This tells you two things. First, once you become an ex-president you have a little more freedom to be objective and centrist. And, two, Obama has really pissed off the Clintons.

CNN’s Jeff Miron:

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street’s hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

Indeed. It should be noted that the DOW climbed more than 200 points the day after the House failed the banking bailout.

One must be skeptical that the same folks in Congress who engineered “affordable housing” loans, and who just a few years ago were protecting Fannie Mae and Freddie Mac, saying there is no crisis, are now crying crisis and offering a massive taxpayer funded plan to save us.

From Wizbang:

If the Treasury simply took the $700 Billion and started paying off taxpayer mortgages, they could pay off every mortgage in the country worth less than $75,000… Or put another way, $700 Billion could pay off well over half of all outstanding first mortgages in the entire country.

Do you really think they need this much money?

So I say we just take the cash and pay off half the mortgages out there and see what that does to the credit market and the economy. Are ya with me?

Maybe combining this with the SEC rule change below will help confidence some. Funny, however, how they didn’t actually get around to doing this until the House defeated the first iteration of the bailout.

WASHINGTON (Reuters) – The chairman of the House Financial Services Committee has told lawmakers that a federal bank regulator will seek authority to increase the deposit insurance limit to a level above its current $100,000, said a source familiar with the chairman’s thinking.

Representative Barney Frank, a Massachusetts Democrat, has told lawmakers of his committee that Sheila Bair, chairman of the Federal Deposit Insurance Corporation, will soon request the authority to boost the level of insured deposits, the source said.

Presidential nominees Barack Obama and John McCain both proposed an increase in federal deposit insurance to $250,000 from $100,000 as a way to broaden support for the bank asset bailout bill rejected on Monday by the U.S. House of Representatives.

Both of these changes seem like little things that cost the taxpayer nothing… and isn’t that the point?

Some appropriate reflections by Jerry Bowyer:

Before we all run out to buy shotguns and propane tanks, perhaps we can try a collective upgrade to Paulson 3.0. The fact is that this issue has been mis-framed by most of the press (and the administration) and therefore it has been misunderstood by the people. Freedom didn’t lead us to this crisis – central planning did. We weren’t under-regulated; we were over-regulated. There has not been a single piece of deregulatory legislation passed in the last eight years. But there was a major piece of re-regulatory legislation passed under Bush – Sarbanes Oxley. By upping the penalties on financial executives largely from civil to criminal sanctions it put the whole multi-thousand page regulation manual on steroids. No more fines; next time handcuffs. No wonder, nobody wanted to hold politically tainted paper. Owning a mortgage backed security in this environment is like owning a pointy hat and a black cat in colonial Massachusetts.

These securities which the government invented (through Fannie Mae), and foisted upon the banking community (through the Community Reinvestment Act), now has regulatory kooties. Own and you’ll get sued. Sell it and you’ll get sued. Keep it and the regulators will force you to write it down to panic level prices, and then you’ll get sued. Try to foreclose and state and local government will refuse to enforce the contract. Try to get private equity investment to keep your balance sheet alive and you find the door barred by 80-year-out-of-date regulations like the Bank Holding Company Act.

Government did this to us. This plan isn’t a bail-out; it’s more like reparations.

The Securities and Exchange Commission and the Financial Accounting Standards Board have just made an announcement that, dry as it sounds, may mean a great deal: “When an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable.”

The SEC is not telling holders of hard-hit mortgage-backed securities that they can willy-nilly slap any value on them they want.

What the SEC is saying is: You can take other factors into account when valuing them.

There is no market right now for the worthless mortgage-backed securities — that’s one of the reasons we’re in this crisis. That means financial institutions that are holding them must value them well below their former value, sometimes near zero. That makes the institutions themselves worth much less.

Accounting is not something that ordinary taxpayers think about much, but it could hardly be more important to businesses: It’s the value they place on what they own, what they owe and what they can sell.

An odd-sounding accounting phrase at the heart of this is something called “mark-to-market” accounting. Many think that if this requirement were ended, the crises could be eased.

Simply put, mark-to-market accounting requires companies to set the value for the assets they own at the price they could fetch on the open market right now. The prices must be “marked to market;” hence the phrase.

What does that have to do with the current crisis? The root problem now is that financial institutions have been caught holding value-less, or “toxic,” assets on their books, such as the mortgage-backed securities based on sub-prime mortgages that have defaulted.

The government believes that those assets will be worth something soon — that’s why they want to buy them in the $700 billion Wall Street rescue plan. But under mark-to-market rules currently required, they are worth almost nothing, threatening those who hold them with insolvency.

If the holders could place a value on the assets equal to the estimated value they should bring in the future, suddenly the balance sheets of these financial institutions would look a lot healthier.

Today’s SEC rules clarifications do not end mark-to-market accounting. But they do let the holders of these low-value “toxic assets” to use other ways to value them, which probably will lead to an increase in their value, even though that is not the SEC’s intention.

If all this sounds like voodoo accounting, well, all accounting can sound that way sometimes. But remember this: Even though homeowners have defaulted on sub-prime mortgages, there is a house at the bottom of it all and that has real value.

– Frank Ahrens, Washington Post.

Similiar to Rich Lowry’s message below, the editors of National Review (Lowry is one of them) recommend that Congressional conservatives swallow some free market pride and concede that offering some government solution doesn’t make them all a bunch of Chavez Socialists. In short, don’t throw out the baby (the economy) with the bath water (the distasteful pieces of the bailout).

There are alternatives to the Paulson plan, some of which are better or worse from a free-market perspective. But all of them involve major government action because in a financial crisis like this  — originally stoked by misbegotten government policies — only the government has enough capital to backstop the system. It is the nature of financial panics to destroy institutions and wealth willy-nilly. Insisting only on private action in a crisis this large is like counting on private emergency response to a hurricane or on a private military to fight the country’s wars.

McCain talks of the honest laboring man as the strength of America. No doubt he is, but he wants to buy a house (which requires a mortgage), not pay for everything with cash (which requires credit cards), have a job (which requires a business that is very likely dependent on loans) and buy big-ticket consumer items he can’t pay for upfront (which requires car loans, etc.). Freeze up all those sources of credit, and economic life as we know it ends.

Already, the panic has sent investors to the safety of Treasury bills, leaving less capital for consumers and businesses. Few realize how much businesses rely on short-term loans for routine operations like meeting payroll, and how that most characteristic American entrepreneurial figure — the guy with a bright idea he works out in his garage — depends on investment and loans.

Conservatives who make so much of their knowledge of the markets would ordinarily be the ones to point this out, but they have a blind spot for the market’s failures. The financial system is subject to periodic panics that, if left to work their course, will wreak economic havoc out of all proportion to reason. They take down good institutions along with the bad.

If it works, the Paulson plan’s most worthy accomplishment will be saving innocent bystanders from the wildly swinging tail of the blind and panicked financial beast.

– Rich Lowry.

Four years ago… My favorite part is Rep. Lacy Clay calling it a “lynching” of Franklin Raines.

So, you get the double whammie of a defense of the guy who cooked Fannie Mae’s books with overstated earnings while personally making $90 million during his five year stint as Fannie Mae CEO, combined with subtle race card politics. Critical of Franklin Raines? You must be racist!

Today’s stock market drop is a record point drop, but does not even crack the top 10 single-day percentage drops in American history.

Let’s stop pounding the panic buttons.

– Michelle Malkin.