http://blogs.wsj.com/economics/2008/10/01/dueling-economists-experts-voice-support-for-bailout-bill/

98115renter: To me it sounds as if they are looking for a free market solution as opposed to a better solution than is currently being offered.

They say the bailout stinks as a solution. They don’t offer a solution. They are telling Congress to take its time to come up with a better solution. Presumably they could help if Congress asked for their input.

I wonder if there is an equally compelling list promoting the intervention?

I haven’t seen one from an economist.

The interesting part is what reeks of free market ideology.

In the third of three points:

“America’s dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted. ”

To me it sounds as if they are looking for a free market solution as opposed to a better solution than is currently being offered. If I had the time I would have the opportunity to research these folks, but I don’t.

I wonder if there is an equally compelling list promoting the intervention?

You gave a pointer to Karl Denninger’s plan. Why do you think his plan will work?

Because it directly addresses the root causes of the mess rather than putting a band-aid on the symptoms.

Why do you think he has credibility?

Because he has been warning of this very mess for years, during times when folks like Bernanke and Paulson were insisting that everything was “contained” and we had hit bottom.

You gave a pointer to Karl Denninger’s plan. Why do you think his plan will work? Why do you think he has credibility?

There is a strong argument not to trust Paulson or Bernanke, but where is the tidal wave of economists shouting “stop!”?

They’re right here.

Please, I do not pretend to know what the heck that all means. I am not a trained economist. Your arguments are going to need to be in lay terms if you are to gain any traction.

Besides, I have no idea who the author is or of his qualifications. There is a strong argument not to trust Paulson or Bernanke, but where is the tidal wave of economists shouting “stop!”? If you can point me to their ignored screams I’d be happy to take a look and decide for myself IF they can put it to me in a language I (and other non-economists) can understand.

Here’s a plan for you (pdf) on how to fix the underlying problems.

Please explain why we should piss away $700B to maintain the broken status quo rather than implement something like this.

The linked article was good at pointing out where our failures lie, but not how to fix them.

I understand where you guys are coming from, but it seems as if you are advocating for a self-correcting market, which is exactly the premise of the republicans deregulation scheme which is half the reason we are here today.

“To put it more simply: the people and principles that blithely led us into this mess are absolutely the wrong people and principles to lead us out of it.”

Which is similar to the famous Einstein quote:

“We can’t solve problems by using the same kind of thinking we used when we created them.”

And that is exactly what we are doing. This bailout will fail, just like the the government has failed over the last year to fix this. Your thinking is making the problem worse renter. We need to stop digging eventually and work to fix the problems.

I don’t actually think this will prevent a recession, I just think it will dampen it.

And I think that bailouts like this one will lengthen a recession / depression.

…but also that our government has failed to do anything meaningful about it on the way down.

I’m in awe of that, too. How about instead of flushing $700B down the toilet trying to prevent the symptoms, we actually begin to address the underlying causes of the mess.

That would be “meaningful” action. The $700B is not.

I was talking to a friend at work a few weeks ago about this impending crisis. He was confident that our leadership in Washington are smart people and were capable of fixing this mess. Now we see what the solution is, borrow money to bail out the banks. Borrowing $700 billion to bail out our nations financial institutions is considered smart.

I remember when my daughter was around 5 years old and wanted her mother to buy her something. My wife said I don’t have any more money. My daughter replied, “just go to the bank and get more”. Life is that simple in this country, “just go to the bank and get more”.

You are in for a serious surprise expecting this to solve our problems. This country has been living in a mass delusion too long and all this is doing is continuing it for a bit longer.

$700b a small price? I guess to an extent we all get a bit blaze to these enormous sums after a while but trust me it’s not small. Perhaps if we could be sure that it would fix the problems it would be something to consider but noone is saying that it will, noone.

http://www.bloomberg.com/apps/news?pid=20601087&sid=akRlc4ks5mDc&refer=home

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBxs213UjqjA&refer=home

Thanks Markor. It’s been a long time since I’ve been in Civics class.

We’ll be “printing” a couple hundred billion on a monthly basis as the option-ARMs reset IMO.

http://online.wsj.com/article/SB122290574391296381.html?mod=article-outset-box

mukoh: As far as the banks getting unstuck, there is no blank check with this from what I have seen. It is blown out of proportion. If the government buys a bad loan and services it until the person sells the house or refinances the government gets the interest which is credited back.

I’ve seen nothing that guarantees the taxpayer a profit. It’s only a possibility, when it could have been made a certainty. Then we know from experience the taxpayer will likely get the shaft, big time. The taxpayers should not only get every dollar back, they should also get 10+% effective interest annually, like Buffett is getting from GE. If a bank getting bailed out is still in business 50 years from now, there’s no reason they can’t still be paying the gov’t back something to make the taxpayers whole plus a nice profit.

Executive pay? That argument is so outrageous as to how an executive gets paid is up to the shareholders of the company not its creditors.

The taxpayers should become shareholders as part of this deal. Instead they’ll get warrants, almost certainly worthless. What’s outrageous is that some fat cat who brought a bank down is going to make umpteen $millions paid for by taxpayers. With taxpayers footing all the losses, I expect to see the highest pay packages ever, just like I expect to see Bush get the highest speaking fees ever when he leaves office. Paulson will probably get a couple hundred $million out of this too somehow.

You should take a trip to Alaska so you can see Russia it is almost like being there I have heard.

The bailout bill will work in the short term as the remaining few bulls will want to get into the market at the “lows” (Don’t miss a good bargain!) But the vast majority of sheeple are spooked. Spooked around the world. Bernanke wanted a shock bailout bill passed so the sheeple wouldn’t wake up (including the news sheeple). Too late. Missed the window of opportunity.

The only question is how far deep down the rabbit hole will we all go.

Bernanke is one of probably 5 guys in the world who is considered a true expert on the Great Depression. Anyone here, the millions of Americans who are suddenly economic experts, the “economic experts” who have all been wrong the last two decades…. none of them have a clue. We are GAMBLING. We are ROLLING DICE. The entire world economy is based on faith, and… look at the papers around the world.

My business is fine. I have a two year nut to keep it running through busts and booms. But the few employees I have aren’t vital. So I’ll fire them. Save as much money as possible. Everything is tightening everywhere. People don’t want to sign contracts, don’t want to get in too deep until they know what’s going to happen next…. and the money keeps drying up. No one wants any risk. I don’t want any risk. Tighten the belt… tighten the belt… I don’t need a massage, I don’t need fancy clothes, I don’t need hotel stays, self help books, eating out, new books… all of that is someone’s job lost.

This bill is festooned with giveaways. No kidding. Business as usual. Politicians looking to protect their job before protecting the nation.

And you want to know why we’ve had it so good the last 50 years? Because the American Dollar has been considered the premiere currency of the world. Everyone puts their money in American dollars for safety. From Argentina? Brazil? Even France? Everyone “knows” America knows finance. And our banks drive the world economy. Except we’ve been destroying our financial system. And the whole world is invested in it. So if we destroy their faith in our system (might already be too late), then they’ll abandon it. And because everyone else hitched their system to ours… theirs will go down with us.

Across the world, everyone will pull their money out. No risk for years. And then another currency (Swedish? German?) will prove to the world that they REALLY have their act together and THAT country will be the new economic powerhouse of the world. THAT stock market will be where everyone invests because it is “the best system in the world”.

Who knows, maybe American bankers will pull a rabbit out of their hat. But American staying the powerhouse with this much mismanagement? This much debt? This kind of gaming the system?

We’ll see.

On the other hand, let Patty Murray know what you think of her “Yes” vote.

As far as the banks getting unstuck, there is no blank check with this from what I have seen. It is blown out of proportion. If the government buys a bad loan and services it until the person sells the house or refinances the government gets the interest which is credited back.

Executive pay? That argument is so outrageous as to how an executive gets paid is up to the shareholders of the company not its creditors.

I do however agree that WaMu guy getting $7m for a few weeks on the job should be a cancelled check.

any of these companies can get money they need. the problem is that they can’t get CHEAP money like they used to, they have to actually pay for it these days. Buffet, along with plenty of other equity firms and our own government (with AIG) have shown that you can get credit if you want to pay the proper risk premium for it. instead they would rather whine to mother government to give them credit for free, rather than admit their "chocolatey" business models are based on 4% CP and can’t handle 8%. if you did not realign your business model during the heyday of lowest credit costs ever for possible higher credit costs in the future, you should go bankrupt and nobody should cry for you. sounds familiar, doesn’t it? perhaps its something similar to WaMu giving Jamba Juice workers $800k opt/arms in California.

mukoh: The financial system right now is at a stand still, AT&T can’t even borrow money for longer then 1 day. This is not going to be a sharp recession it will be an all out depression with all of its 10-20 year consequences.

Microsoft has never borrowed money, so why should AT&T? I don’t have a problem with gov’t unsticking banks though, as long as the taxpayer makes a nice profit, and to help ensure that profit the executives should not be allowed huge pay packages. But we know this bailout is just a giveaway of taxpayer money and there will be giant loopholes on executive pay. Hence the bailout will do more harm than good in the long run.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, — That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. — Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government.

Actually, many people paid the fare to the Americas by being held captive on board the ship when it got here until they could negotiate with someone who would pay their fare in exchange for something like seven years of labor. If their spouse made it more than half way before dieing, then they had to work the extra years to pay that fare as well. As I recall, if they couldn’t find someone to hire them, they went to prison where they usually didn’t last very long. Debtor’s prisons in this country were mostly closed in 1830s.

So now it is the $800+ billion bailout, and the politicians suddenly love it. :) :)

I think the moral of the story is, the more chance these crooks have to manipulate it, the more worthless pork they can pack inside of it. After they pass it, they’ll declare themselves American patriots and brag about all the good they’ve done for us.

Prediction: By the end of this nightmare, the American taxpayer will be on the hook for $3 trillion. That’s a $20k loan to every employed person in the country. :)