Here’s the problem: the 700 billion dollars is to be used to buy the “toxic” (well, worthless, actually) assets of a variety of banks. These assets will be bought for prices greater than the current market price and, in principle, that will “drain the swamp” and bring back “business as usual”. However, to stretch the metaphor, no one really knows how big the swamp is. And no one really knows how many swamps there are.
Right now the focus is on unwinding the securitized sub-prime mortgages. But there is plenty of other consumer debt which has been securitized including credit card debt. How much? Well about $2.6 trillion dollars of which 37% is revolving credit ie. credit cards. (The rest are things like car loans.) How much of that will turn out to be toxic?
For a bailout to be effective it needed to address the full reality of the debt mountain consumers in the US (and Europe) have built up. And it would have had to do that in a structured, orderly, way.
Tossing money at toxic assets and raising the FDIC limits, makes it pretty clear that the great minds in Washington are at a lose as to how to do anything but crisis management. One crisis at a time.
There are a number of things which the US government could do to address the sources of the crisis. One would be to streamline the marking to market and sale of the 3 million foreclosed houses in the US. A second would be to aggressively unwind as many of the toxic assets as can be found including the non-mortgage credit assets. A third would be to significantly reduce the government’s own deficit. A fourth would be to actively participate in the creation of a value (read gold) backed world reserve currency. A fifth would be to levy taxes on credit card balances carried more than one month. A sixth would be to levy sumptuary taxes on things like TVs with greater than 40 inch screens and cars costing more than $40,000.00 and houses larger than 4000 square feet. A sixth would be a deficit reduction supercharge on incomes (from all sources) greater than 1 million dollars. A seventh would be the outlawing of earmarks. An eight would be a tax on college tuition greater than $25,000 per year.
None of these measures need be excessive and all should be a transparent as possible. The objective should be to bring personal and governmental expenditures more into line with real income.
The House of Representatives has defeated the bailout proposal….
OK, the bill failed, 228 to 205. The House has decided, oddly enough, to try a do-over. Yes, the House is taking up the same bill, again, right now, seeing if the same lawmakers vote differently this time. The Dow’s down about 500. washington monthly
Dow is off 460 points and gold is over $900.
It will be really interesting if the House defeats the bill again on the do over…
Update: For those keeping score Wikipedia informs us “The largest one-day point drop in DJIA history occurred on September 17, 2001, the first day of trading after the September 11, 2001 attacks, when the Dow fell 684.81 points”
Okay, Ike turned out to be a mess…quite a big mess; but not the economy wrecking, gas price goosing, hurricane from Hell which it was looking like on Friday. Houston is a mess but the refineries should be online in a matter of five to ten days.
So we can turn our attention back to the financial markets which are having a rather rough ride.
#1 Merrill Lynch, another investment bank laid low by the crisis that was triggered by rising mortgage defaults and plunging home values in the U.S., was in talks to be acquired by Bank of America, a marriage apparently brokered by the federal government. (Not quite that “Bullish on America”.)
#2 New York Insurance Superintendent Eric Dinallo and a representative of the governor’s office spent the weekend at the headquarters of insurer AIG, hit hard by deterioration in the credit markets, trying to craft a solution that protects policyholders, according to Dinallo’s spokesman David Neustadt.
#3 Lehman Brothers may be forced to seek an orderly unwinding of its businesses. All potential buyers walked away after the U.S. Treasury refused to budge on its refusal to provide any takeover aid, as it had done six months ago when Bear Stearns faltered.
Expectations that the 158-year-old Lehman would survive dimmed after Barclays PLC withdrew its bid to buy the investment bank. Barclays and Bank of America were considered front-runners to buy Lehman, which is foundering under the weight of $60 billion in soured real estate holdings.
The unwinding of the broker dealer business and the investment banking business has a lot to do with amazingly optimistic bets Merrill and Lehman mad on the mortgage backed securities market in the US. But the ugliness goes beyond doubtful mortgages. The exposure of the financial community to any amount of doubtful debt bundles is, even now, virtually impossible to determine.
Plus, and this is where its gets really messy, virtually all financial institutions hold the debts of other financial institutions. They are “counterparties” in various transactions. Normally, this is a relatively risk free means to spread and share risk; but “normally” takes for granted that the counterparties do not default, do not go bankrupt. If Lehmans goes down it has a small, but real, potential to take a good sized chunk of the currently undercapitalized world banking system down with it.
Like Ike the potential for a truly catastrophic banking collapse is very real. Not entirely likely, but real enough that the stock market is likely to be very spooked tomorrow morning.
Hold on because this is a financial storm surge of potentially lethal proportions.
Update: “The Lehman board authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value, the firm said. In conjunction with the filing, Lehman intends to file a variety of first-day motions that will allow it to continue to manage operations in the ordinary course.” wsj”
Briefly stated, the Gell-Mann Amnesia effect works as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward-reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.
In any case, you read with exasperation or amusement the multiple errors in a story-and then turn the page to national or international affairs, and read with renewed interest as if the rest of the newspaper was somehow more accurate about far-off Palestine than it was about the story you just read. You turn the page, and forget what you know.
That is the Gell-Mann Amnesia effect. I’d point out it does not operate in other arenas of life. In ordinary life, if somebody consistently exaggerates or lies to you, you soon discount everything they say. In court, there is the legal doctrine of falsus in uno, falsus in omnibus, which means untruthful in one part, untruthful in all. climate audit
It applies well outside the dubious world of “climate science”.
I use caps because, if things go as they are looking to go tonight, Obama and Palin and Harper are all off the front pages for several days.
Hurricane Ike will hit around the Houston Ship Channel overnight. Chances are it will be a Cat2 storm which, in a different location on a different night would be no big deal. But tonight is an unusually high tide and Ike’s storm surge is looking like 20 feet.
When Katrina hit New Orleans the human effect was devastating and the economic loss significant. But, realistically, New Orleans was hardly a center of American industry. Galveston/Houston is. And one of the main industries there are refineries.
If those refineries are hit and if the Houston Ship Channel is damaged we are looking a significant gas shortages throughout the US for weeks and perhaps months.
Update: “Texas is home to 26 refineries that account for one-fourth of U.S. refining capacity. Most are clustered along the Gulf Coast near such cities as Houston, Port Arthur and Corpus Christi. Exxon Mobil Corp.’s plant in Baytown, outside Houston, is the nation’s largest refinery.” AP And in that same article the wholesale price of gasoline has spiked to $5.00 ahead of Ike’s arrival.
Which is likely to change the politics and the economics of the US, Canada and very possibly the world.
Update II: It looks as though we - and thankfully the people in Coastal Texas - made it through Ike. “But the vital Houston Ship Channel was not hit as hard as expected by a storm surge that could have caused far greater damage and swamped refineries.
“Fortunately the worst-case scenario that was spoken about, that was projected in some areas, did not occur,” said Texas Gov. Rick Perry.” Reuters
It’s passionately interesting for me that the things that I learned in a small town, in a very modest home, are just the things that I believe have won the election.
Margaret Thatcher
Because she jumbles up so many cultural categories, because she is a feminist not in the Yale Gender Studies sense but the How Do I Reload This Thang way, because she is a woman who in style, history, moxie and femininity is exactly like a normal American feminist and not an Abstract Theory feminist; because she wears makeup and heels and eats mooseburgers and is Alaska Tough, as Time magazine put it; because she is conservative, and pro-2nd Amendment and pro-life; and because conservatives can smell this sort of thing — who is really one of them and who is not — and will fight to the death for one of their beleaguered own; because of all of this she is a real and present danger to the American left, and to the Obama candidacy.
She could become a transformative political presence.
So they are going to have to kill her, and kill her quick.
And it’s going to be brutal. It’s already getting there. Peggy Noonan, WSJ via SDA
But why bother killing her, you can follow the leftie trope started at talkleft and picked up by our own Dr.Dawg: the Palin Dead Pool - when, not if, Palin is dropped, kicked, from the Republican ticket.
Seems The One cannot stand the competition from an intelligent woman who has better Executive credentials than he does and is, horrors, pretty much a regular working class person. (I am surprised to see the Dawg barking so fiercely at a working class woman aspiring to high office…ah, wrong party. Got it.)
There is no excuse in 2008, especially when you come from a decent, educated, well-off family, and don’t have some obvious mental defect.
Sex is where babies come from. It doesn’t matter that you “didn’t mean to get pregnant” and only wanted the fun parts. An extreme skateboarder doesn’t “mean” to break a leg in eight places, but guess what?
I’m glad she’s not getting an abortion. I’m less thrilled that she’s getting married, but she probably isn’t thrilled either. If it works out, great. It’s been known to happen. But she should have planned her life better. It really isn’t that hard to do. Call it “delayed gratification.” Just control your damn self. five feet of fury
As various lefty commentators have pointed out, now that we are past the disgusting Trig inventions, socons are not down with seventeen year olds getting knocked up. Just say no and all that. My pal Kathy is leading the unreconstructed charge.
Couple of things. First, sex without contraception leads to babies as I know to my delight. Second, telling young ladies to “keep their legs closed” tends to be less effective than the Pill, condoms or, Hell, even the rhythm method.
Young women - and 17 is not 13 - have sex. Mama Palin, apparently (and I have yet to see the quote but it would make sense) is opposed to “explicit sex education” in the schools. So am I ’cause I think explicit sex education needs to happen at home. In the Palin household apparently this did not happen.
Does this make Mrs. Palin unfit to be Vice President. Hell no. It makes her far better able to understand the realities which are faced by families all over the world. It makes her capable of at least having the chance to rethink a rule against sex education in school because, let’s face it, she did not get the job done at home.
At the same time this will illustrate an essential difference between a broad spectrum of righties and lefties.
Obama stated - and I can’t be arsed to get the link - that if one of his daughters was knocked up he would not “want her punished with a baby”. Mrs. Palin has said:
“Our beautiful daughter Bristol came to us with news that as parents we knew would make her grow up faster than we had ever planned. As Bristol faces the responsibilities of adulthood, she knows she has our unconditional love and support,” the Palins said. ann althouse
And for the lefties who are shocked or who want to cry hypocrisy one of Ann’s commentors notes:
Remember, your wonder boy Barack was born to a teen age mother who was impregnated out of wedlock by the 24 year old married black African Muslim father when she was only 17 (actually 18 ed’s note) years old. althouse
Kathy, Bristol apparently did not keep her legs closed…which means that Mrs. Palin and her family will be welcoming a grandchild about the time she takes the oath of office. It would be nice if it had worked out differently; but it didn’t. A new little person will be born. And we will all be better off for it.
A simple, “I am really, really sorry to have forgotten what deranged idiots post at Kos and I am ashamed of calling into question your integrity, the parentage of Trig, and the McCain campaign on the basis of utterly unverified speculation just because there is a little piece of Obama’s dangly bits I have not licked quite hard enough yet and I really hate George Bush and I have friends who are Kennedys and they invite me to servants’ day at Hyannisport every two years.” might go some way to repairing to poor man’s reputation.
New Orleans Mayor Ray Nagin called Gustav “the mother of all storms,” saying its destruction could outstrip that from Katrina, which flooded much of his city.
“You need to be scared,” Nagin said of the Category 4 hurricane tearing along Cuba’s western coast. “You need to be concerned, and you need to get your butts moving out of New Orleans right now. This is the storm of the century.” cnn
Now I hate to say this, and my brother tells me he is spending Christmas in New Orleans, but has anyone thought that, perhaps, The Big Easy would make a better theme park than actual city what with the broken levees and hurricanes and all?
Of course, realistically, there are people living on the slopes of Vesuvius.
Over at Ben the Tiger there is a pretty good discussion of the fallout of the Palin pick I commented:
Pretty damn clever.
I love the talking point “She has more executive experience than the three other candidates combined.”
Locks up security moms and gets soccer moms thinking. Puts Hilly supporters in a pickle. Cements the socon base - not just pro-life, has the poor Downs baby to prove it.
Not from Washington…may never have been to Washington. Not more of the same inside the beltway routine we can expect from Biden (and Obama when someone explains to him what “inside the beltway” means.)
As meaningful a symbol as Obama except that she is a symbol for 51% of the population whereas BO is a symbol for less than 15% fo whom half are female.
Cute.
All this and it sucked the oxygen out of the Obama post convention bounce. Nice work.
Update: Hilariously, Kevin Michael Grace - back at blogging at last - disagrees.
Joining them aboard the carrier Abraham Lincoln were Gen. David H. Petraeus, the top American commander in Iraq, who will soon become the senior officer in the Middle East; Gen. David D. McKiernan, NATO’s top officer in Afghanistan; Adm. Eric T. Olson, head of the Special Operations Command; Lt. Gen. Martin E. Dempsey, acting commander of American forces in the Middle East; and Rear Adm. Michael A. LeFever, the senior American military liaison to Pakistan. General Kayani was accompanied by ranking officers from Pakistan.
The meeting was prompted by a series of ominous developments: continuing political turmoil in Pakistan, increasingly deadly attacks against Afghan and Western targets in Afghanistan and American complaints that the Pakistani military has been ineffective in stemming the flow of militants who launch attacks in Afghanistan from Pakistani havens. washington post via The Torch
I have long thought that if Pakistan is unwilling or unable to police the “Tribal Areas” on the Pakistan/Afghanistan border it is, effectively, no longer sovereign over those areas. And if that is the case there is no reason at all for the NATO and American forces not to adopt a radically more aggressive approach to attacks from those areas. Not to mention a very serious attempt to put paid to bin Laden and his henchmen who seem to be, to a degree, operating in the Tribal areas.
It looks as if the Americans may be swinging around to this view. It is, apparently, Obama’s take when he wants to sound bellicose.
It is that American spirit - that American promise - that pushes us forward even when the path is uncertain; that binds us together in spite of our differences; that makes us fix our eye not on what is seen, but what is unseen, that better place around the bend.
That promise is our greatest inheritance. It’s a promise I make to my daughters when I tuck them in at night, and a promise that you make to yours - a promise that has led immigrants to cross oceans and pioneers to travel west; a promise that led workers to picket lines, and women to reach for the ballot.
And it is that promise that forty five years ago today, brought Americans from every corner of this land to stand together on a Mall in Washington, before Lincoln’s Memorial, and hear a young preacher from Georgia speak of his dream.
The men and women who gathered there could’ve heard many things. They could’ve heard words of anger and discord. They could’ve been told to succumb to the fear and frustration of so many dreams deferred.
But what the people heard instead - people of every creed and color, from every walk of life - is that in America, our destiny is inextricably linked. That together, our dreams can be one.
“We cannot walk alone,” the preacher cried. “And as we walk, we must make the pledge that we shall always march ahead. We cannot turn back.” Barack Obama via The Corner
Update: But not all agree:
And My Fellow Americans…
If we all work our hardest, we can make this the best yearbook ever! [Jonah Goldberg] NRO
I would not vote for Obama purely on his politics and his lack of experience. But his nomination is a huge step forward in the healing of America’s racial divide.
Martin Luther King, who made his “I have a Dream” speech 45 years ago today, has with Obama’s nomination had at least one of his dreams come true.
So let me get this straight: it is newsworthy that 9% of the American voting public are uncomfortable voting for a black candidate, but not at all that 90% of black voters (that’s all America’s black voters by the way, not just the partisans) don’t want to go with the white candidate? We deduce that “race continues to be a significant factor” in the former case, but not the latter? edward michael george
Come on EMG, it’s only racist if you’re white…Jeez, get with the program man.
The thing is, though, the people of eastern Iowa seem to be stepping up in the Iowa stubborn way. I have seen any number of man-on-the-street interviews, and nobody is complaining. They all seem to be working to solve their problem, which is not surprising because Iowans do not complain about tragedy. They complain about hot weather and dry weather, but not tragedy. And I have looked for reports of looting and come up empty so far. tiger hawk
Compare and contrast with Katrina. They breed them tough in Iowa. God’s speed to them. And all the help in the world even if they resent the gesture.
John McCain is perfectly willing to pander. He is bright enough to know that the certainty on global warming is a crock so he says “climate change”; he is smart enough to know the “food crisis” is a crock but he also knows it will gain him some votes. So he panders. So does Hilly and so does Obama.
I’ve got no candidate in the US Presidential election. I know who I don’t want to win…all of them.
As in Canada, every US candidate is hugging the center line. Might work; but it is not leadership and our world needs real leadership.
Aw, look at the cute little Canadian babies! It’s all very sweet and innocuous, right?
Don’t believe it. Read between the lines, and you realize this is a sinister Canadian plot to take over America. Canada’s military is no match for ours, so the crafty Canucks are using infancy instead of infantry to carry out their imperial designs.
Think about it. Canadian officials send women across the border, smuggling in “anchor babies” cleverly disguised as clumps of tissue. The women give birth inside the U.S., which means their Canadian offspring are entitled to U.S. citizenship. As these “children” grow and mature, they receive instructions from their masters in Ottawa about how to undermine American culture. JAMES TARANTO wall street journal
One of the strangest things about the NAACP Wright pseudo-scientific speech on learning, and its enthusiastic CNN coverage and analysis, was the abject racialism of Wright. It was sort of an inverse Bell-Curve presentation, based on assumed DNA differences.
His convoluted explanation of African-American right-brain ‘oral’ culture as more creative, musical, and spontaneous versus European left-brain traditional analysis could never have been given by someone white to that audience without justifiably earning booing and catcalls.
Three comments: this was just the sort of racist ‘genetic’ difference that most Americans learned to shun, now apparently quite acceptable again, and part of the mainstream.
Second, there is no evidence that so-called Europeans could not “rap” or create an oral literature as well as Africans — remember, oral poetry as we know it , began with bards like Homer somewhere in the southeastern Aegean and continued into modern times in the Balkans.
Three, some of the most accomplished speakers of English and analytical thinkers are African-Americans, a fact everyone immediately recognizes from what they read and with whom they speak.
In short, Wright’s speech on black-right brainers, white-left brainers — replete with bogus stereotypes and crude voice imitations — was about as racist as they come and at one time antithetical to what the NAACP was once all about. Again, the Obama campaign and its appendages have set back racial relations a generation. Just ten years ago, any candidate, black or white, would have rejected Wright making a speech about genetic differences in respective black and white brains. Now it’s given to civil rights organizations by the possible next President’s pastor and spiritual advisor — and done to wild applause for an organization founded on the idea that we are innately the same, while being gushed over by ignorant “commentators.” victor davis hanson, the corner
A week or so ago in my commentsDr. Dawg objected to even going to Kevin Michael Grace’s site as Kevin has links to Steve Sailer [ And, Dawg, I warn you Steve says many of the same things Rev. Wright has just said albeit with a bit more rigor] and V-Dare. Based on Rev. Wright’s star turn at the NAACP does this mean Dawg will cease visiting sites which link to Obama? I ask because Rev. Wright, Obama’s spiritual guide for many, many years has now gone on record with remarks which pretty much confirm, and indeed surpass, Steve Sailer’s speculations about race.
House Democratic Whip James Clyburn, of South Carolina and the highest ranking black in Congress, also said he has heard speculation that Clinton is staying in the race only to try to derail Obama and pave the way for her to make another White House run in 2012. tails from the trail
I can’t stand Hilly and I am, I fear, an agnostic as to Obama’s fitness for office. Nor am I thrilled by McCain.
However, if the Dems keep going down this road of sorrow McCain will win in a walk.
In an earlier post I suggested that Obama could ensure he was the candidate in 2012, 16 and 20 by withdrawing. And that was when he was behind.
Looking at the polls and the valances I honestly don’t think Obama can beat McCain. And by walking away now and letting the Clinton Family Circus crash and burn he would ensure a triumphant and sympathetic nominantion in the next race and the one after that.
At this point Obama is poised to win the asterisk…first black Presidential nominee. But if he walks for the good of the party he wins the bold type: first black American President.
I finally have the comments back to working....sort of. Basically I have to wade through the spam to find the nuggets. I do this a couple of times a day. Sometimes comments are lost. I am working on this. What I need is a Capcha like the coolkids have.