Because construction of more suburban and exurban McMansions is just digging further in the already deep hole most of the US population is in, as inevitably higher fuel prices will turn those homes into traps for their occupants. The US would be much better off if labor and (ever more scarce) resources were employed in a massive wind farm construction plan like Al Gore proposed recently.

Related to this, the cars-on-natural-gas part of T. Boone Pickens plan is nonsense. Cars should go electric or at least Plug-in Hybrid (that’s why the US needs so much wind power). Natural gas should be reserved for cooking and heating.

Alright not the absolute safest money market funds. But agencies are the only paper the Fed has for decades treated as equivalent to Treasuries in Open Market Operations. This policy was designed to affect the way agencies were treated by money market fund managers — and it did. It’s simply not reasonable to compare agencies to SIV commercial paper and “asset”-backed commercial paper backed by credit default swaps.

I’m not arguing that in some moral sense, investors in agency MMMFs shouldn’t lose their money, I’m just arguing that poor regulation let a situation develop where the government has no choice but to engineer a bailout. There are right ways and wrong ways to do this and I agree entirely with the third to last paragraph of Stiglitz’ article.

Maybe the government should just have announced this morning that everyone with money in agency commercial paper will only have access to 90% of it, the rest is being held provisionally by the government to finance the nationalization of the firms. But would this be legal? Would this push a large percentage of the banking system over the edge? Whatever they do has to be already done, once the public finds out about it.

I think it would be a disaster to have open debate over this in Congress.

No, they are not. For example, the Vanguard Treasury Money Market Fund (VMPXX):

Investment strategy

The fund invests solely in high-quality, short-term money market securities whose interest and principal payments are backed by the full faith and credit of the U.S. government. At least 80% of the fund’s assets will always be invested in U.S. Treasury securities; the remainder of the assets may be invested in securities issued by U.S. government agencies. The fund will maintain a dollar-weighted average maturity of 90 days or less.
Investment policy

The fund reserves the right to invest, to a limited extent, in floating-rate securities, which are traditional types of derivatives.

At this point we are where we are. If the government doesn’t support their debt, Fannie and Freddie collapse tomorrow with the obvious consequences for the mortgage market. (Remember the *safest* money market funds are in agencies. How do you say run on the bank?)

The bill that passed Congress is grossly unspecific — but what would have been the financial consequences of publishing the details of a bailout before the bailout is ready? With financial firms the only good announcement is the announcement of a done deal — everything else is an arbitrage opportunity.

AMEN, bro! Hank Paulson’s presentation of the bailout to the Congressional committees was astoundingly, even insultingly, vague and ill-prepared.

He said it might cost zero, or trillions. That he might buy debt, or equity, or lend money, or do nothing. Whenever the whim strikes him.

He said that the taxpayers would be protected, but refused to divulge how.

Had I been the chair of the committee, I would have summoned the Sergeant-at-Arms to escort Paulson out of the room, in response to his obvious contempt.

That the Congressional gerbils and hamsters knuckled under and opened the public purse to this greasy Goldman Sachs crook makes me sick. Welcome to the world’s greatest plutocratic, nuclear-armed banana republic. Loot while the looting’s good, cuz when this clearance sale is over, we’re out of business.

Some good stuff over here, which is slighty OT for this thread, but keep an eye there:

http://www.clusterstock.com/2008/7/-1-trillion-of-writeoffs-now-consensus-for-banks-which-leaves-600-billion-of-writeoffs-to-go

and this: Alpert quotes hedge fund manager Rick Bookstaber who believes that financial engineers have accelerated crises and systemic risks via the complex dynamics of new futures contracts, exotic options and swaps. These new financial instruments create interlocking markets (capital, commodities, debt, equity, treasuries) which have the second-order effects of larger yield curve spreads and trading volatility. Alpert and Bookstaber’s views echo Susan Strange’s warnings a decade ago of ‘casino capitalism’ and ‘mad money’ as unconstrained forces in the international political economy.

http://alexburns.net/

You’re telling me that they bought hundreds of billions of dollars of those securities and didn’t even read the prospectus? And that they were pledged something, but didn’t get the pledge in writing?