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November 22, 2009

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Cecil Turner

And we would have had plenty of free time to absorb these lessons while reading by candlight and huddling around the flames thrown off by the burning of the remnants of our civilization.

But think of the negative impact on global warming . . . or would it be positive? In any event, the neo-Luddites would love it.

Pofarmer

The Fed thought not, fearing possible market disruptions.

Ah, yes, the market being, well, the market. Can't have that.

Still think CDS should be illegal.

DC

So, how did OIG get new independent agency status? Was it the guy who got the job in securities or whatever? Did he advocate for 5 year contracts and have those changed at DSS? Who runs OIG now? If your fired by a Prez who's mad you did your job, who is there from OIG? Is this the AGs in reverse, that it is a political job like AG and , if these dems were so adamate about AGs, knowing this makes no sense, where are they now that the IGs are getting fired over sex like CIA station chiefs?

AIG was a scam for jobs for Congressmen's pals usually doing foreign work. They got billions and didn't have to pay it back, so why would OIG be different having got there the same way, deals for advantages for the company agency? Where are all the dems who complained about the AGs now?

We're supposed to focus on the fed when the probelm is treasury and all those 'loans' biden wrote off for Obamabi and his need to give american dollars to foreigners for free; even if he has to tax our GDP. We're broke and will soon loose the rest and this is what they want, so while Obamabi and Biden contemplate what to do in three wars, maybe we should wonder what is happening to the economy and what will make Obambi and Biden happy.
See the new powers of the special inspector general like jobs and 5 year contracts.

BumperStickerist

Hind sight is 20/20.

Which is why hind are such challenging animals to hunt.

Gregory Koster

TM, you keep mentioning that "random" renegotiation of AIG's contracts would be foolhardy. But why insist on random renegotiation? Why not systematic renegotiation, i.e. good old fashioned bankruptcy? Your answer to that is having us huddle round the campfires tossing pages from GOING ROGUE and LIBERTY AND TYRANNY into the flames while Eric Holder smugly raps his nightstick into his palm, watching his minions measure us for our chains, intoning "told you so. The Government is the only institution that can keep you safe," is too daunting. There was a substantial risk that your scenario might have happened.

But conside a similar decision in scale in the fall and winter of 2006-07: the decision to intervene in Iraq with a "surge." This too, ran great risks. It was a "bet the war and a big hunk of American power" decision. My memory is that this decision did not daunt you, and cause you to pull back in the way contemplating an AIG bankruptcy does. Why? It's true that both decisions had huge risks. It's also true that the "surge" would have (and did) much clearer effects than an AIG bankruptcy would have, and the effects appeared much more quickly. But I think the real reason the "surge" decision was made and the AIG bankruptcy was not is that the armed services are perceived as far more trustworthy than big business. Would you trust Lloyd Blankfein, Henry Paulson, Ben Bernanke &Co to do what's right for the United States? In Blankfein's case, you could argue that he represents a private interest, and must look out for it, not the general, American, interest. The obvious answers to that are a) the private interest flourishes best by supporting the American interest e.g. clear protections for property, transparent systems of law, light regulation and b) private interests have no business bawling for government aid. Lehman was abandoned to the devils; why not AIG and the Goldmans who had a big interest in loading AIG's failures onto the taxpayer? Blankfein has decided that he prefers the mediocre results from crony capitalism because he has a privleged place in line, and thinks he can keep it. Private interest meshed with government power is not what American liberty is about.

Well, we didn't take that road, being fearful for our prosperity. What has it gotten us? I grant that the economic blowup happened at the worst possible time. But Geo. W.'s presidential rep is going to take a big hit from the "rescue" package. The strong, burdened Prez who bet the war on the "surge" turned into a panicked puppet, taking direction from a sordid gang of hogs who cared more for their own power than for any liberty they would have to pay for. The consequences are evil in the extreme: the system now is run by a scoundrel who knows little of liberty and its productive capacity and cares less. He has a vision of central control, himself at the top. The "downfall of civilization" that we have avoided in your scenario, has been paid for by the creation of a new nomenklatura, who will batten off the nation at everyone else's expense, while dumping all blame onto those who will suffer the most. It will take years and more blood, toil, tears, and sweat than we can imagine to stop this rot.

I am on the other side of this issue from you.

bgates

we would have had plenty of free time to absorb these lessons while reading by candlight and huddling around the flames thrown off by the burning of the remnants of our civilization.

The decision to further enrich the architects of the housing crisis resulted in 130,000,000 jobs created or saved, huh?

Pagar

IMO, The decision to adopt CRA ruined this country financially and is another fraud forced upon us by the leftists. There is no search for truth among our politicians, every thing stems from leftist lies/leftist fraud.

"How Little Law From '70s Brought The Financial System To Its Knees"

Thomas Sowell is one of the best (at pointing these things out)IMO. I recommend taking a look at his book--"The Housing Boom and Bust"

anduril

An AIG bankruptcy would have given us all a chance to learn about moral hazard and the law surrounding municipal GICS, 401(k) wraps, collateralized securities loans, credit default swaps, conventional swaps, and who knows what else. And we would have had plenty of free time to absorb these lessons while reading by candlight and huddling around the flames thrown off by the burning of the remnants of our civilization.

Bankruptcy = "burning of [sic] the remnants of our civilization"? Whatever happened to reorganization as an option? And why does TM keep pushing this particular line, that the only alternatives were bailout or civilizational catastrophe?

And has he really considered the consequences of three succesive great bubble bailouts, each bigger and more costly to the taxpayer than the last--S&L, Dot.Com, Housing? The real economy of small businesses and individuals is being trashed to pay for these bailouts. When we're left with nothing but Goldman Sachs with their head above water I suppose TM will be lauding the salvation of our "civilization" still?

Thomas Esmond Knox

US Economy 2008 World Bank GNI PPP (released July 2009)

GNI per capita $46,970 (positive growth)

GNI $14,204,322 (positive growth)

[Positive growth means bigger than the previous year]

Losers, take a good hard look in the mirror.

Thomas Esmond Knox

Update:

$14,204,322 million (of course)

Pofarmer

So, a six month old release of year old data is???????????

Neo

I've been to enough "Progressive" sites (and they deserve to have progressive put in quotes) to know that it isn't Goldman Sachs, it's the Juice.

Neo

"... but want to put all of contract law in the shredder in order to to get ..." a better deal for GM unions.

Been there, done that.

Tom Grey

Gregory Koster seems more correct -- AIG bankruptcy would have been more fair, transparent, and morally beneficial in an anti-moral hazard way.

Had all the top Big Banks with too much exposure gone into bankruptcy, due to $10 trillion of real assets (and falling) covering $60 trillion of leveraged financial products (and falling faster), civilization would certainly NOT have stopped.

The Fed/ Treasury could have thrown money at any new projects needing loans, and could have become more active in the overnight bank loaning rates, and could even have extended to big companies that were customers of the dying big banks some higher than before interest loans.

Civ didn't die when 500 000 legal construction workers lost their jobs thru 2007 with the housing bubble pop (and over 1 million illegals?), it could last thru similar losses in the banking industry.

But the rich and powerful bankers didn't want to accept the market solution to their inability to fulfill the terms of their contracts -- bankruptcy.

W. blew it, and Obama is blowing it worse.

glasater

In my little biz I was called upon to photograph many construction jobs in our county.
There weren't too many caucasian fellows on the jobs. Most workers were hispanic.

jimmyk

Bankruptcy = "burning of [sic] the remnants of our civilization"?

Yeah, I was kind of wondering about that too. As if all our accumulated knowledge of science and technology, and all our accumulated physical capital, would just go poof, and we'd find ourselves back living in caves, hunting and gathering. Just because we decide to make AIG's counterparties take the hit instead of taxpayers.

srp

Reposted from the earlier thread:

I'm with Tom on LTCM. I just think the "let 'em go bankrupt" plan was still the right idea ten years later. A guy who did some work for Barclay's confirmed what theory would suggest, that unwinding all of Lehman's supposedly opaque and convoluted transactions took a couple of weeks of lawyers working overtime to accomplish.

The thing is, in fall 2008 people were still arguing that the problem was liquidity rather than solvency--it was all just a big bank run of sorts and if we could do the FDIC-equivalent backup for securities and derivatives all would be well. Unfortunately, that turned out not to be the case for many of these firms' portfolios. They were fundamentally unsound ("had no bottom" as Daniel Dafoe would have said) in the sense that the underlying loans were not going to be paid back on any time scale. So bailing out ("insuring") the feckless counterparties, instead of causing an FDIC-style rebooting of confidence and the return of normal business amounted to a partial and unprincipled subsidy of connected insiders that actually reduced overall confidence in the system.

BelieveWatUwant

Because nobody went to jail.

What's your next question?

AL

There is nothing new about financial bubbles. Always happen, and always will. The current one is not solely housing bubble, but also commodities, East Europe investment, and general credit overleveraging bubbles.

What makes this Recession unique is Credit Default Swaps (I call it “gambling insurance”), which is extremely powerful bubble multiplier.

If CDS will continue going wild, any forthcoming financial bubble/recession again will be of catastrophic proportions.

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