Quote of the Day: Bailouts

Sad, but true:

“If you’re a socialist, you should be happy. But you should really wonder whether you want people’s ability to pay for housing and college dependent on the motives of people in Washington.”

Michael Lind, a fellow at the New America Foundation, a research institute in Washington.

Government as the Big Lender 
NYT, July 14, 2008   

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Discussions found on the web:
  1. winslow commented on Jul 15

    How can anyone be happy about how our government funtions? We have a dysfunctional system and anyone in power at the moment is blind.

  2. Dave commented on Jul 15

    Rather it be the people in Washington than a group of nameless stockholders.

  3. Joe Klein’s conscience commented on Jul 15

    I don’t know any socialists personally. Although Ben and Hank seem like closet ones to me. Someone better check their bookshelves for for Marx or Che.

  4. Joe Klein’s conscience commented on Jul 15

    I forgot to ask something. What’s with the capital requirements for naked short selling that Cox(of the SEC) was on CNBC babbling about a bit ago. It sure turned around the financials(and the market somewhat).

  5. HCF commented on Jul 15

    This is what makes me so sad…

    At least the Dems SAY they want big government, high taxes, etc., so you kinda expect socialist behavior. What we’ve seen lately is that most Republicans in power are really just socialists who go to church a little more often…

  6. Roman commented on Jul 15

    The sad thing is that people are associating this financial crisis as a natural fault of capitalism. Little do they know that the US economic system is socialism for the rich masquerading as free market capitalism.

    This is what is truly sad about this whole set of events. That after this passes and is written about in history books, the vast majority of people will think that this is the consequence of allowing laissez-faire capitalism. Few people will understand that it is socialism, not capitalism, that is being proved wrong by this financial crisis.

  7. Jay Hammans commented on Jul 15

    The saying “if it looks like a duck, and quacks like a duck” seems appropriate here. Thank goodness we have a representative government, now I just wish I could figure out what it represents.

  8. ben commented on Jul 15

    Seems to me there might be a solution; make those in congress have limited terms. President can stay 8 yrs only, make it that way for the house and senate.

    Unlike Dave I would prefer nameless stockholders to those in Washington given the fact that I wouldn’t worry that the nameless have a hidden agenda for personal self gain.

  9. RW commented on Jul 15

    Americans love socialism, there are giveaways galore especially for corporations and the wealthy, but let some insensitive, non-PC soul call it by its real name (or let it become too obvious) and the knee-jerking starts.

    The GSE’s were government agencies before and if it is ‘impossible’ that they be allowed to fail then, profiteering by the usual rent-seeking suspects aside, the logic of making them public corporations in the first place collapses: If their function in promoting the common weal is no longer valid then liquidate them in the usual manner with shareholders last in line as usual, that’s the nature of the game; if their function is still considered critical then buy them out at some discounted value (which would probably still wipe out shareholders) but reorganize them as official government agencies again; either way quit fooling around and call it like it is.

  10. Sinomania! commented on Jul 15

    Funny how the words “socialist” and “socialism” still have traction. Are our collective heads in the sand? What is the social security system? What is Medicare/aid? What is the defense-industrial-complex? Welcome to the People’s Republic folks. Now can we go get out of the 19th Century and focus on what to do about things today??

  11. gregh commented on Jul 15

    only applies to socialists that own bubbly homes

  12. ECONOMISTA NON GRATA commented on Jul 15

    How about…..

    HP : I’ve got a bazooka in my pocket.

    BB: I’ve got ants in may pants.

    GB: I’ve got a bee in my bonnet.

    These guys are kidding, aren’t they…?


  13. scorpio commented on Jul 15

    these actions have nothing to do w socialism. this is crony capitalism, pure and simple.

  14. Dave commented on Jul 15

    Sorry Jay, but I can’t believe that you would rather put your faith in the invisible hand of the market rather than the collection of morons in Washington.

    I tend to be socialist in my beliefs. Now please don’t call me unAmerican or anything like that, I did 6 years in the Air Force. I just wonder if spending more in the European way would be more profitable in the long run as opposed to moving from crisis to crisis given the rising cost of raw goods and engery? I’m not starting a fight, I’m just starting to think that they way we are doing things is not the best…

  15. Valdan commented on Jul 15

    “Seems to me there might be a solution; make those in congress have limited terms. President can stay 8 yrs only, make it that way for the house and senate. ”

    I’ve got a better idea. ELIMINATE THE HOUSE; have Senate propose legislation, and have it all put to a referendum vote on a quarterly basis by We the People. Each voter could be issued a userid so they could vote at home on their computer, or at a library or other designated voting place equipped with PC’s. It would save money, and We would have more of a say than by proxy through the A-holes in Congress. We could also institute a 2-term limit on Senators. President should get one 6 year term only.

  16. shoeless commented on Jul 15

    From Bloomberg:

    The Death of Capitalism

    SEC to Limit Short Sales of Fannie, Freddie, Brokers (Update1)

    By Jesse Westbrook and David Scheer

    July 15 (Bloomberg) — The U.S. Securities and Exchange Commission will take emergency action today to the limit the ability of traders to bet on a decline in the shares of Freddie Mac, Fannie Mae and brokerages, the agency’s chairman said.

    Christopher Cox told the Senate Banking Committee that the SEC will issue an order today imposing a “preborrower requirement” on short sales in the mortgage-financing companies and Wall Street firms. The requirement would prohibit the practice known as naked short selling, in which traders avoid the financial burden of borrowing shares when betting they’ll fall.

    “In addition to this emergency order, we will undertake a rulemaking to address the same issues across the entire market,” Cox said in his remarks to the committee.

    The SEC has been investigating whether trading abuses contributed to the collapse of Bear Stearns Cos. in March and the 78 percent drop in the market value of larger rival Lehman Brothers Holdings Inc. this year. Fannie Mae and Freddie Mac have each lost about 80 percent of their value amid speculation the mortgage-market crisis may push the firms into insolvency.

    Freddie Mac, down as much as 34 percent today before Cox’s comments, recouped more than half of the drop and was down 15 percent at 1:17 p.m. in New York Stock Exchange composite trading. Fannie Mae shares rebounded from a 30 percent drop and were down 12 percent.

    “I don’t think the government should ban short-selling in anything as long as it’s fully disclosed, as long as there’s no manipulation,” MFS Investment Management Chairman Robert Pozen said in an interview with Bloomberg News yesterday. “Don’t we want the market to work here?”

    John Nester, an SEC spokesman, said the SEC’s emergency order will “require any person effecting a short sale in the listed securities to borrow the securities before the short sale is effected and deliver the securities on settlement date.”

    In traditional short selling, traders borrow stock through a broker and hope to profit by selling shares high and later buying them back at lower prices to repay the loan.

    Naked short sellers do the same thing, with one difference: They don’t borrow any shares. Naked short selling isn’t illegal in most cases, unless authorities can prove fraud, such as a scheme to manipulate stock prices.

    Buying good, selling bad. Happy happy all the time.

  17. John commented on Jul 15

    The alternative is to have them dependant on the motives of people on Wall Street. At least with Washington ordinary Americans get some say in the matter. As J.K.Galbraith long ago pointed out and the events of the last six months have amply proved “The only acceptable form of socialism in America is socialism for the rich.”

  18. HCF commented on Jul 15

    “SEC to Limit Short Sales of Fannie, Freddie, Brokers”

    Don’t forget that the execs of those companies are part of the Washington Politburo. I’m waiting for the central committee to seize the WSJ, rename it “Pravda” and print nothing but stories of bunnies, unicorns, and happy things like being long real estate, investment banks, and GSEs.

  19. John Thompson commented on Jul 15

    If Obama gets elected, which I think he will, socialism will keep on coming. Problem is, it appears it will be for a WPA for Mexican and other slave labor foreign nationals, which will not stimulate our economy as much – even if they work on T – Boone Pickens’ windmills.

  20. Jeff commented on Jul 15

    This makes me want to throw up. Anyone who was supposedly smart by cashing out and/or renting a home during the housing bubble should feel sick as well. Socialism for the rich. Let’s face it, the game is rigged for those in power. This isn’t real capitalism at work or am I naively stating the obvious? From Nouriel Roubini today:

    “We have subsidized through Fannie and Freddie, the most wasteful and unproductive form of capital ever,” Roubini says. “We have too many homes and not enough machines.”

    Roubini thinks the two firms’ bondholders should eat this cost, not U.S. taxpayers. That’s because bondholders have been compensated by about a 100-basis points spread above Treasuries for buying Fannie and Freddie debt, he says. At the same time, if the government bails out Fannie and Freddie, then bondholders don’t experience a credit loss. Instead, they’ve been directly subsidized by the federal government.

    Based on the $5 trillion in liabilities between the two firms, that amounts to a $50 billion annual subsidy today to “Wall Street, the investors, and the well-connected,” Roubini says.

    If bondholders collectively took a 5% haircut on the value of their Fannie and Freddie loans, this could fund the $200 million to $300 million shortfall in capital at Fannie and Freddie, he says.

    However, he admits this plan is unlikely, partly due to the large clout by Wall Street firms who are whining for a bailout. He calls the Treasury plan “socialism for the rich.”

  21. michael schumacher commented on Jul 15

    Socialism for the deserving is one thing….this is entirely different.

    This is socialism for China, Japan and the rest of the world who have these bonds crammed into their system.

    let it fail….only then can we actually have a recovery that is not based on yet more “hope”.

    It would be painful and the system would freeze up however the pain would be less severe than what we are headed for if the current crop of socialism for the rich is allowed to continue.


  22. Jeff commented on Jul 15

    Where is the mass outrage in this country? Are we as a country just too stupid, lazy or apathetic (or all of the above) to speak out against these kinds of shenanigans? Do they not have any idea that the rug is being pulled out from under them so that the uber-powerful can continue their reckless ways? How much is the rank and file going to take before they push back? Really, this is getting ridiculous.

  23. Roman commented on Jul 15

    “these actions have nothing to do w socialism. this is crony capitalism, pure and simple.

    Posted by: scorpio | Jul 15, 2008 2:20:30 PM”

    By crony capitalism, you mean some people with lots of money have connections to people in power and get legislation passed which protects them from the market and from economic failure.

    That is not capitalism in any way, shape or form. That is SOCIALISM.

    People do not recognize that it is socialism, because they mostly associate socialism as government programs for the poor. Well this is the same basic idea, except this is government programs to help the rich stay rich. Again, please do not confuse this with capitalism.

  24. KnotRP commented on Jul 15

    > and focus on what to do about things today??

    A monthly stimulus check is next.

  25. L’Emmerdeur commented on Jul 15

    Once again, I am forced to quote Benito Mussolini… this is not socialism, this is fascism:

    “Fascism should rightly be called Corporatism, as it is the merger of corporate and government power.”

  26. Jim Haygood commented on Jul 15

    As any Realtor(TM) will tell you, price is a function of financing. Plenty of credit will support higher sales prices.

    The federal government subsidizes financing for housing, college and health care. As a result, the prices of these goods and services have been escalating in real terms for years.

    I would allege that any benefit to consumers from federal financing is completely offset by the concomitant higher prices and higher taxes. Add in the costs of bureaucrats to administrate these programs, and it becomes a NET LOSS.

    The problem is not with semantic constructions such as “socialism” — I’d be fine with socialism if it provided benefits that exceeded the costs. BUT THESE PROGRAMS DO NOT WORK, AND DO NOT ACHIEVE THEIR STATED OBJECTIVES.

    Unfortunately, in a nation where core inflation is perpetually pegged at +0.2% during one of the great inflationary spikes in history, it is highly unlikely that the voodoo ‘science’ of economics is going to convince policymakers that their federal “help” is systematically impoverishing us. But it is. Welcome to the freaking Third World. You paid for it, you got it.

  27. Roman commented on Jul 15


    People do not understand. The picture they are being painted is that greedy capitalist pigs ran a muck and destroyed America. And that the only solution is more government control. So, the two sides of the argument are now:

    1. Yes, we should give more control to government.

    2. No, everything was just fine and this is just a natural down cycle.

    The real solution is not even being discussed by anyone (except those on the fringe like Ron Paul). The solution being that we got into trouble because the Fed had too much power and the solution is to take that power away.

  28. AGG commented on Jul 15

    Kill the naked shorts. CHECK.
    Bring back the UPTICK rule. Workin’ on it.
    Sorry folks, but unless you have very (and I mean very) deep pockets, you can’t play to win. If you want to make a naked short (otherwise known as an inverted bet to win), you have to go to Vegas.
    Always remember that while there’s a buck to be made, there’s a liar with a trade.
    As to the stupid, assenine talk about government bailouts, give it a rest, people! Our government is misanthropic, not socialist. The only legal person which will benefit is the person the supreme idiots in 1886 declared had all the freedoms entitled to humans. NOBODY but the wealthy and well connected benefit from the “elite socialism’. The welfare queens are corporations and their kings are the boards of directors. As true liars they will always scream about capitalism being attacked and secret socialist agendas. They hate free markets. Do you know what a monopoly is? It’s a price dictatorship, pure and simple. It’s also the goal of any “capitalist”. Freedom is a joke for true capitalists. Buy ’em or bop ’em is their motto. It’s fascinating how fascists can talk about socialism limiting free markets. The BS never ends. Socialism is great for the Corporations but not for people. You guys had a good run. Most people have figured out that you are full to the brim of high quality fertilizer. The long train of offenses has reached the caboose. 2008 has been a great year. The second half will be as boring as the first half. Tail chasing, finger pointing, equity losing, pill popping, reality denying rich bullies will be increasin their visits to their shrinks and cardiologists.

  29. Mr Reality commented on Jul 15

    Our Government is the best that Wall Street could buy and there in is the problem.

    BTW – If the Gramm-Leach-Bliley act hadn’t been signed into law much of this whole fiasco would have never happened. Thanks Dr. Phil

  30. Jeff commented on Jul 15


    I certainly don’t think the government should necessarily have more control (but maybe enforce some of the key regulations that are on the books, basically do YOUR JOB), but isn’t it the self proclaimed free market idealogues (“greedy capitalist pigs” as you put it) in power that are clamoring for a bailout? Any way you slice it, this is basically welfare for the rich, well connected and powerful and to me is worse than any social welfare program for the needy. Sure, those people may also game the system from time to time for their benefit, but the overall costs are likely a drop in the bucket compared to these shenanigans pulled by the fascists disguised as capitalists. Real capitalists know that the risk of losses are involved and take their lumps accordingly. Without the the understanding of risk and acceptance of loss (after all, we’re always reminded by those in power that there are “winners” and “losers” in a capitalist system) there is no real “capitalism”. Bottom line is the psuedo-capitalists are destrying capitalism. Plain and simple.

  31. Vermont Trader commented on Jul 15

    socialism? more like kleptocracy.

    banning short selling? well, it’s illegal in China and look how well that’s worked out from them!

  32. daveNYC commented on Jul 15

    This is socialism for China, Japan and the rest of the world who have these bonds crammed into their system.

    I think China and Japan would be happier with taking a haircut on those bonds rather than dealing with the nasty dollar depreciation would result from the government assuming the GSE’s debt.

  33. michael schumacher commented on Jul 15

    For those of you who are unaware…the uptick rule was eliminated so that the market could (and did) get juiced to over 14K.

    Allowing weak, ill-informed people to short at will is/was part of the plan to drive it up. Putting it back will accomplish nothing…..at least not in the way that is being presented by the gubment.

    Doesn’t look like 11k will hold…..still have about 20 minutes though.


  34. Timba commented on Jul 15

    “I’ve got a better idea. ELIMINATE THE HOUSE; have Senate propose legislation, and have it all put to a referendum vote on a quarterly basis by We the People.”

    Umm, Valdan, then the 26 states that comprise less than 8% of US population would have a stranglehold on all legislation. Do you see California, Florida and Texas agreeing their votes should be equal to South Dakota, Rhode Island and Alaska? How is that fair? Under direct democracy, everyone would vote themselves tax cuts and increased benefits – no one would make the hard choices.

  35. michael schumacher commented on Jul 15

    BTW there is nothing new in the “limits” on short selling announced today. They have always been written so that the shares must be secured in order for the transaction to take place.

    They are just enforcing the letter of the original rule. They have not been for the entire time. Patrick Bryne may not know how to run a profitable company however he has some well researched points and today some of those have been validated by the SEC deciding to enforce a rule that already exists for the most part. Arguing that the 3 day rule is different than this is not seeing the whole picture.


  36. Douglas Watts commented on Jul 15

    socialism? more like kleptocracy.

    Posted by: Vermont Trader | Jul 15, 2008 3:28:12 PM


    Socialism = Finland, Denmark, Sweden etc.
    Kleptocracy = Nigeria, Zaire, Russia, U.S.

  37. pikertrader commented on Jul 15

    It still is a free market. No one is forcing you to buy into the market. Dont go giving your hard earned money these crooks. They need your money to make money.

  38. Sheeple in America commented on Jul 15

    I’m sorry, did someone ask a question?
    I was busy following the advice of my 401K plan administrator by contributing 10% of my income and using the magic of “dollar cost averaging” and “diversification” to procure a 10% annual return so that someday I can retire comfortably in case Social Security dry’s up an disapears.
    They wouldnt lie, would they?

    Joe Lunch Box

  39. daveNYC commented on Jul 15

    BTW there is nothing new in the “limits” on short selling announced today. They have always been written so that the shares must be secured in order for the transaction to take place.

    Keeping with the Hitchhiker’s Guide theme, I think the SEC move today will end up something like this (from the movie)…

    Vogons. They are one of the most unpleasant races in the galaxy. Not actually evil, but bad-tempered, bureaucratic, officious, and callous. They wouldn’t even lift a finger to save their own grandmothers from the ravenous Bug-Blatter Beast of Traal without orders signed in triplicate, sent in, sent back, lost, found, queried, subjected to public inquiry, lost again, and finally buried in soft peat for three months and recycled as firelighter.

  40. catman commented on Jul 15

    The New America Foundation? Righto!

  41. Jeff commented on Jul 15

    There’s no joy in Daniel Mud-ville.

  42. Jay Deal commented on Jul 15

    Mr. Daniel Mudd, CEO of Fannie Mae, was on CNBC a few minutes ago and when starting to talk about the subprime debacle he had a Freudian slip and said “subcrime.” He quickly corrected himself.

  43. RedCharlie commented on Jul 15

    Crony Capitalism = Socialism

    Yeah, right.

    Makes as much sense as “Liberal Fascism”.

    I’ve got a great deal on a bridge for anyone who believes either that
    a) the U.S. is a socialist country
    b) Mussolini (the guy who founded the original F-A-S-C-I-S-T party) was a socialist.

    Anyone who believes that the current mess we’re in is due to socialism needs to explain why the Euro is soaring against the dollar and why the Indians and Chicoms are kicking our a55 economically. As Krugman wrote, Milton Friedman took it as a personal affront that Scandinavia has govt spending of >50% GDP and a robust economy.

    The problem with laissez faire is that it’s a myth. It never existed. Power has always served wealth and vice-versa. Read “Wealth and Democracy” by Kevin Phillips. Read David Abernathy’s “The Dynamics of Global Dominance: European Overseas Empires 1415-1989” Laissez faire is just a fairy tail told by the rich to the poor when explaining why they must suffer in silence.

    The positive feeback between wealth and power is a hallmark of modern western civilization. It’s why Europe colonized the rest of the world. It allowed Westerners “To Serve God, to Win Glory for the King, and to Become Rich” all at the same time. It’s why the industrial revolution happened, it gave us railroads and electric power and interstates and automobiles and the internet etc and so forth. It allowed the Union to beat the Rebs and the US to defeat Japan and the Soviet Union. It got us to the moon.

    Our ability to pay for housing and college, and anything else for that matter, depends and will always depend on the people in Washington. That’s why it’s called a government. What they do matters. The opposite of government is anarchy. If you don’t like being governed, go live in the Amazon, or Sudan, or Afghanistan, or central New Guinea. You won’t survive long, but you will finally get yer pure laissez faire.

    The wealth of the western world was built hand in hand with powerful governance. Without a govt to rescue our buttz when the market tanks, capitalism flies to pieces. You think FDR betrayed capitalism? Man, he saved it. Without FDR, we would have had Huey Long, or worse. Or, in the words of Hale Stewart, “Markets work, but you gotta have rules!”

    Things can get out of hand when the capitalists start believing their own laissez fair propaganda. You and Ron Paul can go lay flowers on Andrew Mellon’s grave, but it won’t help you get paid.

  44. The Financial Philosopher commented on Jul 15

    If the energy spent on cynicism could be captured and spent on changing the things for which our cynicism is based, the world could be a better place to live…

    The only problem with this thought is that we would have to become involved with politics to some degree, which is a thought with its own inherent problems…

    With no truly wise option on the table, I will, therefore, go back to my life and stop being so cynical about the world and focus on the things for which I have control…

    “Those who are too smart to engage in politics are punished by being governed by those who are dumber.” ~ Plato

    “What is a cynic? A man who knows the price of everything and the value of nothing.” ~ Oscar Wilde

    “You have power over your mind – not outside events. Realize this, and you will find strength.” ~ Marcus Aurelius


  45. Jeff Sherman commented on Jul 15

    I was so pleased with Senator Jim Bunnings comments today during the Senate Banking Committee meeting:

    Second, the Fed is asking for more power. But the Fed has proven they can not be trusted with the power they have. They get it wrong, do not use it, or stretch it further than it was ever supposed to go. As I said a moment ago, their monetary policy is a leading cause of the mess we are in. As regulators, it took them until yesterday to use power we gave them in 1994 to regulate all mortgage lenders. And they stretched their authority to buy 29 billion dollars of Bear Stearns assets so J.P. Morgan could buy Bear at a steep discount.

    Awesome. I’m long courage and short Talking Points.

  46. John commented on Jul 15

    Red Charlie:
    Basically I’m with you. Markets are fine and necessary, and infinitely superior to any alternative, but you have to have some rules. FDR did indeed save capitalism and make the US the most powerful country in the world although he gets precious little thanks for it from Amity Shlaes and all her pals at the AEI who are much more concerned at demonstrating that he was closet communist. The fact is the entire western world including the US operates in mixed economies with varying measures of socialism, I use the term although its loaded with baggage. The difference is that all of them, with the exception of the US, accept it and order their affair accordingly. That’s why they all have healthcare systems that while not perfect, cost half what ours does, produce comparable outcomes and cover all their people. Another example is public transport. They know you can never make it profitable enough to attract investors but it has huge side benefits, not the least of which is a reduction in dependence on oil, and so govt funds it. I’ve lived, travelled and worked in France, Germany and Britain and contrary to the opinions of Larry Kudlow and co they are all doing just fine, and in fact the upper middle and elite classes in these countries have lifestyles quite comparable to their counterparts in the US. In many ways superior actually. Unfortunately, way too many people in this country are wedded to shibboleths and myths picked up at church, cable tv or John Wayne movies. I suppose we might grow up sometime but I see little sign of it.

  47. Francois commented on Jul 15

    “By crony capitalism, you mean some people with lots of money have connections to people in power and get legislation passed which protects them from the market and from economic failure.

    That is not capitalism in any way, shape or form. That is SOCIALISM.”

    Putting the word in capital letters does not add any weight to this argument and reflect a heavy-handed insistence in using a lizard-brain trigger. What matters ain’t the label, but an understanding of how we got there.

    The fact is that ANY political system (capitalism banana republic, social-democrat, socialism, Troskysm, stalinism, national-socialism and so on and so forth) tend to have cronies. Politics is based on ideas and loyalty to them. Thus an “esprit de clan” develop among those who share the same ideas, cement the group in power and their relationships with all their helpers (donors/activists etc) who expect rewards for their devotion.

    The only effective counterweight to this tendency is to have strong civil institutions with high degree of independence from the team in power, that can question policies and their implementation.

    The first moves of the current administration was to appoint pure ideologues in each and every Agency of the US government in order to subvert them? They was able to do that to a remarkable degree, rarely seen before in the USA.

    Once they were successful in neutering the most important Agencies, the cronies had carte blanche to start plundering the treasury.

  48. roger commented on Jul 15

    I’m a socialist. I’m not happy. I’d be happy, as a socialist, if more attention was being paid to what America produces – like GM – and less were paid to what the Bush economy produces – financial innovations, like Bear Stearns. A socialist usually has a keen sense for class divides – that makes him a socialist. The class divide here is clear: the government is at the beck and call of an overgrown financial sector, and the financial sector is overgrown because we do have an industrial policy, and have had it for thirty years – de-industrialize. Breaking the bargaining power of labor breaks inflation. Low inflation and a docile labor force was a necessary condition of an inflated financial sector, which depended in turn on an enormous expansion of credit that could be employed by said labor force to ‘invest’ in assets – which would, apparently, be the real moneymaker, not raises at work, not benefiting from increases in productivity or profits.

    The result was a juggling act, and the balls are now coming down. But socialists notice that the people who are suffering are, hmm, the bottom 80 percent. The government hasn’t offered that bottom 80 percent 1 percent loans so that they can invest in T bills paying 2.5 % interest. I wonder why?

    There’s pump and dump schemes. Then there is the belief that government ought to do more than fiddle with tax rates to promote the welfare of its citizens in general. The two aren’t synonymous.

    Isn’t Lind the man who wrote a book arguing that we were perfectly right to fight the Vietnam war?

  49. banana republic commented on Jul 15

    America has a Crapitalist Ponzino economic system.

  50. Jeff commented on Jul 15

    Red Charlie-

    Bingo. Hit it right on the head. Thank you for clarifying what many of us have been thinking.

  51. RedCharlie commented on Jul 15

    If you elect politicians who believe government is the problem, you get a government that is a problem. The fact that Republicans fulfill their own prophesy of doom is not a good reason to listen to them.

    Moreover I wouldn’t get economic advice from an ex-baseball player who has had more than his share of senior moments.

    Amen! I’m with ya 100%. The dialectic between socialism and capitalism is a false dichotomy, yes. I just get fed up with the chorus of Mickey Marketeers who chant “govt=bad, markets=good” no matter what the news is, as though one could somehow have one without the other.

    And yes, my wife’s lived in Britain, we’ve both lived in Japan, and although they don’t live in McMansions (or default on them!) and their cars are smaller, their standard of living is better in many ways.

  52. John commented on Jul 15

    Unfortunately pure socialism has on the whole proved as notable a failure as pure laisser faire capitalism proved to be. In response various societies evolved half way houses which see probably their fullest flowering in Europe. They are not perfect because on the whole the working and lower middle class can be just as greedy and stupid as the upper middle class and aristocracy. By and large the Euros seem to have found a balance, we haven’t got there yet.

  53. RedCharlie commented on Jul 15

    To clarify, the Jeff I directed my reply to was Jeff Sherman.

  54. RedCharlie commented on Jul 15

    Your reply to Roger reminds me of a quote of Winston Churchill’s, “Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of Government except all those other forms that have been tried from time to time.”

    Much the same can be said about capitalism, with the important caveat that it’s an economic system, not a form of government! (And unfortunately some people do need to be reminded of this!)

  55. Alex commented on Jul 15

    It IS the quote of the day. Also SPIEGEL Online cites it in Germany:

    …Es ist nicht ohne Ironie: In der Hochburg der freien Marktwirtschaft ist der Staat die letzte Hoffnung der Finanzbranche geworden. “Wenn du ein Sozialist bist”, lästerte Michael Lind von der New America Foundation in der “New York Times”, “dann solltest du dich freuen.”


    Now Germans start realizing that there is a bigger problem coming up overseas. Until now they felt pretty much safe from that.

  56. Jeff Sherman commented on Jul 15

    RedCharlie, I’d take Bunning, senior moments and all, over Dodd any day.

  57. VJ commented on Jul 15

    Junior today:

    “the decisions on Fannie Mae and Freddie Mac – I don’t think it’s a bailout. The shareholders still own the company.”

  58. roger commented on Jul 15

    John, I take socialism to mean, really, social democracy – no socialist party, except maybe the one in Nepal, wants the state to run everything. I certainly don’t. And, although I think it is important to keep alive the egalitarian ideal, in actual practice, a margin of inequality is always going to assert itself – paradoxically, after a certain threshold, those who try to enforce ‘equality” become themselves unequally powerful.

    On the other hand, there is nothing about the mortgage market today that is formally different than it was four years ago. Back then, nobody was complaining on Wall street or Las Vegas or L.A. or Maricopa, Arizona, about the obvious defect of basing an economy on debt and asset inflation (which, handily enough, didn’t show up as inflation in official measures of inflation – otherwise the Fed would have to… act conservatively and stop it). So the moaning about socialism now is, let us say, more than a little hypocritical. It is like discovering the facts of life when you are fifty. It’s bogus.

    Socialism can be quite adaptive to the private public intermix. For instance, it is obvious from both a liberal and conservative view that August, Bernanke made what I think will be seen in retrospect as a disastrous decision to intervene with interest cuts in response to a quite natural downward movement of the stock market and a quite natural sorting through of the credit markets. I think that decision has put the Fed in a role it was not designed to be in, as our state sponsored economic policy-maker and excuse catcher. It takes on that role due to a vacuum of responsibility among the political leadership.

  59. HCF commented on Jul 15

    RedCharlie –

    I have to disagree your overall point…

    The primary issue with our version of capitalism is that we want capitalism with no losers. Implicit in a market is that for every seller is a buyer, for everyone who thinks something is overvalued, someone else thinks it is undervalued, etc. Difference of opinion/behavior makes markets, so consequently, there are winners and losers on transactions. My issue is that we want everyone to be a winner, like how every kid gets a gold star in kindergarden for being special. As such, our primary market failure is not allowing FOR failure. We have too many sacred cows and entities that are ‘too big to fail.’

    During times of crisis, all I see is huge power grab by all parties. We see everyone: Congress, the Fed, the treasury, the president promising to ‘protect us’ if we yield power to them. It’s this power grab that corrupts our system (as it incidentally also does with every system).

    Government is not bad, but it should be minimized. It is there to protect us as selfish, self-interested people from infringing on the rights of other (likewise self-interested) free-willed people. It’s not there to protect us from ourselves or to protect us from being ignorant, lazy, or greedy. It is also not there to propagate itself to be a larger monster, or else we need an alternate government to protect us from THE government!

  60. Dr. Kenneth Noisewater commented on Jul 15

    Abolish the Senate and limit the House to 3 4-year terms.

    That is the only way you’ll ever get rid of corporate welfare for farms or any other corporation that puts business units into thinly-populated states to collect their 2 senatorial votes very cheaply.

  61. Bob A commented on Jul 15

    Anyone who thinks that only countries or systems that are marginally more socialist than ours is are socialist is an idiot.

  62. Roger Bigod commented on Jul 15

    Permit me to inform you of my desire of going into business relationship with you. Your name has been given to me as person of utmost discretion and trust. I am the grandson of the late Treasurer of Federal National Mortgage Association…

  63. John commented on Jul 15

    We’re all social democrats now, it’s just that that many in America choose to deny it. It’s also probably true to say that the parties here, particularly the GOP, are much more the captives of interest groups than their counterparts in Europe and hence basically much more corrupt although it’s legal corruption and not limited to the GOP of course. In the UK the real differences between the conservatives and new labor are indiscernible to the human eye and much the same is true between the Christian Democrats and Social Democrats in Germany who are actually in a coalition together.

    That’s not really true here on many fundamental issues. Because of that the parties tend to obstruct sensible policy proposals because they conflict with the economic interests of their paymasters. We’re surrounded by examples but healthcare is perhaps the most obvious where the party of management efficiency and sound economics quite happily tolerates the most expensive and inefficient healthcare system in the industrialized world because their bosses in the insurance and drug businesses tell them to. The incongruities inherent in many GOP positions of course get exposed whenever a crisis like the current financial one occurs and all the financial institutions go running to Moma for help. It’s also apparent in areas like farm subsidies, highway bills and earmarks all of which would put the EU to shame with the amount of socialism but they don’t get the same amount of visibility.

    I actually think the US system of govt is in some difficulty. After 150 years when we have been able to flourish based on abundant natural resources, social homogeneity, economies of scale, and fragmentation, backwardness and civil war amongst our rivals, we are entering a period of relative economic and political decline. The total deadheads like neocons and large swathes of middle America either don’t realize it yet or are in denial but we are already operating in a multipolar world again and China certainly, and perhaps Europe, India, Russia and its satellites too, are either going to overtake us or at least draw level during the next fifty years. Our Pacific hegemony will be gone in probably less than 20 years. These are earth shattering events which the American political system is ill equipped to cope with. There is a school of thought that believes the GOP is going to go into eclipse because of demographics and the disasters of the last seven years and there is evidence of this. Basically it’s probably for the best if for no other reason than the Dems are much less tied to obstructive economic interests, although there are also signs that certain segments of the industrial community are waking up to reality. And I say all this as long time dedicated free enterprise Republican who thought the wheels were coming off the GOP bus in the 90’s but have been appalled by the events of the nineties.

  64. John commented on Jul 15


    “have been appalled by the events of the nineties’

    That should have 2000’s!!

  65. Jessica commented on Jul 15

    Having been a socialist in my wild youth, this is NOT socialism.
    Crony capitalism perhaps. Decaying imperialism maybe.
    Heightened contradictions between the needs of individual capitals and the needs of Capital (in other words, what specific elite players need is quite bad for the system as a whole, even though it is this system that makes them the elite)

    I would plead for everyone to see that this is why we actually need a socialist movement with a little bit of strength: it is what keeps capitalists honest.

  66. Alfred commented on Jul 15

    This idea of socialists in favor of government bail outs does neither of them justice. In socialist Europe buying a house or a car with no money down and no interest rates for a couple of years is unheard off. Government bail outs are an invention of the NY Fed and aimed only at the well being of Wall Street with complete disregard of main street. Socialism entails exactly the opposite that is support of main street at a cost for the elite.

    What’s really happening on Wall Street with the help of the NY Fed is socializing losses after years and years of monetizing profits.

  67. Bob commented on Jul 16

    Good relevant blog link below:


    And RedCharlie, it was people like you that said 230 years ago that our ability to get anything done depended on our benevolent British masters in the House of Lords. I don’t give a crap about what “material benefits” we lose or whether our superpower status erodes, I just want my children and grandchildren to be free (to succeed OR fail). You can spew all the Marxist ideology you want, but your Utopian State is a pipedream.

  68. RedCharlie commented on Jul 16

    You want losers? We will all lose bitterly if the GSE’s default on their debt and the mortgage market locks up but good, 1930’s style.

    Economics and government are not zero sum games. The whole is greater than the sum of the parts. Bernanke and Paulson aren’t putting on pink tutu’s and sprinkling fairy dust on our heads. They are trying to save our goose. They, and I, are much more concerned about our three squares a day than our self-esteem.

    The primary issue with right wing free market ideology is that it condemns any sort of collective action as unfair. Every tax is unfair as there will always be somebody that pays more than somebody else. It’s based on an adolescent selfish ‘all about me’ Ann Rand-ian individualism. In the remarkable words of Margaret Thatcher, “There’s no such thing as society. There are individual men and women and there are families.”

    Modern Mickey Marketeers never acknowledge that without government, there is no market. Your money, your property, your job, they all are worth nothing without the full faith and credit of the U.S. government behind them. Without the GSE’s, there is no housing market. Without a housing market, your house is not worth anything.

    (On a side note, anti-regulation “takings” lawsuits crack me up. Want govt to reimburse you for a zoning rule you don’t like? How about you reimburse govt for the road they built to your house, the water and sewer pipe they laid to your door, every thief they caught in your neighborhood, and every time they made your neighbor (or you!) mow your lawn.)

    You feel abused because some of your precious tax dollars might go to keep Fannie Mae and Freddie Mac from defaulting. It’s like you don’t want to help put out a fire in your own house because you weren’t the one playing with matches. And Jim Bunning wants to go a step further and prosecute the Fire Dept for trespass! The choice here is not between Bunning and Dodd, or between Republican and Dem, it’s between doing nothing or doing something. It’s between putting the fire out or watching your house burn down while saying “I told you so.”

    The irony is, of course, that we will lose a lot less, maybe nothing, if the GSE’s keep operating compared to what we will lose if they default.

    So, I repeat my offer. You don’t believe in govt or society? Fine. Go live in the Amazon, Sudan, Somalia, Afganistan, or the New Guinea highlands. Precious little govt or society in those places. Just men, women, families, and tribes. As close to the pure freedom of the Hobbesian state of nature as you can find on God’s green earth. Enjoy.

  69. RedCharlie commented on Jul 16

    If it’s any consolation, the GSE stockholders will be the losers in this one, as the market is showing us. I see no allocation of taxpayer money to help GSE stockholders with issues of self-esteem.

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