The money funnel is being lifted into place

[solarbird]

Good morning.

Karl at Market Ticker takes apart the Bush Administration's history of creating and enabling this credit crisis that is now being used to funnel taxpayer money to "bail out his screwup," even though it won't actually solve any problems, but will certainly give a lot of money to certain friends. Karl's particularly angry that Mr. Bush has used the exact same fear tactics that he's used for everything else on this action, but, well, yes. Karl also points out that the Congressional Budget Office says this will make it worse. Asian banks are worried about panics against US debt. Mish at Global Economic Trend Analysis urges people to write in telling them to scrap this disaster and start over, calling it a mad rush to judgement, but while CNBC reports that calls are running 300-1 against, it looks to me that, as usual, the political class has made a decision and the fix is in. (C.f. the joint statement from Sens. McCain and Obama.)

My favourite tidbit, tho', comes from this Treasury statement:

The $700 billion figure "[i]s not based on any particular data point. We just wanted to choose a really large number."

Read that again. Okay, now read it again. Amazing, is it not?

Meanwhile, the Fed has gotten even less capable of defending its target rate - overnight last night was 1.19%, a huge miss from the 2% target rate. The TED spread hit what is as far as I can tell a new record at 337 basis points before popping back down to a still-astronomical 308. Equities rallied on the realisation that there's no stopping this thing and that a lot of Wall Street is going to get hooked right up to the taxpayer - your - account.

Despite all this, I'm going to engage in a little bit of political protest tomorrow against this; we'll be meeting at 11:15 am at the coffee shop in front of Westlake Centre's main entrance facing Westlake Park. (The one that's in the little standalone building.) Come if you want; look good if you're gonna show up. I figure we'll be lucky to have four of five people, so every extra body counts. If you have any short, pithy sign suggestions, please let me know in comments.

eta: Thanks to nihilistic_kid for the Forbes link to the Treasury statement.

Comments

[elfs.livejournal.com]

The CBO article is misleading, I think. Yes, Orszag says that revealing the insolvency could make the problem worse, but so far it's the opacity that's doing the most damage. We need to get the deadwood out of the system as fast as possible. Orszag seems to be saying that "revealing it all at once" is the problem, and maybe he's right, but don't insolvent institutions need to be flayed out of the system now? Otherwise, they're playing a con game.

[solarbird]

I agree, but the problem is twofold; this won't actually increase transparancy. It, however, will almost certainly funnel dramatically more money than expected, and create a situation where a lot of non-transparent, apparently-sound companies fall over all at once and/or be nationalised, and that'll be even scarier than transparency showing how badly off so many of these companies actually are. (Or were.) It'll add to uncertainty rather than decrease it.

[mundivagant.livejournal.com]

I'm not sure if what you're doing will even get media attention, but I wish you the best of luck in doing it. As for slogans, I think most of the ones worth using have been uttered by both political parties in the last week ("don't privatize profits and socialize losses", etc). Honestly you could probably just grab a few catch phrases from CNN and MSNBC (lol, not Fox, of course), and you'd be ready to roll.

[solarbird]

Oh, I didn't do this thinking it would matter. Hells bells, we had, what, somewhere over 60,000 against the Iraq war and nobody paid any attention to that, either. The political class made its decision and mostly everything else has been theatre.

[mundivagant.livejournal.com]

Pencils for sale!

...sorry, practicing after reading your last economic update.

Pencils for sale!

...actually, to address this directly, it has gotten media attention, at least from media that aren't FOX.

[solarbird]

Second post made! Two overnights, that's unusual for me. I particularly recommend Naked Capitalism's condemnation of "Mussolini-style corporatism in action."

[llachglin.livejournal.com]

There's a difference between the Obama/Dodd and McCain approaches, and it's an equity stake requirement that to me, is a minimum requirement of a good bailout bill. I would like to see a lower number both for the amount of assets that can be purchased at one time and the total amount, and an expiration date of Inauguration Day so that this just gets us through the election and we can evaluate how well it's working at that time before we commit to anything bigger.

I also wouldn't mind seeing a bill that uses a different mechanism for addressing this crisis.

But I disagree with the implication by many that there is no crisis and/or--I'm inferring that this last part includes you--that nothing should be done. I don't think it's just scare tactics to say that we're facing down a Great(er?) Depression if we do nothing.

It would have been better for everyone if this crisis had hit in January, or at least November 5 or later.

[silussa.livejournal.com]

I apologize for sounding a bit dim, but I am not sufficiently familiar with the operations of the FED to understand the meaning of it being unable to defend its target rate. Or what the target rate refers to.

[solarbird]

The target rate is the Fed funds rate, or the "overnight lending rate," the rate used to lend money overnight to banks. When the new talks about the Fed lowering or raising its target rate to "loosen" or "tighten" money supply, this is the one they're talking about.

When they can't defend a target anymore, they typically change the target to match the market. So really the Fed follows the market, not leading it, particularly in recessions.

[peakoilchaplain.livejournal.com]

Tomorrow could be entertaining, in the same way that the really steep downward leg of a roller coaster can be: http://seattlepi.nwsource.com/business/1310ap_financial_meltdown.html

. . . a historic White House meeting with President Bush, the two men fighting to replace him and other congressional leaders broke up with conflicts in plain view.

Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, emerged from the White House meeting to say the announced agreement "is obviously no agreement."