the Bailout is Not my New Bicycle
I put the economic crisis out of mind for a while. I took my furlough day. Furlough days are an interesting concept - you don't have to go to work, but the state doesn't pay you either. Mitigates the reason I took the job in the first place. The economic conundrum is like a bad penny, though it keeps rolling back into view. The bail outs are not my new bicycle, but the stimulus is the new surge. It's somewhat confusing, the bailouts are plural, the federal government is buying different things: "toxic assets", "preferred stock". There was the recent stimulus bill as massive as the bailout. Additionally in the middle of all this the cast of principle characters seemed to change. I began to think I had lost the thread of it all. I turned to Wikipedia, naturally, but also to a web site called Budget Watch, and made an appointment with Frontline. There is a concrete benefit of summaries, I think. Daily news produces a fog of present detail. Response of the current crisis began (in earnest with the
Emergency Economic Stabilization Act of 2008. (H.R. 1424) passed October 3 of last year. This brought into being the 700 billion dollar behemoth: the Troubled Assets Relief Program. This program is managed out of the Treasury dept. By a newly created sub-bureaucracy in fact: the Office of Financial Stability. The TARP consists of a number of purchasing programs: mortgage-backed securities (the heart of the problem), whole loan (for banks that simply have too many mortgages on the books) and equity purchase programs. A triage of sorts using the camel bank rating criteria is one part of the TARP program's work, but the bulk of it consists in determining what to pay for these assets in the absence of an open market. At the end "we the people" own something called an equity warrant. Throughout all this there are FDIC buyouts occurring, of routinely failing banks. Bringing up what hopefully will be the tail of this parade the
American Recovery and Reinvestment Act of 2009 - Wikipedia also know as the Stimulus Bill. The official return of Fiscal Policy. Across the district and environs people are dusting off busts of Keynes and finding a delicately inconspicuous spot in a conspicuous room for them. The next obvious question is How much will this cost? This is where budget watch's web site us useful because they have placed all these programs, in clickable, sortable and filterable tables, and these tables have columns of numbers. You can add it up
Stimulus Watch: Government Responses to the Financial & Economic Crisis | US Budget Watch. At this point the Republicans are willing to raise spectre of deficits. This is a joke. One beyond pointing to Richard Cheney claiming deficits don't matter. While household economics isn't the correct mental model for national debt, they do matter (at least their principle) a little. Beyond this is the stark fact that for eight years the republicans threw money around like a drunken sailor in a liberty port. The executive and every member of their caucus. They worked hard at not eliminating bureaucracies but semi-privatizing them into their own voting base. Senator Gregg (R. NH) offers a useful example. In the Frontline episode that documents the growth of the federal deficit
FRONTLINE: ten trillion and counting | PBS . He acknowledges in one scene the continued growth of the deficit during periods of republican control, though he tried to hold the line, he pauses then adds "most of the time". In heaven you've got your good things and I've got mine. Here no, There are no party favors in a fiscally responsible budget. Minor logrolling aside. A minor irony here is that the targeted spending needed to produce a stimulus effect is not necessarily the classic liberal agenda spending that so many democrats have waited a decade for. Oh well.
The next natural question is who is to blame for all this. There might even be a practical side to such questions as we try to relate cure to illness. The illness, well it involves some zombieism they say. Zombie banks is the nom de guerre for a bank which has gone dark, is no longer performing the services of a bank, merely absorbing liquidity. The prevailing feeling is that these banks have no liquidity, and number among the undead. There are other indications that these banks may be sitting on what liquidity they have and may even possess reasonably accurate transaction costs information on parts of the market. They simply regard all that as proprietary information, and the game as still in play, their value to anyone but themselves irrelevant. For the rest of us it amounts to a question of confidence, whether systemic or accidental trust is gone out of the market. Whether a system as extensively leveraged as the one that existed can have enough market information available to remain stable. The expansion of the financial sector as a driver of the economy was done under the banner of market machinery. It is certainly a moral hazard for the government to repair this system, save it's progenitors from their folly and wind it up for a future of the same. Robert Reich had the simple observation the other week that any institution that might be considered Too Big to Fail, whether a monopoly or duopoly or not, should be considered as being outside the free market system, as no possible market force could then form any check on it's behavior or activity
Robert Reich's Blog | Talking Points Memo | The Real Scandal of AIG:. Within any possible free market, there is inherent limit to the size corporations can grow to, Either they find that limit on their own or they don't, but they can not be allowed to rule through failure. At this point you quickly enter the dangerous territory of Populism and Scape-goating. The Bonus Babies of AIG, recently in the news, were the perfect poster children of entitlement. There is no segment of this current culture more imbued with entitlement than the elite professional classes. These entrepreneurial executives were not really delivering a thousand times more value than wage workers (like myself). Still being human they can flee only so far from humanity. Send them down to the company softball team. Even Ted Williams only hit in the 400s. It is curious (to me) at the wage level I have to argue my value to the system, rarely to any avail, money is tight times are tough. At the financial sector executive level They argue it must be demonstrably proved they are not worth their millions, never to any avail - times are tough, one can't be to careful. Better to pay the man what he wants. They are not irreplaceable though. There is an excellent system in place for training and retraining high quality MBA's. Best Practice programs for identifying and deep selecting the Best and Brightest of new workers. The very fungibility of these elite trained belie their claim of critical uniqueness. What they can do is defect and blow up a company. This is why they get their pay. Retention bonus are like blackmail. It is like robbery. They are shorty-on-the-corner jacking us up for the Jackson's in our pocket with a borrowed glock. I thought this is why we built so very many jails.
Paul Krugman seems to be casting himself as a consistent skeptic of the current system. He has both a blog
Economics and Politics - Paul Krugman Blog - NYTimes.com and a column
Paul Krugman - The New York Times at the New York Times he can harness for this. He is a critic of Geithner, and Lawrence Summers certainly. His main beef is systemic problems of the financial markets. Institutions he seems to believe Geithner tying to insulate from change
Op-Ed Columnist - The Market Mystique - NYTimes.com. Even in detail: when the TARP plan recently amended itself to the idea of bringing private institutions in to assist in buying troubled assets. He noted that as long as this was sponsored by loans from the federal government there would be an inescapable propensity for these concerns to inflate the value of these assets
Geithner plan arithmetic. While on one hand it is encouraging to see attempts to bring the market back in to price and absorb these entities, the other hand shows the financial sector still insistent on the privilege their own affairs while the resources of the entire nation are laid at their feet to keep them afloat They arrested me and they put me in jail.
And called my
pappy to throw my bail.
And he said, "Son, you're gonna' drive me to
drinkin'
If you don't stop drivin' that Hot... Rod... Lincoln!"
[Commander Cody and the Lost Planet Airmen]
11:25:40 PM  ;;
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