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APOCALYPSE DAY 3: Truth and Truthiness

October 1st, 2008 by Celeste Fremon

congress.jpg

Okay, today the Senate has (incredibly) added tax cuts to the Bailout plan,
raised the FDIC guarantee ceiling from $100K to $250K, and then with a few more tweaks, hopes to pass the thing tomorrow.

Monday night, after the House rejected the previous version of the bailout
and the Dow began drilling for China, TV pundits on all channels shrieked about the NO votes being due to the most immoral kind of partisanship (on the Republican side) and a craven fear of being tossed out of office for those with vulnerable seats (on the Democratic side).

Most also mentioned the bill’s massive unpopularity among angry lunk-headed voters who flooded Congressional phone lines because they “failed to understand” the dire necessity to pass the bailout bill as written.

Yet, in truth, the NO vote was a bit more complex than a decidely wild-eyed and accusatory Suze Orman and others wanted to admit. (I normally like Suze Orman but she was a bit on the shrill side Monday night.)

Here, for instance, are two reasons why the Bailout went down in flames on Monday:

************************************************************************************************************

REASON #1: THE BAILOUT PROPOSAL SUCKED

Yes, it was better than the original three-pager, in much the same way that purgatory is better than hell. But it’s still purgatory.

In his final speech before the House in which he ordered his fellow Republicans to vote for the bill, Minority Leader, John Boehner, yelled that the bailout was “crap sandwich.” “Nobody wants to vote for this! Nobody wants to be anywhere near it. … You all know how awful it is. I didn’t come here to vote for bills like this!” But, he went on, “I believe the risk in not acting is much higher. … These are the votes that separate the men from the boys and the girls from the women. What’s in the best interest of our country? Vote yes,” And then Boehner stalked away from the podium in tears.

Not exactly the ideal endorsement.

Similar sentiments were expressed yesterday by one of the most vocal No voters on the Democratic side, Dennis Kucinich, who sent out a letter to supporters and others in which he was not in the least apologetic for possibly being part of the cause of the US economy melting into the molten core of the earth. Here are a few clips:

Congressional Democrats and Republicans alike took on full responsibility to protect the interests of taxpaying Americans, and defeated the deceptive bail out bill, defying the dictates of the Administration, the House Majority Leadership, the House Minority Leadership and the special interests on Wall Street.

[CLIP]

The legislation did not regard in any meaningful way the plight of millions of Americans who are about to lose their homes. It did nothing to strengthen existing regulatory structures or impose new ones at the Securities and Exchange Commission and the Federal Reserve in order to protect investors. There were no direct protections for bank depositors. There was nothing to stop further speculation, which is what brought us into this mess in the first place.

Kucinich went on to say that he’s all for passing something quickly. But it has to be a better something that has certain improvements, in particular a structure that will provide some mortgage-holder protection.

As I mentioned Monday, normally mild-mannered Brad Sherman (whose seat is NOT at risk, thank you very much, idiot pundits) wrote his own strong statement about why he went against his party, and with his conscience, in voting no.

(Sherman had the best quote out of the whole debacle when he described Paulson’s original 3-page plan as “a ransom note that said if you ever want to see your 401(k)s again, send us $700 billion in unmarked bills.”)

*************************************************************************************************************

REASON #2: TRUTHINESS COMES HOME TO ROOST

There has been much talk about how the American people deluged Congress with emails and phone calls because no one had adequately explained to them—the poor rubes—-the virtues of the package.

But Time Magazine’s Michael Sherer wrote on Tuesday that there was a bit more to it, that the crisis exposed a deep and “fundamental problem: “a crisis of political credibility that now threatens to harm our nation further, should the markets freeze up and more companies begin to fail, as many experts predict.”

The problem, wrote Sherer, predates the vote on Monday, and even the mistakes on Wall Street. (duh!)

“Years ago, the trust between the people and their politicians was broken. Credibility was lost. The reserve of goodwill went bankrupt. And when they needed it most, our nation’s leaders found that they had squandered their ability to exert influence over the people who chose them to lead.”

Or to be more specific, the last time the American people were told there was a huge emergency and that Congress had to pass a resolution or terrible things would happen (cough-Iraq-cough) it turned out to all be a pack of lies. (Paulson comes off as a decent and smart guy. But so did Colin Powell.)

Matters have been exacerbated by the fact that lies—-not exaggerations—-but out and out alternate realities have now become an embedded part of American political currency (thank you, Karl Rove), and are being continued into the ’08 presidential campaign (bridge to nowhere, yadda, yadda)—all of which has added to the cumulative affect.

Actions have consequences. Lie too often and when you try to tell the truth, no one believes you.

********************************************************************************************
ONE MORE POINT: THE NO VOTE DIDN’T CAUSE THE MELTDOWN, THE RISE & FALL OF EXPECTATIONS CAUSED IT

Henry Paulson kept saying that the sky would fall unless the bailout was passed. And Wall Street believed him. However, with the prospect that the Secretary of the Treasury would soon be driving through Wall Street in a pick-up truck tossing bales of money out the window, the Dow perked up. Then, on the expectation that a deal was about to be reached, it slowed the worst of its rollercoastering.

By this past weekend, announcements were made that a deal was assured.

Since a deal was NOT in fact assured, this was a bit……what’s the word I’m looking for? Oh, yeah: STUPID.

Raise and crash the expectations of toddlers and you get a tantrum. Raise and dash the expectations of already wounded and hysterical financial markets and you get the massive bloodletting we saw on Monday.

Had anyone had the sense of the average middle-American mother (or father), they would have said cheerily, “still working but making great progress, only a few teensy things to iron out,”

They would NOT have said: it’s a done deal, wooo-hooo! the vote’s a mere formality, ice the champagne!

But they didn’t think. They tried to rush it. Everything blew up.

And the taxpayers take the hit. Again

Posted in Bailout, Economy | 24 Comments »

24 Responses

  1. Rodger Jacobs Says:

    Here’s my proposal: every SOB who voted for Bush and Cheney in the last election and every Swift Boat Veteran for Truth who vigorously campaigned for the Bush-Cheney ticket, please step forward and make yourselves known. You, my friends, will see your federal tax burden increased 100 fold as we attempt to offset the massive check we’re going to write to Paulson and pals. Why not? You shrill bastards wanted Bush Co in the White House so damn bad, it’s time for you to literally pay for your mistake.

  2. don quixote Says:

    I wonder how soon it will be before Dubya and Cheney and the rest of the Fascists will be leaving the sinking ship The USA. After the last eight years of massive rip offs by these criminals Bush will no doubt be in Mengele country, Paraguay, were he has purchased 100,000 acres of prime land in Jena’s name.
    http://www.guardian.co.uk/world/2006/oct/23/mainsection.tomphillips

    And Cheney will be kicking it from his new digs, a mansion in Dubai where he can conduct his Halliburton/KBR empire.

    I just hope we can stay afloat until these bastards are hunted down and prosecuted.

  3. Your Cheatin Heart Says:

    Sad sad but it is all about us staying afloat till they go.
    Celeste, I like Suzie Orman too but shes in a meltdown. Anderson Cooper should have asked her if she lost in the market herself. Her frantic support of the bail out needs perspective.

  4. Rodger Jacobs Says:

    Orman is a disgusting cheerleader for the almighty dollar and the amassment of great wealth. Here’s a tip for AC 360 viewers: turn the channel at 20 minutes after the hour, that’s when Anderson Cooper normally has her on the show.

  5. "reg" Says:

    Interesting James Galbraith column…

    http://tinyurl.com/3qm7wf

  6. Dan Matthews Says:

    You my friend are floating deliriously already. The link you provide reads much different from your delusionary tale. It is all supposition and its supplied by a Cuban News wire. You may as well try and pull some truth out of News Uranus, which is where I’m sure you found this story. We can appreciate your disdain with the scoundrels Bush/Cheney and their cabal, but there’s no need to march out the tin foil hats, silly wabbit.

  7. Dan Matthews Says:

    The above post was directed to this Quixote character.

  8. Celeste Fremon Says:

    DQ, your e-mails are behaving like a 33 1/3 vinyl record with a bad scratch. What’s up? Was there supposed to be a link? (And would you like me to delete the duplicates?)

  9. Celeste Fremon Says:

    GREAT Galbraith column, Reg. Thanks for posting. Food for thought. (Not that it’ll matter.)

  10. don quixote Says:

    I’ll try here one more time Celeste and if it comes up a dud again then by all means delete the rubble.
    Thanks

    Sorry!
    Might be of interest to some, illustrating that this financial melt down is world wide and getting worse,
    I copied this email off a financial blog site today.

  11. Your Cheatin Heart Says:

    Obamas speaking to the Senate and CNN switched terms from bail out to “rescue”.

  12. "reg" Says:

    I’m conflicted about this thing – I’m dead certain that there is a better package/plan than what we’re gonna get. I’d love to see Obama come down from the mountaintop – sort of like McCain claims he’s doing and obviously hasn’t – with The Plan that does everything just right, but he’s not in charge of the Senate or the relevant committees and is busy with another urgent task. I’d love to think that Dennis Kucinich has something in his back pocket that answers all of the BIG questions. I just don’t see it. As for whether this thing is really necessary – my assumption at this point is that it is necessary because everyone involved in the game at the highest levels says it’s necessary. I’m not saying that they’re accurate in what they’re saying – just that when everybody THINKS or even asserts something like this regards to financial markets, you’ve arrived at a self-fulfilling prophecy. I don’t know diddly about this stuff – except it’s been obvious to me since the first day I heard of them, years ago, that ARMs other such subprime instruments were a terrible idea and were corrupting the housing market at both the macro (bubble) and micro (lender/buyer) levels. But at this point I’m betting that doing nothing – or hoping that something can be done that is politically improbable – is probably worse than passing some version of this thing. Also the notion that these assets – even if they’re bought at the highest plausible current market rate, which is higher than what sellers would get if there’s a firesale and therefore a “bad deal” for taxpayers – will appreciate to at least what the Fed pays for them may not be a total scam. I just don’t know. This is the piece of this plan that raises the biggest questions – how are these assets priced for sale to the Fed and what is the long-term outlook for re-sale by the Fed ? I’d like to see some economists who have some shred of credibility weigh in on this. Right now there are people I respect on both sides of this thing. Very confusing.

  13. "reg" Says:

    Also, I’m wondering why the solution to a similiar crisis in Sweden, which was successfully addressed by the government simply buying equity in the banks – sort of like the Feds just did with AIG – isn’t being proposed. That seems to have worked out well and gives the taxpayers a more tangible stake.

  14. Celeste Fremon Says:

    Reg, I feel as you do in terms of feeling conflicted.

    On one hand, everyone is determined to pass this thing, and I think the self-fulfilling prophecy mechanism is very much in operation. But the more I read and listen to economists, the more doubt I hear about this package. (No I don’t think Kucinich has a damn thing in his back pocket, but he talked to a bunch of economists who seemed to persuade him that this was not going to do the job. I read one of the letters sent him at his website and it makes a good case for why so much of this is wrong-headed with regard to mortgage holders, whom it purports to help. Too long to explain here.)

    There are good columns by people, but not as much nuanced reporting as one would like to see, so all that’s being put on is pretty much one note—plus grumpy conservative contras who don’t seem all that credible.

    I think the news is moving so fast that most of the media are not keeping up, except to simply report on events. There’s very little pause to make sense of what they’re reporting.

    The people at Planet Money are doing slightly interesting things. Like this story:

    http://www.npr.org/templates/story/story.php?storyId=95224933&ft=1&f=94427042

    Anyway, look for passage this afternoon. I think people are going to be too scared to hold out for anything better than simply upping the ceiling on FDIC and a few other tweaks.

    It’s a pity.

  15. Your Cheatin Heart Says:

    Im conflicted but I agree with Reg that the panic has become a self fulfilling prophecy. And how does raising the limit on the FDIC helps small business? I do not get it.

  16. Rodger Jacobs Says:

    I know a lot of folks, individuals and a few small business operators, who pulled their cash out of banks in the last couple of weeks, particularly WaMu customers; our legislators don’t seem to want to speak about this openly but raising the limit on the FDIC is a nod to that problem, an incentive to “trust” our financial institutions.

  17. don quixote Says:

    Might be of interest to some, illustrating that this financial melt down is world wide and getting worse,
    I copied this email from a financial blog site today.

    ****************************************************************************************

    “Here are some news from my country, Iceland!

    On Monday one of our 3 banks got nationalized, taken over by the government. That has sent shockwaves throughout our financial system, and as a result, the credit rating of Iceland and many companies got downgraded.

    In the past 3 days our currency has CRASHED. 4% on Monday, 5% yesterday, and another 4% today. Already the currency (the Icelandic Krona) had plummeted since the beginning of the year.

    Today, $1 costs us just over 110 ISK, but 9 months ago $1 cost us only 60 ISK. Graph showing the crash of my nations currency in the past 9 months, see the steep curve up in the most recent days:

    In short, our currency is just under half of what it was at the beginning of the year. Thank God I had purchased gold for all my savings (which was in ISK), and transferred all my money to G—Money.com…as my savings account was at the bank that almost went under.

    I possibly saved all my life savings by taking the decision to buy gold. Imagine that. But at least I saved 55% of my savings.

    You think this can’t happen to you? If you would have asked me a year ago if this was possible I would have said absolutely “no”.

    Trust your instincts. The financial system is collapsing, GET OUT, GET OUT!

    *******************************************************************************************
    I remember asking my late Grandmother about being a widow and raising children during the great depression of the 30′s.

    She said to me “Jito Lindo don’t worry, if you have been poor in your life then being poor again is not so bad, you just make your own tortillas at home and put a little more water in the beans”.

    Pearl of Wisdom

  18. "reg" Says:

    I think that raising the limit on FDIC is supposed to help small businesses because it puts the insurance at a level that’s more in line with the scale of a lot of SB accounts, which isn’t astronomical but generally means holding and moving more money than the average bank customer. I think…

  19. "reg" Says:

    Frankly, this new bill seems worse than the other one because it adds around a hundred billion that mostly does nothing to address the problem. I’m also not sure that increasing FDIC is a good idea, because it decreases moral hazard of shaky institutions. It may seem good in front, but could have long-term negatives. (Although I think it’s only for a year in this bill, it’s no doubt a prelude to making it standard.) I also think that the biggest question that needs to be addressed is regulatory overhaul the day after. This thing may stabilize markets – it may even end up not costing the taxpayer as much as we fear. But the structural stuff is key. We need smarter regulations – not feel-good stuff like the toothless executive compensation limits – but a framework that gives these institutions reasonable flexibility and ability to innovate in serving consumers, but that keep them from dreaming up wild schemes that do nothing to benefit the credit markets that keep the economy dynamic and allow normal people to participate in a growing economy. Transparency is a big part of this, but not enough.

  20. Your Cheatin Heart Says:

    Reg, I understand that the lawmakers think the FDIC increase is a good idea but when I say I don’t get it, I dont get why it would work to build consumer confidence fast as we need it, yesterday. The overall troubling factor to me about the BAIL OUT is that we get more blind religion top down economics. Panicked shrieking at the alter of the trickle down worshipful.

  21. Listener Says:

    Not sure how much play this would have had on your airwaves, Celeste, but in case it’s of interest to your readers… The video is about 10 minutes long. Amazing.

    Via Calculated Risk

    Foreclosure Alley

    For the past few years, the Inland Empire in Riverside County has been one of the fastest growing counties in the state – home to a major housing boom. But now the Inland Empire is pretty much the poster child for the foreclosure crisis. SoCal Connected tracked down some surreal sights associated with the crisis, including a guy who started a business turning abandoned, dead lawns green – with spray-paint.

    As a follow up, Harper’s has a poignant piece in the October issue written by Paul Reyes; Bleak Houses which chronicles one person’s experience in the trash out business.

  22. Ralph Williams Says:

    The number of U.S. car dealerships closing is expected to increase into 2009 with as many as 3,800 dealerships at risk of closure because of dwindling sales and tighter credit, according to a newly released study by Grant Thornton LLP on Wednesday.
    The recent data has been nothing short of astonishing. Auto sales, which were weak over the past 11 months, simply went into freefall in September:

    • Ford Motor posted a 34% drop. Their truck and van sales fell 39%, SUV sales plummeted 57% and F-series truck sales dropped 42%.

    • Honda reported a 24% decline in sales;

    • Toyota U.S. Sept. sales drop 32.3%, light truck sales dropped 38%

    • Lexus sales — Toyota’s luxury nameplate — fell 37.7%;

    • Chrysler U.S. September sales fall 33%

    • Volvo sales slumped 51.8%;

    • Porsche tumbled 45%;

    • General Motors sales down 15.6% (better than the expectations of -26%)

    • Nissan Sales down 37%

    • BMW U.S. sales dropped 25.8%

    • Mercedes-Benz reported sales off -16.4%

    • Volkswagen sales for September fell 9.4%;

    • Hyundai Motor’s U.S. sales fell 25%;

    • Kia U.S. sales slide 27.8%

  23. Pokey Says:

    Companies are bound to close, for the past 5 years we have been spending more than we make by robbing our piggy-banks (or home equity)

    Now we are all cutting back and will hurt everyone. There is no easy solution, and this bail out will just continue masking the desease.

  24. Your Cheatin Heart Says:

    There should of been a direct infusion of cash to the banks for the folks in foreclosure, relief on the loans, let the people who live in the homes stay there for what the home would sell for anyway um half of what it is now, free the banks up to make plausable loans, regulations, regulations, regulations, cant say it enough, and a declaration by congress that this marks the end of trickle down economics. It would still mean hard times but raising the ceiling on the FDIC??? Okay, maybe we save gas from the small business owners having to travel to multiple banks. How does it help the guy in Atlanta who sells popcorn and gifts? It doesn’t. He’s desperatly searching for consumers with 20 bucks to spend of gifts. Sad sad. I agree with DQ. Bush and Cheney and there mad robbers must go away in cuffs.

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