The Failure of "Because I Say So"

LONDON -- Over dinner last night, i was trying to explain to a British friend why the majority of House Republicans fled the bailout bill compromise. Reading the polls, it's easy to understand why those with the most hotly contested elections this November were the least eager to sign up for the bill. But, in surveying the wreckage, one fact became clear: the credit crisis was exacerbated by a credibility crisis.

It's easy for Americans to look at President Bush -- he of the 935 lies in the Iraq war runup--and Henry Paulson, the Goldman Sachs-bred Treasury Secretary -- and say, "prove it" regarding the dire predictions of doom if a bailout doesn't occur. As an American typically ignorant of the arcane ways of the financial wizards, what was missing for me in the scare talk last week was somebody who could put the danger in concrete terms: a businessman, say (as opposed to a financier), who could tell me how lack of credit would prevent him from stocking up on new inventory or meeting payrolls. An administration marked by profound arrogance (hello, Mr. Cheney) sent a financier to Congress to demand unprecedented power for a financier, and the scare talk sounded familiar and empty. It's the boy who cried Wolfowitz.

Somehow, if the danger is that real and that near, somebody with a shred of credibility and some real skin in the game has to stand up and tell us exactly what's in the alleged abyss. The administration's failure to understand that fact is telling and profound.

Comments

[mssisyphus]

It is very simple to me why the American people are against this bail out. We have been struggling for years now, they took ten years to raise the minimum wage, which also effects every hourly wage earner, then reluctantly did so, while voting themselves a nice juicy raise every year.

They threw $300.00 at us when the protests got louder and said "Now go away". (most of them pay $300.00 for their ties!)

Now, they are threatening us with the credit market collapsing saying we can't get any more credit. This does not matter as much now since so many Americans watched their credit ruined due to either massive medical bills, getting in over their heads on credit cards just to get by, or the mortgage massacre, yet only when the greed mongers feel the pinch, do they fain concern for the American people.

Wonder why we don't feel sorry for them?? Many American's won't get any of that credit because they have sat by and allowed so many to watch their credit ruined. No matter how much you give them, they are not going to give loans to the millions who now have bad credit.

They are all a joke!!

[apexfork]

Doesn't this problem exist exactly *because* many people got credit that they didn't deserve?

I mean, we can complain about the greedy bankers, but at the end of the day, isn't the crux of this issue that there are bad mortgages on the books? Aren't bad mortgages nothing more than credit that has been extended to someone who didn't deserve it?

[LeftRight]

Yes, you are correct. Many people got credit that they shouldn't have had. HOWEVER, when your paycheck isn't enough to cover your bills, and a credit company comes up to you and says, "You're pre-approved!" what exactly are you most likely to do? I know that I cut my bills back until I could afford to pay the most expensive debts down, and then I got rid of most of them. I suspect that you are also educated enough to know to do that. However, what about most Americans??? They are most likely to simply take the credit and spend until that's all gone.

That's why there USED to be standards about who could qualify for credit, and why most people weren't able to. It's only been since the de-regulations took effect that they've been willing to loan to everyone, regardless of ability to pay it back....

[Michale32086]

Well, here we are...

The Bail Out failed..

The world is still turning..

The USA did not go down in flames..

The Internet is still standing..

Stocks even rose a little..

So, I have to ask...

What's the problem???

Michale.....

[breakfast]

You seem to be arguing that the failure so far is in that we have not been scared enough into accepting the bailout/sellout plan. If only they had done a better job of terrorizing us, maybe we would all just get with the program and not ask so many questions. Questions like: Why go along with a plan that does NOTHING to address the root causes of the problem?

Why accept this bankster bandaid scheme when we all know that major surgery is needed?

[breakingpoint]

I want to know why Paulson said he would recommend a veto to any bill that says the money would only be used to bail out a US citizens and only a US entity, not foreign?

IOW unless we bail out foreign banks and investor he will not approve anything.

Why must the American tax payer pick up the tab for mistakes made by China, France and England?

R- Rep Sherman from CA who is a CPA and on the foreign relation and finance committee
said the money will go, according to the bill and what Paulson demands, to bail out these foreign investors or Bush won't sign it.

Am I the only one who thinks this is pretty big news?

[LeftRight]

"I want to know why Paulson said he would recommend a veto to any bill that says the money would only be used to bail out a US citizens and only a US entity, not foreign?"

For the same reason that bush has said that he will veto any bill authorizing spending for Iraq if it includes timelines. He doesn't care about the troops, he cares about the war. In Paulson's case, he doesn't care about the PEOPLE, he cares about giving his best buddies in the financial "industry" $700 BILLION!!!

[breakingpoint]

“Can’t you understand what’s happening here? Don’t you see what’s happening? Potter isn’t selling. Potter’s buying. And why, because we’re panicky and he’s not! He’s picking up some bargains. Now we can get through this thing all right. We’ve got to stick together though; we’ve got to have faith in each other”.

[GhostOfSchlesinger]

All we've heard is remarks about liquidity in the credit markets and a threat to our paychecks.

Which would scare most of us if only someone took the time to draw the line from . . .

Bad mortgage-backed securities to weakened financial institutions to a reluctance to lend money capital to tighter money and falling consumer confidence to runs on the banks to weaker financial institutions to the potential apocalyptic collapse of the hedge funds , etc, etc, etc . . . World without end, Amen, Amen.

But, even having heard all that, I NEED A PRIMER, for most of it means nothing to me in concrete terms.

One thing, though. It's beginning to dawn on me that WE NEED MORE BOTTOM-UP IN THIS EQUATION.

If bad mortgages are killing us, why not guarantee OUR mortgages, NOT the banks loans. Empower some quasi-public entity to re-negotiate mortgage rates, principles and terms. Create gap coverage for consumers that - via needs analysis - provides payment support during the financial downturn.

Then, via a transactional task on Wall Street - A FINANCIAL TOLL BRIDGE FOR THE SPECULATORS THAT GOT US IN THIS MESS - that lets Wall Street bail out Wall Street.

Just a few thoughts.

[Doofus]

I know it's an oversimplification, but this is true all the same...

By way of a primer...

America is all about Capitalism, which is about taking financial risk.
A mortgage used to be something of an exception, very low risk.
When other investments became less rewarding, mortgages
became more rewarding & more risky. Those of you who
have such high-risk mortgages have now become
high-risk capitalists. Bet you didn't know that.

[apexfork]

How on earth can you justify renegotiation of a mortgage like that? You can't pay your mortgage, you lose your house. It was in the paperwork you signed.

Sheesh. Pay your mortgage or lose your house. If you're not capable of keeping that deal, then rent.

[LeftRight]

Because first of all, it's those foreclosures that are killing the world financial market. Since the banks are taking over the homes, and then they can't sell them, THAT'S what's destroying the CDOs!

Second, because the only sure way to get us out of a depression is for massive govt spending AT THE BOTTOM. This ensures that people will have jobs, money, and food. They will use the jobs and money to buy food and other goods and services, which will help out the ENTIRE economy.

Now, I'm not saying that we need that kind of bailout, I'm not saying that we need ANY bailout. But if we are going to have a bailout, let's get one that costs the least AND gives us the biggest bang for the buck!!

[HereticalPolemicisit]

They in power and responsibility have dissembled themselves into incredulousness. Beyond that, the economy based on the expectations of hyped desires has lost its own internal credibility. Beyond the necessities of commoities, products, and services that maintain life, one would have o have an intimate, even personal knowledge of the borrowe to be confident about endorsing a request for credit.

In GOD we trust is becoming more profoundly a standard as we hear the pitches o the dream and mythmakers crying, possibly for real. "WOLF!"

[CNBCSucks]

The Dems are about to snatch defeat from the jaws of victory with the Senate vote tomorrow. At best, it will cost them in the Senate races and at worst, Obama will lose the election. You heard it here first. I feel ill.

[paixa3]

Actually, I think you may be correct.

[orkranger]

A very simple solution to this "economic" crisis. Instead of giving the fat cats $700 Billion, give the american citizen, who earn less than $50,000/yr, an economic stimulus of ,say, $50,000. Those making more than $50,000 up to $250,000, a proportional amount, say $10,000. The folks in the lower group will spend it on housing, food, new autos, college tution, etc. Imagine how it would help college students pay for school, single parents with a ton a bills, the overwhelmed couple with the outrageous morgage. Instead of a trickle down effect, there would be a trickle up effect. The lower income group would be able to invest in their own future and generate revenue through purchasing of goods. In many cases, this would lead to credit stability and free up indebtness. Sure it may sound like socialism, but there are times when a crumbling society needs an influx of socialism. Besides, if you have two million dollars and lose one million, aren't you still a millionaire? Yes, I would personally benefit from this plan, but so would my bank, my local grocer, the hardware store and and student loans. I know it will never happen, but the idea is nice.

[jms2qc]

Seriously, perfect. Let's even the playing field and help out the economy for the lower income brackets. I say, some of these multi-millionaires should learn what it's like to budget. It might be partial socialism, but it will encourage economic prosperity for those that can never catch up to the big dogs. Trickle up effect, let's try it. Obviously what we have to work now with isn't so great after all. Love the theory.

[apexfork]

Worst idea ever.

[desertson]

Here's my very cynical take on the whole "bailout".........

Let's say Frat Boy George and his Corporatocracy have figured that Johnnie-Come-Lately has NO chance of becoming Prez. They already know the Congress is gone for at least four more years. So, what can they do to prevent the young, brash, undeserving pretender to the throne from eroding the power and treasure they've already amassed?

Easy! Bankrupt the financial and taxation system, scare the beejesus out of the citizens and further impoverish the disenfranchised masses so: 1) No new federal programs can be launched or funded because of the lack of revenue, 2) tie-up the hands of the new Prez so he can only deal with the most basic of citizen's needs, 3) force the new Prez to cut taxes in an endless death spiral as the only way to stimulate the economy out of its liquidity trap, further starving government of needed resources, and 4) use the fear created to further erode the new President's credibility with the public and eventually win back the White House.

Brilliant if you're an evil mad scientist. Sounds like W and Dick, no?

[Star2000dancer]

Just listen to Dennis Kucinich & Ron Paul, they will both tell you the truth. In the meantime...NO BAILOUT, NO WAY, NO HOW!!!! DO NO LET BUSH FOOL YOU AGAIN.

[bestbuddy]

Im going for any 3rd party canidate after I see how much Obama is for it (the bailout)....he is just appearing as a more intelligent sellout...

[bestbuddy]

Yep...mess it up for Obama, also the economy was heading for trouble anyhow....so now when the stuff hits the fan in 09 it will be blamed on congress and Bushy gets a free pass

[neworleanslady68]

Harry, My husband installs and repairs commercial laundrymats in Louisiana and Mississippi. He runs a one-man business and works with a few other owners of one-man businesses. Yesterday, a new coin-op laundry they were in the middle of installing suddenly had the brakes put on by the bank - credit suddenly withdrawn. It IS affecting small businesses.

[Star2000dancer]

Relax honey, congress is onto Bush this time, and the honest & scared congress & senate is on it. Bush sais he was going to sprint out of office. If we can help it, he's going to sprint out in flames.

We may have a credit cruch, but nothing like Bush & Paulson are crying. And Bush caused this with Pelosi, Dodd, Frank, & Bush are the ring leaders. We knew this was going to happen when Pelosi took Impeachment off the table. I've been warning my family & everyone I knew before Bush was even elected.

Too bad the Clinton's are'nt coming in, they fixed this with the othyer Bush. Whatever, just remember: Republicans are for the weathy few, Democrats are for WE THE PEOPLE unless they're blue dogs, or corrupt.. In the meantime the market went up over 4oo points today already, so keep your gold, keep your cash, & vote Obama.

[MagisterLudi]

I suppose you have a convenient excuse why Obama voted YES on Cheney's Energy Bill, YES on Bush's Tort reform to protect corporations; NO to cap Credit card rates at 30%.
Trust me, the change we want is not the change we gonna get.

[conquistadora]

Perot told me that McCain had a gambling problem and he had uncovered details that McCain was bailed out in the late 1980s from a big gambling debt by his wife, Cindy.

If true, it raises a question as to whether McCain's gambling might ever have put him in a situation where he was pressed to repay his debt through Senatorial favors.

An enterprising reporter has to ask Ross Perot if he will acknowledge what he shared with me 14 years ago, and if so, if he will now provide the evidence to back up the assertion. Perot hasn't talked to me since I published my unauthorized biography, so unfortunately, I am not the person to ask. And some reporter should ask McCain, directly, if he has ever had a gambling debt that his wife had to pay off. American voters have a right to know.

[Janelynne]

Harry, you have said it clearly. How is anyone to know what to do?

We get Bush and his cronies telling us that things are dire. Who knows what Bush is selling this time?It isn't as if we can believe a thing they say. When did Bush stop protecting the fat cats. This week?

Then we hear from the Republican Congress. Now here is an entity with zero credibility. These are the authors of deregulation. These guys want to grease their rich buddies and stiff the working man. The Congress is laughable, if you love irony

Next we hear from the main stream media. No education, no information, just spin spin spin. This happened, that happened, uh huh.

There isn't a clean well to go to. Absolutely no one knows what is going on.

[Jenoah2008]

One way to get some idea of the vastness of this catastrophe is to find EuroNews and the non-Americanized BBC World News at midnight, when we are asleep--literally and figuratively. The night before this vote the reports on other markets globally were being produced for citizens elsewhere who at least had to learn geography and some economics before graduating from high school. Our college grads are asked to choose a social science in their core program and flock to sociology, psychology and with a twist of the arm to political science, rarely economics.
Hence we often buy wooden nickels. Knowledge of geography is going the way of Latin. The difference is that we desperately need geography now. Many of us only know of people in other lands, who, must after all want to be like us, or are already like us, exotic or not worth thinking about. All of this while we try to set the pace for globalization. Then, there are the "know it alls" like Lou Dobbs, who know what's wrong with everything and everyone in a general way and shout opinions across the air an cyber space bolstering "Sean Hannity's America." Sean Hannity is the adjective that describes the happy emotive too-tired-to-think bulk of our weary over-manipulated populace.

[frankm]

You're right Jenoah2008. I've been saying this all along. We NEED to truly focus on education if we want to continue to compete in the new global economy and remain a global power. We need to start churning out smart kids that will be interested in science, math, and economics.

Instead, it seems most young people want to be rock stars and fashionistas. Nothing wrong with entertainment, art and fashion but we need scientists, mathematicians and economists.

I know there are lots of smart kids out there that are strong in science, math and economics but they are too few and far between. Instead we have parents pushing their kids into hollywood.

[Durango]

Hell, I would like a good simple explanation of what the problem is.

Apparently they went out and sold mortgages to anyone with enough pulse to sign their name. They took these mortgages and bundled them into unregulated "financial instruments" that they sold around the globe.

Apparently every bank in the world bought these. Some of the mortgages were still good, many were not. But they don't know which.

Somehow these "financial instruments were turned into "bonds." Whatever the hell that means.

But the problem is that the financial wizards at the investment banks were buying on margin (is that right?) Up to $30 -$1.

Which meant that when the value of homes dropped they couldn't pay their margins?

Who was loaning the investment banks this money? And why would anyone with a lick of sense loan money on those kinds of margins? isn't that exactly what caused the stock market crash in 1929 and the subsequent Great Depression?

And is the problem that all the American dollars in the world are locked up in these margin loans?

And there are no other dollars anywhere? (I would look in Columbia myself)

This is what i have been able to gather as to what the problem is. But I don't really know.

I rely on the American corporate media for my information.

[SimonOne]

Dennis Kucinich is the sanest voice right now - even though he's been so completely neutralized by nothing but snide comments...

"Here is a very quick explanation of the $700 billion bailout within the context of the mechanics of our monetary and banking system:

The taxpayers loan money to the banks. But the taxpayers do not have the money. So we have to borrow it from the banks to give it back to the banks. But the banks do not have the money to loan to the government. So they create it into existence (through a mechanism called fractional reserve) and then loan it to us, at interest, so we can then give it back to them.

Confused?

This is the system. This is the standard mechanism used to expand the money supply on a daily basis not a special one designed only for the "$700 billion" transaction. People will explain this to you in many different ways, but this is what it comes down to.

The banks needed Congress' approval. Of course in this topsy turvy world, it is the banks which set the terms of the money they are borrowing from the taxpayers. And what do we get for this transaction? Long term debt enslavement of our country. We get to pay back to the banks trillions of dollars ($700 billion with compounded interest) and the banks give us their bad debt which they cull from everywhere in the world."

The best President you'll never have.