So if anyone saw The Daily Show last night I have very little to add. Apparently the reason given by several prominent Republicans (notably House Republican leader John Boehner) for the bailout failing to pass the House was Nancy Pelosi's highly partisan speech given before the vote was taken. What the hell kind of kindergarten crap is this? No, I don't like Nancy Pelosi and yes, I agree that the speech was highly partisan and not really necessary at the time, but I fail to see how that is relevant to voting for or against anything. I don't care if she was up at the podium dressed as a nazi, burning a bible in one hand and an American flag in the other, if you think the bill is in the best interests of the country you vote for it and if you don't you vote against it. Period. End of discussion. I still don't know exactly how I feel about the bailout and there were a lot of Reps who cast votes against it and voiced very legitimate concerns about it. That's fine. I'm not arguing that they should have voted for it. I'm saying that if you were all set to vote for it and then you changed your mind because Nancy Pelosi was a big meany you are a spiteful moron and you deserve to be voted out of office immediately.
Of course, as usual the truth of the matter (as I see it anyway) is somewhat more complicated. The bill wasn't going to pass anyway. Nancy Pelosi didn't have the votes and she knew it. She figured there was no chance she was going to sway any more Republicans at the last minute so instead she tried to appeal to Democrats to fall in line by stoking up anti-Republican and anti-Bush sentiment. It didn't work, so then it left a convenient opening for Republicans to blame it all on her. So I actually don't think that Republicans changed their mind based on her speech. I have more respect for their intelligence than that. What I have no respect for and hate with a fiery passion is the earnest desire to take every opportunity to take a partisan shot instead of providing an actual reason why you voted the way you did.
I still haven't had a chance to read through all the details of the bailout but one of the things that has been bothering me is the question of "how did we get to this point this quickly?" How did we go from "yeah, times are tough but we'll pull through it" to "OH MY GOD we need $700 billion immediately or everything's going to collapse!"? That would be like me sitting down at a blackjack table and Christy coming by every hour to check up on me. The first 5 times she asks how I'm doing I say "well, I'm down a little but I'm doing ok" and then she comes back the 6th time and I say "I need $798,000 or they're going to break my legs." Does this mean that everybody's balance sheets have just been lying this whole time, or was everyone (including the auditors) really just this clueless till 2 weeks ago about how bad things were?
On a somewhat related note, I just started reading A Random Walk Down Wall Street which is a fairly famous investing guide that argues in favor of investing in large index funds instead of speculating in individual stocks or managed mutual funds. It was first published in 1973 and has been updated and revised 9 times since (most recently in 2007) and it's amazing how relevant it still is. It's also amazing how in over 80 years Wall Street still has never managed to learn from its mistakes and continually gets caught up in manias and overvaluation where everytime they are convinced that there is no bubble and growth will continue indefinitely. I found this passage, found on page 1, particularly relevant: "many of the pros lost their shirts in the 90s using derivative strategies they failed to understand." That was only 8-15 years ago; there's probably a lot of the same people still at these big investment firms. How did they not see this coming?
With every year I find the Who's Won't Get Fooled Again to be more and more wise. . .
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4 comments:
I'm reading this, which is a pretty handy analysis of what's happening and how it happened.
1. She didn't have the votes.
2. She gives that partisan speech.
3. Republicans yell at her for being partisan.
4. Democrats yell back and say politics shouldn't matter.
5. Everyone gets a little political cover for voting 'no,' which they need because apparently Americans are 3-1 against the bailout. Tough to vote 'yes' for something that 75% of your constituents don't want and then go back to your district/state to campaign.
6. The bill gets marked up a little bit and then passes (although I wasn't expecting the Senate to do it so fast.)
(7. ??? 8. Profit.)
I particularly liked the PR push to get the bill rebranded from 'bailout' to 'recovery package' or 'long term investment.'
I think that some people were predicting this for months, but the majority of people had faith in our financial institutions to gut it out. Unfortunately, they didn't gut it out, and a bunch of major ones failed in the same couple weeks. The market would have been more able to survive if only half of the places went under. The emergency is that they all failed on top of each other (and now Wachovia) and there are more expected to come.
I don't know what you are trying to say in your last paragraph. It sounds like the advice of that book is: diversify. To which I say: duh. One stock speculating is high risk/high reward while diversification is spread risk/spread reward. I don't know if you were trying to tie this in to the mortgage crisis, but they were essentially trying to diversify by tying together good investments with the bad investments (prime/subprime) and that is where most of the trouble came from because the bundled/diversified mortgage packages seemed safer.
Re: my last paragraph
A big part of the reason this mortgage crisis is so bad is that through these complicated derivatives the mortgages were sliced and diced in so many ways that when they started to default no one was really sure how bad they had been hit, and they used these to leverage their positions to the point where a relatively small position left them exposed to a vast amount of losses. In other words: they got involved in a lot of complex derivatives they didn't fully understand. I just found it humorous that almost the same thing happened 10-15 years ago but it still didn't help the "pros" on Wall Street avoid it this time.
Hi ho, my politically-minded friends.
I have seen these websites quoted as reference in political commentary articles. They appear to be nonpartisan. I’ve added them to my daily reads and thought you might want to know about them too.
Fact-checking: http://factcheck.org
Fact-checking: http://politifact.com
Budget/economics: http://usbudgetwatch.org
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