Neither Wall Street, nor stock markets around the world, were impressed with Bush's proffered economic stimulus. While Wall Street was closed Monday, markets from Brazil to Tokyo nose-dived as continued fears of a U.S. recession reverberated from one country to the next, stemming from the subprime mortgage crisis.
Hope that Wall Street would stabilize world markets with a strong opening this morning, evaporated with the opening bell. The Dow dropped more than 450 points, but eventually recovered to a loss of only 128 points. However, this was still a 14-month low for the blue-chip indicator.
The S&P 500 ended at a more than 16-month low, and the Nasdaq composite ended at a 15-month low. (CNNMoney)
Finally kicked into panic mode, Ben Bernanke, head of the Federal Reserve Board, announced a .75% cut in short term rates, the deepest cut since 1984.
Although the rest of the country has struggled since last summer with rising gas prices, rising health care costs, and rising prices in virtually everything but wages, in addition to the housing crisis, Bush and Bernanke seemed oblivious to the economic predicament. In fact, Bernanke said the housing bust was contained, even though delinquency rates and foreclosures continued to climb, and that the problems in the subprime mortgage market would not spill over into the broader housing market. Surprise.
A leading economist at NYU says "We're facing the risk of a systemic financial crisis. The mortgage, credit card, and auto loan industries are all in trouble. The stock market is tanking as we speak. On top of all that, we're hemorrhaging $2 billion a week in Iraq."
Now that the situation is global and can no longer be ignored, with wealthy investors feeling pinched, Bush & Bernanke feel the need to act quickly. I'm thinking they should have done something months ago when the rest of us were feeling pinched.
Allan Sloan wrote today for Fortune on CNNMoney, "even if you believe that the Fed's cut in short-term rates will stimulate the economy, that won't happen overnight. If you took a Fed economist out for a few drinks and promised not to quote him, he'd tell you that the benefits of a cut take at least six months to percolate through the economy. There have been market panics and freeze-ups all over the world since last summer, when the junk mortgage meltdown in the U.S. started gathering speed. These have been confined mostly to the debt markets, which - unlike the Dow Industrials - don't resonate with most people and can't be summed up neatly in one familiar number, as the Dow is."
Sloan continued, "The problem is that the Fed has only a limited amount of rate-cut ammunition, and expended a lot of it today. It's expected by the markets to cut rates again next week, and will have used up most of its bullets."
According to the Dow Jones Market Watch several global markets are already reacting favorably to the Fed's emergency action. However, with the Fed running out of silver bullets, what will it do if the market dives again?
There is flurried activity on the Hill today as both sides of the isle scramble to initiate an economic stimulus. Congressional leaders met with Bush today to try to work together on a compromise package.
Bush wants to give tax breaks to corporations and business, give a one-time rebate to the lower and middle class while making the tax cut for the top 1% permanent. We all know trickle- down economics don't work. Nothing ever trickles down to the middle and lower class.
The Democrats want to extend unemployment benefits, offer more food stamps and tax breaks to individuals, to put more money back in the hands of those who would spend it.
Either way, there is sure to be more bloodletting, but hopefully something will be hammered out quickly. After all, the entire world is watching.
California GOP Leaves Independents Out in the Cold
Early last year, in all their elitist wisdom, the leaders of the California Republican Party decided that only registered Republicans could vote in its presidential primary this February.
Unlike 2004 when independents were welcome in both party primaries, they have now been snubbed by the GOP.
Their reasoning behind this decision? In speaking to the LA Times, California Republican Party spokesman Hector Barajas said his party "decided to exclude unaffiliated voters in February in the belief that only registered Republicans should be able to select the presidential nominee."
Most political strategists, including Republicans, think the California GOP has made a huge blunder. Allan Hoffenblum, a Republican strategist said, "It's the country club atmosphere of Republican leaders. Their attitude is, 'If they don't look like us or talk like us, why should we let them vote in the presidential primary?'" (LA Times)
Not surprisingly the Democratic Party is ready to welcome the independent voters with open arms. With almost 20% of all California voters declining to register with either party, that could feasibly boost the number of Democratic ballots to 62%, up from the 42% of the voters registered as Democrats.
Gary South, a former top advisor to former Democratic Gov. Gray Davis says, "Republicans have made the serious, perhaps fatal error of shutting independent voters out of their primary. The thing we know about independents is, when they choose to vote in a primary, they tend to stay with that party in general elections." (LA Times)
In other words, independents may choose to join the "country club" where they are welcome.
Cheri Cabot, Politics Correspondent
Cheri's column, "Personal About Politics", published every week, will reflect on how the life of a 58 year-old, middle class woman is affected by politics, policy and the current state of the nation - a look at the personal aspects of politics. The articles will be posted to Politics.gather.com as part of Gather Essentials.
Cheri is a freelance writer, living in Southern California. She has two grown children, one in Iowa and one at Columbia University, and is the proud grandmother of two. Cheri is also a purveyor of fine coffee, warm chatter and dry wit.
You can find all of Cheri's columns on Personal About Politics at www.ccabot.gather.com.
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Comments: 49
1) Generally, subprime loans are mortgages given to borrowers with credit scores of 620 or below. Such low scores result from a history of paying debts late or not paying debts at all.
2) About 20 percent of U.S. consumers have credit scores of 620 or below, on a 300-850 scale. But of that group, only 13 percent have mortgages, according to Experian, a credit reporting bureau.
3) "A typical subprime borrower is not someone buying a house, but someone refinancing. A typical subprime borrower is someone who has a lot of credit-card debt, and is refinancing to pay some of it off."
4) Studies have found that subprime borrowers tend to live in low-income neighborhoods. They're less likely to have a college education and more likely to be a minority, especially black or Hispanic. According to Freddie Mac, about 10 percent of subprime borrowers could have qualified for a prime loan.
5) "Historically, they have been in declining cities, the weak cities of the Rust Belt ? Philadelphia, Baltimore, Detroit," Wachter says. She says those subprime borrowers were concentrated in distressed neighborhoods, where banks felt defaults were too high.
6) Even in states with the most foreclosures ? Ohio, Michigan and Indiana," those foreclosures still represent just 0.5 percent of all mortgages. In regions with the most subprime lending that also have struggling local economies, foreclosures may rise to 1.5 percent or 2 percent of all mortgages.
Does that REALLY sound like a "national" problem, or just a problem for the greedy, or the financially unsophisticated??? The "problem" is localized to specific areas, that probably shouldn't have been buying a home in the first place (and probably weren't buying a home at all, but paying off credit cards !).
Shrub is Lucky he's got a bunker in case an unhappy 77%'er goes 'Nucular'.
For the sake of the NSA, DOD, CID, FBI, CIA, NCIS, LOCAL YOKELS, COUNTY MOUNTIES, STATIES, and all other albhabet soupers, IT WILL NOT BE ME!
Yes there are a lot of people who have been irresponsible with their credit cards etc., but they've been egged on by the very industry that is now crying foul and wanting to collect on those basically 'unsecured loans '... isn't that really what credit is, unsecured loans?
Sorry, but it seems ridiculous to me that those same people who blindly courted any and everybody to sell them a home or lend them money for other big ticket purchases when the borrowers obviously couldn't afford them, are now asking or expecting the Fed and the government to bail them out.
It has been proven over and over and over that any (very) short term benefits from tax cuts to the top 5% result in MASSIVE economic slowdowns later. The tendency of the current administration to plug their ears to the voice of the people and repeat "Ain't no problem here; we're doing great" has only made things worse. I'm afraid that any stimulus package that would please GW "Marie Antoinette" Bush would be too little, and FAR too late!
It didn't become an ecomomic crisis until it hit the stock market and the pockets of the wealthy. However, by now, it's been an ecomomic crisis for most of us for quite some time now.
The idea of tax cuts for the wealthy is that they will use that
money and invest it to make them wealthier. This is not
always the case.
If the money is invested it is theorized that it will create jobs.
The problem with the Republicans arguments along these lines
is that there is never any metric or goal to be reached.
If the goal is to build the economy, that is not being met. If the
goal is to create enough jobs for the country, that is not being met.
It is also not accounted for or explained how we are supposed
to evaluate the performance of the Repubican strategy.
Reagan ballooned the deficit up to record proportions, all in
deficit spending that forces us to pay more in taxes to pay
interest to those who fund that debt by buying bonds, in
other words it taxes to the poor to give to the rich in such
as way that it is invisible or unclear to the poor.
The push to extend this strategy is really just an unabashed
attack on the poor, working and middle classes at a time when
the US needs to have an increasing capitalist class to take
advantage of productive labor bargains overseas.
It would be great if we could create a Manhattan type project
that would push Americans into business and investing, teach
management skills, if only to help all of us manage our lives
as "businesses" in this complex world.
Instead we cut people out by ruining the schools, and
infrastructure and making them compete with 3rd world
labor at home and abroad.
No, the Republican philosophy may have some good
points to it, but the leaders of the Republican party and
the carpetbagging investor class that they represent
have ravaged the country and will continue to do so
and pretend to be blind to it.
Oh, and I forgot the most important of the Alphabet soup, The Secret Service.
In response to the percieved needed "stimulus" of our economy I await a candidate that understands the need to remove barriers to organizing by unions. People in and out of unions benefit by their efforts. Business unchecked by collective bargaining will opt to pay less not more as they grant gross salaries to top executives whose performance on the golf course is considered "work".
So leave the "Parties" and increase the numbers of registered independents, make candidates wonder what "you" are going to do as opposed to you "wondering" what candidates will do.
The party system is destroying this country because they make deals to make life easier for themselves.
I say hook the candidates up to lie detectors and and then ask them the hard questions.
Blessings
As far as the Republicans snubbing Independents in California. I guess when the Republicans decide to melt down, they don't screw around about it do they?
Bush's ideas actually center around the corporate tax breaks - as long as the rich are wealthy and healthy everything else will work itself out - that's what we're supposed to believe.
> Until we eliminate the Federal debt, all other measures
> will be like sticking a band aid on someone who has
> had their throat cut.
Not just the Federal government, my state, Calfornia is
in fiscal crisis suddenly even though our loud-mouth
Governor Schwarzenegger has always talked about
his experience and conservatism in financial matters.
The point is if the debt is really really high you cannot
pay for socialistic programs, and the invisible unclear
policy that they Republicans have embarked on does
not let everyone know there is a reason we are in the
mess we are, it is to prevent the middle, working and
poor classes from paying off the debt and setting up
a steady state economy with socialistic tendencies.
It is never talked about seriiusly but everyone knows this.
What it does in effect is to make sure that when we
fail, and fail means tthat things get so bad for enough
people, that there is no graceful way to recover or
fix the mess without a complete meltdown of the world
economy. Republicans and corporations have conveniently
help off social society in America by forcing the rest of
the world to care about what each and every American
does because we owe them so much money.
Do you think the communists in China would be happy
that they are helping to keep America elitist, instead of
Democratic or socialist, for money?
It would be great if we could sue the government for
incompetence of force the current politicians out
based on their incompetent or Anti-Constitiutional
actions.
I have one question for George. What's going to happen when you get to 0%? Will you be able to cut further? I don't think so. You are so stupid.
I'm really happy to hear the news about the republicans. If the Independents vote democratic in the primary, they are much more likely to vote democratic in the November election. That will help insure a democratic win in 2008! Go Republicans! You stupid self serving jerks you!
(Gunner was on a roll, so I hitched a ride)
Since this nation has rarely existed without debt, that's a very silly proposition.
Perhaps your ignorance was grasping for the word "deficits."
There's a reason Bush made his so-called "economic stimulus" announcement on a Friday, he then had all weekend for his message to soften during the slow weekend news cycle.
Bushco and all his little elves are complete idiots where the economy is concerned and they've proven this to us over and over again. Tell me please everyone... would you borrow money to pay down your credit card debt? That's what Bushco are doing and what the CA governator is doing right now. They are borrowing money to pay down our national debt... which in the end will leave us with much more debt than ever before, debt we won't be able to crawl out from under. This is the legacy Bushco (and Reagan) left in their wake.
No one in their right mind would ever continue to borrow money to pay down their debt. The only possible result is financial ruin. But it appears the repubs are so blind to the facts that they will try to continue to defend this indefensible behavior regardless of the facts.
I also agree w what Bruce said once again!
And BTW, we did eliminate our national debt under Bill Clinton, remember him? He spent 8 years being investigated by the repubs and was still able to pay down our national debt and leave office with a surplus... which Bushco couldn't wait to run up again... just like Reagan. That these so-called conservatives are running our government so poorly should be infuriating the real conservatives! Why aren't they speaking out?
just to make a non-existent point? There have been two historic spikes
in debt, Reagan and now Bush that have given us a national problem.
The Republican plan to place an eternal strangling debt on the taxpayers
of this country is like putting Democracy in leg-restraints and handcufs, and
is very clever because hardly any Americans are capable or get the information
needed to understand the problem.
It is the equivalent of taxation without representation, motivated by the
argument that if we have a real Democracy the poor will rape the rich, so
they reverse it and use our relative order and stable ... relative ... to justify
and everlasting war on the working class.
This is akin to an argument that cannot be factually refuted, like President
Bush is doing a good job against terrorism because we have not had any
terrorist attacks since 911.
It ignores 911, and it also allows that if we had had a terrorist attack the
argument would be changed to - we need a hardliner like President Bush
to defend against terrorism.
The reason Democracy does not work is that the language and reason,
and facts are repressed, subverted or sidetracked and no learning takes
place in the public, except to learn the latest slogan of what everyone
is supposed to believe.
pool somewhere on this I would make a lot of money. I'll even give odds
to anyone who wants to take me up on this bet.
This administration made a major point coming in about accountability. Hence such things as No Child Left Behind...hold the schools accountable!
But they talk about bringing democracy to the middle east without explaining what that democracy would look like. They throw around terms like "activist judges" and don't explain what a, what, "nonactivist judge"? would be.
They say we are using harsh interrogation of prisoners but we can't tell you what it is...(But it is not torture...you can believe us!)
So, yes, it would be great to get a good description of what makes for a strong economy. How would we measure the success of a tax cut? How about seeing how many people it lifts out of poverty??
The truth is, liberal wags like him would outlaw deficits, and thereby eliminate debt sooner or later. That way lies madness. Capitalism cannot exist without debt; it is integral to the entire free market system.
On the plus side, Bush and the dems actually seem to be in a hurry to compromise on the details of the rebate and get it done without playing politics. Nobody wants to take the blame for the recession seemingly. On the minus side, there's another hundred billion to add to this year's deficit, and i am not sure it really solves the economic troubles, more like papering them over.
It is true that nobody put a gun to anyone's head in the housing crisis, but it's naive to assume that these people for the most part were not totally taken by people who understood a lot more about how things worked than the buyer did. There is a ton of evidence that people were lied to about what an ARM meant and what would happen. Nobody, or virtually nobody, by the way lives on credit alone. If the banks and financial institutes fail it will be largely because they pushed loans they knew to be unsound because they counted on selling the notes and getting out with the money before the scam bottomed out. Yes. Those who took out the loans bear some responsibility, but those offering unsound loans to people they knew couldn't afford them are much more so. They are the experts after all.
Chris: This "rebate" is nothing more than a bandaid approach to a guillotine problem.
Timeline:
Bush proposes his "fix", (and to be fair, the dems are standing next to him, also pandering to American voters by offering us a small amount of money). They tell us it is important to go out and spend it right away. (They will sell off another chunk of America to Abu Dhabi if they need more money)
Other markets around the world scoff at the lame proposal and their markets dive on Monday.
Anticipating a similar melt down in the US stock market the Fed steps in with an astounding 3/4 point cut in the interest rate. This "stabilizes" the market, (for how long?)
Our gaze then drifts overseas with the hope that major foreign banks and governments will also drop their rates, but they are much smarter than we are and they hold firm.
Now we look up at the big board to see whose stock is doing well as a result of this interest rate cut and who do we see as the big winners??? Citibank, Merrill Lynch, etc.... the very folks who just wrote off billions of dollars in loss because they made very poor and very greedy choices.
Market traders breathe a sigh of (momentary) relief.
I'm sure there is a lot of subtlety to all of this that I don't begin to understand, but I have enjoyed reading your comments very much.
exist without cash. why must you bring up these red herrings
to sidetrack the discussion? The answer to that is the it is the
Republican way, turn any discussion of facts and ideas into
a personal attack ... right from the Bible and the Tower of Babel.
Nothing you, I, or anyone else says will ever persuade them otherwise. He is perfection personnified and makes Reagan look as if he were Atilla the Hun. When he was awake of course. Reason, facts, and logic have no place in any discussion with them.
So, I agree with you Bruce - better direction of the money would be well serverd for the economy. I'm surprised those on the Hill didn't ask our advice! Those silly politicians.
> class and business, and the Dems want to spread it
> around the middle and lower class.
I think the branding needs to change. People who believe
what you said are about 40 years behind the times and
are ignoring current realities, or being led by the media
using old mental associations.
Republicans seem to be more about ignoring people
worldwide in favor of rationalizing that if you allow
virtual tyrannies, corporations, to run everything in
a businesslike manner the world will somehow
develop faster and be more beneficial to poor
people, and working people.
How stupid can people be to believe this ridiculously
crafted marketing myth made up of old symbols
and played back over and over in the media?
The Republicans, and sadly a lot of Democrats have
allowed the government to fall into being a pay as
you go concern until the democratic aspect of it
has been eclipsed by the voices amplified with
cash ... not even necessarily American cash.
You always write a great article! Idaho Republicans have attempted the same thing as California but the courts denied it. I understand the party faithful want to control who is picked for the office. In Idaho the party is quite conservative and talk repeatedly about RINOs or Republican in name only, which they apply to anyone less radical than themselves.
However, when republicans succeed in closing their primaries, they are encouraging the independents to align themselves with the Democrats.
The national debt is a very serious problem when it is the third largest budget item, and that does not include paying a cent to lower the debt! What you spend on interest buys nothing else. It is simply money lost. I don't care about eliminating all national debt as I think government savings bonds may serve a good purpose. But the debt we owe to other nations rather than to our own citizens, is never good. I'd like to see us attack the long term indebtedness and bring it down to a manageable size where it could be serviced with say 3% of the budget going to service it.
Can you imagine the things we could reasonably accomplish with that much less burden? In fact, we might be at a point someday where taxes could be cut and still leave a balanced budget each year.
I am opposed to the balanced budget amendment unless there was considerable latitude in there about times of war and national emergencies with paybacks over extended periods of time. Let's face it, the congress can balance the budget if it has the guts and conversely with such an amendment, there would be ways around it. For instance, the money owed to the Social Security fund is not counted in whether the budget is deficit or not.
When it comes to stimulating the economy, I read more about the congress and the president recognizing that the best stimulus is to put money into the hands of the lower financial classes. The trend has been for the trickle down theory which doesn't work.
Anything the Fed does is going to be quite a while in actually getting into the system. Government public works projects are excellent stimulator's as well but they too take some time. The fed may well be low on ammunition but they pretty much have to use it if they want to cover Bush's ass in this whole thing.
The sub-prime housing thing is not insignificant if it effects the total economy, the stock market and every segment of American life, as well as causing the foreign markets to tank as well. The number of persons involved in the houses may be limited but the number of people involved is vastly greater when you consider the lenders, the persons who work for the lenders, the various bond funds who purchase the indebtedness and the stock exchange!
This is another excellent reason to staunch the bleeding of the economy into Iraq! You could probably pay off every one of the sub-prime defaulted homes with the hundred and forty four million dollars we will dump there in a year.
Right now it clearly appears that the next president is truly going to have the economy as his or her first order of business!