Depression Time?

Power Line: The Bailout mess, where is Barack Obama?

Both the far left and the far right seem to be ready to let the house burn and "blame Bush". I guess that is an option, but once it is burned, we just have a burned house, some number of bodies, and then what? Certainly the Democrats managed to make Hoover into a goat and FDR into a saint, but in real historical terms, what did that net us? Rather than a couple years of downturn, FDR managed to give us a decade, and without WWII it is hard to tell how much longer it would have gone.

So let's assume for the moment that our leadership continues to fiddle while Rome burns, BO gets elected, and we have a good rip-snorting deep recession or depression that gets blamed on Bush. Who gets hurt? I'm sure in absolute dollar losses, the rich get hurt the "worst", but that is sort of like in a famine, the big fat guy loses 50% of his body weight and feels better, while the skinny guy loses 30% and dies.

The far left and the far right are both mad as hell, and in general, they have both decided to direct their anger at Bush. It appears that they are angry enough to see their own 401K accounts drop a ton, lose their jobs and who knows what else. I lived through the '70s, and heard enough about the 30's to be sick of it forever, but it looks to me like there are a whole lot of folks that don't understand the risk being taken. I suspect that a lot of the oldsters think that Social Security will carry them through to the grave in fine form, so maybe it is good to let the young folks suffer a bit -- give them some "character". I also think that a lot of folks believe that they "can't be hurt much" or "the rich guys will get hurt more". The media helps them think that, but it is unfortunately wrong. The price of sheephood is often too high.

Comparing BO to McCain

Power Line: McCain leads, Obama follows

The post does a good job. Don't expect the MSM to tell you that McCain worked to get Fannie/Freddie regulated better and BO voted against it!

Long Detail on Bailout With Context

America's bail-out plan | The doctors' bill | The Economist

This is a long article, but worth the read for those that want to get beyond the MSM / political sparring over the "bailout". The chart above is useful because it shows that bailouts aren't new or unusual, and if one puts this one in the context of the size of the US economy, it isn't nearly as large as the MSM would like us to believe.

My contention is that they have decided "crisis is good for BO, so let's make the crisis as big as we can". As I've said before, if you were told that you would have to invest 1/13th of your salary in your company in order to continue to get the full 13/13ths next year, and have an excellent chance of getting the whole 1/13th back in 5 years or so, I doubt it would take long to decide. When the MSM keeps throwing around the figure $700 Billion though, it just sounds "too big to believe" the US Budget is over $3,000 Billion ($3 Trillion) EVERY YEAR!!!

Here are a couple of especially good excerpts from the article:

The consequences will probably not be so far-reaching. The true cost to taxpayers is unlikely to be anywhere near $700 billion, because many of the acquired mortgages will be repaid. The expansion of the Fed’s balance sheet reflects a fear-induced demand for cash, which drove the federal funds rate above the 2% target.

Yet predictions of a sea change towards more invasive government are premature. The Depression witnessed a pervasive expansion of the federal government into numerous walks of life, from trucking and railways to farming, out of a broadly shared belief that capitalism had failed utterly. If Mr Paulson and Mr Bernanke have prevented a Depression-like collapse in economic output with their actions these past two weeks, then they may also have prevented a Depression-like backlash against the free market.

Right vs Privledge

RealClearPolitics - Articles - Bailout Blues

The whole thing is very well worth reading, but the bottom line here, as it is in so many things is that those that EARN IT have the PRIVILEGE of home ownership. When you try to make something that is NOT a "right" into one, you risk your economy learning that nature provides very few rights, and those are the ONLY rights that are guaranteed.

Any reader who has followed me for some time will guess that I am
appalled by the (purported) $700 billion bailout that U.S. President George W. Bush and Treasury Secretary Henry Paulson have organized, yet cannot reasonably oppose it at a moment when the markets are close to a true meltdown. I am further appalled by the spectacle of the Democrats in the U.S. Congress, exploiting the emergency to affix massive quantities of poorly disguised pork to the blunderbuss bill.

And finally, appalled by the media and chattering heads calling the whole mess a "crisis of capitalism" when the plain facts show the opposite. The whole "subprime mortgage" instrument was invented by bankers specifically to assuage heavy-handed Congressional demands to swell the number of minority and low-income homeowners, 20 years ago. Fannie Mae and Freddie Mac were already bloated quasi-government
bureaucracies, dangerously freed from many conventional market disciplines. And among the chief beneficiaries of the current bailout are the most extravagant contributors to the Democrat Party.

As one of my more knowing correspondents put it: "Wall Street loves money but hates free markets, because free markets distribute economic benefits to those who earn them, rather than to those best able to seize them."

The capitalist investment bankers stand accused, rightly, of having invented brilliant kiting schemes -- ultimately to deliver credit to customers who hadn't earned it. Their "greed" is irrelevant -- everyone is trying to make money. The point is that the schemes themselves were basically unsound. The lesson is that when home ownership is considered a "right" instead of a privilege, it is not only the housing market that goes bottom up.

This is a lesson no one wants to learn, so it will take time to sink
in. But any attentive reader of the Wall Street Journal can know today,what his neighbors may never even hear tomorrow: that this marketcrack-up, like every other, came not from observing the basicprinciples of capitalism, but from trying to deny them in the face ofnature.

Way Way Back in 2003, Freddie and Fannie

New Agency Proposed to Oversee Freddie Mac and Fannie Mae - New York Times

Nobody in the MSM needs to look of course, but WAY back in 2003, that bastion of conservative thought, the NYT ran this column pointing out how WRONG Bush was about the need for more Freddie and Fannie regulation, and how RIGHT brilliant Democrats like Barney Frank were in opposition to any more control, because there were NO PROBLEMS!

'These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.

See, it is GREAT to be a Democrat. You take a position AGAINST more regulation when the administration and the Republicans propose it, and THEN, when it is clear that you were WRONG, the MSM forgets that and let's you blather about Bush failing to regulate. Note also how it is clear even in 2003 that the Democrats understand that if these agencys are regulated like they should be, it will mean "less bargaining power for poorer families". That is regrettable, but it isn't like taking out high risk loans turns out to be FREE is it!!! If you want to do that, why not try to vote a federal subsidy through in the open rather than sink the credit markets and then blame them for the sinking!!

This is the same kind of brilliance as BO saying "The surge will make things worse"!!! Of course, we have a press that does equal treatment -- the fact that Bush thought there were WMD (along with EVERYONE else) and we never found it is something they ignore just as much as they ignore BO being wrong about the surge.

Killing the Goose?

The government seems to be pretty happy taking $3 Trillion PER YEAR out of a $13 Trillion dollar PER YEAR Economy. Even if getting out of the sub-prime debacle actually cost a Trillion, how many folks would spend 1/13th of their income to make the best effort they could to keep making the other 12/13ths? It doesn't seem to be a hard decision at all when one looks at it that way.

I'm waiting to find an article or politician that explains it as clearly as Paulson did during the Senate Testimony. The GOVERNMENT strongly pushed Freddie and Fannie to take more sub-prime loans in order to keep housing starts moving and lower and lower income people getting homes. Then, after Enron, they passed Sarbannes Oxley that put LEGAL restrictions on the rating of the financial instruments that a business could keep on their balance sheet. Sounded good at the time.

When Bear went down, Moody's and Std and Poors started looking at the "mortgage backed securities" and discovered that sub-prime was everywhere. They downgraded the rating. Once they did that, the Financial Officers and the CEOs HAD to sell the mortgage backed securities--they were ILLEGAL to keep on their balance sheet. Selling them was and is stupid, but they had no choice--the law says sell or GO TO JAIL!! Wham, credit instruments that were 97% secure and had maybe dropped to 95% secure at the worst now had to be DUMPED, and none of the businesses that would normally buy them could make any use of them. Even though on the long term their value is almost certainly secure, they are no longer LIQUID--nobody will buy them TODAY. Meltdown caused by an unintended side-effect of well intentioned government regulation.

BUT, SOX was "Bi-Partisan" BOTH guys like Dodd and McCain voted for it--because they thought it was good. I'm sure there is plenty of blame to go around, Wall Street is certainly not blameless, but Washington is FAR from blameless, and it isn't for the reasons that they seem willing to admit. So they are playing "chicken" with the $13 Trillion US Economy that could take the whole world into a depression. Why?

Well, hey, BOs poll numbers bumped up on the crisis, so crisis must be good! I'm convinced that the MSM and the Democrats could care less if they drive the country to 70% of the population starving and the other 30% killed by terrorists. As long as they can blame Bush and get power it will be more that fine with them!

Unless our elected idiots choose to continue to playing politics rather than fixing an unforseen problem that they had a very large role in creating, there is no way that anything over 10-15% of those mortgages are going to default. The $700-$1Trillion "exposure" is very likely to turn them a PROFIT, just like the Chrysler bailout (that was MUCH less of a good idea) and actually the S&L bailout even eventually turned a profit.

I think the people that make the $13 Trillion a year are perfectly willing to be demonized if that is the price to keep the economy running. Better to have a bunch of prima donas that have never produced anything but hot air in their life going "shame, shame, I told you so" when a big hunk of the problem is actually of their creation than to actually let the credit markets dry up and destroy the business "goose" that keeps turning out that $13 Trillion every year. Do Dodd and BO understand that? I really wonder to sit and listen to them, but I believe they must. They simply don't care about ANYTHING but raw political power, no matter what the level of damage caused!

I Can't Believe BO Would "Miss"

Commentary: McCain's Latino ad hits target, Obama's misses - CNN.com

Patriotic for the Other Guy to Pay More

Biden calls paying higher taxes a patriotic act - Yahoo! News

We just saw Biden's tax returns. Funny how it is ALWAYS "patriotic" for the guy that makes just more than you to pay a lot more in taxes. Gee, if THAT is so "patriotic" wouldn't it be UNpatriotic for the 4 out of 5 to get tax CUTS?

Are taxes "patriotic" or aren't they? Did our founding fathers mention $250K, or was that a random number "patriotism" cutoff that just HAPPENED to be basically at Biden's income?

Maybe he copied the figure from somewhere ... in his case, that is something that I would certainly believe.

Time Explains Financial Markets

How Financial Madness Overtook Wall Street - TIME

In general I think this is a pretty good article. I'll summarize and add my spin:

• Markets, like any somewhat natural phenomenon have cycles
• We all want to "control / regulate / moderate" the markets to some extent. Like natural phenomenon (flooding, disease, storms, etc) this is sometimes possible to SOME extent, but at the absolute, out of our control.
  
• Since markets are human created, the psychology of humans has a lot to do with their movements. Greed and fear are two operative feelings that drive fluctuations.
  
• We layer "technology" until nobody completely understands what we built. Financial technology is the same -- we aggregate, derive, hedge, etc until it SEEMS that we have a way to "control the risk", and even "gain from the risk". For some durations of time, maybe we do--but again, the induction problem. We will never KNOW that. Tomorrow ALWAYS has the potential to be "completely new", in both good and bad ways. We doubt that it WILL be--in either the good or bad ways, but it certainly can surprise any of us.
  
• People overreact--in all directions. Too high, too low, too much, too little, too fast, too slow, etc. It is part of human nature. In government, in business, in families--it goes with the flawed nature of humanity.
  

So, where does that all leave us. Bottom line, we don't know, but PROBABLYThe "crisis" isn't as big as the MSM would like us to believe.  We better HOPE that McCain and Bush are right when they say that the economy is "fundamentally sound". It is hard to see how they would NOT be right given the standard of living, corporate profits, etc, but since a lot of it can come down to psychology, it may be that enough of the public has been scared enough by some of the mis-reporting that we may yet get a huge general crash that will be to nobody's benefit.

My favorite piece of that mis-reporting is the CONSTANT statement (repeated in this article) that the Freddy/Fanny bailout is $6 TRILLION. That would be if ALL the mortgages in the US defaulted. How likely do you think THAT is??? The CBO said it was likely a $25 BILLION exposure. That is a LONG way from $6 TRILLION. Do these folks have a death wish? It IS possible to get large masses of people to do really stupid things -- HG Wells War of World radio broadcast if you aren't a believer.

"News" from AP or BO Campaign Material

Power Line: If You've Opposed One Bridge, You've Opposed Them All


PL does a great job here. AP is trying to get you to think that Palin is doing some "special favor" for her town. PL makes it extremely clear that there isn't any truth in that at all, this is simply an attempt to get the uninformed to dislike Palin.

Republicans Control Congress?

Wall Street turmoil gives Dems opening - CNN.com

I could have swore that in '06 the Republicans went down in the fall elections because of "insufficient oversight", "corruption" and "the poor economy". We have now had nearly 2 years (or all the time we ever get to vote for) of Democrats running both the House and Senate. But ONLY the PRESIDENT is responsible for the economy?

Wait, we had a really good economy in '06 -- does that mean that the MSM thinks that REPUBLICANS did a good job to bring that about?

I'd think that we have a classic case of "a pox on both your houses" here with the R in the WH and the D in Congress, but the MSM seems to think that is not the case. Wonder why?

Change You Can Taste!

Obama Waffles.com: Edible Election 08 Souvenir

The Rev Wright "missing" on the side is pretty cool. These guys have at least as much creativity as the Bush "mis-speak" calendar"!

Income, Giving, Biden, Democrats

Joe Biden and American Charity by Byron York on National Review Online

Joe Biden is one of those really nice Democrats. He makes about $250K a year, yet only finds it in his heart to give $300 or so to charity. He believes that "Charity begins in Washington" I suppose. It is also odd that something in the $200K+ income range is suddenly "poor" when it is associated with a Democrat.

That is VERY odd considering that the TOP income group in the US looks as follows:


Note that nearly 10% of the US population makes from 100-149K! Do you know why that is? Hint, Hint -- at $150K the cutoff for a WHOLE bunch of things like Roth IRA's kick in. I'm SURE that has NOTHING to do with it though, because "people aren't negatively affected by government tax policy"! Just ask BO and the MSM.

Note also though that > $200K puts you in the Top 2% of earners! So "poor Joe"-he is in the top 2% of earners, yet he is "poor", and his chairity contributions don't need to be scrutinized.

Here is a chart of the Bidens’ giving for the years covered by the tax returns copied from the article:

Right Wing Coverage Only

E-mail to Obama: dishonest TV ad, wrong audience - Los Angeles Times

Predictably, the BO Ad with the McCain e-mail deficiency is getting no MSM coverage of the obvious mistakes involved. Here are a couple:

First, the ad is dishonest. McCain has been one of the Senate's leading authorities on telecom and the Internet.

In
2000, Forbes magazine called him the "Senate's savviest technologist."
That same year, Slate's Jacob Weisberg gushed that McCain was the most
"cybersavvy" of all the presidential candidates that year, a crop that
included none other than Al Gore. Being chairman of the Senate Commerce
Committee, Weisberg explained, "forced him to learn about the Internet
early on, and young Web entrepreneurs such as Jerry Yang and Jeff Bezos
fascinate him."

Weisberg, an Obama booster, now disingenuously mocks McCain as "flummoxed by that newfangled doodad, the personal computer."

One
reason McCain is not versed in the mechanical details of sending e-mail
and typing on a keyboard is that the North Vietnamese broke his fingers
and shattered both of his arms. As Forbes, Slate and the Boston Globe
reported in 2000, McCain's injuries make using a keyboard painfully
laborious. He mostly relies on his wife and staff to show him e-mails
and websites, though he says he's getting up to speed.

"It's
extraordinary," Obama spokesman Dan Pfeiffer said, "that someone who
wants to be our president and our commander in chief doesn't know how
to send an e-mail." For the record, President Clinton sent exactly two
e-mails while in office, according to the archives in his presidential
library.

Besides, by this logic, Obama is even less qualified
to be commander in chief because, unlike McCain, Obama has never fired
a gun, flown a plane or led men during wartime.

Ever Hear of Tony Rezko?

Palin aide says Obama backers politicizing Alaska investigation - CNN.com

Does the MSM treat Republicans any different? One would think that Tony Rezko was a classified individual--maybe a REAL deep cover CIA spook. Being the convicted felon that helped BO get his multi-million dollar home.

Meanwhile, working to get a guy that Tazers a kid and drinks beer in his squad car removed from a police force is a "scandal" that is worthy of the absolute top headline on CNN.