[IWE] Pelosi's viciously partisan speech
Jay Mehaffey
iwe@warhead.org.uk
Tue, 30 Sep 2008 07:20:27 -0700 (PDT)
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>From: Ben Tilly <btilly@gmail.com>
>The bailout would solve this by making the government into the large
>investor the market needs that can afford to buy and hold and receive
>a profit. If Paulson did it correctly, he could buy $700 billion in
>bonds at above market price. There is a good chance that the market
>in those bonds would recover since the fundamentals for a lot of them
>really are better than the current market price. After that the
>government would have the choice of selling those bonds back into the
>market for a profit, or of holding them to maturity for a profit.
>Either way the recovery of the market would improve the debt/equity
>ratio at banks, opening them back up for lending.
My view of the problem is that there are essentially three interlocking
problems going on.
1. Collapse of the housing market bubble.
2. Slow down/recession of the global economy
3. Bad debt problem
Each of those problems is both a cause and an effect of the other
ones. Since each problem is pushing the other ones, the government
needs to step in to break the cycle.
The problem with the Paulson plan is that it only addresses the
third part of the problem, but it is the first and second that effect
the average person directly. It is also the most expensive way to
deal with the problem, does not punish the companies for their
bad behavior, doesn't address the underlying regulation problem
and isn't sure to fix the problem at all.
A more sensible plan would address all three parts of the problem,
make a clear cut statement that financial markets will be regulated
to prevent this problem from happening again, and deal with the problem
in a more cost effective way. Some sort of direct punishment of the
companies will probably be needed also for popular support, but is
really a side point.
Jay
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<html><head><style type="text/css"><!-- DIV {margin:0px;} --></style></head><body><div style="font-family:times new roman,new york,times,serif;font-size:12pt">>From: Ben Tilly <btilly@gmail.com><br><div style="font-family: times new roman,new york,times,serif; font-size: 12pt;"><div style="font-family: arial,helvetica,sans-serif; font-size: 13px;">>The bailout would solve this by making the government into the large<br>>investor the market needs that can afford to buy and hold and receive<br>>a profit. If Paulson did it correctly, he could buy $700 billion in<br>>bonds at above market price. There is a good chance that the market<br>>in those bonds would recover since the fundamentals for a lot of them<br>>really are better than the current market price. After that the<br>>government would have the choice of selling those bonds back into the<br>>market for a profit, or of holding them to maturity for a
profit.<br>>Either way the recovery of the market would improve the debt/equity<br>>ratio at banks, opening them back up for lending.<br><br>My view of the problem is that there are essentially three interlocking<br>problems going on.<br>1. Collapse of the housing market bubble.<br>2. Slow down/recession of the global economy<br>3. Bad debt problem<br>Each of those problems is both a cause and an effect of the other<br>ones. Since each problem is pushing the other ones, the government<br>needs to step in to break the cycle.<br><br>The problem with the Paulson plan is that it only addresses the<br>third part of the problem, but it is the first and second that effect<br>the average person directly. It is also the most expensive way to<br>deal with the problem, does not punish the companies for their<br>bad behavior, doesn't address the underlying regulation problem<br>and isn't sure to fix the problem at all.<br><br>A more sensible plan would
address all three parts of the problem,<br>make a clear cut statement that financial markets will be regulated<br>to prevent this problem from happening again, and deal with the problem<br>in a more cost effective way. Some sort of direct punishment of the<br>companies will probably be needed also for popular support, but is<br>really a side point.<br><br>Jay<br><br></div></div></div><br>
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