The Panic

Great piece in the NY Times discussing what spooked the powers that be so much that they decided they needed to release the “Paulson Plan”:

This is what a credit crisis looks like. It’s not like a stock market crisis, where the scary plunge of stocks is obvious to all. The credit crisis has played out in places most people can’t see. It’s banks refusing to lend to other banks — even though that is one of the most essential functions of the banking system. It’s a loss of confidence in seemingly healthy institutions like Morgan Stanley and Goldman — both of which reported profits even as the pressure was mounting. It is panicked hedge funds pulling out cash. It is frightened investors protecting themselves by buying credit-default swaps — a financial insurance policy against potential bankruptcy — at prices 30 times what they normally would pay.

It was this 36-hour period two weeks ago — from the morning of Wednesday, Sept. 17, to the afternoon of Thursday, Sept. 18 — that spooked policy makers by opening fissures in the worldwide financial system.

Read the whole thing. For my part, I am still unsure what I would do were I in Congress, but hopefully they have more information that I do. I am completely sold on the notion that something has to be done to ease up the credit markets, but I do not know what can be done or how effective the current plan would be. I would also be lying if there was not at least a part of me that still felt the only way to rebuild the system is to let all the fires burn out.

But then again, that is why I just write a blog.

*** Update ***

Part of the problem is that the powers that be have done a pretty terrible job explaining why something needs to be done. The best explanation that I have seen so far is this clip from Bill Clinton:

The whole thing is worth watching, but the part on the credit crisis starts at 1:58.






75 replies
  1. 1
    LiberalTarian says:

    Yeah, I’ve been hoping the powers that be are actually powerful
    thinkers. And, setting my jaded experience aside, really really do
    hope they don’t make a hash of it. Knock on wood.

  2. 2
    Alan says:

    The Big Picture has an article, Misunderstanding Credit and Housing
    Crises: Blaming the CRA, GSE It can be found here:
    http://bigpicture.typepad.com/.....andin.html

  3. 3
    Comrade Stooleo says:

    For those who give a damn, My wife has a MBA from Vanderbilt and
    the school recently recorded a lecture explaining the current
    financial crisis.
    The video
    is pretty long (50 min) but it does explain a lot.

  4. 4
    rob says:

    I’d forgotten what it was about Bill that I liked so much. He is a
    smart guy (we could use some of that after the last eight years),
    and is able to boil down an argument to something anyone can
    understand.

  5. 5
    gex says:

    Good to see a vocal calling out of “trickle-down”. What a crock.

  6. 6
    Fulcanelli says:

    I’ve seen a couple of blog posts here and there with posters
    claiming that they or somone they know was told by their employer
    that they couldn’t make payroll and wouldn’t be getting a paycheck
    this week, due to the bank cutting off their short term rolling
    credit line, so I guess that squares with what more and more of the
    economic talking heads have been saying for the last week. Sucks to
    be them.

  7. 7
    satby says:

    Thanks John. Ballon Juice is my new lifeline for video, I can’t
    seem to get Crooks and Liars for the last 2 days.

  8. 8
    Brian J says:

    I am still not entirely sure of what’s going on, partly because
    there’s so much shitty information out there–it was all Fannie and
    Freddie, it was the GAYS, it was the NEGROES, it was Barack Obama’s
    refusal to do town hall forums–and partly because it’s very, very
    complicated. But the biggest problems are, as you indicate above,
    some of the basic, day-to-day transactions, like bank-to-bank
    lending, are getting a lot tougher. We’ll have a new president in a
    few months. If the polls are accurate, it’ll be Barack Obama with
    even larger margins in the House and Senate. I don’t know if this
    is possible, but can congress pass a basic bill that lets the basic
    functions of the economy still happen and buys us more time, so
    that we can pass a better bill once Obama is president?

  9. 9
    J Smith II says:

    If you’re interested here’s another good explanation of why it’s a
    “credit crisis” and not a “stock market” one –
    http://seattlepi.nwsource.com/.....sks01.html

  10. 10

    I would also be lying if there was not at least a part of me that
    still felt the only way to rebuild the system is to let all the
    fires burn out.

    There’s a reason for that. It’s because if you have
    eyes, you see who’s been getting kicked in the junk for the last
    thirty years, and every time they’ve asked for a little bit of
    help, they’ve been told they’re worthless and need to work a little
    fucking harder, or get some more training, or quite being a bum. So
    now that it’s starting to hit them, and they’re saying “come give
    us a hand,” we’re not so inclined to listen. We’ve been eating shit
    for a long time, and we’d like it if they get a taste. Now, in the
    end, most of us will go along with the bailout because we know that
    while we may be eating shit, there are a lot of other people who
    won’t eat at all if this thing melts down, but we will never be
    happy about it. Fuck trying to use html. Here’s the link I was
    trying to imbed:
    http://incertus.blogspot.com/2.....eason.html

  11. 11
    greynoldsct00 says:

    I sure miss Big Dog…glad he’s out there putting it in plain
    english. And hell yeah, my boss’s “rich” friends are dying to know
    where they can put all their money right now…

  12. 12
    Conservatively Liberal says:

    They can free up all of the money they want, but until people start
    to earn more there will not be more to spend. People are tapped
    largely out. Wages have not kept up and prices are only going up.
    My wife works at a major department store in retail clothing sales
    and she said that it is so bad that their clearance stuff isn’t
    even moving. Store traffic is down and the same goes for sales, so
    they are starting to cut hours. Real estate in our town is
    basically dead for now. Property prices are dropping and nobody is
    biting. Our pols say that they are saving the system for us while
    we all know it is really all about bailing out the ones who have
    (had?) the big bucks, and that ain’t us folks. The markets need to
    correct and there is no other way about fixing it. It is going to
    be painful but IMO the longer we delay it the worse it is going to
    be to deal with. Propping it up will not work, it will only delay
    the inevitable. Of course, if you are facing reelection then
    delaying the inevitable can be a pretty attractive option.

  13. 13
    greynoldsct00 says:

    Hey, cool, you can edit your comments after submitting if you find
    boo-boo… sweet!

  14. 14
    Conservatively Liberal says:

    I see that we have a five minute edit, but now my formatting (last
    post) looks all wrong. I will leave it for now and hope that it
    corrects once the edit timer is up. :)

  15. 15

    Well, if the problem with credit is that all that “wealth”
    “generated” by the housing bubble and the criminal reselling and
    rereselling of bad mortgages has disappeared, then the solution
    should be to give more money to the guys who screwed up in the
    first place. [/snark] The question I have is whether the panic in
    Congress was by caused by a concern for the economy and for the
    Americans’ well-being or if the panic was caused by pressure from
    Wall Street on its minions in government.

  16. 16
    Fulcanelli says:

    John Cole says… “For my part, I am still unsure what I would do
    were I in Congress”. I admit I wouldn’t know exactly what to do
    either, but I damn sure wouldn’t be signing up to load up the
    “rescue” bill with 100 million bucks worth of freakin’ pork
    projects and pet legislation amounting to more defecit spending and
    tax cuts for business or anybody else. (Rum producers in the Virgin
    Islands?) Have you seen the list? What has the country gotten in
    return for the Bush tax cuts for the wealthy, btw. Over 605,000
    thousand jobs lost in the US just this year. Trickle ‘this’ George,
    and by the way, there’s a crowd downstairs that wants to talk to
    you. Fuckers.

  17. 17
    Comrade The Moar You Know says:

    Goddamnit, I miss Bill Clinton. The guy has a way of cutting
    through all the bullshit and can do it in mere seconds. He also had
    an extraordinary talent for generating bullshit, so I’m a
    bit happier that he has a bit less of an agenda these days.

  18. 18
    Punchy says:

    Dont have time to watch it, but I’m assuing that’s the video where
    Clinton takes responsibility for this whole mess.

  19. 19

    Clinton makes some good points. However, wealthy people are not
    worried about large cash deposits being uninsured. CDARS was set up to circumvent
    the $100K insurance cap issue. Your cash is tied up in CD’s but
    your money is insured up to $50 million. The raising of the
    insurance cap is a nice gesture but is essentially meaningless.
    Clinton’s appearance on the Daily Show was also quite illuminating
    as to what the mortgage crisis was about and how to protect
    homeowners.
    http://www.thedailyshow.com/fu.....eId=185193

  20. 20
    John Cole says:

    @Comrade The Moar You Know: This is a test….. Notice how my comment has a link to a previous comment, as if I was addressing that person specifically.

  21. 21
    Ned Raggett says:

    I enjoyed the NY Times piece too, even if it can’t tell the full
    story, but it illustrates all the more clearly what a terrible job
    the Bush administration in general has done with communication,
    especially in its waning days. Too often that’s been used as an
    excuse by supporters to try and explain away why said
    administration has been so happily loathed but the combination of
    hyperalarmism and general melodrama on display — as opposed to a
    flatter, no less concerned but also more practical approach that
    could have appealed to Congress’s and the public’s concerns instead
    of both scaring and revolting them at 200 mph — was already in
    place before they thought to engage the public.

  22. 22
    Ned Raggett says:

    @John Cole: Hey, nice — that’s the
    kind of comment model I’m familiar with at Idolator (as well as
    other Gawker or Gawker-spawned sites). Good addition!

  23. 23
    greynoldsct00 says:

    John, instructions for the block quote feature, when you have a
    minute?

  24. 24

    […] At the end of the timestamp on every comment, there is an
    arrow. If you click on that arrow, it will automatically start a
    new comment, linking to the comment you just clicked, so your
    comment will be auto referenced. And that explanation sucks.
    Example here. […]

  25. 25

    I checked my html on the CDARS link it should be OK. Why is it not
    showing up properly in saved comments? BTW I do like the comment
    edit feature. But how about a car we can drive before we move on to
    the Maserati?

  26. 26

    By the way, I like Bill Clinton’s explanation of the panic.
    Personally, I rolled over some money in the bank last week over the
    phone and now I’m wondering if the guy I was dealing with did
    something else with my money. I just don’t trust the banks like I
    used to. However, I’ve read in the blogosphere that the panic was
    in some way manipulated (banks deliberately holding back money) in
    order to get this bill passed. Since there is no direct connection
    between credit for buying a car and the bailout of Goldman Sachs, I
    would keep an eye on how quickly, or if, the credit crisis
    disappears. If it’s gone right away I’d suspect that it was
    manufactured. If it doesn’t then I’d suspect the crisis wasn’t
    manufactured… but that the solution wasn’t a solution at all.
    Anyone following this? I’m over my head here. More coffee needed
    out here on the West Coast.

  27. 27
    John Cole says:

    @greynoldsct00: I dunno how the rest of you do it, but I write

    < blockquote > then enter the text I want to blockquote then < /blockquote >

    When you take the spaces out of < block quote>, it would look like this:

    “I dunno how the rest of you do it, but I write

    then enter the text I want to blockquote then

  28. 28

    By the way, does this new formatting have something against the
    concept of paragraphs?

  29. 29
    Brian J says:

    They can free up all of the money they want, but until people
    start to earn more there will not be more to spend. People are
    tapped largely out. Wages have not kept up and prices are only
    going up. My wife works at a major department store in retail
    clothing sales and she said that it is so bad that their
    clearance stuff isn’t even moving. Store traffic is down and the
    same goes for sales, so they are starting to cut hours. Real
    estate in our town is basically dead for now. Property prices are
    dropping and nobody is biting. Our pols say that they are saving
    the system for us while we all know it is really all about
    bailing out the ones who have (had?) the big bucks, and that
    ain’t us folks. The markets need to correct and there is no other
    way about fixing it. It is going to be painful but IMO the longer
    we delay it the worse it is going to be to deal with. Propping it
    up will not work, it will only delay the inevitable. Of course,
    if you are facing reelection then delaying the inevitable can be
    a pretty attractive option.

    I don’t know how connected the two ideas are, but bear
    with me for a minute. I’ve thought for a while now that the only
    things we can really ask of people are that they get their personal
    finances in order. We can all talk about what sort of bail out
    bill, if any, congress should pass, what sort of regulations should
    be in place, and other stuff in that vein, but since we’re not
    advisers to the campaigns or elected officials nor working in the
    Treasury Department or at the Federal Reserve, we’re limited in
    what we can accomplish. But it is always a good idea to pay down
    debt, not live too far beyond your means, and save and invest, all
    of which is possible at the personal level. Now, like I said, I
    don’t know if this is true, but I imagine that the more secure each
    person’s finances are, the better the economy will be. If you have
    money in the bank and no credit card debt, buying a new set of golf
    clubs or clothes isn’t going to be a decision that requires nearly
    as much thought as buying a house. I’d also like to know how much
    of a connection, if any, paying down debt, like that from credit
    cards, helps certain financial firms and/or banks by recapitalizing
    them.

  30. 30
    Brian J says:

    However, I’ve read in the blogosphere that the panic was in some
    way manipulated (banks deliberately holding back money) in order
    to get this bill passed.

    I read that for the most part, the banks were actually
    flush with cash, but that they didn’t want to start doling it out
    because it would be easier to deal with the government than someone
    like Warren Buffett. That makes a certain level of sense.

  31. 31
    john b says:

    i don’t like the whole “@soandso” model. it’s ok if there is still
    block-quoting functionality. but if people get into the habit of
    only linking to other posts, then you’re not reading comments,
    you’re scrolling back and forth between comments the whole time.
    that is a big part of why i don’t read the whole gawker-universe of
    sites.

  32. 32
    Comrade Darkness says:

    @greynoldsct00: I dunno how the rest of you do it, but I write

    then enter the text I want to blockquote then

    It tehvanishes. Wait, it un-tehvanished. Ah, editing
    messes things more. The edit makes the tagging pretty and indented
    and stuff, but those returns added on edit wreak a new havoc upon
    the comment.

  33. 33
    ThymeZone says:

    Circus Maximus tells me we have editable posts? Pigs can now fly.
    Amazing. (editing later: I am speechless. Well, not really. Sorry.
    But anyway, this is great. Congrats)

  34. 34
    greynoldsct00 says:

    @John Cole: I’ve been doing that,
    but the box comes up empty, will practice more…

  35. 35
    Punchy says:

    testing

    looks good in the preview
    ….

  36. 36
    greynoldsct00 says:

    I’m glad I’m not the only one buggering this quote thing up…

  37. 37
    Punchy says:

    Annette broka da blokkwotz!

  38. 38
    Va Highlander says:

    Fulcanelli??? No offense, but it’s an odd name to just
    pull out of a hat. Then again, I contemplated “Satyr” as a
    possibility, so I have no room to complain.

  39. 39
  40. 40
    CIRCVS MAXIMVS MMVIII says:

    @Balloon Juice » Blog Archive » New
    Stuff
    : That’s cool! Thanks :)

  41. 41

    The best explanation that I have seen so far is this clip from
    Bill Clinton

    Who cares what he has to say? He lied about a blow
    job! ! ! ! !

  42. 42
    Cols714 says:

    @rob: dgf

  43. 43
    CIRCVS MAXIMVS MMVIII says:

    @ThymeZone: I just had to tell you,
    after the 5683 or more times you’ve complained I knew you’d be
    amazed at the news. ;)

  44. 44
    qwerty42 says:

    Bloggingheads (here) has had
    two sessions on it. The first was posted on Sept 30 (The 777th
    Seal
    ) between Robert Wright and Daniel Drezner (has a great
    thumbnail that I cannot figure out how to link to). The next was
    Oct 1 (Special bailout Edition) between Yves Smith and Megan
    McArdle. Both were interesting.

  45. 45
    SGEW says:

    At least Bill managed to get the words “Barack Obama” out,
    contra Chris Rock’s observation. Oh man oh man. We’re
    getting Florida, fair and square. Good times.

  46. 46
    CIRCVS MAXIMVS MMVIII says:

    At least Bill managed to get the words “Barack Obama” out, contra
    Chris Rock’s observation. Oh man oh man. We’re getting Florida,
    fair and square. Good times.

    … My post below: … That, and Ohio’s Secretary of
    State is a Democrat now, so we’re not worried about voter fraud in
    that state anymore. ;) Which state will they attempt next?

  47. 47
    Tsulagi says:

    Part of the problem is that the powers that be have done a pretty
    terrible job explaining why something needs to be done.

    I’d go with that. That’s probably the biggest reason
    the public was quickly against this bailout. Me too. My first
    thought was no fucking way give this Heckuva Job administration
    700+B given their competence track record. Likely also another part
    of the reason public opinion was against—no confidence in these
    idiots. Not really helped by a Treasury official breezily saying
    “Gee, we don’t really know how much we need, 700B just sounded like
    a nice big number.” That alone pretty much tells you they don’t
    have a full grasp of the problem, its scope, nor a plan they intend
    to follow to correct. Essentially wing it. That’s worked so well
    the past eight years. But their needs to be a plan and capital to
    unglue credit markets and restore some confidence. If business,
    particularly small and medium sized businesses, can’t get short
    term credit to cover payrolls, inventories, and other needs,
    unemployment would start ratcheting up due to the credit crunch.
    Which then causes more problems. If they would explain what the
    problem is in simple terms as B.Clinton is capable, presented a
    reasonable plan to address the problem, public opinion for the fix
    would probably grow. Especially after seeing their 401k, IRA,
    trading accounts, whatever tank after that 777 point drop.

  48. 48
    nicethugbert says:

    Yeah, whenever I want a favor from somebody I always start off with
    a slap on the ass and a nibble on the ear. I firmly grip their jaw
    and neck get my mouth real close to their cheek and mouth and
    proclaim with exuberance, “Aww, baby! You’re gonna get it now!” I
    lick my chops for good effect. Then I hit them up for $700B no
    strings attached. Works Every Time. I tried George’s Zombie Eyed
    Stare with Neck Tick, but, that’s more of a bondage/commitment
    thing. I ain’t got time for that.

  49. 49
    Brachiator says:

    They can free up all of the money they want, but until people
    start to earn more there will not be more to spend. People are
    tapped largely out. Wages have not kept up and prices are only
    going up.

    Hear, hear! It’s amazing that there is tons of
    Business reporting about the credit crisis, and rising or falling
    home prices, but the elephant in the room that no one wants to
    address is wage stagnation, the lack of new job creation (new
    report on this is due Friday) and the lack of job security. The
    flip side of Bush’s “ownership society” is the idea that wages are
    for suckers, and investment income (capital gains and dividends) is
    the new ideal.

    The question I have is whether the panic in Congress was by
    caused by a concern for the economy and for the Americans’
    well-being or if the panic was caused by pressure from Wall
    Street on its minions in government.

    Unfortunately, this is a global problem. Wednesday’s
    Wall St Journal noted that Ireland and France are aiding their
    banks. What Ireland is doing is astounding:

    Ireland said Tuesday it would guarantee payments on as much as
    $563 billion in bank debt… including individual deposits
    without any limit. … The figure, which the government said
    guaranteed nearly its entire banking system, is twice the
    country’s gross domestic product.

    Whether or not any of this will be effective is
    anybody’s guess. But the sad thing is that neither Congress nor
    Wall Street has shown that they are willing to fundamentally change
    the way that they do business. Can you really “stabilize” financial
    markets if the major banks and investment companies insist on
    playing with a crooked deck? And the idea that Congress is going to
    make a $700 billion bailout bill more palatable is by adding more
    pork and business breaks is just amazing.

    But it is always a good idea to pay down debt, not live too far
    beyond your means, and save and invest, all of which is possible
    at the personal level.

    While this may be laudable, it really is a bit of a
    side issue with respect to the ripples of the financial mess. A
    side bar story in the Wednesday Wall Street Journal notes how many
    retirees are getting hurt as indirect casualties of the financial
    crisis. The bank in which she held stock was acquired and
    re-acquired multiple times, ultimately becoming a unit of Wachovia.
    When Wachovia was acquired by Citigroup, its dividend disappeared.
    This dividend had previously accounted for a third of the retirees
    income. She did everything right, and still ended up having to
    contemplate moving out of her home and moving in with her son.

  50. 50
    CIRCVS MAXIMVS MMVIII says:

    Bad Behavior has blocked 69 access attempts in the last 7 days. …
    Hey John, who’s shit list did you get on?

  51. 51
    CIRCVS MAXIMVS MMVIII says:

    Yeah, whenever I want a favor from somebody I always start off
    with a slap on the ass and a nibble on the ear. I firmly grip
    their jaw and neck get my mouth real close to their cheek and
    mouth and proclaim with exuberance, “Aww, baby! You’re gonna get
    it now!” I lick my chops for good effect. Then I hit them up for
    $700B no strings attached. Works Every Time. I tried George’s
    Zombie Eyed Stare with Neck Tick, but, that’s more of a
    bondage/commitment thing. I ain’t got time for that.

    LMAO

  52. 52
    Tsulagi says:

    Okay, WTF. Blockquote still doesn’t work manually putting in the
    code or using the buttons. Plus, no line breaks in my paragraphs
    above. Tried Edit, no joy correcting that. And Preview lies out its
    ass.

  53. 53
    wilfred says:

    Y2K WMD Credit Crisis More bullshit in and endless series of
    crises. Capitalism is dead – think of useful alternatives to going
    into debt up to your highballs (pun very much intended, Cole).

  54. 54
    El Cid says:

    I don’t get the improvement. Bill Clinton is saying everything that
    everyone has been saying over the past few days. Maybe louder, with
    more finger pointing, and better pauses, but isn’t this exactly
    what we’ve been told over the last week by every Democrat in favor
    of the ‘bailout’?

  55. 55
    w vincentz says:

    Tip o’ the cap to Incertus for “nailing” it in his blog. My two
    pennies worth… Since trickle down hasn’t demonstrated previous
    worth, and since the feds now own Fannie and Freddie, it’s my
    humble opinion that resources could be devoted to troubled
    homeowners to remedy the housing crisis via a trickle up approach.
    Of course, thinking outside of the trickle down box hasn’t happened
    lately with our congress critters, alas perhaps, that is because
    the trickle downers could afford to fund their campaigns when many
    of us trickle uppers have been unable to do so. It seems to me that
    when the middle and lower folks have their interests addressed
    rather than those that have profited from the crisis they’ve
    caused, there will be wider support for a government that is “of
    the people, by the people, and FOR the people”.

  56. 56
    CIRCVS MAXIMVS MMVIII says:

    [And Preview lies out its ass.] Preview isn’t lying, preview is
    telling you the truth according to its own set of ethics rules.

  57. 57
    SGEW says:

    . . . isn’t this exactly what we’ve been told over the last week
    by every Democrat in favor of the ‘bailout’?

    But they didn’t use Bill Clinton’s patented
    Hypno-Speech pattern(tm). Obey the HypnoClinton!

  58. 58
    CIRCVS MAXIMVS MMVIII says:

    Dang, I tried to table #56 in hopes that would make it easier to
    read, table attributes don’t work either. ARGH!

  59. 59
    liberal says:

    Tsulagi wrote,

    “Part of the problem is that the powers that be have done a
    pretty terrible job explaining why something needs to be done.
    I’d go with that.”

    For me, the biggest problem is that (a) the plans have
    no or weak oversight, (b) the plans don’t insist that we taxpayers
    get equity for our $$. (Yeah, maybe the Congressional plans have
    (b), but AFAICT it’s weak and nonbinding, etc.) Then there’s this
    John Hussman guy who claims that the Government (viz, we the
    taxpayers) should be first in line, other than customers and
    counterparties. Meaning, in front of the bondholders. Which seems
    pretty inarguable, except for the usual concern that perhaps
    foreign central banks are among the bondholders and we’re not in a
    position to piss them off.

  60. 60
    eponymous says:

    I agree that the powers that be have not done a good job in
    explaining the problem. Still, I would like for someone to be able
    to (at some point) explain why the banks began not trusting
    each other to the point that they were reluctant to lend to each
    other. The signs were there for the more astute followers of all
    things financial – it would be interesting to know what caused
    things to unravel at this particular time.I think its also quite
    telling that the current credit crisis is a result of a lack of
    trust amongst those involved in the market. Without it (and
    the corresponding elements that allow trust to flourish in a market
    – transparancy, regulation, oversight, belief that laws/rules are
    followed and applied judiciously, etc.), a market becomes
    dysfunctional or non-functioning). Anyway, something to think about
    when encountering arguments for the advantages of a market system
    (that is, trust as an underlying assumption in making such a
    claim)…

  61. 61
  62. 62
    CIRCVS MAXIMVS MMVIII says:

    A frog collar? Huh?

  63. 63
    SGEW says:

    Thank’s a lot, Kevin. Now I have to sit here at my computer all day
    and obey the HypnoToad.

  64. 64
    Tim H. says:

    If guys like Roubini are right, there is literally nothing to be
    done. This bailout will either do nothing or make the economy
    worse. The future has arrived if he’s right, and what we’re
    experiencing is the solution.

  65. 65
    gopher2b says:

    Clinton’s explantion is overly-simplistic. If bank runs are the
    only problem, then raise FDIC insurance to $500k. The real problem
    is that our economy runs entirely on credit and the only solution
    any of them are offering, including Clinton, is to raise the credit
    limit. For somebody who is under 35 years old (me), thanks but no
    thanks.

  66. 66
    w vincentz says:

    I’ve also been trying to figure out what was really behind the
    “crisis” that the chimp stated today he was so “disappointed” in.
    Then I wandered over to Counterpunch (do the google) and read Doug
    Valentine’s take on it. Seems that the “October Surprise” has come
    to be. Hang on to your hats, kiddies. This is going to be a wild
    ride.

  67. 67
    Rick Taylor says:

    As I understand it, there are three proposed solutions to the
    problem, based on three different ways of characterizing the
    problem.

    #1- The Paulson plan

    Problem: People are spooked and so these mortgage derivatives are
    falling below their true value (the opposite of a bubble).

    Solution: We need the government to step in and buy them up to
    reverse the trend and restore confidence; the government may even
    make money in the process. This also justifies things like
    forbidding short selling, and changing accounting methods.

    #2-Krugman/Dodd

    Problem: The banks don’t have sufficient capital

    Solution: Take the direct route. If you want to capitalize the
    banks, have the government buy up the stock, not the mortgage
    derivatives. That way we own equity in the banks and can also
    benefit from their recovery. Since this is politically untenable,
    we’ll buy up the mortgages, but makes sure we get equity in
    return.

    #3-Other economists who’s names I’ve forgotten

    Problem: The banks don’t trust each, because no one knows who has
    the bad paper, or how things are going to shake out, so they
    aren’t willing to lend money to one another.

    Solution: Crack ’em open and shake ’em out! Require that they
    open their books and bring everything into the light of day. Take
    over the ones that are insolvent and sell off the good pieces;
    the ones that are fine can do business as usual.

    Personally, I find #3 the most convincing, speaking as a complete
    ignoramus.

  68. 68
    Mr Furious says:

    The best explanation I heard? Glenn Freaking Beck on his radio show
    of all places. I was astounded.

  69. 69
    w vincentz says:

    Howard Zinn has it… http://www.commondreams.org/view/2008/10/02-2
    Also, while you’re over at Common Dreams, read Amy Goodman’s
    “Seasmurf” piece. There’s cause to be alarmed.

  70. 70

    […] Clinton rallies for Obama, explains the credit crisis I
    agree with John Cole — this is the best, simplest explanation for
    why Congress had to do […]

  71. 71
    Ghost Poet says:

    What I like best about the Senate’s bill IS all the pork. It takes
    one of John McCain’s stupidest talking points “earmarks” away from
    him.

  72. 72
    iluvsummr says:

    @Kevin: Oh no. Not the
    hypnotoad. Make it stop! Must resist urge to turn
    over my bank accounts and 403(b) to Paulson… Too late. Sigh.

  73. 73
    Comrade Tax Analyst says:

    Mr. Frog has got the "rescue" solution for all of us.

    I can’t wait to try out, er…I mean ‘fuck up’ some of the new site features.

  74. 74
    Lize says:

    Along the lines of the Glenn Beck revelation, the one and only Morning Joe has described the need for the bailout better than anyone I’ve heard. And(I am so excited to try the new formatting!) he’s demanding that the pols who come on the show do it as well.

    Joe’s also taken to screaming at Bush when he reads statements about the economy. And, lo and behold, Bush is now reclining in a chair, kicking back in the Oval Office, telling everyone that it’s time to get ‘er done. So, if this whole thing is a confidence game, someone finally realized that having Bush stand behind a lectern is the single scariest image in America.

    btw, looks like we have to tag paragraphs, Bob in Pacifica. No, now that’s not even working.

    [Update] wait, it did work. But now I feel like I’m on beat the clock and I’m going to fuck this comment up. Crap

    Your comment will self-destruct in 2 minutes and 28 seconds…

  75. 75
    KS in MA says:

    Nicholas Kristof’s column in today’s NYT is worth a look, too.

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