What I know so far.

I’ll say it again: I am not an economist and, unlike a lot of people skulking around the internet at this point in time, I won’t pretend to be one. If there is anyone in my readership who can better illuminate the current economic situation, I would very much like to hear from you.free stats

1. Bush tells me that the economy is in a state of emergency and this his bailout proposal is the only thing that can resolve this crisis. As Bush has done nothing but spout transparent lies from the moment he seized power (and well beforehand, for that matter), from this I gather that there is no emergency and that his bailout proposal is an attempt to shake down taxpayers so that he and his Wall Street friends can stay wealthy.

2. Bush submits a bill that says, in essence, "give me all your money and I’ll keep it." He is shocked when lawmakers, both Democratic and Republican (as far as I can tell), question this bill.

3. In response to Congress’s reluctance, Bush goes on TV once, twice, thrice to warn America of the impending doom to its economy if this bill is not passed. America, having been down this road too many times, does not buy his threats. Which is, of course, what they are. Since lawmakers have not given him what he wants, he now threatens to destroy the economy unless we fork over the money, right now. Meanwhile the Wall Street folk stand on the sidelines like junkies, shifting their weight uneasily back and forth, scratching their arms and biting their nails, waiting for Bush to deliver the cash they need to remain obscenely wealthy — just $700 billion, that’s all, you’ll never hear from us again, this is the last time I promise, I just need enough to get me through January.

4. As Bush’s threats have no teeth, lawmakers take a few days to see if they can figure out a way to improve this bill. This is like a mugging victim taking a few days to customize his assailant’s gun. The bill emerges, with some added provisos, but still essentially hands over $700 billion dollars to obscenely wealthy people to do as they please with it — this was, apparently, the unbreakable nut of the deal — it absolutely has to be $700 billion or else the world will end. I wish this were hyperbole, but that’s what Bush tells us, three times.

5. John McCain, who has already proven he knows less about economics than I do, inserts himself into an already rushed, hectic negotiating process, in order to be a drama queen and draw attention to himself, in the hopes of raising his poll numbers. He does nothing to actually help the process.

6. Here’s where it starts getting a little fuzzy, but here goes: House Democrats, doing what House Democrats do, try to "play nice" and "help the economy" by trying to pass this bill, which still stinks on ice. I would have rather they said "Now hold on a minute, why don’t we talk about what really needs to be done?" but I think I see where they’re coming from — they want to be seen as doing something to help, in spite of the fact that there’s no guarantee that anything will. House Republicans, on the other hand, suddenly realize that they’ll be damned if Bush is going to take them down with them. They dig in their heels and refuse to pass the bill. For whatever their reasons were, this is actually the first sane, responsible thing they’ve done in eight years. I won’t pretend to have an understanding of what was in the bill that was not passed, but at heart this should be a Republican issue, should it not? No bailouts for poorly-run businesses. The hypocrisy of the bill should offend any true conservative — you can’t cheerlead for fewer regulations for thirty years and then give away trillions of taxpayer dollars to troubled bankers.

7. Myself, I believe that the government should have a role in regulating the economy — a strong role — but this bill ain’t it. How do I know that this bill ain’t it? Because it was proposed by George W. Bush, who has never done anything fair, positive or good for American citizens in eight years of governance. That’s really all I need to know. If George W. Bush demands trillions of dollars of taxpayers’ money in the final months of his final term, the only thing I can think is that he’s decided "Screw it, I’m taking the country with me." This fits, of course, with the rest of his entire career — be handed a job by wealthy friends, or Daddy, run it into the ground, walk away smiling and humming, wondering where those fire trucks are headed.

8. Monday morning, John McCain boasts to the media about how he’s shown great leadership in bringing together a masterful coalition to present this brilliant, new-improved bill to Congress and has single-handedly saved the economy. When the bill fails, he instantly blames Barack Obama, then, in the same sentence, insists that this is not the time to assign blame. (My favorite Republican meme — when you’ve been caught red-handed in a screwup, the first words out of your mouth should be "This is not the time to assign blame.")

9. As Bush has no threatened three times that the economy will tank if this bill is not passed, the economy obligingly tanks when the bill is not passed — just as Bush has planned all along. Create the emergency, force the bill through, ???, PROFIT!!!

10. Having failed to get his bill passed, Bush does the next best thing — goes ahead and does what he wants anyway.


66 Responses to “What I know so far.”
  1. Sorry for this very long response…

    The history of the current economic situation is this: the Great Depression led to the Glass-Steagall Act, which protected against the predatory lending and overvalued assets that tend to result from competition between various financial institutions. Free-Market-Deregulation Republicans and Housing-for-Everyone-is-Awesome Democrats passed the Gram-Leach-Blilely Act in 1999, which gutted the Glass-Steagall Act, because people forget minor things like the Great Depression. Because of competition now possible between insurance lenders, securities firms, regular banks and the like, competitive rates drove lower and lower, more and more untenable loans were granted, deliberately complicated and aggressive lending became the norm, the real estate boomed as more people came to be able to “afford” houses in the new lending environment, and meanwhile the SEC selectively grants large firms freedom from oversight. The currency of the real estate bubble became loans, traded between firms, packaged into mortgage-backed securities, and at every step overvalued. Eventually the overvalued assets met with a devastating correction as it became abundantly clear the “assets” being tossed back and forth were what should have been obvious: loans that weren’t going to get paid back. Wham bam, they’re magically turned into not-money. And boom goes the dynamite, the stock market crashes, woe and misery, an ungodly amount of foreclosures descends on the populace, large investment firms start imploding, and we are officially in a state of economic crisis.

    Plus gas went up.

    • and some other points…

      1) From your own link: “The Fed’s expansion of liquidity, the biggest since credit markets seized up last year, came hours before the U.S. House of Representatives rejected a $700 billion bailout for the financial industry.” It was done before, not after, the House defeated the bill. And more importantly, it’s the Fed fulfilling its purpose, and not Bush doing what he wants even when he’s told not to. They’d likely be pumping money into the economy anyway, because it’s what the Federal Reserve was created to do in periods of struggling economy.
      2) You’re focusing too much on Bush’s involvement and disregarding other more pertinent facts. From the start here, you’re presenting your position as “Bush says it, it must be false.” So you really honestly don’t believe we’re in an economic crisis right now? Namely one that outright demands action? If so, you’re not paying attention.
      3) The bailout proposal from Bush did NOT make it through the Senate untouched. The draft in the form it went to the House in can be found here (pdf). A nice quick-and-easy summation here. Stuff that should immediately pop out: Section 101, which delineates the hierarchy of involved bodies (POTUSA not included) and provisions against “unjust enrichment by participants of the program”; Section 104, which stipulates the creation of a Financial Stability Oversight Board to watchdog the program’s exercise of authority and make recommendations; Section 105, which stipulates regular reports made to Congress; Section 106, which “Requires profits from the sale of troubled assets to be used to pay down the national debt”; Section 108, which prohibits the allowance of conflicts of interest; and beautifully, Section 111, Provides that Treasury will promulgate executive compensation rules governing financial institutions that sell it troubled assets. Where Treasury buys assets directly, the institution must observe standards limiting incentives, allowing clawback and prohibiting golden parachutes. When Treasury buys assets at auction, an institution that has sold more than $300 million in assets is subject to additional taxes, including a 20% excise tax on golden parachute payments triggered by events other than retirement, and tax deduction limits for compensation limits above $500,000. That means no fat money compensations for Wall Street executives, no cashing in on golden parachute payments without putting up large amounts of tax money.

      There’s tons more to the bill, that’s just a quick run down of the early notable bits that jumped out at me. So this isn’t Bush’s proposal anymore, not a plan to help Wall Street fat cats waiting in the wings to send him kickbacks. You need to start reading up, because it sorta seems that you’re not informing yourself before you form your opinions. Not to be too argumentative about it. There’s just a very strong sense that you’re deliberately avoiding any sense of objectivity for the sake of relishing an anti-Bush position, no matter what. Sort of cutting off the nose to spite the face. Maybe I’m wrong, just the sense I get.

      • Todd says:

        Re: and some other points…

        “So you really honestly don’t believe we’re in an economic crisis right now?”

        What kind of an insulting question is that? Of course we’re in a financial crisis. One that Bush (and McCain’s economic adviser) created. And I do believe the government should do something about it. But, as I’ve said, this bill ain’t it.

        “The bailout proposal from Bush did NOT make it through the Senate untouched.”

        Didn’t say it did, just said it still stinks. It’s demanding that middle-class taxpayers to foot the bill for Wall Street’s greed and non-stop party, is it not?

        Oh, and if you’re going to link to Michelle Malkin for your sober, clear-eyed explanation of “what this all means” we can just stop this right here. Jesus, and people gave me flak for siding with Michael Moore.

        “You need to start reading up, because it sorta seems that you’re not informing yourself before you form your opinions.”

        I’m informing myself plenty, thanks — I just can’t see anybody out there who can tell me what the hell is supposed to happen next. Except I’m pretty sure it’s not John McCain.

        • Re: and some other points…

          What kind of an insulting question is that?
          You, uh, said it yourself. “1. Bush tells me that the economy is in a state of emergency and this his bailout proposal is the only thing that can resolve this crisis. As Bush has done nothing but spout transparent lies from the moment he seized power (and well beforehand, for that matter), from this I gather that there is no emergency and that his bailout proposal is an attempt to shake down taxpayers so that he and his Wall Street friends can stay wealthy.”

          Not an insulting question, when you’ve already indicated a very bad answer.

          Didn’t say it did, just said it still stinks. It’s demanding that middle-class taxpayers to foot the bill for Wall Street’s greed and non-stop party, is it not?
          You’ve certainly implied that what the House voted down was Bush asking to be given money to do with what he wants. Just pointing out it’s not the case. And let’s be clear: you’re against middle-class taxpayers footing a $700 billion plan that will be paid against over the course of a generation or so (with any of the profits from the act being paid directly into the National Debt), and evidently okay with the record drop the Dow Jones saw, which effectively erased $1.2 TRILLION in market value in ONE DAY, in direct response to you getting what you wanted (the defeat of the bill). You can pretend that only effects the greedy Wall Street execs, but that’s bullshit. Clearly stupid bullshit, honestly.

          And other breakdowns of the bill can be found, if you want another source. It all boils down to the same thing, though.

          • Todd says:

            Re: and some other points…

            What I said is that there is no emergency, not one that would immediately force Congress to hand over $700 billion to Bush. And I still see no evidence that that kind of emergency exists.

            I am fully aware of the loss of wealth on Monday, but I still have seen nothing — nothing — from you or anyone else that proves that handing over $700 billion to Bush would have prevented it, or will prevent it in the future.

            • Re: and some other points…

              So have fun splitting hairs between an emergency and a crisis, I’m not interested.

              And if you’re looking for what could have prevented the stock plummet? Uh, that’s obvious, because it was a reaction to the bailout getting stopped. The more interesting question of how we could have prevented the crisis in general is also already clear: regulation, maintenance of the Glass-Steagall Act, and more responsible action by the Fed to cool down the real estate bubble.

              Regardless, what we’re dealing with is the now, and if you want a model for why the bailout has a strong chance at working, look at what the government did in the wake of the Savings & Loan Crisis in the late 80s: the Resolution Trust Corporation, whose mandate was to soak up assets from insolvent firms. Guess what happened, they stabilized the market, reversed the recession, and turned a profit for the government and for taxpayers. That’s the model the current bailout plan follows. It’s worked before. There’s your indicator.

          • igorxa says:

            Re: and some other points…

            but what are we supposed to think when the dow rebounds the next day, up nearly 500 points? it seems like the market is too volatile to be meaningful, especially when its ups and downs seem to be directly proportional to the likelihood of a bailout. please explain?

            • Re: and some other points…

              Valid point, I’m cherry-picking to an extent with the $1.2 tril. But that huge drop was a direct response to news of no bailout, so it does bear looking at. Even the rebound you refer to seems to have been driven mainly by widespread rumors of the American auto industry about to get sizable federal loans. The market’s touchy, definitely, which makes it hard right now to parse for useful info. But bottomline the bailout will provide both a tangible way towards stabilizing the market and a net positive psychological boost. The breathing room it’ll create is the main thing, allowing the market to reverse the steady rapid decline it’s been on. Without the bailout, the market will only get worse before it can ever get better.

              Admittedly, the bailout can’t be the only thing. I’m still waiting to hear of reinstatement of certain regulations.

      • sadrx says:

        Re: and some other points…

        Keeping the banks in business is what keeps the Wall Street executives insanely wealthy. It would be a much larger issue if they were going to receive “compensation” above and beyond their salaries and benefits packages — as if they were somehow wronged by the economy.

        • Re: and some other points…

          And keeping the banks in business is also what keeps the economy moving. People so vehemently against a bailout seem to really hate facing up to that.

      • xbt says:

        Re: and some other points…

        This just in:

        “Democrats, well aware that they were being stampeded toward a solution their constituents hated, went into the deal with eyes peeled and teeth bared. They were unwilling to walk this thing across Capitol Hill without a decent amount of cover in the way of Republican votes in the House. Which was good, because the bill that came up for a vote yesterday was little more than the all or nothing proposal that Bush and Paulson had presented with 107 pages of obfuscation. It really shouldn’t have been passed with Democratic votes alone. In fact, it shouldn’t have been passed.

        Try to remember to leave your asshat at home when you try to push people around in public, champ.

        • Re: and some other points…

          Nice mythical nothing point, here. Look at the vote tally. Majority of Dems voted for, majority of Republicans voted against. Not hard to find. So what was your point again?

          • xbt says:

            Re: and some other points…

            The point is, champ, that you have nothing helpful to say. You come in here swinging your dick around, nothing but a troll and a bully, can’t even be bothered to read the things you attack, only thing you’re doing is looking for a fight so you can crow about how “right” you are. Michelle Malkin? Give me a fucking break, asshole — what, was Father Coughlin’s website down? Of course you have nothing better to do with your life than spew hate and bad feeling, otherwise why would you spend so much time at a blog you describe as “stupid bullshit?” I definitely detect some stupid bullshit around here, that much is true.

            • Re: and some other points…

              Um… k. I’m loving this Michelle Malkin stuff. You guys do realize I linked to a pdf file of the ACTUAL DOCUMENT THAT WENT BEFORE THE HOUSE, right? Malkin doesn’t even enter into it, except that was the first useful link that came up in a google search for the bill. And if you think my sharing an opinion, providing information, and pointing out faults in logic and accuracy isn’t helpful, okay, sure. That’s crazy, but fine. If that’s not the case you’re making, you’ll have to prove it, because funnily enough, otherwise you’re just coming “in here swinging your dick around, nothing but a troll and a bully, can’t even be bothered to read the things you attack, only thing you’re doing is looking for a fight so you can crow about how “right” you are.”

              Yeah, have fun with that.

              • brain_auk says:

                Re: and some other points…

                Still stinging from getting your ass handed to you with the whole Dark Crystal thing, I see. Thanks for checking in.

                • Re: and some other points…

                  Not quite. Weird how, if you actually read anything I said in that discussion, I was the only one admitting it ultimately came down to a difference of opinion. Also the only one who apologized for the discussion getting out of hand, also the only one who worked at all to resolve the discussion when it became clear people were getting upset (not me, by the by, others). No, not really stinging from anything. Or actually ever getting my ass handed to me.

                  You’re welcome anyway, and thank you for checking in.

            • Re: and some other points…

              Oh and PS, you still didn’t clarify your initial point. At first blush, and every successive reading, it still seems to be only a blatant misstatement of fact that’s useless even if it were correct. Again, what was the point in your unsourced quote that incorrectly ascribed voting down the bill to the Democrats? I was honestly curious.

              Before you answer, maybe follow your own advice and remove that asshat first, might let you try pushing me around better.


              • xbt says:

                Re: and some other points…

                Okay troll, you win, I’m gonna stop now because all you’re doing is proving that you’re not worth my time.

              • Re: and some other points…

                So I went and found it myself, guess it was Daily Kos. Funny about that site, not always reliably objective or much for avoiding overstatement. The fact remains, despite what the Daily Kos wants to pretend, that the Democrats in the House tried to pass the bill and the Republicans didn’t. I say this based on the only useful measure, their votes, which weren’t close. Anywho, since it’s interesting, here’s a response to the actual point of the article you quoted:
                -The points are what the article suggests be added to the bill-
                * Add the ability for bankruptcy judges to review and adjust first mortgages so that ordinary Americans stand a better chance of staying in their homes.
                Doesn’t actually change much, but sure, nice enough, why not throw it in. (Aside from being redundant. There’s already stipulations in the bill as is that include review and renegotiation of mortgages to specifically assist homeowners.)
                * Put some real teeth in the caps on pay and bonuses so that Americans don’t see this money as patching in the holes on executive’s golden parachutes.
                I agree with this. There’s already caps on pay and bonuses, taxes on golden parachutes, and restrictions on possible deductions. But it’s always worth ratcheting up.
                * Make the continuation of payments on this plan require an affirmative vote of Congress after each review, rather than having them continue by default, so we only pay if the plan proves to be effective and continues to be needed.
                Again, doesn’t really change anything. (The difference between a regular review that by default allows the act to continue but leaves it open to vote if Congress wants to stop it, and a regular review that by default ends the act but is open to vote to allow the act to continue is defined by a very thin membrane.) But fine. Not disagreeable by any means.
                * Place realistic limits on the power this bill affords the Treasury Secretary, providing for both review and revision.
                Uh, definitely redundant. That’s all already there.

                Basically another hyperbolic non-statement from the Daily Kos. I agree with a lot of their stuff and enjoy it, but they’re not quite being a reliable source when they’re deliberately going on political diatribes.

                • worker11811 says:

                  Re: and some other points…

                  Wow, you’re really quite dedicated to funneling your superiority to a blog you describe as “stupid bullshit.” That takes real dedication.

                  • Re: and some other points…

                    I never described this blog as stupid bullshit, and I’m bored right now. There’s usually intelligent discourse to be had here, but not when people take untenable positions. The “stupid bullshit” was the position that a $700 billion bailout essentially put on taxpayers was somehow worse than $1.2 trillion in market value going down the shitter.

    • capthek says:

      Re: Sorry for this very long response…

      People keep on suggesting that democrats did something that gave away homes to people who could not afford it, but can you find me a specific? I ask because I think that talking point is a huge piece of B.S. so to sum up, the Gramm-Leach-Bliley Act, also known as the Financial Modernization Act of 1999 got rid of the Glass-Steagall Act of 1933 and that prohibited a bank from offering investment, commercial banking, and insurance services. This act allowed both savings and investment in one company. Thus lending companies used investments to lend rather than deposits. When you have lots of money lent out, and then your investors take away their money, you can no longer cover for the money you have lent out if those loans go bad. Then, if you can’t get a loan or investment from another bank, YOU GO OUT OF BUSINESS. That is where we are today. It’s actually rather simple. This act was a DEREGULATION.


      On TV, and what is seeming to become “common knowledge” is that the above act made banks lend to poor people who could not afford their homes. THAT IS NOTHING TO DO WITH THE GRAMM-LEACH-BLILEY ACT. Also, THE VOTE FOR THIS ACT WAS STRICTLY PARTISAN WITH REPUBLICANS VOTING FOR IT AND DEMOCRATS VOTING AGAINST IT! Yep, Clinton signed it, thanks there Bill. In his defense, when obvious problems became clear the next couple of years, new regulations could have protected us all from this crash but instead only more deregulations were passed for the banking industry. I did a study with an organization called ACORN that already saw problems with new lending back in 2000!

      The talking heads are also confusing the above act with the Community Reinvestment Act of 1977. The Community Reinvestment Act required that if someone wanted a loan and they were in a banks geographic area, banks could not turn down a loan FOR AN APPLICANT WHO WAS A GOOD CREDIT RISK! You see, before this law banks would turn down mortgage loans because an applicant was a minority rather than because they were a bad credit risk. This law did not make banks lend money to poor people who could not afford their loan, LENDERS WHO DID THIS LIED TO GET IMMEDIATE COMMISSIONS. Further, lenders who loan out money from investments ARE IN NO WAY REGULATED BY THE CRA BECAUSE THE CRA ONLY MONITORS BANKS WHO USE DEPOSITS TO LEND. The vast majority of home lending today is NOT REGULATED BY THE CRA BECAUSE OF THE GRAMM-LEACH-BLILEY ACT.


      As you can tell, I am very annoyed at the lack of information out there and how the news is allowed to just talk out of their asses with no connection or verification of any facts. The CRA is blamed for doing something it does not do, and although it is acknowledged that these lenders have used fraudulent accounting practices, for some reason everyone is assuming these lenders did not defraud the customers who purchased home loans through them.

      I am writing my Ph.D. dissertation on this stuff right now. If you want to write a screenplay about how people are getting screwed by lenders let me know because I have done two dozen interviews with victims of predatory lending. I can also point people to a great set of readings:


      • Todd says:

        Re: Sorry for this very long response…

        Watch out — he’s not just capthek, he’s caps-lock-thek!

        • capthek says:

          Re: Sorry for this very long response…

          Sorry, I do this for my students who are skimming my lecture notes so they know what is important for the quiz, lol.

      • Anonymous says:

        Re: Sorry for this very long response…

        It’s incredible that people are blaming CRA for this! If you look at the performance of CRA mortgages, they have a much better track record than loans made by the commercial mortgage market, much of which, as you point out, didn’t come under CRA.

        I’ll get into other stuff in a later post, as the long response I wrote earlier got wiped out before I had a chance to post it.


        • capthek says:

          Re: Sorry for this very long response…

          Yes indeed, and I am starting to hear it again and again. I think CRA also gets mixed in with Fannie and Freddie inside of peoples mishmash consciousness.

          Not that what people say about Fannie or Freddie is any more coherent.

        • Todd says:

          Re: Sorry for this very long response…

          Blaming poor people for ruining everything? Where did that idea come from?

      • Re: Sorry for this very long response…

        Just to be clear, this response is basically restating what I already said, we’re in agreement here about everything, and my “housing-is-awesome-for-everyone democrats” line was more about Bill Clinton, Alan Greenspan, and the general Democrat mood that more and more people affording housing (or rather, “affording”) was a positive that shouldn’t be stopped. That’s the primary reason above all else Democrats never stood up to fight or demand the real estate boom be cooled, same reason Greenspan and Bernanke failed to heed warnings.

        I deliberately avoided mentioning the CRA because it doesn’t at all belong in the discussion.

      • malsperanza says:

        Re: Sorry for this very long response…

        People keep on suggesting that democrats did something that gave away homes to people who could not afford it, but can you find me a specific? I ask because I think that talking point is a huge piece of B.S.

        I’m also curious about this. The first time I saw it was when some Republican reps started spouting it in yesterday’s spin cycle,in the wake of the bailout collapse. Is this a New Clever Idea, or is just an old attack repackaged? By any standards it seems dubious to blame legislation from 1968, 1974, and 1977 that led to a 30 year boom in the housing industry, while ignoring the S&L scandal of 1989 and the dereg of the 1990s. Is anyone buying this tripe?

      • igorxa says:

        Re: Sorry for this very long response…

        clinton had no choice but to sign it. the senate passed it with a vote of 90-8-1, and the house passed it 362-57-15. it was “veto proof”. both houses had republican majorities (55-45 senate, 223-211-1 house), so i guess the real question is, why did so many democrats think this was a good idea in 1999?

  2. mcbrennan says:

    I really do need to get that book.

    I’m not an economist either. One of my very best friends is a career economist, though, and for the federal government no less. This gives me some entirely undeserved credibility-by-association. But–this goes to the point of what galls me about this whole thing: the loudly-trumpeted notion that we’re all just too stupid to understand what’s going on. Just give us the money! You’d never understand it even if we tried to explain it to you. And after the last eight years–lets face it, the last 20–that line’s just not good enough. People understand it fine: they understand that Wall Street and corporate America is now going to suffer the way regular people have been suffering for years. And I for one do not have a problem with that. And at this point Bush is the Chicken Little of Presidents. Even his own maniacal followers don’t believe him anymore, whether he’s right or not.

    Of course the economy needs an intervention, and soon. But what we most need is leadership and honesty–somebody needs to get on TV (possibly FDR if he’s available–check with Biden) and lay it out as clearly as possible. Define the problem, explain what they propose to do to fix it, explain (without fearmongering) what the consequences of inaction will be. Reagan would have done it, Clinton, Kennedy, even Bush #1. It doesn’t take an economist to see that this plan does nothing to help people stay in their homes, does nothing for regular folks at all, and until they correct that they’ll never have the support of the public. (and if they do correct it they’ll never have the support of the Republicans in Congress).

    Buy bonds. That’s all I know. Hey, maybe this would be a good time for investors to put their money in the reliable sure-thing world of independent film production. I’d better whip up a prospectus.

  3. capthek says:

    How about a democratic alternative, we spend 700 Billion dollars by giving every adult America $100,000 and they use that money to pay their debts, that saves these lenders, and we are all happy?

    Did you have any specific questions?

    FYI, I am an economic and social geographer, so I literally know everything.


    • Todd says:

      “How about a democratic alternative, we spend 700 Billion dollars by giving every adult America $100,000 and they use that money to pay their debts, that saves these lenders, and we are all happy?”

      Well, now you say that as a joke (at least I think you do) but one of the things that keeps driving me crazy about this whole thing is that for thirty years I’ve been hearing about how there “just isn’t enough money” for Social Security, for schools, for infrastructure, for arts development, for national parks, for housing, for health care, for a welfare safety-net, there’s no money for anything, until a few Wall Street guys suddenly start feeling a wee bit uncomfortable, then suddenly there’s all the money in the world for them to do with what they please.

      • capthek says:

        This also drives me crazy. Here in Minnesota our governor claimed there was a “fiscal crisis” so he had to cut lots of public spending (thanks for our bridge collapse) but this “fiscal crisis” was invented from a lowering of taxes. So, big surprise, we are “forced” to cut spending. I mean, Clinton paid for lots with a tiny tax on the rich, but McCain and Bush want to just cut taxes more? Then we suddenly have huge debts and a “crisis”?

      • Anonymous says:

        Well, in fairness, there probably wasn’t any money then, and there still isn’t any money now, given how avidly we’ve been racking up the deficit. Funding this bailout will just drive us even deeper into debt. This, of course, has never stopped either Congress or the President.

        — N.A.

  4. Anonymous says:

    If you really think George W. Bush is the worst president ever, get educated. He MIGHT be bottom 10.

    • Todd says:

      Thank you, anonymous poster. I feel better-educated already.

      • finleigh says:

        You beat me to the snide remark.

        I think you’re doing fine, Todd. Even if we don’t all know exactly what we’re talking about, at least we’re thinking.

    • rentagurkha says:


      In an informal survey of 109 professional historians conducted over a three-week period through the History News Network, 98.2 percent assessed the presidency of Mr. Bush to be a failure while 1.8 percent classified it as a success.

      Asked to rank the presidency of George W. Bush in comparison to those of the other 41 American presidents, more than 61 percent of the historians concluded that the current presidency is the worst in the nation’s history. Another 35 percent of the historians surveyed rated the Bush presidency in the 31st to 41st category, while only four of the 109 respondents ranked the current presidency as even among the top two-thirds of American administrations.

    • We can’t possibly know how to fairly evaluate every president, but in living memory, sorry dude, Bush clearly wins. Impressively so. Stealing the title of Worst President In Living Memory and absolutely running away with it is the main legacy he’s going to have. Up until his terms are no longer in living memory. Or something.

  5. perich says:

    This is my best attempt to explain the bailout and its implications. The other commenters have also done a good job, though.

  6. clayfoot says:

    This American Life did a marvelous job of explaining the subprime mortgage meltdown, and they’re working on a followup to explain the current crisis. I think that followup airs at the end of this week.

    In short:

    1) The US government, by various means and measures, encouraged a higher and higher percentage of home ownership (the highest in US history).

    2) Eventually, all of the “good” mortgage borrowers were used up, in a macroeconomic sense. They didn’t need or couldn’t be persuaded to refinance or borrow more.

    3) A huge pool of money became available internationally for investing, right after Enron and several other high profile corporate failures. This pool of money sought safe, consistent returns on investments, and mortgages were considered quite safe and conservative.

    4) Government policy and this investment money collided, creating a huge market to lend to less and less qualified borrowers. Lenders, mortgage backers, investment banks, retirement funds, and various other investors offered and bought up more and more risky loans, on the principle that a certain, well understood percentage of them could fail, but no less than that.

    5) To serve calls from these investors, the big financial institutions created financial instruments that “sliced and diced” large pools or mortgages, and sold them like shares of stock. Banks, retirement funds, and other investors held these shares as part of their assets.

    6) Within the last year or so, far more of those mortgages failed and went into foreclosure than the principle, above, allowed. The investors stopped buying them. Investors who held them (and still hold them), now have billions of dollars worth of mortgages (and parts of mortgages) that can’t be valued with any certainty. They’re probably assets and worth something, but when no one will buy them, it’s hard to tell.

    7) When your assets have an uncertain value, you can’t borrow against them, and you can’t make loans backed by them. Banks and other financial institutions stop lending to each other. The inter-bank lending rate goes through the roof for what little funds are still available. This is what has been happening for the last 2 weeks, and part of what has Paulsen and Bernanke so scared.

    8) The easy flow of money between banks and institutions that we take for granted stops. You can’t buy anything at the store this week (even on a debit card), because your employer has to pay payroll out of cash on hand; it can’t use a short term loan as usual. But that doesn’t matter, because the stores can’t afford the cash to maintain a full inventory. But that doesn’t matter, because the trucks can’t afford the cash to buy diesel to ship goods. But that doesn’t matter, because the factories can’t afford the cash for raw materials. And on and on. It ripples into the service economy, the entertainment industry, utilities, and (eventually) government services.

    That’s what really has Paulsen and Bernanke so scared. And they’re right to be scared, but I disagree with a $700,000,000,000 bailout that buys up all those mortgage papers –especially since insiders at the Treasury admit that they pulled that number out of the air, because it just sounded good.

  7. rjwhite says:

    Also, financial types got a super-special private phone call briefing from Treasury-

  8. brendan831 says:

    Better illuminate the current economic situation

    Ask and ye shall receive.

    Essential 20 minute overview

    Recommended 1 hour history class

    Optional advanced studies

  9. schwa242 says:

    8. Monday morning, John McCain boasts to the media about how he’s shown great leadership in bringing together a masterful coalition to present this brilliant, new-improved bill to Congress and has single-handedly saved the economy. When the bill fails, he instantly blames Barack Obama, then, in the same sentence, insists that this is not the time to assign blame. (My favorite Republican meme — when you’ve been caught red-handed in a screwup, the first words out of your mouth should be “This is not the time to assign blame.”)

    This cracked me up. McCain complains that Obama does nothing but say he supports the measure, then McCain goes to Washington to work on things in the middle (from his cell phone at his home in Arlington, but it’s nearby at least). Democrats vote for it by 60%, Republicans by 33%. By these numbers and his own logic McCain is a less effective leader for getting in the middle of things than Barack Obama is for “doing nothing” (who was actually also negotiating via phone, just not as close to D.C. as Arlington, so it doesn’t count).

  10. leechan says:

    Warning. This will not be an educated response whatsoever. I’ve been glued to CNN, the internet, and NPR for the past 2 weeks, but that doesn’t mean I know what I’m talking about. In fact, as you’ll see, I absolutely don’t.


    No. Seriously. Let everything fall. Don’t let this bill pass and let the economy spiral downwards. Why? Because I feel that after all is said and done, the economy will have a way to self correct. It might take awhile, and it might cause a Great Depression. But that’s how you come up with plans and bills and laws to fix these problems and keep them from happening and not just apply a little first aid.

    And part of me just absolutely does not care if a bunch of people from Wall Street lose money. Because fuck it! I’m a 20-something poor college student working on her degree in Art. I have credit card debt and student loan debt out the ass. What could possibly go wrong that would effect me?

    See, I warned you it would be an uneducated response.

    • Todd says:

      I call this the “Joker’s response,” and I totally get it. I don’t entirely agree with it, but I totally get it.

      The problem being that the titans of Wall St are, from what I’ve been led to believe anyway, key to the economic health of the nation, in very basic, go-to-the-store-to-get-a-quart-of-milk ways, and when things reach that kind of crisis, it’s not just “politically disadvantageous” to let it burn, it’s inviting bloody revolution, which in spite of the past eight years, isn’t going to help the US or its standing in the world.

    • yezra says:

      the economy will have a way to self correct. It might take awhile, and it might cause a Great Depression.

      Yes, but… I hate to go all cliche from a silly movie to make a point, but:

      industrialized human beings burning massive amounts of limited fossil fuels (money) = global warming (recession) = melting ice caps (foreclosures) = saline imbalance resulting in loss of ocean currents vital to a warm climate (panic & bail out) = earth’s climate correcting itself with yet another ice age (a great depression)


      I for one would rather see the rich fucks who caused this problem pay for it with their own money – rather than take more of mine (and yours) to try and fix it so that they can keep being rich.

      But, here’s the thing… many people will lose everything if we have another depression, and I’m pretty sure it won’t be the rich fucks. This didn’t happen in the “past few weeks” as our out-of-touch leader put it, it’s been a trend with millions of working class Americans for years. I’ve got 23 years of working full-time under my belt. And after all this time of doing everything right, just as I was told to do by my leaders/employers/etc. – putting into 401k, driving the same car for 15 years, buying generic, never going anywhere on vacation – I find I’m still downsizing my life every time I turn around.

      Yeah… the thought letting them burn sounds great, but the idea of a depression doesn’t make me happy. There has to be another way. I just know in my heart that four more years of McSame is NOT the answer.

  11. quitwriting says:

    My idea of how to clean up this whole mess.

    1) Impeach Bush and Cheney now. Then remove them from office. Don’t wait, we need these men on hand for their public trial and imprisonment.

    2) Remove Bush’s entire administration from office. Two two months and change is enough time for them to fuck us up major big time.

    3) Give me $700 Billion and see if I don’t stimulate the shit out of this economy. I’ll stimulate it so hard you’ll wonder how you ever got by without me.

    Trust me. I’m some dude on the internet.

    • Todd says:

      There was another comment above somewhere that said to take that $700 billion and distribute it to American households — it’d certainly be enough to tide everyone over until the market corrects itself and would probably help the economy faster than bailing out Wall St.

      But it would, of course, be socialism.