Monday, September 22, 2008

Call Your Representatives

It's time to take action, folks. At this stage of the bailout negotiations, there are a lot of options on the table, and your Congressional representatives are taking calls. Here are the contact details for our Sacramento Area congress critters. If you're not sure which district you're in, click here for an interactive map.

Doris Matsui
Fifth District
501 I Street, Suite 12-600
Sacramento, CA 95814
Sacramento Phone: (916) 498-5600
Washington Phone: (202) 225-7163
Washington Fax: (202) 225-0566

Dan Lungren
Third District
2339 Gold Meadow Way, Suite 220
Gold River, CA 95670
Sacramento Phone: (916) 859-9906
Sacramento Fax: (916) 859-9976
Washington Phone: (202) 225-5716
Washington Fax: (202) 226-1298

Sen. Barbara Boxer
112 Hart Senate Office Building
Washington, D.C. 20510
Washington Phone: (202) 224-3553
Washington Fax: (202) 224-0454

Senator Dianne Feinstein
331 Hart Senate Office Building
Washington, D.C. 20510
Washington Phone: (202) 224-3841
Washington Fax: (202) 228-3954

If you're not in the Sacramento Area, Mish has a complete list of all representatives over at his site. I gave Rep. Lungren's office a call, and talked with one of his staffers. According to him, they're getting a lot of calls on the issue. Do your part, guys! Let's take it to 'em!

**Update**

This was posted on Yves Smith's site:

Protests Against Bailout Bill Registering With Congress

We received this e-mail today from one of the Congressional staffers who has taken to corresponding with us:

I know that people are often cynical about contacting their representatives. Frankly, they should be. Most days, the overwhelming volume of constituent contacts is form letter e-mails, pre-printed postcards, blast faxes, and automated phone calls. It's easy for genuine individual requests to get lost in the sea of astroturf (fake grassroots) campaigns.

But, on this issue, the calls and e-mails are making a difference. Members and staffers are talking about it in the halls and in meetings. The volumes are big (although as big as when the NRA or AARP mobilizes their members) but they're all individual. And they're running 99-to-1 against. If you read the capitol hill press (Roll Call, Politico, The Hill, CQ, National Journal), you can see the developing dissent among the rank-and-file on both sides. A lot of that is beign driven by the calls and e-mails from back home. Keep it up!

39 comments :

Max said...

When I told the Lungren staffer that I thought Lungren should stick to his Republican ideals and vote against using taxpayer money to bailout private companies, I thought I detected a touch of fear in his voice.

I don't think this bailout is not going over well in Republican land.

Anonymous said...

Max, are you willing to experience a recession maybe a depression to pay for the price of the regulation of FNMA and ez money, and only now let the free market fix the problem. I don't want the pain involved. If GDP shrinks by much more than the expenditures of the bailout, what have we accomplished? Please someone explain this to me.

Max said...

I don't want the pain involved. If GDP shrinks by much more than the expenditures of the bailout, what have we accomplished? Please someone explain this to me.

What makes you think the $700B will be enough? What makes you think there won't be pain anyway when the US defaults on its debts?

The "plan" is nothing more than a desperate attempt to restore confidence and trust with our foreign creditors. We have a solvency problem, and going further into debt will not solve it.

Rich said...

http://freakonomics.blogs.nytimes.com/2008/09/22/luigi-zingales-why-paulson-is-wrong

Patient Renter said...

If GDP shrinks by much more than the expenditures of the bailout

How does one calculate the expenditure of the bailout?

It's a lot more complicated than $700 billion or any other amount of directly incurred debt. Unintended consequences abound. The few I can think of are borrowing money from non-allies (which has numerous drawbacks), paying interest on borrowed funds indefinately and suffering through increased inflation from it all.

Ultimately, the amount of money we owe and will continue to borrow via this bailout is not repayable. What is the cost of default? War? Shrinking GDP just might be the better alternative after all.

Max said...

Thanks, rich. That was a good read.

Max said...

How does one calculate the expenditure of the bailout?

The bailout rationalizations sound the same to me as the Iraq war rationalizations. At least back then, they created fake evidence to convince us with. Now, we're just supposed to take their word.

The hubris astounds me.

Anonymous said...

Dear Congressman/woman..

version 1
Please do not bail out these silly borrowers so I can buy a home really cheap

v2
Please back out the CDOs affecting my pension in CAPERS so I make more money

v3
Please save my city of Vallejo so I can collect my huge paycheck and pension

v4
Its only 700 aircraft carriers

v5
Its only 700 Ronald Reagan buildings

v6
Its a lot of Big Macs

Sippn

DrDoom said...

I suspect the mortgage/housing issue is bigger than the market's ability to absorb the loss. If so then goverment intervention to maintain stability is beneficial (essential?). In fact, if the default is really that large then it is not a bailout or no bailout question it is simply a how and when question.

The discussion should be on reform that accompainies the bailout and what the full losses will be. What does the public get for supporting the market short term and long term?

Anonymous said...

Solvency is a long term problem, but we have a much more immediate problem to address - liquidity.

I have a client right now, has approx 700 million in hard (very illiquid) assets next to no liabilities, yet I am desperately trying to keep him out of bankruptcy. Why?

The answer is, his 60 million dollar revolving line of credit was frozen. Not because of anything he did, but because his bank took a hit from another bank, a cross default kicked in and now they are out of covenant. In order to get back into covenant, they froze our guy's line and he cant find anyone willing to make the loan right now!

Not only is he willing to pledge everything he has, he has tried factoring - nothing...he has tied memoing - nothing...NO ONE IS WILLING TO MAKE A GOD DAMN LOAN!!!

Next week, he will probably miss payroll and probably 10% of the workforce will walk. If that happens, he will be unable to function, and will need to lay off about 900 employees and sell his business, piecemeal.

What happens when those 900 employees hit the streets? How many more businesses will they bring down with them, all because he cant get a stupid revolving line of credit on assets worth 10X the size of the loan.

Whose to say its not even your employer I am talking about, or a major vendor of yours? Whose to say another attorney is working with your boss on this same problem, even as we speak. Even worse, I have a whole handful of large business clients heading down that same path.

Look, I abhor the bailout, I really do. However, it is our only hope to get money moving again - lest the whole thing collapse in a wave of cross default/cross collateralization provisions.

10 years from now, when the economy is back on its feet, we can worry about the damn debt. Raise taxes, get rid of Nasa, means testign for social security, whatever. At the same time, the short term risk of the entire economy collapsing due to concerns of long term solvency is simply unacceptable.

Please think this opposition of yours through - less this be your employer that I am talking about liquidating, even as we speak. If you think I am fearmongering - god damn right I am. I am scared to death for all of us...

Anonymous said...

Incidentally, MAX - you seem to think there is always money to be had - at a price. Not exactly.

Our guy is willing to offer 50% interest annual 50 god damn percent!!! He would go higher, except that doing so would put him out of covenant with one of his ventors - again those cross default provisions can be nasty!!!

Hes gone to hedge funds for Mezzanine Financing - no deal, they are hoarding cash in fear of upcoming redemptions.

Go public? Even though, he would be willing to take a bath on an IPO to raise cash, there isnt enough time to get him through the registration process - much less the underwriting...

So whats the answer?? You seem to have many reasons to be against the bail out, but dont seem to offer any real viable alternative for what we need to do in the here and now... My client is a great microcosm of the entire problem. How do we get 60 million NOW to save the destruction of countless millions more...

Seriously, if you have any answers, let me know, I have a client who will gladly pay you $600 an hour to fix this problem in very short order...

Patient Renter said...

You seem to have many reasons to be against the bail out

Much of the firm objection to a bailout has to do with the specific obsene proposal that is being pushed by the administration. I think there's a good argument to be made that the long term net effect of a bailout versus letting the economy "crash" favors just letting the economy crash, but obviously under no circumstances would any electable government choose the direction that causes the most immediate pain, so we all know there will be a bailout.

So again, I think the real problem is with the current bailout proposal, something should all be able to agree on (save for any Goldman or MS employees in the room). There should be a way that your client can resolve his situation with the help of a liquidity supplied via taxpayers without screwing taxpayers, violating their freedoms, and circumventing the fundamental separation of powers in the process.

Anonymous said...

Anony - almost everybody has the same problem - just fewer zeros.

Sippn

Anonymous said...

"Patient Renter said...

I think there's a good argument to be made that the long term net effect of a bailout versus letting the economy "crash" favors just letting the economy crash"

Im not so sure - the question is which is least costly. Take my client again for example. If he goes into bankruptcy his $700 million dollar company will be worth no where near $700 million - mostly because few have $700 million in cash lying around, and any buyer will have similar problems i.e. lines of credit. Without credit, in bankruptcy we estimate he will recover about $500 million tops.

Thus in this case the failure to loan 60 million will destroy 200 million in asset value, plus all the collateral damage caused by 900 layoffs. I think a similar argument can be made here - even when you account for all the unintended consequences you correctly noted in the 5th post above. Say the real cost is 1.4 trillion (double the estimate when you include unintended). Id say a loss of that magnitude in GDP is in the bag...


"There should be a way that your client can resolve his situation with the help of a liquidity supplied via taxpayers without screwing taxpayers, violating their freedoms, and circumventing the fundamental separation of powers in the process."

I agree wholeheartedly. Certian provisions can and should be improved upon. The issue I have is idological arguments vis a vis long term solvency. This seems to be Max's primary concern. Long term, I agree with him, but now is not the time for ideolgical stances.

I have been railing against the debt and big government for 14 years of my professional life... That all changed 2 weeks ago when I saw no other way out of this mess.

Bryan Gibson said...

Nothing is "unacceptable," in any ultimate way.

That includes people (including me) losing their jobs, companies going bankrupt, industries suffering, etc. The only analysis is: what alternatives are there? In our case we must choose between evils. Liquidity now and bigger collapse later, or illiquid pain now and obviate a bigger disaster? That's the way this is being framed here, though I sympathize with the strong tendency to want to believe that the bailout will somehow not result in larger problems a decade from now. Since the bailout is going forward, I hope this is right. But I remain very skeptical that we have not simply sold out tomorrow to feel safe today.

We'll see. One way or the other the sun will keep rising and setting and the birds will keep singing. None of these, to my knowledge, are payrolled out of revolving lines of credit or accounts hedged by this or leveraged by that.

Darth Toll said...

anon, the bailout (which isn't a bailout at all but is actually coordinated thievery) has one fatal flaw: taxpayers get no equity position. Why is this? A: Because it isn't a bailout and is theft.

I would drop the bulk of my opposition against this plan as long as all firms in question were nationalized (taxpayer gets a majority equity position the business.) So we get something in return for the capital. Makes sense, doesn't it? We bail you out and therefore we own a large piece of you. Who can argue against this?

As long as we get no equity position, I cannot support this plan as it is nothing more than organized theft.

Patient Renter said...

It's been heartening to see over the last few days that almost everyone agrees that the Paulson proposal is disgusting and many are calling for equity positions as a tradeoff for taxpayer dollars, as Darth mentioned. I have a feeling some form of this will make it into the legislation, though I'm not confident that the end result will still be that the taxpayer is screwed one way or another.

It's interesting to me that the administration seems more offended by Congressional Democrats wanting to limit executive compensation as part of the bailout than they are by the idea of bailed out companies giving up an equity stake. It makes you wonder who is really pulling the strings.

Anonymous said...

"Brian Gibson said...
Nothing is "unacceptable," in any ultimate way. That includes people (including me) losing their jobs, companies going bankrupt, industries suffering, etc."

Brian - how about the largescale human suffering and greater incidences of death? This is a very extreme example, but it is not comletely outside of the realm of possibility either. At a minimum, we wont see much advancement in medical care or technology - most of those ventures are heavily leaveraged and they certainly arent happening now.

"Brian said...

Liquidity now and bigger collapse later, or illiquid pain now and obviate a bigger disaster?"

Brian - I see the reverse. Say we make it through this. Id say there is a decent chance we have scared enough lawmakers to where they will think twice about printing money. We have an office in DC - they say theve never seen such political will to get something done - and it really got them thinking - maybe we need to reconsider how we run this city long term...we shall see.

Also, lets say the backlash builds and this bailout gets nixed. If those predictions are right, and we start having massive job loss thanks to my client and others - solvent companies who cant get credit, you can guarantee that bailout will quickly be back on, except now there has been a decent amount of collateral damage.

Bryan Gibson said...
This comment has been removed by the author.
Bryan Gibson said...

I include large scale human suffering and death in the "nothing is unacceptable" line, inasmuch as its coupled with the corrollary I alluded to: that if it is the least evil of all options, then it is the best. If the consensus is that going to war (which will certainly cost lives) will lead to less death and injustice on the whole than the war will occasion, then war is the answer. Likewise with economic depression. I'm not sure we can disagree here, unless we want to get into Kantian categorical imperatives and deontological philosophy (and I'm more often in the mood to read and annotate all my credit cards' Terms and Conditions).

Anon, I think your political sense is right on. That's probably exactly what will happen. But I do not equate (as I imagine you do not) "the politicians will X" with "X is the right answer with the best long-term result for America." I trust that 230 years of history support this proposition well enough.

On the matter of whether the bail out is the better option (i.e. is it or is it not going to cause a net loss to the American public compared with no bail out?) I think there is no simple way to frame the debate which will prove either position to my satisfaction. Even the "using taxpayer funds with no consequent equity is theft" theoretical argument fails in light of the notion that an elected representative is doing the will of the people (for if not, they would not have voted for him...if only). I.e. if our beholden representative is voting for this measure in Congress, presumably a no-equity bailout is exactly what we want. It devolves to us to dispel this fantasy and give them a clearer picture of our expectations. Having done so, if we are in the majority, it does indeed start to look more like theft.

Anonymous said...

Toll - I agree with you 100% regarding the equity stake. As I said before, certain provisions can be improved upon, and this is one of them. At a minimum we receive non voting warrants.

Brian - fair enough, and I understand you better now. I never thought I would see a reference to Immanuel Kant on this blog!

Bryan Gibson said...
This comment has been removed by the author.
Max said...

Please think this opposition of yours through - less this be your employer that I am talking about liquidating, even as we speak. If you think I am fearmongering - god damn right I am. I am scared to death for all of us...

What makes you think that the banks will loan money to your client after the bailout takes place? There's no requirement that they do anything with the money! They could spend it on moonpies and ribbon candy for all you know.

Whether or not your client deserves to be saved, the fact is there's nothing in this plan that speaks directly to your client's needs! In Paulson you trust. Forgive me if I'm skeptical, but there's nothing he or this administration has said or done that gives me that trust.

What this process needs is honesty, transparency,and openness. Only then can trust be earned.

Max said...

BTW, stats are up one post down. This was turning into a good discussion and I didn't want to break it up.

Anonymous said...

Anon,

Please call us at Wells Fargo Commercial Banking. We are very much in the business of lending right now. We just pushed through a $30MM revolver for a individual in a similar situation.

Anonymous said...

I can only imagine that the people who don't want any gov't intervention work for gov't, or own no assets! They sure as hell don't own their own business or work in the private sector.

Anonymous said...

Max - The reason why this will work is because we their attorneys will alow them to lend again. Case in point, as much as I feel for my client above, I have other clients, small banks with a lending cap of say 1 billion or so, I look at their participaton agreements, overnight lending agreements, etc. and I tell them - point blank - do not lend or you will be in default of this or that Agreement.

At the same time, we have people in our office who have looked at the Paulson plan - the instant it goes through, they are prepared to issue unqualified opinion letters to certain of our banking clients - in our opinion, you are free to lend to this or that, despite the provisons of this or that agreement to the contrary.

One of the banks we represent is, in the words of their inside counsel - drowning in solvency. They have a number of loans they would like to make, they just need to be sure that if they make those loans, they did so under the blessing of an unqualified attorney opinion letter from outside counsel (essentially indemnifying them from a number of potential lawsuits).

I dont blame your skeptcism. In econ classes in undergrad and law school I came to believe money will always be lent, provided risk is fully accounted for. Then I went into private practice where the levers of supply and demand run into the buzz saw of the DTE ratios of a modern Loan, Security, and Assignment of Rents & Leases Agreement. I know this is not a satisfying answer, but the Paulson plan will work because we will make it work...

Anon at 6:26pm - we have contacted Wells Fargo Commercial Lending. The loan officer tells us, sounds good to me. Then he submits it to underwriting and gets denied. Amazingly, we even got a loan commitment letter only to later be told, they cannot make the loan!

That said, maybe you are with a different office and have different underwriting standards. Please provide me with a phone number and I will be happy to contact you ASAP. Thanks - Steven

Max said...

I can only imagine that the people who don't want any gov't intervention work for gov't, or own no assets! They sure as hell don't own their own business or work in the private sector.

Wow. Just wow. I guess people who don't take insane risks and borrow too much money are stupid for not wanting this bailout either.

Businesses that depend on cheap credit from the government are not private. They're charity cases. Without cheap credit, they wouldn't exist at all.

Max said...

I dont blame your skeptcism. In econ classes in undergrad and law school I came to believe money will always be lent, provided risk is fully accounted for.

This market is so opaque, I'm not sure the banks themselves are solvent enough to lend. Between you and me, if I had a business worth $700mm and 900 employees, I would have a few mm on hand in cash. Not sure what business your guy is into, but its obviously not cash flowing a whole lot. Could this be some kind of construction company or a developer? If so, there are other market forces at play against him besides this liquidity crisis.

Anonymous said...

"Max said...
This market is so opaque, I'm not sure the banks themselves are solvent enough to lend."

Bingo - some are drowning in cash, and some are pure phonies - problem is we dont know for sure which ones to trust and thus the credit market is frozen. Thats one of the things the plan will do - drain the pool so we can find out who is swimming naked. Many banks will continue to try and hide the ball, but it will hasten their demise.


"Between you and me, if I had a business worth $700mm and 900 employees, I would have a few mm on hand in cash."

He has and he has already thrown it into the breach.

"Not sure what business your guy is into, but its obviously not cash flowing a whole lot. Could this be some kind of construction company or a developer? If so, there are other market forces at play against him besides this liquidity crisis."

Lets just say its technology driven - nothing to do with construction. The nature of the business is, he has long dry spells between payments. He has a 50MM payment coming in in 14 months, but the long dry spells are the killer.

This is not uncommon either. Any company that doesnt sell widgets and the like (doesnt cash flow well) and will have long dry spells with no cash coming in. Its these dry spells that make the credit essential. Its no surprise that many of the modern technological marvels were developed in the last 30 years as the credit markets really matured. Entire segments of the modern economy are only able to arise and operate with easy availability of credit. When that credit goes away, so do those entire segments.

DrDoom said...

Max:

Thanks for the good post and discussion. It helped me understand it is about the details of the bailout proposal which are overly broad, rushed, without accountability and give too much power to the executive branch. This sounds familiar but I don't remember from where :) I will now make my call to congress.

Also on the Stats, is it possible to get a foreclosure / REO market share graph? I know there is a large shadow inventory but it is foreclosure market activity that is driving the adjustment. It might be more important to look at foreclosure / REO market share than FIT share.

BTW Anon, I found your comments very informative but even for business that do sell widgets many aren't cash flowing and banks are getting real nervous. Credit is tight or not available. For example commercial buildings with non-cash flowing tenants can't be financied at any LTV in the current market.

Bryan Gibson said...

Anon 6:51,

I work in the financial sector and I'm nowhere near convinced the bailout is a good idea. I think your indirect comment on human nature is (get ready) perspicacious (this has nothing to do with sweating). You are quite right that the tendency is care about keeping the things you have and protecting them, even when it's against the common interest or sometimes even when it's clearly ethically or morally wrong (though I'm not leveling that last accusation here as yet). Conversely, the disinterested (in the old propertied sense of the term) will surely find it easier to favor the non-bailout.

But neither of these observations gets us further down the logical track. Broadside ad hominem attacks, even ones based on a good gloss of human nature, can't help us here. For if you're right, the cannon can just be flipped around:

"I can only imagine that the people who WANT gov't intervention don't work for gov't, or own assets! They almost as sure as hell own their own business or work in the private sector."

Would my skepticism abour your (or another's) bias be less valid than yours?

I'm more interested in hearing actual financial analysis.

Anonymous said...

Steven

I see today why we, Wells, would not move forward with the financing.

Max, credit is essential to almost any business, especially rapidly growing ones or those which have seasonality or extended gaps in revenue.

It does not take long to use up a couple of million in cash; actually, that could be close to one payroll. Changing the rules in the middle of the game makes it pretty tough to win. A line of credit is a company's lifeline and decisions are based upon having access to it. Can an R&D company make money without financing, yes, but it can take 2-3 times as long to bring products to market. Can a company grow a new product line rapidly without credit, yes, but they must be immensely liquid.

Not having access to credit will bring this economy to a grinding halt. I don't know what you do for a living, but I am sure a slew of small and middle market businesses going down will adversely impact your quality of life.

Anonymous said...

Dr. Doom - for those that arent cash flowing, but who normally do, the decision to withdraw credit makes sense - especially since many of these business are heavily leveraged/heavily collateralized. I see quite a bit of that and that in commercial real estate and it does not concern me - its an appropriate reaction to increased risk.

What does concern me, is the decision to withdraw credit on a ridiculously overcollateralized asset. Again, my clients business is worth $700MM as a going concern. $500MM at fire sale prices. How in the world can a bank extended to the tune of $60MM lose?

The answer is they cant, yet because of things beyond the banks control, they had to withdraw credit - the fear of cash calls on cross default/cross collateralizations is all consuming, menaing that even the most sweetheart deal in the world wont draw them out of their shell. This should not happen - ever, and it needs to end before it causes severe destruction in an otherwise healthy segment of the economy.

Anon at Wells - I figured as much. You are spot on in your remarks though. Normally, in a very illiquid, non-cash flow business like R&D or my clients, you can account for that increased risk with higher DTE ratios. Yet even then, no one is willing to lend right now for fear of imploding in a wave of cross defaults and endless litigation for violation of loan covenants.

All, it is pure patriotism to challenge the spefics of this proposal, and to demand that this provision should be added and this provision struck. That I have no problem with. What I do have a problem with is a refusal to add to the national debt in a time of crisis. Long term, I get it, and I am one of the biggest champions to reducing that debt before we are completely beholden to China & the like. Short term, I see no way out of this other than far more destruction than any increase to the natl debt load can bring. If I knew of any other way to get things going again without this plan, I would be all for it. Yet if the only alternative is nothing, I just cant agree with that - not now...

Thanks for letting me vent, and may god have mercy on our souls if this doesnt get resolved. Steven...

Bryan Gibson said...

While the question of whether saving some businesses today will cost us much more dearly down the road is not resolved, I am starting to wonder if transferring the pain broadly over the American taxpaying base is not a just outcome.

I wonder if our own materialism (to invoke a cliche), our desire for more house, more stuff, at cheaper cost, quicker, a higher profit margin, and an overriding desire to believe that the magical American economic engine will continue to produce wonders indefintely and "so I need not save, economize or plan for the future"-- is not the true root cause. If it is, and if it has indeed pervaded us at all levels and sectors, maybe it's just that we assume its burden. This is not to say that we should allow the real lever pullers in need of the bailout to keep their equity while we foot the bill, but it does seem that what goes around comes around.

Anonymous said...

Bryan,

You are in the financial sector? Say this doesn't get passed. You lose your job, house, car, and dog because you are out of work and used up all your savings trying to survive. Multiply this cost by 10% of the population. Now which is cheaper, per capita, a bailout or millions of out of work persons filing Ch 7.

Did you see where John Deere's recent debt financing got priced? Almost 6% above treasuries. This just should not be. If the credit market really falters, cost of capital will drive prices and unemployment skyward.

I guess you could say I am materialistic. I don't want to live in a van down by the river.

Another anecdotal point. It is near impossible to get a car loan unless you have credit of 720 or greater. That puts 6 million people who would normally buy a car this year out of the market.

Bryan Gibson said...

I cannot agree that a course which leads to my unemployment, and to that of a chunk of my fellow citizens, is de facto a bad choice (which isn't to say that that wouldn't suck). Only a cost-benefit analysis would move me one way or the other. In the abstract...it's hard to sacrifice oneself, and I wonder if I could really do it at needs end. I hope I would do the right thing.

The sentiments embodied in the doomsday descriptions painted by bailout proponents are really the very same as those deeply felt by many of its opponents. I don't think anyone believes that allowing the credit crisis to continue will be anything but an unmitigated disaster. But in going forward with a bailout are we just making a deal with the devil to avert today's disaster, at a greater cost later? And by greater cost I mean the horrid scenarios now being described as the result of no-bailout, but times 2. Or 4, or 10, or what have you.

I get it. No bailout = bad. Maybe even bad for me. But if Yes bailout = bad x 2, then I can't be for it. IF. Unfortunatly I lack the clarity of mind on this issue which others are evidencing. I really don't know which is the best course. Some one convince me!

720 eh? So people will actually have to have a record of keeping their obligations! Armageddon! Apocalypse! No, really I see your point, the trouble there. But there's a part of me that thinks maybe that's how it should be.

Anonymous said...

"But there's a part of me that thinks maybe that's how it should be."

True, but slowly bring it that way. Cutting off credit overnight is a big shock.

Bryan, let us know your thoughts, or what you have heard, on what greater implications this bail can have. In other words, what is bad x 2. I have been listening to the testimony when ever I had a free moment this week, and have a feel for the long term ugliness of the bailout, but would like to hear more analytical thought on it.

Some alternatives I can think of are changing away from fair value accounting, regulating the over the counter derivatives market, and begin requiring tougher underwriting for consumer loans. It blows me away all the disclosures and protections in a consumer loan, yet the underwriting can be so dangerous to the borrower.

Patient Renter said...

what greater implications this bail can have. In other words, what is bad x 2.

If I can interject:

As with all government interventions, the worst consequences are usually unforeseen at the outset, so bad x 2 is a matter of imagination. Perhaps the world finally rejects the dollar. Perhaps we default on our debt and war becomes likely. One could argue that these outcomes are worse than doing nothing and letting the "crash" happen.