TPM asks a fascinating question about the bailout.

[triggercut]

The New York Times is reporting tonight that foreign banks have managed to lobby their way into the bailout, insomuch as they'll apparently be allowed to sell those smelly, stinky, no-one-wants-them subprime mortgages they bought or invested in back to the US Treasury Department, same as domestic banks. One of the banks successfully lobbying--and apparently with the most at stake--was the Swiss titan bankcorp UBS.

Huh. Hmm.

I'll let Josh take it from here:


John McCain's top economics advisor, who is widely believed to be his choice for Treasury Secretary should he win in November, is former Sen. Phil Gramm. (Indeed, just last night his spokesman refused to say Gramm wouldn't be McCain's choice for Treasury Secretary.)

Gramm is both vice chairman of UBS's US division and a lobbyist for UBS.

If UBS successfully lobbied over the weekend to get in on the bailout, what was Gramm's role in the lobbying?

Hmm.

[Mike O'Malley]

I take the point, but didn't Gramm resign a few months ago, and thus is no longer a formal advisor?

[Trashcan]

Are we assuming that foreign banks shouldn't be part of the bailout? If the crisis has spread beyond our borders then it makes sense to include foreign banks, right? I don't think this has to be sleazy, especially since Gramm stepped down in July (not to say that Gramm wouldn't be a terrible choice for Treasury Sec...)

[NowhereDan]

Are we assuming that foreign banks shouldn't be part of the bailout? If the crisis has spread beyond our borders then it makes sense to include foreign banks, right? I don't think this has to be sleazy, especially since Gramm stepped down in July (not to say that Gramm wouldn't be a terrible choice for Treasury Sec...)

So the question, just to be clear, is whether American tax dollars should go not just to bailing out Americans who made poor investments, but to people who didn't even pay taxes here? Seriously?

[Trashcan]

So the question, just to be clear, is whether American tax dollars should go not just to bailing out Americans who made poor investments, but to people who didn't even pay taxes here? Seriously?

Yes. I'm operating under the following two assumptions:
1) Further instability in the global markets would be bad for the US
2) We want foreign groups to continue to invest in the US and, if we don't extend them the bailout, they might be less willing to do so in the future.

If that makes no sense, then let me know. I'm operating mainly on second and third hand knowledge.

[triggercut]

I take the point, but didn't Gramm resign a few months ago, and thus is no longer a formal advisor?

Gramm is still advising McCain, and as Marshall points out, a campaign spokesperson refused to kill the rumor that he'd be President McCain's choice as Treasury Sec'y.

As far as US responsibility to foreign banks...I can see the point of it going to a greater good for the US economy down the road, but we're already lacking transparency in this "bailout" for domestic financial institutions. At what point does the US Taxpayer say "sorry, but enough"?

[NowhereDan]

Yes. I'm operating under the following two assumptions:
1) Further instability in the global markets would be bad for the US
Bad? Maybe. As bad as putting a bow on a metric shitton of money we can't afford and giving it away for nothing? Hell no.


2) We want foreign groups to continue to invest in the US and, if we don't extend them the bailout, they might be less willing to do so in the future.
Well yeah - I'd be less inclined to invest in something if I knew that I ran the risk of losing my money. Oh wait, that's a risk inherent to investing. If you were guaranteed never to lose money when you invest it, it wouldn't be called investing - it would be called the magical money machine.

Besides, telling international investors "Go ahead and invest in stupid shit, and don't worry about losing your money because the American tax payers will pick up the tab" seems to me like it would incentivize all the wrong kinds of investment.

[Chris Nahr]

The mortgage crisis has nothing to do with "inherent risks" of investing, it has to do with the American legislators and regulators being asleep at the wheel and allowing bad debts to infest the global banking system. And now that the US government bails out American banks you could make a good case that not bailing out foreign banks would constitute anti-competitive subsidies to domestic banks.

[TheTrunkDr]

The mortgage crisis has nothing to do with "inherent risks" of investing, it has to do with the American legislators and regulators being asleep at the wheel and allowing bad debts to infest the global banking system. And now that the US government bails out American banks you could make a good case that not bailing out foreign banks would constitute anti-competitive subsidies to domestic banks.
Nobody held a gun to these international banks and forced them to invest in these shady mortgage backed securities, they could have easily stayed out of it and many did. The bail out (while I don't agree with it) is to help the US consumers and the US economy, not to correct the myriad of mistakes made by these dumbass companies. To that end, no, they shouldn't bail out foreign banks with US tax payer money. If Switzerland wants to bail out UBS (assuming it needs it) that's their concern.

[mystery]

Nobody held a gun to these international banks and forced them to invest in these shady mortgage backed securities, they could have easily stayed out of it and many did.

Unlike AIG, that's exactly what my company (where I work, not that I own...I wish) did. Our only problem is that, as a company, we own/owned a lot of stock in the big failures last week.

UBS is one of the biggest employers in Stamford, CT. When they moved their corporate offices up there six or seven years ago, they built their own office building downtown, contributed to the city fund, and hired locally. If UBS collapsed tomorrow, Stamford would be a bloodbath.

Of course, they'd always have the WWE, but Vince McMahon is not well known for his diverse portfolio.

[Matthew Gallant]

If UBS collapsed tomorrow, Stamford would be a bloodbath.

Of course, they'd always have the WWE, but Vince McMahon is not well known for his diverse portfolio.
What, he's got normal and tag team wrestling! A small amount of ladder and casket matches too!

[Slainte Mhath]

This ill-conceived bailout, should it occur, is an attempt to shore up the US economy by saddling US taxpayers with tons of bad debt to bail out US companies. In no way, shape or form should this be extended to Swiss banks or any other nationality, unless of course the taxpayers of those countries would like to get in on the action.

Seriously, foriegn banks knew damn well what they were getting into. We owe them nothing when it comes to this crisis. If their own respective governments would like to come up with assistance or bailouts for them, so be it, but the US should not be expected to make good on debt sold outside the US to people who should know better to begin with.

[ElGuapo]

I just love it when my taxpayer money bails out the ultra wealthy and their terrible financial instrument inventions and/or decisions.

[Tortilla]

I just love it when my taxpayer money bails out the ultra wealthy and their terrible financial instrument inventions and/or decisions.

They aren't getting any more bailed out than the retirement plans that a lot of Americans rely on. Got to bail out all of them or none of them, trying to separate the deserving from the undeserving would nearly impossible.

[Jason McCullough]

I can't find the post now, but apparently as part of our bailout of AIG the federal government is now a sponsor of Manchester United.

[CSL]

I can't find the post now, but apparently as part of our bailout of AIG the federal government is now a sponsor of Manchester United.

They'd better insist on putting it on the jerseys.

[Tortilla]

They'd better insist on putting it on the jerseys.

Fuck yeah, huge American flags right on the jerseys. That really improves my opinion of the AIG bailout.

[Brandon Clements]

I can't find the post now, but apparently as part of our bailout of AIG the federal government is now a sponsor of Manchester United.
Fergie probably isn't happy at the moment (http://jessescrossroadscafe.blogspot.com/2008/09/us-finally-gets-decent-soccer-team.html)

[NowhereDan]

The mortgage crisis has nothing to do with "inherent risks" of investing, it has to do with the American legislators and regulators being asleep at the wheel and allowing bad debts to infest the global banking system. And now that the US government bails out American banks you could make a good case that not bailing out foreign banks would constitute anti-competitive subsidies to domestic banks.

So... it was a result of companies making decisions that, while legal, were really fucking stupid. That falls under the category of investment risk - when you invest in a company you're betting that they're going to make more smart decisions than stupid ones, legal or illegal.