FINDING YOUR INNER, SCREAMING LIBERAL
Krugman-sensei says:
I think that Congressional leaders know that it’s a bad bill, but feel compelled to defend it, because they’re (rightly) scared of the financial consequences of a second rejection. And to some extent economists like myself are in the same position; I think I called it the “hold your nose caucus.”
So am I for the bill? Yuk, phooey, I guess so. And I’m very angry at Paulson for putting us in this position.
Look, when are people going to stand up against 'politics-as-usual'?
If this season's "Yes, we can" doesn't translate to a new accountability and focus, then ...
As for there being no alternative to proceeding poorly, pun intended, one can disagree from a political-science perspective. Sometimes, things have to get worse, before they get better, before a new consensus emerges, one that is apart from the miserable, hop-along mentality that causes "nose holding", even on critical legislation. From that perspective, making a stand is key, if the topics are important enough ...
FEAR, THE MIND DESTROYER
Wall Street is expert at scaring people.
Myself, I remain unconvinced of many of the claims being issued. Here is one question, to sharpen the focus.
Who in the banking system are we "saving"? Do you know? I don't. I mean, when Greenspan "saved" Citibank in the early 1990s, we knew who we were 'saving', how, and why.
In fact, all we know outside closed doors is that this plan is definitely "who centric", not system-centric, per se. With this latest bill, we have taken the approach that all entities with "mortgage-related securities" are worth saving (one assumes that anyone can bid the Treasury for anything for which Treasury accepts a bid, even when they do it one-on-one with others - I mean, how are Treasury going to legally privileged a few lenders?).
With only two independent investment banks left, are we saving Goldman and Morgan Stanley? They both continue to signal that they have no worries. MS is even paying a handsome dividend!
JP Morgan-Chase? The work that they have left to do they look able to pay out of earnings (they also pay a fancy dividend)? BOA?
Who is left? WAMU and Wachovia are ... already gone.
Are we saving Citibank, again? It could be ... AIG?
AREN'T WE PAYING ANYWAY?
With reduced competition and bank funding from the Fed at super-cheap levels, profitability at Banks should be sky high, before write-downs.
Mark-to-market or not, there is going to be an "earn out" period for even healthy banks, that were under-reserved for the current mess. Nothing that the Bush-Paulson plan does either speeds that along or mitigates it, does it?
In short, there is every reason to believe that a real credit crunch will continue, long after the welfare plan for the "sytemtic risk" is in place.
