(no subject)

[dwenius]

I'm reading a lot of angry people against any form of bailout right now. Which, I have to admit, I find curious in some ways. Yes, the people who got us into this mess are rat bastards who should suck the pipe. Yes, I want to see the CEO's of these banks and mortgage companies strangled with their own intestines and their heads hung on pikes as a warning to the greedy. and so forth. But I am baffled at how many otherwise intelligent people seem to be ignoring the basic reality of the modern credit market. It doesn't matter that the top of the money food chain is filled with irreparable pig-fucking scum; those scum have owned the rest of us for decades, body and soul, and have more influence over national AND world affairs than it is healthy to contemplate. and when they don't get their way, bad things happen. The stock market is the world's most intractable toddler.

John Aravoisis at American Blog posted this summary of the credit crisis, including several practical examples of how the credit freeze affects the day to day lives of normal folks. Got all that?

I know many of you work in technology, and frequently buy hardware or software on Net-30 or Net-60 terms. The whole ability of vendors to offer those terms relies on lines of credit that are established as a basic opening move in starting a business. That is the credit that is freezing up; that, and car loans, and home loans, and bank to bank loans.

Personally, my own mortgage-- thankfully locked into a decent rate for a little longer-- will eventually flip over to the 6 month Libor. To be blunt, the risk of my mortgage interest rate moving from under 3% to almost 7% overnight is WAY more scary than a $700B increase in the deficit, in real, practical terms.

That's why I think some sort of intervention is necessary. but I have no ideas on how to frame such a proposal in a way that will be politically feasible. and at this point, I'm not sure anyone else does either.

Comments

[jgcr.livejournal.com]

credit freeze -- really bad, check.

the first plan was totally bogus, the second mostly bogus. i need to be convinced that the bailout would actually *work* to be even remotely OK with handing over that much money.

[dr-strych9.livejournal.com]

The intervention that will turn out to be politically feasible is the one that won't work very well, and may in fact turn out to be completely ineffective depending on the level of corruption and incompetence at the Department of the Treasury.

The intervention that has a chance of working, i.e. a Swedish-style nationalization, is politically impossible given the large quorum of bug-fucking insane Republicans in the House of Representatives who see more political points to be scored by fueling populist rage than by promoting the general welfare.

Doing nothing much of consequence is how you go about recreating the Great Depression. It's a very well-understood process and documented quite thoroughly in the literature. It would be nice if policy makers would read it.

[dwenius.livejournal.com]

What is your definition of a plan that "works"? Because the market drop yesterday is my definition of failure. and the market-- the childish, emotional, give me a lolly or I'll scream and shout market-- is going to keep failing in this manner.

[dwenius.livejournal.com]

So do we wait until January 21 and hope Obama Claus gives us a big fat nationalized bank as a late holiday gift? Or do we pat the bankers on the head NOW, and THEN fix it up in January, when the Dems may have even stronger majorities in both houses?? Recall that Bush's first few months in office involved overturning dozens of Clinton era laws that got in the way of his agenda.

[jgcr.livejournal.com]

And it's gained most of that back today. The market drop is not the problem -- we could easily throw a bunch of money around, make the market happy for now, and end up with the same credit crunch we were theoretically solving. *That* would be bad.

That said, something should be done, and soonish -- but it doesn't have to be all at once, it doesn't have to be no strings attached, and it certainly doesn't have to make Republicans happy.

[dr-strych9.livejournal.com]

I'm the wrong guy to ask. What I want to do is to hoist all the Princes of Wall Street up on pikes made from the bleached bones of their predecessors and strangle them with their own entrails et cetera ad nauseum.

What I think will happen is that the Senate will pass a tweaked version of the TARP bill on Wednesday, then the House will or will not pass it. I almost don't care, because I don't think TARP will do the trick in either case. (Okay, I care, because I think TARP is likely to do some small measure of good, and unlikely to make things worse than they already are).

I see the economy continuing to slide into a deep recession, possibly including the total systemic meltdown of the entire U.S. financial services sector, modulated only sometime next year after the new Congress is seated and a sweeping nationalization bill can be passed, either with Obama's vote or over McCain's veto. (The possibility of the latter requirement fills me with horror, as does the idea of Phil Gramm as Secretary of the Treasury.)

For the record, I was predicting more or less this outcome back in 2003, because that's when I started reading Nouriel Roubini's letters. My only surprise has been how long it took for us to get to this point. I thought it much more likely to happen sooner.

[dr-strych9.livejournal.com]

There is also this range of possibilities to consider.

[dwenius.livejournal.com]

It has to make at least a few Republicans happy or else it won't pass!

[dwenius.livejournal.com]

I'm the wrong guy to ask. What I want to do is to hoist all the Princes of Wall Street up on pikes made from the bleached bones of their predecessors and strangle them with their own entrails et cetera ad nauseum.

We should start a club, or something.

[eejitalmuppet.livejournal.com]

As an aside on nationalisation, the major shareholders of Northern Rock, the first major lender to go tits-up over here and get nationalised (towards the end of last year, IIRC), are in the process of suing the UK government for taking their toys away, despite the fact that said toys weren't worth anything when they were nationalised.

IMO, nationalisation may be a good way of saving things in the short term, not least because it means the government winds up with something to show for all the money they plan to throw around, and they can presumably refloat those assets when the markets perk up again. However, the merits of the plan won't stop shareholders and others throwing their weight around in the courts. It's gonna be a good time to be a lawyer.

[jgcr.livejournal.com]

It doesn't have to make a single house republican happy. Senate and W, yes, but they're more convincable.

[kmhoofnagle.livejournal.com]

Sign me up.