The financial crisis, my "big picture" take on what's going on ...

We have been put in this situation by Republicans, and the choices for solving it are going to hurt us all. At this point, Congress needs to minimize the hurt.

As repulsive as it is, we need to save our financial infrastructure, which means we need to help the financial institutions that created this mess. This will be followed by strict oversight and regulation.

I don't believe financial institutions will be allowed to lapse back to their irresponsible ways, at least for the next 3-4 generations. This crisis has been a shock to their systems. It's made taxpayers furious, which will be motivation for Congress to keep up with the regulations and oversight.

The Democrats, I believe, are on the right track. The "bailout" is necessary. In order to rescue our very sick financial system, it needs to be resuscitated and reformed. The president and treasury secretary seem to be cooperating with them.

The Republicans who are revolting against it are either following the knee-jerk reactions of constituents who don't understand what's going on, or still believe that a free market can solve its own problems. They don't understand, even now, how their policies have led to this moment.

Taxpayers who oppose the bailout need to realize two things:

* we're as strong as our weakest link. The bad mortgage held by our neighbor is our problem. Everything we do is intertwined with the activities of others. It's always been that way, that's how societies thrive or fail, how civilizations rise and fall. That's why there is so much wisdom in working for the greater good, and ensuring a fairer distribution of wealth.

* "We," collectively speaking, are ultimately responsible for the failure of our financial infrastructure. Many of those angry taxpayers who are calling their congressional representatives to protest the bailout don't realize that they helped create the monsters, the greedy short-sighted New York financiers, who engineered this financial mess. They did it by electing members of Congress who allowed the dismantling of the regulations that led to this financial crisis.

But wait, some of us didn't vote for those members of Congress. Some of us didn't even vote! Some of us had members of Congress who opposed dismantling financial regulations. So don't blame us for this mess!

Doesn't matter. We're all intertwined in each others lives. The bad decisions of others affect us all, as do the good decisions. We're like a big flock of birds, or a large shoal of fish where the actions of few cascades, in a complex series of events, to influence the actions of the entire group.

The only way we are going to affect more good decisions than bad ones is by making everyone understand that we are responsible for each others well-being, that we need to adopt a "we" attitude, and abandon the "me" attitude. It's going to require a major change in the mindset of our citizenry, one that's more compassionate and caring towards others, one that values honesty and justice. Time will tell how it all turns out.

You said: "The Republicans who are revolting against it are either following the knee-jerk reactions of constituents who don't understand what's going on, or still believe that a free market can solve its own problems. They don't understand, even now, how their policies have led to this moment."

It is ideological and this is one of McCain's problems. He can't control them, they don't even like him. They are the new young elected reps of their districts and most of them are safe for the election. Nevertheless, it is dangerous going on because no matter how or why we got into this mess, we have to dig ourselves out of it and as you say the important thing is that safeguards are set up to prevent our financial system getting into this mess again.

This is why Obama is the one needed to win this thing. McCain sure as hell won't set up anything to prevent it. He has exposed himself as nothing more than a drama queen and only cares about himself and winning elections. He has shown himself even willing to risk having a market crash to try and win an election.

Yes, this is a case where republicans and democrats have to find a way to come together to get this deal done. I like the installment thing, the CEO compensation limitations, etc. However, I also would like to see somebody explain in a courtroom setting how, why and who was responsible for this.

Doing nothing may well be a critical mistake, as you appear to argue.

So the emphases should be on doing something that works and helps the most people possible.

Why do you feel this particular "deal" is the best deal?

that the WH as agreed to, such as CEO compensation limits, oversight, and protection for taxpayers in financial difficulty. A lot of those conditions were outlined by Robert Reich several days ago. See
http://tpmcafe.talkingpointsmemo.com/2008/09/21/what_wall_street_should_do_to/index.php

If this is what the Dems are doing, which is consistent with what I've heard in news reports, they are doing the right thing. The WH seems to be going along with it. The Dems appear to be showing some serious spine and should be applauded for it. They are doing an admirable job in what can only be described as a totally horrendous financial situation where the best solution is to minimize damage.

The problem is the Republicans. They're being stubborn and inflexible, clinging to the "free market" mantra that's brainwashed their thinking for decades.

I'm no financial expert. These are just thoughts extracted from my reading of the news. I would really like to hear from people who know more about the complexities of our financial infrastructure.

If someone disagrees with me, please explain why. I'm here to learn more about this and if your arguments make sense, I may change my mind ....

I'm neither agreeing or disagreeing with whatever the so-called compromise was before they switched it. I haven't seen it.

The problem is corporate power vs citizen power. Who pays, how much, and on what terms?

>>This will be followed by strict oversight and regulation.

>>I don't believe financial institutions will be allowed to lapse back to their irresponsible ways, at least for the next 3-4 generations. This crisis has been a shock to their systems. It's made taxpayers furious, which will be motivation for Congress to keep up with the regulations and oversight.


I certainly hope you are right - history is filled with cases though were crisis like these were used for more DE regulation. Usually at the point of a gun.

...the financial industry having a highly regulated future in store for it, but I'm just not as hopeful-- especially not with this rush to "save" the system that is so fundamentally broken and greed driven. I don't want us to preserve our financial system-- I think the ENTIRE focus should be on reform and on helping the real victims of this mess. The real victims are not the bankers and financiers who will benefit from the bail out. Instead, I think anyone who helped engineer the current meltdown should be excluded from playing any roll-- or profiting-- during the recovery.

I think that if we bail Wall Street out there won't be any fundamental change. Even if the bail out comes with strings attached, I'll bet that the strings will all be cut before too long. The system is based on greed, so as long as there are greedy people out there willing to do anything to feed their avarice, the current system will move along a trajectory toward unbridled corruption. Have you read about just what the bankers and their cronies did to make this happen? Even if we seal that stinking hole up, as long as we let them back into the same game they'll find others to exploit.

I want really fundamental change. Deep and wide change. I want an economy and a financial system with little or no resemblance to greedy consumer capitalism. So no, I don't agree that we should saddle ourselves, our children, and god knows how many more generations with debt to save this rotten edifice. I do not consent. We don't even need to tear it down-- it is buckling under the weight of its own stink. Instead, we should be thinking about the future and what we can rebuild from its rubble.

I would start by bailing out the weakest links you describe. Instead of bailing out Wall St and saving the value of those bad mortgages, I'd advocate destroying their value altogether and relieving the debts of people threatened by predatory capitalists. But for god's sake let's not reward the rat bastards who created this mess by saving their corrupt game so they can keep playing it.

and to achieve the things you outline, we first need to fix our financial infrastructure which, unfortunately, includes those scum financial institutions that created this mess. That's what the bailout is about, at least that's my understanding of it.

We've been hurt time after time by these thugs. Perhaps one good thing will come out of this hideous mess, a mass realization of how we've been manipulated and cheated these past few decades by the right. That's the only way we're going to recover and move on.

How is it going to help? Economists are saying it will actually help nothing. Either way we are in for some really rough times ahead...excuse me, rougher times ahead. Why do we need to bail them out? They are getting paid twice. AND...just this week my CC raised my interest rate - doubled it in fact. I am diligent about making my payments for everything on time. I called and they said they raised it due to the economic crisis. They are robbing us blind and we're letting them.

I am OUTRAGED!! I don't want a bailout plan, I want to start seeing people being arrested!!!

> How is it going to help?

What are the alternatives to a Democratic-crafted bailout? Letting the market correct itself won't work, it's practically on life support. This government-backed insurance idea by the Republicans is like giving a saline infusion to a severely anemic financial institution, when what it needs is a blood transfusion (the bailout).

> Economists are saying it will actually help nothing.

I'd like to know the identities of these economists and their credentials before considering their reservations.

> why do we need to bail them out? They are getting paid twice.

Because those scumbags are the heart of our financial infrastructure. We have no choice. Yes, some of them will make more money and will be rewarded for their crimes. But that's a perk that comes with being an indispensable part of the financial system that supports everyday folks like us. It's grossly unfair, and when the market is stabilized, I hope we still have the outrage and will to force changes to that sick system.

> ...just this week my CC raised my interest rate - doubled it in fact. I am diligent about making my payments for everything on time. I called and they said they raised it due to the economic crisis. They are robbing us blind and we're letting them.

I have been in similar situations with my credit card companies, and feel for you. I'm also responsible about making payments on time, and it infuriates me no end to see people who abuse the system making out like bandits as a consequence of lax regulations. Dishonesty and stealing are fundamental human characteristics that we can never eradicate -- there will always be people who think they're entitled to things they did not earn. As long as they exist, we need regulations to keep honest people like us from being abused by them.


I feel sick about this too, and feel your outrage. But I'm also worried about the consequences of allowing the financial infrastructure to crumble. It's a horrible situation, and I want revenge too. But I want to see our financial system stabilized before we go after those crooks who created it.

and indeed, time will tell. It's difficult to keep your head and come to independent conclusions with the tidal wave of knee-jerk opinions that are floating around.

but if I'm wrong about something, I want someone to explain why. I don't understand a lot of what is going on. It's insanely complex. I'm just trying, as you are, to make sense of the information and commentary gushing out of the firehose.

I was almost convinced a bailout was unnecessary after reading James Galbraith's article yesterday. Although I didn't really understand how his plan was better. Then WaMu failed last night and everyone is in a panic again today. It's not an easy thing to figure out, and all partisan lines have broken down. Anyone who looks to a consensus among their party leaders for guidance is going to be hopelessly confused.

Some more of my own thoughts here:

http://journals.democraticunderground.com/ribofunk

My head is going to explode! This stuff is nuts!
We need an emoticon for exploding heads or an exhausted smiley face. ;(

The gist of it was that a Paulsen-type bailout was unnecessary, and that the government should put $500B into FDIC insurance and have another $500 ready to step in if there are additional failures (if I remember it correctly).

What I didn't understand was why he proposed waiting for failure and then forking over dollars to depositors rather than being proactive. If the government steps in before failures, it is possible a lot of the losses might be averted, and the taxpayers would get a good chuck of the value back in equity and collateral.

And have a look at the Century of the Self if you haven't already.

This kind of change, a paradigm shift, will take years. But it has got to start somewhere.

What you say is the basis of socialism, for me. The sense of we > me.

:thumbsup:

I think we may need a bailout but not at this time. I do not think we need to bail out these "weak links" that got us into this mess. WaMu went under last night. Wachovia may be next. They both deserve to go under. The market needs to shake down. This is going to be a painful correction, not a soft landing, as we have become accustomed to. I think by this time next week, most of the bad players will have shown their hands. Then we can begin to fix the system with the oversight and regulations that are needed.

Naturally, these folks want the taxpayers, "the government", to save them. But, I am hoping that Congress can hold out for another week and not be pressured by the doomsayers. Once the market shakes down, we will have a much healthier, albeit, skinnier, financial system. It will not be painless.

I believe the Democratic plan calls for incremental bailouts (I think that's what Schumer has advocated?). If that's the case, bailouts would be done on a case by case basis, based on how the demise of an institution will affect our lives. That's why AIG, Fannie, and Freddie got bailed out but not Bear Stearns. I'm pretty naive about financial matters, but at first glance, I'd agree with you ... WaMu deserved what it got.

Firms will know that if they make risky investments and profit, they keep the profits, and if their risky investments lose money, then the government will give them money.

This isn't a bill for more regulation.

this could be our chance to meaningfully put a stop to that bullshit.

If there is any time in the recent history of our country where we need to force common sense and rule-of-law into our terribly flawed political system, it's NOW. Money talks. Let's work our butts off to make that money talk, for a change, for the greater good of all citizens.

OK, say the bailout doesn't go through, and the worst case scenario happens, we go into a second Great Depression. We've survived Great Depressions before, and recovered from them stronger than ever. Depressions even have some positive points, the scoundrels get their just desserts, the weak are culled from the corporate herd, regulations are put back into place to protect our society, and money is spent on the real economy.

However if there is a bailout, two things are going to happen. First, injecting that much liquidity into the system is going to weaken the dollar significantly, leading to high if not hyperinflation. Second, and most important, within six months, perhaps a year depending on how the bailout is structured, the rating on US Treasury bonds, the method of how we fund our government, is going to get downgraded. We will not be able to obtain any money on the credit market. Our government will have no money to spend, thus collapsing. Our economy will likewise collapse. This will be a disaster of such epic proportions that it will make the Great Depression look like the Roaring Twenties.

This bailout is designed to do two things, bail out the financial sector and buy enough time for Bush to skate out of office, leaving the next president to take the fall. This cure is much, much worse than the disease. I've talked with several economists and they are all scared shitless over this proposed bailout. The Republicans might be misguided in their reasons for opposing this bailout, but frankly I welcome their help in defeating this atrocious and deadly plan.

Once more, as we've seen with Bushco time and again, we're being stampeded over the cliff by the use of fear. Let's stop and actually think this time rather than blindly jumping to our death.

like i said earlier, there's a lot i don't understand about this stuff. So I'll go off and think about what you've said. :hi:

and agree with the effect on the dollar, especially, vis a vis, the euro and the yen.

But I'm also not so sure that doing nothing is the best way also. I'm not terribly crazy about the "equity stake" in the financial markets if what this bailout is nothing more than buying off the financial "bad debt" instruments. Junk debt is junk debt no matter how you slice it. It's yours because no one else wants it. You can keep it all you want but until you do something to make that debt performing again it'll just sit there.

Would another RTC work? Until today I had thought the OTS was twilighted and no longer in existence. But with them taking over WaMu and placing it in FDIC receivership makes me wonder if this may work again? I honestly don't know.

We need to punish those who created this mess,
and reward those who played no part in the chicanery.

BS: " "We," collectively speaking, are ultimately responsible for the failure of our financial infrastructure"

No. That's like saying we collectively are responsible for Bonnie and Clyde.

BS: "We're all intertwined in each others lives..." So, do I have to pay my friends stupid gambling debts. HELL NO!!

Nice sentiments, but this is like walking into a fire smiling when the other team wants to burn your money.

Of course we need to punish the crooks, but what good will it do let the financial infrastructure crash and hurts us all (while those crooks and their billions are happily sipping martinis at their private Caribbean islands or Swiss chateaus). Let's do what we have to do to stabilize the market so the crooks have an interest in sticking around and making even more money, then we go after those scum.

Bonnie and Clyde ... that's got nothing to do with this financial collapse. Get back to the here and now, and think about all the events that have led to this catastrophe. One of those events includes the neighbor's bad mortgage.

No, you don't have to directly pay for your friend's gambling debts. But someone will. If your friend pays off his debts, some bank will be making money from the interest. If your friend and many others go bankrupt, you and the rest of us will pick up the tab indirectly with higher interest rates or fees.

None of us are isolated islands. In a society, a community, a country, little events accumulate to drive larger trends. If most of the little events are negative, the larger trends will be negative and could trigger more negative little events that feeds the growing large negative trends, and so on ... it's a dynamic force. So yes, our lives are all intertwined, whether we like it or not, and it's in our best interest to make sure we're all doing well. That's the lesson that the Republicans can't seem to grasp.

"Many of those angry taxpayers who are calling their congressional representatives to protest the bailout don't realize that they helped create the monsters, the greedy short-sighted New York financiers, who engineered this financial mess. They did it by electing members of Congress who allowed the dismantling of the regulations that led to this financial crisis."

-----

I would be more inclined to agree with this if we had transparent elections. But our elections are: a) now entirely NON-transparent, with electronic voting machines run on 'TRADE SECRET,' PROPRIETARY programming code, owned and controlled by Bushwhack corporations, with virtually no audit/recount controls; and b) have been dominated by "organized money" (as FDR put it) and Corpo/fascist 'news' monopolies for decades before the Corpo/fascists got their hands on the actual vote counting mechanism.

This Corpo/fascist two-fer means that our democracy is not really functioning.

You can blame "angry taxpayers" for lack of vigilance over our voting system, but I would hesitate to blame taxpayers and voters for what the Diebold I, II and III Congresses have done, or what Bush/Cheney have done, because it's clear to me that their actions have been in defiance of the will and interests of the people. For instance, nearly 60% of the people of this country opposed the invasion of Iraq (all polls, Feb 03), just before the invasion. The Dieboldization of the election system was already in progress, and was boosted in the same month as the Iraq War Resolution-IWR (Oct 02), with the misnamed "Help America Vote Act"-HAVA (in reality, the "Help America Vote for Bush's War Act")--the $3.9 e-voting boondoggle that fast-tracked these election theft machines all over the country, during the 2002 to 2004 period.

These election theft machines (s)elected Bush, and we still have these machines. The machines have also been used in our primary elections, selecting our candidates, and, of course, are in use in Congressional elections. I wouldn't say that every member of Congress has been (s)elected by Diebold and brethren, but I would say this, with confidence: There is hardly a member of Congress who can prove that he or she was actually elected.

I remember discussing the election theft machines with a friend of mine, some years ago, and, after I laid out the facts of the system (its non-transparency, the Bushwhack corps who own the secret code), she said, "But the Democrats wouldn't let that happen, would they?"

The issue is not what "the Democrats" would do. It's what they did do. Our party leaders went right along with the privatization of--and, indeed, with Bushwhack corpo control of--our election results, and still support it. This is another reason that I tend not to blame the American people as a whole. They relied on the two-party system to prevent a coup d'etat like this in the vote counting system, and, for whatever reasons--war collusion, collusion with corpos, greed, fear, blackmail, cowardice, helplessness (the Dems are a mixed bag, I think), our Democratic leaders failed us on this matter, catastrophically.

So, in my opinion, the "angry taxpayers" who oppose the bailout did not really "elect" the Bushfucks and Democratic colluders who de-regulated the banking and finance industry (and so much else--f.i., the de-regulation of military spending, with off-book budgets, no-bid contracts, etc.). The Anthrax Congress (Diebold I--partial e-voting) passed both the IWR and HAVA. And the two subsequent Congresses (Diebold II and III--80% e-voting, and 90% e-voting, respectively) have rubber-stamped pretty much the whole Bush war and looting program.

This Corpo/fascist coup is so out of control now that it is almost impossible to know what is going on our nation's capitol and our national political establishment. But we can be sure of one thing: the global corporate predators and war profiteers, and the super-rich, who rule over us, are not going to pay for it. WE are going to pay for this coup.

And there is one other thing I am sure of: Nothing is going to change until we restore our vote counting system to the PUBLIC VENUE. Our right to vote has been taken away. The bottom-line condition of democracy--or even of a republic--is not present. This can still be corrected at the state/local level, where control over voting systems still resides, and where ordinary people still have some influence. But the window of opportunity to do it may rather short--a couple of years (before the feds take over the voting system entirely, and mandate Corpo vote counting with secret code--which they have not yet done). (They relied on corruption and coercion to fast-track these machines--and some kneecappings.) The county registrar who is giving millions of your tax dollars to these Bushwhack corpos, to steal our elections, may live right down the street from you. Think globally; act locally. Force local election officials to count the votes in PUBLIC VIEW, or force them out of office.

See his latest column at commondreams.

http://www.commondreams.org/view/2008/09/26

How Wall Street Can Bail Itself Out Without Destroying The Dollar
by Thom Hartmann
For Grover "Drown Government In The Bathtub" Norquist, this bailout deal will work out very well. At a proposed cost of $4,780 per taxpayer, it'll further the David Stockman strategy of so indebting us that the next president won't have the luxury of even thinking of new social spending (expanding health care, social security, education, infrastructure, etc.); taxes will even have to be raised just to pay for the bailout. It'll debase our currency, driving up commodity prices and interest rates, which will benefit the Investor Class while further impoverishing the pesky Middle Class, rendering them less prone to protest (because they're so busy working trying to pay off their debt). It'll create stagflation for at least the next half decade, which can be blamed on Democrats who currently control Congress and, should Obama be elected, be blamed on him.

But there's another way: Create an agency to fund the bailout, loan that agency the money from the treasury, and then have that agency tax Wall Street to pay us (the treasury) back.

It's been done before, and has several benefits.

In the United Kingdom, for example, whenever you buy or sell a share of stock (or a credit swap or a derivative, or any other activity of that sort) you pay a small tax on the transaction. We did the same thing here in the US from 1914 to 1966 (and, before that, we did it to finance the Spanish American War and the Civil War).

For us, this Securities Turnover Excise Tax (STET) was a revenue source. For example, if we were to instate a .25 percent STET (tax) on every stock, swap, derivitive, or other trade today, it would produce - in its first year - around $150 billion in revenue. Wall Street would be generating the money to fund its own bailout. (For comparison, as best I can determine, the UK's STET is .25 percent, and Taiwan just dropped theirs from .60 to .30 percent.)


... more at common dreams link, http://www.commondreams.org/view/2008/09/26