As best I can gather, Wall Street is having conniptions because its "financial instruments" are worth less than investors thought.  And why are those complex mortgage-backed securities "toxic"?  Because they're based on mortgage payments that some home-owners can not afford to pay.  The pools of Wall Street capital are running low because millions of little streams of mortgage payments are running dry.  Paulson wants to dump buckets of money directly into the pools, because they are "too big to fail".

What I don't get is why the pools would run dry if the cash were dribbled into the individual streams, instead of being splashed into the pools.  In plain English, what if the Treasury offered "bail-outs" to homeowners rather than investment bankers?

The Wall Street whiz-kids and their investors are panicked because they figure they can't count on li'l old me to pay the mortgage I signed up for.  If they could count on me, they would not have to "write down" their fancy "instruments".  One way to give them that confidence would be a government guarantee.  Not to them.  To me.

Suppose the government offered me the chance to "participate" in a "home-owner bail-out".  Say, for example, that I signed up for a mortgage payment of $1000 per month, and I can no longer afford that much.  So I go to my buddy Hank at the Treasury and say, "Look, old buddy, old pal, I can only pay $800.  Howzabout you pay the other $200 for me so I can stay in my house?"

Savor that scene for a moment, and then ask yourself what kind of bargain Mr. Treasury Secretary Paulson could drive with me.  I am not "too big to fail".  He could say, "Sure, friend, I'll help you out.  But it's taxpayer money you're asking for, and the taxpayers have to get something in return.  Tell you what:  if they pick up 20% of your mortgage payment, they get 40% ownership of your house.  What's that -- your house is worth $50K less than your mortgage principal?  Well then, let's say 75% ownership."

Now, this is a much harder bargain than Paulson wants to offer Wall Street firms.  But remember:  I am not too big to fail.  And I do need a place to live.  So, compared to an investment banker, I'm a pushover.  I take the deal, the whiz kids get their slices and dices of my mortgage-payment stream;  I keep my house, they keep their Learjets;  their balance sheets are solvent, their assets are liquid, they have no excuse for panic.

What I want to know is this:  would it cost the Treasury more, or less, than $700 billion to "stabilize the markets" by bailing me out?  By "me" of course I mean "that fraction of American mortgagees who need a bail-out" -- a large number of people, to be sure, but not I take it remotely close to a majority.

The follow-up question is obvious:  if Americans (as taxpayers) cannot afford to help make the payments that Americans (as mortgagees) cannot afford to make, why the hell should we believe that Americans (as a nation) can afford to bail out Wall Street?

I, personally, am not "too big to fail".  I, the American people, certainly am.  I don't know how Wall Street can make do without me.  So why are the financial experts exclusively focused on Wall Street?  Easy:  financial experts, as they have already proved, are smart enough to outwit themselves.

--TP

I have just got to get this off my chest:  the Democrats I've heard today on MSNBC must be idiots.  They can't recognize a good talking point, even when Joe Biden serves it up to them on a silver platter and Sarah Palin throws it at their feet.

Joe Biden said it's time for the wealthiest Americans to show a bit of patriotism.  To stop caterwauling about their taxes going up a few percent, and recognize that "serving a cause greater than self-interest" requires, well, "sacrifice".  Paying a bit extra to your nation's treasury is the easiest possible way to put your "country first".  Much easier, at any rate, than literally sacrificing an arm and a leg.  Rich patriots pay taxes;  rich Republicans clamor for tax cuts. 

Sarah Palin, bless her Christian heart, then does her best Tina Fey imitation and mocks Biden for suggesting that "raising taxes is patriotic". 

Now, I can understand how stupid people (e.g. moose hunters, TV hosts) can fail to grasp the difference between raising taxes and paying taxes.  But what the hell is wrong with Democratic "strategists" who go on TV and fail to make that point?  

--TP 

A "maverick" is a wild horse that does not run with a herd.

Cowboys break mavericks to the saddle.

George W. Bush (former Andover cheerleader and Harvard MBA) styles himself a cowboy.  In one single respect, that is justified:  he broke the (former) maverick John McCain to the GOP saddle.

"John McCain:  Broken to the Saddle" needs to become the bumper-sticker response to McCain's bumper-sticker claim of maverickiness.  Aside from the incidental advantage of being true, it also has the potential to get under McCain's skin in a way that "sidekick" and "voted with Bush over 90% of the time" just can't match.

I know that Obama wants to win on "issues", and he may even be able to do it.  But McCain's tame submission to the Bush Republican party line is the biggest ISSUE in this election.  If a fake cowboy's saddle-horse can get away with branding himself a "maverick", then the English language, let alone the republic, will have suffered a serious blow. 

--TP

"Offshore drilling" is the new "surge".  We have to "drill now" in the Outer Continental Shelf, says McCain, because gas is at $4 a gallon.

Well, shoot:  I would like to pay less for gas, myself.  I don't think that drilling in the OCS will get me cheaper gas, but if most of my fellow citizens disagree, well, that's democracy.  Americans, the teevee says, would accept oil drilling in their own back yards at this point.  What I do not get is this:

Suppose you and your family had geological research showing there's oil under your back yard.  You'd rather not ruin your back yard, but you need the oil.  You have at least two totally different options.
1) Hire a driller.  You pay the up-front costs, but the oil belongs to you.  So does the profit, if prices stay high.
2) Lease your back yard to an oil company.  You actually receive a small payment, up front, but then you have to buy the oil.
If your only goal is to make more oil available on the world market, you should be indifferent between these two approaches.  If your goal is to increase the profits of oil compaines, you will not even consider the first approach.

Why is nobody even talking about 'nationalizing' the OCS?

I get why McCain would never, ever, countenance the idea that off-shore oil belongs to "we the people":  where's the profit in that, for his Hess contributors?  But what's keeping the Democrats mum?

-- TP