I only want to say two things about Monday’s vote in the House of Representatives: one is something about the vote itself, and one is about the media coverage.
NPR talked with Representative Jim Marshall (D-GA), who voted in favour. They recorded their conversation just as the final tally came in, so they got his reaction to the result in real time. What impressed me was his attitude toward the vote. NPR’s Melissa Block noted that he voted for it against strong opposition back home and with a tough election looming.
JM: I’ve been persuaded by all of the experts not that this is necessarily the right plan, and not that it has in it all of the right features, but that it is necessary that we act in order to avoid incredible damage that could occur... and probably not get a lot of credit for that because if the pain is never perceived, then people tend not to give you credit for having avoided it.
MB: You said this is not politically easy, this vote today; that might be an understatement. You were quoted as saying, in a private meeting with some of your colleagues, “I’m willing to give up my seat over this.” Is that an accurate quote?
JM: That’s an accurate quote. I was trying to persuade my colleagues to support this bill. The phone calls that people are receiving, I think, are understandably very angry — I was off the charts angry when I first heard about this, when I first saw the Treasury’s proposal, and I can understand people being just livid. I don’t want to help out one whit the irresponsible people who have dragged us into this, whether it’s the borrowers, or the lenders, or the investors, or the Wall Street crowd. I don’t care who they are; I don’t want to help them out. But this is something that’s going to affect our overall economy — and an awful lot of people that I represent — in a very very bad way, and so although it’s very unpopular, I’ve got to take a different view, and take my licks if that’s what I get.
Here’s someone taking a stand for what he honestly thinks is the best thing for his constituents. Whether I agree with his decision or not (I don’t, in fact), I admire what he’s doing. He says that he’s listened to the arguments, he’s heard what the experts have to say, and he believes that it will be a disaster for his constituents if the bill doesn’t pass. Given that, and knowing that his constituents don’t feel the same way, he has to go against their desires, despite the political consequences for him, and vote in their best interest.
I normally think that our representatives in government have a responsibility to vote as we want them to vote, but that’s mitigated by the understanding that in a representative democracy we’ve delegated the choice and given our representatives our collective proxy... and that sometimes they may just have to do what they think is best, to the best of their abilities and knowledge. We hope we can trust them to do that.
I certainly think I would trust Congressman Marshall to do that, in general. I hope he’s re-elected in five weeks.
On ABC World News with Charles Gibson, they had a segment in which one of their financial reporters (I didn’t get her name) spoke as the Voice of Doom about the market decline that afternoon. I wish I could find the video on their web site, but it doesn’t seem to be there. It was truly a sight to behold.
She went on at length about how the market plunged and people lost all this money, how it was heartbreaking to see someone’s retirement investment just get lost, gone in an instant, just like that, and so on. She was in a state of panic.
This is exactly the sort of irresponsible “reporting” that makes people act out of fear instead of sense. They’re relying on people like that reporter to give them information that will put things into perspective and guide them... and instead they get what amounts to, “Oh, my God, the sky is falling! You’re losing all your money and it’s never coming back! Oh, my God!”
The reality is that with securities, no one loses (nor gains) anything until they sell... and that markets go up and down every day, day by day, hour by hour, minute by minute. Even if the value of your $10,000 investment is now only, say, $7,000, it’s jarring, it’s worrisome, but you have not actually “lost $3,000” as long as you hold onto the stock and there’s a chance that its value will go up again.
There’s a time, clearly, when we decide to cut our losses and sell the securities despite the low value, and then, indeed, we lose the money. But now is not that time, for the most part, and our retirement has not yet been trashed. The sky has not fallen. Don’t panic.
I thought better of ABC News.
4 comments:
My favorite part is that people assume that the market will never go back up again and thus we're all losing our retirement money and yet GWB is saying the junk "bought" with the bailout will go up in value and recoup the taxpayer money. So it's either all gonna go up or it will stay at the same level forever? I have to say I'm glad they won't rush into things. I just think given all the Republican drama-queens acts the Dems will forced into something untoward on the bill. We've seen it before.
"The reality is that with securities, no one loses (nor gains) anything until they sell"
This is a simplified view of the market which strikes me as less than accurate.
There are a number of examples to illustrate how reduced value of something you own actually does mean you lost something. But the most dramatic example is the best: if you own SyQuest stock you can wait as long as you like; it's not coming back.
At its heart, this crisis is about credit availability, not stock prices. The media has misrepresented this plan as a bailout of rich banks. But I guess stock prices are the dramatic story.
Yes, so that's why I said, “as long as you hold onto the stock and there’s a chance that its value will go up again.” Of course there are stocks that crash and never recover, and there are companies that go away, and whatnot.
But that's not what we're talking about here: we're talking about a large one-day drop in the market. Followed, by the way, as if to demonstrate my point, by a large one-day rise.
There is a time to cut your losses; an exercise left to the reader.
I agree with what I think is your basic premise: "don't panic."
One of the reasons there is a measure of stability in the market which is reflected in such things like index funds is that there are people applying monetary and fiscal policy to adjust the health of the market.
When a crisis exceeds the ability of the usual controls, at the very least it ought to be understandable why people are a bit anxious. Saying "don't panic" is easy (I like to say it now and again to make sure that is still true). But the reason for not panicking needs to be reassuring, and to recognize an extraordinary situation.
If the market rebounds it will be because investors are confident that the government is getting closer to a solution to get credit moving again. On the day the market came down, it was not at all clear we had that to look forward to. We're seeing some confidence return to the market because lawmakers have convincingly taken the market drop to heart.
And some of that may have been because of chicken little reactions. Although in such a complex system, who knows?
Post a Comment