Thursday evening one of my daughters called me; she was over at USC studying, and wanted to know if she should run out and get some gas for her aged car (which doesn’t get the best mileage). She had been told that it would go up to $5 a gallon by midnight.
I told her not to worry about it (she had half a tank). We were all just going to have to get used to higher gas prices, because they’re only going to keep ratcheting up. Getting a few gallons at a lower price this once wasn’t going to make a noticeable difference in the long run.
On the way home that night, I saw the queues of cars out into the streets. Of course, those twits — the hoarders — are the reason some stations are out today. Looks like some of us will be carpooling for the next week or so, which is not a bad thing (from an Energy Party perspective), just irritating.
But a run on the gas stations is one thing. Will the banks be next, in this pessimistic environment? I saw this in the WSJ this morning:
The crisis gripping the nation’s financial system deepened, with Lehman Brothers Holdings Inc. racing to sell itself over the weekend and other major U.S. institutions scrambling to show they have the financial wherewithal to ride out the crisis.
Potential buyers of Lehman were heading toward a standoff with federal officials Friday. Firms weighing offers for the battered investment bank sought financial assistance, while Treasury Secretary Henry Paulson has been unwilling to support a government-led bailout, people familiar with the situation say. The weekend’s negotiations over Lehman’s fate could define the next chapter of the government’s handling of the crisis.
Friday’s unease spread beyond Lehman. Shares of American International Group Inc., the giant insurer, fell more than 30%. Standard & Poor’s said it might lower its credit ratings on AIG because of its tumbling share price and the increasing yield on its debt instruments compared with safe government Treasurys. (See related article.)
Now I don’t care much about Lehman; I don’t know what it is any more than I understand the Bear Stearns thing. But that "spreading crisis" talk seems to me a cause for concern.
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The failure of Fannie Mae and Freddie Mac, government-owned, quasi-private, mortgage guarantee programs, just doubled our national debt.
Democrats started this back in the 1980s and accelerated deregulation and credit requirements under Clinton. President Bush, afraid reform of the corrupt lending would slow the economy, now has the hot potato in his hands.
The government made rules requiring junk loans to unqualified black and Mexican home buyers, even to the point of programs for illegals. Now that same government seizes the private assets and is going to run the program completely.
This is the same government which admits to “losing” 31% of last year’s Medicare money, but wants to seize and run all healthcare in America.
Congressman John Spratt, head of the Banking Committee, needs to be removed from office.
I gotta agree with Lee on all points:
How bad are they?
Over the years some Republicans did try to lessen the chances of a F&F failure by instituting tighter controls. They failed.
The cast of characters, party affiliation, and roles includes:
The full impact is yet unknown. The bottom line is that the taxpayers are, er, screwed.
I finally got around to writing another blog entry, this time on the current gas shortages. I found a blog that did a better job than I did two years ago after Katrina explaining why gas prices shoot up.
Too bad there’re no refineries closer to us. I guess that would make sense only if there were a supply of petroleum near by, like off the coast. That would mean jobs too, pretty high-payin’ ones at that. And the state would get a piece of the action, if only our legislators could find a way to spend the money.
The current subprime mortgage debacle (which has led to the current mess for Fannie and Freddie) is an offshoot of the Gramm-Leach-Bliley Act written by former senators Phil Gramm (R) James Leach (R) (referenced in Mike’s post above) and passed by the 106th Congress (both houses Republican). The Gramm-Leach-Bliley Act repealed much of the 1933 Glass-Steagall Act which kept investment and consumer banks separate (among other consumer protections). It was signed into law by President Clinton as part of a larger spending bill.
It’s another sign that some sectors of the economy must be regulated to prevent economic turmoil for consumers, businesses and taxpayers. In this instance, government isn’t the problem, the lack of government is the problem.
Lee, how about you actually use your computer for research on facts and stop spewing Rush’s talking points. Does Rush charge you for use of his material.
It took Norm & I exactly 30 seconds to find documented facts to totally gut your mindless, zombie rant…
ugh..GOP goooood….Dem..baaaad.. even though you were 100% wrong AGAIN. No wonder you love George W. Bush…the two of you haven’t been right on anything in 8 years.
Just what are the colors of the rainbows in you world as here, we deal with actual facts to form our opinions.
Well, it took me a little longer than 30 seconds…
Lee is right, once again.
What are we waiting for? Eventually, oil will be obsolete. Shall we continue enriching Hugo Chavez, Vladimer Putin, and radical Islamists? We have vast resources. It is beyond time to exploit them. This is genuinely a national security issue. As Mike said, we need to drill, we need refineries, AND we need to continue to work on alternatives. We have got to reclaim our economic independence.
Mike Cakora, thanks for taking the time to inform us with your “cast of characters” comment.
The name Gorelick seems to have come up often on such lists. The WSJ’s “Wall of Shame”,WAPO’s “False Signatures Aided Fannie Mae Bonuses”, Abel Danger, etc. As you point out, she is not alone.
What do most of these people and their enablers have in common with each other?
They are in the 2% of the U.S. workforce known by names (e.g. lobbyists) that boil down to a single profession – lawyers.
How will we know there are too many lawyers in elected office? Corruption in appointed positions will be rife. Unwittingly, you have just informed us that corruption has been rife.
There is but one way to stem embedded corruption: turn lawyers out of office en masse (in bipartisan, equal opportunity fashion).
If another 2% occupation — barbers, for instance, comprised 55% of the U.S. Senate
instead of lawyers, there could be no concentration of power in one profession as there now is with an all-lawyer Supreme Court, and when lawyers often become president.
In fact, it is time to break lawyers’ monopoly on the Supreme Court, in my opinion. A barber there could be no worse.
Barbers have a solid handle on public issues
gained from listening to and debating, rather than making speeches to, the public.
This illustrates the need to come up with a different way to get around. We won’t have access to 20 million barrels of oil a day much longer. Isn’t that clear by now? All you folks who think drilling our way out of this mess is possible are, as T. Boone Pickens says, completely missing the point. We can’t. Period. Thanks to 8 years of oil men running the energy show we’re in a much deeper hole now than ever before.
It’s amusing you political types only play the blame game and no solutions offered. In your political pee pee contest only my pants get wet. The lobbyist always block the splash from the elected, the lawyers and the insiders and the common taxpayers pants again get soaked. Bush has had eight years what has he accomplished? Where is the V.P.at the bank? It all smells and the next line up card doesn’t give me any warm fuzzy feelings especialy the two V.P’S. Partisian politics are killing the average citizen, the ones paying the bills while the connected insiders eat at the trough. It seems to happen in Columbia daily. Follow the money in local deals, appointed commisions, real estate deals, zoning ect. the trail will lead back to the funds raised to start the next merry go around cycle. Good example, take a look at the so called Five Points South/ City parking lot mess.It was a done deal and studied to death.Then new people were elected,now new committie appointed to decide if parking lot is really needed after 20 years of studies. Surprise1!The cities deal changed at last minute with city staff, Mayor and most of council SUPPOSELY UNAWARE till hour or so before voted on. The new deal on the surface was to save the city 500 grand but in reality allowed the developers to get out of their commitment to build condos they now couldn’t sell anyway due to changed market.The changed city offer also allowed the project opt out from the PUD requirments.The needed parking project has been canceled a appointed commitie has NOT ONE PERSON that knows anything about parking or buisness but filled with neighborhood leaders who will go back and start the process all over. Double DUH!!We pay taxes for experinced employees of the city to do this job and the city has paid for many studies.Why was the responsibility farmmed out to people who haven’t a clue to decide how our taxes are spent and have to start from scatch. Political pay back is why. Without knowing affialtions I would guess it all ties back to fund rasing and who is on which team.If The State would do an in depth study using this project and others I believe they would show the local level goverment isn’t working for the good of all but for the greed and needs of a few. The city has spent tens of millions on improvements and half a dozen needed parking structures in the Vista area without any of these problems. Why has this become such a political football with unelected neighborhood leaders involved? Is this how our goverment is suppose to work? I only see smoke and mirrors and a pile of something I have yet to I.D. Brad my rant most likely belongs on the editorial page sorry but I feel better now. Please help fan the smoke so we can see.
lee
how do failutes of government owned institutions cost shareholders billions of dollars? while bush has sold the government to big oil, they haven’t actually issued shares of stock. i guess that would be too much of a hot potato for an administration which has been in charge of a major economic slowdown for years. as reagan said “are you better off now than you ..” incidentally chief ditto needs to check his presctiptions: the only way the deficit doubles is if the underlying value of the homes built under the mortgages-subprime and regular-drops to zero. you know, the private assets the government is seizing. even the overwhelmingly republican home building industry cnnot create zero value when an actual home is built on a piece of property. this is not like mccain’s buddy keating and the s & l barons of the 80s when money was just stolen. losses are incurred by the shareholders and by financial institutions holding agency paper. there was never a requirement that loans be made to marginally qualified buyers and certainly not illegal immigrants or Mexicans, germans or saudis. greedy people in another gop industry-mortgage issuers and packagers and financial houses like bear sterns and lehman-cheered on by the wall street journal- grabbed an “opportunity”. greenspan warned about this years ago but bush and his boys did not want to hear it-they couldn’t just sell out to big oil: defense contractors had their so wall street wanted their “share” too. hope ditto’s new jet is nice.
george32, you know so little about banking that I cannot clog up the thread trying to educate you.
In simple terms, Freddie Mac and Fannie Mae are government programs to create mortgages for banks and mortgage companies to broker.
The failure of these quasi or pseudo-private financial companies will cost the TAXPAYERS money. The executives are being paid millions each in severance packages. Where is the investigation? Why is there no punishment, like there was for Enron?
Lehmann Brothers is a private stock and bond company which packages mortgages into bonds for sale to investors. The government shouldn’t bail it out. Let the mortgages be picked up in bankruptcy sale.
This started with Democrats in the 1980s.
Clinton pushed deregulation in order to expand loans to unqualified minority home buyers.
Rep. John Spratt (D-SC) and Sen. Joe Biden (D-DE) led the legislation making these corrupt loans possible.
Mike,
Amoco wanted to build a small oil refinery off Beaufort, but the SC legislature stopped them, so they developed the land into a resort.
Lee, that is the 2nd time in this thread you have talked about the 1980s and what Clinton did. Your credibility (a tenuous concept) declines with each post.
So, keep posting, duder.
Mr. McAlister,
If you were able to discuss Clinton and the Democrats role in the mortgage market collapse, I am sure you would do so.
As a point of information, I designed and developed a mortgage production and bond packaging system which includes an expert system which runs a hedge fund for mortgage producers. It has sold over $200,000,000 of licenses, and user of it has had an financial problems. I have consulted to 2 mortgage bond packaging firms on Wall Street, as well.
I have more than a passing interest in mortgage banking, and more than second or third-hand accounts, much less the ignorant wishes and speculations of Democrats about their role in the market crash.
Typo correction:
“NO user of the expert system I developed has had ANY financial problems in its mortgage portfolios.”
Mike, good article on why gas prices are going up. I only disagree on the solution. What we need is a better, more efficient way to get around. More vulnerable oil supplies in the hurricane-prone ocean will just give the future Katrinas, Gustavs and Ikes more targets and we will become even more dependent on an already shakey source of energy. With American oil production in decline for 38 years and increasing tensions in nations abroad isn’t it time to look for solutions to our energy problems in areas that don’t include oil?
From Time Magazine:
What we are seeing on Wall Street today is the result of an ideology gone amok. There was call to loosen and change the antiquated regulations governing investment back in 1980. But the Republican era has seen that loosening go to the point of near-cataclysm. Banks are failing, markets dropping. We are in the midst of a slow-motion economic crash. What happens next is an economic contraction: loans aren’t available, so businesses can’t expand. A crash comes at the beginning of a period of economic trouble.
Here’s the entire article.
f any of you think that the answer to our oil problem is about ethanol, you can forget that solution. The billions of dollars that are going for grants to the farmers and the industry that will turn corn and other food products into gas, is double dipping and the people are paying way above the amount that gas could cost from drilling.
The people are not being informed of the astromical amount of water that it takes to process the corn, wheat, grass etc into biofuel. The government is awarding the farmer subsidies that far exceed anything that was ever awarded to the auto industry. The vote from the farmers is something that goes to the politician that gives the most for grants to the farmers to provide the ethanol. Ethanol is not the answer to our fuel problems. The government giving money (more than ever because the farmer has been subsidized by the government way beyond their need to keep the farmer part of our export business) will be increasing the cost of the food supply to the poor in our country and around the world. Just so that you can understand what I am saying. I am saying that you cannot eat oil/ethanol. When you turn food supply into ethanol we see the results in nationwide hunger. Are we so dumb that we cannot see that you cannot put food into the car tank?
You people on the blog need to get an education in what could happen if you do not wise up.
For once I agree with slugger. Farm subsidies are far out of control (a situation for which both parties are to blame) and ethanol is not just a dead end, it’s actively counterproductive. Obama’s pandering to corn producing states and voters is one of the few major issues I have with him.
That said, drilling for more oil domestically is only a stopgap measure at best. Government analyses project additional offshore drilling will not have any significant impact before 2030, and if we haven’t come up with some workable alternative energy options by then we’ll be in deep trouble.
Norm, that was not a news article. It was a political opinion piece attacking McCain, written by an Obama supporter. Not factual.
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Sarah
http://blanket.ws