A Skeptic on the Bailout

Jeff Alworth

I was trying to compose a post on the Great Bailout of 2008 (no easy task when you're a bear of little economic brain), when I came across this clip.  It is Representative Marcy Kaptur (D-OH), offering a smack-down that was as insightful as it was cathartic.  Behold:

Hat tip Andrew Sullivan.

  • Greg D. (unverified)
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    Per the New York Times, the firm owned by Rick Davis, McPain's campaign manager, has been paid $15,000 a month by Freddie Mac - which John M forgot to tell us during his recent speeches against power, corruption, etc.

    The sad part is that virtually everyone in a position of power in the US has been nursing at the teat of Wall Street, the major Banks, or the K Street folks who support them. Dems, Repigs, and everybody else. Maybe not Nader, but pretty much everybody else.

    Very depressing.

  • Bill Bodden (unverified)
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    Thanks for this post, Jeff. It's nice to find another Democrat with integrity and guts to say what needs to be said. To bad she has so few colleagues of her caliber. I wouldn't be surprised if Pelosi calls her on the carpet for her candor.

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    Good speech. No 'e' at the end of her name, though...

  • mp97303 (unverified)
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    With all due respect to Rep. Kaptur, I am sick and tired of speeches. I want some "walk with all that talk." Everyone here knows that if we came up with several million dollars, we could get our Representatives to do whatever we wanted.

    A pox on all their Houses (and Senates for that matter).

  • anonymous (unverified)
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    Let's not forget the $2.3 trillion that Don Rumsfeld had to admit was missing and unaccounted for from the Pentagon budget. We can add that to the total waste of taxpayer dollars.

    http://video.google.com/videosearch?hl=en&q=missing+trillions+pentagon#

    Unfortunately, a flight school flunkie with a box cutter was able to execute a diving hairpin turn in a Boeing 757 that Air Force fighter pilots have said would be extremely challenging for a pro in an F-16 to pull off and, rather than plunge directly into the Pentagon causing mass casualties from the direction it was coming, swirled around and skillfully skimmed the Pentagon lawn, plunging into the very portion of the Pentagon where the audit trail of the missing $2.3 trillion allegedly existed.

    Most people believe that, so it's no wonder that the market would respond to the Paulson/Bernanke bail out that comes just in the nick of time to save Goldman Sachs and Morgan Stanly, after they survived to swallow up their hated competitors, then have the former Goldman Sachs exec assume power to wipe all those bad debts off its balance sheet, right before short sellers were about to drive his Wall Street buddies to ruin.

  • Bill R. (unverified)
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    A skeptic about which "bail-out"? Right now there seem to be all kind of proposals out there. The only consensus is that the Bush/Paulson proposal is dead in its current form.

  • joel dan walls (unverified)
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    anonymous forgot to mention the army of Israeli agents (in cahoots with Henry Kissinger and the British royal family) who were videotaping the collapse of the World Trade Center towers from the New Jersey shore.

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    Read this if you want to understand Credit Default Swaps (brought to you by McCain's key economic advisor, Phil Gramm) and how we're being taken for a ride by Wall Street yet again:

    The Savings and Loan "crisis" ... Enron and the "energy markets" ... and now Three Times Is Enemy Action

  • admiral_naismith (unverified)
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    DAMN! Why didn't they run HER for President? Ohio not important enough in national elections?

  • Tom Civiletti (unverified)
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    The woman kicks ass!

  • RW (unverified)
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    How do these REAL people somehow escape notice when we are vetting for the Real Deal for office? I want her for my SON'S mother. Hah.

  • Bill R. (unverified)
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    The current Wall St. meltdown and downturn into recession has given a breakthrough for Obama. Just out, ABC/Washington Post poll has Obama leading by 9 pts.

    http://abcnews.go.com/PollingUnit/Politics/story?id=5866046&page=1

    This is reflected in the numbers now coming out of Colorado, Florid and, Virginia, and the uptick in Washinton State. What's clear is that the senior population and independents are now moving toward Obama. No wonder, as McCain is revealed for his policies, his advisors, and his plan to turn over soc. sec. to Wall St.

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    I happened to see Rep Kapture's speech because of an email sent to me. She hit the nail on the head.

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    No 'e' at the end of her name, though...

    Fixed. Thanks.

  • joel dan walls (unverified)
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    Mr. Bodden, I think Obama was talking about this problem although not in the terms that Nader did. McCain "the fundamentals are strong" obviously did not. But I've not done any sort of archival searching. I think we should all give Nader credit where credit is due, and he has always been one to talk about Wall Street thievery. Where I don't give him any credit at all is as a politician, a term that I do not use pejoratively. Nader disdains the very ideas of governance, organizing, party-building. Wasn't it Henry Clay who said that he'd rather he'd right than president? Seems to me that Nader has that same attitude, in spades.

  • joel dan walls (unverified)
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    Whoops, the (apocryphal?) line from Henry Clay was "I'd rather be right than president."

  • Gregor (unverified)
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    Building a jail big enough to house all these crooks should create a lot of jobs and be good for the economy.

  • Bill Bodden (unverified)
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    Nader disdains the very ideas of governance, organizing, party-building. Wasn't it Henry Clay who said that he'd rather he'd right than president? Seems to me that Nader has that same attitude, in spades.

    In other words, if people want to get elected they should be prepared to pander to the biggest voting blocks, become lying whores and not insist on telling the truth and doing what is right. And what does that say about the American voters?

    As for Nader disdaining the idea of governance, that is meretricious nonsense. At the core of governance in the United States is the U.S. Constitution, something he sticks to but for which the "winners" of past elections have shown disdain by ignoring it when it was politically expedient. That includes Obama, McCain and Biden. And what does it say about the American people if they don't care when politicians shred the Constitution?

    It seems to me that the problem with our government is that we elect people who have no problem with getting it wrong as long as they get elected. Maybe if the people raised their standards and insisted on electing people who made a point of getting it right then we wouldn't be in our Iraqi, Afghanistan, Wall Street bailout and other messes. Some of the politicians who voted for the war on Iraq believed they had to do so to get re-elected even if they might have thought it was the wrong thing to do. John Kerry and John Edwards were told if they wanted to become president they would have to vote for Bush's blank check to go to war. According to a book written by party hack Bob Shrum, John Edwards did just that against his and his wife's better judgment. You can bet they weren't the only politicians thinking only of their re-election. No profiles in courage there.

    Now which is the better person? The one who gets it right and tells you the truth or the one who tells you what you want to hear but goes along with doing what is wrong? And which would you vote for? If you are like most Americans you voted for the majority of politicians who voted for the war on Iraq and deregulation of the banks that helped get us in this mess. Chances are the candidates most people voted for will sell out on this bailout and endorse Paulson's blank check for Wall Street.

    For decades the American people have been voting for the candidate they perceived as the lesser evil, and what did we get? What else? Evil.

    As for "politician" being used pejoratively that should not come as a surprise when Congress managed to get a lower rating from the public than Bush or when people refer to the U.S. Capitol as the biggest and most expensive whorehouse in the world.

  • joel dan walls (unverified)
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    Mr. Bodden, all I can say is, I voted for Nader twice and do not plan to do so again. I like a lot of what he has to say. I just don't think he's got any interest in practical politics; nor do I see much evidence that most "Naderites" are interested in practical politics, which, to me, involves people running serious, sincere campaigns for everything from the school board on up. By way of contrast, the hard-right folks have been doing this sort of thing effectively. If you don't think that capturing a school board or a city council somewhere matters, then I suggest you're badly mistaken. And if you <do> think that mobilizing every four years around a curmudgeon like Ralph Nader--again, a honest man and one whom I admire in many way--is enough to shift our political culture, then again, I sugest you're badly mistaken.

    But...we obviously define "practical politics" very differently. You're the one who seems to be equating "practical politics" with being a "lying whore".

  • Bill Bodden (unverified)
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    You're the one who seems to be equating "practical politics" with being a "lying whore".

    Unfortunately, that is true, isn't it? Or are you gullible enough to believe Obama, Biden and McCain when they promise "change" when their actions indicate it is all business as usual?

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    This is surreal. The only guys who made big bucks out of this situation are the folks who sold their homes at the peak of the market or who borrowed against it full value and can now walk away from their obligations.

    So to punish a few Wall Street traders (mostly guys who took big commissions on the sale of mortgage insurance) and bankers in general, you would be happy to have the credit system freeze up, which really would adversely affect the real economy (s far this is mostly just paper)? Why the rush? Well, there really wasn't one, the Fed was dealing with problems as they came along, but all of a sudden there was a big hew and cry that officials who were not responsible to elected officials were making scary decision.

    So Bernanke said he would stop it and Treasury said they would but something together. In the mean time everything is hanging fire.

    What do my academic economist colleagues say about the 'bailout' -- which essentially involves swapping treasury notes for structured investment vehicles on the basis of a reverse action? Many of them have now weighed in on this issue. Most of those who oppose the bailout are what I would describe as free-market zealots. I'll ignore them, altho in my profession they represent a substantial number.

    There is a second group who support the bailout but believe Treasury should demand an equity stake in return for the swap. They have a much better argument. They are convinced that the stuff out there really is junk and US will be stuck with a big net liability. An equity stake would hedge this risk. If the mortgage backed securities really are junk then by taking an equity stake, the Treasury would share in the gains. If they are worth more than the T-bills swapped for them, Treasury would share in the losses. That is a reasonable consideration.

    Indeed, that was the approach taken by the Fed in several of their recent bailouts. But the Fed has a bottom line and arguably the Treasury does not. And, while the Treasury proposal would give the administration the option of negotiating an equity position in the conduct of their reverse option, it doesn't require it. The question comes down to whether this should be a mandated provision or left to the discretion tof the folks at the Treasury. I am agnostic. I would also note that most of those who argue for mandates distrust the Bush administration and their justified distrust of the bushies is spilling over into distrust of the Treasury.

    The rest is just posturing for face time on TV and U-Tube.

  • anonymous (unverified)
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    Thank you, Joel Dan Walls. I did forget about the Israeli "tourists/students" who were flown out of the country when airspace was off limits and went on TV in Israel (also available on youtube) to talk about how they were in NYC to "document" the 911 attacks.

    I also forgot about how multiple CIA field agents tried to warn the White House. ...How Rumsfeld changed the response procedures for hijacked aircraft, even though they had worked flawlessly in protecting America for decades. ...How France, Israel, and Russia all tried to warn President Bush that they had intercepted intelligence that a plot was underway to attack the U.S. ...How Condi Rice testified that nobody could have anticipated planes be hijacked and used as weapons in the U.S., when the armed forces were going through planned exercises that very day for just such a scenario.

    I did forget to mention that, but that's because it's just too "tin foil hatty" to bring up. That's why I support Pelosi's "impeachment is off the table" approach, because I'm a good Democrat. Would you like fries with your Merkeley lawn sign?

  • Tom Civiletti (unverified)
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    "Fred Thompson" wrote:

    This is surreal. The only guys who made big bucks out of this situation are the folks who sold their homes at the peak of the market or who borrowed against it full value and can now walk away from their obligations.

    Are you out of your freakin' mind?

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    Dear Tom,

    No. There were hundreds of traders making big commissions on transactions, but that is small potatoes compared with the millions of folks speculating on their mortgages. As for the bailouts that have occured so far, Bear, Fannie and Freddie, and AIG, the Fed took pains to make sure that taxpayers got first claim on the assets, common and preferred shareholders paid a steep price, and management was replaced.

    A lot of folks on BlueOregon confuse money with wealth, but it's not. It's just paper (or perhaps an electronic entry somewhere). Its purpose is to facilitate the trade of things for things and to keep account of those transactions. In contrast, wealth is the store of things that have the capacity for producing things in the future.

    I see the primary focus of Paulson's rescue plan as swapping paper for paper, intended to make money perform its function well enough for the real economy to get on with the business of meeting needs and wants. I sincerely hope it is not already too late. Some of you see it as involving a real opportunity cost, i.e., you could use the money to repair infrastructure, deliver needed services to people, etc. But that is comparing incommensurable. All of those activities have real costs in terms of resources used, things diverted from one use to another. That is not true in this case.

    To correct a claim I made earlier, that the Fed could have handled the meltdown on its own, that Bernanke was stopped by the hew and cry that he was overstepping the proper bounds of an unelected official. That is evidently not true. It seems that Bernanke was bluffing. I have heard pretty reliable reports that the Fed was running short of T-Bills last week.

  • Tom Civiletti (unverified)
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    Fred Thompson wrote:

    A lot of folks on BlueOregon confuse money with wealth, but it's not.

    <h2>I'll tell what, Fred: you give me all your money, and I will tell everyone about how wealthy you are.</h2>

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