Comment from Michael
Time October 9, 2008 at 10:15 pm PDT

Am I mistaken? Didn’t this site call for the passage of the bailout?

Comment from Michael van der Galien
Time October 9, 2008 at 10:21 pm PDT

Of course it did. But it’s a funny t-shirt, that’s one, and two: those individual homeowners are responsible for a big part themselves as well – it’s worth pointing that out.

Comment from Michael
Time October 9, 2008 at 10:29 pm PDT

Are you guys going to comment how the bailout has failed to do jack? Or is that now forgotten so you can write articles on the fact that the DOW is tanking?

I can do a search and see you guys calling for the bailout and that we’d be in deep shizznizzle if it didn’t pass… Guess what, we are in deep shizznizzle and it passed. Own up to it.

Comment from Michael van der Galien
Time October 9, 2008 at 10:32 pm PDT

Michael: yeah, because the bailout would pay off immediately wouldn’t it?

O, no, wait, it actually takes time to work, which is why it had to be passed ASAP.

And if you paid attention; we were more critical of the bill that passed eventually, which was a ridicilous 400 pages long.

Comment from C Stanley
Time October 9, 2008 at 10:42 pm PDT

It was supposed to have a psychological effect immediately though, and that didn’t happen (I guess you could argue that it was the delay and changes to the bill that made that ineffective.)

I still feel it was a big mistake, particularly since it looks more and more like it was only the first step and more and more interventions are going to be necessary. I think I’m on record as objecting to the intial bailout for that very reason, because one of my first thoughts was to question the position we’d be in if this massive spending didn’t work.

Comment from Jason, Managing Editor
Time October 9, 2008 at 11:40 pm PDT

It is a curious but often true feature of the stock market psychology that cause often comes after effect. The Wall Street axiom is "buy the rumor, sell the news" — whatever positive impact was to come from the passage (not the implementation, just the passage) of the rescue bill impacted before it was actually passed.  Traders "priced in" the assumption that a rescue bill was coming.  Then when it actually came, they sold to get back to the business of strengthening the cash positions of the hedge funds, etc.

It should be pretty close to its bottom at this point.  I think we’ll see some rebound next week. 

Comment from Michael
Time October 10, 2008 at 2:22 am PDT

You can’t use the time argument now. Remember when they didn’t pass it the first time and the markets crashed? You didn’t hesitate to claim it was because the bill didn’t pass.

Now, AS SOON AS IT PASSED, the markets have COLLAPSED. And, now all of the sudden, it will take time?

So, we can get you guys on record… how much time?

Comment from Jason, Managing Editor
Time October 10, 2008 at 2:53 am PDT

No idea. I never claimed anything on behalf of the rescue bill except that it was the best of a very short list of very bad options. And I stand behind my argument.

Now you go on back to memorizing the latest tract from RonPaul.

Comment from Michael
Time October 10, 2008 at 2:51 pm PDT

So you called for passing of an $800 BILLION dollar bill that you admittedly don’t know how long it will take to have an effect AND in fact don’t know if it will work at all?

Guys, the markets are crashing. The bill didn’t and won’t do jack. All it did increase the national debt and line the pockets of a few bankers.

Comment from Jason, Managing Editor
Time October 10, 2008 at 3:01 pm PDT

So you called for passing of an $800 BILLION dollar bill that you admittedly don’t know how long it will take to have an effect AND in fact don’t know if it will work at all?

Yes, that is correct, except I would place the eventual cost to likely be much higher, probably on the order of $1 trillion. Other rescue “firewalls” in other sectors may raise that bill as well. It is a terrible situation, but it is the necessary cost at this point to prevent a much worse economic fate. You certainly offer nothing in the way of a better idea.

The rescue bill has a chance to work — a pretty good chance, from the analysis that I have seen. But no, it is not "for a fact going to work" and it does not provide a to-the-minute prediction of exactly when the stock market will begin to feel the impact from the loosening of credit markets and the stabilization of derivatives markets.  There are no certainties.  And yes, it will probably take longer to implement such a huge plan than 2 weeks — your demand for instant gratification may be a reflection of a common cultural weakness in America, but it is not a reflection of someone who has thought seriously about what is involved here. What, do you think they just print up $700 billion and carry it to Wall Street in suitcases?

Anyway, if you wait around for absolute certainty before acting, you will never be able to respond to a crisis.  I already tried to explain that to you before, but clearly you just are still in sophomoric "gotcha" mode. But my view is summed up nicely in a column by Steve Forbes:

One of the few heroes on the GOP side in this whole financial mess is Representative Paul Ryan (R–Wis.), a 38-year-old who sits on the tax-writing House Ways & Means Committee. Early on he realized the magnitude of the credit crisis and resolutely backed the Paulson rescue package, not because he liked it but because in disastrous times one must grab every weapon at hand, even the imperfect.

Your view, on the other hand, can best be described as just pseudo-populist ignorance:

All it did increase the national debt and line the pockets of a few bankers.

That’s right, it’s a conspiracy!!!

Comment from Michael
Time October 10, 2008 at 4:52 pm PDT

" clearly you just are still in sophomoric "gotcha" mode."

Do I have to dig up the quote where the DOW fell 800 points and you guys quipped about how the failure to pass the bailout caused it. Now, with the bailout passed, the DOW has shed over 20% and you get upset when I said the bailout hasn’t done jack?

"You certainly offer nothing in the way of a better idea."

You are wrong. The banks that are failing are the ‘investment’ banks. They played the game and got burned. There are plenty of banks, good banks, that have made sound monetary decisions. Now is the time to reward them by forcing the bankruptcy of these gambling banks so the wisely-run banks can expand.

Instead, we are going to save these poorly run institutions and in fact place the people who ran them into the ground, in charge of the $700 BILLION! (http://ap.google.com/article/ALeqM5ivUNym327VFLHYnu3QVFrMPykTdAD93LEDMO0)

So, forgive me, if I don’t want to trust $700 BILLION to the very same people at the heart of the financial trouble… I’ll take my chances and let those firms go into bankruptcy.

"$700 billion and carry it to Wall Street in suitcases?"

Yes. The Fed ‘creates’ credit at the push of a freaking button! How do you think they lent AIG $85 BILLION and then another $38 BILLION?

Where do you think they are getting the money to lend the $1 TRILLION for commercial paper?

Comment from Jason, Managing Editor
Time October 10, 2008 at 5:08 pm PDT

And how much does the Fed pay for those mortgage-backed securities which, because of mark-to-market combined with the shutdown of the underlying derivatives trading market, have a completely uncertain value at this point in time?

Resolving questions like that is going to take a little TIME, Michael.  The point is that the bailout hasn’t even started yet, it has just been authorized. So take your infantile “gotcha game” and stick it in your…ear.

You are flatly factually wrong when you say that only banks that engaged in lots of risky derivatives trading are endangered.  Because other banks own the debt of the investment banks, when the investment banks go down they can trigger a chain reaction that takes down other banks, which in turn take down other banks, and so on. Iceland just had to nationalize all three of its major banks to prevent the imminent collapse of its entire economy — do you think Icelandic banks were all directly and heavily buying U.S. mortgage derivatives or is it more likely that the chain of failures we are seeing all over the world might be evidence that the fallout is not limited solely to the investment banks??? I feel pretty safe in saying that if it is taking down Iceland (along with a dozen or so other countries already), that the problem is not even close to being as contained as you claim (without any evidence whatsoever, as usual) it to be.

You are also flatly wrong on how the rescue plan works.  It isn’t just a block grant of $700 billion.  It is a detailed debt-for-debt swap where the Fed will trade T-bills for illiquid assets like the mortgage-backed securities that are clogging the credit markets due to their uncertain valuation.  By replacing an asset with no currently known value (mortgage-backed securities) with an asset with a known value in an active trading market (T-bills), the rescue plan allows lenders throughout the market to more accurately determine the true credit-worthiness of other banks, and thus to become more willing to lend to them once reassured of their actual stability.

Please read the last sentence repeatedly before replying again, as I am tired of just playing "gotcha games" with you.   If you aren’t capable or willing to engage with the substance of the discussion, you shouldn’t bother commenting.

P.S. My answer to the question on the T-shirt is, “No, you don’t get bailed out while a lot of the bad guys do. It’s not fair, but it’s what there is, because the alternative is worse for everyone.”