But Dean, come on. If the Fed directly bails out GE and friends, then the backers of the Bush campaign of yore in the financial industry doesn't get their payout. Legalized bribery still plays.

Along with torture and presidential pardons.

What a country.

You predicted this just last week Dean when one of your blogs said the Fed would step in if credit markets froze up ... and that's exactly what happened with them buying commercial paper.

Once again, our own government was lying to its citizens. There are alternatives ("plan B's") and they know it. And not once did the government talk of the downsides of passing the bailout, only the downsides of what might happen if it didn't pass.

The government's lack of critical thinking and considering alternatives mirrors that of the mainstream media.

With respect, Fred -- it was perfectly well thought out.

Mark-

the fed would not be bailing out GE and friends. It would, presumably be loaning them money and charging them interest. This is what the member banks would be doing if they weren't so scared.

But this would place the Federal government in the role of competing with private corporations (even if they are dysfunctional). This goes against GOP religion/dogma/ideology and would have received ZERO votes by House Republicans.

The Bailout is like a $700 Billion no-bid contract that picks winners and losers and disperses the money on the basis of WTF knows (cronyism).

Is this increasing the contributions to the Bush library?

So this would be outside of the $700 billion Plan?

I am just curious why no one is explaining why the Plan was needed. The Fed has been expanding its secured lending, and now plans to do some outright buying?

Why did we need The Plan? So we could pay above market rates to bail out friends of The Administration?

Someone in the media, please explain.

I thought about asking why the fed couldn't just lend money directly, but decided it was a dumb question that would prove that I was the idiot my nephew thinks I am. Oh well, brighter than I thought.

There was both knowledge and discussion of the ineffectiveness of executive compensation limits. Similarly, too, several Congressional reps were aware of the fact the U.K.'s five largest banks qualify for tapping into 1/4 of the TARP. They were outspoken about this and they failed to sway their colleagues. So, those outside the realm of the MSM have but four weeks until elections to convince their communities of the need to vote in representatives who might better complement those who resisted this hyper-inflationary bailout. May Pelosi fall like Rome...

Here is Plan B:

http://seekingalpha.com/article/98229-plan-b-for-reviving-the-economy-the-mortgage-investment-bill

This could fix the economy and social security

Why the focus on nonfinancial commercial paper when it is financial commercial that's in trouble:

econospeak.blogspot.com/2008/10/fed-to-purchase-commercial-paper-as.html

As far as I can see, this action by the Fed would obviate much of the need for a private banking system.

Tom Chechatka wrote, So, those outside the realm of the MSM have but four weeks until elections to convince their communities of the need to vote in representatives who might better complement those who resisted this hyper-inflationary bailout. May Pelosi fall like Rome...

Uh, yeah, replacing Democrats with anti-regulatory free-market idolizing Republican zealots is a good idea at this juncture...NOT.

While I was against this plan, electing more utterly deranged Republicans to Congress is just going to make matters worse.

Stan Muse wrote, This could fix the economy and social security

From your page on that: "A much more effective and fairer way to end our economic crisis is easily attainable. To state it simply, all Congress has to do is to pass a Mortgage Investment bill which allows individuals a one-time option to use some of the funds in their IRAs to pay off their mortgage balance in full, without any penalty, interest, or taxes for doing so. In return, individuals choosing to exercise this option give up their mortgage interest tax deduction for life."

AFAICT after a quick skim, you present zero evidence that a large fraction of households with failing mortgages have significant 401(k) assets.

Who are the 'qualifying companies'? What qualifies them?

Dean,

The media may be taken in by Bush repeatedly. But what about the Democratic leaders in Congress, Pelosi and Reid?

Maybe they should watch that clip of Bush saying, "Fool me once shame on you, fool me twice ... fool me twice ... oh, you can't do that."

To answer my own question, the rules are here.

rules

"Why the focus on nonfinancial commercial paper when it is financial commercial that's in trouble"

Because the non-financial paper is needed by businesses to keep their business going. The system has shut down, so businesses that should be capable of repayment are being denied.

Imagine a wreck on the freeway that shuts down traffic. The financial wreck needs to be cleaned up. However, there are viable transactions that are caught in traffic, even though they are intact. By providing an alternate route (diverting traffic off the freeway and circumventing the wreck) the businesses can keep going in spite of the wreck.

This makes a lot of sense because the taxpayers stand to gain by keeping businesses from shutting down and collecting interest

hyperlink anchon did not work..sorr\y

http://www.federalreserve.gov/newsevents/press/monetary/monetary20081007c1.pdf

Point taken, Erik L. "Bailout" is ineptly applied here. Nevertheless, my point is that the bailout of the finance industry constitutes zero substantive improvement in the economic fundamentals. The liquidity freeze is essentially still on and the poison of the mortgage crisis is, as predicted, spreading.

No, not "bailout." A sophisticated characterization would include euphemisms like "diversion of funds from the Treasury." My (admittedly) simple-minded weave comes down to one word.

"Theft."

A tip of the hat here to "Robert the Red":this action by the Fed would obviate much of the need for a private banking system

Ding ding ding! You didn't say much, but when you did, it was right to the point.

so businesses that should be capable of repayment are being denied.

Mmmm, who is to decide what "should" means? That is why we have banks in a free market economy. They determine who 'should' get a loan. If there is money to be made, then they will lend it, after all, that's a banks raison d'etre.

Maybe, these companies would have gotten a loan in the past, but now the times have changed and they are now deemed unworthy.

Whenever credit tightens, some people who previously qualified, no longer do. That's how it works. Credit can't loosen forever..it must tighten some of the time. Once you interfere with this system, it may no longer function.

I can see the reason to do this for essential goods and services, such as utilities and state governments, but GE, Coca-cola and Mariott hotels are not critical and could be left to fend for themselves. Their loss is someone elses gain. That's why we have a market.

This "should" term is loaded to the hilt.

Should may be a loaded term. However, there are all kinds of businesses that are in the very short term loan market to deal with cash-flow problems.

The cash-flow loans are also being frozen and that is a problem.

"While I was against this plan, electing more utterly deranged Republicans to Congress is just going to make matters worse."

So you acknowledge that you yourself were against the plan AND have have made it clear that you don't think too highly of the "anti-regulatory free-market Repub's" who were against the plan.

Then you somehow jump to the conclusion that ONLY "anti-regulatory free-market Repub's" would fit the criteria of "representatives who might better complement those who resisted this hyper-inflationary bailout".

I hope I've clearly painted the judgmental hypocrisy in your positions. If not, do a little research into some of the Dem's who came out in opposition of this bill (Dennis Kucinich is a great start)before bloviating against Republicans who managed to keep Paulson's Bailout Part A from passing.

The only way we're going to solve some of the massive problems facing this country is if we can see terrible policies for what they are and vote accordingly.

I can't see how the credit markets can be in such difficulty as to require the Fed to jump in to buy commerical paper when, as Dean has said in previous posts, the interest rates have not gone up significantly. See the data for nonfinancial paper:

http://research.stlouisfed.org/fred2/series/DCPN30?cid=120

For the five days 9/29 to 10/3, the rates for 1-month nonfinancial paper were 2.12, 2.16, 2.00, 2.01 and 1.98% - right around the federal funds rate, where you would expect them to be. Last September (2007) the rate was around 5.2%. Around 2002-2004 rates (federal funds and short-term commercial) were less than 2%, but other than that you have to go back to the sixties to find rates this low. Financial paper has jumped erratically to over 3%, but the Fed is not buying financial paper (or so they say now).

If somebody is really, really desperate to borrow money (or even just mildly in need), couldn't he offer, say, 2.5 percent? If 5.2% a year ago was not ruinous, how could less than half that be so bad now? In fact, people are offering around 2.0-2.2%, and the paper is being bought - otherwise there would be no daily average prices. Is the volume really down for this kind of paper? - where are the data on this?

Dean has been saying that the credit scare is largely phony - looking at this kind of data, I don't at the moment see any other interpretation. Can anyone explain how commercial credit can be tight without affecting yields?

Hey, maybe we should hire those Grameen-bank / micro-credit types to come here and run the whole market.

Question for Dean or some one who might know:

What would be the effect of declaring the naked CD swaps to be null and void?

Congress knew about the executive compensation loopholes, at least if it listened to Congressman DeFazio who pointed this out during the debate. Check out his webpage.

skeptonomist said:

"If somebody is really, really desperate to borrow money (or even just mildly in need), couldn't he offer, say, 2.5 percent? If 5.2% a year ago was not ruinous, how could less than half that be so bad now? In fact, ..."

You make a great point. Want money? Money is in short supply? Pay higher interest then people with cash might be more inclined to loan it to you. Wasn't it super low interest rates that were part of what caused this mess?

If your average Jane is short cash for food and utilities do you think the fed will give her a 2% short term loan? Noooo! She has to go get a payday loan with a **** 390% APR ****:

http://www.cbs8.com/stories/story.142661.html

So businesses get a 2% loan and average Jane gets a 390% loan.

jfv411 wrote, Then you somehow jump to the conclusion that ONLY "anti-regulatory free-market Repub's" would fit the criteria of "representatives who might better complement those who resisted this hyper-inflationary bailout".
I hope I've clearly painted the judgmental hypocrisy in your positions.

I don't follow.

In general, all things being equal, I'd rather that Democratic incumbants who voted for the plan were replaced by someone "more sensible."

However, we're not in a state of "all things being equal." We're about to conduct an election, where in most cases the choice is a Democrat who voted for the plan, or a Republican who is most likely a total nutjob.

In that case, I choose the Democrat.

Now, in two years, if someone wants to run a primary challenge to an incumbant Dem who voted for the plan, that'd be great.

But that's not the choice facing us now.

Pretty simple, huh?

El Cid wrote, Hey, maybe we should hire those Grameen-bank / micro-credit types to come here and run the whole market.

Those micro-credit folks are completely ignorant.

There's exactly one primary cause of poverty in the third world (putting aside non-economic phenomena like war and disease): private, concentrated capture of Ricardian land rent.

The microcredit folks don't understand this basic fact, and are just confusing things.

You're tilting at windmills liberal. The Grameen bank isn't trying to singlehandedly wipe out third-world poverty; just trying to provide credit to very poor entrepreneurs who are unable to provide collateral.

How about Plan M? My rescue package. It calls for decriminalizing the use of marijuana, taxing it's sale to adults, releasing all prisoners convicted of marijuana use, and the implementation of hemp for biofuel and biochar technologies, as well as the funding of medical research into the chemicals in pot that have been proven to kill cancer cells.

It was the exercise of freedom to vote of who is the deserving president of America but it was the choice of the majority, I can say that the Citizen of America was very practical it terms of nominating of who is the right president but what is matter most is that we have to exercise our right to vote and to express our freedom of choice.
American people truly deliberated on the current issues before casting their vote in the November 4th election. It would be nice to believe that most of you did, but in actuality, I know that many of the people’s political choices are less than studied. I’m sure some have studied more whether to take out a payday advance than what the issues are in the election. For instance, check out “The Howard Stern Show” and listen to this brief audio clip that was recently posted. Roving Reporter Sal roamed the streets in Harlem, New York to acquire opinions from men and women, determining whether they supported Barack Obama or John McCain as President. In actuality, the purpose was to determine whether African-Americans would automatically vote for Obama simply because he’s black. By taking McCain’s policies and disguising it as Obama’s, Sal discovered shocking responds. He discussed issues like the pro-life argument, stem cell research, the war in Iraq and who Sarah Palin is – placing McCain’s positions to Obama's. He gets many of them to admit they support Obama regardless of what his policies are. This activity has really exposed the ugly truth of some of our ignorance of the issues. I just hope that people really thought about the real problems when casting their vote for the presidential election.

Click to read more on Payday Loans

The employees at Trading Forex Review.Com that Plan B and the Fed buying commercial paper certainly is not nor was it ever the principle focus of a federal agency to prop up private companies. They need to run the economy as well as they can within there guidelines and let the open market determine which firms survives and thrives for another day.

There are alternatives ("plan B's") and they know it. And not once did the government talk of the downsides of passing the bailout, only the downsides of what might happen if it didn't pass.

It would be nice to believe that most of you did, but in actuality, I know that many of the people’s political choices are less than studied. I’m sure some have studied more whether to take out a payday advance than what the issues are in the election.

They do obvious things I think. In the begining they reduce the cost of papers to buy them later for the low price. All crisis reflact the same thing. You musn't apply for no teletrack payday loans to buy something for the low price.