Stocks Tumble From Stimulus Plan News

Wall St. doesn't think much of the stimulus plan. The Dow fell 382 points.

Yesterday's decline deepened as investors -- who had bid up the price of stocks last week in anticipation of this week's announcement -- cashed in their gains and sold, traders and analysts said.

Geithner's presser hurt as well:[More....]

Traders and Wall Street analysts attributed the nose-dive to a lack of detail in Treasury Secretary Timothy F. Geithner's highly anticipated speech earlier in the day, in which he described the administration's plan to commit up to $1.5 trillion in public and private funds to help financial firms and get credit rolling through the economy again.

If you read the quotes in the article, Wall St. is frustrated and fed up. Who isn't?

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    I think (5.00 / 2) (#1)
    by jbindc on Tue Feb 10, 2009 at 04:57:32 PM EST
    The only people who are happy with this plan (and are publicly saying so) are Obama and the Dems in Congress.  No one else anywhere seems to be happy - Republicans, regular, mainstreet Dems, economists - no one.

    Are you sure Congressional Dems are happy w/ Obama (none / 0) (#63)
    by jawbone on Tue Feb 10, 2009 at 11:02:43 PM EST
    TARP aka TALF? Seriously.

    Probably more related to ... (5.00 / 5) (#3)
    by Robot Porter on Tue Feb 10, 2009 at 05:00:08 PM EST
    Geitner on TARP II than Senate passage of the stimulus plan.

    Yes - the word on CNBC was (5.00 / 1) (#41)
    by inclusiveheart on Tue Feb 10, 2009 at 06:52:12 PM EST
    that Geithner's plan as layed out in his speech was short on detail and the market reacted as a result. I watched it and thought it to be designed to be somewhat instructive for the general public as to why TARP was necessary, but not all that detailed in how he planned to apply it.

    Also, there is a lot going on in the world right now.  I'd wait for a real economic assessment of what market factors were really in play today before blaming the losses on anyone.  I mean last week they were all buying because of all of the lay offs announced.


    Well, this should help (5.00 / 1) (#4)
    by jbindc on Tue Feb 10, 2009 at 05:02:40 PM EST

    House Dems to give up their pay raises next year.

    They won't take COLA increases.

    It was Geithner's press conference (5.00 / 1) (#5)
    by Coral on Tue Feb 10, 2009 at 05:05:35 PM EST
    He was awful. There is no plan, except, it seems to keep from having to go to Congress for money because they know they won't get it.

    The financial system is in severe distress, and there seems to be no way out.

    What's scary (5.00 / 1) (#11)
    by Socraticsilence on Tue Feb 10, 2009 at 05:34:22 PM EST
    is that on the stimulus various economists (Krugman, the Friedmanites, etc) seem to have various solutions- but on this no one seems to have any coherent answer- not even a hack one that fits their respective ideologies- everyone just seems to be concerned but powerless to stop it with anything short of complete nationalization or allwoing the banks to fail.

    I thought so, too -- not just (5.00 / 1) (#18)
    by Cream City on Tue Feb 10, 2009 at 05:50:09 PM EST
    in lack of substantive detail but also in style.  (In an earlier thread, I said he sounded like an assistant vice principal, the one in charge of discipline.  And he talked way too fast, while still not saying much other than doom and gloom.)

    Coral, I didn't think (5.00 / 2) (#19)
    by NYShooter on Tue Feb 10, 2009 at 05:52:30 PM EST
    His testimony was quite as bad as you apparently feel.

    As I wrote on one of BTD's threads, the really smart people don't know the extent, or depth, of this problem. I found it encouraging that, at least Geithner and Obama admit this fact.  Geithner seemed to have a good grasp of the number of constituencies this plan must somehow satisfy. Also, he's an economist first, and a politician second. With hardly no historical precedents to guide him, he had to be careful not to over-promise results in-so-far as the scope of the problem in unknown.

    Listening to both Obama and Geithner, I'm getting slightly more hopeful that they're growing into the complexity of the problem, and are probably doing as well as they can.

    Do I have to say it; imagine if the other party had one?


    Agree (5.00 / 2) (#29)
    by Dr Molly on Tue Feb 10, 2009 at 06:22:39 PM EST
    I just had a chance to watch his speech - it wasn't that bad. A little vague at the end, but there was still a lot of meat in it. And I thought he did a conscientious job explaining things. (Of course, I have no idea if it will work or not.)

    ".... I have no idea...." (5.00 / 2) (#34)
    by NYShooter on Tue Feb 10, 2009 at 06:35:12 PM EST

    What kind of "Dr." are you, anyway? Huh?, Huh?



    not much of one, lol. (none / 0) (#40)
    by Dr Molly on Tue Feb 10, 2009 at 06:50:43 PM EST
    BTW, I really regret my screen name (which was based on a longstanding nickname and seemed liked a great idea at the time). Changing it is problematic now though - although fresh starts are appealing as well....

    OMG, some gasbag on Lou Dobbs is talking about states shouldn't get money in the stimulus plan because they secretly has surpluses. Ach.


    you could do what the Kossacks (none / 0) (#76)
    by sarany on Wed Feb 11, 2009 at 06:53:02 AM EST
    seem to be doing these days.  Yesterday I saw at least a couple of screen names like this by longtime Kossacks:

    "(real first & last name) AKA (former anon screen name)"

    I can't tell if it's a trend that's taken hold or if it's something Markos is encouraging. Maybe some of them simply realized that it would be a good personal resume-building move to go public at such a visible venue.


    okay, never mind (none / 0) (#77)
    by sarany on Wed Feb 11, 2009 at 07:32:39 AM EST
    Kos speaks to the transitional names:


    On that name thing
    by kos

    Tue Feb 10, 2009 at 04:01:24 PM PST

    As you've noticed, several editors have started transitioning to their real names. And like anytime we try something new around here, everyone notices and wonders what the heck is going on. So here's what's going on:

    We started a new site called Congress Matters with Kagro X at the helm. It's a serious site, -snip-

    However, it's an unfortunate fact that few in establishment DC will take someone who calls himself "Kagro X" as seriously as they would the guy whose name is "David Waldman". -snip-

    So we decided we'd transition him away from his old account to what will ultimately be just "David Waldman". The "aka" is temporary, so people are aware of the transition over the next couple of months.

    Sooner or later (none / 0) (#6)
    by Manuel on Tue Feb 10, 2009 at 05:10:33 PM EST
    we'll have to nationalize failing banks.  Geithner and Obama should be preparing the public and Wall Street for that.

    Maybe They Are... (none / 0) (#25)
    by santarita on Tue Feb 10, 2009 at 06:09:00 PM EST
    Geithner mentioned comprehensive stress testing for the banks.  

    The market values clarity (5.00 / 2) (#8)
    by Steve M on Tue Feb 10, 2009 at 05:18:38 PM EST
    Geithner provided none.  He would have done better to say nothing.

    Is The Stock Market The Best... (5.00 / 1) (#27)
    by santarita on Tue Feb 10, 2009 at 06:15:19 PM EST
    bellwether?  Or the only entity that Geithner has to satisfy?

    I'm not sure why he chose to throw out the general outlines at this point.  Maybe he is setting the table.  I watched most of the hearing later in the day.  Dodd made a good point - if Geithner had come to Congress with a fully developed fait accompli, people would gripe that Congress was not consulted.  



    Shrug (none / 0) (#31)
    by Steve M on Tue Feb 10, 2009 at 06:27:07 PM EST
    I don't particularly live or die by the market.  Clinton (or his advisors, really) famously obsessed over pleasing the bond market during his first months in office, and they kind of got off track as a result.  But to the extent the market matters, I'm pretty sure the lack of clarity was the source of the problem today.

    As to whether Congress was consulted, unless TARP 2.0 requires new legislation, I don't see what Congress has to do with it.  Dodd can pound sand as far as I'm concerned.


    Congress will need to approve ... (none / 0) (#33)
    by santarita on Tue Feb 10, 2009 at 06:31:12 PM EST
    any release of the next $350, no?

    no (5.00 / 1) (#37)
    by CST on Tue Feb 10, 2009 at 06:40:50 PM EST
    they already approved 700 billion, this is just the second half of that.  Congress has no more say.

    Well (none / 0) (#35)
    by Steve M on Tue Feb 10, 2009 at 06:38:47 PM EST
    They have the right to disapprove, yes.

    Obama had Bush ask Congress to release (5.00 / 1) (#39)
    by steviez314 on Tue Feb 10, 2009 at 06:47:53 PM EST
    the second $350B right before the inauguration.

    The Senate voted to release it (or rather didn't vote enough to not release it) which is all it took.  The House voted to not release it.

    Both House and Senate had to vote to not release it by a super-majority, so the deck was really stacked for releasing the funds.


    That passed right by my notice ... (none / 0) (#43)
    by santarita on Tue Feb 10, 2009 at 06:52:42 PM EST
    thanks for the clarification.  I also missed the fact that Mary Schapiro got confirmed.  If she had come up for nomination after last week's hearing, it might have not gone so smoothly.

    I think Steve was joking (none / 0) (#44)
    by CST on Tue Feb 10, 2009 at 06:54:26 PM EST
    They can personally disapprove, but they can't vote on the package.

    Needed a snark tag...


    Really, really hard to argue that (none / 0) (#65)
    by gyrfalcon on Tue Feb 10, 2009 at 11:40:27 PM EST
    convincingly when the market started to tank as he was walking out to the podium and was down a good 200 by the time he finished the first couple of sentences.

    There's been an absurd level of hope that Geithner was going to come out and announce he'd solved the whole problem with some brilliant scheme and that nobody would have to suffer any pain to get things back on track by, oh, next month.

    A lot, a lot, a lot of traders, investors, etc., knew he couldn't possibly live up to that hope, and dumped stock at the last minute before he revealed anything in expectation that the market would tank when he coudldn't.

    In other words, what happened in the market today was basically a self-fulfilling prophecy, IMHO.  I'm not expert, but I'd be real surprised if it didn't go back up again Wednesday.

    There was no surprise about what he actually said today, in any case.  The summary had been leaked to the Times yesterday, and as I recall, the Times piece matched up exactly with what he said today.


    Neither one, IMHO (none / 0) (#67)
    by gyrfalcon on Tue Feb 10, 2009 at 11:47:23 PM EST
    I think you may be onto something there.  I was a little puzzled after hearing his press conference why there had been such a sense of urgency about getting him out there with the outlines of the plan when he wasn't ready to announce the details.  Perhaps the reason is as you suggest.

    Now, that gives me some hope (none / 0) (#86)
    by Cream City on Wed Feb 11, 2009 at 10:18:19 AM EST
    and has a logic to it that explains the vagaries in the message from Geithner, which gave me such unease.  And it may explain what seemed to be his discomfort in doing so, too -- new to the political ploys that must be played in working with Congress.

    Totally AGREE! (none / 0) (#74)
    by BrassTacks on Wed Feb 11, 2009 at 02:07:25 AM EST
    THIS was the BIG announcement that Obama referred to last night?   I was so disappointed.  I have NO idea what Geithner said, if anything.  He's even more vague than Obama!  

    One thing at a time (5.00 / 1) (#10)
    by scribe on Tue Feb 10, 2009 at 05:20:56 PM EST
    the "Stimulus" bill has to get passed - and now is the time to get it done.

    IF (big IF) the Repugs can't stop it, that should be done within a week.

    But, truly, what I wouldn't give to have a hand on the levers of power right about now.  B/c I am most definitely unhappy at the way Obama and his people are using them.  We could start with opening 3,500 files in the S.D.N.Y., one for each of that madam's clients, and start putting the boots to making the banking system start flowing again.  These clowns are refusing to lend out of fear, and only a greater fear will get them off the dead center where they are presently stuck.  Then we could unscrew that stimulus bill by starting to lean - hard - on  the Republicans.  Remind the world that we reached out to them and they slapped back in response.  Start with some stronger, accurate yet harsh rhetoric.

    I am so p*ssed.

    "Have you no decency, sir?" (none / 0) (#16)
    by Dadler on Tue Feb 10, 2009 at 05:39:45 PM EST
    A little of this from Obama and Co. would certainly help.  He gives off a decidely, for lack of a more scientific term, wimpy vibe.  Even when he talks "tough" about not taking economic advice (even though he then does take some) from folks who ran us into the ground in the first place, he sounds far too nice.  

    I get the sinking feeling he really expects more than one or two Republicans to try and "help" him.  Foolish and naive, as many others here have said.  


    Refusing to Lend (none / 0) (#84)
    by Samuel on Wed Feb 11, 2009 at 10:11:40 AM EST
    The banks won't lend because they are concerned with finding borrowers that are likely to pay them back. Encouraging lending above what the free market would dictate was the basis for the housing bubble / mortgage debts.  I do not understand how enticing banks to lend against the advice of their forecasters is a sound approach - what has changed since 2003 that would make this a good idea?

    Steven Pearlstein (5.00 / 6) (#20)
    by ai002h on Tue Feb 10, 2009 at 05:56:06 PM EST
    had a great comment on how the markets react. He basically said the markets would've reacted positively to a true bailout, they were expecting money to come to wall street, not much oversight, and basically bad assets being taken away. The market isn't cheering stricter oversight, board-firings or nationalization. In other words, what's good for the market isn't necessarily what's good for us. So lets not use the market reaction as a barometer.

    yes, pearlstein (5.00 / 1) (#23)
    by JThomas on Tue Feb 10, 2009 at 06:05:36 PM EST
    seemed to be cautiously optimistic with the plan, subject to more detail. He was going point by point on how it will help but was not allowed to finish his assessment as his substantive answer was deemed too long by Chris Matthews who interupted him before he could finish his 4th point.
    Bottom line, if the market reacted positively, it was probably a giveaway to the Banks.

    Even Krugman is cautiously optimistic,pending more detail that it might not be too bad...for him to concede that is almost amazing knowing his contempt for most Obama remedies.


    Small point. What's good for (5.00 / 2) (#26)
    by Radix on Tue Feb 10, 2009 at 06:13:01 PM EST
    CEO's and board members, isn't neccessarily good for main street. What's good for the bank, as a business, is probably good for main street.

    There are still numerous community (5.00 / 1) (#49)
    by inclusiveheart on Tue Feb 10, 2009 at 06:58:26 PM EST
    banks that are actually healthy.  They are on main street.  The big difference right now is that the community banks for the most part have stayed in the realm of reality in making their loans while their larger counter parts were handing out cash to anyone with a pulse.

    And if you are talking about a bank being healthy - you're right that their health is important to main street - but the reality is that CitiGroup for instance stopped being banks a long time ago - Citi is a "group" not a bank.  That's the heart of the problem.  Banks need to go back to being banks and stop being bank-constructoncompany-retail-broker-etc. hybrids.


    It used to be the 3-6-3 rule for banks. (none / 0) (#54)
    by steviez314 on Tue Feb 10, 2009 at 07:10:21 PM EST
    Borrow at 3%, lend at 6%, be at the golf course by 3PM.

    Why did they make it so complicated?


    Regulated public utilities... (5.00 / 1) (#58)
    by lambert on Tue Feb 10, 2009 at 08:37:33 PM EST
    .... is what the banks should be. Back to 3-6-3. And why not?

    Why shouldn't making a mortgage payment be like paying your light bill?


    Central Banking (none / 0) (#85)
    by Samuel on Wed Feb 11, 2009 at 10:15:22 AM EST
    Is a regulatory apparatus.  Let's try unregulated banking that allows individual banks to have runs and fail for faulty practices.  

    To Make More Money (5.00 / 2) (#61)
    by cal1942 on Tue Feb 10, 2009 at 09:55:25 PM EST
    And in the end greed'll get ya every time.

    Every time they get "creative" the nation falls apart.


    They thought that they'd win (none / 0) (#56)
    by inclusiveheart on Tue Feb 10, 2009 at 08:09:19 PM EST
    more money at the golf course if they had a "group"?  Maybe?

    The status quo needs to be blown up (none / 0) (#30)
    by Dadler on Tue Feb 10, 2009 at 06:22:58 PM EST
    And Wall Street will never do that without some serious shoving.  The trick is getting them to buy into the reality that, since money has no value but for people's belief it does, that stability and profit are much better friends than chaos and profit.  Chaos tends to seek out profit with malicious intent, both financially and physically.  It is quite possible to have both an employed/stable society and opportunities for wealth through innovation, invention, achievement, etc.  Logic says, in fact, profit is only sustainable and enjoyable (sans exile) through a stable/employed society.  Be a nice person, be generous, help others to work and achieve so some wealth can be spread to them.  Change up the rhetoric for the purpose of some intellectual disarmament of the other side.  Yap, yap, yap, what do I know?

    You're absolutely right (none / 0) (#70)
    by gyrfalcon on Tue Feb 10, 2009 at 11:57:16 PM EST
    except that until everything blew up, they thought they were operating in a stable, non-chaotic situation.  They Were Wrong.  But the lure of huge profits made an awful lot of people, not just banks and Wall Street, avert their eyes from the stuff they didn't want to see.

    Banks really, really like stability and hate chaos.  The reason they won't lend to anybody now is because the chaos and uncertainty terrify them.


    Pearlstein has been (none / 0) (#69)
    by gyrfalcon on Tue Feb 10, 2009 at 11:53:52 PM EST
    one of the only sane voices on this whole financial situation.  He's a stuffy, arrogant guy, but as far as I can tell, has no ideological or partisan axe to grind, just a very smart guy who knows the ins and outs of the financial system in more depth than anybody else I've read/listened to.  Note-- the financial system, not necessarily the economy generally.



    The Bank Plan actually does have some good (5.00 / 1) (#22)
    by steviez314 on Tue Feb 10, 2009 at 06:04:29 PM EST

    1.  Some banks are insolvent now.  Some banks are not insolvent.  Some may be in the future or may not be.  All this talk of "nationalization" is way too glib and premature, especially coming from economists who have not actually looked at the banks' balance sheets and cash flow statements. It paints all banks the same, when they are not.  The "stress test" will help.

    2.  The Treasury and Fed balance sheets are NOT infinite.  To the extent that gov't money can be used to get private money in to recapitalize, it's a good thing.  Of course, which money gets seniority is important too.

    The problem today was that Wall Street is a baby that wants instant gratification.  They were led to believe that Geithner would unveil a detailed plan today, not the broader outline he did.  They want to know what price the gov't will buy the bad assets at (but not if it's zero!).  So they were disappointed, and in a Bear Market, it's sell first and ask questions later.

    The market also needs mark-to-market accounting suspended.  Now, before you cry that we need transparency, here is why mark-to-market doesn't work:

    Let's say my neighbor and I each own an identical house with identical mortgage with the same bank.  He loses his job, can't make the payments and has to sell the house for 50% of his mortgage.  If I'm current on my payments, why should the bank have to write down my mortgage by 50% on their books?  

    That's basically the problem. The "market" value of many assets (and it's not like the stock market, these things hardly trade) do not reflect their cash flow value.  Maybe in the future I'll lose my job too, and maybe my mortgage shouldn't be valued at 100% because of that chance, but it's worth more than the distressed sale that took place because of someone else.

    Maybe After the Stress Testing... (5.00 / 1) (#32)
    by santarita on Tue Feb 10, 2009 at 06:30:06 PM EST
    the Gov't can permit institutions that are basically ok to suspend mark to market accounting temporarily.   Is  mark-to-market accounting per se causing the problem or that no pone at this point has come up with an acceptable way of assigning a value to these assets other than a market value, which would be 0 or close to o because of lack of sales.  Suspending mark to market valuation might be ok if it is not used to protect banks from failing that should fail because all of their numbers are problematic.  And isn't the MBS just one part of the problem.  Don't the banks have derivative problems as well?

    Most of the banks whose financials I have (none / 0) (#36)
    by steviez314 on Tue Feb 10, 2009 at 06:40:09 PM EST
    looked at ARE solvent, at least on a current cash flow basis.  They may not be balance sheet solvent, based on mark-to-market accounting.

    I sense most of the derivative problems were at AIG and Lehman, and that is not as big a concern as we might think, especially once all the bets  are netted against each other, like a bookie does.


    Are they solvent with or without ... (none / 0) (#46)
    by santarita on Tue Feb 10, 2009 at 06:56:12 PM EST
    government $$$?  Somehow I have to think that mark to market of the toxic assets isn't the only problem.  If it were, the solution would be fairly simple.

    That's exactly, precisely (none / 0) (#71)
    by gyrfalcon on Wed Feb 11, 2009 at 12:04:00 AM EST
    what TARP I was originally intended to do, have the government establish a de facto value for the toxic assets.  I still haven't heard a convincing explanation for why they abandoned that almost out of the gate.  Maybe the mao-maoing from Krugman and others who insisted infusions of direct capital was a better idea.

    (Let's not forget, by the way, which sainted Nobel economist pushed the hardest for that idea when we're excoriating the Bush admin for throwing all that cash at the banks with no conditions, kay, everybody?)

    Seems to me that allowing the banks to abandon mark-to-market only drives the problem down deeper and only solves their problem temporarily.  Since confidence is the big problem here, I fail to see how allowing banks to value the toxic crap on their books any old damn way they please makes things better.

    I think Paulson had the right idea initially, to have the government take on the burden of valuing this stuff by purchasing it. It almost doesn't matter what they pay for it, just that they get it off the books of the financial institutions.  IMHO, of course.


    I agree (none / 0) (#24)
    by JThomas on Tue Feb 10, 2009 at 06:08:37 PM EST
    that allowing mark to market to sabotage balance sheets into insolvency is folly.

    Find a range of value and try to split the baby..knowing that it is impossible to accurately value these toxic assests.


    Krugman was on the Newshour ... (5.00 / 3) (#38)
    by Robot Porter on Tue Feb 10, 2009 at 06:47:50 PM EST
    talking about Geithner's proposal.

    His major point was that the proposal doesn't explain what they're going to do with insolvent banks.

    Another panelists suggested there weren't going to be many more insolvent banks.

    Krugman said:

    ... a substantial part of the banking system, quite a lot of the major banks, are probably actually not viable ... they are insolvent.

    Yup, he said it.  A lot of the major banks are insolvent.

    I know he has a Nobel and I don't, (5.00 / 2) (#42)
    by steviez314 on Tue Feb 10, 2009 at 06:52:28 PM EST
    but he's not exactly correct.

    They may be balance sheet insolvent, but they are not cash flow insolvent.

    They may become insolvent in the future, depending on the economy and the fate of mark-to-market accounting and the timing of their assets and liabilities, but most banks are cash flow positive.


    He was ... (5.00 / 1) (#48)
    by Robot Porter on Tue Feb 10, 2009 at 06:58:14 PM EST
    speaking of insolvency from an asset perspective.

    He said:

    ... if you look at what the market will be willing to pay for their assets, they are actually insolvent

    This is after all what "insolvency" means, i.e. debts being greater than assets.


    Liabilities too. (5.00 / 1) (#51)
    by inclusiveheart on Tue Feb 10, 2009 at 07:04:07 PM EST
    I was having this conversation with a friend today and thinking about the maintenance cost of the assets - expenses that will directly affect the value of assets like buildings and houses for instance if they are not maintained.  It really is distressing that bankers of all people do not have a firm grasp on the ongoing costs of real estate ownership.

    His Nobel is in economics (5.00 / 1) (#72)
    by gyrfalcon on Wed Feb 11, 2009 at 12:06:28 AM EST
    not in the financial system.  Krugman is out of his area of expertise in this.  He knows what he's talking about more than almost anybody on macroeconomics, but on the way the finanical system works not so much.  One takes his counsel on that part of the mess at one's peril, IMHO.

    Is this a money vs. cash distinction? (none / 0) (#47)
    by Dr Molly on Tue Feb 10, 2009 at 06:56:52 PM EST
    It's more cash versus net worth. (5.00 / 1) (#52)
    by steviez314 on Tue Feb 10, 2009 at 07:08:32 PM EST
    Imagine you paid $200K for a house and got a $175K mortgage, and now the house is worth $100K.

    Technically, you are balance sheet insolvent.  You owe more than you are worth.

    But if you make enough money to make the mortgage payment each month, you are not cash flow insolvent.

    As long as the you aren't forced to pay back the mortgage you have no problem.

    So for the banks, it's a question of when do they have to pay back their liabilities and what are the assets worth then.  Because of mark-to-market accounting and distress sales, the assets in many cases are "worth" less than the cash flow they generate would indicate, but if you don't have to sell them to meet your obligations, who cares?

    Sure, many banks may become insolvent in the future, but I don't see any bank creditors lining up demanding their money thus making the banks sell at distressed prices.  That's why we have FDIC insurance and why the gov't also guaranteed recent bank debt--to avoid those runs.

    It's the fear of what may happen in the future that is freezing everyone in place right now.


    Thanks. (5.00 / 1) (#55)
    by Dr Molly on Tue Feb 10, 2009 at 07:11:45 PM EST
    I once worked for an institution that kept making this kind of distinction even as they sank deeper and deeper into debt, and they got into a lot of trouble in the end. So, this seemed reminiscent - it is not very comforting! (Luckily I got out in time.)

    But what about failing to meet (none / 0) (#59)
    by BackFromOhio on Tue Feb 10, 2009 at 09:45:44 PM EST
    required debt coverage ratios?  Doesn't that give the Feds the obligation to put the banks that don't meet required ratios into receivership or conservatorship?  & if so, why hasn't this been done?

    Ken Rogoff of Harvard was on with Krugman-sounded (5.00 / 1) (#64)
    by jawbone on Tue Feb 10, 2009 at 11:07:29 PM EST
    more pessimistic that Krugman. Seems getting the banks back to solvency taking a long time and costing more than has been talked about. Trillions. Plural. He agreed with Krugman, just thought it would be slightly worse.

    A "lot" of the banks are insolvent? (none / 0) (#45)
    by MKS on Tue Feb 10, 2009 at 06:55:14 PM EST
    And, just when I think we are past the cliff of 1929, we get some wonderful blast like that....

    Wouldn't it be loverly, (5.00 / 1) (#57)
    by KeysDan on Tue Feb 10, 2009 at 08:10:01 PM EST
    if the Annual Pentagon budget received the congressional scrutiny and public discussion being accorded the economic stimulus bill and bank bailout plan--legislation critical to the country's economic survival?  By way of perspective, the Pentagon budget for fiscal year 2009 is $514.4 billion, plus the extra-budget wars in Iraq and Afghanistan of $170 billion (in 2007), plus veterans affairs, plus nuclear weapons costs housed in the Department of Energy, for a 2009 estimate of $l trillion for military-related annual expenses.  Moreover, the economic recovery act is not, apparently,  to be allocated as a bolus, but rather, over several years.  The bank bailout plan is an immediate appropriation.

    Link at Open Left about history repeating (none / 0) (#2)
    by magster on Tue Feb 10, 2009 at 04:58:12 PM EST
    and the problems Clinton had in 1993.

    How find this post at (none / 0) (#62)
    by BackFromOhio on Tue Feb 10, 2009 at 09:57:03 PM EST
    Open Left?

    the problem (none / 0) (#83)
    by Jlvngstn on Wed Feb 11, 2009 at 09:15:17 AM EST
    in 1993 the number of households with a computer was 22.8%.  In 2003 that number was 62%.

    Peripheral sales for computers, internets (thank you mr bush), dot bombs etc, was new and growing incredibly fast.

    In fact, from 1992-2000 high tech companies created twice as many jobs as non high tech companies.  

    High tech jobs paid substantially more than most jobs at the time hence creating higher wages and demand for employment.

    Higher wages means more consumption.  High vacancy rates in employment create higher wages through competition for talent.  

    What sector are we going to get 1000% growth in the next 8 years?

    Therein lies our problem.  One might argue that green tech has that potential but without serious committment from the government to help bridge the funding and science gap, i am not sure timing is good.

    Bush and co left us a huge mess with no safe roads out of town.  We literally have to build our own roads on our way out of town and it is going to take a long time to get out of town....


    No One Knows the Way Out (none / 0) (#7)
    by Gary Z on Tue Feb 10, 2009 at 05:17:39 PM EST
    Economics is clearly a black art. If it were a science, we'd have an economic system with low taxes, little or no national debt, affordable housing and health care for all and no poverty. Instead, Republicans in power cut taxes, increase the national debt, start wars and everything gets worse. Democrats in power raise taxes, increase the national debt, start wars and everything gets worse. No one knows what they are doing, albeit they think they do. The system has been broken from the get go. Its only our collective belief in fairies that keeps it going.

    LOL (none / 0) (#9)
    by CST on Tue Feb 10, 2009 at 05:19:51 PM EST
    So everything got worse under Clinton???

    Could've fooled me


    In this case (none / 0) (#12)
    by Socraticsilence on Tue Feb 10, 2009 at 05:35:44 PM EST
    only in terms of deregulation basically we've been on consistent slide since Reagan took office in terms of government oversight.

    Honestly CST... (none / 0) (#82)
    by kdog on Wed Feb 11, 2009 at 09:01:16 AM EST
    if it wasn't for the dawn of the internet age and the associated boon to the economy, we probably would have noticed a continuing downward spiral during the Clinton years.

    He was one lucky sob...in '92 I didn't even understand what the internet was, by 2000 everybody and their grandmother was using it.  Ya can't take that kind of good fortune lightly.


    Manifest Destiny, baby! (none / 0) (#17)
    by NYShooter on Tue Feb 10, 2009 at 05:45:09 PM EST
    As long as America's eleventh commandment is: "Consumer Spending MUST Rise Every Quarter" all that you mentioned MUST take place.

    Oh, and since we have "separation of Church and State," we placed into our Constitution that Corporations are people, and bribing Government officials is "free expression."

    We're No. 1! Weeeeh


    And ponies too (none / 0) (#28)
    by Democratic Cat on Tue Feb 10, 2009 at 06:17:39 PM EST
    Don't forget we'd all be rolling in ponies if economics were a real science. /s

    IMO, economics is not per se the problem (none / 0) (#60)
    by BackFromOhio on Tue Feb 10, 2009 at 09:54:10 PM EST
    Economics, for sure, is an art as well as.. whatever, but we are in unprecedented times.  I think the world of Krugman, but even he can't say for sure that huge spending by the government on true stimulus measures will take us out of this mess; what can be said, on the other hand, is that non-true stimulus measures will not work.

    I don't know why we keep rewarding failing banks.  Isn't the whole point of a market economy to separate the winners from losers?  Why can't the government, i.e., we the taxpayers, take the banks, with the good and bad assets, and do what we did under Bush I and Clinton, i.e., realize whatever money we can from bank assets, including the sale of banks through open bidding?


    Remember what happened (none / 0) (#66)
    by gyrfalcon on Tue Feb 10, 2009 at 11:45:07 PM EST
    when Lehman was allowed to fail?

    There are some that are too big and too entangled in too many parts of the world economic system, like Citi, to be allowed to fail.

    But if you actually read the papers once in a while, you'll have noticed that somewhat smaller regional banks are failing all over the place every day.  I think we're up to something like 34 since September, but I wouldn't want to swear to the exact number.

    In any case, it's false to suggest that banks in general aren't being allowed to fail.  They are.


    I think more banks have failed so far this (5.00 / 1) (#73)
    by tigercourse on Wed Feb 11, 2009 at 12:15:23 AM EST
    year then in 08. Something like 1,000 could go under in the next 2-5 years.

    I wasn't suggesting that no banks (none / 0) (#87)
    by BackFromOhio on Wed Feb 11, 2009 at 08:18:52 PM EST
    are being allowed to fail.  The big guys may not be.  

    Economics is not that complicated (none / 0) (#78)
    by Slado on Wed Feb 11, 2009 at 07:53:59 AM EST
    it only becomes complicated when you try to cheat the system or not play by the rules.  That is what the government is involved in right now.  As others have pointed out many banks and the federal government for that matter are insolvent right now.  They owe more then they have.  The mortgage example was a perfect explanation.  

    What's making this so complicated is the federal government is trying to make sure nobody loses.  So we are aquiring debt in order to keep this house of cards standing.  It gets really complicated and unsustainable when you don't let the inevitable happen.  Banks need to be allowed to fail.  Investors need to lose money and we need to let market forces run thier course.  It will suck, it will be hard but that's what these tax dollars we're wasting should be spent on.  Helping people get through and giving the economy a place to start over from.

    The longer our government monkeys with the system the harder the eventual fall is goign to be and I become more certain every day when one bailout after another does nothing (remember detroit?) that the day of reckoning is coming.


    Obama and Geithner ... (none / 0) (#13)
    by Robot Porter on Tue Feb 10, 2009 at 05:37:10 PM EST
    need to listen to FDR's first "fireside chat."  It was on the banking crisis.  This is how you address a crisis and restore confidence.

    You can read and listen to it here.

    Restoring confidence (none / 0) (#75)
    by BrassTacks on Wed Feb 11, 2009 at 02:17:36 AM EST
    Is very much needed, but we're not getting that.  The Obama administration is hell bent on doom and gloom.  If people believe that it will be YEARS before a turn around, as Obama has stated, that means YEARS before the economy will begin to turn around because no one will invest, or a buy a house, or buy a car, or anything else.  

    When markets fall (none / 0) (#14)
    by TeresaInSnow2 on Tue Feb 10, 2009 at 05:38:18 PM EST
    they always blame it on the news of the hour.

    Dow was up Friday and Monday, maybe due to the stimulus.  Now it's selling off, just like a selloff after an earnings announcement..

    Based on where the Dow was on January 1st and where it is today, the market doesn't seem to like Democratic -- anything.

    Right. Also, why assume market moves are (5.00 / 5) (#21)
    by esmense on Tue Feb 10, 2009 at 05:59:00 PM EST
    intelligent, as some here seem to be doing? Just because the fools who got us into this mess are displeased because they may not be helped out of it in the consequence-free way they'd prefer, doesn't mean the administration isn't proceeding in the right direction. After all, many of Wall Street's most influential are people dumb enough to love Reagan and take Ayn Rand seriously as some sort of economist.

    Bingo (none / 0) (#68)
    by gyrfalcon on Tue Feb 10, 2009 at 11:51:12 PM EST
    Well said.

    Every stock market analyst/observer with any brains I've ever heard says it's impossible almost always to ascribe some single reason for why the stock market rises or falls on a single day.


    Big bounce yesterday (none / 0) (#50)
    by SOS on Tue Feb 10, 2009 at 07:04:00 PM EST
    Major "shearing" today.

    If you are a beginner trader the simple self check would help.

       1. Check if you have a graduate degree from Harvard or similar institution
       2. Check if you understand that 5+ years of practice and several books are necessary before you can risk real money
       3. Check if you have time to do the research

    So after this portion of humiliation, should you invest at all?

    By current market logic (5.00 / 1) (#53)
    by SOS on Tue Feb 10, 2009 at 07:09:28 PM EST
    we should see another pump starting tomorrow followed by a another dump in a few days.

    800 billion reasons to be (none / 0) (#79)
    by Slado on Wed Feb 11, 2009 at 08:01:53 AM EST

    This is why Wall Street isn't a fan.

    This stimulus won't work and we'll be paying for it for years.

    Every poker player knows this behavior.... (none / 0) (#80)
    by kdog on Wed Feb 11, 2009 at 08:44:46 AM EST
    Yesterday's decline deepened as investors -- who had bid up the price of stocks last week in anticipation of this week's announcement -- cashed in their gains and sold, traders and analysts said.

    The same thing as a person buying into a card game, doubling up within an orbit, and cashing out.  While technically within the rules of the game, such behavior is frowned upon by any self-recpecting poker player, and in some home games this behavior could get you beat up, or at the least never invited again.

    We could take a cue from the poker world and drag these hit and run clowns into a Wall St. alley...that will teach them not to hit and run.

    Bailout (none / 0) (#81)
    by Jlvngstn on Wed Feb 11, 2009 at 08:56:30 AM EST
    Wall st is pissed because they want the government to assume more risk on the toxic assets.  There is no doubt we will have to overpay for dead assets the question is the gap between how much we want to pay and how much they want.  No surprise here.

    Let the banks fail. Wall st is trying to muscle the fed into a higher price for toxic assets and 350 bn cannot save insolvent banks.  The banks right now need nearly 2 trillion in capital to retain liquidity through the write downs.

    I am a bit overleveraged in my portfolio in the finance sector and would take a crappy hit, but I am sick and tired of Wall St. using a bully pulpit in this crisis of their own making.

    Eff em and my stock.  you cannot negotiate with financial terrorists.....