+8. Hot damn! Looks like Obama has made huge gains in the suburbs of KC and St. Louis in the past few weeks.
Starting to look like McCain is
Monday, October 13, 2008
Sunday, October 12, 2008
European nations back banks
Euro-zone leaders held an emergency session Sunday. Measures include injections of capital.
Last Updated: October 12, 2008: 4:14 PM ET
PARIS (AP) -- Nations in Europe's single-currency zone agreed Sunday to temporarily guarantee bank refinancing as part of a raft of emergency measures to ease the credit crisis.
The head of the region's central bank welcomed the unity -- but warned there is more work to do.
"The force of unity that we showed today is a fundamental element of confidence," said European Central Bank Chief Jean-Claude Trichet. But, he added: "there are still many things to do," both by governments and central bankers.
French President Nicolas Sarkozy said the measures -- which range from help with liquidity and injections of capital to new accounting rules for banks -- will be enacted "without delay" in the 15 countries using the euro -- with simultaneous Cabinet meetings being held Monday in Italy, Germany, France and elsewhere.
OK. The term "injection of capital" is being tossed around pretty frequently, and as far as I can tell, all that means is "nationalization". Which of course = socialism. Cue scary music.
Why are the media using a gobbledygook phrase to avoid calling it what it really is (the government taking over a bank)? Beats the hell out of me. I think part of it is that the Reagan-era mantra of "government isn't the solution, government is the problem" has become such a deep-seated part of our political discourse over the last three decades that we don't seem to know how to talk about governmental solutions to problems any more. Every disaster is further proof that the government can't solve problems. And there have been a whole bunch of disasters over the last eight years.
So we have no way of having an effective national discourse about what really smart folks are saying is probably the ony way to address with the problem. Just mentioning the word "socialism" in most corners in America will draw instant hisses and bared teeth. We don't have any words to describe nationalization--state takeover of private business by fiat--because, duh, we're Americans and we believe in the free market, d-duh.I mean, didn't the Cold War prove to everybody that capitalism is superior?
But the American government has always intervened in the markets! We've never been a truly, 100% purely free market, because such a thing implies no regulation at all....clearly ridiculous. Anarchy is worse than any form of government--Madison famously said "if men were angels, they would have no need of government." So it seems to me that the art of statecraft is in guiding the nation on the sliding scale between 100% nationalization of the means of production (communism) and 0% government intervention in markets (pure laissez-faire capitalism).
On one extreme is abolition of private property, and on the other is plutocracy (which is pretty much where we're at now).
In fact, you may have been quickly laughed out of the room for suggesting such a thing, but maybe it's possible that the disintegration of global Reaganist economic policy is analogous (imperfectly) to the fall of the Soviet Union in the late 80s/early 90s. Their economic philosophy had ceased bearing any relationship to reality, and it eventually caught up to them. While I don't think the US is going to break into dozens of different mini-republics any time soon, we've definitely been knocked down several pegs in the global King-of-the-Hill game, for what ultimately is the same reason: our economic philosophy ceased bearing any relationship to reality, and it eventually caught up to us.
George "Fucking" Bush (who has done nothing more useful than screaming REMAIN CALM!!!!! ALL IS WELL!!!!! like Kevin Bacon at the end of Animal House throughout this debacle) ran the national debt from $5T to $10T. He managed to do that by giving huge tax breaks to rich folks*, and by playing political games with the budgetary process to keep the occupations of Afghanistan and Iraq from counting in the official budget. And then, there's this....
Although not included in the figures reported by the government, the U.S. government has moved to more explicitly support the soundness of obligations of Freddie Mac and Fannie Mae, starting in July via the Housing and Economic Recovery Act of 2008, and the September 7, 2008 Federal Housing Finance Agency (FHFA) conservatorship of both government sponsored enterprises (GSEs). The on- or off-balance sheet obligations of those two independent GSEs is just over $5 trillion. The government accounts for these corporations as if they are unconnected to its balance sheet. The U.S. Treasury contracted at the inception of the conservatorship to receive US$ 1 billion dollars in senior preferred shares, and a warrant for 79.9% of the common shares from each GSE, as a fee to fund, as needed, up to US$ 100 billion total for each GSE (in exchange for more senior preferred stock), in order to maintain solvency and adequate capital ratios at the GSEs, thereby supporting all senior (normal) liabilities, subordinated indebtedness, and guarantees of the two firms. Some observers see this as an effective nationalization of the companies that ultimately places taxpayers at risk for all their liabilities The net exposure to taxpayers is difficult to determine at the time of the takeover and depends on several factors, such as declines in housing prices and losses on mortgage assets in the future. Over 98 percent of Fannie's loans were paying timely during 2008. Both Fannie and Freddie had positive net worth as of the date of the takeover, meaning the value of their assets exceeded their liabilities. The Congressional Budget Office has recommended incorporating the assets and liabilities of the two companies into the federal budget due to the degree of government control over the entities. The 5-year credit default swap spread for U.S. treasuries had risen to 18 basis points per annum as of 9 September 2008 as a result of market perception regarding the increased debt load of the government.
Ugh. Just thinking about this shit makes me want to reach for the
And then, on top of that, we have the collapse of the housing bubble, which triggered the problems with banks, which is liable to trigger problems in the ~$60T credit default swap market. (60 trillion. That is not a typo. Do not adjust your TV set.)
So perhaps there's a parallel here to the way the USSR fell apart; the US, by contrast, is in much better shape and is not headed for anything like the total political meltdown of the Soviets. But there's a similarity in the blind adherence to ideology and browbeating or ignoring Ph.D.s that knew better, the stubborn refusal to acknowledge reality until the roof comes caving in, and the self-inflicted nature of many of the wounds. (And there's also the parallel endless occupations of Afghanistan..........)
So I guess, in light of all that, which is surely rattling around in a great many national reporters' brains, if not in so many words, maybe it's no surprise that we can't talk very well about moving somewhat to the left on the economic intervention/freedom scale.
Again, as far as I can tell, when a bank is insolvent, the government has to step in and clean up after them. That means the bank doesn't get to keep operating as a private business, which is what Treasury Secretary Paulson wanted in the original bailout package. But....I think we're finally beginning to see Paulson change his mind and start mulling over bank takeovers, which is what Europe is already doing. (Note that the linked Seattle Times article manages to use both the "inject capital" euphemism and the phrase "partial nationalization".)
Will it work? No idea. Maybe. I hope so. I don't think we have any other realistic options.
Which means the FREE MARKET UBER ALLES crowd is just going to have to get over this. The more they bitch and moan about "socialism," as if they have any idea what they're talking about, just makes them sound more and more disconnected from the world the rest of us are living in.
* Remember the Clinton surplus? Bush claimed we needed tax cuts because we were running a surplus. By 2004, when he'd managed to blow thru the surplus and get us back into good ol' Republican deficit spending, he claimed we clearly needed more tax cuts, because we were running a deficit. YEEEEEEEEAARRRRGHHHH
EDIT: Devilstower muses on very similar territory here. He's better at articulating this stuff.