Officially titled the “Emergency Economic Stabilization Act of 2008,” the plan to rescue the financial system of the US has ballooned from 3 pages to 110 (pdf). Others with more time (and experience) than I have looked at it in more detail (see this NY Times article, for example), concluding that this bill is needed now and in its current form, this is about the best we can get.
My biggest concern is that $700 billion may be the tip of the iceberg and that we may very well find ourselves on the hook for much, much more. Once we go down this path (Iraq, anyone?) there is no turning back.
VIVIAN J. PAIGE | All Politics is Local 
Best we can get, because of . . . what?
I’m thinking my interests aren’t terribly well represented in this bill. Not entirely sure I’m not still cheering on the House Republicans, here.
Yeah, I know what you mean.
C’mon, Vivian, it’s 25 lines per page, at 5-8 words per line. That’s about 20,000 words. At 500 wpm, that’s 40 minutes. A good scan in 20.
Done. Basically, the Treasury Secretary will be able to purchase troubled assets directly or sell insurance on such assets, as he sees fit.
Much of the bill details who will appoint the members of various committees, what must go into the committees’ reports, and how often those committees must send their reports to Congress.
Other fairly large chunks just make minor changes to existing law to account for the existence of this program.
At least the ACORN garbage is gone.
For what it is worth, the following is the Tidewater Libertarian Party statement on the bailout:
The adage that when deep in a hole, the first thing to do is to stop digging has never been more true than in the midst of the current banking fiasco. This mess is the direct result of government interference in the marketplace, beginning with the Community Reinvestment Act in 1977, facilitated by the creation of Fannie Mae and Freddie Mac, and finally precipitated by the Sarbanes-Oxley asset accounting rules.
Bailing out sick corporations with taxpayer money, or guarantees, is always a mistake. It is far better to let them fail, no matter how big they are. When a company fails, its assets, including its competent employees, do not evaporate, they are simply transferred to more competent management through the bankruptcy process, the sole Constitutional remedy for corporate or individual insolvency.
If the government steps in and saves failed institutions, the incompetents remain in charge of those assets and nothing is learned.
The Tidewater Libertarian Party recommends that we let the market sort this out. Interference in the marketplace by government caused these problems, and more interference can only dig the hole deeper. Call your representatives and tell them ‘No bailouts, let the bankruptcy process run its course as the Constitution intended.’
The direct result of the CRA and Fannie/Freddie, eh?
Hilarious. This faith-based approach to seeing the world – that no matter what, it’s always the gov’ts fault – is really quite something. And like most cult beliefs, it’s quite appealing in what feels like end times. I’ve seen slight variations of the above cut and paste all over the place this weekend.
BM,
I thought you were in favor of the House Republicans position on the bailout? How quick you have changed your position.
MB, was the problem not started by the failure of Fannie Mae and Freddie Mac? Did not both Pres. Bush and Sen. McCain push for the creation of an oversight agency for these GSEs? Did the Democrats not block those reforms?
MB – This mess is clearly the result of government meddling.
In their zeal to increase home ownership among low income wage earners, first the CRA was created to pressure banks to loan in low income neighborhoods. But that alone could not make it happen if those applying for the loans were not credit worthy or did not have the 20% down payment that was required back in the 70’s.
So, along come Fannie and Freddie, with reserve requirements so low, 2.5% of their loans, and we get sub-prime loans which require little or nothing down and less stringent credit requirements. The effect is to inject a trillion or so dollars into the housing market, much faster than the supply can be increased, and surprise, Economics 101 turns out to be true, and prices skyrocket.
Builders see all this money, but only have so many lots to work with, so they build $800K McMansions instead of the affordable housing intended for first time homeowners who were the intended beneficiaries.
Then, people wake up and realize that house is really only worth $400K, and the housing bubble bursts. Artificially high prices resulting from the easy credit plummet. Poof, a trillion dollars in wealth disappears almost overnight and the financial markets are in deep trouble.
The thing is that wealth never really existed. It was always an illusion created by Fannie and Freddie loaning money it never really had (remember that 2.5% reserve requirement) and that illusion disappears as soon as the see the little man pulling the levers behind the curtain.
None of this was even remotely possible, no matter how greedy or dishonest a banker might be, without the fraud on the public committed by the government by creating Fannie and Freddie and the force, again by government, to lower credit requirements.
Had government stayed out of the marketplace, except as a referee to keep others from using force and fraud, this could never have happened. Instead, government itself injected force and fraud into the marketplace.
So, the Wall Street bashing can stop. Investors acted as they had to to survive under the conditions created by Fannie and Freddie. Their other choice would have been to go out of business.
The fault for this is entirely that of government.
Wait. You’re telling me that one could get a Fannie-backed mortgage for $800k as a first time home buyer? And that banks, since the introduction of the CRA in 1977, have been forced to loan entirely under CRA-enabled programs? Am I understanding you correctly?
For someone who jumps up and down about responsibility, you seem remarkably unwilling to assign any to private actors.
This is a good analysis (as best I can tell) of the bailout bill everyone is pushing this morning.
Mouse – there are many problems with that video but the one that stands out the most for me is the claim that Democrats blocked the efforts of Bush/McCain. At the time, who was in charge of both the Senate and the House?
Oh, and simply reading the bill is not the issue. It is understanding its implications.
MB – If you would put half the effort into understanding the issues as you do looking for ways to twist other people’s words, we could have a reasoned discussion.
No, first time homebuyers were not buying $800K homes, but the same sub-prime loans that allowed low income buyers to get over their heads on a $250K house allowed middle income buyers to get over their heads on $800K homes.
And sure, banks could have continued to insist on 20% down loans on homes people could afford based on their income, I bought mine like that myself, but with Countrywide down the street offering 110% Fannie Mae loans of much larger size in relation to income, how long do you think that bank would remain in the home loan business?
Bankers will respond to the incentives they face, just like anyone else.
Vivian – You know how the Senate works.
The GOP never had the 60 votes needed to invoke cloture on a bill the Democrats wanted to block.
The GOP simply having a one or two vote margin was never enough to control the Senate.
Don, I’m quite happy to have a reasoned conversation. However, you repeating your articles of faith over and over don’t really constituted reasoned (or interesting, to me) conversation. At this point, it appears to me that you could stub your toe, and you’ll blame the government for it. But on the off-chance that you want to pursue this:
Longer than Countrywide, WaMu, et al (or is that ad nauseum?). The bankers were only responding to incentives? Uh, yeah. Next time you have your wallet out and someone snatches it from your hands, just consider it as the robber responding to incentives, shall we?
I don’t dispute that CRA has had some impact on the market (it was intended to!). What I do dispute is the wholly ridiculous notion that the banks (which, after all, are the locus of capacity, information, and action) aren’t the actors primarily responsible for the failure here. *No one* forced them to make loans to people who weren’t creditworthy. *No one* forced them to package these loans into CDOs, slice them up into (apparently) incomprehensible and obscenely leveraged packages, handing them off on Wall Street (which was entirely capable, in theory, of saying no, they don’t want these instruments anymore). Instead, you want to worship at the foot of a non-existent free market diety and hang all of these modern failures of judgment and choice on a program put in play 30 years ago. I’d like to say I’m surprised, but . . .