You Can’t Handle The Truth!

I noticed this, too:

This is really extraordinary.

At the Banking Committee hearing today, Chuck Schumer–not generally known as someone who is tough on Wall Street–asked Hank Paulson a reasonable question: why do you need $700 billion right now? You said you were going to use about $50 billion a month; so why don’t we give you $150 billion now and then come back in 3 months?

And Paulson simply refused to answer the question.

This bailout may really be necessary, and all my snarking and concern about the politics of this aside, I think it is in fact necessary. Enough people who have no reason to be supporting this (think Krugman) support it, and enough of you commenters have chimed in to make the case that I am convinced. That being said, the arrogance of this administration is not making this easy.

36 replies
  1. 1
    cleek says:

    why do you need $700 billion right now?

    11/4! 11/4! 11/4!

    we can’t wait for the rest of the money because we need that $700B number in order to run against the big-spending Dems!

    11/4! 11/4! 11/4!

  2. 2
    liberal says:

    The more I’ve thought about it, the more I think the case for acting immediately, and in the manner dictated by Paulson et al., is faith-based.

    The right approach would be to empanel a commission of experts. You don’t need to look at every line on every bank’s balance sheet. Rather, you could statistically sample the balance sheets and come up with a variety of scenarios.

    It’s just too complicated a problem for us to throw money at it.

  3. 3
    mcd410x says:

    Riddle me this, Batman… The question isn’t whether the bailout is necessary, the question is whether it will work.

    And, if not, why not give the $700,000,000,000 out to each man, woman and child (around $2,300 apiece)? Certainly they’ll pump it back into the economy — I’m pretty sure there’s a law against saving.

  4. 4
    Dan says:

    Cue Jonathan Mardukis (Charles Grodin) in Midnight Run: “You’re making it very difficult for me to do the right thing here!”

  5. 5
    NonyNony says:

    This bailout may really be necessary, and all my snarking and concern about the politics of this aside, I think it is in fact necessary. … That being said, the arrogance of this administration is not making this easy.

    Yeah, well, I would think that just about anyone who doesn’t work on Wall Street and who thinks the bail out is needed should be worried that this particular administration has proven time and time again that it can’t find it’s own ass with both hands. And they look to find a way to profit – both politically and financially – from every single freaking crisis we find ourselves in. And not in a way that makes things better for the citizens, but rather a way that makes us pay for their profits.

    Congress should actually have some hearings and have the bankers who want our “phat l00t” come in with their books and some charts and explain what bad debts they’re holding, why they’re bad, why they took them on in the first place, why no one wants to buy them now, and exactly what impact it will have on their institutions if Congress doesn’t give them a bail out. All this stuff being done in secret behind closed doors and having Paulson say “trust me” isn’t going to cut it – he’s from the Bush administration – even if I thought he was trustworthy, history shows that you really shouldn’t trust him.

  6. 6
    Comrade SGEW says:

    I can’t remember when I’ve felt so helpless about our nation, strangely enough.

    During other recent crises (9/11, the Iraq invasion and occupation, the U.S.’s abandonment of the rule of law, Georgia, etc.) I’ve had some sense of the situation and could at least form a reasonable opinion about causation, effect, and remedies. But this financial screwy ka-blooie defies my analysis. Or anyone’s analysis, apparently (but certainly beyond my area of expertise*).

    As far as I can tell with some definiteness (in SATSQ format for e-z reading):

    1) Has financial scamming occurred on a heretofore unprecedented scale? Yes, probably. Also blithering incompetence.

    2) Whose fault is it? Greedy and/or incompetent bankers/investors/lobbyists and the Republican party, with Pres. Clinton and many Democrats sharing some accessory culpability. Also, lots of Americans got suckered into shady deals, ’cause we’re suckers.

    3) Is our country going to get ripped off by these motherfuckers? . . . Probably. Based on recent precedence, I would even say likely.

    Is that more or less it? Correct me if I’m wrong.

    *I think I’m gonna just read Krugman, Reich, and hilzoy (and Comrade Cole, natch), and hope that they can figure it out for me. I give up on trying to figure it out: I have too much other crap I have to cram into my brain right now :(

  7. 7
    gbear says:

    Actually Paulson did give an answer. He told Schumer that Wall Street wouldn’t have faith in our bailout unless we totally committed to totally giving them all the money up front, even if we can’t spend it that fast.

    Like, Wall Street wouldn’t trust us to give them the rest of the billions if we only gave them just a little tiny bit now. How could they possibly move forward to straighten out this mess if they knew that we weren’t totally committed to making sure that they didn’t have to suffer?
    We taxpayers are such thoughtless louts that way.

  8. 8
    Rick Taylor says:

    I think something needs to be done, but that doesn’t mean I have any confidence whatsoever in Paulson. I think what he’s doing is trying to keep the speculative bubble going. He did answer the question; they need 700 billion dollars to build “market confidence”; so that wall street will turn around and revalue all this junk based on the fact the government is buying it.

    At Goldmann Paulson participated in the scam that’s just fallen apart. This is what people who are part of such scams; they try to keep them going thinking they can go on indefinitely. The attitude needs to be not that we’re going to prop up worthless paper, in the hopes of discovering it’s worth much more than it is now. The attitude needs to be we need to find a way to somehow survive, to keep the system running as the paper is devalued in an orderly fashion.

  9. 9
    Comrade Napoleon says:

    It tells you everything about this administration and the Republican party that even staring the financial abyss in the face (and I pretty much believe that Paulsen and Ben B. do think they are) they can not but help but present a plan that is completely non-serious and is nothing other then a payoff to the richest people in this country, instead of a plan that is pretty close to one they believe that a broad spectrum of the electorate could support.

    They would rather risk seeing the country implode instead of doing the right thing simply because their golfing buddies may not like it.

    By the way, to highlight their irresponsibility it has been reported that this plan was made up some time ago and they were sitting on it (which makes me believe it is their last line of defense, the “plan Z” contingency after they burned through plans A through Y) yet instead of formulating the plan in secret with, say, house and senate committee leadership so that they were bought into the plan before it was ever sprung on the public, they instead decide they would do it in a way designed to maximize p!$$ing off as many people as possible.


  10. 10
    Billy K says:

    You know, the collapse of our banking system and economy in general scares the hell out of me, but more and more I’m starting to think that’s just the point, and this is Bush’s last-chance final gift to his Crony Overlords before he packs up for the Ranch.

    The only thing I know for sure is I’m sickened by the whole damn thing.

  11. 11
    Comrade General Stuck says:

    Being a believer in pro-active government to do for it’s citizens what they can’t do for themselves, or at least make it possible for those things to be done, I’m not against this bailout in principle. It’s not even the huge sum of cash involved, that gives pause. It is the scope of control transfer from public to private I’m just flat against. As I’ve already said, I’m ignorant about the details of what the problem is, but the proposed solution just stinks to the high heavens. It has the feel of a PERSONAL rescue mission by Bush/ Paulson to save the hides of the people Bush once called “his base” . People who have played fast and loose with the rules to fatten their bank accounts. And after seeing Dodd’s reaction to this proposal, I don’t think I’m entirely wrong.

  12. 12
    Comrade Napoleon says:

    Whats with my comment going into moderation!!!

  13. 13
    Comrade General Stuck says:

    That should be private to public. It’s early here

  14. 14
    James says:

    Its interesting to watch the google talks with krugman from last year, as he basically lays out the here and now as a somewhat likely scenerio. minute 47 is really key, but the whole thing is good

  15. 15
    nicethugbert says:

    Bailout = Early Vote

    It just dawned on me that this Bailout is nothing more than Rethuglican theater to lock in the early vote, so is Palin. And, they wrote this script months ago.

    Man, are we getting played, by people in bow ties!

  16. 16

    Here’s the deal: Vinny’s gonna hafta take out their kneecaps if they don’t have his money by Friday. It’s nothin’ personal, see, he’s just got a reputation to uphold.

  17. 17
    ElBlot says:

    So what makes you think Krugman supports the bailout? I have read everything he has written on this and I do not get that sense at all. He certainly does not support the Paulson – Bush plan, but does seem inclined to support something along the lines of what Dodd is proposing.

    Can you point us to somewhere where he says supports the Paulson – Bush plan? Here is the very last paragraph he has published on this:

    “No more taking this administration on faith — and Paulson’s performance over the last few days has made it clear that yes, he is a Bush administration official, with the trademark inability to take responsibility for his own actions. Explain what you’re doing and why — or get out of the way, and let Chris Dodd and Barney Frank write the plan.”

  18. 18
    Wayne says:

    If the offshore drilling situation is any indication, the Dems should just sign the check over and go home. Quit wasting everyones time.
    On the other hand, the government should come at this from an entrepreneurial standpoint. Whatever they take on, should have enough underlying value that a profit can be made, or at least keep the loss low. This means not just bailing out the companies. They have to be hurt. Not to run them into the ground, but they have to suffer because of their actions.
    Unfortunately, the government (Bush side of the fence) only wants to give it away, and Congress (dems) have no clue and are scared of toeing up with Bush.
    I think they should hire someone strong in business, Pickens or Trump say, offer them 5% of all transactions and let them do the negotiating.

  19. 19
    Comrade RareSanity says:

    This bailout may really be necessary, and all my snarking and concern about the politics of this aside, I think it is in fact necessary. … That being said, the arrogance of this administration is not making this easy.

    I agree in part. I think that some government intervention is necessary, however, it should be extraordinarily painful for institutions to participate and then the government should step in to fill the vacuum that they might leave.

    For example, it should be a requirement that any institution applying for aid (and they should have to apply individually), will have to open its books completely, including the offshore stuff. They will have to state exactly how much they need, how it will be used, and an explanation on how it will END the issues they are requesting it for. If it won’t end your issues, you get no money because you are going to eventually fail anyway, this will only delay it. If they veer from that outline by one dime, the government will be allowed to immediately seize all assets of the company to recoup it’s money plus a penalty. The rest of the assets would be liquidated and the proceeds evenly distributed to shareholders on a price per share basis. All upper level executives would then be brought up on fraud charges, or lying to Congress or something else, and have to go to jail, period.

    An equity stake will need to provided to the government in perpetuity. If you want money from the taxpayers, than the taxpayers will be “in your business” forever. No blank checks for a new GulfStream…

    I don’t buy the “consumers won’t be able to get car loans, credit cards or mortgages” angle. If that were to happen, the government need only provide “FHA” type programs to the “healthy” banks and provide a pool for money that will directly help those people. Give the SBA more money if small business loans become scarce.

    Basically, a company would REALLY need the money and be able to prove that it would end there trouble before applying for a bailout. Otherwise the government should directly step in and help taxpayers (though the healthy banks) affected by this fiasco, not the companies that created it. It would be cheaper and directly help people, not corporations.

    If you don’t really need the money or you are going to fail anyway…no soup for you!

  20. 20
    Joshua Norton says:

    The so called bail-out is just another in a long line of brazen attempts to move your money to the pockets of the very, very rich. This is trickle up economics. It was formerly just called a swindle. And they signed your name to the debt. The idea is to dump the losses on people who had the good sense or sufficient control of their greed to avoid overextending themselves to begin with.

    By propping up overblown values, they have effectively closed the market to those who can actually pay. Those of us who play by the rules are priced out of the market so the hustlers are the only game in town. The bailout is asking the taxpayers to underwrite the ridiculous valuations that only hustlers would pay.

    They tell us we should fear the consequences if they can’t swindle us. That the financial system will fall apart. So we are on the hook for more than we are going to earn.

    Gee, sucks to be us…..

  21. 21
    ThatLeftTurnInABQ says:

    Riddle me this, Batman… The question isn’t whether the bailout is necessary, the question is whether it will work.

    Here’s the part that I don’t seem to hear anybody talking about – how are we going to scrape up $700 billion?
    Where does that money come from? It sure isn’t from some sudden spike in tax revenue.

    Either we just up and print it out of thin air (whee! more better inflation!), or we borrow it from somebody (how do you say “I will gladly pay you Tuesday for a hamburger today” in Mandarin?)

    So let’s assume the best case scenario – we are able to borrow it at something resembling reasonable interest rates.

    That means this is our last chance to get it right. We will not be able to go back to that well again, on this kind of scale, without giving up payday loan rates.

    I don’t think we should be squandering our last chance to get our house in order without having our kneecaps busted on some half assed plan that Paulson drew up on the back of a napkin in between the main course and dessert at Morton’s. If we are going to have a bailout this big it needs to be planned like D-Day, down to the last detail.

  22. 22
    Glenn says:

    How can I say this? FUCK WALL STREET and it’s bought and paid for flunkies in Congress and this uber – crooked Administration. This isn’t anything more or less then a robbery in plain sight and anyone political who votes for it is a traitor. Why should we move the goal posts for these toxic klowns now? They created this with one lie stacked upon another until it all became a huge house of crooked cards. Let it tumble and let others come in and pick up the pieces as is the case for every other failed enterprise or individual in this land. They wanted a free market didn’t they? But, what they didn’t want was the possibility that THEY might lose in that market. So now that they’re schemes are all un-raveling because they were nothing more then a fancy pile of lies they want the rest of us to come and bail them out? Not so quick. As for Paulseon why in God’s good name would anyone believe a word this guy says? he’s one of the people that lead this whole crooked movement from day 1. He presided over one of the biggest offenders in this whole sorry drama. What’s worse is that HE KNEW what was wrapped up in all that rotting paper NOTHING. He made damn sure his firm Goldman Sacs only sold this crap to others put kept none of it on his own books! Like a smart dope dealer Mr. Paulson knew enough NOT to smoke his own stuff didn’t he? Hank is a real slicko IMHO he’s especially NOT to be trusted here. He’s part of the BV$H crime syndicate in fact he and others might be the core of this gang in reality. We know Emperor BV$H certainly isn’t the brains behind this crew thats for sure!

  23. 23
    comrade chopper says:

    its easy, we’ll just print more money.

  24. 24
    Tsulagi says:

    This bailout may really be necessary

    I’d agree with that.

    Maybe I’ve missed it, but so far I haven’t seen anything that addresses the underlying lack of regulation or enforcement of existing regs, oversight, and other areas that led to this slow-burn Enron to take place.

    There’s been some crowd-pleasing toughy talk like capping CEO and upper management compensation, but that’s crumbs. And some complete bullshit as from Coleman how this could be wildly profitable (yeah, let’s do more of this), but that’s been about it.

    That being said, the arrogance of this administration is not making this easy.

    Yeah, you really gotta love the unitary executive mindset from these fuckups. Out of the gate, give us $700B with no strings attached, no oversight, complete immunity from a heckuva job, and we want the check by the end of the day or the economy gets it. So they want the $700B to go to the same guys in the financial sector, with the same “watchdogs” in Washington that got it to this place in the same environment, but expecting a different result. Yeah.

    Arrogance aside, I have absolutely zero faith in the competence of this administration with its Monica Goodling franchised HR departments in each agency. These fuckers could go through $700B+ in a heartbeat with nothing to show for it. Or even know where it went. When Paul Bremer was asked why CPA couldn’t account for up to $11B in cash bricks, his answer was a war was going on so they couldn’t be expected to do bookkeeping.

    So yeah, let’s give them the $700B to start and expect a different result.

    I’m with Shumer’s direction expressed in the blockquote. What’s the bare minimum you need to keep afloat for a few months while we examine the problem in more depth to come up with hopefully intelligent legislation and funding to address the problems. And to a time when there might be some competence in the next administration.

  25. 25
    jake says:

    Of course he didn’t answer the question. He doesn’t have to answer the question. You don’t question Hank “Candy Man” Paulson!

  26. 26
    Rick Taylor says:

    There’s a fascinating letter by a reader of Ezra Klein. He says he’s spent fifteen years in the financial sector, that there is definitely a crises, and comes up with an explanation for why participants may need to be enticed to enter the bail out.

    Second, as for your point about “enticement” of Wall Street, I totally agree that we should just swoop down and take control of the whole lot of them. But what Paulson and Bernanke are getting at is that there’s a very distinct division of labor in finance, and that the corner of Wall Street which produced this mess is wholly operated by testosterone-fueled assholes with God complexes. Even now, while the straight banking and insurance sectors are pissing their pants, the douchebags that crapped out this whole mess still think they’re invincible. I know I’m getting a little “strawman” here, but I know these jerks. They really believe that don’t need bailed out. They think they can cook up some new, crazy derivative to sit on top of the failed credit default swaps, restore the Wild West credit market (and by extension, liquidity), and make a shitload of money. They’re complete idiots. Diabolical, narcissistic idiots, but idiots nonetheless. Bernanke and Paulson quite rightly fear that a voluntary program that isn’t full of gimmes and profits will have no participants and will solve nothing. These guys (and a few women) are already rich beyond most people’s wildest dreams, and don’t believe that can ever change. I think Paulson and Bernanke really fear that these assholes will continue to take a series of increasingly big, stinky dumps on the global economy if we don’t kiss their asses and beg them to let us buy their shit. Again, I think we should be sending jackbooted thugs into their $12M meat-packing district co-ops and take every last saleable thing they own and give it to Sarah Palin to auction on eBay.

  27. 27
    Rome Again says:

    This bailout may really be necessary, and all my snarking and concern about the politics of this aside, I think it is in fact necessary.

    A solution is necessary, this bailout isn’t it.

    In a time when we’re having severe financial difficulties we’re about to piss a whole bunch of money away and watch it go down a rabbit hole never to be seen again.

    The numbers don’t add up, the demands require no questioning, and it all has to be done NOW when a month ago all these people were saying our financial outlook was great. Something smells rotten with this deal.

  28. 28

    […] The answer here is clear – don’t give Hank Paulson $700 billion anything, even the new pennies. Comrade Cole notes that Paulson, when asked why he couldn’t just take $50 billion a month for three months, simply didn’t answer the question. As usual, we’re getting an administration that demands some absurd thing, and rather than accepting even a portion of it that they’d don’t deserve, stands their ground until they get (or don’t get) everything they want. Then they celebrate or pout, depending upon the outcome. […]

  29. 29
    eyelessgame says:

    This bailout may really be necessary,

    A bailout is almost certainly necessary. This bailout is an absurdity. Keep everybody’s feet to the fire – we can at least push for the least unfair bailout we can get.

  30. 30
    Margarita says:

    I think it is in fact necessary. Enough people who have no reason to be supporting this (think Krugman) support it

    Fair enough. But the same sort of snowballing consensus occurred with respect to WMD in Iraq. Just saying, this approach will only take you so far. And those in a position to act, as opposed to us in the bleacher seats, should educate themselves but quick.

  31. 31
    Bill H says:

    From the New York Times today:

    One thing is certain. If taxpayers do not share in the potential profits from a bailout, someone else will. On Tuesday, the Federal Reserve announced that it was relaxing rules that require investors who take large stakes in banks to submit to longstanding regulations on transparency and managerial control. Private equity firms have pushed for the changes because they would like to become big investors in beaten-down banks but do not want to be regulated.

    So while Bernanke is on Capitol Hill demandingblackmailing Congress for bailout money, he is deregulating the mess even further.

    The reason these two guys look panicked is that they are trying to pull off the largest theft of public money of all time and it isn’t working they way they though it would. They expected Congress to just roll over and hand them the dough. What happens if Congress balks, they walk away empty handed, and then the collapse they said would happen doesn’t happen? They are revealed not only as liars, but as thieves on a ginormous scale.

  32. 32
    Margarita says:

    It really is sad how eroded the government’s credibility has become. I wonder whether, between “The Very Hungry Caterpillar” and “My Pet Goat,” Bush ever got around to curling up with “The Boy Who Cried ‘Wolf’“?

  33. 33
    Gianduja Kiss says:

    During hearings today, Bernanke – now having had a day to come up with an answer – said that Wall Street’s delicate psyche will not be sufficiently assuaged unless Treasury has the full $700 bill up front.

  34. 34
    binzinerator says:

    Why is this bailout or any bailout necessary? I’ve not seen anything — facts, figures or charts — that make the case. All I’ve heard is some noises of worry or fear.

    What makes this necessary? And I don’t want to hear it’s too complicated to understand. I want to judge for myself if it’s too complicated to understand. But so far Paulson hasn’t explained. Why?

    This is bullshit. It’s a build up of a consensus based on rumor and innuendo and intonation.

    I want an in-depth explanation. Of how we got here, and why it’s necessary to have $700 billion right now. I want to know what can happen if we do nothing, and not this nebulous bullshit of “scary bad things, very very SCARY things will happen, so trust me”. I want details.

    Everyone is refusing to talk. Like we are children and should not be exposed to some things because they are too terrifying. We very well may be on the hook for all this money, we damn well have the right to be talked to in the big boy voice.

    The people who should know aren’t saying. Why?

    If it’s because they don’t know either, then this whole bailout is truly bullshit. You can’t assert something as absolutely necessary if you don’t know enough to make a solid case for it.

    This looks like another Bushie snowjob, complete with fearmongering and a coordinated effort to rush it through. I can only conclude Paulson and the Bushies don’t want anyone to look too closely or to ask too many questions. And that is deja vu all over again.

  35. 35
    Badtux says:

    Okay, biz. First, go to Teh Google and look up “deflationary spiral 1930” then get back with us. (I will modestly note that I give a good example of how the deflationary spiral of 1930-1932 worked on my own blog). Now: Realize that the toxic paper that these Wall Street mavens have created is money. Now I hear you say, what? Isn’t money green stuff with pictures of dead Presidents on it? Uhm, not if you’re an economist. For an economist, money is anything that can be traded for something else of value. Thus after the Soviet Ruble collapsed in 1992, turnips became the effective currency of most of Russia. Want spare parts for your car? That’ll be ten turnips please! So anyhow, this toxic paper is trading — or was trading, I should say — for real money, and was being used as the asset basis for loans using real money, thus as far as the economy is concerned is money.

    Now, what happens if you take 700 billion dollars of toxic paper that is money and just vaporize it into thin air? I’ll tell you what happens. Seven *TRILLION* dollars worth of money disappear from the economy. Hold on, you say, how can 7 trillion dollars worth of money just disappear if only 700 billion dollars worth of money is what we’re talking about? Go look up “Fractional Reserve Banking” on the Wikipedia, note that the current reserve requirement is 10%, and get back with us.

    Okay, so this toxic paper is turning into a pumpkin. That’s a problem. A real problem. So what do we do about it? Bernanke’s plan (and this *is* Bernanke’s plan, Paulson isn’t smart enough to develop something like this) is to basically grab all this toxic paper and replace it with T-bills. T-bills are nice and stable. As a first step this is a good one. It stops the possibility of a deflationary spiral. The next step, though, has to be to ban the practices that led to all this toxic paper going into the economy in the first place — *and* use government possession of all this toxic paper to go after the assholes who perpetrated this fraud upon the public in the first place by requiring them to actually honor the toxic paper, and if they can’t, well, they get to learn how to say “will there be fries with that order sir?” after all their assets get seized and auctioned off to the highest bidder, and that’s if they don’t get a trip to the Big House for fraud and learn first-hand why you shouldn’t drop soap in a communal shower in that environment…

    As for mortgages that served as the basis of all this toxic paper, let’em fail. Default them, foreclose them, shove all that property out onto the market at market values, deflate the housing bubble and bring prices back to affordability with conventional mortgages for the majority of Americans. Ban all those exotic mortgages. I don’t have any sympathy for people who signed those ‘liar loans’ and now can’t meet their payments. Look, when you lied about your income you lost any opportunity for sympathy from me, because even a five year old knows lying is wrong. You do something wrong, you pay the consequences. Call me vicious if you will, but I’m one of the people who did not buy a home because these jerks bid up the prices of homes beyond my ability to pay on a conventional mortgage and I was smart enough to pull the BS they pulled, and now they’re going to have to sell me their home for 40% of the price that they paid for it because they can’t pay for it? Oh wahh, I coulda told them that when they bid the prices up to buy it, doh! Screw’em. I’ll enjoy living in their (former) house.

    – Badtux the Vicious Economics Penguin

  36. 36

    Government is too big it cannot handle it self they are the ones who is being rich off savage taxpayers. It time to get small government it will take revolutions to changes this the side of government. Sure the truth does hurt. We need to get rither the red tap we should not have to wait if want a new home should be able to move in right off.

    Salem, New Hampshire

Trackbacks & Pingbacks

  1. […] The answer here is clear – don’t give Hank Paulson $700 billion anything, even the new pennies. Comrade Cole notes that Paulson, when asked why he couldn’t just take $50 billion a month for three months, simply didn’t answer the question. As usual, we’re getting an administration that demands some absurd thing, and rather than accepting even a portion of it that they’d don’t deserve, stands their ground until they get (or don’t get) everything they want. Then they celebrate or pout, depending upon the outcome. […]

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