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I didn't notice anyone had posted this article
But it makes a couple of points-
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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.
The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.
If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.
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I think you fundamentally misunderstand the situation. The banks are not lending because they have credit concerns about their counterparties - they are worried they may not get their money back. The reason is because they hold toxic debt which is very hard to price. It is not the case that they know how much this stuff is worth, and hope to fleece the markets once again by selling them for more than they are worth. People are not buying them because there is a basic uncertainty as to their value. If the banks have to write off these debts, their balance sheets will be devastated - they will not be able to lend, or to pay back investors and depositors. This is people losing money, unable to run their businesses or pay their debts, and generally causing recession. It is ridiculous to say the curent credit crunch is because the markets expect a bailout. This has been going on for a year, and banks have been falling like ninepins lately - not much or a get-rich-quick scheme if you are a banking boss.
(Basic bank accounting - investors and depostors provide the liabilities to a bank which allows them to invest in assets such as loans or, sometimes, toxic debt. If the assets suffer substantial writedowns, then the banks either have to service those liabilities out of existing capital resources (which are limited) and, if that isn't enough, go bust. Banks have a particular problem in this as they are, by their nature, highly geared - they have very big balance sheets relative to their profits and capital. Banking regulation focusses on trying to make sure they have enough capital so that if the s@&+ hits the fan, they can withstand the writedowns - obviously, it didn't work too well.)
The biggest problem is uncertainty. No one knows how much the debt is really worth. There are no market price cues because the market for such debt is dead. While the bailout as it stood caused massive moral hazard problems, moral hazard has to take a back seat to a catastrophic recession, which is a real risk. Getting back at the bank bosses for their greed and ineptitude is small comfort if you lose your job, your house, and all that goes with it. If the banks cannot lend, either because they are bust or don't have the capital to put at risk, this could lay waste to the world economy for several years. No one knows what might happen - it might not be Armageddon, it could be worse than that.
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Here's some food for thought: If you divided that bailout among every American citizen of age 18 or older, it shakes out to over $250,000 per person.
f*%! the banks. Give us the f*%!ing money.
Actually, not a completely silly idea. That would allow many people to get out of their unsustainable morgage, with would stop the problem at the source.
As nice as this may sound, I really feel like this is a bad idea. The banks still need people to be in debt in order to survive and make money. If we eliminate that, the banks would be in as much or more trouble than they currently are in.
Although it's still nice to dream...
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Sorry to do the point by point thing - it can seem a bit hostile, but it's not intended here.
You are correct that many banks can't know the precise value, but they know that if they sell it on an open market they will get very little for it. Lehman Brothers had about $639 billion in assets, the problem is that much of it was illiquid, and thus, when they fell a few billion short of their obligations, they went bankrupt. $639 billion in assets on paper might only sell for firesale prices on the open market.
To remove the uncertainty the banks need to clear their bad debts off the table, sell what can be sold, and if they must go bankrupt so be it. They have resisted doing this because they want the government to bail them out, which has caused the paralysis and slump in housing. They won't drop prices to sell the bad stuff. Those banks which have failed were in the deepest and couldn't hold out long enough.
The market for these assets is very depressed. While there may be issues with valuation, quite a lot of the stuff might, under more benign economic conditions, be worth more, maybe even a lot more. Prices goup, prices go down, and prices can go back up again. These assets are not generally heavily traded, but generally purchased on a buy-and-hold basis. Selling them into a market paralysed by fear when you expect that you can recover quite large amounts on redemption would not be sensible. Even if your stuff is crap, you don't want to sell it if you can help itsince it may lead to your good stuff getting marked down too. In current market conditions, it is very hard to see what the real value of this stuff is - what it is worth now may be very different to what it is worth in a year. Should you drive banks to the wall today on depressed prices when they might be OK in a year?
I think that you have also pointed at the wrong source for the paralysis in the housing market. That is caused by the real economy, with too many people buying too many homes that they cannot afford, and with over-supply of houses from the building industry and general economic malaise leading to falling house prices. This has fed through to the securities which were created from those mortgages, and this has caused a drop in their holding values on the banks' balance sheets. They have since suffered write-offs but, more pertinently, the erosion of the value of their assets has led to other banks questioning whether the money they lend each other in short term funding will be paid back. This has led to a drying up of the interbank money markets, liquidity problems where banks were more heavily exposed to the interbank markets for short term funds, and subsequent bank failures. Hence, the credit problems have run into liquidity problems, and nothing will kill a bank quicker than the loss of its funding.
But to say that the banks have been holding out because of the possibility of rescue is, in my view, unrealistic. They have been holding out because the alternatives are deeply unappealing, and this has been going on much longer that the sudden appearance of the bailouts over the last few weeks.
You mention, "they won't be able to lend, and they won't be able to pay back investors or depositors".
It is true they won't be able to lend, and they shouldn't lend, they made bad loans, and those lenders who make bad loans should fail and get out of the lending business, to make room for lenders that know what they are doing.
There is an argument for that. However, banks carry out a very vital service - they convert short term savings into long term loans (or they should - some of the investment banks have been doing other stuff). It doesn't take a huge proportion of a bank's balance sheet to go bad before it is bust because banks are, by their nature, highly geared. You will be wiping out good lending as well as bad, putting up the price for others (on grounds of both increased risk and lack of competition) and fewer loans all round. It might sound cathartic, and in moderation it might be. But the scale of the problem at the moment suggests that it might be less catharsis and more bloodbath.
It is true they won't be able to pay back investors or depositors. The investors will have to lose money on their investment, and depostiors are already backed up by the FDIC up to $100,000. Investors made a bad investment, why should taxpayers bail them out? Taxpayers are already going to bail out the depositors even if nothing passes.
Investors should get wiped out - that's the risk they take. Depositors get a free ride, only they don't really because the FDIC could easily be overwhelmed by the scale of the bust and the taxpayer still picks up the bill.
We already have a recession, the recession actually serves a purpose, it wipes out the people that caused many of these problems, by making them lose money on their bad loans and bad investments. Once that is cleared away, we can recover.
Again, it's a question of degree. How far low would you be prepared to go? It is possible to fall into deflationary spirals which wreak havoc and do no one too many favours. The authorities are terrified of something like Japan in the 1990s, when nothing was done about the banks and Japan suffered a lost decade from which they have still not really recovered. It wasn't a quick blip, but destruction of value on a massive scale that lasted years and had appalling consequences. And tax payers still got ripped off in the end.
Interesting statistic: the bailout it scheduled to cost, at most $700bn, of which some recoveries can probably be made to reduce the cost from realising the assets purchased. When the House voted it down, it wiped $1,600bn off the price of shares in a day. How much of that do you think was borne by American taxpayers, either directly or indirectly through their pensions and savings? More than $700bn, I suspect.
I oppose the bailout not because I want to get back at bank bosses. The bank bosses squandered a lot of their money and investor money, and now they want to do it again with a few rounds of taxpayer money. They have demonstrated they don't know what they are doing, so the last thing we should do is give them more money to do it again.
I don't deny the moral hazard angle - it is alive and well (though you seem happy for depositors who put their money with shaky banks to get a bailout through the FIDC scheme, which is also moral hazard) and stinks a lot. But the issue isn't black and white. There is a genuine risk of a serious depression happening in the US, and the world at large by implication. You imply that there will be a brief lull and then things will just get better, and it might, but it might also get a lot, lot worse. The government would be reckless and in dereliction of its duty if it crossed its fingers and hoped for the best. The Japanese tried that. It didn't work.
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Aubrey, would you answer a silly question of mine?
Are banks any different that other businesses in regard to write-downs? My understanding is that a write-down is irreversible. I would assume banks are no different but I think you would know more certainly that I would.
Thanks
Well, no writedown is irreversible. Under accounting rules you are supposed to carry an asset at what you think it is worth, and if you think it is worth less than you paid for it you take a writedown. But if it turns out (normally through subsequent sale) that it was worth more than you thought, you write that value back as a "write-up". But there are other accounting rules to stop you manipulating your balance sheet and P&L by writing assets up and down as you want, and the auditors are supposed to check to see that the value you have is reasonable and backed up.
Part of the problem with the dud assets on the banks' balance sheets is the auditors can't do that easily, as market prices (the normal arbiter of value for a financial asset) are few and far between, and some are fiendishly complex to understand and value using a model. The banks don't want to write down their assets to current, depressed market prices, so they are terrified of anyone selling or, particularly, someone going bankrupt and having their assets liquidated at fire sale prices, as this could give the auditors an (unwelcome) market price clue as to the value of the stuff on other bank's balance sheets.
I don't know if anyone pointed this out, but the lack of funding from the congress isn't really stopping the fed from having an effect.
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I don't know if anyone pointed this out, but the lack of funding from the congress isn't really stopping the fed from having an effect.
That's true. But what the Fed is doing is providing short term liquidity to banks, because the banks are not lending to each other. What it isn't doing is cleaning up the banks' balance sheets by getting rid of the toxic assets. It is treating the symptoms of the disease, but not the cause. The bailout targeted the assets, and was an attempt to treat the cause.
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Here's some food for thought: If you divided that bailout among every American citizen of age 18 or older, it shakes out to over $250,000 per person.
f*%! the banks. Give us the f*%!ing money.
Actually, not a completely silly idea. That would allow many people to get out of their unsustainable morgage, with would stop the problem at the source.As nice as this may sound, I really feel like this is a bad idea. The banks still need people to be in debt in order to survive and make money. If we eliminate that, the banks would be in as much or more trouble than they currently are in.
Although it's still nice to dream...
Actually, it might help the banks since they would get their money back and be able to repair their balance sheets, but only if their customers used it to reduce their debt. Of course, it might also cause hyperinflation, very high interest rates and cause the dollar to collapse, and screw the economy that way. Not to mention that the money will have to be repaid in taxes one day.
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My (probably flawed) understanding was that an item is recorded at historical cost and kept that way except for depreciation or impairment of value. If it were sold then the asset would be removed from the balance sheet and the profit would be recognized as "gain on sale of asset".
Would you call this an instance where assets had their value seriously impaired?
With financial assets, you can record them in three different ways (if you are in the US, this is probably FAS 133, and in IAS probably IAS 39, but don't quote me):
- hold to maturity (= historical cost + impairment, but this assumes you will buy and hold until they redeem and never sell them in the interim)
- available for sale (= mark to market, with the profit or loss on the securities going through reserves rather than P&L, which assumes you will hold them for an extended period, but does allow some selling)
- mark to market (with profits going through the P&L, which assumes you may sell them in the near future)
It is hard to say how these assets are being accounted for - probably a mixture of all three.
For accounting purposes, the mark to market approach allows you to recognise losses and gains on an asset as they arise, but it is an approach which is only used for financial assets (since it doesn't make much sense for a machine tool, for example, and financial assets are much more freely traded). It is very difficult to mark to market these assets, as pointed out above, because no one really knows what they are worth and the markets for trading them are in paralysis.
And it is similarly very hard to work out what the impairment might be on the hold to maturity assets. So yes, these assets are very impaired, but no one quite knows by how much.
I'm actually not that close to accounting rules, as I passed my exams years ago and haven't really worked in accounting since, so don't assume I'm an authority.
Found this tidbit...
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The Russel Crowe Economic Recovery model: Give every American a million dollars and let them spend their way out of the three hundred thousand billion dollar Economic holocaust.
He's a genius.
How about this: The USA sells its territorial share of the Planet Mars to Japan and the assorted other nations it owes money. The Planet Mars is approximately worth 20 billion billion terraformed.
US share of a Terraformed Mars = 1 billion billion dollars.
Divesting itself of any territorial claim what so ever over Mars requires the surrender of all US Coal reserves and Space technology (both are critical for terraforming Mars) and no US citizen may ever go to Mars. In return the USA is freed of all debts and can function as a closed economy isolated from the rest of the world.
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Economic Holocaust? excuse me?The Russel Crowe Economic Recovery model: Give every American a million dollars and let them spend their way out of the three hundred thousand billion dollar Economic holocaust.
He's a genius.
It would be an Economic Holocaust if the 700 billion were to blow out to 300 thousand billion just so every american could have a million dollars.
Say it with me: Economic Holocaust
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Well, okay, banks are holding out because the alternative is bankruptcy. They are holding out for anything that will save them, whether it be a bailout or the market turning around. I am just saying, from their point of view, a bailout is far more realistic for them then the market turning around.
But we are currently caught in a spiral downwards. We agree an oversupply of housing has led to falling demand, and falling prices. As prices fall more people go underwater in their mortgage, default, and get foreclosed. This in turn puts more empty homes on the market, which pushes down prices further, and causes more people to go underwater.
This downward spiral is going to keep going and going. How do we get out of this trap?
The answer is for prices to hit the point where supply and demand meet, then we will have stability in the markets. This is where the market is driving prices to be, to a stable price point. The bad news is that stable price is lower than what prices are now.
The bailout will give banks money and let them offload their junk. The junk isn't going to be taken care of, empty houses will decay. If prices aren't cut to get rid of them, they might never sell, becoming stripped empty shells. The government isn't going to be able to sell stripped empty shells at a profit.
The bailout won't accomplish a turnaround in the market, and it won't allow the government to turn around and sell this stuff in a year, or two years or three. It will prevent prices from coming down, as banks and government sit on these properties at unrealistic prices.
When prices won't come down, then you get a prolonged recession/depression. Those with money won't buy, and those with something to sell can't sell.
Unfortunately, history suggests you might be wrong. When the Swedes had a banking crisis in the late 80's they created a "bad bank" to take on the dodgy loans, not at all dissimilar to the bailout proposed. And it worked quite well. I don't see the Swedish economy staggering form crisis to crisis, in fact it has doen pretty well since.
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Ok, first no, we don't need a bloodbath! The solution for the drunk becoming sober is not more alcohol. The solution for the heroin addict going into withdrawal is not more heroin. The solution for the insomniac falling asleep is not to wake him up and give him coffee.
This crisis was caused by too much easy credit. The solution is not too make more easy credit available.
Will some good lenders be hurt with the bad? Yes they will. Everyone will be. Will good lenders survive though? Yes they will. Will credit still be available? Yes it will. If a business can only survive on easy credit, then it isn't a stable business and could go under easily.
There is a second way of doing business. That would be funding business growth through savings. Saving, not borrowing. If many of the credit spigots are shut off as the economy descends further into recession this will force business to rely on saving money from profits to improve and grow their business.
This is a good thing.
Reduce the whole economy to your personal household budget. If you find yourself maxed out on credit cards and spending more money than you take in, how do you solve your problem? By cutting your spending, tightening your belt, paying off your debts, and saving your earnings.
That is what the economy needs to do. Not go on another wild $700 billion dollar spending and borrowing spree.
Contrary to conventional wisdom, Japan's government did not "do nothing" in the 1990s. If it had it would have recovered much faster. The government lowered interest rates to 0, they were throwing out credit to any who would have it. They let banks sit on unproductive loans that would never be paid back, causing paralysis as I described in other posts. The free credit got to the point no bank would take it, they had already taken on too much risk and didn't want to lend out any more money. Those unproductive loans on the books made it impossible to make new productive loans.
In other words, Japan's decade plus economic decline was caused by the exact same thing Paulson and the White House are pushing. It was fortunate the average Japanese individual was a big saver, we don't even have that in the US. If they had made the banks book their losses, some would have gone under, but then they would have started the recovery in the 1990s, instead of waiting over 10+ years.
Let's not make Japan's mistake. Let's stop borrowing, and start saving. The banks will have to do without, and let the market kill off those banks which are in over their head.
Lastly, don't believe them when they say this $700 billion is the last time. The banks will come back for more. Between Fannie Mae, Freddie Mac, AIG, the FDIC bailouts, we are on the hook for $1 trillion before this bailout.
As for the stock market drop, that $1.6 trillion wiped out on Monday hit the people who had made the investments and taken on the risk. 54% of Americans have money in the stock market. 46% don't. Those 46%, which are more likely to be poor, should not have to carry the burden of another $700 billion just to try and save some 401Ks.
Strictly, the Japanese did not prop up the banks, though they did let them pretend they were healthier than they were. However, everyone actually knew the truth and so didn't lend to them. The zombie banks were kept alive and the Japanese tried to prop up the market and the economy with big public works spending, which didn't really work. I'm nopt sure how what you are propoising is very different from what the Japanese actually did. Sure, they dropped interest rates to 0% eventually, and Bernanke has also reduced interest rates. But many banks would stagger on like Japanese zombies in a recession, maybe with the odd one collapsing to cause a panic from time to time. Unless you are proposing a mass shut-down of the banking industry, I'm not sure what else you have in mind. There are certainly differences between the US economy and the Japanese, but the point remains that sitting around and doing nothing is not necessarily a good option.
I should point out that the point I am making is that there is a risk of a serious depression. Not that it will happen, but that it might have a good chance of becoming reality. Banking crises always cost the economy a fortune, even if you ignore them, through lost tax receipts if nothing else. $7000bn might not be the final bill, it's true. But the point is that that isn't being handed out as a gift, it is being used to buy assets. The Swedish bad bank actually did pretty well in disposing of the assets it held and getting decent value for them. I have no figures, I'm afraid, but it is generall acknowledged as being one of the better bail-out schemes.
Also, the point about $1,600bn is less that shareholders need bailing out too (they don't) but that by trying to save $700bn taxpayers lost more in a day than they might if the bailout was being implemented (and badly). Trying to save the taxpayer in this instance would appear to have been ineffective (though I also accept that that is not the crux of your argument).
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It is government action, in propping up failing businesses and prices which are trying to fall, that causes a lasting depression.
This is what Japan did in the 1990s, prop up banks which should have failed.
This bailout can help cause a depression, it can't prevent it. The best it might do is keep bad banks going a few more years, at the cost of wiping out people's savings through inflation and a then greater crash later on.
As for the FDIC, it would be completely unnecessary to have an FDIC if we got rid of fractional reserve banking, which I have consistently said we need to get rid of, as it is the ultimate cause of this crisis.
I get the general gist of what you are saying, and you are right as far as it goes. You are certainly correct in spotting the causes of the current problem, and what the eventual solution will be. But the risk of a deflationary spiral is real, and as the Japanese found out that actually renders the central bank impotent. I think it is pretty clear that regulation will tighten up a lot, and while I am sceptical of the value of regulation (or, more specificially, regulators) I imagine that any excessive exuberance will be curbed for a long, long time. I'm not pretending I'm right and you are wrong - what you suggest may well work, but I think it is risky.
I get the general gist of what you are saying, and you are right as far as it goes. You are certainly correct in spotting the causes of the current problem, and what the eventual solution will be. But the risk of a deflationary spiral is real, and as the Japanese found out that actually renders the central bank impotent. I think it is pretty clear that regulation will tighten up a lot, and while I am sceptical of the value of regulation (or, more specificially, regulators) I imagine that any excessive exuberance will be curbed for a long, long time. I'm not pretending I'm right and you are wrong - what you suggest may well work, but I think it is risky.
So if I understand what you are saying (which is by no means guaranteed), part of the purpose of the $700 "bailout" is to allow a controlled crash - to hopefully avoid a complete catastrophe.
Weak institutions are still likely to fail, causing lots of economic problems in the process. But hopefully they won't take everyone else down with them.
Here's some food for thought: If you divided that bailout among every American citizen of age 18 or older, it shakes out to over $250,000 per person.
f&*% the banks. Give us the f&*%ing money.
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Four in every million...
Four thousand in every billion...
Forty thousand in every ten billion...
Four hundred thousand in every hundred billion.
Four hundred thousand times seven is two million eight hundred thousand.
There's what, three hundred million of you guys?
My thumbnail estimate says its more like $2800/adult (if you eliminate about 50,000,000 kids). That's still a lot of money, and I suspect many of you could put it to better use. :)
My thumbnail estimate says its more like $2800/adult (if you eliminate about 50,000,000 kids). That's still a lot of money, and I suspect many of you could put it to better use. :)
Well, let's do the math. Say you're underestimating each taxpayer's share by a factor of 4 (closer to $11K/person). Also pretend for a minute that a few $700G buyouts can stave off a depression (no guarantees that there will be one, or that if so it could be prevented, but we have to play the odds). Full-blown depression -> lower wages and up to 25% unemployment (no credit for businesses = mass layoffs).
Now compare that $11,000 to 1/4 of your current salary, every year for as long as you'd be potentially out of work (how long did the great depression last?). Hopefully you wouldn't be that 1 in 4. But say you and 3 buddies make $40K each. Bailout = $45K for you guys' share, per big bailout. Loss of one guy's wages = $40K per year. Which is cheaper? Depends on how many buyouts, and how long a depression would last, and so on. If one big bailout prevents a 2-year downturn, you and your 3 buddies have saved $35,000.
It's not a question of "worth it," it's a question of how important it is to hedge your bets, or whether you're willing to play long shots, and risk losing big if they don't pay off.
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Citibank bought WAMU and its huge debt and is taking a gamble it will pay off. The CEO of Citibank said "Now is the time to take big risks for big rewards."
Umm. Isn't that what got us in this mess?
I say we let these guys retire to their own private luxury estates... in Leavenworth Federal Prison.
First of all, JPMorgan/Chase bought WaMu. Citibank bought Wachovia.
Regardless, there is still a whole lot of "good" debt in those buyouts. Buying bulk packages like this is a lot more complicated than simply "taking risks" on a per loan basis. While there is definitely going to be some risk involved in these situations, the entire transaction really isn't a big risk. Things will just be tight for them for a while until things cool down.
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So if I understand what you are saying (which is by no means guaranteed), part of the purpose of the $700 "bailout" is to allow a controlled crash - to hopefully avoid a complete catastrophe.
Weak institutions are still likely to fail, causing lots of economic problems in the process. But hopefully they won't take everyone else down with them.
Basically, yes. It will be bad no matter what happens. The issue is now "How bad?".
So what these articles are saying is that these financial disasters have happened before and we were , to dumb not to do it again?
Dumb, arrogant, corrupt, lazy, politicized, zealous, all of the above... Take your pick.
So what these articles are saying is that these financial disasters have happened before and we were , to dumb not to do it again?Dumb, arrogant, corrupt, lazy, politicized, zealous, all of the above... Take your pick.
I prefer the theory proffered by Lewis Black: economists are trying to keep us ignorant about how the economy really works.
"I took an economics course, but it was taught at 8:00 in the morning. You can't learn anything out of one blood-shot eye. So I went up to the professor and asked, 'Are you trying to keep this **** a secret?!?'"
Basically, yes. It will be bad no matter what happens. The issue is now "How bad?".So if I understand what you are saying (which is by no means guaranteed), part of the purpose of the $700 "bailout" is to allow a controlled crash - to hopefully avoid a complete catastrophe.
Weak institutions are still likely to fail, causing lots of economic problems in the process. But hopefully they won't take everyone else down with them.
Then I have a question.
If this legislation was so vital to the US Economy, why did it need 96 pages worth of Pork Lard added to it?
I almost feel like I am seeing a pattern here. Get everybody panicked, pass the Patriot Act. Get everybody panicked, invade Iraq. Get everybody panicked, pass the Bailout Bill....hmm...
Except this time they didn't get enough people panicked. It took another $150 billion in special pet projects (pork) to get the bill passed through Congress.
Well, if they didn't have to work harder the third go around, we'd really be a nation of dopes...
Basically, yes. It will be bad no matter what happens. The issue is now "How bad?".So if I understand what you are saying (which is by no means guaranteed), part of the purpose of the $700 "bailout" is to allow a controlled crash - to hopefully avoid a complete catastrophe.
Weak institutions are still likely to fail, causing lots of economic problems in the process. But hopefully they won't take everyone else down with them.
Then I have a question.
If this legislation was so vital to the US Economy, why did it need 96 pages worth of Pork Lard added to it?
Nothing gets passed in congress without pork.
Nothing gets passed in congress without pork.Basically, yes. It will be bad no matter what happens. The issue is now "How bad?".So if I understand what you are saying (which is by no means guaranteed), part of the purpose of the $700 "bailout" is to allow a controlled crash - to hopefully avoid a complete catastrophe.
Weak institutions are still likely to fail, causing lots of economic problems in the process. But hopefully they won't take everyone else down with them.
Then I have a question.
If this legislation was so vital to the US Economy, why did it need 96 pages worth of Pork Lard added to it?
In other words (while it would not have mattered for this bill), is the Line Item Veto. With it, a good President could actually try to break Congress's addiction to PORK.
(I realize the nothing can actually stop "earmarks," but . . . as I said, a good President might have a shot at getting the problem under control.)
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Contributor, RPG Superstar 2008 Top 6
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In other words (while it would not have mattered for this bill), is the Line Item Veto. With it, a good President could actually try to break Congress's addiction to PORK.
(I realize the nothing can actually stop "earmarks," but . . . as I said, a good President might have a shot at getting the problem under control.)
Earmarks are a drop in the bucket, pretty much literally. About half of a percent of the typical yearly budget. Many of them are for useful programs. Fix areas were there is meaningful waste first - optimizing 0.5% isn't worth the effort. Very much against the line item veto, mainly because of how a sociopath like Bush would have used it.
Note that not all (or even most) of the 150 billion was pork, which is aimed at a particular district or area.
Seriously, that earmarks even came up in the debate only shows how both candidates have agreed to make this election a debate over trivial, meaningless issues. What will bankrupt the US government are Medicare, the Pentagon, and Social Security, probably in that order. At this point, US government bankruptcy is inevitable even if it will take a decade or two.
Earmarks are a drop in the bucket, pretty much literally. About half of a percent of the typical yearly budget. Many of them are for useful programs. Fix areas were there is meaningful waste first - optimizing 0.5% isn't worth the effort. Very much against the line item veto, mainly because of how a sociopath like Bush would have used it.
Actually, this pork laiden bailout of the irresponsible, over-paid Wall Street bankers (who none-the-less made sure to keep up their payments to their congresspeople) is larger then the current Pentagon budget.
(Yes, I am angry. Earlier I might have bought that this was an urgent economic emergency, but with 94 pages of LARD I am finding hard to stomach.)
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I know my representatives in the house voted no on the bill, and they support the fair tax, so they are going to get my votes to stay in office. I know that neither of my senators support the fair tax though and as soon as I find out if they voted yes for this bill, I'll vote them out as well. If they voted no I'll see how they voted on other issues important to me before I make my decision.
Either way I am actually happy with my representatives and dissapointed in my senators, although until we get the fair tax pushed through I'll admit that being able to write off my sales tax and homeonwners tax is nice. Still that isn't enough of a reason for me to support people who vote for things I don't agree with.