A deal needs to get done, but thanks to John McCain propping up the Republican Study Group, it's likely not going to happen. Thanks a bunch, asshat.

http://news.yahoo.com/s/nm/20080926/ts_nm/us_washingtonmutual_jpmorgan_news

The stock markets are 80% psychological, and the psychology of the current moment is not good.

I'm really skeptical of any bailout, but if Paul Krugman signs onto a Dodd/Frank plan, count me in. He knows this stuff a lot better than I do.

What happens after they smoke up this hit of cash...

another fix?

Below, however, makes some sense to me - from dKos:

James Galbraith has a solution:

Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises.

Is this bailout still necessary?

The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.

Next, put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.

The rest of Galbraith's plan is infrastructure renewable energy investment to help pull us out of the inevitable coming recession. All of this makes great sense.

Sure, it doesn't directly bail out irresponsible assholes on Wall Street, and there may be problems with this plan smarter people than me can identify, but it's clear that alternative solutions to a $700 billion giveaway are available and should be debated and considered.

The White House and/or Congress should release the full details of the Paulson presentation so that we (and smart economists) can get a true measure of the problem, and so that saner alternatives can be fully explored

http://www.dailykos.com/story/2008/9/26/35114/8937/215/611004


Join Soulforce-seeking Justice for God's GLBT children.

Up until now, I would have agreed with this. But the more I read up and the more I think about it, I am coming to the conclusion that we need to take a different approach. Not the Dodd plan, but what Robert Reich says:
http://robertreich.blogspot.com/2008/09/coming-bailout-of-all-bailouts-bill.html

"Some Democrats will try to make the best of the emerging Bailout of All Bailouts Bill, seeking to tack a stimulus package on it. In my view, they'd be better advised to hold out for a different approach.

Paulson is right that it makes sense to allow the big banks to wipe their balance sheets clean of as many bad loans as they can identify, and put them into a special agency that then sells them for as much as possible. The agency would bundle or unbundle the risky loans, slice and dice them as needed, with the goal of getting the most for them on world markets by creating a market for them.

But there's no reason taxpayers need to be involved in this."

It's good to know that Reich is one of Obama's economic advisors.

The wealth that would be lost is that of the very wealthy, which is of no use to anyone else. If housing prices go down further, that would be good on the whole, since it would make housing more affordable and in line with the normal ratio of housing prices to incomes. Just force banks to renegotiate mortgages to correspond to the new housing market.

Why the Bailout Will Fail

The bailout is an attempt to bring confidence back to the lending market that has seized up in fear and is not making loans. The concern is that the cessation of liquidity and lending will exacerbate the meltdown on Wall Street and ripple broadly into the economy. The Paulson plan fails to address the issue of fear that is behind the crisis. [...]

Buying the bad assets of institutions is going to at best provide a temporary return to lending. Ultimately you can lead a horse to water but you cannot make him drink. [...]

Government needs to regulate and get rid of the excesses created by the free market's binge of the past few decades. Bold and aggressive initiatives such as the government seizing control of financial institutions are needed at this time.

It makes no sense to allow the people who got us into this mess in the first place to dictate a plan when the elections are just around the corner.

AMY GOODMAN: So, how do you think it needs to be staved off, what happened?

PAUL KRUGMAN: Oh, what always happens in--when governments finally come to grips with financial crises is they temporarily take over part of the financial system. You look at Sweden in the early 1990s, they basically seized more than half of the country's banking system, paid down--paid off some of the debts, wrote off the worthless assets, and then were able to privatize them again. In our own savings and loan crisis, basically the federal government took control of failed savings and loans for awhile. And in the end, you basically have to do that.

It's temporary. You know, these are [inaudible] words these days, but temporary nationalization in a financial emergency is always the way to go. But we haven't come politically to grips with that yet.

And that includes you, Booman. I don't see why you have swallowed the Wall Street line on this. In the case of Obama, I do understand, since he's surrounded by the same people that got us into this mess, deregulators like Robert Rubin.

A number of commentators and politicians have noted that the proposed financial bailout is, in effect, a socialization of Wall Street. They claim that such socialism is new in the good ol' commie-hatin' U.S. of A. But as my weekly syndicated newspaper column today shows, it's far from new. America has always been the United States' Socialist Republic, or Amerika for short. And the problem we are facing now is not socialism unto itself, but our unique brand of kleptocratic socialism - socialism whose objective is private theft. [...]

In Amerika, we socialize private losses, and privatize public gain. We, for example, are about to socialize $700 billion in Wall Street losses, while continuing to fund the research and development of pharmaceuticals, which we then give away to drug companies so that they can sell the finished products back to Americans at the highest prices in the world. The examples of this dichotomy are endless, and it's clear what has forged it - our campaign finance system. A political system run by monied elites is one that socializes on behalf of those monied elites - and no one else.

The post has a link to Bernie Sanders' letter about the giveaway that you can sign.

Sept. 25 (Bloomberg) -- More than 150 prominent U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely.

In a letter yesterday to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson's plan because it's a ``subsidy'' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.

``It doesn't seem to me that a lot decisions that we're going to have to live with for a long time have to be made by Friday,'' said Robert Lucas, a University of Chicago economist and 1995 Nobel Prize winner who signed the letter. ``The situation may get urgent, but it's not urgent right now. Right now it's a financial sector problem.''

The economists who signed the letter represent various disciplines, including macroeconomics, microeconomics, behavioral and information economics, and game theory. They also span the political spectrum, from liberal to conservative to libertarian.

But Democrats like you, Booman, find Bush and Paulson more convincing than experts.

Advocates for a rescue plan this week point to a seizing up of credit markets, reflected in elevated inter-bank lending rates, as reason for action. Some economists are unconvinced.

``I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,'' said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.