I'm no economist but I play one on DU...

[kentuck]

In a breathtaking display of naivete, the Democrats truly believe they are saving the world's economy because Hank Paulson told them so. Most likely, they will pass this bailout with a huge majority of Democratic votes and a few Republicans. But it will have their stamp on it. They will pay a political price for this naivete, masquerading as patriotic concern.

The bailout will make the dollar less valuable because we are borrowing the money. That does not help the average person. Further decline of the dollar should be as much a concern as bailing out the Wall Street firms. Wages simply cannot keep up.

The emergency "panic" was created by Wall Street for obvious reasons. They are losing their asses. In order to sell it to the American people, they had to get the Democratic Congress to go along. They said that everything would freeze up. Nobody would be able to do anything because the entire economy was in danger of collapsing. The Democrats bought it - hook, line, and sinker. After all, somebody has to show responsibility in this "crisis".

But, being the economist that I am not, I would say that the $700 billion dollar bailout will make matters worse, not better. The bad assets will still be there after we give away all this money. It was a mistake to start at the top and work down. That is just another re-incarnation of "trickle-down" economics. They should have started at the bottom and worked up. They should have started with the foreclosed properties and resolved that issue first. These properties will still be there after we give this money to Wall Street. It does nothing to solve the problem.

The huge amount of money at the top will only spur more inflation and make matters worse for the folks on Main Street. Yes, there is a problem with the banks and investment firms. And there is going to be a hard fall. There is no easy landing in this recession. There is going to be pain. But, unfortunately, the Democrats are transferring the pain to average Americans, rather than those that are responsible for the mess. It proves true the old maxim, "those that stand for nothing will fall for anything". The Democrats seem to have forgotten what they stand for.

[Skink]

1. They haven't done it yet.

calls to Senate offices are 100 to 1 against. The public is starting to understand that some of the money they want is supposed to help banks in other countries. We can't stand for that.

[lostnfound]

31. That's good to hear but the perception is different.

At my work place, the left-leaning but moderate non-political types are asking why the Democrats are ready to hand over $700 billion of our tax dollars.

[sandnsea]

2. Look up the HOPE Mortgage program

and look at the additional changes that will go in affect Oct 1.

[Gin]

5. I can't find what changes happen on Oct 1....is it a good thing or what?

gin

[sandnsea]

6. For starters,

it will change the qualifications so that somebody who missed a credit card payment in order to make their mortgage payment will still qualify for help. The point is, there are some programs to help homeowners, and more is on the way.

[2Design]

3. if they vote for any bailout they have lost me - I have had enough

they believed this addict every time he yells fire they give him more money, wars, and the souls of our young while killing umteen people in a innocent country for their political gain on both sides of the aisle - this is horrendous.

people who were responsible and didn't buy into these ridiculous loans and ridiculous speculation and saved are losing because house prices have to come down they are out of sync with reality of peoples annual salaries - regulation has to be put in place in many industries as it was before reagan and others behind him took them away -

[Warren Stupidity]

4. I don't think the panic was fake.

The crash was real enough. I agree that the Republican Party, or at least part of it, is playing to make this wildly unpopular bailout 'the Democratic Bailout'. I fear that our party's leadership, because we are Democrats and good people who try to do the right thing, will go forward with a rescue plan, because it is required to salvage an actual economic disaster, regardless of the political consequences. It is quite a dilemma. Do the right thing for the nation, possibly lose the election over it.

What I think the House Democrats ought to do is to have a vote-buddy system. For each House Republican, there is an assigned Democratic buddy. The buddy holds his vote until his untrustworthy Republican peer has voted Yes or No on the bill. If the Republicans have committed to back the bill, and then renege on their commitment, it will become obvious that they are doing so and the remaining Democrats should then also vote down the bill.

[kentuck]

8. With all due respect...

:-) (Sounds like a Congressman, don't it?)

But I think it is also naive to think the Repubs would go buddy-buddy on this deal. Furthermore, I think this is a terrible situation that we are in. I do not think the economy is going to freeze up - I think many of the snakes on Wall Street are going to freeze up. I do not believe this bailout will do anything to help anybody but those that got us into this mess. I believe the dollar will be stronger once we have rid ourselves of these leeches. They need to go under. The sooner the better. They do not need to be saved. Our lives and our economy do not depend on them. They depend on us to save them.

From a purely political perspective, I would hope that the Democrats put together a plan and if the Republicans do not join with at least 50% of their caucus by next Friday, we should let the chips fall where they may. I think WaMu and Wachovia were their biggest worries and those seemed to have been resolved by Wall Street themselves - with JP Morgan Chase buying WaMu and CITI rumored to be buying Wachovia. Those were the two largest banks they were worried about.

[hfojvt]

18. I am not convinced that having the chips fall would be less than a disaster

That is would be like dominoes falling, taking down more and more dominoes in a ripple effect. Better to put out a small grassfire before millions of acres get burned.

[prayin4rain]

7. yep, i do not think this bailout is the answer to the crisis... they have to do something

that is obvious, but this Paulson plan or an modification thereof, I am just not on board with. I think they need to start with at least 5 different plans that take different approaches and have different pros and cons and decide which one has the most reasonable consequences for the country. I don't think this was handled well by ANYBODY.

[underpants]

9. Its really "only" $100 Billion of bad paper

but that can't come into the discussion. That is why Schumer proposed starting with $150Billion and see how they handle it.

[Skink]

10. If the governtment buys all this for 100 Billion with a full equity stake then...

it's an investment. Done before Obama takes office.

[underpants]

11. Exactly but if the insurance nonsense goes through we still pay but get no ownership

Treasury underwriting or actually loaning the money is still OUR money

[earth mom]

12. K & R. nt

[annabanana]

13. How much inflation is"OK"?

I'm not talking about the ginned up CPI (no food, no fuel) numbers.. I'm talking about a loaf of bread, gallon of milk numbers. I have heard even strong proponents of both plans say that (or imply that) the governments pockets are bottomless because they can make more money. I know there's some "give" in the system for most Americans.. but the ones in tightened conditions already, and those on fixed incomes will be hurt badly if there is a measurable increase in the rate of inflation.

[gravity]

14. The credit markets freezing up is more serious

than the inflation risk associated with the bill. We are in a recession with a credit crunch, which are deflationary in nature, so that isn't a big deal.

You talk about the risks associated with this bill, but the risk of doing nothing is much worst. Banks play a vital role in are economy, and if they fail to lend money, major sectors of the economy will go under. We would see double digit unemployment and be in a deeper longer recession from this.

[Warpy]

15. I'm not an economist and I fully agree with you

I do think a bank bailout of some time will become necessary in the future, but not this bailout and not now.

You're right about all the reasons it will fail. In addition, it's like giving that ne'er do well compulsive gambler brother in law a big loan so his kneecaps don't get broken; although he swears on all the bibles you can find that he's a reformed character, unless you get him proper treatment he'll do it all over again next month.

The only thing that will fix this economy is ending the war economy and going back to an economy based on decent wages.

This bailout won't do anything but make CEOs more secure and a few fat cats a little happier.

[tjwash]

16. first of all...it"s HENRY Paulson. Don't call that scum sucking bottom feeder "Hank"

The other night Bush* swaggered into the national media room with his faux-folksy act and rechristened Henry Paulson as "Hank." That nickname is meant to humanize a cold-blooded reptile so that we'll trust it with not just the keys to the kingdom-but the entire fucking kingdom.

Second of all, this "bailout" is all a huge scam. It's an incredible cash grab that these bastards are attempting, and is the culmination of 8 years of looting, that will make the USA once and for all the CEO's wet dream-Mussolini-style corporate/government fascism. All this shit is an advance transfer of money and power so that the criminals who have pillaged and looted the treasury and the collective pockets of the United States and the world for the past eight years remain in control, after Bush* no longer serves as the official front-man for their confidence game.

What are they gonna do? If we don't cough up $700 billion, they'll show us that they mean business, by beginning to knock us off one family, one industry, one town, at a time? Jesus Christ on a crutch...THAT'S WHAT THE FUCK THEY HAVE BEEN DOING FOR THE PAST EIGHT YEARS. The only difference is, that they have ordered and instructed the media outlets that they own to publicize their crimes against the American people. Keep that good old fear...fear...fear shit going that has served them so well the past 8 years.

Bush and his Wall St cronies have taken the American people hostage. We should be marching these slimy bastards into prison for extortion and war crimes...not handing these bastards a blank fucking check.

Bush's base tell us how it is...

[bvar22]

17. Democrats vote to cut wages on all Working Americans.

If Democrats agree to borrow another $700Billion, or even another $150Billion, the net effect will be the reduction in Buying Power of the American Dollar.....that is a cut in wages.

[TahitiNut]

19. The fundamental PROBLEM in the economy will be WORSENED.

Let's step back and understand that the mortgage/realtor/developer industries confronted the problem of "scorched earth capitalism" not by addressing the cause of the lessening market demand (declining real wages) but by artificially and fraudulently peddling time-bombs to people, all for the sake of (1) grabbing the up-front commissions and (2) flooding the capital markets with MBS without any quality assurance.

The PROBLEM is too many houses on the market and too few people who can afford them. That's due to years and years of inflation in the housing market combined with years and years of declining earnings in the working class.

Business cannot fairly survive without buyers ... buyers able to purchase their products and services. When predatory capitalists take over businesses and destroy the business' customer base, they're also destroying the business itself ... which is why those businesses fail and have to be sold for scrap. The predatory capitalists don't mind ... since they're ONLY concerned with making money, NOT with building a business that lasts.

The bail-out is being constructed SOLELY to put the destroyed businesses on life-support ... but WITHOUT doing anything to address the original problem of people without the wage and salary income that matches a fundmental cost of living.

This approach will result in several consequences. The market value of every kind of residential property will decline. EVERYONE owning residential property loses ... whether its rental or family-owned. Even people with jobs and fixed mortgages face major losses of equity and possible capsizing of their mortgage. Anyone who then faces the need to relocate will find themselves unable to transfer any equity in a new residence.

The residential construction industry faces a massive downturn that will last for years. This February will see the most massive construction layoffs in recent history. Real estate offices will go out of business nationally. That's MORE people unemployed.

The MBS purchased by the fed will DECLINE in value as more and more people go belly-up.

[kentuck]

21. A true Democratic solution would be...

to put $700 billion into jobs and loan assistance to those folks at the bottom that need help in saving their homes - not giving the money to Wall Street. However, if you believe Bush and Paulson that our entire economy will "freeze up" if you do not give them the money, then I guess the folks at the bottom are irrelevant? But it does say something about the changes that our Party is going thru and has gone thru, in my opinion.

[scarletwoman]

25. Wonderful post, TN. I really wish you'd make an OP out of it.

"...years and years of declining earnings in the working class."

That's really the core problem. Too many people equate the "economy" with Wall Street, completely ignoring the fact that while Wall Street trades in intangible paper and illusion, real living people trade their time and their labor in exchange for the means to purchase tangible goods. Why are we propping up the economy of trading intangible constructs and not the economy of living bodies working in the solid material realm?

sw

[TahitiNut]

26. Thanks. It's a "market" (in name only) for Traders and Owners, but no Producers.

That's why it's Predatory Capitalism. When 'ownership' has absolutely no interest in production and operation and is solely interested in buying what it can sell, where profit is totally decoupled from product and traders' commissions dwarf ANY production values, that's Predatory Capitalism.

Those who CREATE WEALTH (i.e. workers) are kicked to the curb as those who trade in ownership beg at the government door.

This "bail-out" does not row the boat or patch the holes in it's bottom. The rowers are being tossed overboard.


It's pretty much a waste of time and effort to argue this on DU. The folks who have invested time and effort in understanding the intricacies of the financial instruments and derivatives and trading strategies and regulations are so busy describing how the boat is designed that they don't notice nobody's rowing it. When our "knowledge" is solely vested in how to profit from the labor of others and NOT how to operate that business or labor in it, we tend to ignore that the "engine" (WORKING PEOPLE) hasn't been oiled and tuned and is no longer able to get the dead weight out of the ditch we've been driven into without unloading the fat cats and their baggage.

[scarletwoman]

29. You're on a roll -- another excellent post!

I can't think of anything to add, you've said it all so well.

:loveya:
sw

[Two Americas]

30. brilliant posts

Thank you.

Thanks to kentuck and scarletwoman, too.

[REACTIVATED IN CT]

20. I'm not an economist either, but this makes sense to me

whereas Paulson's plan leaves us holding the bag full of worthless paper.

I'm in favor of a bottom-up bailout - use the $700,000,000,000 to bail out the working class, the elderly and the underpriviledged if and when a recession hits.

[dkofos]

22. Maybe we are using the wrong tact. We should call and tell our reps

that they should pass the BAILOUT bill. They ALWAYS do the opposite of
what the majority wants so maybe this will work.

They fall for everything else.

[Skink]

23. They told us Iraq had weapons of mass destructions.

[scarletwoman]

24. k&r -- great post. I totally agree. (nt)

[David Zephyr]

27. Your point about weakening the dollar is spot on.

The big impact will be that our standard of living will simply have to be scaled down even more than it already is --- and in a very significant way --- as this takes the dollar lower and lower against other world currencies.

Everything will cost more even as we slide deeper into recession and the sad thing, no the tragic thing, is that the tool of stimulating the economy which could help build and rebuild infrastructure, pay for alternative energy development and create jobs, that "tool" is now taken away as we borrow and print money to pay for Bush's war of choice and a bailout for sleazy corporations and an aristocratic class of privileged bankers, brokers and investors.

Life is going to get hard in the United States...real hard. Americans will have to learn to do with a lot less and to set their expectations a lot lower.

The trick for the government will be to make the slide down as slow as possible so people get used to it, like the frog in the slow to boil water.

That's what's going on. The bail out is a done deal. The only snag is how do they make an "installment plan" for the collective abuse that the populace will suffer; how do they stretch out the brutal blows to our standard of living so we don't notice it too much?

That's the only snag now.

[Greyhound]

28. Perhaps once, when I was a little kid, we stood for something, but

I haven't seen them stand for anything other than retaining their seats and excluding new/different ideas in my lifetime.

[OakCliffDem]

32. Kick