Krugman Warns Of "Covert Bailout-Snuck Past Voters-Bail Out Investors-DO NOTHING For Homeowners"

[kpete]

Privatize the profits, socialize the risk. American capitalism in its finest hour.

Never do I want to hear again from my conservative friends about how brilliant capitalists are, how much they deserve their seven-figure salaries and how government should keep its hands off the private economy.

Except when it’s time for them to be bailed out:

Paul Krugman

March 17, 2008, 8:17 pm
The uses of incomprehensibility

I’ve been looking around, trying to see what the great and the good — or at least those who play such on TV — are starting to say about what should be done. And I was particularly eager to read this piece, http://www.ft.com/cms/s/0/194ed856-f441-11dc-aaad-0000779fd2ac.html?nclick_check=1 by a top guy from Pimco. Pimco is a smart outfit, with a deserved reputation for talking frankly about stuff. So what would Mr. El-Erian say?

I read it; and read it again; and again. It took me the third reading before I got it.

Why is it so incomprehensible? Because what he’s basically saying is,

bail out the investors,
do nothing for the homeowners

.....................

But it’s not going to work. The financial industry is not going to get away with a covert bailout, snuck past voters with obscure wording.

more at:
http://krugman.blogs.nytimes.com/2008/03/17/the-uses-of-incomprehensibility/

another good link:
Rogoff: The debtor's empire
By Kenneth Rogoff
http://www.dodgeglobe.com/stories/102203/opi_1022030009.shtml

[SpiralHawk]

1. "Smirk." - republicon 'taxpayer-enhanced' financial cronies

[wain]

2. This is nothing new

Clinton did it for the banks in the 90s when defaulting loans to Mexico and Latin America countries threatened financial market stability.

If you screw up really, really big, then you'll get bailed out.

But, we do need to see and read more about bad times for the financial wizards that got us into the sub prime mortgage debacle. Not rewards.

[NashVegas]

3. Many DUers Have Said This When the First Phase of Bail-Out Came Down

Everything that's being done is being done for investors. If anyone who bought a home expecting to live in it for 15-30 years should also benefit as a side effect, that's an accident - but don't worry, we'll fix that.

[varelse]

4. "...the Fed must act in unfamiliar ways"

Corporate welfare is "unfamiliar"? Suddenly it is a bold, new plan of action???
:nuke:
:grr:

[elizfeelinggreat]

5. I'm repeating myself

but I think this fits many threads today. Follow the Money, the same people are benefiting:

from Wikipedia: The US Savings and Loan crisis of the 1980s and 1990s was the failure of several savings and loan associations in the United States. More than 1,000 savings and loan institutions (S&Ls) failed in "the largest and costliest venture in public misfeasance, malfeasance and larceny of all time."<1> The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government -- that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts-- <2>, which contributed to the large budget deficits of the early 1990s. The resulting taxpayer bailout ended up being even larger than it would have been because moral hazard and adverse-selection incentives compounded the system’s losses. <3>


A taxpayer-funded government bailout related to mortgages during the S&L crisis may have created a moral hazard and acted as encouragement to lenders to make similar higher-risk loans during the 2007 subprime mortgage financial crisis. <4>

The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990-1991 economic recession. Between 1986 and 1991, the number of new homes constructed dropped from 1.8 million to 1 million, the lowest rate since World War II. <5>

[mopinko]

7. ding ding ding

we have a winner.

[nashville_brook]

6. "privatize the profits, socialize the risks" -- the meme of the era.

[L. Coyote]

8. HELLO! Are they bailing out Republican election results. HELLO!

Is the object to save R seats in Congress?

[sbyte]

9. Point of Order: Bear Stearns Bailout is Illegal

The fed's mandate is to protect and regulate the Banks, not Brokerage houses.

The Emergency Banking Act, passed by Congress on March 9, 1933, provided for government assistance to protect vital banking functions, but was restricted to commercial banks.


----
I relate to the fed's actions from a computer programmers/plummer point of view. The Fed is Tinkering with problems from a bottom up method and opposed to a top down approach. I don't think they realize the the whole thing is broken, the logic that connects the financial conduits failed. Yes warning flags of distress are signaling code red. The former solutions is to dump in more drano dollars to clean out the systems money pipelines and open the dam gateway to flush residual muck down the river. But the lake of liquidity is just getting as low as the interest rates.
What is needed is a top down approach to rework the system, using the parts that work. A systems analyst is very much needed.{but not good old alan) Remembering a program works only when ALL the parts work.

----
Think about letting go,,, see LaRouchepac