Economic Plans

McCain’s plan, to buy bad mortgages from people who can’t afford them, and then have the home owners pay back the new market value, is a give-away to foolish speculators. Obama’s right to hit him on the bail-out to banks, but Barack’s silence on the give-away to foolish home-owners is worrying (if predictable).

The latest news from Treasury, that the government is considering using the $700 billion to buy stock instead of subprimes, is promising. I’m glad someone is reading this blog!

9 thoughts on “Economic Plans”

  1. yesterday japanese banks traded BID ONLY, no offer. i’m in a very insulated postion, and even i thought about throwing in the towel.

    This morning Chinese holders were dumping agency debt and LOCs were being seized. Again, I almost moved to Mexico at about 9am. Hell, the peso has absolutely death spiraled. I could live like a king for quite awhile in that environment.

    Around 10am, Fed reports there was no OMO for a 2nd day. All they have left is $80B of MBS… please no more BS! I sent out a note at that time saying we expected major basic operation disruption beginning by next week’s end, our supply chain is already on fumes and it didn’t seem possible to meet basic demands for more than 5 working days.

    Paulson FINALLY has stated publicly that he is going to recap the banks. FINALLY. Only problem is this might be too late.

    Anyway, raise as much cash as can and assume essential service disruption, we are not out of the woods, but it apparently is the case that Paulson is listening.

    Next steps needed are massive government spending on infrastructure and making Fed lender of first resort to the SB community. Full and blanket guarantee on all US deposits. Quick decisions on which banks should be allowed to fail… and then… LET THEM FAIL.

    Most importantly, frog-march the liars out into the open with world’s press assembled. Put them in handcuffs. And throw them in Jail on live TV.

    Anything less will just make it all worse. 3-mo LIBOR easing, but overnight still hasn’t come in as much as needed.

    In other words, we’re expecting things to start resembling SOP in 3-mo, but not tomorrow. That isnt good, but it is better than Thurs.

    One thing that isn’t getting picked up, a lot of the pressure on equities is a result of hedge funds going under and getting liquidated. That will continue. And the short ban has really only exacerbated that process. Sorry I haven’t commented much this week. I’ve been… shall we say… distracted 🙂

  2. Oh I almost forgot… Merdian Bank of IL and Main Street Bank of MI are gone.

    So are about 100 more hedge funds. But hey, I didn’t want Main Street to be left out.

  3. FedX,

    Next steps needed are massive government spending on infrastructure and making Fed lender of first resort to the SB community. Full and blanket guarantee on all US deposits. Quick decisions on which banks should be allowed to fail… and then… LET THEM FAIL.

    Agreed.

  4. It’s hard to keep up with McCain. On economics he has a tendency toward falling in line with a a fashionable left-of-center solution (global warming, buying up mortgages, etc). It’s disconcerting to have an election in an economic crisis where the Democrat’s solution seem more sensible.

  5. Quoting (since I don’t know how)

    > FedX … Agreed.

    Agreed to which part? Massive government spending on infrastructure or LET THEM FAIL.

    Either way, and both ways, I’m on board. I’m hoping the Dems and our new Democratic President don’t fumble this. Last thing I want to hear for a half century is how the Dems dropped the ball on McCain’s mortgage crisis.

  6. Aaron,

    You will find a newfangled device called the “blockquote” “tag” works quite well for quoting blocks of text. 😉

    Agreed to which part? Massive government spending on infrastructure or LET THEM FAIL.

    Either way, and both ways, I’m on board. I’m hoping the Dems and our new Democratic President don’t fumble this. Last thing I want to hear for a half century is how the Dems dropped the ball on McCain’s mortgage crisis.

    The bizarre attempt to score political points aside (affirmative action lending [1] was McCain’s idea?), agreed on both. We need a stimulus package that also helps us get off foreign hydrocarbons [2], as we need a liquidation of the financial markets that does not subsidize bad behavior [3].

    [1] http://www.tdaxp.com/archive/2008/09/30/smoking-gun-the-affirmative-action-financial-crisis.html
    [2] http://www.tdaxp.com/archive/2008/10/20/photovoltaics.html#comment-151868
    [3] http://www.tdaxp.com/archive/2008/09/30/the-bailout-liquidization-and-subsidy.html

  7. I think the idea that the CRA was the cause of all this has been pretty thoroughly debunked. There was no television channel catering almost exclusively to house flippers in the late 70s, nor do the numbers line up that the majority of foreclosures are affecting minorities.

    McCain and his deregulation at any cost allies modified the rules of the game so large financial institutions could be exempt from leverage rules that govern their small slice of the industry. 5 of them are out of business as of this month. Now that unrestrained speculation destroyed trillions of dollars of pseudo-imaginary dollars (exactly the currency speculation markets require) the securitization industry is clamoring for regulation. Or is that just to look good so their investors stick around? While I use McCain tongue-in-cheek as you often use ‘Daschle-Pelosi’ the echoes of Keating 5 remain. If McCain had recently not called for _more_ deregulation, I’d likely have called it the Gramm/Greenspan mortgage crisis.

  8. Aaron,

    As I mentioned on the post I linked to [1], blaiming the CRA is a red herring that’s invoked only by ignorant McCain supporters and Obama supporters looking to attack a strawman.

    The Economist has a good special report on the crisis, which has some interesting thoughts on the role of regulations [2]. Certianly we’re going to come out of this with a much more transparent Bond Insurance (CDS) market, which will be a good thing. But the major cause that provoke this was the Fannie Mae / Freddie Mac mortage industry, which of course were government operated.

    [1] http://www.tdaxp.com/archive/2008/09/30/smoking-gun-the-affirmative-action-financial-crisis.html#comment-142187
    [2] http://www.economist.com/specialreports/displayStory.cfm?story_id=12373696

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