September 27, 2008
John Cochrane reveals his gut — and other — reactions.
This week, a group of economists signed a petition citing pitfalls in Treasury Sec. Henry Paulson's Wall Street bailout plan. Finance professor John Cochrane of the University of Chicago helped organize the petition drive. Cochrane talked with David Kestenbaum about alternatives to the bailout this week.
I completely don't understand how banks can ever stop giving loans. It's like the pharmaceutical companies not doing research. They will go out of business. Otherwise, if interest rates are so high, then prices will fall and people will buy cash.
I see a bunch of names on the letter that are associated with many institutions of higher learning. I have yet to see any description that tells in real terms,(person work years) the loss of value to the market and the cost of the bailout.
What the 401k contributing, social security investing, taxpaying baby boomer really wants to know is:
How much longer will I have to work?
A. Not much your about to lose your job.
B. As long as you can, your savings are toast.
C. 5 years, that is about the time needed to make up the gap between what you will need in retirement and the additional contributions needed to replace the value lost in these bad mortgage deals.
D. We have no idea, our degrees are more about philosophy than statistics.
I know credit is hard to get right now but I would be really interested to hear about what is going on at prosper right now (www.prosper.com). This isn't an advertisement I am acutally really wondering if they are still working and what kind of lending they are seeing go in and out.
Like millions of Americans, I am really skeptical about this whole 750 Billion bail out. And, I'm especially skeptical about the RUSH to spend the 750 Billion dollars of tax payers money ... which does not allow independent economists the time to properly investigate and evaluate this plan. In addition, Bush and the Democrats seem to be united on this bail out. My guess is that Bush wants to pay back big money Wall Street people, who helped him over the years ... and, since the Democrats expect to rule both houses and, possibly the White House ... they are salivating at the chance to control spending the 750 Billion. In spite of all the rhetoric about careful spending and oversight, the Democrats have already allocated 20% of this huge sum to fund crooked liberal programs, like Acorn. If we simply print Billions for bail outs, even if the market returns, inflation will make our currency virtually worthless.
P.S. Did anyone ask Alan Greenspan what he thinks???
Congress is about to make the biggest tax increase in history. This change is going to affect families for generations. The peoples' voice is being ignored. What would happen if Bailout bill reading rallies were held all over the country?
What do you think?
If you want to hold a Public Bill reading, you should text the time and place (your town square) to your friends. Be safe, be careful, and obey the law. This is a message of peace. Have fun!
Prevent message tracking
If you think this is a good idea cut and paste this entire message into a new email and use the blind carbon address line to send it to your friends. (BCC) protects the identity of those you care about. It also helps protect against spam. In Gmail click the (add Bcc) in Yahoo it is (show Bcc) Hotmail is (show CC, BCC)
When the people lead the leaders will follow, eventually.
Be sure to print a copy of the bill to read.
Stalling is good. The Europeans have the right idea. The longer gridlock provails, the more likely panic subsides as we all get used to living with a potential credit crunch. The potential will diminish as market forces drive creative decentralized solutions. Gridlock is the binding at the top of the mop. Its the loose strands that always clean up the mess.
I hear little-to-no news coverage on several key questions: What if anything is the federal government going to do to keep this from happening again? What is going to be done to hold those responsible for such high-risk loans accountable? I'm really concerned the bail-out sends a really bad message: an dubious financial instrument like sub-prime mortgages needs only be wide-spread enough and cause a big enough threat to the national economy to force a government bail-out and get many involved in it off the hook. If the high-risk scheme turns out well, mortgage lenders, banks and rating agencies make good money; if it fails, the tax-payer pays the price. If such foolish business decisions are rewarded by government bail-outs, am I an idiot not to get in on it myself the next time around? Do we want to reward (or rescue) people involved in this?
If the taxpayers will be responsible for this bailout, how about some real input from the people! Here's mine: What if we take the money and make payments of 100k on recent home mortgages (5-8 years) of 100k-200k, 150k on mortgages of 200k-300k and maybe 200k on homes of 300k-500k. Then increase (perhaps double) property taxes to help raise the capital in the US treasury. This should save thousands of dollars to the people every year, the one's down here, and give us the ability to make double payments on property taxes and afford some of the necessities that have been recently taken out of buying range, like gas to go to work, food and basic needs as well as those things we would like to have. This in turn should keep the economy healthy ensuring public spending and indirectly helping out Wall Street. Then we should take (or shakedown) the gains from greedy Wall Street CEO's and the such (except their salaries) to put into the treasury. The drowning firms should then be able to invest and help some domestic industries as well as small businesses revive themselves or stay above water during this economic depression. During the market's volatility from about 1996-2002, home prices began to rise slowly then very rapidly creating a selling mania in which home prices were no longer market driven but inflated in response to the weak market. This inflation in the price of homes was artificial and driven by greed in hopes of making some money, hence the problem we have today. This was such a problem that it prompted the FBI to investigate real estate firms in select big city markets. And so it is time to justly give back to the true hard workers that are and will bear the brunt of this financial mess created by the greedy capitalist few. If you divide $700 bil by $100k, you should be able to help 700 mil homes, there aren't 700 mil troubled mortgages out there so there should be more than enough money to around. It sounds idealistic, but really, I'm just tired of the corrupt capitalist ways of this country and the government that supports and tolerates it. It's time for some real change, not just an ad campaign. So if some real economists with an open mind can entertain this thought and perhaps develop it into a viable solution and throw it out there for public discourse, then we shall witness a sort of democracy that is absent in this country.
Is anybody even listening to this guy ? This is absolutely the right plan. If a small business needs credit and his/her bank dont have money, let either the bank borrow from the Fed or the Fed directly lend to the small business. Why bailout wall street for their mistakes ?
I am very skeptical about the Bail Out as well. And I see some remarkable resemblances between this and some things that went down in the 1980s.
The Savings and Loans Crisis in the 1990s driven by what was apparently multi-billion dollar bail outs of Thrifts due to defaulted Loans held by all Three Bush Brothers, including George W.
Why isnt anyone looking that. In the very least I see a distinct pattern of Behavior, and worst case scenario it smells a lot like a long term Set UP.
People should be in JAIL! But instead we see this incredible train of B.S. in the press about politics rather than criminality.
If anyone else were to rob a bank, there would be a man hunt.
I guess if they arent black and weilding a gun at the time, that act just doesnt carry the same kind of threat. But then I wonder what thousands of Americans living in Tent Cities from Florida to California would have to say about that.
Get on the Ball American Press! The Wall Street Journal Covered this in the 1990s why ignore it now, because I cant be the only one out there who sees this rather disturbing likeness emerging from the Sceptic Swamp that is Capital Hill.
I will give you key words:
Neil Bush--Silverado Savings and Loan
Jeb Bush/Armando Codina and Broward Federal Savings
Harken, George Bush, and Smith Barney.
Keating 5.
Gods Do I have to do everything in this country?
I'm sorry but its hard to beleive that if these banks dont get this bailout that there will be this credit crunch. They'd be willing to hold my $100,000, but would be able to give me credit. This is what happens when you give an institution too much power. They make it seem as if we have this dependence on banks, people are watching and waiting to see what the Feds are going to do. Its interdepence, the banks need us just as much as we need them. I'm just glad that the Feds reached an agreement
Howard - I was wondering what Greenspan's thoughts are on this, too.
It never ceases to amaze me how the US government can "find" money for big business and yet leaves the average citizen high and dry. A cap on payments to the idiots who got into the mess in the first place isn't good enough - they should have to sell of assets to make up some of "needed" bail-out monies themselves.
This whole fiasco makes me so sick I can't think about it too long...it actually makes me physically ill.
an you explain grammswaps and their impact in this meltdown?
"We're not even in a recession now." It must be great being a university professor, tenured for life. I know so many quarters of GDP negative growth. Meanwhile back in the real world, everyone who thinks we're in a recession, raise your hand. I'm no fan of comrades Bush, Paulsen and Bernacke's nationaliztion of Wall St. profits, but if anyone ever says they want to deregulate the finance industry again...
To what extent are alternatives to the Paulson plan being pursued by the Senate? My sense is that the debates are about adding or removing stipulations to the plan, as opposed to looking at alternative plans. What chance is there of these 100 petitioning economists actually changing the core of the Paulson plan?
Her is paranoid peace off mind from Bosnia. Due to the Russian raw material and China/India people potential, America's economy is ultimately loosing the economic global battle. I'm thinking that all this bail-out business is really just a way for government to bay-out and take control off real estate business in the USA. This will serve for tough decisions needed in the future regarding closing the USA market from global movement, baying time to switch to new energy source, consolidate, use nuclear power to blackmail international community or... My interest is that America remains a super-power, for only balance in the world can guarantee peaceful solutions for many off us. Cowboy oil stilling from Middle East is short term solution but I don't see long term one, for neither presidential candidate have suggested strong economy plan, or there is maybe a hidden agenda. God help us all indeed.
I don't understand why they don't give the $700B to the people who are in debt. The holders of the so-called toxic assets are the ones in need. It's called trickle-up theory (TM). Give the money to the people, they will pay off their debts, the institutions will get their 'liquidity' - from the bottom up, not the top down.
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