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The Bailout:

Co-conspirator Eric Posner writes:

Meanwhile, right now niceties of statutory construction must be ignored because the people who drafted the statutes did not anticipate the nature of this emergency though of course they knew that emergencies could happen. Back in 1932 (the most recent amendment was in 1991), Congress apparently believed that the Fed could respond to a financial crises solely by making loans so there was no need to give it the power to purchase businesses, a power that could be abused. Turns out this belief might have been wrong. Some loans may not be wise unless the lender can more or less control the borrower and can earn a portion of the upside, which just means that the Fed should have the power to purchase equity as well as debt. Going forward, all that Congress can do is provide even greater statutory discretion by expanding old authorities, so that next time round there will be no doubts about legality, and hope that the Fed does not abuse this discretion. There is, and can be, no serious debate about the best way to respond to the emergency in advance of it, and no time to have a debate during it. So Congress proves itself again an utterly helpless institution. It can whine (http://online.wsj.com/article/SB122176444088253287.html?mod=googlenews_wsj) today, hold oversight hearings tomorrow, and dutifully hand over more authority to the Fed on the next day. In the meantime, bad decisions by our government during this financial crisis, and future ones as well, will harm Americans and people around the world just as much as bad war-on-terror decisions do. Sorry, my libertarian friends; this is the world we live in. And there is no conceivable alternative

He's probably right, sad to say -- Congress can no more give direction in crises like this one than it can direct troop movements during wartime. But one (small) point should be stressed here: the current bailout is being crafted not just by the Fed, but by the Treasury Department in conjunction with the Fed. It's not an insignificant point -- the Fed, after all, is almost completely shielded from political pressure, which is (usually) a good thing. But I, for one, would be a lot more nervous about the current bailout (and future bailouts) if I thought that the Fed was acting on its own; at least the occupants of the Treasury Dep't have some claim to having been chosen by the electorate, and are not entirely independent of voters' claims.

And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?

Mahan Atma (mail):
Note that the bailout now includes FOREIGN banks.

It is clear what is going on here. China and other foreign entities will refuse to buy the treasuries necessary to fund this bailout unless they get bailed out too.

Note this piece from the WaPo:

As U.S. financiers scrambled this week over how to deal with possible collapse of major financial institutions, Chinese Vice Premier Wang Qishan arrived in Washington with a message: To survive the crisis, U.S. equity markets need countries such as China that have massive foreign exchange reserves to jump in a big way.

[snip]

Accompanied by a delegation that includes senior officials from China's central bank and Ministry of Finance, as well as banking, insurance and securities regulators, Wang had originally traveled to the United States on Sept. 14 for trade talks in Los Angeles. But as new shocks hit earlier this week, Wang flew to Washington to meet with Treasury Secretary Henry M. Paulson Jr.


Wang sought assurances that if the Chinese government were to encourage its companies to seek investments in the United States, the deals would not face the same political opposition that has undone past Chinese investment proposals.


Andy Xie, an independent economist who was formerly Morgan Stanley's chief Asia economist, said the United States needs to accept that a large amount of U.S. assets must be transferred to other countries' ownership. "If the U.S. is not willing to accept that," Xie said, "they will have to print money and the dollar will fall. And we will be headed toward a global financial meltdown."



This is extortion, plain and simple.

Watch now as our country gets looted before our eyes.
9.21.2008 3:24pm
glangston (mail):
Nice cheap shot on Palin.
9.21.2008 3:27pm
Steve Lubet (mail):
Don't worry, the crisis and its aftermath will surely last though January, after which the McCain/Palin team can "shake things up" while making sure that they "don't blink." Unless, of course, they decide to put Phil "Mental Recession" Gramm and Mitt "Sweep out the Regulators" Romney in charge of the Treasury Department.
9.21.2008 3:27pm
John Thacker (mail):
I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?


In any particular case I suspect that various advisers would have more of a role, regardless of the politician.

I would actually welcome some commentary on Sen. Obama on the current crisis. I don't think it unreasonable that, as a Senator and Presidential candidate, he offered opinion on the SoFA with Iraq. He ought to have some sort of opinion on the current crisis. (However, politically, I certainly agree that it's safer to stay quiet and out of the spotlight in situations like this.)
9.21.2008 3:31pm
ARCraig (mail):
The US Constitution applies just as much in times of crisis and war as it does during times of 'normalcy'.

Of course, the real answer to the question "Should the Executive/Fed or Congress be in charge of managing the economy?" is "neither".
9.21.2008 3:31pm
John Thacker (mail):
And by commentary, I don't mean the sort of platitudes that all the candidates can offer (and have), but actual advice about how to handle the situation.

Steve Lubet-- Sure. Or Obama/Biden will put Howard Raines and Jim Johnson, who know a little bit about the current crisis, in charge of cleaning it up.

The Executive Branch and others are indeed taking too much power in my opinion-- but Congress isn't offering much of a challenge or even an opinion at all. Harry Reid sure isn't.

"I made it very clear I'm happy to meet with you, but the fact that I'm meeting with you doesn't mean I support what you're doing," Reid said. "What happened has happened."

So does that mean he's against it? Or for it, backing the Bush administration on a major economic move?

"I'm not in a position to say that what they've done has been appropriate," Reid said.


Sen. Obama:

Sen. Barack Obama today met with some of his many economic advisors and made an announcement that he was not going to make an announcement about any new plan to plan plans.

Obama did suggest a bipartisan effort to deal with the financial crisis wreaking havoc on Wall Street, always a good idea for any candidate after the primaries because it sounds good and costs nothing.

But Obama did not present any detailed proposal of his own for how to resolve the monetary situation that has roiled world markets in recent days.


It's clear that Congress wants to wash their hands of it and hope that the White House gets stuck with the blame. I wish that they'd actually be involved, for I agree it's dangerous for the President to have so much power.
9.21.2008 3:38pm
johnbragg (mail):
Actually, a President Palin would be much less likely to get the blank check that Secretary Paulson loks like he'll get.

To this troglodyte's eye, the proposal looks like Bolshevism in a Brooks Brothers suit. I'm deeply nervous of bipartisan agreements in times of emergency without details. I fear that the Evil Party and the Stupid Party have reached an Evil, Stupid consensus that we will all look back on soon and regret, as we now regret no-money-down mortgages for bad credit risks.

Citations would follow if I didn't have an in fant on my lap and a toddler climbing my back.
9.21.2008 3:40pm
David M. Nieporent (www):
And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?
Come on, this is a cheap shot. There are precisely none of the last 42 presidents who are equipped to handle this. Bill Clinton was undeniably smart, but that didn't make him suited to be chairman of the fed or secretary of the treasury.

In fact, it's not clear to me that Paulson and Bernanke are equipped to handle this, either; it's not as if they did anything before it came to this point. But we certainly don't expect non-economist/non-bankers to be able to do so (even if they all manage to Monday-morning quarterback). We expect them to hire the right people. Which even doofus Bush seems to have managed to do (as much as anybody can be said to be the right people here), no?
9.21.2008 3:40pm
Francis Marion (mail):
Talk is cheap. If anyone has any better ideas besides Secretary Paulson's proposal, then now is the time to step up to the plate, present it, and have it legislated by the end of this week. Otherwise, there will be a market crash rivaling the market crash of 1929 shortly hereafter.
9.21.2008 3:47pm
Turk Turon (mail):
Actually, I would prefer to have President Palin handle it; at least she would be unlikely to have been a classmate, Bonesman, golf partner, law partner, client or business partner of some of the financial titans whose bacon she was about to save.
9.21.2008 3:47pm
Mahan Atma (mail):
"We expect them to hire the right people. Which even doofus Bush seems to have managed to do (as much as anybody can be said to be the right people here), no?"


Wha...?? The right people?

These are the same people who presided over the escalation of the crisis to begin with.

Republicans, seriously, you people f'in amaze me...
9.21.2008 3:48pm
Nate in Alice:
If the bailout is absolutely necessary to save the market from a very catastrophic crash, is it reasonable to think that industry types will give-in to Democrat's amendments adding "strings" to the money?

Seems like now is not the time to be playing chicken, but if the industry types will vote NO unless the money comes with no strings, I say Call their bluff.
9.21.2008 3:56pm
dearieme:
"If a little knowledge is a dangerous thing, think how much damage a lot can do." (Tom Sharpe). Come on, your last really clever President was Herbert Hoover; great success, eh?
9.21.2008 3:59pm
Soronel Haetir (mail):
These are very good times for me, selling bottled alcohol at the retail level.
9.21.2008 4:02pm
Humphrey Bogus (mail):
No offense, Professor, but I wouldn't want you in charge of formulating the rescue plan either.

Nor would I want you (or the President, no matter who it is) in charge of coming up with cleanup plans in the aftermath of an environmental disaster. The President, like the CEO of any large enterprise, is not intended to be hands-on in this way. His responsibility is to hire the right team and protect the public's interest.

Presidents are effective when political solutions are required. For highly technical problems in finance, politicians and--sad to say--law professors, are not well equipped to handle them. Would you put the chairman of the Senate banking committee in charge here? Neither would I.

I'll wager that neither you nor Sarah Palin nor Barack Obama nor anyone who has occupied the Oval Office has the level of required knowledge to tackle this without expert input (otherwise Henry Paulson would have to go back to making millions at Goldman).
9.21.2008 4:06pm
Jack S. (mail) (www):
Who has standing the challenge this?
9.21.2008 4:08pm
Milhouse (www):
There's no reason to suppose a President Palin would do any worse on this than Presidents McCain, Obama, or Biden. Or Barr or Root, for that matter.

The only one who's come out of this with a slightly less noxious odour than anyone else is President Bush, for having tried to fix this five years ago. In hindsight he should have put up more of a fight when both sides in Congress rejected his proposal, but at least he tried, and going into a re-election year, with Iraq on everyone's mind, didn't seem like a good time for such a fight.
9.21.2008 4:10pm
davidbernstein (mail):
I'm amazed that Obama supporters, including David P., continue to raise Palin's lack of experience. And Obama's knowledge of the worldwide financial systems is exactly what? I think he worked in the private sector for about three hours, and has spent the rest of his time on politicking. You know, he would have made a classic CEO of Fannie Mae, back in the day.
9.21.2008 4:34pm
smitty1e:

And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?


The sobriety, perspective, and unfettered integrity she would bring to bear would probably result in an assassination within a fortnight.
The sooner you realize this is more a CYA situation than a pursuit of the long-term good, the better your predictive powers will become.
9.21.2008 4:39pm
davod (mail):
"And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?"

As you have been well and truly slapped down for the above, simplistic statement, I will just include that your comments are sexist, elitist and partially racist (Palin is married to a part eskimo).
9.21.2008 4:41pm
John Earl Haynes (mail) (www):
Noting your comment about Governor Palin, I think that you are likely without any significant experience with an executive branch government position or direct experience with how elected government executives function. I have worked directly for governors (Democrats) and your remark was ill-informed.
9.21.2008 4:44pm
CB55 (mail):
If these companies wanna get a piece of the public money whould it be too much for the public to get a piece of the wealth of Bank of America, Goldman Sachs and others? Make Uncle Sam a part owner since we are in it for a long haul.
9.21.2008 4:45pm
David Warner:
"And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?"

Perhaps if we'd had someone like Palin calling the shots for the last 16 years, we'd not be in this mess, given how much corruption and partisan obstruction has gotten us to this point (beginning with Clinton v. Newt in '95).

Post, your caricature of Palin is unbecoming of a professor. Think harder.
9.21.2008 4:49pm
loki13 (mail):
Actually, I think Post's snarky (yes, it was snarky) comment about Palin was right on. A person who was so overwhelmed as mayor of a small town that she had to create c ity manager position to, um, manage the town might be a little put off about this. A governor of a state that concerns itself with:

1. How much money to extract from the federal government.
2. How much money to extract from oil companies.
3. How much money to give to residents.
4. How to dole out positions to friends from high school.

Might, just might, have some issues. This is where the whole "background experience" comes in. I trust the base of knowledge held by Obama, McCain, and even Biden. I can say no such thing for Palin. Which again goes to the lack of judgment in picking her. The judgment came down to only whether it would excite the base- not whether she could step in on day one; this reflects poorly on McCain.

But that's me and my partisan blinders.
9.21.2008 4:57pm
D.R.M.:
I don't know about you all, but really, I sure wish that we had someone like Barack Obama calling the shots here -- nothing like someone who knows absolutely nothing about the issues and who has received lots of donations from Lehman Brothers executives to steer us through a potentially planet-wide financial meltdown, eh?
9.21.2008 5:01pm
Anderson (mail):
I wish that they'd actually be involved, for I agree it's dangerous for the President to have so much power.

Amen.

Seems like now is not the time to be playing chicken, but if the industry types will vote NO unless the money comes with no strings, I say Call their bluff.

Amen to that as well.

Step back. Why is this rescue necessary? Because of its supposed effects on Americans at large.

If Wall Street is demanding a $700B+ bailout for its own bad choices, without conceding any federal interest in restraining the Street's future ability to make similar (and ever-larger) demands on the taxpayers ...

... then tell them to look to the Free Market for help, save the $700B, and use it to help the "Americans at large" if and when the economic tumble hits *them*.

--Loki13, don't confuse them with the facts.
9.21.2008 5:02pm
Mike Keenan:
"And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?"

Yeah, all the smart people in change have down a really spiffy job up to now.
9.21.2008 5:04pm
Nate in Alice:
Palin is probably not even semi-literate in securities lingo. (If she is, then have her prove it in a press conference.)

Obama, Biden, McCain are.
9.21.2008 5:07pm
Anon #319:
I am getting tried with these red-hearring arguments being raised about Palin. She isn't running for President, and even if McCain wins, she is quite unlikely to be anytime soon. If one objects to McCain's policies, then address his policies.

This is a pure re-direct, when Obama has offered nothing of his own plan and "had to consult with his advisors" before he could speak on the joint Fed. Rev. and Treasury plan. Reminds me of the whole "it's above my paygrade" answer. The word of the day--punt.

I am getting really sick and tired of this fallacy. Maybe this crap flies on the Daily Kos...
9.21.2008 5:10pm
Anderson (mail):
when Obama has offered nothing of his own plan and "had to consult with his advisors" before he could speak

Good lord! The man felt the need to CONSULT WITH HIS ADVISORS before addressing one of the most drastic and unprecedented crises ever to affect American finance.

My friends, John McCain won't consult with his advisors. He'll fire Chris Cox, vent about greed, and then tell his Veep and Phil Gramm to call Wall Street and ask them who to make the check out to, while the President takes a nap.

Really, if "consulting with advisors" is something you DON'T want in a president, then vote Republican. Or better yet, don't vote.
9.21.2008 5:28pm
A. Zarkov (mail):
Where does the bailout money come from? Everyone seems to want to avoid this basic question. The choices:

1. Cut spending and divert to the bailout.

2. Increase taxes.

3. Borrow from Americans by selling bonds to them.

4. Borrow from foreigners by selling bonds to them.

5. Sell government assets. The Feds own most of Nevada and Alaska and other real property.

6. Sell American assets in the private sector to foreigners.

7. Treasury sells bonds to the Fed which pays with its magic check book. This is of course money creation.

Choices 1-5 are politically difficult. Ask Obama if he is willing to give up his new spending programs and actually curtail current social spending. He won't even answer you, all you will get is a "no, no, no." The guy is pathetic. Ask McCain if he is willing to raise taxes and curtail military spending and all you will get is a blank stare as his feeble brain tries to digest what you said. Choices 6 and 7 are most likely what we will get.
9.21.2008 5:36pm
Obvious (mail):
David B. "You know, [Obama] would have made a classic CEO of Fannie Mae, back in the day."

DB wins the thread. Unless of course, the above is a subtle racist comment...:-)
9.21.2008 5:43pm
Anderson (mail):
Where does the bailout money come from?

Sorry to get all tinfoily, but I have actually caught myself wondering whether the bailout doesn't reflect GOP anxiety that McCain will lose, and thus, how to ensure that the federal largesse is devoted to the rich rather than to anyone else.

As Zarkov suggests, such huge donations of cash to Wall Street, on top of existing debt (as magnified by the Iraq war etc.), will make it difficult to spend money on, say, national health insurance.

This could be the latest version of "starve the beast," with the pleasing adjustment that instead of reducing federal expenditures, the money just goes straight into the pocket of Wall Street.

(--PLEASE feel free to explain the silliness in what I've written, as I would very much like to be proved silly here. After all, I didn't consult with my advisors before writing this comment.)
9.21.2008 5:44pm
A.W. (mail):
> And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?

As opposed to Obama who have voted present this week?

Its not good enough to say "Palin sucks." you also have to explain why Obama would be better.
9.21.2008 5:55pm
A. Zarkov (mail):
"... when Obama has offered nothing of his own plan and "had to consult with his advisors" before he could speak..."

This is a cop out and the Obamabots know that. We don't need details from him, but we do need to know what will guide him in making policy choices with regard to the bailout. Is he willing to give up his new spending programs? Is he ok with selling American private assets to foreigners? The Chinese really want to buy American corporations to enhance an already outrageous amount of technology transfer to them. The Arabs of course in too. Under current circumstances wouldn't they stand to get the Dubai Ports deal?
9.21.2008 5:55pm
SenatorX (mail):
Here is one problem with this post, it assumes that the story being fed to the masses is the truth. In reality the bailout plan has probably been in the works for a long time. After all anyone who has read economic history knows that bailout IS THE GAME. This isn't about us being lucky to have smart people at the wheel during a crisis. These people were put into place to do exactly what they are doing now. Anyone on the internet and interested in economics has been going on about this bust happening for years. Is anyone really naive enough to think this whole issue is a surprise? This is exactly how these power grabs are done. It's always allowed to get to a crisis because that is when you can fast track your bailout. You profit off the excess on the way up knowing full well you will get bailed out and then profit even more on the other side of the crisis as you grab the weaker player's assets. It's just a matter of who has the political connections to profit most.

The jab at Palin is infantile though. Bush isn't calling the shots on stuff like this nor would anyone who is president. They all play ball or they don't get to play.
9.21.2008 5:57pm
Johnny Canuck (mail):
I sure wish that we had someone like Sarah Palin calling the shots here --

why not draw on her Alaska experience:
1. eliminate income tax
2. fund budget from royalties and excess profits taxes on resource companies
3. remit surplus to taxpayers

She has a proven track record.

Welcome to a Palin and McCain administration.
9.21.2008 6:00pm
Mahan Atma (mail):
Where are all the libertarians and free-marketeers around here?

Balkin is on target today:

One would have thought that conservative, free market Republicans, of all people, would have warned us of the dangers of state planning and state control of the economy. Certainly they have spared no opportunity to denounce reform of our health care system as socialism. These accusations seem to be stilled, however, when the issue is bailing out the Republican Party's friends on Wall Street, while enlisting many of these friends in running the new state corporate enterprise, and selling the assets back to the same group later on.
9.21.2008 6:00pm
trad and anon (mail):
And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?
Unfortunately for us, we already do. Fortunately, he's turned the thinking over to Paulsen and Bernake rather than screwing the situation up even more than it already is by trying to do something about it himself.
9.21.2008 6:00pm
loki13 (mail):
Johnny Canuck,

Satire doesn't come through very well on teh intertubez, so just to check- you are being sarcastic, right?
9.21.2008 6:02pm
Fub:
A. Zarkov wrote at 9.21.2008 4:36pm:
7. Treasury sells bonds to the Fed which pays with its magic check book. This is of course money creation.
Just rebadge inflation as a "pay as you go" plan.
9.21.2008 6:04pm
Perseus (mail):
This could be the latest version of "starve the beast," with the pleasing adjustment that instead of reducing federal expenditures, the money just goes straight into the pocket of Wall Street.

No doubt Karl Rove and the office of the Vice-President cooked up the plan! Now, whoever succeeds President Bush will be locked into both his foreign and domestic economic policies. Moohaha!
9.21.2008 6:11pm
SenatorX (mail):
When has a choice between the Democrats and the Republicans not been a choice between socialism or fascism? I mean we don't expect to have politicians that are against the growth of government and it's power over individuals do we? The point of being a politician is to get the teat, not hate the teat.
9.21.2008 6:13pm
Johnny Canuck (mail):
loki13: did I scare you, or are you deciding whether to seriously examine the math?
9.21.2008 6:14pm
A. Zarkov (mail):
"Anyone on the internet and interested in economics has been going on about this bust happening for years. Is anyone really naive enough to think this whole issue is a surprise?"


Bingo! Given SenatorX 100 silver dollars (and like the rest of he's going to need them). Anyone who has read the blog site Calculated Risk regularly over the last several years knew the real estate bust was coming. How can a market sustain price/income ratios of 10? Krugman nailed the situation two years ago. Christopher Thornberg analyzed the real estate situation perfectly along with the devastating affect on the California economy, which now has the third highest unemployment rate in the country. Are we to believe all the smart guys on Wall Street, all the economists at the Fed and Treasury didn't know what was coming? How about a $45 trillion (notional value) in Credit Default Swaps. Is that chopped liver? Instead of analysis we get snarky comments about Palin. Shame on you professor.
9.21.2008 6:24pm
Jmaie (mail):
Palin is probably not even semi-literate in securities lingo. (If she is, then have her prove it in a press conference.)

Obama, Biden, McCain are.


They're semi-literate?
9.21.2008 6:24pm
loki13 (mail):
Johnny C.,

Uh, no. You did scare me, but I don't have to do the math. Let's make this very basic:

The United States != Alaska.

First, Alaska does well because of the money they extract from the Federal Government. The Fed. Govt. can't extract money from a higher government for needed improvements (the U.N.?).

Second, the resource extraction works for Alaska because of their, y'know, resources. Not so much the rest of the nation. Unless you want to tax companies for their general business, which also won't work.

Third, you would need to replace the income tax with another tax (consumption, for example) while reducing services. That's fine, but that has to be said.

I could go on, but in short, your plan is ridiculous.
9.21.2008 6:25pm
Ed Scott (mail):
"And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?"

You are right, you don't know about we all.

An un-necessary, gratuitous "shot" at Governor Palin. Maybe you should hope that she does not take a "shot" at you. The comment seems a sexist comment guided by a biased ideology.

I am interested in your view of B. Obama's qualifications to be POTUS based on his experience as a community organizer, who has only organized (agitated) but has never lead anything, with his demonstrated vast knowledge of "absolutely nothing about the issues." You are right again when you say "nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?"


Governor Palin, the only person in the campaign with executive experience, is only a VP nominee and yet is seen as a threat to the "one" and is causing a liberal melt-down, eh?.

Is your tower really made of ivory, or is it plastic?
9.21.2008 6:28pm
Benjamin Davis (mail):
Hey doesn't anyone here think this is a huge swindle of Main Street America? Where are the criminal prosecutions of all these Wall Street bankers who created this mess?

I say - like I said to you guys months ago - bail out Main Street before you bail out Wall Street. Keep people in their homes by covering their mortgages for a period (one year) in exchange they will have a lousy credit rating but neighborhoods are stabilized. Persons who are in a position to continue to pay off their loans have the benefit of keeping a decent credit rating as compared to the persons who have gone belly up.

Why this extraordinary speed and secrecy on this deal to push it through? To bailout domestic and international capital first instead of the average Joe and Jane.

Talk about affirmative action for the rich!

Best,
Ben
9.21.2008 6:28pm
EPluribusMoney (mail):
Whenever someone mentions Palin's lack of experience it just reminds me that Obama has even less, so what's the point?
Is an inexperienced VP worse than an inexperienced president?
Is an inexperienced woman worse than an inexperienced man?
is an inexperienced white worse than an inexperienced black?
Or is an inexperienced conservative worse than an inexperienced liberal?
What's the point David and why don't you just make it?

Or are you just exposing your PDS?
9.21.2008 6:38pm
Johnny Canuck (mail):
Loki13: It isn't my plan. It is drawing on what Palin has her executive experience in doing.

PS: Thirdly, I believe Gov. Palin is opposed to sales taxes, except for municipalities;
Secondly, Palin has vastly overstated the energy contribution of Alaska; therefore there are many other resource rich locations to fund this
firstly, I doubt Palin would think of the UN as a higher government, perhaps China would help.
9.21.2008 6:42pm
PC:
Where are the criminal prosecutions of all these Wall Street bankers who created this mess?

The bankers are already suffering enough:

"A lot of those people will have to sell their homes, they're going to cut back on the private jets and the vacations. They may even have to take their kids out of private school," said Frank. "It's a total reworking of their lifestyle."

He added that it's going to be no easy task.

"It's going to be very hard psychologically for these people," Frank said. "I talked to one guy who had to give up his private jet recently. And he said of all the trials in his life, giving that up was the hardest thing he's ever done."
9.21.2008 6:50pm
lonetown (mail):
Gee, I think our very "experienced " congress had lots of opportunities to address this BEFORE it became a crisis and punted.

I would take Palin, who thus far has done nothing nearly as stupid, over anyone of the jerks we're calling experienced.
9.21.2008 6:57pm
kietharch (mail):
Mahan Atma:

From the Paulson's famous "3 pages":

"(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters INTHE UNITED STATES."

So I do not think the INTENT of the Treasury's action is to bail foreign banks.
It may work out that way.

The key here (and it is touched upon in a WSJ "Heard inthe Street" article today) is how much the Treasury is going to pay for the "toxic" debt. If properly done it may end up costing taxpayers very little. The purchase price for the debt should be low enough that some banks will suck it up and hang on to the debt they own, toxic or not. This will be a tough and complex auction and if congress could somehow stop playing to the bleachers for a few days they might be able to put pressure on Paulson to negotiate a passably good deal for the taxpayer.
9.21.2008 7:10pm
unhyphenatedconservative (mail):
I love the professoriat. Rocket scientists on Wall Street and experienced policy makers in Washington have brought this crisis on. But who can we turn to for salvation? The "experts" on Wall Street and in Washington!
9.21.2008 7:10pm
Mahan Atma (mail):
From the Paulson's famous "3 pages":

"(a) Authority to Purchase.--The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters INTHE UNITED STATES."

So I do not think the INTENT of the Treasury's action is to bail foreign banks.

It may work out that way.


You're looking at an old version of the language. The new proposal removes "having its headquarters in the United States." It now says:

"Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets."
9.21.2008 7:15pm
Mahan Atma (mail):
"The purchase price for the debt should be low enough that some banks will suck it up and hang on to the debt they own, toxic or not."


That's not possible. If the banks had to take those kinds of losses onto their books, it would defeat the purpose of the bill.

Second, there's nothing whatsoever in the language of the proposal that ensures this will happen - or even encourages it to happen. It's all left to the unfettered discretion of Paulson -- one of their own former partners.
9.21.2008 7:17pm
Tomm:
I have to agree with the crack about Palin. I am tired of having a president I can't respect intellectually, and wouldn't want a veep like that either.

That's not to say I will vote for Obama, I just despise incompetence/ignorance/idiocy. It certainly doesn't help my opinion of politicians when they possess all three qualities.
9.21.2008 7:28pm
deepthought:
John Thacker:

In addition to your Obama quote from the LA Times blog, he also issued this statement, outlining his view on what a any rescue plan should look like, noting that the proposed legislation is a concept, not a plan (quoted in Politico):


No blank check. . . . . we must insist on independent accountability and oversight. Given the breach of trust we have seen and the magnitude of the taxpayer money involved, there can be no blank check.

Rescue requires mutual responsibility. . . . We cannot abet and reward the unconscionable practices that triggered this crisis. We have to end them.

Taxpayers should be protected. This should not be a handout to Wall Street. It should be structured in a way that maximizes the ability of taxpayers to recoup their investment. Going forward, we need to make sure that the institutions that benefit from financial insurance also bear the cost of that insurance.

Help homeowners stay in their homes. This crisis started with homeowners and they bear the brunt of the nearly unprecedented collapse in housing prices. We cannot have a plan for Wall Street banks that does not help homeowners stay in their homes and help distressed communities.

A global response. . . . this is a global financial crisis and it requires a global solution. The United States must lead, but we must also insist that other nations, who have a huge stake in the outcome, join us in helping to secure the financial markets.

Main Street, not just Wall Street. . . . [A]n emergency economic plan for working families — a plan that would help folks cope with rising gas and food prices, save one million jobs through rebuilding our schools and roads, help states and cities avoid painful budget cuts and tax increases, help homeowners stay in their homes . . .

Build a regulatory structure for the 21st century. . . . We need new rules of the road for the 21st century economy, together with the means and willingness to enforce them.

The bottom line is that we must change the economic policies that led us down this dangerous path in the first place. . . .


While neither Obama or McCain have issued specifc proposals (except McCain's flailing around vow to fire Chris Cox as head of the SEC). McCain has proposed a Mortgage and Financial Institutions trust, which sounds like a permanent government agency to take bad assets from banks rather than letting them fail.

I can't wait for the Presidentail debate on the economy, scheduled for October 15th.
9.21.2008 7:29pm
Mahan Atma (mail):
"While neither Obama or McCain have issued specifc proposals..."


Not true! McCain proposed creating a commission to study the problem.
9.21.2008 7:34pm
Mahan Atma (mail):
Foreign banks lobbied to be included:

Foreign banks, which were initially excluded from the plan, lobbied successfully over the weekend to be able to sell the toxic American mortgage debt owned by their American units to the Treasury, getting the same treatment as United States banks.

On Sunday, the Treasury secretary, Henry M. Paulson Jr., indicated in a series of appearances on morning talk shows that an original proposal introduced on Saturday had been widened. "It's a distinction without a difference whether it's a foreign or a U.S. one," he said in an interview with Fox News.

9.21.2008 7:38pm
Assistant Village Idiot (mail) (www):
All the blaming and complaining, and no one here has said the names "Barney Frank" and "Chris Dodd." Whether you think they are 5% or 50% at fault here, you have to admire the ability of members of Congress to avoid blame. And deplore our ability to see through their disguises.

Where in the world do people get this Wall-Street=Republican pals idea? That was the 1950's, Jake. It's equal opportunity now. Room for all at the trough. The Dems may even be "leading" in that scramble. (Tough call, I know.)
9.21.2008 7:38pm
whit:
purely from a trader's perspective, the market last week was literally the BEST TRADING MARKET I HAVE EVER SEEN in index futures. the volatility and emotional excess were phenomenal. All told, by the end of the week it ended roughly where it started, but boy did it make some major moves to get there.

Remember, from both a trader's and longterm investor's perspective (and even a swingtrader's perspective), with great panic, euphoria, and emotional excess comes great opportunity. This is the kind of market where those with cool heads, a contrarian nature, can find some phenomenal value and trade opp's.

Just putting in my note of optimism here. I HATED the market (long) when dow was near 14k. To be honest, I hated it from about 12.5 k and on up to 14k. I was almost exclusively cash, commodities, shorts, etc. see WAY more opp's now than I saw then.
9.21.2008 7:40pm
Javert:

And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?
As opposed to the geniuses from Harvard and Goldman who created this mess?

I'm no fan of hers, but she couldn't be worse than the looting, power-lusting politicians who make back-room deals with welfare-seeking "businessmen."
9.21.2008 7:53pm
ShelbyC:
'cmon, you lawyers. Somebody figure out who has standing to sue to try and stop this.

And I do wish Palin was running the show, she might be see through the con and stop this nonsense.
9.21.2008 7:55pm
markm (mail):

Tomm:
I have to agree with the crack about Palin. I am tired of having a president I can't respect intellectually, and wouldn't want a veep like that either.

Considering Biden, this just isn't your year...
9.21.2008 7:56pm
kietharch (mail):
Mahan Atma:

Thanks for your correction.

"That's not possible. If the banks had to take those kinds of losses onto their books, it would defeat the purpose of the bill."

Explain please; why is it not possible? the debt is currently carried on their balance sheets "marked to market". Some is carried as low as $.40 on the dollar so if some debt is sold at that figure, an obviously unappealing but necessary choice, why not keep some of the debt and hope for a better outcome ? I don't think the banks' balance sheets are so bad that they can't keep a lot of this debt. They won't, of course, if they get paid face value for their bad paper.

But I don't think the rescue will do that.
9.21.2008 8:01pm
FlimFlamSam:

And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?


Yeah, because the opinions of a bunch of law professors are oh-so-important when it comes to economic management.
9.21.2008 8:03pm
Jerry F:
"And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?"

Why is it that otherwise intelligent Leftists always feel that it is acceptable to take dumb, easily rebutted cheap shots at people that they disagree with? Considering that neither Palin nor Obama/Biden know anything about these issues, one would have thought that the quote would be more convincing if you substitute "Sarah Palin" with "Barack Obama." Since Palin at least has more executive experience than Obama and Biden (and Clinton) combined, she would at least be in a position to get the right people to give her the right advice and make the right decision in a time of crisis.
9.21.2008 8:06pm
Mahan Atma (mail):
"the debt is currently carried on their balance sheets 'marked to market'."


No, it is NOT actually marked to market. There IS no market for it. If they actually marked it to market, it would be worth much, much less than the book value (zero, in some cases).
9.21.2008 8:11pm
Nate in Alice:
Shorter Jerry F:

Executive experience always translates into more knowledge.

Jesus, you'd rather put a Burger King Manager in charge of the economy than a magna cum laude Harvard Law graduate who taught law at U of C for ten years and has been in the U.S. Senate for 4?

Please, stop the insanity.
9.21.2008 8:14pm
Nate in Alice:
It's not JUST that she isn't an economic expert, but there is absolutely no reason to believe that she has the mental acuity to analyze information supplied to her by advisors. In fact, there is reason to believe she doesn't have it.
9.21.2008 8:19pm
whit:

No, it is NOT actually marked to market. There IS no market for it. If they actually marked it to market, it would be worth much, much less than the book value (zero, in some cases).



bingo. i trade mostly index futures, but i have been in contact with bond traders etc. who see instruments being offered with LITERALLY no bid. these instruments are so exotic and decoupled, that nobody really knew what they were worth, but they were valued at unrealistic prices because simply put, they could be.

when you have a commodity or a stock with an established two way auction market, the current price is whatever the current bid/ask is, and there always is one/. when you are dealing with exotic crap, there IS no such market. i was actually reading "blood on the streets" recently (great account of the tech bubble collapse) and roughly the same thing happened in many cases.
9.21.2008 8:23pm
Johnny Canuck (mail):
JerryF:
Since Palin at least has more executive experience than Obama and Biden (and Clinton) combined, she would at least be in a position to get the right people to give her the right advice and make the right decision in a time of crisis.

Obama seems to have been able to get a number of "people to give him the right advice and make the right decision in a time of crisis".

You may not like them since many of them were providing advice on the US economy to Clinton in the 90's when the US seemed to be prospering and running a budgetary surplus.

Palin knows how to hire people? well seems as if Obama does too.
But as to Palin, who is it she knows? Her team from Alaska?
(I'm not disparaging the Alaska team, but isnt that what the Carter problem was in 76: he brought his Georgia team.
Alaska sure seems like an easy state to be governor of. 90% of Revenue from resource companies. Makes it pretty easy to balance the budget.
9.21.2008 8:25pm
whit:

Jesus, you'd rather put a Burger King Manager in charge of the economy than a magna cum laude Harvard Law graduate who taught law at U of C for ten years and has been in the U.S. Senate for 4?



amazing statement, especially on a libertarian leaning blog. here's a hint. i wouldn't "rather" put ANYBODY "in charge" of the economy. nor IS there anybody "in charge" of the economy.

presidents are not in charge of economy. nor is congress, but at least they have the power to tax, etc.

no public (or private) person or group is "in charge" of the economy, nor should they be. the very concept is absurd. bogus premise- bogus conclusion. nobody will be put "in charge" of the economy.
9.21.2008 8:26pm
sputnik (mail):
Village idiot(appropriate name)
if I offered you a $300,000 loan without bothering to check that you had the income to pay it back, if I asked for a wildly-overvalued asset as collateral, who would be the bigger fool? You for taking the loan or me for making it?

There's this thing called, 'due diligence'. I would think a Very Serious Person like yourself would be familiar with that concept.
9.21.2008 8:33pm
Mahan Atma (mail):
"a libertarian leaning blog"


Right...

I see no evidence of this whatsoever. Anybody who was remotely a libertarian would be screaming bloody murder right now.
9.21.2008 8:33pm
Mahan Atma (mail):
"nobody will be put 'in charge' of the economy."


BTW, what rock have you been living under?
9.21.2008 8:35pm
CDR D (mail):
>>>Jesus, you'd rather put a Burger King Manager in charge of the economy than a magna cum laude Harvard Law graduate who taught law at U of C for ten years and has been in the U.S. Senate for 4?<<<



I'd rather put my garbageman in charge of anything, rather than some semi-literate Soros tool who can't even address a rodeo crowd without a teleprompter.
9.21.2008 8:40pm
Roger Schlafly (www):
The cheap shots at Palin only help McCain-Palin, because they draw attention to Obama's inexperience. Yes, she is inexperienced, but Obama has even less relevant experience. Please keep reminding everyone.

Obama is not smart enough to be in charge of the economy, no should we want anyone in charge of the economy.
9.21.2008 8:42pm
A. Zarkov (mail):
"While neither Obama or McCain have issued specifc proposals (except McCain's flailing around vow to fire Chris Cox as head of the SEC)."

McCain's call for dismissing Cox as chairman of the SEC is disgraceful and shows what a lunkhead he really is. There's nothing wrong with Cox or the SEC. In fact Cox is an intelligent and dedicated public servant. The problem is Congress. Among other things they took away the power to regulate derivatives from the SEC. They helped create this mess.
9.21.2008 8:43pm
Arkady:
@whit


Remember, from both a trader's and longterm investor's perspective (and even a swingtrader's perspective), with great panic, euphoria, and emotional excess comes great opportunity.


Reminds me of a line from an old movie, Operation Petticoat, about the misadventures of a WWII sub (it sinks a truck at one point). Tony Curtis plays some kind of hustler assigned to the sub as supply officer. The sub pulls into port (needing repairs and gear) just as the port is being bombed by the Japanese. He grabs two guys and starts to leave the boat to go into the burning, bombed port. The capitan, Cary Grant, asks him what does he think he's doing? Curtis says, "In chaos, there is profit."
9.21.2008 8:45pm
kietharch (mail):
Atma, you are wrong. By law, securities have been marked to market for about three years now, I believe quarterly. The fact that there is a thinly-traded or non-existent market does not relieve the banking entity from making an estimate and I am sure all corporations do exactly that. They are not carried on the books at face value.
9.21.2008 8:52pm
David M. Nieporent (www):
Jesus, you'd rather put a Burger King Manager in charge of the economy than a magna cum laude Harvard Law graduate who taught law at U of C for ten years and has been in the U.S. Senate for 4?
You're a liberal, so you don't get it: nobody can be "in charge of the economy." Central planning doesn't work. I'd rather have a Burger King Manager who understands that than your lawyer who thinks that mere applied intelligence can "run the economy."

And while there's no doubt that Obama is academically accomplished and knows something about the law, what on earth about being good at law school would make him qualified to "run the economy" even in a relative sense? He's a lawyer, not an economist.
9.21.2008 8:59pm
Michael B (mail):
"And I don't know about you all, but really, I sure wish that we had someone like Sarah Palin calling the shots here -- nothing like someone who knows absolutely nothing about the issues to steer us through a potentially planet-wide financial meltdown, eh?" David Post, in the tradition of vapid, nose-pick commentary that could just as easily be evidenced by a newly pubescent middle-schooler.

By contrast, unless I've missed something in any of the posts or comments here to this point, no one delves into certain aspects of the causes of this near meltdown. Excerpt:

"Barack Obama and Democrats blame the historic financial turmoil on the market. But if it's dysfunctional, Democrats during the Clinton years are a prime reason for it.

"Obama in a statement yesterday blamed the shocking new round of subprime-related bankruptcies on the free-market system, and specifically the "trickle-down" economics of the Bush administration, which he tried to gig opponent John McCain for wanting to extend.

"But it was the Clinton administration, obsessed with multiculturalism, that dictated where mortgage lenders could lend, and originally helped create the market for the high-risk subprime loans now infecting like a retrovirus the balance sheets of many of Wall Street's most revered institutions.

"Tough new regulations forced lenders into high-risk areas where they had no choice but to lower lending standards to make the loans that sound business practices had previously guarded against making. It was either that or face stiff government penalties.

"The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but "predatory.""
9.21.2008 9:08pm
Benjamin Davis (mail):




"The untold story in this whole national crisis is that President Clinton put on steroids the Community Redevelopment Act, a well-intended Carter-era law designed to encourage minority homeownership. And in so doing, he helped create the market for the risky subprime loans that he and Democrats now decry as not only greedy but "predatory.""


Oh great - it's the fault of the minorities buying homes that President Bush use to tout as his one accomplishment with regard to minorities! Man I have seen everything.
Best,
Ben
9.21.2008 9:19pm
Michael B (mail):
Also, for reference in terms of the experience issue, there is this review of David Freddoso's The Case Against Barack Obama, a far more conscientious and judicious treatment of the subject than most, according to this and other reviews I've seen. Excerpt, emphases added:

"Unlike the authors of some of the cruder attacks on Mr Obama, Mr Freddoso works for a well-respected organisation, the online version of the National Review. Although it is a conservative publication and the author makes no secret of where his political sympathies lie, this is a well-researched, extensively footnoted work. It aims not so much to attack Mr Obama as to puncture the belief that he is in some way an extraordinary, mould-breaking politician.

"The Obama that emerges from its pages is not, Mr Freddoso says, "a bad person. It's just that he's like all the rest of them. Not a reformer. Not a Messiah. Just like all the rest of them in Washington." And the author makes a fairly compelling case that this is so. The best part of the book concentrates on Mr Obama's record in Chicago, his home town and the place from which he was elected to the Illinois state Senate in 1996, before moving to the United States Senate in 2004. The book lays out in detail how this period began in a way that should shock some of Mr Obama's supporters: he won the Democratic nomination for his Illinois seat by getting a team of lawyers to throw all the other candidates off the ballot on various technicalities. One of those he threw off was a veteran black politician, a woman who helped him get started in politics in the first place."
9.21.2008 9:19pm
Michael B (mail):
No Ben, that's both a crass and a gross mischaracterization.

You'd need to read - and comprehend - the article as a whole.
9.21.2008 9:23pm
Ed Scott (mail):
Tomm

"That's not to say I will vote for Obama, I just despise incompetence/ignorance/idiocy. It certainly doesn't help my opinion of politicians when they possess all three qualities."

Incompetent: Inadequate for or unsuited to a particular purpose or application.
Ignorant: Unaware or uninformed.
Idiot: A foolish or stupid person.

Assuming you will not vote for a politician possessing these three qualities, can we conclude that you will not vote for Obama?

An additional qualification for the "one": Andrew C. McCarthy has suggested that the "one" is an example a tabula rasa: The mind in a supposed empty state before receiving sense impressions, id est, teleprompter input.
9.21.2008 9:27pm
Mahan Atma (mail):
"The fact that there is a thinly-traded or non-existent market does not relieve the banking entity from making an estimate and I am sure all corporations do exactly that."


An "estimate", right. Anybody who believes their estimates actually represent anything resembling market value is incredibly obtuse.
9.21.2008 9:31pm
Mahan Atma (mail):
"You're a liberal, so you don't get it: nobody can be 'in charge of the economy.'"


Sorry, but when you put a single person in charge of $700 billion, ostensibly for the purpose of preventing the collapse of the financial system, that's about as close to being "in charge of the economy" as you get.
9.21.2008 9:33pm
whit:

Atma, you are wrong. By law, securities have been marked to market for about three years now, I believe quarterly. The fact that there is a thinly-traded or non-existent market does not relieve the banking entity from making an estimate and I am sure all corporations do exactly that. They are not carried on the books at face value.



and you still don't get it. when there IS NO MARKET, there is no LEGITIMATE way to determine price/value.

the whole point is that two way auctions ESTABLISH price by the respective best bids/offers in the book. but many of these securities have no market/book.

despite the fact they have to be marked to market, the # can be meaningless, and is largely based on the whim of the holder of the security as to "value".

markets define price, and of course traders and investors (on various time frames) step in and buy/sell when they see divergence between their perception of current/future value and current price. in the case of pure priceaction traders, they step in when they see divergences in supply/demand that suggest either momentum shift or continuation movement.

that's not the case with many of these instruments that were being marked to market based on assumptions (mortgage solvency etc.) that were speculative at best and laughably wrong at worst.

in brief... how do you mark to market, when there is no market?
9.21.2008 9:37pm
Asher (mail):
I'm amazed that Obama supporters, including David P., continue to raise Palin's lack of experience. And Obama's knowledge of the worldwide financial systems is exactly what? I think he worked in the private sector for about three hours, and has spent the rest of his time on politicking. You know, he would have made a classic CEO of Fannie Mae, back in the day.

The difference, Prof. Bernstein, is that Obama at least has the mind to understand what's going on, whereas Palin's stupid.
9.21.2008 9:39pm
PC:
You're a liberal, so you don't get it: nobody can be "in charge of the economy." Central planning doesn't work.

Someone should tell Paulson, Bernanke and Bush.

To anyone that still wants to blame this crisis on the CRA, read this. The CRA being the cause of this crisis is a wingnut talking point.
9.21.2008 9:41pm
D.R.M.:
Obama seems to have been able to get a number of "people to give him the right advice and make the right decision in a time of crisis".

Oh, really? He's the one who ignored his economic advisers and started talking about renegotiating NAFTA.

Obama has proved that on economic issues, he's a demagogue with neither an understanding of economics nor a willingness to listen to experts. Palin might be the same, but at least she hasn't proven that she's both ignorant and incompetent like Obama has.
9.21.2008 9:45pm
Alexia:

You're a liberal, so you don't get it: nobody can be "in charge of the economy." Central planning doesn't work.




Someone should tell Paulson, Bernanke and Bush.



The market is telling Paulson, Bernanke and Bush.
9.21.2008 10:01pm
CaDan (mail):
So I've been wondering.

Why can't these institutions file for bankruptcy under Zywicki's super duper new Bankruptcy Act? Could it be that they paid good lobbying money to get an Act that's designed only for other people?
9.21.2008 10:03pm
Asher (mail):
Oh, really? He's the one who ignored his economic advisers and started talking about renegotiating NAFTA.

Obama has proved that on economic issues, he's a demagogue with neither an understanding of economics nor a willingness to listen to experts. Palin might be the same, but at least she hasn't proven that she's both ignorant and incompetent like Obama has.


I'm not an Obama fan either. But that was pandering. He has no intention of pulling out of NAFTA. Remember Goolsbeegate? As for Palin, she's proven that she's really dumb. Tell me when she says one thing in unscripted remarks that makes sense or means anything.
9.21.2008 10:11pm
David Warner:
Prof. Post,

To put a little more meat on the bones of the critique of your Palin caricature, see this. Excerpt:

"Talk with her for awhile, as I did (on July 12, 2007), and try to count the number of references to her state Constitution. During that phone call, she cited it more than 12 times -- not once gratuitously.

'It's my bible in governing,' Palin says. 'I try to keep it so simple by reading the thing and believing in it and living it. It's providential. Some of the crafters of the Constitution are still alive. They're my mentors, my advisers. I get to meet with these folks and ask, 'What did you mean by this?' And it makes so much sense.'"

Assuming you're a con law scholar, this should provide some reassurance.

If not, compare the Murkowski pipeline deal with the one reached through the process hammered out by Palin and the legislature. Then compare the Murkowski deal to Dodd/Rangel Fannie/Freddie oversight/sponsorship. Connect the dots.

Hint: she's not that "conservative", as you seem to understand the term. Just think of her as a Rizzuto.
9.21.2008 10:20pm
Derrick (mail):
"Talk with her for awhile, as I did (on July 12, 2007), and try to count the number of references to her state Constitution. During that phone call, she cited it more than 12 times -- not once gratuitously.


I can't wait to hear what Thomas Jefferson's animated head says we should do about credit default swaps and nuclear proliferation.

I know you think that this was a compliment, and maybe if she wanted to be a judge it would be. But to me it sounds like someone who thinks with the complexity of...who does this remind me of.. oh yeah, George frickin' Bush.
9.21.2008 10:27pm
davod (mail):
"I have to agree with the crack about Palin. I am tired of having a president I can't respect intellectually, and wouldn't want a veep like that either."

There, there. On January 20, 2009, you will can sign up for a 16 year course at the PDS institute for the simple minded.
9.21.2008 10:42pm
SenatorX (mail):
Level 1 assets are marked to market, level 2 are marked to model, and level 3 are marked to myth. Basically you can only consider the lvl 1 asset prices to be accurate by any measure and these are not the assets that will be sold to Uncle Sam. I'll leave you to guess which level of assets is the meatiest portion of the balance sheets.
9.21.2008 10:55pm
Tomm:
Ed Scott

Assuming you will not vote for a politician possessing these three qualities, can we conclude that you will not vote for Obama?

That's right. I will not be voting for Obama. I guess I should have been more explicit then

That's not to say I will vote for Obama

However I don't think Obama is ignorant or an idiot; merely incompetent. I consider McCain incompetent and ignorant, Biden as an incompetent idiot, and Palin as all three. So in all likelihood, I'm not voting for anyone.
9.21.2008 11:06pm
Asher (mail):
'It's my bible in governing,' Palin says. 'I try to keep it so simple by reading the thing and believing in it and living it. It's providential. Some of the crafters of the Constitution are still alive. They're my mentors, my advisers. I get to meet with these folks and ask, 'What did you mean by this?' And it makes so much sense.'

So she's a naive original expected applicationist.
9.21.2008 11:15pm
Sagar (mail):
David Post,

Weren't you whining about the (well deserved) "mean response" you got for your earlier asinine post about Palin? Is there any point to your snark in this post? You come across as a partisan imbecile instead of a Law Professor with this type of a post. Respect is to be earned - not automatically bestowed because you are a professor.

You criticized a VP candidate, fine! What did the presidential candidates do or say? I don't know if your chosen one is supporting this or not. He said he is not opposed to it, but is not supporting it yet. So, he is voting "present" again. And Mr. Experience (mccain) says he will not allow greed on wall street! Talk about changing human nature! Who knows what Biden is saying except that we have to pay more taxes to earn patriotism brownie points. And you are going out of your way to show that you are a petty idiot?
9.21.2008 11:17pm
Mac (mail):

These accusations seem to be stilled, however, when the issue is bailing out the Republican Party's friends on Wall Street, while enlisting many of these friends in running the new state corporate enterprise, and selling the assets back to the same group later on.


Mahan Atma,

Perhaps you should check and see who the top 3 recipients of Fannie Mae and Freddie Mac largesse is. What is amazing, Obama is Number 2 and he managed that in 4 short years in the Senate. He also voted for the poison pill amendment to the Reform Act proposed by McCain in 05/06 to restore oversight of these 2, thus helping to kill the bill. Bush has been agitating for reform since 2003. Democrats and Republicans were having none of it, but as it was a Democratic Congress, they have to take more of the blame. Bush was for it, so they can't use that as an excuse.

This is a time, Mahan, when you have to wake up. The only folks benefiting from partisanship is the politicians who won't be held accountable by their own party. Yes, I do blame Democrats more as the MSM is on their side and won't ask the tough questions that our Founding Fathers thought they would to keep them honest.

A lot of the same folks who presided over the 1987 Savings and Loan fiasco and bail out, which I believe was caused by Congress changing the very tax laws they wrote earlier without understanding the consequences, have presided over this fiasco. Then, as now, they point to "greed on Wall Street" . I don't know what that means. Wall Street has a fiduciary responsibility to maximize profits. However, the real greed, that needs to be addressed is the greed on the part of those sitting in the halls of Congress. If you really believe that Democrats are not on the take from Big Business as well as Big Unions and Big Lawyers, esp. trial lawyers, you are terribly ill informed and naive.

And, Professor. I would like Sarah Palin in there, quite frankly. I would feel a lot better about her than someone who has never held a job in the private sector. never met a payroll and never had to struggle to make ends meet. And, one who isn't best buddies with the players, Congressional and otherwise. What conceivable experience does Obama have? And, Biden??? He makes 300,000 per year and has a net worth of 150,000. It seems the guy has never saved a dime, let alone made any investment or at least any successful investment. No, he is not giving his money to charity. His charitable donations amount to point 6 percent, not 6 percent, but point 6.

I rather liked Obama's message of doing business in a new way, until I figured out he never has and isn't likely to start now. McCain, for all his shortcomings, has railed against earmarks and pork and the money in politics for most of his career. He is one of the few who has consistently worried about passing on all this debt to our children and grandchildren. No one else gives a damn. I don't even like a lot about McCain, but give the Devil his due, for Pete's sake. Don't give me he knows lobbyists. Everyone in Washington knows lobbyists. Quite a few probably know lobbyists for lawyers.

And, if you believe that Biden is going to keep his promise to not talk to lobbyists, perhaps you should ask him if he plans on not talking to his own son who is a lobbyist? I bet having Biden as his Dad never helped him one bit. Yeah, right.
9.21.2008 11:22pm
Smokey:
Zarkov:
5. Sell government assets. The Feds own most of Nevada and Alaska and other real property.
Does anyone seriously disagree with this proposal? And if so... why?

I was a kid in 1959 when they had the Colorado land rush. It was exciting - you could stake out your own 5 acres of federal land and own it, free and clear.

If this were done in Alaska, Hawaii, Nebraska, Nevada, Utah, Montana, Wyoming, etc., etc., can you imagine how much cash it would generate? Rather than a land rush, they could do it by a citizen lottery.


[BTW -- for those extolling Obama's wonderful senatorial 'experience,' check out his brave voting record.]
9.21.2008 11:25pm
Tomm:
Mac

And, Professor. I would like Sarah Palin in there, quite frankly. I would feel a lot better about her than someone who has never held a job in the private sector. never met a payroll and never had to struggle to make ends meet.

As mayor, Palin hardly struggled to make ends meet. She raised taxes and spent the town into debt, then left the next mayor to deal with the problem.

Come to think of it, Richard Fuld has more executive experience in the private sector then any of the candidates. Fuld 08!
9.21.2008 11:29pm
Mac (mail):
McCain's call for dismissing Cox as chairman of the SEC is disgraceful and shows what a lunkhead he really is. There's nothing wrong with Cox or the SEC. In fact Cox is an intelligent and dedicated public servant. The problem is Congress. Among other things they took away the power to regulate derivatives from the SEC. They helped create this mess.


AMEN!
9.21.2008 11:35pm
Smokey:
Mac:

You would probably appreciate Sen. Joe Biden's comment about Barry Obama:

"I mean, you got the first mainstream African American who is articulate and bright and clean and a nice looking guy."

Translation: Barry's the first really good one. All the others were jive-talkin', stoopid, dirty, ugly negroes.

Thanks for your opinion, Joe. But bein' a Democrat and all, you get a pass.
9.21.2008 11:35pm
Mac (mail):

Obama seems to have been able to get a number of "people to give him the right advice and make the right decision in a time of crisis".



Gee, I wish I could find that article detailing all the times Obama blamed his advisors for his doing something stupid, like the NAFTA fiasco in Canada. If we are to believe Obama has great advisors, one wonders why he blames them so much.
9.21.2008 11:38pm
Mac (mail):
Professor,

Listening to the evil Wall Street mavins and the even more EVIL, Rupert Murdock, yesterday, bottom line is, no one knows what to do. We have never been here before. If Murdock and a lot of other smart people are perplexed, I am quite sure that neither you nor the posters here have a clue either.

Congress could have prevented this, but they won't fix it.

There is this article by Amity Shales that bears reading regarding the similarities between today and 1929. Bottom line, if Government does the wrong thing or repeats the mistakes of 1929, we could be in a Depression for many years to come. I am amazed at how similar Congress then is to Congress now. It's rather scary and is a scenario quite likely to be repeated.
9.21.2008 11:56pm
Mac (mail):
Ah ha! I found it. Professor Posner this may not make you feel so good.



Still others point to Tony Rezko, the Illinois political fix-it man who was recently convicted of bribery. Rezko contributed what amounted to probably hundreds of thousands of dollars toward buying Obama house and raised over $160,000 more toward Obama's campaigns.

But there is another less noticed problem. Obama doesn't seem to be able to find employees whom he can trust. The mainstream media has recognized this problem. One article by ABC's Jake Tapper was entitled "Obama's Inability to Hire Good Help Rears Its Head … Again." Another by Politico's Ken Vogel was entitled "Obama vs. his staff."

-- Among the better known examples, an aide, Austan Goolsbee, told Canadians that Obama didn't mean his promise made right before the crucial Ohio primary that he would renegotiate NAFTA. Obama disavowed Goolsbee's claim and said that he had misstated Obama's position, and Goolsbee denied claims by the Canadians.

-- A 1996 candidate questionnaire form that was answered stating that Obama supported a ban on handguns was explained as a staffer's mistake. A statement to the Chicago Tribune last fall claiming that Obama supported the DC gun ban was dismissed as a staffer's mistake.

-- In a 2004 questionnaire, Obama refrained from criticizing Yasir Arafat or strongly supporting Israel's security force. As ABC noted: "Mr. Obama blamed a staff member for the oversight."

-- Obama was asked this year about funding he got for the University of Chicago while his wife, Michelle, worked there. He claimed that someone on his staff had handled it because neither he nor his wife would have allowed his office to benefit his wife's work.

-- When the Tony Rezko corruption questions emerged, Obama claimed that he had never done anything to advance Rezko's business interests. Then a letter Obama signed was discovered supporting a Rezko project to city and state housing officials. Obama said that he wasn't aware of the letter and he said that staff had mishandled it. When answers to questions about how much money Rezko had raised for Obama campaigns proved to be much too low, the mistake was again blamed on staff.

-- When Sarah Palin's vice presidential nomination was announced, Obama's campaign immediately issued a statement that reporters described as "ripping" into her. A few hours later, after the initial public reaction, Obama first supported and then backed away from the statement, saying that his campaign had misrepresented his views.

-- Tim Russert confronted Obama at a Democratic Presidential debate in January about Obama's campaign claiming that the Clintons were "stoking racial tensions." Yet again, Obama blamed his "overzealous" staff.

The list goes on, but these cases seem to leave only two options: Either Obama is dishonest and these mistakes were not really mistakes, or he is a very poor judge of people.

Since Obama points to his campaign as proof that he has more executive experience than Palin, these problems also raise questions about how efficiently he runs things. If his own staff keeps on making mistakes in misrepresenting what Obama believes, can Obama clearly tell staff what policies he wants them to implement if he becomes president.
9.22.2008 12:03am
David Warner:
Ben:

"Hey doesn't anyone here think this is a huge swindle of Main Street America? Where are the criminal prosecutions of all these Wall Street bankers who created this mess?"

You mean by Main Street America? We're the ones who demanded cheap credit and lax standards and elected and re-elected the representatives who delivered it. Plenty of blame to go around if you want to play that game. Maybe after the Depression is averted we can sort things out together.
9.22.2008 12:22pm
David Warner:
Derrick,

"I can't wait to hear what Thomas Jefferson's animated head says we should do about credit default swaps and nuclear proliferation."

I'm guessing it wouldn't include a blank check for Treasury on the former and negotiations without preconditions (talk about naive!) on the latter, but I don't have to guess: we have the document itself to go by, and amend as necessary.


"I know you think that this was a compliment, and maybe if she wanted to be a judge it would be."

I think it is evidence - something the critiques of her are sorely lacking. Instead we get rank prejudice that makes the critic look more foolish than the criticized. Do you really think that the judicial branch is the only one that should be guided by the constitution?


"But to me it sounds like someone who thinks with the complexity of...who does this remind me of.. oh yeah, George frickin' Bush."

Your reply suggests you might strain to reach that level yourself, although I'd hope one could find a better word than "complexity" to express the sort of thinking we seek in a President.
9.22.2008 12:36pm
David Warner:
Asher,

"So she's a naive original expected applicationist."

Unless we want to invite Sarkozy or Putin to run, all four candidates will be naive the moment they take the oath. The question is what they would likely do in that naivete. The instincts, actions, and accomplishments Palin has shown in her Alaskan naivete indicate some unique promise in the larger arena.


"As mayor, Palin hardly struggled to make ends meet. She raised taxes and spent the town into debt, then left the next mayor to deal with the problem."

As I understand it, under her watch municipal bonds were issued to finance infrastructure development (and a sports center). The bonds were retired early. And raising taxes is now a disqualifying practice for national office? Who knew? As I said before, she's not that conservative...
9.22.2008 12:49pm