Good News? Bad News?

There were rumors earlier today about an agreement in principle on the bailout.  It’s not as bad as it could be, but House Republicans are trying to make the best of the situation.  Again, I keep harping on the need for institutional reform.  The House Republicans are floating this as part of a blue-ribbon panel, so that’s better than nothing, but if you’re going to get hosed, you might as well get something good out of it, like not having to get hosed again.  Strangely enough, John McCain isn’t kicking conservatives in the teeth…yet…

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Sundry Economics Links

I’ve been busy the last few days and have been collecting some links, so I’ll hit most of them in one post.  Forgive the disjointedness of this post…

Fannie Mae and Freddie Mac:  the scandal.  This will probably make you angry.  You know that things are interesting when folks at the American Enterprise Institute agree with Ralph Nader…

Naturally, Fannie Mae and Freddie Mac aren’t the only ones with shady business practices.  If the federal government had to follow accounting standards, there’d be a lot of politicians in jail.

Ramesh Ponnuru is mad about the AIG bailout.

It’s a troublesome scenario when the Treasury is financing the Federal Reserve.  As Jim Manzi notes, this undermines the notion of central bank independence, one of the key tools for fighting inflation.  If the Fed were to become a wing of the Treasury, political decisions would play a large role in Federal Reserve policy and inflation would grow even more than at present.  The Washington Post has more on this.

Andy McCarthy points out what would be good advice for John McCain.  I doubt he would take it, though.  It’s really frustrating dealing with McCain on fiscal issues (not to mention some others…) from the right because you’ll like him sometimes (such as on ethanol and corporate welfare in general) and he’s one of the fiercest earmark- and pork-hawks in the Senate.  At the same time, though, he goes off on populist rampages, wants to increase regulation in already-over-regulated industries, and is fine with higher taxes so long as they lead to balanced budgets.  So sometimes he goes and does something good and then you feel warm and fuzzy for a few minutes, but then he goes and does something stupid and then you wish somebody would build a time machine and transport the Bobby Jindal of 5 years from now back here so that he could have run…

If you’re confused about all of the financial jibber-jabber, Arnold Kling has a great primer on financial systemic risk.  He doesn’t talk directly about Basel II or VAR but he does hit an important angle.  This points out the sheer importance of expectations in market behavior, I might add…

Yves Smith has an article describing why you shouldn’t like Henry Paulson’s plan.  It’s overarching (and unconstitutional), essentially unaccountable, and is a massive form of corporate welfare (that’s the third time I’ve used that phrase in this post…).  The worst part of it is that, after Paulson & co. pay out, perhaps enhancing the bank accounts of friends and associates of the executive branch individuals choosing whom to lavish money upon, there are no institutional reforms to fix the problems that caused this.  It’s the same thing with the Fannie/Freddie bailout:  lots of cash, little improvement.  I’m not as bearish as the article is regarding any currency problems, and the US situation is markedly different than Thailand and Indonesia, given that those two countries had pegged currencies but wanted to keep favorable terms of trade.  Fortunately, Republicans in Congress appear to have a bit of a backbone, including Senatorial political heartthrob Jim DeMint.

John McCain has suspended his campaign in order to help with the finance bill.  Here is Newt Gingrich’s response to that.  It’s a fairly shrewd move for him, I think, and if I actually trusted him to do it well, I’d applaud him for it.  I don’t think he’ll do any good, however.  Obama, meanwhile, is staying far away.  Given that all he knows how to do is vote Present, it’s better that he leave the grown-ups to figure things out.

Every once in a while, you read about X million without insurance.  The number now is 45 million, but Sally Pipes explains why that number is extremely misleading.  A more legitimate number is somewhere between 8 and 17 million people, depending on how you factor in the $50-75K/year crowd.  That’s between 2.5 and 5%, which isn’t nothing but could be helped with institutional reforms such as allowing insurance companies to trade across state lines and giving the same tax incentives to individuals purchasing health insurance as companies get.

One final note here on the bailout:  Jonah Goldberg sums up my position almost perfectly.  We might need some short-term bailing on a limited scale, but opening up an avenue for government to own a major sector of the economy is suicidal.

Thanks to Cafe Hayek, I got to see an interview Julian Simon did a while back.  Simon was beautifully optimistic and The Ultimate Resource 2 was nothing short of mind-bendingly awesome.