Friday, October 03, 2008

Please Forward to Your Congressman/woman/transgender

Why this bailout strikes me as “odd.”

1) Congress is about to spend $850billion without holding even one day of hearings to determine what options are available and what people (other than elected officials and lobbyists) such as experts have to say.
2) Nobody seems interested in a solution which injects the same amount of capital but which rewards those who managed risk properly rather than rewarding parties who bet, lost, and now want their money back.
3) This “unprecedented” crisis has happened before and was “solved” without destroying the risk/reward paradigm which is essential to capitalism. Ex. The Swedish solution to their “unprecedented” financial crisis of the early 1990s involved preferred equity investment by the taxpayers. Or, as Luigi Zingales of the University of Chicago suggests
, the solution could involve debt forgiveness or a debt-for-equity swap. Effectively, banks could simply be placed into receivership (as would happen with any other failing enterprise which cannot pay its creditors). Receivership would restructure the debt to pay something to the creditors, but they would bear the risk associated with the poor investments. I am sure there are other historical examples. The key question is why we are not hearing about any solutions which are consistent with the risk/reward tradeoff necessary for our investment system to function.

PS to Congress: Go Employ Autopederasty!


Doc Bok said...

but would those ideas work in time to prevent the looming crash, where everyone loses, including the dirty, money-grubbing cocksuckers who caused it? I totally agree that the list of incompetent idiots who are to blame is long, and Alan Greenspan is at the front of the line, but do you really think there is time for the usual, non-productive argumentative bullshit that is our government to work through due process and appropriate consideration of all or even most options without allowing time for the complete vaporization of every single citizen's retirement plan? The credit market has seized; there is no time to fuck around, and almost no time to even think. That was the mistake that made the Great Depression last so long: government didn't step in. We should never be in this predicament except for dishonest businessmen (which is to be expected and will always happen, given opportunity)and the officials who failed to read the economy correctly and then poured salt into the wound by failing to do their jobs of officiating. Every fucking bit of this was predictable--it has been for almost 80 years now. And to countries older than us, which is most, it has been predictable since their first big financial fuck ups. The regulations were there for a reason.

OneEar said...

In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Tuesday. "We just wanted to choose a really large number."

OneEar said...

So you contend that doing anything is better than doing nothing?

The fruits of my labor are taken from me and used to destroy market capitalism for the sake of avoiding some short-term pain. State-mandated heroin injections might be a better way to alleviate our collective concerns. I don't need any more details, sign me up.

Doc Bok said...

it won't be short-term. That's the problem. If the whole fucking game-board burns up, you can't play monopoly anymore. Should we fuck every person responsible, with special focus on the Fed and Central Bank? Absolutely. Give them the pain, short or long-term and use them as an example for the next group in their positions who might let the market run free for their own egoistic desire to be known as the "Maestro" or some such other bullshit. These guys weren't competent at being the wet-blanket necessary for a central bank. They ran around drunk helping everyone make money, generating the dot-com and real-estate bubbles and then failed to enforce regulations to prevent what just happened. It's done, but go back and hold them accountable, rather than taking every about-to-retire 65-year old and erasing a lifetime of savings and investment. There is nothing "short-term" about that pain; it's for a lifetime for them, and it will set you and I back to ground zero for all the fruits of our labors we've managed to stash away so far. Of course risk has to be present for the market to function properly, but when the custodians of the system are smoking pot and nobody held them accountable or fired them, the government (i.e., you and I and our wallets) needs to step in and stop the hemorrhage and make sure it can never happen again. There seems to be a running theme of governmental incompetence these days. Throw them all out, all they want is to be re-elected and don't give a fuck about your money.
If you know that doing nothing will result in your balls getting lopped off, doing anything seems like some effort of self defense. Work out the details when your scrotum is safely tucked away in your undies and there is some time to think things through and do what's right and best.

Doc Bok said...

(doesn't really matter now, anyway, does it?)

OneEar said...

Nurse: "The patient is suffering cardiac arrest caused by alcohol induced system failure. You must do something Dr.!"

DokBok: "700Billion ml whisky, stat! This will stop the withdrawal effects and anesthetize the patient."

Doc Bok said...

That is exactly how to treat alcohol withdrawal. The pharmacy in my hospital during residency kept Beck's beer, until it started getting stolen and was subsequently replaced with Black Label, and some kind of whiskey.

You're a much better doctor, evidently, than lawyer. You should change the sign outside of your office; switch the "j" for an "m".