[Reader-list] Heavy Hitters Against US Bailout

[Isaac souweine]

Hi Madhumita,

I'm quite skeptical of this notion that "government cannot keep up on
economics", especially when buffered by the John McCain example. In
principle, the economic knowledge of presidents (or candidates) is beside
the point. That's what advisors are for. More to the point, the job of
regulating economic activity falls to qualified agencies like the SEC, FTC
etc. And when properly funded and supported by meaningful legislation, it
seems fair to believe that they might do (and have done) an OK job at it.
Indeed, I would propose that it is only in America that it even make sense
to assume that if they are paid out of the treasury than they couldn't be
competent. Funny that now the incompetent government is being asked to bail
out the comptent investment banks (er - the ones that are left).

I do agree with you whole heartedly that more fundamental economic issues
lie ahead for the US. Not just an impending recession, but decades of slowly
declining economic hegemony as the world eventually stops footing the
American consumer credit bill, shifts off the dollar as the currency of last
resort and continues its irresistible move toward economic multi-polarity.
We're going to see some angry and bewildered people and some hateful
ideologies and demagogues as the American way of economic life rather
quickly becomes untenable for many in the hyper-leveraged middle class. One
of the reasons I moved to Asia :-)

Best,
Isaac


On Tue, Sep 30, 2008 at 1:12 AM, Madhumita Lahiri <ml49 at duke.edu> wrote:

> Hi Naeem and Isaac,
>
> Thanks for the additional links, thoughts, etc. I posted the Schiller
> article mainly because it (a) historicizes (b) attempts to provide specific
> suggestions and (c) addresses the hysteria around us.
>
> I cannot speculate what the US would look like if we had universal health
> care -- it would be an entirely different situation, both fiscally and
> otherwise, and certainly poverty in this country would be a lot less dire.
> However, I'm not sure that universal health care would have prevented
> unsustainable/predatory lending practices, a housing bubble, and a series of
> bad financial 'innovations'.
>
> I seriously doubt if Michael Moore aims to win over the undecided American
> middle, as opposed to people who already agree with him for the most part.
> But perhaps that's just my perspective from the South, where he is seen as a
> crazy, anti-God, anti-American radical. I jumped to Schiller in part because
> the last person I heard linking the bailout to healthcare was... Sarah
> Palin! I read the financial news somewhat obsessively, so there were other
> people's words I could have used--but I liked the Schiller because we're in
> this strange situation where the right/conservatives are advocating
> government intervention, while leftists/progressives are advocating for
> letting the market settle itself out. Again, not an endorsement, just
> thought it was interesting, and broad.
>
> I suspect that Schiller's "build better markets" is in fact a call not so
> much for direct government regulation to prevent, e.g., incentive problems,
> but for corrective measures to be built right into the ways in which
> financial instruments function. Historically this has a better record of
> succeeding -- the government does not generally do a particularly good job
> of keeping up on economics (e.g. John McCain), plus any such situation is
> rife for corruption and rent seeking. Which I think is what you two are
> correctly pointing towards in the problems with the current bailout
> proposal. Incidentally I think Bush's policies have been so bad *not only*
> because he is anti-regulation but also because he is that
> once-thought-extinct creature, a supply-sider.
>
> Finally, I don't endorse or not endorse the bailout plan, though I do think
> there is a real crisis in the financial markets. I'm more generally
> concerned about the impending recession in the US, against which the bailout
> is simply one aspect of what will have to be (IMO) a larger effort to keep,
> e.g., unemployment from rising (which it probably will in any case, at least
> a bit). Summers I think had a piece recently advocating for a  Keynes-still
> heavy spending effort, e.g. government job creation; whether this will
> happen is another question. The presidential candidates on Friday were
> instead obsessing about balancing the budget.
>
> Would love to hear what others think, not just the bailout but the general
> economic (yes, not just financial) mess. Not so much about heavy hitters,
> but I do have an anachronistic appreciation for the (usually) careful
> writing of print media op-eds.
>
> Thanks for reading.
>
> Peace,
> Madhumita
>
>
> -----Original Message-----
> From: reader-list-bounces at sarai.net [mailto:reader-list-bounces at sarai.net]
> On Behalf Of Isaac souweine
> Sent: Monday, September 29, 2008 12:49 PM
> To: Naeem Mohaiemen; Sarai Reader List
> Subject: Re: [Reader-list] Heavy Hitters Against US Bailout
>
> Hi Naeem -
>
> Well, I guess we're saying just about the same thing then, huh? As in - the
> bailout probably isn't that sweet a deal for the common folk. Not that one
> needs a fancy PhD to guess that much would be true ;-) As someone who pays
> into the American treasury every April 15, I guess it's especially appaling
> to see this year's misue of my funds, but when you think that a similar
> amount went to the Iraq boondoggle, and when you consider the annual size
> of
> the defense budget - well, its hard not to feel a little fatalistic. . .
>
> As for Moore, I would say "don't get me started" but really it's a pleasure
> to. Every time I read another open letter from that one-trick
> "documentarian" turned folksy champion of the left, I marvel to myself at
> how snugly Moore fits into America's system of cultural hegemony. Where
> buffoonery and emotive populism hold sway, the rational discourse required
> for real policy change fear to tread. Of course, Moore's politics are often
> in the generally right direction, viz. gun control, health care, the Bush
> years etc., and one could argue that his "gadflyism" opens up space for
> cooler heads to actually do some thinking, but my guess is that every time
> Michael Moore hits send, the powers that be chuckle to themselves.
>
> Cheers,
> Isaac
>
> PS - I really enjoy the articles etc. you post on the list. Helps clear
> some
> of that Kashmir air. . .
>
>
> On Tue, Sep 30, 2008 at 12:19 AM, Naeem Mohaiemen <
> naeem.mohaiemen at gmail.com
> > wrote:
>
> > > 1. Re: Michael Moore: The Rich Are Staging a Coup This Morning (Isaac
> > souweine)
> > > I too found Moore's rant difficult to follow. I think that's what we
> call
> > being out of your depth.
> > ...
> > > Shiller is a pretty heavy hitter <
> > http://en.wikipedia.org/wiki/Robert_Shiller>
> >
> > Moore rants unapologetically because that's his style. Some may find
> > it grating but it's who he is, and his focus is on winning over middle
> > america's mass undecided. His style may irritate, and his
> > footnote-less prose may dismay, but the core sentiments I find echoed
> > in various shades by others-- not on healthcare, that's reflective of
> > MM's singular focus since making SICKO the film; but on worries about
> > the fundamental economic unfairness of this bailout plan.
> >
> > 1. Is the Bailout Needed? Many Economists Say "No"
> > http://www.mcclatchydc.com/227/story/53107.html
> >
> > 2. Stiglitz on a Better Bailout
> > http://www.thenation.com/doc/20081013/stiglitz
> >
> > 3. Economists see need for a penalty
> > http://www.iht.com/articles/2008/09/23/business/23skeptics.php
> >
> > 4.Ferguson-Johnson: Bridge Loan to Nowhere
> > http://www.thenation.com/doc/20081006/ferguson_johnson
> >
> > 5. Economists Petition to House of Representatives
> >
> >
> http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
> >
> > To the Speaker of the House of Representatives and the President pro
> > tempore of the Senate:
> >
> > As economists, we want to express to Congress our great concern for
> > the plan proposed by Treasury Secretary Paulson to deal with the
> > financial crisis. We are well aware of the difficulty of the current
> > financial situation and we agree with the need for bold action to
> > ensure that the financial system continues to function. We see three
> > fatal pitfalls in the currently proposed plan:
> >
> > 1) Its fairness. The plan is a subsidy to investors at taxpayers'
> > expense. Investors who took risks to earn profits must also bear the
> > losses.  Not every business failure carries systemic risk. The
> > government can ensure a well-functioning financial industry, able to
> > make new loans to creditworthy borrowers, without bailing out
> > particular investors and institutions whose choices proved unwise.
> >
> > 2) Its ambiguity. Neither the mission of the new agency nor its
> > oversight are clear. If  taxpayers are to buy illiquid and opaque
> > assets from troubled sellers, the terms, occasions, and methods of
> > such purchases must be crystal clear ahead of time and carefully
> > monitored afterwards.
> >
> > 3) Its long-term effects.  If the plan is enacted, its effects will be
> > with us for a generation. For all their recent troubles, America's
> > dynamic and innovative private capital markets have brought the nation
> > unparalleled prosperity.  Fundamentally weakening those markets in
> > order to calm short-run disruptions is desperately short-sighted.
> >
> > For these reasons we ask Congress not to rush, to hold appropriate
> > hearings, and to carefully consider the right course of action, and to
> > wisely determine the future of the financial industry and the U.S.
> > economy for years to come.
> >
> >
> > Signed (updated at 9/25/2008 8:30AM CT)
> >
> > Acemoglu Daron (Massachussets Institute of Technology)
> > Adler Michael (Columbia University)
> > Admati Anat R. (Stanford University)
> > Alexis Marcus (Northwestern University)
> > Alvarez Fernando (University of Chicago)
> > Andersen Torben (Northwestern University)
> > Baliga Sandeep (Northwestern University)
> > Banerjee Abhijit V. (Massachussets Institute of Technology)
> > Barankay Iwan (University of Pennsylvania)
> > Barry Brian (University of Chicago)
> > Bartkus James R. (Xavier University of Louisiana)
> > Becker Charles M. (Duke University)
> > Becker Robert A. (Indiana University)
> > Beim David (Columbia University)
> > Berk Jonathan (Stanford University)
> > Bisin Alberto (New York University)
> > Bittlingmayer George (University of Kansas)
> > Boldrin Michele (Washington University)
> > Brooks Taggert J. (University of Wisconsin)
> > Brynjolfsson Erik (Massachusetts Institute of Technology)
> > Buera Francisco J. (UCLA)
> > Camp Mary Elizabeth (Indiana University)
> > Carmel Jonathan (University of Michigan)
> > Carroll Christopher (Johns Hopkins University)
> > Cassar Gavin (University of Pennsylvania)
> > Chaney Thomas (University of Chicago)
> > Chari Varadarajan V. (University of Minnesota)
> > Chauvin Keith W. (University of Kansas)
> > Chintagunta Pradeep K. (University of Chicago)
> > Christiano Lawrence J. (Northwestern University)
> > Cochrane John (University of Chicago)
> > Coleman John (Duke University)
> > Constantinides George M. (University of Chicago)
> > Crain Robert (UC Berkeley)
> > Culp Christopher (University of Chicago)
> > Da Zhi (University of Notre Dame)
> > Davis Morris (University of Wisconsin)
> > De Marzo Peter (Stanford University)
> > Dubé Jean-Pierre H. (University of Chicago)
> > Edlin Aaron (UC Berkeley)
> > Eichenbaum Martin (Northwestern University)
> > Ely Jeffrey (Northwestern University)
> > Eraslan Hülya K. K.(Johns Hopkins University)
> > Faulhaber Gerald (University of Pennsylvania)
> > Feldmann Sven (University of Melbourne)
> > Fernandez-Villaverde Jesus (University of Pennsylvania)
> > Fohlin Caroline (Johns Hopkins University)
> > Fox Jeremy T. (University of Chicago)
> > Frank Murray Z.(University of Minnesota)
> > Frenzen Jonathan (University of Chicago)
> > Fuchs William (University of Chicago)
> > Fudenberg Drew (Harvard University)
> > Gabaix Xavier (New York University)
> > Gao Paul (Notre Dame University)
> > Garicano Luis (University of Chicago)
> > Gerakos Joseph J. (University of Chicago)
> > Gibbs Michael (University of Chicago)
> > Glomm Gerhard (Indiana University)
> > Goettler Ron (University of Chicago)
> > Goldin Claudia (Harvard University)
> > Gordon Robert J. (Northwestern University)
> > Greenstone Michael (Massachusetts Institute of Technology)
> > Guadalupe Maria (Columbia University)
> > Guerrieri Veronica (University of Chicago)
> > Hagerty Kathleen (Northwestern University)
> > Hamada Robert S. (University of Chicago)
> > Hansen Lars (University of Chicago)
> > Harris Milton (University of Chicago)
> > Hart Oliver (Harvard University)
> > Hazlett Thomas W. (George Mason University)
> > Heaton John (University of Chicago)
> > Heckman James (University of Chicago - Nobel Laureate)
> > Henderson David R. (Hoover Institution)
> > Henisz, Witold (University of Pennsylvania)
> > Hertzberg Andrew (Columbia University)
> > Hite Gailen (Columbia University)
> > Hitsch Günter J. (University of Chicago)
> > Hodrick Robert J. (Columbia University)
> > Hopenhayn Hugo (UCLA)
> > Hurst Erik (University of Chicago)
> > Imrohoroglu Ayse (University of Southern California)
> > Isakson Hans (University of Northern Iowa)
> > Israel Ronen (London Business School)
> > Jaffee Dwight M. (UC Berkeley)
> > Jagannathan Ravi (Northwestern University)
> > Jenter Dirk (Stanford University)
> > Jones Charles M. (Columbia Business School)
> > Kaboski Joseph P. (Ohio State University)
> > Kahn Matthew (UCLA)
> > Kaplan Ethan (Stockholm University)
> > Karolyi, Andrew (Ohio State University)
> > Kashyap Anil (University of Chicago)
> > Keim Donald B (University of Pennsylvania)
> > Ketkar Suhas L (Vanderbilt University)
> > Kiesling Lynne (Northwestern University)
> > Klenow Pete (Stanford University)
> > Koch Paul (University of Kansas)
> > Kocherlakota Narayana (University of Minnesota)
> > Koijen Ralph S.J. (University of Chicago)
> > Kondo Jiro (Northwestern University)
> > Korteweg Arthur (Stanford University)
> > Kortum Samuel (University of Chicago)
> > Krueger Dirk (University of Pennsylvania)
> > Ledesma Patricia (Northwestern University)
> > Lee Lung-fei (Ohio State University)
> > Leeper Eric M. (Indiana University)
> > Leuz Christian (University of Chicago)
> > Levine David I.(UC Berkeley)
> > Levine David K.(Washington University)
> > Levy David M. (George Mason University)
> > Linnainmaa Juhani (University of Chicago)
> > Lott John R.  Jr. (University of Maryland)
> > Lucas Robert (University of Chicago - Nobel Laureate)
> > Luttmer Erzo G.J. (University of Minnesota)
> > Manski Charles F. (Northwestern University)
> > Martin Ian (Stanford University)
> > Mayer Christopher (Columbia University)
> > Mazzeo Michael (Northwestern University)
> > McDonald Robert (Northwestern University)
> > Meadow Scott F. (University of Chicago)
> > Mehra Rajnish (UC Santa Barbara)
> > Mian Atif (University of Chicago)
> > Middlebrook Art (University of Chicago)
> > Miguel Edward (UC Berkeley)
> > Miravete Eugenio J. (University of Texas at Austin)
> > Miron Jeffrey (Harvard University)
> > Moretti Enrico (UC Berkeley)
> > Moriguchi Chiaki (Northwestern University)
> > Moro Andrea (Vanderbilt University)
> > Morse Adair (University of Chicago)
> > Mortensen Dale T. (Northwestern University)
> > Mortimer Julie Holland (Harvard University)
> > Muralidharan Karthik (UC San Diego)
> > Nanda Dhananjay  (University of Miami)
> > Nevo Aviv (Northwestern University)
> > Ohanian Lee (UCLA)
> > Pagliari Joseph (University of Chicago)
> > Papanikolaou Dimitris (Northwestern University)
> > Parker Jonathan (Northwestern University)
> > Paul Evans (Ohio State University)
> > Pejovich Svetozar (Steve) (Texas A&M University)
> > Peltzman Sam (University of Chicago)
> > Perri Fabrizio (University of Minnesota)
> > Phelan Christopher (University of Minnesota)
> > Piazzesi Monika (Stanford University)
> > Piskorski Tomasz (Columbia University)
> > Rampini Adriano (Duke University)
> > Reagan Patricia (Ohio State University)
> > Reich Michael (UC Berkeley)
> > Reuben Ernesto (Northwestern University)
> > Roberts Michael (University of Pennsylvania)
> > Robinson David (Duke University)
> > Rogers Michele (Northwestern University)
> > Rotella Elyce (Indiana University)
> > Ruud Paul (Vassar College)
> > Safford Sean (University of Chicago)
> > Sandbu Martin E. (University of Pennsylvania)
> > Sapienza Paola (Northwestern University)
> > Savor Pavel (University of Pennsylvania)
> > Scharfstein David (Harvard University)
> > Seim Katja (University of Pennsylvania)
> > Seru Amit (University of Chicago)
> > Shang-Jin Wei (Columbia University)
> > Shimer Robert (University of Chicago)
> > Shore Stephen H. (Johns Hopkins University)
> > Siegel Ron (Northwestern University)
> > Smith David C. (University of Virginia)
> > Smith Vernon L.(Chapman University- Nobel Laureate)
> > Sorensen Morten (Columbia University)
> > Spiegel Matthew (Yale University)
> > Stevenson Betsey (University of Pennsylvania)
> > Stokey Nancy (University of Chicago)
> > Strahan Philip (Boston College)
> > Strebulaev Ilya (Stanford University)
> > Sufi Amir (University of Chicago)
> > Tabarrok Alex (George Mason University)
> > Taylor Alan M. (UC Davis)
> > Thompson Tim (Northwestern University)
> > Tschoegl Adrian E. (University of Pennsylvania)
> > Uhlig Harald (University of Chicago)
> > Ulrich, Maxim (Columbia University)
> > Van Buskirk Andrew (University of Chicago)
> > Veronesi Pietro (University of Chicago)
> > Vissing-Jorgensen Annette (Northwestern University)
> > Wacziarg Romain (UCLA)
> > Weill Pierre-Olivier (UCLA)
> > Williamson Samuel H. (Miami University)
> > Witte Mark (Northwestern University)
> > Wolfers Justin (University of Pennsylvania)
> > Woutersen Tiemen (Johns Hopkins University)
> > Zingales Luigi (University of Chicago)
> > Zitzewitz Eric (Dartmouth College)
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