I think you’d be hard-pressed to find one person out of twenty who understands that Paulson’s bailout plan is not a transfer of tax money from the middle class to the wealthy.

Here in flyover country there is the feeling that the bailout is a national version of “Extreme Home Makeover” for the profligate poor. People who have worked their whole lives and still live in a very modest home, do not want to bail out the mortgage of a welfare recipient who lives in a brand new $200K home.

The second perception is that another bailout will follow in a few months and that it will be credit card related. So, again, like an unfair version of “Extreme Home Makeover,” they expect to be buying large screen TVs and cars for people who did not manage their money properly.

I heard nothing about Wall Street greed in my travels throughout PA over the weekend. It was all about personal finance.

I am not a student of finance or economics or an ‘expert.’ But I am going two give my long winded two cents any way. I would just like to say that I oppose to the bailout and I am well aware of its contents and purpose. I think buying what are now useless assets of bank balance sheets well do nothing to help the economy. For starters it treats the symptoms not the disease which is correct me if I’m wrong the housing market which seems to be in a depression itself in the sense that it is falling into a self feeding cycle of deflation of prices. Lastly, As a ordinary citizen I see this has (im in columbia, sc by the way) gone far beyond mortgages subprime or otherwise. The american consumer/worker has been ‘zapped’ of their financial strength people are falling behind on car payments credit cards and etc…not to mention the effects of higher food and energy price over the past few years. And while I know little econ. or fin. I am a student history and I can and CANT see the parallels between now and in the early thirties. Well thats enough for me whatta y’all think?
dave in sc.

I am not a student of finance or economics or an ‘expert.’ But I am going two give my long winded two cents any way. I would just like to say that I oppose to the bailout and I am well aware of its contents and purpose. I think buying what are now useless assets of bank balance sheets well do nothing to help the economy. For starters it treats the symptoms not the disease which is correct me if I’m wrong the housing market which seems to be in a depression itself in the sense that it is falling into a self feeding cycle of deflation of prices. Lastly, As a ordinary citizen I see this has (im in columbia, sc by the way) gone far beyond mortgages subprime or otherwise. The american consumer/worker has been ‘zapped’ of their financial strength people are falling behind on car payments credit cards and etc…not to mention the effects of higher food and energy price over the past few years. And while I know little econ. or fin. I am a student history and I can and CANT see the parallels between now and in the early thirties. Well thats enough for me whatta y’all think?
dave in sc.

on this:

http://www.redstate.com/diaries/icarus/2008/sep/30/this-time-focus-the-bailout-on-main-street/

Have greatly appreciated your series. Have been sending to anyone who keeps asking me to explain.

I don’t know what to believe or who to trust. In times like these you see what people are really made of. This is a total disgrace on the character of the USA, on public display before the entire world.

I sure would like to hear Fred Thompson’s insight on all of this right about now!

What are you thoughts on the alternate proposals such as suspending mark to market, eliminating capital gains, etc? It would seem that if we did these things, we would be using the free market to get out of this mess instead of socialism.

But, if the bailout bill was only going to prop up confidence for a bit and potentially only provide a short-term boost to the market, aren’t we basically punting the ball down the field only to have to really deal with the underlying problems in the future?

Would this fund for toxic debt really free up credit? If the “time to do this” was 10 days ago (although, wouldn’t it still have taken some 45-60 days to get this fund up and have banks actually participate?) and the bailout bill appears then to basically be window dressing, why pass it now?

Why not use every other tool in the kit to open up liquidity and investment, and jumpstart the credit market. Why not have the fed/treasury/gov’t address the root problem straight on, and work to insure and cover the toxic debt without becoming the owners of it?

Or am I way oversimplifying everything?

Heck, I’m just a “hick” in flyover country…

of a female actor.

She must win the Best Actress Award of 2008.

As always, nice analysis. There is so much about this issue that the Congress/Paulson/President have mishandled:

1. Educate the people to what the situation and its dangers to Main Street are. They need to explain to the American People that if we do not pass this bailout in some form, then this is what could happen to you and your future (jobs, savings, etc). They need to explain that this is not a cure, this is just a very large bandage, then we begin working towards a cure.

2. I personally feel (you may diagree) that the economy is facing 2 problems. The liquidity problem that the Paulson Plan was designed to relieve, we still need some type of relief for this problem. But we are also facing stagnantion in capital flow. Why not temporarily (2008 & 2009) suspend the upper limits on all retirement accounts (IRAs, Roths, 401Ks, 403Bs, Keoghs, etc) allowing those that should begin bargain hunting to stimulate capital flow?

3. I know it appears gimmicky, but I also like a temporary suspension or further reduction of the Capital Gains tax, as proposed by Gingrich. Most Republicans always point to the fact that Govt revenue increases when Cap Gains are decreased, but I really don’t give damn about that. According to the Cato Institute and I agree, capital formation always occurs after a Cap Gains decrease. Imagine what would happen if a suspension were to occur.

4. As Gingrich & Forbes have been stating, Mark to Market needs to be adjusted or suspendend. Last night on Greta, Gingrich made a good point. Let Chris Cox suspend it for 2 weeks and let’s observe its effect. If markets begin to stabilize, then leave it suspended, if not, reinstate it. I know you have written on MTM several times, but has your opinion on it changed in recent days?

Basically, I think Washington is making a similar mistake with this Financial Crisis that it has made with the Energy Crisis which is a partial driver of the Financial Crisis. The mistake is Rigidity. In trying to gain the higher ground neither party is willing to compromise on the issue. I believe that like with the Energy Crisis, we should be throwing everything against the Wall and seeing what sticks and begins to stabilize financial markets.

During the Carter administration, liberals set up a program to increase homeownership. A noble effort; but as usual a government program became more expensive for tax payers and more beneficial to liberals than to homeowners and taxpayers.

During the Clinton administration, the program went on steroids. See former Pres. Clinton’s comments:
http://www.youtube.com/watch?v=n2TT4jrIIak

The Bush administration tried to reign in Fannie/Freddie and was blocked by Dems. (This is where Alan Colmes and others with liberal talking points interrupt and talk over others so the facts can’t be clearly presented and it is made to look like everyone was equally to blame.)

John McCain co-sponsored a bill to correct this financial problem. It was killed by Dems on a party line vote in Chris “Sweetheart Mortgage Deal” Dodd’s committee.

Longtime Sens. Dodd and Kerry received large contributions from Fannie/Freddie. Sen. Obama received almost as much even though he just joined the senate! And he had a buddy from Fannie/Freddie to chair his VP search committee!

Remember when Hillary Clinton said in the primary, that she AND Sen. McCain had the experience to be president, while Sen. Obama had a speech he gave just before becoming a senator?

Cong. Barney Frank has oversight in the house. Which is why he is carrying on and trying to shift blame from himself.

Sen. Reid and Speaker Pelosi are also going off the deep end in a desperate attempt to provide an Alice in Wonderland rewriting of history.

By the way, the house is controlled by Dems and could have passed a bailout bill by itself. They didn’t because they were afraid of political blowback, especially when voters found out that liberals benefited from their tactics and that they still wanted to give 20% of any future profits from the sale of mortgages to Acorn which helps them at election time instead of returning profits to tax payers.

Watch this video that Libs tried to take down:
http://www.youtube.com/TheMouthPeace

…. but never will….

Congressional Investigation Finds Congress at Fault

Too much panic and the sky is falling, the sky is falling.

We all need to take a step back and watch how it unfolds the next two or three days. So far the sky has not fallen and I for one am sick and tired of being told how this needs to be done or else.

So far the or else has only been to make corrections in total valuation of the market. Nothing catastrophic has happened yet.

It is amazing that we posit ourselves as conservatives yet we disdain the abilities of the market to heal itself.

I wish to see this unfold further.

As you can imagine, colleagues from around the world are having a good laugh at our expense last night and today, save Asia (-800) who hit the bars early and may still be there. London wanted to know if the trains are still running. I frankly don’t know the answer.

I would still opine at the end of this Paulson, Dodd and Frank should resign. The latter two should be especially flogged with their past actions; carcasses hung in the desert sun. But realistically that won’t happen as they ride in like white knights and are applauded by an unknowing or uncaring population destined for a repeat years down the road. Worse then that, the main bag man and messiah Obama will receive the ultimate reward. For doing what, I have no idea.

Paulson will be sitting in Fiji sipping Yagona in the tropical sun as, under Democrat stewardship, this legislation and the power it vests in Treasury becomes unidentifiable from its original intent. I don’t blame him for the future, that blame and frankly most of the past will and does lie with Democrats in Congress. Keep telling yourself this is a “bailout” of Wall Street if it makes you feel better and satisfies your misdirected anger.

We are certainly on a precipice not of our own doing and have no choice. That said, we should pass this legislation. But it should be done with knowledge it is a temporary solution which displays no affinity, contrition or understanding of past transgressions which brought us here. In fact, it still contains contra intellectual sections mandating continuance and in some case furtherance of lending and credit extension to the same sectors that created this mess; truly astonishing.

You ought to read the thoughts of the man who led the House revolt against the bailout bill.

He understands the failure of the Keynesian model of government management of the economy.

I’m no expert on financial markets and have enjoyed reading your insight. Brian Wesbury, and I’m sure others, have said that a decentralized system of forgiving mark-to-market accounting temproarily, and in a targeted fashion, should be the route we take.

What are your thoughts on this? Sorry if you have addressed this previously. I don’t recall seeing it.

I get the impression from this post and others that your main frustration is the inability of the Federal Reserve and/or treasury department to ‘do what is necessary’ to calm the markets. I understand there is a tendency to use the government power to keep things orderly.

But isn’t it really government’s role that caused this whole mess? I mean if we didn’t have rules that force banks to make bad loans or artificially lower interest rates wouldn’t the problem get solved quickly?

The whole messy thing about government power is that when you hand it to the bureaucrats you lose some of your freedom and you never get it back. As soon as you relinquish market forces over to the government it always gets mucked up with unintended consequences. And handing over near dictatorial powers to someone within the government is extremely dangerous. That’s how tyrants come about. And we all know how that eventually turns out.

Blackhedd and others,
First, thanks for your incisive analysis. Just one question. I hear over and over again that if Congress doesn’t pass the bailout plan, that some companies won’t be able to meet their payroll, because many companies rely on debt to pay things like payroll and credit is really tight as you point out. But even accepting this statement as true and not mere scare tactics, doesn’t it seem insane to finance a recurring expense like payroll with debt? Why would you do that? I always thought debt was an instrument that was used to finance new ventures, not recurring expenses. If these big companies did this then they deserve to fail based solely on their sheer stupidity.

Blackhedd and others,
First, thanks for your incisive analysis. Just one question. I hear over and over again that if Congress doesn’t pass the bailout plan, that some companies won’t be able to meet their payroll, because many companies rely on debt to pay things like payroll and credit is really tight as you point out. But even accepting this statement as true and not mere scare tactics, doesn’t it seem insane to finance a recurring expense like payroll with debt? Why would you do that? I always thought debt was an instrument that was used to finance new ventures, not recurring expenses. If these big companies did this then they deserve to fail based solely on their sheer stupidity.

You say:

The stock market, which had been led to expect approval of this piece of legislative sausage, promptly had an aneurysm and went on to its largest point loss in history, dropping nearly nine percent of its value on the day.

Emphasis mine. Don’t you feel that this statement is a little misleading? Although it may be true you really should put this in perspective, if not I might as well just watch MSNBC. The crash of 1987 was 25% down. Now as far as points what you said is true…but another bit of perspective…in 1987 the DOW was peaking at around 2800 whereas today we are at around 10000-11000. This is a huge difference, and we were much closer to failure in 1987 than we are today. Please provide the perspective Francis, you do yourself a disservice to leave it out.

Perspective, people. On October 19, 1987, the Dow plunged 508 points in one day — 22.6%. If you’d had the brass to step up the next day, you’d have made 30% on your money by the end of the year.

I remember that day very well. Though I was in the equity research department of a Wall Street firm, I sat on the trading desk until 8 PM that night, helping them match up trades; back then, it was all paperwork.

People were in shock. A lot of folks had not seen a bear market before and had no idea how to behave (myself included).

I finally got home that night feeling like I’d been hit by a train. I thought my life might well be over at the ripe old age of 32. My job might be gone and my net worth wiped out. It would be back to living my parents’ basement for me.

A neighbor saw me and asked what was wrong. He hadn’t heard the news and seemed unfazed. “Let’s go get a beer,” he said.

Whenever the market goes nutso, I remember Sir John Templeton’s appearance on Wall Street Week that Friday night. I still have it on videotape. He reminded us that taking the long view was always best, that your loved ones still love you, your dog thinks you’re great, and the sun will rise in the morning.

In the ensuing 21 years, I’ve seen nothing to persuade me any differently. This, too, shall pass.