Monday, September 29, 2008

Yes or No?: Today's Quotes on the Golden Fleece

I don't have any thoughts of my own on the current version of the Golden Fleece, so I'll -- once again -- quote others. More quotes may be added later today.

It passes my test of no equity, no deal; that, plus the danger of financial panic if it doesn’t go through, makes it worth passing, though celebration is not in order.

- Paul Krugman

There is no plausible scenario under which the no bailout scenario gives us a Great Depression. There is a more plausible scenario (but highly unlikely) that the bailout will give us a Great Depression. There is no way that the failure to do a bailout will lead to more than a very brief failure of the financial system. We will not lose our modern system of payments. At this point I cannot identify a single good reason to do the bailout. ...the restrictions on executive pay and the commitment to give the taxpayers equity in banks in exchange for buying bad assets are jokes. These provisions are sops to provide cover. They are not written in ways to be binding... Finally, the bailout absolutely can make things worse. We are going to be in a serious recession because of the collapse of the housing bubble. We will need effective stimulus measures to boost the economy and keep the recession from getting worse. However, the $700 billion outlay on the bailout is likely to be used as an argument against effective stimulus... If the bailout proves to be an obstacle to effective stimulus in future months and years, then the bailout could lead to exactly the sort of prolonged economic downturn that its proponents claim it is intended to prevent. In short, the bailout rewards some of the richest people in the country for their incompetence. It provides little obvious economic benefit and could lead to long-term harm. That looks like a pretty bad deal.

-- Dean Baker

...there’s just no way to get around the fact that the Bush administration will take the lead in implementing this legislation. And while the administration did cave on a couple of key points and allow in language that permits Treasury to take on equity in bailed-out firms and to do some mortgage modification, it seems likely from the differences between Paulson’s proposal and the Dodd-Frank counteroffer that the person who’ll be in charge of implementing this doesn’t really believe in doing that stuff. Under the circumstances, it looks like a bill that’ll be good enough to stave off collapse of the financial system, but probably won’t wind up addressing the full extent of the problem. This subject is going to have to be revisited after the election. But the unfortunate reality is that the current configuration of power in Washington still leaves the conservatives whose policies and ideology is largely responsible for the collapse in command of too many levers of power to simply implement a solution that’s not tainted by their misconception of the problem.

-- Matt Yglesais

It also seems to me to be really important to keep my anger focussed where it should be: partly on the people whose deals got us into this mess, but much more importantly, on the legislators who failed to do their jobs, or who allowed themselves to be seduced by idiotic economic theories which were, as it happened, in the interests of powerful lobbies. We're obviously going to have to pass some serious regulation to prevent this from happening again... We will also have to have some serious deficit spending. Regulation might prevent the next disaster, but it will not help with this one....

- Hilzoy

So is the package worth voting for? It is, in my view, but just barely and only as a stopgap. Congress did add tighter controls, and does not permit Paulson to go out and spend the whole $700 billion at once.... Given the choice of voting this rescue package up or down, the responsible vote is Aye. It's what's for breakfast. And we will have something else for lunch.... So the best outcome is that this bailout buys several weeks or perhaps months, that both parties' fingerprints are on this hasty and flawed package, that Paulson runs through only a hundred billion or two by the time Congress grasps that it's time to go back to the drawing board. And that the incoming president starts thinking now about how to do this right.... Think of this package as a bridge -- not an Alaska-style bridge to nowhere, but as a just-barely-viable bridge to the Obama administration -- which can then begin the arduous task of getting it right.

-- Robert Kuttner

I’m being asked two big questions about this thing: (1) Was it really necessary? (2) Shouldn’t Dems have tossed the whole Paulson approach out the window and done something completely different? On (1), the answer is yes.... On (2), the call is tougher. But putting myself in Barney Frank or Nancy Pelosi’s shoes, I’d look at it this way: the Democrats could start over, with a bailout plan that is, say, centered on purchases of preferred stock and takeovers of failing firms — basically, a plan clearly focused on recapitalizing the financial sector, with nationalization where necessary. That’s what the plan should have looked like. Maybe such a plan would have passed Congress; and maybe, just maybe Bush would have signed on; Paulson is certainly desperate for a deal. But such a plan would have had next to no Republican votes — and the Republicans would have demagogued against it full tilt. And the Democratic leadership cannot, cannot, be seen to have sole ownership of this stuff. So that, I think, is why it had to be done this way. I don’t like it, and I don’t like the plan, but I see the constraints under which Dodd, Frank, Pelosi, and Reid were operating.

- Paul Krugman 2

...if a rescue is really as necessary as informed observers think, then why shouldn’t the GOP’s friends in the business community have forced them to go along?... I think the Democrats had the strongest hand and just blinked at the thought of going “all-in” with it. Arguable that was the responsible thing to do. But on another level, you really can’t ever get anything done in the American legislative process if you’re not willing to engage in a little brinksmanship...

-- Matt Yglesias 2

If something really needs to be done, tell Paulson, the Republicans, and the Bush Dogs to eat shit and pass a bill Democrats can support.... Don't play football with Lucy.

-- Atrios, aka Duncan Black -- 2nd half from here

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