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[glynor]

So, what do you think?  Is the world order really coming to an end?  Is there anyone who doesn't suspect that our real enemies (other than the *********s in charge of our country and financial system, of course) will try to hit us now?

What say you?

- Comrade Glynor

[rjm]

There is something fishy going on given the unbelievable $ and urgency to approve it.

The American people should be very very suspicious, and should think about their children.

Here is one theory: http://europe.theoildrum.com/node/4563#more

[rjm]

I am half way through the audiobook "The Trillion Dollar Meltdown" by Charles R. Morris. Anyone who wants to understand what is going on this week should get it. The author is very knowledable and he researched and wrote the book before the meltdown started. Scary thing is that the current "adjustment" is just phase one of a multi-phase economic meltdown.

He does not discuss the other 2 elephants in the room which I am even more concerned about: peak oil and climate change. Peak oil is here now and in the best case will constrain economic growth and prevent us from pulling out of this current downturn. In a worst case, we will see a collapse of our civilization and the death of 5 billlion people over the next 20 years.

The other elephant is climate change. This one won't hurt our generation too much but will really screw up our children's lives. We need to reduce absolute CO2 emissions now, not just slow down over the next 20 years. Today CO2 emmisions are continuing to increase, and I expect this trend to get worse as we use more coal because we will have no choice as oil/natural gas gets more expensive. And if you are counting on carbon sequestration to save our ass, check out how many coal plants in the world are using it now. Zero. I just about sh*t when I discovered this fact.

[glynor]

You know what's amazing?

The current home mortgage default rate in the US is around 3%.  This is already vastly higher than normal (usually less than 1%), but even if you figure that it gets twice as bad as it is already, that only puts it at 6%.

Assuming it did manage to climb to 6%, and the congress authorized the treasury to outright buy every single foreclosed home it would only cost around $300 billion.  Even if we just bought them and tore them down and sold them for scrap, it wouldn't probably end up costing us more than $100-$150 billion or so net.

This $700b has nothing to do with the sub-prime housing bubble anymore.  It is because these banks tricked themselves into believing that these mortgage backed security pools were worth much, much more than any disaffected reasonable person viewing it from the outside ever could have.  And then, they made bets based on these imaginary valuations.  Bets in of 20 and 30 and 40 times the bank's entire net worth.  And now those bets are coming due and they can't pay up, and so they should fail.  You make a bet worth 40 times your company's net worth and you loose, you should go under.

[jgreen]

The world must be ending, because I keep agreeing with Glynor.

IMO, this is the high and low irony of it all:  If mortgage defaults are the root problem, buy up all the empty homes and let unemployed bankers live in them.  As most know, there is a scarcity value to real estate, which worthless pieces of paper just don't have.  Yet the discussion has always centered on buying up worthless pieces of paper, the only questions have been how much and what kind.

I can't help thinking of Roger Smith restructuring GM to compete with Toyota, etc.  He spent more to close plants than it would have cost to buy Toyota outright.  He got rid of a lot of wasted capacity, but did nothing to prepare GM to compete.

Now that we're faced with a housing freefall, don't forget that housing has yet to fall as far or as fast as it rose--and nobody complained on the way up.  Well, spending $700 billion anywhere, even on "good" policy, means that there's $1400 billion less to drive housing prices back up where everybody (who already owns a house) wants them.

Funny, in all this discussion, nobody seems to mind that health care, college aid, new home buyer aid, etc, etc, etc, will all be drained to pay for this.

[rjm]

Another interesting analysis http://www.theoildrum.com/node/4578 ...

[KingSparta]

nobody seems to mind that health care

What Health Care?

Medicare?

[JimH]

After the House voted NOT to support the $700 bailout today, Rep. Barney Frank of Massachusetts, a Democrat, had a few choice words for the partisanship.

As House Democrats and Republicans blame each other for the Wall Street bailout bill going down in flames, Representative Barney Frank of Massachusetts mocked the GOP leadership for saying that it lost some votes because of a partisan floor speech by House Speaker Nancy Pelosi.

Frank, one of the major architects of the bailout package, said he was "appalled" that members of Congress would put "hurt feelings" ahead of the good of the country.

"Frankly, that's an accusation against my Republican colleagues I would never have thought of making," Frank said.

"Here's the story: There's a terrible crisis affecting the American economy. We have come together on a bill to alleviate the crisis. And because somebody hurt their feelings they decide to punish the country. I mean, I would not have imputed that degree of pettiness and hypersensitivity....But think about this: Somebody hurt my feelings so I will punish the country. I mean, that's hardly plausible. And there are 12 Republican members who were ready to stand up for the economic interests of America but not if anybody insulted them.

"I think they are covering up the embarrassment of not having the votes," Frank said increduously at a Democratic news conference.

Among Democrats, 140 voted yes and 95 no. Among Republicans, 65 voted yes and 133 voted no. In the Massachusetts delegation, Democrats John Tierney, Stephen Lynch, and William Delahunt voted no.

Frank remarked on the numerical "coincidence" that the number of "deeply offended Republicans" who voted no equalled exactly the number needed to reach the 218 votes in favor to pass the bill.

"I'll make an offer," he added. "Give me those 12 people's names and I will go talk uncharacteristically nicely to them and tell them what wonderful people they are and maybe they'll now think about the country."

From The Boston Globe.

[glynor]

Video here: http://www.youtube.com/watch?v=vs0qkOgMabg

I almost shot beer through my nose as I watched that.

[jgreen]

it's easy enough to shout "partisanship" when it's the other guy doing it.  But substantial blocks in both parties did not vote for this garbage, thank Dog. 

My hope is that the bickering continues and wall street continues to fluctuate but nobody does anything of any substance, just like when Bill Clinton shut the government down twice and nobody noticed.  I think the only true risk to the economy is handing a blank check for $700 billion to the same crisis team/goofballs that one month ago said the economy was just fine.

Although this mess was caused by Greenspan's easy money mortgages, Bernanke is a Village Idiot, barely fit to function as Paulson's deputy, much less an independent central banker.

[KingSparta]

i found it interesting the Senate had like 10 pages, and the house had something like 700 or so pages of pork.

Then They Added A Bunch More Pork at the last moment (like we really need that)

The upper house salvaged the legislation by adding more than $100bn (£56.2bn)-worth of incentives for members to approve it.

These included a tax exemption for a specific type of toy arrow used by children and a $478m (£270bn) tax incentive scheme to encourage movie companies to continue producing films in the US.

maybe they also voted more money for the arts so they could pay more artists of excrement, and gutted cows.