And more on the bailout...

Whew -- lot to talk about today.

First -- more comments. Ming says, "How much faith can one have in a government that encourages recklessness and irresponsibility... There are banks that are out there that are doing fine in this "crisis", why? because they weren't reckless and minimized their risk. As long as some of the banks are able to survive, the remaining ones need to go, even it wipes out the stockholders. (Sorry stocks are a gamble, always have been, always will be)"

You know what? I agree for the most part. The government is very much guilty of encouraging reckless behaviour. The tax code gives free reign to hedge funds, entitlements are out of control, pork is out of control*1, and Congresspeople actually left Washington on Monday after killing the first bill so they could go home and campaign, instead of staying around to fix the "worst crisis since the Great Depression". The FED and SEC and FDA are all
bureaucracies that put their own agendas before the public's.

Also correct is that some banks should certainly go under if they cannot compete -- that is absolutely the risk stockholder face.
(I do NOT agree that stocks are a gamble. The market can act like a casino, especially to short timers who go "all in" or misuse options. But I don't think ANYONE would say Warren Buffet is a gambler. *grin*)

I actually think the worst offenders are WE the people ourselves (in the overall sense, not you, or me, personally, of course). As Ming put it in an email, the sheer chuztpah of the folks who took mortgages they either did not understand the terms of OR couldn't repay, OR both! And to compound their sin, they then used their homes as an ATM -- buying cars and material goods on the soaring equity -- only to see it crash and walk away, leaving $750K mortgages on homes now worth $300K. And elected officials wouldn't keep enlarging entitlement programs if we didn't have our hands out. We need to look in the mirror and realize the present is a direct reflection of our past behaviour.

That said, I am seeing more and more clearly that a bailout/rescue is needed. Yes, it would be healthy for the economy in some respects to have a severe correction; some corporations ought to be bought out by others. But the staggering loss of jobs, mass foreclosures that would blight neighborhoods, and human cost argue to me that something is needed on the federal level.

Ming -- is it "fair"**2 to those who kept their debts reasonable, and lived within their means, to see those who did not saved? Of course not! But at some point fairness goes out the window to prevent a national disaster.

We should take this time however, to really look at what led us here and how to prevent similar situations in the future. It sounds like the mark-to-market rule is being suspended temporarily. The SEC supposedly is extending the no-short-selling ban on the financial companies***3 until Oct 17. We need plenty more of these kinds of actions -- I strongly encourage people to let their congresspeople know exactly what they want NOW -- they actually seem to be listening, for the moment.

The VP debates are tomorrow at 6 PDT. Watch them and learn more about the views of whoever is to be our future vice-president!

Regards,
Trond

---
* The current bailout bill passed tonight by the Senate used to be 3 pages. Now it is something like 456 pages, and 200 pages of that is pure pork, as an incentive to get votes. Among other things, THEY ARE REVOKING A $.39 TAX ON CHILDRENS' BOW AND ARROW, ARROW SHAFTS. Which Senator's kid uses arrows in bulk? This one move loses $200K in estimated revenue a year. Obama and McCain****4 both voted for the bailout.

** I don't think it "fair" that my tax dollars go to subsidize Ted Turner's peanut farm, for example.

*** And why the HELL is it limited to 700 odd "financial" companies (of which IBM and GE now qualify!!)?? If the SEC is now FINALLY acknowledging that short selling is harmful (thank you Patrick Byrne!) then the Equal Protection clause, and well as "fairness" demands all companies should be similarly protected.

**** There goes his argument that he never votes for pork. :-)

My Endorsement

Time for a rant. :-)

Does anyone seriously expect any of the three candidates for President to actually do anything once in the Oval Office? And inviting the winning college World Series players to a photo op in the Rose Garden doesn't count.

Now, I don't mean "not do anything" in an apathetic sense. What I mean is -- the President really cannot do much.
Think about it. All three have their various platforms, and sure, they can ask to have certain bills introduced. But those get amended to include pork for Senator X so he'll vote for it, something else for Representative Y because she's the Chair for the committee that would otherwise reject it... and so on and so on ... until the bill that arrives to be signed looks nothing like the original item.

It is not their fault, actually. Remember "checks and balances" from way-long-ago history or civics class? The Executive and Legislative branches were purposely set up so that laws would take a while to be passed, and hopefully well deliberated ones to boot.

So if HillaryCare is what you think is most important, and thus you vote for her, please remember that she then has to go to battle with 535 Congresspeople -- all of who have their own ideas about the "right" way to spend our tax money on the people's health. Hey, here's a campaign slogan: "Hillary Clinton -- the 6th and 7h terms of the Bush/Clinton era."

If we do need to "stay the course" and thus you cast your vote for John McCain -- same thing. Congress actually controls the purse strings -- remember? Thus if a Democratic majority decides to shut down funding, we will get out. Hmmm... feel like you wasted your vote?

Obama is new enough to the scene that he does not yet seem captured by the machine yet. He has made the populist claim to be the outsider and seems the most believable at this point. I honestly believe that he will be marginally better than the other two, and that is why Barack Obama wins the coveted "Official Trond24 Presidential Endorsement."

Regards,
Trond