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Congressional Irrelevance:

One interesting aspect of the recent government bailouts has been the complete irrelevance of Congress. The operation and decision-making seems to be run almost entirely by the Secretary of Treasury and Federal Reserve. Congress appears to lack the ability, the will, and the decisiveness to play any role except spectator, as a handful of senior executive branch officials have nationalized major portions of Wall Street.

What is further interesting is that Congress is not missed in the slightest. No one is clamoring for a greater role for our elected representatives in dealing with these problems. I haven't heard anyone saying, "We really need to get Congress more involved in this. They'll know what to do."

The other day, I offered my view that Congress today is fundamentally a silly place stocked with silly people. This latest situation illustrates the principle. I don't know whether Paulson and Bernanke are doing the right thing (I tend to think not). But I know for certain that I'd rather that they be making these decisions than Congress.

Moreover, this problem has become systemic. A recent Wall Street Journal article noted that the current Congress has enacted less legislation than any Congress in recent history--and that includes its many symbolic pieces of legislation such as renaming Post Offices. The output of administrative agencies dwarfs that of Congress. The Senate's behavior on judicial nominations is preposterous.

I sense a vicious cycle at work here. As Congress has become more dysfunctional and unable to address matters of public importance, the Executive Branch has stepped in to fill the gap. In turn, this allows Congress to behave in an even less-serious manner, which in turn necessitates further action by the Executive Branch. If the Executive waited for Congress to do anything, nothing would get done. So Congress essentially spends its time bloviating and posturing, while the unelected beavers in the bowels of the bureaucracy crank out federal regulations.

Put more generally, Congress's ridiculousness has increasingly caused it to forfeit its status a co-equal branch of government. 40 or 50 years ago it might have been plausible to imagine Congress addressing important public policy issues like entitlement reform or health care reform (I'm not saying they would have done it, but it seems like it was more plausible then). Serious people were in the Senate then--Taft, Johnson, etc. Today, however, the idea that serious solutions to pressing social problems might originate in Congress is hard to suggest with a straight face.

In the abstract, I am no fan of the administrative state and see the theoretical value of political accountability. But if I have to choose who I'd trust to deal with the big decisions, it is hard to make the case that Congress as it actually exists is who we want in charge. Over the past few years, the Executive and Courts have increasingly filled the gap that they perceive as existing because of Congress's incompetence. One would like to say that if the Executive or Judiciary won't step in Congress will step up. But that doesn't seem like a realistic scenario to me. It is a vicious cycle and it is hard to see how that cycle can be broken.

But I'm sure that there will be much ballyhooed Congressional hearings in a few months to "get to the bottom of this." Congress's last effort on this was Sarbanes-Oxley, and a lot of good that seemed to do (see Larry Ribstein).

As I said last week, John McCain has seemed to remain a serious person despite his service in the Senate, not because of it. And that it is not clear on Barack Obama. On Joe Biden it seems reasonably obvious that he long ago succumbed to Senator-itis. I think that this latest episode, and Congress's irrelevance in it, nicely illustrates my points.

trad and anon:
Moreover, this problem has become systemic. A recent Wall Street Journal article noted that the current Congress has enacted less legislation than any Congress in recent history--and that includes its many symbolic pieces of legislation such as renaming Post Offices. The output of administrative agencies dwarfs that of Congress. The Senate's behavior on judicial nominations is preposterous.
What a shock that divided government enacts less legislation than when the President and the Congress are of the same party! Who could have anticipated such a thing?
9.18.2008 5:28pm
MD22304:
Would someone who is well versed in ancient history please comment on how the decline of the Congress compares to the decline of the Roman Senate?
9.18.2008 5:29pm
trad and anon:
40 or 50 years ago it might have been plausible to imagine Congress addressing important public policy issues like entitlement reform or health care reform (I'm not saying they would have done it, but it seems like it was more plausible then).
About 40 years ago they did, it's called Medicare. And they did it a few years ago too, it's called Medicare Part D. I'll concede that it's not the kind of reform you prefer, but that's a different matter.
9.18.2008 5:32pm
ASDF:
On what basis can you legitimately conclude that McCain has remained (which assumes he ever was) a serious person? I ask this not as some partisan troll, but as one who sees nothing in McCain's legislative record or otherwise that evinces a serious interest in anything but maintaining an image as a "serious" person.
9.18.2008 5:35pm
subpatre (mail):
Todd wrote: "As Congress has become more dysfunctional and unable to address matters of public importance, the Executive Branch has stepped in to fill the gap."

This became apparent some years ago when the 'declaration' of war was a weasely document that, in essence, gave Congressional approval for the President to declare the war. Sort of a "here, you do it" statement.

It's not a good direction to be headed in. The pattern encourages --if it doesn't nequire-- a dictatorshi very strong executive branch.
9.18.2008 5:39pm
Curt Fischer:
Perhaps one factor for Congress's increasing irrelevance is the increasing de facto nationalization of our government.

Since the President and VP are the only nationally elected government officials, it makes sense that as governmental power flows over time from the states to the Fed, it accumulates primarily in the Executive. One way to look at it is that Congressmen are too busy putting on dog and pony shows to please the oftentimes limited special interests of their own particular states.

Maybe it's time to nationally elect a subset of our Senators! Just imagine if would-be Senators had to also campaign in many states, and vie for media attention with Presidential candidates. I'm half convinced that alone would go a good way to curbing the expansion of Executive power. What does everyone else think?

(Or we return to a truly federal system, but I'm not holding my breath for that.)
9.18.2008 5:41pm
commontheme (mail):

Put more generally, Congress's ridiculousness has increasingly caused it to forfeit its status a co-equal branch of government.

I take it here that you are comparing congress with the competency and gravitas that has characterized the Bush administration?
9.18.2008 5:43pm
tommears (mail):
Is it really congressional incompetence or is it the us vs. them mentality that seems to have gotten into every aspect of governance in the last 20 years. It just seems that the two parties spend more and more effort each year trying to beat each other to death than actually govern. Incompetence implies that they are too stupid or ignorant to govern. It seems to me that it is more about inflated egos than stupidity.
9.18.2008 5:43pm
BookMan:

Would someone who is well versed in ancient history please comment on how the decline of the Congress compares to the decline of the Roman Senate?


I agree. As I was reading the post, all I could think about was the similarity with Rome. My knowledge is only passing, but it seems that you can draw a link between the growth of populist power under the Gracchi, and executive power under Marius and Sulla, with the eventual rise of the Triumvirs under Crassus, Pompey, and Caesar. For what follows, see HBO's Rome.
9.18.2008 5:44pm
LawMan 5000:
I don't know if Congress is weak as a general matter, but I think using the current financial crisis to make your case is flawed. The fed and treasury actions we are looking at have taken place in a matter of days and sometimes hours and congress is a deliberative body not meant to micromanage crises. At most, an emergency session of congress usually grants authority to the executive to deal with a crisis.

The blame for the general state of regulation or lack thereof, however, can be put squarely on congress's shoulders.
9.18.2008 5:49pm
PLR:
The problem is not division of power between Congress and the executive branch, but the division of power within the Congressional houses.

The Senate now conducts its business such that no bill may pass without at least a 3/5 vote, meaning nothing gets done except for Presidential appointments to vacancies that actually are noticeable.

The House was given over to the Dems by an angry 2006 populace that wanted us out of Iraq, yet the left-leaning Speaker Pelosi was given nothing but hawks by the guy who recruited the freshmen, Rahm Emanuel.
9.18.2008 5:51pm
ThreeSheets (mail):
"bloviating and posturing"

Hey, you forgot grandstanding.
9.18.2008 5:51pm
Sam Draper (mail):
I don't know where this "coequal" language came from, but it pretty apparent from the text of the constitution that there really is supposed to be preemenent branch - Congress. The other two branches are just supposed to do what Congress says. Things obviously got turned on their head during the Civil War and the World Wars, but Congressional got back in the driver's seat as soon as peace was concluded. Congress wrecked the Nixon administration, duked it out with Reagan, had its way with Bush the 1st, smashed Clinton - and then disapeared during the Bush the 2nd administration. Their sole role seems to be garnering pork for their districts, where that was only about half their job beforehand.

What happened? Does Bush the 2nd have some secret formula to emasculate Congress, or has Congress done this to itself? Will Congressional grow a pair once Bush has ridden off into the sunset?

It is a curious phenomenon.
9.18.2008 5:54pm
Scott Scheule (mail) (www):

For what follows, see HBO's Rome.


I see where you're going with this--you're saying Sarah Palin is going to drive a mace into Ted Kennedy's neck while yelling "THIRTEEN!!!"

You know, I saw that possibility being offered on an offshore betting site, but I was skeptical. But I'm rethinking things.
9.18.2008 5:56pm
ejo:
common, we hear a lot of sniping over the term "unitary executive" and how Bush is running roughshod over the separation of powers. then, when there is the opportunity to make some sort of mark or propose some coherent policy or strategy, be it on the economy or the war, Congress' response is "We're outta here". gravitas? compared to what passes for it in the legislative branch, Bush is a giant. Congress wants to be the micromanager but has neither the smarts or courage to put itself on the spot.
9.18.2008 6:00pm
Minitruth:
Sam, you could argue that the WOT 9/11 turned things back into the hands of the Exec...
9.18.2008 6:00pm
Mark Field (mail):
I have to say this post doesn't make much sense to me. In a crisis, we don't expect Congress to be the first responder. Its job is to analyze the problem and pass legislation enabling the solution or correcting the procedures so we don't get caught again. In the former case, the New Deal legislation -- passed by Congress -- seems to give at least some basis for the actions of the Fed. In the latter case, everyone's still sorting out the issues; some correctives are obvious, others aren't. The obvious ones are likely to be vetoed by Bush, so Congress is in a holding pattern until either (a) the crisis becomes so severe that even Bush can't avoid common sense; or (b) we reach Jan. 20, 2009.

No, the real question we should be asking is "Where is Bush?". The actors here are Paulson and Bernanke; did they hide the body somewhere? It's fascinating, really -- when it's inappropriate for the Executive to act unilaterally, Bush races to do so. When it's right for the President to offer dynamic leadership, Bush is off... doing what? cutting brush?
9.18.2008 6:02pm
Justin (mail):
This is a post that maybe deserved a little more reflection on Professor Zywecki's point. It cannot withstand scrutiny at any level.

As mentioned, the Presidency is hardly a serious place these days either, by TZ's sort of vague metrics. The presidency has all sorts of silly, vaguely ceremonial acts and decisions, and the executive is fully of silly and purely partisan men.

Moreover, the inability of Congress to get anything done is a) a reflection of the unprecedented amount of filibustering in the Senate and other delay and hold tactics by the minority, supported by the Executive, b) a feature, not a flaw, particularly in divided government, and c) a feature that was supposed to be supported by conservatives!

Furthermore, the executive hasn't "filled in the gap" left by a delinquint Congress. Instead, it has simply IGNORED Congress, or pushed for Congress to cede its power. What do you think executive signing statements are? What about the White House's flagrant violations of the FSIA? Or their ignorance of any subpoena, ever?

Next, TZ completely ignores the many "serious" things that Congress does and did, including the FSIA, but also including almost every revenue and appropriation bill, the Bankruptcy bill, (I agree the 108th Congress had no major achivements), SOX, NCLB, BCRA, DMCA, etc.

Furthermore, monetary policy has always been different, and this was made even more true by Greenspan. But this is not a Congress vs. Executive sort of thing, as if it was viewed that the President interfered with the Fed or dictated its decisions, this would *also* be viewed as very unpopular.

Next, Congress is not a body that acts responsively to emergencies. It's a deliberative body, and it is supposed to act longer term.

Finally, the summation attack on Obama has no weight to it at all. Is this what passes for argument these days at the VC?
9.18.2008 6:02pm
ChrisIowa (mail):

The operation and decision-making seems to be run almost entirely by the Secretary of Treasury and Federal Reserve. Congress appears to lack the ability, the will, and the decisiveness to play any role except spectator, as a handful of senior executive branch officials have nationalized major portions of Wall Street.


Isn't this the difference in basic function of the executive and legislative branches? The legislature enacts basic policy and the framework. As a committee it's ability to act is inherently slow.

The executive by its nature can act more decisively and more quickly in times of crisis. Whether it acted in this case in the framework intended by Congress is a different question.
9.18.2008 6:03pm
Tony Tutins (mail):
I'll never forget how Congress took the lead during the Great Depression, instituting the parade of agencies that FDR later took credit for, under the rubric of the "New Deal."

There were giants in those days.

I do find it odd on a libertarian blog to hear the Congress criticized for not creating enough legislation. Perhaps they could focus on repealing existing legislation.
9.18.2008 6:04pm
RPT (mail):
"The other day, I offered my view that Congress today is fundamentally a silly place stocked with silly people. This latest situation illustrates the principle. I don't know whether Paulson and Bernanke are doing the right thing (I tend to think not). But I know for certain that I'd rather that they be making these decisions than Congress."

Todd, how democratic of you! No reason to tell the people or their elected representatives what is going on, being done or what trillion dollar commitments are being made in their name, so long as the proper members of the elite are in charge. Conservative authoritarian heaven.
9.18.2008 6:04pm
darelf:
The difficulty is that actual reform will require Congress to remove/defund entire departments. Remember that the executive exists to implement those things that Congress granted them the power to do. So, if we don't like, for instance, the welfare or medicare system, then perhaps Congress can just cancel those systems. Then we can't complain about how they messed it up.

Don't think the government should be telling you which controversial subjects to push in school (pick, depending on taste)? Get rid of the idiotic public school system.

etc. etc.
9.18.2008 6:04pm
Randy R. (mail):
"Today, however, the idea that serious solutions to pressing social problems might originate in Congress is hard to suggest with a straight face."

True. See: Terry Schaivo, Banning gay marriage, Appropriations to Bridge to Nowhere, Deregulation of the Financial Industry, No Apparent Interest in How the Adminstration Prosecutes its Wars, Tax Cuts in Boom Times and Tax Cuts in Bad Times.

Gosh, I wonder who we blame in Congress for this sorry record?
9.18.2008 6:07pm
wb (mail):
"In a crisis, we don't expect Congress to be the first responder."

It is not as if this is a crisis in the manner of a volcanic eruption or a sneak military or terrorist attack. The financial situation has been brewing for years with little attention paid by Congress which also can't seen to get its principal constitutional duty of passing a budget accomplished. Congress could have been active before the horse ran out of the barn. Instead the financial crisis is just one more example of how the congress sits around until the roof falls in before it does the only thing possible at the point, grandstand.

I'd say the absence of congress on this score is prima facie evidence of how little "experience"being a senator yields with respect to running the country.
9.18.2008 6:13pm
pluribus:

One interesting aspect of the recent government bailouts has been the complete irrelevance of Congress. The operation and decision-making seems to be run almost entirely by the Secretary of Treasury and Federal Reserve

You point out that Paulson and Bernanke are acting but Cngress isn't, but you overlook Bush. Is there any evidence that (a) he is addressing the crisis, (b) understands the crisis, or (c) even cares about the crisis? Congress passes legislation giving authority to the Treasury and the Federal Reserve to act in case of crisis. Is it any surprise that when a crisis arises, they use it? (I use the word "crisis" because that seems to be the one McCain prefers today.)
9.18.2008 6:17pm
Rod Blaine (mail):
I suppose there's only a 0 to 5% chance that the US will adopt a Westminster-style system, where Congress elects the executive (President and/or Cabinet), and can remove it for lack of confidence, and where the Cabinet's members have to be and remain members of Congress.

It seems to me that Committee Chairs have (allowing for their long experience and non-removability by the President) as much de facto power over their respective Depts as a Secretary who might serve at most 8-10 years and can be dismissed at will by the President (and then disappears back into private life, usually to write angry memoirs, rather than remaining in the Legislature).

So Chairs have nearly as much quasi-executive power as Cabinet Ministers do in a Westminster system. However, they are much less accountable for it.
9.18.2008 6:26pm
llamasex (mail) (www):
SOX is an overall good thing. It wasn't designed to prevent companies from going out of business, it was designed to push for some honest accounting. That honest accounting might have forced some of these companies out of business. But better sooner than later when they are bigger and hurt more people.

Congress has always sucked. It isn't anything new.
9.18.2008 6:49pm
Mark Field (mail):

It is not as if this is a crisis in the manner of a volcanic eruption or a sneak military or terrorist attack. The financial situation has been brewing for years with little attention paid by Congress which also can't seen to get its principal constitutional duty of passing a budget accomplished. Congress could have been active before the horse ran out of the barn.


Congress surely bears some of the blame for its actions in the past (e.g., repealing Glass-Steagall; though I doubt that's what our libertarian friends have in mind as a flaw). But the criticism made in the post involved Congressional lack of action right now. When the horse escapes, we don't expect Congress to chase it down, we expect the Executive to do so.
9.18.2008 6:54pm
ejo:
wb hits the nail on the head. I would add that, when Congress does do something that is disastrous or fails to take action on the approaching iceberg, everyone remains blameless. Barney Frank still appears to be oblivious. Any bets on reforming Social Security?
9.18.2008 6:55pm
titus32:
No, the real question we should be asking is "Where is Bush?". The actors here are Paulson and Bernanke; did they hide the body somewhere? It's fascinating, really -- when it's inappropriate for the Executive to act unilaterally, Bush races to do so. When it's right for the President to offer dynamic leadership, Bush is off... doing what? cutting brush?

I disagree with the premise of this -- I have no problem with the Treasury Secretary taking the lead on issues like AIG -- it's within his expertise. For consistency, you would also have to criticize George Washington, who let his Treasury secretary, Alexander Hamilton, create and manage the U.S. financial system. Personally, I'm happy that Washington had the wisdom to defer to Hamilton.
9.18.2008 7:03pm
JB:
More worrying than Rome, this is reminiscent of Latin America. As unelected administrators became in charge of more and more (especially in Peru), they became more and more corrupt and the voters less and less interested in voting in people who would appoint better people. The result was awesomely inefficient, expanding government.

Given how silly Congress is now, it may be better in the short term to have more appointed executive-branch people run things. In the long term, not going back to a more serious Congress will spell disaster.
9.18.2008 7:23pm
JB:
Latin America is also known for supremely nasty electoral fights, not surprising since power is so granular (the election winner can impose his will on the loser to a very large extent). In the American system, loss of the Presidency can be balanced by winning Congress, and the President's powers are limited anyhow, making victory less rewarding and defeat less bitter; if that balance eroded, expect Bush v. Gore to look like a kindergarten birthday party, and the lies thrown about this election to look like an Abraham Lincoln/George Washington debate, compared to the electoral conflict and shenanigans that will be commonplace.
9.18.2008 7:26pm
Angus:
This is nothing new, and is a feature, not a bug. Remember the fantastic Congressional leadership in the 1780s when there was no executive branch at all under the Articles of Confederation? That success is the reason the Articles of Confederation are still our governing constitution today. Or not.
9.18.2008 7:31pm
MS (mail):
Isn't this just Tempting of America with Bernanke instead of Brennan?
9.18.2008 7:35pm
crane:

Would someone who is well versed in ancient history please comment on how the decline of the Congress compares to the decline of the Roman Senate?


As I understand it, the Roman Senate declined not because of any silliness on the Senators' part, but because Rome acquired an empire.

1) A political structure set up to democratically govern a medium-sized chunk of Italy is just not going to translate well to democratically governing the entire Mediterranean world, and

2) The empire also wrecked the economic situation of the Roman plebians; when men were called away to serve in the army for many years at a time, there weren't enough adults left to properly run their family farms, which meant a lot of plebian families had to sell their farms for whatever they could get and move to the city, where there wasn't enough work to go around. This created a large mass of urban poor who would vote for whoever promised them the most government largesse. Meanwhile, the aristocracy got to buy up all those farms at discount prices, concentrating more and more wealth and power in their own hands.

Essentially, the Roman Senate before the fall was composed of a super-rich minority who owned most of everything and won elections on pork-barrel politics for the dependent majority. The Senate was quite capable of getting things done; they were just massively corrupt about it and wouldn't vote against their personal interests. Rome badly needed economic reform, but it wasn't going to happen until someone or other took control of the state and overruled the Senate's opposition.
9.18.2008 7:43pm
Nibbles:
All of the prominant Roman Senators (and most of the remaining ones) held executive and millitary offices at some point in their career. The order of precidence in the Roman Senate was based on executive experiance (ex Consuls spoke first, then ex-Praetors, etc.)

So it wasn't full of silly people like the US Congress. But it still got very little done towards the end of the Republic.

Because the prominant Senators were so powerfull the other Senators were afraid of them getting credit for passing any needed reform, and so nothing got done. In the mind of Cato the Younger and his Optimates, Crassus and Pompey only needed a slight bit more popularity and they would be able to seize control of the Republic. So Cato blocked them, while admitting that the laws they proposed would be good for the Republic.

Eventually Crassus and Pompey got around the Senate, by having Ceasar take things directly to the popular assemblies. And things snowballed from there.

Maybe the only thing worse than being governed by silly people is being governed by not-so-silly people.
9.18.2008 7:44pm
PC:
I'd say the absence of congress on this score is prima facie evidence of how little "experience"being a senator yields with respect to running the country.

I agree. We should find someone that has an MBA from a top flight business school, someone with decades of experience running businesses and also has experience as a governor. Preferably from one of the larger states.

That should work out extremely well.
9.18.2008 7:46pm
Toby:
I am surprised that no one (unless I missed it) has touched on the growth of the power of agencies as part of the problem. When Congress can turn vague assertions over to agencies, and claim creit for what they like, can rail against what they do not like, but never take actual responsibility, then a critical discipline has been removed from the institution.
9.18.2008 8:24pm
Courtney Stevens:
I certainly agree that this congress has been idiotic and irrelevant, but I hardly think it right to criticize them for passing too little legislation-- by far that is their greatest accomplishment!
Let's not adopt the amount of legislation enacted as a criterion for determining a Congress' performance--(unless we either agree that every statute Congress enacts is just and necessary or the understanding is that the least amount passed reflects the most optimal performance). They do not need yet another incentive to pass worthless, and worse, injurious, legislation.
9.18.2008 8:35pm
byomtov (mail):
Is there any evidence that (a) he is addressing the crisis, (b) understands the crisis, or (c) even cares about the crisis?

No. For which we should all be grateful. If the markets thought Bush was making decisions here, rather than Paulson and Bernanke, the Dow would be down about 3000.

Butting out is the smartest thing he's done as President.
9.18.2008 8:37pm
Elliot123 (mail):
"A recent Wall Street Journal article noted that the current Congress has enacted less legislation than any Congress in recent history--and that includes its many symbolic pieces of legislation such as renaming Post Offices."

So what? Is the number of bills passed a measure of the success and value of Congress? If so, then they can just rename post offices until they reach a higher number
9.18.2008 8:46pm
Charlie (Colorado) (mail):

One interesting aspect of the recent government bailouts has been the complete irrelevance of Congress. The operation and decision-making seems to be run almost entirely by the Secretary of Treasury and Federal Reserve.



Um, isn't that kind of the whole point? Isn't that why it's called the "Executive" Branch, and the Congress is called a "deliberative body"?
9.18.2008 9:18pm
Mac (mail):
Won't it be fun to see what kind of "free" health care these bozo's come up with for us if Obama wins ? Why do I get the feeling they know as much about medicine as they do about finance?

Oh yeah. It doesn't really matter as it creates a huge new slush fund with which they can "reward" those who contribute to them.
9.18.2008 9:47pm
Glenn W. Bowen (mail):

So Congress essentially spends its time bloviating and posturing, while the unelected beavers in the bowels of the bureaucracy crank out federal regulations.


WOW!!!

:)
9.18.2008 9:53pm
Perseus (mail):
I haven't heard anyone saying, "We really need to get Congress more involved in this."

I'm in (rare) agreement with Mark Field on this one.

Also, Professor Allan Meltzer is an example of someone who favors Congressional action if any action is to be taken at all (which he isn't too keen on): "This is a problem -- if there is a government problem, it's a problem to be handled by the Congress, not by the Fed."
9.18.2008 10:00pm
Bama 1L:
As has been pointed out, the Roman Senate was nothing like a modern legislature. Senators got their seats by holding magistracies (elected executive/military/judicial offices), for which the main qualifications were wealth, family, connections, and education. Furthermore, the Roman Senate did not enact legislation. It deliberated, pronounced opinions, and entered treaties, but it had no power to make law.

The Romans did have legislative bodies--the various assemblies--and oddly enough you can connect the decline of the Roman Republic to the emergence of actual issue-driven politics in the assemblies, particularly the plebeian assembly. The Gracchi brothers and all that. The Roman political system was good at encouraging elite consensus but bad at dealing with conflict.
9.18.2008 10:03pm
Bruce Hayden (mail) (www):
On Joe Biden it seems reasonably obvious that he long ago succumbed to Senator-itis.
Biden calls paying higher taxes a patriotic act.
9.18.2008 10:12pm
guy in the veal calf office (mail) (www):
...the current Congress has enacted less legislation than any Congress in recent history...

"The mystery of government is not how Washington works but how to make it stop." -- PJ O'Rourke
9.18.2008 10:18pm
Mac (mail):
Taking Care of Business

Despite the financial crisis, Congress will not delay its upcoming recess and is likely to wait until next year to take any action. The House is scheduled to adjourn September 26, and the Senate will skip town a week later.


Bloomberg News says Democrats have not ruled out a return to Washington after the November elections, but would only do so if Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke ask for help.

House Speaker Nancy Pelosi defended the decision, Wednesday, saying lawmakers could return "if there is a need to do so."

But Senate Majority Leader Harry Reid cited what may the more compelling reason for leaving town — "No one knows what to do."


Perseus.

They don't want to deal with the problem. Got it? They want to point fingers when someone else does something to solve the problem. Also, they don't want to accept any blame for the problem. McCain tried in 2005 too get a reform bill passed regarding Freddie Mac and Fannie Mae and it was defeated. Obama helped defeat it.
September 11, 2003

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
Also, from another source, but easily confirmed;

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.


Now then, Obama was the second highest in recipient dollar amount money from Freddie Mac and Fannie Mae. He managed this in 3 short years in the Senate. No mean feat. And, he helped insure that this never became law. Vote for any of these jerks that you want to, but remember it was McCain who saw this coming and tried to do something about it. Obama cashed in and paid back.

Plenty of Republicans as well as a lot of other Democrats who were on the take from these outfits, helped kill the bill as well. Remember this when they start pointing fingers next year.

Change you can believe in anyone?
9.18.2008 10:29pm
Bob from Ohio (mail):

No, the real question we should be asking is "Where is Bush?". The actors here are Paulson and Bernanke; did they hide the body somewhere? It's fascinating, really -- when it's inappropriate for the Executive to act unilaterally, Bush races to do so. When it's right for the President to offer dynamic leadership, Bush is off... doing what? cutting brush?


Bernanke has independent authority.

I know you don't care for the President but is letting the Treasury Secretary, a man trusted in the financial markets, be the public face actually bad? President Bush's active role would just draw political flak that would detract from the effort.

Paulson obviously got the President's approval on such a serious matter. But just as obviously, it was just a "go ahead" after a briefing. What president in US history has or had the knowledge to do anything but rubber stamp his advisors on such an issue?

Would not President Clinton have let Robert Rubin take the lead if he was still president? I don't remember Reagan being prominent in 1987 during the "crash".
9.18.2008 10:38pm
David M. Nieporent (www):
No, the real question we should be asking is "Where is Bush?". The actors here are Paulson and Bernanke; did they hide the body somewhere? It's fascinating, really -- when it's inappropriate for the Executive to act unilaterally, Bush races to do so. When it's right for the President to offer dynamic leadership, Bush is off... doing what? cutting brush?
I don't understand this criticism. Paulson and Bernanke are Bush. They're the people to whom he delegated responsibility for economic affairs.

If there were a, e.g., cholera epidemic, you'd expect the CDC to take the lead, not Bush, right? If Mexican tanks rumbled across the Rio Grande, you'd expect some general to oversee our military response, wouldn't you? If there were a plane crash, you'd expect the FAA to investigate. Etc.
9.18.2008 11:24pm
David M. Nieporent (www):
Congress surely bears some of the blame for its actions in the past (e.g., repealing Glass-Steagall; though I doubt that's what our libertarian friends have in mind as a flaw). But the criticism made in the post involved Congressional lack of action right now. When the horse escapes, we don't expect Congress to chase it down, we expect the Executive to do so.
Why on earth would Congress deserve blame for that? What on earth do you think Glass-Steagall has to do with this? It's banks who are rescuing the investment banks, remember? That's exactly what Glass-Steagall would prevent.
9.18.2008 11:25pm
DangerMouse:
Congress surely bears some of the blame for its actions in the past (e.g., repealing Glass-Steagall; though I doubt that's what our libertarian friends have in mind as a flaw).

This is an incredibly stupid comment, since the repeal of that law allowed Bank of America, a commercial bank, to purchase Merrill Lynch, an investment bank. That action alone did a lot to prevent what could've been the bankruptcy of Merrill Lynch. With ML and Lehman Bros declaring bankruptcy so quickly, the result would've been terrible, and the Fed might've decided to bail both of them out, along with AIG, because it would've been so bad.

Anyway, my point is, the repeal of that law SAVED Merrill Lynch.

Lawyers really should read the Wall Street Journal more often.
9.18.2008 11:35pm
David Warner:
Justin,

"silly and purely partisan men"

There are few on the interwebs who can speak on this topic with such a depth of first-hand experience as yourself.
9.18.2008 11:45pm
PC:
This is an incredibly stupid comment, since the repeal of that law allowed Bank of America, a commercial bank, to purchase Merrill Lynch, an investment bank.


Thanks. I was wondering what the next right wing talking point would be after the CRA talking point was debunked. Glass-Steagall helped prevent the consolidation and risk taking that have occurred in the years since its repeal. Those factors led directly to the mess we are in today (but by no means were the only factors).

Go back to the Great Depression and see why Glass-Steagall was enacted in the first place. According to right wing logic, a 31 year old law is more responsible for the current mess than the repeal of a 55 year old law that coincided with the orgy of risk taking.

Next thing we'll be hearing how the Commodity Futures Modernization Act actually helped prevent the current meltdown.
9.18.2008 11:48pm
Federalism (mail):
Repeal the 17th Amendment!
9.18.2008 11:53pm
DangerMouse:
PC,

Irrespective of other factors at play, it is just factually correct to say that under Glass-Steagall, Bank of America could not have acquired Merrill Lynch, and therefore Merrill Lynch would've been forced to declare bankruptcy on Monday if that law were in effect.

That's just the basic truth of the matter. Another truth is, that merger saved Merrill Lynch. So it helped save part of the economy.

Maybe there are various ways that commercial banks and investment banks should operate, but separating them via legislation has nothing to do with anything that occurred in this recent financial crisis. In fact, in Europe, the banks are not separated at all. Don't liberals always look to Europe for inspiration? Why not here?
9.18.2008 11:59pm
Choey (mail):
In my opinion, this is what you get when congress critters and presidents are elected for their partisan ideology instead of their competence and concern for the nation.
9.19.2008 12:19am
Mark Field (mail):

I know you don't care for the President but is letting the Treasury Secretary, a man trusted in the financial markets, be the public face actually bad? President Bush's active role would just draw political flak that would detract from the effort.


I'll reply to your comment and DMN's similar one.

Of course I think any President should be getting technical advice on rescue operations from his Treasury Sec'y. But just as we expect to see a President tour a disaster area while FEMA does the work, we expect a President to be giving us reassuring statements demonstrating that he has a handle on the situation and is going to make sure that its under control. "We have nothing to fear but fear itself.": that's what Presidents are supposed to do.

Now, it may be that Bush's reputation today is so poor that it's best for him for him to hide. But isn't that pretty damning in itself?


Irrespective of other factors at play, it is just factually correct to say that under Glass-Steagall, Bank of America could not have acquired Merrill Lynch, and therefore Merrill Lynch would've been forced to declare bankruptcy on Monday if that law were in effect.


This is true but incomplete. Yes, BofA could buy ML. But the issue is to what extent other entities became entangled in the mess which wouldn't have gotten caught if the previous limitations had stayed in effect.


Lawyers really should read the Wall Street Journal more often.


Nobody should read the WSJ editorial pages. There is no greater source of misinformation in America today (and that includes Faux News). But I agree that it's good to read the news pages of the WSJ.
9.19.2008 12:20am
PC:
DangerMouse: Irrespective of other factors at play, it is just factually correct to say that under Glass-Steagall, Bank of America could not have acquired Merrill Lynch, and therefore Merrill Lynch would've been forced to declare bankruptcy on Monday if that law were in effect.

I just dropped an anvil on my foot, but luckily the anvil is exerting enough pressure that I'm not bleeding from my foot. Impeccable logic.

Maybe there are various ways that commercial banks and investment banks should operate, but separating them via legislation has nothing to do with anything that occurred in this recent financial crisis.

Wait, which market are you paying attention to? Glass-Steagall helped prevent the conflicts of interest that generated a good part of this mess.


Don't liberals always look to Europe for inspiration? Why not here?

I don't know if liberals look to Europe for inspiration, but maybe you should take a survey and let me know the results.
9.19.2008 12:23am
Thomas_Holsinger:
The purpose of Congress is re-election. This means maximizing power while minimizing responsibility and accountability.

Mark Field asked:
"No, the real question we should be asking is "Where is Bush?". The actors here are Paulson and Bernanke; did they hide the body somewhere?"

This is like asking "Where is Bush?" about the war in Iraq, because he's not directly commanding troops in Iraq. Presidents do not act directly. They have subordinates, and manage the subordinates. Which here is Treasury Secretary Paulson doing what he is supposed to be doing.

Mr. Field's comment shows that he is a partisan whose statements on political matters can be predicted in advance such that he can be ignored. We always know what his posts will say, and so do not need to read them save for entertainment.
9.19.2008 12:32am
Michael Edward McNeil (mail) (www):
Sam Draper says:
I don't know where this "coequal" language came from, but it pretty apparent from the text of the constitution that there really is supposed to be preemenent branch - Congress. The other two branches are just supposed to do what Congress says.

That's not what perceptive observers of the fledgling American system thought. As Alexis de Tocqueville wrote in his masterful view of the early U.S., Democracy in America:
The American lawgivers had a difficult task to fulfill; they wanted to create an executive power dependent on the majority that yet should be sufficiently strong to act freely on its own within its proper sphere. […] The lawgivers of the Union appreciated that the executive power could not worthily and profitably carry out its task unless it was given more stability and strength than were granted in the individual states. The President was appointed for four years and could be reelected. With his future to consider, he should have the courage to work in the public interest and the means to do so.

The President was made the one and only representative of the executive power of the Union. Care was taken not to subordinate his will to that of a council, a dangerous expedient which both clogs government action and lessens the ruler's responsibility. […] Some legislatures can act directly on the executive power, and we have seen that the Americans were careful to prevent that. But their action may be indirect. The power of the two houses […] with the making of laws at their command, there is always a danger that they will gradually encroach on that share of power which the Constitution intended the President to preserve.

This dependence of the executive power is one of the inherent vices of republican constitutions. The Americans could not eliminate that tendency which leads legislative assemblies to take over the government, but they did make it less irresistible.

I'd say that one sees in post-Watergate actions by Congress such as the War Powers Act what appear to be just the sort of attempts by “legislative assemblies to take over the government” that Tocqueville is referring to. The more recent NSA wiretapping issue of intercepting foreign-anchored trans-border communications (which every President has always exercised and been considered to have the right to do in earlier wars) is yet another instance.
9.19.2008 12:46am
DangerMouse:
Glass-Steagall helped prevent the conflicts of interest that generated a good part of this mess.


I'm sorry, but that is completely stupid, and I mean that as a factaul matter, it is evident you don't have the slightest clue what you're talking about. You're only speaking talking points. What, exactly, were the conflicts of interest that were at issue for Lehamn Brothers? What about Merril Lynch? Lehman Brothers was an investment bank. How could there POSSIBLY be a "conflict at interest" involved there when it didn't have a commercial bank affiliate? Basically, the absence of Glass-Stegall had NOTHING to do with Lehman Brothers because there was no commercial bank to "conflict" with. Same with Merrill Lynch.

Do you know anything about the companies you're talking about, which supposedly had these "conflicts"? Or are you just reading liberal talking points?

Honestly. Talking points is no substitute for thinking, or basic knowledge of the facts.
9.19.2008 1:03am
DangerMouse:
Grr... apologies for the typos in my prior post. Was typing too fast.
9.19.2008 1:04am
Tony Tutins (mail):
McCain tried in 2005 too get a reform bill passed regarding Freddie Mac and Fannie Mae and it was defeated. Obama helped defeat it.

Are you referring to H.R. 1461? What exactly did McCain do in 2005 to get it passed? He didn't cosponsor the Senate equivalent till 2006. And just how did Obama help defeat it?

According to Thomas, H.R. 1461 passed the House and was sent to the Senate Committee on Banking, Housing, and Urban Affairs, where it died. Obama was not on this committee (although Sarbanes, Dodd, Bayh, Stabenow, and Schumer were.)

Moreover, when I googled H.R. 1461, I found articles slamming it from both the Heritage Foundation and the American Enterprise Institute. Perhaps Obama agreed with conservatives and business men that the bill was seriously flawed.
9.19.2008 1:23am
Elliot123 (mail):
"Glass-Steagall helped prevent the consolidation and risk taking that have occurred in the years since its repeal."

How did it prevent risk taking?
9.19.2008 1:25am
Michael Edward McNeil (mail) (www):
MD22304 says:
Would someone who is well versed in ancient history please comment on how the decline of the Congress compares to the decline of the Roman Senate?

Pace earlier commenters, in my view the analogy isn't very compelling, because from the moment that the Empire came into being under Augustus and there thus was an “Executive Branch,” the Senate was under the almost complete thumb of the Emperor, who controlled its membership.

As to that fate contributing to Rome's decline, note that the fall of Rome didn't occur (in the West) until more than half a millennium after Augustus' acquisition of power (at the battle of Actium), and (in the East) almost three halves of a millennium later, making the Roman state (from the founding of the Republic in 509 BC to the fall of Constantinople to the Turks in 1453 AD) the longest lived state in history.
9.19.2008 1:30am
Perseus (mail):
I suppose that I should clarify the extent of my agreement with Mark Field. I agree with his notion that "in a crisis, we don't expect Congress to be the first responder." On the other hand, I disagree with the popular expectation that the president himself needs to be running around make statements reassuring the public since that expectation reflects the most unfortunate rise of the "rhetorical presidency."
9.19.2008 1:31am
PC:
DangerMouse: Grr... apologies for the typos in my prior post. Was typing too fast.

That's okay, I'll type slowly so you can understand. Lehman didn't fail directly from the repeal of Glass-Steagall, they failed because of the market that the repeal of Glass-Steagall helped create along with their own greed and stupidity.

Before the G-S repeal you had numerous IBs that would have done due diligence on all of these CDOs and exotic derivatives that were being offered up. Sure, you have backend desks that are supposed to assess risk for the front end desks, but we're talking profits here. Besides, the guys that are sold the investment vehicles will end up holding the bag if anything goes wrong.

Add on to that the CFMA and you have a clusterfuck of epic proportions. Ask AIG why they needed to be bailed out. It wasn't their core insurance business, it was all of the CDSs they issued.

I'm a free market fan, but I'm not a free market fundamentalist. In 2003 I looked into buying a house and saw just how screwed up the market was and I'm just some guy that does decompositions on n-dimensional matrices (no, I don't understand quants). I have friends in finance that didn't see anything wrong because they were rolling in profits and eating their own dog food.

The regulations that were in place were there for a reason and they seemed to work. The subprime crisis that's lead to the alt-a crisis, that's leading to the prime crisis, is the tip of the iceberg, imho.

The CFMA is a much bigger issue as far as the blame game goes. The $596 trillion in derivatives is a much bigger issue. You don't need to believe me on that one, just look at what Warren Buffet has been saying for years.
9.19.2008 1:31am
PC:
Elliot123: How did it prevent risk taking?

The financial conservatives, i.e. the FDIC insured banks, had the risk takers working for the same company[0]. That put pressure on the normally conservative analysts to take bigger risks due to pressure from management to make bigger profits. Fudge a number here, turn a head there and all of a sudden a CDO that no one had any idea what it contained was as good as gold.

[0] - And why not? In good times the IBs could rake in the profits. In bad times the banks could weather the storm. It's the perfect marriage!
9.19.2008 1:44am
Soronel Haetir (mail):

Of course I think any President should be getting technical advice on rescue operations from his Treasury Sec'y. But just as we expect to see a President
tour a disaster area while FEMA does the work, we expect a President to be giving us reassuring statements demonstrating that he has a handle on the situation


Personally I would find a president who realized that personal presence at a disaster simply distracts from the important things that need to happen. I am thinking of incidents like Bush's helicopter tour over the bridge collapse as a prime example. I would have been thrilled had he simply sent the helo for use by those who could benifit from a bird's eye view but leaving everyone else to do their work.

"I would just get in everyone's way" would have been a refreshingly truthful statement, but I don't expect such behavior from any elected official.

Also, in regard to the earlier comment about a plane crash, I would hope the NTSB would handle such an investigation and not the FAA.
9.19.2008 1:56am
Aaron Armitage (mail):
Sam Draper;

Things obviously got turned on their head during the Civil War and the World Wars, but Congressional got back in the driver's seat as soon as peace was concluded. Congress wrecked the Nixon administration, duked it out with Reagan, had its way with Bush the 1st, smashed Clinton - and then disapeared during the Bush the 2nd administration.


On what planet is this? After Teddy Roosevelt, policymaking initiative passed to the President, and ever since the New Deal the entire policymaking process increasingly takes place within the executive branch. Congress singularly failed to smash Clinton: he handily put down the only attempt within living memory on the part of Congress at taking the policy initiative, and their attempt at revenge failed.
9.19.2008 2:02am
David M. Nieporent (www):
Of course I think any President should be getting technical advice on rescue operations from his Treasury Sec'y. But just as we expect to see a President tour a disaster area while FEMA does the work, we expect a President to be giving us reassuring statements demonstrating that he has a handle on the situation and is going to make sure that its under control. "We have nothing to fear but fear itself.": that's what Presidents are supposed to do.
So you're complaining that Bush isn't giving photo ops?
9.19.2008 2:08am
DangerMouse:
Before the G-S repeal you had numerous IBs that would have done due diligence on all of these CDOs and exotic derivatives that were being offered up.

sigh... Really, you don't know anything about Wall Street. Let me clue you in on something. There were AAA rated securities that were devalued. The Investment bankers did due diligence on them, the Financial advisors did due diligence on them, the Portfolio managers did due diligence on them, the credit rating organizations did due diligence on them, etc.

The fact is, there was a LOT of high yield bonds out there, otherwise known as JUNK BONDS. But people were investing in them, along with the AAA stuff, because the market was good at the time given the rates and the trenches that were created with the debt.

Seriously, your best argument is that people didn't engage in due diligence? Do you even know what Glass-Stegall does?

Please, really, answer this: How does a law designed to prohibit the merger of commercial banks and investment banks involve the failure of Lehman Brothers, an investment bank that was unaffiliated with a commercial bank?

Did G-S prohibit investment banks from leveraging their own assets out the whazoo? Nope. It wouldn't have stopped the failure of Bear Sterns.

And get your story straight. CFMA had nothing to do with the repeal of G-S.

I'm not claiming I know ALL the reasons for the screw up, but I'm certain that G-S had nothing to do with it. The only people clinging to that idea are liberals who don't know a thing about the economy.
9.19.2008 2:51am
Soronel Haetir (mail):

block quote
Of course I think any President should be getting technical advice on rescue operations from his Treasury Sec'y. But just as we expect to see a President
tour a disaster area while FEMA does the work, we expect a President to be giving us reassuring statements demonstrating that he has a handle on the situation
and is going to make sure that its under control. "We have nothing to fear but fear itself.": that's what Presidents are supposed to do.
block quote end
So you're complaining that Bush isn't giving photo ops?



And we all remember how well Bush's FEMA photo op after Katrina went, "Hell of a job Brownie" anyone?
9.19.2008 3:02am
PC:
DangerMouse: sigh... Really, you don't know anything about Wall Street.
Yes indeedly. Never lived there, never worked there and certainly don't have any friends there.
DangerMouse: Let me clue you in on something.
Please do.
DangerMouse: There were AAA rated securities that were devalued.
S&P, Moodys and Fitch were the geeks invited to the party because they scored some good alcohol from mom and dad's liquor cabinet.
DangerMouse: The Investment bankers did due diligence on them, the Financial advisors did due diligence on them, the Portfolio managers did due diligence on them, the credit rating organizations did due diligence on them, etc.
Obviously. That's why those AAA securities are so rock solid that the federal government is setting up an agency to absorb them with tax payer dollars.
DangerMouse: But people were investing in them, along with the AAA stuff, because the market was good at the time given the rates and the treanches that were created with the debt.
The rates were good because there was loose lending (cheap money - Fed rates) and low/no standards.
DangerMouse: Seriously, your best argument is that people didn't engage in due diligence?
No, that's one argument. It's based off of the CDOs that are floating around that are so bad we need to set up a tax payer funded agency to absorb them.
DangerMouse: Please, really, answer this: How does a law designed to prohibit the merger of commercial banks and investment banks involve the failure of Lehman Brothers, an investment bank that was unaffiliated with a commercial bank?
I typed it in slowly before, but I'll cut and paste slowly again so maybe you'll get it this time:
Lehman didn't fail directly from the repeal of Glass-Steagall, they failed because of the market that the repeal of Glass-Steagall helped create along with their own greed and stupidity.

DangerMouse: Did G-S prohibit investment banks from leveraging their own assets out the whazoo? Nope. It wouldn't have stopped the failure of Bear Sterns.
And get your story straight. CFMA had nothing to do with the repeal of G-S.

Glass-Steagall had nothing to do with investment banks and leverage. As I pointed out earlier, the repeal of G-S put financial conservatives in an awkward position. Back end desks were pressured to approve instruments for front end profits (but hey, I know nothing about the Street or the City).
DangerMouse: I'm not claiming I know ALL the reasons for the screw up, but I'm certain that G-S had nothing to do with it.
I don't know all the reasons either. I can only make conjectures based off of reasonable observations. Perhaps I'll be proven wrong at some future date, but at this point the repeal of G-S and the passage of the CFMA (seriously, almost 600 trillion) seem to be a big deal.
DangerMouse: The only people clinging to that idea are liberals who don't know a thing about the economy.
Could you point to conservative economists we should trust? The last eight years have been under the GOP and, well, we see how that's going. I'm partial to the Austrian school, but I think the US is way beyond that at this point. At least until there is a major crash. And the way things are going...
9.19.2008 3:34am
PC:
Bad formatting. Sorry.
9.19.2008 3:35am
AMac:
Fabius Maximus comments on the premise of TZ's post, Another step away from our Constitutional system, with applause.
9.19.2008 4:35am
Ryan Waxx (mail):

I typed it in slowly before, but I'll cut and paste slowly again so maybe you'll get it this time:
Lehman didn't fail directly from the repeal of Glass-Steagall, they failed because of the market that the repeal of Glass-Steagall helped create along with their own greed and stupidity.


Except that that isn't an actual answer to the question. I could with equal validity claim that the failure occurred because of "the market that the underpants gnomes helped create". And if you are familiar with the reference, you are missing step 2.
9.19.2008 10:37am
Sparky:
"Beavers in the bowels"? Sounds like a nasty medical condition. Or a nasty mixed metaphor.
9.19.2008 10:42am
DangerMouse:
Except that that isn't an actual answer to the question. I could with equal validity claim that the failure occurred because of "the market that the underpants gnomes helped create".

Bingo. But don't get too upset, Ryan, he's just parroting liberal talking points. The guy doesn't know what he's talking about.
9.19.2008 11:57am
Mark Field (mail):

On the other hand, I disagree with the popular expectation that the president himself needs to be running around make statements reassuring the public since that expectation reflects the most unfortunate rise of the "rhetorical presidency."


In light of the events of late yesterday, I think the point of this post is mostly moot. I'll just say in response to this (and similar comments by Soronel and DMN) that yes, I do expect the President to provide leadership in a crisis. That's one of his jobs; it's what the best Presidents (Lincoln, FDR) have done; it's one reason we celebrate Churchill (well, I do, anyway). It's one way we, the citizenry, retain confidence that the people we appointed to run things can be trusted to solve the problem.

Now, it's true that bad Presidents can get in the way more than they reassure. Perhaps we should be grateful that Bush isn't standing in front of cameras saying "heckuva job, Paulie". But as I said before, that's a pretty damning commentary on its own.
9.19.2008 12:20pm
PC:
Ryan Waxx: And if you are familiar with the reference, you are missing step 2.

You would need to read what I've said in context, but if that's too difficult I'll try it South Park style just for you:

Step 1) Purchase an investment bank thanks to the repeal of Glass-Steagall
Step 2) Create and purchase complex financial instruments that are opaque and no one really understands (but hey, we're a bank that's FDIC insured so we don't do risky thing!)
Step 3) PROFIT!!!

DangerMouse: Bingo. But don't get too upset, Ryan, he's just parroting liberal talking points. The guy doesn't know what he's talking about.

First, point our where I'm getting these "liberal talking points" from. Like I said, I prefer the Austrian school. Maybe Mises is a hot bed of liberals?

Second, it's funny to be lectured by someone that doesn't know the difference between a trench and a tranch. A trench is something I need to dig to shovel in what it is you are saying. A tranch is a commonly understood term in finance.
9.19.2008 1:18pm
PLR:
Second, it's funny to be lectured by someone that doesn't know the difference between a trench and a tranch. A trench is something I need to dig to shovel in what it is you are saying. A tranch is a commonly understood term in finance.

That would be "tranche."

(I'm not with the spelling police -- not enough time for such foolishness -- but anyone who needs to look it up should have the correct spelling.)
9.19.2008 3:05pm
Ryan Waxx (mail):
Glass-Steagall has not a thing to do with investing in something you don't understand. Perhaps you are reading the 'enhanced' version.
9.19.2008 3:28pm
Black's Law Dictionary:
I list tranch and trench as variants of tranche.
9.19.2008 5:12pm
deepthought:
I don't object to Congress doing nothing, I object to the Administration doing something. The best thing the Administration (including the Fed) is to do nothing, and let companies survive or fail on their own. Where are the believers in capitalism and free enterprise? What about "putting country first" (to use a current phrase?)

I know there is a political imperative to "do something," but sometimes the best thing is to do nothing. Now the Administration is proposing the government take over the "toxic assets" of prefectly healthy companies (something Congress will have to approve.) Why shouldn't the companies deal with their own problems? The government will be committing itself to taking on hundreds of billions of bad debt rung up by private companies, in addition to the several hundred billion they have already committed to Fannie Mae, Freddie Mac, Bear Stearns, and AIG.

The Bush Administration is (deliberately?) burdening the Federal government with hundreds of billions of debt that will constrain whomever wins the election, thereby leading to massive tax increases and/or budget reductions. Kiss goodbye tax reform.
9.19.2008 7:36pm
Soronel Haetir (mail):
The thing I don't understand about this debt purchase is why should only one side of such poor transactions receive government largess when it would basically cost the same to save both sides?

It makes even less sense to aid the side that is supposed to be skilled and knowledgeable.
9.20.2008 1:58am