Thursday, September 25, 2008


... is wrong with these people:

Senator Mitch McConnell of Kentucky, the Republican leader, quickly went to the Senate floor and declared Mr. McCain’s proposal "an outstanding idea."

An outstanding idea? McCain has no clue what is going on. His stunt of suspending his campaign is just that - a cheap stunt to try to get out of the debates, especially the VP debate. But McConnell is just warming up:
“Americans want to know that their home values and college funds and retirement accounts are safe. In other words, that the problems on Wall Street are not going to spread to Main Street. So I appreciate my colleague’s proposal and I hope that it is given serious consideration.”

Hey Senator, the problem is on main street, i.e. record foreclosures - and is headed back to Wall Street in the form of MBS and other toxic paper they invented - to supposedly avoid the very such problems they are in - not the other way around.

Do they just let anybody who is rich become a senator?

Tuesday, September 23, 2008

The financial markets are working

Knowing that there is nothing this administration won't try, you really have to start to wonder about this plan's timing. Did Paulson really think he could make Chuck Schumer crap himself and sign over a trillion dollars over a weekend?

The plan as it emerges is terrible - it is simply a bailout of the people/institutions holding these MBSs and other pieces of toxic paper.

I have a pretty plain observation about the whole mess - the financial markets are working - not melting down. Credit is tighter, the TED spread is exploding, treasury yields are low, etc. etc. because the market - the market in, of, and for these things - knows that there is no "there" there. There is no credit to be offered, because there are no assets to back it up. The market is trying to tell people to stop borrowing - this is exactly what it is supposed to be doing.

Let the housing market come to rest where it should, let thousands of housing starts stop, let hundreds or thousand of CRE developments grind to a halt, let unemployment rise - and let these banks/brokerages/hedge funds/etc. fail if they have to. They made the mess - they invented it, participated in it, feed slovenly from the trough of it. And when it still wasn't enough, they forced the game all the way down to the lowest of consumers and convinced damn near everyone in the entire United States that they had to own a home (or two or three) and two cars and a 60 inch TV, etc. etc. and that we could all just pay for everything later.

Well you can't. You can't leverage everything up 30 times - it just doesn't work. This has just been proven - and all this bailout seems to want to do is to return things to the way they were a couple of years ago. Instead of seeing the housing market as a bubble, Paulson is talking about a housing recovery. What recovery? Is he insane?

Some links:

Pigs at the Trough TPM

Getting real — and letting the cat out of the bag Krugman

Monday, September 22, 2008

The Bailout

The new bailout as it stands this morning is a crock of crap. This is not a liquidity crisis - it is a solvency crisis. Wall Street is about to be bailed out by the taxpayer, plain and simple. More of these institutions should be allowed to fail. Home prices should adjust to where they have to on their own. When I hear Paulson talk about a housing "recovery" it shakes me to the bone. There is no recovery coming. There was a bubble, it burst, get over it. The fact that there are so many lucid comments all over the web, but that none of those quotes are coming from the government should tell you something. Here are a couple:

Cash for Trash from Paul Krugman:

"Some are saying that we should simply trust Mr. Paulson, because he’s a smart guy who knows what he’s doing. But that’s only half true: he is a smart guy, but what, exactly, in the experience of the past year and a half — a period during which Mr. Paulson repeatedly declared the financial crisis “contained,” and then offered a series of unsuccessful fixes — justifies the belief that he knows what he’s doing? He’s making it up as he goes along, just like the rest of us."

From a commenter on TPM:
"As a Wall Street guy I am sort of glad that this bailout is being organized. However, what seems unfair to me is that there are absolutely no provisions for homeowners. Moreover, this morning on Stephanopulous I saw Hank Paulson talking about homeowners taking out mortgages that were higher than they could afford and about them needing to live up to their obligations.

I find it incredible that he would use language like that while asking taxpayers to send a trillion dollars to Wall Street because investment banks made irresponsible investments and aren't able to live up to their obligations."

And whatever your opinion of Shedlock at Global Economic Trend Analysis, he has been all over this mess forever. As has Calculated Risk.