Explaining Paulson's plan better than Paulson.
We helped bankrupt the banks. Now we're doing the same thing for health care! What does mental health "parity" legislation, which has now been incorporated into the big "rescue" bill passed by the Dem-controlled Senate,, have to do with the nation's financial crisis? .. . P.S.: Actually, the thinking behind the push for "parity" and the now-questionable decades-long push to extend mortgages to "underserved" groups seems eerily parallel: 1) Stodgy/greedy old bankers say they can't afford to lend to minorities who don't meet traditional mortgage criteria. But we have a noble social goal to fulfill and we know they're wrong! ... 2) Stodgy/greedy old health plan administratiors say they can't afford to cover hard-to-diagnose mental problems (anxiety) and substance abuse to the same extent as they cover easy-to-diagnose physical problems. But we have a noble social goal .... 1:55 A.M.
Tuesday, September 30, 2008
TARP, Baby! Veteran Fannie Mae critic David Smith builds on Andy Kessler to explain why Paulson's "troubled-asset" purchase plan may make sense. The taxpayers could even make so much money that the governement could fund ... national health care! (Take that, Jim Lehrer.) ... As usual, Smith's post is exceptionally easy to follow for those (like me) who don't understand fancy financials. ... It's a particularly useful antidote to Krugman's critique--which seems to assume, in at least one of its forms, that the government will only pay the current, going, distressed market price for the assets it buys. Smith argues it could pay more than this going, "immediate" "market" value and still a) be driving a reasonably hard bargain, b) boost the economy by freeing up capital, and c) make money down the road. ... In part that's because the market in "troubled assets" isn't completely rational right now, something that shouldn't surprise leftish economists. In part it's because, as Smith and Kessler note, the government (unlike an ordinary purchaser) can goose the economy to make sure its "troubled assets" regain some of their value. .. Two obvious problems: 1) Goosing the economy usually means inflation. Kessler is not wildly convincing on why this isn't a threat; 2) Smith seems to assume that of course real estate will bounce back if the economy does. But why? A bubble is a bubble. A growing economy didn't bring back the tech stocks that were overpriced in the 90s--unless someone got rich off their old Pseudo.com stake without telling me. ...
Smith responds (via e-mail):
Two points. (1) Smith's Law of Inter-generational Revenge: Inflation is the revenge the young take on the old for the previous generation's overspending. Yes, I expect inflation to rise, and the question is whether its rise stalls the economy. (2) Unlike tech stocks, which rode on anticipated future earnings, real estate has earnings (homeowners' cost of occupancy); and real estate is a necessity, not a luxury. You can consume less or more real estate, but you've got to occupy something." ...
Monday, September 29, 2008
If Nancy Pelosi had wanted to screw Sen. McCain, could she have done a better job? Just asking! ... 8:19 P.M.
Photograph of John McCain on the Slate home page by Alex Wong/Getty Images.