Tin Foil Hat in Crazytown: Why the Bailout Failed

No, this is savvy analysis Jazz. I confess that I have been so wraped up in Democratic hype that they are as much self serving as any Republican.

That they would sacrifice their economy and country to win an election is a staggering idea. They had better hope that meme does not take hold.

Yes, every day we don't do something, confidence fails in the US and the stock market fails. However, I do think that the situation is very dicey and both dems and republicans have real and tangible reservations about hasty allotments of money to causes that may not work.

We need an interim plan until after the election.

If we get the Clintons on board with Obama, the stock market will soar right back up again. Isn't that weird? But it's true. The world is waiting to see if Americans will vote sanity or cowboy this time around. With the Clintons and the leap-frog terms agreement between Obama and Hillary, the world will see both long and short term stability and will invest accordingly.

Please don't make me say "I told you so."

Nope, it doesn't make any sense at all. Lots of liberal Democrats opposed this plan on principle. Lots of conservative Republicans oppose it on principle. John Boehner is whining that some Republicans were ready to support but didn't like it that Nancy Pelosi said mean things about Bush. LOL.

Pelosi did not sabotage this bill. She delivered as many votes as she could. I would venture to guess that Boehner delivered as many votes as he could too.

It's just there are a lot more conservative Republicans ideologically opposed to this thing than liberal Democrats opposed to it.

If Pelosi wanted to sabotage it she would have done so at the negotiations stage. She allowed the vote to go through and hoped there'd be enough Republican votes to pass it.

I'll take out the pitchforks. :) Basically, as Lit3Bolt says, you are accusing the Democrats of intentionally wrecking the American economy for possible electoral spoils while the majority of Dems in the House voted for it and the majority of Republicans voted against. And the only evidence we have that this party (a majority of whom voted for it) is political cynicism.

Well, Pelosi's very partisan speech -- and I know some Democrats will defend absolutely her right to slag the GOP whenever and wherever she chooses, even before a very sensitive vote -- certainly didn't help passage of the bill.

If Pelosi wanted to pass it, would it not be sensible to assume she would act as a statesman, and dole out credit rather than attacking her opponents?

So one is left with the choice: Pelosi was politically stupid or Pelosi wanted to see this go down to defeat or . . .

. . .perhaps she intends a TOTALLY Democratic bill, that will fulfill all the Democrats wishes and none of the Republicans . . . funding ACORN to the Day of Judgement, that sort of thing. . . and dare Bush to veto it.

I don't really believe that, however.

Occam's Razor would suggest that this failure was just the result of collective stupidity and partisanship on both sides of the aisle. . .instead of a devious plot, that would require far more complexity of calculation than Pelosi is capable of. There is no need for conservatives to start metamorphosing Pelosi into the liberal counterpart of the Democrat fantasy/nightmare of the evil geniuses Karl Rove and Darth Cheney.

Marlowecan: Pelosi's speech didn't change the content of the bill. Anyone who changed his/her vote based on hurt feelings deserves to be voted out of office.

"I'll take out the pitchforks. :) Basically, as Lit3Bolt says, you are accusing the Democrats of intentionally wrecking the American economy for possible electoral spoils"

Thank God the Democrats never accused the Republicans of waging a war and killing 4,000 American troops to win an election.

The GOP scuttles an attempt to patch up the mess the GOP made through their unwavering support of unfettered corporatism. Somehow you make this about Pelosi wanting to maintain Obama's lead? That surprises me from you Jazz. Pelosi said she could deliver 50% of Dems and got 60%. It is not the Dem's fault. The GOP wants to blame Dems for the mess, and like Nero, are fiddling while Rome burns.

Rahm Emanuel has a good take on this HERE.

"This is a situation where a house is on fire. We're going to put that fire out." This, he says "an ideology that says 'the markets know best'... That's wrong. We know that for a fact. In fact the philosophy that 'markets know everything and just get out of the way' has now cost us a situation where the taxpayers are asked to do something because the market can not do it itself. It was an ideology run amok."

It's a plausible scenario that doesn't really match the facts. The Republicans torpedoed this bill, which was only a minor modification of the plan Paulson proposed. From what I read today and yesterday about the bill, there was no poison pill added by the Democrats. It actually seemed far more repugnant from a liberal point of view than from a Republican one.

If Republicans wanted to swiftly remove the economy from the debate, they had the chance today, but they didn't, and they can't seriously blame anyone but themselves.

Three people I would blame for this are Bush, Frank and McCain.

Bush for failure of leadership. Frank has been playing a complicated game with this from the beginning. McCain for showboating, and introducing presidential politics into the whole mess.

Which led Frank to strike back last Thursday night, if folks recall, when he announced he had the votes . . . it was a done deal . . . and it was pointless of McCain to be in Washington. (Folks remember that scene of Democratic triumphantalism? . . . no Republicans were invited to discussions, as no GOP votes were needed . . . As reported by Reuters, Frank had the votes among the Democrats).

I said at the time the timing was suspect . . . Frank seeming to undercut McCain's showboating.

Turns out, Frank didn't have the votes after all.

This is a sorry failure of leadership across the aisle.

In fact, the only leader to come out of this sorry business with any prestige intact is . . . Senator Obama.

Amazing.

Not a credible theory. Pelosi and the Dems have a lot more to gain by looking like grown-ups and fixing the Republican mess than they can by letting the economy tank. Many Dems and no doubt a few moderate Repubs boldly waited to see if the bill would pass by a large enough margin to cover their asses. When they saw that, after subtracing off the consevative Repubs plus anyone in a close race, there would be less than 70% voting yes, they decided that wasn't enough cover and bolted. Maybe Pelosi knew this before the vote was taken, so she got in her licks.
The public hates this bill, largely because it hasn't been sold well. The congressional leaders have been negotiating with Paulson; no time to sell. Who should have? Bush. He hasn't been doing much anyway. He needed to play educator/cheerleader to the public for this, but instead he's dysfuctionally staring at a disaster just like Katrina.

Elyas . . . Especially on complicated, emotive issues, words do matter. People are not abstractions.

In the British House of Commons there are fewer seats then there are MPs. This ensures that, on major debates of interest, the House will be crowded with MPs forced to stand.

I recall a number of Churchill's great debates, even one in the darkest days of WWII when the House was restive after British defeats around the world, and willing to toss Churchill, his words of contrition and inspiration moved the House and saved his leadership.

Politicians are not abstractions, and words matter.

Franky Jazz, I didn't like the bill or more specifically the thought of giving Wall Street 700billion for screwing up. You don't reward bad behavior. I hope I can weather the storm ahead as I hope everyone who was mature in their personal finances will.

As I said in another thread:

I'm sorry, but the consumers should have known not to get a loan they couldn't afford nor understand. I can't believe how many claim stupid now on how the ARM, balloon, interest only, or worse loan they purchased work, I'm sure some of the loan officers didn't go out of their way to explain how the loan would work but if I was going to sign my name to a contract I'd want to now what I was in for.

That's why I insisted on a 30year fixed when everyone was hopping onto the wagon, look who's loosing their home now? Nor me!

Also the corporations that were handing out these loans like candy had to known they were playing with fire. The claim that they "were only doing what consumers demanded" is just as much BS as this bailout plan is. These corporations didn't want oversight, they wanted a "free market" so no bailout for them as it's just the "Free market" working.

I had a friend who worked a Waco as a loan officer, she left over a year ago because management was more interested in closing a certain number of loans than making sure they were closing GOOD loans. All about quantity not quality.

Too bad the top execs aren't really feeling the downturn in the market.

"That surprises me from you Jazz. Pelosi said she could deliver 50% of Dems and got 60%. It is not the Dem's fault. The GOP wants to blame Dems for the mess, and like Nero, are fiddling while Rome burns."

Hey, read the title again, Green. But seriously, answer the initial question. If it's that good of an idea and fixes something that the GOP is entirely responsible for, why would Pelosi only commit to delivering 50%? Seriously... step back a minute from the "make it look good for the Dems" POV for a moment and answer me these few things. So it's the GOP's fault. The Dems are here to rescue us. How could it fail? And second, (more to to the point) please explain how torpedoing this bill is bad for Pelosi's party in November? Are you one of the few who never even thought that the GOP would use WAR to win an election? And shall the independents among us just assume that the Democrats are NOT "just another bunch of politicians" and might use an economic crisis for their benefit? See? I don't take either side as saints. Frankly, I could believe anything at this point and it wouldn't shock me if it was true.

"Thank God the Democrats never accused the Republicans of waging a war and killing 4,000 American troops to win an election."
We're not going to play the group game are we, where I'm held responsible for anything any liberal or Democrat has ever said, while I hold you responsible for, I don't know, Bob Barr's entire political history? I only disagree with this post. No more, no less.

Tim_H said: "Bush. He hasn't been doing much anyway. He needed to play educator/cheerleader to the public for this, but instead he's dysfuctionally staring at a disaster just like Katrina."

This is very true. I cannot believe Bush's performance through all of this. Perhaps he does not understand it at all. Perhaps he is clinically depressed. I don't know.

But he is not acting as a president. It is like the ship of state is rudderless.

Marlow, how immature of them. Sure Polsi is an idiot for saying what she said so I'll just link this:

Barney Frank, the top Democrat on the House Financial Services Comnmittee, demanded: "Because somebody hurt their feelings, they decided to punish the country?"
http://edition.cnn.com/2008/BUSINESS/09/29/us.c...

I'm not sure the passage of this bill wouldn't be "punishment" to the country but either way I thought what he said was funny.

Public sentiment (among those who chose to express their sentiment to the extent of telephoning or writing to their Congressional representatives, at least) has of course been overwhelmingly against the bailout. I still don't know how Pew managed to find a majority supporting it.

The bill was bad and it's great to see it fail. The original Bush-Paulson plan was too quick and too short, this bill too quick (little time, "crisis" BS) and too long (100+ pages?).

Yes, Pelosi was partisan and stupid, as she often has been. It may be due to misplaced but revealing ambition, too. This is a warning to wiser minds about what an Obama White House _and_ Dem Congress could unleash upon this nation.

Now, do the Dems want to try to get an even worse (they'll call it "better") bill passed without GOP approval? Go ahead, bail out all the deadbeats in a massive welfare gesture to buy votes before November. Go ahead. I suppose they've managed to make their childish "statement" if they pass a bill even if it's vetoed and there is no override.

* * *

"The consumers should have known not to get a loan they couldn't afford nor understand"

They were often childish and downright greedy, wanting something too good to be true. Now the Dems and activists want these people's unpleasant consequences to be removed. (At decent and normal, better people's expense, that is.) It's another great moral hazard, more cradle-to-grave-security risk-and-resonsibility-free living, subsidized or outright bought at better people's expense. That's true for buying out mortgages outright, imposing interest rate freezes (or a mere "moratorium," ahem) on ARMs, all that welfare-parasite vote-buying appealing-to-childish-Dem-voters BS.

Go ahead, Dems. You have the chance to write your own bill, _your_ way this time, as Robert Kuttner said on NPR. That's a _better_ bill for parasites and vote-buyers, to be more explicit and honest. Go ahead, if you can get a presidential veto overridden. (Bush is an idiot if he doesn't veto such a moral monstrosity and grand welfare Dem giveaway of the taxpayers' money such a bill constitutes.)

Rambie said, "That's why I insisted on a 30year fixed when everyone was hopping onto the wagon, look who's loosing their home now? Nor me!"

The problem, Rambie, is that a lot of people on 30 year fixed mortgages who managed their money relatively well are likely to be in trouble now as well. If the banks stop lending completely, many fiscally conservative investors are going to lose their jobs and not find another. It's not their fault. But they are not spared because of it.

"the consumers should have known not to get a loan they couldn't afford nor understand. ... Also the corporations that were handing out these loans like candy had to known they were playing with fire."


*** You're not losing _your_ home, but you are going to be losing money: you will be "asked" to "contribute" to the kinds of "investments" that "we" "need" to make to keep the idiots in their homes they should be renting or vacating. ***

Many if not all the real crooks are going to start to be exposed and will live at public expense elsewhere (hopefully not limited to Club Fed).

I've agreed with much of Marlow's comments on this chain, such as Pelosi having a deaf ear for statesmanship with her speech. However, Marlowe, I was surprised when you though Obama came out well on this. What did you have in mind?

Good points Jazz. If that was Pelosi's game, then she "won". The majority of Dems supported fixing the mess, while the GOP had FAR from a majority supporting it. From a political perspective it looks more like a Republican problem, as the party that has been viewed as the financial adults continues to prove that idea wrong. Remember this was a Bush administration proposal, backed by his Sec of Treasury. The amended bill also had White House and Treasury support, and the support of GOP leadership. How can Dems possibly be blamed for the deal going down? Do you think the original "blank check" bill would have had strong GOP support?

That said, this mess doesn't hurt the super-rich long term, many of whom will profit more handily the farther the market falls. It hurts the rest of us. As with Rambie, I never thought going for a temporarily cheap ARM was a good idea (though Greenspan pushed it, probably hoping to save the banks). While others were getting second mortgages based on inflated valuation, I was paying down my (30 yr fixed) mortgage as fast as I could.

Fact is, easy stupid credit extended from greedy lenders to equally greedy and uninformed citizens got us here. Risk assessment on both sides failed. So now we're all in the crapper together.

This entire financial problem shows big, nasty flaws in our financial system AND the insanity of crisis partisanship. No one should have blamed no one. Just said we couldn't get a deal done and we're going to work together to come to a consensus. Instead street gang politics prevail.

I should say that I do blame Dems as well as Republicans on this. Some, as Patrick says on another post, on both sides disagree with the bail-out for legitimate (possibly correct, possibly incorrect, but legitimate) reasons. I have no problem with their votes against the bill. But if there are people on either side who think the bill is needed to avoid a severe depression and they didn't vote for the bill for political reasons or out of fear (they didn't want to lose their jobs), I have little sympathy. She (or he) who puts their own job over the hundreds of thousands that could be lost in a Depression do not deserve the job at all. I just disagree with Jazz that this was a deliberate attempt from Democratic leadership to hurt Americans for possible political points. We'd need to see some evidence of that.

Pacatrue said: "Marlowe, I was surprised when you though Obama came out well on this. What did you have in mind?"

Well, presidential candidates are quasi-leaders . . . with presumptive, rather than real authority.

Senator Obama has, wisely, kept himself out of the disaster zone as much as possible. He has said that since he does not have the power or the authority to shape the debate in Washington - he is only a junior senator, after all - there is no point to his being there. While this is politically self-serving, it is also true.

In contrast, McCain showboated, and joined the rest of the crew of the dysfunctional ship of state in Washington . . . complicating an already messy business.

While Senator Obama is a politician, he has not overtly or cynically made use of this crisis for his political ends as has McCain et al. When asked how it will impact his plans, Obama was honest enough to say he did not know.

However, in contrast to Bush -- who makes me nervous whenever he talks about this, as he seems very agitated as if caught in headlights or something - Senator Obama treats this crisis seriously, but not hysterically. He inspires more confidence than the other leaders.

Damn you, Pacatrue :) I cannot believe you prompted me to write all that. I don't even support Obama (or maybe I do . . . )

Ack . . .

*** You're not losing _your_ home, but you are going to be losing money: you will be "asked" to "contribute" to the kinds of "investments" that "we" "need" to make to keep the idiots in their homes they should be renting or vacating. ***

DLS, I can't tell if you're disagreeing with me or not.

Pacatrue: The problem, Rambie, is that a lot of people on 30 year fixed mortgages who managed their money relatively well are likely to be in trouble now as well...

Agreed, that's why I said, "I hope I can weather the storm ahead as I hope everyone who was mature in their personal finances will."

DLS: "Now the Dems and activists want these people's unpleasant consequences to be removed. "

I thought it was the Bush Administration that got this ball rolling with a 3-page outline. Look DLS, there is plenty of us all over the political spectrum that do not like this bailout idea there is no reason to throw insults around.

I wouldn't go as far as you in ascribing what would really be pure evil to Nancy, but I wonder if Marlowe had it right here:
. . .perhaps she intends a TOTALLY Democratic bill, that will fulfill all the Democrats wishes and none of the Republicans . . . funding ACORN to the Day of Judgement, that sort of thing. . . and dare Bush to veto it.

Because reportedly Nancy instructed her whip to basically release the Dems- which is obviously a choice to let the GOP own the defeat of this bill. Why do that unless her intention is to go back to the plan without the concessions that were made to get GOP on board (esp, adding the ACORN slush fund back in.)

IOW, my theory is that when they saw that they weren't going to get enough GOP votes, her calculation was that she isn't going to make her vulnerable members take ownership of a potentially toxic bill unless there was something in it for them. And as an added bonus, by letting this one go down and subsequently letting the Dow take a nosedive, she'll get to ratchet up the partisan blame game even more. And of course Boehner was foolish enough to giftwrap it for her and Barney when he said that they'd probably have gotten enough GOP votes if Nancy hadn't hurt everyone's feelings.

Anyway, we'll find out soon enough when we see the next move on the chessboard.

Apparently the republicans aren't satisfied with the horrible legacy they've created this century and have to make it even worse. Party first. Conscience nonexistent. Country hosed.

CStanley, your version is pretty plausible, actually.

::shudder::

Rambie said: "Agreed, that's why I said, "I hope I can weather the storm ahead as I hope everyone who was mature in their personal finances will."

I hope you will, Rambie. The personal aspect of your comment was interesting, as most folks here seem to debate the political aspects.

To be honest, today I am sort of anxious for the first time, even though I am pretty liquid.

I wonder how other people here actually feel about this crisis.

Are you concerned about your own situation? Are you getting more or less anxious?
Or does it all seem an abstraction occuring at a level where people talk in terms of billions of dollars?

Take a look at Galbraith's plan. Any thoughts?

GreenDreams, you just scared the hell out of me. What if we don't really need to do anything near what we're being told is required to save the cheerleader and save the world?

Marlowe, I'm quite concerned. I have absolutely no debt at all, so that's great. And I have one of those 3-6 month emergency funds. But after that, things dry up pretty fast. I would have had about 10 years into my 30 year fixed mortgage at this point, but we sold the house so that I could pursue an advanced degree. If we lose our jobs, as a renter, I'll be out of a place to live. I might have a backup in that my parents own their residences, and I assume they'd let us go there instead of move on the street, but for someone who moved out of the parent's house 1 month after graduating college, it's rather humiliating to have to move back 15 years later should the economy collapse.

Anyway, my main personal worry is that, because I am a renter, I have to keep income rather high. There's no just having enough to eat here. Incidentally, my 1br apt in Hawaii is more than the old mortgage in Tennessee.

CStanley, who is reporting that Pelosi instructed her whip to release the Dems?

Greendreams, I can't truly assess Gilbraith's ideas, but the one thing that seemed to be missing is the issue of the liquidity crunch. If we can't keep enough capital flowing, a lot of businesses with real assets will go down, making the problem worse than it needs to be.

Well, pacatrue, I think that may be the genius of his suggestion. If we alleviate the panic and insure bigger depositors, we head off a run on the bank, so to speak, and with the higher insurance for depositors, money can flow into those banks specifically to make loans. And alleviating the credit crunch could reassure Wall St enough to return some confidence in the market. In any case, it makes more sense than the "cash for trash" idea of just turning taxpayer money over to failing banks. He makes a great point that many of these institutions are not insolvent.

BTW, I have accounts at WaMu. FDIC kept me from pulling my funds out when I first heard they were in trouble. It can do the same for bigger account holders if the insurance limit is raised.

Greendreams, Galbraith's plan sounds intriguing. But I have to say, I find trying to truly evaluate any of the alternatives proposed is a bit above my pay grade. I wonder how true that is of the congresscritters we have invested with the responsibility to make decisions. I suspect it's quite true in most cases.

Rico, I'm not sure where I read that, but if I find a source I'll come back and post it. Even if there wasn't such an action during today's vote, she's already as much as said that she wouldn't pass this bill without GOP support.

CStanley: Rico, I'm not sure where I read that, but if I find a source I'll come back and post it.

Please do.

Even if there wasn't such an action during today's vote, she's already as much as said that she wouldn't pass this bill without GOP support.

Honestly, are you complaining or just finding fault? Wasn't that the whole idea? It was supposed to be a bipartisan bill, right?

Not only do I think this post is wrong, I think it's probably impossible. Getting the entirety of the democratic house to secretretly throw their own bill? We're talking about hundreds upon hundreds of reps and staff handling a secret that would be a political A-bomb if exposed, which it probably would.

She delivered 60% of her party on a highly controversial bailout, that's pretty darn good.

I am not sure I buy the purposely scrapped the bill tag too. She seems more likely to be guilty of poor statesmanship.

As for myself, I am becoming more concerned. I am contracting at a steel company right now, and water cooler rumor has it that a competitor has had to resort to charging customers 50% up front on orders because their revolving credit to buy from suppliers and offer terms is gone. I heard the same type of thing is thing for some franchise owners where in they might have issues making payroll as credit terms are drying up. Neither of those things sounds good, since we are a very credit dependent economy.

As for my family? We did a 30 year fixed mortgage and paid points to boot. The idea was that at 4.86% with tax write offs on top, it was better to invest the rest. The later never really materialized however, as we are mostly tech investors and have not seen much appealing over the last year or so and have been sitting mostly in cash. That may turn out to be the a very lucky move, given the fire sale prices that seem to be approaching in the market.




Similarly my wife and I are largely in liquid cash and have been for about a year now.