Say Anything Blog

Rob,

We don’t have to fall in love…

Out Here
Rodney G. Graves

Ceterum censeo Parthia esse delendam
Latin: “Furthermore, Parthia (Persia aka modern day Iran) should be destoyed”

Rob: this from http://www.breitbart.com today.

I have always been committed to the principal that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.

McCain went on to suggest a round-table of major investment firms to come up with a solution and a limited, temporary plan of assistance for those facing foreclosure.

"Here lies, in honored glory, an American soldier, known but to God.”

The stakes are high. Whether the issue is the economy, or energy, or the federal courts or national security, the right answers are coming not from the Democrats, but from the Republicans. The surge of operations that began a year ago is succeeding. The only way to lose this fight is to quit. Richard M. Cheney, Vice President, 30 May, 2008

It’s just a jump to the left
And then a step to the right
With your hands on your hips
You bring your knees in tight
But it’s the pelvic thrust that really drives you insane,
Let’s do the Time Warp again!

Madness takes its toll
One of Mac’s econ advisers is a guy who wrote DOW 36000

Compared to Clinton or Barry O?
Those are the choices; deal with it.
I can make money off them, either way! LOL!

Rob: this from http://www.breitbart.com today.

What am I supposed to believe?  What McCain says, or what he does?

When the people fear their government, there is tyranny; when the government fears the people, there is liberty.

-- Thomas Jefferson

Rob’s recently listened-to songs:

Today’s flip is tomorrows flop

“If a conservative is still a republican after the last 13 years, he is blind to the fact that his party of choice has failed him utterly.” – Realitybasedbob

Rob:  Well, on the housing/market crisis, McCain hasn’t done anything yet.

"Here lies, in honored glory, an American soldier, known but to God.”

The stakes are high. Whether the issue is the economy, or energy, or the federal courts or national security, the right answers are coming not from the Democrats, but from the Republicans. The surge of operations that began a year ago is succeeding. The only way to lose this fight is to quit. Richard M. Cheney, Vice President, 30 May, 2008

Gee, pparets, I hate being right.  As I pointed out in an earlier post, McCain will find a way to piss off all of us again.  He can’t help it.  McCain has worked so hard to gain our ire, he’s not about to give it up just to win an election.  It’s pathological for him.

I do have to admit that I was wrong on one point though, I said that it would happen after the Democrat food fight is over.  The man must have been jonesing really bad to not wait until after the he lied/she lied news cycle had played itself out.

Kbeil: ... and what part of McCain’s observation did you not understand?

"Here lies, in honored glory, an American soldier, known but to God.”

The stakes are high. Whether the issue is the economy, or energy, or the federal courts or national security, the right answers are coming not from the Democrats, but from the Republicans. The surge of operations that began a year ago is succeeding. The only way to lose this fight is to quit. Richard M. Cheney, Vice President, 30 May, 2008

Let’s see, I didn’t understand this part:

When we commit taxpayer dollars as assistance, it should be accompanied by reforms that ensure that we never face this problem again.

That doesn’t sound like someone who has “always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers”.

Perhaps you were a little perplexed by his non-politics playing political game.  James Pethokoukis tried to point out how McCain really feels about this by bolding the pertinent parts, but maybe you need some one to parse it for you:

In our effort to help deserving homeowners, no assistance should be given to speculators.

In other words, we will be bailing people out, but not speculators.

Any assistance for borrowers should be focused solely on homeowners, not people who bought houses for speculative purposes, to rent or as second homes.

In other words, we’re going to give assistance, but we will have some rules about who may qualify

Any assistance must be temporary and must not reward people who were irresponsible at the expense of those who weren’t.

In other words, we will be giving assistance for a specified amount of time.

I will consider any and all proposals based on their cost and benefits.

In other words, McCain won’t be deciding this on principle as despite his earlier statement.

In this crisis, as in all I may face in the future, I will not allow dogma to override common sense.

In other words, McCain has no principles regarding “the duty of government to bail out” people.

In other words, McCain is for a massive government bail out, but not one quite as massive as his opponents might want.

Why doesn’t someone pay off my mortgage for me?

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

One should be careful not to allow ideology to triumph over reality. Hoover opposed strong economic measures and the result was a deepening of the depression and, ultimately, even greater government control in numerous areas of society. While the purity of laissez faire economics may seem attractive, the risks of economic catastophe and subsequent increase in central economic and social control should not be cavalierly dismissed. This is not 1930, and the almost unimaginal consequences of an economic meltdown might make a McCain “government bailout” seem as next to nothing in comparison.

Go, the reason the depression was so bad was the Federal Reserve cut the supply of money by 1/3. 

Also the depression deepened the longer the New Deal went on.  The only thing that got us out of trouble was World War II.

Bottom line is that the Government ACTION not inaction messed up the economy and Government ACTION did not help it.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

central economic and social control should not be cavalierly dismissed

Bullshit. That’s the problem we have. Having those components push and pulling precludes us from having a true laissez faire market. You can’t pile regulation, rules, policies on a system and call it free. Of course, if you’d like, we can go with strict central planning and we can have all the wonderful shortages and rationing that accompanies it. Yours is just not naive thinking, it’s completely dangerous to our economy and way of life. That being said, neither lender nor borrower needs a taxpayer bailout. It’s not my job to subsidize bad business decisions. But, as long as lenders and borrowers know there’re politicians out there willing to use the power of government to protect them from themselves, the risk homeostasis prevails (people engage in marginally riskier behavior according to the protections [real or perceived] provided to them).

""That’s the problem with you lefties, you’re not willing to get your hands dirty. I’d suggest you roll up your sleeves.”

-Jack Bauer

Kbeil:  First, McCain hasn’t done anything yet. Don’t get your panties all in a knot. 

Second, if we end up with thousands, maybe millions, of folks with no home and massive debt, they will be on the public dole one way or another. Do you have a better solution?

Micro-economies are linked to macro-economies: If enough individual boats sink, yours and mine will be pulled down with them, no matter what principles we espouse. Get real.

Hence, no government on the planet is going to stand by and risk damage to, or destruction of, it’s economy on principle.

Government loans, which must be paid back, are not welfare.

"Here lies, in honored glory, an American soldier, known but to God.”

The stakes are high. Whether the issue is the economy, or energy, or the federal courts or national security, the right answers are coming not from the Democrats, but from the Republicans. The surge of operations that began a year ago is succeeding. The only way to lose this fight is to quit. Richard M. Cheney, Vice President, 30 May, 2008

Whistler,

A bit of oversimplification.
Five seconds of Google produced, “Hoover was criticized for his refusal to authorize large-scale relief programs that might have alleviated the nation’s suffering and hunger, his unwillingness to use a significant amount of federal dollars to stimulate the nation’s economy, and his failure to recognize the all-encompassing nature of the Great Depression.”
But, I’m not going to debate the minutia of such an enormously complex piece of history here. Believe as you will.

You guys do seem to be advocating a laissez faire approach to the mortgage crisis.  I don’t think that is by any means the best approach here.

If it were simply a case of a few individuals making poor decisions, that would be one thing.  The very number of bad mortgages suggest that the flaw was systemic in origin, not related simply to a collective bad judgement.

I see it appropriate in cases like this, where our economy obviously depends on a functioning banking system, to respond to both restore the fiscal solvency of the banking system, and to change regulations to protect both banks and consumers in the past.

That said, the most efficient way to restore solvency would be to repair bad mortgages that were underwritten using bad banking policy.

If the alternative is a crash of the market,it will cost us individually far more to deal with the mess at that point to apply resuscitation and an extended stay in intensive care, than it would be to fix the bleeding wound now.

This isn’t about bailouts for individuals.  This is about the best way to protect our interests in a strong banking system, and a healthy real estate market.

should have been a bit more careful with my words: “, to respond to both restore the fiscal solvency of that sector of the banking system”

Since the depression got worse as the New Deal continued there’s no logical evidence that an Hoover New Deal would have improved anything.

And if the Federal Reserve hadn’t mismanaged the economy we wouldn’t have had a “Great Depression.”

That comes from Nobel Laureate Milton Friedman, not google.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

If it were simply a case of a few individuals making poor decisions, that would be one thing.  The very number of bad mortgages suggest that the flaw was systemic in origin, not related simply to a collective bad judgement.

While I’ll certainly agree that there were systemic problems (laws requiring loans to people of questionable credit backgrounds certainly contributed to this) to discount the role bad judgment played is wrong, I think.  Again, nobody forced these people to take the loans.  Nobody forced these people to re-finance their homes so they could take luxury vacations or live beyond their already adequate means.

You talk as though the only alternative to bailouts is the collapse of our banking system, but I’m not at all convinced that this would be the case.

When the people fear their government, there is tyranny; when the government fears the people, there is liberty.

-- Thomas Jefferson

Rob’s recently listened-to songs:

Whistler:

And if the Federal Reserve hadn’t mismanaged the economy we wouldn’t have had a “Great Depression.”

This is an endorsement for government action, rather an endorsement of absence of it.  The question that remains what, if anything, is appropriate to do here.

Rob:

Again, nobody forced these people to take the loans.  Nobody forced these people to re-finance their homes so they could take luxury vacations or live beyond their already adequate means.

I am pretty sure that people re-financed loans to take luxury vacations isn’t a significant contributor to the underlying systemic problem.

Secondly, I don’t think in cases where you have as massive a problem as this, that you can lay all of the blame on either the borrowers (that just seems a bit simplistic to me), or even the lenders.  To me wide spread problems suggest the root cause to be the system instead.

Thirdly, we as a society have a vested interest in a robust banking system.  Those needs outweigh others here.

Finally, I don’t suggest we would have a collapse of our banking system, but the cost of doing nothing no doubt far outweigh the cost of appropriate corrective action.

Secondly, I don’t think in cases where you have as massive a problem as this, that you can lay all of the blame on either the borrowers (that just seems a bit simplistic to me), or even the lenders.  To me wide spread problems suggest the root cause to be the system instead.

Ok, then what is this root cause?  Because I see the cause as lax lending principles (often government-mandated) combined with poor borrowing decisions (I don’t care how easy a loan is to get, you don’t have to take it).

the cost of doing nothing no doubt far outweigh the cost of appropriate corrective action.

I’m still not buying it.  The cost of “appropriate correction action” will undoubtedly be more entitlements for the lending industry that will most assuredly never, ever go away.

If we ask the government to fix our problems we get stuck with government fixes that rarely go away with the problem.

When the people fear their government, there is tyranny; when the government fears the people, there is liberty.

-- Thomas Jefferson

Rob’s recently listened-to songs:

"You talk as though the only alternative to bailouts is the collapse of our banking system, but I’m not at all convinced that this would be the case.”

OK, I’ll ask. What alternatives do you envision? We dodged a bullet with Bear Stearns, or would that collapse have been as a tree in the forest of the deaf? When you are already seeing a run on the banks, what alternative alleviates that crisis?

If the banking system suffers a critical loss of confidence because the government won’t support the banks and the credit system collapses because the mortgage industry crumbles under bad debt, the ensuing social upheaval make make moot who is a candidate in the election.

Economic instability nurtures the seeds of socialism and totalitarianism. See the consequences of WW1,the Great Depression, and WW2 for examples. The risk of doing nothing in the name of ideology, to possibly prevent a catastrophe, strikes me as one of those cutting off your nose activities. But, if there is an alternative to not doing a bailout that would have kept Bear as an ongoing entity, I’m certainly interested. I firmly believe that had Bear collapsed as a result of the run on it, this thread would be a lot different.

This is an endorsement for government action, rather an endorsement of absence of it.  The question that remains what, if anything, is appropriate to do here.

Well control of the money supply has been turned over to the Federal Government.  However it is an example that the government reaction to a crisis is as likely to make it worse than make it better.

Which gets to the point.  Much of the problem has to do with poor decisions made by actors in the market.  What’s the bailout going to do but take away the pain of making bad decisions. 

We’ll get more bad decisions in the future because of it.  Are we seeing a repeat of the S & L crisis where bad actions by the government led to more bad actions which led to a massive bailout of the system?

Speaking of the McCain plan it appears he only wants to bail out legitimate home owners rather than speculators.  I would contend that many of these home owners were speculating that they could bail out before the market slowed.

But anyway, if we want to prop up the banking system how does allowing the speculators (many of which WERE bankers) to fail do that?

What we’re going to see is a massive bailout of some people which will sow the seeds of the next crisis.

Let’s restore market discipline to the market.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

I firmly believe that had Bear collapsed as a result of the run on it, this thread would be a lot different.

I don’t know that I’m against the Bear Sterns action by the Fed.

It seems that market discipline was maintained without greatly damaging the credit markets.

The owners of Bear took a kicking and the top management is out.  People in similar situations at other banking firms can look at that and hopefully learn from it.

Bear was bailed out, the Fed say to it that the assets weren’t dumped on the market.

It looks like a terrific deal for the purchaser as well.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Go, pparets and Carrick,

You seem to be missing a huge point of the free market.  Not only does it make us prosperous, but it also disciplines us.  Losing money is a form of discipline.  The people who are being foreclosed on are not suddenly going to go on the public dole assuming that they are being foreclosed on for not making their payments because either a) their decreasing property value put them upside down in the mortgage and they decided to walk away or b) they couldn’t afford the increased payments on their ARMs.  In either case, they are not poor, they just can’t afford the house they bought.  They’ll walk away, owe some money to the mortgage company for the negative equity which they will probably never pay or will have discharged in bankruptcy.  In the mean time, they’ll rent a smaller home or an apartment, continue to work at their jobs, maybe learn a lesson about living within their means, and hopefully start saving for a sizable down payment on their next home purchase.  If they end up living in card board boxes, it will be purely because they choose to, not because of a lack of resources or because the government didn’t make it all better for them.

Rob:

?  Because I see the cause as lax lending principles (often government-mandated) combined with poor borrowing decisions (I don’t care how easy a loan is to get, you don’t have to take it).

How much of the current sub-prime mortgage is due to this sort of governmental interference, as opposed to lapses in regulation?

I’ve heard these claims, they sound reasonable, but are they true?

I think we all agree that law and regulation is necessary for an orderly society.  That’s as true in the banking industry as anywhere.  When you have system-wide failure, I don’t blame the individual actors (bankers or borrowers), I blame the system. 

I can’t go much beyond stating what I see as the governing principles here (you like talking about principle, so here’s mine):  The sub-prime mortgage problem is clearly due to a systemic failure, and that we should respond differently to systemic failures than we do to errors in individual judgement, that the criteria for intervention should include whether a failure in government led to the problems as well as the cost to society of no action compared to an appropriate level of action.  Finally the risks associated with acting must also be weighed into the decision to act.

I would consider the error in your thinking that we can regulate a perfect market. 

More likely it seems that fixes for one crisis lead to the next.

However retaining market discipline would work to eliminate (or at least reduce) the next crisis.

As I said before I’m not necessarily against the Bearn Sterns action.  That seems to have propped out the market without rewarding stupid people.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Whistler, I understand your concerns regarding bailing out people who have made poor decisions (bankers as well as borrowers).  I would set as one criterion for not acting is when the damage is contained to those who made poor decisions, though I would say again, when a problem is this wide spread, it’s not poor judgement.  (Anymore than driving on the “wrong” side of the road would be poor judgement if there were no law governing which side was “right”.)

When the failure threatens to spill over and affect the rest of us, then when we act to ameliorate the consequences of this failure for those of us who lived right and made no poor decisions here, we aren’t really bailing these people out so much as preventing ourselves from being part of the collateral damage associated with the system failure.

I might go beyond that and say that to the extent that the government is the culprit in this mess, it does have some responsibility to “make things right”, but the governing principle is that innocent third parties shouldn’t have to suffer for the mistakes of others.

I would say again, when a problem is this wide spread, it’s not poor judgement.

What is it when you sign a mortgage you have no chance to pay off?

What is it when you offer that mortgage to someone with no chance to pay it off.

What is it when you count on the market appreciating at 10%/year forever?

I would say “Bad Judgment.”

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Whistler:

I would consider the error in your thinking that we can regulate a perfect market.

I never thought that.

What I am saying is different:  An unregulated market can be as bad or worse than one that is over-regulated.

Strictly laissez-faire economics has been tried and rejected to the trash heap of history.  Society’s reaction to its failure, socialism, should have been already sent there too.

I have a feeling that once we come up with a Hari Seldon level of a theory of economics, that there will be a rather broad “sweet spot” in terms of the balance between too much regulation and too little, and that other principles such as minimum interference of government on people’s lives will be more important in deciding where the set point between too-little and too-much government should be.

But fundamentally, at the moment we’re left with a somewhat “cut and try carpentry” approach to economics, moderated to a degree by common sense (to the degree that common sense actually works on a system as complex as our economy is).

Whistler:

What is it when you sign a mortgage you have no chance to pay off?

What is it when you offer that mortgage to someone with no chance to pay it off.

You can’t pass laws to stop people from making stupid choice.

But you can regulate what stupid choices get offered to them.  Clearly something is wrong if on a massive scale people are legally getting offered loans that have no chance of succeeding.  We regulate the banking industry to protect our interests, as well as those of the lender and the borrower.

Whistler/Kbeil, et al: Anyone who reads this complete thread learns one thing: This is an enormously complex and potentially critical problem.

The issues include principle, history, policy, government, the economy and the election; all made more difficuly by the sheer number of those who are being impacted.

Example: “They lose a house, rent or buy a smaller one and go on with their lives.

1.  The family still owes the money on the mortgage.
Check your own: losing your house doesn’t eliminate your debt.

2.  The investors who bought the stocks from mortgage lenders and banks are also losers.

3.  As the financial ‘black hole’ widens, people are forced to default on car loans, credit cards and other debts.  Debt collapse spreads.

4.  The sheer number of defaults, now in the millions, threatens the national economy and puts all of us - you and me - at risk.

5.  Whether government intervention in the past worked, failed, made matters worse, is irrelevant. The government will have to take steps. The only question is, what kind of steps?

None of us [certainly not me!] is an economist skilled enough to resolve this matter, however much we defend our points of view. We are in trouble and pinning blame will do nothing to correct it.

"Here lies, in honored glory, an American soldier, known but to God.”

The stakes are high. Whether the issue is the economy, or energy, or the federal courts or national security, the right answers are coming not from the Democrats, but from the Republicans. The surge of operations that began a year ago is succeeding. The only way to lose this fight is to quit. Richard M. Cheney, Vice President, 30 May, 2008

Kbiel,

“You seem to be missing a huge point of the free market.  Not only does it make us prosperous, but it also disciplines us.”

I don’t think that point is lost here. The point that seems to be missed is that this is not a case of individuals or individual companys making bad decisions that negatively impact their bottom line. The current credit crisis, left to work itself out, has the potential to cause catastophic harm to our entire econcomic system. It is not a matter of “disciplines us” as in correcting a wayward child: It could be a bullet to the head, as in making the economic landscape unrecognizable.

Yes, as they say, mistakes were made. But as Carrick rightly points out, those who made the mistakes won’t be the only ones stewing in their own juices. Were all of the people who lost their nest egg as a result of Black Friday unrealistic speculators? Bad decision makers?  If somehow, only those wayward were the ones disciplined, I might well agree with the point. But I think it naive to believe that would be the outcome. Unfortunately, though not of our doing, we find ourselves all in the same boat and subject to the same potential economic typhoon. And getting back to the origins of this thread, if McCain sees the turbulence and thinks we should act to quell it, I find it sensible in consideration of the potential consequences of doing nothing.

In that political vein, if the country is calling for action, and it is, it will get it. If such action is inevitable, and it may well be, one should strongly consider which party one wants taking that action. A review of the politics surrounding the just past “tax rebate” might be instructive on the issue, should the problem continue past the election, which it probably will.

By the way, I almost never post on blogs. I think the participants here should be commended for the civil dialogue. Thanks.

I have a feeling that once we come up with a Hari Seldon level of a theory of economics,

If I remember correctly, and it was a lot of years, Hari was able to predict the collapse, not prevent it.

You can take all the negatives about so and so still having to pay on his mortgage after he’s been foreclosed upon and the calamity that is to him.

That does NOT justify the damage to the rest of the economy as those of us who didn’t make bad choices are forced to bail him out. 

You can talk about the consequences of what may happen if we do nothing (or do little as I would propose) but you ignore the backside of what happens when we do do something.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

Whistler, I’m not ignoring the damage either way.  What I’m saying is doing nothing causes damage too.  When you have a large scale problem like this, regardless of what you do, there will be spill over to the rest of us who didn’t make the bad choices.

So the idea is to minimize the damage done to the rest of us, not eliminate it.  I never claimed that latter was possible.

Whistler, I’m not ignoring the damage either way.

I would contend that the politician rarely if EVER consider the consequences of their actions which is at least partly why we are in the current situation.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.

I would contend that the politician rarely if EVER consider the consequences of their actions which is at least partly why we are in the current situation.

Well, definitely.  They have to optimize for short term, and hope that the long term takes care of itself.

If they cause more problems in the long term then they are doing us a net harm with their actions.

What’s going to happen to US industry when the global warming extremists like John McCain double the price of electricity?  I would think all these factories will close and set up in countries where they aren’t scared of technology.