Balkinization  

Monday, September 15, 2008

Who's your constitutional dictator?

Sandy Levinson

I note the following comment in a very interesting post on the turmoil in the US financial markets by "The Deal Professor, " Steven Davidoff:

Lesson 11: Henry Paulson Runs the U.S. Economy

Not President George W. Bush, not Federal Reserve Chairman Ben Bernanke…

A note: For those who watch the Fed, it announced Sunday that it would take as collateral much riskier assets — including equities, junk bonds, subprime mortgage-backed securities and even whole mortgages — in exchange for emergency loans through the Primary Dealer Credit Facility.


In a day of big news, this is equally as big as the other events. Before, the Fed justified the facility by saying it would only take on safe assets. But now, the taxpayers are really going to be guaranteeing the balance sheets (and investments) of the financials.


For those of us interested in understanding the nature of America's constitutional dictatorship, this is certainly worth mulling. Obviously Paulson occupies his office legitimately: He was nominated by George W. Bush and confirmed by the US Senate. But, as always, one can ask about the scope of authority he (or Ben Bernanke) was given. If they are given the authority to engage in huge economic decisions that significantly redistribute assets, then this is not analytically dissimilar from the Roman dictatorship, in which civic worthies were given similarly wide-ranging discretion to make major decisions without seeking any prior approval (perhaps even from the President, let alone Congress).

I'm not clear, incidentally, why Professor Davidoff thinks he must necessarily choose between Paulson or Bernanke, unless there is evidence of a showdown between them that Paulson won. The major point appears to be that George W. Bush is not a serious presence in this most serious economic crisis since 1931. But if we take Bob Woodward's book seriously, he was scarcely a serious presence in many of the most important decisions with regard to Iraq, so why should things be different with regard to decisions about the economy. Would any serious person want George W. Bush to be a serious player, anymore than any serious person would want Sarah Palin to be "the Great Decider" with regard to dealing with economic crises? But I digress....

UPDATE: The New York Times has just posted an article, "Bush says economy strong enough to handle turmoil." Now, don't all of us feel so much better....



Comments:

The executive bureaucracy is the one area which we agree is dictatorial. Of course, the bureaucracy's quasi legislative powers are also in facial violation of the Constitution. Care to join me in calling for the judiciary to enforce Congress' plenary power over legislation and stripping the buracracy of these powers?
 

President Hoover: 8 Dec 1931: "Although some of the causes of our depression are due to speculation, inflation of securities and real estate, unsound foreign investments, and mismanagement of financial institutions, yet our self-contained national economy, with its matchless strength and resources, would have enabled us to recover long since but for the continued dislocations, shocks and setbacks from abroad....The fundamental difficulties which have brought about financial strains in foreign countries do not exist in the United States. No external drain on our resources can threaten our position, because the balance of international payments is in our favor; we owe less to foreign countries than they owe to us." [State of the Union 1931]

Note: In 2008 the balance of international payments is not in the US favour and US foreign debt is greater than ever before.

15 Dec 2000: Senator Phil Gramm excludes swaps in financial services from SEC/CFTC regulation: see Mother Jones: Foreclosure Phil

As Congress and the White House were hurriedly hammering out a $384-billion omnibus spending bill, Gramm slipped in a 262-page measure called the Commodity Futures Modernization Act. Written with the help of financial industry lobbyists and cosponsored by Senator Richard Lugar (R-Ind.), the chairman of the agriculture committee, the measure had been considered dead—even by Gramm. Few lawmakers had either the opportunity or inclination to read the version of the bill Gramm inserted. "Nobody in either chamber had any knowledge of what was going on or what was in it," says a congressional aide familiar with the bill's history.

It's not exactly like Gramm hid his handiwork—far from it. The balding and bespectacled Texan strode onto the Senate floor to hail the act's inclusion into the must-pass budget package. But only an expert, or a lobbyist, could have followed what Gramm was saying. The act, he declared, would ensure that neither the sec nor the Commodity Futures Trading Commission (cftc) got into the business of regulating newfangled financial products called swaps—and would thus "protect financial institutions from overregulation" and "position our financial services industries to be world leaders into the new century."


Between 2000 and 2008 securitised lending instruments traded went from circa US$500 billion to US$2,800 billions until the sub-prime crisis broke - the market is now down to under US$500 billion again. Estimated global credit losses US$1 trillion.

President Bush: 15 Sep 2008: "I know Americans are concerned about the adjustments that are taking place in our financial markets. At the White House and throughout my administration, we’re focused on them — and we’re working to reduce disruptions and minimize the impact of these financial market developments on the broader economy. I’ve been in close touch with Secretary Paulson throughout this weekend and this morning. I appreciate the work the Treasury Department, and the Federal Reserve, and the Securities and Exchange Commission, and major financial institutions here and around the world are doing to promote stability in the financial systems. As policymakers, we’re focused on the health of the financial system as a whole. In the short run, adjustments in the financial markets can be painful — both for the people concerned about their investments, and for the employees of the affected firms. In the long run, I’m confident that our capital markets are flexible and resilient, and can deal with these adjustments."

McCain: 15 Sep 2008: "You know, there's been tremendous turmoil in our financial markets and Wall Street and it is, people are frightened by these events. Our economy, I think, still, the fundamentals of our economy are strong, but these are very, very difficult times."

Bush, McCain (insofar as he understands any of this) and certainly Gramm follow in the tradition of Hoover. Deregulation=good - Regulation=bad.

President Roosevelt: 4 Mar 1933: "Practices of the unscrupulous money changers' stand indicted in the court of public opinion, rejected by the hearts and minds of men. True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish....In our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money, and there must be provision for an adequate but sound currency. [Inaugural Address 1933].

Yet there are still those misguided souls who call for more deregulation! Perhaps with a secret desire to be able to fire up their furnaces this winter with their junk bonds and other worthless financial paper.
 

The major point appears to be that George W. Bush is not a serious presence in this most serious economic crisis since 1931.

Something to be grateful for.
 

The NY's Chief Financial Correspondent has been blogging Lehman Monday. This was a notable comment:-

"Mr. Paulson blamed past actions for the problems, pointing to a depression era regulatory system. But he ducked an opportunity to address whether decisions made in Washington during the Bush administration played a role. “I’ll leave history to the historians.” He also said the “long-term economic fundamentals” of the United States were as good or better than any other large developed country’s fundamentals. There is a rule of thumb that when the government proclaims the fundamentals are good, you should sell.

And if they praise only the “long-term” fundamentals, implying that the short-term ones are not so great, that does not sound encouraging at all.

Mr. Paulson, whose performance has been impressive this year, made it clear that it would take a while — years, in fact — to get over the current housing and mortgage mess. “I believe there is a reasonable chance that the biggest part of that housing crisis can be behind us in a number of months. I’m not saying two or three months, but in months as opposed to years. I think we will have housing issues and mortgage issues for years.”


Lehman in London also went into Administration this morning. It is reckoned that because Lehman had open positions without just about every bank, the work out is going to take 18 months at least. The fear is that quite a few pension funds which put part of their monies into derivatives will be left holding worthless paper.

Senator Schumer and Mayor Goldberg commissioned a useful 2007 paper on the NY Market Sustaining New York’s and the US’ Global Financial Services Leadership (NB - 142 page PDF). Worth reading.
 

This just in:

Public opposes increased presidential power

By MARK SHERMAN, Associated Press WriterMon Sep 15, 6:37 AM ET

Americans strongly oppose giving the president more power at the expense of Congress or the courts, even to enhance national security or the economy, according to a new poll.

The Associated Press-National Constitution Center poll of views on the Constitution found people wary of governmental authority after years of controversy over the Bush administration's expansion of executive power, and especially skeptical of increasing the president's powers.

"There is clearly a concern about executive power and the balance of power that comes out in a couple of different ways," said Joseph Torsella, president of the Philadelphia-based organization. The nonpartisan center is dedicated to educating the public about the Constitution.

Torsella said he believes the polls reflect long-standing skepticism of presidential power. "I think it's a basic chord in the American song and it gets louder and stronger depending on what's happening in the headlines," he said.

***

President Bush and Congress are at record low approval ratings in recent polls, with Congress even less popular than the president. But in the new poll, the public is more reluctant to expand the president's powers than those of Congress.

Two-thirds of Americans oppose altering the balance of power among the three branches of government to strengthen the presidency, even when they thought that doing so would improve the economy or national security. People were more evenly split over giving Congress more power in the same circumstances.

"The Constitution sets up three branches of government and to increase the power of one at the expense of the others endangers the fundamental structure," said poll participant James Crowder, 74, of Cockeysville, Md., a Baltimore suburb. "This current president and his vice president have distorted the office of president so much that it will take an enormous amount of time, if ever, for us to recover from that." Crowder is a Democrat and a retired Episcopal priest.

In one area, the poll found Americans clearly on Congress' side. They said Congress should have the power to require senior presidential aides to testify before House and Senate committees — a topic currently wending its way through the courts. The administration is trying to prevent former White House counsel Harriet Miers from testifying about the firing of nine U.S. attorneys.

***

Majorities also favor following the rule of law, even if that sometimes comes at the expense of short-term public safety considerations and protecting the rights of everyone in the face of majority opposition.

***

The AP-National Constitution Center poll involved telephone interviews with 1,000 adults nationwide. The survey was conducted Aug. 22-29 by Abt SRBI Inc. and had a margin of sampling error of plus or minus 3.1 percentage points.


You'd think, from all the talk about our wanting a "commander in chief," from the Democratic leadership's quaking at the prospect of reining in Bush, from the "24" and the Fox News things, and from the scowls about reading terrorists their rights -- from all this flogging, you'd think someone would have taken the pulse some time ago.

But the thing about dictators is, no one gets to vote them in.
 

The title of this post made me think of those games where you figure out your porn name or something.

Seriously, in the modern administrative state, secretaries or whatnot will have great powers. This is so even if the current system requires a constitutional amendment to legitimize it.

Next up, we determine WHO would be in control of executing such a system. The chief executive ideally, but realistically, s/he would not be skilled at every aspect of the job.

In one or more areas, great powers will be in effect be delegated to someone s/he trusts with the job. For instance, I don't know how much George Washington knew about the particulars of Hamilton's monetary policy.

As to dictatorships, wouldn't they, e.g., just tact on a "defense of marriage" amendment or install a favorite on the Supreme Court like Miers? Or not have to worry about lower courts and the Supremes interfere on how they deal with miscreants they have in custody?

I guess dictators don't really have free reign in the real world, but many still have less to deal with than the American President. For example, Congress still passes budgets etc. Dictators like to have the power of the purse.
 

[Prof. Levinson]: UPDATE: The New York Times has just posted an article, "Bush says economy strong enough to handle turmoil." Now, don't all of us feel so much better....

And there's another strong economic voice chiming in too, saying the "fundamentals of our economy are strong". No need to worry, folks, keep calm, everything's under control....

Cheers,
 

Professor Levinson, is this a criticism? Would you like Congress to have greater sway in these matters? I'm not sure that's a good idea.
 

Let's not forget that George W is the first MBA President. So if he says the economy is in good shape, why you can take that to the bank. OOPS?
 

It is to some extent a matter of wonder to someone in London to see how muted the reaction in the USA seems to be to the present financial services crisis.

Can it possibly be that the penny has not dropped in the public mind that the health of the financial services sector is every bit as much a matter of national security as the much more unlikely possibility of a further terrorist attack somewhere on the US mainland? The financial services industry, particularly investment banking, does not mean much to "joe public" but it really is the motor which makes the whole economy go round.

As the Schumer/Bloomberg report (see my earlier post) pointed out by reference to 2005: "The US financial markets, with New York at the center, are still the world’s largest and are among the most mportant by many measures. The United States is home to more of the world’s top financial services institutions than any other country: six of the top ten financial institutions by market capitalization are based n the New York area, and US-based firms still head the global investment banking revenue rankings". Note: You have just lost 2 of them.

Already in 2007 there was great concern expressed in the Schumer/Bloomberg report that New York was ceding ground to other financial services sectors, London in particular for a whole variety of reasons: ranging from a better legal environment, a more modern single authority regulator, even more appropriate immigration laws for an industry needing a particularly skilled multi-national work-force. This to the extent that smaller US companies wishing to raise capital were going to London to raise it, rather than New York.

83% of the world's mortgage-backed securities business however was developed in New York, marketed world-wide and pushed into the portfolios of just about every major bank and financial institution in the world. With about US$1 trillion of estimated losses on those securities - now worth considerably less than 15 cents on the dollar, banks world-wide are going to have to turn off the lending taps for a long time while they renconstitute their balance sheets - what is that going to do to the industries which need to borrow money to trade and survive? It's very certainly not good news for the employees.

That's why the NYSE lost 500 points on Monday, the worst day since 9-11 and a further 100 points opening this morning. AIG fell 32% this morning after its credit rating was cut. That means AIG's market value has shrunk more than 90 percent since 2006.

What may not be understood is that AIG insured the holdings of banks and other investors in $441 billion of fixed-income assets, including $57.8 billion in securities tied to subprime mortgages. If AIG were to follow Lehman, the fall-out will be very considerable.

Regulators and central bankers are doing what they can, but this is a bit like Canute at the seaside.

People seem to think that what's all happening is in the little world of Wall Street - well, Wall-Street today, Main Street tomorrow. The only law firm departments likely to expand over the next couple of years are going to be the insolvency-bankruptcy sections - for whom there look to be pretty rich pickings in prospect throughout the country.
 

It is amusing to see Dems attempt to place the Freddie Mac and Fannie Mae debacles on the Bush doorstep. Back in 2003, Mr. Bush proposed legislation to keep a tighter leash on these monsters and the Dems opposed it:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates...

Franklin D. Raines, Fannie Mae's chief executive, endorsed the shift of regulatory oversight to the Treasury Department, as well as other elements of the plan...

Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said.


Meanwhile, Freddie and Fannie's second favorite recipient of their campaign contributions is ... drum roll please ... Barack Obama.
 

Can it possibly be that the penny has not dropped in the public mind that the health of the financial services sector is every bit as much a matter of national security as the much more unlikely possibility of a further terrorist attack somewhere on the US mainland?

At this point, it's no longer in doubt: Alan Greenspan and W have done FAR more damage to America than Osama bin Laden and all the "Islamofascists" combined could even dream.
 

The last near recession was severely aggravated by the 9/11 attack.

To date, the mortgage failures have not even managed one quarter of negative growth. Indeed, last quarter the GDP grew at 3.3%.

The reason Mourad is able to semi-seriously compare the Lehman Bros failure as a more serious national security threat than a second enemy attack on the US is because Mr. Bush pretty much destroyed the ability of the enemy to reach the United States.
 

Mr. Bush pretty much destroyed the ability of the enemy to reach the United States.

# posted by Bart DePalma : 11:49 AM


Because fuel costs have increased so much that terrorist can no longer afford airline tickets?
 

Mark, I try not to shill for Bush, and am not going to join in with Bart in trumpeting last quarter's empty growth, but people who know much more about economics than I (http://meganmcardle.theatlantic.com/) claim that he isn't particularly at fault here.
 

Meanwhile, Freddie and Fannie's second favorite recipient of their campaign contributions is ... drum roll please ... Barack Obama.

That includes employee contributions, so of course Obama received a lot of money--as the democratic nominee, he receives a lot of money from people in all sorts of work. To narrow the focus a bit, look at the PAC donations again and see who gets the most money.

(Hint: it isn't Obama or Dodd, although neither is it McCain.)
 

pms:

"Employee contributions" are how businesses get around the contribution limits. Freddie and Fannie are creatures of the government which exist to dispense government subsidies. The Dems have wanted that spigot opened as far as possible. Keeping that spigot open is why Obama as the Dem candidate received the lion's share of Freddie and Fannie's campaign contributions.

What is not being discussed here is that regulations limiting Freddie and Fannie lending to credit worthy borrowers to avoid future loan defaults are going to cut off Dem constituents. Obama claims to be for such regulations as part of his tacking to the right, but I doubt that he would ever carry through.
 

tray:

I am curious. How is 3.3% GDP growth somehow empty?
 

Horrendous as it was, 9-11 in no sense threatened the life of the US nation. Terrorists, criminal conspirators, were allowed to take control of aircraft and use them as missiles by directing them at inhabited buildings.

Only exceptionally lax transportation security allowed it to happen in the first place and reasonable security thereafter made it reasonably certain in short order that it would not happen again.

9-11 was a criminal conspiracy which caused a great number of deaths and injuries and did some damage to a limited amount of real estate.

I would not like to suggest that the moral fibre of the US people is any less than that of the citizens of the UK who put up Hitler's bombs V1's and V2 in the Blitz and with the IRA bomb outrages, or those of the people of Iraq who have suffered the effects of the Bush/Blair Enterprise of Iraq (which has resulted in a vast number of deaths and injuries and caused vastly more damage to real estate), or those of Spain who put up with ETA bombs, or other peoples who have put up with other criminal activities.

One is outraged, one insists the police do their duty and apprehend the conspirators and put them on trial, one buries the dead, tends to the injured and rebuilds. One takes reasonable precautions and gets on with life.

As it happens Sherson Lehman were on the 109th floor of the World Trade Center - the corporation survived that.

A melt-down of the US financial services sector does threaten the life of the US nation. US$1 trillion of worthless securities have to come out of the balance sheets of those financial services providers who keep the economies running. That means the corporations who need finance to expand and create jobs, or to retool, or to finance inventory may not be able to get it. As of this evening it looks as though the survival of AIG is in doubt. AIG does not just cover risk on financial products. AIG is the largest corporate insurer, the 2nd largest property and casualty insurer and the 7th largest life insurer in the USA. How many businesses and people, not to mention state and municipal governments may suddenly be without cover ?

De Palma's political points:-

1. It may be unwise to tempt providence. Yes there has been no major terrorist attack on the US mainland since 9-11. For how long into the future we do not know. Certainly the Bush Administration has done its level best to encourage the formation of a new generation of terrorists.

2. As I recall President Bush has been in office for 8 years give or take a few months. He and his Treasury Secretary had ample time to improve regulatory oversight had that been desired. It happened on his watch - as did much else. No excuse is acceptable.

3. Yes Fannie Mae and Freddie Mac spread a lot of money through congress - on both sides of the aisle - too much money for a government sponsored corporation (and why did the Administration not put a stop to that?), but then every other corporation does too - for example the oil majors, the pharmaceutical industries - K Street is not short of clients including some pretty unwholesome foreign governments. Seems the biggest 3 Fannie Mae/Freddie Mac PAC contributions were to one Roy Blunt (R-MO), $78,500, to one Robert F. Bennett (R-UT) $71,499 and one Spencer Bachus (R-AL) $70,500 (all conservatives) while poor Mr Obama (D-IL) received just $6,000.

4. As to the effect of this crisis on the US economy - too early to say (it will take 5-10 years to sort) - but very substantial. Particularly for those who have any kind of savings, investments or retirement plans. But I'm sure Bart feels he will be immune from all that. He can just raise his fees a tad.
 

Mourad:

Yes there has been no major terrorist attack on the US mainland since 9-11. For how long into the future we do not know. Certainly the Bush Administration has done its level best to encourage the formation of a new generation of terrorists.

Apart from no significant attacks on the US outside the Iraq and Afghan war zones for 7 years, a collapse of al Qaeda attacks in the war zones and a near collapse of the popularity of the Islamic fascist movement in the Muslim world, I suppose you could have a point.

As I recall President Bush has been in office for 8 years give or take a few months. He and his Treasury Secretary had ample time to improve regulatory oversight had that been desired. It happened on his watch - as did much else. No excuse is acceptable.

You may have forgotten that Mr. Bush is not a PM in charge of the legislature and executive as you have in Britain. Rather, all Mr. Bush can do is suggest legislation to Congress and Congress can and did tell him to take a hike on the Freddie and Fannie regulation bill. As I have pointed out here several times, Congress is by far the most powerful branch under our Constitution, which makes the entire Bush as Roman dictator meme pretty silly indeed.
 

As I recall President Bush has been in office for 8 years give or take a few months. He and his Treasury Secretary had ample time to improve regulatory oversight had that been desired. It happened on his watch - as did much else. No excuse is acceptable.

It wasn't just that he failed to press for additional regulatory authority. He certainly should have done so but was blinded by adherence to a bankrupt economic philosophy which denigrates regulation in favor of socialism for the rich. No, it was that his administration actively discouraged the exercise of such regulatory authority as it did have. Bush is the lookout on the Titanic: "Iceberg? What iceberg? I don't see any iceberg."
 

Apart from no significant attacks on the US outside the Iraq and Afghan war zones

This Baghdad Bartism always cracks me up. Apart from all the shit that keeps blowing up, there have been no attacks!!!
 

This post leaves me confused as to whether Prof. Levinson is a supporter or an opponent of the unitary executive.

Also, Bart's suggestion that "employee contributions" are some kind of dodgy end run is downright hilarious.
 

Steve's suggestion that they aren't frequently a dodge is somewhat amusing, too.

"Horrendous as it was, 9-11 in no sense threatened the life of the US nation."

Yeah, and if I stabbed you through the bicep, horrendous as it would be, it would in so sense threaten your life. You'd still be a fool to let me keep at it until I hit something vital.
 

Tray's link doesn't really help to clarify things one way or another, since the comments suggest that some of those in the know (on this issue, surely not me) strongly disagree with the sentiments supplied.

Anyway, my amateur opinion would be reflected by someone who once noted that the President had something like 1/3 (fill fraction here) real effect on economic realities.

IOW, some limited amount, but enough to really matter.
 

"Bart" DePalma:

The last near recession was severely aggravated by the 9/11 attack.

Perhaps. Regardless, why did Dubya sit on his a$$ and let it happen?

Cheers,
 

"Bart" DePalma:

"Employee contributions" are how businesses get around the contribution limits.

Typo there. That should be "Republicans". Like that middle-class couple that decided, out of the clear blue, to donate $57K to McSame, despite never having contributed before in their lives. Guess they thought that a better investment than a down payment on buying a house instead of renting....

Cheers,
 

Mourad:

2. As I recall President Bush has been in office for 8 years give or take a few months. He and his Treasury Secretary had ample time to improve regulatory oversight had that been desired. It happened on his watch - as did much else. No excuse is acceptable.

And had a Republican Congress for half that (including the 2003 period that "Bart" cites).

Not to mention, the Macs imploded this year, not in 2003.

Cheers,
 

Apart from no significant attacks on the US outside the Iraq and Afghan war zones for 7 years,...

"... on alternate Tuesdays in months with no letter 'r', when there's a full moon."

But more than 4154 families might not think this is such a good record.

Cheers,
 

Care to join me in calling for the judiciary to enforce Congress' plenary power over legislation and stripping the buracracy of these powers?

Well Bart, I'd love to join you in calling for more Phil Gramm-style, laissez-faire economic policy so the US can enjoy even more financial meltdown and even more socialism for the rich. (NYT: Fed to Loan A.I.G. $85 Billion in Rescue)

Only thing is, I'm not mentally ill so I guess I'll take a pass.
 

Then there's this:

[McCain financial advisor] Gramm orchestrated the Gramm-Leach-Bliley Act in 1999 which “destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.” He also pushed the Commodity Futures Modernization Act in 2000, which made legal “the mortgage swaps distancing the originator of the loan from the ultimate collector.” The Nation writes that “those two acts effectively ended significant regulation of the financial community.”

Pretending that the Republicans were the Chicken Littles here is just a bit disingenuous. They wer in fact the "Party hearty!" crew....

Cheers,
 

mattski:

Here is a clue:

1) Free markets are the antithesis of government corporate welfare. Gramm supports the former, while FDR and the Dems enacted the law which is permitting the Fed to do the latter without even a fare thee well to the elected Congress or the elected President.

2) It appears to have gone right over your head, but I am proposing stripping the Fed and the rest of the bureaucracy of their power to legislate corporate welfare like the bailouts of AIG, Freddie, Fannie, et al without being answerable to the voters and return that power to your elected Dem Congress where it belongs.

Of course, the idea of placing the fate of our financial system in the hands of economically clueless people like Pelosi and Reid could be construed as "mental illness" as you stated, but gosh darn it I actually believe in democracy with a small "d." Nothing makes adult children like those in Congress grow up faster than being presented with a responsibility they cannot escape.
 

BD: I am curious. How is 3.3% GDP growth somehow empty?

When it is empty.
 

1) Free markets are the antithesis of government corporate welfare.

"government corporate welfare" is the palliative for the excesses of the "free markets".

I'd note that it tends to prop up the already wealthy more than it helps the little guys (see comment in Prof. Lederman's later thread), but then again, that's what "The Best Gummint Money Can Buy" will do....

Cheers,
 

Well, readers, I'm very pleased to see that the Administration realised the impact the collapse of AIG would have had on the financial system and has at the 11th hour effectively nationalised the corporation.

Bart in his ignorance said:-

"I am proposing stripping the Fed and the rest of the bureaucracy of their power to legislate corporate welfare like the bailouts of AIG, Freddie, Fannie, et al without being answerable to the voters and return that power to your elected Dem Congress where it belongs."

In fact, the powers which have been used overnight are those of the Federal Reserve Act 1932 enacted during the Great Depression to keep the US financial system functioning. It's not exactly new legislation - it has stood the test of time.

The Governors of the Federal Reserve system are not exactly wild-eyed liberals - they are conservative bankers and lawyers - who know a crisis when it is staring them in the face.

AIG would not be getting an $85bn bail-out loan with what is effectively tax-payer money (in return for an 80% public stake in the corporation - effectively nationalisation) from these people if there were no crisis.

And so we go back to Roosevelt's Inaugural Address 4 Mar 1933 which I cited at the beginning of this post: "Practices of the unscrupulous money changers' stand indicted in the court of public opinion, rejected by the hearts and minds of men. True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish....In our progress toward a resumption of work we require two safeguards against a return of the evils of the old order; there must be a strict supervision of all banking and credits and investments; there must be an end to speculation with other people's money, and there must be provision for an adequate but sound currency."

Both the Clinton and the Bush Administrations have to take their share of blame for the dismantling of the regulatory system and the failure to modernise it. But the Congress too - and as Arne points out the two worst pieces of legislation were actually the handiwork of Senator Phill Gramm:

"Gramm orchestrated the Gramm-Leach-Bliley Act in 1999 which “destroyed the Depression-era barrier to the merger of stockbrokers, banks and insurance companies.” He also pushed the Commodity Futures Modernization Act in 2000, which made legal “the mortgage swaps distancing the originator of the loan from the ultimate collector.”

It is the latter piece of legislation which created the wholly deregulated derivatives market which has brought the entire financial system to its knees. And what remedy does the McCain camp propose: A Commission of Enquiry! For heaven's sake.."a don't commit yourself....committee yourself" response.

Bart should be down on his knees thanking the wisdom of those who created the New Deal legislaton. Because of them, Bart can still write a cheque this morning in the expectation it will be paid, his credit cards will continue to work, his insurance policies will be honoured and his retirement investments will still have some worth at maturity.

But that does not mean that there is not going to be some years of pain during the workout of these major problems - for which Bush and his cronies - including McCain and his coterie of laissez faire advisers - should be held responsible by the electorate.
 

It appears to have gone right over your head, but I am proposing stripping the Fed and the rest of the bureaucracy of their power to legislate corporate welfare

As Arne suggested, gov't bailouts are unfortunate but realistically we don't have a lot of choice once the damage reaches a certain level. The problem was excessive "free market faith" to begin with.

Of course, the idea of placing the fate of our financial system in the hands of economically clueless people like Pelosi and Reid...

(***Not expecting a 'return on cognition' here) Bart, my friend, certainly there is error & excess on the political 'left' when it comes to economic thinking. However, a rather commanding case can be made that--as a rule--Democrats have a greater understanding of economic reality than your average 'free market' Republicans, who tend to dwell mostly in the domain of their own thoughts.

In the real (actual) world there are no "free" markets, there is no economic progress without government rules, regulations, institutions, instruments (take for example, "money") etc. Law & order are artifacts of government...

OK, so I'm wasting my breath.
 

Fraud Guy:

The blog to which you cited does not really present an argument but appears to misunderstand how real GDP is calculated:

Real GDP is the sum value of all produced goods and services at constant prices. The prices used in the computation of real GDP are gleaned from a specified base year. By keeping the prices constant in the computation of real GDP, it is possible to compare the economic growth from one year to the next in terms of production of goods and services rather than the market value of these goods and services. In this way, real GDP frees year-to-year comparisons of output from the effects of changes in the price level.

The first step to calculating real GDP is choosing a base year. For example, to calculate the real GDP for in year 3 using year 1 as the base year, use the GDP equation with year 3 quantities and year 1 prices. In this case, real GDP is (10 X $1) + (9 X $6) = $64. For comparison, the nominal GDP in year 3 is (10 X $2) + (9 X $6) = $74. Because the price of bananas increased from year 1 to year 3, the nominal GDP increased more than the real GDP over this time period.

 

"Bart" DePalma:

The blog to which you cited does not really present an argument but appears to misunderstand how real GDP is calculated:...

Ummmm, that blog made precisely that point; that "real GDP" must be discounted from nominal GDP by the amount of inflation/price-increase. That you didn't understand it just means that you don't read so good.

Cheers,
 

It appears that Mr. McCain was pushing Freddie and Fannie reform back in 2006 through the Federal Housing Enterprise Regulatory Reform Act of 2005

, but it was nuked by Chris Dodd, the only Senator to receive more Freddie and Fannie campaign contributions than Mr. Obama.
 

A safe website always work hard in order to make sure can deliver each Buy Gold for WOW order within 15 minutes, no matter how many World of Warcraft realms there are!
 

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