Posts Tagged ‘credit crisis’

Wall Street v. Main Street, Biden v. Palin

Friday, September 26th, 2008

Peter Robinson, a research fellow at the Hoover Institution and interviewer for Uncommon Knowledge, writes about the Wall Street crisis seen from the hinterlands:

The chairman of North Carolina banking giant BB&T (nyse: BBT – news – people ), John Allison, has issued a statement. While Wall Street went on a binge, Allison notes, a lot of financial institutions in the hinterlands, including his own, resisted the allure of the subprime frenzy, retaining both profitability and impressive capital positions. Why, he asks, should Congress bail out the institutions that played fast and loose?

What we have here is a contest between Main Street and Wall Street. Who will prevail? The ad hoc, still-coalescing group of outsiders? Or Paulson, Bernanke and the executives in Manhattan with whom they are consulting?

He also compares and contrasts the insider veep candidate Biden to the outsider veep Palin:

What’s clear is that the results of the vice presidential experiment are already in. Palin, the “regular citizen,” is running a flawless campaign. Biden, the man of “prudence” and “experience,” is making a fool of himself two or three times a week.

Then he ties the two together.

As an aside: check out the final installment of this week’s series of interviews with Archbishop Chaput by Robinson at Uncommon Knowledge:

Archbishop Chaput says Catholic Democrats have an obligation to change their party’s platform on abortion, just as Catholic Republicans are responsible for keeping their party pro-life. Moreover, he says the Catholic position on abortion need not be just a Catholic position, but an American position.

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Where’s Nancy?

Friday, September 26th, 2008

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“We are going to get a package passed,” President Bush says. “We will rise to the occasion.”

I feel all warm and fuzzy now. Don’t you?

Yesterday’s White House summit is behind us. Today we’ll settle on a deal.

From various sources comes the story that bailout legislation is stalled because of foot-dragging by House Republicans.

But Republicans are a minority in the House of Representatives.

Here is Byron York with a question about this legislative oddity:

When it comes to the bailout plans, from a Democratic perspective: If it is House Republicans who are the problem, who cares what they think? Isn’t it a distinguishing characteristic of the House that the majority can pretty much do what it wants? It’s the Senate where the minority can make lots of trouble and slow down the process. In the House, we have seen Nancy Pelosi and her top lieutenants steamroll over Republican objections time and again in all sorts of legislative matters. Before Pelosi, we saw a Republican majority do similar things. So if Pelosi wants the bailout to happen, and House Democrats are united behind her, why don’t we have a bill?

The answer is that Madame Speaker wants to cover her hiney with enough Republican votes that she’ll keep her head of the bailout fails.

Say it’s House Minority Leader John Boehner’s fault.

It ain’t so.

Madame Speaker is at fault.

Meantime, what’s happening on the floor of the House of Representatives?

Texas Rep. John Culberson reports that Speaker Pelosi (D-CA) found time in the House’s schedule to bring a permanent tax increase to a vote:

On the House floor voting against Pelosi’s 60 bill permanent tax increases to “pay for” temp tax cuts. Tax cuts pay for themselves!

Yeah, that’s what skittish consumers and reeling businesses need right now: a tax increase.

Nancy Pelosi has been a huge disaster as Speaker of the House.

Developing, Rep. Culberson via Twitter:

Heard tentative agreement btw McCain, WHouse, Sen and House Dems – sounds like scaled back Paulson bailout paid for by our kids – not good

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A Tiny Tale of Liquidity

Friday, September 26th, 2008

Here is a tale to illustrate why the government bailout is needed, and quickly.

Once upon a time in a not so far away land, a mighty river supplied everyone with water.

The river supplied so much water that larger riverside landowners diverted water into holding tanks and sold that water to landowners further away. Those landowners promised that they would return the water during the rainy season, when their own cisterns would refill.

Smaller landowners and other folks further downriver saw no problem with this practice, even applauded the wisdom of opening up land further from the river.

When the rainy season came, rain fell here but not there. Landowners far from the river could not fill their cisterns. Many walked away, leaving the empty cisterns and their promises behind.

Large riverside landowners could not refill the withering river from the empty cisterns of the departed landowners. Fearful, they hoarded the water in their own holding tanks.

Smaller landowners and other folks further downriver, dependent on a free-flowing river, faced disaster. They grew angry at the large landowners for the earlier profligacy and demanded that all the water in their holding tanks be seized.

But all the water in those holding tanks would not reflood the river.

Something would need to add water — lots and lots and lots of water — upstream, and promise to keep adding water to maintain the river’s flow. That would restore trust in the flow, and life and commerce along the river could return.

The moral of the story is get the river flowing again and wait until later to tar and feather the idjits responsible. (They are legion, and not just on Wall Street. Many work on Capitol Hill. Some used to live in the house on the next street over, the one a bank is now trying to sell against the wind of a housing downturn.)

The river in question is lendable cash. The water is cash lent to get stuff done. If banks and credit unions don’t have the cash to lend out or hoard cash to maintain their own liquidity, Stuff doesn’t get done.

Stuff like buying and selling houses, or merchandise for the upcoming holiday season, or fuel for transport of that merchandise.

Stuff like feeding cattle until they’re ready for slaughter.

Stuff like development of new software.

If the river of credit stays dry, pain will be real and widespread.

Call or email your congressweasels to let them know that you want something done today.

For another explanation, see Steven Perlstein’s Gut Check.

(Hat tip: Bill Dyer (aka Beldar) at Townhall.)

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