“And Mr. McCain has a spe­cial advan­tage to bring to any such inves­ti­ga­tion — many of the rel­e­vant wit­nesses are friends or col­leagues of his. In fact, he can prob­a­bly get to the bot­tom of the whole mess just by cross-​​examining the peo­ple rid­ing on his cam­paign bus. So the can­di­date should take a deep breath, remind him­self that the coun­try comes first, pull the Straight Talk Express over at a rest stop, whis­tle up his media pals, and begin.”

“…Fifth, ful­fil­ment of this last mis­giv­ing, in the shape of abrupt dis­ap­pear­ance of the buy­ing demand through­out the coun­try, this par­tic­u­lar phe­nom­e­non being pro­longed through a period of months and some­times years.”

“I’d love for some­body explain why it is appar­ently unthink­able for America’s tax­pay­ers and bor­row­ers to declare their inde­pen­dence from the cur­rent crop of moronic incom­pe­tents now mas­querad­ing as financiers. Remem­ber, this is the same group of guys who mis­al­lo­cated credit (their sup­pos­edly core com­pe­tency) on a scale unknown in human history.

How exactly did these bozos get to be so indis­pens­able? Isn’t this indis­pens­abil­ity entirely in the minds of Bernanke and Paul­son? And doesn’t that make them, in the most polite terms imag­in­able, cap­tured regulators?”

““For­get all this chat­ter about whether or not she knows what the Bush doc­trine is. That’s triv­ial. The real dis­turb­ing thing about Sarah is her mind-​​set. It’s her under­ly­ing belief sys­tem that will influ­ence how she responds in an inter­na­tional cri­sis, if she’s ever in that posi­tion, and has the full might of the U.S. mil­i­tary in her hands. She gave some indi­ca­tion of that think­ing in her ABC inter­view, when she sug­gested how will­ing she would be to go to war with Russia.”

“But per­haps that also explains why there has been so lit­tle pub­lic out­cry about it. We love the idea of the small town, but we don’t really want to live there, fac­ing a choice between the night shift at Wal-​​Mart and the army. The war is being fought by peo­ple from those place we invoke as part of our national mythol­ogy but whose real­ity we have oth­er­wise largely for­got­ten. Places we barely notice as we zip by on the bypass.”

“We have said before that this pro­gram is an inef­fi­cient, covert way to recap­i­tal­ize the finan­cial sys­tem. If I were a for­eign cen­tral bank, I’d have a lot more con­fi­dence if the US imposed reg­u­la­tory reform, took over dud banks, got rid of top man­age­ment, and then did the good bank/​bad bank split. That’s a model that has worked and could be mod­i­fied and improved. But for some unknown, the pow­ers that be are refus­ing to employ for­mu­las that have worked and pre­fer their own home-​​cooked brew.”

“But not every­one did bet­ter. Work­ers, in real terms, did not get a share of the prof­its from the boom, their wages stag­nated over this time period. So why should they pay for the bailout? This is noth­ing more than The Lit­tle Red Hen run back­wards, they ate the bread first and now the hen is ask­ing “Who will help me pay for the bread?” It shouldn’t be those who weren’t allowed to sit at the table.

So I would increase taxes pro­gres­sively, and I would do it in pro­por­tion to the changes in the dis­tri­b­u­tion of income over this time period. And I like this a lit­tle bet­ter than Luigi Zin­gales’ solu­tion for pre­cisely that rea­son, it puts the bur­den directly on those who ben­e­fited from the boom.”

“Fur­ther, the word con­fi­dence keeps com­ing up, we must restore con­fi­dence in the Amer­i­can finan­cial sys­tem. It is not enough that we hand over our money, we must hand over our trust as well. Surely, then, if this is a new era of trust, there should be no prob­lem with requir­ing sell­ers to dis­close at pre­cisely what value the assets for sale had been booked on their finan­cial state­ments, with crim­i­nal penal­ties for mis­state­ment. We should be able to eval­u­ate, in the light of day, how forth­right finan­cial insti­tu­tions have been in rep­re­sent­ing their true con­di­tion to poten­tial investors and the public-​​at-​​large. We may find that some have played things rel­a­tively straight, while oth­ers sur­vived by sleight-​​of-​​hand and exag­ger­a­tion. The for­mer group will have earned our con­fi­dence. The lat­ter will have earned some­thing else.”

“This pro­posal is an expen­sive boon­dog­gle and should be opposed by all. As one bit of evi­dence here, how many noticed that mort­gage rates went up on the day the deal was announced? Here is a graph for Fan­nie 30-​​year fixed-​​rate mort­gages (click to enlarge):…”

“The pub­lic doesn’t like a blank check. They think this whole bailout idea is nuts. They see fat cats on Wall Street who have raked in zil­lions for years, now extort­ing in effect $2,000 to $5,000 from every Amer­i­can fam­ily to make up for their own non­fea­sance, malfea­sance, greed, and just plain stu­pid­ity. Wall Street’s request for a blank check comes at the same time most of the pub­lic is wor­ried about their jobs and declin­ing wages, and hav­ing enough money to pay for gas and food and health insur­ance, meet their car pay­ments and mort­gage pay­ments, and save for their retire­ment and chil­drens’ col­lege edu­ca­tion. And so the pub­lic is ask­ing: Why should Wall Street get bailed out by me when I’m get­ting screwed?”

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“A key ele­ment here, though, is the con­nect­ed­ness of gen­er­a­tions. Not every­one has chil­dren, for exam­ple, and Barro’s mech­a­nism works by putting the util­ity of chil­dren as an argu­ment in the par­ents util­ity func­tion. In the 1980s, in response to Barro’s paper, I remem­ber see­ing a sem­i­nar given that attempted to esti­mate inter­gen­er­a­tional con­nect­ed­ness. I can’t remem­ber exactly what the paper found after all these years, but the main point is that mea­sures of con­nect­ed­ness exist. [In answer to the ques­tion, are bonds net wealth?, many peo­ple who have exam­ined the empir­i­cal work take an inter­me­di­ate posi­tion and use 50% as a rule of thumb, i.e. that 50% of bonds are net wealth, the other 50% is off­set through antic­i­pated tax liabilities).”

“Bruised by stock mar­ket losses, Amer­i­cans bought houses. The mort­gage indus­try used secu­ri­tised bonds to ensure that the peo­ple who ini­ti­ated the mort­gage did not worry about get­ting paid back; risk was pack­aged and sold to oth­ers. This time Mr Greenspan did not just stand aside. He said repeat­edly that hous­ing was a safe invest­ment because prices do not fall. Home own­ers could wait out any down­turn. Is it any sur­prise that so many peo­ple thought if the world’s finan­cial genius held this view it must be all right?

Even as things went com­pletely wild, Mr Greenspan dis­missed those who warned that a new bub­ble was emerg­ing. It was just a case of a lit­tle “froth” in a few areas. Later, after wait­ing until 2007, two years after he left office, he con­ceded that “froth” had been his euphemism for “bub­ble”. “All the froth bub­bles add up to an aggre­gate bub­ble,” he told the Finan­cial Times.”

“While behav­ioral per­for­mance did not dif­fer between groups, Zen prac­ti­tion­ers dis­played a reduced dura­tion of the neural response linked to con­cep­tual pro­cess­ing in regions of the default net­work, sug­gest­ing that med­i­ta­tive train­ing may fos­ter the abil­ity to con­trol the auto­matic cas­cade of seman­tic asso­ci­a­tions trig­gered by a stim­u­lus and, by exten­sion, to vol­un­tar­ily reg­u­late the flow of spon­ta­neous mentation.”

“The sooner you “drop out” of the spec­u­la­tive econ­omy and its abstract con­cerns, the sooner you will be able to cre­ate and pro­vide real value for the peo­ple all around you, and the bet­ter posi­tion you will be in to get what you need for your­self and your family.

This is not bad; it is good. The pain that peo­ple are about to go through now is not the prod­uct of the spec­u­la­tive economy’s fail­ure, but its for­mer and inten­tional unjust success.”

“From adver­sity always seems to come a lit­tle oppor­tu­nity. The Ann Arbor Chron­i­cle — “the com­mu­nity news­pa­per and town hall” – is some­what the way I remem­ber the news, it just isn’t folded as tightly as my papers. The dif­fer­ence is I didn’t get paid any­thing to write this col­umn and you didn’t pay any­thing to read it, so we’re even. I don’t like to owe any­body anything.”

“…But those who speak for the Princes of Wall Street–well, they really believed that the Princes earned their for­tunes by virtue of their virtue–their intel­li­gence, their nerve, their skill, and their will­ing­ness to run great risks for great rewards. The idea that there is a pub­lic safety net to catch the Princes when they all fall off the tightrope at once–that they are not actu­ally rugged Ran­dite indi­vid­u­al­ists run­ning great risks–that they are peo­ple in the right place at the right time with enough low ani­mal cun­ning to cover them­selves with glue and then step out­side at 57^th and Park or on Canary Wharf as the money blows by so that a bunch of the money sticks to them–well, this strikes those who speak for the Princes of Wall Street on the edi­to­r­ial page of the Wall Street Jour­nal or in Investors’ Busi­ness Daily as a betrayal of the moral order.”

“Our reg­u­la­tors have been stun­ningly inept. The up-​​tick rule has been abol­ished. Nig­gling dis­tinc­tions between “abu­sive” naked short-​​selling and accept­able naked short-​​selling become the basis for a ten­ta­tive approach to pos­si­ble reg­u­la­tion. A state offi­cial, Eric Dinallo of the NY Insur­ance Depart­ment, was the only reg­u­la­tor to come to the defense of MBI, when he finally wrote an arti­cle in the Finan­cial Times, not­ing the ille­gal­ity of Ackman’s defam­a­tory attacks.
Mean­while, the huge credit default swap indus­try, a totally unreg­u­lated busi­ness of insur­ance, con­tin­ues as an arena of toxic machi­na­tions. Here, in total obscu­rity, bets are placed: which of the remain­ing finan­cial com­pa­nies should be the next vic­tim? Would you be com­fort­able if strangers could legally place bets on your longevity? Or on whether your house would burn down?”

“What to do? Not to social­ize cap­i­tal­ism with bailouts and sub­si­dies that put tax­pay­ers at risk. If what’s lack­ing is trust rather than cap­i­tal, the most impor­tant steps pol­i­cy­mak­ers can take are to rebuild trust. And the best way to rebuild trust is through reg­u­la­tions that require finan­cial play­ers to stand behind their promises and tell the truth, along with strict over­sight to make sure they do.

We tell poor nations they have to make their finan­cial mar­kets trans­par­ent before cap­i­tal will flow to them. Now it’s our turn. Lack­ing ade­quate reg­u­la­tion or over­sight, our finan­cial mar­kets have become a snare and a delu­sion. Gov­ern­ment only has two choices now: Either con­tinue to bail them out, or reg­u­late them in order to keep them hon­est. I vote for the latter.”

“At the same time as ques­tions of labor were dis­ap­pear­ing, eco­nom­ics began to ele­vate the sta­tus of investors’ finan­cial claims, insist­ing that own­ers of this form of prop­erty had rights equal to those of own­ers of real goods, such as land or fac­to­ries. Even some­thing as ephemeral as “good will” became rec­og­nized as property.”

via http://​growabrain​.type​pad​.com

“The Repub­li­cans are play­ing to vot­ers’ iden­tity. The Democ­rats are cam­paign­ing on their eco­nomic inter­ests. The out­come of this year’s elec­tion will ride on whether or not a seg­ment of the work­ing and middle-​​class elec­torate in economically-​​devastated states will sup­port a ticket whose can­di­dates pre­tend to be the cul­tural allies of the peo­ple or a ticket whose can­di­dates are chal­leng­ing (at least in part) the failed eco­nomic poli­cies that should be the real source of bit­ter­ness at the grassroots. ”

“The list of rea­sons the finan­cial sys­tem is unsound grew mas­sively today, by the tune of a $1.2 tril­lion tax­payer funded bailout designed to bail out the wealthy at the expense of the poor.
Ear­lier today Paul­son had the gall to state “this will cost the tax payer less than the alter­na­tive”.
No one both­ered to ask why it should cost the tax­payer any­thing at all.”