"The worst case scenario is that we have an extremely scary day"

[koganbot]

Dean Baker opposes the bailout, thinks we're better without it than with it.

Paul Krugman thinks the bailout is necessary, and that this relatively poor bill is nonetheless likely the best the Dems could get.

I think Setser and DeLong think, like Krugman but unlike Baker, that something must be done, though I don't know their opinion on the specific bill that was unveiled this morning.

Meanwhile, four major bailouts/takeovers/nationalizations in Europe and one in the U.S. in the last 24 hours.

And the 1-month t-bill is at 0.04%, TED spread at 3.5. I have little idea what that means, but people who do are gaping in astonishment.

Comments

[koganbot]

OK, after a brief look at Wiki, I think this is the significance of the t-bill rate. 1-month at 0.04% means that people who are parking their money for a month in Treasury bills are earning virtually no interest whatsoever, but are willing to do so because they consider the alternatives that pay any interest to be too risky.

The TED spread is the difference between the interest rates on inter-bank loans and short-term U.S. government debt, i.e. 3-month T-bills. A high number (3.5 is extremely high for a TED spread; it looks like it's dropped to 3.2 in the last couple of hours) indicates that banks think that lending to each other is much riskier than parking their money in T-bills, hence they demand a relatively high rate of interest. (Last March, Krugman explained it like this: "The TED spread is an indication of lack of trust in financial markets; its widening was a sign that things were going bad.")

And if banks aren't lending to each other, the financial system freezes.

Is that right?

[petronia.livejournal.com]

That's right. (Same reason precious metals have been spiking etc. etc.)

The compromises in the bailout bill

[koganbot]

Steven Davidoff in the NY Times:

Ultimately, the bill gives Mr. Paulson discretion on taking equity, and executive compensation standards will only be implemented if there are direct purchases. This makes some sense, since if there is an auction or a market purchase, there is no ostensible benefit given to the corporation. However, neither a market purchase nor a reverse auction in this market is really efficient. So, perhaps this implies that Mr. Paulson will be doing this pursuant to one of these two means. Ultimately, these limitations likely mean that no corporation will be subject to these standards and the Democrats significantly retreated from their initial proposal.

[skyecaptain.livejournal.com]

I'll be very interested to see where the failed bailout goes from here. Krugman is against Dems taking this one alone and trying to push through a more progressive bill that would get zero Republican support -- it would probably be the weirdest moment in Bush-era political history, Congressional Dems pushing through regulatory/nationalizing legislation with the backing of the Bush White House! I just really really really doubt it will happen.

I'm taking in more simple pleasures today by basking in the imminent schadenfreude (or is it a death drive thing?) high of Thursday's VP debates and waiting for CBS to leak the remaining Palin/Couric footage, which is reportedly worse than what's been shown so far. A very sad day.

[koganbot]

Krugman's response was to quote himself from three days ago:

So what we now have is non-functional government in the face of a major crisis, because Congress includes a quorum of crazies and nobody trusts the White House an inch.

As a friend said last night, we've become a banana republic with nukes.

I don't think there's a way that Bush/Paulson can shift right and get what Paulson wants. So, will they be willing to shift left? But as Krugman says, Dem leadership might not be willing to do this even if they had the votes. It would be very interesting what happens in the next few days.

Maybe Dean Baker is right.

[skyecaptain.livejournal.com]

Ha, hadn't seen the update...at any rate, it doesn't seem like any new legislation will be forthcoming. Barney Frank's response to accusations that it was the fault of Pelosi's "partisan speech" before the vote is priceless.

[koganbot]

Tell me about Talking Points Memo, who posted that vid and are also the people who are running that Dean Baker piece I linked. Never heard of the site until today. I wonder if they need music writers, and if they pay.

[skyecaptain.livejournal.com]

Unfortunately, they probably don't need music writers -- they're one of the more consistent (due in large part to Josh Micah Marshall, who writes the majority of main posts) leftish (left-Dem, anyway) blogs that I follow. They find a nice balance between "everything goes" sites like DailyKos -- which are impossible to read if you don't refresh them about three times an hour -- and more scattered/sporadic analysis like you might find in op-eds or op-ed blogs like Krugman's. Their video features have been excellent lately, though they could use some production values (they might pay for that, but probably not well).

A friend of mine worked there and enjoyed it, but because Marshall runs the show, it's somewhat difficult to break out, even for their political analysts. I still think your best bet might be a bigger online place like Slate or even Salon, though I'm not sure if the latter runs much music/pop culture analysis.

[koganbot]

TED spread almost back up to 3.5.

[koganbot]

Question: of the Dems who voted no, were there a significant number who were voting no from the left (as opposed to voting no because their mail was telling them overwhelmingly to vote no)? I really don't know who is who. Wondering if, in the unlikely event Paulson decides to shift left rather than let the rescue plan die, he and Bush would be able to get enough Dems to push through a Sweden-type plan. My guess is politically this couldn't happen - that you still couldn't get enough Dem noes to switch yes to offset Republican defections, and anyway as Krugman says the Dems wouldn't be willing to push something through without significant Republican support to give them political cover.

Another question: does this help McCain and the Repubs in November? Logic says it does, but logic has little to do with it.

Stock market now down 700. Maybe that's a sign of impending doom, maybe it's just a sign that they think firms are overvalued now that Wall Street isn't going to get its Christmas present.

[skyecaptain.livejournal.com]

Statistically, Dems up for re-election were far more likely to vote no than yes. I've seen others quoted as being against it in principle, though that isn't really a statistical analysis or anything.

Those 13 who voted no from the Dem side won't budge -- it's just too unpopular in an election season.

McCain is stuck in the middle of a shitstorm at the moment, I think -- all of his rhetoric has been that he is helping unite bipartisan support, and as far as I know he still plans on voting "yea" himself (he announced he was this morning, and that bipartisan agreement would happen, even if he had to "swallow hard" and vote yes). But of course what he has down in the paper in the morning could very well be the opposite of what's in the evening edition.

I think the bad economy is going to reflect primarily on the Bush White House, not the Democratic Congress, who simply haven't been in long enough to get tied to this mess quite as directly. I wouldn't be surprised if even more seats get overturned to Dem in the Congressional elections now that the Bail Bill has failed the House. (Democrats who voted "no" are actually in a weirdly strategic position -- it was clearly the Republicans who "sank" the legislation, with the direct inverse of votes to the Dems, but the 30% Dem dissenters get to wash their hands of involvement with the bill.)

[skyecaptain.livejournal.com]

And if anyone who's undecided has even the remotest interest in looking at the House Republican plan [/naive], they'll find that it's incomprehensible. Get rid of the capital gains tax! Yeah!

[koganbot]

Makes sense to me that if businesses are in trouble because they're losing capital the way to shore them up is to cut the capital gains tax. What could be more reasonable than that?

[koganbot]

By "Dems up for reelection" (they all are) you actually mean Dems in swing districts. But that's only 13 of the 95 Dem nay votes, and those 13 are likely to be in conservative districts. So what about the other 82? If the plan shifted left, to something like the Swedish bailout/nationalization in the early '90s, would enough of those shift over?

[skyecaptain.livejournal.com]

Woops, yes, misspoke bigtime! So I guess a better response is "I don't know."

[carsmilesteve.livejournal.com]

hehehe, this may be the most sensible comment i've read on this whole damn mess anywhere :)