Comrade_paulsonToday’s MSM article worth reviewing is a pair of opinion pieces from across the pond: The first is the delightfully titled Take this weekend off, Hank:

"I do not know what plans Hank Paulson, the US Treasury secretary, has for the weekend. Bird-watching, perhaps. Whatever they are, may I suggest that he sticks to them?

Mr Paulson is a keen ornithologist but he is also an energetic intervener in financial markets and, when he has worked on weekends recently, the US taxpayer has paid dearly.

In March, it was a line of funding to steer Bear Stearns, the investment bank, into the hands of JPMorgan Chase. On Sunday, it was the bail-out of Fannie Mae and Freddie Mac, the quasi-public mortgage lenders, which could cost the US government $200bn (€143bn, £114bn) or more.

It is only Thursday and, already, others seem to be preparing to interrupt his days of rest again."

The entire article is similarly snarky.

The next bit of Brit opinion worthy of your attention is the Times’ We’re all capitalists now? Not any longer:

"Their failure has been so obvious, that even the most capitalist
administration ever, in the world’s most capitalist country, had decided to
wipe out the private owners of its biggest and most important financial
companies and replace them with state-appointed bureaucrats.


The reasons for these failures – related, ironically, to the dogmatic belief
among regulators, politicians and financiers that “the market is always
right” – have been much discussed. Much less widely considered have been the
consequences of this justifiable disillusionment with market forces.


Even more than the mind-boggling $5,500 billion size of the two US mortgage
companies, it was the political significance of their nationalisation that
marked it out as an historic turning point. This was, after all, the biggest
expropriation of private property undertaken by a government outside the
former communist world, yet there was absolutely no protest, nor even
discussion, about the terms imposed by the US Treasury.


Viewed from across the Atlantic, where nationalisations of relatively
unimportant industries such as steel, shipbuilding or coal provoked years of
parliamentary opposition and legal argument, it seems astonishing that the
US Government could simply announce itself as the owner of these giant
companies, wiping out overnight some $20 billion of shareholder wealth. But
what is even more significant is that nobody in American politics or
business objected to this anti-capitalist coup.


This lack of any serious debate about the sudden fate of Fannie and Freddie
may help to stabilise the US economy and housing market in the months ahead,
since American homeowners should soon enjoy a potentially unlimited supply
of government-financed mortgages. But the effects of this nationalisation on
the future of the world financial system will be more far-reaching and
profound."

True dat.

More on Lehman later today . . .

>

Source:
Take this weekend off, Hank
By John Gapper
Published: September 10 2008 19:15 | Last updated: September 10 2008 19:15
http://www.ft.com/cms/s/0/591cec72-7f54-11dd-a3da-000077b07658.html

We’re all capitalists now? Not any longer
An historic turning point has been reached: the West is ditching its faith in free markets and private enterprise
Anatole Kaletsky
Times September 12, 2008
http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article4735446.ece

Category: Bailouts, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

64 Responses to “Take this weekend off, Hank”

  1. Marcus Aurelius says:

    Right now, the American public is the equivalent of being drunk off its ass. They’ll hate themselves in the morning, when the hangover is raging and their bank account is overdrawn.

    Party on, dudes!

  2. Mike M says:

    “…that even the most capitalist administration ever, in the world’s most capitalist country,….”

    Funny.

  3. TDL says:

    I take serious issue with this statement, “Their failure has been so obvious, that even the most capitalist administration ever, in the world’s most capitalist country…”

    The Clinton administration was leaps & bounds more capitalistic than the Bush administration and very few people call Clinton capitalistic. Once again, rhetoric does not equal action (i.e. policy)!

    Regards,
    TDL

  4. CNBC Sucks says:

    I just turned on CNBC on, no audio of course, when what do I see? Dennis Kneale talking to some guy on a split screen with the caption “Should Lehman be allowed to fail?”

    Well, of course, if it can be allowed to fail, then it should be allowed to fail! But my point here is that the expectations of the investing public and that of the general public sure have changed.

    I never thought corporate socialism could be an everyday headline in this country. Never thought that investors would be satisfied with meager and deteriorating earnings to continue to buy stocks. Never thought that we would provocatively send our Navy into the Black Sea, or have an American politician publicly contemplate war with Russia. Never thought that a hurricane could be ready to demolish Texas and have a Venezeualan dictator prepare to cut off a portion of our oil supply and yet have crude only be up $0.93 per barrel. Never thought that a Naval Academy flunkie and a community college and tanning booth bimbo would ever pass for a potential executive branch of the US, much less the ticket of my old Republican Party.

    Times have changed and our expectations and concept of reality as a nation are out of kilter. Dissent such as that seen on this blog is the exception and not the norm.

  5. rj says:

    That’s because Clinton was a Democrat, TDL.

    This past year has taught me I think what should be realized as the key rule of capitalism. Certain businesses have a degree of control over a country just by their very nature, banks being the most obvious because they control the money and purse strings.

    rj’s Doctrine on Markets’ Interactions with Government: Capitalism is practiced when it is good for banks, and capitalism is thrown in the trash can when the banks need help.

  6. leftback says:

    The British do have a talent for irony.

  7. larrybob says:

    part of the reason of the lack of outcry was that they used to be part of the government. they parted ways for purely political reasons (see johnson and vietnam) but never really left. perhaps the lucrative business of securitizing conforming mortgages is best left in the hands of dull bureaucrats and not to the whims of recent mba grads…sort of like monoline insurers: who could screw up these dull but lucrative businesses?

  8. ben says:

    But what is even more significant is that nobody in American politics or business objected to this anti-capitalist coup.

    Um, not exactly, I think plenty of people in politics and business were objecting to this b.s.

    I never thought corporate socialism could be an everyday headline in this country. Never thought that investors would be satisfied with meager and deteriorating earnings to continue to buy stocks. Never thought that we would provocatively send our Navy into the Black Sea, or have an American politician publicly contemplate war with Russia. etc, etc, etc.

    Why are you so surprised????

  9. Concerned Citizen says:

    Why did I quit smoking pot? Could use a thin rolled africain gungy about now!!!

  10. wally says:

    re the Times piece:
    I think that right now the US is so accustomed to being lied to, misled, manipulated and simply looted that it is simply too numb to respond. We’re in a war whose legitimate purpose never existed, we’ve dolloped out gazillions to contractor cronies, we’ve seen the vast majority of CEO’s backdate options and bonus themselves for stripping shareholders clean, we’ve seen any rule of law or limit of authority in financial matters thrown on the fire of expediency. There is no legal way to get back at those guys and the electoral process only polishes the surface and it is illegal to shoot them or burn them out. So what do we do? Go to work for declining wages; dump money in the 401k and watch it drain out the bottom; buy some holiday junk from China to keep the kids happy, mail in the payment on a house that’s worth less than you owe… and wonder, bemusedly, if it really matters if the bottom falls out of everything.

  11. Greg0658 says:

    article “wiping out overnight some $20 billion of shareholder wealth”
    may be true (today), but the government didn’t do that, the market and corporate top exec’s did

    I wonder what the share price will be after the “you markets are on your own” decision? How many years before anyone will go near the shark infested waters?

    This is not a bailout – it’s an arrest.

    Fix the system by removing all the loopholes. Hense Transparency.

  12. leftback says:

    I love to hear the interesting opinions from everyone on here, but can we limit the intra-day ranting just a tad, especially when it is OT – say, in the direction of some of the wilder military fantasies? (Did some of you guys play a lot of toy soldiers when you were little?)

    Perhaps we could have a 12 line limit on the Rant-O-Meter?

    (not you Barry, obviously we love your rants and it’s YFB after all..)

  13. Ben says:

    Learn from the Japanese, let the bureaucrats and aristocrats rules! We’re living in the BAIL-OUT nation. And I’m delighted the Bulls are in control as always!

  14. off topic Q says:

    off-topic question to the BP world…

    Does anyone know of a good site/blogger who tracks the NY Fed’s Open Market operations?

    I’m getting bored of doing it myself and couldn’t find anything from my searches.

    Cheers.

  15. Dan Duncan says:

    A margin call on the US in the form of Fannie and Freddie….

    Questions about whether LEH or WAMU will survive the weekend….

    Questions about whether AIG or MER or Nat’l City…or…. are next?

    A storm as large as the ENTIRE gulf of Mexico bearing down on Texas and oil refineries….

    Retail sales spilling red ink….

    And the indexes are essentially where we started when Fan and Fred plummeted to penny stock land.

    If stocks aren’t selling off now, what will it take? The fundamentals tell me its delusional to be long; but the price action is telling me I’d be going short into a tightly wound coil.

    I tip my hat to those who have a good read on this, because I am beyond befuddled. I guess I’ll just have to enjoy watching what unfolds from the sidelines.

  16. RW says:

    I quit smoking pot cuz the durned stuff was gett’n so potent it put me to sleep before I could get out the first giggle. I just drink scotch, bourbon, beer and wine now; this weekend I may drink all of ‘em.

    As to Frannie, I would have preferred to see it broken into about a dozen pieces to sink or fall as separate enterprises but if their mission is considered critical and no one wants to risk mission creep then re-establishment as a good old government bureaucracy ought to do the trick.

  17. KJ Foehr says:

    I give up; I can’t take this irrationality any longer. The market is doing what I feared today: selloff at the open and rally through the day in celebration of Lehman’s failure / demise / bailout / fire sale buyout.

    What I don’t understand is why? I am sick to death of all this repeated celebration of failure! BSC goes down, the market rallies. Same with Indymac, FF, and now Lehman. Financials are no where near the July lows; yet Roubini and others say we have $700B to $1.3 Trillion in losses remaining to write-off. Are investors really so short sighted as to believe Lehman will be the end of the credit crisis? What about WM, AIG, MER, and the likelihood that others are yet to be identified!?

  18. CNBC Sucks says:

    leftback – Apologies. I agree to the 12 line limit on future rants. This really is my favorite blog.

    Concerned Citizen – You aren’t Brian Westbury, are you?

  19. Chief Tomahawk says:

    Interesting spectrum, BR. Now you’re monitoring the Brits… How long before another Karachi Stock Exchange update? The Brits use their wit… The Pakistanis just riot after 9 straight down days.

    I guess the “eclectic posts rep” for the blog is alive and well!

  20. larster says:

    Is Paulson stating no Fed funds for LEH, because they have used up their credit line at the discount window?

    I think the confusion expressed today is healthy. Think how screwed up you would be if you understood this stuff.

  21. karen says:

    RE: Fed Open Market Operations

    I visit this site, and you can play with the dates if you want. It’s not all-inclusive but it’s interesting…

    http://www.gmtfo.com/RepoReader/OMOps.aspx

  22. scorpio says:

    it’s crony capitalism, and it’s practised whenever and wherever capitalists can get away with it. heads i win, tails you lose. this is how things go really bad: when there isnt a competing ideology or political party, when the Democrats are simply echo chamber for the Republicans, just a little fainter and a bit more polite. the Democratic refrain lately after major action taken by Republicans to save their buddies: “there must be hearings, we’ve got to know more!” i think we know enuf already

  23. leftback says:

    KJ and Dan – I feel your frustration, dudes. Chill.

    Bear markets are always very oscillatory, whatever the underlying fundamentals might be screaming. It takes a lot of fear to create a big sell-off, or a lot of energy on behalf of the shorts, and these intense “selling stampede” (to quote Jeff Saut) periods can’t be sustained. I actually put some longs on last week and again on Tuesday, partly with an eye to the Fed meeting and partly because the selling was so intense.

    So what can you do? Well, you can spend the intervening time watching the charts, looking at the money you made last time and setting up your next short for when Mr Market bumps into technical resistance. Pretty cool, eh?

    You can also join the discussions about which CNBC/Fox/Bloomberg anchors you like to listen to, with or without the sound. It passes the time. So far, Christine Tan seems much more popular than Dennis Kneale. Odd, that.

  24. Marcus Aurelius says:

    Some people quit smoking pot because it causes introspection, and they don’t like it. Try PCP.

  25. Jtil says:

    There has been no discussion and no outrage because the American People don’t have the slightest understanding of what just happened. They’ve been discouraged from thinking critically for three generations now. The Government can do what it wants without much public outrage (go ahead and demonstrate, citizens. Get it out of your system). And the bleating Republican party can continue to chant their free-market mantra and pretend nothing has changed.
    Of course the Brits call a spade a spade.

  26. there are nice people on the internet too says:

    ***RE: Fed Open Market Operations

    I visit this site, and you can play with the dates if you want. It’s not all-inclusive but it’s interesting…

    http://www.gmtfo.com/RepoReader/OMOps.aspx

    Posted by: karen | Sep 12, 2008 11:59:46 AM***

    Thanks this was exactly what I wanted! Woo-hoo. Now let’s watch WaMu.

  27. dome says:

    With respect, BR ……..

    I disagree with your analysis over the last few days on the impact of the various bail outs of US banks.

    Your – and many other people’s – reaction is that the Government ( aka US taxpayers ) will pick up the bill. I do not believe that is true. The reason is that nobody is suggesting that US taxes are going to INCREASE in order to cover this INCREASE in Government spending; in fact, EXISTING US taxes are insufficient to pay for the Government’s EXISTING spending – that is why there is a budget deficit. No, the people who will ACTUALLY be asked to pay for the bailouts are overseas investors in US Government Bills, Notes and Bonds. They are also the people who ACTUALLY paid for the recent tax rebate cheques.

    This creates a number of interesting problems.

    (1) The US Government is putting itself in exactly the same difficult position that US banks currently hold – having to raise increasing amounts of money from “outsiders” while under extreme financial pressure.

    (2) If an investor buys a large percentage of the shares in a company, he wants influence, a seat on the Board maybe. Have we not already started to see this effect with Chinese / Russian / Japanese governments, who are large investors in FNM & FRE “twisting the Government’s arm” to formally guarantee the debt of the GSEs? Do you not think that they may want – and obtain – more influence as they are asked to buy even more debt in coming months? Does the Government believe that is NOT going to happen?

    (3) Then the important question becomes “What quantity of T-Bills, Notes and Bonds are going to be sold to finance the budget deficit (however you want to measure it)?” That is a question that will be answered over the next few months. The answer will not be pretty. Will those Bills / Notes / Bonds be sold at a higher yield? I believe so. BUT more importantly – “Is the US Government really willing to pay higher interest rates for up to 30 years to overseas investors, in order to prevent a SHORT TERM problem that the banks have brought upon themselves?”

    Your thoughts?
    Dome

  28. lb’s on the right track, those that are trading all the time wind up burning their funds out, or themselves up.

    Stay liquid, pick your spots, learn how to use Options to amplify returns and/or generate income..

    Here, at TBP, we should know, by now, thanks to BR’s diligence, the Frame changes the Scene..

  29. Concerned Citizen says:

    CNBCsucks, no he’s doing something though – perhaps mushrooms but I think it might be more like glue sniffing?

  30. John says:

    “I think the confusion expressed today is healthy. Think how screwed up you would be if you understood this stuff.” larster

    This is my favorite line of the day. Got a huge belly laugh from this, and believe me I don’t get many of those these days.

    Thanks for the laughs

  31. John says:

    Why should we worry about a small amount of nationalization when we have lip stick on a pig to consume our deeper political brains.

    Such a country.

  32. DavidB says:

    This is all becoming so very……pathological

    Hey, do you realize that the system is now so heavily leveraged that any kid’s piggy bank is now too big to fail?

  33. Lysander says:

    “RIYADH, Saudi Arabia (AP) — Saudi Arabia’s top judiciary official has issued a religious decree saying it is permissible to kill the owners of satellite TV networks that broadcast immoral content.”

    I had no idea that many people were mad at CNBC

  34. Andy Tabbo says:

    I don’t think the market is completely falling apart because shorts have been burned more than a few times with many of those “miracle Sundays” where the Fed slashes rates or bails out someone….so the big shorts are probably just staying away from it for now….

    but this price action is not great imo. I agree it seems somewhat bullish the market is not falling apart in the face of terrible news and anxiety….but 1225 was a big key level to hold and the market has been testing and breaking that level a few times now…markets are NOT supposed just keep testing support levels…markets are supposed to reach critical support and then scream higher….it’s not really doing it. I think the shorts are leary….

    We could see a real vomit comet on Monday.

    - AT

  35. Please, please take the weekend off, find another hobby!

  36. karen says:

    leftback, hope you are happier with your gdx now :)

    anyone take a flier on NEM yesterday? gdx is the better % performer, though.

  37. winslow says:

    Americans have been lied to by their government for a long time. Truth and lie can no longer be separated. We were always fed the belief that truth and knowledge would prevail. But, alas, the MBA marketers understood psychology of the American mind and how to manipulate.
    Ameicans should be protesting this cronie government but, I guess, we’re too busy watching the tube. Hardly anyone was upset that we were even torturing captives (even before determining if they were guilty). In other words, in the name of what we stand for, we can do anything ….lie, deceive,torture, look aside when ethics are compromised. Republicans can attack Democrats and vice-versa, but don’t ever seek common ground…that is not the new American way.

  38. Ben says:

    A BIG OUCH on AIG! Is that what MELTDOWN means?

  39. John(2) says:

    All this tearing of hair and rending of garments about the rescue of BS and takeover of F/F seems a bit overdone. According to all these pontificants Paulson is going to burn in hell for his actions but none them actually say he should NOT have done what he’s done. They just want to bemoan the consequences, bluster about moral hazard, whine because Bill Gross has made a lot of money and so forth but what were the alternatives? It’s a form of self abuse or, since this pieces were picked up from British newspapers, what they’d call wanking. There’s a similar ritual denunciation in the WSJ this morning from one of the usual suspects at the AEI because Paulson has essentially ensured the survival of F/F in something approaching their historical form. He’s done it for the very sound reason that they perform an essential function in the US mortgage market whether anyone wants to admit it or not. As to Lehman it’s more borderline than BS but there are a lot of sound arguments for its orderly purchase by a big bank despite all the screaming about principle. I can’t see how the deal gets done without some greasing of wheels by Paulson. This seems to be one of those cases where we’ve swallowed the camel so why all the fuss about swallowing the gnat. Unlike so may here I’m not anxious to see a conflagration on Wall Street because most of the people who would get burned are on Main Street.

  40. leftback says:

    @Karen: ” hope you are happier with your gdx now :) ”

    U betcha. Gold may have finally put in a bottom here and you were right on with the oversold indicator on GDX.

    The big question is: is this a head fake or is this a turn-around in the $? If this is for real and we get a rate cut, then gold will fly – buy on dips.

    It’s been a good week after all – I am just pissed off I didn’t buy more – and also that I got stopped out of DIG yesterday through my own idiocy.

    BTW, anyone looked at the yield curve? That ol’ Bear Steepener is on again, everyone piled into 3-month bills. The long end of the curve is not the place to be right now as Treasury prepares to launch a massive supply to pay for Maximum Bailouts.

  41. KJ Foehr says:

    Leftback,

    Thanks for your comment. I know you are right, but sometimes the insanity of the market becomes unbearable, or nearly so!

    A question for TBP readers: Do you think BOA can absorb the toxic waste from both Countrywide and Lehman and continue to survive itself? Or, at least, without serious consequences (huge losses / stock decline)?

    I had assumed Countrywide would have caused it enough heartburn to last a few years, so I was shocked to hear it is considered the most likely buyer of LEH.

  42. Anonymous says:

    First, I think the government using bureaucrats to take over FNM and FRE is asinine and will result in catastrophe.

    But, please, please, please, stop citing people who say that the government “wiped out” shareholder equity. The government made a senior injection of capital to a failing enterprise. Sure, it got common warrants, but what non-governmental lender would set up a credit facility of up to hundreds of billions of dollars and not ask for common warrants and a suspension of dividends until the line of credit was repaid. Honestly, the government did not wipe out anything. You could actually view it as saving the ass of these shareholders. The preferreds and common still theoretically have a chance to make back their money if FNM and FRE are not really insolvent (which they were/are and thus these shareholders had no equity to wipe out anyway).

    Of course, as I said at the top, this is a monumentally stupid idea to let the Congress and the bureaucrats have their hands on this gigantic mortgage machinery. It will end in catastrophe for FNM and FRE shareholders and the US people. But there was no “wiping out” here.

  43. ben says:

    karen, I did a little NEM wed. afternoon. I’m now out.

  44. karen says:

    I just saw the headline:

    Bush Administration: GSEs To Remain Off Federal Budget

    I guess they’ll put them in Level 3 Assets

  45. Lysander says:

    “markets are NOT supposed just keep testing support levels…markets are supposed to reach critical support and then scream higher….it’s not really doing it. I think the shorts are leary….

    We could see a real vomit comet on Monday.”

    True, and they’re also not supposed to keep hitting their 50 DMA from below and keep failing to break through.

    As for Monday…we’re coming up on OpEx week so you never can tell. I’ve given up on guessing. For now I have skin in the game to profit if things go way south, but plenty of dry powder if there’s a bailout pop.

    Good luck to all.

  46. karen says:

    ben, 2 gaps on gdx. one at 31, the other at 37.35. haven’t decided what to do yet. looks like nem closed it’s first one. good going :)

  47. pmorrisonfl says:

    John(2) writes:
    > but none them actually say he should NOT
    > have done what he’s done. They just want > to bemoan the consequences, bluster about > moral hazard, whine because Bill Gross
    > has made a lot of money and so forth but > what were the alternatives?

    I’ve seen it claimed that what should have been done is to place F/F into receivership, and let the existing bonds run off. I realize it’s politically unplatable to allow the investors (China, Russia, PIMCO, etc…) take actual losses based on actual risk, but to not think of it as an alternative seems unfortunate to me (as a US taxpayer and citizen). Having the cheapest,easiest mortgage market on the planet is what got us in to this mess; it’s still not clear to me that keeping it cheap and easy will get us out of this mess.

  48. KJ Foehr says:

    Take a look at a 10-minute / 10-day chart of the VIX. That is the most encouraging thing I see right now as a short.

  49. Ritchie says:

    Capitalism was last allowed in the Clinton Administration. Remember the DOT-COM BUBBLE? A lot of companies failed. The better one survived. The Internet grew continuously through all that creative destruction.

    Then along came the bush administration and ENRON

  50. DL says:

    KJ Foehr @ 2:47:28 PM

    VIX is indeed acting strangely. Since 9/3/08, the SPX has barely budged, yet the VIX is up 15%.

    For what it’s worth, my own guess is that VIX goes to 30 before it goes to 20.

    (And if it does get to 30, the $64K question is whether that will be enough for a reversal).

  51. leftback says:

    The power of technical analysis… I have been talking about this currency reversal for a few days now as the $ index rolled up to USD 80, but wasn’t expecting such a violent move. The $ index peaked at 80.3 and rolled over big-time today:

    http://www.bloomberg.com/apps/news?pid=20601083&sid=am6b4iSP8hgw&refer=currencies

    The long bond is also selling off after reaching a multi-year low yield earlier this week.

  52. John(2) says:

    pmorrisonfl:
    “I’ve seen it claimed that what should have been done is to place F/F into receivership, and let the existing bonds run off. I realize it’s politically unplatable to allow the investors (China, Russia, PIMCO, etc…) take actual losses based on actual risk, but to not think of it as an alternative seems unfortunate to me (as a US taxpayer and citizen).”

    The problem is that it wouldn’t just have been politically unpalatable it would have dramatically increased US public borrowing costs because these guys having been burned would want more for their money and it might even have produced a major flight from US govt securities. An increase of say 150bips in US borrowing costs adds I believe around 200 billion a year to the budget deficit. That’s why they couldn’t afford to tick off the Chinese and Russians. And then who exactly was going to continue buying securitized US mortgages? They’d either stop buying altogether or the cost would have gone through the roof and if either of these had happened what would have been the consequences for the mortgage market and home sales. In practice there were no realistic alternatives even if Bill Gross made a lot of money for his mutual funds.

  53. Prophet of Profit says:

    By the time Hank is done nationalizing all banks, auto companies…etc. the People’s Republic of America will have a command economy that’ll make the old Soviet economy look like the Wild West of capitalism!

  54. pmorrisonfl says:

    John(2)
    Thanks for taking the time to respond. I may be barking up the wrong tree, but I’m still not seeing your point.

    > dramatically increased US public
    > borrowing costs because these guys having
    > been burned would want more for their money
    If the money USTreasury was committing was sitting in savings/assets, I would agree with this. Since the money will be borrowed/printed/defaulted in to existence, these guys will be burned anyway, driving up everyone’s costs anyway. It just kicks the can down the road in a way that can be stage-managed by the government. That doesn’t bode well for the future.

    > major flight from US govt securities
    I realize there’s more going on than being rational, but it seems a rational investor would consiser US govt securities to be more valuable rather than less without the F/F bundle of assets/ liabilities/ uncertainty effectively on its balance sheet.

    >adds I believe around 200 billion a year to the budget deficit.
    There are two ways to deal with a deficit: earn more or spend less. This doesn’t really do either.

    > who exactly was going to continue buying securitized US mortgages?
    You say this as if the only possible future is more of the present. We would wind up with less systemic risk if we returned to the old local bank/local loan model. I don’t think we can close Pandora’s box, but to think that it’s going to start emitting solutions as well as problems might not be the best approach.

  55. leftback says:

    pmorrisonfl :

    >adds I believe around 200 billion a year to the budget deficit.

    There are two ways to deal with a deficit: earn more or spend less. This doesn’t really do either. <

    If we actually did earn more or spend less we would be in good shape.

    Unfortunately, US government can also: issue debt (increase supply of Treasuries) and print money to save the finance economy.

    At some point this can result in increased interest rates and price inflation in food and energy, which ultimately slow the real economy.

  56. Blissex says:

    «we’ve seen the vast majority of CEO’s backdate options»

    As to this, I have yet to see any of those sent to jail for massive tax evasion, unsurprisingly. Backdating options may or may not be corporate or accounting fraud, but is surely tax evasion, because it reclassifies income as capital gains.

    The amount of tax evaded is usually so huge that it goes easily into criminal territory, and the case is open-and-shut.

    Why aren’t the backdater’s in jail?

    Now I understand the argument that taxing the income of executives is itself a crime a a fraud, as they are the best the brightest and the most deserving citizens, and fully entitled to deploy any means necessary to protect their income from the parasitic exploitation of the state.

  57. pmorrisonfl says:

    leftback: of course you’re right, and I stand corrected.
    In my defense, I was limiting myself to ways to actualy deal with debt, as opposed to temporarily look like we’re dealing with debt.
    It’s obvious that the US is on the course you describe. In my personal life, I found out there was a limit to that, thankfully before I ‘crashed’. I do hope, but don’t expect-based on this week’s events in particular-, that the US will pull back from the brink before a crash.

  58. John(2) says:

    pmorrisonfl:
    With due respect you are barking up the wrong tree. I typed a lengthy response attempting to explain how the 2 billion a day we borrow is funded and that a return to the Bailey Savings & Loan isn’t really an option in 7.5 million+ housing market, but I deleted the lot. I’m sorry if this sounds rude, but you need to go and buy a book on political economy.

  59. pmorrisonfl says:

    John(2):

    You seem to take it as a given rather than a problem that we must fund the 2 billion a day. As I was typing the post you refer to, I was thinking ‘don’t feed the trolls’.

    But I’ll bite: which book on political economy would you recommend?

  60. pm,

    you’re a decent dude, there are better things than ‘jonteau’–he has no answers, merely a pre-recorded message.

  61. dogcatcher says:

    “…that even the most capitalist administration ever, in the world’s most capitalist country…”

    I think the author of this piece meant “the most crony-capitalist administration ever.”

  62. Fred S. says:

    Seems like the free market crisis, brought about by the free market ideology is causing the free market administration to abandon the free market principles. Hey maybe we should leave these clowns in office to clean up the free markets. The irony is killing me. The negative feedback loop is so intense that this most capitalistic administration is being forced to take steps that it wished could be pinned on democrats. The markets are self regulating after all.

  63. pmorrisonfl says:

    Mark Hofer
    > there are better things than ‘jonteau’

    I read this blog for education; I read the comments for education and irritation. To me the irritation is a necessary ingredient, in much the same way pearls form around grains of sand. There are certainly much better things than the irritation, though. Thanks for your contributions to my education.

    Fred S.
    > Hey maybe we should leave these clowns in office to clean up the free markets.

    What if administrations(and legislatures and executives and boards) had to recover their deficits by the time their terms were over? Or, what if they remained on the hook for the deficits after their terms? Seems like it would encourage greater responsibility. When they asked Henry Ford how to regulate pollution, he said that the factory owners and their families should be required to live down stream from the factory. Something like that probably should (and probably won’t) happen.