Today’s BS Bailout Meme That Must Be Destroyed: $1.2 Trillion Lost
It’s the latest scare tactic in the bailout propaganda war.
“$1.2 trillion in market value was lost in yesterday’s trading.”
Every newspaper writer and TV talking head you see who makes this point today is an economic illiterate who doesn’t understand basic concepts like market capitalization.
Worse still are the newspapers, pundits, pols, and talking heads are saying “That’s less than the bailout would have cost!”
I don’t use these words lightly: You must be some special kind of stupid to equate market cap with government expenditures.
Update: Also, what Nick Gillespie at Reason said.
Are journalists, politicians, analysts, et al. really so retarded that they insist on leading all stories about yesterday’s Dow with a patently useless measure?
Somehow “Dow absorbs 17th-biggest percentage drop in its history” just doesn’t pack the same wallop, does it? More here.
My Warning Still Stands
I wrote a column for the Dallas Morning News last week warning about politicians trying to sell us on big decisions based on appeals to fear.
And here comes Bush, warning that if we don’t pass Paulson’s version of a bailout, there will be “painful and lasting” economic damage and, “The consequences will grow worse each day if we do not act.”
His talking points hate my freedom. (*sniffle*)
Tuesday Roundup: Problems in Plano, Shootout at the OK Corral, Cheerleaders ‘Kissing,’ The Failout & Palin Prep
- My friend Scott Henson at Grits for Breakfast wonders what the hell is up in Plano? Cops using steroids, a DA and judge sleeping together, cops setting up a guy for a DWI, that bigot county commissioner who hounded a gay employee out of his job, and so much more. Yeah, well, um, er…at least we’re not Farmers Branch.
- There was a gunfight at the OK Corral. Four are dead. Yesterday. Seriously.
"You're no daisy."
- High school cheerleaders suspended. For playing a song. “I kissed a girl.” No, really. A song.
- The $700 billion bailout didn’t pass and even though the Dow fell Just. Six. Percent. the sky didn’t fall. Now let’s all take a deep breath, engage our reason, and not let panic lead us into supporting a bad idea. There are better ways to deal with this. Seriously — the people pushing this bailout on us are 1) the financial regulators who allowed this to happen, 2) the Bush administration, and 3) Congressional Democrats. And we’re supposed to oblige when they say, “Trust us?” I don’t think so.
- Palin is boning up on foreign policy at Epcot Center.
Bailout Quote of the Week
I’ve spent some hours sitting down with Jeb Hensarling at his Dallas home, and he’s one of the good ones on economics. The $700 billion bailout has had its EPIC FAIL (woo hoo!) moment, but before it went to vote, he put it perfectly.
Republican Jeb Hensarling of Texas, a leading conservative, said the bill puts the country “on the slippery slope to socialism. If you lose your ability to fail, soon you will lose your ability to succeed.”
Who’s Behind the Financial Crunch, Part II
I brought you part one on Friday. Here’s the sequel. (Bonus Bill Clinton moment at the end, where he has a little honest mea culpa moment.)
(And just to be clear, the problem that kicked this off was regulations demanding more home loans for unqualified borrowers. Poor judgment on the part of people who bought and sold mortgage backed securities expanded the problem, and they’re the ones who are being bailed out — and who shouldn’t be. And since Fannie Mae and Freddie Mac are not, in fact private companies but government-chartered institutions, the call for more regulations on those two is not an endorsement of more regulation of the free market itself.)
Pinon Canyon Update: Eminent Domain Ban Goes to the Hill
My latest dispatch on the great Pinon Canyon land grab is up at thelandreport.com.
Maybe, just maybe, ranchers will be able to breathe easy for a year as the ban on eminent domain is extended another year. But that doesn’t mean backers of the PCMS expansion don’t have an ace up their sleeve.
About The Dallas Convention Center Hotel Idea…
Trouble,
Oh we got trouble,
Oh, we got trouble
Right here in Big D
With a capital “T”
That rhymes with “C”
And that stands for Convention Center Hotel
Tell me if any of this sounds familiar.
Today, the cavernous [convention center] is only partially utilized.
“You can’t look at the hotel by itself,” says [the mayor]. “We’ve got a tremendous investment in the convention center. The hotel will help us get a better return on that investment and help it reach its potential.”
“I’d say — not even reluctantly — that this is an investment that we ought to be making. There’s going to be risk involved, but we’re willing to take the risk. We’ve made a decision that we’re going to get into the convention business. We should make sure that we make that convention business the best it can be. We can’t do that without a first-class convention- center hotel,” [the mayor says.]
Yes, it does sound familiar doesn’t it? Come along with me, dear reader, a little deeper down the rabbit hole.
The biggest argument for the hotel is that it will allow [the city] to draw additional convention business — an expectation that’s supported, in part, by anticipated bookings compiled by the … Convention and Visitors Commission. “That hotel is going to allow [the city] to host more major conventions during the course of any year…,” says the CVC president.
And then the convention and visitors boss predicts this:
[He] estimates the number of major conventions will climb from 33 to more than 50 a year after the new hotel goes on line. A corresponding increase in smaller meetings should help boost convention-related hotel business from 413,676 room nights [now] to 800,000 a year, according to CVC projections.
So is this Mayor Tom Leppert and Convention & Visitors President Philip Jones?
Close. It’s the now mayor of St. Louis and the president of their equivalent of Dallas’ CVB, back when they sold the city of St. Louis on the need for a city-owned convention center hotel in the late 1990s, putting St. Louis taxpayers on the hook for hundreds of millions of dollars, all based on rosy projections. Read the full story here.
So the obvious question is, how did that work out for them? I’m glad you asked.
In September 2000, a division of HVS International…said the St. Louis convention center accounted for 460,000 room nights in the city annually. “It is expected that with the addition of the subject properties, the city will be able to accommodate over 800,000 room nights in future years,” HVS reported.
And what was the reality?
Instead, from a peak of 500,000 convention room nights in 2000, the total fell to 400,000 in 2003. It is now projected to be 470,000 in 2007.
So their total gain in room nights — city wide — was 10,000. Almost no change at all. Despite hundreds of millions sunk into the St. Louis convention center hotel. Which, by the way, is a four-star hotel that if you use priceline.com, you can get a room in for about $55. Guess what that does to the market for private hotels that aren’t subsidized on the taxpayer dime?
So wait, you ask, who was that who made those rosy projections about St. Louis’ convention center hotel?
Why, it’s HVS, which seems to travel from city to city like Professor Harold Hill selling city after city on this really bad idea of owning a hotel when no private developer would build them. The very same HVS who, after a 2004 study that said Dallas shouldn’t bother with a convention center hotel, came back in 2007 with another study that said Dallas should.
Funny that. Looks like we’re traveling down a well-trod road.
PS – The Dallas Morning News on Sunday endorsed the notion of putting the city owned convention center hotel to referendum. Good work.
Update: Good info on the bond situation in financing the convention center hotel here from Sam Merten.
Uh Oh. Guess What’s Really Behind the Financial Crunch?
It’s not the “Wall Street fat cats,” unless you mean by that the head of the the government sponsored corporation known as Fannie Mae.
Buried in the NY Times archives is this little gem of a story from Sept. 10, 1999:
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.
”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”
(Raines, incidentally, is an adviser to Barack Obama.)
Now here comes the best part.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.
”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”
Glorious.
So you see, the problem isn’t greed (which exists in every market, because it’s part of human nature) and it’s not a Lack of Regulation(TM).
No, it’s government pressuring the market to make irrational moves like loaning money to people with bad credit in the name of “fairness.” The problem is not too little, but too much, government regulation. As usual.
Friday Roundup: Obama and Thought Crime, Guns, CBS Fails & César Chávez Fun
What were you saying about Barack?
- No matter who wins the White House in November, I lose. I don’t like either of them. But there’s something sinister about the way Obama keeps trying to silence ads critical of him. And even more sinister about how the Washington Post does a fact check on NRA ads, when the fact check itself is nearly fact free.
- The same government that created the current economic crunch by forcing businesses to make loans to unqualified poor and minority borrowers is testing a system to read the thoughts of people in public places, in airports, and crossing the border, hoping to determine if they are hostile. This should work out just peachy.
- I think it says more about the state of news at CBS News that it took David Letterman to show John McCain was BSing about having to rush back to D.C. CBS news execs said someone would get fired for revealing McCain was lying. Huh?
- What am I going to do about AMR? Just hold it. This bailout mess has all my artistic calculations blown off course. Though I am glad I was able to take advantage of WaMu’s volatility last week to turn a profit before they had their EPIC FAIL.
- I’ll never get tired of the César Chávez renaming mess. Because after all, this is the most important challenge facing the Hispanic community in Dallas. Not DISD or anything. (Let’s throw old Barefoot Sanders’ name into the mix just for s***s and giggles.)
Quote of the Day: Sam Merten on the Convention Center Hotel
From Sam Merten’s piece yesterday on Unfair Park about the campaign to build a city-owned hotel.
“The City of Dallas desperately needs the convention center hotel if we want to retain our ranking as one of the top meeting and convention cities in the United States,” Jones said.
Jones added that the DCVB is on track for a record year. So, just to be clear, the DCVB had a record year, and Dallas ranks as one of the top meeting and convention cities, all without a convention center hotel.