It's Time for Paulson to Cut the Crap and Do His Job
Just about every economist who supports bailing out the banks thinks that taking an equity stake through a direct infusion of capital is the way to go. While Secretary Paulson had pushed for his buying bad assets approach, he is now playing Hamlet and flirting with the idea of going the equity route.
This is not the time for high school drama. Doesn't Paulson remember his comments from the last two weeks when he told us that the economy would collapse if Congress didn't act immediately? Those statements were not true, and obviously Paulson didn't believe them, since it has now been a week since he got his bill and we still don't have even the outlines of his plans for buying bad assets.
We could harp on the bad faith shown by the administration in using unwarranted fear to force Congress into hurriedly passing the bailout bill. We could also harp on the horrible media coverage on this issue, with the media acting almost as an appendage to the Bush administration in its efforts to increase public support for the bill.
But the immediate issue is to get the Treasury to actually do something to help the economy. That means using its $700 billion in the most effective way possible by directly injecting capital into the banking system. What will it take to get Paulson to move?
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Suppose Amway to increase profit decided to allow customers to buy on the promise of payment.
Product would flow of the shelves ... the sales force would double just to deliver ... accounts receivables would burst with anticipation of record profits until ... that first default.
Realizing the whole structure was in trouble Amway would turn to(in this analogy) the customer and ask for 700 billion dollars to bail them out.
And this makes sense because ... we're Amway damit ... we're too big to fail.
Actually this delay is because he's finally thinking instead of panicking. He has made the statement that most if not all of the bail-out money will come back to the taxpayers. Now he realizes that it won't, if he dumps the funds into the Wall Street banks, as much as 50% of those funds will be lost. Worse those lost funds will go for rescuing those who caused this mess.
The best route is twofold: make money available to local banks so they have the funds to loan to individuals and businesses. The second and most critical is not to buy equity in troubled banks but to purchase those foreclosed assets at their present value. The speculators caused this mess and the speculators are the ones who must suffer the loss. By offering to purchase mortgages at present values and offering those mortgages at their current value back to those who were foreclosed will do much to rescue the current housing market. But that purchase at current values must be for a limited time. After the initial purchasing is done, a second purchasing should be offered at 80% of current value.
If Paulson follows his plan born in panic he will cause an actual recession or even depression. The bottom line is he now realizes he panicked and in turn panicked the administration. That initial plan was a disaster and he needs to come up with something superior or this country will be in a serious depression.
To correct this article, I submit the following: The Media works for the Corporations as does the Government. What we have to fear is Fascism not Socialism as the Corporations pretty much run everything and will continue to do so. Wake up America.
Paulson is doing his job as he sees it; protecting himself and his friends who authored the current debacle from negative consequences. The bill that he presented to congress was a another his "vehicles",. It would have done nothing to allow all the bad paper he and his cronies created to be flushed out of the system.
Fortunately that didn't fly.
No one abroad has a lick of faith in him and we shouldn't either.
What's needed is a no confidence vote from Congress and new treasury secretary who isn't part of the problem.
You may be on to something here. No one who was involved in destroying the system should be given a free pass and that includes Barnie Frank, who has been Chairman of the House Finance Committee and his significant other was a big dog at Frannie Mae; Chris Dodd who has been in charge of the Banking Committee in the Senate for the past two years. The two of them could have clipped this crisis if they had been alert. Instead the two of them, along with Obama have been sucking up thousands of dollars from these two companies. It won't do to blame Bush - for once he had very little to do with the problem and may have been one of the few in
washington calling for oversite (from the Republicans and during the last two years from the Demovrats)
Same story, same book. The Bush administration has gotten its way repeatedly by crying "Wolf," it's amazing to me that the Democrats continue to fall for his "The sky is falling!" BS. How did Congress get such chickens**ts running the show as Harry Reid and Nancy Pelosi? Makes me wonder what Bush & co. have on them, what they've threatened them with. Nothing this regime has done has been on the up-and-up. Why do the Dems (and the media, for Pete's sake) continue to believe that they'll ever tell the truth? Paulsen's original 2 1/2 page bill gave him unfettered power with no oversight. That was a sure sign that it was BS. Typical BUllSHit. We need to replace a few Democrats in high places, too.
Paulson's a reporter, not a participant.
Two things concern me here--one, that the worst-case scenario I anticipated is true, that the Bush cronies are forcing retirees and the overextended into selling assets at below market rates, in order to launder drug and other ill-gotten money.
Second problem is that Obama's connection with Bill Ayres worries me far less than Obama's connection with Warren Buffett. Buffett commands major campaign funding, and Obama's lead in campaign funds can't all be attributed to ghetto gangsters, liberals, and the black middle class, no matter what the GOP says. Buffett has the knowledge, skills, and compatriots to collude in manipulating the market in precisely this manner, and I wouldn't put it past him. Why? Escalating group health costs which he may want to shuck onto the taxpayers? Obama's soft on illegal immigration and Buffett's Southern factories are crammed full of Hispanic employees. And, of course, the final profits involved will sweeten the game.
Very interesting, I never put two and two together with Buffet before. Now you really have me thinking, I bet your right, Buffet is behind the big money for Obama. The thing is, why does he want Obama to win so badly? I bet Buffet had a lot to do with this stock market crash too, exactly at the time that McCain was leading in the polls? Interesting isn't it.
http://www.newsmeat.com/billionaire_political_donations/Warren_Buffett.php
M'kay littlepitcher, here is Buffet's Campaign contribution list. Looks like he's with Obama about $9600 in four donations, the last of which was the end of March. BUT------$25,000 + or- to the DNC.
Buffet considers Barack Presidential, like he did Bill Clinton. If he has ulterior motives, they may not be akin to the one's in your imagination. LOOK ---------(0-0)---------at all the others!
Clinton knew how to work well with almost all the people. A good President has to fair with all peope rich & poor. epublicans are for the sristocracy. Think about it. You have to be rich to even run for office. Ths is wrong, money should not count. They should put a cap, but not a minimum.
The logic here is beyond bizarre.
Sick. I know Warren Buffet. Years ago I wrote him an 8-page letter with an idea for business investment. I am just a middle-class mom who reads a lot. This 75-year old billionaire wrote me back, himself. No one else I contacted did. He didn't take up my idea, but he was very complimentary and respectful, complaining he just didn't have time since he was already so busy with so many things at 75 years of age! I am married to a 69-year old who barely gets out of his pajamas each day, so I was impressed.
Warren Buffet earned his money the old-fashioned way, by building factories that actually employ people and produced products. He didn't try to get rich quick off of other people's money. He worked hard for fifty years or so, and still does. He didn't waste his money on fancy spa vacations and mcmansions. He still lives in the same house he bought in the 1950's in Omaha, NE.
He is smart, conservative, and budget-conscious. He is exactly the kind of cool headed experience we need advising our leaders now.
When the stocks fell--he went and bought Goldman Sachs and GM, because he is smart and buys when everyone else sells.
This is a good, decent man. Stop looking for scapegoats and accept some responsibility for this mess. We are all culpable. Have a mortgage, or a car loan? You are living on borrowed money.
I don't know the "In's and Outs" of the Financial world either, but I know enough to realize that if I loan my brother $700.00 because he gave me this sob story that he is going to be kicked out of his house in three days unless he pays his mortgage. then I find out he went to the Casino and blew some of it on the slots, I'd be damned before I'd give him another dine, and I LOVE my brother!!
Most of us have sense enough to realize that! (ala A.G.I.) None of them deserve another dime!!
I still believe that if they had given an infusion of cash to local banks, then they could loan money to individual's in local communities to boost local economies, then some good may have been done.
The ones who the tax dollars come from get no help and SURPRISE, the Bail out is not working because it is not helping main street.
The best thing the Average American can do is use CASH, and let the credit card companies go to Hell!!!!
Franky its simply a case of the chickens coming home to roost... this is great opportunity for the citizens of this country to TRY and wake up ... why is it OK to have socialism for the wealthy elites, but capitalism with absolutely NO safety net for the rest of the populous ??
NO public funds should be handed over without stock certificates and options for more at the same price (isn't that what THEY would demand from us ??? )
Why would ANY sane country need to spend 51% of its GDP on what is laughingly called "defence"??
(we are just 5% of the worlds population, yet spend more than the rest of the world combined on this idiocy ... who, exactly benefits ?????? ..and who foots the billl ???)
The courageous, wise and insighfful founding fathers of this country set up a system of checks and balances which have now been totally eviscerated ... freedom, liberty and the persuit of happiness can only be achieved by truly free individuals.... we are a nation of serfs ... in debt up to the eyeballs due to being constantly bombarded and conned by shallow and totally erroneous values ... consume consume comsume ....
An education system that teaches one critical thinking might be a good place to start ...
and 'religious' values that allow one to become aware of the magnificance of the conscious living system that sustains us would be another ...
Clearly Dean Baker doesn't know what he's talking about. I love it when uninformed pundits who don't know a damn thing start nitpicking the details about the markets and the financial crisis the world is in. I'm no fan of the Republicans but both Bernake and Paulson are doing everything humanly possible to avoid the mother of all depressions.
Ladies and Gentlemen, the United States is in a sorry mess. We can squabble about who's responsible for this situation some other time. But now is the time to come together to solve this mess in the best way possible. And in case you didn't notice it is the equivalent of thermo-nuclear war when nuclear bombs are exploding all around us, or the equivalent of a force 5 hurricane which is obliterating the financial system.
All I am saying is that now is not the time to squabble and point fingers. America and the world are in the throws of a catastrophic financial melt-down. If Paulson and Bernanke are at a little bit of a loss as to what to do, keep this in mind. Fixing the financial mess is akin to trying to construct a house in a category 5 hurricane.
If they're at a "little bit of a loss" as to what to do, then why the hell did they have a meltdown and carry on that if they didn't get the money RIGHT NOW then the sky will fall? What, you find it acceptable to say "I have no idea what we should do first, but I'm positive I need you to give me complete and unfettered access to obscene amounts of money to do it?"
George Bush is cursed. A string of money losing businesses was capped when he persuaded the good people of Arlington to build him a stadium and give him as well a couple hundred acres of land for development around it. It seemed the only way this could fail was if baseball, the national sport, passed out of existence. Then, baseball passed out of existence with the season cut short and the world series cancelled. Nobody could say Bush was altogether the blame since the lockout was the choice of a vote among 25 owners, but one could say, this was the Bush curse.
Now, as his administration comes to its end, we see America suffering from his curse. Things can get worse: Soon, he will enjoy a presidential pension, and the only way his pension could diminish is if the country went so broke that its money was worthless. It should seem, you can count on it.
NO, pointing fingers is EXACTLY what we should be doing while everyone is STILL PAYING ATTENTION so that we don't have to keep reliving this every hundred years or so. GREED is what has put our country and economy in this position and middle and lower-class American individuals will end up with the bill for years to come. IF somehow, our economy is able to recover from being stripped bare by the upper 1% without everyone in the country being on the street, we need to make a pact once and for all that this will be the REAL NEW DEAL and we are done with greed forever.
I THINK PAULSON SHOULD BE FIRED!!!!!!!!!! GET SOMEONE IN THERE THAT ACTUALLY KNOWS WHAT THEY'RE DOING!! HE IS PITIFUL.
Perhaps Mr Paulson is in meeting with the all knowing S. Palin. It will be worth waiting for, and waiting and waiting.
I can tell you what I think shouldn't be done. A couple of days ago John McCain said he thought the government should use a portion of that money to buy up the shylock lenders bad mortgages at full mortgage value then turn around and rewrite government mortages for the same properties at current market value.
In other words the banks and subprime lender would get the full amount of the loan instead of the current market value it is now worth. Meanwhile the homeowners in the process of foreclosure would then have a new mortage at todays market value.
So the lowlife lender gets more than a bailout he gets to screw the taxpayer too. Meanwhile the home owner who has diligently paid his mortgage in good standing gets his home devalued. This plan is just plain wrong.
The plan should be reversed. The government (taxpayer) should buy the mortgages at todays market value which would amount to approximately what the lender could recover if he could ever sell the property in this market.
The homeowner in trouble because of the shylock loan should get a new government loan at a low fixed rate with the standard 30 year conventional mortgage in the amount of what they actually owe.
That way the value of the home helps the entire housing market get back up and nobody suffers a loss except the bad lender guys.
EleanorAnn, you haven't truly thought this through. I agree that the lenders have to pay for their bad judgement and take a loss when the homes are revalued to actual market value. Actually, those who designed these loans with disregard for the likelihood of repayment have perpetrated some sort of fraud and should face jail time. However, the homeowner who has the principle of his mortgage and the interest rates reduced gets an unexpected windfall. His home is not truly devalued since he doesn't immediately sell it, but can merely hold on at less expense or sell later when prices might have risen again. This is the point; it is about sustaining property values by keeping the owner on board to maintain his home and his neighborhood.
I can see that those who kept up their payments and do not profit from the program may feel ill used. Creating a neighborhood of empty houses would hurt them much more. They should then feel ill used because they would be at hazard from fires and rats and ugliness all around them.
I'm sure you're right, billw, but I still agree with EleanorAnn. So what's wrong with giving the homeowner the advantage on this one ? Isn't it about time that middle America comes out ahead for a change ? Why does it have to be so "fair" as you put it ? Wall St and corporate America will always win. How about a "win", albeit miniscule, for the little guy ?
Your right, McCain had a very good plan, but people don't understand it because of the way it has been spun.
Americans should not close their senses to Senator Maccains insincerity and inconsistency. Americans cannot bo fooled. Today he defended Obama at town meeting as a respecful man and an achiever, while at the same time running a negative campaign ad linking Obama to Terrorism. He tries differnt things to win the election and not to find solution to the recent economic problems.
I think Paulson has done the job that he was put in office to do and done it to the extreme satisfaction of the people who put him in that office, which of course doesn't include we the people.
"We could harp on the bad faith shown by the administration in using unwarranted fear to force Congress into hurriedly passing the bailout bill."
I appologize for harping on "the bad faith...unwarrented fear to force...", but I have to! How many times can America fall for the Republican Party's Henny Penny, The Sky is Falling Routine! I was so P.O.'d when congress signed the bailout bill, because I knew it was just another scare tactic. Lord only knows what America has signed away with that bill! What are we on now, Red Alert or Orange Alert? I've lost track, but this administration has me doubting every word that comes from their lying mouths.
Makes me wonder how our Democratic leaders could be so flaming NAIVE. They've been burned by anything W, yet they keep sticking their fingers in the fire! We have the worst Dem. leadership in my lifetime (over a half-century)! I wish they'd give their positions to Dems who have some balls (and ovaries), so something could get done. What a waste of time they've become!
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