Crime & Federalism

Let's say you, like Nanci Pelosi, supposedly think that the bailout is necessary.  Do you really make this speech before the vote?

Is Pelosi evil, or just insincere?

UPDATE: Wow, Pelosi truly is a moron.  Speaking of the Great Depression, she said: "I don't know what's so great about the depression, but that's the name that we gave it."  Umm.... "Great" doesn't mean "desirable;" it means "large."  Pelosi cannot even grasp basic English, and she is third in line for the Presidency.  These are our leaders.  Heaven help us.

Albert Einstein famously said: "You do not really understand something unless you can explain it to your grandmother."  This has been a useful heuristic in my life.  How does it apply to the market bailout?

Well, first, my grandmother can understand this comic strip.  So clearly complex market transactions can be explained to an untrained audience.

Second, has Henry Paulson, in any of his interviews, explained why this market bailout will actually be a bailout?  If he can't explain, in clear and simple terms why the bailout will work, why should we believe that he understands why the bailout will work?

This total scam called the Emergency Economic Stabilization Act of 2008 supposedly offers "market transparency."  How so?  Here is how:

SEC. 114. MARKET TRANSPARENCY.
(a) PRICING.—To facilitate market transparency, the Secretary shall make available to the public, in electronic form, a description, amounts, and pricing of assets acquired under this Act, within 2 business days of purchase, trade, or other disposition.

So he'll tells us what he bought after he buys it?  We the taxpayers get no input.  It gets better:

(b) DISCLOSURE.—For each type of financial institutions that sells troubled assets to the Secretary under this Act, the Secretary shall determine whether the public disclosure required for such financial institutions with respect to off-balance sheet transactions, derivatives instruments, contingent liabilities, and similar sources of potential exposure is adequate to provide to the public sufficient information as to the true financial position of the institutions.

In other words, it's Paulson's call what to disclose!  He could tell us nothing.  He could give us cooked books, and we'd never know. 

Someone explain to me again why we want to give $700 billion to someone who's in bed with the same Wall Street fat cats who made this mess.  That's right: No one can explain why.  We just need to.... just because really bad stuff with happen if we don't go along.  And the plan will work because.... well, if we don't go along with it, we'll all be living in Hooverville.

Me, too.  (Relatedly.)

UPDATE: Good commentary from a message board I read:

What's kinda funny/sad, is that the mayor and other people forwarding this email, are probably hard core church goers, use the "good book" as the basis for their life decisions, and proudly proclaim that to everybody who will listen, yet don't know that it's pretty stupid to think the bible has a reference to a religon that didn't exist for centuries after the book was written.

Query whether people so ignorant about basic scripture are qualified to answer tough theological questions - like whether homosexuality is a sin?  The lack of a basic understanding of the Bible won't stop them from having opinions though, will it?

All 106 pages of the bailout legislation are available here. (UPDATE: That site crashed.  Try this link.)

The legislation gives almost total control to Henry M. Paulson. Look, for example, at this conflicts-of-interest provision:

(a) STANDARDS REQUIRED.— The Secretary shall issue regulations or guidelines necessary to address and manage or to prohibit conflicts of interest that may arise in connection with the administration and execution of the authorities provided under this Act, including—

(1) conflicts arising in the selection or hiring of 18 contractors or advisors, including asset managers;

(2) the purchase of troubled assets;

(3) the management of the troubled assets held;

(4) post-employment restrictions on employees; and

(5) any other potential conflict of interest, as the Secretary deems necessary or appropriate in the public interest.

Talk about foxes guarding the hen house!  Paulson gets all of the money.  He also gets to decide which of his investment-banker cronies to hire. 

Shouldn't an outside agency determine what a conflict of interest is?  How is Paulson best suited to determine whether and to what extent he and his fat-cat Wall Street friends have a conflict of interest?

This bill is bad news for America.  It's crony capitalism at its worst.  Paulson's sole goal under this legislation is to make his rich friends richer.

UPDATE: More posts here.

A tentative deal has been reached:

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price.

At the insistence of House Republicans, some of the program's $700 billion would be devoted to a program that would encourage holders of distressed mortgage-backed securities to keep them and buy government insurance to cover defaults.

The legislation would place "reasonable" limits on severance packages for executives of companies that benefit from the rescue plan, said a senior administration official who was authorized to speak only on background. It would affect fired executives of financial firms, and executives of firms that go bankrupt. Some of the provisions would be retroactive and some prospective, the official said.

Sounds like a disaster.

What a disaster (via AutoNews):

WASHINGTON – In a rare Saturday session, Congress gave final approval to funding that will launch a $25 billion low-interest loan program for automakers and suppliers.

The program, designed to help companies retool for more fuel-efficient vehicles, also is expected to provide a financial lifeline to struggling companies, particularly the Detroit 3.

The funding that is needed to begin the program, about $7.5 billion, was attached to a wide-ranging spending bill that will keep the federal government running in the new fiscal year that begins Wednesday.

The Senate vote Saturday was 78-12 in favor. The House approved the bill last Wednesday. President Bush is expected to sign it.

I am a libertarian, so I am skeptical of most government programs.  That said, if we're going to spend $25 billion, I can think a few thousand causes more worthy than the American automobile industry. 

Republican cannot oppose this legislation, and Bush cannot veto it, because Michigan and Ohio are swing states.  (Map here).  With our all-or-nothing Electoral College, massive wealth redistributions like this are bound to occur.

The only rational solution is to abolish the Electoral College, or change the all-or-noting system.  This will never happen, because then states like Michigan and Ohio would lose their ability to extort $25 billion from us taxpayers.

Another sign of the Decline.

What are you doing with your retirement accounts?

The conventional "expert" advice goes as follows: If you're old, diversify.  If you're young, stay almost entirely in stocks.  But "experts" also tell everyone to stay in stocks, even a declining market, because no one can time the market. 

The conventional wisdom is dollar cost averaging. Keep buying, because you'll buy some stuff high, some stuff medium, and some stuff low.  So long as you keep buying, you'll eventually average your way into a respectable return.

Does that advice fly today?

Can we really say it's currently impossible to time the market?

Does anyone really think the market is going to rise, and stay high?  Who?  Why?

The Dow today closed at 11,143.  The Dow has been rising and falling based on news of the bailout.  If the bailout fails, the Dow will decline.  If the bailout goes through, the Dow will rise.  But will it remain high?

Does anyone really think this Christmas is going to be very merry?

Even if there is a bailout, and the Dow rises; what happens when retail returns this Christmas are horrendous?  Does anyone think the market will not decline?

So... What are you doing with your money?  I'm currently 50% in a 401k, and 50% in various Vanguard funds, including an S&P 500 fund.  I'm likely going to move entirely out of stocks for at least the next few months.

What will you do?

This is the Decline.  Many Americans live off of their credit cards.  Now banks are lowering credit limits (story here):

After a weekend getaway in New York City, Joseph Lanza logged onto his Bank of America Visa account and was shocked to see that his line of available credit had been reduced to $1,000 from $3,800.

Because of the recent charges from his trip, his balance was $970, dangerously close to his credit limit. "I had been trying to pay my debt down to improve my FICO score and also my debt-to-credit ratio," said Lanza, 26, who works at an investment firm in New Hampshire.

But despite making timely payments and keeping careful track of each charge, he said, "It feels like I'm running up against a bunch of walls."

Betty Riess, a spokeswoman for Bank of America, said she was unable to address the specifics of Lanza's account, but she did say the bank is "taking a more aggressive look at accounts to control risk, given the current environment."

I had been predicting this move for a while.  This is what is going to kill us.  Many Americans live off of their credit cards.  It's how they pay not just for frivolous items like large televisions, but also how they buy their groceries and gas.

How will people pay their bills?  What happens when people miss payments, and due to universal default rules, end up owing credit-card companies 29.99% interest? 

This Christmas is not going to be very merry.  With a bad retail season this Christmas (How will it be anything but bad?), what will happen to the stock market?

The idea that this "bail out" is anything such, is a total joke.  There are huge problems that our visionary leaders in Washington haven't even noticed.