The Crisis
I’m blogging under the influence, so perhaps things aren’t quite as dramatic as they seem to me right now, but the bailout plan on the table right now seems to me like something of a crisis point for American liberalism. The plan is bad. But bad policies get enacted all the time. But we’re at a point now where congress is, allegedly, in the hands of progressive leadership. Simply put, if congressional Democrats manage to acquiesce in a plan that spends $700 billion on a bailout while doing nothing for average working people and giving the taxpayer virtually no upside in a way that guarantees that even electoral victory would give an Obama administration no resources with which to implement a progressive domestic agenda in 2009 then everyone’s going to have to give serious consideration to becoming a pretty hard-core libertarian.
It’d be one thing for a bunch of conservative politicians to ram a terrible policy through. Then we could say “well, if some progressives win the next election things will be different.” But if this comes through an allegedly progressive congress then the whole enterprise starts looking pretty hollow.
107 Responses to “The Crisis”
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September 21st, 2008 at 2:22 am
obama is the presumptive head of the democratic party.
and he needs to make economy a political issue.
i suspect that his people are going to make this a wedge issue.
first he has to blame it all on the republicans. then he needs to drag it out all the way into the debates.
i wouldn’t go libertarian yet.
(btw, you’re going libertarian cuz you’re in vegas. i lived there last year and i was turning libertarian too).
September 21st, 2008 at 2:26 am
Why would the alternative be hard-core libertarian?
Why not maintain your policy views but reinforce your disgust with right-wing ‘liberalism’ as it is actually practised in the Democratic Party? After all, your policy preference seems to be for a deal which does provide a bailout, combined with provisions for later taxpayer upsides, as part of a package that does something for working people?
Though you are right about the damage to the Democratic Party. It will be even more so if this ‘progressive leadership’ also gives us war with Iran.
September 21st, 2008 at 2:35 am
Unfortunately, you don’t have to be drunk for a new $700 billion debt to seem dramatic. Especially when it’s for junk you bought when you were even drunker, and you’ve already lost the stuff. Damn credit cards.
September 21st, 2008 at 2:45 am
Liberal isn’t such a bad word anymore. It might be time to do the same for class warfare.
September 21st, 2008 at 2:45 am
The plan is NOT expected to “cost” the taxpayers $700 billion. Presumably, the securities bought by the government will be worth something. It’s even possible (though perhaps unlikely) the govt. will make money off the whole thing. In any case, the cost to the taxpayer should be much less than the full $700 billion dollars.
September 21st, 2008 at 2:48 am
Obama needs to show up in the Senate and be a Senator. Not just show up for the vote.
If his debate prep suffers, so fucking be it. Knowing McConnell, he may want the vote scheduled just to ensure Obama and McCain miss it.
September 21st, 2008 at 2:49 am
It’s even possible (though perhaps unlikely) the govt. will make money off the whole thing. In any case, the cost to the taxpayer should be much less than the full $700 billion dollars.
So, say, only $350 bn? As in, seven times the cost of Obama’s healthcare plan?
September 21st, 2008 at 2:52 am
If only more our elite decision-makers were drunker…
September 21st, 2008 at 3:22 am
The trouble is that Congress is being pushed to ratify a rescue without knowing who holds the bad debts and, therefore, who is being rescued.
People with 401(k)s, IRAs and pensions did not invest in bad paper by choice; their money was handled by fund managers operating independently of the investors. These investors deserve a bailout. Others consciously made speculative investments expecting a high rate of return; they don’t deserve a bailout. Can the bailout include the former, exclude the latter, and survive a court challenge?
Those with dicey mortgages should be an easier case. If the government takes over their debts, Congress can legislate provisions under which debts are renegotiated or called in.
Even without statutory protection, though, I can’t picture an administration — even one in which Phil Gramm whispers poisonously in John McCain’s ear — conducting mass foreclosures on busted homeowners who retain the vote.
September 21st, 2008 at 3:25 am
“the bailout plan on the table right now seems to me like something of a crisis point for American liberalism. The plan is bad. But bad policies get enacted all the time. But we’re at a point now where congress is, allegedly, in the hands of progressive leadership.”
Y’know, I’m more eager for redistributionist policy than anyone.
But believe it or not, keeping the economy strong is more important at a moment like this than any additional legislation one could imagine.
I have no idea if the bailout plan is the right one or not, but if it works, I’m just fine with it not accomplishing any additional progressive purposes.
A financial lockup will affect low and middle income Americans worse than anyone else. It wasn’t the rich standing in breadlines in the Depression.
Save the economy first. Worry about additional goals later.
September 21st, 2008 at 3:30 am
“if congressional Democrats manage to acquiesce in a plan that spends $700 billion on a bailout while doing nothing for average working people…”
In short, if the bailout plan accomplishes its purposes, it will be doing a lot for average working people.
Seriously, who do you think gets hurt by an economic collapse?
September 21st, 2008 at 4:25 am
Given that the bailout fund will be buying the junk securities at a large discount to face value, it’s entirely possible (I’m not saying probable) that a profit can be turned in the long run.
The banks get to monetize their junk, but should hav to take a big haircut in the process.
The devil will be in the details of how the reverse auctions are conducted.
September 21st, 2008 at 6:04 am
Rumor on the street is that Paulson’s ex firm Goldman Sachs was about to go belly up. Which coincidenly was the very moment he spied Armageddon.
Funny how these things work.
September 21st, 2008 at 6:18 am
Could we retire ‘progressive’? Go back to liberal.
September 21st, 2008 at 6:22 am
“The plan is NOT expected to “cost” the taxpayers $700 billion.”
Actually, it likely will. The money generated from debt that is sold will be used to buy additional debt. This cycle will be repeated until the $700 billion is exhausted. There is way more than $700 billion of toxic debt out there.
The question is not whether some taxpayer money will have to be used. The question is whether we trust the Bush appointees whose lack of oversight facilitated this mess to oversee the spending of $700 billion without Congressional oversight.
No deal.
September 21st, 2008 at 6:33 am
Democrats are already signaling weakness. From what I read in the morning papers the choice looks like…
$700 billion dollars (the Bush/Paulson plan)
or
$700 billion dollars + a grab bag of for unemployment insurance, mortgage protections, etc. (worth what?)
So the deal is either a giant turd sundae OR a giant turd sundae with a cherry on top. Nowhere do I see “Turd sundae? No thanks!”
Having your home foreclosed sucks but it doesn’t suck worse than dying, which 18,000+ people a year do because of our “too big to fail” medical-industrial complex.
Boehner and McConnell are already tipping their hand saying they want “straightforward legislation” which means “no legislation” other than the President’s 3-page I CAN HAZ $700 BILLIONZ KTHXBAI ACT.
Frack.
September 21st, 2008 at 6:56 am
Are we experiencing the latest episode of Naomi Klein’s “Shock Doctrine”?
September 21st, 2008 at 7:07 am
The real problem is that this is a terrible plan for bailing out financial institutions. It gives too much power to Treasury (it can spend money however it wants with no oversight), does not provide value to taxpayers and rewards those financial institutions who have messed up the most.
We need a better plan, such as buying equity in the financial institutions.
September 21st, 2008 at 7:15 am
If you’d sober up on weekdays and get a clue, you’d realize that THERE IS NO FUCKING DIFFERENCE BETWEEN DEMOCRATS AND REPUBLICANS!
There is only the “Establishment Party” (as William Lind put it) and the “War Party” (as Justin Raimondo puts it.)
And they’re both supported by suckers like you, Matt.
And if you think Obama is going to change any of that, you’re an even bigger sucker.
September 21st, 2008 at 7:22 am
A little instability there, Richard old boy!
September 21st, 2008 at 7:24 am
Oh Richard Steven Hack! Save us from ourselves!
September 21st, 2008 at 7:45 am
There is only the “Establishment Party” (as William Lind put it) and the “War Party”
Let’s grant that you’re right, Hack, as you may well be. If you formulate it this way, this is still a BIG difference. Cold-blooded, status quo centrism or raging radicalism? I know which one I pick.
And Petey - can’t we get 1% of the outrage you direct at “trust-fund scumbugs” and “health care bloggers” sent at the actual architects of our misery, who are currently robbing all of our children blind? I think you’re a republican.
September 21st, 2008 at 8:01 am
“And Petey - can’t we get 1% of the outrage you direct at “trust-fund scumbugs” and “health care bloggers” sent at the actual architects of our misery, who are currently robbing all of our children blind?”
I am deeply outraged at Alan Greenspan, George Bush, General Electric, and the Cato Institute. Happy?
But none of that changes the fact that at the moment, a successful move to avoid a financial lockup is the most important thing for “average working people” by far.
September 21st, 2008 at 8:06 am
“Are we experiencing the latest episode of Naomi Klein’s “Shock Doctrine”
My best guess is that we’re experiencing something less ominous than that, merely that we’re dealing with the hangover of some pretty massive looting.
A setup for shock doctrine isn’t an impossible scenario, of course. But I don’t think the folks we’re dealing with are quite so forward-looking or intelligent to pursue a complicated plan.
September 21st, 2008 at 8:38 am
Unemployment insurance is nice, but I’d like the Congress to insist on more oversight.
The people at the Treasury ought to be giving them monthly reports on auction strategies, pricing, etc etc. I understand why it’s not clever to specify all of that in advance, but if we’re signing on the dotted line for $700 bil, we might want to retain the right to make a few follow-up inquiries.
September 21st, 2008 at 9:04 am
I don’t give the slightest damn what nincompoop tries to claim stupidly that this nonsense is pro-worker. All this is is “Hand us the $700 Billion America in no marked bills or the economy gets it.”
No deal.
September 21st, 2008 at 9:09 am
Actually the word “lampposts” has a nice ring to me right now.
September 21st, 2008 at 9:13 am
Actually, no.
Securities are not loans. They are parts of loans. They are arranged in tiers (or tranches) and get repaid in order. So first tier gets paid before second before third, and so on.
If a bank forecloses a home and resells it at a lower price than the loan, then the lowest tiers get no money from the sell (the money was exhausted paying the higher tiers). As prices are down 30% from peak in several areas, most of the lower-tiered securities are probably worthless.
These are what Paulson wants to use your $700 billion to buy.
September 21st, 2008 at 9:15 am
The only difference between the Bush plan and Somali warlords stealing food shipments in 1992 is that the food shipments cost considerably less than $700 billion.
September 21st, 2008 at 9:21 am
Re Petey’s comment “Seriously, who do you think gets hurt by an economic collapse?”
——————
Could it be the 3 percent richest part of the population who not only get much of the national income but who ALSO possess much of the NATIONAL WEALTH??
C’mon, Petey, you’re embarrassing yourself.
September 21st, 2008 at 9:34 am
But none of that changes the fact that at the moment, a successful move to avoid a financial lockup is the most important thing for “average working people” by far.
True, Petey, that is something that should be avoided, and if that costs taxpayers monies then so be it. The problem, however, which you have not addressed, is that by giving the powers that be a blank check for such a large sum of money, we don’t know if what they are doing is necessary to protect our economy or necessary to protect their buddies at Goldman. Yes, we should do something to avoid a financial crisis, but no we shouldn’t bail out all of Wall Street with ZERO OVERSIGHT. Those people fucked up and they should be held accountable. Under this plan, people with friends in the right places and influence on the Hill are going to get a bail out with our money when they should be left vultures.
That’s the problem–and that’s what your ignoring.
By the way, to the poster who said Petey is a Republican, welcome to the world of concern trolling. Of course Petey is a Republican.
September 21st, 2008 at 9:44 am
Re Asher’s comment “Could we retire ‘progressive’? Go back to liberal. ”
———-
Given that we’ve installed a Democratic Congress — only to get “Progressively” deeper in shit, that might be a good idea.
I agree the Superrich and their corrupt Republicans caused the problem –but it is our Democratic Leaders who are sticking US –not the Superrich –with the bill.
September 21st, 2008 at 9:53 am
Re Petey’s comment : “But I don’t think the folks we’re dealing with are quite so forward-looking or intelligent to pursue a complicated plan.”
———
Well, let’s see. They’ve given the richest part of the population a $2 Trillion tax cut –paid for by stealing the money out of the Social Security/Medicare Trust Funds.
They put forth a massive LIE about what caused the Sept 11 attack — and coerced the Democrats into shutting up and support the coverup. They then used the LIE to destroy several longstanding civil rights (trial by jury, no imprisonment without trial, no search without a judicial warrent, a ban on torture) –against, with Democratic complicity.
They got major Democratic leaders on board approving an unnecessary war to grab oil deposits for Big Oil. At a cost to the common citizen of $1 Trillion plus, 4100 plus dead, and tens of thousands crippled for life.
Now they’re forcing a Democratic Congress to hand over roughly $2 Trillion to pay off the Superrich’s gambling debts.
C’mon , Petey, you’re looking EXCEPTIONALLY stupid today.
Exceptionally.
September 21st, 2008 at 9:55 am
Again, I better not f***ing here one g** d*** Congress critter whine about how “complicated” this is.
For 3/4 of a trillion g** d*** dollars of taxpayers money, you better f***ing hire enough accounts and economists and lawyers to work 24 hours a day to come up with this sh*t.
You know who else deals with complicated sh*t? NASA. And no matter what crisis they’ve ever had, they never just said, ‘well, f*** it, it’s all complicated and sh*t, just hand us a zillion dollars no strings attached and we’ll figure some sort of sh*t out.’
September 21st, 2008 at 10:02 am
Gee, you think?
September 21st, 2008 at 10:05 am
“All this is is “Hand us the $700 Billion America in no marked bills or the economy gets it.”
Exactly. Why do we want to negotiate with terrorists?
September 21st, 2008 at 10:30 am
Who are the people alleging that we have a progressive Congress? Same people who figured that we could have a second Gilded Age without a second financial melt-down?
Essentially all of the House Republicans are conservative, and enough Democrats to add up to a majority. Anywhere up to a third of House members are more or less progressive Democrats, and the balance are moderates. If there’s much of a difference in the Senate, its the smaller number of progressives compared to moderates, given that state boundaries cannot be gerrymandered like House boundaries.
September 21st, 2008 at 10:39 am
Save the economy first. Worry about additional goals later.
Shorter Petey: Let’s unconditionally pay off the trustfund scumbags. What a complete fucking over-leveraged fraud he is.
This is disaster capitalism conducted using the same OH NOES! WE MUST HAS VOTES! script that has been called on time after time these past eight years.
September 21st, 2008 at 10:41 am
Has the Union of Republican Communists yet started demanding an UpperDown vote?
September 21st, 2008 at 10:47 am
Actually the word “lampposts” has a nice ring to me right now.
I’ve long thought that the bourgeois ‘revolution’ that created the US could really have done with at least some of the less bourgeois elements of subsequent revolutions elsewhere — just a little bit of the mob — to keep the worst capitalist filth a tiny bit nervous.
When you have the network news reporting a bank exec saying that the worst catastrophe of his life was to lose access to his private jet, the rope-lamppost combo really does take on a disturbing appeal. Pour encourager les autres.
September 21st, 2008 at 10:49 am
There just may be no alternative here, but this is likely to
be very very expensive for the public. The deal seems to
be that Wall Street hands the govt. “dead mice” ( a term stolen from
the FT a while back) and gets in return US treasuries.
Among other problems, watch the clever Wall Street boys restructure
their stuff so as to make bundles of securities containing nothing
but “dead mice”. They aren’t going to give the US govt the good stuff now
are they?
September 21st, 2008 at 10:54 am
There are indeed alternatives. People have been presenting them for months. Anyone saying there are no alternatives to the Paulson ‘plan’ (i.e., if the ‘plan’ means giving him the money no questions asked it’s NOT a ‘plan’) is listening to too many Republicans salivating over $1 Trillion free money.
September 21st, 2008 at 10:58 am
Any attempt by progressives and Democrats (often overlapping but not identical) in Congress to slow the bailout train and put some thought into how it’s structured had better be prepared for a full assault of the “they’re delaying the salvation of the American Nation and the American People for the same of political self interest” type.
September 21st, 2008 at 11:00 am
This “plan” is bad but almost besides the point. It accomplishes nothing but bailing out wealthy people whether they are Democrat or Republican. Congress is made up of wealthy people so the “plan” passes easily. Hank hands out cash to whoever he wants so now everybody loves Hank.
We’ve been living in Bushville for almost eight years. Some Americans will be actually living in tent city Bushville’s by this time next year. Great Depression II is here.
September 21st, 2008 at 11:10 am
Re Optimistic American’s comment “Some Americans will be actually living in tent city Bushville’s by this time next year. ”
————-
Boy, you ARE an optimist.
Americans are ALREADY living in Tent city Bushvilles:
http://www.newkerala.com/topstory-fullnews-24621.html
“London, Sep 20 : The number of ‘tent cities’ housing homeless people is increasing in the US and the rise has been partially attributed to the ongoing financial crisis, increased home repossessions and rising job losses, according to a report.
A majority of organisations of the homeless reported an increase in homelessness since the mortgage crisis began in 2007, according to a study by the Washington DC-based National Coalition for the Homeless, the Telegraph newspaper reported Saturday.
The problem has intensified with the rise in the number of repossessions, soaring energy and food prices and rising unemployment since the study was conducted in April, the organisation said”
————
Of course you have to go to British papers to read about it.
September 21st, 2008 at 11:14 am
1) OR to “Left Wing” CBS.
http://www.cbsnews.com/stories/2008/09/19/national/main4460034.shtml
2) The New York Times, meanwhile, is pursuing its usual asskissing journalism and running articles telling us what Demigods Paulson and Bernanke are:
http://www.nytimes.com/2008/09/21/business/21paulson.html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1222010040-FtOC1vJvdEoybfeUMNghlw
September 21st, 2008 at 11:20 am
Don- Maybe the 20x increase in the size of our newest cities in the coming months will actually make the American press notice. I await the first official declaration of a “Bushville” soon.
September 21st, 2008 at 11:27 am
and by the way… Thanks for the links Don
September 21st, 2008 at 11:43 am
I think Obama and the Dems need to get out in front of this issue, and the way to do it is to draw comparisons to the last Bush Admn end-of-the-world crisis: the handling of 9/11. Obama and the dems need to ask themselves and, I think, ask the country what we have all learned from that experience.
In both cases, 9/11 and now, there was/is a real crisis and a real reason to be concerned about big dangers in the immediate and long term future. Okay. So how was 9/11 handled and what have we learned to help us handle this crisis better?
Obviously a blank check of money and authorization to the Bush Admn - or any Admn - to rule by dictat without Congressional and Judicial oversight is out of the question.
At the same time, there is every reason to think that some quick and decisive action is needed . . . and, of course, there are questions about exactly what that decisive action should be (invade Afghanistan? hunt Al Qaeda? invade Iraq? torture? . . . oh, I don’t know, secure domestic infrastructure and shipping?) and this case the questions are the kinds that have been discussed in earlier postings here and elsewhere by Paul Krugman, the CalculatedRisk.com blog and more.
What I hope Obama and the dems can do, and what I think is even more important than the economic specifics of the rescue plan, is:
1) Say loud and clear that we’ve learned from the 9/11 aftermath that we cannot grant authorities without check and processes of review, not under any circumstances. This has to stick in the legilsation.
2) And then Obama and the Dems need to pivot from suggesting similarities to the 9/11 aftermath to drawing a key difference: After 9/11 there were military and intelligence and police operations that needed a certain amount of operational secrecy. Everyone understands that some secrecy is needed in such cases (although there are debates about exactly how much, and about certain such operations that should not be allowed like domestic spying). In the current economic crisis there is no justification at all for secrecy. In fact, secrecy is part of the cause of the crisis, so the cure must include almost total transparency from the get-go.
If these two points are established by Obama and the Dems, then concessions can be granted to Paulson because the concessions can be monitored, reviewed, changed, and the people who demanded the concessions can be held accountable.
September 21st, 2008 at 11:46 am
“Now they’re forcing a Democratic Congress to hand over roughly $2 Trillion to pay off the Superrich’s gambling debts.”
Forcing? Come on! The “Democrats” control congress. They’ve got the votes. They’ve got the threat of a market meltdown as leverage to ask for major concessions. Time is on their side.
Nobody’s forcing them to do a damn thing! They’re just rolling over like a couple of trained poodles. As usual.
September 21st, 2008 at 11:50 am
Simply put, if congressional Democrats manage to acquiesce in a plan that spends $700 billion on a bailout while doing nothing for average working people and giving the taxpayer virtually no upside in a way that guarantees that even electoral victory would give an Obama administration no resources with which to implement a progressive domestic agenda in 2009 then everyone’s going to have to give serious consideration to becoming a pretty hard-core libertarian.
I have to agree with Petey’s sentiments here. I don’t know whether this plan is going to work or not. I don’t know whether the crisis is a serious as politicians and finance chiefs and finance media across the globe are saying it is, or not. But Matt doesn’t seem to know either. Neither, apparently, do 99.9% of the bloggy commentators I have read over the past several days, which isn’t stopping them from ranting wildly about the proposals, pulling half-baked theories out of their ill-informed asses, and opining with passionate intensity and affectations of absolute certainty about matters that they seem to know little about.
Isn’t it obvious that the overriding progressive concern here for “average working people” and “taxpayers” is preventing a deep recession or depression, and thereby preventing millions of people from losing their jobs? Yes, it totally sucks that that the economic policies that have held sway in this country since the Reagan administration have now produced this financial train wreck. It totally sucks that the Obama administration might have to spend its first four years pulling the country out of a deep economic hole, a hole that progressives didn’t create, rather than pursuing every exciting initiative in his policy agenda. But that’s life, and I’m sure I’d rather have Obama in charge of the rescue of the American economy than McCain. If its is the job of progressives to step up now and save the American economy, then so be it.
Now, a whole bunch of you seem absolutely convinced that this crisis is all made up, and that it is just a bail out of reckless Wall Street fat cats that we can decline to support without thereby destroying the lives of the rest of us. All I know is that a lot of reasonably progressive politicians seem to be crapping in their shorts over this mess. So if some of you know better, then put up or shut up. I want to see some numbers, evidence and details, and not just kneejerk grousing, conspiracy theories and angry generalities.
Matt’s last comment is so illogical as to be beyond stupid, so I’ll put it down Matt blogging under the influence. If we are in dire economic straits because nominally progressive political forces have been unable to fight back effectively against libertarian deregulation voodoo and market fundamentalism malpractice, then isn’t the obvious solution more and better progressive politicians? For Matt to say that the failure of progressive politicians to do whatever it is he vaguely thinks they should do would make him become a libertarian makes about as much sense as saying that the failure of a few timid doctors to succeed in getting their patients to accept a scientifically well-founded treatment regimen would make him become a faith healer.
I would suggest that everyone remember Matt is just a blogger and dilettante, ambitiously pursuing a career in Washington punditry, who has no expert knowledge of anything on which he blogs. He also probably has less actual stake in the matters on which he blogs than most of the rest of us, since the Crimson Network will no doubt have each other’s backs, and probably sail through any major downturn just fine.
September 21st, 2008 at 12:01 pm
Some guy from work approaches you with an interesting proposition. Seems a coupla nights ago he got drunk and crashed his car on the freeway. No insurance, of course, though he’s a flashy dresser and always seems to have plenty of money. Hangs with a fast crowd with a big appetite for risk, bet-on-anything types, find ‘em at the card club a lot and at the race track.
Now what he wants is for you to co-sign a car loan for him. Nothing exotic, say a Lexus or a Beamer. Tells you he’s scared about the people he crashed into coming after him in court. Says he can’t get to work without a car, and that he’s so important to the company that if he loses his job yours will suffer too. Needs the car by this weekend.
Good deal?
September 21st, 2008 at 12:10 pm
I TRULY hope the D’s don’t capitulate on this. It seems that this thing will truly affect a lot more than just the financial institutions, so why do the R’s largesse not extend to everyon affected? That’s the question. Plus the D’s don’t need to let this wedge be marketed as if they are the ones holding up. R’s got us in this mess, the people aren’t in any hurry to blindly trust that they will do anything with this 700B but help their own.
No on this one the D’s, led by Obama need to fight and take the story directly to the American people, no more blind authority for R’s to do what they want.
k1
September 21st, 2008 at 12:16 pm
Since the early 70’s, we have had a accelerating movement towards libertarian treatment of the financial markets & what we have seen is an ever greater concentration of wealth at the top. & increasing misdirection of capital- that is if we assume capital should be directed towards making the country stronger & a good life for the average American; as opposed to easy millions for the elites. With a bit more socialism, we could have had an ever increasing supply of solar & wind energy. We could had put more money directed towards the middle & working classes- who’s current insecurity & the fact that they are generally tapped out is the root of why the economy is on the brink.
September 21st, 2008 at 12:40 pm
Kervick,
I completely agree with your sentiments regarding an economic meltdown and corresponding blogger commentary, but I still think you are wrong about this bill. Paulson is basically asking for $700B, no strings attached. For all I know, he could just pass that money out to his best friends on Wall Street. And, yeah, that wouldn’t fix the crisis, so then he would just come back and ask for another $700B. The issue here is not whether we should take desperate measures to fix the problem. The issue here is should we give the criminals who created this problem a free hand in ’solving’ it? I expect nothing less than full congressional and/or judicial oversight on any monies disbursed by Paulson with a congressional line item veto power. Anything less would just be complicity in the greatest theft in human history.
September 21st, 2008 at 12:48 pm
1) Dan Kerwick is ducking the REAL issue –which is who PAYS for the Bailout.
If the Superrich are tapped, then they will work to ensure the bailout is conducted to reduce their losses. And the rest of us will have no reason to care how the bailout is handled and whether it is necessary.
2) But what we have seen repeatedly in the Bush Administration is class warfare. The Superrich get $Trillions — the tax cuts, the oil reservoirs of Iraq, and now this bailout — whereas the common citizen has already been fucked by having $3 Trillion stolen out of his Medicare and Social Security Trust Funds accounts. ANd is being told to bend over for another $2 Trillion drilling.
If the Superrich leaves the rest of us holding this bag of shit , they will do like Phil Gramm: Wave merrily as they walk away from the car wreck back to the Good Life.
3) Dan’s refusal to address this shows where his real concerns are –and they are not for the national interest.
4) I repeat — if the current Democratic Congress fucks us on this, then fuck them in the election. Vote for Ralph Nader. OR write in the Long Ranger . But the Party’s going down.
September 21st, 2008 at 1:21 pm
There’s a guy in California, Dr. Joe Marshall, who works with troubled inner-city youth. Tells them “A friend would never lead you to danger.” Something to remember when their gang-bangin’ homies come around.
Seems to me some of you college boys could benefit from that insight too. Especially if you think Schumer and Barney Frank and Dodd and them are your progressive friends, only somehow they want to rope you into making payments on some $7-million property in the Hamptons for some Wall Street crook FOR THE REST OF YOUR LIFE. Think about it.
September 21st, 2008 at 2:57 pm
mpowell,
I said nothing about the bill itself, so I don’t think I can rightly be accused of being wrong about it. Yes, it sounds perfectly reasonable to me to attach lots and lots of strings to the bailout, rather than just give a Republican treasury secretary an outright $700 gift that he can use in whichever way he wants. Again, I just want to see some actual evidence and details about proposed plans, based on knowledge, rather than a lot of angry populist ranting.
Don Williams,
I am perfectly cool with the idea of the wealthy being taxed a lot more so that they will pay more for the bailout than they will under the current tax system arrangements. I am also cool with using whatever additional tax revenues are taken out of the private sector being plowed into progressive public investment schemes to stimulate jobs and growth. I am also concerned, however, about the short-term impact of depressing the savings rate on an economy that is apparently woefully short on capital. So again, I want to see some actual numbers from progressively-minded economic experts who actually know what they are talking about, and not just more ravings from street philosophers like you and me.
And if you think voting for Ralph Nader yet again will just “fuck the Democrats”, thus apparently ushering in some bold progressive era after we are done digging out from the collapse, then you are an irresponsible moron. Four more years of Republican rule will only consolidate more power, more wealth and more public assets in the hands of the wealthy and the reactionary. I’m not going to stand around and let purist nitwits like you jerk around my son’s future so they can make spiteful, nose-cutting, self-indulgent points about how much they hate Wall Street and the rich.
By all means, once we have saved the economy from going in the dumpster, let’s rework capitalism and give it a makeover. But let’s also not pretend that, in the interim, our fortunes are not bound up with those irresponsible, poorly governed and greedy Wall Street asses.
September 21st, 2008 at 3:08 pm
RE Dan Kervick’s comment “By all means, once we have saved the economy from going in the dumpster, let’s rework capitalism and give it a makeover.”
———
Won’t happen.
IF you don’t surtax the Superrich now –while they are desperate — to pay for this, we will be stuck with it.
Any increase on the Superrich will require a bill –which the Senate Republicans will block in a variety of well known ways even if they are in a minority. And if they need any help, several Democratic whores will give sheepish grins and wonder across the aisle to join them.
Just look the 12 Democrats who voted for Bush’s tax cuts in 2001.
And the Zell Millers, the Joe Liebermans, and the John Bureaux
know they can get away with it without retaliation — because the Democratic Leadership will eat dogshit before they will give up a tenuous majority and lose their Committee Chairmanships.
September 21st, 2008 at 3:49 pm
What makes you think the Superrich are more desperate than regular folks, Don? Even if a lot of their financial assets vaporize, they still control plenty of real estate, cash, and so forth. While they’ll lose more in a total meltdown, and maybe even a bigger percentage of their assets than average people, at the end of the day they’ll still be rich.
Bad as the Great Depression was for rich folks, it was a hell of a lot worse for poor folks.
September 21st, 2008 at 4:38 pm
The more I read about this the more pissed I get. So let me get this straight. I have to pay $700 billions dollars for my debt that I am already paying for now. So I have to pay twice on my crap and even more for some other people’s crap too? I must belong to the wrong union.
Let’s be fundamental here. This crisis was caused by Cheney and McCain’s Oil Greed. The prices of gas…not to mention insurance (health auto house) skyrocketing for no reason at all…except for greed caused this as those factors removed the liquid capital from “normal” people’s wallets.
So instead of addressing the issue…we are going to give more money to the greedy, while not helping the folks at home struggling to pay their bills…or not.
Here’s a better alternative that would start people buying again:
* A complete repeal of whatever legislation allowed insurance companies to base their rates on our credit and a return to the levels prior to that legislation. It’s stupid legislation to allow insurance companies to increase your debt because your are in debt.
* An immediate and unequivocal repeal of the tax subsidies to Oil Companies. With the added benefit that the prices will be capped at the pump for the near term at 2004 levels.
* Credit Card rates should be dropped and fixed across the board and it maybe necessary to write off credit lines that cannot be paid off based upon a families income percentage.
* All housing costs should be recalculated at true market value with consideration to the equity the owner has and in getting that equity to build again. The house payment should reflect an adequate payable percentage of the family’s income. All foreclosures, where the family still inhabits the home, need to stop and desist and measures need to be taken so that the folks can resume the loan.
* All small loans, automobile loans, etc, need to be recalculated at the true value of the item and payment adjusted accordingly.
* A $1500-$3000 per household stimulus payment, to help bolster the liquid purchasing capital of the individuals.
The rich…made their money. Now it’s time to be patriotic and pay some of it back.
September 21st, 2008 at 8:05 pm
That’s possible, but it depends on how the how the junk securities are valued. If the government forces the banks and funds to accept an aggressive discount (”You don’t like it? Great, find another customer for this stuff.”), then we (the taxpayers make money at the expense of the financiers. However, if I read the Times correctly this morning, Paulson still holds something like $700M of stock in Goldman. Given a choice, he would not be my agent in this deal.
September 21st, 2008 at 9:12 pm
Sixty-one posts, an abundance of opinions and a few good thoughts. I’d award #49 patriot games top honors for: “1) Say loud and clear that we’ve learned from the 9/11 aftermath that we cannot grant authorities without check and processes of review, not under any circumstances.” And: “2.. In the current economic crisis there is no justification at all for secrecy. In fact, secrecy is part of the cause of the crisis, so the cure must include almost total transparency from the get-go.”
I wouldn’t have expected a competent administration would have let the financial system collapse under their watch, but reading the proposed LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY at http://calculatedrisk.blogspot.com/ reminds me of Congress’ panic into giving the administration a blank check to purse weapons of mass destruction. We know Cheney’s old company made billions from the Iraq venture, but this is reaching for the big money “without regard to any other provision of law regarding public contracts;” with “Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure,” and with “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
September 21st, 2008 at 9:19 pm
Sixty-one posts, an abundance of opinions and a few good thoughts. I’d award #49 patriot games top honors.
I wouldn’t have expected a competent administration would have let the financial system collapse under their watch, but reading the proposed LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY at http://calculatedrisk.blogspot.com/ reminds me of Congress’ panic into giving the administration a blank check to purse weapons of mass destruction. We know Cheney’s old company made billions from the Iraq venture, but this is reaching for the big money “without regard to any other provision of law regarding public contracts;” with “Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure,” and with “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.”
September 21st, 2008 at 10:53 pm
Dan: “I would suggest that everyone remember Matt is just a blogger and dilettante, ambitiously pursuing a career in Washington punditry, who has no expert knowledge of anything on which he blogs. He also probably has less actual stake in the matters on which he blogs than most of the rest of us, since the Crimson Network will no doubt have each other’s backs, and probably sail through any major downturn just fine.”
What have I been saying for months here - and cussed out every time for saying it?
But Dan is wrong for suggesting everybody here needs to be an expert in bailouts to complain about this. Merv above is right - this is handing a bunch of criminals a blank check worth $700 billion. Are ANY of you stupid enough to believe these criminals won’t take advantage of that?
Let the economy collapse. It might help render the US less likely to start WWIII in the next four years, which right now we are on track to do either against Iran, Pakistan or even Russia.
You don’t want to pay for the actions of these criminals, so you want to bail out the economy. You VOTED THESE CRIMINALS IN and let them ALLOW OTHER CRIMINALS TO PROFIT! So suck it up and accept the consequences! You’re going to ANY WAY sooner or later - probably sooner.
September 22nd, 2008 at 10:32 am
And who sez the economy will collapse? Ya gotta love the folks who come on here and other progressive sites with “Well, I may not know anything about economics, and fersure I’m a real progressive, and, yeah, everything the Bush administration has said for the last eight years has turned out to be a lie, but . . .” and then they give you all the Reichstag Fire talking points word for word:
‘There just may be no alternative here . . .’
‘ . . . a successful move to avoid a financial lockup is the most important thing . . .’
‘. . . there is every reason to think that some quick and decisive action is needed . . .’
Of course there’s no evidence for any of this (WTF is ‘financial lockup’?) beyond a lot of arm-waving by the very people who stand to gain hugely, but nevermind that. We’ll get ‘em next time.
By the way, anybody notice that the right side of the blogosphere has gone deathly silent on this issue?
September 22nd, 2008 at 11:07 am
Except what if they DO take a stand, and politicize the Bailout Plan, and end up killing it? What if, as is probably likely, the result of no bailout is a systematic failure of the financial system? What if, as is not unlikely, a complete seizing up of the credit markets leads to widespread funding shortages and bankruptcies among non-financial firms across the country and then worldwide, causing unemployment to soar to the 15%+ range and plunging the U.S. into another Depression?
Do the Democrats in Congress want to be blamed for that?
September 22nd, 2008 at 11:13 am
John, a “financial lockup” is an interesting terminology but it means a failure of the credit markets.
Last week, prior to the bailout plan, investors fled even safe assets like money market funds after one “broke the buck”. The actual interest rate on Treasury bills fell to zero as investors were willing to take no return whatsoever, for the piece of mind that they would get their money back in the future. At the same time, the interbank lending rate (the one that the Federal Reserve is supposed to set through its control over money supply and for which it maintains a current target of 2.0%) soared to over 4% as banks refused to lend to one another.
The danger of this crisis, which was already apparent by Wednesday afternoon, was that everyone - investors, banks, you name it - lost faith in the financial markets and ceased to extend credit. When this happens, even healthy companies cannot borrow to fund their operations. Short term funding markets seize up (or “lock up”, if you will). Companies can’t fund their working capital for their operations. With no credit, a company can’t buy raw materials for its factories, the factories shut down, the workers are laid off.
A crisis in the financial markets has spread to the “real economy” before, when it ceases to affect just “investors” and begins to harm anybody who runs a company or holds a job. This was in 1929-1930, and a lot of very smart people had good reason to believe it was imminent again.
September 22nd, 2008 at 11:22 am
For the record, I’m a progressive/liberal Obama supporter. But I’m also a finance professional and there is an acute lack of understanding among the general public about just what is happening, what was at risk of happening, and what the plan is and does.
Now, the taxpayer needs to get something in exchange for any bailout. There should be no severance for terminated executives (the former CEO of AIG just turned down his $22m package, as he should). The Fed should receive warrants for a significant percentage (i.e., 20%+) of the equity in any financial institution that takes advantage of the bailout. The Fed should not pay above fair value for the assets acquired (note that this is still more than the banks can sell them for in the private market, otherwise there would be no point… but they’re not trading anywhere near fair value now due to lack of market liquidity, i.e., no willing buyers).
But at the end of the day, it’s not Wall Street greed that’s solely to blame for what’s happened. It’s a combination of:
1. Inadequate risk controls at investment banks.
2. Lack of oversight and dereliction of duty on the part of the ratings agencies (S&P, Moodys) that decided to pretend that the first tranch of a package of subprime loans should be rated ‘AAA’.
3. Irresponsible lending practices on the part of local banks and mortgage companies (Main Street banks, not Wall Street banks) that did not have their own profits or the compensation of the relevant loan officers and managers tied to the future performance of the mortgages they were approving.
4. Greed on the part of home buyers and average Americans who insist on spending more than they make, leveraging themselves to the hilt, and buying houses they cannot afford.
If greed was the problem, it’s not just greedy investment bankers. It’s also the greedy “regular Joe” that makes $40,000 a year and thinks he should live in a $400,000 home.
September 22nd, 2008 at 11:35 am
As a libertarian Democrat, I agree with everything that you say. However, we can’t give up. There’s an avalanche of resistance to the Paulson Plan on the liberal and libertarian blogs. Let’s keep up the pressure!
September 22nd, 2008 at 11:42 am
The Democrats in Congress do not represent a progressive voice. Schumer, Dodd, Biden etc. are tied too tight to the interests that are being protected in this bailout plan.
It’s WMD all over again, and the Dems as usual will cave. Screw them if they do; it makes me SICK.
September 22nd, 2008 at 11:51 am
Matt is usually right about everything. He’s wrong about this. There’s a way to turn this mess into the a enormous source of strength for Obama:
*He should make a campaign promise that he will either reduce deficit spending to zero by the end of his first term in office or not run for re-election.
*The markets and the value of the dollar will jump in response, thereby giving voters a sense of Obama as visionary economic leader.
*It will highlight the primary legacy that Republicans have left us: an addiction to borrowing and debt. That’s the root of this crisis and addressing it is not just wise politics, it’s the right thing to do.
More explication here.
September 22nd, 2008 at 11:58 am
This bail-out makes Marie-Antoniette look frugal. Let’s not bail out the people who believed in the free-market, government hands-off Wall Street people without guarantees that all regulation is back on the table. They got what they wanted now we should get what we want.
September 22nd, 2008 at 12:04 pm
Keep drunk blogging. Today, my broker said he and his friends call the Paulson plan: “Cash For Trash.” Wheeeee!
September 22nd, 2008 at 1:01 pm
it would be nice if democratic leaders - pelosi, reid, dodd(chairman of the banking committee) and obama - would actually provide leadership.
this smells like another democratic rollover.
all of the typical whimpers and whines are being heard.
how about actually LEADING obama?
this will be another instance of democrats being put on the defensive when all logic and common sense says that they should be kicking butt.
these guys don’t know how to play the game.
September 22nd, 2008 at 1:19 pm
Thanks, TH, for making my point: “For the record, I’m a progressive/liberal Obama supporter. But . . .” (insert arm-waving arguments here)…
Look, I respect your sincerity but I read the Financial Times and Bloomberg too. So does everybody else. Big deal, we all know what’s been going on. You’re a finance professional? Great, so are Bob Willumstad of AIG and Dick Fuld of Lehman Brothers. And let’s not forget former Fannie Mae CEO Daniel Mudd and former Freddie Mac CEO Richard Syron. Plus the thousands of ‘quants’ and others finance geniuses, from LTCM to now, kiting the market (including commodities), playing fast and loose with regulatory policy, courtesy of compliant schmucks like Barney Frank, Schumer, Dodd, and of course the Bush administration…
In science they say ‘Extraordinary claims demand extraordinary proof.’ A trillion dollars (for openers, mind you — nobody knows the extent of the liabilities), a trillion dollars we don’t have, because some folks who’ve never missed a meal got upset last week about what MIGHT happen? C’mon, that’s conjecture, not proof. It’s laughable…
September 23rd, 2008 at 12:21 am
Is this going on our Capitol One card with 0 percent interest for the first six months and if we are not late on our payments will we get a good interest rate?
September 23rd, 2008 at 2:01 am
Matt,
Your tears of despair are soooo sweet.
September 23rd, 2008 at 6:27 pm
Not so fast. I’d like to know what any of this does to help the majority of “average working people “, renters. We of all groups in the economy are blameless in the current fiasco.
September 24th, 2008 at 12:58 am
With “liberals” like Petey, who needs corporate shills?
The bailout plan may or may not solve the immediate asset problem but you’ll be back here in six months. The problem is not the toxic paper. It’s how the paper got toxic in the first place.
September 25th, 2008 at 12:26 pm
More SHEER TREACHERY by the DC “Democrat” “Leadership”.
As much as liberals, Lefties, and Dems are gloating over Bush’s now 20% +/- approval rating, Speaker Pelosi’s 110th Congress has a FAR MORE DISMAL approval rating - not even HALF of Bush’s! (at a dismal 9%!)
By all rights, Pelosi SHOULD HAVE BEEN FIRED months ago, but due to the excessive influence of MONEY in our politics, Pelosi holds on to power by making the Democrats a pale imitation of the Neo-Con Republicans.
The DC Dems have their formual down pat: TOSS UP A BILL or policy or position, say “SEE? WE STAND FOR ENDING THE WAR and bringing deficits under control and bringing unlimited surveillance under control!” BUT _all_ Bush, Cheney, & Rove have to do is start cranking up the Right-Wing wurlitzer (big-media propaganda machine), and suddenly the Democrats COLLAPSE - “How suprising! But WE REALLY TRIED this time!”
Well, the DID NOT TRY.
TAKING ORDERS from the Right-Wing Media machine IS NOT _LEADERSHIP_.
Just to prove that the above is not my imagination, there was ostensible “Democrat” leader BILL CLINTON - HOSTING JOHN McCAIN last night!!
Clinton, Pelosi, Rockefeller, Hoyer, Feinstein, Reid - IF the Dem. presidential campaign wins in 6 weeks, it will be IN SPITE of the treacherous, two-faced DC Democrats.
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What To Do About the Price of Oil
stumble digg reddit del.ico.us news trust mixx.com Posted May 28, 2008 | 12:46 PM (EST)
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Read More: Big Oil, Chevron, Chevrontexaco, Collusion, Exxon, Exxonmobil, Gasoline, Global Warming, Oil, Speculation, Windfall Profits Tax, Business News
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Is Big Oil ripping off consumers? Are Wall Street speculators manipulating oil markets? What should be done?
Whether or not Big Oil is improperly restricting refinery capacity, whether or not Wall Street traders are driving up the traded price of oil to heights completely disconnected from supply-and-demand fundamentals, a few things are clear about gas prices — and so is the most appropriate, immediate policy response.
Current pricing arrangements are generating profit gushers for the large, integrated oil companies — ExxonMobil, ChevronTexaco and the like. While the price of oil is going up, these companies’ drilling expenses are not. Oil can trade at $40 a barrel, $90 a barrel, or $130 a barrel. It still costs ExxonMobil and the rest of Big Oil only about $20 to get a barrel of oil out of the ground.
The oil companies’ staggering profits are a windfall of the purest sort (Websters’ definition: “an unexpected, unearned, or sudden gain or advantage”). This is not a moral judgment about the oil companies, it is just a description of what’s happening.
A windfall profits tax could generate substantial government revenues. Allocated to investment in renewable energy, it could significantly increase funds directed to renewables, and be a small but important down payment on the massive investment needed in mass transit, energy efficiency and renewable energy.
Beyond the immediate future, it is important to get a better fix on energy markets. What’s clear now is that the U.S. refining market is very concentrated, thanks to a series of mergers permitted by antitrust authorities; and that oil and energy futures markets are dangerously unregulated.
Just five large oil refiners now control over half of the U.S. market, and the top 10 control over 80 percent, according to Public Citizen. There is very good evidence that the refiners have worked in the past to limit supply and drive up price. Whether this is an ongoing issue is perhaps less clear, given that independent refiners are now facing profit squeezes.
Still, for the medium term, either the government needs to scutinize refinery activity much more closely, adopt new regulatory authority and aggressively enforce antitrust laws, or it must intervene to deconcentrate the market.
Meanwhile, oil and energy markets have mutated in dangerous fashion over the last decade. At Enron’s instigation, these markets have become largely deregulated in the United States. Leading Wall Street firms like Goldman Sachs have subsequently bought up oil transport and storage operations — not because they are looking for new business outlets, but because they want insider knowledge about oil and gasoline markets. Meanwhile, investors large and small are pouring money into oil as a tradable commodity.
Are these markets being manipulated? Perhaps. But even with no manipulation, the intensified financialization of oil trading subjects the market to speculative frenzies characterized by sudden and severe price fluctuations. These prices swings have real impacts at the pump and in the overall economy (and much more ominous impacts for oil-importing developing countries than rich nations).
Re-regulating energy markets, imposing margin requirements and lessening investors’ ability to trade with borrowed money, and cracking down on market manipulation will all slow the Wall Street frenzy and limit price spikes.
For the long term, however, oil demand will continue to shoot up — though higher prices and the U.S. recession will moderate this tendency — and supply cannot keep up. Ultimately, new sources of oil may become available, including from deep water sites and tar sands and shale, but these will be more expensive to obtain.
The world is likely witnessing a long-term, steady (if bumpy) and permanent rise in oil prices. (More on the causes of oil price increases tomorrow.) This price increase will impose major economic hardships, unless there is a massive effort to shift to oil-displacing technologies and renewable energy.
That exactly this shift is needed to address the even more pressing threat of climate change, makes it all the more urgent that Washington adopt a windfall profits tax (and end governmental subsidies for Big Oil) and invest the proceeds in renewables. This is very unlikely for 2008. Will things be different in 2009?
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- + seawolf77 See Profile I’m a Fan of seawolf77 I’m a fan of this user permalink
America’s hypocrisy knows no bounds. When housing prices were going thru the roof no one was saying let’s get rid of the speculators. When Miami apts on Brikell Ave were fetching $1,000,000 for a 1000 sq foot flat that just 3 years before sold for $150,000 no one was saying the speculators should be taken out back and shot. When a stock clerk at Wal Mart was buying a $300,000 house with no money down no one was saying let’s change the margin requirements. Those same “no one was saying” people are now the ones SCREAMING to do something about speculators. What a pack of hypocrites. Look in the mirror. That big L has now turned into a big H.
Favorite Flag as abusive Posted 02:28 PM on 05/29/2008
- + dadw5boys See Profile I’m a Fan of dadw5boys I’m a fan of this user permalink
Some of the WINDFALL PROFITS should go to the people of the country where the oil came from.
People in Nigeria live on less than $1.00 a day while their natural recourses are being stolen by the wealthy and forgien corporations like our oil companies.
They live like animals so you can drive a HUMMER!!!!!!!!
Favorite Flag as abusive Posted 02:13 PM on 05/29/2008
- + drkazmd65 See Profile I’m a Fan of drkazmd65 I’m a fan of this user permalink
One possible use of a ‘windfall’ profit tax,…. last I checked a home solar panel system ran in the ballpark of $20K to get installed. Current tax credits for installing such a system are generally less than a couple of thousand.
Take part of these billions in windfall profits, and use these to bump the tax credit up to near the cost of installing such a system. I would install one in a hearbeat (or at least as soon as I could line up a contractor) if I knew that payback would be more realistic.
Also, take the remainder of these windfall profits - and start installing a real electric / recharging network - maybe even cut the oil companies in on the deal so that their current franchisers can get into the system. And - improve the damned mass transit systems.
We need an “Apollo Program” for getting this all on track. And we needed it yesterday.
Favorite Flag as abusive Posted 12:22 AM on 05/29/2008
- + agjag06 See Profile I’m a Fan of agjag06 I’m a fan of this user permalink
Of Exxon’s 52bil in operating cash flow in 2007 ~$15bil went to CAPEX and 8bil went to dividend payments(return on capital). They then spent 31billion dollars on stock buybacks. To me this money ($31bil in excess capital) is clearly economic rent and they have no productive use for it. Allowing them to keep it retards growth and productivity, while providing no real benefit to them or society.
Taxing this portion of their profits would not negatively affect behavior and the proceeds could be used to fund alternative energy research or implementation. Or it may cause them to come up with a better way to use their windfall scarcity rent in a much more productive way than stock buybacks.
Favorite Flag as abusive Posted 07:40 PM on 05/28/2008
- + agjag06 See Profile I’m a Fan of agjag06 I’m a fan of this user permalink
There is an obvious problem with terminology when one speaks of a windfall profits tax. It is inherently anti-American and anti-capitalist to speak of such a thing and people justifiably react negatively to it. That’s why economists must clarify and begin referring to it as a “windfall rent tax,” “windfall economic rent tax,” or my choice a “windfall scarcity rent tax.”
In my opinion the oil companies are clearly benefitting from scarcity rent. Exxon for example, last year recorded a “profit” of $40billion dollars. In economics, normal profit is that rate of minimum profit which a firm must earn in order to survive in the market. Which means they make enough profit to provide a return on capital and fund capital expenditures to sustain their business. Anything earned beyond this, due to rent-seeking, monopoly power, oligopoly collusion (explicit or implicit), even superior efficiency and productivity, is supernormal profit or economic rent. In a perfectly competitive market, which the oil industry clearly isn’t, the presence of economic rent would signal other firms to enter into the market and compete because there is money to be made. Clearly not the case.
Favorite Flag as abusive Posted 07:40 PM on 05/28/2008
- + joebhed See Profile I’m a Fan of joebhed I’m a fan of this user permalink
This windfall profits tax sounds good.
The problem is it is after the fact.
And based on who’s look at what books?
Let’s take the players out of the game that are contributing NOTHING to the resource-need balance.
The speculators.
I don’t care to bet that I am right that about 35 percent of today’s price for both oil and gasoline are a result of speculation.
The fact is that it was not always legal for commodity speculators to trade in oil futures.
This is something that comes about by virtue of legislation and regulation.
Did I say virtue?
It’s a right created by a pen.
It’s a wrong created by a pen.
It would take a pen to right that wrong.
That, and a couple or three hundred delegates that we elect and send to Washington DC.
And, a President to sign the bill.
But, that can be undone.
No doubt about it.
While we’re at it, we should take a look at all commodities markets and the amount of so-called economic growth that is happening as these markets take otherwise productive capital and squander it on outlandish profits for marketers.
As for the need to fund alternative energy, use the carbon tax.
You can reduce the price of oil by 35 percent and tax 10 percent of it back to government and you would have all you need for renewables.
Favorite Flag as abusive Posted 06:57 PM on 05/28/2008
- + vipersdad See Profile I’m a Fan of vipersdad I’m a fan of this user permalink
High prices are not the worst thing that can happen. Only when the pain gets high enough do people change their behavior. If the American people can cut 1 gallon of consumption per week per driver, the message to big Oil would be alarming and clear. In my mind we need to penalize the companies as well as the consumer. I think a windfall profits tax and government oversight are ok but we cannot rely on those as the panacea.
There are areas where the government can take the lead:
-Incentives for those who move to small, more fuel-efficient cars or alternative methods of transportation.
-Telecommuting should be rewarded with tax incentives for corporations with certified programs. Forget about carpools - why go to the office at all any more?
- Housing developments or communities that adopt and maintain certain standards and practices can qualify for federal monies or tax relief (as with the interstate highway system or some such model)
-Communities that make it easier to ride a bike should be rewarded
-I’m sure the Huffpo contributors can come up with a panoply of other ideas too.
We the people need to organize and have a goal of putting the oil companies out of business - the American consumer can do this if we had the proper sense of urgency and leadership. As long as we are united we can win. Divided…. well - you know.
Favorite Flag as abusive Posted 04:15 PM on 05/28/2008
- + Pquilson See Profile I’m a Fan of Pquilson I’m a fan of this user permalink
So, you want a goal of putting oil companies out of business. How very novel.
How do you propose you shall heat or cool your home? What do you propose that will fuel your vehicle(s)? Do you fly? What will fuel those planes and jets? Do you drive to work? How will you do so. If you live in an urban area close to your place of employment you could ride mass transit (what will fuel those?) or ride a bike - how’s the weather there? Ever rain, or snow?
Are you aware that more than gasoline and diesel are made from crude oil? If there is no crude oil, how will all the other things be made?
Who, do you suppose, has prevented updating and building new refineries?
Who, do you suppose, has prevented the building of nuclear power plants?
Who, do you suppose, has tried oh so very hard to prevent additional drilling for oil and gas?
Oh, yes, those would be the people who are crying the loudest now about the high price of electricity and gasoline/diesel
Just think about what you are proposing.
Favorite Flag as abusive Posted 06:35 PM on 05/28/2008
- + Craig See Profile I’m a Fan of Craig I’m a fan of this user permalink
We can increase supply by one or two percent, but we can reduce or dependence on oil by 100 percent. So where do I want to concentrate my efforts?
Favorite Flag as abusive Posted 07:36 AM on 06/02/2008
- + BBackSoon See Profile I’m a Fan of BBackSoon I’m a fan of this user permalink
Yes but we will first need an Administration that is actually interested in making things better for the masses.
Favorite Flag as abusive Posted 06:10 PM on 05/28/2008
- + KillTheMessenger See Profile I’m a Fan of KillTheMessenger I’m a fan of this user permalink
Oh cry me a river. We know about peak oil since at least 1956. We have been taught to expect rising energy prices in high school (at least I have, sorry if you haven’t). We have been taking advantage of the good sides of capitalism (please compare to the success with alternative systems like communism!) for decades. Now suddenly we are crying foul because the known flaws of the system (uncontrolled exploitation of finite resources until resource depletion sets in) show their ugly?
Please. No really. Please, slow down for a moment and reflect about it. Did you lend a voice to the critics of capitalism ten years ago who said this was bound to happen? Did you think about it twenty years ago? Did you read the reports of the Club of Rome thirty years ago? No? So why are you crying NOW? Because now it hurts and there is little to ease the pain. All of this could have been mediated decades ago. Now it’s too late for mediation and we have to make the best of it. But at least we shouldn’t whine like small children about dropping our ice cream cone.
Favorite Flag as abusive Posted 03:39 PM on 05/28/2008
- + ImmanuelGoldstein See Profile I’m a Fan of ImmanuelGoldstein I’m a fan of this user permalink
Hey Kill, I’ve been beating the drum on this one since I was in JUNIOR high school with little effect. The energy debate for me has this overwhelming sense of deja-vu. It’s like watching a theater remake of some made-for-tv movie from back in the 70’s. It’s stars Brad Pitt instead of Robert Foxworth and the production values are better, but you already know that Questor isn’t going to blow himself up at the end. http://www.imdb.com/title/tt0070585/
(And yes I know how much this all dates me, I’m PAINFULLY aware…..)
Which is why I’m such a pissy, bitchy , curmudgeon about the Green Car =Big Lie thing. I saw how kowtowing to American car worship kept us from making the needed changes in our societyfor THIRTY YEARS, and I have NO intention of wasting my time running down the same cul-de-sac AGAIN.
Favorite Flag as abusive Posted 10:12 PM on 05/28/2008
- + RoloTomassi See Profile I’m a Fan of RoloTomassi I’m a fan of this user permalink
While Peak oil will eventually arrive, that’s not the problem right now; we have an artifical bubble created by speculation, and in the end, if we reduce our usage and focus on alternative energy resources, I am betting that we’ll see oil prices come down much farther than anyone expects.
Between the suppliers and the traders and the devalued dollar, we’re seeing a huge bubble in crude oil prices–but if we, as the #1 customer of oil companies, reduce our NEED for there product and strongly indicate that we’ll be able to drastically reduce comsumption, they will burst their own bubble in order to make a very good profit at half the current price.
Favorite Flag as abusive Posted 03:33 PM on 05/28/2008
- + StinkyPete See Profile I’m a Fan of StinkyPete I’m a fan of this user permalink
George Soros is of the opinion that a good butt-thumping recession will do the trick.
http://tinyurl.com/58m3yh
Our candidates are not showing any leadership on the issue.
Favorite Flag as abusive Posted 04:26 PM on 05/28/2008
- + ddharder See Profile I’m a Fan of ddharder I’m a fan of this user permalink
pt 1 (from Bob Carver’s blogspot)
Definition of cornering a market: “to purchase enough of the available supply of a commodity or stock in order to manipulate its price.”
–Investor’s ABC
Commodity index funds (”indicers”) have been buying up baskets of commodities, including food and energy, in order to take advantage of increased demand for real goods and have now reached the stage of cornering many of these markets. Normally, this kind of speculation is prevented by position size limits set by the government. For example, the Hunt brothers illegally cornered the Silver market in 1980, sending Silver prices soaring to $50/ounce. Once the government stepped in to break up the corner, Silver prices then plunged to less than $3/ounce. There were quite a few speculators who found that, although they had profits on paper, they were not able to sell on the way down. They got crushed, along with their brokers.
The moral of the story: those who participate in trying to corner a market take on exceptional risks. When the government determines that a corner exists, it will be crushed without mercy as it is antithetical to society as a whole. In other words, markets are not free for a very good reason.
Favorite Flag as abusive Posted 03:25 PM on 05/28/2008
- + ddharder See Profile I’m a Fan of ddharder I’m a fan of this user permalink
Cont..
Are things different now? Indicers are the big money interests who often get their way in a capitalistic system. Like the process by which laws are created in Congress and the Presidency, these big money speculators have essentially bribed the government to allow them unlimited position sizes in the markets. Thus, for example, they have bought up the entire Wheat crop for the next two years. Now, if the richest man in America, for example, had decided to illegally buy up, say, all of the milk supply in the US and bribe Congress and the bush in the White House to look the other way, he could certainly do it with his gargantuan wealth. But, consumers, faced with the prospect of paying hundreds of dollars per gallon of milk (which the rich guy would certainly try to charge to maximize returns for his shareholders), would quickly rebel and find ways to smuggle milk into the country to break the market.
Favorite Flag as abusive Posted 03:24 PM on 05/28/2008
- + seawolf77 See Profile I’m a Fan of seawolf77 I’m a fan of this user permalink
Oil companies profits are not staggering, their operations are. As a percentage of revenues, oil companies are normal when it comes to profit. It costs substantially more to produce oil today than it did yesterday for many reasons none of which you have bothered to point out. The light sweet stuff is gone, the heavy sour stuff is the new norm. The refineries are old and under constant repair. Choice drilling spots are far and few in between and in spite of what you may have heard about all the new teechnology, oil comapnies still drill lots of dry holes. Somebody has to pay for those. Most oil is under the control of hostile governments. There is new nationalism developing around natural resources. America is incredibly wasteful when it comes to energy. Price increase tend to get rid of that sort of thing the old fashioned way. So who is to blame for high oil prices? Look in the mirror. It’s you.
Favorite Flag as abusive Posted 03:15 PM on 05/28/2008
- + magen See Profile I’m a Fan of magen I’m a fan of this user permalink
Anybody ever see a sign that says-
SALE ON GASOLINE!!!!!!!!!!! PRICES SLASHED!!!!!!!!!!!
That’s how you know oil is not part of the “free market” that republiCONS always talk about.
Favorite Flag as abusive Posted 02:11 PM on 05/28/2008
- + JBS See Profile I’m a Fan of JBS I’m a fan of this user permalink
Actually, I have - but it’s been 40 years.
Favorite Flag as abusive Posted 06:40 PM on 05/31/2008
- + KillTheMessenger See Profile I’m a Fan of KillTheMessenger I’m a fan of this user permalink
Actually, oil was practically on sale for decades. The sale lasted so long that nobody advertised it, so people became complacent about the low price of oil and gasoline. Friends of mine who were in the oil business in the 1980s can tell you about how one can go broke by owning an oil well.
The misconception that
Favorite Flag as abusive Posted 04:58 PM on 05/28/2008
- + tompoe See Profile I’m a Fan of tompoe I’m a fan of this user permalink
HuffPost’s Pick
Why are we looking to oil companies to invest in alternative energy? Why are we not restricting their participation in alternative energy resources? Lock them out, let them swim in their oil. A national policy to switch, let them provide gasoline, petroleum products, and watch the world leave them behind, to die a slow miserable demise.
We’re going to be suffering greatly, as it is, so why not join the green movement big time, and if the oil companies want to participate, tough cookie to them. We start simple. Initiate a broadband infrastructure policy out of the white house akin to the present digital tv switch nonsense. The same price for a digital tv converter box buys a wireless access node for each home. From that point on, every community has their local broadband infrastructure in place, and generations of Americans have free local telecommunications, tv and radio access. Oh, but that would disrupt the telco/cableco duopolies. Good. We get rid of them, and we set ourselves up for creating a way to eliminate travel to work.
Time to stop listening to corporate media, corporate thugs that control what we see and hear.
Favorite Flag as abusive Posted 01:25 PM on 05/28/2008
- + RoloTomassi See Profile I’m a Fan of RoloTomassi I’m a fan of this user permalink
They certainly should be locked out of developing hydrogen fuel cells in order to continue their rape of the energy consumer, but the windfall profit tax is a great idea as far as spurring the growth of alternative fuel resources. With the windfall tax should come restrictions on HOW the money is spent; the funds should be meeted out by fair bidding methods to innovative companies that have ZERO connection to the Big Oil Criminals.
Favorite Flag as abusive Posted 03:20 PM on 05/28/2008
- + Henry See Profile I’m a Fan of Henry I’m a fan of this user permalink
I for one find it strange, strange, strange, that the so-called “conservatives” of the country have missed every opportunity to inspire the country to a conservative posture vis-a-vis energy consumption. Your car(s), your home, your hobby. This country could consume 10% less in energy with the guide being efficiency. Mobilization has been fear, how about conservation? Republicans are a joke, a now stale joke!
Favorite Flag as abusive Posted 01:18 PM on 05/28/2008
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