I guess the credit crisis isn’t that bad after all, because according to this report, Wall Street is about to say “Thanks, but no thanks” to the bailout:
Fears are mounting that many Wall Street banks and financial firms will refuse to participate in the US government’s $700bn bail-out package, leaving global markets and world economies in a perilous state for months to come.
‘There is a growing feeling that banks … might instead decide to tough it out,’ said Thomas Caldwell, chairman and CEO of Caldwell Financial, a $1bn-plus fund manager.
For the past two weeks all eyes in the market have been focused on US Congress and its attempts to pass Treasury Secretary Henry Paulson’s bail-out package – a bill to allow the US government to buy up to $700bn of toxic mortgage-related assets from American banks, which would in theory free the credit markets and set the gears of global commerce spinning once more.
Why might they decide to let things go down the tube rather than take the help? According to the story, the same greed that helped get us into this position:
But Wall Street analysts, believe the addition of so many terms to the bill might deter potential participants.
One of the least attractive elements is a section designed to curb executive pay at banks that participate in the bail-out package. These include limiting stock-related pay and banning ‘golden parachutes’ for executives.
‘I think this hodge-podge of regulations and rules will be enough to put many [chief executives] off participating,’ Caldwell said.
Sources close to Goldman Sachs and Merrill Lynch indicated the banks might choose not to participate in the bail-out as there is a growing view on Wall Street that the market may be bottoming out.
Charming. But, on the upside, if the market is bottoming out and they don’t need to take taxpayer money, I support it. If they are wrong, and bring about financial armageddon due to sheer greed, well, at least we know who to blame.
We’ll just file this under “country first.” I pray to the all-knowing FSM that either this report is wrong or Wall Street is right about the market having already bottomed out.
Stuck in the Fun House
What a country.
Financial market credo; All For One and One For Me
JGabriel
The Guardian (as quoted by John Cole above):
Translation:
Anyway, when Krugman, Rubini, et. al. talk about the Swedish solution, one of the features was that it discouraged banks from seeking help unless they had no other option.
If the current bill is achieving that much, then it’s better than I thought.
.
John
If corporate executives chose not to participate in the bailout because of limits on their salaries, aren’t they basically begging for a stockholder lawsuit against them?
The executives are supposed to be serving the stockholders. If they would explicitly screw over their stockholders in order to see more money themselves, they ought to be out of there. Unbelievable.
JGabriel
Only if the company fails, or provably could have been more profitable by applying for a bail-out. And if the company fails, the CEO probably has even bigger concerns than a shareholder lawsuit to worry about.
.
Phoebe
Fine! Since we can’t bribe them sufficiently to do the right thing, let’s just pass some bills that regulate their asses – the ones that McCain voted against before. Let’s see if they pass this time, and let’s see the "debate" that goes on when people are watching.
If, in fact, it was deregulation that enabled this runaway train.
Brachiator
I love a good game of chicken. The McCain/Palin team say that they want to go after Wall St greed and corruption (incely bypassing the issue of regulation for the "few bad apples" approach). Obama should call them on it and demand that they lay out specifically what they should do, who they would punish, who might go to jail, etc. And if Wall St wants to forego bailout bucks, Obama should demand from them explicit details of what they will do to prevent another financial flameout. And then he should regulate their asses anyway.
Walker
Well, we made the offer. Now we just need to contact our Congressmen and pass one more law: for any company that takes down the economy because it refused to accept this bailout, we get to execute its management.
Craig Pennington
You can bet that they won’t say "no thanks" to the relaxed accounting rules that got tacked on to the bailout. Since they no longer have to use the market price of toxic securities to set their book value, the solvency problem disappears. At least until the maturity of those securities, when we get to see who is holding the bag of poop.
colleeniem
I said this yesterday, but I’ll say it again today. Listen to the "This American Life" broadcast as soon as possible. Some (currently unknown) hero slipped language into the bailout bill that could require the federal gov’t to get their hands all over these firms’ books. It wasn’t even noticed before Thursday.
BWAHAHAHAHAHAHAHA.
Svensker
Sounds like a Win to me. They don’t need the money, because everything’s OK afterall? Great!
Glenn
Na, I don’t believe any of it. The key word in all this of course is executive pay. The cry babies who want to be bailed out also want their million dollar parachutes as well and they’re already whining about this provision of the deal. Paulson will now go back to Congress and tell them this isn’t working because the pay thing and this and that and basically I want it the way I first ask for it. No strings etc. The Congress will say no and BV$H will do a one of his famous "signing statements" effectively nullifying any of the parts Paulson and his pals don’t like. The MSM will report it on page 29. Move along nothing more too see here folks. Chalk this up to standard BV$H gang policy move. These guys have it down to an art form.
Kamishna ya Watu Xenos
The bailout bill may be better than I thought. If banks don’t want to make use of it, then they will only do so if they really must. And if a corporate board lets a bank die rather than cut executive pay, open the books and let the government save it, then it will be on them… the mother of all shareholder derivative class action suits.
It is all win.
jcricket
Seriously, what did we think CEOs and their buddies were going to say? Reduce my pay, it sounds good.
Industries/Lobbyists/CEOs are like little whiny teenagers. They bristle under rules, structure, guidelines, and claim that if we only "set them free" everything would be fine. Of course when you listen to them, you get negative results. And when you do what you know is right, none of the bad things they predicted come to pass and good stuff happens.
If, for some reason, the rapacious greedy monsters who created this situation "opt out" and we get CEOs willing to play by some rules, FUCKING GREAT.
Reagan claimed Medicare would destroy America. It didn’t. Republicans have been claiming for years that any form of taxation, regulation, oversight, accountability, limits, etc. will ruin America. When it fact it’s the exact opposite. We get what we deserve if we listen to these tools for another single, fucking, solitary moment.
gbear
Does that make this The Bailout to Nowhere?
Actually, I’m glad to see that the stuff that got added to the bill is effective enough at limiting CEO compensation that the CEO’s are balking. Seems like everyone was afraid that they’d get both their bailout and bonuses.
If they want the voter’s money, they need to follow the voter’s (well, congress’s) rules. If they can figure it out without taking our money or failing themselves into government intervention, more power to them. Maybe it will only take a fraction of the hundreds of billions to get the credit market moving again? We can hope.
Comrade Mary, Would-Be Minion Of Bad Horse
@colleeniem:
This episode? Is there really any good news in it, or should I just keep hiding under my blankie?
kommrade jakevich
Shorter Wall Street: Waaaah! We wanted a green lifesaver and this one is blue!
Throw those fuckers an anvil.
Yet another example of why I hate the passive voice. Who, exactly, is afraid? I don’t know because the writer didn’t bother to tell us.
SamFromUtah
Wall Street is about to say “Thanks, but no thanks” to the bailout…
There you have it, all the proof we needed that the important thing was the CEOs’ private jets.
It’ll be interesting to see if they really do hold their breath until they turn blue.
Comrade Napoleon
colleeniem, was that this weeks This American Life? Your link didn’t work and not only didn’t I catch todays broadcast on my local NPR station, but for some reason it didn’t download on my scheduled podcast.
Nylund
So am I getting the basic dialog right?:
Wall St Exec. : "OMG, we’re all gonna die unless you give me a trillion dollars to save the market!"
Taxpayer: "Really? Its that bad? Crap! Take all the money you want for the market! We’ll get through this! Just one thing. Use that money to save the market. You can’t keep any for yourself."
Wall St. Exec.: "Really? I can’t keep any? Not even like 20 million or something paltry like that? Well then. Nevermind. If I don’t get to keep any of tha trillion then whats the point? Sorry for getting everyone riled up."
David
So it’s not enough to bail out the failing businesses that are weighing down the financial markets in the first place, we have to make sure that the people who were in charge and let this shit go down in the first place still personally get their millions? The hell with them.
John Cole
@gbear: Changed the title just for you.
Comrade Mary, Would-Be Minion Of Bad Horse
Comrade Napoleon and colleeniem, TAL doesn’t have their free download or podcast out yet. There’s a 30 second preview up at the show page now, and the free download (free only if you download it this week, or free if you subscribe to their podcast) should be up soon.
PREVIEW only for now, free download coming up.
Random Asshole
Just to make a comment, I believe the regulation on executive pay that got added in was written very broadly. Fundamentally, I can imagine these banks worried that their best talent–not management, but the people who are actually productive–will pick up and leave for other parts of the industry or other firms that don’t have this kind of regulation tying them. There are plenty of divisions within these banks that had nothing to do with mortgages and are themselves fairly profitable; the executives may be realizing that by accepting this bailout, the most profitable, remaining divisions are going to disappear.
Comrade Napoleon
Huh? I have been getting free podcast of TAL through i-tunes for the last 2 years. Why would this one be any different?
colleeniem
Comrades Mary and Napoleon (& Random)
It’s not great news, no, and you’ll notice I used the word "could" in my original post (making Paulson the ultimate decider, boo). But it clarifies things a great deal, so I recommend it anyway. You’ll probably have to listen to it when they upload it on ITunes tomorrow. Sorry, I thought it was already available, while I heard it live.
gbear
@John Cole:
Man, I’m glad I read down to your comment at 21. I saw the title and was wondering how I’d completely missed that when I made my comment at 14.
Comrade Mary, Would-Be Minion Of Bad Horse
Sorry, maybe I wasn’t clear. The free podcast should be available soon: it hasn’t downloaded for me on Canuck iTunes yet, and on the show page, there isn’t yet a link to the free downloadable version for people who don’t subscribe to the podcast. Once that link goes up, it will be free for one week, then after that you either have to stream (free) off the site, or pay $0.95 for the mp3 download.
Comrade Peter J
@Comrade Mary, Would-Be Minion Of Bad Horse:
Here it is.
Comrade Napoleon
By the way, what was the headline that some New York paper (maybe the Daily News) ran years ago when NYC was in danger of default and either Ford or Carter refused to have the feds float them a loan – it was something like "US to NYC "Drop Dead""
If this story is true I hope they run a "Wall Street to US, "Drop Dead""
Comrade Mary, Would-Be Minion Of Bad Horse
@Comrade Peter J:
Thanks. Ooh — I can tweak the URL to go as far back as show 363 (which I have, but still, it’s nice to know where to go if I forget to boot iTunes one week to get the download automatically.)
CIRCVS MAXIMVS MMVIII
If you play the video game called Civilizations – Rome you learn that taxes are a necessity. I think all right-wingers should be sent this game to learn the lesson.
Mino
Relaxing the mark to market rules lets them "paper" over their insolvency. They are probably hoping to hold on long enough for a homeowner rescue after the election. That will help restore some value to all that paper.
It was the new mark to market accounting rules that exposed them in the first place.
That and they are probably afraid to open their books to the government. Smart little cookie to get that in the bill. Was that why Bank of America was so quick to buy Countywide? Inquiring minds, and all that.
Ed Marshall
I get the same thing through a pod catcher. What you are getting from itunes is last weeks episode. You’ll get the new one a week from tomorrow.
Comrade Napoleon
I am certain I get this weeks on Saturday. Depending on when I bike ride or do yard work I can listen to radio or the podcast and its always the same show.
jt
I think the CEO pay limit provision is working like it was supposed to by making a company think long and hard about taking a bailout lifeline from Uncle Sam. It should be a last-ditch option for a bank about to go under from its bad CDO portfolio. If a bank goes under because the CEO refuses to forgo millions in bonuses, well it probably had no business being in business anyway.
LiberalTarian
I don’t think these people (the Wall Street CEOs) think of themselves as taxpayers/American citizens. They are some uber-model of centurion. They don’t appreciate what they have done to the country, and they don’t appreciate the largesse of the government that has given them free reign to screw us over for so long.
Funny how the theme they support to try to hurt Obama with voters is, "He thinks he’s better than you." That works for them–because they think they are better than us. They feel no compunction about receiving tax breaks to spend here at home, but they invest their manufacturing plants abroad, for cheap labor. They don’t even think it’s a scam. It is what they do–because they deserve breaks, even if they don’t exercise good faith. They probably even think they are the most patriotic, since they deign to live in our country.
Fuck ’em. We’ll get by without them, and moreover, let’s take their patents that they’ve been using to stifle innovation that they wouldn’t profit from.
Grrr. :) +2+1. :)
Bill H
If the companies that needed bailing out aren’t signing up because their principals aren’t willing to take pay cuts, I see a couple of problems.
It means that Paulson lied his ass off about the scope and nature of the problem, and that he should be thrown in prison for extortion. Making false threats for the purpose of extracting money is extortion.
It means that our Congress was incredibly stupid. They basically fell for the Nigerian email scheme. Every single one of them should be impeached.
When the negotiations were going on, Paulson said that limits on executive pay might create reluctance for signing up. How could that not have been a fire alarm to Congress that Paulson was lying his ass off about the scope and nature of the problem?
NonyNony
Au contraire on your first point that I quoted above, my friend. Congress clearly wasn’t stupid – at least, not completely stupid. By putting in the strings, they may have flushed out the fact that either Paulson was lying to them or Wall Street bankers are unpatriotic sacks of shit who are willing to let the whole economy fail for the sake of their golden parachutes.
Had they passed the plan with no strings attached, I’d agree with your "stupid" diagnosis. But they put the strings in and may have just baited a trap that is either going to get Paulson & Bernanke, or a bunch of sack of shit treasonous Wall Street bankers. Either one works in my book. (BTW – if the Wall Street bankers turn out to be right and the market really has "bottomed out" then Bernanke needs to step down as soon as the next President is inaugurated – it means that he panicked when there was no call do and made the situation worse than it needed to be. Which is NOT what the chief central banker needs to be doing in a situation like this).
And the tail end of that "This American Life" episode cited above is classic. If I understand correctly, it sounds like the enterprising bill writer in the Senate buried a provision in the bill that allows the Sec Treasury to enact a "Swedish style" bailout as an alternative to what Congress proposed – without having to go back to Congress to ask for it. Meaning that when the next President comes into office he can just tell the Sec Treasury to use the other plan. And if the bankers refuse to take a bailout until its too late, well, perhaps schadenfreude is the right word to use here…
Brachiator
The problem is that the financial crisis is an international problem, not just an American one. I wondered why Dubya didn’t consult with our European and Asian allies before coming up with his bailout plan, until I remembered the degree to which being capable only of unilateral action is fundamental to Bush’s political character. Worse, just as Wall St can’t let go of their selfish greed, even at the promise of a bailout, Europe is floundering as they try to deal with the financial crisis (Every country for itself as European unity collapses in an attack of jitters):
Meanwhile, the credit crisis is starting to hit Main Streets all over the world. What a mess.
Mike G
By the way, what was the headline that some New York paper (maybe the Daily News) ran years ago when NYC was in danger of default
"Ford to City: Drop Dead"
One of the greatest, most memorable headlines of all time.
Dennis - SGMM
CEO’s (Holding guns to their own heads): "Hold it! One more step and the CEO’s get it!"
PAULSON: "Hold it, men. I think they mean business!"
the lies to nowhere
It makes a lot sense that the barons of Wall Street would demand their usual share of the loot or else and let the whole system go down. Systemic rot.
xyzzy
BARF. If only I had a dime for every fucking time I’ve sat in a company meeting and listened to the CEO defend a stupid board decision because "our duty is to the shareholders."
gopher2b
Can I say "told you so" now or should I wait six months?
nicethugbert
I saw on TV an small bank executive claiming that buisiness has doubled since the large banks have stopped making loans. It was stated that this is generally the case. Yet, he was in support of the bailout and voicing plenty of the ussual scary talk. I guess his banker buddies would have been upset had he not recited their mantra.
I guess the free market is not totally bust if the small banks can pick up the slack. Good, who the hell needs To Big To Fail?
Conservatively Liberal
We are not at or near the bottom yet, and IMO we are not going to be there until mid to late 2010 at best. There is a lot of pain coming home to roost all around the world. The financial wizards fucked this one up and royally so. People are going to be hurt and not just here at home.
As they say, the bigger they are the harder they fall. Too big to fail? Never. Sooner or later, everything fails. Everything. This financial house of cards they have created is coming down, and the correction is going to hurt a lot of people. People who did absolutely nothing to deserve this, all so some rich bastards could get richer.
Those who chant the too big to fail mantra as being something good have forgotten the lesson of the Titanic. Nothing is too big to fail.
If they are afraid of the very bill that contains the money that they need to save themselves, then you know it’s going to get messy. They say that we have a dire emergency at hand. If the building is on fire and nobody wants to abandon it and help put out the fire, then we are fucked.
Joe Max
Someday, someone is going to have to call bullshit on this mind-set.
Every year many thousands of hungry new MBAs are cranked out – UC Berkeley where I work spews them out of Haas Business School in swarms. I’m thinking the financial world has become like the music business – there’s no lack of fucking talent, just too few overpaid stars. The downsizing is going to create a bigger pool of people competing for employment. This creates downward pressure on salaries. Hopefully, corporate boards are going to realize this and start saying "hell no, we aren’t going to offer anyone a double digit signing bonus and an unconditional golden parachute. We don’t care who you are. There’s a dozen smart, hungry MBAs with more than a few years in the trenches who look pretty damn impressive, and they’re willing to take this position for a quarter of what you think you’re worth. So get stuffed."
Joe Max
For would-be imperialists the Neocons certainly don’t understand how the old masters ran their empires. The Egyptians invented modern taxation and social welfare. And like the Romans, they were obsessive about infrastructure, public health and the commons. They both built empires that lasted many centuries, while the Neocons grand "American Century" crashed and burned in less than a decade.
I think it was Philip Gold who said that Neo-con wingers are not Romans, they’re Prussians – all the warlike belligerency and delusions of exceptionalism, but with a very un-Prussian-like inability to plan a war or balance a ledger.
iluvsummr
Meanwhile, a 90 year old woman facing eviction from her foreclosed home attempts suicide when sherriff’s deputies show up to throw her out.
Brachiator
@Mike G:
Do you mean this one?
Crap! I tried to link to the image, but it can be seen at the Wiki entry for the NY Daily News.
Mike D.
@CIRCVS MAXIMVS MMVIII: If you play practically any RTS released in the last decade, you quickly learn that mellow, productive, fully employed peons are the secret strategy to whipping your opponent’s ass with a belt. The whole point of the military is to keep the peons choppin’ that cotton without rude interruptions from foreign devils. If you have 100,000 units of each raw material safely banked away, no civilization upgrades, and idle peons picking their noses, you’ve already lost. Why is this so difficult for Neo-cons to understand? Because it’s so easy for 13-year-olds to understand, and comprehension is a zero-sum game?
CIRCVS MAXIMVS MMVIII
So there is hope for us, we just have to wait until those thirteen year olds are grown up enough to gain public office.
CIRCVS MAXIMVS MMVIII
And since her mortgage debt was forgiven as a result of her shooting herself, we can see this become the new strategy for homeowners about to be thrown out of their homes.
Medicine Man
Sinfest’s view of the bailout.
Mike D.
@CIRCVS MAXIMVS MMVIII: A $500 Dell laptop has the horsepower to double-check every last calculation in the Apollo space program in two minutes and change. I forget when commodity Win32 hardware blew past the Cray YMP, but I think Eminem was at the top of the charts. Either officially sanctioned wargames of the type "your speedboats wasted my CVN; I call shenanigans, refloat my CVN and take my turn" are realistic or they are not. I realize the Galaxy might actually spin off its axis and tumble into the void if it turned out that any dropout with a Compaq Presario could master/Ender’s Game/ and learn something about macroeconomics at the same time, such that his weblog consistently performed at the level of the Brotherhood of Tenured Talking Heads, but that’s just too damn bad. Krugman’s traffic cop on Valium routine earns him no honor or glory now that the shit has hit the fan.
Conservatively Liberal
Wrong thread, moved post! Love edit! :)
CIRCVS MAXIMVS MMVIII
Well, Mike D, I have no idea what you just said, but…
I never played any of those games myself, although I did watch my ex-husband play "Rome" and I got the gist of the economic necessities of keeping the taxes coming in just by watching the game for a little while.
comrade chopper
and the dow has broken 10000 today.