House Passes Bailout

12 Responses to “House Passes Bailout”

1. Paul writes
   October 3rd, 2008 12:59 pm

   Wamp just lost the GOV race

2. M Kennedy writes
   October 3rd, 2008 1:13 pm

   I have a terrible feeling about this legislation. The Republican leader called it a “crap sandwich” before trying to sell it to his caucus members. It might be better than doing nothing but it wasn’t the only option. It was the only option that was sold by the administration and the leadership. It is probable that rank and file House Republicans will end up on the right side of this.

3. Sean Braisted writes
   October 3rd, 2008 1:17 pm

   Martin,

   Politically, you might be right, simply because we have no way of proving what would have happened if this package did not pass. All we do know is that the credit markets have ceased, bonds aren’t being issued, and construction is slowing to a crawl; that is a recipe for economic disaster and is much more dangerous than the potential for inflation.

4. Paul writes
   October 3rd, 2008 1:22 pm

   Sean

   I just don’t like it. We are never going to get out of debt

5. Sean Braisted writes
   October 3rd, 2008 1:28 pm

   And we wouldn’t have gotten out of debt if we did nothing, the economy was weighted down, and tax revenue dried up.

6. Sean Braisted writes
   October 3rd, 2008 1:29 pm

   Under this plan, theoretically, many of the funds could be recouped. Whether they will or not probably depends on many factors, not the least of which is who the next Treasury Secretary is.

7. M Kennedy writes
   October 3rd, 2008 2:16 pm

   Don’t misunderstand Sean, I did say that it “might be better than doing nothing” which is another way of saying that it is probably better than doing nothing. Unfortunately it was the only approach sold by the administration.

   The best case scenario is that the Treasury (taxpayers) buys these bonds at prices higher than what they command currently. If credit markets begin to function smoothly again then the Treasury can sell these real estate backed loans back and it doesn’t “cost” the taxpayers. Maybe that will happen but then we are still left with the problem of moral hazard - encouraging the very problem, poor risk management, that led to the problem to begin with. I don’t think who the next Treasury sec is matters.

   In general I don’t like the paralells with the recent history of how we got involved in Iraq… sold as a bigger crisis than it was with a dramatic big government solution. You are right of course that a downturn, which is practically unavoidable, will reduce our ability to pay down any debt as tax revenues fall.

   My survey of macroeconomists (what they are saying online and in newspapers) with respect to this plan is not re-assuring

8. Sean Braisted writes
   October 3rd, 2008 3:12 pm

   Martin,

   I think this might’ve been the best/only thing Congress could do, but that by no means it will fix the problem. We seem to think that there is always something we can do to do repair a situation or mistake, sometimes the only repair is a collapse and rebuilding.

9. Martin Kennedy writes
   October 3rd, 2008 5:06 pm

   It seems obvious too that the folks who devised the plan were the lobbyists for the financial sector. It was (is) a crisis for them. Of course it spread and now has the potential to hurt innocent bystanders, sound businesses who need access to credit and eventually the workers for those firms (when the rain falls it doesn’t fall on one man’s house).

   A couple economists in the WSJ yesterday backed an approach that would have helped holders of adjusted rate mortgages to switch to conventional fixed rate mortgages, for their place of residence. They didn’t support adjusting mortgages for those who were just speculating. That would have helped somewhat to stabilize real estate prices, the tangible assets that back these mortgage backed bonds. There have been other suggestions that were lighter (and cheaper) than this massive move. Again I can’t help but be reminded of Iraq, a crisis is exagerrated, a dramatic response is formulated, and lawmakers are boxed into a corner.

   The Dems, in my opinion, are to blame more than the Republicans for thwarting efforts to address the problems at Freddie and Fannie but to both sides of the aisle:

   Citing greed as the cause of this crisis is stupid, pathetically shallow. But, if greed created this problem then that is an argument NOT to bail out those who bought tons of mortgage backed bonds, and for that matter not to bail out homeowners who opted for more home than they could afford.

   I think this plan will fix the problem in a superficial sense at a great cost. It is not just the money or primarily the money. The state has stepped in in areas where it doesn’t belong, where it isn’t healthy - the referee getting into the game. Lobbying and brokering power will become a bigger business. Hey, if the state is going to keep stepping in then you’ll want to make sure it steps in on your side.

10. Sean Braisted writes
    October 3rd, 2008 6:26 pm

    Martin,

    The credit markets are based, in part, on faith in the system. Part of this plan’s purpose was to restore some semblance of faith. Simply tweaking a few laws dealing with mortgages, while perhaps necessary, wouldn’t have done that in the near term which was necessary.

11. volvoice writes
    October 4th, 2008 10:27 am

    I urge everyone to consider what gas and milk cost before 2001 compared to what they cost now. The inflation that we have seen up to now, IMO, is largely due to spending for the war. This amounts to an expenditure of between 650 and 700 billion. So now we are going to spend upwards of 850 billion in one move over a shorter period of time. If we have no surpluses in the treasury and the foreigners have quit buying our t-bills where do we think that money is going to come from? This move is going to cause some serious inflation in the dollar because the FED creates this money from thin air, it is backed by NOTHING. The American people better wake up and realize that they have been snookered by the Wall Street con artists once again. The vote for the bailout by guys like Mr. Wamp prove that our legislators are just as dumb as the general populace. My prediction is that this spending package will not even make it a year before they will be back before congress asking for more money.

12. The Gubernatorial Destabilization Act Of 2008 : Post Politics: Political News and Views in Tennessee writes
    October 4th, 2008 9:21 pm

    [...] I urge everyone to consider what gas and milk cost before 2001 compared to what… [...]