Bail In or Bail Out?

As I write this, the DowJones is down 600 points, largely in reaction to the House defeating the federal bailout of the credit industry.

What should we think and do about this?

If you've got no money and no debt, then just go about your business normally. I think the smartest long-term positioning is to begin looking at the goods and services you can provide to other people in your community without involving long distance transport or complex supply chains involving multiple creditors and borrowers. In other words, try to make what you do as real as possible.

If you do have money, well, either sit tight through the "capitulation" or do some bottom feeding of favorite underpriced stocks in industries that provide real goods or services to real people, and that don't need to borrow lots of money to do it. If you've got more than 100k in a single bank account, you might spread it out.

The reality of the (failed) bailout plan is so very different from the way people are thinking about it, though, that I thought I might offer some clarity. (I'm sure some of you will interpret this as additional obscurity, so ymmv.)

The main point of the original plan was for the federal government to buy distressed assets - like mortgages - from banks and other institutions. "Distressed" doesn't necessarily mean these are bad assets, or that the mortgages won't be paid back. It simply means these are debts that are selling way way below their longterm value. No one wants to pick up anyone's mortgages because housing prices are going down, foreclosures are going up, and shareholders of banks don't want them on the books.

So a package of mortgages that might be worth a million bucks in the long term if they're all paid back is only getting, say, $200,000 on the market. That's what's shrinking the credit markets. So the Federal government wanted to buy all this credit at a higher rate, bail out the creditors, and take on the mortgages. In the best of worlds, the Treasury would have made money off all this. They'd be using what government has over business (time) to purchase depressed investments and wait out the decades it takes for them to earn out.

The deal almost went through until McCain made his highly publicized drop in to DC, accidentally highlighted the leftist underpinnings of any government intervention, and polarized the parties involved. He left, but the damage was done. (It may have failed without McCain's help, but I enjoy blaming him.) America now saw the bill as an anti-populist bail out of banks. Call it socialism if you like but it was really just business. Democrats compromised by turning the investments into loan guarantees, but conservatives saw the whole plan as much too much like the way FDR got America out of the Depression last time: namely, socialism.

The bigger fact, though, is that even with a short-term bailout, the underlying mega-economy is in the dumps. Government can help lubricate the gears of the economy by utilizing its capacity to engage in longterm investing, as with the failed bailout bill. But this entire effort was really just a balance sheet adjustment. Unless we are also investing our time, energy, and remaining money in productive industries, education, and renewable resources, we will not have changed the real economy at all.


  1. Step One, remove the people who caused the problem from any role in fixing the problem. It was either greed or shortsightedness neither of which is what we need to even listen to just now.

    After that, not really sure. Maybe the wizards of wall street can then thank us for not jailing them, and donate every dime they’ve made in the last 7 years to the cause?

    I know I like that Barney Frank is repeatedly using the words “no unjust enrichment”, and that makes me smile.

  2. What frustrates me (as an artist, as far from being an economist as one can hope to be) is the lack of clear, nonbiased analysis (until the post above, of course) of the proposed bailout – to hear most of my liberal contemporaries tell it, our gov’t finally sold us out. On the other hand, it doesn’t seem unreasonable to imagine that the problem could be solved by dumping money on it (hopefully with helpful regualtory strings attached). I can’t quell my disgust over the possibility of bailing out the CEOs though. Why SHOULD I pay for these so-called golden parachutes?

  3. I’m still not convinced that the system as it exists today is worth saving. Sometimes a system is so fundamentally flawed that the only way to fix it is to allow it to fail catastrophically and start from scratch. I hope we don’t need another depression to get a workable financial system, but it won’t surprise me if that’s what it comes to.

  4. Wow, that’s a crazy bad summation of what’s actually going on.

    The main point is not and never has been to buy distressed mortgages. What they’re actually looking at buying are obscure securities BASED ON mortgages.

    For instance, one security could contain nothing but interest payments on mortgages above $700,000 provided to no-doc loan applicants, while another security would contain nothing but the principal payments on that same mortgage and a third security would be based on the equity from that same mortgage.

    And worst of all, some of those securities are planned to become all but worthless if even one mortgage in the package goes belly up.

    That’s a lot different from a product trading below their “longterm value”. No one knows what the long term value of these securities are, but it doesn’t take a genius to know that they’re probably not worth very much.

    There’s an argument to be made about the value of the bailout as a recapitalization, but there’s no argument to be made from your point of view….

  5. How ironic is it that a 700Bn bailout is being pursued in the same week that the 680Bn annual defense budget was passed?

    Follow the money.

  6. What should you do, hypothetically, if you have no money and yes debt?

    @1: I don’t know what magical fantasy world your first two paragraphs came out of, but sign me up.

  7. Hate to sound like a broken record, but the root of the problem is the actions taken by this administration to create a mortgage bubble to fund an illegal war. The economy has been slowing down or stopping for years and has been artificially propped up by all this mortgage credit business.

    The root of the problem is energy. We’ve been living off (very) cheap energy for about 60 years, in the form of oil. Now the price of energy is going up, which naturally leads to a slow down.

    But an economic slow down isn’t necessarily a bad thing. I mean, we’ve been incredibly wasteful with our energy/time/food/resources. A sluggish economy will force efficiency and innovation. And maybe, just maybe, it’ll make people think before they act. But probably not.

  8. “… shareholders of banks don’t want them on the books. ”

    Which isn’t necessarily true – Shareholders of banks want their money invested to be increased as safely and as productively as possible.

    Unfortunately, there was a United States legal precedent set to the effect of : Executive Management of publicly-held firms has a /fiduciary duty/ to maximise shareholder profits in the /short term/; This judicial interpretation of SEC regulations and United States law makes it /illegal/ for executive management of these banks to purchase these “toxic”-in-the-short-term assets – even if they probably will pay off in the long term – because it does not serve the immediate short-term interest of whomsoever is holding that company’s stock at that point in time.

    Our economy has become caught in a giant Prisoner’s Dilemma game, in which every major player is required – under penalty of law – to betray the long-term benefit of all.

    There are many things broken with the Market, and this bill does not address them all.

  9. Well, since it really is life and death for some, maybe we should license financiers as carefully as we license doctors. Make them carry malpractice insurance. Some sort of Hippocratic Oath?

  10. All your mortgage-based derivative are not belong to us.

    You are on the way to destruction.

    What you say!!

    You have no chance to survive make your time.

  11. What to invest in:

    There are lots of companies out there that are essentially honest, and provide actual products and services that people need.

    These often pay actual dividends; they’re stable old companies in comfortable niches.

    If you’re feeling brave, you could invest in industries that might have growth prospects in a world where oil is increasingly dear and the whole greenhouse warming thing is increasingly undeniable. Solar cells. Railroads.

  12. Firstly, “getting the lines of credit flowing again so people can get what they need to survive”… is not a solution to anything. It’s a massive mistake.

    This bailout does have leftwing underpinnings. But so does a lot of what’s happened this week. The United States government should not have an interest much less a controlling interest in any private or public enterprise. The very notion is absurd, and a clear violation of the constitution.

    Now call me old fashioned for believing in the constitution and wanting to eliminate the continual shifting debt of an economy completely detached from reality… but you know what. If we don’t address this now… ten years from now when it collapses even worse things may not be salvageable for the United States. Already our economic status is in jeopardy. We need to actually sit down and address the real problems with this economy, and stimulate actual economic growth.

    I’m all for this bail out being shot the hell down. People need a depression. Something needs to change, and more of the status quo won’t change a thing. We need to stop ignoring these problems, and balancing sheets… this is how this mess came to be.

    Why isn’t ANYONE candidate, leader, or news media demanding someone actually address the issues at hand? Where is the rage? the public outcry?

    Let’s replace apathy with some hungry stomachs, empty wallets, and a rise in the homeless. Then we’ll see how likely you are to not give a shit. To keep your head down and hope you are spared.

    Glad this ridiculous bill was shot down. Hope it is never passed. Let’s face this problem head on.

  13. MDH: The problem with having them carry malpractice insurance is this: They’d find SEC loopholes to make it seem like they’re covered when they really aren’t.

  14. Good summary. Folks who are in a position to let things ride through a stock market dip, or do dollar-cost averaging through it, usually do all right on the other side. Folks who draw down their investments don’t. Of course the problem is that some folks have been gambling rather than investing and need their money _now_, and they’re going to be forced to “sell low”. (Which is why the idea of putting Social Security into the market was so idiotic.)

    It’s a pity that the big investment banks get to hold the rest of the economy hostage. Maybe what we need is a modified bankruptcy process — take their toys away, put the company in recievership, appoint someone to oversee the orderly selling off of the assets which are still worth something, and use that income to offset the cost of taking over the questionable loans.

    There’s a quote attributed to J. P. Morgan, among others, to the effect of “When your shoe-shine boy starts talking about his stock market investments, it’s time to get out of the market.” We’ve been running on the concept of the Ultimate Sucker for a while, here as in housing: “Prices are going up, so no matter how much I overpay some other idiot will overpay even more.” Unfortunately, as the advisors are careful to say, past performance does not predict future value; eventually you run out of suckers and anyone left holding the bag discovers they’re stuck with it.

    The NPR hour-long special on “the giant pool of money” has been mentioned here before, but it deserves being praised again. It’s the single best explanation I’ve heard of where the roots of the problem really lie, and how the banks and investors fooled themselves into believing they’d found a way to turn lead into gold.

  15. Rushkoff, you simply don’t get that this is a planned activity – the economic equivalent of 9/11. The ‘bailout’? A way to loot the fixtures, as they head for their ‘undisclosed locations’. The timing of this, at the close of the Bush II years, is not an accident.

    Checkout the regular, non-hysterical postings at:

    and the detective work at:

    b at Moon of Alabama had a particularly clear analysis of how the ‘bailout’ was a ripoff by Goldman Sachs. Remember, Paulson is still a major shareholder!

    September 27, 2008

    The Tracks Lead To Goldman

    Two weeks ago, the nation’s most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster.
    As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America’s oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.
    The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern.
    Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said.
    Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.

    Behind Insurer’s Crisis, a Blind Eye to a Web of Risk

    It seems that Paulson invested $85 billion of taxpayer money into AIG to save Goldman from a $20 billion loss, or $200 billion – who knows? Still Paulson acted to save Goldman, not AIG. With what reasoning?
    Why would anyone trust this criminal who asked Congress for unreviewable power to spend a Trillion, or two, to run the U.S. Treasury?

    Here’s the deal, the ruins will be deeper and worse than you imagine or anticipate. I am the grandson of folks who escaped Germany during the crisis in ’25. This is the same opportunity to completely remodel a society, and it was engineered as such.

    Ezra Pound couldn’t locate the names of the real criminals, and he was trying. You have no basic idea of where money comes from and how it works – how can you identify blame or solutions

  16. “Wow, that’s a crazy bad summation of what’s actually going on.”

    I have to agree there. Wall Street is trying to get Main Street (via the gummint) to pay them the imaginary value of their shitpile.

    Suck it up, let them fail, then pay actual market price. Dice them up, and sell off whatever assets. It’s going to be a rough ride for a few years, but better than doing what the Japanese did to hamstring their economy for a decade.

  17. They’d be using what government has over business (time) to purchase depressed investments and wait out the decades it takes for them to earn out.

    It’s not just time that the government has, but more importantly, the government doesn’t need the securities as investments. It doesn’t matter if the securities perform so badly that any company holding them would have moral worse than Marvin the Paranoid Android, they don’t need the money.

    @1 Good luck figuring out who had a hand in the dealings. By the time you work that out we’ll all be dead of old age and it won’t matter any more.

    @2 I recently posted some descriptions of how it’s supposed to work. You can also find great stuff on NPR’s Planet Money podcast. Start with The Giant Pool of Money.

    @3 Agreed. That’s why I told my representative to vote against the bill, which he did.

    @4 Very interesting, can you direct me to resources that provide more characterization of the features of the securities?

    @16 Ron Paul is asking people to address what he sees as the root of the problem, which as much to do with our money supply and fractional reserve banking system. Unfortunately he’s stuck on hard money which may be just as much of a mistake (hard to say, I haven’t seen a detailed plan about how multiple competing hard currencies would work)

  18. The problem with having them carry malpractice insurance is this: They’d find SEC loopholes to make it seem like they’re covered when they really aren’t.

    Not if we’re good.

  19. @19 I tend to agree that it’s a planned event, but I also tend to think that 9/11 was a planned event, and that makes me a tinfoil hat batshit crazy nutcase.

    note ‘tend to think’ |= ‘believe’

  20. #6 Dangerpants, I concur.

    I also have no money and a modest debt. I’m thinking we should be cackling away and throwing parties, waiting for the soon-coming day when everyone’s balance is reset to $0. Or, we can max out what’s left on our credit cards buying Euros, which will in the end be considered a wise move by all.

    Am I right? I know little to nothing of the inner workings of the economy, so I’m just guessing. Maybe Rushkoff or one of our other fellow boingers will help clear that up?

  21. CBS MarketWatch:

    Those who understand that taxpayers will eventually get much of the money back support the bailout by a 2-to-1 margin,” Rasmussen Reports said. “Those who incorrectly believe the government will not be getting money back oppose the bailout by a 62% to 18% margin.

    Spot the FNORD!

  22. If everyone – and I mean everyone in the US who has a mortgage simply stopped making mortgage payments, we would have they government’s full attention. I’m just saying.

  23. I don’t think the bailout would have worked to help the economy long term, mind you. I’m not implying it would – just that there is a surface logic to it.

    And that its failure today is part of the reason why the stock market is falling.

    This would all be happening anyway, one way or the other. As I’ve been arguing in articles for three or four years, now.

  24. @ #24 Codesuidae

    …that makes me a tinfoil hat batshit crazy nutcase

    If there is one thing that being a member of the Tinfoil Hat Brigade has taught me, it’s to remember to cut out eye holes. Otherwise, you trip over the furniture alla time.

  25. #16 Matt Joyce, you said exactly what I feel. I know that if the economy tanks even more seriously than it already has, I’m going to feel the pinch (and that’s not a strong enough phrase, I’m sure), but it will force the hand of our “leaders.” I’d rather pay the price now and potentially have a bright future than to have a cloudy present with a devastating future almost guaranteed.

  26. I call bull on this one:

    “The deal almost went through until McCain made his highly publicized drop in to DC, accidentally highlighted the leftist underpinnings of any government intervention, and polarized the parties involved. He left, but the damage was done. (It may have failed without McCain’s help, but I enjoy blaming him.)”

    Seems like you would be dedicated to the truth and not just demonstrably false statements by Harry Reid, etc. The Democrats control both sides of Congress … that should have let it pass through, even with 100% Republican distraction. In fact, it is well established that Reid did not even contact the House Repubs, and in fact, the support was internal on a committee vote.

    This problem took many forms, but too think he is at fault, it at best naive.

  27. The credit crunch end of things is a joke. I have neither a steady job nor a driver’s license (while I do have a credit rating below 500), but every car dealership in town wants to give me a nice fat loan and my new bank (who just finished eating my old bank) keeps sniffing around to see if I want a loan or a mortgage.

  28. I think the house will end up passing the bill but this delay is creating a buying opportunity and allowing their friends and lobbyists to pick up some stocks at ridiculously low prices.

    The bailout is a bad idea. it only prolongs the agony of fundamentally flawed investment decisions on a systemic level rather than attempt to reform badly needed change. I’d rather see the effects devastate us and recover from it from a clean slate than see this bloated financial system suck up another trillion before it finally dies.

  29. @33
    If I were going to pick a conspiracy, I like yours the best.

    And of course all roads lead back to Goldman. Goldman made a mint shorting the same mortgage securities they were underwriting.

  30. Boy, did I ever pick the wrong year to get a student loan from Sallie Mae…

    But on the plus side, I sure picked the right year to start huffing paint fumes!

  31. @26 Great quote, I lold.

    @27 Sounds like a plan, let’s do it! (and in the meantime, stay away from the prisoners dilemma wikipedia page, k?).

    @39 Wigwam Jones: Oh, I know! And as crazy as it sounds, it’s best to actually remove the foil hat first, believe me!

  32. @ #36 Takuan

    who will be the scapegoat? There must be an appropriate minority group.

    Is it too late to blame Bill Clinton? If not, then the CFR, the Tri-Lateral Commission, the Illuminati, Sarah Palin, George W. Bush, George Carlin, or the Stupid, Stupid, Rat Creatures.

    Or possibly it was “Q.”

  33. My big issue with the bailout was that there was no real analysis done to say “this will work” or even, as the Dems kept trying to claim, “this will keep people in their homes”. Correct me if I’m wrong, but it doesn’t really matter who holds your mortgage. If you can’t pay it, you’re out. If you want to keep people in their homes, you have to refinance their mortgages based on the current value of the house, and at a fixed rate lower than their current mortgage. And even that probably wouldn’t do much more than cause another drop in the housing market.

    Also, without a massive reduction in government spending, the only way to recoup the money would be to raise taxes. And I know I don’t want to have to pay the government for a bunch of loans that people made without doing their due dilligence.

    The whole idea that the government will “eventually” recoup the money, I think is pretty shaky at best. After all, that’s the theory that most of these investment firms were working with before they found out that the mortgages backing their securities were near worthless. There’s no guarantee that a significan amount of those mortgages will ever regain the value that the government would pay for them right now.

    In fact I would hazard a wager that these mortgages would eventually be re-sold to some of the companies that were bailed out for far less than they’re worth some time in the future, so that the companies can turn around and instantly make money off of them. The government “recoups” a bit of the money they spent and writes the rest off as an “investment in the economy”. The bankers who were about to go bankrupt become richer. And the people are still stuck either paying their inflated ARMs, or ditching their home.

    Maybe I’m being overly cynical. But that just seems like the kind of thing that’s likely to happen when the government and the banking industry are in collusion.

  34. Now that the dollar is sinking like the Titanic after kissing an iceberg and our debt is rising like flames off the Hindenburg, the last thing this disaster movie needs is to have the Feds (in effect) pump seven billion vapor-dollars into the system. The money just ain’t there, and printing it up does not change that. Better to go through a few years of depression than destroy our economy keeping such a flawed system afloat.

    The sad thing is, McCain’s take on all this is we need less regulation. Yeah… that will work…

  35. “Getting the money back” is only part of the issue. So Mr. Bush pushes Democracy for Iraq and Socialism for American taxpayers!

    I pay my bills on time including a $7,500 mortgage. I understand the effort is to help the “victims” of the housing bubble spend no more than 38% of “reported” income. So while we make your mortgage payments on time, if this passes, as a taxpayer we will pay for deadbeat homeowner’s homes through:

    A. Reduction in interest rates,
    B. Reduction of loan principal
    C. Other similar modifications

    This is an outrage. I plan on placing a lien on each of these homes to make sure I get paid back.

  36. #37

    “But on the plus side, I sure picked the right year to start huffing paint fumes!”

    At least you didn’t choose gasoline. That’s an expensive habit.

  37. @ #37 FourFiveFire

    But on the plus side, I sure picked the right year to start huffing paint fumes!

    Do you like gladiator movies, Timmy?

  38. Who the heck actually uses tin foil anymore?

    The shiny stuff you can get these days is aluminum foil.

    Neither, of course, is proof against Orbital Mind Control Lasers.

    For that, you need to stop washing and brushing your hair. Get a good stiff mane of unkempt shag up there.

    Bit of leaves and bird droppings are a plus. They help refract the beam.

  39. Color me confused here – I’ve read a couple comments that point this bailout to the leftists, or Democrats if you will. My understanding was that Mr. Bush was the one that introduced this and asked it to be pushed through with haste.

    So what really is the deal?

  40. I think the smartest long-term positioning is to begin looking at the goods and services you can provide to other people in your community without involving long distance transport or complex supply chains involving multiple creditors and borrowers. In other words, try to make what you do as real as possible.

    That is actualy one of the smartest things I heared about all this. It makes sense in times of crisis to create smaller, self-sustaining nuclea. This will also create a redundancy, which is quite necessary in times when you cannot take things for granted. If there’s an energy fall-out, it’s good to know you have a wind-mill or solar panels. And it’s even more re-assuring to know that your neighbour has them as well. When big things break down, you have to rely on the small things, and that means your own community, and your own backyard.

  41. “If there had been the proviso to make the banking CEOs eat a bowl of live cockroaches for the $700 Bil this thing would have absolutely passed by a landslide.”


  42. #4 is right. The giant speculation machine that is now causing problems for the wall street firms was running on securities that were based on the value of real property mortgages. I heard a great presentation about “securitization” at the National Consumer Law Conference back in 2002 or so.

    It works like this: a private/public lender issues a “subprime” mortgage, either one where the borrower may have some problems paying, or one where there may be problems with the value of the collateral, or something else. This affects regular mortgages, too, but the orgy of subprime mortgages has had a devastating impact on the housing market.

    The lender then sells the note for the mortgage (and a crapload of other mortgages). The buyer of the note combines it with other notes, then issues another promissory note based upon the value of the bundle of mortgages. This second note (the “securitized” note) gets bought and sold multiple times. Eventually your mutual fund company buys it (or a fractionalized interest in it).

    Wham, the housing market slows to a grinding halt. The securitized notes rapidly lose their value, since whatever absurd value it had was driven by speculation, not the value of the mortgages that “securitized” it. Panic, everyone is trying to dump their bizarro securitized mortgage notes. Nobody knows what they’re really worth, and the price spirals down.

    The underlying asset beneath all the crap still has value, even if it is “subprime.” It’s the speculative bubble that has burst, but in such a major way that it’s devastating all the other credit markets.

    OK, I may have gotten some or all of this wrong, but this was the gist of the presentation I went to. Really, it’s the magic of capitalism.

  43. #50 most likely both sides are to blame, people just like to blame the Democrats for anything and everything. Note the republicans who voted against the bill who are now blaming it for failing because of Pelosi’s “partisan” speech.

  44. Gotta say I thought the bailout was a horrible idea.

    My only annoyance in the current situation is that I’m beholden to Republicans for not passing the damn thing.

    I think it was pure crisis politics by the Bush Administration looking to line their pockets and the pockets of their cronies and I still can’t understand why the Democrats basically rolled over and tried to give them everything they want.

    But then again, the Democrats have been George’s b$tches on every other thing he’s ever demanded of them in the past so I shouldn’t be surprised.

    -abs was appalled, with two “p”s, at this whole thing and is very glad it failed, he’ll be happier yet if it never rears up again before Bush is gone forever.

  45. /me attaches combat-grade tinfoil helmet.

    Does seem a little ‘planned’, doesn’t it? I wonder if this is one of the excuses that will be used to suspend or override the election.

    I was actually kinda happy about the increasing number of foreclosures. I figured that being a slum-lord would be one path towards retirement for this post-dot-com’er. However, if I can’t get loans, I’ll be looking at Ghetto Crack-Shacks for $5k instead of $25k. Even still, I’ll be working into my seventies just to stay afloat.

    Does everyone here have a Victory Garden?

  46. I think we all just need to believe in the power of Bat Boy…

    Henry Paulson has called on Bat Boy to persuade those in the House of Representatives who rejected it to move the plan forward.

    Bat Boy seemed confident that a bounty of mosquitoes and his collection of bird skulls will do the trick.

  47. Your last few sentences make me curious. Is this current crisis an example of consumer-oriented unsustainability? (That’s not counting the unsustainability of bad business practices, unless it somehow ties in to our consumer culture.)

  48. As it turns our Article 1 Section 8 of the constitution requires that any legislation such as this has Specific and Unambiguous requirements that act in the general welfare of the Union.

    No specific requirements would be a valid argument for the unconstitutionality of the bill.

    Also arguing the the Hamilton view of Article 1 Section 8 is an incorrect perspective on what the text of the constitution means is a viable argument.

  49. Talia, isn’t that a fckin’ hoot. I could probably count on my singular appendage the number of times a republican has changed their vote because of Nancy’s stirring oratory.

  50. I’ve been getting ‘sell your gold for cash’ e-mails and online ads for a while. Lately I’ve seen them on the TV too. And now I get them in the mail.

    Next they come for our fillings.

  51. Rushkoff’s advice on what to do with your money isn’t bad, although he left out the part about what to do if you have loans.

    The entire situation does smell a bit of the same circumstances as what precipitated the Great Depression:

    1.) High risk speculation sinking the market when the inevitable economic bubble bursts, compounded by special permission for certain companies to take abnormally high risks.

    2.) Investor panics driving the stock market crazy, while the government walks a tightrope trying to keep investors from causing more bank runs or crashes.

    3.) People hoarding their money waiting for the storm to pass, never realizing that, by slowing their own investments and purchases, they are contributing to the problem.

    3.) Legions of ignorant and angry citizens wondering where their money, assets and jobs have gone, yet helpless to do anything other than to watch with despair as the financial system flops around like a fish on the ship’s deck.

  52. #24 posted by codesuidae , September 29, 2008 12:41 PM

    @19 I tend to agree that it’s a planned event, but I also tend to think that 9/11 was a planned event, and that makes me a tinfoil hat batshit crazy nutcase.

    note ‘tend to think’ |= ‘believe’

    I think pretty much everyone believes 9/11 was a planned event. Most of us just happen to believe it was planned by foreign terrorists and not the U.S. government.

  53. #16

    Someboody give Matt Joyce the voice of reason award.

    You don’t learn from mistakes when people don’t make you pay for them.

    And I call me crazy, but wouldn’t tinfoil/pots on your head make it easier to read your mind? Just speculating, but just because you have metal on your head, dosn’t mean your brain is in a Faraday cage; you could be wearing a giant antennae. Just saying.

  54. Yeah–those cocksuckers actually believed we were going to bail out their dead asses? That we were going to sanction and underwrite the continuing accumulation of paper fortunes–the accumulation of money without creating anything? Wake up, motherfuckers–you keep taking and taking and taking and the shit’s going to fall down, just as in 1929.

    You can’t get paid for creating nothing forever. I hope you go down for good this time.

  55. Our transportation in this country is, very soon, going to revolve around bicycles a great deal more than it once did.

  56. This thread cracks me up. Best entertainment all day.

    #2, and others: In what way can you possibly consider a post that contains the sentence: “It may have failed without McCain’s help, but I enjoy blaming him.” to be “non-biased”?

    #25, 44, and others: The dollar is up 1.2% on the Euro today. Anti-americanism/euro-envy is not a good investment strategy.

    # too many to count: How long can you all keep blaming the failures of Nancy Pelosi’s leadership on the Republicans and Bush? Seriously? Bush is a failure, and the solution to the Bush problem was to elect bigger failures. (otherwise known as Democrats)

  57. Flip This House was full of the stock-tip quoting shoe-shine boys (ref. technogeek’s post).

    New show…Flip This Investment Bank.

    Put in some nice sod, a nice vinyl fence, granite counters (buyers today demand granite!), paint the place Navaho White…

    Couple of trips the to the improvement store and we’ll double our $700b in a year. Money for nothing. We can’t lose!

  58. Here is what I’ve been thinking lately:

    Bicycles = good. Learning how to build and repair them = good.

    Houseraising parties, where neighbors get together and build a house for a neighbor – good.

    Transparent and fair and simple zoning = good.

    Transparent and fair and simple code regulations = good.

    Land for growing crops = good.

  59. Some blogs blame Pelosi; some blogs blame McCain. Pot-shots at politicians solve nothing. We already knew that each and every one of them was on the make.

    The real blame is in the hands of the assholes who set up this carnival and continue to benefit from it. They’ll get their bailout–at which point the politician-shooting will continue. And likely no one will do anything about the bloody assholes who continue to take money without producing shit. (Perhaps, as some will suggest, those who might do something about this are themselves bellying up to the trough.)

  60. #69: wtf are you talking about? Are you saying all the problems in this country are all the democrat’s fault, not the crappy administration we’ve had the past 8 years? Riiiiiight.

    This little tragedy was at least 50/50 everyone to blame.

  61. Brainspore @65 Here! Here!

    JackM @64 Don’t forget the part about buying everything on huge margins. IIRC someone posted recently about SEC changes that dramatically increased the allowed debt to whatever ratio, which was the enabler.

  62. In what way can you possibly consider a post that contains the sentence: “It may have failed without McCain’s help, but I enjoy blaming him.” to be “non-biased”?

    Who EVER claimed BB is non-biased?

    She’s saying NOBODY is offering a clear picture. The banks are playing their cards close to their vest, Congress is not demanding open books, and many of those to blame are clearly lined up to profit from the fail and the bail.

    Unless and until someone fesses up and starts being open, their efforts will be made of fail.

  63. If we’re going to get all serious here, the only thing I can contribute is that I think we’re all bozos on this bus. I don’t think anyone has any real clue as to what will happen next, but it will be interesting, that’s for sure.

  64. Let’s introduce some new ratings for this toxic debt.

    “Instead of bond agencies politely rating debt according to the likelihood of default, perhaps bonds should be ranked according to how silly it would be to take on the debt. Ratings such as “Worse Than Junk,” “Danger Will Robinson” and “There’s One Born Every Day” might make debt instruments a tougher sell.”

  65. My understanding is that in fact we had rules/laws/measures put into place to deal with exactly this sort of situation after the savings & loan fiasco in the ’80s. Unfortunately, no one bothered to enforce them. Too many people like McCain are inherently against regulation I guess.

    Another thing I have yet to hear much mention of is that Japan went through a very similar crisis. It took them 20 years, but they recovered. So what did they do that worked? What did they do that didn’t work? Can we learn from their experience?

    I also hear on NPR that as an academic, Ben Burnanke developed computer programs to model economics, similar to models that model the tracks of hurricanes. So does any one know if this crisis & proposed bailout were ever modeled, so we might have some idea of possible outcome scenarios? Some model results like that might lend some credence to the $700B number. It may not be perfect, but I’d feel better about that than thinking that Paulson grabbed that number from out his tuchas.

    As far as the caps on CEO compensation go, it’s purely symbolic. As a percentage of the $700,000,000,000, it’s practically nothing, and these are the same folks who employ armies of accountants & lawyers to avoid paying taxes & such.

  66. #73: We’re saying the same thing. Both parties are to blame. Not sure why you thought otherwise. I’m not aware of any way “Bush is a failure” could have been interpreted as “all the problems in this country are all the democrat’s fault, not the crappy administration we’ve had the past 8 years”.

    #75: Did you even read the post I referenced there?

  67. #75: Did you even read the post I referenced there?

    I did. I think u read it wrong. I was explaining what I saw in that post – and also that I think you’re wrong for bringing partisan hackery up.

  68. i am pretty much ignorant to all of this stuff b/c i am still in school and have never had any debt or property. i have started to accumulate debt from medical school, but i dont know the implications that the current wall street debacle could have for my student loans. they are federal loans thru wells fargo…does anyone know how-if at all-this is going to affect student loans? forgive my ignorance, but any insight is much appreciated! i would like to be as educated as possible. thanks for any help!

  69. #81: I suppose i took umbrage at
    “How long can you all keep blaming the failures of Nancy Pelosi’s leadership on the Republicans and Bush?”

    I’m not sure what part of this is supposed to be Nancy Pelosi’s fault. I can tell you the republicans think it is, which is stupid, since its the republicans who refused to vote for the bill. Remember this was theoretically a compromise both sides drafted together. So the republicans are rebelling both against their own leaders and against the majority of the democrats.

    The overall implication was that the democrats have made a bigger mess of things than Bush, which I don’t believe to be accurate. Sorry if I took on an adversarial tone.

  70. So looks like Bush’s final act won’t be looting the nation after all!

    in a way that’s good. but im sure “plan B” will be a WHOLE lot messier.

  71. Apple got slaughtered today. That made me sad and buy lots more. Now everyone just needs to THINK POSITIVE…

  72. “If you’ve got no money and no debt, then just go about your business normally”

    A run on the stock market (conversion to cash) is just as bad as a run on the bank (withdrawal of cash).

    It’s the greedy people on top who already have millions who want to convert their mythical millions on certificate paper to actual millions of greenback paper. And that’s where all the economic collapse troubles start. There should be some sort of high, heavy penalt. Esp. for those who try to get out now only to return and buy when the market has bottomed out so that they make a killing on the way back up to where economy was when they killed it in the first place.

  73. lolz. blame mccain if that makes you happy. the fact of the matter is that there was a large grassroots effort to get the congress to vote no, and it worked.

    i maybe hate mccain just as much as you do, but to blame it on him wrecks your credibility.

  74. My @ss it was a balance sheet adjustment.
    Section 8
    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.

  75. #69 Ivan,

    I HAVE NO IDEA what you’re talking about. I LOVE AMERICA!! Oh, say can you see..

    (Shh, man, you’re gonna get me put on some list!)

  76. I say if we’re talking about spending hundreds of billions, how about we take longer than a couple weeks to figure out how to do it right. This idea that “it has to be decided before the recess” feels like a hustle.

    This talk about “the abyss” isn’t useful either. Everyone using that term should instead use more accurate and descriptive terminology that doesn’t stir up nightmare fears of the unknown. Put a name on it, light it up, get to know it and make a plan. Don’t panic. There’s nothing we can’t deal with.

  77. I (well, being a Libertarian,), of course, agree w/ Bob B.: No Bailout, and Indict the Bank Officers. Bailing these a-holes out just gives them the impetus to keep on w/ business as usual. Darn, I wish that NONE of my hard-earned cash were in mjy retirement/stock market accounts…

  78. I think the smartest long-term positioning is to begin looking at the goods and services you can provide to other people in your community without involving long distance transport or complex supply chains involving multiple creditors and borrowers. In other words, try to make what you do as real as possible.

    I think this is one of the smartest things said about the modern economy. As much as big box stores seem to be stifling small businesses, there is a clear groundswell—that keeps on growing—of people who want to buy/sell locally and where quality is trumping quantity.

    I mean think about it folks. You can buy tons of stuff for cheap online, but then again look at entities like Etsy, MAKE and local crafts consignment shops.

    Heck, look at Apple. When they came back from the dead, they created an online store where you could customize the configs you wanted which was a radical idea at the time. And then when that became a cliched idea, they opened retail stores. And yeah, Apple is a chain, but the retail stores provide a personal touch you can’t get when ordering online.

    That’s a bit of a tangent, but I think we’re nearing the point where big-box stores are losing ground. Heck, a planned Whole Foods in Park Slope is not happening because now the trend is towards smaller stores.

    I don’t think folks will be able to pay the rent by doing local “small business”-like transactions in the near future, but I think people need to look more and more to having a side business that could grow to something else. Sell on eBay or Etsy or on Craigslist. But what Doug says is something that I strongly believe will be the best part of the new world of retail.

    Oh, the bailout. Let’s face facts: They are trying to make money come out of nowhere to pay for debt that should have never existed. How we would get out of this black hole is no easy task, but I deeply admire the fact this bill was shot down. It gives me hope to the fact that our elected officials are not just blind robots.

  79. What the real question is:
    Investigate where Americans stand in the western world on education? What is the percentage of Americans who actually understand variable percentage loans and mortgage terms? duhhhh.. the real reason for the meltdown is that most middle income Americans are just plain stupid and believe they actually can live in a big house beyond their means.. AND they actually got suckered by the deregulated banking industry in the states. YOU dumb fu*cks deserve what you got. I just hope you dumb fu&cks don’t drag us all the way down with you.. God help America! (Joke.. he know you are beyond help)And these dumb fu*cks will buy all the good ole’ boy platitudes of McCain and elect another ole’ boy to the Oval office… man oh man.. when will America wake up and see how you have feathered your own nest with greed and narrow sighted ignorance.. what a bunch of dumb greedy fu*cks..

    Actually I have argued for years to (mostly) dead ears that it’s pretty perverted that our schools don’t have basic courses explaining how/why of the personal financial system.

    You mean I went to high school, learned complex math but nobody seems to see the value in applying such concepts to practical life.

    The American education system was built initially to train factory workers and manual laborers. It doesn’t encourage free thought. But we now live in a world where (1) manual laborers are not really needed in the same amount as we once did and (2) we live in an information age but people barely understand how to fully utilize it and are even afraid of it.

    Now is the time for someone out there to propose true financial and information age education in the classroom in all schools at all levels.

  81. @96
    As someone who does understand mortgages terms and loans and the like, and also who happens to be an american, allow me to be the first to say that your post was totally uncalled for. I would imagine the number of americans that actually understand how those numbers work is probably pretty comparable to the rest of the world. Do you think the average person anywhere understands this stuff? I doubt it sir. As for my greed, narrow sighted ignorance, living beyond my means, and general dumb fu*ckery, please do grow up.

  82. #16 – Matt Joyce:
    > This bailout does have leftwing underpinnings.
    Leftwing? Paulson? GW Bush? Bernanke?

    > The very notion is absurd, and a clear violation of the constitution.
    More important bits of the constitution have de-facto been abolished.

    And I don’t actually recall any section on the state being banned from owning all or part of an enterprise

  83. Apparently the roster of “no” votes today was a who’s who of U.S. representatives who are facing competitive races in their district.

    This does explain why more Republicans voted against it than Democrats; the average Republican representative is I believe more likely to be in a tough race to retain his or her seat than your average Democrat rep.

    For those who made it this far and want a summary of what was wrong with the measures proposed to this point, I offer the following link to Paul Krugman’s column from a week ago. I have no idea if he’s right, but I at least understand what he’s saying.

    Note in particular his 4-point breakdown of what’s causing all the hubbub, and why fixing point 4 (which is what the current plans do, or rather what it’s hoped they’ll do) doesn’t really solve any long-term problems.

  84. @100

    Which is why every other extremely intelligent stock exchange in the world is tanking overnight. I guess American Dumbness isn’t an exclusive to Americans. Seems every investment house in the world kind of has its own native dumbness that has allowed a lot of blue sky to build up. We will be learning real soon what real world values are. Not anywhere near what we’ve been valuing them at. Paper profit is a really poor asset to bank on. Ooops!

  85. What about Obama’s statement that polarized the PUBLIC and the GOVERNMENT with his now vastly over quoted “Main street shouldn’t be bailing out Wall Street.”

    Seriously I’ve heard hundred of people both on the radio and in public who know next to nothing about ANYTHING financial or government or anything of the like but all they understood was “What about Main Street? Why does Main Street have to get punished? Why won’t the government bail ME out?!”

    I don’t like McCain a bit either but I’m getting really tired of Obama’s “Fat cats against the common main” speech, which is literally the only thing he ever says when you boil it down. Oversimplification with no substance and the public latches on to that morsel of information like the last helicopter out of ‘Nam.

  86. I have thought a lot about this bailout bill, and have come down on the ‘no’ side. The other day I heard an economist in an interview where he described the way the U.S. economy has shifted from relying on trading on goods to trading on debt. He said that the markets are basically moving around pieces of paper, and that it’s unsustainable. We need to get our markets trading on goods and labor again, and the bailout won’t do that.

    It really shouldn’t be so easy for businesses or individuals to have so much credit, and run up huge debts. Banks want everyone feeding endlessly at the credit trough, but that has proven to be a disaster. As far as I can tell the bailout does nothing to fix these fundamentals.

    “Neither a borrower nor a lender be;
    For loan oft loses both itself and friend,
    And borrowing dulls the edge of husbandry. ” — Shakespeare’s Hamlet

  87. This is the result of a couple of decades of churning out MBAs who shouldn’t even be allowed into college, and letting them go to Wall Street with their ridiculous scams. Everyone stood by, and no-one said the emperors have no clothes.

    We should let the companies fail, and use the 700Bn to help the people who will be affected by it. I don’t mean the ones who bought way over their heads and should have known better, I mean the ones who were scammed into getting in too deep.

    But what really pisses me off is that I, a responsible taxpayer, mortgage holder, and good credit user, am going to pay for all this. And so’s my kid, which is bad news for him today, since it’s his fourth birthday, and we’re already burying him with our mounds of debt.

  88. This is one of the great times to have no money. It allows the complete objectivity to watch all the people who have money squirm and wonder what to do.

    Rather than worry or complain you could DROP OUT>

    Today was also one of the rarest of occasions: the US Congress had a perfect excuse to spend BILLIONS of dollars … and DIDN’T

    Remember it well, you’ll probably not see it again in your lifetime.

  89. I have to say that the level of incomprehension, cluelessness, conspiracy theorising, ideologically-driven nonsense and just downright dumbness exhibited on the posts here are really rather depressing, especially as the mass media has been trying to explain all of this to you for well over a year now.

    To those saying “Let ’em crash and burn” — you don’t seem to comprehend that this means that you and your children will be out of work and on the streets as well.

    To those saying “It’s a planned event, like 9/11” – please, take your paranoid conspiracy theories to a more suitable forum. I hear that there are quite a few on the Internet.

    To everyone who ever made a sarcastic, sneering remark about liberals, environazis and clueless yammering that comprises the “blogosphere” — I’m really sad to see so many stereotypes confirmed here. (And I speak as a card-carrying tree-hugger and LibDem of many years standing.)


  90. To those saying “Let ’em crash and burn” — you don’t seem to comprehend that this means that you and your children will be out of work and on the streets as well.

    I’m against the bailout but that’s not exactly how I would describe my opinion. It’s not that I want the whole financial system to crash and burn, it’s that I’m not convinced this is a problem that can be solved by throwing hundreds of billions in taxpayer dollars at it. Even if it was, I don’t trust the people who are asking for the money to do it properly.

    Basically I think we’re probably fucked either way. Given that, I’d like to keep my $700 billion.

Comments are closed.