Contributors

Tuesday, September 30, 2008

777

We have definitely entered the Twilight Zone. I spent a lot of time watching the news last night and one thing really stood out at me. After the Dow dropped 777 points yesterday, our leadership in Washington (both parties) looked like a bunch of incompetents. Over the years, there have been so many things that President Bush has done that have embarrassed our country but there was no doubt that he was on the sidelines yesterday. In fact this morning, he looked like a beaten dog.

The embarrassment yesterday and today, though, lies with the US House of Representatives. All of them should be positively mortified at their unbelievable incompetence to get anything done. I heard a few lone voices, on both sides, saying a couple of slightly intelligent things but for the most part, they behaved like impotent buffoons.

I am not necessarily saying I supported the bill. In fact, those voices on both sides that I speak of in the above paragraph were ones that voted against the bill. Couldn't they have worked little smarter to make it better?

I guess not.

6 comments:

Anonymous said...

I, for one, am happy it didn't pass. On the contrary, it is a victory of prudent Congressional action, and not a failure, as some would have us believe. Don't listen to the whining of the House leadership; they just want to go on record as showing support should the economy collapse as predicted.

It should come as no surprise that Bernanke and Paulson's solution to this crises was to throw money at it. What is encouraging is many in congress simply wouldn't buy it. 700 billion - why not 700 trillion? They should have started at 100 billion just to get it passed, incrementally hiking it later when the press and public weren't looking - that's the American way. On the contrary, they we're too busy with their own self-importance, sounding the alarm thereby deflecting blame and focus away from themeselves and their inability to see this coming and make people listen. Be the hero, make it sound urgent and dire. Ultimately and as a result, there was no way the American public would sign on to such a huge number, because, and here's the dirty little secret, the majority of Americans don't carry huge credit risk. And the other not so secret, secret? Noboby trusts Washington anymore.

Without knowing the true bottom, we cannot know the cost. 700 billion today could very well constitute an economic Iraq. Let's face reality, shall we; the sooner we hit bottom, the sooner we can react and recover. Yes, it could be painfull - that is, painfull those operating their lives within "easy credit fringe." The hard working, resposible and competant among us, will survive and thrive.

Congress should concentrate on getting better at making protective financial policy, and not contionually putting the burden of policy mistakes on the people. 700 billion, what a joke. We are suppose to be the world's beacon for pure capitalistic democracy. 700 billion public dollars earmarked to purchase bad debt and create permanant management oversight of mortgage and financial futures, is Socialism. And try getting out, once you get started.

Anonymous said...

I'm sure you've all been sitting around wondering "Who does PL endorse in the upcoming Presidential election?". Well, here is your long-anticipated answer.

Bob Barr.

Who?

Bob Barr.

Setting aside the facts that he's got more faults than California and is something of a political chameleon, Barr's platform reflects so much of traditional conservative ideology it's as if he used to be a Republican. (Oh wait...he did.) Plus, Barr recently scored huge points with me when he had the courage to stand up against the bailout legislation, unlike your major political party candidates who shall remain nameless. Granted, Barr doesn't really have anything to lose by taking such a stand. It's not like voicing an unpopular opinion and losing out on 0.1 of his 0.3% vote total is really going to affect anything. That being said, kudos to Barr for taking a stand based on what is right and not on what is popular.

Conservatives - be honest. The only thing worse than an Obama Presidency would be a McCain Presidency. There is another choice.

M and you yippy dogs - you should also feel free to join me in throwing away your vote this November.

Mark Ward said...

I did vote Libertarian in 2000. I do think there is something to be said for a true conservative ideology in government when it comes to finance. The questions is...who will oversee Wall Street if not the government?

Anonymous said...

Well, yes it has to be the government who must oversee wall street, as it is the government who must protect us from ourselves, I guess. The government must act to create and enforce safeguards, but not, to infuse actual money into the system. If there is a bailout, where is the lesson learned?

Create policy that has foresight. For example, a dozen years ago legislative policy was created that relaxed regulation allowing Wall Street the ability to speculate in the mortgage business. It was during this legislation process that the monster baby of zero-down, no-interest, 0% financing was born. The idea, of course, was to provide opportunity for the downtrodden, to provide affordable housing and ultimately, to use the booming housing sector to infuse real cash directly into the big banks. The big banks would therefor have more money to distribute at the lowest possible rate thereby trickling down growth in jobs, inventory, and wages.

The problem was, as we all know now, was that the housing market was artificially inflated, in part because of this relaxing of financial rules. And when the supply of new poor suckers looking for the next easy deal, began to dry up, along with the supply of old poor suckers defalting on loans they should have never had in the first place increased, well . . . oops, it was a good idea at the time.

The sad part is, that along the way, legislation was introduced intended to watchdog this, intended to put controls in place. Of course all were blocked, and this is the core problem. Legislation was created that let the genie out of the bottle - Wall Street will regulate itself, and/or Congress will monitor and react along the way. A genie, with a long leash.

Congress forgot that greed is the driving force of Capitalism, and Capitalism is the basis for their jobs.

Anonymous said...

Today the Dow went up 485 points. The stock market isn't the best predictor of the economy because it is so wildly volatile.

In the recent past the yield on Treasury Bills has been 0% or negative! Yet people have been buying them like crazy because they're "safe."

When that happens, you can be sure that investors will start bailing on T-Bills because they're losing money. Stock market players will always return to the market because nothing else has the kinds of yields they expect.

The real problem with the real estate bubble was that it let too many speculators get into the housing market (buying multiple houses and being able to unload them), and too many low-income people were stuck in usurious adjustable-rate loans.

The long-term solution is to require reasonable down payments, proof of ability to pay off the loan, disallowing multiple loans to speculators without appropriate financial backing, and the banning of most ARMs. This would stabilize markets and give the industry more confidence that things aren't going to fall apart.

It won't be quite so profitable, but that's a good thing -- it'll keep the rampant thieves out of a sector of the economy that we can't afford getting trashed again.

Anonymous said...

That solution is correct; revert back to the old days when housing was seen as slow growth, long term investing. The question is however, does America have the stomach for this kind of investment.

We must remember that the forclosure issue is but a small piece of this, less that 5% of all homes nationwide. The big problem is the value of the mortgage paper overall has declined, in some areas by 25%, and for some of the banks currently failing, the threshold had been breached where they could no longer secure loan money based on negative collateral. However, there still remains a handfull of stout, fiscally conservative financial giants poised to make their move - it's classic capitalism. Bank of America and JP Morgan will do the government's bidding, gobble up the bad debt, and flush it through their systems for slight profits in the end.

This is the market of opportunity and the government should just get out of the way. The issue before Congress now is to watchdog these mega banks - these will be the lifeline for recovery, but they will also hold much power.

What we are also going to see is a further continuation of lower housing values based on simple supply and demand. The supply of single family homes will continue upward as the baby boom generation downsizes in ever increasing numbers, society contracts more to centralized living, and increasing energy costs create needs to decrease square footage per person ratios. New demand from young families will be unable to keep pace as mortgage rules will tighten, wages will remain flat, and interest rates will no doubt increase sharply. Supply up, demand down, prices down. And down for a good long time.

I have been in the real estate business for most of my career, and all of us have seen this coming for years. In a way, it will be interesting to see how this all settles out. In the end, however, America will experience a new beginning and new opportunities of growth in many sectors of the construction and real-estate markets, so fear not.