A few quotes and Gingrichian observations:
1) He called it a “stupid plan” that looks like it had been designed by autocrat Vladimir Putin. He also said it will be a “nightmare” to implement and full of corruption.
2) He said the Paulson Plan would be a “dead loser” on Election Day that will “break against anyone who votes for it.” It will hurt even worse with the 2010 election once Americans see what a drag it is on the economy when implemented.
3) He recently chatted with economic historian Alan Meltzer who advocated doing nothing rather than implanting the Paulson Plan. Meltzer apparently joked to Gingrich that this was about the third time he had seen Wall Street scream “the apocalypse was nigh” only to have the economy keep right on chugging along.
4) Gingrich thinks that if the Paulson Plan isn’t passed by this weekend, it is dead and the White House better have a Plan B, economic-growth package ready. Right now, he still thinks it has an 80 percent chance of passage, partly because of Paulson’s apocalyptic tone that if a bill isn’t passed, “the whole world will end on Tuesday.”
5) He advises McCain to play the maverick and come out against the Paulson Plan. Then it will be the Obama-Bush plan.
Much more here.
Technorati Tags: investment, real estate, real estate marketing
J Boyer Summit NJ says:
Those crazy Republicans, what they won’t do to win an election. ObamaBush plan? Please put those 2 in a room and you would have a cat fight. They have nothing in common politically or economically.
Hey that is a good idea actually, is there any way we could lock Bush, Obama, McCain, and their running mates, and oh yeah Dick Cheney in a rubber room until after the elections. There has got to be someone better to run the country than any of these people.
September 23, 2008 — 12:26 pm
Clarendon condos -- Jaybird says:
#5 is classic and great strategy I must say as a political junkie.
j
September 23, 2008 — 12:37 pm
Clarendon condos -- Jaybird says:
I’m downloading dreamweaver CS3 right now and scared to death I won’t even be able to get my index page set up to work from after having screwed around on drupal creating a couple folders I don’t even know how to access now….
September 23, 2008 — 12:39 pm
Michael Cook says:
The question that I have for any politician is do you understand the gravity of the problem, heck do you even understand the problem at all? I have yet to see anyone with a serious financial background in government offer a plausible alternative to this plan.
The biggest issue I have seen so far is the question of what does the government actually pay for these things? If they pay fire sale prices, then paper losses become real losses and banks go bankrupt. If they overpay, then they reward very bad behavior. Its a tough situation.
If you havent heard of a CDO before last month, then you are probably not qualified to weigh in on the situation. Hell, I have been an investment banker for almost two years plus have an MBA and I would not call myself qualified enough to weigh in on the nuts and bolts of the situation/solution.
The most reputable people I know in the industry are behind this, even contrarians like Buffett support it.
Excuse me if I prefer his opinion over the shrew economic genius of someone like Newt Gingrich.
September 23, 2008 — 1:01 pm
Bob says:
“There has got to be someone better to run the country than any of these people.”
I like Newt. He is smarter than both tickets combined.
“a “stupid plan” that looks like it had been designed by autocrat Vladimir Putin. ”
Dead on.
September 23, 2008 — 3:07 pm
Brian Brady says:
“If you havent heard of a CDO before last month, then you are probably not qualified to weigh in on the situation. Hell, I have been an investment banker for almost two years plus have an MBA and I would not call myself qualified enough to weigh in on the nuts and bolts of the situation/solution.”
Okay, MC- you’re overreaching here.
Let me interpret this for the readers: I know we screwed up because we created financial instruments that were so complex that the performance was the exact opposite of what we expected. Now, we want you to trust us with your money because only we understand them…so don’t criticize us.
“The most reputable people I know in the industry are behind this, even contrarians like Buffett support it.
Excuse me if I prefer his opinion over the shrew economic genius of someone like Newt Gingrich.”
Follow the money, MC; Buffet’s got an insurance company to protect. Industry people are not necessarily “reputable” anymore.
I, like you, have a lot of respect for the genius that comes out of Wall Street but the system’s broken. I have an inordinate amount of respect for the Goldman alumni but Rubin watched over G-L-B and Paulson watched Rome burn while he fiddled.
I’m starting to think it’s time to have a healthy dose of suspicion when dealing with Wall Street.
September 23, 2008 — 4:42 pm
Tom Vanderwell says:
“I’m starting to think it’s time to have a healthy dose of suspicion when dealing with Wall Street.”
The time to have suspicion actually would have been 2002, then today would be a walk in the park. We all missed it then and it’s come back to bite us.
Tom
September 23, 2008 — 8:29 pm
John Sabia says:
“Those crazy Republicans what they won’t do to win an election”
…The Democrats are any less crazier?
I agree, I think Newt may be right, but it scares me to think about what plan b might be.
September 24, 2008 — 5:18 am
Michael Cook says:
Brian,
You make good points. The main reason why I cited Buffett is because he is the smartest, yet most simplistic investor out there. It is also hard for me to believe that the richest man in the world would pander for Wall Street for a few hundred million dollars, after he has expressed his distate for it for over 20 years. Everyone is right to be suspicious of Wall Street, but in my opinion Paulson and Bernanke are not Wall Street. They represent the governments arm to Wall Street and are very smart people. Again, Paulson showed me he was for the government with the AIG deal. The taxpayers will be winners there, big time.
You can argue that Paulson created some of this when he was at the helm of Goldman, a very fair point, but he is in a completely different role. He knows the in / outs of the banks and he has a much better understanding of the situation than the armchair economist out there. Certainly better than most politicians. They should certainly be questioned and their plan should be vetted, but a lot of the critique and suggestions coming from the polictical pundits is well off the mark, including the Newt comments above.
September 24, 2008 — 7:37 am
Ryan Ward says:
How about if the government ensured the subprime loans the way that they do FHA, VA, etc…? This would make the loans marketable to other enities besides the federal government (read, someone would buy them) and it would cost a whole lot less than the Paulson plan.
It’s less broad, but, may be enough, along with a temporary stop to the mark to market accounting that creates daily peaks and valleys.
Then at least, we would be allowing the free market to make some choices and play a role in the “bailout”.
September 24, 2008 — 12:47 pm
Chris the Implementer says:
I am a Solution’s Day guy myself. very nice, and thanks for blogging on this.
Chris the implementer
September 24, 2008 — 6:24 pm
Michael Cook says:
“Temporary stop to the mark to market accounting…”
I would rather see more firms be required to mark to market. Sure it causes volatility, but it forces companies to be more transparent about their valuations (or cook up some crazy valuation model, then ask for a bailout…). Mark to market should be the standard because it lets investors know where they stand at all times.
September 25, 2008 — 9:02 am
Ryan Ward says:
I disagree. Daily volatility does not give an accurate analysis of value – unless you are a day trader. This is nothing more than legislators attempting to legislate ethics. Which by the way, is not possible.
It does not increase transparancy, it creates artificial peaks (bubbles) and valleys (bubbles popping).
You can not use legislation to create transparant valuations by making them do it more fequently.
September 25, 2008 — 9:07 am
Michael Cook says:
Mark to market accounting cannot account for daily votality. From a traders perspective mark to market gives them more information to trade on certainly, but only as it relates to quarterly reporting.
I am not sure what market pricing theory you subscribe to Ryan, but based on most of the research I have seen long-term value expectations determine the price of a stock. Daily movements are just noise, compared to a true adjustment of a stock price due to a change in investor expectations. Mark to market accounting gives an investor more information to predict the long term valaution of a particular assets and therefore better information on how to price the stock.
Perhaps you took my “at all times” a little to literal. I am simply suggesting that more information is better than less, period.
September 25, 2008 — 10:41 am
Michael Cook says:
“You can not use legislation to create transparant valuations by making them do it more fequently.”
Correct, but you can create better rules around reporting. I am not sure what is worse, having an asset listed at the value you purchased it at 20 years ago on your books at the same value with no guidance as to its movement up or down, or having an asset with a “market value.” In the cases of things that trade regularly, the later is clearly better, but you could argue that investors could simply find that information themselves. The more challenging aspect is marking to market assets that trade infrequently or worse have no real market. Then, you are at the whim of the company’s ethics / knowledge.
September 25, 2008 — 10:46 am
Ryan Ward says:
Perhaps I did take it too literally.
Mortgage backed securities have no market. So, in this instance, I think it would be best to allow the market come in and figure it out by at least temporarily suspending it and having the government back these loans up the way they do with FHA and VA loans. With the assurance of a loan guarantee, the free market would dive in on these securities at 22% of their original value and begin the correction without placing 700 billion dollars of taxpayer money at risk. I think the estimations for this type of plan show the risk to be nearer 100 billion.
It just seems easier to swallow.
September 25, 2008 — 10:58 am
Michael Cook says:
Would that be enough size to kick start the market back into pricing the assets? Right now banks dont want to turn paper losses into real losses, so I would be surprised to see banks as sellers at $0.22. The government plan projects buying 5% of the market, suggesting that is the amount needed to get the system pricing itself again. If they could do it with less, all the better. Unfortunately it seems like they are throwing in auto and credit card loans, so it seems to be getting bigger rather than smaller.
September 25, 2008 — 1:29 pm
Ryan Ward says:
I’ve seen the 22 cents on the dollar number in a couple of places recently as well as heard it on Fox business and CNBC, but, I just did a quick google check and couldbn’t find where I read it. I’ve got to run so I don’t have time right now to rummage around for it, but, the idea of insuring them would by itself (I think) make them marketable because of lowering the risk substantially, if not totally to anyone who would buy them and people would buy them with lowered risk.
I think it’s important to remember that behind each and evry one of those loans (most good, some bad) is real property that actually does have a value in the market today. Historically, real estate averages about 5%-6% annual appreciation and the reality is that these things actually do have quite a bit of value. It’s just that there is absolutely zero market to purchase any of it and my understanding is that much of it has to do with the mark to market accounting that has forced them to devalue them to the point of worthlessness.
September 25, 2008 — 1:47 pm