The Fierce Urgency of Now?
Paul Glastris on the need to avoid making decisions under pressure:
One of the classic mistakes we all make–and this is true of political leaders and average citizens alike–is to accept unquestioningly that the choices we’re being presented with are in fact the only choices we have. And so it was on Friday that Democratic leaders in Congress seemed to line up behind the Bush administration’s plan to have the federal government spend half a trillion dollars or more to buy up toxic mortgage securities held by banks and other institutions. It was a radical idea, suspiciously lacking in detail, and rife with taxpayer risk with moral hazard. But if it’s either that or the whole financial world melts down, the thinking went, what choice do we have?
As Paul observes, the crucial thing to note is that we do have options and alternatives — bailouts for homeowners rather than bankers is a possible scenario, it’s just not the one the bankers prefer.
29 Responses to “The Fierce Urgency of Now?”
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September 21st, 2008 at 2:12 pm
The sky is falling! I’m about to make a run on my bank.
September 21st, 2008 at 2:15 pm
In the time it took for today’s round of Democrats to complain that time is so short, they could have hired several thousand economists, accountants, lawyers, and whoever else needed to draft a detailed plan that isn’t just a smash & grab job for Hank Paulson’s Wall Street friends.
September 21st, 2008 at 2:25 pm
This is the Iraq war resolution all over again. If the Dems cave in as hey have done before, they lose their supporters for at least a generation.
My plea to the Dem leaders is not to live upto their sterotype.
September 21st, 2008 at 2:32 pm
The Wrong Strategy in the Financial Crisis and the Lessons of the Aftermath of 9/11 (What I’ve just sent to my senators and congressional rep)
The financial crisis is real, as was the crisis of national security after 9/11, but we are in danger of making some of the same mistakes again. The Democrats – and the country – must learn from that experience so that we take rapid and decisive action, but take smart action that addresses the real problems and increases accountability rather than throws it away.
Please read these two excellent posts by Professor Paul Krugman of Princeton.
http://krugman.blogs.nytimes.com…ailout-through/
http://krugman.blogs.nytimes.com…inancial-force/
The first suggests the alternative rescue plan of having the govt buy stakes in companies as the way to recapitalize firms, and then have a share of future upside potential, and also, implicitly, a quid pro quo for transparency and regulation.
The second post is shorter and, I think, more important. There Krugman implicitly compares the handling of the current crisis to the handling of 9/11 and the Iraq war vote. This is more important because demanding checks, balances, judicial review, accountability, and transparency in the rescue plan allows the country to make changes in the future – in contrast, the Bush Admn used terror to demand total authority and secrecy, which could then be used to push back on any argument for change. That cannot be allowed again.
I hope that you and Senator Obama and the Democrats will act strongly and decisively by pushing through the best rescue plan possible.
More importantly, it is absolutely necessary that the disasters of the country’s response to 9/11 be avoided. That requires a demand for accountability and transparency, and this needs to be explained to the country in the most forceful possible terms.
September 21st, 2008 at 2:33 pm
The pace of all of this certainly is cause for concern. What confidence do we have that they’ve even assessed the problems correctly, much less the solution?
September 21st, 2008 at 2:35 pm
Looking at the NYT this morning, it seems that as of Friday, Sec. Paulson still held about $500M of Goldman Sachs stock, presumably representing the overwhelming bulk of his personal net worth.
That means that the run on Goldman stock earlier in the week had probably cost him over $100M on a couple of days, and the rumored impending collapse of Goldman would have pretty much wiped him out, just like the top Lehman people lost 99% of their money. But once he announced his plan, Goldman—and his net worth—immediately bounced back up again
Offhand, Paulson seems like a pretty decent and honorable guy. But doesn’t this seem like some sort of “conflict of interest”?
September 21st, 2008 at 2:44 pm
I think whenever anyone asks for the authority to spend $700 billion from a rotating account in any fashion they want with no review or questioning or court challenge whatsoever that it suggests a conflict of interest even if that person had not one iota of savings, investment, or property on the planet.
But, yeah, that this is a heavily invested former Goldman-Sachs executive himself? Just icing on the cake for the Union of Soviet Republicans.
September 21st, 2008 at 2:54 pm
Re “Paul Glastris on the need to avoid making decisions under pressure:”
———–
I take it that Paul Glastris has never had a mugger hold a gun to his head and ask for his wallet, else said mugger will blow Glastris brains over the sidewalk?
Which is what this situation is.
September 21st, 2008 at 2:57 pm
The Urgency of Now – kind of like the way we decided to invade Iraq? That worked out well.
As an aside, I just e-mailed the Fed:
Ironic that Bernanke is touted as the expert on all the “mistakes” the Fed made back in the Great Depression. At least then the Fed had the excuse of grappling with the worse economic crisis we ever faced. I wonder what Bernanke’s excuse will be. He was working with our perfect Goldilocks economy, after all.
Future generations of grad students in economics will no doubt be writing their Ph.D. theses about all the screw ups Bernanke engineered, and bragging about how they (in Bernanke’s words) “won’t let it happen again”. Poetic justice?
Contact them at:
http://www.federalreserve.gov/feedback.cfm
Feel free to pile on. Believe me, they deserve it.
September 21st, 2008 at 3:11 pm
If I wasn’t so pissed off at the whole situation, I would be completely entertained at the whole political irony of the situation.
The Democratic’s are lining up to support a Bush plan. Republicans are calling for regulation. The blogosphere left and right, are resentful of a bailout.
Left leaning economists are against it, right leaning economists are against it.
And to compound the situation, neither one of the two Presidential candidates has given an inkling on where they stand despite this being the biggest issue… like in forever.
My vote is up for grabs based on the following logic.
Whoever votes against the bailout as describe gets my vote.
If both vote for the bailout then the one who votes for CEO compensation limits gets my vote.
Otherwise, screw them all.
September 21st, 2008 at 3:24 pm
the bailout plan as written: no fucking way
the Dems better have some cojones here
(Obama could capitalize on this with the announcement of a plan of his own tomorrow. Follow it up with a news conference.)
September 21st, 2008 at 3:26 pm
Well, Obama seems to oppose the Paulson plan:
http://www.youtube.com/watch?v=dZH_19Oa5gg
September 21st, 2008 at 3:35 pm
Well crap, I watched the Obama video and agreed with everything he said, except for the part about helping home owners stay in their homes.
September 21st, 2008 at 4:01 pm
Where’s Obama?
September 21st, 2008 at 4:07 pm
Duncan Kinder — Obama is here
http://my.barackobama.com/page/community/post/amandascott/gGg9zm
September 21st, 2008 at 5:02 pm
anyway, I prefer “urgent fierceness”
September 21st, 2008 at 8:50 pm
It has occurred to me that one advantage of having the treasury own mortgage backed securities is that it will be easier to offer the underlying mortgage holders work outs of their existing mortgages. no pesky investors to sue for breach of contract.
September 21st, 2008 at 10:36 pm
Just to put this in perspective: $700 billion would pay off – not shore up, refinance, extend, etc but PAY OFF – 4 million mortgages of $175,000 each. In most places in the country, even at no money down, that will get you into a respectable house. Since we are talking about bad loans, the banks should actually be thrilled to get 87.5 cents on the dollar, so lets say we are really paying off $200,000 each time. But really, its not fair to completely pay off the mortgage for some and leave others still holding the bag – so instead lets pay off half of the mortgage for 9.2 million people, at an average of $100000 each.
Even though this is a flat-out giveaway, it is still a better deal than the Bush-Paulson plan. You give 9.2 million families $100 grand, that is some serious economic stimulus. Give 70,000 Wall Streeters $10 million each, and I don’t know how much makes it down here to Western North Carolina.
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