tag:blogger.com,1999:blog-9069354713843321730.post762766096831911605..comments2023-10-01T09:22:37.695-07:00Comments on Economists for Obama: Obama on the Treasury ProposalDon Pedrohttp://www.blogger.com/profile/15438565798505041042noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-9069354713843321730.post-651402259292012252008-09-21T23:21:00.000-07:002008-09-21T23:21:00.000-07:00Oh, another long-term cleanup: it's time to stop i...Oh, another long-term cleanup: it's time to stop issuers from buying ratings. Asking the Feds to insure monies or backstop risks based on hired flacks is unacceptable.<BR/><BR/>Issuers would pay a fee to the new "Federal Reserve Investment Bank" if it wanted ratings, for which the FRIB would contract with independent ratings agencies. The agencies would owe their allegiance to, and be subject to quality checks by, the US Govt.Walt Frenchhttps://www.blogger.com/profile/00873789914522579055noreply@blogger.comtag:blogger.com,1999:blog-9069354713843321730.post-13354030891171973242008-09-21T23:15:00.000-07:002008-09-21T23:15:00.000-07:00The call for a "new regulatory environment&qu...The call for a "new regulatory environment" is tone-deaf... a political killer.<BR/><BR/>Innovations in markets help them, not slow them down. And the American public -- especially when they are being asked to put their hard-earned money on the line -- will not tolerate any connection to the govt-sponsored cronyism that the Paulson plan reeks of.<BR/><BR/>Economists for Obama should urge him to take three immediate actions:<BR/><BR/>1. demand that McCain to apologize to the American people for politicizing the current crisis and making it harder for public servants to do their jobs. SEC Commissioner Cox, whose head McCain called for, is merely carrying out the policies that McCain advocated. Bernanke, who McCain said should get out of the bailout business runs an independent agency created for the express purpose of calming banking markets. McCain must be shown to be the uneducated buffoon that he is acting as, and not capture the high ground of responding to Americans' righteous anger at this mess.<BR/><BR/>2. Call for Congress to do its job, even while reminding voters that Paulson has been aching to do this for a while, but waited until things got bad enough that he could put a gun to Congress's heads. Basically, the Administration yet again failed to anticipate needs of the US, but the Congress is NOT the Administration. Paulson should be called an expert tactician and honest servant who needs to be told the priorities of the American people.<BR/><BR/>3. Let the voters know that "urgent" is not a substitute for "vital." America importantly needs long-term reforms that all Americans can celebrate, bjut that John McCain has fought against:<BR/>* Paid-in insurance for all Federal backstops. FDIC insurance is widely understood as a huge success that helps banks operate smoothly, so successful that its costs are very low. (A bit TOO low; the government should only re-insure losses higher than an industry association can't handle, putting the incentive for good risk management on the experts.) Anyway, it'd be a bargain at twice the price and the banks would jump at it.<BR/><BR/>* Cleaned-up disclosure for all entities doing business with the govt. FASB 140 has been gutted but it needs to be strengthened past what FASB recently had shot down. This si the fundamental purpose of SEC's existence. Open, honest, transparent markets make the US marketplace the envy of the world and lower businesses' costs of funds by maybe a half percent vs other less-transparent markets. This fair-dealing will only be opposed by swindlers.<BR/><BR/>* If money funds are to be insured -- and the genie seems out of the bottle -- clients of those funds need full disclosure of all assets, SIVs, conduits, whatever. Not to mention ALL bailouts by parent banks in the past 10 years.<BR/><BR/>* Close down all OTC risk markets -- derivatives, swaps, spreads. This is where lots of the toxic waste is; an open, exchange-like marketplace where all counterparty risks are covered or at least fully disclosed is the only answer. This perfectly parallels the institution of the Fed from banks' issuance of unverifiable banknotes in the 19th century. Create open markets where counterparty risk disappears.<BR/><BR/>* Finally, maybe most importantly, voice the principle of "Let business do what business does best." We owe our current overall well-being to the incentives for innovation and risk-taking that corporations do. That means NO additional red tape; rather enhanced markets from more open disclosure or risks and credit. It means an environment where businesses can take risk, possibly to the point of failing, without jeopardizing others besides the shareholders. (No externalities!) It means that Creative Destruction reigns, not the Financial Terrorism of "Give us your money or you all die!"<BR/><BR/>So the "new regulatory environment" is a modernized framework that provides for markets that don't freeze up due to Akerlof's Lemons and manageable risks (viz Diamond & Dybvig).<BR/><BR/>Now is the time for Obama to carpet-bomb the inept "give the keys to the inmates" actions of the hard-right-wing Bush & McCain deregulation mania. I think a half-hour speech, reminding Americans that the President gets free access to talk to the public but his campaign is buying time to let them know that help is close at hand, would shoot down McCain's lies about lack of specificity and higher taxes while exposing his ineptness.Walt Frenchhttps://www.blogger.com/profile/00873789914522579055noreply@blogger.comtag:blogger.com,1999:blog-9069354713843321730.post-16983759976164665702008-09-21T19:39:00.000-07:002008-09-21T19:39:00.000-07:00"My guess is that the Administration will push for..."My guess is that the Administration will push for a vote very quickly, the Democratic leadership will roll over and agree, the Paulson proposal will pass--with vague promises of action on the points Obama raises--and voters will be pissed."<BR/><BR/>We agree, but you left out the last step:<BR/><BR/>Pissed-off voters either (1) vote Republican or (2) stay home. (See, e.g., 2000, where some of them actually got out of their chairs and cast a "protest" vote for Nader.)<BR/><BR/>Obama, having said the right thing, just lost the election, unless Pelosi is smarter and shrewder than she has been for the past 19 months.<BR/><BR/>This <EM>is</EM> the time to play Chicken, and <A HREF="http://angrybear.blogspot.com/2008/09/solidary-pt-2.html" REL="nofollow">Tom's suggestion</A> about the 39.6% tax rate isn't a bad place to start.Ken Houghtonhttps://www.blogger.com/profile/01440837287933536370noreply@blogger.comtag:blogger.com,1999:blog-9069354713843321730.post-48742875457770758192008-09-21T14:50:00.000-07:002008-09-21T14:50:00.000-07:00Obama makes sense, and he has a concrete plan. We ...Obama makes sense, and he has a concrete plan. We need Obama now, not four months from now. (McCain is more interested in scape-goating Cox to take the heat off his Enron buddy Phil Gramm.)Anonymousnoreply@blogger.com