This one is an interesting one, because it’s not so much D and R as … I don’t know what and I don’t know what. I have good Dem friends (like Finnegan above) who agree with good Repub friends (like you, Bill) who think the whole thing was a boondoggle. And I have good friends on both sides who think those who think this was a boondoggle have heads full of lead.

And as is so often the case, I end up in the middle hearing it from both sides, which is what good journalist types do most of the time. I definitely see both sides to the argument, and while I come down firmly on the pro-rescue bailout side, it’s not for political reasons, because if it was, what would those political reasons be? Because I support Obama when McCain backed the bill as well? Nah. This one is a lot more complicated than that.

From the transcript of the Sept. 25 broadcast of ABC’s “Good Morning America”:

(ABC NEWS’ CHRIS) CUOMO: A little surprising to you to hear the Democrats saying, “This came out of nowhere. This is all about the Republicans. We had nothing to do with this.” Nancy Pelosi saying it. She signed the ’99 Gramm bill. She knew what was going on with the SEC. They’re all sophisticated people. Is that playing politics in this situation?

CLINTON: Well, maybe everybody does that a little bit. I think the responsibility that the Democrats have may rest more in resisting any efforts by Republicans in the Congress or by me when I was president to put some standards and tighten up a little on Fannie Mae and Freddie Mac. [break] I think the biggest mistake, by the way, that contributed to the current circumstance that almost nobody talks about, is the repeal after decades of something called the uptick rule –

CUOMO: Mm-hmm.

CLINTON: — which allowed the hedge funds, heavily leveraged, and others to just drive down the market without any kind of automatic stoppers. But we are where we are. I think the most important thing is that you got two candidates for president saying, “Let’s try to minimize the partisan differences. We’ll have plenty of time later to look at who caused this and what mistakes were made. Let’s figure out what to do now and go forward.”

The part where Clinton continues his answer was left out of the right-wing blog posts about the interview. Conveniently. It never hurts to do a little digging …

“I think the biggest mistake, by the way, that contributed to the current circumstance that almost nobody talks about, is the repeal after decades of something called the uptick rule, which allowed the hedge funds, heavily leveraged, and others to just drive down the market without any kind of automatic stoppers.”

The uptick rule was repealed by the SEC on July 3, 2007.

- http://people-press.org/report/452/public-favors-bailout

(The second one is two weeks old. I reference that one to show that there was support for the bailout even at the outset.)

To be clear, Brent, I didn’t accuse you of proposing inaction in the face of inaction. I do accuse Bob Goodlatte and Jim Gilmore of that. (You are in the crossfire as you defend Goodlatte. My apologies.) I like your idea of having opponents drafting alternatives and debating the issue for weeks, but the opponents weren’t interested in drafting alternatives, one, and two, in my mind, and the minds of many Americans, we didn’t have weeks to figure this one out.

We will never know now, of course. For me, that makes me happy. As an amateur economics historian, I didn’t want to have the opportunity to see the Great Depression of the 1930s that I’ve read a lot about play out in front of my eyes.

I’m currently listening to the best episodes of This American Life I’ve ever heard. They’re about the credit crisis, what caused it, and what should have been done to stop it. Highly recommended listening:

http://www.thislife.org/Radio_Episode.aspx?episode=355
http://www.thisamericanlife.org/Radio_Episode.aspx?episode=365

For the record, I’ve never proposed inaction in the face of crisis. If you look at my comments here, I wrote, “Where were the expert testimonies? They should have had hundreds of leading economists testifying before Congress day and night for weeks while opponents drafted alternatives. Where were the alternative plans?”

I don’t disagree that the administration and Republicans and Democrats in Congress dropped the ball over a period of several years, and that’s what led to the crisis. My view is that when facing a crisis, it doesn’t do any good to talk about what you coulda, woulda, shoulda done. Give ‘em all hell for getting it wrong before, I’m there with you. But to respond to years of inaction leading to crisis with more inaction is irresponsible, in my view, and Goodlatte, with all due respect to him, given that this wasn’t an easy call either way, responded in this manner for reasons of political expediency.

Thanks, Bill, for sharing the suggestion from the financial guru that you quoted above. Part I looks good, but the politics to Part II make me a little suspicious of the gentleman’s motives. Which may be pure, since he ackowledges them in his presentation.

False.

That’s like when meteorologists predict a hurricane, warn residents to prepare, and the residents do nothing until the hurricane is already upon them. Congress saw this coming for years, but did nothing to prevent it. Leading economists have been predicting this for years. Everyone in the U.S. has known for years that housing prices have become grossly overinflated. Even among non home-owners, the term “housing bubble” is not new to the American lexicon.

Bush did nothing for years, except encourage people to live outside their means and push for market deregulation. Congress did nothing for years but allow deregulation to take place.

The argument that there was “no other way” is absolute BS. Congress should have been drafting a solid bill years ago. Instead, they panicked when Bush and Paulson put a gun to their heads and said, “You have to vote for this shitty bill and give us hundreds of millions of dollars immediately OR ELSE!”

And they did.

I have never defended anything Goodlatte’s done before, but your claim that “He did NOT vote for your interest, but instead – his own,” is patently false. I’m one of countless constituents that called his office (Monday and again yesterday) and urged him to vote no. And I’m not alone.

I. INSURANCE

a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

b. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.

a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.

b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while working with the borrower—again limiting foreclosures and ruined lives.

2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming
executives from being paid when they don’t do their jobs.

c. This backstop will cost less than $50 billion—a small fraction of the current proposal.

II. MARK TO MARKET

a. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

b. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.

III. CAPITAL GAINS TAX

a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in
the markets. Again, this costs the taxpayer nothing.

b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement
investments that go up instead of down.

This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess.