News: September 2008 Archives

Despite the announcement on Sunday that a bailout deal had been reached, I was pleased to see yesterday that the deal fell through. Good. The markets were down because people realized that the government wasn't about to pay $1 for assets that are probably only worth 50 cents. That's bad for the people who own those assets, but good for the taxpayers who were about to buy them at inflated prices.

Harvard professor Jeffrey A. Miron has written the best prescription that I've seen so far: the solution is bankruptcy, not bailout. I've been saying the exact same thing for weeks. Maybe I should be an economics professor?

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

Just go read the whole thing. It's concise and exactly right on every point.

Once again our government finds a way to screw over people who acted wisely and followed the rules, reaching into our pockets to hand our money over to fools who borrowed or lent more than they should have.

Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession. ...

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price. ...

To help struggling homeowners, the plan would require the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.

So taxpayers, responsible homeowners, and people who were sitting out the bubble because they knew prices were too high get screwed.

The government buys up the bad loans and sells them cheaper than the banks were willing to, thereby transferring wealth to these failing companies to prop them up. Does anyone honestly believe that we're going to make a profit from these loans or the equity stake we get in these companies? Please. That's ridiculous. The loans are probably worth fifty cents on the dollar, so there's a lot of ground to make up before there's any profit.

Not only that, but people who bought houses they couldn't afford will now get their mortgages "renegotiated", so there's some free money for them, too. People who bought houses they could afford have to shell out money to help the idiots. Again.

My family works hard, lives frugally, any we deny ourselves many immediate pleasures to provide for our financial security. And the government just spits in our faces.

With Alcee Hastings in the news again for attempting to rally blacks and Jews against Sarah Palin with some offensive rhetoric, it's worth remembering this Congressman's history.

ABC News' Teddy Davis Reports: Florida Democratic Congressman Alcee Hastings pointed to Sarah Palin on Wednesday to rally Jews to Obama.

"If Sarah Palin isn’t enough of a reason for you to get over whatever your problem is with Barack Obama, then you damn well had better pay attention," said Hastings. "Anybody toting guns and stripping moose don’t care too much about what they do with Jews and blacks. So, you just think this through."

Is Hastings comparing Jews and blacks to mooses? (Meese?) You decide for yourself what the heck he means.

While you're pondering it, don't forget that Hastings used to be a federal judge until he was impeached for bribery and perjury by a Democrat-controlled Congress. Yeah, and then the Democrats decided to put him in Congress (and on the House Permanent Select Committee on Intelligence!). Is it any surprise that Congress is a continual embarrassment to our country?

For a fascinating read, check out the reactions of primarily Jewish readers to the disinvitation of Sarah Palin from the anti-Iran rally. The rally organizers decided to disinvite Palin after Hillary Clinton refused to share a stage with her, and the reaction from Jewish rally supporters is almost uniformly against the disinvitation.

I've asked before and wondered for a long time why American Jews almost monolithically support the Democrats, but maybe that's changing.

Michelle Malkin quotes a correspondent who explains the technical details behind the "hacking" of Sarah Palin's Yahoo email account. I think it's fascinating that the political crowd is now technically sophisticated enough to be interested in such an explanation.

Good morning, fellow AIG shareholders! If you're an American, you now own a chunk of the country's "largest" insurance company... not counting the debt obligations that make it insolvent.

The U.S. government seized control of American International Group Inc. -- one of the world's biggest insurers -- in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system.

The step marks a dramatic turnabout for the federal government, which had been strongly resisting overtures from AIG for an emergency loan or some intervention that would prevent the insurer from falling into bankruptcy. Just last weekend, the government essentially pulled the plug on Lehman Brothers Holdings Inc., allowing the big investment bank to go under instead of giving it financial support. This time, the government decided AIG truly was too big to fail.

The U.S. negotiators drove a hard bargain. Under terms hammered out Tuesday night, the Fed will lend up to $85 billion to AIG, and the U.S. government will effectively get a 79.9% equity stake in the insurer in the form of warrants called equity participation notes. The two-year loan will carry an interest rate of Libor plus 8.5 percentage points. (Libor, the London interbank offered rate, is a common short-term lending benchmark.)

First, I say let these companies fail. Oh, I know, it'll be the end of the world! Really? One day after Lehman Brothers went bust Barclays wants to buy them. The financial system won't go poof if these companies fail... but a lot of our elites will be out on the street.

Second, that's exactly what should happen. Here's my suggestion for a bailout law: if your company is SO important that we have to bail you out to avoid a total collapse of the world economy (*cough*), then when we do so the top 1% of all earners go to jail. The CEOs get life sentences, and we can work our way down from there.

Jeremy Walker knows the Galveston area, worked in the Katrina recovery effort, and speculates about the impact of Ike.

There's no real doubt about how fast carbon-13 decays into carbon-12, but if you're going to use radiocarbon dating to estimate the age of dead biological matter than you need to know how much carbon-13 there was in the organism when it died. Apparently the carbon-13 estimates were wrong.

The principal indicator of the amount of organic carbon produced by biological activity traditionally used is the ratio of the less abundant isotope of carbon, 13C, to the more abundant isotope, 12C. As plants preferentially incorporate 12C, during periods of high production of organic material the 13C/12C ratio of carbonate material becomes elevated. Using this principle, the history of organic material has been interpreted by geologists using the 13C/12C ratio of carbonates and organics, wherever these materials can be sampled and dated.

While this idea appears to be sound over the last 150 million years or so, prior to this time there are no open oceanic sediment records which record the 13C/12C ratio, and therefore, geologists are forced to use materials associated with carbonate platforms or epicontinental seas. ...

It appears that records related to carbonate platforms which are often used throughout the early history of the Earth are not good recorders of the 13C/12C ratio in the open oceans. Hence, the work presented suggests that assumptions made previously about changes in the 13C/12C ratios of carbonate sediments in the geological record are incorrect.

"This study is a major step in terms of rethinking how geologists interpret variations in the 13C/12C ratio throughout Earth's history. If the approach does not work over the past 10 million years, then why would it work during older time periods?" said Swart. "As a consequence of our findings, changes in 13C/12C records need to be reevaluated, conclusions regarding changes in the reservoirs of carbon will have to be reassessed, and some of the widely-held ideas regarding the elevation of CO2 during specific periods of the Earth's geological history will have to be adjusted."

Unless I'm misreading the results (I'm no expert in this field) it appears that the new understanding of ancient carbon-13 levels means that much of the biological remains being measured are younger than previously thought.

Tom Spaulding has the best take on the Obama-pigs-lipstick scandal.

Obama poked fun of McCain and Palin's new "change" mantra.

"You can put lipstick on a pig," he said as the crowd cheered. "It's still a pig."

"You can wrap an old fish in a piece of paper called change. It's still gonna stink."

"We've had enough of the same old thing."

... BTW, If McCain had characterized Obama's secretiveness regarding Ayers and Wright as "Trying to get the fried chicken recipe from Colonel Sanders", or described Obama's Marxist environmental programs as "Like watermelons...Green on the outside, Red on the inside", would that be simply using a "turn of the phrase" and would McCain not be attacked by libs?

But I think the McCain camp could have handled this smarter by not asking for an apology. Why not say something like "If Obama wants to call Sarah Palin a pig in lipstick then that's up to him. We don't think that's the kind of change that voters are looking for."

Once she got into it, Sarah Palin's speech was fantastic. She was funny without being catty, and strong without being screechy -- the anti-Hillary. There were several great lines in her speech, particularly the bit about how being a mayor is kinda like being a "community organizer" but with actual responsibilities, and she delivered her lines with confidence and power. I was grinning the whole time.

Hillary must be losing sleep over the possibility of running against Sarah Palin in 2012....

Additionally, Rudy Giuliani set her up brilliantly. His speech was spot-on, and it was evident that he was having a lot of fun with the crowd. Nice job, Rudy. Putting "America's Mayor" on right before Palin was a stroke of genius.

I wrote my concerns about Sarah Palin as McCain's VP candidate earlier, but it's going to take a few weeks for the public to really get a feel for her as a person. Excitement is running high right now, but will the experience issue sink her like it failed to do for Barack Obama? We'll have to wait and see.

I believe that Kleinheider is correct in asserting that the Left doesn't understand the Christian conservative mind and is aggressively playing a losing hand by focusing attention on the unborn child of Palin's unmarried 17-year-old daughter (Bristol).

The Left will fight this battle as a political debate. They will argue that Bristol Palin proves their assertions about traditionalism. They will lay it out point by point. The evidence will be solid. And their case will make sense — in theory.

But this is not theory, and to a certain extent its not even politics, this is life. Steve Schmidt is not wrong when in reaction to the news he says, “Life happens.”

Life does happen. It happens again and again to people in rural America who go to church, work and pray hard. Everyday life happens. Despite their prayers, it happens.

The Left simply misunderstands the Cultural War because they believe that social and religious conservatives think they are perfect people. Rural, working class people know exactly who they are. The Left seems to think that they are somehow breaking the news to social conservatives that sometimes, even often, kids will have sex and get pregnant. Social conservatives know these things. They are not as divorced from reality as they sometimes get painted. ...

Conservatives know they are imperfect. Instead of embracing the imperfection and “giving up” they instead prefer to strive for something better.

The Left essentially "gives up" on morality by refusing to affirm standards that cannot be met. That's a critical difference between Christians and secular people. Rabid secularists crow when they catch a Christian in "hypocrisy" -- that is, failing to live up to the standards we espouse -- but they fail to comprehend that one of the core principles of Christianity is the certainty that we will fail. All of us. Frequently. But rather than doing what secularists do and lowering the bar so we can jump it more easily, we reaffirm the high standards and trust in God to help us leap higher next time.

As for the attitude towards Governor Palin, the early comments on this TalkLeft post asking when she'll drop out are fascinating. TalkLeft is a leftwing site with a primarily leftist readership, yet the first several responses to this post are incredibly supportive of Palin. Here are a few excerpts responding to the question "when will Sarah Palin drop out?":

I'm kinda thinking that she doesn't

I agree: not gonna happen

agreed- she will end up being a net plus

and all of the attacks on her and her family by the left are going to backfire. I am a liberal Dem and I am astonished that anyone is playing the experience card, when we have just nominatd the most inexperieced prez. candidate in 150 years. i can see the commercials alreay.

Right! Because even if Palin has far right views - she is REAL. And there is a HUGE shortage of real in politics today. And she has accomplished things, she has a lovely family - especially with the problems (because every family has problems), and she is strong. Obama isn't strong. He doesn't have passionate views on things. What are his opinions on things? Who knows? (Please don't tell me to go to his website to find out!) Neither does Biden or even McCain have stong opinions. They have been in Washington too long. Palin knows who she is. You may not agree, but she believes - and you have to respect that. Her views are not political, they are her life.

Palin won't ever drop out if Obama keeps this up..

Obama didn'd do himself any favors here.

Obama smiled and said Palin's town of Wasilia, Alaska had 50 employees. His campaign has 2500. The town's budget is about $12 million a year. His budget is 3 times that per month.

This is a level of excess which a seasoned politician, with any common sense, would keep to himself. But Obama sits there, and witlessly touts his CAMPAIGN'S superior manpower and financial prowess in relation to a small TOWN.

This episode of utterly tone-deaf braggadocio will, no doubt, end up in a GOP attack ad. Obama just doesn't get it.

And so on. It's quite amazing. Is the public impression of Palin already solidifying into "new and exciting" rather than "inexperienced token female"? If so, the elites in the media and both parties haven't gotten the memo yet.