Last week’s Bernake/Paulson/Cox C-Span Congressional Extravaganza left me impressed w/:
• SEC’s Cox’s extremely educational testimony on what his agency can/can’t regulate (according to current law).
• FedRez’s Bernake’s insight on foreign banks are intertwining w/ those in USA.
• Congressional questioning, whether from D or R, seeking some/any clarification on procedures for the “proposed purchase of troubled assets”.
• Was particularly proud of my own Junior Sen. Jon Testor’s (D-MT) understanding of the implications and history of this year’s gov bailouts, and his pointing out how in past, the Fed/TreasDept has said all $X-Billion of the loan appropriation might not be used (as they’re saying now), but in fact every penny was.
Sec. of $s Paulson, otoh, met every request for clarity w/ a variation of: “We want the money and we want it now.” Heard no evidence this guy has any clue what he’s doing, what he’s going to do, or even what he did.
I gave him the benefit of doubt, tho — maybe he was hiding details in hopes of expediency. So I looked elsewhere for some sign this guy’s even mildly competent.
Found none. But along the way did run into lotsa illuminating info. What follows is an audio and url annotated travelogue of my trip thru the web.
Here’s the only info — mostly useless — Paulson’s Treas Dept had to offer as a starting bid: “Proposed Treasury Authority to Purchase Troubled Assets.”
But the above didn’t have the now infamous 32 words:
“Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
Found those here in the original 3-pager: “Legislative Proposal for Treasury Authority To Purchase Mortgage-Related Assets.”
Again, nada to inspire any confidence that Paulson can do what he proposes. So despite what been-right-before Buffett sez, I really have no reason to believe their solution will fix the market, or that The Market alone ain’t the fix.
“Trust me, I’m from the government” has never proved a good policy for the US polulace. As Paula Poundstone sez:
“I don’t want to be the one to spook the herd, but when I hear President George W. Bush say the government’s measures require putting a significant amount of taxpayers’ money on the line, and that it entails risk but they expect it’ll eventually be paid back, I fear I do have fear.
It could only be scarier if he asked Colin Powell to present it to us using satellite photography.”
Sure, from w/in the investment world it looks like sky-falling. But investment bankers who are into mortgage-backed securities are only a single facet of a single sector (total financial sector = 17% of the economy): (NY Times interactive) “A Year of Heavy Losses.”
And even w/in that sector, the core prob, tho historically high, is still quite small: (NPR)– “Bad Mortgages Taking Down Good Loans, Too“— There are about 51 million first mortgages in the United States right now — but only about 1.4 million of them are either referred for foreclosure or in foreclosure.”
So less than 3% of homes w/ mortgages have foreclosure probs (even less % of all homes, ie. inc. those w/o mortgages). This has been going on for years, and ‘course the housing sector is hurting, but employment hasn’t taken too huge a hit, and GDP is fine.
These investment guys contribute to the capitalization of industry. But, really, all they do is run money factories. They offer nothing “value-added” to society or economy. They are often allowed to run free & deregulated w/ billions of dollars. If they can’t make a consistent profit, it’s cuz they suck at their jobs. We should work to bring down their lame-ass companies, not prop ’em up.
“Bailout? Just do nothing” by Joel Stein (LA Times):
Sure, like any American, when I see a photo on the Internet of an adorable little investment bank and find out it’s at risk of being put to sleep, I want to throw in $2,000 to $3,000 of my own money to adopt it…
I foresee a not-too-distant future when Chinese guys complain about how every time their cheap Google phone breaks, they can’t understand the tech-support guy because his Mandarin has a thick Minnesotan accent.
Amusing side note: WSJ readers also seem un-convinced by “Reichsmarschal” Paulson; see comments under the article: “Testimony on Turmoil in U.S. Credit Markets.”
More than a year ago when our probs brought down London banks, anyone awake could have seen this current crisis coming. Paulson must have been sleeping: (NY Times interactive) “How a Market Crisis Unfolded— Some of the key events in the upheaval.”
BTW, look at this “History of U.S. Gov’t Bailouts.”
Costs in above are misleading cuz the loan totals don’t include the value of assets recovered from the loans. For instance, $300B was loaned in S&L bailout, but, after assetts liquidated, eventual cost to taxpayers was only about $130B.
But do notice how often a bailout (aka, socialism) is often a GOP admin’s solution. Which makes sense cuz: “Politicians Lie, Numbers Don’t— And the numbers show that Democrats are better for the economy than Republicans.”
Not sure why there’s no discussion of propping up the other end of the housing market, namely, the houses — which’d surely cost less than $700B, and is no less procedurally uncertain than the current save-the-investors plan. Even if it fails as an economy-fixer, it will certainly help restore housing prices and industries.
And contrary to current spin, Fannie and Freddie didn’t do it. Mae & Mac came late to the party (and they don’t make loans, they buy ’em): “The GOP Blames the Victim— Capitalism sure is fragile if subprime borrowers can ruin it.”
Truth is, tho, this never was as much house-loan prob as it was a leverage-gone-crazy Ponzi scheme upon which the former financial center known as Wall Street built a quant-cryptographed house of quick-buck cards — aka, money needs somewhere to go, and after the dot-com’s busted, mortgages is where it went. But that’s another set of stories…
I’ll conclude with the definitive discussion of the dilemma, found, as usual, on The Daily Show: “Debt to America!— Treasury Secretary Henry Paulson’s brilliant $700 billion plan could buy every single American 2,000 McDonald’s apple pies.”