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The Socialist Creep

Jonah Goldberg (who is not a creep - it's a verb, people) stopped picking apples long enough to make the following observation on the bailout plan being rammed through Washington corridors. He says Count me Out of the Bailout.

Basically, I think the bad paper should stay with the people who bought it. If we need to further capitalize the banks, create short term rules or cobble together other backstops, fine. But Paulson's plan basically says, "I am the Lord thy God," and that's crazy. But it seems to me that Newt and the editors of NR are right when they worry that the Paulson plan essentially opens the door to unending government control of capital markets, which is just crazy.

Well, it's not crazy. It's the definition of socialism, in my humble books, which is a step away from communism in the respect that the latter is the markets, not merely controlling them.

We've been drifting towards this point - careening at times - since The New Deal. I'm no economist, but such credentials are not needed to spot the dangers to the free market system.

In reading Jonah's basic observations, I have to say that my opinion on the bailout is: Ibid.


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Comments (12)

It's okay to call Hank and ... (Below threshold)
John S:

It's okay to call Hank and Ben's Bolshevik bailout "socialism." And if we get a President Obama, his income redistribution tweaks definitely will tip us into true communism. For the first time in my life, I'm rooting for Democrats to stop Goldman Sachs from looting the U.S. Treasury.

I say let those companies d... (Below threshold)

I say let those companies do whatever any other company with financial problems does. They made their freakin' bed, let 'em lie in it. Why should the US Taxpayer fork over money to the same lame ass CEO's who let this happen? Just maybe the stockholders will decide to do something about their money grubbing Boards of Directors.

Another excellent, short an... (Below threshold)

Another excellent, short and to the point post (ya gotta know, I'm a very slow reeeeaderrr). The fact that it confirms the nagging helplessness that plagues me certainly is of no comfort but hey, you promised me a rose garden.

Uh, you NEVER promised me a... (Below threshold)

Uh, you NEVER promised me a rose garden that is. (I say, I say boy! That Ducharmes' as sharp as a bowlin' ball!)

I am no economist, I don't ... (Below threshold)

I am no economist, I don't even play one on TV. The current mess we are in doesn't lend itself to ideological fault lines. The basic reason we are where we are is because neither the far right nor the far left will embrace one single idea from the other side. It always boils down to my way or the highway.

And that is just flat wrong.

Unless you belong to the Tom DeLay school of government on the right or the Barack Obama, Chicago political scum school on the left, it seems to me that both the right and the left have some pretty decent ideas. But both sides are held captive to their extremes and thus, nobody risks listening; well except McCain, who has the track record with something besides his mouth and promises.

Without question, the Bush administration should have screamed louder, longer and more forceful than they did. Without question, Greenspan's legend is in his own mind and those on Capital Hill that believed the old goat over the years. And of course, Dodd, Frank and a cast of thousands that included lots and lots of Republicans, sold all of us out as they accepted money from Fannie and Freddie. Socially motivated loans courtesy of Clinton were bad enough, but then the bright lads at mortgage loan packagers decided why not extend that same level of garbage to the rest of us as the price of housing went up and up and up.

And ignorant consumers bought off on it. So in the current climate of ideological hubris, should we not only take their house but also find something else creative we can do to drive the point home that they shouldn't have done it? I do agree that the ill gotten gains of a bunch of CEOs needs to gone after, if only so they can pay lawyers as part of the price of screwing their employees, their company, stockholders and the rest of us in the process.

I think Newt's plans, so far as they go, is a good start, with the exception of Ethanol, which is a really, really, really bad idea.

If we don't kill Sarbanes/Oxley, forget new start ups. If we don't exercise oversight on creative money instruments with no underlying real world value, we are just gonna keep going through mess after mess after mess. It is reasonable to expect that a government should exercise oversight upon financial markets in the name of the common good, doing what it can to prevent the equivalent of ponzi schemes with a fancy name.

It is reasonable to expect Congress to pass the laws and the executive branch to enforce them; yet all too often, it turns into political footballs thrown around on the altar of a partisan battle that screws the rest of us, left and right included.

The sooner we get over falling in love with a politician or ideology, the better off we will be. Obama is no savior. Neither is McCain or Palin although I believe both are honorable people, which is more than I can say for Obama; yet neither has all the answers. And forget about Biden, his mouth will kill him off sooner or later.

Right now we save wall street or have a major depression. It is that simple. Do I like it? Hell no I don't. Is it more burden we are putting on future generations? Of course it is. At the same time, our failed social experiments have put at least 7 trillion of our national debt in that same category, so what's a few more trillion? And I'm sorry folks, the Republicans spend and waste as much as the Democrats.

And meantime, it is business as usual in Washington, complete with finger pointing and hollering and pandering and blame shifting.

My worry is feeding my family and providing them with shelter, clothing and school. And those on the far right and the far left can stick it in their ear, I am fed up with the lot of you.

The correct word isn't Soc... (Below threshold)

The correct word isn't Socialism, it's Fascism!

This is an issue that shoul... (Below threshold)

This is an issue that should unite the left (anti-corporate greed) and the right (anti-socialization of the marketplace). Those fuckers made their bed. Paulson can fart out of his mouth all he wants, but the people in your country seem to have a pretty good handle on where to lay the blame for the disaster and whether or not writing a blank cheque to those responsible is a sensible solution.

I would normally agree. (I... (Below threshold)

I would normally agree. (I am a libertarian at heart, and a Republican by practicality.) However, the incredibly detailed analysis posted by Daffyd ab Hugh on his Big Lizards blog (Sept. 22 post) makes me think the Paulson-Bernanke plan is the only way to prevent a total market crash.

First, it is not a government intrusion into a free market, because the market has not been free since 1997's Community Reinvestment Act revision. Instead, it is a consolidation and elimination of the existing intrusion: the government forcing banks to make sub-prime loans.

Second, it is not a bailout. It is a temporary buy-up of the assets which have become liabilities. Once in the hands of the government, those bundled securities will be dissected, the sub-prime loans removed, and then the revalued portions resold, hopefully at a profit (which could then be used to help the people who actually need it: families with sub-prime mortgages).

Third, it directly solves the problem. Due to the way the sub-prime mortgages were split into bundled securities, it became impossible to find the actual value of the securities. The plan will make their true value clear, removing the instability from the market in one stroke.

I only want to add that some market regulators who were supposed to keep this sort of thing from happening have been kept from doing their jobs by not having been confirmed by the Congress. Why? Because they were appointed by President Bush. Ouch.

"It is a temporary buy-u... (Below threshold)

"It is a temporary buy-up..."

There is nothing "temporary" about anything the government gets its hands in. Nothing.

There is nothing "tempor... (Below threshold)

There is nothing "temporary" about anything the government gets its hands in. Nothing.

Let me make this clearer: the Residential Mortgage Backed Securities, the "toxic" illiquid assets, will be bought, made transparent (as the private sector cannot, or this crisis would not have occurred), and sold at auction.

The auction is a vital and necessary part of this plan. It is truly the free market, where private sector companies bid what they think the now-transparent assets are worth. In holding these auctions, the "temporary" part becomes obvious: if the government is going to sell them, they are BY DEFINITION holding them temporarily.

And maybe, if Republicans take back the Senate and House, and if John McCain is elected, a few regulators will be confirmed by Congress to currently-empty offices so this won't happen again.

Sub-prime loans were... (Below threshold)

Sub-prime loans were made investment grade during Clinton's years. This was initially for the purpose of expanding the Community Reinvestment Act of 1977 under Jimmuh Carter to do its job more expansively. It worked. So Mortgage Lenders who facilitated loans, then repackaged them as "Investment grade," expanded the program on their own to any idiot who couldn't afford a mortgage at a certain level, so they could move their kids to a better school district, keep up with the Jones or whatever.

Then you have the issue of insurance to protect the loans, a creative way to make money so long as the price of houses kept going up. Buffet told his insurance company to stay out of that business. Fair warning for those who think Buffet is a pretty good businessman, if not in love with his politics. AIG, among many others didn't listen.

Finally, Fannie and Freddie pushed this house of cards, led by mostly Democrats and protected by Dodd, Frank and others, which included many, many Republicans. Any warning? Sure, but not too loud, at least not loud enough to get the attention of average americans.

So both sides share in the blame.

What to do to prevent a major depression? We are where we are for reasons clearly defined. It is what to do NOW that matters, not ideology and blame shifting. There is NO ideological fix for the problem we have, only a practical one that is obvious.

Then comes payback. And the FBI has already started that process. Hope it amounts to something. Take back a bit of executive compensation and throw a few in jail and the rest will toe the line of public interest for obvious reasons.

I doubt that Frank and Dodd will get theirs, unfortunately.

Let me put this in local te... (Below threshold)

Let me put this in local terms.

Credit matters. Credit matters to solid local employers and the service they provide. If there is no liquidity in the market, in other words, no or less credit, here is what can and has happened as an example.

We have two hardware stores in town. Well, we had two until one of them closed down. It was part of a chain in Texas that is located in many small towns. The local store here was profitable. There were two employees. They primarily sold to local contractors and some to the local "Public." The other store is and was more of a general store with most of its sales to the public at large and is locally owned.

The company that owns the "speciality" store was put in a credit squeeze. In case anyone hasn't been looking lately, the credit squeeze has been on for about a year. Anyway, credit is how the owner of the hardware store financed inventory. The bottom line is that the owners had to shut down their more marginal stores, even if those stores were making a profit.

So now we have one hardware store. Given that the store left is gonna pay higher interest on their own inventory, the question is where do prices go.

Can you say up?

We are going to pay for the current financial mess one way or the other. And higher prices is very much a form of indirect taxes.






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