number2son writes:
Wow, if Hank's joke segueing into the Q&A is any indication, this "plan" is going to go over like a lead balloon.

Where's the hook?
number2son | 03.31.08 - 10:44 am | #

Vito writes:
The economy is in trouble - LET'S CUT TAXES!
The economy is doing great - LET'S CUT TAXES!
We're going to war - LET'S CUT TAXES!
It's partly sunny - LET'S CUT TAXES!

The train shall never fall off the track.
Vito | 03.31.08 - 10:46 am | #

Anonymous writes:
Vito

Darn...exactly what I was going to say! This group always has the same solution no matter the problem.

Problem now is that the train is alreay off the track and smoking and burning.
Anonymous | 03.31.08 - 10:50 am | #

Anonymous writes:
OT, sort of:

U.S. Sen. Christopher Dodd, who did not attend Monday's summit but spoke Monday afternoon in Stamford, has proposed legislation that would streamline the process by which national infrastructure projects are targeted for funding.

The National Infrastructure Bank Act of 2007, which Dodd proposed last August, would create an independent national bank that would identify, evaluate and help finance infrastructure projects nationwide. If Dodd's legislation is enacted, the Stamford Urban Transitway could qualify for funds from the national bank.
Anonymous | 03.31.08 - 10:51 am | #

4tehlulz writes:
Vito, your forgot the best one:

We have no money! - LET'S CUT TAXES.
4tehlulz | 03.31.08 - 10:53 am | #

ac writes:

If those regulatory agencies just had the good sense to promote Ultra-Sub-Prime Mortgage products and cater to lobbyists a bit more (though apparently they did do quite a good job of that), we still might be talking about how much the value of our houses were going up.

ac | 03.31.08 - 10:55 am | #

gc writes:
So who is hosting the discussion of the real problems and the real possible solutions?

Is the current train wreck evidence that the borrow short and lend long of the US home finance system a problem that can't be solved?

Is the current train wreck an incompatiblity of transparent markets with hedge fund operation?

Paulson's proposal makes it seem like nothing can be discussed so long as the current administration is in power because they have never made a mistake and the are not starting now.
gc | 03.31.08 - 10:58 am | #

Neal writes:
How many time did Lucy pull the football from Charlies kick?

How many times will a GWB plan be pushed in a time of crisis that really has more to do with a narrow, private agenda and little to do with the actual problems.

Look where they have lead us. Flat on our backs again.

America at the end of 2008 will be much worse off than at the end of 2000.

Check out Ritzholt's post today regarding revised guidence on mark to market pricing.
Neal | 03.31.08 - 10:58 am | #

ac writes:

The economy is in trouble - LET'S CUT TAXES!
The economy is doing great - LET'S CUT TAXES!
We're going to war - LET'S CUT TAXES!
It's partly sunny - LET'S CUT TAXES!

The train shall never fall off the track.

I'm not the biggest fan of government spending, but I gotta agree that cutting taxes as a solution to every problem seems to me a sure fire way to bankrupt the US government.

IMO the policies that supposed "fiscal conservatives" are promoting -- more spending, less taxes -- is the most fiscally irresponsible strategy of them all.

ac | 03.31.08 - 10:59 am | #

EEngineer writes:
The "reorg" is also a time honored way of shaking up the food chain. Opponents are shuffled off to the side, allies are placed at choke points. Titles don't need to change so civil service seniority rules don't provide much protection against this type of purge.
EEngineer | 03.31.08 - 11:00 am | #

Neal writes:
From Big Picture

An SEC opinion letter advising companies how to deal with their Level 3 assets made a rather curious suggestion. They advised that if the prices of mark-to-model crappy paper are underwater, well then, declare it the result of forced liquidation -- and then you can simply ignore them.

It truly boggles the mind.

Would someone please explain to me how providing an official mechanism for allowing companies to ignore market values of the bad investments they made help investors? Instead of working towards transparency, the SEC is providing a mechanism to allow banks to hide losses from their shareholders. This is nothing short of an invitation to commit fraud.
Neal | 03.31.08 - 11:01 am | #

Markel writes:
Catering to the rich kind of stops working after they're bankrupt.

Bush's domestic audience no longer has the cash to carry on. Our bankers now are all foreign, and they take quite a dim view of this nonsense.
Markel | 03.31.08 - 11:02 am | #

Anonymous writes:
Neal

Link that level 3 strategy to bail outs and discount window exchanges
Anonymous | 03.31.08 - 11:05 am | #

Tanta writes:
The "reorg" is also a time honored way of shaking up the food chain. Opponents are shuffled off to the side, allies are placed at choke points.

I happen to think it's even worse than that. What you're talking about is just the top-layer war of political appointees against political appointees.

Down under in the org chart are the career people who can read the reports, find their way around a supervised institution's file room, and distinguish between "answers to the question" and "hopeless bullshit" at 20 paces with their calculators tied behind their backs.

Shuffling them around is a great way to render their experience and expertise worthless. You know a lot about mortgage loans? Let's move you over to deposit-ops! You understand money-laundering and bank secrecy regulations? Let's have you go review appraisal management!

You can't fire those people, but you can damned well make them useless to themselves and others.
Tanta | 03.31.08 - 11:06 am | #

Peripheral Visionary writes:
It is becoming clear that the regulatory agency restructuring (disclaimer: which may directly affect my current position) would not necessarily fix the problems currently in the market. The question remains, however: what exactly does it accomplish? The NYT analysis is the most cogent I've heard so far, although it remains to be determined what the overall effect will be.

Is more, or less, regulation the answer? Put another way, is more, or less, government involvement the answer?
Peripheral Visionary | 03.31.08 - 11:06 am | #

Peripheral Visionary writes:
Tanta,

You're correct, in that the reshuffling could render some very experienced people near-useless. However, it could, *potentially*, open up some doors to better oversight. The regulatory walls are sometimes a little artificial; there are efforts to make all regulatory agencies pull together in the same direction (anti-money laundering efforts, for instance, are coordinated across a lot of agencies), but regulatory "our agency doesn't handle that" barriers are still all over the place.

This change could, again *potentially*, change that. Or not--remains to be seen.
Peripheral Visionary | 03.31.08 - 11:09 am | #

dryfly writes:
Darn...exactly what I was going to say! This group always has the same solution no matter the problem.

Its the only way they can be sure to be right at least once - its the counterpart to the Dilbert Strategy - Brocken Clock Tactics.

I'm dying to hear what Pres-elect McCain's solution will be... let me guess... reorg & cut taxes.

dryfly | 03.31.08 - 11:11 am | #

Mel writes:
Bushies only think short term.
Mel | 03.31.08 - 11:11 am | #

moon writes:
seems to me a sure fire way to bankrupt the US government.

we already are and we need to SLASH GOVT SPENDING as well as reduce taxes that stimulate investment and research and not consumption

We are screwed in any event. Both parties are the same for anyone that is watching the ball
moon | 03.31.08 - 11:12 am | #

Rob Dawg writes:
You can't fire those people, but you can damned well make them useless to themselves and others. - Tanta

You can't fire those people, but you can damned well make them more useless to themselves and others. - Dawg

Seriously thoughIt is now less than 10 months to changing the Executive adminstration. The HUD Sec just resigned. This is the end of an 8 year. Expect lots of turnover. It's normal, don't confuse this with possible turmoil or radical change.
Rob Dawg | Homepage | 03.31.08 - 11:14 am | #

Neal writes:
http://bigpicture.typepad.com/comments/
Neal | 03.31.08 - 11:15 am | #

Eric writes:
OT - Dollar is in a nasty slide this morning. Trigger event = ? Fed plan to auction another $100Bn?
Eric | 03.31.08 - 11:16 am | #

sbarrkum writes:
Paulson learnt his ropes under John Ehrlichman of Watergate Fame

I may not like his policies but like this style:
Despite his wealth, Mr. Paulson does not cultivate the airs often seen in top financiers. He prefers bird-watching in Central Park to golf and flies back as often as he can to a small farm in Barrington, Ill., located next to his parents' house, that he and his wife, Wendy, bought in 1974.
Also note,
the guy who was better than him "I was magna cum laude at the law school, and they picked the football player from Dartmouth," is now CEO of a Landscape company.

sbarrkum
sbarrkum | Homepage | 03.31.08 - 11:17 am | #

Neal writes:
Mel:"Bushies only think short term."

The real problem is that they have grandiose plans to remake the world for all time, but the plans are being made by people who apparently would have trouble planning where to go to lunch today.
Neal | 03.31.08 - 11:18 am | #

Anonymous Bosch writes:
vito. The train can't fall the track. The tracks were sold for scrap.
Anonymous Bosch | 03.31.08 - 11:19 am | #

dryfly writes:
You're correct, in that the reshuffling could render some very experienced people near-useless. However, it could, *potentially*, open up some doors to better oversight.

Depends who runs the ship... a highly centralized organization in the hands of motivated aggressive leadership can be frighteningly effective (for good or bad)... in the hands of the 'indifferent' much less so.

That was always why I was so surprised by GOPer Senators & HORs supporting Homeland, Patriot, & such... what happens if the others guys get control of this (without real checks & balances being put in)? I don't think they thunk that one through...

The Bush/Paulson proposal could become more of same only on the econ front... a real monster in the hands of aggressive 'market action' oriented administration.

I'm no 'lazy fair' neocon but even I worry about our friends in gov't coming to help - and staying forever. A reorg could make it real hard to throw them out...

Always beware the unintended consequences.
dryfly | 03.31.08 - 11:20 am | #

s0mebody writes:
This is a crisis of confidence. Therefore, it is a confidence game. Confidence men play confidence games. Con men play con games.
s0mebody | 03.31.08 - 11:20 am | #

number2son writes:
sbarrkum, Barrington is an ultra-tony suburb of Chicago. A farmer indeed.

I know because I grew up on the other side of the tracks.
number2son | 03.31.08 - 11:20 am | #

Anonymous writes:
OT

Report in Chicago Tribune about how lenders are planning to wait out the market with their foreclosed homes.

http://www.chicagotribune.com/ bu...1,7435818.story

Seems like the Chicago area is in for some form of slow housing water torture.
Anonymous | 03.31.08 - 11:20 am | #

Kp writes:
Make no mistake about it the aristocrats and politicians have let slip from their memories the cost of squeezing the serfs too hard.

In the end when the dollar is worthless as opposed to worth less. The rich will have two choices....either move to another country were their wealth will be eroded via exchange rates or stay here and pay their taxes.

Robbing the serfs and the treasury have inescapable consequences.
Kp | 03.31.08 - 11:20 am | #

Ralph Cramdown writes:
This is the end of an 8 year. Expect lots of turnover. It's normal, don't confuse this with possible turmoil or radical change.

I don't believe this to be likely, I just mention it as food for thought: Trifecta man may not be the brightest MBA Harvard ever minted, but he's got to be thinking about his Legacy. The war and the nation's finances reflect poorly, and it doesn't look like a year of cramming after 7 of neglect will budge the Middle East process. He must be grasping for some legacy, no matter how small, to be remembered for something that didn't turn to crap.

Maybe it's unlikely, and it certainly isn't the foundation for good policy, but every other model I've built to predict the behavior of this administration has failed.
Ralph Cramdown | 03.31.08 - 11:22 am | #

Tanta writes:
You can't fire those people, but you can damned well make them more useless to themselves and others. - Dawg

Sorry, Rob, but you're just being an enabler of the kind of thinking Krugman is going after. If you start from the position that everyone who works for the government is a "worthless bureaucrat," then you can defend the position that cutting them off at the kneecaps is the way to improve things. It's the great circular argument: gubmint is bad because gubmint is bad.

There are plenty of people at, say, the Comptroller's Office or the OTS or what have you who know what day it is and can examine the hell out of a regulated institution. If someone would take the leash off. The fact that, say, Alphonso Jackson is an incompetent political hack with an ego the size of the Van Allen Belt, is no reason to conclude that the folks who actually operate the joint are idiots, too.

I'm not very impressed by arguing that they're already Dilberts, so we should just treat them that way.
Tanta | 03.31.08 - 11:23 am | #

dryfly writes:
Report in Chicago Tribune about how lenders are planning to wait out the market with their foreclosed homes.

The Buffalo NY solution - good luck with that.

dryfly | 03.31.08 - 11:24 am | #

Peripheral Visionary writes:
Neal,

I posted this over at Mish's write-up on the SEC change, but what has gone unsaid is that the pricing services (which are used by a lot of companies and funds) already filter out "fire sale" prices for regularly traded securities. The SEC clarification brings valuation for unpriced securities into line with that for priced securities. Now, it's rumored that the pricing services have very recently started changing their practices to include "fire sales" in their pricing models, but it's not entirely clear what their underlying motivations are.

Should distressed sales be included in pricing models? That's a long topic of conversation, and I don't think there's an easy answer. A one-off sale under very distressed conditions may not be appropriate to include in a pricing model, but if every sale is being called a "fire sale", then the pricing model may be broken.
Peripheral Visionary | 03.31.08 - 11:24 am | #

Anonymous Bosch writes:
Eric
Dollar made a leap for new high, faltered, and is back to last week's range.
Anonymous Bosch | 03.31.08 - 11:24 am | #

Kp writes:
Should distressed sales be included in pricing models? That's a long topic of conversation, and I don't think there's an easy answer. A one-off sale under very distressed conditions may not be appropriate to include in a pricing model, but if every sale is being called a "fire sale", then the pricing model may be broken.

Models should reflect the most likely of assumptions. Fire sales are more common than say 1 year ago....and one year from now will they be more or less likely? I'd say at the very least equal. They should be included until current visibility suggests otherwise(which is why they were previously excluded..they were unexpected and rare).
Kp | 03.31.08 - 11:28 am | #

sbarrkum writes:
number2son writes:
sbarrkum, Barrington is an ultra-tony suburb of Chicago. A farmer indeed.

barrington, It always helpful to have someone on the ground to give perspective to a storyline.

Reminds me of Sanjay Kumar (name ?) CEO of Computer Associates. He is supposed to be from Sri Lanka (which I doubt). In a interview he mentioned that he grew up without TV and the only place to watch TV was couple of doors away at Arthur C. Clarke's. What non Sri lankan dont realize was Sri Lanka did not have TV until 1977 and Arthur C. Clarke lives in the most expensive neighbourhood in Colombo (capital of Sri lanka)

regards

sbarrkum
sbarrkum | Homepage | 03.31.08 - 11:28 am | #

Riplakish writes:
I'm disappointed that its all about raising/lowering taxes and raising/lowering levels of regulation and paperwork.

Why is it never about lowering spending, and removing the bureaucracy?

One could write one simple SEC rule to handle 80+% of the cases: "Treat the money you get from others as if it were your own. If you do something with it that 12 reasonable and prudent people consider bone-headed, you're going to jail."

I think you'd quickly see a return to financial conservatism.
Riplakish | 03.31.08 - 11:28 am | #

Anonymous Bosch writes:
Why is it never about lowering spending, and removing the bureaucracy?

Why is there never a thought to trim the 450 billion dollar military machine budget?
Anonymous Bosch | 03.31.08 - 11:32 am | #

sbarrkum writes:
number2son:
Sorry for calling you barrington. Barrington was a high school mate.

cheers
sbarrkum
sbarrkum | Homepage | 03.31.08 - 11:33 am | #

Rob Dawg writes:
Tanta, the very next words after my snark was 'seriously though...'

Didn't we just have a talking to about humor?
Rob Dawg | Homepage | 03.31.08 - 11:33 am | #

Chuck writes:
The regulations are smoke and mirror and coming from Paulson they are a waste of time, too little to late. He is a disciple of greed that got us into this mess in the first place, he is 6 years late and he wasn't complaining than while collecting huge bouses for himself and friends.
Chuck | 03.31.08 - 11:34 am | #

Vito writes:
Anon,

Just finished the Chicago Tribune article. I wonder how much of the banks' gregariousness has to do with the recent sales tax increases in Cook County.

Could there have been a backroom deal where if the banks keep the properties off the sales rolls the county won't collect property taxes?

Things that make you go mmmmmmmmmm...
Vito | 03.31.08 - 11:34 am | #

FreedomWorks writes:
We do need less regulation...the whole problem here is too much taxpayer subsidy for the mortgage/housing industry. We need to:

Eliminate the mortgage interest tax deduction

Improve Title company competition

Break up the govt-mandated ratings agency oligopoly and allow real competition for Moody's and S&P

Privatize the GSEs, the FHA, and the FHLB all of which subsidize people who are above median income and put taxpayers at risk

Ban the Fed's new "temporary" lending windows to undisclosed investment banks
FreedomWorks | Homepage | 03.31.08 - 11:34 am | #

EEngineer writes:
Tanta:
You can't fire those people, but you can damned well make them useless to themselves and others.


Yes, absolutely. The FEMA syndrome. Hide or handcuff the competent and hope they quit making room for more of your cronies.

The other thing about appointing/hiring incompetent people is that they are usually most afraid of being discovered, even though it's obvious. This makes it very easy for a patron to manipulate them into doing just about anything, since they have no other option but to trust someone they think knows what to do. What's the saying about getting folks to believe absurdities and commit atrocities? It's even easier if the fool isn't bright enough or even knowledgeable enough about the job to recognize absurdity when it's in their face.

Sigh... Watching this iteration of the disease called hubris run it's course is going to rival any of the classic Greek Tragedies.
EEngineer | 03.31.08 - 11:35 am | #

Anonymous writes:
This tension between The Bush Retards and The New Democratic Majority should have produced tension and positive change, but The Bush Black Hole seems to have diffused the orbits of The Democratic electrons which are spinning off into deep space -- devoid of energy.
Anonymous | 03.31.08 - 11:35 am | #

dryfly writes:
sbarrkum, Barrington is an ultra-tony suburb of Chicago. A farmer indeed.

barrington, It always helpful to have someone on the ground to give perspective to a storyline.

Thing is Hank is right - if you're a fat cat NY banker Barrington IS podunk... if you are from podunk (say Herrin Illinois) then Barrington looks pretty 'Tony'... and to complete the unpealing of the onion... there are small towns in the hills arounf Herrin that look at Herrin like Herrin looks at Barrington like Barrington looks at highend Manhattan.

I been to all of 'em (meth cookin' bush around Herrin, Herrin, Barrington & Manhattan) its all a matter of 'perspective'.

dryfly | 03.31.08 - 11:39 am | #

El Cliffo writes:
Why is there never a thought to trim the 450 billion dollar military machine budget?

Probably because the $626.1 billion of US military spending (cf. Wikipedia) is only 4.6% of 2007's $13.5 trillion US GDP.
El Cliffo | 03.31.08 - 11:41 am | #

ron writes:
It gets the focus off the unwinding leverage debt for a few days and the political gas bags can discuss and blame each other while the unwind continues. Sooner then later another event will draw the attention back to the main event.
ron | Homepage | 03.31.08 - 11:45 am | #

Anonymous Bosch writes:
only 4.6% of 2007's $13.5 trillion US GDP.

but not an insubstantial portion of the federal budget.
Anonymous Bosch | 03.31.08 - 11:47 am | #

Harsh Realty writes:
We all know that the Department of Homeland Security has made every American much safer and is a paragon of efficiency and competence. In fact, why don't we merge this new organization with the Department of Homeland Security, since it is to oversee economic security. It should be directed by an expert banker, perhaps an ex-president of the World Bank Group.

Let the Global War on Financial Instability begin.

What, me worry?
Harsh Realty | 03.31.08 - 11:47 am | #

Cod Peace writes:
Anonymous Bosch writes:
vito. The train can't fall the track. The tracks were sold for scrap.

No, the tracks were stolen for scrap by out-of-work mortgage brokers.
Cod Peace | Homepage | 03.31.08 - 11:49 am | #

Anonymous Bosch writes:
Cod Peace

Touche!
Anonymous Bosch | 03.31.08 - 11:50 am | #

MaxedOutMama writes:
I still think that no significant fix can be completed without an overhaul of the ratings firms' place in the structure.

There were Glass-Steagall waivers granted early in the 1990s, and GS was finally effectively repealed in 1999. The truth is that a major overhaul of the regulatory structure IS needed to cope with the enhanced risks.

However, the large ratings firms are the official arbiters of value under the current regulatory system. That is what failed so dramatically, and it seems not to have been addressed in this proposal.

Without addressing that issue, it is hard to see how any real improvements could occur. What failed was risk assessment.

It is probably too late to undo Gramm-Leach-Bliley, so we'd better figure out a to handle investment ratings.

All you people yapping about the Bush admin should read the publications of the FSF. There's way more going on here than just in the US. The Feb doc (at the bottom of the above link) is interesting, but it too skirts the issue of the credit ratings firms. It's all very well to go on about Basel II's risk and capital mgmt provisions, but the reality is that first risk must be recognized. If your incentive system makes it profitable for intertrading entities to agree that a lower risk is involved, private identification of risk is likely to fail.

Tanta has spent a great deal of time carefully explaining the workings of securitized mortgages, and the truth is that the financial incentive to ignore risk was present at every level of the process. By the time the CMO sausages are spit out to investors, the real information that would allow investors to evaluate risk has been edited out. Therefore telling investors to evaluate risk is BS. They can't.

There are similar problems with CRE, commercial loans and derivatives. I would like to see some discussion of effective checks and balances that make it likely that risk WOULD be recognized.

That is the weakness of Basel II. The part of the Paulson proposal that makes sense is the idea that regulators would have the power to identify practices that present a risk to the system AS A WHOLE, rather than being restricted to evaluating institution-by-institution risks.
MaxedOutMama | Homepage | 03.31.08 - 11:55 am | #

Jim writes:
We'll have to wait for the next administration for any decent reforms, but of course by then....where will we be? Congress might well put together a reform bill and shove it under Bush's nose and defy him to veto it. He would of course and then that stupidity could at least be used to finish off the GOP in the fall.
Jim | 03.31.08 - 11:59 am | #

Anonymous Bosch writes:
What if the ratings agencies were a GSE, MoM?

Or would that open the graft to/from political contributions?

Anonymous Bosch | 03.31.08 - 11:59 am | #

donna writes:
Well, swapping around agencies and creating more confusion will allow the Bushies and friends to steal a little more money before they leave and cover up their tracks while they hide it again.
donna | Homepage | 03.31.08 - 12:03 pm | #

Lurker writes:
If you are from the Chicago area, Paulson isn't from Barrington, he's from Barrington Hills.

The "small farm" thing is so Crawford, Tx... a convenient cover, nothing more.

And I don't care where your from, Barrington Hills is high end.
Lurker | 03.31.08 - 12:17 pm | #

wally writes:
"What failed was risk assessment."

Absolutely! However, risk assessment is NEVER the job of a third party, an outsider or a contractor. It is always the job of the person who puts money on the line. Risk is inherent in business and investment - and also in not doing business and not investing. You cannot farm if off for a fee, then take the profits from the investments. That ought to be one of the prime lessons from the "turmoil", but we are still finger-pointing.
wally | 03.31.08 - 12:17 pm | #

energyecon writes:
Everything you need to know about the reorg proposal:

Paulson noted the plan is not in response to the current market turmoil, and will not be completed this year.
energyecon | 03.31.08 - 12:24 pm | #

JBL writes:
The whole more-vs-less regulation conversation is misguided. It treats "regulation" as a mass noun, as if all regulation is of equal quality and the only real question is whether we have more or less of it.

In reality, regulation is a collection of hundreds of specific provisions. Some are effective and some are not, some get enforced and some don't.

There is currently a huge difference in the level of regulatory scrutiny between the different types of financial institution. Whatever the optimal level of scrutiny may be, it makes sense that a broker, a S&L, and a national bank should have similar requirements.

The current mass of regulation really does require a lot of time and money to comply with, and bankers are constantly held accountable for details that have very little to do with the underlying financial or communication issues. Meanwhile, the regulations that are currently in place obviously haven't prevented various forms of unseemly behavior.

We don't need more regulation or less regulation. What we need is fewer but better-crafted regulations. And they need to be vigorously enforced.
JBL | 03.31.08 - 12:43 pm | #

Jack Staub writes:
Is Paulson the anti-Gump?
Jack Staub | 03.31.08 - 12:54 pm | #

ARW writes:
"Bushies only think short term."

As opposed to other politicians?
ARW | Homepage | 03.31.08 - 12:58 pm | #

Markel writes:
We all know that the Department of Homeland Security has made every American much safer and is a paragon of efficiency and competence.

This is the typical Bushco argument. "We're completely incompetent at government, QED, government is inherently incompetent."

No. Government isn't incompetent. You are.

FEMA was widely admired under the Clinton Administration when it was run by a talented administrator with an impressive and relevant resume.

Not so much when it was run by a failed horse show producer.
Markel | 03.31.08 - 1:06 pm | #

Josiphos writes:
I saw something on Squawk Box this morning about the new regulations.

The Fed would have the power to step in and say "no thats too risky, we can't allow that" to any potential business/investor idea?

Am I missing something? Thats government run business, i.e facism.
Josiphos | 03.31.08 - 1:15 pm | #

r€nato, sprung writes:
How many times will a GWB plan be pushed in a time of crisis that really has more to do with a narrow, private agenda and little to do with the actual problems.

*coughWarWithIraqcoughBinLadencough*
r€nato, sprung | 03.31.08 - 1:20 pm | #

MaxedOutMama writes:
What if the ratings agencies were a GSE, MoM?

Well, that's one suggestion that has been made. I came over here looking for discussion on something like that.

The issue of changing the agencies is a red herring. They currently aren't doing their job. What's not a red herring is that even though CUs, banks and thrifts have all blown up, some of the major non-bank players get even less scrutiny. Clearly there is going to have to be a regulatory change to provide more scrutiny. I think it was necessary for the general welfare to put a lid on the BSC insolvency, but by the time we use public facilities to bail out these guys, it seems to me that we'd better be planning for some sort of regulatory scrutiny to cut our losses.

If we want a world without the Glass-Steagall firewalls, we'd better figure out how to make that world function less like a financial demolition derby.

It's not just residential mortgages. It's commercial RE, commercial junk bonds, LBO debt - even some auto and CC debt.

It's not just the US either. My personal belief is that the situation in Spain, Northern Rock in the UK, and various Irish banks all raise the issue of whether Basel II is addressing risk on a realistic basis.
MaxedOutMama | Homepage | 03.31.08 - 1:50 pm | #

sierra writes:
WE must remember, "de-regulation" started grossly under Jimmy Carter and proceeded thru the Clinton/Chimp presidencies.
We need a "firewall" between the forces of capital (greed, etc)and the basic needs of societies and the wherewithall to finance those needs.....
Not, maniacal consumerism...NEEDS that will fulfill those of progressive thinking societies.
I'm afraid that's not possible anymore because of the prostitutes within our government bought and paid for by lobbyists that enjoy the closest relationships with politicians.
I do agree that the institutions that caused this to go "broke." Plain and simple.
Yes, the pain will fall on all of us...but what is the alternative?
More "off the books" models that do not take into consideration any "downside" risks??
All this bs of Paulson is to reshuffle the chairs on the sinking economy.
Let's mark to market and let go of the "mark to myth" models.
Time to pay the Piper!
sierra | 03.31.08 - 2:11 pm | #

Jay Henderson writes:
CR, I hope you are not suggesting that more regulation of the financial industry is what we need. Lack of regulation was not the problem here, the current crisis (as all crisis) was created by too much regulation, along with the Federal Reserve, the existence of GSEs, and government sponsored ratings agencies. This whole mess was created by our government's bad policies. The solution is to eliminate government intervention as much as possible. I'm dissappointed to hear Krugman call for more "correct" intervention. That does not exist.
Jay Henderson | 03.31.08 - 2:29 pm | #

ilsm writes:
GAO report today on how DoD weapons acquisition does it.

Hire contractors who don't know the business and will research any answer desired.

Forget reality.

DoD has eliminated the career civil servant, (we were all Vietnam era and going to retire anyway, blither....)too set in the rules and obstructionist in a regime where failure is not an option just deliver junk.
ilsm | 03.31.08 - 3:05 pm | #

OhNoNotAgain writes:
"I hope you are not suggesting that more regulation of the financial industry is what we need. Lack of regulation was not the problem here"

Ha, ha, ha, ha, ha, haaaaaaaa !!!!
Wait.....

Ha, ha, ha, ha !!!!
Hold on...

Ha, ha, ha !!!!

Oh heck, forget it, it's a waste of time even bothering with you.
OhNoNotAgain | 03.31.08 - 3:30 pm | #

Tom O writes:
Just another example of using a crisis caused by their own incompetence to push a preexisting agenda. Shades of the Patriot Act.
Tom O | 03.31.08 - 3:47 pm | #

headaches writes:
I work for a regulator and my political appointee *&(&^ boss will take the leash off provided I go after those he dislikes.

The generals under this system have no technical skills, have never worked in the trenches and are in positions where they can dream up grandiose plans with no cognizance of how hard they are to execute.
headaches | 03.31.08 - 4:08 pm | #

demeur writes:
This is sounding like the U.S.S.R of the 50s. Does your company have a political director to make sure all decisions conform to the party line?
demeur | Homepage | 03.31.08 - 5:04 pm | #

Jay Henderson writes:
OhNoNotAgain- you may believe the government can and should "protect" us from the free market. I completely disagree. Anyone who thinks this mess was caused by the free market, does not understand what happened. I see you simply skipped over the other words in my post.
Jay Henderson | 03.31.08 - 5:19 pm | #

PeeDee writes:
I'm still waiting for Bush to announce a role for the military. Seriously, at least get Blackwater and Halliburton into the trough.
PeeDee | 03.31.08 - 6:40 pm | #

halbhh writes:
The only problem was leverage (allowing the bubble).

The only regulation lacking, and needed is capital requirements.

btw, anyone notice that Obama nailed this one?
halbhh | 03.31.08 - 8:24 pm | #

Francois writes:
"The fact that, say, Alphonso Jackson is an incompetent political hack with an ego the size of the Van Allen Belt, is no reason to conclude that the folks who actually operate the joint are idiots, too."

On the contrary, it is proof-positive that they are competent; otherwise, the Bushies would NOT have sent someone so embarrassing to common sense and decency, solely for the purpose of destroying the reputation of HUD, thus enabling the neocons to scream "See! We told you the go-vermin is baaaaad!"
Francois | 03.31.08 - 9:17 pm | #

OhNoNotAgain writes:
"you may believe the government can and should "protect" us from the free market. I completely disagree."

I never said any of that. I simply laughed at you, because that's about all that your post was worthy of.

"Anyone who thinks this mess was caused by the free market, does not understand what happened. I see you simply skipped over the other words in my post."

Because it was nothing but more bullshit. Go ahead, explain how government over-regulation caused the financial excesses of the last 10-12 years. I've got 100 bucks that says that what you'll say is something straight out of the right-wing, gold-bug playbook, right down to the "if we'd just get rid of all of the zoning ordinances...". Yeah, the US would be a real paradise if we'd simply just ditch all of the rules and transparency. My 13-year old son has a more nuanced grasp of the world.
OhNoNotAgain | 03.31.08 - 10:20 pm | #

Jay Henderson writes:
OhNoNotAgain-

"I never said any of that."

You laugh at the idea that government should get out of the way of capitalism. The alternative is to have more government regulation. If you think that is good for America, then we will never agree.

"Go ahead, explain how government over-regulation caused the financial excesses of the last 10-12 years"

Ok- the Federal Reserve creates money into oblivion, and artificially manipulates interest rates, then bails out banks for making perposterous loans, and leaves the taxpayers to pay the bill. All the while, Congress creates and defends GSEs to buy bad loans created from careless lenders who only need a patsy to pawn off their garbage. That's how. Acursory study of financial history can tell you that. There is no magic to it.

I suppose "goldbug" is intended as a bad name? I wish you understood the role of gold thoughout the last 5000 years, it would help you understands our current situation more accurately.
Jay Henderson | 03.31.08 - 11:59 pm | #

Unbelievable writes:
The Bush administration is proof that governments don't work. But his incompetence was known before he was elected.

His gross incompetence defies belief, war, debt, destruction of the constitution and financial assets etc. He will go down as worse than.........
Nixon and maybe even NERO.......

Unbelievable how he got elected. The greedy and powerful got what they wanted, an idiot in charge that made them all very rich. Trouble is the serfs are going to starve and starving surfs aren't too nice to the rich elite.
Unbelievable | 04.01.08 - 12:42 am | #

Graham Andrews writes:
The Paulson Plan has NOTHING whatsoever to do with current economic problems. Its not intended nor will it address them.

I'm astounded how thick skulled you all seem. Paulson EXPLICITLY SAYS in his address that it isnt about the credit crunch or bear stearns or ANYTHING IN THE NEXT TEN YEARS.

Its a long term plan, and we need long term planning even while we complain about whatever pet crises happen to be going on.

All I can say is youre all being either reactionist, or undereducated about the matter, or both.
Graham Andrews | 04.01.08 - 1:17 am | #

OhNoNotAgain writes:
"You laugh at the idea that government should get out of the way of capitalism."

Yes, because for the last 30 years that is exactly what the government has done, and it has almost brought this country's economy to its knees. Unfettered capitalism is much worse than over-regulated capitalism.

"The alternative is to have more government regulation. If you think that is good for America, then we will never agree."

No, the alternative is to put the original regulations that had been there for many years back into place, and *enforce* them like they should have been enforced in the first place.

"Ok- the Federal Reserve creates money into oblivion, and artificially manipulates interest rates, then bails out banks for making perposterous loans, and leaves the taxpayers to pay the bill."

None of this has anything to do with government regulation, and you're being a lousy liar by trying to make it seem so. The Federal Reserve did just fine under Paul Volcker, for example. The fact that we had an idiot like Greenspan in charge for so long wasn't an issue with regulation, it was an issue with how that particular regulatory body operated. Greenspan decided that it wasn't the job of the Fed to keep speculative bubbles at bay, and now we're paying the price. The recent investment bank bailouts are simply more crony capitalism from Republicans, just like the S&L bailouts. We need the Fed chairman to be more responsive to the public, not less.

"All the while, Congress creates and defends GSEs to buy bad loans created from careless lenders who only need a patsy to pawn off their garbage. That's how. Acursory study of financial history can tell you that. There is no magic to it."

Again, regulation has nothing to do with the above, other than the fact that our piss-poor excuse for an administration that we currently have is run by a bunch of incompetent boobs. The GSEs have been around for a lot longer than the current administration, and they worked fine up until that point. Both Fannie Mae and Freddie Mac are good things, when run properly and prudently.

Your argument is the same simpleton argument that people use against our capitalist society. By your standards we should get rid of capitalism because it keeps wrecking the environment and shipping jobs overseas. It's not the *idea* of capitalism that is flawed, it's the people running the corporations today that are flawed. It's a small, but very important distinction.

Until we start voting in competent people to run our government, regulation will not work or will be subordinated to the will of corporations, and the status quo of chaos will continue. Capitalism works best when it is helped and guided by the government to produce things that are of immense value to our society. Capitalism exists for our collective benefit alone, and for no other reason.
OhNoNotAgain | 04.01.08 - 7:42 pm | #

The Oracle writes:
"...the claim that lack of coordination among regulatory agencies..."

Gee, where have I heard this, or something similar, spewing forth from the bowels of the Bush administration?

Oh, let's see, something about the "lack of coordination" among our intelligence branches contributing to the 9/11 attacks succeeding, with the Bush administration then ramming through Congress the Patriot Act and DHS.

But, then there was the "lack of coordination" among our emergency responder agencies (FEMA, DHS) during Hurricane Katrina, which led to hundreds of billions of dollars in emergency funding being rammed through Congress, with much of this taxpayer money going to Republican crony companies through sweetheart no-bid contracts.

And another. The "lack of coordination" among NASA divisions prior to the space shuttle disaster.

And the "lack of coordination" between the Defense and State Departments before the Iraq War disaster.

And the "lack of coordination" between Bush's brain and the handlebars on his bike before one of his bike mishaps.

Anyway, "lack of coordination" is just another attempt to deflect blame from George W. Bush and Dick Cheney for being two of the most corrupt and incompetent individuals ever to befoul our White House. Oh, and insane is another term perfectly describing these two Republicans, plus many of those they appointed to run our federal government...into the ground...in a highly-coordinated effort...to sabotage our democracy. Traitors.
The Oracle | 04.02.08 - 12:46 am | #

Jay Henderson writes:
OHNoNotAgain-

"Yes, because for the last 30 years that is exactly what the government has done"

Are you serious? You believe for the last 30 years, government has stayed out of business? Where have you been for 3 decades? What news articles do you read. All our fascist government does is run the economy and regulate business to make it "fair". This is how we have lobbyists! Where did they come from then? You think the Fed pumping hundreds of billions of dollars into the world helps us? They do not exist to prevent bubbles, all they do is create them! Fed can no better set prices for money then it can set for orange juice, or televisions. This is not the free market at work, you are sorely mistaken.

"By your standards we should get rid of capitalism because it keeps wrecking the environment and shipping jobs overseas."

Uh... no. Government allows huge oil companies to pollute our land, and protects them from lawsuits. Not to mention "imminent domain" - what a great justice in the world! Jobs go overseas because our government taxes and regulates business into bankruptcy, and they inflate the money supply to become worthless. There is more value in overseas labor than in America- that's why they leave. You can thank government for that.

"Capitalism exists for our collective benefit alone, and for no other reason."

Haha... spoken like a true communist. Collectivism at it's finest. Yes, no other reason except profit. Like I said, OhNot, we will never agree.
Jay Henderson | 04.02.08 - 10:06 am | #

OhNoNotAgain writes:
"Are you serious? You believe for the last 30 years, government has stayed out of business? Where have you been for 3 decades? What news articles do you read. All our fascist government does is run the economy and regulate business to make it "fair". This is how we have lobbyists! Where did they come from then? You think the Fed pumping hundreds of billions of dollars into the world helps us? They do not exist to prevent bubbles, all they do is create them! Fed can no better set prices for money then it can set for orange juice, or televisions. This is not the free market at work, you are sorely mistaken."

Okay, let me try this - if there were regulations in place and the government was doing its job of enforcing them, then why are we seeing tainted products arriving in the US from China, why are we seeing anti-organizing tactics being used by companies with little to no punishment, why are we seeing financials services companies place our whole economy in jeopardy, why are we seeing contractors in Iraq shooting Iraqi citizens and not being prosecuted for it, why are we seeing companies cheat the US government out of billions in taxes by off-shoring their operations to tax havens, and on and on.....

"Uh... no. Government allows huge oil companies to pollute our land, and protects them from lawsuits. Not to mention "imminent domain" - what a great justice in the world! Jobs go overseas because our government taxes and regulates business into bankruptcy, and they inflate the money supply to become worthless. There is more value in overseas labor than in America- that's why they leave. You can thank government for that."

Our government taxes businesses into bankruptcy ? More bullshit. Our tax rates are very fair compared to the rest of the industrialized world. Just because you want to live in the equivalent of some third-world country with no taxes does not mean that we have to follow along. This country did fine with much higher rates of taxation on corporations and the wealthy in the past. The promise of America is opportunity, and our government is responsible for maintaining that opportunity for everyone. It does that by making sure that our infrastructure is functioning, that our children are educated, and that we receive the proper healthcare. That leaves businesses able to concentrate on what they do best. These things do not go away because the government abdicates its responsibility to take care of them, and businesses certainly do not start picking up the tab out of the goodness of their heart. No, instead what you see is the current situation - these things are simply neglected until bridges start collapsing, our employees can't afford to go to college, and more employees can't get adequate medical care.

"Haha... spoken like a true communist. Collectivism at it's finest. Yes, no other reason except profit."

Wow, that's clever. I've never been called a communist by a right-winger before. God forbid that the people that actually work extremely hard their entire lives should actually receive some of the fruits of that labor. Nah, that's communism. Even though that's exactly how this country worked very well for the better part of the last century.

Read this carefully and try to understand it:

If our economy doesn't provide real, tangible benefits to the majority of the citizens in this country, then you are going to see massive dislocations both in our economy and government. That's a fact, and you can count on it. What we've had for the last 20 years is a "fake" economy that produces crumbs for the majority, great wealth for the few, and very little in terms of actual material wealth for the country. It's not sustainable, and only our government can change things and bring them under control.
OhNoNotAgain | 04.02.08 - 12:45 pm | #

Jay Henderson writes:
Ok, let's take those one at a time:

"why are we seeing tainted products arriving in the US from China"

You just proved my point- government is not doing it's job, and these products are being discovered by regular citizens. Another useless government beaurocracy.

"why are we seeing anti-organizing tactics being used by companies with little to no punishment"

Because a corporation should be able to run it's company the way it desires. If it practices bad policy, people will stop 1) working for them, and 2) buying their products.

"why are we seeing financials services companies place our whole economy in jeopardy"

I've already discussed this at length. The Fed artificially lowered interest rates, and when big business is bailed out (yet again) there are no consequences to suffer. That's why the cycle always repeats itself, we use taxpayer money to prop up risky decisions.

"why are we seeing contractors in Iraq shooting Iraqi citizens and not being prosecuted for it"

Because our government protects KBR from lawsuits and gives them authority to break Iraqi law. That is all done with the help of the US government. Not to mention, we invaded Iraq by ignoring our own Constitution and intiating violence. Hooray for government!

"why are we seeing companies cheat the US government out of billions in taxes by off-shoring their operations to tax havens"

The government has no greater claim for corporate profits than it has for your paycheck. I believe taxes are completely immoral, along with any other policy that veils force and coercion under the "legitimate" guise of a majority vote.

“Just because you want to live in the equivalent of some third-world country with no taxes does not mean that we have to follow along”

True, unfortunately, as the minority, I must “follow along” with whatever the majority demands from me. If you all vote that I can only keep 10% of my paycheck, then I lose 90% of my efforts. You claim this is a legitimate argument whther it’s a 90% tax rate or a 5% tax rate. I believe both are immoral.

“This country did fine with much higher rates of taxation on corporations and the wealthy in the past.”

You know what? The country did fine for 137 years without an income tax and the Federal Reserve. I think we should go back to freedom. Life was affordable back then.

“businesses certainly do not start picking up the tab out of the goodness of their heart.”

No, they sure don’t. They do it because they make a profit when they offer goods or services that improve the world. They make money when people buy them.

“bridges start collapsing” - Yes, raods and bridges are another government monolopy.

“our employees can't afford to go to college”- thanks to the Fed’s inflation of the money supply and government subsidies.

“and more employees can't get adequate medical care.”- Again, more inflation, but you are aware of government created HMOs, right?

“God forbid that the people that actually work extremely hard their entire lives should actually receive some of the fruits of that labor.”

Oh I wholeheartidly agree that hard working people should keep their money. What I oppose is our coercive, Ponzi-scheme, welfare system.

“If our economy doesn't provide real, tangible benefits to the majority of the citizens in this country, then you are going to see massive dislocations both in our economy and government. That's a fact, and you can count on it.”

I totally agree! Unregulated capitalism is the only thing that can save us now. The empire is crumbling fast.
Jay Henderson | 04.02.08 - 1:37 pm | #

OhNoNotAgain writes:
"I believe taxes are completely immoral"

There you go - all you need to know about your personality in one nice, complete sentence. If you hate taxes so much, then you should quickly proceed to the nearest airport and get yourself on that plane to the lowest-tax place on earth that you can find. I'm sure it will be just as nice as the US.
OhNoNotAgain | 04.02.08 - 2:41 pm | #

Jay Henderson writes:
"If you hate taxes so much, then you should quickly proceed to the nearest airport and get yourself on that plane to the lowest-tax place on earth that you can find. I'm sure it will be just as nice as the US."

Or I could try to change my country so that it works fairly for all people, not just the majority. There are always options. :)
Jay Henderson | 04.02.08 - 3:51 pm | #