Goodenough Gismo

  • Gismo39
    This is the classic children's book, Goodenough Gismo, by Richmond I. Kelsey, published in 1948. Nearly unavailable in libraries and the collector's market, it is posted here with love as an "orphan work" so that it may be seen and appreciated -- and perhaps even republished, as it deserves to be. After you read this book, it won't surprise you to learn that Richmond Irwin Kelsey (1905-1987) was an accomplished artist, or that as Dick Kelsey, he was one of the great Disney art directors, breaking your heart with "Pinocchio," "Dumbo," and "Bambi."



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Comments

Peter Hoh

I can think of at least one difference with this crisis.

No one is using the Bush administration stock phrase: "No one could foresee (fill in the blank)."

Liza

Glad you are having good time with people who love you!
As for the rest of it, we are scratching our heads in disbelief, too. My husband's life insurance is with AIG, so can we now deduct whatever premium he paid from our taxes? It's a government-owned business now, isn't it? or is it not a business anymore? or what? and does he still have insurance, anyway? It's a brave new world, indeed...

Ron

So Bush's term ends with an airplane full of bad loans slamming into Wall Street! Bookends, I suppose...

I think the deeply held belief in home ownership is that people will psychologically bond more with society if they own a piece of it. Perhaps a translation/interpretation of 18th Century European experience?

wj

Owning a home became part of The American Dream because it appeared that the value of houses always rose. Which, between a growing population and inflation, it certainly appeared to, at least over the reasonably long term. So being a home owner was the single surest way to become (more) wealthy -- what politician could resist encouraging that?

But with the population stabilizing, and inflation moderate, there was way too good a possibility that the rise in value would be drop off. Add to that a huge amount of money (liquidity) sloshing around, and the ability of those who wrote the mortgages to pass them off of their own books onto someone else, and nothing-down, minimal-initial-rate mortgages became reasonable -- from the perspective of those writing them originally. After all, when the rates reset, and the buyers discovered that they couldn't meet the payments, it would be someone else's problem. So a lot of people were given mortgages that your father (or anyone else who thought about it for two seconds) could see were simply not viable.

The real gotcha, however, was in allowing the risks to get way too concentrated. When Fannie and Freddie end up underwriting the vast majority of mortgages, having either of them (let alone both) fail would trash the financial system. Ditto with AIG and insurance (Credit Default Swaps) for mortgage payments. If a single company had 10% of those markets, letting them go bankrupt would be painful, especially to those who had bought them without knowing what they were doing. Painful, but not a general disaster. Too bad we didn't stay there.

So now we have an economic rollercoaster for a few months, while everybody figures out which companies are going to survive and which are not. And a lot of stocks (e.g. AIG) become essentially worthless for those who own them -- too bad if much of your retirement money was there. Congress, with their usual style, will bang out a bunch of new laws on the subject -- with luck, as many as a third will be, if not helpful, at least not actively harmful to the economy.

Personally, I give thanks that my parents Depression-era view of family economics rubbed off on me. No big mortgage, no pile of credit card debt, some money put away, so I can get thru it for a few years. But I really feel for those who bought into the "debt is wonderful" mindset. Even at best (which means they are still able to afford the real necessities), they are going to face some severe retrenchment.

And way too many people are going to find themselves late in their working lives effectively starting over from scratch. Not to mention those with pension plans which are going to get abruptly slashed due to the money simply not being there to pay them. And, as those who thought civil service pensions were certain are starting to find out, even some cities (and maybe states) are going to end up bankrupt and making severe cuts. (I'm watching Vallejo, California do that even now.)

It's not going to be pretty.

realpc

Oh God yes, everything Amba said. I never hated Bush before, but now ...

I just got Krugman's "The Great Unraveling" from the library. I never wanted to read it before because I thought it was just a lot of Democratic Bush-bashing. But maybe it was prophetic.

Bush is NOT a conservative! I sympathize with some aspects of conservative philosophy, and it does not include socialist mega-bailouts (or preemptive war, for that matter).

This is such BS. The reason for bailing out AIG is not to save the world, it's to save Bush's mega-rich cronies. I never ever thought I would be saying anything like this.

But it can't all be blamed on the Bush administration, since the Democrats are obviously part of the whole scam scenario.

And the American public is also to blame because, as Amba said, there is absolutely no reason to think that everyone can and should own property.

Now people like me, who work hard and save and were smart enough to not buy a house at the height of an obvious bubble, are going to pay for everyone else's house-buying mania.

And if they can't extract enough money from the taxpayers to buy all this worthless garbage debt, don't worry, they can't always print some more. So all of us hard-working responsible Americans can drown in inflation.

Well I'll see if Krugman is a prophet genius or not, after I read this book.

Dave Schuler

Welcome back to the Windy City, amba. I'd invite you over for dinner but we've been without a kitchen for nearly three months until our home addition is finished.

Danny

What a thrill it was to finally meet the real Annie Gottlieb today! Except I felt like I already knew you. Your family is utterly fascinating in its diversity--I'd like to sit them all down with a tape recorder for about three weeks, starting with your amazing parents.

And with this economic crisis, I may be spending more time in Chicago as my freelance jobs dry up and my retirement accounts shrink to where they could fit in a change purse. OY.

Mazel tov to your family--have a great weekend here in this gorgeous town!

Rod

How can we forget the tulips, or for that matter, the South Sea Bubble? We forget, again and again, because we want to believe we can get rich without contributing anything of value - by speculating.

RW Rogers

This is such BS. The reason for bailing out AIG is not to save the world, it's to save Bush's mega-rich cronies.

*sigh* I don't like this any more than you do but the fact of the matter is that is not true.

Here's an article in today's Wall Street Journal that might interest you.

When government officials surveyed the flailing American financial system this week, they didn't see only a collapsed investment bank or the surrender of a giant insurance firm. They saw the circulatory system of the U.S. economy -- credit markets -- starting to fail....The market froze for the short-term loans that banks rely on to fund their day-to-day business. Without such mechanisms, the economy would grind to a halt. Companies would be unable to fund their daily operations. Soon, consumers would panic....

For some assets, there were no buyers at any price. The weekend's tumult set off a cascade of fear among investors who buy bonds of all stripes, crucially those who buy the shortest-term obligations of companies and financial institutions, called commercial paper. This market feeds borrowers' most immediate needs for working capital....

In three days, the Fed had pumped hundreds of billions of additional cash into the financial system. But instead of calming markets and helping to suppress interest rates, short-term interest rates had gone haywire. Most strikingly to some Fed staff, its own federal-funds rate, an interbank lending rate managed directly by the central bank, repeatedly shot up in the morning as banks sat on cash....

Through Wednesday, money-market fund investors -- including institutional investors such as corporate treasurers, pension funds and sovereign wealth funds -- pulled out a record $144.5 billion, according to AMG Data Services. The industry had $7.1 billion in redemptions the week before.

Without these funds' participation, the $1.7 trillion commercial-paper market, which finances automakers' lending arms or banks credit-card units, faced higher costs. The commercial-paper market shrank by $52.1 billion in the week ended Wednesday, according to data from the Federal Reserve, the largest weekly decline since December.

Without commercial paper, "factories would have to shut down, people would lose their jobs and there would be an effect on the real economy," says Paul Schott Stevens, president of the Investment Company Institute mutual-fund trade group....

"If we don't do this, we risk an uncertain fate," Mr. Bernanke added. He said that if the problem wasn't corrected, the U.S. economy could enter a deep, multi-year recession akin to Japan's lost decade of the 1990s, or what Sweden endured in the early 1990s when a surge in bad loans plagued the economy and sent unemployment to 12%.

House Financial Services Chairman Barney Frank, the Massachusetts Democrat, tagged the rescue of AIG as the tipping point. "It didn't have the broader calming effect," Rep. Frank said. "They tried it the free-market way, they tried it the big intervention way -- and the result was on Wednesday, the world was falling in on everybody's ears."

amba

Dave: next time, for sure.

Danny: mmmMMMWAH!

Randy: thanks for that quick education. Scary.

Donna B.

While I don't think everybody should own property, for those who do so reasonably, it's a good way to accumulate wealth.

We are fortunate that we paid off our house a few years ago. We also had an ordinary mortgage except it was for only 15 years, not 30.

The problem is people who want more than they can afford. Buying a house twice the size you need and twice what you can afford is just plain silly. Somebody financing such is just plain stupid.

Cars are the same way. The last car I bought new was in 1993 and we paid it off in two years. (That was my beloved SHO, Amba.)

Since then we've not bought one we couldn't pay cash for. It doesn't make sense for us to make a car payment.

(oops, that's a bit of lie, I forgot about the motorcycle my husband bought, and financed, but that payment came out of our "entertainment" budget)

It doesn't matter if you rent or buy if you bite off more than you can chew.

There was an accumulation of one stupid move on top of another where regulation, de-regulation, and the push to "grow" the housing stock dammed the river of money.

RW Rogers

Krugman's analysis of the proposed deal via economist Mark Thoma's blog. Read the comments. Weep as necessary. Pray if you are a believer. Reading Thoma's blog provides insight into what economists advising the Democratic Party are probably talking about. Tyler Cowen's blog, Marginal Revolution is always a good source of information with good links to authoritative sources. He offers a decent mix of policy wonk posts and others the rest of us have a hope of understanding. Reading his blog this week has been something like reading the I-Ching, lots of interpretation required (and most of it will end up be wrong). As that is not normally his style, it is far from comforting. (It is not meant to be, I assume.) The best continuing coverage of the housing bubble, its aftermath, and now this continues to be found at Calculated Risk. They were raising the alarm about the bubble long before anyone was paying attention. Many of the posts can be highly technical but others are clear enough for us lay people to understand.

Everything may be just fine and dandy come Monday. It is probably just a coincidence that, for the first time ever after over a decade of being on-time every time, a monthly automated electronic transfer from one of the largest financial institutions in the USA (not directly involved in this mess) didn't arrive in my checking account on Friday.

RW Rogers

FWIW, this commercial played in our area for 4 or 5 years, right up to late 2007:

Woman: "I have liens, judgments, I filed bankruptcy last year. I'm self employed, and can't verify my income. Can I get a home loan?”

Man: "If you have equity in your home, XYZAAA mortgage can help"

Woman: "What about your rates?"

Man: "At XYZAAA mortgage we have the lowest!"

Woman: "And to think the bank turned me down!"

Man: "At XYZAAA mortgage, we say YES!"

(IIRC, the mortgage company went BK. Property values in our area have declined about 34% from the high so far and continue dropping.)

realpc

"He said that if the problem wasn't corrected, the U.S. economy could enter a deep, multi-year recession akin to Japan's lost decade of the 1990s"

Ok, but that still doesn't justify the bailouts. It doesn't justify forcing American taxpayers to buy tons of worthless debt. By the time they noticed the problem, it was too late to fix it, so they applied giant band-aides. In the long run, we will suffer more.

realpc

And I am not a Democrat, and I don't blame it all on the Republicans. But when I saw the president on TV explaining what they're doing and why I could not help thinking "how idiotic." There is just no appreciation of what a monster our economic system is, or how to tame it. Not that I know. But the people in charge obviously do not know what they are doing.

The Republicans love free markets, because they're self-correcting and efficient. But when the market starts correcting itself, in a big way, they rush in and try to prevent it. Either you believe in free markets or you don't -- and everyone does -- so it's pretty ironic that a supposedly free market-loving administration is ignoring it's own philosophy in such a tremendous way.

And I do think there is corruption involved.

reader_iam

Anybody believe this is gonna stop at 700 billion? Not I.

RW Rogers

What would you rather they did, realpc? Allow over $1 trillion in debt to default? Do you really think it would stop there?

RW Rogers

Anybody believe this is gonna stop at 700 billion? Not I.

I understand mattresses are returning the same yield as T-bills these days. They're marginally safer and more liquid (unless you per chance live next door to a Federal Reserve Bank). Not recommending it but it is worth considering.

Ron

You gotta admire W's persistence to come up with some reason to invade somewhere before he exits, stage left!

Well, ok, we don't have to invade, per se... "Nice little country you have there...sure be a shame if something happened to it!"

wj

Just to be clear, the AIG actions are not going to help anybody who owned stock in AIG. After the government does it's thing, their stock is worth very little -- because the government now owns 80% of the company, and whatever the company is actually worth, they now own 1/5 of that they did.

Now if you meant by "bail out his buddies" the financial firms who did business with AIG, you might have more of a point. But it is not entirely clear that they have come out of this unscathed either.

Perhaps it would be helpful to be a bit more specific on just who you see being helped by the AIG "bailout" (although "nationalization without compensation" is more accurate). You know, companies, positions, something. "Bush's buddies" is just too vague to be meaningful.

realpc

"What would you rather they did, realpc? Allow over $1 trillion in debt to default? Do you really think it would stop there?"

Yes, allow it to default. Better yet, go back in time and prevent this from happening.

When companies take stupid risks they are supposed to learn a lesson. What would you have thought if the government had decided to bail out Enron? Well what's the difference between Enron's tricks and AIG's? Maybe I don't get it, but I just can't see the difference.

This is not the first time capitalism went haywire and won't be the last. But it is the first time, as far as I know, that government had the arrogance to think it could fix it. You don't need an expert to tell you this is wrong wrong wrong. But how many economists approve of this? Not too many, I bet.

realpc

Ok, they didn't technically bail out AIG, they just bought its bad investments (with our money). And the AIG shareholders lost. But this allows AIG to continue on its merry way, when it should be dead. Yes I know that could have brought down the whole world, at least temporarily. But I just don't see how this helps the world in the long run.

RW Rogers

There is a reason that the government has the right to purchase up to 79.9% of AIG and not 100%, and a reason it hasn't actually bought the company, just holds warrants giving it the right to do so. Suffice to say the taxpayers would get screwed even worse if they didn't pretend they have not bought 100% of the company. As it is, the profitable divisions will be sold off but the profits from the sales will end up in the government's coffers. (The interest rate for the loan as it is drawn is the LIBOR rate + 8.5%, about like a VISA card.) At the end of 24 months, you will get your wish and AIG will undoubtedly cease to exist. It may look like the stockholders still own 20% but they really own 20% of nothing. The bondholders are already getting a haircut - no dividend payments. They may ultimately get something but it is unlikely to be 100% of their principal because the amount owed the government now has priority. As far as is known, AIG, unlike Enron, didn't engage in illegal activity. Maybe some will be uncovered. That said, there's plenty of criticism to be directed at them and just about everyone else.

Almost every economist I've read doesn't like this a damn bit and almost all of them believe there was no other choice.

realpc

"Almost every economist I've read doesn't like this a damn bit and almost all of them believe there was no other choice."

Well maybe there wasn't. I just don't trust this whole thing at all. I feel that the economy is like the weather, in that humans can't control it and have limited ability to predict it.

Economists are familiar with the law of unintended consequences. Well what do you imagine the unintended long-term consequences of this might be?

RW Rogers

After reading various things this morning, it seems to me that the law of unintended consequences is already in full play and the right thing to have done was to let the financial system, and with it the economy, collapse last week. The Democrats are already playing partisan politics while the lawyers drafting the enabling legislation want to make it impossible for judicial or legislative review of any decision by the Treasury Secretary.

In other news, squatters are making a comeback. My niece and her husband live in a town where a few thousand homes were built in the last decade. Almost all of the houses are "starter" homes. An overwhelming majority of them were purchased with little or no money down using adjustable rate mortgages. Prices are 40% off the high and people are walking away from them by the hundreds. Countrywide holds one out of every six mortgages there and is so far behind in serving notices that it is taking eight to nine months to complete the foreclosure and repossess the house. The smart ones move to a rental unit before their credit record is updated. Dozens have given the keys to friends who then live free of charge in the houses until Countrywide finally gets around to processing the paperwork to begin the foreclosure process and, once that is complete, in turn evict the unknown non-paying tenants in possession. At this rate, a smart squatter should be able to live rent-free for a few years.

RW Rogers

Why You Should Hate the Bail-Out.

Here's the probable reason Paulson said this morning that they would bail-out foreign banks. Note the asset/equity leverage ratios in the graph at the bottom. By way of comparison, American banks are far less leveraged: BofA's ratio was 12.3, Citicorp's was 19.3, and Wells Fargo was 12.9.

realpc

"the right thing to have done was to let the financial system, and with it the economy, collapse last week."

But I thought you said they had no choice, the bailouts were necessary.

If they had let the economy collapse, what exactly would that mean? Would everything stop functioning? Would it come back in a reasonable amount of time?

I have so many doubts and questions, but I suspect most people will hope for the best and try not to think about it, as long as their mutual funds and bank accounts still appear to exist.

karen

Why does everyone need to own the their own house?

"Senate Majority Leader Harry Reid, (D-NV) in 2005, in response to an effort by the GOP to trim Fanny & Freddy’s portfolios: “The legislation from the Senate banking committee, passed today on a party line vote by the Republican majority, includes measures that could cripple the ability of Fannie Mae and Freddie Mac to carry out their mission of expanding homeownership,” said Sen. Harry Reid, D-Nev., the Senate Minority Leader Thursday…”While I favor improving oversight by our federal housing regulators to ensure safety and soundness, we cannot pass legislation that could limit Americans from owning homes and potentially harm our economy in the process,” Reid said."

It doesn't sound very bi-partisian to me. I got this quote off a pretty informative post at Anchoress. Thre's also this:
"Do listen to Levin. He gets loud and shrill sometimes; he is certainly passionate. But he is also very, very informative, especially about the “corrosive cronyism,” as Levin describes it. I had not realized that so many of Barack Obama’s top financial advisors are people who made millions running Fan & Fred. And yes, that’s troubling. It would be troubling if it was true of McCain’s campaign, too. But it’s more troubling about Obama, because Obama has not done anything. He’s running for president on 140 days of experience in the Senate. It feels, increasingly, like he’s simply being put into place to maintain the status quo."

Hate Bush- i'm sure none of this will stop anyone from bashing his ignorant head in. It's still unfair.

Outis

If they had let the economy collapse, what exactly would that mean?

The last time the US economy failed was the Great Depression.

realpc

"The last time the US economy failed was the Great Depression."

That doesn't meant the same thing would happen this time. We don't know what would have happened. And we don't know what will happen as a result of the interventions.

I just don't think it's possible to have all sun and no clouds, all day and no night. There has to come a point where mistakes are paid for, one way or another. I think the leaders of this country are in denial.

Rod

McCain missed a great opportunity on this. He could have said something like this:

I understand why the leaders on both side of the aisle want a bailout. Many economists support it with the same consensus as when most of them said nothing while this problem festered. With a bailout, there is no accountability. I believe that is fundamentally wrong.

The mega investors who created this mess should be held accountable, or at least not rewarded with a rescue at the expense of the American taxpayer. To the extent the lack of a bailout for the wealthy investment bankers creates a problem for ordinary people who were misled, we can help the ordinary people over the next two years. But in the meantime, there should be no safety net for the architects of financial crisis. The right for them to fail is true Conservatism.

Then he could wink at the malefactors of great wealth, sit down, watch the bill pass, and no matter what pain people feel in the coming months, he could say things would have been better if we chose the truly capitalist alternative. People could argue with him, but nobody could refute him, because nobody knows what would really happen if Atlas Shrugged.

Now, I'm done being cynical for today.

Charlie (Colorado)

That doesn't meant the same thing would happen this time.

You're right. It would very possibly have been worse.

I've been thinking about what could happen if the credit system collapse. Here are some of my bullet points:

- rapidly escalating unemployment, up to, oh, 35 or 50 percent.

- grocery store shelves get empty (grocery stores don't own the merchandise on their shelves; they get it from wholesalers who obtain loans against the inventory they ship, pending payment.)

- winter wheat doesn't get planted (seed loans are the way most farmers buy their seed, against next yers crops.)

- much of the way we do business disappears (Amazon closes. eBay closes. Checks stop being accepted.)

And that's the start.

...the right thing to have done was to let the financial system, and with it the economy, collapse last week.

Tell me that after the food riots.

Charlie (Colorado)

No one is using the Bush administration stock phrase: "No one could foresee (fill in the blank)."

Possibly because the Bush Administration has warned about this possibility seventeen times since 2001.

Of course, the response was like Barney Frank's response: "Frank, now chairman of the House Financial Services Committee, said that the president's suggestion for a strong, independent regulator of Fannie and Freddie was 'inane.'"

realpc

Charlie,

I was not trying to say that letting things take their natural course would not be a disaster. I am saying the long-term consequences of this intervention could be worse than short-term misery.

It's obvious that we all depend on this monster system working, since most of us do not live by subsistence farming or hunting.

But just because we depend on it does not mean we are able to control it. Yes the monster needs our love and faith to survive, but that is not all it needs.

And please don't mistake me for an anti-capitalist because I am calling the economy a monster. It has become a monster, yet again, because of the usual short-sightedness and wishful thinking.

Spud

Hate Bush- i'm sure none of this will stop anyone from bashing his ignorant head in. It's still unfair.

Posted by: karen

"I say the Bush administration has failed," McCain said on "60 Minutes" after agreeing that he placed "a great deal" of responsibility on the President for the financial meltdown.

realpc

It would not be fair to blame this entirely on the Bush administration. Haven't these investment banks been going wild for decades? Now the big party is finally over, and everything landed on poor old unlucky G. W. Bush.

I would blame this on the big investors, who absolutely must have had some idea what they were doing. These Ponzi schemes just never go permanently out of style, do they? Well of course not, because they really do work and we can see all those golden parachutes to prove it.

And how can we expect congress to keep the laws up to date? Even if they aren't entirely crooked and paid off, they can't possibly keep up with the ever increasing intricacies of this game.

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