Friday, September 26, 2008
Wednesday, September 24, 2008
Monday, September 22, 2008
Cash for Trash
By PAUL KRUGMAN
Some skeptics are calling Henry Paulson’s $700 billion rescue plan for the
There’s justice in the gibes. Everyone agrees that something major must be done. But Mr. Paulson is demanding extraordinary power for himself — and for his successor — to deploy taxpayers’ money on behalf of a plan that, as far as I can see, doesn’t make sense.
Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us.
So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:
1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.
2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.
3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.
4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”
The Paulson plan calls for the federal government to buy up $700 billion worth of troubled assets, mainly mortgage-backed securities. How does this resolve the crisis?
Well, it might — might — break the vicious circle of deleveraging, step 4 in my capsule description. Even that isn’t clear: the prices of many assets, not just those the Treasury proposes to buy, are under pressure. And even if the vicious circle is limited, the financial system will still be crippled by inadequate capital.
Or rather, it will be crippled by inadequate capital unless the federal government hugely overpays for the assets it buys, giving financial firms — and their stockholders and executives — a giant windfall at taxpayer expense. Did I mention that I’m not happy with this plan?
The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.
That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets. It’s also what happened with Fannie and Freddie. (And by the way, that rescue has done what it was supposed to. Mortgage interest rates have come down sharply since the federal takeover.)
But Mr. Paulson insists that he wants a “clean” plan. “Clean,” in this context, means a taxpayer-financed bailout with no strings attached — no quid pro quo on the part of those being bailed out. Why is that a good thing? Add to this the fact that Mr. Paulson is also demanding dictatorial authority, plus immunity from review “by any court of law or any administrative agency,” and this adds up to an unacceptable proposal.
I’m aware that Congress is under enormous pressure to agree to the Paulson plan in the next few days, with at most a few modifications that make it slightly less bad. Basically, after having spent a year and a half telling everyone that things were under control, the Bush administration says that the sky is falling, and that to save the world we have to do exactly what it says now now now.
But I’d urge Congress to pause for a minute, take a deep breath, and try to seriously rework the structure of the plan, making it a plan that addresses the real problem. Don’t let yourself be railroaded — if this plan goes through in anything like its current form, we’ll all be very sorry in the not-too-distant future.
Wednesday, September 17, 2008
Monday, September 15, 2008
Sunday, September 14, 2008
We must especially beware that any liberty we suspend for fear of terrorists could easily be forfeited for generations to come. The freedoms we enjoy in our democratic society are worth whatever dangers we will face, whatever risks we must take, and whatever sacrifices we choose to make. America must not retreat from two and a quarter centuries of hard won civil liberties. Never before have we settled for being the land of the safe and the home of the secure. We’ve always had the courage to strive to be the land of the free and the home of the brave.Instead of the frightful overreaction we have witnessed since September 11th, our nation would do better if it would respond to terrorism the way the people of Oklahoma responded to the bombing of the Murrah Federal Building. That bomb did not prompt us to surrender our civil rights or to infringe on the rights of others.
Unlike our federal government:
We did not suspend the constitution.
We did not send the police out to round-up, lock-up or expel all the foreigners and immigrants in town.
We did not hold suspects indefinitely without access to the courts or to counsel.
We did not tape conversations between suspects and their lawyers.
We did not suspend the laws requiring probable cause for wiretaps or search warrants.
We did not expand the role of the military in domestic law enforcement.
We did not torture suspects to obtain information, nor did we allow surrogates to torture suspects for information.
We did not create a military tribunal to try and execute suspects without applying the Constitution or state and federal laws.
We did not endorse assassination as an alternative to capture.
We did not create a private foundation to issue ID cards to all citizens.
We did not create a network of free-lance spies to report anything that might be considered suspicious.
We did not create a massive computer system to keep tabs on every aspect of our citizen’s daily lives.
And, we did not use the bombing as an excuse to suspend the first, second, and fourth amendments and then attack militias or invade white supremacist compounds to make them disarm.
What we did was to rescue survivors, clean-up the wreckage, rebuild our city and bring the criminals to justice.
The bombing of the Murrah Federal Building did not destroy the freedom-loving, risk-taking, self-sacrificing spirit of the people of Oklahoma. Neither should the criminal acts of a few terrorists destroy the freedom-loving, risk-taking, self-sacrificing spirit of our nation.
Since September 11, 2001 it has become commonplace to say that the world changed that day. Some things did change. Several thousand precious, unique and irreplaceable lives were lost and the lives of many more were irreparably harmed. I must object, however, to assigning any significance to the evil that transpired that day.
In my mind, the most important lesson to be learned from that day is to be found in the images of heroism and the examples of self-sacrifice demonstrated by the men and women of the New York City fire department and police department and others like them. We need to learn from the people who left places where they were safe and secure and walked courageously into harm’s way to rescue the victims of a grave injustice. From them we learn that there are some things in life that are more important than safety and more valuable than security. Only those who have learned that lesson have the capacity to truly calculate the price of freedom and security.
Friday, September 12, 2008
Thursday, September 11, 2008
Mom is signing the papers on her new house tomorrow and then there are the joys of packing and moving, but the rewards of getting her out of that awful apartment make it well worth it, and besides she'll be coming to get her couch and microwave that much sooner.
Last I heard Penni is doing well.
We're still trying to get M a job so she can start filling up the Windstar with her own money.
There was a nice truck parked at the car lot down the road from us. a new model, V8 engine with automatic transmission and very reasonably priced. I was thinking of trading in my truck (I don't drive it much except to the dump and the golf course, but I'm really tired of shifting the standard transmission.) anyway I took a look at it and decided to keep what I have, the windows were tinted so dark it would have been like driving in a cave.
E drives the truck some, his 3 year old step son really likes looking out and seeing everthing he can't see from his seat in the car.
Tuesday, September 09, 2008
Sunday, September 07, 2008
The Yikes blog summed up my thoughts pretty well:
Look at what’s happened since the closing night of the Democratic Convention. Sen. Obama gave what was indisputably a great speech — a historic speech. A speech that people should have been talking about for DAYS. But did they? NO, because politics is war, and McCain shot back immediately with his Gov. Sarah Palin assault rifle. And guess what has happened? For more than a week now all people are talking about is SARAH PALIN.
McCain had a full week of publicity for his campaign, while Sen. Obama pretty much fell off the radar screen.
And guess who is helping fuel the fire? The so-called progressive blogosphere.
Political ju-jitsu -- use the other person's strength agains them. The political party of indignation using the dems indignation to give their candidates a week of free publicity because they don't know how to shut the @#$% up. I've watched two Bill Maher specials on HBO and on both of them the women on his panel kept telling him to lay off of her, that any jokes he makes against her only makes him look like a bully and she gets the sympathy vote, and he's too stupid to listen.
My take on this election is that it is a referendum on the American Spirit. The dividing line between the Democrats and Republicans is Reason and Superstition.
Reason is based on the real world and trying to figure it out in order to solve problems. Listen to Obama's speeches whether it's on race or the economy, or health care, terrorism or taxes. He difines the problem and lists ways in which they can be solved. I know, I know it's academic, dry, boring, makes the average listener actually have to think, but he approaches the American Public as equals and has a basic belief that we can vote for someone who knows what they are doing.
Notice what decides the issue is reality. This reinforces my opening statement: Reason is based on reality.
Notice Republican advertizing: It has a complete disconnect with reality.
Think of all the things in the last eight years that Bush has said that are unreasonable. "I know in my heart I'm right." concerning his invasion of Iraq.
"I looked it his eyes (Putin)..."
Superstition: is based on blind faith or "belief" which is determined by emotion. In politics the emotion that is played on is fear. The Republicans have used the fear card since 1948 and fall of China to Mao ZeDong. Richard Nixon's entire political rise was do to being a "Red baiter"
There is no arguing with a person who has their mind made up, don't confuse it with facts.
Will Obama reason with the American Public and will the voters look at the reality that Republicans have done to the system of government since Richard Nixon to destroy our checks and balances?
Will the voters look at the reality of so many other problems too numerous to list or discuss here or listen to the fake father figures that blame everything that has happened on the political party out of power for the last eight years and then say "Trust me?"
It's an election of reality versus media spin. A real nailbiter!