Dow Drop Politics

The Wall Street Journal headline read: "Stocks Stumble as Credit Crisis Spreads."

The website The Street declared that: "US stocks fell violently..."

Bloomberg reported that: "Stocks, Euro, Crude Oil Slide on Concerns Credit Seizure Will Deepen Slump."

News from before the Congress agreed to back the bailout plan promoted by President Bush, Treasury Secretary Hank Paulson and House and Senate leaders of both parties?

Nope.

This is the what happened on the first full trading day after Congress acted as it was told it must as an essential step to stabilize troubled financial markets.

Ohio Congressman Dennis Kucinich, one of the dissident Democrats who opposed the $700 billion bailout of Wall Street, offered an appropriate, "I told you so."

"Think about it," declared Kucinich Monday afternoon, when the Dow fell below 10,000 for the first time in four years. "Congress passed a $700 billion bailout and the market is continuing to plunge!"

"Already," the Cleveland congressman noted, "economists and the news media indicate that the $700 billion bailout [approved] on Friday is not enough."

Kucinich isn't buying it. And his counsel is important for Democrats -- including presidential candidate Barack Obama -- who will come under pressure to back another bailout scheme.

"If Wall Street does come back for another bailout, we must be prepared in advance to say NO," the congressman said. "The bailouts of Wall Street must stop. It will never be enough. When the federal government gets involved in picking winners and losers on Wall Street, we open up a financial whirlpool of insatiable greed."

What's the problem?

"We are now facing the perfect financial storm. The elements are the deficit spending for the war of 3 to 4 trillion dollars, the trillion more in tax cuts, the war itself, the lack of serious investment in our country and now $700 billion to Wall Street. We are being hollowed out," Kucinich explained. "We are going to see more unemployment and more people losing there homes. With $700 billion we could have made a real investment in the country, in jobs, in infrastructure and in homes. Now we must invest in homeowners to prevent any additional bailout."

What's the solution?

"The fundamental problem that led to the credit crisis is that millions of homeowners are in jeopardy, and millions of people are out of work, said Kucinich. "Congress rushed to bail out Wall Street but sits on its hands when millions of homeowners are at risk. The only way to prevent another bailout is to take action which will directly impact the market stress at its root - - the millions of homeowners who face default on their mortgages. This is the path toward market stabilization."

Kucinich says he is proposing legislation to give the government controlling interest in mortgage backed securities in order to "help homeowners save their homes by working out their payments, through restructuring the principal and the interest rate on their loans."

Comments (44)

1. my head hurts.......

   Posted by frosty zoom at 10/06/2008 @ 5:10pm

2. This really is sad.

   The DOW performance has ABSOLUTELY NOTHING to do with the credit crunch or the bailout and is almost always about perception and confidence concerning the value of the underlying businesses that make up the DOW. This perception and confidence ebbs and flows by the minute and it is therefore impossible to control it long-term with any action from government.

   If Paulson were honest, he would have admitted as much, but his primary objective was to cover-up his own sorry legacy as head of Goldman Sachs and the market be damned in the process.

   The fact that Congress fell for Paulson's con game says more about their lack of understanding of equity markets than it does about anything else.

   Paulson can't save the DOW from tanking anymore than he could make it rise fantastically. The fact that no one seems to understand this is truly incredible!

   Posted by Metteyya at 10/06/2008 @ 5:13pm

3. The always insightful Mike Whitney, on the current economic catastrophe --complete with references to the candid ex-World Bank chief economist, Joe Stiglitz and the well-respected NYU economist, Nouriel Roubini:

   tinyurl.com/3jqhpv

   excerpt:

   Years from today, when the current financial crisis is over, historians are likely to agree that it would have been far better if the Bush administration had declared a state of emergency earlier in the process so that the necessary steps could have taken to avoid a complete financial meltdown. The media could have been used to bring the American people up to date on market-related developments and educated in the bizarre language of structured finance. Knowledge is power; and power can prevent panic.

   Now we're in a terrible fix. People are scared and removing their money from the banks and money markets which is intensifying the freeze in the credit markets and driving stocks into the ground like a tent stake. Meanwhile, our leaders are "caught in the headlights", still believing they can "finesse" their way through the biggest economic cataclysm since the Great Depression. It's madness.

   If something is not done to increase the flow of credit immediately, the stock market will tumble, unemployment will spike, and many businesses will grind to a standstill. We could be just days away from a severe shock to the system. Secretary of the Treasury Henry Paulson's $700 billion bailout does not focus on the fundamental problems and is likely to fail. At best, it puts off the day of reckoning for a few weeks or months. Contingency plans should be put in place so the country does not have to undergo post-Katrina bedlam.

   Posted by b_kool_66 at 10/06/2008 @ 5:17pm

4. The always insightful Mike Whitney, on the current economic catastrophe --complete with references to the candid ex-World Bank chief economist, Joe Stiglitz and the well-respected NYU economist, Nouriel Roubini:

   tinyurl.com/3jqhpv

   excerpt:

   Years from today, when the current financial crisis is over, historians are likely to agree that it would have been far better if the Bush administration had declared a state of emergency earlier in the process so that the necessary steps could have taken to avoid a complete financial meltdown. The media could have been used to bring the American people up to date on market-related developments and educated in the bizarre language of structured finance. Knowledge is power; and power can prevent panic.

   Now we're in a terrible fix. People are scared and removing their money from the banks and money markets which is intensifying the freeze in the credit markets and driving stocks into the ground like a tent stake. Meanwhile, our leaders are "caught in the headlights", still believing they can "finesse" their way through the biggest economic cataclysm since the Great Depression. It's madness.

   If something is not done to increase the flow of credit immediately, the stock market will tumble, unemployment will spike, and many businesses will grind to a standstill. We could be just days away from a severe shock to the system. Secretary of the Treasury Henry Paulson's $700 billion bailout does not focus on the fundamental problems and is likely to fail. At best, it puts off the day of reckoning for a few weeks or months. Contingency plans should be put in place so the country does not have to undergo post-Katrina bedlam.

   Posted by b_kool_66 at 10/06/2008 @ 5:18pm

5. Does Congress have any idea of the mess they've made by passing the Bailout bill? Do they even read the papers or are they so isolated in their Capital Hill bubble-world that they're entirely clueless? Did any Senator or congressman even notice, that while they were busy mortgaging off America's future, the stock market was plummeting to new lows? Between the time the ballots were cast on Paulson's bailout, and the announcement of the final tally (which was approved by a generous margin) the market went from a 310 point gain to a 157 point loss; a whopping 467 plunge in less than two hours.

   Thus spake the Market: "Paulson's bill is a fraud!"

   Listen up, Congress: This massive trillion dollar deleveraging process cannot be stopped. The system is purging credit excesses which are unsustainable. The levies you're building with this $700 billion bill may plug a few holes, but it won't stop the flood. Economist Ludwig von Mises put it like this:

   "There is no means of avoiding the final collapse of a boom brought on by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

   The best course of action is to soften the blow as much as possible for underwater homeowners and let the market correct as it should. Otherwise the dollar will be torn to shreds.

   Posted by b_kool_66 at 10/06/2008 @ 5:18pm

6. Sorry for the double post.

   Nation blogs still not bug free unfortunately.

   I want my HTML.......

   Posted by b_kool_66 at 10/06/2008 @ 5:20pm

7. If you really want to get banks lending again, then all you have to do is provide incentives to lend and disincentives for banks that don't lend.

   Open up direct lending from the Federal Reserve to more banks and give favorable discount rates to those banks that have healthy loan-to-reserve ratios and higher rates to banks that don't. This will straighten out the credit crunch overnight!

   Relaxing mark-to-market valuation is a fraud, as these INFLATED real estate assets must come down to achieve equilibrium. Trying to prop them up by not valuing them at what they are worth only forces the taxpayer to buy inflated assets and lose money as a result when the real value of these properties is finally assessed.

   Propping up and accelerating increasing real estate values beyond what most buyers were willing or able to pay is what got us into the real estate bubble, so the only way out is allowing these values to fall. In fact, there should be a rebuttable presumption against any mean property values that exceed the ability of buyers with mean incomes in that community to buy.

   Posted by Metteyya at 10/06/2008 @ 5:25pm

8. Hey, Metteyya.

   Put a sock in it.

   You're not an economic expert, and no one is paying you any close attention.

   Bet on it.

   Posted by b_kool_66 at 10/06/2008 @ 5:32pm

9. The DOW performance has ABSOLUTELY NOTHING to do with the credit crunch or the bailout and is almost always about perception and confidence concerning the value of the underlying businesses that make up the DOW. This perception and confidence ebbs and flows by the minute and it is therefore impossible to control it long-term with any action from government.

   Posted by Metteyya at 10/06/2008 @ 5:13pm | ignore this person | warn this person

   So why do you suppose the stock market reacts to the Fed increasing or decreasing interest rates?

   Posted by OneVote at 10/06/2008 @ 5:39pm

10. Posted by OneVote at 10/06/2008 @ 5:39pm

    I is usually a short term reaction based on day-traders. The market usually resumes its long-term trend as long as the fundamentals are the same.

    Posted by Metteyya at 10/06/2008 @ 5:52pm

11. Posted by b_kool_66 at 10/06/2008 @ 5:32pm

    Put me on "ignore" BKOOL.

    I promise to not be offended!

    Posted by Metteyya at 10/06/2008 @ 5:53pm

12. "Put me on 'ignore' BKOOL.

    I promise to not be offended!"

    ~Metteyya

    I don't use the ignore list --commonly a refuge for the weak minded.

    I just ask for better quality posts.

    You can do it Metteyya --I suspect. Feel free to link your posts to your intellectual betters.

    ;-)

    Posted by b_kool_66 at 10/06/2008 @ 5:59pm

13. Posted by b_kool_66 at 10/06/2008 @ 5:59pm

    No source - just Economics 101 with a little market insight from my days as a financial futures trader.

    Posted by Metteyya at 10/06/2008 @ 6:05pm

14. Meta-dude,

    There are plenty of college educated readers here --probably the majority.

    We've all taken our econ 101's and perhaps quite a bit beyond that. Econ 101 and experience as a futures trader don't put you ahead of the curve on these blog pages.

    And statements like, --"The DOW performance has ABSOLUTELY NOTHING to do with the credit crunch or the bailout and is almost always about perception and confidence concerning the value of the underlying businesses that make up the DOW."-- leave your credibility in the same shreds that they were when you spent so many months as Barack Obama's principle shill, spouting all manner of absurd "defenses" and assorted pabulum on The Nation's blog spaces.

    You've got a long slog ahead if you wish to seriously rebuild any credibility here.

    Best of luck to ya' though.

    Posted by b_kool_66 at 10/06/2008 @ 6:18pm

15. Q. By the way, Meta, who is Barack's number one financial contributor?

    A. Goldman Sachs.

    Not that anyone here believes that Obama should not win on Nov. 4, but it is sobering to realise how disastrously this economic crisis is now unfolding, and how poor the quality of information circulating in the so-called mainstream media has thus far been.

    Populism is on it's way. Let's hope it's of a decidedly constructive nature.

    Posted by b_kool_66 at 10/06/2008 @ 6:31pm

16. Posted by b_kool_66 at 10/06/2008 @ 6:18pm

    Have you ever been a trader BKOOL where you had to follow the market minute-by-minute for years and sort through thousands of stories on economic news and actions by the Fed and others to try to influence the market?

    I think if you had, you would stop trying to denigrate others experiences and opinions and admit you don't know much on the subject.

    I am entitled to my opinion just like any one else, and if you don't like the opinion, ignore it, or respond with some facts or an experience of your own rather than trying to inject personal insults into the discussion.

    Most "educated" people on this board realize when you are not being responsive and going ad hominin on someone - and we all interpret this as you simply not knowing enough to respond critically to what is being discussed.

    But there is another option - you can simply remain silent when we are on a topic that you know nothing about.

    Posted by Metteyya at 10/06/2008 @ 6:33pm

17. Posted by b_kool_66 at 10/06/2008 @ 6:31pm

    Q: Do you think Barack would prefer to not take ONE PENNY from Goldman Sach's employees?

    A: Yes, but the current campaign finance reality doesn't give him much choice if he wants to win the presidency of the United States.

    Posted by Metteyya at 10/06/2008 @ 6:35pm

18. But there is another option - you can simply remain silent when we are on a topic that you know nothing about.

    Posted by Metteyya at 10/06/2008 @ 6:33pm

    Bingo!

    I knew you had it in ya'.

    Posted by b_kool_66 at 10/06/2008 @ 6:35pm

19. Posted by b_kool_66 at 10/06/2008 @ 6:35pm

    If I didn't think I could contribute, I would remain silent, but I have practical experience with these markets and graduate level academic training in economics at a pretty high level that went deep into econometrics, game theory, and advanced mathematical modeling.

    But you are correct, I do not hold myself out to be an "expert' - I am just another poster with an opinion just like yourself.

    Posted by Metteyya at 10/06/2008 @ 7:19pm

20. Anyone coulda seen that this wouldn't help. The Repubs and Demo's tried to bill this as a long term solution that would only take effect until things "calmed down." Too bad things calming down means the economy hitting rock bottom.

    Posted by Cccomfo1 at 10/06/2008 @ 7:23pm

21. Yes, let it burn.

    Sadly, only the arsonists will survive the blaze. That's how the system is designed.

    Posted by freiheit1 at 10/06/2008 @ 8:31pm

22. This bailout is a crock, I agree with Kucinich that the money would have been better spent investing in infrastructure and new technologies to create new jobs, but I don't agree that we should be working to bail out those who bought homes they couldn't afford. I live in the heart of the real estate bubble, and see it on a day to day basis. There might be a small minority who were taken advantage of, but the large majority of people in trouble are those who bought million dollar homes on a 60k a year income. Then they pulled out equity to buy BMW's, motorcycles, boob jobs, boats, etc. I don't agree with lowering people's principles so I can pay for their false consciousness. I feel like people who were smart, practical, and not greedy are being punished. Can we have our principles lowered too since we didn't buy things we can't afford and don't want to live a lifestyle that's a farce?

    Posted by desiraen at 10/06/2008 @ 8:43pm

23. Posted by desiraen at 10/06/2008 @ 8:43pm

    I'm sure there are ways to set the bar low enough. For example, Govt-backing could be limited to home's where the value is no more than X % of regional median home pricepoint... And no more than X times mortgage holder's income.

    Posted by winyahn at 10/06/2008 @ 9:00pm

24. Giving more money to these corporations, is like giving more heroin to an overdosed drug addict.

    Posted by MMSMITH at 10/06/2008 @ 9:25pm

25. Yes, let it burn. Sadly, only the arsonists will survive the blaze. That's how the system is designed.

    Posted by freiheit1 at 10/06/2008 @ 8:31pm

    "So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no they do not."

    "professor" friedman.

    Posted by frosty zoom at 10/06/2008 @ 10:03pm

26. Posted by Darin_the_Troll at 10/06/2008 @ 10:22pm

    Darin, has the dimming prospects of McCain and Palin (or is it still Palin/McCain) snapped your synapses?

    What the HELL are you babbling about???

    Posted by Maskdelta at 10/06/2008 @ 10:30pm

27. What the HELL are you babbling about???

    Posted by Maskdelta at 10/06/2008 @ 10:30pm

    THAT is one of the strangest posts I have ever read.

    Posted by Benchrest at 10/06/2008 @ 10:52pm

28. I recomend renting a Mad Max movie, the one with Tina Turner is a good one, and pay attention to their society. Take notes. Whatever you pick up could help you get by in the near future.

    Posted by koroviev at 10/07/2008 @ 12:09am

29. I is usually a short term reaction based on day-traders. The market usually resumes its long-term trend as long as the fundamentals are the same.

    Posted by Metteyya at 10/06/2008 @ 5:52pm | ignore this person | warn this person

    Likely you are partially right....buy on the rumor sell on the news. But don't you think that credit costs impact financial projections and actual operating performance quarter to quarter?

    Posted by OneVote at 10/07/2008 @ 12:17am

30. THAT is one of the strangest posts I have ever read.

    Posted by Benchrest at 10/06/2008 @ 10:52pm

    Remember Rese?

    All his/her backward spinning white album new world order funk?

    Posted by winyahn at 10/07/2008 @ 12:20am

31. egad!

    343.8

    194.2

    Posted by frosty zoom at 10/07/2008 @ 01:14am

32. Posted by Darin_the_Troll

    PPP Poll: Obama Expands Lead in North Carolina

    A new Public Policy Polling survey in North Carolina finds Sen. Barack Obama now leading Sen. John McCain, 50% to 44%.

    For the first time, "Obama is earning over 80% of the vote from self identified Democrats, and that's fueling a four point increase in his lead in the state compared to last week. He now has an 82% to 15% lead with voters in his own party. His share of the Democratic vote had been anywhere between 69% and 76% in PPP's previous five surveys of the state."

    Interesting: Obama's numbers rise every time he makes a visit to the state. McCain hasn't visited in five months.

    Posted by frosty zoom at 10/07/2008 @ 01:23am

33. You know, as McCain's prospects spiral slowly down the tubes, 3 things are becoming increasingly obvious...

    1) the more desparate McCain becomes, the more shrill his rhetoric and the crazier he sounds.

    2) Like Bush trying to explain his 'plans' for social Security...the more McCain and his 'Wasilla chihuahua' try to yap in the negative about Obama's character, the more the public is turning against them.

    3) As the electoral map turns increasingly blue, the wingnuts (Rio, Darin, Lying Larry, Ponti) are ALL going absolutely insane!

    Posted by Lillian at 10/07/2008 @ 01:23am

34. egadder!!!

    "- but the fact is, if we went in on the ground into Baghdad that's the only way I know of that the Arab world could turn Saddam Hussein from the bum that he is into the hero that Nasser was, number one.

    Number two is I don't think you could do it with air power. Unbeknownst to a lot of people, we tried bombing- We weren't trying to kill him, but we were just trying to bomb every place we thought he might be or could possibly be.

    Third of all, I'm not sure that if we did go in on the ground we could tell a Shiite from a Sunni, even from a Kurd. And who is it that we'd be fighting and battling against on the streets of Baghdad? And, if we got into Baghdad, we would lose all of our military supremacy and we would take casualties. . ."

    guess who?

    Posted by frosty zoom at 10/07/2008 @ 01:34am

35. Apparently immune to all the turbulence was Iraq. The government has little if any investments in the institutions affected by the crisis and a barely functioning stock market. Most Iraqis keep their money in their homes rather than trust banks.

    "We don't believe it will affect our bank balance," said Minister of Industry Fawzi Hariri. "In the short term we'll be one of the least affected nations."

    The Iraqi government has more than $25 billion in cash reserves. Even with oil prices dropping below $90 a barrel, the Iraqis forecast oil revenues to be in the neighborhood of $80 billion.

    Posted by frosty zoom at 10/07/2008 @ 02:17am

36. Remember Rese?

    All his/her backward spinning white album new world order funk?

    Posted by winyahn at 10/07/2008 @ 12:20am

    Yeah, rese/plunger my only two on ignore.

    I should have clarified and said THAT is one of the strangests posts by a normally lucid person I had ever read.

    Posted by Benchrest at 10/07/2008 @ 09:22am

37. Posted by Benchrest at 10/07/2008 @ 09:22am

    I've seen PLUNGER (kept him off Ignore to keep updating him on "World War-III progress"...given it started in March of 2007!...heheh)...

    but is RESE still out there???

    Posted by Maskdelta at 10/07/2008 @ 10:28am

38. but is RESE still out there???

    Posted by Maskdelta at 10/07/2008 @ 10:28am

    black helicopters........

    Posted by frosty zoom at 10/07/2008 @ 10:59am

39. Sorry, but it was written in too much of a hurry, but my point is that economic tough times are always hardest on the poor.

    Posted by Darin_the_Troll at 10/07/2008

    well, if the money weren't made out of rubber.......

    Posted by frosty zoom at 10/07/2008 @ 11:02am

40. Sorry, but it was written in too much of a hurry, but my point is that economic tough times are always hardest on the poor.---Posted by Darin_the_Troll at 10/07/2008 @ 10:35am

    Yes....that's merely a truism.

    So what? Are you trying to sound more "liberal"?!?!??

    Posted by Maskdelta at 10/07/2008 @ 11:40am

41. but I have practical experience with these markets and graduate level academic training in economics at a pretty high level that went deep into econometrics, game theory, and advanced mathematical modeling.

    Posted by Metteyya at 10/06/2008 @ 7:19pm | ignore this person | warn this person

    Isn't game theory and advanced mathematical modeling found in the prospectus of credit default swaps?

    The problem is that the "shadow market" did not reflect reality based economic fundamentals. I haven't figured out yet whether the peddlers of these derivatives should be put in jail or an insane asylum yet.....maybe jails for the criminally insane would be appropriate.

    Posted by OneVote at 10/07/2008 @ 11:52am

42. but is RESE still out there???

    Posted by Maskdelta at 10/07/2008 @ 10:28am

    NSA got her.

    Posted by Benchrest at 10/07/2008 @ 12:18pm

43. Posted by Darin_the_Troll at 10/07/2008 @ 10:35am

    http://tinyurl.com/4o73mt

    Isn't there a law concerning the incitement of violence against a presidential candidate?

    Bottom line the frustration is justified concerning the pilfering of our public funds-- but it has little to do with Obama's candidacy even as McPalin is misdirecting their GOP mob to violent fear against Obama. The markets were going to correct all the way to about 8000 and that was predicted to happen now about a year ago. Is it really a surprise to anyone that McPilan will manipulate this crisis in a way that has nothing to do with the crisis in order to win?

    That the DOW was going to do this whether or not the hsuB/cHeney dic'tatorship got a few more billion stolen out of the public coffers to no bid unknown places or not anyway, does not but help confuse the McPalin misdirection.

    That they're getting away with it means that we and our children's children are a lot more trapped in indentured servitude than we all were previously.

    Will a new admin ever expose where the missing billions got absconded to and by whom?

    Well, definitely not if it's McPalin.

    With O'Biden, there's at least a little hope...

    Posted by hsuBfools at 10/07/2008 @ 12:21pm

44. but is RESE still out there???

    Posted by Maskdelta at 10/07/2008 @ 10:28am

    NSA got her.

    Posted by Benchrest at 10/07/2008 @ 12:18pm

    Well, thank goodness.

    heheh

    Posted by Maskdelta at 10/07/2008 @ 3:22pm