"Watcha Doin', Barney Frank?"... "Aww, Nothin', Just Savin' The World."

You may not have noticed, because the Congressman is a modest man, but today Treasury Secretary Henry Paulson announced that brilliant, gay, cute li'l Representative Barney Frank (D-MA), had saved the world.

Aww, that's sweet. Look at Barney keeping the world's financial system out of the clutches of right-wing maniacs. Looks like he's about to give Paulson a big kiss, doesn't it? And Paulson almost deserves it today - and not just for showing that John McCain is a tragi-comic liar. After all, how hard is that?

Note this moron McCain saying he will make Fannie Mae and Freddie Mac "go away". He also says that "There are lots of banks, savings and loans, and other financial institutions that can do this job.

Where are these institutions, Senator McCain? In space? In Heaven? What an imbecile. The private banking system is in near collapse and this fool is saying they can take on trillions of dollars more debt. What a shameless fraud is this McCain.

Back here on Earth, many of you will not remember that in January I wrote this:

What this all means in the short term is that markets of all kinds are going to drop and governments are going, once again, to have to step in to rescue financial institutions - probably in the form of creating a public bond insurance agency.

And that is exactly what happened today.

It's my own fault. The post was much too long and it had no videos, or pictures, to give you a little rest and entertainment while you took in the possibility of total financial doom. And I know that it's an uncomfortable world when Dlaw starts getting things right. Believe me, I know. I am Dlaw, after all.

A Tale Of Three Cramers

When I'm getting things right, the world tends to sound a little like this:

This happened when Jim Cramer came on television, burdened with the knowledge that huge "fixed-income" markets even CNBC audiences didn't know about ("fixed-income" = Wall Street for "bonds and things like bonds") were blowing up, crashing, freezing and the Federal Reserve was talking ideology.

In case CNBC is not your thing, here's a little more translation from Wall Street to human:

Call = Conference call when Bear Stearns reported its quarterly results.

Discount Window = http://en.wikipedia.org/wiki/Discount_window

Bill Poole = Right-wing ideologue Federal Reserve Bank President William Poole

"Five bid, half a million....1990" = When Cramer bought a lot of Citigroup stock very cheap during the 1990 banking crisis and it went down even further.

Ladies and Gentlemen - Comrades, if I may - the danger of this present financial crisis is that rare situation which, because it resides in a place far from most people's consciousness, actually cannot be overstated.

That's a strange situation for me. Clearly, I'm used to being able to overstate things all the time in both style and substance. I'm sure it even is for Cramer who certainly enjoys overstating in style, but if you listen carefully, not in substance. So when - just a couple weeks ago and a little more than a year after the meltdown that finally embarrassed the government into action - Cramer said:

"They're trying to destroy the ecomony"

More people should have taken note. Cramer was much, much calmer this time, but ultimately more rueful and even more dismissive of the insane foolishness of the Administration. I urge you to take a look at the video.

"It is mind-boggling how wrong they are and how wrong they've been...," he says, bluntly, "...they're reckless and they're radical...they're trying to destroy the economy in order to be able to re-invent the economy, that's their plan... that's a radical right-wing thing to do...it's like 'Leviathan', it's like the Hobbesian Dream." Wow, you don't often hear a financial commentator invoking Hobbes. It's a searing political critique made be a person who usually talks numbers and "booyahs". Please watch it.

Just a bit more translation here: "overlook oil...overlook grains" means Cramer is suggesting people should not consider the bubble-peaking price rise of oil and commodies this summer to be real inflation. "CPI" is the Consumer Price Index, which does not include real estate. Also, "Dick Fisher" refers to Richard W. Fisher, yet another right-wing ideologue Federal Reserve President.

Maybe people did take note, because on Friday, however, things changed. After the rescue package for Fannie Mae and Freddie Mac became common knowledge on Wall Street, Cramer was ebullient with optimism. He knew, and we all later found out, both that something had finally been done and that the right-wing radicals in the Administration - who, Cramer took a moment to remind his readers, had been "lazy, wrong, intransigent and foolish" - had not been able to destroy the effort. The tragic failure of the Administraion moved Cramer (and many others) to hysteria and then to abject misery. This huge step has Cramer bull-headedly hopeful and if we don't take a cue from that we should, again, take note of it.

In the coming days, you'll hear and read a lot of criticism of the "GSEs" - Fannie Mae and Freddie Mac. The vast majority of it will be ideologically-inspired and without any sense of proportion. Unlike normal corporations, Fannie and Freddie had their own government regulator. If there were shenanigans at Fannie and Freddie - and there were - just imagine what they probably are at Washington Mutual. Actually, the problem is you can't. Right-wing ideologues undermined regulation and made sure financiers in the non-GSE world could get away with almost anything they wanted to. Now they're whining that Fannie and Freddie didn't have enough regulation? What a bunch of hypocrites. Six months ago - when it was convenient for them - Republicans pushed a measure to REDUCE the capital cushion at the GSEs.

In the coming days, you'll also hear a lot about the cost of the plan. Whatever it is, it's a pittance compared to the cost of default. Capitalism as we know it is struggling for its very solvency. This is a good plan - or at least it's a really, really good step.

I think I'm less sanguine about the package in the short term than Cramer is, but I think I'm even more hopeful about the long-term changes that will ultimately stem from it. This is a huge, Progressive change. This is a signal defeat of laissez-faire. There's risk, yes, but the potential is enormous.

In January Web Sherpa and extremely smart person Microveldt gave me this piece of wisdom:

If this Web 2.0 financial world has been about an explosion in access to information, the next phase of Web 3.0 must be an explosion of meaning. We the taxpayers and citizens are going to have to rescue the financial system at a huge cost, so we better get some meaningful change out of it.

I think we will.

If not for the 2006 election, by which I mean if not for all your hard work this immensely important step would not have happened. You put Barney Frank into the position to save the world economy. It's just that simple and it's no over-statement.

As a person who is well left of the Democratic party, I sometimes toy with the notion that catastrophe might be what America needs. But that's a bit irresponsible so, for your sakes, I hope three things happen:

  1. I hope this works.

  2. I hope people have the sense to elect Barack Obama over this ridiculous McCain.

And although it may not be fair - although they will have been delivered from catastrophe quite despite themselves:

3) I even hope the bulk of the American people never realize how close they came to disaster.

< You should vote Republican if ... | On Making A Statement, Or, The Revolution Will Be Downloaded >
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Is that possible?

by dlaw on Sun Sep 07, 2008 at 03:45:54 PM PST

* 1 none 0 *

...to click on the link to know what cramer was saying--this might be his most famous utterance ever.

one unaswered question: exactly how many 10% reductions per year in the size of the new entity are planned?

is the idea to make the ongoing business 80% of current size? 60%? 20%?

we await that answer with very bated breath.

by fake consultant on Sun Sep 07, 2008 at 08:28:47 PM PST

* 2 none 0 *

What is the point of writing that there is no point in clicking the link?

A) It's stupid and untrue. There are plenty of people who haven't seen that video and plenty more who've seen it but haven't understood it.

B) You confuse readers between the TWO videos. One is well-known. The second - possibly more important - is not.

F.C., there are a lot of things in your posts that I find perfectly extraneous, but I do not make an effort to point them out because that would be stupid and uselessly obnoxious. I am not of the opinion that I am your editor. Possibly you think you're mine. You're not.

Finally, to your question: there will not be any reduction in the GSE's holdings - ever.

Even the right-wing Fannie/Freddie haters at Treasury will grow the institutions by 10% in THIS plan, and the notion that they will then be putting a more than a half-trillion dollars of credit enhancement out to the market each years is an idiot fantasy.

The GSEs will grow because they are the right way to do this business - witness the utter failure of the private credit enhancement system.

by dlaw on Sun Sep 07, 2008 at 11:39:28 PM PST

* 3 none 0 *

From the Movement Conservative/Republican blog "Redstate" (no, I won't put a link), of all places:

"Fannie and Freddie have issued $1.6 trillion in assets on top of $70 billion in shareholder equity. That's a rate of capital efficiency that's simply untouchable in the private world, and that's why mortgage interest rates have been so low (and home ownership rates so high) for so many years in the US.

If you were to fully open the mortgage market to private competition today, (which you simply can't because Fannie and Freddie already own or guarantee half of it, and it would take ten years for that to run off), retail mortgage rates would probably nearly DOUBLE, and housing values would plunge.

And what would happen then? That's right: Republicans and Democrats alike would be howling for a New New Deal."

Folk, the Hobbesian Dream is dead.

by dlaw on Mon Sep 08, 2008 at 01:59:52 PM PST

* 4 none 0 *

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