There's room at the top, they're telling you still...
I have no idea why the Democrats aren't attacking Bush continually over the state of the economy and the US Dollar. The two reasons that come to mind are that they're either utterly incompetent or disgustingly pusillanimous. Neither's a good option.
Really, I don't know why there's no liberal party in this country that's not afraid to start pushing the slogan that there are now two types of people associated with the Republican Party: millionaires and suckers. In fact, I'd even say that the Republicans have swerved so far from the "limited government" idea that traditional conservatives espouse that it's hard to classify the party anymore. Let's take a look at a few numbers.
The war in Iraq has already cost $500 billion. Joseph Stiglitz and Linda Blimes have estimated that the Iraq war will eventually cost $3 trillion. I believe this is one of three things that will eventually cause another Great Depression-scale period for this country. The $500 bil that's already been spent is absorbable, barely- though I think it would've been far better spent on darn near anything else, whether it was investing in alternative energy infrastructure(I also am amazed by Bush's ineptitude regarding the Strategic Petroleum Reserve) and research or paying down the other $9 trillion of national debt.
The Dems should also be hammering on the Republicans on the Bear Stearns bailout. Having the Fed guarantee $30 billion of Bear Stearns' assets...well, this is, to put it bluntly, corporate welfare. Heads JP Morgan Chase wins. Tails the American taxpayer loses, to the tune of about $100 each. $30 billion is a fuckton of money. By comparison, Temporary Assistance for Needy Families(TANF)- what's commonly known as welfare- costs about $16.5 billion a year. The next time any "compassionate conservative" opens his or her piehole about welfare, they should be hammered with the Bear Stearns bailout. The Republican management believes that the free market is the best allocator of resources...until it's their own that takes it in the nuts.
Bear Stearns is only the beginning, of course. I'm not exactly impressed by what I've been hearing about the Lehman Brothers' portfolio, for example. By the time the smoke clears, I expect at least one and possibly as many as three major investment banks requiring federal intervention. The taxpayer, of course, will foot the bill. If I didn't think massive inflation was going to be an issue and if I had more of a bankroll, I'd seriously consider buying puts.
The Republicans wanted deregulation. They got it. And now the subprime debacle is giving them all the deregulated market they want. The next time deregulation comes up, the Democrats need to bring up the subprime meltdown.
Finally...the tax cuts. The class warfare nature of the tax cuts has been discussed in tons of outlets. I've also mentioned how Bush departed from the usual taxation pattern during wartime. But given that our Idiot-in-Chief wants to make his cuts permanent...that'll hit us for another $1 trillion a year over the next decade. What slight chance we'd have of avoiding the complete collapse of the USD would be gone. The Democrats should be emphasizing this every time tax cuts are mentioned.
Why can't we have a _real_ liberal party in this country, not these cowardly, idiotic Democrats?
no subject
But the bailout only works if investors are convinced that the Fed would do it again in the case of another overnight failure. The entire system works on trust, and as soon as trust goes away, people pull their money and we get serious problems. If we get presidential candidates saying, "Screw that, that's not the Fed's job" we risk exactly what it was trying to avoid.
I'm still waiting to see whether I *really* consider it corporate welfare, considering the stockholders got screwed. I'm want to see whether the idiots at the top of the company actually get held accountable -- which I think would also be very good for the economy, to know that people who take stupid risks pay for them.
I am not really a fan of financial market regulation. Not because it's not a good idea (they could certainly use some rules!) but because I think that it's not really a workable proposition. You'd either wind up with an agency that moves far too slowly to be effective, or a revolving door between financial institutions and the regulatory body that would enable it to work quickly... but paralyze it the minute it had to make tough decisions.
Personally, I think it would be far better to institute a bailout fund. Force financial institutions like Bear Stearns to pay into a fund that would then be used to bail them out if they fuck up. It wouldn't be insurance, exactly (insurance companies are notorious for stalling just when quick action is needed) more of a safety net. In exchange for paying into this fund, they could be given a freer hand to act as they see fit.
Now, that should have been coupled with low-income assistance, that's for damned sure. And it looks like they may well have been shamed into acting.
But before going off on the "subprime debacle" let's not forget that there is *plenty* of blame to go around. The fundamental problem was that people were getting loans that they just could not pay back, either because they didn't have the income, lost the income, or didn't understand that the monthly rate would change as interest rates changed. For everyone who lost a home because their lost their job or had a major medical problem, there seem to be dozens who were simply living beyond their means or just fundamentally did not understand how mortgages work. The banks can take the blame this time: they were greedy a hell and put in a position where they weren't held accountable. But this sort of thing is going to happen over and over again so long as the America population remains this woefully ignorant about how finances and the banking system work. I've been privately convinced that the next big crisis will be a credit card meltdown: but who do we blame then? I'm still waiting for a presidential candidate to start saying that Americans need to be better educated about money, but with people piling on Obama for being "elitist" that's not going to happen. (Gee, a Yale law graduate and senator is an elitist? Color me surprised. But hey, the last guy was pretty down-to-earth and anti-elitist. How'd that work out?)
Now, Bush's tax cuts? They're just stupid. Opposing them isn't liberal or conservative, it's just the responsible thing to do.
no subject
This is a similar problem with the credit card industry (which I agree is doomed for crisis) - credit card companies seem to think that just making consumer bankruptcy more difficult will make their investments safer. They've actually quite openly stated that they are more interested in preventing bankruptcy through stricter laws than through simply not making risky, high-interest loans, and that this is all because the sub-prime credit card borrowers make them the most money.
no subject
The loaning banks were secured just fine, though. The biggest problem is that because of all these financial "products" they had a reverse incentive: they were repackaging and selling off all their loans, and so their incentive was to get as many loans as possible within this designation. And because the "subprime" designation is so absurdly wide, it was actually somewhat reasonable of buyers to assume that they were not that risky, because most mortgages aren't. (Since it's either "prime" or "subprime", and the cutoff is a credit score of 650-700, most mortgages fall under "subprime", including some very safe bets that fall in that category due to short credit histories or old problems with repayment such as an illness) That's the thing, except for the lenders themselves, pretty much everyone along the line made reasonable but faulty assumptions. And even with the lenders, it was the series of decisions rather than any single one.
The house price decline is what precipitated this crisis, though; all of a sudden people who were living above their means *couldn't* just bail. This wasn't a surprise, prices had to come down eventually, and a lot of the worst cases were people who bought at the height of the bubble.
I think the credit card industry is becoming a pyramid scheme these days. They're racing to sign up new people, and paying their transactions based on the presumption that their current customer base will continue paying fees. (Hell, every day I come home to a new offer to go further into debt at even more exorbitant rates) But even if people don't go bankrupt, they will still eventually die, and increasing numbers of them will die with assets insufficient to cover their debts. Even if they outlaw bankruptcy entirely, I still think they're doomed -- and given Visa's recent IPO, maybe they agree with me.
no subject
As it is, every time the Fed does something like this, they send a signal to aggressive bankers that they'll do it again next time, which is of questionable value.
no subject
I'm pretty convinced that this isn't going to act like that kind of signal. BS was pretty much destroyed, and the people involved were not really rewarded for taking those risks. I just can't see any other investment bank looking at what happened and considering that a viable safety net. When push comes to shove, BS shares went from $130 to $2 in less than a year: that's just not a win for anyone. (OK, the takeover bid's up from $2 now, but presumably someone pointed out to JP Morgan that BS's building alone is worth more than that)
But just to be a wiseass, let's think about the message it sends home buyers and mortgage lenders if the Federal government is willing to step in and save them from foreclosure. Is that going to change the behavior of predatory lenders or irresponsible buyers? If the sheer volume is what triggers it, all that tells the lenders is that if they're going to screw up, they'd better screw up REALLY BIG.
no subject
I think that kind of thinking has already been ingrained- just look at Long Term Capital Management. It goes back to what I said before about the idea "If you owe a bank $50,000 and can't pay it back, you have a serious problem. If you owe a bank $50 million and can't pay it back, the bank has a serious problem."
no subject
I'm aware of the arguments that the bailout was fundamentally a good idea, and I'm in partial agreement. The main thing I was driving at is that intervention here should be used as a club each time some Republican argues against intervention in far lesser cases.
Personally, I doubt that the idiots at the top will get held accountable- both because of their powerful allies and the ability to diffuse responsibility downwards. The thing is, everybody was raking it in(from the quarter million salary+bonus of the junior workers to the multimillions of those up top) even when the investment banks were writing assets down right and left. This is part of why I'm so frustrated- just look at Angelo Mozilo and Countrywide. It's tough to hold anyone accountable unless they were actively doing illegal stuff...and it seems tough even then.