December 5, 2008

Knicks & Knacks I

The Juice gets squeezed

So Orenthal Simpson gets sentenced to a minimum of 15 years, maximum of 33 years, and not eligible for parole until at least nine years have passed. Picture me doing the Snoopy dance all about the room.

Is there any part of Simpson, any slight shred of conscience left, that whispers in his ear that he deserves the sentence he got -- and maybe even more? I sincerely doubt it; I believe he sees himself entirely as the victim here, just as he saw himself as the victim when he murdered his ex-wife, Nicole Brown Simpson, and an innocent witness, Ron Goldman.

I wonder which of the following Simpson has convinced himself of:

1. That he was completely justified, both in the robbery and in the killings;
2. That he actually, for real, didn't kill either his former wife or Ron Goldman, and he didn't really rob anybody;
3. Both (a) and (b) simultaneously.

Barney gets frank with us

Here's Rep. Barney Frank (D-MA, 95%) pimping for a bailout of $25 billion -- whoops! now it's $34 billion -- for the risibly dubbed "Big Three" American auto makers (they're actually the Big One, the Weak Sister, and the Flyspeck):

The [House Financial Services] committee chairman, Rep. Barney Frank, D-Mass., cited the jobs report showing the 11th consecutive month of losses as all the more reason for Congress to act to help Detroit.

"For us to do nothing, to allow bankruptcies and failures in one, two or three of these companies in the midst of the worst credit crisis and the worst unemployment situation that we've had in 70 years would be a disaster," Frank said.

Let us rephrase that with some Frank talk of our own:

It's a classic example of the "do something" syndrome: Don't stop, don't think, don't wait -- just do something! Of course, sometimes the very best thing to do is sit back patiently and let nature take its course. In this case, if GM and its mini-mes are forced into Chapter 11 bankruptcy, they might actually be able to break some of the onerous labor contracts they've entered into over the decades.

Incidentally, there are two significant differences between the already enacted rescue of Wall Street and the proposed bailout of Detroit; here is the first:

• The automakers like to claim that the "American automobile industry" -- by which they mean the American-managed automobile factories in the United States employing American workers and headquartered in the United States, as opposed to the American-managed automobile factories in the United States employing American workers but headquartered in other countries -- "touches" 10% of the American economy.

  But the international credit and banking market and the financial industry that controls it is vital to 100% of the American economy. If credit is frozen across the board -- as it was and to some extent still is -- then no company can function. It's a much more significant and national (even international) problem that whether GM goes "bankrupt" and is forced to sell its assets and plants and such to other car companies.

And the second:

In the rescue of the financial markets, we have done two things: At first we purchased "toxic assets," mortgage-backed securities that literally could not be valued, hence could not be traded or used as reserves; then Treasury Secretary Henry Paulson decided to inject money more directly into the financials by buying woefully undervalued stock in major financial companies.

But once we sort out the actual components that make up the MBSes, down to the actual mortgages themselves, they will be found to have an intrinsic, nonzero value: They're based upon real property that has physical value. And once they can be valued, they will be worth more than they are right now. Similarly, as the credit crisis eases, bank stocks will rise.

• All of which means that the $700 billion already authorized and any other money spent on this rescue is an investment, not a bailout: We will realize a positive return on our rescue money, especially if lawmakers can find the huevos to repeal or rewrite the laws that currently force financial institutions to offer oversized mortgages to borrowers who cannot possibly make the payments.

  By contrast, unless the auto companies can dramatically change their business practices to the point that they can actually compete with Toyote, Honda, BMW, Mercedes, and other "foreign" manufacturers (all made in the United States by American auto workers), they will continue to fail worse and worse, no matter how much money we inject into them.

Even if we gave them their blasted $34 billion bailout, they would simply be back in four years, like Oliver with a twist: Instead of "please sir , I want some more," it will be, "Give us another $50 billion right now, or we'll make the economy collapse again!"

That is the very definition of a bailout: enabling anti-market behavior by shielding companies from the consequences of their own corporate stupidity... hoping that if you just bail enough water out of the boat, the leak will fix itself.

Hatched by Dafydd on this day, December 5, 2008, at the time of 6:00 PM

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The following hissed in response by: Dick E

The above hissed in response by: Dick E at December 5, 2008 9:55 PM

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The above hissed in response by: Karmi at December 6, 2008 10:18 AM

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