Peter Krupa

Thanks to BoingBoing.net. See CBSnews.com for full, terrifying interview.

How the mess started, from the New Yorker:

Beginning in 1978, when the Carter Administration abolished government restrictions on airline routes and fares, both parties began to espouse the doctrine of unfettered free markets. In some industries—airlines and telecommunications, for example—deregulation delivered lower prices and more choices, with few downsides. Then the Reagan Administration relaxed parts of the Glass-Steagall Act, a Depression-era law that restricted the activities of big financial firms. This facilitated innovation and growth but also made the system more fragile. A few years later, the Clinton Administration—after heavy lobbying by Wall Street, and vigorous encouragement from Alan Greenspan, then the Fed chairman—removed the last vestiges of Glass-Steagall. (Phil Gramm, the former Texas senator—and a McCain adviser, until he recently referred to Americans as “a nation of whiners”—co-sponsored the key piece of legislation.)

Commercial banks, such as Chase Manhattan, merged with investment banks, such as J. P. Morgan. The remaining Wall Street firms, grappling with new competition in their traditional businesses, increased their borrowing and made riskier bets. Last year, Bear Stearns, Lehman Brothers, and Merrill Lynch had more than thirty dollars of investments on their books for every dollar of capital. Having borrowed so heavily, the firms were hostage to a withdrawal of credit on the part of their lenders. After the sub-prime-mortgage market collapsed, that was precisely what they faced.

The $700-billion-dollar bailout, From the New York Times:

The trouble is that these investments are so intertwined and complex that no one seems able to figure out what they are worth. So no one has been willing to buy them. This is why banks have been in lockdown mode: with mystery enshrouding both the value of their assets and their future losses, banks have held tight to their remaining dollars, depriving the economy of capital.

Now, the Treasury aims to clear the fog by buying up these investments. But their value is as mysterious as ever.

“There’s a tendency for people to think these are stocks and bonds and you know what the price is,” said Bruce Bartlett, a former White House economist under President Reagan. “The problem is people are operating in a world in which nobody knows what the hell is going on. There’s some naïve assumptions about how this would function.”

If Mr. Paulson pays the market rate — whatever that is — that presumably would not be enough to persuade banks to sell. Otherwise, they would have sold already. For the plan to work, Treasury has to pay a premium.

“It’s a straight subsidy to financial institutions,” said Martin Baily, a former chairman of the Council of Economic Advisers in the Clinton administration, and now a senior fellow at the Brookings Institution. “You’re essentially giving them money.”

BuyMyShitPile.com:

With our economy in crisis, the US Government is scrambling to rescue our banks by purchasing their “distressed assets”, i.e., assets that no one else wants to buy from them. We figured that instead of protesting this plan, we’d give regular Americans the same opportunity to sell their bad assets to the government. We need your help and you need the Government’s help!

Use the form below to submit bad assets you’d like the government to take off your hands. And remember, when estimating the value of your 1997 limited edition Hanson single CD “MMMbop”, it’s not what you can sell these items for that matters, it’s what you think they are worth. The fact that you think they are worth more than anyone will buy them for is what makes them bad assets.

Also from the New Yorker:

John Kenneth Galbraith’s comment that in America the only respectable type of socialism is socialism for the rich has never seemed more apt.

What do we think the Al-Qaeda terrorists wanted to do on 9/11? Kill a few thousand people maybe? Strike a blow against the Great Satan? Or did they hypothesize what would be the far-reaching repercussions of their act?

Thousands of U.S. soldiers dead; U.S. civil liberties compromised; U.S. values (Guantanamo Bay, secret C.I.A. prisons, Abu Ghraib) exposed to world scrutiny; billions of U.S. dollars spent on war instead of infrastructure and education; thousands of new young extremists rallied to their cause all over the world; the U.S. military pinned down and used up for a generation; Shia Iran developing nuclear capability and threatening to join the Sunni extremists in their cause.

In retrospect, our reaction to 9/11 hurt us more than the terrorists ever could have.

There are all sorts of things I could say about this Palin business. Mostly my jaw has just been flapping up and down in silent shock. I had no idea it was possible, in a matter of 24 hours, to simultaneously establish Barak Obama as a seasoned veteran and drive away all experience-minded independents leaning McCain. Great job, Republicans!

The real loser in all this, however, is Levi Johnston. Poor Levi Johnston is the unluckiest horny teenager in the world. First, he knocks up the governor’s daughter. Stupid, but probably not all that difficult in a state of 600,000 people. But then, the unthinkable (for everyone!): the Republicans nominate that governor for the vice presidency of the United States of America!

Suddenly, it becomes a matter of national security that he marry the girl. If he doesn’t man up, Obama will win the presidency and the terrorists will attack Juneau!

The term “shotgun wedding” evokes the rich imagery of a gun-toting father forcing the guilty young stud to make his pregnant daughter an honest woman, but I shudder to think what the Republican Party is holding to Levi’s head.