Hey...guess what? The 2008 Official Republican Party Platform opposes bailouts of private companies.
We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself. We believe in the free market as the best tool to sustained prosperity and opportunity for all.
And yet John McCain is supporting Paulson's plan? A plan that has the blessing of the President? Help me out, here folks. What am I missing?
15 comments:
I'm still cracking up about this one. They caused this whole mess and now they want some welfare. And their platform doesn't even support it? Sheesh, what a bunch of dork wads.
I guess cracking up is what you do when you are able to break the issue down into short, simple soundbites or assign blame to one entity.
I can tell you what you are missing. The bottom line is that none of us want to see what will happen if AIG or Goldman Sachs goes under. To use a really bad analogy, think of the twin towers. The top takes a major hit and the bottom is going to be in big trouble in no time. Yes, they are bailing out rich people but they are also bailing us out as well because there are so many tentacles into society from these firms. The consequences of a firm like AIG or Goldman Sachs going under are so grave that it would make the great depression look like a picnic (direct quote from our finance instructor who has been in finance for 50 years). I always try to keep in mind that sometimes decisions are simply not black and white and that one also needs to take into account the consequences of *not* bailing out these firms. If you haven't looked into the consequences of inaction then you haven't assessed the situation very well.
But how does that jibe with your stated belief that the government should not be involved with the free market?
Enjoy the discombobulation of the Republicans - they do deserve it for abandoning the principles they once proclaimed (even as recently as their convention). But don't enjoy it too much, once the Dems are in the White House and Congress, the internal contradictions of that party will be exposed for all to see. And the grinding stupidity of the political process will turn your precious ideals into dust.
The answer to that question Sara is in the second sentence of my paragraph above...the consequences of one of those large companies going under will have absolutely devastating effects to the entire economy and the financial health of the country as a whole. In this situation, I'll set aside my ideals and base my reaction to the whole bailout question on the practical reality of the situation at hand. If you follow politics you know that history has presented plenty of past presidents with choices that can be summed up as "bad" and "less bad". The consequences of several more companies the size of F&F going under certainly trump any points I would score in a meaningless conversation on a blog. I even agree with Obama on 2 points he made...there needs to be more transparency and the salary of the CEO's of the companies we bail out needs to be kept in check.
The real estate bubble was on the horizon for at least three years. The Bush administration did nothing to stop it, and exacerbated the problem by playing limbo with interest rates to stimulate the economy at a time when they should have been raising taxes to pay for the billion dollars a day we're spending in Iraq.
This disaster had been widely and visibly predicted by such people as Paul Krugman in the New York Times.
Yes, these companies need a bailout to prevent them from taking us all down. But that fact shows that the Republican line on the free market is wrong. The markets do not self-regulate. Greed is not good. Government is not always the problem.
These executives now demand that we bail them out to the tune of a trillion dollars, but until now they've been raking in 10, 20, 100, 200 million bucks a year. They told us, "Screw you, I got it all," until they stumble and come begging to us for help.
The tax rate on millionaires used to at least 50%. In some countries it's as much as 80 or 90%. In part the bailout should be financed by restoring the tax rate on millionaires to 50% (including all compensation, not just salaries). In addition, corporations should not be able to deduct executive compensation in excess of, say, $2 million. Scams like "deferred compensation" (which had Dick Cheney on Halliburton's payroll while he is VP) should be outlawed. The capital gains tax should be raised to be more in line with regular tax rates (from 15% to something like 35%). These tax increases will not affect average Americans in the slightest.
The country needs more money to deal with all the problems we have: a war in Iraq, a war in Afghanistan, cleaning up after hurricanes and tornadoes, rebuilding our crumbling bridges and roads, building mass transit, finding new sources of energy, bailing out rich and greedy idiots, and so on. The fact that the rich and greedy will have less money to throw around on get-richer-quicker schemes will stabilize the economy, rather than choke it.
When regular people want to buy a car, they have two choices: work and save, or take out a loan. The government is the same: work and save (tax people who work, and build up a reserve) or borrow (issue treasury bonds). Why have the "conservatives" been hell-bent on borrowing, and totally averse to the working and saving? Doesn't that seem completely backwards?
"And the grinding stupidity of the political process will turn your precious ideals into dust."
Why am I suddenly getting the image of the Emperor from Star Wars in my head?
"The Bush administration did nothing to stop it". Yeah, and Barney Frank did nothing to stop what was going on at Fannie and Freddie, which was a government-run entity. Plenty of blame to go around. Who got the most money to keep things going the way they were? Be honest now libs. Not even sure why I am attempting to respond to blk as he never responds to anyone himself but hindsight is always 20/20. GWB in 2003 and McCain in 2006 sounded warnings on Fannie and Freddie. You all saw the link the rld posted in an earlier thread. You all also saw the youtube link in the same post with the CEO of Fannie and Freddie stating that their goal was to get more low income people mortgages. What's the economy like or the unemployment rate like in those countries that tax millionaires 90%Bruce? Be sure to provide the complete picture. Capital gains tax rate to 35%???? Wow, what a great way to get investment to stop in this country.
Interesting thing to note - nobody else on this blog has really said if they are for or against the bailout and explained the reasons why they think the way they do.
Another big part of the problem in the financial markets is the desire to assign blame and get a quick "fix" (a typical approach). I'm going to keep reading here to see who doesn't really care about root causes or cures - as long as the other party is seen taking blame in public opinion right? Who is to blame? Lax regulation? Greedy corporate bosses? A feeling the market could only go one way? All probably have a little to do with it. For all your Cheney and Bush bashing, the fact remains that for more than two decades low interest rates allowed many marginal credit risks to obtain credit with little or no personal investment (read: down payment) and that is probably the single biggest reason for the current crisis. In other words, we're in this mess because the banks said yes to those loans we (yes, you and I) asked for (turns out they should have said no more or at least required a healthy down payment). What else didn't help? Legislative policy allowing people to deduct mortgage interest created an incentive for people to load all their personal debt into mortgages. Policy designed to allow more people to buy homes with little or no down payment didn't help.
Here’s the problem with having lots and lots of debt and no savings, whether in the form of a savings account or equity in your house: Sooner or later Tuesday comes around when you happen to have had a bad week, and the guy who sold you your hamburger wants his money, but you don’t have it. Once home prices began to decline (or for the most over-leveraged homeowners, simply stopped rising fast enough), it became a big problem when Tuesday started to come around and lenders and vendors started to ask to get paid for the hamburgers.
Normally this would have been bad for both the homeowner and the guy who wanted to get paid for his hamburger, which might very well be the mortgage lender, but not really a big deal for you or me but this impact was magnified by the fact that most of the mortgage lenders sold the right to the payments under the mortgage to third parties. These third parties broke up the rights to the payments from the mortgages into lots of little pieces, combined these pieces with the rights to payments for little pieces of lots of other mortgages, repacked these in "creative" ways, and re-sold them to fourth, fifth and sixth parties. Four, five and six then used these promises as their own equity in order to raise further debt of their own. This would be like you using an IOU from your neighbor as your down payment for a mortgage. So when lots of these over-leveraged homeowners started to miss mortgage payments, parties four, five and six had less money than they expected, and they had problems making their own debt payments if they themselves had taken out enough debt.
Oh yeah, many of these debt contracts are in fact between parties four, five and six. But the reality is that parties four, five and six are the financial institutions where we all have our life savings and 401k's deposited. That is fact.
I hope I've done my best to shield myself from this...paid cash for my new car a couple years ago, have no credit card debt, made sure my mortgage was a 30 year fixed rate loan, don't feel the need to keep up with the jones' on anything, live below my means, etc. I'm expecting the value of the average home to fall further. Some very over-leveraged homeowners are going to declare bankruptcy. Others are going to sell the boat and eat out less in order to avoid this (WHAT? You mean I have to live within my means? You mean I can't have that latest iphone?!?!?!?! OMG WTF!!).
The trick, of course, is how we get these excesses purged from the system without tanking the economy worse than anything we have seen at least since the 1930s. What makes this especially tricky is that we don’t have a lot of visibility into how exposed each of parties four, five and six are to collapse. This is what Paulson and Bernanke are trying to manage.
Against all of this we have one huge consideration...if investors lose confidence in the safety of money market funds, mutual funds, and other things, we will have a major problem. I’m not sure how many people realize how close we were to the wheels coming off last week. Want evidence of what I just said? When was the last time you heard of the U.S. government identifying a problem, developing a multi-hundred-billion-dollar program/solution and announcing it within about 48 hours?
Very informative last.
I agree. It's nice to hear that your class spent a lot of time talking about what was going on and I agree there is plenty of blame to go around.
I'm not certain a bailout will help. Interestingly, the right and the left are in agreement on this. My main concern, and maybe you can answer this for me, last, is how does a bailout affect the insane amount of spending that has been done under Bush? How much is this going to add to the problem, in light of the fact that everyone seems to want to cut taxes?
"But don't enjoy it too much, once the Dems are in the White House and Congress, the internal contradictions of that party will be exposed for all to see. And the grinding stupidity of the political process will turn your precious ideals into dust."
It won't be the first time I've had my precious ideals turned to dust, juris. And probably not the last. My precious ideals have a lotta bounce-back, though.
Thanks for caring!
Well, the fact that GWB wants to cut taxes or spend money is pretty much a moot point right now when you take a look at the make-up of the house of representatives so there is no way that Bushs desire to spend or desire to cut taxes could affect anything here. Nancy Pelosi has the power to bring a bill to the floor of the House and no parliamentary procedure can help the minority party (the Republicans) to block a majority will to pass it. That’s one fact that has to be remembered. If Pelosi has all the democrats in line to support the Paulson plan then she has the vote to pass it. Some estimates have as many as 50 Republicans ready to support the plan in defiance of Boehner. If that’s true, Pelosi could lose all of her Blue-Dog Democrats and still pass the bill. So why not just call a vote? Pelosi doesn’t want to get married to George Bush on this legislation is my guess. She wants to spread the political risk and get consensus on a bailout plan so that the responsibility for any failure doesn’t rest solely on her shoulders, at least in the House. It appears that Reid has enough Republicans on board in the Senate to survive a filibuster. George Bush will happily sign the bill as soon as he gets it from Capitol Hill. Pelosi could deliver that bill with plenty of votes to spare simply by scheduling a vote at any time. She apparently lacks the courage to do so. That’s not the fault of the House GOP.
So what house Republicans think at this point really doesn't matter. Isn't it a distinguishing characteristic of the House that the majority can pretty much do what it wants? So if Pelosi wants the bailout to happen, and House Democrats are united behind her, why don't we have a bill? Politicization is a two way street. If the Democrats' reaction to McCain's coming to Washington is to care more about denying him a victory than to get the deal done, they're just as guilty of "politicizing" this mess but anyone who knows anything about politics knows that Nancy Pelosi doesn’t need 1 Republican on board to pass a bill through the house. The support of House Republicans is not needed to pass bailout legislation. The Democrats control the House.
I realize that the natural, knee-jerk reaction in an election year is to blame the other party and I’m certainly not letting Republicans off the hook in this case. Yes, in 2003 the Bush administration tried to stop the runaway train of Fannie Mae and Freddie Mac, but the Republicans controlled both chambers of Congress at that time so Democrats alone didn’t block it. No one filibustered the Bush administration’s bill in the Senate; it didn’t have the votes to pass anyway. Likewise in 2006, when Chuck Hagel, John McCain, John Sununu, and Elizabeth Dole attempted to fix Fannie and Freddie, Republicans controlled Congress then too and did nothing to pass this bill. Democrats blocked it, but without some help from Republicans, both efforts would have passed easily. A lot of people, you and I included, had equity building in our own houses at fast rates, making us feel pretty good about ourselves and our futures, and certainly keeping us too happy to complain about it. That’s why this isn’t just a Democratic Party problem. They set the wheels in motion but Republicans, or anyone else for that matter, should have known better. I think plenty of people who work in the financial industry saw this coming but politicians weren’t going to do anything about it. All of us homeowners benefited from the housing bubble and now the bill has come due. We should certainly fault every incumbent politician but if you are an honest student of politics you should also demand an end to government distortion of lending and investment markets to pick winners and losers. No more GSEs, no more CRAs - just a free market with competent oversight and rational regulation.
Thankfully, I don't need to sell my house in the near future. I'll ride this out as best I can.
Good points over all and I agree that there is plenty of blame to go around. Curious what you think about the Responsible Lending Act and its role in all of this.
"just a free market with competent oversight and rational regulation."
I agree completely. The competent part may be a pipe dream.
Let's all just grow a pair and face the reality that this economic situation is like a desperate drunk in the dryout bin screaming for a drink. The party is over people, and we need to bottom out now, so we can rebuild. This economy doesn't need a 700 billion dollar bandaid; it needs to be trashed and rebuilt through dilligence, hard work, and long term planning.
Let it crash. The sun will rise, and we will survive. Anything else is just prolonging the agony.
One more thing for last, his comments are what I mean by "coming heavy."
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