peter Schiff’s critics gets poetic about how wonderful we are. After talking about how precious our money is so that it motivates people in sweatshops, he says that everyone wants to live here.
If that is a sign of American economic superiority, then it is time to realize that it isn’t true any more.
Immigrants are finding they are better off at home.
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Filed under: political-economy
I’ve got a book coming out (I think) that goes into the details, so I won’t talk here about the so-called “TrooperGate” and the bizarre political theatre being acted out in Juneau.
I do wonder though if Alaska will be worse off for Palin’s absence. It looks as if there was yet another “good old boy” network that needed to be cleaned out–the state troopers and their union who think ten days suspension of one of their own for a series of offenses including illegalities is too severe and get it cut in half. It would be interesting to try to research what sort of behavior the Alaskans have been trained to expect from their state troopers.
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Filed under: News, culture & value, political-economy
And so I cam across for this application for the Evil League of Evil. I love it! And it seems especially excellent for the election drawing near.
I wish the candidates would apply.
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Filed under: Tumble
Schiff or the Laughers?
Peter Schiff - CNBC - Kudlow & Company - 7/2/2007
Peter Schiff- Bulls & Bears - 12/16/2006
What’s amazing about this is that these people actually sound more ignorant than Republicans in Congress who tried to fix Fannie Mae and Freddie Mac.
Another question: Are we Melnibone? I would think we would be too young for that…..
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Filed under: Video, political-economy
