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Thread: A failure to convince the American people

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    Elite Member witchcurlgirl's Avatar
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    Default A failure to convince the American people

    A Failure to Convince the American People


    The American public on Monday stuck it to the "knowledgeable and sophisticated" elites who warned that without the $700 billion federal financial bailout plan all hell would break loose.

    The House vote, 228-205, was a rejection, for better or worse, by "regular Americans" of the Hobson's choice presented to them by the upper echelons of government, politics, Wall Street, media and others.

    Either:
    Write a blank check for $700 billion, $350 billion or whatever, in the most drastic U.S. government intrusion into the private sector perhaps ever, or at least since the Great Depression, with unknown consequences;

    or:
    live through another Great Depression, with unemployment of "20 percent," loss of homes and other horrors.

    We who hesitate are lost. On top of that, the public was asked to pick its poison immediately, without congressional hearings, extensive public debate or any other accouterments of a democratic republic. The public was required to accept the edict. No look before you leap.

    That an upstart public would flood Congress and the administration with unscripted, immediate and overwhelmingly negative reaction was, itself, considered a disaster of unprecedented proportions. You could read in the faces of the Wall Street types on CNBC and elsewhere their astonishment that anyone would dare defy their wisdom. Jim Cramer, the popular stock guru, expressed it best when he stated that the folks who opposed the deal are "not knowledgeable or sophisticated." As if everyone who disagreed with him is stupid.

    Rant and rave all they want about how the 95 Democrats and 133 Republicans who voted against the package were cowardly hacks genuflecting to the populist rabble, the truth is their vote was courageous. They are the ones taking the risk in a belief that a more sensible, middle-ground position can be worked out; they are putting their chips on the belief that the nation won't go belly up by stopping for a moment to have more debate.

    They aren't the ones who dumped a 110-page bill on top of everyone the night before the vote. After the vote, Democratic House Speaker Nancy Pelosi and the rest of her gang accused the Republicans of being ideologues who couldn't depart from harebrained, free-market notions, while seeming to forget that 95 members of her own caucus would be guilty of the same sin. This is the same Nancy Pelosi who after the vote bizarrely blamed Republicans for a failure of bipartisanship, when, during the debate leading up to the vote, she let loose with a nasty partisan attack totally inappropriate for the quality of the debate. You had to see it to believe it: There was rational debate on the House floor, indeed in a spirit of bipartisanship, and then she comes along blaming President George W. Bush for everything.

    It sure put a damper on the debate. But if turned off Republicans were mad enough to switch votes from aye to a nay just for that reason, Rep. Barney Frank, the Massachusetts Democrat who managed the legislation, was right: Putting personal affront ahead of the national good is ridiculous.

    Easy for me to take shots from the sidelines; as much as I dislike the legislation, I might have voted for it, because I'd be scared stiff about the consequences of no bailout. But in the few short days of debate, I also know that other possible routes are available for addressing the "seizing up" of the credit markets. Among them are accounting-rules changes that would allow banks to keep good mortgages on their books at their face value, instead of deeply writing off their value, thereby strangling the ability of banks to make loans.

    How about the involvement of the Federal Deposit Insurance Corp., which in the past week managed to salvage the assets of two major financial institutions without endangering a dollar of taxpayers' money?

    So, rack up another congressional failure in what seems to me to be the most unproductive legislative session in my memory. Here's a Congress whose public approval ratings are lower even than Bush's. The markets, of course, will spin wildly out of sight, offended by this public uprising. But things will settle down, Congress will work it out.

    Take the word of someone who don't know nothing.

    Dennis Byrne is a Chicago Tribune op-ed columnist. dennis@dennisbyrne.net.
    RealClearPolitics - Articles - A Failure to Convince the American People
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    Elite Member kingcap72's Avatar
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    Nobody likes the idea of a $700 billion bailout. But the people in Congress who are against it should come up with a better plan, instead of just saying 'no I'm not voting for it.' But I think the reason why a lot of people in Congress, and in the public, are against the bailout is because Bush is the one pushing it. And nobody trusts him, with good reason.

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    Elite Member sputnik's Avatar
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    here we go again with those pesky 'elites' telling 'the people' how to think, and having the audacity to want to actually intervene to prevent a financial crisis. don't they know the 'invisible hand' of the capitalist gods will come down and make sure everything turns out for the best?
    I'm open to everything. When you start to criticise the times you live in, your time is over. - Karl Lagerfeld

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    Elite Member witchcurlgirl's Avatar
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    two men who's views could not be more divergent both voted no......Kucinich and Paul....

    When people that are that far apart both vote against a bill, that says a lot about the bill......

    yes, something needs to be done. Is the answer this bill? perhaps not....

    Funny to me that all the bush hater's are now upset that Bush's bill didn't pass though.......guy didn't do one thing right in 8 years, but this time he has it all figured out
    It's no longer a dog whistle, it's a fucking trombone


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    Elite Member sputnik's Avatar
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    ^^^
    that might be true too.
    i just have a problem with the ones that opposed it out of ideological conviction that you must never interfere with the market.
    I'm open to everything. When you start to criticise the times you live in, your time is over. - Karl Lagerfeld

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    Elite Member kingcap72's Avatar
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    Quote Originally Posted by witchcurlgirl View Post
    two men who's views could not be more divergent both voted no......Kucinich and Paul....

    When people that are that far apart both vote against a bill, that says a lot about the bill......

    yes, something needs to be done. Is the answer this bill? perhaps not....

    Funny to me that all the bush hater's are now upset that Bush's bill didn't pass though.......guy didn't do one thing right in 8 years, but this time he has it all figured out
    It's not exactly the bill Bush was pushing. He wanted Congress to give Paulson a $700 billion blank check with no oversight and no questions asked.

    And nobody thinks Bush has anything figured out, but nobody else is coming up with any better ideas other than a bailout.

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    Elite Member witchcurlgirl's Avatar
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    There are other ideas out there......they're just pushing this one through fast......like Iraq....and that worked so well.....


    The Bailout: What Are Our Options, And Why Haven't We Explored Them?

    David Cay Johnston, who won a Pulitzer Prize for his innovative coverage of our tax system, retired this year as a investigative reporter for The New York Times. He is the author of Free Lunch: How The Wealthiest Americans Enrich Themselves at Government Expenses (and Stick You with the Bill).


    Maybe there is a cheaper way out of the credit mess than the plan put forth by Treasury Secretary Henry Paulson, the former chairman and CEO of Goldman Sachs. Any solution that costs less or has a better chance of success deserves serious review before Congress takes an action that will affect taxpayers for years to come.

    The most stunning aspect of the Bush Administration's plan to borrow $700 billion to buy illiquid assets like bundles of subprime mortgages was the initial demand that neither Congress nor the courts could review how the money was used. That arrogance caught the attention of everyone who looked at the actual proposal, angering not just Congress, but Middle America.

    The second most stunning was the lack of alternatives, the my-way-or-the-highway approach that has characterized the two terms of a president who won office promising he was a uniter and not a divider. The lack of options was also surprising since a basic tenet of management theory is exploring al options and this is, after all, the first time we have a president with an MBA, though not the first time we have a Treasury secretary who was head of an investment bank.

    Taxpayers should be troubled that on Capitol Hill and at the White House the talk was about modifying the Paulson plan, not a different approach. They should be just as troubled that most news reporters and TV anchors initially assumed that there must be a crisis and only asked questions around the edges of the plan instead of taking it apart.

    Now several options to the Paulson plan have begun to circulate.

    One is based on how the Swedish government dealt with its own banking panic 16 years ago, a plan that put taxpayer money at risk, but that also gave taxpayers a chance to get their money back when the banks recovered. That plan, relative to the size of the Swedish economy, cost less than half as much as the $700 billion. And that $700 billion could just be a down payment on a bigger bailout if the Bush Administration plan goes awry.

    One of the most intriguing proposals comes from Larry Kotlikoff, a Boston University economics professor who has conducted revealing studies of savings and retirement issues, and Perry Mehrling, an economics professor at Columbia University's Barnard College.

    Kotlikoff is the author of an intriguing new book that challenges widely distributed advice on retirement savings called Spend 'Til the End: The Revolutionary Guide to Raising Your Living Standard--Today and When You Retire. (Disclosure: we have the same literary agent, Alice Martell.)

    Kotlikoff and Mehrling suggest that Uncle Sam get into the bond guarantee business--for a price (actually, prices). They say this would lubricate the system so credit continues to flow.

    Here is why you should be interested: If they are right, it could sharply cut the costs to taxpayers and might even make money.
    The professors note that "despite what we hear that 'no one knows' the value of toxic bonds, there is in fact a market for them, currently barely functioning at distressed prices."

    Bondholders do not want to sell their weakest bonds for a fraction of their value for regulatory reasons (unmentioned by the professors) and because if Congress approves the Paulson plan the price of the bonds is likely to rise since Uncle Sam will have become a buyer of last resort. Indeed, the worst bonds, those that would sell for a small fraction of their face value, may sell for prices close to their face value if the Paulson plan becomes law.

    So how to get bond sales moving?

    "The Treasury would offer default insurance for the roughly five different classes or 'tranches' of bonds sold in the market, ranging from the safest AAA bonds, to the worst BBB bonds," the professors propose.

    "Insurance premiums would be set based on the market value of the bonds just before the crisis hit, and would range from low" for top rated bonds to very high for the worst bonds. And they would let buyers pay in cash or in preferred stock, the kind of investment Warren Buffet just made in Goldman Sachs.

    The professors suggest that instead of issuing preferred stock to the government some banks would pay cash for bond insurance, while others could be loaned money by the Treasury to pay their premiums.

    If Uncle Sam loaning money to banks so banks can pay Uncle Sam an insurance premium seems convoluted, be advised that Kotlikoff, who brain is more akin to bubble-headed alien geniuses than mere mortals, loves complexity.

    He is also half of a different economics team that figured out that our 401(k) system, which arose quite by accident, may cost many people more in taxes than if they had just paid their taxes up front ands then invested for their old age.

    What matters here is that Kotlikoff and Mehrling have put forth an alternative, and one based on market principles. Before borrowing $700 billion, and thus shackling our government for years to come dealing with this debt monster, their idea ought to get a thorough review by Congress and by experts in finance.

    Why hasn't Congress put a call for more alternatives and held hearings on options?

    The Bailout: What Are Our Options, And Why Haven't We Explored Them? - The Plank
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    Elite Member kingcap72's Avatar
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    ^^Some of those alternatives, on the surface, actually seem better than a bailout. But, in the end, I think they may end up having to craft together a plan that's made up of a few different options.

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