So I’m trying to tease apart the big issues behind how and whether to design a bailout. Here’s what we need to consider: 1) How much is at risk if government does nothing? Does this justify the use of taxpayer money? This part needs to address what happens to the main-street economy and ordinary taxpayers, employers, and employees if banks fail. It also needs to address some conceptual dividing line that tells a policymaker what financial issues justify public bailout, and what financial mismanagement should be punished by permitting bankruptcy. 2) Accountability. Wall Street professionals made a lot of money doing things that basically created this mess. Why should we let them keep their millions and what is a fair way for them to pay their “fair share” for contributing to the problem. 3) Fairness. Are we better served by rescuing organizations that have well-paid employees, or should we use money first to help keep Americans in residential homes (thereby reducing the risk of residential MBS). 4) Transparency and Oversight. How can we ensure that monies allocated to a bailout/rescue are spent in ways that secure ordinary people, and do not simply line the pockets of the already wealthy and politically connected. Anything else?
Yeah, 5) How can we do this in a way that respects the three-tier system of gov’t and the Constitution? 6) How can AF participants profit from the situation?
Agreed with all except the accountability issue. Only those who broke the law should have their wealth stripped. Being greedy and/or the “little guy” feeling like the way the cookie crumbled is just not fair, is not a good enough IMO to justify appropriations of peoples wealth. I believe these folks are not the demons people are making them out to be. I doubt they acted maliciously, just selfishly. The left wing media and the left wing pundits should just leave them alone and lets focus on solving the problem, instead of all this damn finger pointing.
Gouman, looking back at what I wrote, I agree that it sounds like I was just advocating taking their money away from them without due process. I agree that that shouldn’t happen. But I think that what’s stopping a lot of congressionals from implementing something that will protect the economy and ordinary people is the perception that a bunch of rich executives absconded with lots of money and left the rest of the country holding the bag. Whether or not it actually IS fraud, it FEELS like fraud, and that’s what’s stopping people from acting. But was it fraud? Maybe it was? I’m not entirely sure.
bchad, it is a misconception to think that the public will necessarily pay for this. The government issues bonds all the time without raising taxes. This time is no exception. Debt level will increase from about 38% of GDP right now to less than 45% if all money is raised. Many countries around the globe have debt/GDP ratios much more than that. And if the government gets it right, they could make a killing on these investments. I agree with your other points.
LOL @ 6 JDV. Willy
If the government issues bonds and inflates the currency, then everyone pays through inflation. Or we can get taxed, which might allow some targeting about who pays. However, I agree that, long term, the government may end up making more on the deal than it would have to pay in interest rates. Maybe that difference could even be used to address some other housing related expenses, or a tiny bit of social security needs. The problem is that in the short term, the money has got to come from somewhere, and we need to think through where it should come from.
The gov’t isn’t going to make money on this deal, if they do it will be in inflated dollars. The gov’t needs to pass this bill, return the tax code to where it was under clinton, lower spending, let a recession happen, enforce reasonable banking rules with regard to leverage (and i know the 40 to 1 are bogus figures), raise the age of retirement, expand the work force, and get rid of this attitude that deficits don’t matter, then, maybe, after maybe 3-5 years we’ll return to our position as a financial superpower.
How about the AF distressed debt fund? Joey can manage it. I got ten bucks to contribute, you could probably buy a quarter of Citi’s book for $9 and have money left over for a coke.
Why isnt anyone questioning the credibility of Bernanke and Paulson or to an extent Barney Frank . They were the guys who just a few weeks ago were proclaiming how the economy was ‘solid’ and our financial institutions ‘strong and liquid’. The crisis they claimed was ‘contained’ and reasonably working itself out of the system. So these guys clearly had no idea or if they did then they lied blatantly. If these fellows had no clue what was coming,how come they know what the solution is?. That too a solution created just over the weekend without much apparent thought except panic knee jerking? Why should anyone trust their judgement?If i used Treynor Black these people would have very poor adjusted alphas and their opinions need to be weighted extremely low . I would prefer someone like Nouriel Roubini or Jim Rogers -who was publicly short these companies since over 1.5 years.They saw it coming and they know better how to get out of it. credit=trust.Credit crisis is a crisis of trust.Nobody should have any confidence left in these confidence men. Why is anyone trying to blame greedy wall st or mortgagees who took on loans they could never repay?. they thought they could game the system especially since the govt decided home ownership was some kind of “fundamental right” or part of the american ‘dream’. Its just a natural reaction to the loose policies of Easy Al G
"I would prefer someone like Nouriel Roubini or Jim Rogers -who was publicly short these companies since over 1.5 years.They saw it coming and they know better how to get out of it. " Jim Rogers? Isnt he the guy who said “I dont buy options because 90% of them expire worthless”
Screw the Bald & the Beard - we need fricking PETER OLINTO to solve the mess we are in!!!
My vote goes to Sarah Palin Anchor: Governer Palin why do you think we should use tax payers money to rescue these institutions from crisis? Palin: because we should not blink when faced with crisis (financial)
batterinram Wrote: ------------------------------------------------------- > "I would prefer someone like Nouriel Roubini or > Jim Rogers -who was publicly short these companies > since over 1.5 years.They saw it coming and they > know better how to get out of it. " > > Jim Rogers? Isnt he the guy who said “I dont buy > options because 90% of them expire worthless” uh so he didnt understand the mechanics of options that well.thats why he cashed out and retired rich at 37. i am sure bernanke does.but who saw it coming? rogers also predicted the commodities boom in 1998-99 when everyone was going bonkers about dotcoms. for crissakes, learn to give credit where it is due.
Greenspan isn’t getting enough credit for creating this mess.
“uh so he didnt understand the mechanics of options that well.thats why he cashed out and retired rich at 37. i am sure bernanke does.but who saw it coming? rogers also predicted the commodities boom in 1998-99 when everyone was going bonkers about dotcoms. for crissakes, learn to give credit where it is due.” he shorted these companies and made money, good for Rogers. How does it prove that he has a solution to the mess we are in? and even if he has how can anyone be sure its a better solution? Agreed Bernanke did make some ridiculous statements about the economy, but he did not create this mess. It might be a case that no matter what the Fed nothing was going to prevent the economy from going to dogs.
you ,sir, have a lot of reading to do.the fed CREATED this bubble.maybe you can search youtube for jim rogers interviews over the years
“you ,sir, have a lot of reading to do.the fed CREATED this bubble.maybe you can search youtube for jim rogers interviews over the year” you have to read what I write more carefully. I said Bernanke is not responsible for the mess I did not say Fed is not to be blamed. Fed might have contributed to the mess, but having got here Fed under Bernanke might be in such a position no matter what they do will not be able to rescue the situation without considerable damage. Now is that clear? Coming to Rogers. With his statement on options he not only showed poor understanding of options, but also poor understanding of the risk/reward framework in general. The fact that he has made millions by getting a few calls right is irrelevant , I dont want a man with such a poor understanding of risk to fix the crisis we are in today. I dont have to listen to his interviews on youtube to form my opinion.
I can hear Peter Olinto in the meeting now: “Do me a favor…”
whats options got to do with understanding risk and reward in macroeconomics. . Rogers was quoting a SEC study btw. the academia is full of conflicting opinions. practitioners like rogers have a better understanding of real life. options werent even that popular a few decades back.are you implying people had no idea of risk and reward then?. bernanke is an academician from the rarefied world of princeton. he is supposed to be a great scholar of the great depression. its a diferent matter if he learnt the wrong lessons from history. so rogers,got a few random calls and lucked out?. you have some gall. bernanke is from the same school as easy Al g’span. he is of the helicopter drop speech fame. he did exactly the same things g’span did.there is nothing he did to reverse g’span’s follies and for that he is culpable. the nobel prize winners and their quants had a great idea of risk -didnt they?.or were they just unlucky ? its difficult to get a mathematician to understand economics and human nature all at the same time.no wonder we’ll keep having spectacular ends to model based trash.