7 ms·

The bailout was a mess, but I feel there's some truth to what Kissenger wrote a while back: basically, a leader will never be given credit for choosing between

The bailout was a mess, but I feel there's some truth to what Kissenger wrote a while back: basically, a leader will never be given credit for choosing between two evils (a possible crisis, or a poorly-executed bailout) because you will never be able to prove with certainty how bad the other option would have been. We have no way to truly know what things would be like without the bailout, and we really ought to think of long-lasting solutions. Like funding startups, right? Frankly, your comparison doesn't make much sense. The administration is making an obvious effort, but there's a big difference between investing in startups and attempting to patch an economy that looks like it will collapse. Investing in startups is quite literally an investment for a future economy. The bailout was a bit of the opposite -- a quick-and-dirty patch up.

fleitz 15y ago
Yeah, one is an accounting trick that penalizes everyone who saved money and the other has a serious chance of working. If startups were important they could have just cancelled the V-22 Osprey program which eats $2.8 billion per year, or ballistic missile defense at $9.9 billion, or DHS at $60 billion. $1 billion dollars over three years is probably less money than the gov't spends on toilet cleaning. It's equivalent to withdrawing from Iraq a week early. Sorry, if I'm unimpressed it doesn't look like effort, it looks like a PR campaign.
- shantanubala 15y ago
  Yes, but these are all separate decisions with their own (opportunity) costs, aren't they? Think of it this way: Why would the government invest in Facebook or Twitter when there are plenty of people who already have their wallets open? That goes for many tech startups -- YCombinator alone is very beneficial for the government in an indirect way because the government no longer needs to think about funding tech startups -- someone else is already doing it really well for them. So the real necessity for government intervention is for extremely risky and potentially extremely unprofitable ventures that allow for amazing possibilities (think NASA when the US was afraid of the Soviets). Pure scientific research is often this way as well. And even NASA is a small fraction of the federal budget (I remember Neil DeGrasse Tyson repeating "half a penny to a dollar" a lot. So my point is this: startups, research, or pretty much any economy-advancing investments aren't going to exceed the cost of trying to keep people happy. The War in Iraq is an example: we wouldn't be there if we weren't scared 10 years ago. We wouldn't have been eager to go to war unless it made us feel happier or safer or more content. In contrast, how content do people feel when they hear about a space shuttle explosion? Or money "wasted" on research that could be used to feed the poor? Why did we even fund NASA again? Oh yeah, we were afraid. The United States collectively didn't give a crap about space until we imagined the Soviets creating the Death Star before us. I'm not saying any of this is rational. Actually, I really agree with you, but the fact that money is going to startups is a good sign. The quantity is low because nothing will cost more than making people feel happy, safe, and secure right now.
  - trevelyan 15y ago
    No, he is simply an ignorant conservative hack. The boom and bust happened in the subprime loan market. Subprime loans are by definition those which are "sub-prime" (i.e. don't qualify for backing from Federal Agencies). This is why they were aggregated, sliced into parcels and sold on the market as CDOs rather than simply transferred to Fannie Mae.
- mkramlich 15y ago
  > Sorry, if I'm unimpressed it doesn't look like effort, it looks like a PR campaign. I think you're both right and wrong that it's a PR campaign. It can be both. Something positive, and something done for political benefit. The context is that it's very hard to get a bill passed in Congress right now unless both parties support it, and the Republicans have repeatedly blocked efforts to do things that help middle/working class folks, or help the the most serious environmental problems, etc. unless there's also kickback to the richest Americans and their favored industries (oil, military, etc.), or at least doesn't have anything that drops tax cuts or closes loopholes for them. They've opposed extended unemployment checks, for example. They've brought the nation to the very brink of default on it's debts, on an issue which historically is a routine ceremony of raising the "ceiling". That brinkmanship alone scares people, raises fiscal and market uncertainty and has a negative effect on spending -- this is beyond obvious to economists, a no-brainer. They opposed extending payroll tax cuts which disproportionately help middle/lower income class folks, and that most economists will tell you have a positive economic stimulus effect. Trying to pass anything in Congress gets turned into a political point scoring match, regardless of the actual objective merit or wisdom of it's benefits. In that context, it's much easier for a President to figure out which things they can do, just within the power of the Executive branch, to do something positive, however far from ideal it might be.
pjscott 15y ago
This is also the chronic PR problem of public health efforts to stop epidemics: if they succeed in stopping a plague before it gets huge, then it looks like they got all worked up over nothing.
HilbertSpace 15y ago
Some clarity and contact with reality: "The bailout was a mess" The efforts of big gumment to get people who couldn't afford a house into one that blew a housing bubble that popped and created the worst financial and economic disaster since the Great Depression "was a mess". The 'bailout', that is, the TARP program was not "a mess" at all but a grand success: (1) TARP made money. All or nearly all the money has been paid back with very high interest, about 11% per year. As far as I know, all the TARP money will be paid back without difficulty. (2) The money was nothing like a 'bailout' but just loans to tell the world that the institutions would not go bust. So, TARP stopped 'runs' on the banks. (3) TARP was not a 'bailout' but just to solve a short-term 'liquidity' problem, that is, as in 'runs' on the banks. Note: A 'liquidity' problem is when you are worth $10 million but have only $500 in cash and suddenly have a traffic ticket for $600 and have to pay up or go to jail right NOW. You have the money but just don't have it in cash right away; you can get the cash easily enough but will need some days or weeks to do so. So to solve your 'liquidity' problem, you get a loan using some of your $10 million in assets as collateral. The loan is not really at risk; you pay your $600 bill; then a few weeks later you repay your loan with interest. You are not broke. You are not begging for welfare. The loan is not a gift. The loan is not at risk. The loan is NOT a 'bailout'. (4) Secretary Paulson called the nine bank CEOs to DC, sat them on one side of a table with a form in front of them, and told them all, "You WILL sign this form before you leave here today.". They all signed. Goldman Sachs was one of the nine, didn't want or need the money, signed, took the money, but paid it back, with interest, as soon as Paulson would permit. (5) Paulson's main point was just to tell the world that those nine banks were NOT bust and, thus, to stop 'runs' on those banks. What Paulson did was fine. It was a good solution to a serious problem. The effort cost the taxpayers $0.00 and actually showed a nice little profit (11% was HIGH interest for such a loan). To have not done TARP, we might have had cascading runs on all the major financial institutions in the US and all of the industrialized world and, then, been well into a second Great Depression, WWIII, global nuclear war, etc. Yet too many people want to leap to call TARP a 'bailout'. It was no such thing. Lesson: Those sources that call TARP a 'bailout' you should realize are providing toxic sewage in place of information for a well informed citizenry. For such sources, you should put on a rubber suit, hold your nose, dump the swill, pull the chain, and call a toxic dump cleanup crew. Why do these 'news' sources scream 'bailout'? Because they want to grab you by the heart and the gut so that your eyeballs will follow for their ads and know that to grab you they should scream versions of greed, corruption, danger, scandal, etc. So, they spout glowing, fuming, bubbling, sticky, toxic nonsense. If the newsies had actually informed us, then we wouldn't have gotten into the popped housing bubble nonsense in the first place. In Iraq, we would have known that there was no good evidence that Saddam had WMDs. If we invaded Iraq anyway, then we would have dumped the Saddam regime and gotten out in three weeks instead of staying for 10 years and losing 5000 dead, 50,000 wounded, and $1.5 trillion. If we had good information on Akrapistan, then we would have been out'a there years ago. With good information, China wouldn't have wiped out much of our textile, manufacturing, and other industries and been ripping off our intellectual property. Meanwhile, back in the US, the media was telling us ALL about Brit, Paris, Lindsay, Kim, etc. BUMMER. Bad information from the newsies, such as screaming 'bailout', is the worst and most dangerous problem facing civilization at present. PG and HN don't like for me to criticize 'big media', but I do so anyway because the media nonsense is the most dangerous problem facing civilization at present. Sorry PG.

fleitz 15y ago

Yeah, one is an accounting trick that penalizes everyone who saved money and the other has a serious chance of working. If startups were important they could have just cancelled the V-22 Osprey program which eats $2.8 billion per year, or ballistic missile defense at $9.9 billion, or DHS at $60 billion. $1 billion dollars over three years is probably less money than the gov't spends on toilet cleaning. It's equivalent to withdrawing from Iraq a week early. Sorry, if I'm unimpressed it doesn't look like effort, it looks like a PR campaign.

shantanubala 15y ago
Yes, but these are all separate decisions with their own (opportunity) costs, aren't they? Think of it this way: Why would the government invest in Facebook or Twitter when there are plenty of people who already have their wallets open? That goes for many tech startups -- YCombinator alone is very beneficial for the government in an indirect way because the government no longer needs to think about funding tech startups -- someone else is already doing it really well for them. So the real necessity for government intervention is for extremely risky and potentially extremely unprofitable ventures that allow for amazing possibilities (think NASA when the US was afraid of the Soviets). Pure scientific research is often this way as well. And even NASA is a small fraction of the federal budget (I remember Neil DeGrasse Tyson repeating "half a penny to a dollar" a lot. So my point is this: startups, research, or pretty much any economy-advancing investments aren't going to exceed the cost of trying to keep people happy. The War in Iraq is an example: we wouldn't be there if we weren't scared 10 years ago. We wouldn't have been eager to go to war unless it made us feel happier or safer or more content. In contrast, how content do people feel when they hear about a space shuttle explosion? Or money "wasted" on research that could be used to feed the poor? Why did we even fund NASA again? Oh yeah, we were afraid. The United States collectively didn't give a crap about space until we imagined the Soviets creating the Death Star before us. I'm not saying any of this is rational. Actually, I really agree with you, but the fact that money is going to startups is a good sign. The quantity is low because nothing will cost more than making people feel happy, safe, and secure right now.
- trevelyan 15y ago
  No, he is simply an ignorant conservative hack. The boom and bust happened in the subprime loan market. Subprime loans are by definition those which are "sub-prime" (i.e. don't qualify for backing from Federal Agencies). This is why they were aggregated, sliced into parcels and sold on the market as CDOs rather than simply transferred to Fannie Mae.
mkramlich 15y ago
> Sorry, if I'm unimpressed it doesn't look like effort, it looks like a PR campaign. I think you're both right and wrong that it's a PR campaign. It can be both. Something positive, and something done for political benefit. The context is that it's very hard to get a bill passed in Congress right now unless both parties support it, and the Republicans have repeatedly blocked efforts to do things that help middle/working class folks, or help the the most serious environmental problems, etc. unless there's also kickback to the richest Americans and their favored industries (oil, military, etc.), or at least doesn't have anything that drops tax cuts or closes loopholes for them. They've opposed extended unemployment checks, for example. They've brought the nation to the very brink of default on it's debts, on an issue which historically is a routine ceremony of raising the "ceiling". That brinkmanship alone scares people, raises fiscal and market uncertainty and has a negative effect on spending -- this is beyond obvious to economists, a no-brainer. They opposed extending payroll tax cuts which disproportionately help middle/lower income class folks, and that most economists will tell you have a positive economic stimulus effect. Trying to pass anything in Congress gets turned into a political point scoring match, regardless of the actual objective merit or wisdom of it's benefits. In that context, it's much easier for a President to figure out which things they can do, just within the power of the Executive branch, to do something positive, however far from ideal it might be.

pjscott 15y ago

This is also the chronic PR problem of public health efforts to stop epidemics: if they succeed in stopping a plague before it gets huge, then it looks like they got all worked up over nothing.

HilbertSpace 15y ago

Some clarity and contact with reality: "The bailout was a mess" The efforts of big gumment to get people who couldn't afford a house into one that blew a housing bubble that popped and created the worst financial and economic disaster since the Great Depression "was a mess". The 'bailout', that is, the TARP program was not "a mess" at all but a grand success: (1) TARP made money. All or nearly all the money has been paid back with very high interest, about 11% per year. As far as I know, all the TARP money will be paid back without difficulty. (2) The money was nothing like a 'bailout' but just loans to tell the world that the institutions would not go bust. So, TARP stopped 'runs' on the banks. (3) TARP was not a 'bailout' but just to solve a short-term 'liquidity' problem, that is, as in 'runs' on the banks. Note: A 'liquidity' problem is when you are worth $10 million but have only $500 in cash and suddenly have a traffic ticket for $600 and have to pay up or go to jail right NOW. You have the money but just don't have it in cash right away; you can get the cash easily enough but will need some days or weeks to do so. So to solve your 'liquidity' problem, you get a loan using some of your $10 million in assets as collateral. The loan is not really at risk; you pay your $600 bill; then a few weeks later you repay your loan with interest. You are not broke. You are not begging for welfare. The loan is not a gift. The loan is not at risk. The loan is NOT a 'bailout'. (4) Secretary Paulson called the nine bank CEOs to DC, sat them on one side of a table with a form in front of them, and told them all, "You WILL sign this form before you leave here today.". They all signed. Goldman Sachs was one of the nine, didn't want or need the money, signed, took the money, but paid it back, with interest, as soon as Paulson would permit. (5) Paulson's main point was just to tell the world that those nine banks were NOT bust and, thus, to stop 'runs' on those banks. What Paulson did was fine. It was a good solution to a serious problem. The effort cost the taxpayers $0.00 and actually showed a nice little profit (11% was HIGH interest for such a loan). To have not done TARP, we might have had cascading runs on all the major financial institutions in the US and all of the industrialized world and, then, been well into a second Great Depression, WWIII, global nuclear war, etc. Yet too many people want to leap to call TARP a 'bailout'. It was no such thing. Lesson: Those sources that call TARP a 'bailout' you should realize are providing toxic sewage in place of information for a well informed citizenry. For such sources, you should put on a rubber suit, hold your nose, dump the swill, pull the chain, and call a toxic dump cleanup crew. Why do these 'news' sources scream 'bailout'? Because they want to grab you by the heart and the gut so that your eyeballs will follow for their ads and know that to grab you they should scream versions of greed, corruption, danger, scandal, etc. So, they spout glowing, fuming, bubbling, sticky, toxic nonsense. If the newsies had actually informed us, then we wouldn't have gotten into the popped housing bubble nonsense in the first place. In Iraq, we would have known that there was no good evidence that Saddam had WMDs. If we invaded Iraq anyway, then we would have dumped the Saddam regime and gotten out in three weeks instead of staying for 10 years and losing 5000 dead, 50,000 wounded, and $1.5 trillion. If we had good information on Akrapistan, then we would have been out'a there years ago. With good information, China wouldn't have wiped out much of our textile, manufacturing, and other industries and been ripping off our intellectual property. Meanwhile, back in the US, the media was telling us ALL about Brit, Paris, Lindsay, Kim, etc. BUMMER. Bad information from the newsies, such as screaming 'bailout', is the worst and most dangerous problem facing civilization at present. PG and HN don't like for me to criticize 'big media', but I do so anyway because the media nonsense is the most dangerous problem facing civilization at present. Sorry PG.