Bill's Big Diamond Blog

Pesky Honored

OK, Some Good News… Pesky’s Number Retired

After the catastrophic numbers we’ve been hearing about on Wall Street today, here’s one number we can feel good about.  Red Sox stalwart Johnny Pesky’s number was retired on the last day of his team’s 2008 regular season.  At age 89, after 57 years in the game with his beloved team, Pesky saw his number 6 unveiled on the upper deck of Fenway Park Sunday, just above the right field pole named in his honor.  His eyes got a little misty. 

Ours, too.

Swedish Experience Outlined

The 1992 Swedish bank nationalization plan was carried out under a conservative government, with the participation of the center-left opposition.  Sound familiar?

Details of the plan are outlined in a recent International Herald Tribune article.  The plan was credited with bringing back the health of the Swedish economy after a real estate bubble popped and an ad hoc series of patches didn’t make any headway towards a solution:

The tumultuous events of the last few weeks have produced a lot of tight-lipped nods in Stockholm. And for all the differences between Sweden and the United States, Swedish officials say there are lessons to be learned from their own nightmare that Washington may be missing. Lundgren even made the rounds in New York in early September, explaining what the country did in the early 1990s.

A few American commentators have proposed that the U.S. government extract equity from banks as a price for the bailout they are likely to receive, as Sweden did. But it does not seem to be under serious consideration yet in the Bush administration or in Congress.

That's despite the fact that the U.S. government has already swapped its sovereign guarantee for equity in Fannie Mae and Freddie Mac, the mortgage finance institutions, and American International Group, the insurance giant.

Putting taxpayers on the hook without offering anything in return could be a mistake, said Urban Backstrom, a senior Swedish Finance Ministry official at the time. "The public will not support a plan," he said, "if you leave the former shareholders with anything."

UPDATE-  Economist Joseph Stiglitz's Nation article notes the Scandinavian model's success in the 90's.  Perhaps it's time to revisit the options tossed aside when a deal seemed at hand.

John McCain Saves the Day!

Boy, I was just wondering... where was John McCain's excellent intervention today?  Wasn't he going to personally save this thing?

Bailout Fails: Done Deal Undone... Time for Another Approach?

In the wake of the massive Republican sellout on the bailout deal, it will be hard to put the genie back in the bottle.  Democratic leaders crafted legislation that gave the House Republicans what they demanded: no money for housing programs, no bankruptcy changes to allow judges to adjust mortgages, no automatic equity stake for the American people in return for $700 billion, a meaningless insurance program option, and more control by the Treasury than Democrats were comfortable with. 

What did the Democrats get in return?  Being publicly burned on the floor by the overwhelming majority of the GOP.

Maybe it’s possible to get back ten to fifteen votes for a revote shortly.  Compromise further in an effort to bring in those who caused the problem... Or maybe it’s time to do what many economists say makes more sense in the first place:  employ the Swedish Plan.  Here’s how it might work, explained by Brad DeLong:

Nationalization has the best chance of avoiding large losses and possibly even making money for the taxpayer. And it is the best way to deal with the moral hazard problem.

It might work like this. Congress:

-grants the Federal Reserve Board the power to take any financial firm whatsoever with liabilities and capital of more than $25 billion that is not well capitalized into conservatorship

-requires the Federal Reserve Board to liquidate any financial firm in its conservatorship when it judges that the firm is insolvent (paying off in full or not paying off in full the liabilities of the firm at its discretion), unless

-the Federal Reserve Board finds that preservation as a going concern is in the interest of the taxpayer, in which case Congress

-grants the Federal Reserve Board the power to transform equity stakes in the firm into junior preferred stock at par value and then transfer ownership and custody of the firm to the Treasury

-requires the Federal Reserve to terminate conservatorship if the firm becomes well-capitalized once again.

In addition, Congress:

-grants the Treasury the power to issue up to $500 billion of troubled asset redemption bonds, the proceeds of which are then to be loaned to the Federal Reserve to be used to cover the liabilities of those liquidated firms that the Federal Reserve judges it is in the interest of the taxpayer to have their liabilities paid off in full.

Paulson had his shot. It's time for the Democrats to pass a nationalization in the taxpayers' interest bill and dare Bush to veto it. If he does, then announce that the congress will pass it again the day after the election. And if he vetoes it again, announce that congress will pass it yet again on January 21, 2009.

 

 

McCain-Palin and Lobbyists: Perfect Together

The connections between Rick Davis’ lobbying firm, Davis Manafort & Freedman, Inc. and the McCain-Palin campaign are so extensive that the question isn’t whether Davis has cut his ties, but, according to Josh Marshall, “whether McCain-Palin 2008 and Davis Manafort are even distinct organizations.”  In particular,Michael Isikoff in Newsweek and TPM point to 3eDC, an internet company owned by Davis and his lobbyist partner Paul Manafort as a conduit for funds from McCain.  

For a campaign that’s busy throwing around loose talk about their opponent’s connections with lobbyists, the McCain campaign appears to be beholden to lobbyists from the top down.  The web of Davis’ connections to the mortgage industry and other lobbying clients, both foreign and domestic, are coming clearer even as the NY Times is running a major piece today on his boss’ cavalier casino gambling sprees conducted while heading up the Indian Affairs Committee in the Senate, which oversees casino legislation.  

Done Deal

A deal has been reached (again) on Capitol Hill to bailout Wall Street.  This deal apparently won’t include any foreclosure freeze or allow bankruptcy courts to renegotiate mortgage terms for homeowners.  It also omits an earlier agreement to put 20% of any profits that might accrue from loan repayment towards affordable housing programs.  There’s some mention of encouraging renegotiation of mortgages, but it’s not clear how.

Wall Street will get the $700 billion in three traunches, with oversight but little chance that Congress will withhold any money, since a supermajority will be required to do so.  There’s some equity participation.  An insurance program will be encouraged, without funds, largely to give House Republicans a fig leaf for blowing up the previous deal.  Some limits will be placed on pay for financial executives.

It sounds less good than the first deal, if protecting ordinary people was supposed to be an important element of the plan.  Maybe the elements involving mortgage renegotiation will turn out better than they sound, but how often are we surprised in a good way about the details of such things?

The plan as announced leaves this reader aware of the overwhelming possible cost to the taxpayer, which will be left to the next President to decide how to assess.  If the bailout works, it will limit the damage caused by the credit freeze.  If not, the government will have lost any chance of accomplishing positive change, no matter who is President, for the foreseeable future.

There wasn't much choice.  

Let’s hope this works.

Setting the Bar in the Gutter

In puzzling out why undecideds' impression of Obama’s performance in last night’s debate was so much better than my own, I’m struck by an unintended consequence of the McCain campaign of lies and hyperbole.  

Steve M. points this out over at No More Mr. Nice Blog:

Alas for them, the real Obama is a hell of a lot more impressive than his caricature. He's prepared. He's sharp as a tack. He's gracious but persistent. And he's not a secret-Muslim-whitey-hating-flag-non-pledger.

 If you set the bar in the gutter, don't give your opponent a chance to jump over it, because he'll clear it by a mile.

Paul Newman, 1925-2008

Paul Newman has died after a long struggle with cancer.  The Vice-Chairman of the Newman's Own Foundation issued this statement:

"Paul Newman's craft was acting. His passion was racing. His love was his family and friends. And his heart and soul were dedicated to helping make the world a better place for all.

"Paul had an abiding belief in the role that luck plays in one's life, and its randomness. He was quick to acknowledge the good fortune he had in his own life, beginning with being born in America, and was acutely aware of how unlucky so many others were. True to his character, he quietly devoted himself to helping offset this imbalance.

"An exceptional example is the legacy of Newman's Own. What started as something of a joke in the basement of his home, turned into a highly-respected, multi-million dollar a year food company. And true to form, he shared this good fortune by donating all the profits and royalties he earned to thousands of charities around the world, a total which now exceeds $250 million.

"While his philanthropic interests and donations were wide-ranging, he was especially committed to the thousands of children with life-threatening conditions served by the Hole in the Wall Camps, which he helped start over 20 years ago. He saw the Camps as places where kids could escape the fear, pain and isolation of their conditions, kick back, and raise a little hell. Today, there are 11 Camps around the world, with additional programs in Africa and Vietnam. Through the Camps, well over 135,000 children have had the chance to experience what childhood was meant to be.

"In Paul's words: "I wanted to acknowledge luck; the chance and benevolence of it in my life, and the brutality of it in the lives of others, who might not be allowed the good fortune of a lifetime to correct it."

"Paul took advantage of what life offered him, and while personally reluctant to acknowledge that he was doing anything special, he forever changed the lives of many with his generosity, humor, and humanness. His legacy lives on in the charities he supported and the Hole in the Wall Camps, for which he cared so much.

"We will miss our friend Paul Newman, but are lucky ourselves to have known such a remarkable person."

Debate 1: Morning After Roundup

Immediate polling and blogosphere pulse-taking seems to confirm that the debate last night helped Obama.  His numbers are up today and independents polled afterwards thought he’d won.  The optics of the night were his, based on his looking at McCain and finally taking Jim Lehrer up on his invitation to talk to each other.  On substance, Obama appeared not to fulfill McCain’s promise to show him unready.

As crazy as it sounds to a political junkie, some Americans are just now thinking about whether Obama has what it takes— and are seeing a guy who looks essentially sound.  I’m thinking about what James Carville said a few months ago— that in the end, the race would come down to this. 

People are really fed up with the last eight years and would like to change the White House, but they want reassurance that Obama won’t muck things up if they do.  I think that last night’s performance gave that kind of reassurance.  

Personally, I would have liked much more from Obama (events of this week called for getting ticked off, for once), but the baseline for the undecideds was more about an even temperament than about hitting the ball out of the park.

My favorite stops this morning include:

Buck Naked Politics for a roundup of reaction.

Kevin Drum’s ruminations and his live-blog validation for me of how boring I thought they were at times.

Josh Marshall’s polling info and psych 101 post on looking at the other guy.

Debate 1: A Draw, Hence Advantage Obama

I’d say a draw, which in this case goes to Obama.  Staying even isn’t pretty, but it is probably all Obama needed.  The big question tonight was, "Does he have what it takes to step in and run the country?"

It seemed that Obama held his ground and answered that question in the affirmative.