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Wednesday, September 24, 2008

“You should think of that as unthinkable.”

W's deputy press secretary, Tony Fratto, told reporters, when asked what would happen if Congress does not pass some sort of economic bailout of Bear Sterns, AIG, Freddie Mac, Fanny May, and other companies that are failing or contracting this week, “You should think of that as unthinkable.” What an idea! The reasoning of Mr. Fratto presupposes a contradiction -- something that has clearly been thought of is deemed unthinkable.  Funny thing about that is from a contradiction all propositions including other contradictions become provable.

As it turns out, the week is not yet over and a rescue the rich plan has not been agreed to by the Congress, and we come close to the unthinkable not only being thinkable but being a fact.  One of the really troubling things about the efforts of Henry M. Paulson Jr. and Ben S. Bernanke to persuade Congress to approve their bailout plan is their arrogant presumption that their plan is the only workable one.  In fact, insisting, as many Democrats have, that the executives that have driven their companies into this dire situation be stopped from profiting in any way from the bailout, is not a part of their plan but would have no impact on the workability of their plan.But Bush didn't want it.  He thought it would be punitive.  What a dolt!  The American people want these bastards punished and punished good.  Some Congress(wo)men have advocated putting a ceiling of $400,000 per year for CEO's of bailed out companies.  Usually people who fail as they have are simply fired so $400,000, far from being punitive, is generous.

There are other approaches that have as much credibility as W's boys' plan. According to the Washington Post, which sketches three alternatives to the plan of Paulson and Bernanke, Simon Johnson, a former chief economist for the IMF and current MIT professor, drives a stake in the heart of the Administration plan when he claims that the plan P & B have put forward is neither comprehensive nor decisive.  This last concern should trouble everyone.  If this bailout fails to stop the collapse of these companies, then this could mean that we do slide into a national economic crisis affecting us all.  

I have my own solution which is predicated on the most basic principle of free enterprise, the "Upward Percolation Principle" according to which capitol is formed from the profit of the sale to consumers of goods and services.  I just coined this principle but I bet you could find it in some economic text.  

My plan is to provide to mortgage investment companies the funds to cover all mortgage obligations that have not been paid for all homes in foreclosure or headed that way due to the failure of home owners to make a payment or two.  This gives an immediate influx of cash to these companies and makes the home owners "whole."  Then we convert all ARMs (Adjustable Rate Mortgages) to fixed rate mortgages at some reasonable rate close to that which homeowners had once been able to pay. This will provide a continuous influx of money to these failing compaies but will result in another shortfall for them since they depend on rises in rates of ARMs when interest rates rise.  My plan is that the government provide loans to these banks at a rate lower than what they can charge consumers and businesses for new loans.  This is the single bailout they get.  It seems just since we are also bailing out the persons that obtained ARM mortages they cannot pay due to rises in rates.

I, of course, have no idea what I am talking about.  But, does anyone else?  The solution to the current economic crisis may itself be unthinkable.  This is not like a math problem for which a solution is guaranteed if you can only find it.  This is a problem that may have no single solution and we could end up chasing our economic tails for years.  The great irony in all of this is the AIG ads that had children expressing their fears about how their parents are handling their finances which conclude with a smug little brat who announces that his parents are with AIG, that, apparently, being enough said.  I have not seen an AIG ad recently.  I don't expect one.

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3 Comments:

Blogger Chimera said...

The minute I hear anyone say that any idea other than his own is "unthinkable," I tend to think of his idea as being unthinked.

Unthunk?

*grin*

6:09 PM

 
Blogger Le vent fripon said...

At times like this I regret not having taken an economics course in college. It's one of those areas where general knowledge and common sense just don't help much. Maths and philosophy don't seem to carry over very well either...

These are all good reasons why Bush should have absolutely nothing to do with the orchestration of the bailout.

6:53 PM

 
Blogger The Language Guy said...

fripon, I share your regrets about a lack of education in economics. However, based on the work of some of our best economists (surely Enron, WorldCom,....AIG, Freddie Mac, etc. hire the best) I would say that there is less to such an education that meets the eye.

7:18 AM

 

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