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You know, I probably shouldn't even be discussing this, since I'm sick and I had a crap weekend and I'm pissed off and I'm generally not in the kind of mood where people think very clearly, but I'm having the kind of morning where every single thing in the newspaper makes me want to shove people into oncoming traffic.

The financial collapse is what it is; we're drowning in should-haves right now, plenty of them coming from me, but it happened, and no amount of I-told-you-so is going to undo it. I'm not too thrilled with the federal bail-out, though I think it's probably necessary; just letting the whole thing sort itself out would be an even greater disaster. However, what is vitally – or maybe fatally -- important is that the bail-out not be the only remedy.

We are currently under the thumb of an administration backed by the kind of neoconservative ultra-right demagogues whose extremist economic philosophy in no way precludes the tactic of deliberately doing things to make the federal government worse so that they'll have convincing arguments in favor of essentially dismantling it. Those people are standing on the verge of a major victory. The right-wing authoritarians in the Bush administration would love to give the Secretary of the Treasury the same kind of unchecked power they've given the DHS and the DOJ, and have attempted to give the President and Vice-President; it would be a very, very bad thing to let that happen. But even worse would be to let them stick the federal government with nearly a trillion dollars worth of debt to sponsor the financial bailout, unless it is immediately followed by a massive, comprehensive set of regulatory reforms.

This can't be stressed enough. This collapse didn't happen for no reason: it happened for a very specific and identifiable set of reasons, nearly all of which were made possible by a near total lack of regulation of the financial instruments behind those reasons. If we allow this massive bail-out to take place without any accompanying regulation to make sure it doesn't happen again, we will prove ourselves substantially less intelligent than even the do-nothings who allowed the Great Depression to get as bad as it did. We will be saying to a group of multimillionaires: "Thanks for ruining the economy to your own enrichment. We'll take care of the mess – we trust you not to let it happen again." A wink and a smile isn't going to be good enough this time.

Don't be fooled about what this means for every one of you reading this: you have to pay for this colossal fuck-up. The bail-out – which, honestly, is like a godsend for the Grover Norquist wing of the Republican party – is going to be paid for through your tax dollars. Your kids' college funds, your own plans to buy a house, your savings, your health care, every expense you have is going to jump because of this, and every single thing that you might want the government to do for the next 20 or 30 years, from providing health care to repairing the infrastructure to fighting a war, is going to be impacted negatively by the bailout. It makes us weaker in every way. Only its dire necessity is a mitigating factor, and even that is a total write-off if we don't insist on protective regulation in its wake. That's all there is to it.

This is the kind of crisis that can wreck a nation, and the way we respond to it will literally set the tone for the rest of our lives. This election, already the most grotesque in American memory, could very easily be won by a man who, contrary to his contemptible lies of the last week, has opposed financial regulation his entire career and specifically voted to repeal some of the laws that would have helped prevent, or at least lessen, the collapse. It is absurd to think that he isn't trailing by two dozen points in the polls; if he wins the election, it will be enough to send my own dismally low faith in democracy straight over the falls. There is no conceivable reason to vote for John McCain in the wake of this nonsense; he had no answers before, and now he has less than that. His tax plan, incidentally – which he has shown no interest in rewriting in the wake of the collapse – will reward the very rich by unburdening them their share of the bailout, and do nothing to ease the share borne by the rest of us.

What we are saying, if we say yes to a federal bailout with no subsequent protection through regulation, is this: private citizens who control wealth greater than that of most nations may do so with minimal oversight. Should they fail, those who prospered least from their success will be charged with bailing them out, while those who prospered most from their success will be given a pass. Consequences and responsibilities, for them, will barely exist. And we will continue to elect people who will make sure it stays that way until we're finally building children's castles made of worthless cash, the way they did in Weimar Germany.

Sorry, folks. It was this or dream transcriptions. I'm goin' back to bed.


Sep. 22nd, 2008 03:01 pm (UTC)
I agree with you wholeheartedly, except we cannot allow the regulation to be separate at all. Allowing them to rush through new powers with a promise to fix the system after is Patriot Act part two - at the speed they're moving, they may skip reading the bill again.

The urgency is partially false. Wall Street is bluffing a bit to force swift passage. What is need is not "immediately followed" or "subsequently" but simultaneous and slow.

If that bill is not carefully vetted and includes all regulation up front, it won't happen.

Edited at 2008-09-22 03:02 pm (UTC)
Sep. 22nd, 2008 08:03 pm (UTC)
No, you're totally right. As I said, I wasn't thinking entirely clearly when I wrote this.
Sep. 22nd, 2008 03:06 pm (UTC)
Don't apologize, thank you for writing this with eloquence and clarity. What's happening now is not just a natural down in the swinging pendulum of a healthy market, this is the result of an extremist conservative approach to economics at a level of unregulation we've never seen before. People don't seem to grasp how serious this is.
Sep. 22nd, 2008 08:03 pm (UTC)
It's really astonishing. It's almost unfathomable what a fuckup this is. God help us if that bailout goes through as planned.
Sep. 22nd, 2008 03:23 pm (UTC)
Leonard, this is great stuff, and I agree with you 100%
Sep. 22nd, 2008 08:04 pm (UTC)
If only this sugar were as sweet as you, sir.
Sep. 22nd, 2008 03:47 pm (UTC)
Herny Paulson says:

Sep. 22nd, 2008 08:04 pm (UTC)
He actually wrote the lyrics of "Stop Snitchin'" into the bailout bill.
Sep. 22nd, 2008 08:08 pm (UTC)
Some motherfuckers think they gangster. Then there's motherfuckers that are gangsters FOR REAL!
Sep. 22nd, 2008 04:28 pm (UTC)
Damn right. This is just another example of this administration telling the American people that this is all just "too difficult for you to understand so just trust us to take care of it and everything will be fine"...and just another example of the American people rolling over and saying, "Okay, thanks, we trust you without hesitation because everything you've done has worked out so well so far." The crap that this administration has been able to get away with is in direct correlation to the American people's abdication of our responsibilities as members of a democracy. We vote on personality, not issues, and we vote without even beginning to understand those issues that we're choosing to ignore.
Sep. 22nd, 2008 08:05 pm (UTC)
Like I've said, if the American people elect McCain after this, I'm pretty sure I'll go back to not voting. What's the fucking point, if people are gonna be that stupid?
Sep. 22nd, 2008 09:38 pm (UTC)
I'm feeling the same way (except for the not voting). If Obama doesn't win, I'll feel a little pissed at the party, but supremely pissed at the American people. Obama is far from perfect, and of course some people, evaluating him fairly, still won't like him. Unfortunately, many other people's decisions are based on irrelevant factors, or a scary evaluation of relevant ones (like intelligence being a negative trait). As much as I deplored the use of boy-kissing to scare the masses in 2004, I grok that it was a truly important issue to a certain demographic. It's much more upsetting this time around to see that those type of issues aren't getting as much play, and it really is coming down to things like having a "weird" name.

And speaking of irrelevant or scary factors, I heard this weekend that McCain's numbers are up among white women voters, which is surely due to Sarah Palin. I can't help but think "All those women worked so hard to get us the vote, and this is what you do with it? I would never try to disenfranchise a voter in any way, but DAMN I wish some of them would somehow disenfranchise themselves.
Sep. 22nd, 2008 04:36 pm (UTC)
I know, for all intents and purposes, absolutely nothing about economics or financial matters generally. But over the past couple of weeks, I have had this vague, nagging memory of something they told us in like, ninth grade social studies that kept me thinking: Wait a minute. Wasn’t the fact that we had banking and SEC-type regulations in the first place a more-or-less direct result of the Great Depression? In other words, didn’t the Depression occur in the first place largely because of the lack of regulation? And when the industry was de-regulated (thanks Phil Gramm! McCain ’08!!!), didn’t that pretty much, I dunno, guarantee that eventually, maybe not right away, but at some point, the consequences would be similar if not identical to what happened in 1929? I mean, has there been some fundamental change in the way money works that would have made this a completely unforeseeable event this time around? Like, “Shucks, what do we need regulations for? There’s no depression now!

Somebody commenting on one of my friends’ LJs recently said something like, if you want a good long-term investment, forget about gold. Buy meat? And all I could think was, What good is that gonna do you when you can’t afford to pay the ConEd bill and the freezer goes off? Me, I’m thinking of short-selling lentils. Also, I’m speculating very heavily right now in mung bean futures.
Sep. 22nd, 2008 05:30 pm (UTC)
I was actually briefly working in financial writing back in the late 90s/turn of century... which is when the Glass-Steagel (I think that's it) Act was dropped by Gramm et al. And at the time, I was like, wow... that Glass-Steagel thingie sure seemed like a good idea. Certainly was one of the many things that helped re-right the financial system back in the '30s.

I remember there was all sorts of justifications of why "things are different this time!" that we don't need those silly protections anymore. I can't remember the justifications because they didn't make sense. I kinda figured it wasn't that I was stupid, but that the reasoning just didn't make sense, but no one important was asking me. So I just shrugged and went on my merry way.

Who knew it would be less than 10 years later...

Sep. 22nd, 2008 05:30 pm (UTC)
And buy canned meat.
Sep. 22nd, 2008 08:07 pm (UTC)
Yeah, as I hinted at, the big difference in the Depression and right now is that back then, once the government got off its ass and finally DID something -- which took them a long time -- they at least realized that the first thing to do was to regulate all these new markets so there wasn't a repeat. The Bush administration hasn't said a fucking thing about regulation, and Paulsen's bill leaves no room whatsoever for accountability.
Sep. 22nd, 2008 05:27 pm (UTC)
> However, what is vitally – or maybe fatally -- important is that the bail-out not be the only remedy.


Good writing as usual, Leonard. And I hope some of this common sense gets knocked around a few heads in Washington. Everyone on TV keeps "joking" about socialism. I'm like, this isn't going to be socialism. It's going to be fascism. *sigh*

I called my congresscritters today. I'll call again tomorrow.
Sep. 22nd, 2008 08:08 pm (UTC)
The direction Bush has been taking has certainly had all the economic qualities of fascism, if not the political ones.
Sep. 22nd, 2008 07:56 pm (UTC)
Leonard - I've been reading Paul Krugman throughout this crisis, and he has been very clear as to why Paulson's proposal is bad. Here's Krugman's column for today and here's Krugman's ongoing blog. I'd summarize Krugman's argument as follows: (1) If we the gov't buy the bad assets at market value we're not going to get the financial firms out from under, (2) if the we buy the assets at way more than market value we will be helping the firms by giving a windfall to the firms (and their stockholders and executives) at taxpayer expense, so (3) what we should be doing instead is give capital straightup to the firms - without buying bad assets and without having to guess the value of what we're getting - in return for part ownership of the firms, so that we can demand that some of the benefits of the bailout goes to the public.

In any event, Senator Chris Dodd, who chairs the Senate Banking Committee, is floating a counterproposal that I haven't looked at but at first glance seems to Krugman to be a step in the right direction. Here's a news story and here's a text of the Dodd proposal.

Says the article:

The legislation requires Treasury to take an equity stake equal to the purchase price of the assets being bought. If the company isn't publicly traded, the government would take senior debt instead, placing it in the front of the line of debt holders for repayment in the event of a bankruptcy.

Dodd's proposal also would create a five-member oversight board to supervise the Treasury secretary's purchase and sale of distressed mortgage debt.
Sep. 22nd, 2008 08:09 pm (UTC)
Yeah, I read Krugman's piece early this AM. Eminently sensible, as always. I'm glad Dodd got his proposal out that soon; the GOP is pushing the bailout through so fast I was worried there would be no time for an opposition bill.
Sep. 22nd, 2008 08:41 pm (UTC)
yeah, but them damned Democrats don't want us to solve the problem swiftly! Damned overtalkin' elitists.

Seriously, one thing that has ALWAYS bothered me is that a lot of people seem to have a hard time thinking about what constitutes "immediate need." The cost of pushing through really wrong legislation is high; and while there is certainly some benefit to market-powered solutions (I'm only saying that to be "fair" and "balanced"), we're fucking re-enacting the go-go-OOPS late 80s and we've apparently accelerated our recession cycle (7 or so years since our last downturn).

There's a fucking problem, and I don't see how Bush's people can push a "no oversight" bill. People don't understand economics, but do they expect Congresspeople to return to their electorate with something that sounds so stupid?


flavored with age
Gun-totin', Chronic-smokin' Hearse Initiator
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Leonard Pierce is a freelance writer wandering around Texas with no sleep or sense of direction. If you give him money he will write something for you. If you are nice to him he may come to your house and get drunk.

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