Santelli’s Chicago Tea Party

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1. Comment by Brandon on 20 February 2009 at 2:50 pm:

   The New Deal saved Capitalism’s ass from the people. Any other effects are far less important. Without the New Deal we may have had a president along the lines of Debs. People were not amused by JP Morgan Chase and Socialism was awfully popular.

   The system of economics didn’t really create any of the things you listed BJM. A) They were around before and B) a lot of them wouldn’t exist as we know them today if governments hadn’t forcibly intervened to create or preserve them. A few examples:

   WEALTH – Capitalism has certainly created an abundance of wealth. It has also created vast inequalities both between and within nations. Absolute equality is neither practical nor particularly desirable, but gross inequality is as bad if not worse. This wealth has come with a cost in the form of threatening long-term survivability, culture, and interpersonal relationships.

   HEALTH – well first off most countries with *gasp* SOCIALIZED medicine score better on almost every health indicator (on average) than we do. We rank below Bosnia for life expectancy as a rough indicator. I threw in Japan as an example of a similar economy’s performance.
   U.S. Male 75.15 Female 80.97 Average 78.06
   Bosnia Male 74.57 Female 82.03 Average 78.17
   Japan Male 78.73 Female 85.59 Average 82.07
   To get these results we spend $5711 per capita on health care per year. Bosnia in contrast spends a whopping $125 per capita per year (2001 estimate per WHO) Japan spends $2249 per capita per year.

   EDUCATION – You’re joking right? Education on this country is a) in pretty sad shape and b)funded by taxes. Nuff said.

   FOOD – Really? Did you ever read Upton Sinclair’s “The Jungle”? That was our food supply before regulation as “the market” dictated. After that book, meatpackers begged the government to regulate to offer a veneer of credibility and to drive out smaller competitors. Oh and our food inspection system is in pretty sorry shape too.

   LUXURY AND TRAVEL – Yeah. Capitalism can create shiny shit that no one needs. No doubt about that. But you wouldn’t be able to enjoy it much if not for the evil government and its labor laws(which of course interferes with the ability to contract) giving you a five day work week (well not you, you won’t see a weekend for quite a while, but “you” in the general sense).

   ART (including music)- If most of the post modern tripe that passes off as art qualifies, then the market is doing a bang up job of preserving it. If we’re talking about theatre, classics, and “high culture” art it’s a bit more spotty. Much of the “high culture” stuff is supported by governments of some level through community theater, National Endowment of the Arts and state programs.

2. Comment by JAL on 20 February 2009 at 3:20 pm:

   Yes to Santelli, no to “Is It Live or is it Geithnerex.”

   Oh, and screw China.

3. Comment by Library Grape on 20 February 2009 at 4:33 pm:

   Don’t you think it’s just a bit too late to rediscover the invigorating vapors of Randian hands-offishness?

   Quick question: which President/party in the last half-century presided over the largest expansion in the size of Federal bureaucracy and unfunded liabilities?

   Yep, George “$30 trillion to our grandkids” Bush and his Republican enablers in Congress over the six+ years of hegemonic “conservative” (cough) rule.

   The simple fact is that Obama would probably have to try REALLY hard in order to outdo “conservative” financial gluttony over the last eight years.

   Aren’t you ultimately setting up a false dichotomy? You stand up a cutout of what you think Obama’s librul philosophy looks like on one side of a line and then put up some mythical model of what “conservative” fiscal ideology is supposed to resemble on the other. Is either depiction valid or are they just vast oversimplifications engineered precisely to allow TV talking heads to distill everything down into 1-minute “He said/They said” clips?

   One question that I think will help elucidate the crux of what I found objectionable in your post:

   What, in your mind, is largely behind our current financial meltdown (the worst in nearly a century): (a) too LITTLE government regulation and oversight of the financial markets; (b) too MUCH government regulation and oversight of the financial markets?

   If you answered correctly and chose (a), do you think it would be fair to characterize a period of increased government regulation and oversight — that is required in order to remedy a period of LAX regulation and oversight — as having “socialist implications”? If government falls down on the job and it’s then later forced to fix the problem, isn’t that what it’s supposed to do?

4. Comment by Evan on 20 February 2009 at 4:56 pm:

   Library Grape,

   Billy pretty clearly states he doesn’t have a problem with government regulation:

   “Markets require extensive regulation to prevent them from self-destructing, but market intervention is distinct from market regulation.”

   Brandon,

   For as much crap as you give Brian about being effective in conveying a message, your posts often come off as crass and condescending.

5. Comment by Brandon on 20 February 2009 at 5:06 pm:

   I may be condescending, but that doesn’t mean that I lack substance. I criticize him for lacking substance, I back up and give examples.

   The line between market regulation and intervention isn’t nearly as clear as conservatives would like to make it. It’s really not very clear cut at all. There are examples you could give, but to come up with a workable black/white definition would be awful tricky.

6. Comment by Library Grape on 20 February 2009 at 6:21 pm:

   Evan,

   I think we can all read the subtext of him trying to make an oh-so-principled distinction between “regulation” and “intervention”. Acceptable “regulation” becomes a handy carrying basket for that stuff which he finds acceptable while dastardly “intervention” becomes the convenient sewer down which he can throw all the stuff he considers to be objectionable, like stimulus spending, certain types of market regulation and housing relief.

   I wonder what your and Billy’s responses might be to my ultimate question…

   Library Grape

7. Comment by Joshua on 20 February 2009 at 6:25 pm:

   Billy, You should spend some time and care responding to Library Grape. He’s one of the brighter progressives I know, and I think butting heads with him with nuanced, supported answers, would be helpful.

8. Comment by Brandon on 20 February 2009 at 11:17 pm:

   Grape,

   I’d also add that he had the stones to say that the trading floor was a fairly representative cross section of America puts this guy slightly out of touch.

9. Comment by John Monchhichi on 21 February 2009 at 1:33 am:

   The Empire Strikes Back.

   Seriously, Billy Joe, I can’t believe you’re on board with this crap. DBag derivatives trader goes on DBagNBC, suggests that losers who can’t afford their mortgages get kicked out of houses. After, of course, the banks already got bailed out because DBag derivatvies traders made a speculative bubble. This is obviously the fault of said losers who can’t afford their mortgages, because if they could afford their mortgages, then the bubble would not have burst and DBag derivatives traders could still go on DBagNBC and pretend to be productive members of society. Alas, no, the masses are starting to figure it out. DBag derivatives traders throw paper at each other and pay themselves lots of money. Soon, the money runs out. Then, the government has to step in and resupply (or the puppy gets it). Rinse. Repeat. American industry is in trouble because our modern welfare queens drive German cars and wear Italian suits.

   What to do if you’re a DBag derivatives trader with a clear speaking voice? I know. Pretend like it’s all beacuse of deadbeats and the government turning their backs on CAPITALISM! Nobody on DBagNBC will call you on it. It’s the Matrix’s central information node fer chrissakes. None of this is happening! We’re Americans! Take your socialism back to Cuba! Palin/Santelli in ‘12!

   Declining civilizations always build bigger and better churches. Ours will be full of fraudlent securities and copies of Atlas Shrugged.

   There is one spot of good fortune. There will be a huge DBag gathering right on the shores of Lake Michigan! I’m going to call the Israelis and see if I can rent an armored human relocation encouragement vehicle for the day. If you’re joining their little party, Billy Joe, make sure you wear a life vest. Trust me on this one.

10. Comment by Frankie the Goat on 21 February 2009 at 6:59 am:

    This man works for General Electric. GE received a $149 BILLION dollar loan guaranty from (wait for it)….the Federal Government! I hope he has the integrity to quit working for such a band of “losers”. I mean to stay in their employ would be reinforcing “bad behavior”, wouldn’t it? Does he really think that taxpayers like me should subsidize his ability to make a living? Talk about a “moral hazard”!

11. Comment by Library Grape on 21 February 2009 at 10:45 am:

    John,

    Loving this quote: “Declining civilizations always build bigger and better churches. Ours will be full of fraudulent securities and copies of Atlas Shrugged.”

    Library Grape

12. Comment by moosh on 21 February 2009 at 10:57 am:

    Hey, hey, hey. Everyone is being so aggressive! Give the man a chance.

    Okay, Billy Joe. You say, “I find it sad that we forget the values that have made us the most powerful nation in history – economic liberty and limited government intervention – when fear overwhelms logic.”

    I’ll bite. That statement SEEMS totally unsupported, either by history, philosophy, or economics. But I don’t know much about any of those things, so I’m willing to believe that “economic liberty and limited government intervention” are responsible for making the nation what it is today. From my limited point of view, at every critical juncture, it SEEMS to be the government forcing hard choices that makes this country great.

    But like I said – I’ll bite. You’ve proposed what seems to me to be a totally counterintuitive and unsupported proposition. I’m willing to hear what you’ve got backing it up.

13. Comment by John Monchhichi on 21 February 2009 at 11:13 am:

    In defense of the “aggressive” rant above, it was aimed at the statements lionizing Santilli. Billy Joe’s free market ideas have a rational defense. Santilli and his “tea party” are worthy of nothing less than a celestial chorus of derision.

14. Comment by Billy Joe Mills on 21 February 2009 at 12:33 pm:

    Hey everyone. Thanks for all of the comments. I am working on a verbose, unsatisfying response right now. However, I need to take two of my car-less international friends grocery shopping, so I won’t be able to finish it until this evening. Apologies for the wait.

15. Comment by Billy Joe Mills on 22 February 2009 at 12:56 pm:

    OK. First, thanks for all of the comments. You have all made some good points.

    I disagree with a lot of what Santelli said. Traders on the floor of any exchange do not represent a cross section of America’s economic or social profiles and probably do not represent a cross section of America’s ethnic or cultural profiles. Working class people who cannot afford their (ARM) mortgages have no relationship with “losers,” so it is illogical to label them as such. I may have become overexcited about the idea of participating in a tea party. I have dreamed about being a rebel colonist in Boston Harbor for many years…hahahaha. Anyway, I do support that Santelli is furious. Someone needs to be furious and critical when we aggregate our money into one huge pot and then spend $800 billion out of an empty pot – or rather a pot that already has a giant black hole in it. My support of Santelli is nothing new. I have long respected his knowledge of the bond and commodity markets. (This paragraph attempts to introduce my comments and to respond to John Monchichichi).

    Brandon,

    I think it is fair to say that America has the greatest abundance of wealth in the world and that abundance allows us to fulfill human ambitions. The countries that surpass us in areas like health or K-12 education (no one surpasses us at the University level) are capitalist countries. I am not promoting America; I am promoting capitalism. You misunderstand me. I don’t claim that capitalism can do everything on its own accord. My claim is that the abundance created by capitalism allows a central government to spend lots of money on things like endowments for the arts or education. Again, I am not a libertarian of any shade. The only thing that rivals socialism’s success in the academic world is libertarianism. I don’t care for academic solutions.

    Library Grape,

    I do not support Randian libertarianism. In fact, I disagree with it just as much as I disagree with quasi-socialist European economics. Not even the prince of capitalism, Adam Smith, advocated for an unfettered market. He recognized the nature of human greed must be checked. If it’s true that Bush “presided over the largest expansion in the size of the Federal bureaucracy” in terms of real, not nominal, dollars, then I agree with you. I do not support Bush’s spending habits. I am not Bush. Please don’t conflate me with Bush and I will not conflate you with Al Franken. I am not putting up “some mythical model of …‘conservative’ fiscal ideology.” I am putting up my model and a model that I believe works best. I realize that Bush does not agree with my model, so please accept that I also do not agree with his. You try to stuff me with straws and then call me “Mr. Bush” rather than confronting my arguments. With that said, given the panoply of Obama’s hopes for the country and his faith in big government, I don’t think he will have “to try REALLY hard in order to outdo” conservatives.

    You erect a false dichotomy yourself. You propose that I only have two options for explaining the financial meltdown. Ironically, you give me two “oversimplified” choices for explaining the most complex financial event in history after ranting about how I have used “vast oversimplifications.” First, no one has a sound empirical answer yet for what precise mechanisms caused the meltdown. I would not trust anyone claiming to have anything more than a vague impression. My vague impression has little to do with the amount of regulation, rather I feel we did not have smart regulation. Lots of ignorant regulation will be less effective than a small amount of smart regulation. My other impression is that the push from both the Democrats in Congress and Bush’s Ownership Society encouraged too many people to buy home – people who could not afford them. In my opinion, that push is an example of government intervening (not government regulation) in the marketplace and trying to tinker with a complex network of incentives that they cannot understand.

    Evan,

    Thanks for your comments. Not only do I not “have a problem with government regulation,” I emphatically favor government regulation. Human nature destroys itself without rules.

    Library Grape & Brandon

    What Brandon says is true, “The line between market regulation and intervention isn’t…clear.” However, just because we cannot discern the precise location of that line does not mean that we cannot discern the vast regions that clearly reside on one side of the line or the other. I think most instances are clear. I’m curious if either of you have examples of a government action that lie so close to this line that it is ambiguous – an action we cannot in good faith label as either intervention or regulation. Also, if you find it difficult to discern between regulation and intervention, does that mean you propose throwing in the towel and intervening everywhere? Obviously we should not concede. Here are examples of government intervention: raising a military, building parks, building roads or bridges, subsidization of farmers, welfare, bailing out GM or GE, subsidizing mortgages, erecting trade barriers. Your arguments should be that it is unclear what types of government intervention conservatives find acceptable. We favor raising a military or building roads, so why is it fair for us to disfavor welfare or farm subsidies or bailing out bad mortgagees?

    Here are examples of government regulation: the rules that govern the SEC, the Federal Reserve’s ability to alter minimum reserve requirements for banks, creating standards for food quality, setting emission standards for cars and factories, the FDA’s ability to test drugs for safety…and so on.

16. Comment by Library Grape on 22 February 2009 at 5:14 pm:

    Billy,

    To your first reply: I am curious to know what metaphysical insight leads you to breezily call out “Obama’s … faith in big government”? I don’t have a clue how one could begin to intelligently refute a statement like that. What is “faith in big government” supposed to mean? I hope you’d agree that an assertion like that is crafted precisely to be pejorative. Would it be fruitful for us to talk about conservatives’ “faith in big government” over the last eight years, as evidenced by their complicity in the bankrupting of America by way of complete fiscal irresponsibility and the ballooning of the size of government obligations at the federal level? Is it better that they professed an alleged affinity for small government during the day while sneaking out to have an affair with fiscal profligacy at night?

    As to your second reply, I just don’t see any use in quibbling over what is supposed to constitute “regulation” versus “intervention”. “Regulation” is a broad term that can be applied to pretty much anything government, especially Congress, does (see, e.g., definition of ‘regulation’: “The act of controlling or directing according to rule”). “Intervention” is an unhelpfully loaded term, a la Frank Luntz (viz. “death tax” vs. “estate tax”), that distracts people from intelligently debating the actual merits of the action to be undertaken. What good purpose is served by divvying up mostly acceptable stuff into the “regulation” pile while tossing all the rest of the presumably mostly unacceptable stuff into the “intervention” bin?

17. Comment by Library Grape on 22 February 2009 at 5:30 pm:

    Further to my above point re “intervention” vs. “regulation”, I realized I may not have made myself entirely clear. One of the main reasons I don’t find the distinction useful is the flip side as well. Any “regulation” by government can be conceivably deemed an “intervention” of sorts. To your point that “I find it sad that we forget the values that have made us the most powerful nation in history – economic liberty and limited government intervention”, I don’t find that this advances your argument in any material way. Ok, so you believe limited government intervention is a fine idea. Does that really have any bearing on whether Obama’s plan on the housing crisis is sound. Not really. This is the trap that the modern Republican party has set for itself. The sine qua non of “Republican-ness” has been reduced down to adhering to the idea of “Intervention Bad”. This increasingly rigid ideology now preclude the national Republican leadership from engaging in a rational debate about what measures are necessary to prevent our country from falling off a cliff. We’re left with millionaire derivatives traders railing against “loser” homeowners while silently assenting to billions doled out to prop up insolvent banking institutions. We’re left with Senator Lindsey Graham throwing a hissy fit on the floor of the Senate and countless Republican legislators doing prop comedy over a tiny endangered Marsh Mouse. It’s fine to have certain general principles that you believe are right (e.g. less intervention is a good thing) but when this general principle becomes unyielding absolutist dogma — which sacrifices the good in pursuit of the perfect — practical solutions become impossible and nothing substantive gets accomplished.

18. Comment by Brandon Ruiz on 22 February 2009 at 5:47 pm:

    BJM

    Thank you for responding pretty fully. Re: intervention vs regulation. The objection here is that you’re setting up a false dichotomy. Most regulation is intervening or interfering in the operation of free markets. Labor laws interfere with contract; any government regulation that enforces a standard or mediates private disputes is an intervention in private resolution of disputes and uses force to coerce parties to follow certain guidelines.

    Definitions from Dictionary.com
    Regulate:
    1. to control or direct by a rule, principle, method, etc.: to regulate household expenses.
    2. to adjust to some standard or requirement, as amount, degree, etc.: to regulate the temperature.

    Intervene:
    1. to come between disputing people, groups, etc.; intercede; mediate.
    4. a. To involve oneself in a situation so as to alter or hinder an action or development: “Every gardener faces choices about how and how much to intervene in nature’s processes” (Dora Galitzki).

    The gripe with the false dichotomy is that it’s not helpful. Talk about what kinds of government action are acceptable or not and why. Do not flatly label something intervention and expect us all to hiss at it. It’s just not a useful distinction. Tell us what is and is not acceptable in your view, not whether it belongs to fuzzy categories.

19. Comment by James Prescott on 22 February 2009 at 10:02 pm:

    What baffles me about this entire discussion is that there are a lot of pots calling the kettle black. To Library Grape, your confusion as to why the distinction of regulation vs. intervention is important is baffling to me, because the two have different goals. Regulation is meant to create a fair and equitable marketplace in the hopes of preventing future economic anomalies, where the government acts as an arbiter and a provider of necessary public goods. An intervention generally correlates to Keynesian ideals where the government enters the market as a participant whose desires run counter to the normal consumerin that it is acting not in its own self interest but in the public’s. Your insinuation that these categories are fuzzy also confuses me; the vast majority of acts are easily categorized by the intent behind the action. When a government rushes a bill through congress to start buying stuff without much consideration, that is probably going to be intervention. When Congress passes new laws governing how consumers can participate in the market, that is regulation. There are some gray areas, but I don’t think there are as many as you would lead us to believe.

    These distinctions matter very much because the government is trying to do two things; create a stable market environment (which is created through regulation) and a stimulus effect (which is created through intervention). I’ll get to regulation in a minute. But if we are going to evaluate the effectiveness of that which is intervention, we will have to measure it under Keynesian principles. Keynesian theory relies on government spending but only when that spending would encourage a multiplier effect. Essentially, Keynes suggested that if the government spends strategically, the effect of the outlays will be greater if targeted towards encouraging consumers to buy more consumer goods or if it encourages businesses to spend more in expanding its work force. I don’t see that happening since money is pretty much free already and businesses are not flocking to load up on debt to expand their workforce. If the cheap money can’t do it, it is incredibly hard to believe that government money would be able to achieve the multiplier effect that Keynesians seek. If it doesn’t achieve that effect, government would be better to conserve its funds to be used when it would be used at a higher effect.

    Now if the government action is regulation, it needs to be considered in a different light; namely does it create a market where everyone knows the rules and feels relatively calm about how things are going to progress. In this, I agree with Grape and others that significant time needs to be spent altering the market. I disagree with how they achieve it. This is the argument that Santelli and Billy should have made.

    The mortgage crisis sucks. It has caused the entirety of the housing market to take a hit in value which effects everyone. But while there has been an increase in foreclosures, the vast majority of home owners are not in danger of facing that, barring much more significant economic upheaval. Now, while I would not say I know what all homeowners are thinking, I do know what my parents, who are now non-encumbered owners, are thinking. They complain that they did not buy the most expensive house they could afford, because they did not want to risk losing the house if someone lost a job. They didn’t take risky loans, even though these loans were offered, because they mitigated the risk. They sacrificed to make sure they met their obligations. So now, with their house paid off, how is their prudence rewarded? A bail out for those guys who took risk. That is where the anger comes from. The derivative traders are not representative of a cross section of America, thats true. But there is a real sentiment there among the non bourgeois that is pissed off about this. They aren’t having their houses foreclosed on, nor did they make money on faulty loans, but all of a sudden their house took a big it in value because of the action of others. That is something President Obama will have to be cognizant of going forward. It also creates an unsure consumer base; if the citizens don’t know what the government is going to do next or how the market is going to evolve, they aren’t going to spend their money. They are going to save it against what it feels is continuous threat, which will stymie growth.

    But back to the original point. Library Grape, you called for additional regulation, saying there was not enough. I think that is crap, but in fairness you never really said what you were looking for in that regard. So what do you mean by more regulation? If you would like you can focus on the tax code, which is 3,387 pages long and is supported by 20 volumes, or 13,458 pages, of regulation which is so complex that there are provisions that the IRS does not understand and therefore does not enforce. Or, you could focus on the derivative markets, which is defined by 7 USC sec. 1, and compels the traders to interact with no fewer than 5 oversight agencies (the CFTC, the NASD, the SEC, the NFA, and the individual exchanges). How much more oversight would you require in that particular area? I am just confused as to how you would measure “regulation”?

    The flaw with more centralized regulation is that essentially you are asking us to take control of the market out of the hands of thousands of ivy league educated economists and MBAs and put it in the hands of a couple hundred ivy league educated economists. I don’t see what that gets you long-run. The failure of this market was a combination of factors, the most important of which was the application of new risk assessment theory and technology combined with a few bad assumptions that were shared by the market ivy leaguers and the government ivy leaguers. This should hardly be surprising since they were probably in the same classes, listening to the same professors and reading the same books. So I don’t see more in-depth regulation allowing us to avoid this situation, given that neither party anticipated this.

    This is the trap that the modern Democratic party has set for itself. The sine qua non of “Democrat-ness” has been reduced down to adhering to the idea of “Intervention Good”. The illusion of security and doing something is more vital than taking a minute and trying to figure out what to independent of past biases. Personally (and I am a Republican) I don’t think we should be cutting taxes now (shouldn’t be raising them, either), and I think significant revamping of the regulatory scheme of a variety of markets and industries are warranted. So can we all put down the cliches we have been using for the past couple of months, and think our way through this, instead of frantically throwing money at it merely because we think doing something is better than doing nothing?

20. Comment by Billy Joe Mills on 22 February 2009 at 11:34 pm:

    Yea…what he said.

21. Comment by Brandon Ruiz on 23 February 2009 at 7:57 am:

    Okay buhbie, so you’ve explained the technical economist’s distinction between regulation and intervention, but it still doesn’t seem particularly helpful as a distinction because labeling a program as one or the other doesn’t tell us anything about why it is useful or harmful

22. Comment by James Prescott on 23 February 2009 at 9:25 am:

    Again, the point is under what light to evaluate the effectiveness of the program. If it is regulation, you need to evaluate the program as to whether it improves stabilization of the market. If it is intervention, you need to evaluate it based on its stimulative effect. The point of the labeling is to explain the point of the program, which is important to know. I don’t anticipate labeling something as intervention as always bad, or something as regulation always good, if that is what you are thinking. I merely put these programs in those categories as a means of trying to predict whether it will be effective based on differing criteria. I don’t think a lot of the stimulative spending will be effective as a lot of people think because of the low multiplier effect, but that is specific to this one circumstance, not stimulative spending is always bad because of low multiplier effects.

    Does that make sense?

23. Comment by Brandon on 23 February 2009 at 9:41 am:

    Quite a bit more. Thanks Bubala. That still doesn’t excuse writing something off as intervention or praising it as regulation without some sort of explanation as to why it’s good or bad. You didn’t do it, so don’t freak out. But Santelli’s broadsie and BJM’s thumbs up sort of did.

24. Comment by Library Grape on 23 February 2009 at 9:41 am:

    James,

    After all that ink (er, pixels), I still don’t see why spending the time and energy to parse out what is considered “regulation” and what’s “intervention” is helpful in any meaningful way.

    You gave a stab at actually addressing the merits of Obama’s housing plan, which I applaud. This is where the attention should be focused, in my mind, rather than quibbling over categories.

    However, is this truly the essence of people’s Very Serious concerns with Obama’s plan?: “They complain that they did not buy the most expensive house they could afford, because they did not want to risk losing the house if someone lost a job. They didn’t take risky loans, even though these loans were offered, because they mitigated the risk. They sacrificed to make sure they met their obligations. So now, with their house paid off, how is their prudence rewarded? A bail out for those guys who took risk.”

    Are we reduced now to evaluating the merits of a government program by resorting to the purely emotional knee-jerk reactions of one’s parents (no disrespect)? Although the OP obvious concerns another type of knee-jerk reaction via Mr. Santelli, don’t we owe the debate (and our parents) something a little more substantive than just letting the knee-jerk be passed on uncritically as gospel?

25. Comment by James Prescott on 23 February 2009 at 10:35 am:

    Okay, I guess we’ll move beyond categorization because Brandon and Grape believe that categorization is this hugely complex and difficult undertaking with neglible benefits despite my contention that it takes about 45 seconds to a minute in most circumstances and is vital when trying to come up with a means to predict and measure the success of a program. Thats fine…at this juncture lets move on.

    As to grape’s issue, as I stated, I haven’t talked to every non-defaulting homeowner so I won’t speak as to the American homeowner, and I know my parents probably do not typify the average American. But politicians do base their decisions on the knee jerk opinions of the populace…thus opinion polls. Now, I tried looking at Gallup just now to see if there was anything on the Housing Bill. I didn’t look very hard cause I have class soon, but I didn’t find any polls on the housing bill immediaely, but I am sure that if someone invested time in it, they could. I, too, think we should move beyond the knee jerk public reaction, but that is what is motivating the government in their action. Again, the finger prints of public demand and whim is all over the housing and stimulus packages, given the haste and slopiness in its passage. The public demands that something must be done, so something is done, no matter what it is, and it is done quickly. Personally, I heartily approve of longer, more indepth debate with experts on the floor of the House and Senate prior to the passage of legislation. Unfortunately, President Obama and Congressional leadership do not feel this way, and instead publish fear mongering editorials in newspapers which state that if the bill is not passed the American way of life is over. So, I guess my response would be I am anxious to discuss the merits of the bill on something more than knee-jerk response; I just wish the President would want that too. I am just writing in the same spirit as the leadership.

26. Comment by James Prescott on 23 February 2009 at 1:37 pm:

    Also, Library Grape, please answer my question. If more regulation is needed because that was the reason for the collapse of the economy, please describe what new regulations you envision are necessary. You do need to have exact detail, but if you could describe what areas are not covered by regulations that need to be and how you would address them, I would appreciate it.

27. Comment by John Monchhichi on 23 February 2009 at 6:10 pm:

    I have a suggestion there, James. An outright prohibition of any type of security that did not exist in 1980. No more dervatives, no more mortgage-backed securities. All securities that did not exist in 1980 have to be apporved by a special SEC committee which will evaluate them based on a balancing test considering both their value to the economy and the potential downside, especially consdiering difficulty of valutaion and odds of a speculative bubble. If a given type of security is approved by the SEC, it will then then go to the Federal Reserve Board of Governors for final approval.

    You get my point, I hope. The financial markets have become so obsessed with the lastest thing that speculative bubbles are almost assured. Speculation is not the point of a financial market. The point of a financial market is to raise investmenal capital. You don’t need exotic derivatives to raise investment capital. Nobody knows how to valulate them, so it becomes a wild, out of control betting pool. At least casinos have definitive events which causes payouts and losses.

28. Comment by James Prescott on 27 February 2009 at 3:39 pm:

    John -

    Sorry for the delay, but a host of things came up.

    I get what you are saying, I am just not buying your plan being practically effective. First of all, whatever this vetting council you propose is, it will still be constituted by people who have the same background as the people proposing the derivatives. If it makes sense to those proposing the new derivatives, it will make sense to those judging them. I mean, these devices had to go through a vetting process the first time, and they got through. What makes you think that a new organization made up of the same people as the old vetting boards would be any more effective in blocking “bad derivatives”? And if you don’t want the same or comparable people vetting the new instruments, who would you replace them with?

    Also, I do not understand why you would want the Federal Reserve involved, as they are more concerned with monetary supply and the supervision of banks, not the supervision of markets. Maybe the Reserve can set limits as to how much of a bank’s balance sheet can consist of certain securities, but giving the Fed any say in what the markets can offer seems to be outside of their jurisdiction. Especially when the Federal Government for years supported these types of securities in the name of lowering the cost of borrowing money for poor families.

    Also, I do not understand why you think that speculative bubbles are a new thing. They have been around as long as financial markets. Also I would disagree with your characterization of financial markets. Yes, it is to raise capital in part, but it is also meant as a means to diffuse risk among a larger body of individuals; thus the process of hedging and derivatives. I would disagree that you do not need exotic derivatives to raise capital; by effectively hedging certain risks through the acquisition of derivatives, you lower the risk of a certain investment making it easier to acquire investors. The hedging process is highly legislated already, in both how it is done and how it is reported to stockholders. This process needs to be refined, obviously, but I don’t know how you will be able to address future issues that no one (ok some people anticipated the debt issue being an issue, like me, but most people anyway) anticipated.

    As for stopping people from being inventive in their assets, I don’t see how you are going to curtail that either. People from the private and public sector are going to argue that innovation is the corner stone of economic development, and it is going to be a hard argument to refute. Yes, bad stuff happened this time, but I do not know how you will be able to convince people in the long run that innovation is bad.

    But welcome to Urbanagora.

29. Comment by Camila Perry on 30 June 2010 at 4:46 am:

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30. Comment by Callum Harris on 25 July 2010 at 8:02 am:

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31. Comment by Juan Torres on 10 September 2010 at 12:29 am:

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32. Comment by Curtain Lining  on 20 October 2010 at 5:52 pm:

    we can say that the stimulus package that were issued several years ago have been taking its effect now.-,

33. Comment by Polycarbonate %0B on 14 December 2010 at 12:04 pm:

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