- Credit Crisis Redux

I once described the credit collapse as watching a man fall down the stairs in slow motion. Well things have changed fast in the “credit crisis”, and they still are, but now it seems to me the man is finally reaching the bottom of the stairs.

The Democrats made a big mistake when they had their media lap-dogs portray this is a “bailout for the Wall Street Fat cats”, but I think they’ve gotten it right now. I think they went that way to bolster their desire to turn the Paulson plan into a Democrat Christmas tree with goodies under it for all of the radical left interest groups like ACORN and La Raza. They couldn’t structure any 800 Billion dollar deal without cutting out a slice for themselves… they simply couldn’t. So they went with the shamelessly inaccurate “fat cats” line.

But now I think the Democrat leadership has realized that it wasn’t a useful or productive message because it got all the wrong people angry. And by that I mean the people who were most effected by that sound bite were libertarian leaning right, all of whom would rather perform their own appendectomy with a rusty garden trowel than let Barney Frank and Chuck Schumer slap an 800 Billion dollar bill on the American taxpayer. And then of course there was notorious dimwit Nancy Pelosi, and he pre-vote warm up speech to motivate the faithful God… what an embarrassment that woman is.

Anyway, I’ve gotten a lot of traffic on the credit crisis stuff over the last few weeks, so I went back and looked again at what I wrote just to make sure I didn’t write something a few months ago which now looks idiotic in the new landscape. I don’t think I did, but I leave it to you to be the judge. So here, with a little detail about where we all were in context of the crisis, is my “Credit Crisis Redux:”

First was this piece:

A Quant On The Credit Crisis
I wrote this just after the Fed provided a “credit backstop” to JPMorgan for the purchase of Bear Stearns. The data about pervasiveness or severity of the distress at other institutions was still unknown. I said that I was bored with the issue at the time… needless to say, that’s no longer true.

Then came this:

A Free Market Solution To Further Market Crises
I still think regulation like this will go a long way toward interrupting the boom-bust cycle, and reduce the need for further government intervention. But with the leanings of both of our candidates for president, I think this kind of Free Market Solution is exceedingly unlikely in the face of the scope of the current problem. Free Markets don’t’ fail, government regulation causes them to fail, but that fact is always ignored when it comes time to react to the crisis it creates and the answer is almost always more regulation, even if that regulation is likely to lead to another crisis.

Then came this piece:

Corzine Won't Ask For Taxpayer Approval (even though the law says he has to)
which described a little of the outlook for New Jersey during the coming crisis, and how it was effecting the current governor’s policies.

Then came this one:

Too Big To Fail: Fed Chief's Latest Temptation
which described the reaction my coworkers and I had to the Lehman deal. It was posted in the corner by my occasional shooting buddy John Derbyshire, and it received a great deal of attention.

Some of which resulted in this:

Credit Crisis: So What Happens Now?!
which was my testimony for the NJ Legislature Labor Committee on the topic.

And then finally there was this:

Witch Hunting Instead Of Deer Hunting
where I’m back to harping about the wholesale distortion by the news media, and (to my eyes anyway) I seem as frazzled and unfocused as everyone else in the business.

I’m not going to detail all the mountains of ridiculous conspiracy theories being tossed around out there by the under informed, or review any more forward looking stuff until after the vote this afternoon. I’m expecting the vote to pass this time; not because the bill has tax break kickers, but because the media has gotten out of the way. No one was willing to bail out the Wall Street fat cats, but now that it’s clear that it never would have done that, people can get behind it as a bad but necessary thing.

After that, hopefully, we can begin to look at solving the problems that caused this, and can begin to consider how to end the systematic distortions of reality that were Freddie and Fannie’s mortgage policies. Government caused this, not the free market, so we'll need to change the government rules if we want to fix it.