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After this relief rally in the markets, my guess is we’ll see it stagnate until near the end of Obama’s first term. The relief is that there is some plan in place to restart the banking system; whether or not it really helps we’ll only know later. As sentiment goes, there is “hope” now, so thus the rally.
But then again with Obama there, this hope usually does NOT play out according to what people hope for.
Tom in CA
15 years ago
So isn’t this the 10th “restarting of the banking system”? Or the 10th “taking care of toxic assets”?
I also do not see much hope in the business climate in my industry – (construction) The relief rally is just that, what companies are prospering?
I am glad I wasn’t the only one who realized Obama opened himself up perfectly for the Titanic analogy.
All that’s left is for an artistic photo-shopper or political cartoonist to put Obama at the front of the Titanic a la Leonardo DiCaprio in Titanic shouting “I’m the King of the Worrrrrrrrrrrrrrrld!” Only make Obama the captain of the ship, so put a captain’s hat on him and have the lookouts be the GOP warning of his economic policies heading us straight for Icebergs (labeled as “Depression” or “Socialism/Communism”) and then have DiCaprio’s friend, who was also there at the front of the ship enjoying the ride, be labeled “mass media”.
I mean sh*t, this stuff writes itself and comedians and political artists say they can’t make fun of Obama. Geez.
UPDATE: Forgot. They’ll also need to add a Teleprompter at the front of the Titanic which tells Obama to say “I’m the King of the Worrrrrrrrrrld!”
Hard Right
15 years ago
Ooh, oooh! Dibs on the deck chairs!
liam09
15 years ago
and bruce springsteen plays while it sinks to its icy depths.
trizzlor
15 years ago
Has anyone laid out, conclusively, what the conservative alternative is to Geithner’s plan? The Republicans just put out their budget proposal, but, I shit you not, it’s echoing the “Resolution Trust Corp”-type socialization that was put forth by Krugman (of all people) not too long ago.
On the other hand, the Teaparty-types seem to just be calling or less taxes + de-regulation, right? So, what would have happened to AIG under such a scenario? What about all of the people and businesses they insure? The mess of CDS’s connecting them to other corporations (yes, Goldman claims to have hedged on an AIG collapse, but who else?). Assuming a period of “creative destruction”, what effect will this have on homeowners who still have good homes – if foreclosures hit another bump, property values could go so low that even currently valuable assets would become worthless, and the road back is much more difficult. Worse, how do our re-birth pangs effect the rest of the world, in particular nearly-failed states like Pakistan (this would sound like a conspiracy theory if it wasn’t being vigorously voiced by Petraeus advisor, David Killcullen)?
I know there’s a lot of hypotheticals here, but I haven’t seen Conservatives or Republicans even dip their toes in the water as to answering these questions. I’m all for creative destruction, I’d just like to make sure the destruction part doesn’t put us in the stone age.
While Mother Jones Magazine and MoveOn.org don’t link to the House GOP, there is nothing to stop you from going there and reading detailed GOP alternatives for yourself:
@Mike’s America: Thanks for the reply, and for assuming that I’m a complete moron ;).
Like I said in the previous comment, the Republicans are proposing that “a Resolution Trust Corporation-type entity would restructure these firms in receivership by selling off their assets and liabilities, reappointing private management … ” which echoes almost exactly what Krugman has been calling for, and is essentially the Swedish bank nationalization proposal with Republican spin. This is the only portion of the “Republican Road to Recovery” that presents a concrete plan for the banks, the rest deals with preventing another collapse through lower taxes and deregulation. Moreover, there isn’t a single statistic or example regarding the success of the proposal – I understand that this is essentially their abstract, and they will hopefully roll out the numbers in due time, but the fact that you glibly assume gop.gov has the answers and didn’t pick up on my specific references suggests that you didn’t read their proposal very carefully if at all.
So let me rephrase – aside from creeping nationalization, the only solution conservatives have proposed is tax cuts and deregulation. For all the complaining about AIG bailouts, has anyone looked at this free market alternative and the impact that a period of creative destruction will have domestically (on homeowners and other corporations) and internationally (on nearly failed states such as Pakistan)?
Every crisis is different, although everyone is also the same.
When SEAsia had its crisis, Paul Krugman came here and gave some cockammamie advice that had everyone scolding him and telling him to get lost.
There is a standard way to handle such crises, BUT rather than doing just that, the Obama admin has used the SOP to further his admin’s power, entrench the power of the democrats and pay off democratic interests. This is very clear, esp when one looks at the so-called stimulus(most of which is just megapork sent to his supporters).
When one looks at the general outline of the GOP way to handle the problem, it is certainly much better because it lacks the self-serving corruption and partisanship of the Obama way.
The Obama admin is using the financial crisis mainly to entrench its power and pay off its supporters; saving the economy comes in second. This is so obvious that anyone with half a brain can see it.
ruaqtpi2
15 years ago
How to save (what’s left of) our economy:
1) Stop bail-outs! Period.
2) Encourage AIG, GM, Chrysler, and other insolvent fims to avail themselves of bankruptcy laws.
3) Cut unnecessary government programs (not just across the board cuts).
4) Freeze government spending at 2008 levels + COLA.
5) Simplify tax code. One possibility: 0% (0 to poverty level), 15% (above poverty level to 100x poverty level), 25% (above 100x poverty level).
6) Find and plug budgetary leaks, or cut leak amount from next year budget.
Not perfect, but stops the hemorrhaging. Jobs and trade agreements would need addressing next.
Jeff V
trizzlor
15 years ago
@ruaqtpi2: Sounds pretty good, but what happens when these large banks start going bankrupt? Sorry to sound like a broken record, but are we sure that this won’t cause a bank run? Further market crashes & inflation? Larger international failures in unstable countries?
If we’re just talking either/or (either we go with (1) Obama’s/Democrats’ socialism/communism plans or (2) the GOP’s ‘let them go bankrupt’ plans), wouldn’t Plan 1 give us short term ‘safety’, but long term disaster, while Plan 2 would give us short term disaster with long term success?
Also, here’s another option: what about just doing nothing? Seriously. Because it seems that if the government just decided to do nothing and keep the status quo, things would eventually work themselves out. No bailouts. No raising taxes. No big spending bills. Keeping the capital gains and corporate tax rates where they are. Simply making this year’s budget a duplicate of last year’s budget, same spending, no increases or decreases, so keeping the same deficit. And then telling the country that we’re just going to ride this out and let the Market self-correct.
Anyone have any idea how Wall Street would react to that were that to be announced next Monday?
This is a serious question. Because the economy was actually fine from 2001-2007. It didn’t go bust until 2008. But it seems that the solutions of the Democrats and Obama are to use the lie that the policies of 2001-2007 were bad, thus we need to scrap them and implement socialism/communism, whereas the the GOP doesn’t have the backbone to say “look, the policies of 2001-2007 were not the problem, it was X,Y,Z and here’s a small plan to keep the successful policies of 2001-2007 in place AND add some corrections for X,Y,Z in addition to keeping spending status quo instead of quadrupling it as the Democrats/Obama propose.
Also, what am I missing from thinking that simply (1) keeping spending status quo (not cuts nor increases from the 2008 budget) (2) lowering capital gains taxes and (3) lowering the corporate tax rate will help the economy recover? Why is there a need for any HUGE plans at all? What am I missing here?
These questions are for everyone, not just “trizzlor”.
Sooner or later we are going to have to eat the economic spit sandwich. I would rather we do it before we spend trillions and trillions and trillions of my grandkid’s (who aren’t even born yet) money. Let me answer your questions with one of my own. Are you sure that we won’t end up with bank runs, inflation, market crashes, and destabilized countries even after we have wasted all these trillions of dollars? Creating massive new debt is very rarely a good idea when you are having financial troubles, and if you do have to borrow, you are well advised to only borrow what you absolutely must.
trizzlor
15 years ago
@Michael in MI: I’ll answer a few, but I would also really like to see some other viewpoints.
wouldn’t Plan 1 give us short term ’safety’, but long term disaster, while Plan 2 would give us short term disaster with long term success?
Agreed, and I’d love to see the banks and especially the auto-sector start from scratch, but what’s important is the extent of the disaster; particularly in a global economy where unstable countries have nukes. The Dems have been pushing the “too big to fail” policy and so the banks need to be propped up no matter what. I have yet to see a competent and systematic response to this from the Republicans.
Why is there a need for any HUGE plans at all?
I think there is some consensus here that the financial crisis was one part Fannie & Freddie over-reach, and two parts ponzi scheme in the form of CDOs (which let bankers cut up and regroup assets so it wasn’t clear where they were coming from) and CDSs (which let bankers gamble cyclically on the value of a single CDO). Both problems have been around for at least a decade – gambling works only when the die is rigged in your favor (as it was with the housing bubble). Banks need to be responsible enough so that a housing lull does not again result in this ridiculous debt spiral.
Geithner’s proposal assumes that the assets banks currently hold are undervalued, and if the government buys them up, the economy starts working again, it can sell them for profit in the future. Krugman & Republicans assume the contrary, and believe that a government organization needs to buy up the banks, figure out what assets are insolvent, and restructure the bank to be hedged against them.
After scouring the GOP web-site, I have yet to see a free-market solution. I’d love to see Mike point me in the right direction.
trizzlor
15 years ago
@Lightbringer: I’m reminded of a phrase – “You bring your expert and I’ll bring mine”.
The economists that the Dems are citing – Krugman, De Long, Rubini – claim that lack of government intervention will continue the spiral. Plus, Obama promised he would do this and he got elected, so he has the benefit of the doubt (though it doesn’t stand for much without factual support, in my book).
As far as I can see, the Republican experts claim that the CRA and “social engineering” caused this, and that government deregulation would prevent a future crisis, but they’re mum on what to do about the current one. Meanwhile, the GOP inches towards nationalization (with the full details revealed on April Fools day).
ditto
15 years ago
This may sound crazy, but has anyone considered that maybe, just maybe, Obama’s plan for the country depends on causing our economy to fail? Perhaps he is deliberately trying to create a depression. With the value of the dollar ruined (ala’ Argentina), skyrocketing unemployment, financial collapse, in destitution the people would be willing to accept extreme measures. Then Obama and the Dems can pretend that they are FDR and force us to accept radical social engineering (such as changing our form of government from a democratic republic into a socialist republic).
Why else would captain Obama be steering directly for the iceberg?
“This may sound crazy, but has anyone considered that maybe, just maybe, Obama’s plan for the country depends on causing our economy to fail? Perhaps he is deliberately trying to create a depression.”
Well, if that’s crazy, then I’m nuts, because that has been obvious to me for weeks now. But too many conservatives and Republicans are too afraid to say it, for fear of sounding “crazy”. But, if you put Obama’s actions of his first 2 1/2 months in office in context with his entire political career, it seems pretty obvious that he is deliberately causing this “crisis” in order to “transform” this nation into his socialist and eventually communist utopia that he has been envisioning for the past 2 decades, all in the name of “fairness”. He broadcast his intentions loudly and clearly during the campaign. But people refused to believe he was a radical, despite 2 decades of surrounding himself with radicals, learning from radicals, being mentored by radicals.
The man is a radical and had this planned from the get-go. I personally still cannot believe that America has not woken up to this fact.
ditto
15 years ago
Well, I’m glad I’m not the only one. It certainly explains a lot: Obama’s waiting so long to appoint treasury staff while in a financial crisis. His “gallows humor” where he has been laughing and in good spirits during most of Washington DC/Wall Street created crisis. The sloppy handling of foreign affairs. Why he is going off in so many directions at once but getting very little done, while what little he has done, has been done badly. Obama definitely does not come across to me as taking the responsibilities of his office seriously.
After this relief rally in the markets, my guess is we’ll see it stagnate until near the end of Obama’s first term. The relief is that there is some plan in place to restart the banking system; whether or not it really helps we’ll only know later. As sentiment goes, there is “hope” now, so thus the rally.
But then again with Obama there, this hope usually does NOT play out according to what people hope for.
So isn’t this the 10th “restarting of the banking system”? Or the 10th “taking care of toxic assets”?
I also do not see much hope in the business climate in my industry – (construction) The relief rally is just that, what companies are prospering?
Tom in CA
Damn, that is good, not sure anything will left for the salvage company…….
All we can hope for is that we don’t sink as fast as the Titanic did and we have some time to save the country and our economy.
http://franklinslocke.blogspot.com/
On the bright side, if things go south badly enough maybe all the
liberals will move to Canada.
I am glad I wasn’t the only one who realized Obama opened himself up perfectly for the Titanic analogy.
All that’s left is for an artistic photo-shopper or political cartoonist to put Obama at the front of the Titanic a la Leonardo DiCaprio in Titanic shouting “I’m the King of the Worrrrrrrrrrrrrrrld!” Only make Obama the captain of the ship, so put a captain’s hat on him and have the lookouts be the GOP warning of his economic policies heading us straight for Icebergs (labeled as “Depression” or “Socialism/Communism”) and then have DiCaprio’s friend, who was also there at the front of the ship enjoying the ride, be labeled “mass media”.
I mean sh*t, this stuff writes itself and comedians and political artists say they can’t make fun of Obama. Geez.
UPDATE: Forgot. They’ll also need to add a Teleprompter at the front of the Titanic which tells Obama to say “I’m the King of the Worrrrrrrrrrld!”
Ooh, oooh! Dibs on the deck chairs!
and bruce springsteen plays while it sinks to its icy depths.
Has anyone laid out, conclusively, what the conservative alternative is to Geithner’s plan? The Republicans just put out their budget proposal, but, I shit you not, it’s echoing the “Resolution Trust Corp”-type socialization that was put forth by Krugman (of all people) not too long ago.
On the other hand, the Teaparty-types seem to just be calling or less taxes + de-regulation, right? So, what would have happened to AIG under such a scenario? What about all of the people and businesses they insure? The mess of CDS’s connecting them to other corporations (yes, Goldman claims to have hedged on an AIG collapse, but who else?). Assuming a period of “creative destruction”, what effect will this have on homeowners who still have good homes – if foreclosures hit another bump, property values could go so low that even currently valuable assets would become worthless, and the road back is much more difficult. Worse, how do our re-birth pangs effect the rest of the world, in particular nearly-failed states like Pakistan (this would sound like a conspiracy theory if it wasn’t being vigorously voiced by Petraeus advisor, David Killcullen)?
I know there’s a lot of hypotheticals here, but I haven’t seen Conservatives or Republicans even dip their toes in the water as to answering these questions. I’m all for creative destruction, I’d just like to make sure the destruction part doesn’t put us in the stone age.
Yes, Trizzlor…. someone *has* laid out an alternate. Oddly enough, some of it follows the conservative bent that some companies need to fail.
See my latest post… Just in case you haven’t heard enough economic doom ‘n’ gloom.
[THIS INDIVIDUAL IS BANNED FROM COMMENTING ON MIKE”S AMERICA POSTS DUE TO FLAMING SPAM.]
Hussein doesn’t need lifeboats…just the national guard to put down the insurrection after his plans have been completed.
@trizzlor: You haven’t been paying attention.
While Mother Jones Magazine and MoveOn.org don’t link to the House GOP, there is nothing to stop you from going there and reading detailed GOP alternatives for yourself:
http://www.gop.gov/
@Mike’s America: Thanks for the reply, and for assuming that I’m a complete moron ;).
Like I said in the previous comment, the Republicans are proposing that “a Resolution Trust Corporation-type entity would restructure these firms in receivership by selling off their assets and liabilities, reappointing private management … ” which echoes almost exactly what Krugman has been calling for, and is essentially the Swedish bank nationalization proposal with Republican spin. This is the only portion of the “Republican Road to Recovery” that presents a concrete plan for the banks, the rest deals with preventing another collapse through lower taxes and deregulation. Moreover, there isn’t a single statistic or example regarding the success of the proposal – I understand that this is essentially their abstract, and they will hopefully roll out the numbers in due time, but the fact that you glibly assume gop.gov has the answers and didn’t pick up on my specific references suggests that you didn’t read their proposal very carefully if at all.
So let me rephrase – aside from creeping nationalization, the only solution conservatives have proposed is tax cuts and deregulation. For all the complaining about AIG bailouts, has anyone looked at this free market alternative and the impact that a period of creative destruction will have domestically (on homeowners and other corporations) and internationally (on nearly failed states such as Pakistan)?
@trizzlor: House GOP leaders have issued a slew of comprehensive alternatives.
Just because you don’t like what they are offering is no reason to suggest they aren’t putting forward a plan.
And yes, it does appear to me that you are focused only on one particular and are ignorant of the panoply of policy alternatives on offer.
Every crisis is different, although everyone is also the same.
When SEAsia had its crisis, Paul Krugman came here and gave some cockammamie advice that had everyone scolding him and telling him to get lost.
There is a standard way to handle such crises, BUT rather than doing just that, the Obama admin has used the SOP to further his admin’s power, entrench the power of the democrats and pay off democratic interests. This is very clear, esp when one looks at the so-called stimulus(most of which is just megapork sent to his supporters).
When one looks at the general outline of the GOP way to handle the problem, it is certainly much better because it lacks the self-serving corruption and partisanship of the Obama way.
The Obama admin is using the financial crisis mainly to entrench its power and pay off its supporters; saving the economy comes in second. This is so obvious that anyone with half a brain can see it.
How to save (what’s left of) our economy:
1) Stop bail-outs! Period.
2) Encourage AIG, GM, Chrysler, and other insolvent fims to avail themselves of bankruptcy laws.
3) Cut unnecessary government programs (not just across the board cuts).
4) Freeze government spending at 2008 levels + COLA.
5) Simplify tax code. One possibility: 0% (0 to poverty level), 15% (above poverty level to 100x poverty level), 25% (above 100x poverty level).
6) Find and plug budgetary leaks, or cut leak amount from next year budget.
Not perfect, but stops the hemorrhaging. Jobs and trade agreements would need addressing next.
Jeff V
@ruaqtpi2: Sounds pretty good, but what happens when these large banks start going bankrupt? Sorry to sound like a broken record, but are we sure that this won’t cause a bank run? Further market crashes & inflation? Larger international failures in unstable countries?
@trizzlor:
If we’re just talking either/or (either we go with (1) Obama’s/Democrats’ socialism/communism plans or (2) the GOP’s ‘let them go bankrupt’ plans), wouldn’t Plan 1 give us short term ‘safety’, but long term disaster, while Plan 2 would give us short term disaster with long term success?
Also, here’s another option: what about just doing nothing? Seriously. Because it seems that if the government just decided to do nothing and keep the status quo, things would eventually work themselves out. No bailouts. No raising taxes. No big spending bills. Keeping the capital gains and corporate tax rates where they are. Simply making this year’s budget a duplicate of last year’s budget, same spending, no increases or decreases, so keeping the same deficit. And then telling the country that we’re just going to ride this out and let the Market self-correct.
Anyone have any idea how Wall Street would react to that were that to be announced next Monday?
This is a serious question. Because the economy was actually fine from 2001-2007. It didn’t go bust until 2008. But it seems that the solutions of the Democrats and Obama are to use the lie that the policies of 2001-2007 were bad, thus we need to scrap them and implement socialism/communism, whereas the the GOP doesn’t have the backbone to say “look, the policies of 2001-2007 were not the problem, it was X,Y,Z and here’s a small plan to keep the successful policies of 2001-2007 in place AND add some corrections for X,Y,Z in addition to keeping spending status quo instead of quadrupling it as the Democrats/Obama propose.
Also, what am I missing from thinking that simply (1) keeping spending status quo (not cuts nor increases from the 2008 budget) (2) lowering capital gains taxes and (3) lowering the corporate tax rate will help the economy recover? Why is there a need for any HUGE plans at all? What am I missing here?
These questions are for everyone, not just “trizzlor”.
@trizzlor
Sooner or later we are going to have to eat the economic spit sandwich. I would rather we do it before we spend trillions and trillions and trillions of my grandkid’s (who aren’t even born yet) money. Let me answer your questions with one of my own. Are you sure that we won’t end up with bank runs, inflation, market crashes, and destabilized countries even after we have wasted all these trillions of dollars? Creating massive new debt is very rarely a good idea when you are having financial troubles, and if you do have to borrow, you are well advised to only borrow what you absolutely must.
@Michael in MI: I’ll answer a few, but I would also really like to see some other viewpoints.
Agreed, and I’d love to see the banks and especially the auto-sector start from scratch, but what’s important is the extent of the disaster; particularly in a global economy where unstable countries have nukes. The Dems have been pushing the “too big to fail” policy and so the banks need to be propped up no matter what. I have yet to see a competent and systematic response to this from the Republicans.
I think there is some consensus here that the financial crisis was one part Fannie & Freddie over-reach, and two parts ponzi scheme in the form of CDOs (which let bankers cut up and regroup assets so it wasn’t clear where they were coming from) and CDSs (which let bankers gamble cyclically on the value of a single CDO). Both problems have been around for at least a decade – gambling works only when the die is rigged in your favor (as it was with the housing bubble). Banks need to be responsible enough so that a housing lull does not again result in this ridiculous debt spiral.
Geithner’s proposal assumes that the assets banks currently hold are undervalued, and if the government buys them up, the economy starts working again, it can sell them for profit in the future. Krugman & Republicans assume the contrary, and believe that a government organization needs to buy up the banks, figure out what assets are insolvent, and restructure the bank to be hedged against them.
After scouring the GOP web-site, I have yet to see a free-market solution. I’d love to see Mike point me in the right direction.
@Lightbringer: I’m reminded of a phrase – “You bring your expert and I’ll bring mine”.
The economists that the Dems are citing – Krugman, De Long, Rubini – claim that lack of government intervention will continue the spiral. Plus, Obama promised he would do this and he got elected, so he has the benefit of the doubt (though it doesn’t stand for much without factual support, in my book).
As far as I can see, the Republican experts claim that the CRA and “social engineering” caused this, and that government deregulation would prevent a future crisis, but they’re mum on what to do about the current one. Meanwhile, the GOP inches towards nationalization (with the full details revealed on April Fools day).
This may sound crazy, but has anyone considered that maybe, just maybe, Obama’s plan for the country depends on causing our economy to fail? Perhaps he is deliberately trying to create a depression. With the value of the dollar ruined (ala’ Argentina), skyrocketing unemployment, financial collapse, in destitution the people would be willing to accept extreme measures. Then Obama and the Dems can pretend that they are FDR and force us to accept radical social engineering (such as changing our form of government from a democratic republic into a socialist republic).
Why else would captain Obama be steering directly for the iceberg?
@ditto:
Well, if that’s crazy, then I’m nuts, because that has been obvious to me for weeks now. But too many conservatives and Republicans are too afraid to say it, for fear of sounding “crazy”. But, if you put Obama’s actions of his first 2 1/2 months in office in context with his entire political career, it seems pretty obvious that he is deliberately causing this “crisis” in order to “transform” this nation into his socialist and eventually communist utopia that he has been envisioning for the past 2 decades, all in the name of “fairness”. He broadcast his intentions loudly and clearly during the campaign. But people refused to believe he was a radical, despite 2 decades of surrounding himself with radicals, learning from radicals, being mentored by radicals.
The man is a radical and had this planned from the get-go. I personally still cannot believe that America has not woken up to this fact.
Well, I’m glad I’m not the only one. It certainly explains a lot: Obama’s waiting so long to appoint treasury staff while in a financial crisis. His “gallows humor” where he has been laughing and in good spirits during most of Washington DC/Wall Street created crisis. The sloppy handling of foreign affairs. Why he is going off in so many directions at once but getting very little done, while what little he has done, has been done badly. Obama definitely does not come across to me as taking the responsibilities of his office seriously.