WSJ: Bailout Discussion
Here's the video I did for the WSJ on Tuesday -- it was the #2 video on the WSJ.com site yesterday:
"Barry Ritholtz, the writer behind the popular economics blog "The Big Picture," discusses his soon-to-be-published book, "Bailout Nation." He tells WSJ's Christina Jeng the government might be too quick to come to the rescue and it might not even benefit the economy. (Sept. 23)
Thursday, September 25, 2008 | 01:00 PM | Permalink
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"Capitalism without failure is like religion without sin."
I couldn't have said it better myself.. Great video, Mr. Ritholtz
Posted by: Domenic | Sep 25, 2008 1:08:52 PM
book cover looks good.
"Prophylactic approach"
So are you saying the Paulson Plan is just a trillion dollar condom?
Posted by: Vermont Trader | Sep 25, 2008 1:09:31 PM
Nice interview!
Looking forward to the book.
Posted by: JS | Sep 25, 2008 1:14:15 PM
Normally I'm a strong advocate of birth control measures, but in this case I'd prefer Bailus Interruptus.
Posted by: bluestatedon | Sep 25, 2008 1:14:16 PM
I'd like to continue on the thread we had yesterday about Debt/GDP ratio, since it appears this bill may pass in the next few days.
Fact: 14 trillion dollar economy
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
Fact: as discussed yesterday, Hank wants to increase the debt ceiling to 11.3 trillion.
Fact: 11.3 divided by 14 puts out debt/GDP ratio at 81%..very high...(agreed it is not Italy, yet)
BUT..as I posted earlier, Bill Gross today says at least another 500 billion will be needed for this handout, er, bailout..
This also does not include the 50 billion that I read today may be going to Detroit, the "Big 3"...which I thought one of which was privately held, and not a public corportation...
Let's see...11.3 plus .55 as noted above is 11.85 sure debt divided by 14 is 84.64% debt/GDP ratio...
Well, see how easy it is to spend money when your credit card has no limit...
I think if I was Hank Paulson I would sing," Ain't no business like show business like no business I know" every morning while I was shaving. I think he might even win on The Apprentice...
I wonder if he will find a good job in January that keeps a roof over his head.
Posted by: Bruce in Tennessee | Sep 25, 2008 1:25:19 PM
AWESOME. Get those books printed and on the shelves!
Posted by: Tony | Sep 25, 2008 1:40:33 PM
Yikes!
Tax on Trades Should Be Part of Rescue Plan, Some Democrats Say
By Laura Litvan
Sept. 25 (Bloomberg) -- A group of House Democrats is proposing to make Wall Street companies and investors pay more of the cost of any financial rescue plan through a new tax.
In a letter sent late yesterday to House Speaker Nancy Pelosi, 16 Democrats asked her to ensure any rescue legislation include a ``transaction tax'' on all U.S. stock trades and on other types of trades, such as credit default swaps, options and futures. They are proposing the tax would be at a rate of one quarter of one percent on all trades.
``The same Wall Street speculators and investors who are principally responsible for having caused this avoidable financial crisis and profited from it must now be required to pay for it, not U.S. taxpayers,'' according to the letter, which was signed by Representative Peter DeFazio, an Oregon Democrat, and Representative Pete Stark, a California Democrat.
In a news conference today, House Speaker Nancy Pelosi said she would support some mechanism that could return more funds to Treasury coffers if the $700 billion to be spent to acquire troubled investments isn't later recouped. She didn't endorse any specific proposal and suggested it is likely to be explored later.
``You might make a judgment down the road that there is a shortfall and it should be covered,'' Pelosi said.
Posted by: Vermont Trader | Sep 25, 2008 1:44:24 PM
BR, can you get me her phone number? Nice interview. Your book should be a best seller...by the time it hits the market the market will be tanking and everyone will be wanting answers to all the fock-ups.
Posted by: Concerned Citizen | Sep 25, 2008 1:44:38 PM
It looks like Pelosi is running interference for Treasury here and gathering up Dem votes. Of course she represents Foreclosure Central in California, so there is no way she wouldn't be in support of bailout entities. There have to be some foreclosure workout clauses in this thing now as well, you would assume.
As Barry points out, none of this will work in terms of housing prices. Inventory continues to pile up because there is no true price discovery taking place. So even if it is sold as a Housing Rescue it is nothing of the sort.
How to trade this? Buy the signing in the Rose Garden, and sell the text of the bill on Monday morning? Or just sit tight until all of the jawboning is over and we get through the Sept 30 refinancing deadline? Long GDX and short the 10-year for now.
Posted by: leftback | Sep 25, 2008 1:45:30 PM
@VT Trader: Yikes indeed !!
A tax on trades and the ban on short selling is a classic example of shooting the messenger. If they keep on doing this, people will walk away and then it is the empty elevator shaft to the basement.
These people have no idea how markets work...!!
Posted by: leftback | Sep 25, 2008 1:48:44 PM
Somewhere, Karl Marx is laughing his ass off.
Nice job, Barry.
Posted by: Uncle Jefffy | Sep 25, 2008 1:52:35 PM
You are a freakin Legend! - Your blog is highly instructive.
Posted by: jdoe | Sep 25, 2008 1:54:17 PM
When I hear Barry I think of Regis Philbin.
Posted by: Miracle Max | Sep 25, 2008 1:56:56 PM
Vermont Trader @ 1:44:24 PM
“The same Wall Street speculators and investors who are principally responsible for having caused this avoidable financial crisis and profited from it must now be required to pay for it…”
Right. The average retail investor at Etrade or Ameritrade caused this.
What morons they are.
Posted by: DL | Sep 25, 2008 2:00:17 PM
I'm glad to see The Wall Street Journal is giving after-school jobs to high school students.
Was that her first interview?
Posted by: George | Sep 25, 2008 2:04:37 PM
Nice interview, Barry. Good soundbites. Your book is gonna make the charts, I predict (couldn't have timed it better).
Too bad the WSJ paired you with a little girl reporter with a voice like my 11-year-old. I'm sure she's a smart gal, but the MSM is shooting itself in the foot when it tries to save money by having print reporters do broadcast. It's image uber alles, and while you came off as confident and expert, the WSJ reporter, alas, came across as a high school cheerleader. Not really someone you want representing your paper to discuss heavy issues with serious sources.
Whatever. I'm sure Murdoch likes her.
Posted by: jtil | Sep 25, 2008 2:06:00 PM
If the bailout is pretty much as advertised the stock market will probably go up -- hard to imagine that much money pumped in w/o comparable impact on equity prices to say nothing of squeezing shorts -- but inflation is also probably going to rise as will bond yields so the real question becomes how you preserve your purchasing power: gold and equities could both wind up on the top of the heap in that scenario (with the understanding that the heap is actually in a deep hole so the top is about where level would be). JMO
Posted by: RW | Sep 25, 2008 2:09:34 PM
Thank you, Mr. Rithotlz. Thanks to the accurate info I've been reading on your site for the past year or so I was able to explain to my wife what was going on with the economy and the governmetn in surprisingly good detail and also answer her very logical questions clearly and sensibly. She understood the implications longer term also. When she understands things, me, for instance, she stays in a good mood for a while. That means good things happen for me...if you know what I mean. Good lookin' out, Barry. You done gone and got me some!!
Posted by: andre lee | Sep 25, 2008 2:11:13 PM
So if most people are against the bailout(call it what it is - GRAFT),
but CONgress passes it anyway(which they will),
The new math in the US says that
the winner of the Presidential Election
is the candidate who receives the least votes and that people hate.
Posted by: MarkTX | Sep 25, 2008 2:16:19 PM
The title of the bill should be:
"Postpone financial pain till after the election so McCain can be elected."
Posted by: David Chapman | Sep 25, 2008 2:20:19 PM
Bruce, my crystal ball says...
Hank Paulson joins a consulting firm after leaving office that bills a lot of hours to GS.
Ben Bernanke becomes an author of children's pop-up books, including "The Incredible Mr. Bubble" and "Ben Bernanke's Big Banzai Boingeroo Up the Bung Hole."
George W. Bush continues to be an avid reader of children's pop-up books after leaving office.
Dick Cheney returns to his crypt in the ruins of Nineveh to sleep for 1,000 years.
Arlo Guthrie, Jr. becomes famous for writing "The Ballad of Warren Buffett."
Pat Robertson blames the Great Crash of '09 on homasectials and Hollywood liberals.
Theodoric and Vercingetorix are named to the Joint Chiefs of Staff, insisting on pay in gold, mutton, and women.
The AMA successfully lobbies to give its members the right to seize body parts to collect unpaid bills.
America recovers and becomes dominant once again, thanks in large part to a well-edited heroic montage of Benny Goodman songs, FDR smiling, young people swing dancing, interspersed with dramatic Battle of the Bulge and D-Day footage.
Posted by: Madame Sosostris | Sep 25, 2008 2:22:45 PM
Congratulations, Barry! Excellent timing, too.
Posted by: oyster | Sep 25, 2008 2:31:29 PM
Madame:
Thank you. What does your crystal ball say about the bet of a Whopper tomorrow...that we end lower than we ended Monday? Mr. Leftback eats like he has a tapeworm....
Thanks.
Posted by: Bruce in Tennessee | Sep 25, 2008 2:33:59 PM
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. —Thomas Jefferson, 1802
Posted by: SPECTRE of Deflation | Sep 25, 2008 2:42:00 PM
Bruce,
Madame Sosostris always says that future performance is no guarantee of past or present performance...
My ball is getting hazy... tomorrow's close will be ... volume of ...
Sorry, but the spirits demand another $20 to allow me to read the ball.
Posted by: Madame Sosostris | Sep 25, 2008 2:43:38 PM
