Tuesday, February 24, 2009

Thoughts on Obama's first State of the Union speech

Some quick thoughts, nothing too in-depth:

- Good speech, as expected, but... is it just me, or does the empty rhetoric sound more obviously empty and dishonest now? I mean, politicians usually do a pretty good job of disguising it, especially in meticulously-prepared speeches, but there were a few parts where I thought even marginally-informed people might be groaning and thinking "oh, common...". Maybe just my take, though.

- Carbon credits bit was kinda funny; liked the joke about it being the thing the country needs right now. I mean, regardless of if you think pandering to the global warming cult is a worthwhile thing for our government to be doing with our money or not, you'd have to agree that imposing additional crippling costs on our few remaining industries in the middle of a recession when we're desperately struggling to preserve the limited viable private-sector industries which are left is the last thing the country needs right now. It was nice to have a bit of levity, intentional or not.

- The part about not being able to delay reforming health care any longer was supposed to be inspirational, I guess, expect the reason we haven't done so is not because we're lazy, but rather because not everyone in the country agrees that we want socialized medicine. I guess it's going to happen, though... just wish we could have held out a few more years, I was looking forward to a few more years of real medical progress and innovation in the US.

- Also thought the bit about everyone needing to make sacrifices, including Obama, followed almost immediately by how he will be funding everything he wants to do, and how all his agenda items are essential national priorities which must be done, was kinda humorous. Dark and sad funny, sure, but still kinda funny.

- Budget "ideas" and "plans" sound identical to every other president I've ever heard. "gonna cut the deficit by the end of my term", "there will be short-term higher costs", "identified large savings areas", "will cut [other party's favored areas]", etc. Blah blah.

Those were my quick thoughts; curious what other people's impressions are (I'm sure there will be much break-room talk among people who watched it and/or cared). Overall, I thought it was predictable, ho-hum, surprisingly hollow and false-ringing for such a high-profile speech.

Saturday, February 21, 2009

How to Correctly Fix the Economy

Apologies in advance if this is long and boring, but I figured since I've been thinking about it for a while, I should write down what I would do to smooth out the natural down-cycles of the economy, if I were so inclined, with the minimum amount of "bad" effects. This is not to say that I think it's necessarily what the government should be doing (although I'm getting inclined to think so), but assuming that it's the goal, here's the "correct" way to do it, as far as I can think of to date.

First, background on why I'm thinking the government should be doing something. Since roughly 2000, we have been in a worldwide credit bubble, which has inflated the valuation of virtually everything. Now that the bubble is correcting, asset values are returning to normal (and will probably overshoot normal), and personal spending has decreased substantially, probably below "normal" in a steady economy. Now, increasing the personal savings rate is good, and decreasing personal debt is good, however this does have a ripple effect through the economy, as businesses which would otherwise be healthy and viable with "normal" consumer spending may go under due to a prolonged period of "below normal" consumer spending. This then cascades through to other businesses as B2B purchases are reduced, and as each of these businesses fail, more people lose their jobs. More job losses lead to less spending and less well-being, and businesses closures lead to longer recover time. So, there is value in the government doing something to try to preserve businesses which would otherwise be healthy under a "normal" economic scenario, to help the system as a whole, even if it means borrowing from our future prosperity (by increasing the national debt, for example).

Given that, we should consider how best to do so. As we know from many historical lessons, one of the worst things the government can do to their economy is cause economic uncertainty, or inefficiencies in allocation of private resources. This is why a free market with minimal corruption, fixed and minimally-obtrusive laws, minimal government manipulation, and a solid-value currency is the most efficient system known for generating economic prosperity, and the US has taken advantage of this to various extents to become the most economically prosperous nation in the world. So, in injecting new borrowed government money into our economy, the "correct" course of action should involve something which minimizes the disruption to the factors which make the economy work well in the long-term. Let's examine the ideological proposals of both major parties in this context.

First, the Democrat proposal is ideologically to spend a lot of money having the government take-over the services lost through private business failure, and provide new services (like building infrastructure, investing in new politically-targeted technologies such as "green", and providing more welfare services). The prevailing thought is that spending the majority of the money quickly is of maximum benefit. This would cause:
- Private businesses will still fail (no support and no increase in private spending), causing cascading job losses
- Some jobs will be created in government or government-sponsored industries, but these are only funded for a year or two, after which they will be lost again (without additional borrowing and spending)
- The Democrat agenda is advanced with more government services, but these do nothing to help the economy
- Private resources are inefficiently allocated to meet changing government mandates and "special favors" (tax breaks, incentives, backdoor deals), which causes loss of economic efficiency
- No long-term benefit; prolongs the recession (same as response which created the Great Depression)

Now for the Republican proposal, which is ideologically to give tax breaks to all individuals, large tax breaks to businesses, and some spending on infrastructure (it's hard to discern if there's anything else they would propose, since they had virtually no input into the "stimulus" pork bill, but this seems at least ideologically fair). This would cause:
- Small businesses get very little help (no profits to tax), so they still fail, cascading. Large businesses and energy companies would be the big winners, but they don't generate jobs or help the economy, so no benefit.
- Individuals benefit, but they largely save the money or pay down debt (which is not incorrect, just not particularly helpful to the economy), which is not the purpose for the government support. Although they would be helped in the short-term, it does nothing to help the economy, just transfers wealth from the future to short-term help now.
- No long-term benefit; prolongs the recession (no severe disruptions or inefficiencies, so at least not negative, but not positive either)

Now for what I think is the "right" approach:

The goal is to keep private businesses which would be viable with "normal" consumer spending alive long enough for the economy to recover, without propping up businesses which should be allowed to fail, or causing severe economic disruption (eg: moving substantial capital allocations around chasing the next government handout). To that end, the government should devise a formula which calculates private business profits from operations (not investments) which is realized in the US (and thus subject to US taxes after costs). They should then allocate an amount for ongoing "economic support", on a per-year basis, to be funded with borrowing as necessary. This money should be given (tax-free) to every private company based on their percentage of the total gross revenue from operations realized in the US for every private business in the country, as real-time as possible (probably quarterly with estimated tax filings).

This would cause:
- Viable businesses would be able to survive, but only by continuing to produce meaningful profits in the same relative magnitude as would be required to survive "normally". If profits degrade because the business model is not viable, government support will degrade by the same percentage, leading to failure anyway (which is correct, since the business would have also failed with "normal" spending). Overall business levels (employment and production) are preserved.
- B2B business is preserved, which preserves the maximum amount of private jobs.
- No inefficiencies are introduced in capital allocations, because the support doesn't create special incentives of direct capital.
- When private savings have "caught up" to lost asset valuation and spending returns to normal, the government can uniformly reduce the amount of support causing minimal disruptions.
- No individuals are directly benefited (although all all benefited indirectly), and there's no subjective allocation, so the potential for corruption, manipulation, and special favors is minimized.
- The system can be codified as a "standard" support policy in dire times, removing the need for ad-hoc "solutions" which disrupt the economy further.

Anyway, for what it's worth, that would be the "correct" way for the government to support the economy without causing a prolonged recession or a depression. I'm sure there are many reasons we're doing all the other things instead, be them political, personal, or intellectually-deficient, but this would be the right way per the stated goals (as far as I can think of). Just wanted to write it down, since I can't resist trying to "solve" problems, and this seems like far closer to the "correct" solution than anyone else has proposed to date.

Tuesday, February 17, 2009

Today on "How Stupid Are We?"

On today's episode, we have the Democratic legislature of California, who could not get the necessary three votes from Republicans to pass their budget. This is primarily due to the massive tax hikes and temporary non-solutions, although it is notable that one Republican said he would vote for the measure (giving enough votes to pass it) if the legislature only added a provision to stop paying themselves when the state had no budget: a proposition which was apparently rejected by the Democrats as too onerous.

But wait, it's gets dumber. Tonight, apparently, the Democrats are preparing to stage a "lock in" of the state Congress, until another Republican capitulates to their bullying and votes to pass their load of garbage they call a budget. So, if I understand correctly: they think that by using pressure, intimidation, and physical confinement for a couple of days, they can force someone to abandon their principles and essential betray the state? Yeah... I'm sure that will be a productive expenditure of time and money. At least we know the Democrat morons staging this debacle will still be receiving their full salaries during it, unlike the 20,000+ state workers going to get pink slips because the majority party hasn't even heard the term "negotiate".

Our system is broken, we need a new one (and cleaning out all the incomprehensibly moronic "representatives" at the same time wouldn't hurt).

Saturday, February 14, 2009

My take on California's budget "solution"

So California has a budget proposal which is currently being debated, and since I still live in California, I feel like I should be paying attention to what our local idiots are doing now. And by idiots, I mean our idiotic "leaders" who nominally have the best interests of the state in mind as they over-spend the state into financial oblivion. Anyway, the latest budget proposal has many hair-brained schemes, doesn't close the budget gap, and primarily relies on federal bailouts to keep the spending party going (for a real solution, see my "zero-day budget" idea which I blogged about a while ago).

The LA Times had an opinion piece about businesses being a big winner in the budget proposal, at the expense of normal people, at a time when the budget is in peril, and only added to buy Republican votes; the author was obviously not a fan. What the change does, per the article, is this:
Under the proposed changes, companies would no longer be required to pay state taxes based on a formula that includes the size of their workforce, the amount of property they own and their total California sales. Instead, they could pay based on total state sales alone. The idea, supporters say, is to stop penalizing companies for expanding their workforces and building new facilities in California. Under current law, the companies' state tax bills grow when they do those things.

Now, that sounds like a reasonable idea to me, if you're interested in having businesses employing people in the state: don't tax them extra for it. Obviously, the counter-argument is that businesses have offices here anyway, cause that's where people are: and that much is true in many cases. However, people see the writing on the wall: the business environment in California is horrible, as as businesses downsize and people leave, those jobs are not coming back.

Chalk it up, then, to a token effort to avert financial suicide, which is strongly and adamantly opposed by the Democrats, and only allowed into a bill to try to buy enough Republican votes to keep the tax and spend party going. As usual, I hope this plan fails: although the state desperately needs to avert the collapsing industry, the tax and spend party has to end, and the only way for that to happen is for their unsustainable economic model to actually collapse. The only way California is going to get better in the long run (and not just hobble along crippled by our long-term incumbent morons) is to have a clean-out, and the worse the budget gets the more fed-up the voters will hopefully get. It's like tough-love, and California desperately needs it to have a chance of getting better.

Friday, February 13, 2009

Following Japan's example

Today the NY Times had an article about how America is following in Japan's footsteps in creating a lost decade of economic activity by trying in vain to prop up failed banks and the housing market. While I agree with the premise, I have to take small issue with their conclusion, which was that the US wasn't throwing enough money away.

To wit, to quote from the article:
Only in 2003 did the government finally take the actions that helped lead to a recovery: forcing major banks to submit to merciless audits and declare bad debts; spending two trillion yen to effectively nationalize a major bank, wiping out its shareholders; and allowing weaker banks to fail.

Aside from nationalizing a major bank (which they probably felt they needed to do to keep lending subsidized), what did they do? Let's see, they:
- Forced banks to realize their bad debts and deal with the consequences
- Wiped out the shareholders of public banks which were insolvent
- Let insolvent banks fail

Hm... I would say I agree with the facts. If the US wanted to deal with the banking crisis without extending it into a decade long (or longer) depression, they should immediately cease all the bailouts, capital infusions, accounting shams, housing market subsidies, and other misguided attempts to "help", and just let the bankrupt banks fail! In short, the most direct, least painful, and most effective way to deal with the crisis is to do none of the things we are doing. The best thing the government can do for its economy is to provide a fair, free, open market; the worst thing it can do is to increasingly interfere, compounding the problem. Good job, guys.

Tuesday, February 10, 2009

Good political move?

War court asked to examine Gaza war

This is kinda interesting; I don't think it's necessarily a bad thing, it's just kinda interesting in a circuitous manner. As described in the article, the international court can bring charges against any citizen of a country which is a signatory to the court, and prosecute crimes which occurred within territories of the same.

Now, the facts of this case are:
- The Palestinian Authority, which claims legal authority over the Gaza strip, despite having no de-facto authority there or government presence there, has asked the court to investigate war crimes that may have occurred there by Isreali troops during the latest incursion into Gaza
- The debate currently is if they have standing to ask for an investigation; if they do, an investigation could follow
- Isreal is not a signatory to the court, so the court cannot prosecute Isreali soldiers or citizens, but if they find they have standing, then they can investigate the actions of Hamas members during the conflict, and potentially bring charges against them

So essentially, the Palestinian Authority is asking the UN International Court to prosecute Hamas members while acknowledging the PA's legal authority over Gaza, under the guise of doing something anti-Isreal. Hamas would look silly objecting to an anti-Isreal investigation, but in fact the court can only hurt Hamas. I have to wonder, though: sneaky smart political play, or gigantic circle-jerk waste of everyone's time and money?

Monday, February 9, 2009

Building on a bad idea to create a monumentally bad idea

The government's current plan for "saving" the banks got me thinking. See, the current plan goes something like this: instead of dumping more money into the black hole of insolvency that is most of the large banks who took enormous risks chasing leveraged returns during the housing bubble, we'll get private investors to do so with their money. How exactly do we do that? By essentially providing insurance that when they sell the worthless assets, they will be worth as much as the banks sold them to the private investors for.

"But wait a second," you might ask, "how is this different from the government just buying those worthless assets at face value, or just giving money to the banks directly and cutting out the middle man?" It is a good question: the end-result would be the same, the colossal waste of public money would be the same, and the effect on the economy (hint: all bad) would be the same. However, like the giant derivatives debacle which helped create the current mess, it's all a matter of accounting.

See, to buy up all the assets at face value (or just give the banks as much money as they wanted for free, which is functionally the same thing), the government would have to create and allocate that amount of money, which would be easily in the Trillions. However, by just providing guarantees, the government can fudge the numbers, and claim the realized losses to the taxpayers at this moment are negligible (since used toilet paper could be worth trillions, there's just no market currently). Treasury can guarantee as many assets as it wants without Congress allocating any money: it's only when people sell them that they need to pay, and payment is assured by the full faith and credit of the US government. It's like an enormous insurance policy written by a bankrupt insurance company, except this bankrupt insurance company is trying to lose as much money as possible, and it prints the money itself. It's really quite stunning in its simplicity.

Of course, why stop there? Treasury could help out everyone who bought a house by just guaranteeing the future sales value of the property: that's only a $12ish Trillion dollar obligation, but doesn't cost anything up-front, or require Congress to approve the expenditure. Sure, Treasury rates might go up as other countries refuse to finance the truly ridiculous spending gymnastics, but we have that covered too: the Fed can step in a buy Treasuries to keep rates low (with money they, too, print arbitrarily).

Good times... the only thing which could possibly derail the party would be a total economic and currency collapse, and nobody thinks that's really possible, right? I mean, there's no historical precedent for the collapse of an empire as large as the US built on a fiat currency and out-of-control spending, so nobody can predict what will happen, right? I'm sure we'll be fine; everyone else seems to be.

Sunday, February 8, 2009

Why the Obama New Deal Spending Plan is Bad

Originally, I was going to title this "... Will Fail", but that would be misleading. The goal of the massive pork wasteful spending plan isn't to help the country, as many politicians claim; rather it is designed to give special-interest handouts to Democrat supporters and push the Democrat agenda, at the expanse of the country. To this end, I believe it will be a success, just like the original New Deal was a success at pushing a largely socialist agenda on the American people during a time of crisis. Why am I convinced this plan is not even an attempt to help the country? Read on...

First, I would recommend reading this blog post, which describes in fairly good detail why the original New Deal was a complete failure at helping the US economy. To quote from a quoted article,
In 2004, a team of UCLA economists concluded that the policies of the New Deal, which suppressed competition and kept unemployment in the range of nine to 16 percent, actually prolonged the Great Depression by seven years.

Now, it doesn't take a PhD economist to see that government market manipulation and suppressing free-market competition causes the economy to do poorly. In fact, there are many example of fascists and socialist governments in history that we could look at to demonstrate this point. What's interesting in this case is that we have an exact parallel to what's currently happening (massive government spending on market manipulation and government jobs), and we can see exactly what the results will be: a prolonged depression and more debt. The fact that we have such an exact parallel example to learn from and politicians are still telling us that this time will be different is stunning: it's either textbook insanity, or one of the most pronounced and audacious lies in American history. I'm betting on some of each; in either case, though, it's bad for the country.

Now, you might say that I'm all negative, with no good ideas of how to "fix" the current "problem". I would certainly critique anyone with only criticism and no plan to fix a problem: look at all the politicians stumbling around the looming Social Security Ponzi scheme leftover from the New Deal; at least the people trying to privatize retirement had a viable plan to fix the problem, even if it might not have worked. So, here's what I might do:

First, I think the government should be careful to only solve "real" problems. By that, I mean market corrections happen, and trying to reflate every bubble as it's popping is a recipe for beating yourself in the face, over and over. There's no reason for the government to give Trillions of dollars to the banks to pay off all their bad debts, and even less reason the Fed should get a free pass for allowing all the systemic risk to become so large in the financial industry. Everyone who participated in the housing securitization debacle must be allowed to fail if they are insolvent; it's essential for the free market to operate correctly in the long run.

Second, economic downturns are a necessary part of a healthy economy, especially in a country as litigious as the US. There's simply no other way for otherwise healthy countries to offload dead-weight employees than layoffs during slow times: it's the only thing which is allowed by our courts. Consequently, we could use a downturn every few years for optimal business operation, even if it only lasts a few months. As the government, I would not take any action until or unless unemployment got into double digits: anything less is a normal, required, and as it turns out, beneficial downturn.

Third, if and when we feel like it's essential for the government to sacrifice the future prosperity of the country by printing money to stimulate the economy, it's also essential to make sure it's done the "right" way. The only spending which helps the actual economy in a long-term, meaningful way is spending which creates or preserves jobs in the private sector, without interfering in the free market or creating mal-investment through special-case rules or special-interest handouts. To this end, several things could be considered: tax cuts (which, if done fairly and non-progressively, distribute extra money without bias or manipulation), consumption (that is, the government buys goods and services as a normal consumer from private industry, stimulating production), military spending, or something equivalent. I would be inclined to try one or more of these, while being careful not to allow the government to fall into any of the pitfalls which could prolong the recession and hurt the economy in the long-term.

Anyway, I hope this blog post has been educational (for the 1-2 people who will read it). Here's hoping the damage isn't too great in the next four weeks (not to mention four years), and that the country is strong enough to eventually recover, despite the Obamanation.

Thursday, February 5, 2009

Kinda funny article

So I saw a link to this article, explaining what a "bad bank" was. Only, I initially read the headline as "bad idea" bank, which I thought was actually much more indicative, descriptive, and factual (so I was somewhat disappointed with the actual piece, which was fluffy, misleading, and not particularly interesting). So, here's my revision. :)

Obama's 'bad idea' bank: What it is, how it would work and its potential drawbacks

By me
February 6, 2009

As President Obama's administration considers its next step to help a troubled economy, one of the ideas being considered is the creation of a "bad bank" to help the financial sector. Here are answers to some of the key questions that surround the proposal.

What is a bank?

A bank is a place where people put their money and, in exchange for the bank's use of the money, earn interest. Banks use their customers' deposits to make loans, usually to big corporations, and as collateral for borrowing more money, which they can then invest. Banks also use that money to buy and sell leveraged investments, sell derivatives, and essentially gamble on borrowed money to try to maximize the returns for their executives in the form of fat salaries and bonuses. Sometimes these bets don't work out well, in which case the government pays them off instead with taxpayer money.

So what is a bad bank?

A bad bank is created -- usually by the government or an agency -- to store assets that are worth less than their face value in the hope that over time they will be worth more than they are now. In this case it's not really a hope: the assets are largely already worthless, and everybody knows it. Their face value is whatever the bank says it is, in order to appear to be less insolvent than everybody knows it is.

Where do these bad assets come from?

A poor economy can create bad assets in many ways. For example, banks could give loans for million dollar homes to people who didn't have jobs, because they didn't care since they were securitizing the loans and selling them as highly-rated securities to investors who relied on the fraudulent colluded ratings. Or, the value of a house, which was bought during the peak of the enormous housing bubble at over 5x historical average valuation, corrects enough that it is worth far less than the mortgage. Or, the bank could have purchased a derivative with borrowed money secured by its deposits which is now worthless because the entity they would collect from (eg: another bank) is effectively bankrupt, and only still in business because of fraudulent accounting allowed by the government. In general, when a bank loan or investment cannot be recouped by foreclosure (or otherwise collecting on the asset securing the loan, if any), it is considered a bad asset.

Why would we want to put all of the bad assets in a single bank?

Putting all of the bad assets in one place frees up all the other banks, which are reborn with a clean balance sheet. With a good bottom line, banks can again pay their executives their enormous salaries and bonuses, and get back to leveraged gambling to maximize their returns. If all goes well, the banking sector gets stronger, there's no effect on the economy, and taxpayers get raped in the ass repeatedly with the largest telephone pole in financial corrupt insider payoff history.

What are some of the potential drawbacks?

The biggest issue is how to value the bad debts. The bank wants the value to be as high as possible so it can get funneled as much taxpayer money as possible. But a high price means that the bad bank, or government, pays more money for the worthless assets; and, depending on the future market, might mean that there's less money available to waste on other massive pork spending programs. Then again, since the government is printing new money in both cases (not to mention the Trillion+ deficit this year alone), that problem is already being dealt with at the expense of the longevity of the US currency.

So bad debts should be valued at a lower price. Is there a problem with that?

A low valuation means that similar debts, still on the good banks' balance sheets, are also worth less. Too low a price means that the bank won't have enough capital to make loans, which was the reason for creating the bad bank in the first place if you're a total moron, don't understand how anything in the lending market is working, and/or are a sociopathic liar. Too low a price really means that you risk the banks being revealed as insolvent, forcing you to print more money and manipulate the accouting standards further to keep them afloat long enough to pay for the next round of executive bonuses and retreats.

Has a bad bank ever been tried before?

Yes, both in the United States and abroad. The Resolution Trust Corp. formed in the wake of the savings and loan crisis of the 1980s was a form of bad bank. In that case, however, the low asset valuation was caused by a lack of confidence in the system, rather than a complete loss of value of the underlying assets which caused the current problem. However, massive government bailouts to prop up bubbles have certainly been tried before: see Japan in the 1990's through today, and the US in the 1930's.

The sad thing about the "porkulus" bill

Side note: I usually dislike Rush Limbaugh, and find him overly right-wing for my tastes, but I do like his characterization of the gigantic pork wasteful spending package currently being inflated by both parties in Congress as the "porkulus" bill... kinda has a if not nice, extremely accurate ring to it. Anyway...

I hesitate to say "the" sad think about the enormous waste bill, as in fact there are many, many sad things about it. For example, it's sad that we're going to flush such an incomprehensibly gigantic amount of money down the toilet of special interest payouts. It's also sad that Congress is so corrupt, that even as a few voices of sanity can be heard proclaiming that the bill is a gigantic waste, the contemptible "financial conservative" Republicans are busy adding their own corrupt worthless scum pork to the bill. Surely some people must be also sad for future generations of Americans, who will either pay for this colossal waste with the sweat of their labor, or the stability of their country itself.

No, what occurs to me is the truly sad thing about this monument to corruption, waste, fear mongering, partisan politics, and everything which is wrong with Washington (everything Obama said he would strive to change, and is now spearheading) is not all of those. What's truly sad is that despite all of that, everybody knows what's going to happen:
- Congress will "debate" the bill for a while, adding more pork, until they have bought enough votes with special-interest corrupt handouts and waste to get their own agenda passed
- Congress will approve the bill, along partisan party lines, despite over a 90% disapproval among the voting population
- Obama will sign the bill, each party will claim success while blaming the other, the colossal amount of money will get printed and wasted, and politics will have been conducted as usual

At the end of the day, this will just go down in history as a story we'll tell our kids, huddled around the fire burning dollar bills to stay warm, about how it's just the way the world worked then. At the end of the day, no amount of outrage, rational thought, common sense, logical argument, or impassioned plea can or will stop politics as usual, and nobody will be surprised. That's the real sad thing.

Sunday, February 1, 2009

Agreeing with John Kerry; something is defnitely wrong

So I was up insanely early this morning (illness, sleep schedule hosed, not important), and I caught Meet the Press on TV. One of the panels had John Kerry and another Senator from Taxes (Republican), and they were talking about the pork spending bill. Now, normally I'm pretty much with the Republicans on their thoughts: the Republican Senator sounded like she "got it", and John Kerry came off as a liberal pushing his agenda (which, of course, he is).

However, I have to say (as shocking as this was to me), that I found myself actually agreeing with Kerry about how the government should handle the banks and their "toxic assets" problem. First, as an aside, let me say that the term "toxic assets" is misleading and disingenuous; the near-worthless mortgage securities which banks have on their books would better be termed "unrealized gambling losses", as that both better conveys their actual genesis, and doesn't make it sound like they were not entirely of the banks own doing, in pursuit of higher profits. Plus, I have a feeling voters might be somewhat more incredulous about the government buying "unrealized gambling losses" at fantasy value, as they well should be. But I digress...

Kerry's position was that if the government eats the losses from the gambling bets, it should wipe out shareholders of the banks, and the government should get warrants to any future gains if by some miracle those gambling bets get into the money. This is compared to the Republican position, which seems to be that the government should just eat the losses, without any compensation, and let the banks take more gambles in the future "for the good of the markets". Now, I'm a pretty "free market" person, but that's ridiculous: if were not going to let the banks fail outright as just compensation for taking ridiculous gambling risks chasing profits, the least the government can do is wipe out the shareholders and get warrants for future gains. Now, I'm sure Kerry would contend that the government should nationalize the banks (de-facto at least), and resume below-market risk-ignorant lending, which I wholeheartedly disagree with; the last thing we need is the government taking the same idiotic risks the banks did with public money, in the name of "crisis, must do socialism, direst of consequences" etc. But if we need to intervene to prevent the connected markets from all collapsing, take a financial interest which supersedes the normal shareholders, take the bad gambling debts off their books, give them an infusion of new capital (from public money), and for god's sake, make sure there's some g-damn regulation and oversight to prevent any more risky gambles, under-market lending, or lavish compensation.

Oh, and one more thing, while I'm thinking about the show. Later, they had a Democrat from Congress railing against the banks for paying out lavish bonuses after getting TARP money. She called them "idiots", and insinuated that they don't know what they are doing. Oh contrair, Ms Senator from wherever... they know exactly what they are doing. They can see the writing on the wall, when they get nationalized or equivalent, and either their private industry collapses, or worse (eg: the government collapses the currency trying to reflate the housing bubble). There are certainly idiots involved in the TARP debacle, but the wall street executives taking the money which you gave them and running are not among them. I would look first and foremost to the people who voted to give them public money with no oversight, no strategy, no transparency, and no perceptible strings attached: if there is idiocy to be found, I'd start there. I wonder how she voted on TARP 1 & 2...