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  #1  
Old 10-01-2008, 09:01 AM
Bloggingheads Bloggingheads is offline
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Default Special Bailout Edition

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  #2  
Old 10-01-2008, 11:17 AM
AngryOrioles AngryOrioles is offline
 
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Default Re: Special Bailout Edition

I'm sorry, but I just don't get it.

I have no idea what these two intelligent and articulate diavloggers are talking about...

Could the powers-that-be post a glossary with links in the sidebar?
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  #3  
Old 10-01-2008, 12:23 PM
Namazu Namazu is offline
 
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Default Re: Special Bailout Edition

Quote:
Originally Posted by AngryOrioles View Post
I'm sorry, but I just don't get it.
I have no idea what these two intelligent and articulate diavloggers are talking about...
I'll bet your Congressional representatives don't either. Wikipedia is actually pretty good on this kind of stuff, but be prepared for a little tough sledding in places.
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  #4  
Old 10-01-2008, 03:13 PM
Anyuser Anyuser is offline
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Default Re: Special Bailout Edition

Quote:
Quoting AngryOrioles: I'm sorry, but I just don't get it. I have no idea what these two intelligent and articulate diavloggers are talking about...

Quoting Namazu: I'll bet your Congressional representatives don't either.
There comes a point, from a public policy perspective, where obscurity and complexity become prohibitive in and of themselves. There's probably no more than a low 5-digit number of people on the planet that can even fake an understanding of credit derivatives, yet those gizmos have apparently brought us to the brink of a global depression. This diavlog was interesting, and I don't mistrust anything these two have to say, but it was all a bunch of insider palaver. (I'm hard to please. I was pissed at the Drezner/Wright diavlog for breezing past financial issues and instead bullshitting about presidential campaign tactics, and I'm less than pissed - annoyed, I guess - at this one for not making some policy prescriptions.) It should be possible to identify which financial/accounting mechanisms and transactions caused this problem, and to regulate them out of existence. I'm not satisfied saying, let's make everything transparent and then the market will take care of if all. Also, saying let's have a financial Manhattan Project is a vacuous trope. It doesn't make John Q. Public a financial Luddite to expect an understandable explanation of the problem and an understandable solution. It's painful to watch all the dumb ass Representatives trying to understand so far beyond them, but it's also a pisser that Bernanke and Paulson, endorsed by Bush, basically say only trust us because we're experts and you're not. (The idea that direct investment in institutions is better than buying toxic assets from them sounds like a reasonable argument, and it's being made all over the place. What is Paulson's counter argument? If we don't know, why don't we know?) If in order to enable my regional bank to make loans to good credits, we've first got to save the bacon of a bunch of jackleg hedge fund managers, somebody in the government ought to be explaining that step by step in terms some appreciable level of the citizenry can understand. I'm hardly a socialist, but I can't imagine what good hedge funds and credit derivatives do anybody other than the con men who peddle them (what I call "commercial" hedging - commodity prices, currency exchange - can be done on public exchanges). There's an old saying that war is too important to be left to the generals, and where I'm coming out is that finance is too important to be left to the financiers.
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  #5  
Old 10-01-2008, 04:17 PM
typop typop is offline
 
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Default Re: Special Bailout Edition

This bugs me. A lot. I understand this stuff well enough, without the benefit of a PhD, an MBA, or Wall Street experience. Frankly, it's no more difficult than --- let's say --- U.S. foreign policy in the Middle East, and my guess is that you would say that a passing understanding of U.S. foreign policy is important to being informed. The fact is, most educated people simply don't find this stuff interesting enough to learn even the basics. And they're almost offended that it matters so much. But it does. It always has, of course, but now people are noticing.

What I would to like to ask you is, How do you propose to regulate finance intelligently without understanding it? Even if you could identify all the existing holes and patch them up, how would you know where the new holes are going to be? This is ridiculous. The educated people in this county need to understand this stuff; pundits need to understand it; and we need to demand that our elected representatives do, too. This is what we try to do with everything else that matters. Why should finance be an exception?

Quote:
Originally Posted by Anyuser View Post
There comes a point, from a public policy perspective, where obscurity and complexity become prohibitive in and of themselves. There's probably no more than a low 5-digit number of people on the planet that can even fake an understanding of credit derivatives, yet those gizmos have apparently brought us to the brink of a global depression. This diavlog was interesting, and I don't mistrust anything these two have to say, but it was all a bunch of insider palaver. (I'm hard to please. I was pissed at the Drezner/Wright diavlog for breezing past financial issues and instead bullshitting about presidential campaign tactics, and I'm less than pissed - annoyed, I guess - at this one for not making some policy prescriptions.) It should be possible to identify which financial/accounting mechanisms and transactions caused this problem, and to regulate them out of existence. I'm not satisfied saying, let's make everything transparent and then the market will take care of if all. Also, saying let's have a financial Manhattan Project is a vacuous trope. It doesn't make John Q. Public a financial Luddite to expect an understandable explanation of the problem and an understandable solution. It's painful to watch all the dumb ass Representatives trying to understand so far beyond them, but it's also a pisser that Bernanke and Paulson, endorsed by Bush, basically say only trust us because we're experts and you're not. (The idea that direct investment in institutions is better than buying toxic assets from them sounds like a reasonable argument, and it's being made all over the place. What is Paulson's counter argument? If we don't know, why don't we know?) If in order to enable my regional bank to make loans to good credits, we've first got to save the bacon of a bunch of jackleg hedge fund managers, somebody in the government ought to be explaining that step by step in terms some appreciable level of the citizenry can understand. I'm hardly a socialist, but I can't imagine what good hedge funds and credit derivatives do anybody other than the con men who peddle them (what I call "commercial" hedging - commodity prices, currency exchange - can be done on public exchanges). There's an old saying that war is too important to be left to the generals, and where I'm coming out is that finance is too important to be left to the financiers.
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  #6  
Old 10-01-2008, 05:12 PM
Anyuser Anyuser is offline
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Default Re: Special Bailout Edition

Quote:
Originally Posted by typop View Post
The educated people in this county need to understand this stuff; pundits need to understand it; and we need to demand that our elected representatives do, too.
I guess that's what I would call an appreciable level of the citizenry.

Anecdote: I have a friend who worked at Goldman Sachs for fifteen years, specializing in mortgage backed securities. She left Goldman in 2002. I asked her to explain what was going on and she said she couldn't really say, because a lot of the credit derivatives and hedge fund activities that are causing problems today had not been concocted in 2002. She further said that what goes on in hedge funds and in a huge portion of the credit default swap market isn't intended to be seen or understood.

When Bear Stearns cratered Paulson, Bernanke, Robert Rubin, and a zillion other people who I think should have understood the situation confessed to not fully understanding the derivative market or the consequences of letting Bear Stearns go under.

In newspapers like the NY Times and the WSJ and (less so) the Financial Times business reporters refer to the "obscure" CDS market, or the impenetrable hedge fund industry. The credit rating agencies don't understand this crap.

So I'm ignorant, but I've got a lot of company. It's not just me, or some bored citizen who doesn't grasp the problem, it's presidents of commercial banks and (no longer existent) investment banks that seem baffled. All due to these gimmicks created by bullshit artists trying to create something out of nothing. It shouldn't be possible. The impenetrability of what's going on is of the essence of what's wrong with it. The reason finance is frozen is because nobody understands the shit that has filled up the system. People are baffled and angry, and I think it's legitimate to be angry because you're baffled, because the entire government is baffled.

I've always admired business managers who flatly refuse to approve a deal that can't be simply explained. I know one (rich, smart) guy who refuses to consider a deal that takes a picture to explain it (e.g., structured investments). I guess rather than expecting the Congress and the electorate come up to speed, I would prefer to somehow metaphorically make the finance community go away and come back with a plan that makes sense to your basic educated people, pundits, and elected representatives.
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  #7  
Old 10-02-2008, 12:55 PM
typop typop is offline
 
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Default Re: Special Bailout Edition

Anyuser,

I'm definitely not buying the too-obscure-to-understand argument. Anything worth knowing has nuance, and so does this, but there's nothing at all complicated about the idea that some institution might buy insurance against a bond defaulting. And, years ago, Greenspan thought this was a great idea, because it would spread risk around with free-market efficiency. Pretty neat, in his mind. But at the same time, people like Warren Buffett were calling these credit derivatives "financial weapons of mass destruction." YEARS AGO. So are you telling me that we shouldn't have knocked heads together back then when it would have mattered?? I think it's worth repeating: Educated citizens and opinion-makers who SHOULD have known better --- and whom I hold responsible --- thought this was boring and not worth their time, but they sure did have lots of opinions about Abu Ghraib.

A few months ago on Yves' blog (the awesome nakedcapitalism.com), some expert-systems guy talked about how you're supposed to design expert systems so that a big failure in one part of the system doesn't take the whole thing down. He used the human body as a kind of archetype, saying that even a large trauma --- say, a broken arm --- doesn't cause your heart to stop. Whereas the financial system, with the cheerleading of Greenspan and others, became ever more systemically connected, almost assuring that a broken arm would cause the heart to stop.

I think being embarrassed that we let things come to their present state is wholly appropriate. But I guess it's fair to say that people don't find this stuff quite so boring any more.

Quote:
Originally Posted by Anyuser View Post
I guess that's what I would call an appreciable level of the citizenry.

Anecdote: I have a friend who worked at Goldman Sachs for fifteen years, specializing in mortgage backed securities. She left Goldman in 2002. I asked her to explain what was going on and she said she couldn't really say, because a lot of the credit derivatives and hedge fund activities that are causing problems today had not been concocted in 2002. She further said that what goes on in hedge funds and in a huge portion of the credit default swap market isn't intended to be seen or understood.

When Bear Stearns cratered Paulson, Bernanke, Robert Rubin, and a zillion other people who I think should have understood the situation confessed to not fully understanding the derivative market or the consequences of letting Bear Stearns go under.

In newspapers like the NY Times and the WSJ and (less so) the Financial Times business reporters refer to the "obscure" CDS market, or the impenetrable hedge fund industry. The credit rating agencies don't understand this crap.

So I'm ignorant, but I've got a lot of company. It's not just me, or some bored citizen who doesn't grasp the problem, it's presidents of commercial banks and (no longer existent) investment banks that seem baffled. All due to these gimmicks created by bullshit artists trying to create something out of nothing. It shouldn't be possible. The impenetrability of what's going on is of the essence of what's wrong with it. The reason finance is frozen is because nobody understands the shit that has filled up the system. People are baffled and angry, and I think it's legitimate to be angry because you're baffled, because the entire government is baffled.

I've always admired business managers who flatly refuse to approve a deal that can't be simply explained. I know one (rich, smart) guy who refuses to consider a deal that takes a picture to explain it (e.g., structured investments). I guess rather than expecting the Congress and the electorate come up to speed, I would prefer to somehow metaphorically make the finance community go away and come back with a plan that makes sense to your basic educated people, pundits, and elected representatives.
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  #8  
Old 10-02-2008, 01:17 PM
Anyuser Anyuser is offline
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Default Re: Special Bailout Edition

Quote:
Originally Posted by typop View Post
So are you telling me that we shouldn't have knocked heads together back then when it would have mattered??
Nope. Didn't mean to imply that.

Quote:
Originally Posted by typop View Post
Whereas the financial system, with the cheerleading of Greenspan and others, became ever more systemically connected, almost assuring that a broken arm would cause the heart to stop.
On that topic, this article from this morning's Washington Post might interest you.

Quote:
Originally Posted by typop View Post
But I guess it's fair to say that people don't find this stuff quite so boring any more.
I'm dismayed by the extent to which so many commentators and politicians change the subject from an effort to understand the problem to partisan political gassing. Perhaps that's a version of boredom.
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  #9  
Old 10-02-2008, 01:41 PM
typop typop is offline
 
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Default Re: Special Bailout Edition

Thanks for VaR article; I hadn't seen that. I would add that even really careful risk analysis relies on a lot of potentially bogus assumptions (that generally can be summarized as, The past predicts the future).

But my view is that all of this is tail-wagging-the-dog. In other words, the higher-ups wanted to buy the magic high-yield AAA stuff. That came first. THEN came the models to "prove" that the risk was acceptable. Risk people are always fighting with the sales people and the execs, because they are looked at as doom-and-gloomers who just get in the way of making money.

But, again, this is fancy dressing for a simple salad. Everyone on the "inside" knew there was systemic risk (again, my view); they just hoped the earthquake wouldn't come for a long time.
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  #10  
Old 10-02-2008, 01:27 PM
typop typop is offline
 
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Default Re: Special Bailout Edition

Forgot one thing: You can't let the rating agencies off here; they are the biggest villains by far. They collected huge fees for these things, and they knew their services would have been worthless without AAA ratings, because the securities couldn't have been sold otherwise. And how did they justify all the AAA ratings? The assumption they relied on was that house prices never go down unless unemployment goes up. Everything followed from that. To put it a different way, that's what this WHOLE house of cards is built on.

Again, there are obviously plenty of nuances and complexities, but because everyone is pretending it's rocket science (which it most assuredly is not), we get the reward of a huge piece of legislation with literally unimaginable consequences.
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  #11  
Old 10-01-2008, 05:15 PM
Namazu Namazu is offline
 
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Default Re: Special Bailout Edition

Couple of points:

1) There's something extremely important at stake here, which Yves talked about and which I outlined in the comments under the Kling interview, namely whether Treasury should buy distressed assets or just inject liquidity into the banks (I'm simplifying a little). This may sound like a quibble, but I urge you to follow the link I provided to see that it's not. A very interesting question is why Paulson only put one option on the table and a loaded gun to the head of Congress. My personal feeling (based on no special knowledge) is that we're going to be taking substantial assets off the hands of a foreign bank or banks, and that the current bill allows this to happen with minimal pushback. Time will tell.

2) You're quite right to denounce the complexity of the shadow banking system. It was clearly a major cause and/or enabler of this crisis. Now a lot of this will go away by itself, and a lot of "no-brainer" regulations will come to pass. The big challenge is to anticipate what the next bubble is going to look like and head it off at the pass.

Quote:
Originally Posted by Anyuser View Post
There comes a point, from a public policy perspective, where obscurity and complexity become prohibitive in and of themselves. There's probably no more than a low 5-digit number of people on the planet that can even fake an understanding of credit derivatives, yet those gizmos have apparently brought us to the brink of a global depression. This diavlog was interesting, and I don't mistrust anything these two have to say, but it was all a bunch of insider palaver. (I'm hard to please. I was pissed at the Drezner/Wright diavlog for breezing past financial issues and instead bullshitting about presidential campaign tactics, and I'm less than pissed - annoyed, I guess - at this one for not making some policy prescriptions.) It should be possible to identify which financial/accounting mechanisms and transactions caused this problem, and to regulate them out of existence. I'm not satisfied saying, let's make everything transparent and then the market will take care of if all. Also, saying let's have a financial Manhattan Project is a vacuous trope. It doesn't make John Q. Public a financial Luddite to expect an understandable explanation of the problem and an understandable solution. It's painful to watch all the dumb ass Representatives trying to understand so far beyond them, but it's also a pisser that Bernanke and Paulson, endorsed by Bush, basically say only trust us because we're experts and you're not. (The idea that direct investment in institutions is better than buying toxic assets from them sounds like a reasonable argument, and it's being made all over the place. What is Paulson's counter argument? If we don't know, why don't we know?) If in order to enable my regional bank to make loans to good credits, we've first got to save the bacon of a bunch of jackleg hedge fund managers, somebody in the government ought to be explaining that step by step in terms some appreciable level of the citizenry can understand. I'm hardly a socialist, but I can't imagine what good hedge funds and credit derivatives do anybody other than the con men who peddle them (what I call "commercial" hedging - commodity prices, currency exchange - can be done on public exchanges). There's an old saying that war is too important to be left to the generals, and where I'm coming out is that finance is too important to be left to the financiers.
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  #12  
Old 10-01-2008, 11:29 AM
eric eric is offline
 
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Default Couldn't hear

It may not be a substantive issue, but like spellchecking and punctuation, it's a simple thing to check to keep your audience.
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  #13  
Old 10-01-2008, 12:09 PM
Namazu Namazu is offline
 
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Default Re: Special Bailout Edition

Credit where credit is due: Yves is one of the most respected voices in the finance-o-sphere, and her blog was on one of the lists I've been pestering the bhtv staff with. Tip of the hat, guys.
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  #14  
Old 10-01-2008, 01:23 PM
zookarama zookarama is offline
 
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Default say what?

I thought that with the new video format, the old audio problems had been eliminated, but this diavlog was a return to the bad old days of muffled, unbalanced, audio. I found myself missing important points of the discussion because I was busy fiddling with my audio controls, trying to overcome the lousy audio feed.
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  #15  
Old 10-01-2008, 03:17 PM
nikkibong nikkibong is offline
 
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Default Re: say what?

Quote:
Originally Posted by zookarama View Post
I thought that with the new video format, the old audio problems had been eliminated, but this diavlog was a return to the bad old days of muffled, unbalanced, audio. I found myself missing important points of the discussion because I was busy fiddling with my audio controls, trying to overcome the lousy audio feed.
you mean you actually want to hear what megan mcardle has to say?
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  #16  
Old 10-01-2008, 03:47 PM
handle handle is offline
 
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Default Re: say what?

Quote:
Originally Posted by nikkibong View Post
you mean you actually want to hear what megan mcardle has to say?
rimshot!
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  #17  
Old 10-01-2008, 07:03 PM
Furcifer Furcifer is offline
 
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Default Re: say what?

Quote:
Originally Posted by zookarama View Post
I thought that with the new video format, the old audio problems had been eliminated, but this diavlog was a return to the bad old days of muffled, unbalanced, audio. I found myself missing important points of the discussion because I was busy fiddling with my audio controls, trying to overcome the lousy audio feed.
There's only so much any software can do to overcome the laws of physics. Smith was simply sitting too far away from the microphone in a noisy environment. Headsets may be unsightly and uncomfortable, but there is really no reliable alternative outside a professional sound stage.
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  #18  
Old 10-02-2008, 07:49 AM
TwinSwords TwinSwords is offline
 
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Default Re: say what?

Quote:
Originally Posted by Furcifer View Post
There's only so much any software can do to overcome the laws of physics. Smith was simply sitting too far away from the microphone in a noisy environment. Headsets may be unsightly and uncomfortable, but there is really no reliable alternative outside a professional sound stage.
Exactly. Any time people use the mike on their laptop, it picks up all the ambient noise in the room and the echo of the voice bouncing off the walls. The mike needs to be in front of their mouth.
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  #19  
Old 10-01-2008, 01:27 PM
claymisher claymisher is offline
 
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Default Re: Special Bailout Edition

Note: McArdle is not an economist. She's a libertarian ideologue. They often think that makes them economists, but it doesn't.
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  #20  
Old 10-01-2008, 02:08 PM
bkjazfan bkjazfan is offline
 
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Default Re: Special Bailout Edition

I don't see how everyday regular folks (those without PH.D.'s in economics from elite universities) are going to understand this obtuse jargon. It smells, feels, and looks like a bailout for the rich and I don't see how that perception will be changed by all the talking heads including the 2 presidential candidates.

John
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  #21  
Old 10-01-2008, 02:05 PM
travis68 travis68 is offline
 
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Default Re: Special Bailout Edition

Assume that housing prices fall another 10-20%. Is it better for the economy as whole if the Federal government takes this loss on the mortgages or is it better for the banking system to take the loss? Or does it matter? Because that is what Paulson is in effect saying: the government should take the loss and not the banking system.

I ask this independent of the moral hazard question.
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  #22  
Old 10-01-2008, 04:06 PM
claymisher claymisher is offline
 
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Default Re: Special Bailout Edition

Derivatives aren't that hard to describe. They're only a little more complicated than options. The thing is that they're not standardized. A lot of them (I wish I knew how many) are written completely ad hoc. That's part of the charm for the Wall St. firms that sell them -- they can totally rip off the buyers.

Here's a great book about them, written ages ago:

Fiasco: The Inside Story of a Wall Street Trader by Frank Partnoy
http://www.amazon.com/Fiasco-Inside-.../dp/0140278796

And a PDF worth a skim:

http://www.investinginbonds.com/asse...erivatives.pdf
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  #23  
Old 10-01-2008, 05:15 PM
Anyuser Anyuser is offline
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Default Re: Special Bailout Edition

Quote:
Originally Posted by claymisher View Post
Thanks for this link.
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  #24  
Old 10-01-2008, 04:23 PM
Mari Dupont Mari Dupont is offline
 
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Default Re: Special Bailout Edition

It seems like Ms. Smith appeared on Bloggingheads simply to vent. Not that I blame her, but it made the discussion hard to follow. I believe complicated topics like this one are better addressed when one of 'heads isn't an expert in the field and is happy to play dumb and ask basic questions (i.e. what is commerical paper? Why is it used and why should I care? How does this relate to bad loans?) The Kling dialog was great because Will was happy to appear clueless (whether he was or not.) Megan does a good job on her blog explaining how the average person might be affected by a non-bailout, but she missed a great 60 minute opportunity to remedy a lot of the ignorance she bemoans.
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  #25  
Old 10-01-2008, 07:47 PM
jmoe jmoe is offline
 
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Default Re: Special Bailout Edition

Meghan seemed to be surprised that there are people opposed to the bailout without understanding financial markets. That most people don't understand financial markets isn't even worth pointing out. The real story here is that this administration has very, very little credibility. People hear, "financial meltdown" and they think "weapons of mass destruction." This is an instructive moment when one can see why it's important for an administration not to lose the trust of the public, and the Bush admin has certainly lost the trust of the public.
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  #26  
Old 10-01-2008, 07:58 PM
handle handle is offline
 
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Default Re: Special Bailout Edition

Quote:
Originally Posted by jmoe View Post
Meghan seemed to be surprised that there are people opposed to the bailout without understanding financial markets. That most people don't understand financial markets isn't even worth pointing out. The real story here is that this administration has very, very little credibility. People hear, "financial meltdown" and they think "weapons of mass destruction." This is an instructive moment when one can see why it's important for an administration not to lose the trust of the public, and the Bush admin has certainly lost the trust of the public.
With one notable exception, I might add, we trust them to fail spectacularly, and in an historically unprecedented manner.
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  #27  
Old 10-02-2008, 01:58 AM
Dee Sharp Dee Sharp is offline
 
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Default Re: Special Bailout Edition

God created Bloggingheads for discussions like this. Stuff this episode and put it on the wall.
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  #28  
Old 10-06-2008, 07:13 PM
willmybasilgrow willmybasilgrow is offline
 
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Default Re: Special Bailout Edition

Audio is horrible. I can't hear!
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  #29  
Old 10-01-2008, 06:13 PM
popcorn_karate popcorn_karate is offline
 
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Default Re: Nationalize the Banks?

Quote:
Originally Posted by kidneystones View Post
The Clintons might have been able to manage this, but Dems have chosen 'hope' over experience.

Prepare for impact.
Dead wrong on that one KS, Corporate Dems like the Clintons sold out to wall street just like the republicans did - and that is a big part of why we are in this mess. Progressive Dems and hardcore, wingnut libertarian republicans are the only ones with any claims to being on the right side of the issues here.

wasn't it Clinton that signed the repeal of Glass/Steigal? Clinton was no better than Reagan/Bush I/Bush II in gutting regulations and castrating regulators.

have a good day,

-Z
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  #30  
Old 10-02-2008, 09:22 AM
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Talking Re: The Hidden Financial Benefits of Bad Lending Practices?

Quote:
Originally Posted by kidneystones View Post
pk writes...[..]

Your cruddy reading skills and desire to score political points at all cost make your comments here virtually worthless on topics of ordinary complexity. My post isn't about getting into the mess but getting out. Both political camps are knee-deep in this muck. I'm not aware of a single non-partisan expert who believes otherwise.

Rescuing and restructuring the finance/banking/securities industry will be done by major-league wonks. I'm not sure how much of the latter part of this discussion you actually watched or understood, but both Megan and Yves listed a number of reasons why the majority of economists/analysts signed off on the efficiency model. Many of the same will likely be consulted on building the 'safety' model. See Yves' Manhattan project comment.

As for your inane remark that 'libertarians' and 'progressives' had this right, I couldn't disagree more, and ordinarily wouldn't waste my time explaining why. Hint: yours is a 'broken-clock' analogy if there ever was one. Neither of the two available candidates can be characterized as 'progressive' or 'libertarian'. You make my point, not your own, not that it matters much. The big issue is that the best people are now, thanks to the Dems, out of the game for at least four years.

The one or two experts I do know do credit Bill Clinton, not Alan G. for the relatively sound fiscal policies of the 90's. Neither 2008 candidate has Bill's experience, knowledge, or expertise dealing with structures or problems of this scale. Water, as it were, under the bridge.

If we're going to get 'radical', and I don't know how much more radical we can get on the back of Yves' astonishing suggestion America nationalize its banks, why not follow on Megan and Yves' point about bad metrics?

What impact did putting low-income folks, even temporarily, into homes they could not afford play in reducing crime, increasing productivity and paying for schools? We know that wealth is the single most reliable predictor of educational success. Did a large number of families (millions) do better because the family saw themselves as part of the ownership society?

Are these benefits being factored into the equations? My guess is not yet.

Bill Clinton's track record managing big numbers and big projects is excellent compared with the other folks who, thanks to the 'hope' vote, are now likely to be charged with taking on the massive challenge of cleaning up after GB.

I'll stand on that argument and say so long.
lol!!!
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  #31  
Old 10-02-2008, 07:34 PM
Gravy Gravy is offline
 
Join Date: Feb 2008
Location: Cincinnati, Ohio
Posts: 50
Default Re: Nationalize the Banks?

[QUOTE=kidneystones;92610]Yves point about determining value is pretty much the same as Dan Drezner's. Don't have a link, but a pal who follows this closely told me of a frightening interview months ago with a Bank of Canada high-up who claimed it was going to take forensic accountants years to figure out how much is owed and to whom.QUOTE]

You shouldn't believe this with regard to the actual mortgage backed securities. Yes, they are composed of many fractions of mortgages, and there is a hierarchy of seniority, but the processes of putting them together and the original processes of pricing them are reproducible. The pricing involves lots of data on the particular mortgages, collateral (house) prices, credit scores, and a host of other relevant data. It is a boat-load of information, and it takes hard work, but it all is still available and is updated frequently enough to support an active market when the data looked rosy....now we hear that figuring this out is impossible? I don't think so. The market for these instruments is not fundamentally frozen because no one knows what they are worth; more truthfully the market is frozen because, knowing what the stuff is worth and actually trading on that basis would make acknowledging insolvancy impossible to avoid. Yves is correct that trading at fair prices does nothing to re-capitalize the banks, so one has to believe that the plan must involve recapitalizing by overpaying. Well, shoot, why don't we just take on preferred equity stakes if the US Treasury is the only hope in Dodge. Remember, these are real losses, not just some make believe "panic" phenomena that calming the market will solve. Someone has to eat them, that cannot be avoided.

The derivatives, such as credit default swaps, are more opaque and unwinding those will be very difficult.
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