Right Thinking From The Left Coast
I find that the harder I work, the more luck I seem to have. - Thomas Jefferson

Fiscal Update

The debate over fiscal reform is heating up.  We’re almost to the 0.2 Obamacares in intensity.  The GOP finally unveiled their version of the Dodd bill and it is ... better.  There are a lot of similarities (the $50 billion liquidation fund; regulation of hedge funds and derivatives.  But there are key differences.

The Republican proposal deals with two things that the Democratic proposal does not touch. First, the Republicans take on the government-sponsored entities Fannie Mae and Freddie Mac — bailed out during the collapse of the housing bubble. Democratic staffers say that figuring out how to handle the GSEs and re-regulating the trillion-dollar market in government-backed mortgage finance requires its own bill. They have just started researching what they want to accomplish and how best to achieve it. Republicans, in fewer than 400 words, take the massive market on. They create a special regulator and indicate that no further taxpayer money should be at risk.

Personally, I would prefer to see the GSEs sliced up and sold off.  The government has no business running a mortgage industry.  But at least this does what the Republicans tried to do (and fiscal “hero” Barney Frank blocked) several years ago—get some outside supervision of the place where politicos go to get rich.

Read the whole thing, which is very detailed.  There’s a lot I don’t like, but this is a big improvement over the Dodd bill and maybe a sign that the GOP is slowly coming to their senses about governing the country.  I’m sure the Limbaughs of the world will explode if the GOP does anything other than filibuster.  But that way lies political suicide.

The other news is the continuing Goldman Sachs show.  The current cris de coeur is that Goldman continued to sell mortgage-backed securities while they bet against them.  But as Bainbridge points out, this is not illegal:

Maybe Goldman sold investors some rotten eggs. Maybe not. So what? Goldman argues that it is being “railroaded by Congress for performing a normal market function—pricing risk and providing investment opportunities for grown-up investors,” which strikes me as precisely right. It is a central tenet of the federal securities laws that you’re allowed to sell rotten eggs, so long as you disclose that they’re rotten. So long as Goldman fully disclosed all material facts, the fact that Goldman thought the securities being sold were “shitty,” as one scatological email reference by an unwise trader put it, is not a breach of the securities laws.

Again, read the whole thing.  Of course, we all know Bainbridge is a shill for big business, right?  Well, his opinion is shared by The Economist, Surowiecki, and even fricking Matt Yglesias.

In fact, at least one prominent person —holy shit, it’s Bill Clinton!—is not sure Goldman Sachs broke any laws.

That’s our former President, sounding more sensible than all the grandstanding morons on Capital Hill combined.

Congress has been looking to beat up some Wall Street execs too long to let little matters of law and business sense stand in the way.  But fortunately, it’s looking cooler heads may prevail when it comes to actually doing something about the fiscal crisis.  I’m not holding my breath—Sarbanes-Oxley had heavy bipartisan support.  But I’m slightly less gloomy than I was yesterday.

Posted by Hal_10000 on 04/28/10 at 07:22 PM (Discuss this in the forums)

Comments


Posted by on 04/28/10 at 11:31 PM from Germany

Clinton doesn’t have any power left to hold onto, or even acquire, so he can actually be honest and engage his intellect for a second or two every now and then.

Clinton’s actually turning out to be a fairly decent ex-president for the most part.

Posted by HARLEY on 04/29/10 at 04:34 AM from United States

There’s a lot I don’t like, but this is a big improvement over the Dodd bill and maybe a sign that the GOP is slowly coming to their senses about governing the country.  I’m sure the Limbaughs of the world will explode if the GOP does anything other than filibuster.  But that way lies political suicide.

So this is Still a shit sandwich with some cheese in it, Why the fuck should the GOP vote for this?
Posted by AlexinCT on 04/29/10 at 06:35 AM from United States

Read the whole thing, which is very detailed.  There’s a lot I don’t like, but this is a big improvement over the Dodd bill and maybe a sign that the GOP is slowly coming to their senses about governing the country.

This is the thing that saddens me Hal. The republican bill is orders of magnitude better than the Dodd disaster, and I would take it no holds barred. Yet, it is at best a mediocre attempt that still leaves way too much power in the hands of government, the tax payers liable for the excesses government will push for, and ignores the fundamental underlying problems that gave us the crisis we are in. I still feel like I have to choose between a turd sandwich and a crappy sandwich, and I am getting tired of that.

The other news is the continuing Goldman Sachs show.  The current cris de coeur is that Goldman continued to sell mortgage-backed securities while they bet against them. But as Bainbridge points out, this is not illegal:

Not only is it not illegal it is smart management. You bet things are going to go well and you cover yourself for if they don’t. That’s not criminal, it is smart as hell. There are no guarantees when dealing with any kind of trading, or we would all already be billionaires by now. It’s called hedging your bets, and anyone that says they don’t do this should be considered a poor broker, and be avoided.

The stuff we should be watching for and getting mad about is when traders buy stocks, push them heavily, then sell at a profit only to let their holders get stiffed when the stock turns out not to be as great and goes south. That’s bad stuff. Of course this won’t come up, because then Dodd would have to explain why he helped prop up several companies as well as brokers in this way.

Congress has been looking to beat up some Wall Street execs too long to let little matters of law and business sense stand in the way.

What do you expect from these collectivists? Everything they do is predicated on playing one group of people against another, feigning concern for one aggrievement or another, and then ripping of and screwing over the stupid productive part of the population to buy votes from the perpetual losers. Don’t worry though. Wall Street still knows that the best people to buy favors from are democrats, and these demcorats know that even if they tar & feather Wall Street their campaign coffers won’t suffer a bit.

Let the circus go on! I am waiting for the fiddleling and poetry a-la Nero as the US burns down.

Posted by on 04/29/10 at 08:47 AM from United States

Clinton’s actually turning out to be a fairly decent ex-president for the most part.

Except for that whole if you protest against anything I or my party believes in, then you are the next McVeigh.

Posted by on 04/29/10 at 09:05 AM from United States

The more I read about this Case against Goldman Sachs, the less I think they did anything wrong, other than not realize some of what they wrote to each other in those emails looks bad.

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