Senator Shelby (R-AL), has come out and said this entire bail out deal is fatally flawed. He claims to have over 300 Economists agreeing with him.
Richard Shelby is the ranking GOP member of the banking committee and what is more interesting is he used to be a Democrat and switched parties in 1994.
We ought to look at alternatives
and further said:
Package is Flawed From the Beginning
So, are there alternatives? There sure are!
We have some robust plans already written, ready to go.
Roubini, aka Dr. Doom has a complete 10 step plan, which is a mix of a an RTC, a HOLC and a RFC.
Hillary Clinton, Bernie Sanders also have plans in place, with Hillary, due to her Presidential bid, having a series of proposals fleshed out, thought out, vetted and even typed up.
I've proposed a new Home Owners' Loan Corporation (HOLC), to launch a national effort to help homeowners refinance their mortgages. The original HOLC, launched in 1933, bought mortgages from failed banks and modified the terms so families could make affordable payments while keeping their homes. The original HOLC returned a profit to the Treasury and saved one million homes. We can save roughly three times that many today. We should also put in place a temporary moratorium on foreclosures and freeze rate hikes in adjustable-rate mortgages. We've got to stem the tide of failing mortgages and give the markets time to recover
Billionaire George Soros has some interesting insights and suggestions.
Finding specific alternatives is quite tough. Sen. Shelby is obviously correct, many economists are raising red flags but in terms of putting together a comprehensive alternative, the results are more piecemeal.
Shelby in a Press Release:
Last Saturday Secretary Paulson presented Congress with draft legislation that would grant him sweeping authority to spend up to $700 billion in taxpayer money to buy illiquid securities. The stated goal of this scheme is to return confidence and liquidity to our credit markets.
I do not believe this is the right approach. We did not get into this situation in a matters of days, and we are not going to fix it in a matter of days.
Proponents of the Paulson plan are telling the American people we can solve this problem with a single bill. I don’t believe that is credible. We have a number of interrelated problems that need to be addressed in order of their significance. First, and most urgent, is liquidity. Then we must address the solvency of our financial institutions and declining home values, not to mention our entire regulatory structure.
I believe Congress can address the liquidity issue by increasing the combined resources of the Federal Reserve System and the Treasury. By enhancing the Federal government’s existing lending facilities and guarantee programs, we can help stabilize money market funds and provide loans to troubled financial institutions without exposing taxpayers to massive losses.
Thereafter, we must determine how to address the troubled assets on the books of financial institutions and continue the process of dealing with declining home values. This will likely be a long and difficult process. We must recognize that now.
Even if the Paulson plan works perfectly, which many doubt, including nearly two hundred economists, it will not stimulate new lending, stop de-leveraging, help distressed home owners, or jump start the economy.
The next Congress is going to have to do more to address this crisis and we have not made this clear to the American people. As a member of Congress, I’m concerned that we are being asked to ratify the Secretary’s plan without having given meaningful consideration to any alternatives. This I can not support.
I find this astounding actually since the modeling of a solution based on HOLC, RFC, RTC and so on is really a Democratic solution, but hey, if someone bothers to get something that will work that's great.
The Question is What Alternative Will He Back to Address those Toxic Assets?
One of the biggest problems are the pricing of the toxic assets to be liquidated that is causing the credit market to freeze (Jesus, I'm sounding like a finance head, I'm not one! Full disclosure!)
I'm not so sure his ideas are the solution either, especially putting off the creation of some sort of RTC/RFC/HOLC to stem foreclosures now. I have no idea if the liquidity crisis with his proposed solution would work. Now that Shelby has issued a press release, hopefully these same economists will devour it and comment.
One must ask themselves if all of this is going on, why in God's name are Democrats ignoring Clinton's plans and these other economists to deal with the toxic asset pricing problems?
Final comment. Don't shoot the messenger and I'm not talking about myself here, an obvious leftie writing about a conservative who I disagree with on almost every issue....for it's the policy stupid.
Here are the main points of these 300 Economists:
- Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
- Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
- Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, 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.
Bailout could make things worse
Who could have predicted this? Oh, wait! I did
I hope everyone realizes now that Obama will only be a one-term president.
I wrote about this yesterday
Budget - Ultimate Credit Card.
Yeah, that's the issue is it appears these derivatives are a catch 22.
where's your link?
Everyone else, Midtowng's blog posts.
Yeah, I know McCain's plan looks completely like a fat cat bail out but the real question is will conservatives back something that has a prayer's chance of working and get over their deregulated selves?
On Lou Dobbs he just reported that only 4 Congressional Republicans would support the current deal....
hmmmm, sounds like a lot of publicity railroading!
The Big Picture
The Big Picture has a video interview on the bail out and it's quite strange...he's like "oh yeah it's necessary, oh yeah might not work, oh yeah, taxpayers will be soaked, oh we'll see.
What? He wrote a book on the history of past bail outs, unfortunately (and assuredly bad for him on sales) it's not out yet.
Sen. Graham just came on FAUX and said 20% of the bill was going to ACORN.
Anybody know anything about this, if true?
It is true. Oh man, because they are under heavy investigation for fraudulent voter registration.
Well, I guess it pays to visit conservative land periodically to find out what's going on.
There is no way 20% should go to lobbyists organizations, I don't care if they represent the green little men from mars who are under represented....that has to go to a financial structure authority who is not involved in some major political agenda.
also does a lot of work on foreclosure prevention, so this may be an effort to use that group to distribute monies that are going to be used to help refinance mortgages.
It's strange but ACORN's website is down right now. Coincidence?
I'm not so sure
because they are under investigation for voter fraud, misappropriations of tax payer funds.... and it's not just one incident....
I don't think this is a freeper attack but even if it is, they should not be directly distributing funds to any outside enterprise here....it should be official government agencies ...
about as bad as Paulson's plan to let a bunch of Wall Street CEOs oversea the buying of "assets".
What a mess. I understand why the conservatives don't want government...it's not philosophy I think, more they believe our government is completely corrupt.
I think that there's
a difference between "clean government" conservatives and the "drown the beast" crowd? I think that populists have a lot of common ground with the clean government crowd, but it's the social issues that get in the way.
Social liberals honestly often have more in common with the "drown the beast" crowd then they do with economic populists.
And economic populists often have more in common with the clean government crowd than with the social liberals. It seems that although the people from the social liberals/neoliberals dominate the political discussion in this country, that a new majority can be found in the union of economic populists who differ on social issues.
I think the major point of consensus is trade. But removing the social agenda out of the picture, still creation of a new government agency is something I would imagine some would have to hold their nose on.
Although some of the libertarians I just don't know what they are thinking but I do believe I'm nailing down my problem. I few the government as something that is ours..whereas they view the government basically as the enemy. I think the consensus point on this one is currently...well, I can see their point!
I know on EP we actually do have some conservatives joining in and hopefully that will keep up for when one starts analyzing things logically and by causes, effects, results...the philosophy goes away a lot faster!
I have no idea if Shelby's or this new one on using loans and some sort of government insurance proposal will work.
That's what's really missing on all of this: analysis, objective, unbiased.
It's such a huge thing to analyze I'm not surprised experts couldn't immediately just "get right on that" and analyze the cause and effects of various proposals...
one of the reasons I keep pointing to the few that have been out there for awhile because they have been analyzed.
right wing populism
I find a certain irony in that its conservatives that are lining up to protect the taxpayers in this manufactured crsis, and the usual democratic "leadership" once again lining up to roll over to the Bush administration.
Now I am not sure of the motivations of the right in this instance, but I am not wanting to look a gift horse too closely in the mouth at this point. They seem to be the voices of reason and restraint - Shelby, Pence et al.
McCain's grandstanding may actually help to inadvertantly scuttle the Paulson plan. I think he is paying attn to the various public opinion polls that show overwhelming numbers of the public are against this bailout and see this as a way to bolster the independent vote.
Obama did the usual democratic thing and didn't fail to miss an opportunity to lead - he is going along with the crowd rather than coming out in front with his own ideas.
Gentlemen, I think we are seeing the beginnings of right wing populism siezing the momentum of the populist movement - while the left is asleep at the wheel once again
I sense this too and it seems like the GOP is responding to the ring wing Populism right now and the left is just ignoring what the people want, not just this but seemingly on a host of issues, at least Congress.
Being sold out again
We are being "sold" the Paulson plan, just like Iraq, just like Patriot Act. Since when is our elected representatives in the business of selling this bailout? or any other unpopular program for that matter
Whatever happened to representative democracy? Is not the job of our elected representatives to represent the will of the people?
Once again the American people are being sold a bill of goods based on the flimsiest of facts and evidence, with little more than token debate or discussion
This situation has been years in the making - whats the big rush now?
I don't know about you, but my red flags go up the minute some salesperson starts putting the hard sell on me, and I definitely have that feeling about this bailout. "Better hurry, this is the last one!! got five other people interested!" "Act now on this limited time offer!!"
From a partisan political view
This bailout will likely delay the coming economic crunch. From a Democratic viewpoint, this would be horrible. It would push the economic pain well into the next Administration, thus making it look like the Obama presidency messed up, when in fact all the screw-ups happened under Bush.
Oh, sure, anyone with a brain would know better. But we are talking about the American public here.
If we are going to crash, then lets crash now and get it done with.
but whoever is in office is probably 1 term because of the imploding situation and neither party will get real and objective to work for the American people.
This is the "NoBama" strategy, to let McCain take the fall so Hillary can win in 1012.
I found it ACORN
Noquarter has the story (warning he is not exactly an Obama supporter!) The Acorn Poison Pill
in the draft (noquarter has this draft) it has direct a "percentage" of profits to Affordable Housing Fund and Capital Magnet Fund.
(versus return those profits back to the budget to the taxpayers).
Then, these funds has been funneling operations and the #1 group has been Acorn and another....La Raza and other "advocacy" groups.
I don't know about you, but having my taxpayer dollars be funneled into these organizations, I mean esp. La Raza man, the ultimate US chamber of Commerce, cheap labor illegal immigrant lobby...
Then in reading over the multiple, multiple state investigations on ACORN...
well, if this is such a crisis as claimed, it's astounding they would put something like that in this bill.
and they are giving them millions, now billions for for ????
WSJ: analysis of bail out "what will work"
Ok, here's my take. Almost no one thinks the Paulson plan and derivatives thereof is going to work.
Now I guess conservatives want some sort of insurance fund.
and yet another other economists again point to a HOLC type of agency creation to basically bail out the actual homeowners being foreclosed on so they are not foreclosed on.
I wonder if conservatives could get their head around that?
Their objections are different from others and I just hope they will admit to what works is what works.
Robert Reich predicts only 5% of a global meltdown
Robert Reich is a neo-liberal moron
He's swallowed the koolaid. I don't trust anything he has to say.
However, he's right about one thing - this bailout may not be necessary.
I read some of his posts during the primary and it was....well, just completely unprofessional in my view.
But, I am picking up not just on him but a whole series of economists who are now saying Armageddon probably will not happen.
Of course not
because if the market did fail without government intervention it might suggest that markets are incapable of self-regulation. And if this is the case, then the government should always be there to step in before the problem balloons as it has now. In short, it invalidates the bout of deregulation that has occurred since the 1970s. And shows the neoliberal ideology to be broken.
Now is the time for new economic populist ideas to capture the loyalty of the public in this time of crisis, and to form the foundation of future economic governance.
one thing is certain this plan to buy up these toxic assets is being slammed and hammered by almost anyone with some financial knowledge.
I have a hard time believing this house of cards won't collapse, regardless.
There is only so long one can rape the middle class and not have it come back and bite the perpetrator(s).
Paulson pleads on his knees
It dissolved into a verbal brawl in the Cabinet Room of the White House, urgent warnings from the president and pleas from a Treasury secretary who knelt before the House speaker and appealed for her support.
In the Roosevelt Room after the session, Treasury Secretary Henry M. Paulson Jr., literally bent down on one knee as he pleaded with House Speaker Nancy Pelosi not to withdraw her party's support for the package over what Pelosi derided as a Republican betrayal.
I'll Bet He is! - LIBOR
I'll bet he is! Dollar falls etc. Bloomberg stats but this one is the horror show:
What that means is no bank is loaning out anything to any other bank and the only ones lending are Gov./central banks...
So, this is the legitimate issue they are trying to address a complete freeze or lock up on the loan/credit markets.
I think Shelby is also saying this is the #1 critical issue to immediately address but I'm completely unsure if his alternative plan would do 'er.
I'm not so sure Paulson's plan would do 'er either.