Remember when TreasSec Henry Paulson got down on his knee to beg Nancy Pelosi to support his $700 billion recovery plan? He said he would use the money to buy mortgage securities in order to set a floor on their value and restore faith to the credit markets. Treasury Department wonks talked about reverse Dutch auctions and other fancy ways of making sure that the bailout would succeed and maybe even earn a profit for taxpayers.
Immense pressure was put on Congress to pass the bill authorizing Paulson’s plan. “If there is even the slightest chance it will work,” one congressman said, “we should do it.”
Now, a mere seven weeks after Paulson bent his knee, not only is there not the slightest chance it will work, there is not even the slightest chance that Paulson is going to do it. Paulson now admits that “it was clear to me” as early as October 3, the date the President signed the bailout bill, “that purchasing troubled assets” would not work. But he waits almost six weeks to tell us?
Instead of buying securities, he has spent $200 billion on company-by-company bailouts, and Paulson says he has shifted strategy from buying up questionable assets to simply handing out more bailouts to “bolster the financial markets.”
Not surprisingly, this has led companies all over the country, from GM, Ford, and Chrysler on down, to want a bailout. But Paulson doesn’t see any point in rescuing the auto or other industries because “my focus is on the financial sector.”
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In normal times, it probably makes sense to let a banker run the Treasury Department because he understands finance. But now that everyone wants bailouts, Paulson the banker only wants to bail out banks and other financial companies. If an auto industry executive happened to be treasury secretary, do you suppose he or she would want to bail out auto companies instead of banks?
There are probably good good reasons not to bail out the auto industry. But those reasons apply just as much to the financial industry. One important one: bailing out the banks could just prolong the recession. That’s what Japan did when its property bubble burst in 1991, and the resulting recession lasted a decade.
Meanwhile, there is increasing doubt about whether the credit crunch is even real. As Alex Tabarrok writes on Marginal Revolution, it is still pretty easy for people with good credit scores to get credit. If it is harder for people with bad credit scores to get credit, maybe that is just evidence that the credit market is behaving rationally in response to increased defaults among people with bad scores. If so, then any subsidies to the credit market may simply encourage it to irresponsibly give out credit.
Of course, Paulson has no desire to help people with bad credit deal who were foolish enough to run up their debts. Instead, his plans aim to help the banks foolish enough to loan money to people with bad credit, and the banks foolish enough to purchase securities based on those loans. While some people will see this as bailing out the rich, the real problem is that it sends a signal to the banks that they can loan money to poor credit risks and get bailed out when the borrowers default.
One of the Antiplanner’s favorite books is Great Planning Disasters by Peter Hall (himself a professor of urban planning). When the next edition of this book is written, it will have to include the present bailout mess.
What does the bailout package have to do with urban planning? That there’s planning involved (or, as it would appear here, there’s none)? There’s planning involved in business plans, too. Urban planning has little in common with either of those two except for the part about actual thinking ahead.
I agree, TO. Anything to have an argument, even making shhhh…tuff up.
At any rate, it certainly is a joke, this “bailout”. Anything coming from this BushCo administration is a sh*t swindle, Keystone Kop runaround, poorly thought out, or a sop to the kleptocapitalists.
F’n joke.
DS
George Bush is a socialist…!
Well it’s socialism for the rich, same as with most road spending.
That’s the connection to exurban planning you were looking for!
Urban Planning, Smart Growth, has a major part in the world wide financial problems. Wake up Planners!!! Subprime financing was invented to provid buyers for San Jose and other Smart Growth cities where housing costs had gone up 10 times in the last 25 years because of the UGB. Barney Franks demanded that lenders make loans they did not want to make. Fanny and Fredie agreed to purchase the loans and grade them AAA and sell them in bond form all over the world. Lenders were required to report back the numbers of Subprime, etc. loans they were making. Cities where housing prices have increased more reasonablely (less Urban Planning) are not having the foreclosures the Smart Growth cities are experiencing where less secure lending was required.
With the farming industry, transit, biofuels and other “renewables†industries (to name a few) being perpetually on taxpayer life support, I am not surprised that the US auto industry is soliciting a $50BN shot in the arm. Not a big deal – that is just $166 for every person in the US, $600 for an average family of 4. What do you get for it? – you keep alive for another couple of years your option to buy an American made car, even if you never bought and never intend to buy a GM, Ford or Chrysler vehicle.
“Too big to fail†= “Too expensive to bail out.â€Â
“But just this one more last little help and then I’ll be out of the woods, I promise…â€Â
—-
Actually, to his credit, Bush seems to be resisting this latest handout. It seems that it is primarily the newly elected Democrats that are pushing the bill. Dirigisme by government committee of experts led by czar. Great!
Capitalism in the US started to decline when the 16th Amendmant was passed.
lgrattan, we’re awake. Most of us readily concede that an urban growth boundary does limit the available supply of land. However, so does conventional single-use, separated, Euclidean zoning practices. I’d argue that they reduce the available housing tenfold over what an urban growth boundary limits. The logical conclusion, then, if we were to argue against UGB because they raise housing prices, let’s do away with conventional zoning. Let’s see how the mortgage and real estate markets feel about that. I’m game. Are you?
Most of us readily concede that an urban growth boundary does limit the available supply of land
Aren’t UGBs typically required to contain a 20-year supply of land?
There it is again, obsession with the fact that 2-3% of the US surface is Euclideanly zoned to not high enough density (per NU enthusiasts) while insisting in maintaining the remaining 97% under mandatory near 0 (zero) density. New Urbanists would only need to liberate 0.5% of the remaining 97% to be able to do all the high-mid-low density experiments their hearts desire.
But nooo… “…We cannot afford another 0.5% of the land surface being ruined by development (NU this time)”.
TexasOkie: Whoever said this blog is only about urban planning? And as far as getting rid of conventional zoning, that’s fine with me (but neighborhoods should be allowed to develop their own homeowner associations if they want).
neighborhoods should be allowed to develop their own homeowner associations if they want
Why should some people in a neighborhood get to tell other people in that neighborhood what they can and can’t do with their property?
The Democrats were eager for the first round of bailouts too, particularly trifecta of Pelosi, Reid and Frank. Not to mention the first auto industry bailout which preceeded the ‘financial institutions’ bailout which dwarfed it. Now the so-called Big 3 automakers are back for more, as are credit card companies, and a host of States, most notably Ohio which is asking for a bailout so it can pay its unemployed ????
Obama adn the Congressional Dems bought Ohio (and other big union states) fair and square. There are surely more ‘bailouts’ (read paybacks) to come.
Line forms to the left …..
The Antiplanner Says:
“TexasOkie: Whoever said this blog is only about urban planning? And as far as getting rid of conventional zoning, that’s fine with me (but neighborhoods should be allowed to develop their own homeowner associations if they want).”
That just changes one kind of red tape to an other.
Lorianne wrote:
“Obama adn the Congressional Dems bought Ohio (and other big union states) fair and square. There are surely more ‘bailouts’ (read paybacks) to come.
Line forms to the left …..”
Though these people work at big businesses, so then there is a U-turn to the right…
Read up on Rothbard’s brilliant “America’s Great Depression” if you want a firm grasp of what’s going on and what we shouldn’t do:
http://www.mises.org/rothbard/agd/contents.asp
“If there is even the slightest chance it will work,†one congressman said, “we should do it.â€Â
Utterly rediculous. Roulette with taxpayer money. Let’s put a trillion on black 13 and let ‘er ride! How can we trust these idiots to “fix” anything?
The country is financially bankrupt and our “leaders” are morally and mentally bankrupt.
And this does relate to central planning. The Fed, an unconstitutional quasi-governmental organization, manipulated interest rates to be artificially low, which spurred malinvestments in capital projects. This is how Portland has ended up with the rediculous blood letting that is South Waterfront. This malinvestment consumed excessive resources that could have been better used elsewhere. (Petroleum is an example. The falling prices are partially a result of the collapse of the construction boom and subsequent weakening demand.)
If you believe the incompetent government bureaucrats can plan anything better than the free market, you’ve got your head in the sand.
“If there is even the slightest chance it will work,†one congressman said, “we should do it.â€Â
That’s right, “If there is the slightest chance that taking money from other industries, say,…err.. companies looking for new cancer cures… to the automakers then buy all means we shall do it – whether we want to or notâ€Â.
Of course, to be fair, with autoworkers facing the unpleasant prospect of finding another job, the public welfare maximization committee has decided that looking for new ways to cure people with cancer should be secondary. Sorry for the dark humor, but this is the de-facto reality of progressive mandates.
The folly of dirigisme – coming sooner and more conspicuously than I imagined.
Remember the words of GM CEO Charles Erwin Wilson.
“What’s good for General Motors is good for America and what’s good for America is good for General Motors!”
Now, hopefully we can also spare some money to bail out crude oil commodities speculators. Now that’s a group that must be really hurting!
I was going to post it as a joke but alas.
NPWeditor wrote:
“The country is financially bankrupt and our “leaders†are morally and mentally bankrupt.”
Now the people at Cato & Reason can put up big banners on their buildings saying.
“MISSION ACCOMPLISHED”
“If you believe the incompetent government bureaucrats can plan anything better than the free market, you’ve got your head in the sand.”
And, if you believe that the free market can plan everything better the the government, you’ve got your head in the sand. This is just a stupid dichotomy, and until we are able to see the virtues of a free market with government imposed limitations we’ll jut be a bunch of angry bloggers.
BTW: highwayman #20. That was harsh, but made me chuckle out loud.
“the virtues of a free market with government imposed limitations”
That sounds a lot like Bush’s statement, “There ought to be limits to freedom.”
Got any more oxymorons?
Ok, this is an old one.
Well if “Pro” is the opposite of “Con”.
Then what is the opposite of “Progress”?
NPW,
Do you not think there are reasonable limits to freedom or are you an anarchist? When you don’t impose limits on free markets you get ENRON, mortgage backed securities, etc. Having said that, I agree with you that the bailout is ridiculous, which brings me back to the stupid dichotomy. There are very few (and none on this blog I can find) that think the the government can do no wrong. There are many that think the free market (as if such a whimsical thing could actually ever exist) can do no wrong. The truth lies somewhere in between. And if you think that sentiment substantially relates to Bush’s limitations on personal privacy, I guess you can make that leap of faith. Just don’t forget your parachute.
http://www.youtube.com/watch?v=L30V5vnYHzk
I’m not an anarchist. I think that people should be able to do what they want as long as it doesn’t infringe on the freedom of others. And that should be the primary role of government: protecting individual freedom; “That which governs least governs best.” “ENRON, mortgage backed securities, etc.” are not the result of a free market because the market was anything but free during these occurrences. The Federal Reserve’s tinkering with interest rates and very existence since 1913 means we have not had a free market in a very, very long time. The fractional reserve system, a corporate and government partnership, is partially to blame with mortgage backed securities. These are the results of corporatism, not a free market.
Highwayman, that’s good joke 🙂
I think we are somewhat on the same page. At least we can agree that the “free market” in the mentioned examples is a myth. As for the libertarian stance, now is not the time to dance that dance. Let me just say that to say “the primary role of government (is) protecting individual freedom” is a can of worms. Huge grey area, and we’ll never agree where to draw the line. This statement also suggest that there is a secondary role for the government. What could that be?
I’m all for civil liberties, though I’m for fair markets or open markets.
To me the term “free market” sounds like an other way to describe shop lifting or more as an oxymoron.
Also Mr. Setty helped to correct me, a real libertarian(not a vulgar libertarian) would see the need to restore and expand rail systems in a distorted market place.
A real libertarian:
Exist and let exist
A vulgar lbertarian:
All modes are equal but, some modes are mode equal than others
Regulation vs. free market and bailout boondoggles…
Was there ever a market for bank safety? If there was, I did not notice. Whenever I had to park money at a bank, I never even bothered to check the bank’s soundness (e.g. the ratio of liquid reserves the bank would be holding against my deposits). I just went to the bank that gave me the highest interest rate. Why? Because it was FDIC insured anyway!
I just made sure not to put more than 100K in any one bank (the old FDIC insurance limit). Wasn’t I suspecting that the higher interest rate could correlate to the bank investing my money in riskier investments? Sure. But I did not care. Why? Because it was FDIC insured anyway!
And with no market for bank safety, there was also little market for consumer information on bank safety.
P.S. There could be a more market driven approach to FDIC insurance, one where different deposit types are offered with different safety levels and the depositors pay for the increasing safety in the form of lower returns (just like in free markets: high risk high return, low risk low return). But that could be a long story…
http://www.afirepro.com/history.html
Sounds a bit like how it was between fire companies and insurance companies.
I have a better idea than for taxpayers to bailout the Big 3 Automakers.
Now is the time for BIG OIL to invest in car companies.
Exxon and the other oil companies should not wait for the next Congress to impose a windfall profits tax when they can invest capital today to save American jobs and ensure continued growth and profit for themselves. !!!
What a PR coup as well.
I have family that work in the auto business and at one time I use to make parts for Ford.
If any of the Big 3 should be saved it’s Chrysler, since they did the least amount of economic damage to America over the years.
” … neighborhoods should be allowed to develop their own homeowner associations if they want… ”
“Why should some people in a neighborhood get to tell other people in that neighborhood what they can and can’t do with their property?”
The 1st Amendment to the Constitution … freedom of association. People can freely CHOOSE to buy a house in a HOA neighborhood. They sign a contract to follow the rules when they buy in such a neighborhood. It’s silar to joining a club. You pay your dues and follow the rules.
It’s free association. No one is compelled to buy a house in a HOA neighborhood.
There is no need for a taxpayer ‘bailout’ of the auto industry. Now is the time for BIG OIL to invest in automaker companies.
Exxon and the other big oil companies should not wait for the next Congress to impose a windfall profits tax when they can invest capital in the Big 3 automakers to ensure continued growth and profit for themselves (and save American jobs in the process).
Plus, what a PR coup. They could crow “Exxon saves the US economy!”
Lorianne wrote:
“I have a better idea than for taxpayers to bailout the Big 3 Automakers.
Now is the time for BIG OIL to invest in car companies.
Exxon and the other oil companies should not wait for the next Congress to impose a windfall profits tax when they can invest capital today to save American jobs and ensure continued growth and profit for themselves. !!! ”
I don’t know why, but that just seems so far a way?