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This summary post by Ezra is so good, I can’t resist quoting it at length.

THE FIVE WORST PROBLEMS WITH THE BAILOUT BILL.

Commentary on the bailout has been a bit fractured as people work to understand this and that aspect of it, and try to keep abreast of the portions just now coming to light. But here are the main criticisms.

The Imperial Treasury: The bailout plan, as currently designed, gives Hank Paulson almost unlimited power with virtually no oversight. The bill says, “Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.” You almost wonder if they included that line as a gag, or if it was originally a hyperlink that got you RickRolled. As Yves Smith writes, “This puts the Treasury’s actions beyond the rule of law. This is a financial coup d’etat, with the only limitation the $700 billion balance sheet figure. The measure already gives the Treasury the authority not simply to buy dud mortgage paper but other assets as it deems fit. There is no accountability beyond a report (contents undefined) to Congress three months into the program and semiannually thereafter. The Treasury could via incompetence or venality grossly overpay for assets and advisory services, and fail to exclude consultants with conflicts of interest, and there would be no recourse.” It makes Hank Paulson the country’s economic czar, and fairly few of us were even aware that was an open position.

At What Price?: “Within hours of the Treasury announcement Friday,” wrote Sebastian Mallaby, “economists had proposed preferable alternatives. Their core insight is that it is better to boost the banking system by increasing its capital than by reducing its loans.” Buying the bad assets is an odd strategy: It requires paying much more than the market currently thinks they’re worth, but hoping that the amount you paid is less than they eventually will be worth. But no one knows how to price these assets. Mallaby continues: “Bad loans are weighing down the financial system precisely because private-sector experts can’t determine their worth. The government would have no better handle on the problem. In practice this means the government would make subjective choices about which bad loans to buy, and it would pay more than fair value.”

Why Not Equity?: Rather than recapitalizing Wall Street by buying the bad assets (as Krugman terms it: “Cash for Trash“), you could recapitalize Wall Street by lending money directly, and getting an equity stake in return. That would give Wall Street sufficient cash-on-hand to survive the current crisis, but ensure a more stable repayment process where taxpayers would recoup their investment. Instead, as Luigi Zingales writes, “The Paulson RTC will buy toxic assets at inflated prices thereby creating a charitable institution that provides welfare to the rich—at the taxpayers’ expense. If this subsidy is large enough, it will succeed in stopping the crisis. But, again, at what price? The answer: Billions of dollars in taxpayer money and, even worse, the violation of the fundamental capitalist principle that she who reaps the gains also bears the losses.” The bailout has been designed to do more than protect against collapse. It has been built to limit losses, which it will do by shifting them to taxpayers.

And the Foreclosure Crisis? The financial crisis is one symptom of the foreclosure crisis. The bad assets are largely bad mortgages, and when they go bad, it means Wall Street loses some money, yes, but it also means a family loses their home. And though ensuring Wall Street’s survival is a definite priority, it’s extremely hard to argue that elite investors who made bad bets in order to reap big profits deserve public help while ordinary homeowners who entered into bad mortgages on the strength of bad advice merit nothing. The terms of this bailout, however, actually make it easier to imagine a policy that could aid these folks. As Dean Baker says, “The government will inevitably come into the possession of a vast amount of mortgages in various stages of delinquency. The priority in these cases should be to allow people to remain in their homes, not maximizing the return on the mortgages. This should mean first a good faith effort to negotiate a write-down that makes it possible for homeowners to remain in their house as owners. If this proves impossible, then the next recourse should be to give homeowners the option to remain as renters paying the market rent for the house. Only if the homeowner can neither arrange a new mortgage nor pay the market should the government move ahead with foreclosure procedures.” For the government to protect Wall Street by buying these mortgages but abandon Main Street once it owns them would be obscene.

Emergency Powers? Lastly, the timing has everyone skittish. There’s little doubt that a bailout must be constructed quickly, but watching the Bush administration demand instant passage of an emergency bill that arrogates enormous power to the executive branch and shifts tremendous quantities of cash to the moneyed elite is bringing up bad memories, and rather a lot of them. $700 billion is a huge amount of money. We’re talking “foreign war” money. And the Bush administration want all that money under its direct control, with no oversight, under the terms of a Treasury plan developed in secret over a matter of days. Congress, happily is beginning to buck at this. Today, Barney Frank went on CNN and said that doing “one of the most important things ever done in America in two days really doesn’t work.”

I’ve been reading about the crisis compulsively without having much to say about it on the blog, largely because I feel I lack expertise. That’s a mistake. I’m not an economist, but non-economists have every right to discuss these issues. And you don’t have to have a PhD to know that giving a $700 billion dollar blank check to the same folks who brought us the Iraq war — not to mention the current economic crisis — isn’t wise.

I think Paul Krugman has this dead to rights:

I hate to say this, but looking at the plan as leaked, I have to say no deal. Not unless Treasury explains, very clearly, why this is supposed to work, other than through having taxpayers pay premium prices for lousy assets.

As I posted earlier today, it seems all too likely that a “fair price” for mortgage-related assets will still leave much of the financial sector in trouble. And there’s nothing at all in the draft that says what happens next; although I do notice that there’s nothing in the plan requiring Treasury to pay a fair market price. So is the plan to pay premium prices to the most troubled institutions? Or is the hope that restoring liquidity will magically make the problem go away?

Magic. It’s been the Bush administration’s plan on most things, why would this be any different?

But the real reason to oppose this deal is in Krugman’s penultimate paragraph:

And there’s no quid pro quo here — nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

Exactly. The plan as it stands basicall involves the government giving more than half a trillion dollars to banks, no questions asked, nothing in return for your average Joe and Jane except for the possible prevention of the collapse of banks — and that’s not guaranteed.

This looks like a plan guaranteed to help out a lot of rich folks…but not much else. We can do better than that. I don’t know if the Bush administration can do better than that, though.

As much as I understand why people want to say he did. Yes, he’s a total douchebag, and here’s a hint for anyone looking for a night of romance with someone you don’t actually know: don’t be carrying around $150 large in cash.

But nobody deserves to be drugged and taken advantage of. This wasn’t rape, but it’s in the same genre of crime. We wouldn’t be laughing if a female RNC delegate had been taken back to a hotel, drugged and robbed — and we’re not sure what else. Even if she was a cobag herself. We shouldn’t be laughing about this.

Hurricane Ike is just about to make landfall, and looks like it will just about bulls-eye Galveston, Texas. This is, of course, nearing the worst-case scenario; Galveston, like New Orleans, is extremely low-lying, and if Ike overtops or breaches the sea wall protecting Galveston, the damage could be catastrophic. This wouldn’t be a problem if Galveston had evacuated, but almost half the city chose to ride it out, with predictable results:

As Hurricane Ike pushed a swelling surge onto Galveston Island tonight, many Galveston residents who ignored a mandatory evacuation order phoned for rescues to no avail because emergency workers were called off the streets, officials said.

Help wasn’t expected until after dangerous storm conditions subsided.

“We don’t know what we’re going to find tomorrow,” said the city’s mayor, Lyda Ann Thomas. “We hope we’ll find that the people who didn’t leave here are alive and well.”

City Manager Steve LeBlanc went so far as to ask the media not to photograph “certain things” in the aftermath, referring to the possibility of dead bodies.

Power was out all across the island, much of which already had flooded. Two house fires are burning, as did a boat warehouse that was widely photographed earlier today.

Power lines are down, he said, and it may be weeks before it can be restored. Assessment teams will get out Saturday morning after the storm. Fifty people were rescued from high water and about 260 are in a shelter at Ball High School.

LeBlanc said he didn’t know how long it would take before evacuated residents could return. The city may briefly allow them back in to check on their homes, but will then ask them to leave again until the city is safe.

“We feel the city of Galveston will have suffered from this storm,” she said.

Eric Berger, who mans the Houston Chronicle’s SciGuy Blog, was not optimistic:

I noted on Wednesday night that I couldn’t believe that the Galveston mayor hadn’t yet called for an evacuation, and she finally did Thursday morning. Still, I feel that emergency planners weren’t sufficiently firm in their warnings, leaving that job to the National Weather Service.

Sensing the danger, the weather service was left to writing messages such as, “Persons not heeding evacuation orders in single family one or two story homes will face certain death. Many residences of average construction directly on the coast will be destroyed. Widespread and devastating personal property damage is likely elsewhere.”

Unfortunately this may now come to pass on an island where more than 20,000 people remain to ride out a monster hurricane.

Meanwhile, tiny Surfside Beach has already been completely swamped, and the damage looks like it will only grow worse.

I am not by nature a praying man, but I also am of the firm belief that no matter what lies beyond this mortal realm, whether it be incomprehensibly vast or simply nonexistent, no good thought is wasted. And so if you are one who is so inclined, please pray for those who are facing catastrophe tonight; if you do not wish to pray, at the very least hold them in your heart. Perhaps the flood wall in Galveston will hold, and the level of destruction will not be as great as it could have been. Perhaps not. But these are our fellow humans, and it is our duty to remember them tonight.

Hurricane Ike is currently a Category 2, but don’t let that fool you. It’s a massive, destructive storm, and while it will probably be a strong 2/weak 3 at landfall, its storm surge looks like it will be significantly worse:

The amount of water Ike has put in motion is about 10% greater than what Katrina did, and thus we can expect Ike’s storm surge damage will be similar to or greater than Katrina’s. The way we can estimate this damage potential is to compute the total energy of Ike’s surface winds (kinetic energy). To do this, we must look at how strong the winds are, and factor in the areal coverage of these winds. Thus, we compute the Integrated Kinetic Energy (IKE) by squaring the velocity of the wind and summing over all regions of the hurricane with tropical storm force winds or higher. This “Integrated Kinetic Energy” was recently proposed by Dr. Mark Powell of NOAA’s Hurricane Research Division as a better measure of the destructive power of a hurricane’s storm surge than the usual Category 1-5 Saffir-Simpson scale. For example, Hurricane Katrina hit Mississippi as a strong Category 3 hurricane, yet its storm surge was more characteristic of a Category 5 storm. Dr. Powell came up with a new scale to rate potential storm surge damage based on IKE (not to be confused with Hurricane Ike!) The new scale ranges from 1-6. Katrina and Wilma at their peaks both earned a 5.1 on this scale (Figure 2). At 12:30pm EDT today, Ike earned a 5.2 on this scale, the second highest kinetic energy of any Atlantic storm in the past 40 years. Hurricane Isabel of 2003 had the highest.

Simply put, Ike has the potential to do really serious damage with its surge, which could be high enough to overtop the 17-foot-high storm wall at Galveston — Jeff Masters estimates the possibility at about 10 percent, which would make me pretty nervous if I was a Galvestonian. The current National Weather Service advisory for Galveston is pretty blunt:

All neighborhoods… and possibly entire coastal communities… will be inundated during the period of peak storm tide. Persons not heeding evacuation orders in single family one or two story homes may face certain death. Many residences of average construction directly on the coast will be destroyed. Widespread and devastating personal property damage is likely elsewhere. Vehicles left behind will likely be swept away. Numerous roads will be swamped… some may be washed away by the water. Entire flood prone coastal communities will be cutoff. Water levels may exceed 9 feet for more than a mile inland. Coastal residents in multi-story facilities risk being cutoff. Conditions will be worsened by battering waves closer to the coast. Such waves will exacerbate property damage… with massive destruction of homes… including those of block construction. Damage from beach erosion could take years to repair.

Needless to say, if you’re still in Galveston, get out of Galveston. A 10 percent chance of imminent death is not something you want to play around with.

At best, it looks like much of the Texas coastline is going to get walloped with tropical storm-to-hurricane force winds, and very serious, if not catastrophic, damage in Galveston and Houston. Ike is currently forecast to come aground early Saturday morning. Stay safe, Texas.

Aaaargh!

Do the folks at the Bush administration believe a word they say about economics? Or are they consciously lying because they know that just saying “we want to help the rich and powerful, and fuck all to everything else” might not fly with the voters?

I’d like to believe that there’s such a thing as an honorable opposition, but they make it so hard.

From Ezra:

In one of the more insane stories you’ll read today, the Department of Agriculture has banned a small beef producer named Creekstone from testing its cows for Mad Cow Disease. Why? “Larger meat companies worry that if Creekstone is allowed to perform the test and advertise its meat as safe, they could be forced to do the expensive test, too.” And when they say “forced,” they mean that Creekstone will attain a competitive advantage by investing in diagnostics which will give consumers information they value, and then the market will strongly suggest that other producers follow suit. Other producers don’t want to follow suit and so they bent the ear of their good friends in the Bush administration. Dean Baker makes the right point here, saying “This is just a wonderful example showing that the Bush administration conservatives have no interest in the free market or ‘you are on your own’ economics. They are prepared to use the heavy hand of the government to ensure that small meat packers do not win out over bigger more politically powerful meat packers.”

This also has the effect of cutting US beef off from foreign markets, particularly Japan. But, really, I’m not crying any tears for the beef producers. It’s the hypocrisy that drives me mad.

It’s appalling that Governor Palin had to publicly announce her daughter’s pregnancy, apparently to kill some rumors.

The speculation about this has been shallow, stupid, disgusting. It’s not something that political bloggers should be treating as a news story. And it’s completely unfair to Palin’s daughter, who is not a public figure and shouldn’t be subjected to public discussions of her body or her pregnancy.

UPDATE: What Hilzoy said.

Via Renee and WOC PhD, INCITE!’s New Orleans branch is helping women of color prepare for Hurricane Gustav. And they’re asking for help.

August 30, 2008

Dear INCITE! friends and supporters,

On the eve of the 3 year anniversary of the devastation wrought by Hurricanes Katrina and Rita and subsequent government criminal negligence and assaults on the low income people of color on the Gulf Coast, our sisters from INCITE! projects in New Orleans (including the local chapter, the Women’s Health and Justice Initiative, and the New Orleans Women’s Health Clinic) are bracing for the potential landfall of Hurricane Gustav, which is currently projected to hit the Louisiana coast on Monday or Tuesday at a category 4 or 5. Voluntary evacuation of New Orleans has already begun, and mandatory evacuation could be declared as early as today.

INCITE! organizers and supporters in New Orleans have made over 700 phone calls to women of color and their families that make up the constituency of the New Orleans Women’s Health Clinic, working to prepare and implement evacuation and safety plans.

Your assistance is urgently needed to help low-income women of color and their families evacuate safely if need be, stay safe for the duration of the evacuation, and return to the city as soon as possible so as not to fall prey to the pushout that has kept so many folks from being able to return to New Orleans since Katrina. Local organizers are using whatever resources and funds at their disposal to help women and their families evacuate, bond people being held in Orleans Parish Prison out, and support those who make the choice to stay in whatever way they can.

Your support is urgently needed: financial donations of any size are needed and would be greatly appreciated.

Donations online are preferred because we can more quickly send the funds to our folks in New Orleans.

You can send your donation to INCITE online by clicking the button below and putting “New Orleans” in the “Purpose” line:

Or you can write a check directly to WHJI and send it to:
PO Box 51325
New Orleans, LA 70151

Your donation will go directly to supporting the hundreds of low income women of color that are the constituency of the New Orleans Women’s Health Clinic.

Once again, the particular vulnerability of low-income women of color and single female-headed households (including folks with disabilities, seniors, undocumented immigrant women, and incarcerated women) has been erased in the face of disaster and overlooked in the days leading up to the storm. Folks in New Orleans women’s prisons are being evacuated to the Angola men’s prison, with little thought for safety. With few resources, facing challenges and concerns for their families of their own, INCITE! New Orleans and WHJI have stepped in to fill the gap. Please send all your support, solidarity, sisterhood and strength their way, and join us in hoping for the safety and well-being of the people who are already suffering from Gustav in Cuba, Jamaica, and Haiti, and willing the storm to subside or veer off safely before it strikes the Gulf Coast.

We will keep you posted as things develop.

peace,
INCITE!

I’ve had a very positive impression of INCITE! over the last couple of years, and this seems like a very worthwhile cause.

So Hurricane Gustav looks like it’s going to suck. As of tomorrow, New Orleans will be under a mandatory evacuation order. Gustav has already decimated western Cuba, and hurricane-force wind stretched as far east as Havanna itself. The storm appears all but certain to bulls-eye Louisiana, with most of the models taking it in just to the west of New Orleans — which is the worst place for it to hit, as the highest winds and storm surges are to the north and east of a hurricane. It should hit as a Category 4 storm on Monday afternoon.

We have, one hopes, learned a bit in the past three years about how to deal with a hurricane in the Gulf, and one can hardly imagine that the state, local, and federal governments could possibly do worse than they did in 2005. But one immediate concern is the fact that there will be no shelter of last resort. Yes, that means there will be no Superdome, no concentrated focus of misery. But that also means for those left behind in New Orleans, there is nowhere for them to go; the state is, to their credit, mobilizing to evacuate absolutely everyone from the city, spending millions on busses to get people out. But it’s foolhardy to think they will get everyone out, and I’m very worried about the people who get left behind.

New Orleans is what it is, a city 10 feet below sea level — and nature, in its impassive wisdom, will try to fill that. We don’t know if the levees, which have been shored up since 2005, can hold. We don’t know if the evacuation will work as planned. We do know that FEMA can’t do worse than they did three years ago, but we don’t know if they can do better.

The one thing that is certain is that the Bush administration will not ignore the disaster this time. Katrina ended George W. Bush’s ability to effectively lead the nation; after August 29, 2005, George W. Bush had no credibility, and was treated like it. The Bush administration will try to use this to undo the damage of their neglect. Sorry, it’s too late for that — 1800-odd people are dead, and they aren’t coming back. But if they want to prove that they’ve learned their lessons, good — prove it. Because I want New Orleans to get the support it deserves from its government. It’s the least we, as a country, can do. And if George W. Bush getting credit for it is the price it takes to get that governance, well, that’s the price we pay.

Stay safe, Louisiana. We’ll be hoping and praying you come through okay.

Remember when McCain economic adviser Phil Gramm said that the U.S.’s economic woes are “a mental recession” and called the United States “a nation of whiners”? I thought at the time that was the most callous statement we’d see from a McCain adviser this year, but I was so wrong.

But the numbers are misleading, said John Goodman, president of the National Center for Policy Analysis, a right-leaning Dallas-based think tank. Mr. Goodman, who helped craft Sen. John McCain’s health care policy, said anyone with access to an emergency room effectively has insurance, albeit the government acts as the payer of last resort. (Hospital emergency rooms by law cannot turn away a patient in need of immediate care.)

“So I have a solution. And it will cost not one thin dime,” Mr. Goodman said. “The next president of the United States should sign an executive order requiring the Census Bureau to cease and desist from describing any American – even illegal aliens – as uninsured. Instead, the bureau should categorize people according to the likely source of payment should they need care.

“So, there you have it. Voila! Problem solved.”

Do I have to explain how incredibly stupid this is?