pars partis f. [a part , piece, share; a direction, region; a side, party; an actor's role]; in gen., usually plur., [office, function, duty]; ‘pars…pars’, [some...others]; ‘pro (sua) parte, pro virile parte’, [to the best of ones's ability]; ‘magna ex parte’, [to a great extent]; ‘multis partibus’, [many times, much]. Adv. partim, [partly]; used like a noun, [some].

Since we were using Latin phrases, after all. Ad hominem, to the man, ad partem, to the party.

I figured that the Latin root was close enough to the modern English noun that it would be clear in context, especially as ex parte, “from one party,” is somewhat common in the legal world. Then again, sometimes I forget that most schools don’t have mandatory Latin like mine did.

I imagine that leaders from neither major party are willing to create a bill with too many specifics for a number of reasons, from the fact that the market will change quickly (while the legislative process is slow), to that little voice in the head of most politicians that shirks blame and takes credit: passing authority to the executive branch makes it the Bush administration’s problem again.

Having only made it through economics 101, I don’t want to comment in depth any further, but I do know what moral hazard is and we seem to be creating quite a bit of it.

Kelly, if you’d like to discuss some of the controls you claim wouldn’t make things so bad, I’m all ears, but from what I’m seeing right now, they don’t look particularly good. Reference this discussion of the main control:

The bill includes a provision intended to protect against such future net losses by requiring that firms selling troubled assets to the government also provide warrants or senior debt instruments. CBO anticipates that this provision would not have a substantial effect on the net cost of the TARP, however. On the one hand, warrants or senior debt instruments might reduce the incentive for sellers to overcharge for low-quality assets. On the other hand, since the warrants or debt instruments would have value, Treasury would generally face higher prices because sellers would seek compensation for both the value of the troubled asset and the value of the warrant or debt instrument. In addition, the warrants or senior debt instruments may be difficult for the government to value, complicating even those auctions in which the government is otherwise most likely to obtain a fair market price.

My main opposition to the bailout stems from the fact that it was written by Republicans as a bailout to the ultra-wealthy, and the version that recently came up for a vote wasn’t significantly altered. I’m not necessarily opposed to a bailout, but it has to be done correctly. We need to get a return on our investment over the long term, not just throw $700 billion down the drain. I read recently that $700 billion could purchase every single home that is currently up for foreclosure. Granted, that wouldn’t be a good idea since it would prop up home prices that don’t have any business being that high, but wouldn’t it still be better than writing blank checks to large financial companies since it would at least benefit normal people instead of the uber-wealthy? It would also rescue the banks, I should point out — the government isn’t going to default on those foreclosed homes like the occupants did.

Our only hope is that the economy will be able to stumble along until November 5th, at which point the lame-duck Congress can pass the bailout without concern to the impact on reelectability, the main reason it failed yesterday.

The funny thing about that is the full ramifications of this bailout won’t be felt for years. Congress, for once, shouldn’t worry about reelection and should just do what they think is correct.

Unfortunately, not nearly enough people understand macroeconomics, and so don’t understand that a 30% reduction in M1 will mean a similar reduction in wages, without a concomitant reduction in their mortgage payment. Anyone living paycheck-to-paycheck better start packing; they won’t be in their home much longer if we don’t get some sort of bailout soon. Our only hope is that the economy will be able to stumble along until November 5th, at which point the lame-duck Congress can pass the bailout without concern to the impact on reelectability, the main reason it failed yesterday.

Just as an example, related to the sort of consulting work we do, think of a company that has an inefficient paper process currently in use. They want to make this process more efficient by changing from paper to an electronic process. This improvement in efficiency will help them save money/provide better service, but it might take 5 years to actually pay for itself. As long as this hypothetical company can take out a low interest loan to pay for the upfront costs of the upgrade, it is in their best interest to do it. They can keep paying their normal bills with their normal revenue, but they can also simultaneously afford the upgrade. Then they can pay off the loan with their cost savings over the years.

This is the type of positive economic activity that we need to happen all over the country, but which requires banks that are willing to lend money cheaply. If all the banks are worried that they don’t have the liquidity they need to survive, they will be much less likely to lend any money, and the money they do lend will have an interest rate that reflects the risk they are taking.

The problem with your take is that it overlooks the usefulness of finance.

Without banks and other investors lending money by the trillion, the economy slows down to a standstill. The finance industry bail out is really more of a bail out of the economy as a whole since finance is sort of like the oil in a car’s engine. Without credit available to companies that produce more than paper (tech, consumer goods, etc.) those companies will cut jobs and lose money which will only cause to further contract the economy.

On the other hand, this latest proposal was shoved down the American tax payers throat. We were rightfully skeptical because it would have been an incredibly bad deal. I think it would be much more positive to low ball the financial community with an offer of $350 billion for assets that although they are illiquid are probably worth more than $350 B. That isn’t a bail out. That is providing liquidity.

Then the other half of that 700 billion could be used on a New Deal style investment in green energy.

The truly interesting–and possibly tragic– part of this though is the political side of things. The fact that this is happening mere weeks before an election is a mixed blessing. On the one hand it may cripple our legislature with fear of a constituential backlash. On the other hand, the fact that this problem is being covered so much by the media on the eve of elections may force politicians not to rush into a bad decision that could be held over their heads.

Keep your fingers crossed…