Never thought I would support a lot of Barney’s world, but am big believer that this bailout should not be a check without some pain. Love the equity interests etc. This is going to be interesting debate as sounds like Repubs don’t want to give anything and Dems want to keep people in homes (which I think is a nice idea). This will be interesting to see how the end game plays out. Would like to see no creation of the new Barney boondoggle of Housing Trust Fund, but we should definitely punish banks for dumb bets.
Interesting question, given that the results of this debate will likely mold the first year or years of the next administration, where are our 2 candidates? Obama doesn’t want to “inject partisan politics into the debate” but shouldn’t the potential leader of the free world begin the debate about what he believes the end game should look like, and likewise while McCain has called for some resignations (agree Cox is an idiot and cant believe that the WSJ did a “Brownie is my guy” type support the other day) and increased regulation, but he should be pressing his agenda in the Congress?
Personally, think the lack of leadership on both sides of this is pretty appalling given that they will be at the helm as we move into Jan.
See here's where you and I are going to show our true colors... as Joe Klein pointed out, the only thing that changed in all this from Monday to Wednesday was polling data in Obama's favor, and suddenly McCain wants to call timeout and go to Washington to try to broker a resolution on a topic he knows nothing about. It's a logical play on his part, to try to project leadership through proactivity, and certainly has the potential to limit the damage done to his chances as the economy has come front and center here. But then the McCain campaign says they want to move the first debate to replace the VP debate, and it starts to look even more like they're terrified that a bad showing by McCain tomorrow or Palin next week is the last nail in the coffin. I mean neither one of these guys have MBA's from Harvard....how on Earth is going to the WH today to meet with Bush going to add anything substantive to the process? And i agree that a foreign policy debate isn't ideal...maybe the McCain camp would agree to change the topic to the economy?
About time we finally saw the two potential president's involved. Not sure I like the use of a major calamity to score points, but that is the way things go. Was interesting to see that after Obama declined to do the 10 debates he is now prioritizing a debate in Mississippi on foreign policy over the economic plan. I am not sure what he is affraid of, but like the faith forum answer in which Obama said that things were "above my pay grade" maybe the state of the future US economy is such as well. I would hope that both "leaders" could try and create a model from which we will build towards, but it appears Obama is worried that McCain may benefit on economics which has been his soft side. Next 24 hours will be interesting. If I was McCain I would be in DC at all the debates and hearings and build the bail out in my image -- Obama can then either risk supporting the policy and look week or oppose and appear like Hoover in 1929. By the way, did everyone see Biden's last doozy that in 1929 FDR got on TV to calm the country -- aside from the TV issues, Hoover was President then.
Well, we knew this was coming:
"Congressional leaders tell George Stephanopoulos that if Sen. John McCain doesn't support the Bush administration's $700 billion bank bailout plan, the plan won't pass.
Said one lawmaker: "If McCain doesn't come out for this, it's over."
"A Democratic leadership source says that White House Chief of Staff Josh Bolten has been told that Democratic votes will not be there if McCain votes no -- that there is no deal if McCain doesn't go along."
Jake Tapper: "Senior Democrats on the Hill are worried that Sen. McCain will 'demagogue' the bill, continue to voice opposition to it, use it to run against both Wall Street and Congress, as well as to distance himself from the Bush White House. Democrats worry McCain will not only vote against the bill, he will provide cover for other Republicans to do so, leaving Democrats holding the bag for the Bush administration's deeply unpopular proposal."
Trevor, what happened to arguing with me?
This is great. We are in the midst of one of the more important elections in which both major candidates profess strong leadership skills and neither is doing anything to involve themselves in the greatest debate of their potential first term. Got to love that.
I agree, Trevor. If any of the candidates miss this vote, they're simply copping out of their responsibilities to us - and refusing to take a hard stance on the issue. We have to question any candidate that isn't clear on their convictions.
I think Mike makes an interesting point about how certain regulations may have played a role in spurring on the current mortgage crisis. However we don't get to this point without wholesale irresponsibility on the part of dozen's of financial institutions, all of whom were supposed to self-regulate in order to avoid these sorts of cataclysmic calamities, and that's what people point to when they see a need for increased regulation. It's regulation designed to keep banks out of trouble, not put them in harms way. I also think we reached a point where letting the free market sort itself out in this case would have hurt the American economy in fundamental ways and much more deeply than most people think of when they think of recession or a slowing economy.
Also, Politico is saying that none of the 3 senators involved in the presidential campaign are expected to get back for the vote on this, whenever that finally comes. They can't possibly afford to miss a vote like this even if it's going to pass comfortably, right?
Great blog and discussion. From my observations the bottom line in my opinion is do we want to Government to bail these companies out and create more regulation and safety nets for banks and others to repeat the same mistakes?
I believe the market would've corrected itself without major interference. In fact it can be argued that Government intervention and regulation were a factor in these developments. One example is the Government Reinvestment Act which required banks to grant loans to underserved members of communities (read: high risk people who wouldnt normally receive credit). Combine that with the advantages of the market given to Freddie and Fannie and you have Government right in the mix of being a helping hand in this current crisis.
There would be some losers in the equation if we let the market do its thing but to keep this inflated environment is not going to help for the long term and I don't feel like I should have to pay for others mistakes which was helped by our Federal Govt.
The bailout is full of major issues, and the planned reverse auction sounds like a positive response, but will create some prisoners' dillemma for the banks as they would rather be paid more, but also want to dump the loans. If the government would rather just help the banks, they should gain capital in return for our money. While this sounds tough given the ownership aspect and government not wanting to get into that mess, we can not afford to stabalize on the back of everyone else.
Last thought, it should be illegal for any bank who takes money to have insider sales until they have offloaded loans as the share appreciation should not benefit option exercises etc. for the internal managers.
It sounds like I'm inserting myself into a conversation where you guys are fully informed on this topic (I am not), but here goes anyway...
The banks are as much to blame for this as the government programs that state that everyone deserves to own a home. I disagree completely. Everyone deserves to have a roof over their heads, and that's it. Those that can't afford to own a home shouldn't be provided access to programs that mask or defer the eventual burden. Sounds good for the 1st year or two, until they hit the balloon, and all the sudden their loan payments nearly double. Some can't afford it to begin with. Alter those programs to assist them in with paying for apartments or other community dwellings. If the American dream is to own your own home, then by all means work for it - make more, spend less...whatever you have to do.
Regardless of who or what programs they're backed by, the banks shouldn't craft loans for people that can't ultimately afford it. If it didn't have such a ripple effect, I'd say let them sink under the weight of their stupidity.
Not sure if anyone is watching the bailout hearing, but Bernanke wants to purchase loans at "held to maturity" levels as disclosed by many banks. While this will help banks liquidate and recapitalize (to their benefit), it will definitely hoist all of the debt onto the tax payer. Bank pricing (as held on balance sheet) has yet to rationalize the real street pricing. Some banks likely need a lot of help, but if the government is going to be that support network we (as tax payers) should become the primary beneficiaries of that upside. As designed, I am concerned that those banks nationally (most of these banks are not based on Wall Street, unbeknownst to the folks in DC and on TV) that gave loans on no-doc and to people with no jobs to by McMansions will benefit on my money.
This debate will frame whether the government allows our natural regeneration economically as in many other economic cycles, or (as Time Magazine noted) goes the way of French/German economic socialism.
Don’t disagree with the strategy, am just personally disappointed.
While biased, think it is imperative for McCain to take bull by horns as would have staked a leadership claim, pulled some economy debate to him (which is a perceived weakness, even though both are naïve) and would potentially force Obama to also put a stake in the ground.
That said, McCain’s people are scared to try and put stake in ground on economy. By avoiding it they reinforce the perception of weakness and thus thrust power to Obama, who is by no means an economic genius. Interestingly he surrounds himself with accomplished people economically, but still says nothing.
McCain needs to push this and step up or just watch the campaign continue to shift against him.
I think, in terms of the candidates, we've officially entered the "Can't Afford to be Wrong" phase of the campaign, which keeps either one of them from going all in....for starters, it's easy for politicians to agree on a few generic ideas like a) we need action to avoid slipping further into crisis, b) we'd like to include some pain to hold up the moral hazard argument, c) more regulation is needed to avoid this again, though the spectrum of what "more regulation" means is obviously huge.
But while they'd both love to look like leaders, neither guy wants to leap out on the ledge and offer a solution that Congress then ignores...that's a nail in the coffin. Obama is perceived to be the better candidate for the economy (though he's clearly no expert), so he's happy with the public opinion status quo and has doesn't want to make a mistake. McCain has a Phil Gramm problem, so he has to tread lightly or risk havign more flip-flop problems...
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