Innermost Thoughts

By Chip Hanlon | September 29, 2008 | 12:09 PM | 3 CommentsTweet This

After re-reading a lengthy email I sent to a close friend today, I thought I'd post a portion of it here, for what it's worth:

I don't believe in this scheme from a long-term standpoint, though. I hope I'm wrong but if inflated asset values are the problem, then how does encouraging lenders to lend against those assets again solve the issue? Nothing says they will, though, and the economy may already be in an unstoppable de-leveraging phase that the bailout can't change.  I actually think that such a de-leveraging would be best for the economy, but from a practical standpoint I'd hope that, if passed, this plan would first bring a few months of liquidity, optimism and a bounce in the markets so you can get your deal done and, selfishly, so I can re-arrange a few things myself.

Same time, I cannot get it out of my head that we are running precisely the Depression-era playbook. You might want to check out "The Forgotten Man" by Amity Shlaes... I believe her contention is that Hoover was as responsible for the Depression as FDR, not because he was too laissez-faire but because he was a big government taxer, spender and regulator, which most people don't realize.

I actually haven't read the book until now because I knew I agreed 100% with her central assertion (if I understand if correctly, which I'll find out soon enough), but I cracked it for the first time yesterday to beef back up on details about the era because I suspect I could be writing about them a lot in coming weeks/months.

In a perfect world, I truly believe it would be best if this bailout died somehow.  The economy would be atrocious for a number of months but it would allow markets to clear and wouldn't inject Barney Frank deeply into our financial system.

I say "in a perfect world," though, because we are careening straight toward quite the imperfect one with Obama as our next President. In that respect W looks very much like Hoover (that has been my assertion about him since about '02 or '03...did you know I did not vote for him in ‘04? I say that today with great pride) because Obama looks very much like FDR, especially since he'll have Nancy Pelosi and Harry Reid to send him legislation. FDR actually ran against Hoover as the fiscal conservative in '32! Only years later did one of FDR's key advisors admit that the New Deal simply expanded on programs Hoover had created. Bush has given Obama a similar opportunity.

I mean, Maxine Waters suggested nationalizing the oil industry with a straight face only a few months ago! Just think what sort of nuttiness we'll see next year with a President Obama.

With that in mind, perhaps there's a defense for this bailout: one last Hail Mary in the hopes it'll put things on track so Obama won't have an excuse to launch the New Deal, Part II.

Hope I'm just going overboard, but hope ain't a plan...
(end)

Now, I'm an optimist by nature and saying the word 'Depression' doesn't represent a thought I even like to hold, but it's hard to ignore what's going on around us: free market ideology is dying and the folks in Washington who created this mess are about to insert themselves further into our economy.

Just keep your eyes open and honestly assess what you see developing.  Maybe everything will be just fine but sometimes history happens-- and not always in a good way.

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scary! scary! Submitted by Anonymous (not verified) on Mon, 2008/09/29 - 11:13am » reply |

What About the Consumer? No Magic Bullet Here Hopefully The government's intervention is quick, decisive, and most of all limited. What about the consumer? Sure the consumer benefits from liquid credit markets but there is a flip side to those loans that are being summarily wiped off the bank's books. Consumers cannot wipe these loans off their balance sheets and they are the ones who spend the money in this economy. They are stuck with these things. Wait unitl we see the majority of the ARMs come due. I hope I'm wrong but I doubt it. Submitted by Jim Slagle on Mon, 2008/09/29 - 11:22am » reply |

American Tax Payer Bail-out Credit Why is congress so un-willing to give a tax credit or vocher to all Americans to pay-off mortgage payment and credit debits. Can we for once let this trickle down economic trickle up forall tax-payers period. Yet they want American to feel good about private sector being bail-out and yet do not care what happens to all of us left out. Of the $700- billion why not give a share of ($2Bill)bail-out to help all Americans tax-payers and the very poor. We are all hearing lip-service from those that were able to get there share and close the books on those they pledge to help. It stated with wanting to help those facing foreclosure and modification on loans to force restructuring of mortgage this is all lip-service because we have been left out of the process the big banks are using bail-out money to buy other banks and stopping all credits to company forcing them to close there door on jobs and the tax-payers they wanted to help shame on congres for allowing the tax-payers to be sold out under false hope.car-makers feel bankruptcy will hurt there image what about American being thrown to the street we are crying out for help is any-one there??????. Submitted by Anonymous (not verified) on Thu, 2008/12/11 - 3:25pm » reply |

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