WASHINGTON -- Regulatory overhaul legislation working its way through Congress will end taxpayer-funded bailouts "once and for all," President Barack Obama said Saturday.(WSJ)The problem? Nobody with a brain believes him. Oh, don't take my word for it! Let's see what National Public Radio has to say:
We at Planet Money did an informal survey of economists and regulatory experts on the left and the right. We couldn't find any who fully endorse the reforms backed by President Obama and Democrats in Congress.
Everyone thinks the reforms just aren't enough to solve the problem.Take, for example, "too big to fail" -- the idea that if one of the largest banks in the country gets into trouble, the government will save it with taxpayer money.
"A vote for reform is a vote to put a stop to taxpayer-funded bailouts," Obama said in his speech in New York on ThursdayI cannot find any experts -- of any party -- who are willing to agree with Obama on this one.Will at least one reporter in this country besides Jake Tapper get up off his knees long enough to ask Minister of Propaganda Gibbs this question:
If this ends bailouts, why is there a clause in the bill authorizing up to $4 Trillion in "secured loans," and why is congress not striking existing language in 12 U.S.C. 343 that authorizes the Federal Reserve to hand out taxpayer money to foundering businesses that are favored by the US Government? (BigGov - Obama's Backdoor Bailout)
Reform that doesn't take 1,300 pages of congressionally-produced bureaucratic BS
John Steele Gordon sees this for what it is: More Crony Capitalism. He touts the solution of Niall Ferguson and Ted Forstmann:
(In a nutshell: moving derivatives trading from back rooms to exchanges and limiting the leverage that banks can use.)
The Senate bill wouldn’t do that. Instead it would move most derivatives trading to exchanges but allow the chairman of the Commodity Futures Trading Commission to decide what derivatives can still be traded over the counter. Does anyone see there a hugely empowered federal official (not to mention a golden lobbying opportunity for banks and members of Congress alike)? Is a back room at the CFTC an improvement over a back room at Goldman Sachs?
You want real reform? Let 'Em Fail!
The trouble with Wall Street isn't that too many bankers get rich in the booms. The trouble, rather, is that too few get poor -- really, suitably poor -- in the busts. To the titans of finance go the upside. To we, the people, nowadays, goes the downside. How much better it would be if the bankers took the losses just as they do the profits.Personal Profits, Socialized Losses
Happily, there's a ready-made and time-tested solution. Let the senior financiers keep their salaries and bonuses, and let them do with their banks what they will. If, however, their bank fails, let the bankers themselves fail. Let the value of their houses, cars, yachts, paintings, etc. be assigned to the firm's creditors. (WaPo - James Grant)
No surprise, then, the perversity of Wall Street's incentives. For rolling the dice, the payoff is potentially immense. For failure, the personal cost -- while regrettable -- is manageable.End the perverse incentive to gamble (Heads I win, tails the taxpayer loses), and the gambling will end. The prospect of having to eat their immense losses will restore some needed sanity to the market.
Personal responsibility. What a concept.
13 comments:
It is amazing that Hussein says this will end "Too big to fail" when clearly it is written in the bill.
I hope liberals are paying attention on this as it does not take an economist to see what is going on.
The Wall Street bill isn't the only instance either. I don't know if you caught it, but apparently GM and the big O have been so busy congratulating themselves on the supposed repayment of the loans to GM, they forgot people can still do math.
GM didn't repay their loans using money they earned from selling cars. Instead they used more government money to make it look like they had. Obama Lies, Freedom Dies is right!
Christopher: Libs are sticking their fingers in their ears and chanting "lalalala..." They don't want to hear the truth.
Mr. Beardsley! Long time no see. I hope the job is working out.
You caught that too, huh? Taking from one government pot and putting it into another. I asked some liberals on another blog this weekend where GM got the money, since they lost over $6 billion the last quarter of 2009. I still haven't gotten an answer.
Here's the thread, for the morbidly curious...
The job is great, thanks for asking! I don't miss the DR treadmill at all. ; ) I still see Ken every week and he keeps me up to date on the fun you all are still having.
I guess hope and change can magically transform huge losses into loan repayments. I wish I had some of that magic dust to use when paying my outrageous taxes. = (
And I wont be surprise of a 2nd Obama term. 50% of Americans pay taxes and another 50% doesn. The 50% that doesnt will enjoy not paying taxes therefore voting for a 2nd term for Mr Obama.
Obama calls his troops against tea parties and republicans?
http://www.politico.com/blogs/bensmith/0410/Obama_seeks_to_reconnectyoung_people_AfricanAmerins_Latinos_and_women_for_2010.html?showall
crazy world we live in!
No education hurts!
Unfortunately economics was not founded on sayings but rather principles. Personal responsibility is important, but not allowing the busts get so bad as to bankrupt a nation (even more than it already is) is even more important.
In Canada we didn't have a recession. There was a period of less than average growth, but for the most part, we've been okay. I wonder why that is?
Is Canada a more liberal country than America?
You didn't have the rampant speculation in Canada because your government was smart enough to not construct perverse incentives.
Chalk one up for Canada! Now if we could only learn a lesson...
What incentives does the US gov't have for rampant speculation?
We have the hardest regulations on getting credit cards, mortgages, etc... I know of. You wouldn't believe how hard it is to get a mortgage here! A 20% down-payment is a minimum down-payment. That's why we don't have busts.
It's b/c our markets are less free, to put it bluntly. The freedoms we care about are those that actually matter. Freedom of speech, religion, etc... (i.e. civil freedoms) - though, I should say, we have room to improve. We also care about rights. For instance the right to get paid a decent days wage for a hard days work (on this we can also improve though).
Does this hurt overall economic growth? Sure it does; but you know what? No one's really complaining b/c even rich people are taken by the idea of less poor people, and poor people who aren't 'all that' poor.
It's not because of freedom. It's because the government was forcing creditors to issue high risk loans to people with low income and minorities. Freedom in the marketplace would have had companies not issuing those high risk loans.
Who owned good old Fanny and Freddy? That's right the government again.
Who turned a blind eye to derivative trading?
Obviously the government epically failed. Saying we need more of it to fix the problems we have is like saying I need a good beat down to fix a broken arm.
They failed to address the problem. That doesn't mean all gov't is bad, but that Bush was awful.
Nobody is saying government is all bad. Keep tilting at those straw men!
"Obviously the government epically failed. Saying we need more of it to fix the problems we have is like saying I need a good beat down to fix a broken arm."
What else is that implying but that all gov't is bad.
Obviously the controls and regulation the Canadian gov't implemented worked.
Good for Canada! You've contributed nothing to this conversation about Obama's Crony Crapitalism.
The thread is dead.
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