Rescue Me: A Fed Bailout Crosses a Line

News Type: Event — Seeded on Sun Mar 16, 2008 4:23 PM EDT

Article Source: The New York Times

business, democrats, republicans, election-2008, federal-reserve, capitalism, bear-stearns, crony-capitalism, let-them-eat-cake, get-the-guillotine-out-of-storage, krapitailism

Seeded by jfxgillis

WHAT are the consequences of a world in which regulators rescue even the financial institutions whose recklessness and greed helped create the titanic credit mess we are in? Will the consequences be an even weaker currency, rampant inflation, a continuation of the slow bleed that we have witnessed at banks and brokerage firms for the past year?

Or all of the above?

Stick around, because we'll soon find out. And it's not going to be pretty.

Published to:

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Groups: Communists, Das Krapital, DemGuys, Down With Tin Horn Dictators, Left of Center, NYTimes Forums Refugees, Political Analysis, The Big 2008 Election, The Bigger 2008 Election , The X Committee
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{"commentId":1585336,"authorDomain":"jfxgillis"}

jfxgillis

This is, um, how do I put this? Oh yeah:

SCARY!!!

{"commentId":1585336,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

10 votes

#1 - Sun Mar 16, 2008 4:25 PM EDT

{"commentId":1585397,"authorDomain":"Missy2"}

Kathleen54

Scary? How about unconscionable?

This bailout helps the people who contributed mightily to this mess in the first place. Meantime the average homeowner, if there is such a thing anymore, faces foreclosure, possible job loss, increasing energy bills and overstretched credit card payments with ENORMOUS fees.

Perhaps someone can sing a song at another Gridiron Club Dinner about how George and Laura are changing their names to Louis the Sixteenth and Marie Antoinette? The audience may laugh their heads off.

{"commentId":1585397,"threadId":"235466","contentId":"1370502","authorDomain":"Missy2"}

11 votes

#2 - Sun Mar 16, 2008 4:40 PM EDT

{"commentId":1585438,"authorDomain":"jfxgillis"}

jfxgillis

Kath:

Oh, the outrage is all given!

What's scary is: The Fed doesn't do this unless they think systemic failure is an appreciable risk if they don't.

Which means the Fed is worried about systemic failure.

Now when Greenpagan talks about the collapse of Capitalism, I take it with a grain of salt, but when the FED acts because they can see it possibly happening, oh lawdy lawd--run fer da hills.

{"commentId":1585438,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

10 votes

#2.1 - Sun Mar 16, 2008 4:48 PM EDT

{"commentId":1587238,"authorDomain":"martinez"}

MartinEZ

You are exactly right. I am trying to prepare my parents for it to be honest.

Although I'm not really sure what to expect. I just can't see tens of millions of people jobless and broke in the country. I would think if job loss and poverty reached a certain point, the lenders better be ready to die for the homes they come and reposes. Which, in reality, aren't worth anything near the numbers these guys put out and pretend to lose. I can take solace in the fact that most of the money they lent was pretend (only if the masses show them it was fake and all default on their homes but continue to live in them). Imagine what will happen when we have mothers and children pan handling in the middle of the road instead of old drunks...

Maybe that is a little excessive. Maybe it will never reach that point. I'm really not sure. This country in it's current state is going to have a really hard time dealing with a massive depression. I think the government might have an even harder time dealing with the people if there isn't food on store shelves, or gas in their tanks.

What does collapse actually mean in the scheme of things anymore anyhow?

{"commentId":1587238,"threadId":"235466","contentId":"1370502","authorDomain":"martinez"}

3 votes

#2.2 - Mon Mar 17, 2008 3:11 AM EDT

{"commentId":1585462,"authorDomain":"spiffie"}

spiffie

Only last Monday, for example, Bear put out a press release saying, "there is absolutely no truth to the rumors of liquidity problems that circulated today in the market." The next day, Christopher Cox, the chairman of the Securities and Exchange Commission, said he was comfortable that the major Wall Street firms were resting on satisfactory "capital cushions."

Three days later, it was bailout time for Bear.

Uh, fraud? Can we get a DOJ investigation going? Oh never mind. The DOJ is just as dysfunctional. Maybe NY State can look into it? OH WAIT, Spitzer's been targeted and is out of the picture.

You're right. This is scary.

{"commentId":1585462,"threadId":"235466","contentId":"1370502","authorDomain":"spiffie"}

9 votes

#3 - Sun Mar 16, 2008 4:54 PM EDT

{"commentId":1585495,"authorDomain":"jfxgillis"}

jfxgillis

spiff:

$200 billion in taxpayer obligations? Good grief. That's enough to pay for one year of Iraq.

{"commentId":1585495,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

8 votes

#3.1 - Sun Mar 16, 2008 5:03 PM EDT

{"commentId":1585536,"authorDomain":"spiffie"}

spiffie

Not a bad strategy though. Put the government is such financial straights that even if the Democrats do win, they have to raise taxes or slash programs. Then in '12 the Republicans get to run against those nasty tax-raising Democrats. Even if the Democrats don't win, Bush gets to screw John McCain. Bonus!

{"commentId":1585536,"threadId":"235466","contentId":"1370502","authorDomain":"spiffie"}

11 votes

#3.2 - Sun Mar 16, 2008 5:14 PM EDT

{"commentId":1585787,"authorDomain":"JoulesBeef"}

JoulesBeef

Grover Norquist in 2001:
"My goal is to cut government in half in twenty-five years," he says, "to get it down to the size where we can drown it in the bathtub."
looks like they are way ahead of schedual.

{"commentId":1585787,"threadId":"235466","contentId":"1370502","authorDomain":"JoulesBeef"}

6 votes

#3.3 - Sun Mar 16, 2008 6:13 PM EDT

{"commentId":1585948,"authorDomain":"wood-s"}

trex-138069

I thought they already did that in NOLA in the late summer of '05.

{"commentId":1585948,"threadId":"235466","contentId":"1370502","authorDomain":"wood-s"}

7 votes

#3.4 - Sun Mar 16, 2008 7:01 PM EDT

{"commentId":1587389,"authorDomain":"greenpagan"}

greenpagan

Norquist is on the S-List.

====

{"commentId":1587389,"threadId":"235466","contentId":"1370502","authorDomain":"greenpagan"}

3 votes

#3.5 - Mon Mar 17, 2008 6:31 AM EDT

{"commentId":1586046,"authorDomain":"greenpagan"}

greenpagan

jfxgillis

Sounds to me like you're messing with...

THE PRIMAL FORCES OF...NAAYTURR...!!!

====

{"commentId":1586046,"threadId":"235466","contentId":"1370502","authorDomain":"greenpagan"}

5 votes

#4 - Sun Mar 16, 2008 7:26 PM EDT

{"commentId":1586079,"authorDomain":"jfxgillis"}

jfxgillis

Am I getting through to you, Mr. Beale?

{"commentId":1586079,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

6 votes

#4.1 - Sun Mar 16, 2008 7:35 PM EDT

{"commentId":1587382,"authorDomain":"greenpagan"}

greenpagan

Correction:

NAAY-CHURR...!!!

is better.

====

{"commentId":1587382,"threadId":"235466","contentId":"1370502","authorDomain":"greenpagan"}

4 votes

#4.2 - Mon Mar 17, 2008 6:27 AM EDT

{"commentId":1587402,"authorDomain":"jfxgillis"}

jfxgillis

GP:

Because you're on the internet, dummy.

{"commentId":1587402,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

2 votes

#4.3 - Mon Mar 17, 2008 6:43 AM EDT

{"commentId":1586261,"authorDomain":"jfxgillis"}

jfxgillis

polecolaw looks further into the future that Morganstern does: A History of The Great Economic Collapse of 2008

Also:

SCARY!!!

{"commentId":1586261,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

7 votes

#5 - Sun Mar 16, 2008 8:28 PM EDT

{"commentId":1586641,"authorDomain":"newbroom"}

newbroom

all this was foretold by Walter/Huxley....repeatedly for months, years ago....

{"commentId":1586641,"threadId":"235466","contentId":"1370502","authorDomain":"newbroom"}

5 votes

#5.1 - Sun Mar 16, 2008 10:08 PM EDT

{"commentId":1586686,"authorDomain":"gedanken"}

gedanken_1

Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'

"We as a people must stand united, banding together to tear this nation in two," Bush said. "Much work lies ahead of us: The gap between the rich and the poor may be wide, be there's much more widening left to do. We must squander our nation's hard-won budget surplus on tax breaks for the wealthiest 15 percent. And, on the foreign front, we must find an enemy and defeat it."

The Onion, January 17, 2001 - January 23, 2001 | Issue 37•01

{"commentId":1586686,"threadId":"235466","contentId":"1370502","authorDomain":"gedanken"}

6 votes

#5.2 - Sun Mar 16, 2008 10:20 PM EDT

{"commentId":1586693,"authorDomain":"jfxgillis"}

jfxgillis

gedank:

SCARY!!!

(but funny)

{"commentId":1586693,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

5 votes

#5.3 - Sun Mar 16, 2008 10:22 PM EDT

{"commentId":1586802,"authorDomain":"spiffie"}

spiffie

Scarily prescient.

{"commentId":1586802,"threadId":"235466","contentId":"1370502","authorDomain":"spiffie"}

5 votes

#5.4 - Sun Mar 16, 2008 10:51 PM EDT

{"commentId":1586966,"authorDomain":"jfxgillis"}

jfxgillis

Damn. Poleclaw's been busy today:

A Long Article about the Credit Markets

Get Smarter There.

{"commentId":1586966,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

5 votes

#5.5 - Sun Mar 16, 2008 11:37 PM EDT

{"commentId":1587396,"authorDomain":"greenpagan"}

greenpagan

Who has time for long articles?

I believe in minimalism. (And besides, I have ADD...)

[Although Poleclaw is a good sort and a knowledgeable specialist on economic matters and law. So I'll recommend his article even though I haven't had time to read it yet.]

====

{"commentId":1587396,"threadId":"235466","contentId":"1370502","authorDomain":"greenpagan"}

3 votes

#5.6 - Mon Mar 17, 2008 6:37 AM EDT

{"commentId":1587129,"authorDomain":"gedanken"}

gedanken_1

Bush is going a step further - he's celebrating our good luck by singing and dancing.

The dollar's crumpling, the recession's thundering, the Dow's bungee-jumping and the world's disapproving, yet George Bush has turned into Gene Kelly, tap dancing and singing in a one-man review called "The Most Happy Fella."

{"commentId":1587129,"threadId":"235466","contentId":"1370502","authorDomain":"gedanken"}

6 votes

#6 - Mon Mar 17, 2008 1:07 AM EDT

{"commentId":1587164,"authorDomain":"profwork"}

profwork

Do neo-cons, should there be any after debacle, object? Or should American capitalism falter right before an election? Or whatever? Do suggest.

{"commentId":1587164,"threadId":"235466","contentId":"1370502","authorDomain":"profwork"}

2 votes

#7 - Mon Mar 17, 2008 1:46 AM EDT

{"commentId":1587197,"authorDomain":"LeanderWapshot"}

Leander WapshotDeleted

{"commentId":1587340,"authorDomain":"newbroom"}

newbroom

3) Is the US Treasury guilty of counterfeit?

{"commentId":1587340,"threadId":"235466","contentId":"1370502","authorDomain":"newbroom"}

2 votes

#9 - Mon Mar 17, 2008 5:24 AM EDT

{"commentId":1587383,"authorDomain":"greenpagan"}

greenpagan

We should just stay the hell out of the way and let the phony fried baloney Free Fricken Market sort things out viciously and efficiently. (Talk about articles of faith…)

In the mean time workers and soldiers should organize building the new society within the shell of the old.

Just throwing a few ideas around here…

====

{"commentId":1587383,"threadId":"235466","contentId":"1370502","authorDomain":"greenpagan"}

6 votes

#10 - Mon Mar 17, 2008 6:28 AM EDT

{"commentId":1587400,"authorDomain":"greenpagan"}

greenpagan

That Hoover Recovery should be kicking in any day now...

====

{"commentId":1587400,"threadId":"235466","contentId":"1370502","authorDomain":"greenpagan"}

6 votes

#10.1 - Mon Mar 17, 2008 6:40 AM EDT

{"commentId":1588540,"authorDomain":"Missy2"}

Kathleen54

Prosperity is just around the corner.

In the face of economic crisis, a quagmire of a war and the republican party fighting for it's right to exist, isn't it time for Bush to do something besides sing about the Brown, Brown Grass of Home? Isn't it time for him to do something useful and take another trip to Africa? They liked him there.

I'm wonderin' when some of us will make the connection between the cost of the war and the fact that our economy is emanating a Giant Flushing Sound?

{"commentId":1588540,"threadId":"235466","contentId":"1370502","authorDomain":"Missy2"}

4 votes

#11 - Mon Mar 17, 2008 1:24 PM EDT

{"commentId":1588889,"authorDomain":"jfxgillis"}

jfxgillis

kath:

You can't fight a war without raising taxes. The Brits figured that out 300 years ago and the French didn't. "Get the guillotine out of storage."

:^{)>

{"commentId":1588889,"threadId":"235466","contentId":"1370502","authorDomain":"jfxgillis"}

2 votes

#11.1 - Mon Mar 17, 2008 2:52 PM EDT

{"commentId":1588979,"authorDomain":"sirmonkey"}

sirmonkey

I do expect the fearmongering will die down pretty soon, once election season passes. Even the "end of the world" (global warming) crowd may quiet a bit. This is just natural.

To discuss your premise. I have heard many claim that war is undertaken to bolster the economy. Some have claimed that even WWII was such a thing.

War is a massive government spending project, is it not? I thought massive government spending is what makes our whole economy work, isn't it?

{"commentId":1588979,"threadId":"235466","contentId":"1370502","authorDomain":"sirmonkey"}

2 votes

#11.2 - Mon Mar 17, 2008 3:16 PM EDT

{"commentId":1604940,"authorDomain":"cletuswilbury"}

Cletus Wilbury

I found this part of the article most interesting:

"For the government to print money at the expense of taxpayers as opposed to requiring or going about a receivership and wind-down of any insolvent institutions should be troubling to taxpayers and regulators alike," said Josh Rosner, an analyst at Graham Fisher & Company and an expert on mortgage securities. "The Fed has now crossed the line in a very clear way on 'moral hazard,' because they have opened the door to the view that they are required to save almost any institution through non-recourse loans — except the government doesn't have the money and it destroys the U.S.'s reputation as the broadest, deepest, most transparent and properly regulated capital market in the world."

Those attempting to justify the government's actions should address that paragraph.

{"commentId":1604940,"threadId":"235466","contentId":"1370502","authorDomain":"cletuswilbury"}

2 votes

#12 - Fri Mar 21, 2008 12:16 PM EDT

{"commentId":1609246,"authorDomain":"sirmonkey"}

sirmonkey

Well, at least it's consistent. We are very much in the business of "subsidizing failure" in many regards, are we not?

{"commentId":1609246,"threadId":"235466","contentId":"1370502","authorDomain":"sirmonkey"}

2 votes

#12.1 - Sat Mar 22, 2008 5:42 PM EDT

{"commentId":1611061,"authorDomain":"cletuswilbury"}

Cletus Wilbury

I guess that's one way of looking at the 'social contract'. Maybe we should go back to debtors prison, at the other extreme? I'm kind of a humanitarian in such cases as the 30's with 25% unemployment and many people facing starvation government should take action to prevent a calamity. It is 'subsidizing failure'. Another example, since it is believed a poor diet can effect brain development, it makes sense for the nation to provide some basic foodstuffs for children. Sure the system sill have its abuses, but the trade off falls on the side of these programs sometimes. The long term health of the nation as a whole warrants at least some level of funding for most people, details vary of course.

{"commentId":1611061,"threadId":"235466","contentId":"1370502","authorDomain":"cletuswilbury"}

2 votes

#12.2 - Sun Mar 23, 2008 12:15 PM EDT

{"commentId":1612365,"authorDomain":"sirmonkey"}

sirmonkey

Well, bankruptcy laws do provide a safety net against extremes like debtors prison. In this case, we're talking about a corporation that arguably "managed itself into bankruptcy". A "personally" humane application would entail ensuring that executives in the company do not starve and do not face prison in lieu of payment for their debts ;)

I think the implied precedent to consider is that some investment companies can profit from the "reward" side of risky behavior, and remain insulated from the "loss" side of risky behavior. All investments entail risk. Normally they must be cautiously tended to, or "underwritten" at some negotiated cost. IN this case, it appears that the entire tax paying public is covering the "insurance" tab.

I do wish that I could enjoy the luxury of taking profits when I'm lucky, and avoiding responsibility when I lose. It would make me a "genius" at the stock market, or poker! It must be nice. Arguably, this does not simply provide stability to a market, it addresses a short term concern, but in the long term it promotes destabilizing tendencies.

{"commentId":1612365,"threadId":"235466","contentId":"1370502","authorDomain":"sirmonkey"}

2 votes

#12.3 - Sun Mar 23, 2008 9:14 PM EDT

{"commentId":1612435,"authorDomain":"LeanderWapshot"}

Leander WapshotDeleted

{"commentId":1613671,"authorDomain":"cletuswilbury"}

Cletus Wilbury

sirmonkey -

I'm in agreement. It's frustrating for us small fries when the government taxes us & throws so much of it at corporations deemed 'to large to fail'.

Chrysler's Crisis Bailout

...
The Carter Administration decided last week that now was the time to come to the aid of the nation's most beleaguered major company. ...

In his first public act at the Treasury, Miller spelled out the ideological ground rules of federal aid and warned other troubled companies against expecting similar help. Such assistance, he said, "is neither desirable nor appropriate, being contrary to the principle of free enterprise." But Chrysler was an unusual exception, he added, in which the Administration "recognizes that there is a public interest in sustaining [its] jobs and maintaining a strong and competitive national automotive industry." ...

{"commentId":1613671,"threadId":"235466","contentId":"1370502","authorDomain":"cletuswilbury"}

2 votes

#13 - Mon Mar 24, 2008 10:39 AM EDT

{"canLink":false,"threadId":"235466","isPrivate":false}

After Bear Stearns Rescue, Who's Next?	Associated Press	Sun Mar 16	19
After the Bear Stearns bailout: Fears of more Wall Street failures	World Socialist Web Site	Mon Mar 17	8
ALL BUSINESS: Markets Driven by Fear	Associated Press	Fri Mar 14	0
JPMorgan Buys Bear Stearns for a Song	Associated Press	Sun Mar 16	0
Fed acts Sunday to prevent global bank run Monday - MarketWatch	MarketWatch.com	Sun Mar 16	0

JFXGILLIS

Backyard

Rescue Me: A Fed Bailout Crosses a Line

Published to:

SCARY!!!

THE PRIMAL FORCES OF...NAAYTURR...!!!

NAAY-CHURR...!!!

SCARY!!!

Bush: 'Our Long National Nightmare Of Peace And Prosperity Is Finally Over'

SCARY!!!

FUN STUFF:

COMPANY STUFF:

LEGAL STUFF: