Follow this link to HotAir and watch Norah O'Donnell debate Liz Cheney (Dick Cheney's daughter) about interrogation techniques. It really encapsulates most of the arguments on both sides. Liz Cheney provides one of the best and most complete arguments for our enhanced interrogation program after 9/11 that I've heard in years.
While you're there, be sure to follow Allahpundit's link to HotAir archives from 2006 which has audio of Bill Clinton scoffing at the idea that you wouldn't have 100% agreement that it would be OK to rough a guy up a little if an attack was imminent and we had someone in custody who knew the details and wouldn't talk, and that was the only way to get the information out of him and prevent the attack.
Note that this is before the liberals (and McCain) got going with their argument that "torture" does not work and/or does not produce reliable information.
The only difference I can see between Bill Clinton's described scenario and what the Bush administration was faced with was Clinton did specify in his definiton of "imminent" that we knew an attack was going down within 3 days. The problem with Clinton's definition is that it is very difficult to guage how "imminent" an attack is before the high-value terrorist detainee talks. It is reported that when they tried to interrogate Khalid Sheikh Mohammed and asked him if any further attackes were planned, he said something to the effect of "You will soon find out." In that situation, the responsible course of action for our national security apparatus to take is to assume that an attack is imminent. There could have been another attack within days or weeks, or it could have been months or even year(s) away. We did not know, but we knew we had someone in Khalid Sheikh Mohammed who did. Anyone who says they would not aggressively interrogate in this scenario to obtain the information necessary to protect Americans from another attack has no business being in charge of our national security. And any country who acts like they wouldn't have done at least as much as we did in an identical scenario is lying.
Sunday, April 26, 2009
Sunday, April 5, 2009
Obama refuses repayment of TARP money
If this doesn't send shivers down your spine, it should. I was really worried about how Obama would handle the increased government power that Bush was forced to hand over to Obama after Bush's response to the financial crisis last fall with TARP, and this is a NOT a good sign. It's starting to smell like socialism, or if not, at least WAY to much government intrusion into the private sector.
Obama is fanning the flames of panic and public outrage to build the case for government power to regulate Excecutive pay. Then he is trying to tell Michigan what type of autos to build, and threatening bank CEO's in an attempt to exert power over the financial industry. Now he won't let banks who were forced by Paulson to take TARP money to repay it, because he doesn't want to lose his power over the bank!
If we let him takover his favorite 3 industries -- health care, education, and energy -- what will be left of the economy that isn't larglely controlled by government?
If a pollster called me today, I would definitely say the country is headed in the wrong direction.
Obama is fanning the flames of panic and public outrage to build the case for government power to regulate Excecutive pay. Then he is trying to tell Michigan what type of autos to build, and threatening bank CEO's in an attempt to exert power over the financial industry. Now he won't let banks who were forced by Paulson to take TARP money to repay it, because he doesn't want to lose his power over the bank!
If we let him takover his favorite 3 industries -- health care, education, and energy -- what will be left of the economy that isn't larglely controlled by government?
If a pollster called me today, I would definitely say the country is headed in the wrong direction.
Friday, April 3, 2009
Gun Statistic Is A Flat Out Lie
HotAir highlights a Fox News report debunking a widely-cited statistic that 90% of all guns recovered at crime scenes and raids on drug cartels in Mexico are from the U.S. The statistic makes it sound like the U.S. is the overwhelming supplier of firearms to Mexican drug cartels. Supposedly, they just come up into some of the border states, buy a bunch of guns, and then drive them back to Mexico.
The problem is that the statistic, when stated this way, is flat out false. Fox News did some digging and found that Mexico's own numbers show that only 17% of such firearms are traced to the U.S.
Because of gun regulations in the U.S., guns manufactured in the U.S. have good markings that make the guns traceable. Mexico submits about 1/3 of the guns they find, the ones that have good markings, to the U.S. to see if they can be traced. About half of these guns are successfully traced, and it is of that subset, the ones that Mexico has pre-screened to be most likely to be from the U.S., that 90% are traced to the U.S. This proves nothing more than that the U.S. originated guns are more easily traced than the other 83% that came from black markets around the world, which is a good thing. It allows for more effective efforts to stem the flow from the U.S.
So you have quite a stark difference between the lie, "90% of the guns recovered by Mexico in drug cartel busts are from the U.S.," and the truth, "only 17% of the guns recovered can be traced back to the U.S."
Be wary when you hear statistics bandied about, even by politicians where you would think, "They wouldn't say that unless there was a strong element of truth to it, right?" You think that they wouldn't dare to say something so blatantly false that could be so easily disproved. But the media, save Fox News and some bloggers, does not do its job in this country, and so the politicians can get away with it, and so they will keep repeated outrageously misleading statistics.
The problem is that the statistic, when stated this way, is flat out false. Fox News did some digging and found that Mexico's own numbers show that only 17% of such firearms are traced to the U.S.
Because of gun regulations in the U.S., guns manufactured in the U.S. have good markings that make the guns traceable. Mexico submits about 1/3 of the guns they find, the ones that have good markings, to the U.S. to see if they can be traced. About half of these guns are successfully traced, and it is of that subset, the ones that Mexico has pre-screened to be most likely to be from the U.S., that 90% are traced to the U.S. This proves nothing more than that the U.S. originated guns are more easily traced than the other 83% that came from black markets around the world, which is a good thing. It allows for more effective efforts to stem the flow from the U.S.
So you have quite a stark difference between the lie, "90% of the guns recovered by Mexico in drug cartel busts are from the U.S.," and the truth, "only 17% of the guns recovered can be traced back to the U.S."
Be wary when you hear statistics bandied about, even by politicians where you would think, "They wouldn't say that unless there was a strong element of truth to it, right?" You think that they wouldn't dare to say something so blatantly false that could be so easily disproved. But the media, save Fox News and some bloggers, does not do its job in this country, and so the politicians can get away with it, and so they will keep repeated outrageously misleading statistics.
Sunday, March 29, 2009
The Economist Has Buyer's Remorse
After endorsing Obama during the campaign, The Economist is the latest in in a string of people that have become disenchanted with Obama.
Ed Morrissey at HotAir has the details and analysis.
Ed Morrissey at HotAir has the details and analysis.
Friday, March 27, 2009
AP: The White House Fudges Stimulus Estimates
The AP actually wrote some good analysis explaining how Obama's "Bold Claims of Stimulus Jobs Can't Be Measured"
Some of my favorite assumptions behind the White House's estimate of 3.5 millions jobs being saved or created:
What planet are these people living on?!
Some of my favorite assumptions behind the White House's estimate of 3.5 millions jobs being saved or created:
For every two jobs directly created by the stimulus spending, a third job will be indirectly created. The 2-to-1 ratio is rough and varies considerably by sector. A tax cut has only one-quarter of the value of a spending increase of the same size, in terms of expanding the economy. Every dollar spent on unemployment benefits is worth $1.63 of quick economic expansion. Food stamps boost the economy even more.
What planet are these people living on?!
AIG Losing Executives
If you want a completely new perspective on the AIG bonuses, try reading Jake DeSantis' Resignation Letter.
(or click on the first result from this Google Search if you are not a resgistered member of NYTimes.com)
Follow that up with news of more AIG employees jumping ship.
This is exactly what I predicted would happen back on March 21st:
(or click on the first result from this Google Search if you are not a resgistered member of NYTimes.com)
Follow that up with news of more AIG employees jumping ship.
This is exactly what I predicted would happen back on March 21st:
Second, AIG needs to be able to retain its valuable employees. It is simply not fair to blame the entire Financial division at AIG for the decisions a few executives likely made. My understanding is that most all of the executives that were most responsible for misjudging risk and overselling their financial products have been let go. You simply cannot lose all the employees in a division of a company and expect the company to be able to continue to function well, and we REALLY need AIG to be able to continue to function, at least for now. How well would the company you work at function if 80% of the employees left all at once? When AIG started to realize how bad of shape all the investment banks were in, and that they themselves were headed for insolvency as a result, they were afraid many of their employees would leave the company. How many employees would stay at the company and have their reputations sullied by their continued association with AIG if they were not promised additional compensation in return? In early 2008, AIG offered retention bonuses to anyone who would stay until March 2009, and more bonuses for those who would stay until 2010. We just hit the round of bonuses that were due on March 15, 2009, and the bonuses were paid as promised. It is important to realize that the bonuses were NOT performance bonuses, they were retention bonuses. These valued employees that may have had little if any responsibility for the financial crisis were promised bonuses if they would stay on at AIG. They fulfilled their part of the contract, and their contracts should be honored. It is VERY DANGEROUS to go down the road of breaking contracts. Government is supposed to help enforce voluntary contracts, not force companies to break them.
Discussion: Government Taking Over?
Here's a good discussion that got going on one of my friend's Facebook page:
Kyle Miller's Notes
"The Way I See It" - #35
Tue 3/24/09 8:12am
U.S. seeks expanded power to seize firms (http://www.msnbc.msn.com/id/29847658)
Is anyone paying attention out there????? Does this latest "political move" scare anyone else? Where will it end??
This article tries to portray the government as "protecting" the interests of the American people by "managing" financial institutions to keep them solvent. Don't let the wool be pulled over your eyes! This is nothing more than a move to control our financial system from Washington and set up a Nationalized Banking system so the GOVERNMENT controls our banking infrastructure.
The sub-title of this article even states this gross understatement claiming, "Goal is to limit risk to broader economy". What a crock!!
Is that along the same lines as "Gun control goal is to limit firearms in the hands of criminals"??? Yeah, like that's worked really well.
This is typical of a liberal regime. The American people are too stupid to handle their own business so we, the smart, intellectual, educated, responsible government lackies will step in and remove the knife from the stupid kid in the room. COME ON PEOPLE!!!!!
If the government starts controlling our banks - our economy will most certainly take a nose dive. Anyone else care to notice what happened to the DOW today when this news came out? Yeah...like whenever Obama speaks...it took a dive. When just yesterday, all the liberal drive by media types were trying to give Obama the credit for a 7% increase in the DOW! When did Bush ever get recognition for the DOW going up??? No, the only news we ever heard when the DOW went up was how the rich fat cat oil companies were supposedly lining their already silk pockets. But when the DOW goes up under the almighty Obama regime, it's because it's a victory for Obama and his policies.
Wave bye-bye to competitive rates for loans! Wave bye-bye to banks investing in their local communities. Bye-bye capitalism! It was great to have you here, but you threaten a tyrannical leaders control over a nation, so you must go. You will be missed, but we won't be allowed to mourn your absence, because we'll be told that socialism is now "Modern" European Socialism and that it's for our best interest.
WAKE UP PEOPLE!!!!!!!!!!!
Kyle Miller at 8:20am March 24
And again...there's apparently no time for discussion or review of this policy. Just like the $800 Billion bailout plan it HAS to be done NOW or else...I fear this is becoming an all too common theme with the Obama regime to force feed liberal agenda's down the throat of the American people. They're supposedly voting on this measure THIS WEEK! So EVERYONE needs to call their representatives and tell them to VOTE NO on this unprecedented government control.
Tobias Wilson at 12:49pm March 24
Hello Socialism.... i hope that at least one reporter at the primetime news conference will ask the president "isn't your plan too much like socialism!"
Kyle Miller at 1:22pm March 24
They might try...but if you remember back to the election process, we're not allowed to ask that question because the WORLD is socialist now, and we should be more like "Modern Europe". I don't want to be more like Europe, and the questions from the right will continue to be ignored because this President feels he has won political equity because the majority (all be it a majority by a small margin) of the American people voted him President.
Toby Bierly at 2:17am March 25
Treasury Secretary Geithner is still trying to work out details for the proposal -- as far as I know, it hasn't been presented to Congress at all yet. An initial proposal could be sent to Congress later this week. I think this is prompted more than anything by the failure of Lehman Brothers last year, and underscored with the recent furor over AIG bonuses. I think most people who have studied the issue carefully would agree that letting Lehman Brothers fail the way it did greatly destabilized the financial markets. That said, I do not really trust the Treasury department to know the right action to take. Any such proposal MUST be very carefullly thought out and fully deliberated, and there should be clear checks on the Treasury's power and clear guidelines on exactly what would trigger the need for Treasury to take action with someone like a Lehman Brothers. It should be very limited in scope and only ever used as a measure of last resort. I don't trust Congress to get it right.
Kyle Miller at 10:36am March 25
Well here's my concern...government intervention, at any level, no matter how "noble" always opens the doors to more and more regulation. DEregulation is a term that isn't in their vocabulary. So if it starts here, where does it end?
My opinion, is that if companies like AIG, Lehman Bros, etc fail, then they fail. Will it hurt the economy? Yes. Will it hurt the global economy? Yes. But growing pains are never easy. Why do we have the success we do today? Because of the stock market crash. Am I saying we need to have another crash of that magnitude? No. But what I do believe is that having a natural "reset" of financial companies failing that got greedy and "got it wrong" should fail so that better run companies can rise up.
I read an article the other day talking about why we can't allow AIG to fail, and the ONLY reason they could come up with is because of the shear volume of cash they circulate around the world. So if they fail they fail. Will it hurt? Yes. Like anything that grows strong it must have a pruning period. If I ran a vineyard and just let the dead vines stay connected to the live vines, the live vines are gonna eventually die and my whole crop will be lost. The dead vines must be cut away so that the healthy vines can flourish.
Government intervention at any level only means one thing, control. And once they have a little, they'll lobby and push and pull till they get even more. It's a never ending cycle.
If anything, if they truly want to set up an "oversight" committee, a third party private organization should be brought in to oversee and review their finances. I mean, if I buy a ton of stuff with a credit card, and then decide to tell the credit card company, "I'm sorry, I don't have the money to pay you." Do you think they're just gonna say, "Ok, no problem." and be done with it? No!
They're gonna hit my credit score from every which way they can and make it impossible for me to obtain another line of credit with any other lender.
Why shouldn't the same principal be applied to these companies?? We like to think these companies are run by the smartest people who have the "little man's" best interest at heart. And the truth is, they could care less about the little man, and are run by regular people just like you and me that get greedy, get powerful, and think they're indestructable. They should have to pay the same price ANY OTHER COMPANY OR PERSON WOULD HAVE TO PAY. And if that means the company goes down the toilet, and their stocks are worth $0 then so be it.
Toby Bierly at 9:49pm March 25
Here's a good description of the type of risk that the feds would have been taking if they let AIG fail: http://www.portfolio.com/views/blogs/market-movers/2009/03/17/why-aig-wasnt-allowed-to-fail?tid=true
We are talking about a possible meltdown of the entire global financial system. Think of the frozen credit market last fall and expand that throughout the entire financial system. Major economies could contract by 25-50% like happened to the U.S. at the start of the Great Depression.
Believe me, I'm a free market guy, and in 99% of cases I say if a company cannot manage itself properly, it should be allowed to fail. This to me is an exception to the rule.
And it's REALLY SCARY, because creates a situation where there is enough agreement that the government needs to take action that the government will take action, and it's about a 30% chance they actually make the right moves
Toby Bierly at 10:02pm March 25
By the way, I think you make a lot of good points, but blaming greed is anti-capitalist. Every company tries to make money. That is the entire point, isn't it? Every company tries to maximize profit and grow. And it is usually healthy, because in order to grow in a free market, you have to offer services that others are willing to pay for. The beauty of a free market system is that it typically channels everyone's self-interest in service of their fellow man.
The more relevant point is that they "got it wrong". Even those with the best of intentions can get it wrong. And if they got it wrong, they deserve to fail. But my argument is not based on what AIG deserves, but what is best for the economy as a whole, and I do not think a completely dysfunctional financial system helps anyone. That is the risk that a failed AIG poses. We are not talking about pruning the vineyard, we are talking about taking a machete to the completely wipe out a huge part of the vineyard!
Toby Bierly at 10:11pm March 25
One area I bet we are in TOTAL agreement on is the necessity to stop Obama from passing his proposed budget through Congress. Radically shifting people toward government provided health insurance (the only way they can "cut costs" is by denying care, either directly for certain procedures or indirectly through price controls which result in supply shortages), wasting hundreds of billions on ineffiicient and more expensive alternative energies, mindlessly throwing more federal money at schools when we already spend by far the most per student in the world, and increasing taxes on all fossil fuels and on "the rich" in the middle of a recession are ALL the EXACT OPPOSITE of what we should be doing.
Kyle Miller at 11:02am March 26
And I guess the idea of total economic meltdown is where we would have to disagree then, because I'm of the opinion that no matter how much it hurts, it needs to be done or else the core issue will never be truly dealt with and the cancer will be allowed to continue.
If the government steps in, does it REALLY stop the potential for an economic meltdown or only slow it? I mean, if a balloon has a hole in it, tape will stop the outflow of air for awhile, the fact still remains that there's a hole in the balloon and air is going to eventually expose the weakness and pop.
When I say greed, I'm not referring to a companies right to make a profit or expand or grow. I'm all for that. What I'm referring to is when certain CEO's start making selfish decisions because it will benefit THEIR OWN personal bottom line, no matter the cost. Enron is a perfect example, and I'm sure we'll find out that AIG had a lot of the same characteristics.
Kyle Miller at 11:05am March 26
You are right that we agree that more money is not the answer. Neither is increased taxes. If they want to really stimulate the economy, put more money on a regular basis in the pockets of the American people, and that's accomplished by letting them keep more of their monthly paycheck.
All these "stimulus checks" do is increase the spending for that quarter. It's not ongoing, sustained spending, it's a little blip in the overall financial system for that year.
Regardless, I think we have to realize that this President is going to spend us into the largest fiscal deficit in the history of our country. And then the next four presidents are going to have to work to try to fix it.
Toby Bierly at 9:51pm March 26
When the credit markets froze last year, it wasn't because there weren't plenty of credit-worthy institutions; it was because everyone got spooked after Bear Sterns and AIG had to be bailed out with loans and guarantees, and then Lehman failed. With such big names dropping like flies, and with so many smaller institutions being affected, no one knew who it was safe to lend to, and whether or not the government would step in. It was a crisis of confidence.
If the government had not injected some of the TARP I funds, the credit market would have stayed frozen, and it would have resulted in a cascade of banks all across the country failing. That in turn would have caused a swell of business failures and lack of new business startups, and unemployment would have skyrocketed as GDP fell.
This phenomenom of cascading bank failures is what started the Great Depression, when more than half the banks in the U.S. failed and the economy shrunk in half.
Toby Bierly at 9:59pm March 26
On CEO incentives, it is true that a lot of board of directors who make most of the decisions are focused on whatever short-term incentive plans that will help them meet short-term growth goals, and in doing so can sacrifice, purposefully or not, long-term growth and/or stability of the company. Those incentives need to be changed. The biggest question is how to do so. I don't really want the government stepping in and mandating what a good bonus program is. That gives them too much power, and they will likely mess it up and politicize it. We somehow have to get the power back in the hands of shareholders with enough education and intiative to police the companies they own. This is barely being talked about though.
Stimulus checks give an artificial boost to GDP for a quarter or two, and hurts long term growth because of deficit spending. Sooner or later the goverment has to increase tax revenues or print the money which stifles the economy or results in inflation.
Toby Bierly at 10:09pm March 26
But the recent "stimulus" bill was not even much stimulus; it was the next 5-8 years of Democratic spending jammed into one huge pork-laden bill that no one bothered to read, merely labeled as stimulus. Most of the spending is not even scheduled to happen in the next year, thus most of the quote "stimulus" will likely occur after the economy has already started recovering (assuming Obama doesn't screw things up so bad that we have not started recovering by then).
What will happen is that Obama will raise taxes, but tax revenues will not increase significantly because of weak economic growth. And then we will be forced to print money which will sharply increase inflation (back to the 70's!) and devalue the dollar. If that happens enough, we could risk a run on the dollar. Then our money will be worth much less and you will see prices go up and standards of living decline.
Kyle Miller at 7:51am March 27
Agreed. :-)
Toby Bierly at 9:10am March 27
Thanks for "listening". I don't know hardly anyone who wants to talk about politics. Almost everyone is ignorant of or apathetic about public policy, usually uninformed because they are too busy, have "more important" things to do, don't see how it affects them, assume it will all sort itself out without their help, find it excessively boring, desperately want to avoid any disagreement or arguments, find it too confusing, or just plain don't care.
Kyle Miller at 9:21am March 27
LOL - you're right...I run into that issue as well...although I have tagged quite a few people in this note that usually do have strong opinions, none of them have responded. Maybe cause they don't share the same view, or are just tired of the debate. :-) I'm never too tired of the debate, especially when it's about a President I so vehemently disagree with. :-) Feel free to tag me in any notes you post regarding political issues, I'm more than willing to chime in! :-)
Toby Bierly at 8:53pm March 27
What I would really like to focus on is sharing ideas with those who aren't necessarily political. I'd like to expand the discussion to include as many people as possible. It seems like the only people you can find to talk politics with are those already informed or involved. But who we need to reach are the great mass of people that don't pay much attention by somehow creating a place where those who do have some interest are comfortable speaking up and entering the conversation.
Toby Bierly at 9:53pm March 27
Geithner to Seek Power Over Hedge Funds, Derivatives
http://news.yahoo.com/s/bloomberg/20090326/pl_bloomberg/a0v_8uopk2a0
Here's the broad outline of what Geithner is proposing. Not sure quite what to think on this yet. I think it is appropriate for the government to set some sensible rules for large financial institutions, the equivalent of saying to an individual, "No you cannot use $10,000 equity in your home to borrow $300,000 to start a business."
Although government doesn't need to do that for an individual because it is so obvious a risk that no one would lend him the money. I think the same principle would work with investment banks and other large financial firms if there was enough transparency that people could accurately assess the risk.
One of the major untold stories of the financial collapse was that the government approved credit rating agencies like S&P and Moody's were WAY off giving Mortgage Backed Securities AAA ratings (the best).
Toby Bierly at 10:03pm March 27
Maybe the best answer is to require financial institutions to release more information to give proper transparency in the market. Buyers should always be presented with sufficient information about what they are buying.
Kyle Miller's Notes
"The Way I See It" - #35
Tue 3/24/09 8:12am
U.S. seeks expanded power to seize firms (http://www.msnbc.msn.com/id/29847658)
Is anyone paying attention out there????? Does this latest "political move" scare anyone else? Where will it end??
This article tries to portray the government as "protecting" the interests of the American people by "managing" financial institutions to keep them solvent. Don't let the wool be pulled over your eyes! This is nothing more than a move to control our financial system from Washington and set up a Nationalized Banking system so the GOVERNMENT controls our banking infrastructure.
The sub-title of this article even states this gross understatement claiming, "Goal is to limit risk to broader economy". What a crock!!
Is that along the same lines as "Gun control goal is to limit firearms in the hands of criminals"??? Yeah, like that's worked really well.
This is typical of a liberal regime. The American people are too stupid to handle their own business so we, the smart, intellectual, educated, responsible government lackies will step in and remove the knife from the stupid kid in the room. COME ON PEOPLE!!!!!
If the government starts controlling our banks - our economy will most certainly take a nose dive. Anyone else care to notice what happened to the DOW today when this news came out? Yeah...like whenever Obama speaks...it took a dive. When just yesterday, all the liberal drive by media types were trying to give Obama the credit for a 7% increase in the DOW! When did Bush ever get recognition for the DOW going up??? No, the only news we ever heard when the DOW went up was how the rich fat cat oil companies were supposedly lining their already silk pockets. But when the DOW goes up under the almighty Obama regime, it's because it's a victory for Obama and his policies.
Wave bye-bye to competitive rates for loans! Wave bye-bye to banks investing in their local communities. Bye-bye capitalism! It was great to have you here, but you threaten a tyrannical leaders control over a nation, so you must go. You will be missed, but we won't be allowed to mourn your absence, because we'll be told that socialism is now "Modern" European Socialism and that it's for our best interest.
WAKE UP PEOPLE!!!!!!!!!!!
Kyle Miller at 8:20am March 24
And again...there's apparently no time for discussion or review of this policy. Just like the $800 Billion bailout plan it HAS to be done NOW or else...I fear this is becoming an all too common theme with the Obama regime to force feed liberal agenda's down the throat of the American people. They're supposedly voting on this measure THIS WEEK! So EVERYONE needs to call their representatives and tell them to VOTE NO on this unprecedented government control.
Tobias Wilson at 12:49pm March 24
Hello Socialism.... i hope that at least one reporter at the primetime news conference will ask the president "isn't your plan too much like socialism!"
Kyle Miller at 1:22pm March 24
They might try...but if you remember back to the election process, we're not allowed to ask that question because the WORLD is socialist now, and we should be more like "Modern Europe". I don't want to be more like Europe, and the questions from the right will continue to be ignored because this President feels he has won political equity because the majority (all be it a majority by a small margin) of the American people voted him President.
Toby Bierly at 2:17am March 25
Treasury Secretary Geithner is still trying to work out details for the proposal -- as far as I know, it hasn't been presented to Congress at all yet. An initial proposal could be sent to Congress later this week. I think this is prompted more than anything by the failure of Lehman Brothers last year, and underscored with the recent furor over AIG bonuses. I think most people who have studied the issue carefully would agree that letting Lehman Brothers fail the way it did greatly destabilized the financial markets. That said, I do not really trust the Treasury department to know the right action to take. Any such proposal MUST be very carefullly thought out and fully deliberated, and there should be clear checks on the Treasury's power and clear guidelines on exactly what would trigger the need for Treasury to take action with someone like a Lehman Brothers. It should be very limited in scope and only ever used as a measure of last resort. I don't trust Congress to get it right.
Kyle Miller at 10:36am March 25
Well here's my concern...government intervention, at any level, no matter how "noble" always opens the doors to more and more regulation. DEregulation is a term that isn't in their vocabulary. So if it starts here, where does it end?
My opinion, is that if companies like AIG, Lehman Bros, etc fail, then they fail. Will it hurt the economy? Yes. Will it hurt the global economy? Yes. But growing pains are never easy. Why do we have the success we do today? Because of the stock market crash. Am I saying we need to have another crash of that magnitude? No. But what I do believe is that having a natural "reset" of financial companies failing that got greedy and "got it wrong" should fail so that better run companies can rise up.
I read an article the other day talking about why we can't allow AIG to fail, and the ONLY reason they could come up with is because of the shear volume of cash they circulate around the world. So if they fail they fail. Will it hurt? Yes. Like anything that grows strong it must have a pruning period. If I ran a vineyard and just let the dead vines stay connected to the live vines, the live vines are gonna eventually die and my whole crop will be lost. The dead vines must be cut away so that the healthy vines can flourish.
Government intervention at any level only means one thing, control. And once they have a little, they'll lobby and push and pull till they get even more. It's a never ending cycle.
If anything, if they truly want to set up an "oversight" committee, a third party private organization should be brought in to oversee and review their finances. I mean, if I buy a ton of stuff with a credit card, and then decide to tell the credit card company, "I'm sorry, I don't have the money to pay you." Do you think they're just gonna say, "Ok, no problem." and be done with it? No!
They're gonna hit my credit score from every which way they can and make it impossible for me to obtain another line of credit with any other lender.
Why shouldn't the same principal be applied to these companies?? We like to think these companies are run by the smartest people who have the "little man's" best interest at heart. And the truth is, they could care less about the little man, and are run by regular people just like you and me that get greedy, get powerful, and think they're indestructable. They should have to pay the same price ANY OTHER COMPANY OR PERSON WOULD HAVE TO PAY. And if that means the company goes down the toilet, and their stocks are worth $0 then so be it.
Toby Bierly at 9:49pm March 25
Here's a good description of the type of risk that the feds would have been taking if they let AIG fail: http://www.portfolio.com/views/blogs/market-movers/2009/03/17/why-aig-wasnt-allowed-to-fail?tid=true
We are talking about a possible meltdown of the entire global financial system. Think of the frozen credit market last fall and expand that throughout the entire financial system. Major economies could contract by 25-50% like happened to the U.S. at the start of the Great Depression.
Believe me, I'm a free market guy, and in 99% of cases I say if a company cannot manage itself properly, it should be allowed to fail. This to me is an exception to the rule.
And it's REALLY SCARY, because creates a situation where there is enough agreement that the government needs to take action that the government will take action, and it's about a 30% chance they actually make the right moves
Toby Bierly at 10:02pm March 25
By the way, I think you make a lot of good points, but blaming greed is anti-capitalist. Every company tries to make money. That is the entire point, isn't it? Every company tries to maximize profit and grow. And it is usually healthy, because in order to grow in a free market, you have to offer services that others are willing to pay for. The beauty of a free market system is that it typically channels everyone's self-interest in service of their fellow man.
The more relevant point is that they "got it wrong". Even those with the best of intentions can get it wrong. And if they got it wrong, they deserve to fail. But my argument is not based on what AIG deserves, but what is best for the economy as a whole, and I do not think a completely dysfunctional financial system helps anyone. That is the risk that a failed AIG poses. We are not talking about pruning the vineyard, we are talking about taking a machete to the completely wipe out a huge part of the vineyard!
Toby Bierly at 10:11pm March 25
One area I bet we are in TOTAL agreement on is the necessity to stop Obama from passing his proposed budget through Congress. Radically shifting people toward government provided health insurance (the only way they can "cut costs" is by denying care, either directly for certain procedures or indirectly through price controls which result in supply shortages), wasting hundreds of billions on ineffiicient and more expensive alternative energies, mindlessly throwing more federal money at schools when we already spend by far the most per student in the world, and increasing taxes on all fossil fuels and on "the rich" in the middle of a recession are ALL the EXACT OPPOSITE of what we should be doing.
Kyle Miller at 11:02am March 26
And I guess the idea of total economic meltdown is where we would have to disagree then, because I'm of the opinion that no matter how much it hurts, it needs to be done or else the core issue will never be truly dealt with and the cancer will be allowed to continue.
If the government steps in, does it REALLY stop the potential for an economic meltdown or only slow it? I mean, if a balloon has a hole in it, tape will stop the outflow of air for awhile, the fact still remains that there's a hole in the balloon and air is going to eventually expose the weakness and pop.
When I say greed, I'm not referring to a companies right to make a profit or expand or grow. I'm all for that. What I'm referring to is when certain CEO's start making selfish decisions because it will benefit THEIR OWN personal bottom line, no matter the cost. Enron is a perfect example, and I'm sure we'll find out that AIG had a lot of the same characteristics.
Kyle Miller at 11:05am March 26
You are right that we agree that more money is not the answer. Neither is increased taxes. If they want to really stimulate the economy, put more money on a regular basis in the pockets of the American people, and that's accomplished by letting them keep more of their monthly paycheck.
All these "stimulus checks" do is increase the spending for that quarter. It's not ongoing, sustained spending, it's a little blip in the overall financial system for that year.
Regardless, I think we have to realize that this President is going to spend us into the largest fiscal deficit in the history of our country. And then the next four presidents are going to have to work to try to fix it.
Toby Bierly at 9:51pm March 26
When the credit markets froze last year, it wasn't because there weren't plenty of credit-worthy institutions; it was because everyone got spooked after Bear Sterns and AIG had to be bailed out with loans and guarantees, and then Lehman failed. With such big names dropping like flies, and with so many smaller institutions being affected, no one knew who it was safe to lend to, and whether or not the government would step in. It was a crisis of confidence.
If the government had not injected some of the TARP I funds, the credit market would have stayed frozen, and it would have resulted in a cascade of banks all across the country failing. That in turn would have caused a swell of business failures and lack of new business startups, and unemployment would have skyrocketed as GDP fell.
This phenomenom of cascading bank failures is what started the Great Depression, when more than half the banks in the U.S. failed and the economy shrunk in half.
Toby Bierly at 9:59pm March 26
On CEO incentives, it is true that a lot of board of directors who make most of the decisions are focused on whatever short-term incentive plans that will help them meet short-term growth goals, and in doing so can sacrifice, purposefully or not, long-term growth and/or stability of the company. Those incentives need to be changed. The biggest question is how to do so. I don't really want the government stepping in and mandating what a good bonus program is. That gives them too much power, and they will likely mess it up and politicize it. We somehow have to get the power back in the hands of shareholders with enough education and intiative to police the companies they own. This is barely being talked about though.
Stimulus checks give an artificial boost to GDP for a quarter or two, and hurts long term growth because of deficit spending. Sooner or later the goverment has to increase tax revenues or print the money which stifles the economy or results in inflation.
Toby Bierly at 10:09pm March 26
But the recent "stimulus" bill was not even much stimulus; it was the next 5-8 years of Democratic spending jammed into one huge pork-laden bill that no one bothered to read, merely labeled as stimulus. Most of the spending is not even scheduled to happen in the next year, thus most of the quote "stimulus" will likely occur after the economy has already started recovering (assuming Obama doesn't screw things up so bad that we have not started recovering by then).
What will happen is that Obama will raise taxes, but tax revenues will not increase significantly because of weak economic growth. And then we will be forced to print money which will sharply increase inflation (back to the 70's!) and devalue the dollar. If that happens enough, we could risk a run on the dollar. Then our money will be worth much less and you will see prices go up and standards of living decline.
Kyle Miller at 7:51am March 27
Agreed. :-)
Toby Bierly at 9:10am March 27
Thanks for "listening". I don't know hardly anyone who wants to talk about politics. Almost everyone is ignorant of or apathetic about public policy, usually uninformed because they are too busy, have "more important" things to do, don't see how it affects them, assume it will all sort itself out without their help, find it excessively boring, desperately want to avoid any disagreement or arguments, find it too confusing, or just plain don't care.
Kyle Miller at 9:21am March 27
LOL - you're right...I run into that issue as well...although I have tagged quite a few people in this note that usually do have strong opinions, none of them have responded. Maybe cause they don't share the same view, or are just tired of the debate. :-) I'm never too tired of the debate, especially when it's about a President I so vehemently disagree with. :-) Feel free to tag me in any notes you post regarding political issues, I'm more than willing to chime in! :-)
Toby Bierly at 8:53pm March 27
What I would really like to focus on is sharing ideas with those who aren't necessarily political. I'd like to expand the discussion to include as many people as possible. It seems like the only people you can find to talk politics with are those already informed or involved. But who we need to reach are the great mass of people that don't pay much attention by somehow creating a place where those who do have some interest are comfortable speaking up and entering the conversation.
Toby Bierly at 9:53pm March 27
Geithner to Seek Power Over Hedge Funds, Derivatives
http://news.yahoo.com/s/bloomberg/20090326/pl_bloomberg/a0v_8uopk2a0
Here's the broad outline of what Geithner is proposing. Not sure quite what to think on this yet. I think it is appropriate for the government to set some sensible rules for large financial institutions, the equivalent of saying to an individual, "No you cannot use $10,000 equity in your home to borrow $300,000 to start a business."
Although government doesn't need to do that for an individual because it is so obvious a risk that no one would lend him the money. I think the same principle would work with investment banks and other large financial firms if there was enough transparency that people could accurately assess the risk.
One of the major untold stories of the financial collapse was that the government approved credit rating agencies like S&P and Moody's were WAY off giving Mortgage Backed Securities AAA ratings (the best).
Toby Bierly at 10:03pm March 27
Maybe the best answer is to require financial institutions to release more information to give proper transparency in the market. Buyers should always be presented with sufficient information about what they are buying.
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