that hits the bogus free trade philosophy where it lives without, of course, explicitly saying so. Much of it sounds like Obama, and it gives Obama some pithy talking points for the on-again debate. Webb and his companions have come up with something staisfactory, with some teeth in it; what a great Senator we have.

The devil, as usual, will be in the details, especially on the "new regulatory agency"---- The House Republican free-trade contingent will howl. And, will Bush accept limitations on executive compensation for his Wall Street buddies? Won't it be amusing if McCain tries to co-opt these points for himself (in his new persona disguised as a populist), thus yanking the rug out from under his new-found right-wing friends in the Republican House Caucus.

Please, Please NO BAILOUT of anykind.

If the congress passes a bailout, hedge fund and speculators on wall street roll on for a while and get richer for 4 to 6 months.

Then we have a Depression.

The so called "conservative" Republican House members  (McCain and his new right wing partners) say they are getting thousands of letters saying NO BAILOUT from their constituents. What do they do?  They come up with their own BAILOUT:  we do more deregulation and continue to build two economic classes  Rich and Poor.

And then we have a Depression.

What most of us want is NO BAILOUT!!!

And then we may have a steep Recession or a Depression.

Times will be tough for all of us for a couple of years. What is wrong with that?  Can't we live without new Lexus's and Starbucks for a couple years?  We end up in an economic downturn regardless of what we do.  We should all be in the same boat.  Both of the plans being put forward help the wealthy "ownership class" continue their lifestyle while the rest of us decline.

Please do not vote for a Bailout of anykind.  Let the economy find its own level.

PLEASE SENATOR WEBB:

NO BAILOUT FOR BILLIONAIRES
NO "STEALTH" BAILOUT FROM "CONSERVATIVE" REPUBLICANS

NO BAILOUT PERIOD!!!!!!!

Progressice economist James Galbraith had this article published in WaPo yesterday.  Many of these suggestions make sense.  I especially agree with this:

...put half a trillion dollars into the Federal Deposit Insurance Corp. fund -- a cosmetic gesture -- and as much money into that agency and the FBI as is needed for examiners, auditors and investigators. Keep $200 billion or more in reserve, so the Treasury can recapitalize banks by buying preferred shares if necessary -- as Warren Buffett did this week with Goldman Sachs. Review the situation in three months, when Congress comes back. Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.

Here is the link to the entire article:

http://www.washingtonpost.com/...

while this article made one or two good points (especially about the crisis coming down the road in local jurisdictions), much of it was gibberish.

Take, for example, this:

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.

Is he kidding? There was a run on WaMu that has driven it under. There was a run on IndyMac prior to its insolvency.

And these were runs by small depositors. If you want to see what happens when large depositors stage a run on a bank, look no further than Lehman or Bear.

Also, how is the average person to know whether a bank is solvent? Experts sometimes can't tell. A run can quickly drive a bank into insolvency.

Nor did I get this:

Hedge funds should be left on their own. You can't save everyone, and those investors aren't poor.  

I don't believe anyone is proposing providing any help to hedge funds (although they will be aided, just like everyone, by a return to more normal credit conditions).

Indeed, Galbraith's very first statement suggests he doesn't fully grasp the problem:

The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."

Uh, no. The point of the bailout is to recapitalize banks by allowing them to value these troubled assets at more than zero. Yes, banks hold loans, and they are illiquid. But as long as they are performing, they have a value on banks' balance sheets.

The difference with these securities is that their illiquidity results in a market that values them well below their actual economic value, and since banks have to mark these assets to market (that is, value them at their current market value which is too low), their balance sheets are getting killed.

Admittedly, Hank cam to the Capital seeking to be appointed dictator, but isn't this basically the deal everyone had yesterday?

The one that McCain killed.  

Paulson had a separate proposal on the table for that a while back.  But no one seemed too interested in that except trade magazines.  And then there was much discussion like there has been with Internal Financial Reporting Standards (IFRS) as to whether that will work considering how accustom folks are to rules based approaches.  Also, making oversight more efficient steps on a lot folks toes.

First of all, kudos to Senator Webb for pushing this forward. These principles are the absolute minimum we should expect from a bailout of any kind, and I'm happy to see him enunciate them clearly (especially specific compensation limits for executives in these firms).

The other interesting thing is the collection of Senators that signed this list. Barbara Boxer is the most liberal member of the Senate, with apologies to Bernie Sanders and Ted Kennedy. Tom Harkin is also very much a realiably liberal voice. Feinstein is a center left establishment Democrat. Klobuchar is somewhere between Feinstein and Harkin. But Salazar, Lincoln, and Bill and Ben Nelson are some of the most conservative members of the caucus. For once, Democrats are organizing in a manner that really puts the screws to the Republicans. If Tim Johnson, Mary Landrieu, Mark Pryor, Evan Bayh, and the North Dakota Senators could be brought on board, this group would control the debate on the bailout mess from the Senate side.

Very heartening to see.  

I find it interesting that our political discourse is at a point where no politician dares to say the word "tax" or "taxes" unless the word "cut" is in the same sentence.

Everyone knows or should know that taxes are going to go up.  Indeed, the "Bush tax cuts" self destruct at the end of 2010.  Putting aside all the money the Fed and Treasury Dept. are spending, there is the small matter of the $10 billion a month we are spending in Iraq.

Yet our political leaders aren't permitted to talk about it.  Remember Mondale?

How can there be intelligent political discourse with such dishonesty?

As for executive compensation, the obvious solution is to raise taxes on compensation over a certain level.  Raising taxes is also the obvious way to stop the financial sector from making windfall profits out of the bailout.

Debt relief in the form of a bail-out for businesses who have been irresponsible lenders; and for individuals who have been irresponsible borrowers, is simply wrong. It would set a bad example that such behavior is without consequence.

Most Americans pay their taxes; their mortgages, and other bills in a timely fashion.  They have done nothing that makes them financially responsible for the debts of greedy profiteers and those who have risked their own financial stability on ill-advised investments.

If the markets should collapse, if the economy should enter a deep and prolonged recession, or even a depression, so be it.  Such events are benchmarks that temper with wisdom those who live through them.

The Great Depression spawned the Greatest Generation.  They went on to win World War II and make America the beacon of hope and freedom.  They created the greatest prosperity ever seen, sent men to the Moon and ushered in an unprecedented age of technology.  In no small way, those achievements had their genesis in the fundamentals established as we worked our way out of economic catastrophe.

Billions and billions of dollars to clean up this mess will not be money well spent.  The suffering caused by letting our free market system correct itself, will be terrible. However, it will force a collective relearning of the lesson that wealth is the product of work and diligence, not speculation and greed.

Another depression, should the current crisis lead to one, will make an otherwise spoiled and apathetic electorate realize that elections are about something more than guns, flag-burning, and same sex marriage.  It is time to stop the vicious cycle of bail-outs and to reap the fruits of the Republican mantra of less government and deregulation.  In short -- no bail-out, no way, no how!

Amen, Rick.  Well said.

So, you're saying we can see the train wreck coming, and we can possibly prevent it, but we should let it happen in order to teach the engineers a lesson about how to drive trains, and to teach the passengers a lesson about which trains to board, and if some people get hurt, or killed, it will be good for them, or if not for them, for all the rest of us who can take a valuable lesson away from the wreck?

Let me just highlight a few great statements you make:

The suffering caused by letting our free market system correct itself, will be terrible. However, it will force a collective relearning of the lesson that wealth is the product of work and diligence, not speculation and greed.

And:

Another depression, should the current crisis lead to one, will make an otherwise spoiled and apathetic electorate realize that elections are about something more than guns, flag-burning, and same sex marriage.

Folks, dismiss this thinking. Suffering is never good. As for the collective relearning about wealth, be good parents, siblings, friends, employees and employers to teach that. We don't need to ruin the lives of millions and millions of people, many of whom will be completely innocent of any personal responsibility for this mess at all, to teach this.

As a progressive, I categorically and as strongly as possible denounce this kind of irresponsible view of the current situation.

We've seen this "train wreck" coming since Reagan brought us the concept of trickle-down "voodoo economics."

The endless cycle of buying our way out of our mistakes is neither healthy nor moral.  Bush's receipe for national unity after 9-11 was to go shopping.  His first response was a $15 billion bail-out of the airlines to protect them from litigation.  Since then there has been a unending string of buy-outs and bail-outs.  

Quite simply, at some time the piper must be paid.  Now is that time.  Painful to millions, yes.  Productive in the long term, definitely.  The alternative is what?  Another trillion we don't have next year?

As my mom used to tell me, If you expect to get well you'll have to take your medicine.    

...I don't buy it, in fact I find it vaguely repulsive, depending on how it's used exactly.  For instance, I have a good friend right now who has cancer, the treatment for which is horrible.  If she lives, how has that cancer and the chemotherapy made her "stronger" in any way?  She's got all kinds of neuropathy from the chemo, constant pain, and a lot of mental/emotional anguish.  One thing I can say for sure is that she wishes she never got cancer.  So how do harsh sayings like "whatever doesn't kill you..." make any sense to my friend, or really to any of us? What next, the prisoners who were tortured at Abu Ghraib are "stronger" because they weren't killed, only mistreated horribly?  The Rwandans who lived through the genocide in that country are "stronger" because they survived?  What a horrible, harsh way of thinking...blech.

to me is that it sounds like an attempt to excuse really bad things in life by arguing that there's some greater "purpose" to it all. I don't buy that for a minute. Instead, I believe it's just a way to rationalize nastiness and pretend that "it all makes sense" in some way.  It doesn't.

In this specific case, we need to make sure - if at all possible - that our country does not fall into a depression or that tens of millions of people get badly hurt.  We also need to make sure this never happens again, and that means ditching conservativism for the next generation or two, at least...

I saw a nice stable society in Mexico break down in a few short years. Families broken, houses lost, and the potential of two generations wasted.

The same can happen in the U.S.

The answer here is not to have millions or tens of millions of Americans - most of whom had absolutely nothing to do with this Wall Street fiasco - suffer just to prove a point or teach a "lesson" or whatever. That's pretty much immoral by my way of thinking...

with you and Al in principle.

However, I am disgusted that this game has devolved again into the farce of, Bush/Paulson's way or the highway.

There's time for a substantive debate here considering a multitude of other options. If the Republicans don't want to play ball after we consider other things besides just forking over [insert astronomical, crazy number], well, then that's their decision, and we'll wait 'til January '09.

But the Fed can be empowered to prevent a full-blown Depression by loaning directly to large corporations with the highest grade commercial paper. Things can be done to allow the mess on Wall Street to shake itself out while still allowing most of the rest of the economy to operate.

I think there ought to be repercussions for all this risky behavior on the part of the few, but it can be relatively quarantined. And I think that's the best solution.

At the end of the day, I predict the adults on Capitol Hill will do what is right, no matter what the political cost to them.

In the meantime, people like Rick and Eric Cantor can be secure that they can will be able to continue to spew their extremist, self-satisfying economic points of views for the very reason that their perspectives do not prevail.

We saw where Conservative economic ideology led us with George Bush at the helm and the GOP in charge of Congress for 6 of the last 7 years.

Once again, pragmatic Democrats will have to step in and clean up the mess this ideology has made.

Rick, you talk about learning. What have you learned from history?

WWII itself, didn't it?  And all that led up to WWII.

I think the old folks who actually lived through the Great Depression would be the first ones to say that we should try like hell to avoid another.

Anyway, let's vote on it.

Our country was NOT made "stronger" by the Great Depression.  It was only made "stronger" by World War II in the sense that we won the war, while other countries were devastated, so we were relatively more powerful. Still, even with that, we had decades of Cold War with the Soviet Union, McCarthyism, wars in North Korea and Vietnam, racial problems, and lots of other troubles.  Again, I see no way that the Great Depression made us stronger, and in general I think that war usually makes us weaker (not to mention all the death and destruction it causes).

With all due respect this is the silliest angry screed I've ever seen. God help us all if we follow those over a cliff whose philosophy it is to cut off their own noses to spite their faces.

The problem is all those who played by the rules, did not live beyond their means, who ran their small businesses and, yes even their banks, well using sound business principles, who will be harmed by this.

No, we don't need a major depression that punishes people because guess what Rick?

POOR PEOPLE WILL ALWAYS SUFFER MORE THAN THE VERY RICH PEOPLE YOU ARE ANGRY AT!

Got that?

Even in the Great Depression, you had very wealthy people who suffered not a whit even though they were the cause of the problem.  Meanwhile, those on the soup lines and bread lines were the middle class and working class people who lost their jobs, their pensions, their life savings and their children's futures.

Yes, they also produced the Greatest Generation.  But there are people who still hoard their food, who still are afraid to spend money, who still are insecure and who have been scarred by that experience.

I'm sorry to be rude, but only an idiot would agree with you.

And God knows, you can't question my "populist credentials" if you had ever read what I practically spend all my spare time writing.  

What you are saying is not what FDR, LBJ or John F. Kennedy would ever had countenanced and those are my heroes.  It's not what the great labor leaders like Eugene V. Debbs, Samuel Gompers, Walter Reuther, or even modern leaders like John Sweeney or Andy Stern would agree with.  And believe me, their whole lives are lived to protect working people, not fat cats.

but I've got to say, I kinda like it - at least in this case! :)

Karen on this one. Quote of the day:

POOR PEOPLE WILL ALWAYS SUFFER MORE THAN THE VERY RICH PEOPLE YOU ARE ANGRY AT!

I guess I need to get angry more often :)

Actually, it's really my protective instinct when somebody says suffering and pain are good for people.  No they're not.  They are necessary evils because we can't always prevent it - like your friend with cancer.  And I'm so sorry about that.  My husband is a cancer survivor so I know the horrible effects of chemo.

But all unnecessary suffering should be prevented.  Always!

I am not into the harsh approach towards like, this concept of "no pain no gain" or "whatever doesn't kill you makes you stronger."  Frankly, I think it's just an excuse for people to be nasty and mean.

Now that the ad homin attacks have begun to flow, I am saddened that my fellow progressives are so fearful.  We live in a society that is driven by institutionalized avarice.  Our televisions blare with ads telling us that we should, '. . .want it all, . . . want it all, . . . want it all, and that we should want it now.'

What have I learned from history?  From my own history, I survived a war and it did make me stronger.  I would not wish that anybody should endure the horror and violence of that experience.  Yet, it is part and parcel of who I am.  Likewise, college was a struggle in night school while working two jobs to make ends meet and to pay tuition not covered by my era's GI Bill.

Recently, one of my aunts died after an 11 year battle with non-Hodgkins lymphoma.  Her last years, after living through hospice care twice, were characterized by an inspiring strength of character that seemed to grow by the day. I will tell you, both from my wartime experiences and from observing people like my aunt, that facing death or dire situations does in fact strengthen the soul.

In the broader context, the Great Depression did strengthen this nation.  It gave us the resolve to wage World War II.  We took that fight to the attackers.  We literally tracked Yamamoto down and killed him.  Need I remind any of you that there is no such public mandate for Bin Laden.  Despite attacks in New York and here in Virginia, it's remained largely business as usual.

Yes, I understand that people who lived throught the Great Depression hoard food and are inherently thrifty.  That very point validates my argument about the need to return to some fundamental values in this country.  How sad that we have become a nation that allows itself to be lead by fear not conscience.

I am not heartless and have in fact spent my entire adult life in service to others.  I know very well the heartache another depression will cause.  However, I also believe that it may well be the very thing needed to return us to a nation that honors hardwork and thrift.

I don't think there was a single ad hominem attack levelled here, with the possible exception of my characterization of your views as "extremist" and "self-serving," for which I apologize.

of any Great Depression II will be those very same surviving members of the Greatest Generation.  Those are the people living on fixed incomes, pensions, and dividends who will see their money dry up.  So, you're willing to put the oldest and most vulnerable, who already went through this before and have nightmares about it, through it once more.

Blech!

An acute economic crisis is something, such as war, that only those who haven't lived through it want it to happen. For those who have lived through them, they know that it is nothing but pain, heartbreak, and social breakdown.

Guess what? Those who are responsible for the economic crisis won't be punished: they have enough money to weather the storm.

The people who will end up paying with their jobs, life, and families will be the people who paid their taxes and their bills on time. The little guys who played by the rules.

Bailing out the big thieves, as unsavory as it is, is necessary. Let's not burn the house down because reckless children put it on fire. Let's stop the fire, save the house, and the punish the children.

Financial market regulation has developed over the course of 80+ years.  The last significant piece of legislation on the topic (and yes I have harped on this) was Sarbanes-Oxley, which was not passed in a week's time.  If you want to reorganize all these regulators, that is going to take more time than a week.  There is the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, National Credit Union Administration, the SEC, the CFTC, SIPC, the PBGC, a bunch of Self-Regulatory Organization (SROs) and a myriad of state regulators.  Just giving everybody an idea of scope because its huge.  And that won't happen this year.

Great idea though, but it won't be in this package.  Or if something is, it will most likely just be a bolt on to existing authority of one of those many regulators I named.  The problem with two many sets of reviews though is that there is the danger that someone thinks someone else's review caught something; consequently, important things can slip through the cracks.

I meant too many sets of reviews not two many.  =)

and everyone, including Bush and the Free Marketers understand this. A sad fact is that a new President can bring real changes only in the first couple of months of his presidency, and he has to do it at one fell swoop before that window closes, which is why FDR's 100 Days was so crucial, so if we keep postponing "fixing" things it will never get done. A little hurting may be good in order to compel us not to dilly dally and give the lobbyists and big money time to muck it up, but a lot can bring us dictatorship and violence.

We all know the Big Money caused this mess, but Big Money will not be the ones hurting, it will be (and are) the innocent little guys and the middle class. This, by the way, is exactly why I've been plumping for Democrats to get rid of the Free Market Religion (or at least modify it deeply), so as to be able to argue successfully against the conventional wisdom of Free Market. We do have to "do something" for many reasons, among them, if we do not, foreign investors, for example, will never trust the American financial system again, and how will we then continue to sell our Treasuries abroad in order to finance our deficit?

I grew up during the Great Depression and please let us not permit that to happen again when we have the tools to prevent or ameliorate it. The unintended consequences which flow from such a disaster are unknowable and inevitably terrible.  

Teddy, I gotta address this meme that our current financial problems were caused by greed on Wall Street, and that somehow the middle class is just a innocent victim in all this.

Well, sure, some Wall Streeters made money off these mortgage backed securities. Plenty of Wall Streeters didn't. Thousands of people lost their jobs at LEH last week, and many who kept their jobs lost their bonuses (even with the provision for paying bonuses in the LEH bailout), and the vast majority of these people were hardworking folks -- investment bankers, analysts, traders, secretaries, janitors -- who had nothing whatsoever to do with mortgage backed securities.

As for us, the middle class, well folks, ask yourself these questions:

1. Did you accept a low introductory rate credit card in the last 10 years?
2. Did you take out an adjustable rate mortgage?
3. did you take out a car loan for a $30K+ automobile?
4. Is your total monthly debt more than 30% of your gross pay?
5. Did you take a home equity loan in the last 10 years?

Because a lot of these decisions were driven by greed. In fact, without this greed, the Wall Streeters would not have been able to do what they did.

Now, to me, there are two basic differences in the greed exhibited by Wall Street and the greed exhibited by Main Street, but the main one is that Maibn Street has a lot more votes than Wall Street.

Folks need help. But lets not misdiagnose the cause of the problem, because that leads us to the wrong solution, and lets not scapegoat.

The answer is "No" for me for all five. Be that as it may, I agree that the pervasiveness of Greed (a normal human condition, but exacerbated by the introduction of Free Market theory which sanctified greed) has been a distinguishing characteristic of this mess and of our society for two or three generations.

Nevertheless, it is not the greed of the middle class which invented all the fancy financial instruments which brought down Wall Street; they also did not invent the adjustable rate mortgage and the liars' loans. The middle class took advantage of them once invented, and they were assured by the professional loan officers on whom they relied (foolishly perhaps, but modern life is so complicated that we all cannot be experts in everything, so we rely on professionals) that this was all perfectly acceptable and safe.

When you have professional economists proclaiming that our American system of a consumption-based economy is the finest expression of mature capitalism's development, and a President who tells us to go shopping instead of instituting rationing and war profits taxes when he took us to war, why do you think the average citizens would be wary of the system? Moreover, anyone who questioned the Free Market system of Greed is Good was a social and political outcast; those who warned against constant inflation of the money supply, or objected to the outrageous speculation in derivatives were subject to what can only be called character assassination.  We certainly fell off the "A" list.

Perhaps the word "innocent" is a little too much, but the middle class Main Street is not the ultimate guilty party here, if we are assigning guilt. Let's not forget, also, that supposedly sophisticated foreign bankers and investors were every bit as complicit in this as the American leaders. In the final analysis, it is my opinion that the Free Market theory, which sounds so convincing and scientific, and which converted the world's leaders to its ways, is the root of the problem.

I was just trying to make a point that there was plenty of greed to go around.

The causes of this mess are complex. I just think it is facile, unfair and ultimately harmful to simply to blame it all on Wall Street greed.

Financial instruments like adjustable rate mortgages or even (gulp) nodoc loans (a/k/a liar loans) are not inherently good or bad. Indeed, adjustable mortgages have helped millions of people own homes, which IMHO is a generally positive thing.

Sure, some people had advantage taken of them, but it all still owrked because people were greedy for material goods, and it still raises the question of why greed for these folks was acceptable, but somehow when practiced on Wall Street it is a horrible sin that must be punished.

I'm not trying to be judgmental, and I'm not even anti-greed (though I think we would all be better off if there  was a little less materialism in our society, but whatever).

But it's not simply a matter of greed. Consider, for example, people who think that Wall Street banks purchased risky securities out of greed. Well, yes and no. About two years, when the yield curve inverted for a long period of time, banks needed to take on greater risk to remain profitable. So, it wasn't only banks wanting to own everything -- economic circumstances dictated the moves of even conservative banks.

Indeed, there is a reason that inverted yield curves hacve predicted every single post WWII economic slowdown -- because they create conditions that constrain capital and impair the availability of credit.

What sets this situation apart is the level of fear.

We had rules that prevented people from getting easy credit in the past, and the financial industry used their muscle to get rid of them.

And the financial industry understood very well that they were lending money under conditions that couldn't be paid back.

How well did they understand this? Well enough that they pushed for a new bankruptcy law back in 2005, to make sure that they were going to be able to squeeze the last penny of their victims.

Here is the true tragedy: many of the people who got subprime mortgages could pay the initial low rates. Had the financial industry lived with the modest profits, we wouldn't be living through this crisis.

But no. They wanted to get all of the profit they thought they were going to make. When people began to default when the higher rates kicked in, the rational solution was for the mortgage companies to go back to their lenders and redraw the terms so that they could stay in their homes and for them to stay in business. But with every house lost, the usurious rates on the other subprime mortgages became more and more important to keep.

So the financial industry could have avoided this three times: by respecting old usury law, by not giving credit under punitive conditions, and by renegotiating conditions once it was obvious that their deals were not sustainable.

I don't know that this Congress and this president can do it.  What we can do is a stop-gap measure.  Then while that is working, we can work on something truly substantial.  

We are going to have to address not just this bed debt.  We need to address the financial system as whole.  And not just ours, but also the world's.  And we will have to look at the credit market as a whole too and address our over-extension into debt.  Because it isn't just Wall Street that was high on leverage.  Households and government are also swimming in debt.

I have faith that Congress will not soon forget this.  I have faith that a stronger Democratic majority next year will come up with something really good.

is beyond the power of geographically limited nation states to regulate.  You are correct, the world financial system greatly needs rationalization and enforceable rules of engagement, however.  That means international compacts and agreements, and that cannot be reached if we leave it all up to the "free market." I surely do not want accolytes of the Free Market designing the new system, so pray that Republicans do not win the election.

Wachovia looking for a buyer

http://www.ft.com/cms/s/0/1830...

This underscores again the need to take quick action.