Tarring and Feathering Capitalism
By Charles Payne Sep 24, 2008 12:15 pm
Looking past the political mess.
"Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tossed to me,
I lift my lamp beside the golden door!"
- Emma Lazarus
America has been a beacon of hope for the hopeless because it's been willing to embrace those most in need. For all the talk about how backward our nation is, it alone has allowed every nationality, race and gender to succeed. Moreover, for all the talk from elitists about how important it is for our president to have traveled outside the United States, I want a president who's well-traveled within this country. I’d rather a president that’s been to Paris, Texas than Paris, France. 
We have taken in refugees, political prisoners, given trillions of dollars of aid and sacrificed the lives of our young men and women. So why is there so much resistance to saving the financial system?
Okay, nobody should have a blank check. Okay, there are no guarantees. Okay, bad behavior got us into this mess. At this point, something has to be done. Doing nothing just isn’t the American way.
Sure, finger-pointing has become an everyday pastime, I do it all the time, myself. But right now, Americans need to understand that the assets the Treasury wants to buy are their assets.
Those toxic assets are mostly shaky home loans taken out by taxpayers. Folks who oppose the deal have to ask if they've lost faith in Americans' ability to live up to their obligations. If so, let's watch this thing burn to a crisp and pick up the pieces later. After taking huddled masses for a couple of centuries and the most powerful nation the world has ever known lets watch the pain and suffering of our own citizens just to harm a couple of fat cat CEOs. Not living up to one’s responsibilities is reprehensible in a society where people rely on other people. The system was run amok and greed blinded the smartest guys on Wall Street.
I hope anger, envy and a thirst for revenge doesn’t blind the rest of us.
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2008-09-24 12:27:15
Socialism?
The proposed bailout is socialism. It is moral hazard. And once you establish that the government can spend a trillion dollars to prevent your mistake from harming me, or vice-versa, then the government can spend a trillion dollars to keep my neighbor's foreclosure from lowering my house price, and also spend a trillion dollars to help people who can't afford houses at current inflated prices buy them, and spend another trillion helping people keep up with the inflation engendered by the first three trillions. It does not end.
The only way for the bailout to not engender moral hazard is for the banking industry to pay an enormous cost. Since they have no money right now, that cost will take other forms. Such as limiting CEO pay, and imposing regulations to keep them from getting into a mess like this again. And other things that may occur to us down the road.
The take away that so many are resisting so strongly is this: free markets require government regulation to function properly. Otherwise risk is always underpriced, every single time, and when the bubbles burst people who never participated still get hurt. In other words, Ronald Reagan and Dubya were/are completely, totally, and absolutely wrong about the role of government in our economy, and modern conservativism died this week, and no intelligent voter should ever buy into that load of baloney ever again.
The only way for the bailout to not engender moral hazard is for the banking industry to pay an enormous cost. Since they have no money right now, that cost will take other forms. Such as limiting CEO pay, and imposing regulations to keep them from getting into a mess like this again. And other things that may occur to us down the road.
The take away that so many are resisting so strongly is this: free markets require government regulation to function properly. Otherwise risk is always underpriced, every single time, and when the bubbles burst people who never participated still get hurt. In other words, Ronald Reagan and Dubya were/are completely, totally, and absolutely wrong about the role of government in our economy, and modern conservativism died this week, and no intelligent voter should ever buy into that load of baloney ever again.
2008-09-24 12:28:33
The "system" is failing?
Maybe it's time to question whether this system should even be saved. No, I'm not saying we should allow it to collapse.
But maybe we should start talking about a different method of capital allocation other than every man for him or herself.
As Toddo often says, just saying.
But maybe we should start talking about a different method of capital allocation other than every man for him or herself.
As Toddo often says, just saying.
2008-09-24 12:42:55
Chuck my man!
Where does this come from? You're saying the blowback all boils down to people wanting to rake CEO's over the coals? That has to be the most simplistic socialist hook I've seen yet. This isn't about limiting CEO pay Chuck, this is about responsibility you preach of.
Companies are going to get away with selling worth less paper to me and they keep on making this circle jerk work. Well I think we're all sick of it and it's time to hold them just as accountable as all those who will lose their homes, their credit and feel like their lives. They'll move on and still continue to live. Those who pushed this insaneness at the higheset levels, need to go to jail, need to lose everything, and need to be the example for real responsibility to ever show up in this country ever again.
I support a bailout that rewards tax payers and punishes poor management. The current proposal punsihes tax payers so we can hurry up and fix it. Let it blow up and lets start picking through the ashes to find the Phoenix. Have faith in our ability to start from scratch.
Companies are going to get away with selling worth less paper to me and they keep on making this circle jerk work. Well I think we're all sick of it and it's time to hold them just as accountable as all those who will lose their homes, their credit and feel like their lives. They'll move on and still continue to live. Those who pushed this insaneness at the higheset levels, need to go to jail, need to lose everything, and need to be the example for real responsibility to ever show up in this country ever again.
I support a bailout that rewards tax payers and punishes poor management. The current proposal punsihes tax payers so we can hurry up and fix it. Let it blow up and lets start picking through the ashes to find the Phoenix. Have faith in our ability to start from scratch.
2008-09-24 12:44:05
anyone else think Rex Tillerson might be more valuable to the economy than say Angelina Jolie?
2008-09-24 13:03:16
Exxon CEO value?
That depends. If you buy into the conspiracy theory that Exxon et al have manipulated the price of oil in collusion with the House of Saud, then yes, Tillerson is very valuable to Exxon - but, also, he should be shot. Repeatedly. With a large caliber weapon. Starting with the toes and fingers and working inwards.
If, conversely, the price of oil is being set by free market forces, then probably 1,000 MBAs could have presided over Exxon in recent years and made comparably good decisions. Exxon makes huge profits when oil prices go up regardless of who is running things.
On the other hand, Ms. Jolie is very 'bankable'. People will go see a movie just because she appears in it (for the teen-aged boys, the more of her that appears, the better, if you take my meaning).
So I would say that Ms. Jolie has a measurable value-added to her employers that Mr. Tillerman does not, and is probably worth more.
If, conversely, the price of oil is being set by free market forces, then probably 1,000 MBAs could have presided over Exxon in recent years and made comparably good decisions. Exxon makes huge profits when oil prices go up regardless of who is running things.
On the other hand, Ms. Jolie is very 'bankable'. People will go see a movie just because she appears in it (for the teen-aged boys, the more of her that appears, the better, if you take my meaning).
So I would say that Ms. Jolie has a measurable value-added to her employers that Mr. Tillerman does not, and is probably worth more.
2008-09-24 13:13:26
Exxon CEO value?
how about this take American's pay less per gallon of gas than any free market in the world. Rex deals with keeping a constant nearly uninterrupted flow of energy to the entire country. He deals with matters as diverse as Eco terrorists here at home and real ones in Nigeria. His company has resisted expensive oil exploration while the rest of industry scrambled to drill wells that are only profitable if oil is over 100 dollars a barrel. Yea I think Rex does a little more than Angelina Jolie.
2008-09-24 15:13:19
Exxon CEO value?
And how many other people would have done the same? Supply and demand, my friend. Sitting back and watching the product you sell quadruple in price due to no action on your part is not brilliance. If the price has quadrupled because of action on his part he is a criminal and a traitor. Either way he's not particularly valuable to the economy.
Regarding terrorists, I would imagine Exxon has paid bribes to MEND. Helps Exxon, hurts everyone else on the planet. That's an example of negative value to society.
Regarding terrorists, I would imagine Exxon has paid bribes to MEND. Helps Exxon, hurts everyone else on the planet. That's an example of negative value to society.
2008-09-24 15:35:11
network effects
Angelina Jolie (say), or J. Rowling, is a beneficiary of network effect - as is anybody whose wealth derives from fame. I believe Taleb covers this in The Black Swan.
2008-09-24 16:01:15
network effects
You guys are too cynical I don't know how you sleep at night.
2008-09-24 18:56:21
Charles' Fox Roots Showing Again
Charles my man, they have you trained well down at the fixed news channel. You spout that nonsense as though you really believe it!
Most of the toxic assets are home loans taken out by taxpayers? Whew! Thank goodness it's all their fault!
I guess guys like Bennet and Kevin and Mr Practical and Toddo and others have just been blowing smoke here on Minyanville about those derivatives of derivatives of repacked debt that were bought and sold and then repacked again into some other trading instrument by the investment banks.
Thank goodness we can blame the common man and not have to try to figure out what those "financial wizards" from those failed firms were doing behind the curtain in Oz.
Never mind Dorothy, just you and that wicked dog of yours move along...
Most of the toxic assets are home loans taken out by taxpayers? Whew! Thank goodness it's all their fault!
I guess guys like Bennet and Kevin and Mr Practical and Toddo and others have just been blowing smoke here on Minyanville about those derivatives of derivatives of repacked debt that were bought and sold and then repacked again into some other trading instrument by the investment banks.
Thank goodness we can blame the common man and not have to try to figure out what those "financial wizards" from those failed firms were doing behind the curtain in Oz.
Never mind Dorothy, just you and that wicked dog of yours move along...
2008-09-24 19:45:02
What it really is..
It's about promises. Promises that people make to pay money for things they think they want. The banks and mortgage derivatives are poker games that bet on the future ability of people to make good on their promises to pay.
In walks Peak Oil, and the cost of living skyrockets and people can't make good on those promises.
A government bailout is equivalent to the military and police stepping in, locking ALL of the people in chains, and telling them that they will have to pay if it means working from prison to pay the taxes.
Debts are chains. If the chains are too heavy, the slaves die just carrying around the chains and no work gets done.
What we need are people and production, not usury. It doesn't mean socialism or any 'ism' except the idea that value comes from living, breathing people; not from spreadsheets with magic programs and physicists working for Wall Street because the research they SHOULD be doing doesn't pay.
You think some CEO's should be paid like athletes or rock stars, but what about farmers, who bring forth food from only the sun and soil and the labor of their backs while making all of the same labor, spreadsheet, risk, and fancy habidasherie decisions as a CEO, but without the sheep-like investors?
Not to mention greater physical risk than football players: cows don't listen to referees, and they are a lot bigger than linemen.
Burn it down and we'll build a new bank IF the need arises. Maybe our sons and daughters can come home from the poppy fields in Afghanistan and defend our crops instead of the ones belonging to the CIA.
In walks Peak Oil, and the cost of living skyrockets and people can't make good on those promises.
A government bailout is equivalent to the military and police stepping in, locking ALL of the people in chains, and telling them that they will have to pay if it means working from prison to pay the taxes.
Debts are chains. If the chains are too heavy, the slaves die just carrying around the chains and no work gets done.
What we need are people and production, not usury. It doesn't mean socialism or any 'ism' except the idea that value comes from living, breathing people; not from spreadsheets with magic programs and physicists working for Wall Street because the research they SHOULD be doing doesn't pay.
You think some CEO's should be paid like athletes or rock stars, but what about farmers, who bring forth food from only the sun and soil and the labor of their backs while making all of the same labor, spreadsheet, risk, and fancy habidasherie decisions as a CEO, but without the sheep-like investors?
Not to mention greater physical risk than football players: cows don't listen to referees, and they are a lot bigger than linemen.
Burn it down and we'll build a new bank IF the need arises. Maybe our sons and daughters can come home from the poppy fields in Afghanistan and defend our crops instead of the ones belonging to the CIA.
2008-09-24 19:58:21
I think you are wrong
I think you are wrong. I don't think congress should act in haste. I don't think Paulsen took enough time to think about what he is trying to jam down congresses throat. One, two three weeks longer will not ruin this country, but the speed that he wants things done could. We do not need another Bush. Paulsen wants to be in complete control and the republicans want to wrap this up before the election.
2008-09-24 20:19:40
"Of course we want to be paid back and maybe even make money on the deal"
No, the real fear is that the taxpayer will cough up 700 billion and when/if the good times come back these very same crooks will get all the rewards. It is bad enough for us to get screwed but having to pay for it too seems to be asking a little much!
The real problem is a system that allowed these companies to become 'too big to fail'. No company should be allowed to get so big as to be in a position to blackmail the country.
Maybe we can't let them all fail but we should let some fail as a preventative for future moral hazard. I say let Goldman Sachs fail and save the rest. This should send the appropriate message as it would make everyone understand that there are no guarantees and there are no sacred cows. That goes for Mr. Buffett as well.
As for your girl Palin, not only hasn't she traveled outside the country much she hasn't traveled very much inside it either. See, she's not very experienced. If you like comedy you would love watching President Palin run this country during a meltdown of our economy. I think she would be in so far over her head that she would actually resign (or at least make someone else acting President). If you are so partisan as to be unable to acknowledge this then you probably shouldn't be the one calling for us all to join hands and sing Kum Ba Ya now that your buddies have fallen on hard times.
2008-09-25 10:20:22
Palin is far more experienced than Obama so I am not worried about her in a crises situation. What the average person doesn't understand is without this bail out pain will trickle down in a way most people have never seen. Credit will come to a halt that means no credit cards, no payrolls, no financed car sales, no new business, Utilities may shut down, no bond issues for schools, the whole system would crash and the chinese and everyone else would go down with us.
This isn't about a paycheck for a few lucky CEO's this is about the entire system.
This isn't about a paycheck for a few lucky CEO's this is about the entire system.
2008-09-25 10:56:26
F.B.I.
I'm not for tarring and feathering capitalism at all.
I simply want any debate on any bailout bill halted until the F.B.I. completes its FRAUD investigation into FRE, FNM, AIG, LEH and 22 other banks. (Hmmm. C, JPM, MER, MS perhaps???)
How the media buried that story is beyond me. Smacks of treason and complicity.
I simply want any debate on any bailout bill halted until the F.B.I. completes its FRAUD investigation into FRE, FNM, AIG, LEH and 22 other banks. (Hmmm. C, JPM, MER, MS perhaps???)
How the media buried that story is beyond me. Smacks of treason and complicity.
2008-09-25 11:45:22
Palin far more experienced than Obama?
Only on a planet where the University of Idaho is a better school than Harvard Law, and Journalism is more useful to a politician than law, and having to hire a city manager to help you run a town of 5,000 shows managerial skills, and being absent over 50% of the days the state legislature is in session is being a good governor.
Obama beat Hillary by taking on the most well-connected politicians in the Democratic party and out organizing them. It is an incredible achievement that shows terrific managerial skills. Running Obama's campaign is not only harder than anything Palin has ever done in politics, it is harder than everything Palin has ever done in politics put together.
Palin literally freezes up when asked a question she does not have a memorized answer for; see her response to Katie Couric asking about McCain's campaign manager and Freddie Mac as one example. She is absolutely not ready for prime time.
Obama beat Hillary by taking on the most well-connected politicians in the Democratic party and out organizing them. It is an incredible achievement that shows terrific managerial skills. Running Obama's campaign is not only harder than anything Palin has ever done in politics, it is harder than everything Palin has ever done in politics put together.
Palin literally freezes up when asked a question she does not have a memorized answer for; see her response to Katie Couric asking about McCain's campaign manager and Freddie Mac as one example. She is absolutely not ready for prime time.
2008-09-25 12:27:06
"the whole system would crash"
And this would be a bad thing?
This system needs to be rebooted. The credit grease for this economy has gunked up and no longer serves the public good. The idea that this much corruption, greed and malfeasance can simply be papered over by more borrowed money and the problem will go away is ridiculous.
The idea that these people have MY best interests at heart makes me want to vomit. Watch as the squealing pigs all rush the trough trying to get theirs as the government puts an even larger burden on the backs of future generations.
I mean of all people, Bush comes out and gives a prime time speech and that is going to convince anyone that he knows what he is doing...after these past 8 years???
The fact that you can even pretend to believe that Palin is qualified to lead this country shows just how far off the tracks we've gone...all in the name of 'winning'. Funny thing is, it seems like the more people we have interested in winning the latest election, the more we all lose.
No, the answer isn't more of the same...more borrowing, more greed, more corruption, more war, more torture, more paying off dictators to help us keep their people in subjugation, more profits for Exxon and Haliburton (by the way, where is Cheney these days).
The answer is going to be a lot of suffering and sacrifice whether we pay this bribe or not but hopefully, out of this morass will come a people that understand that any country whose citizens have become 'too good' to pick their own fruits and vegetables, clean their own restrooms or work in their own meat packing plants is a country that is doomed. This country was built on hard work, conservation and sacrifice and if we ever want it back we must learn there is no easy way to true prosperity.
2008-09-25 20:27:21
The end of the world, for God's sake...
The DJIA is at 11000, right where it was in 1998. History will show that there was no credit crisis, or any other type of economic crisis for that matter about to doom the US. THe US is simply in another trickle-down, overcooked-supplyside deflationary period, period. Anyone living and breathing in the fresh air on mainstreet in Minyanville for the last 2 years knows that. Now, on the other hand, if you were an investor living in your so-called "gated" community and tightknit social circles, you might have missed the actual move to mark to market of many assets and equities back in the recession of 2001-2003. What we have witnessed in the last 5 years has been the hangings-on of the Robberbarons. This crisis in confidence with anything to do with Wall Street faux mark to market AND hyper-derivative investment portfolios has got to run its course. The bottle has been shaken, the tiny bubbles have formed and been contained far too long. The cork must pop and we must sit out a few more years without our 12% returns. This is not a first either, simply review the flatline period from 1962 to 1981 and you will see similar economic growth and pressure. America's resilient economy did not go bust.
2009-11-24 19:32:50
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