$700 B Bailout
 

I know we have some economists on this site. Educate me. Pros, cons...

Personally, I'd love nothing more than to let every single one of the affected companies fail. But the ripple effect pretty much removes that as an option. I can't see this actually doing anything but postponing the inevitable though. If less than half of this bailout ends up in personal bank accounts, I'll be shocked.



*I know this was touched on in other threads, but I thought it was worthy of its own.

Re: $700 B Bailout
 

quick fix to keep the credit line moving. might work, might not. something did need done. this administration probably shouldn't have waited until all the animals were out of the barn, before closing the door. i would like nothing more then these high priced C.E.O's going down with the ship, but that only hurts non players in the end

Re: $700 B Bailout
 

I don't understand why we have to BUY all the bad loans. Why can't the gov't just insure the bad loans? Seems like that'd be more cost effective?

Re: $700 B Bailout
 

i think they are looking at it as an investment, not a bailout.

Re: $700 B Bailout
 

Not sure if there are any Easterbrook fans here, but [URL="http://sports.espn.go.com/espn/page2/story?page=easterbrook/080923"]this article[/URL] does a great job summarizing things in a very general way. This country is going to hell. I love the fact that all of those responsible have profited hugely and will bare no accountability in this mess.

Re: $700 B Bailout
 

This whole thing is so [URL="http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html"]stupid it's unbelievable[/URL].

[QUOTE]In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number." [/QUOTE]

The level of [URL="http://www.nytimes.com/2008/09/21/business/21draftcnd.html?_r=2&ref=business&oref=slogin&oref=slogin"]audacity[/URL] breathtaking.
[QUOTE]
Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.[/QUOTE]

Re: $700 B Bailout
 

[quote=dmek25;480927]quick fix to keep the credit line moving. might work, might not. something did need done. [B]this administration probably shouldn't have waited until all the animals were out of the barn, before closing the door[/B]. i would like nothing more then these high priced C.E.O's going down with the ship, but that only hurts non players in the end[/quote]

You are [I]so[/I] from Lancaster. lol.

Re: $700 B Bailout
 

[quote=saden1;480990]This whole thing is so [URL="http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html"]stupid it's unbelievable[/URL].



The level of [URL="http://www.nytimes.com/2008/09/21/business/21draftcnd.html?_r=2&ref=business&oref=slogin&oref=slogin"]audacity[/URL] breathtaking.[/quote]

What's truly ridiculous is that every quote looks like it should come from the Onion. But no, that's our government, people.

Re: $700 B Bailout
 

[quote=FRPLG;480973]I don't understand why we have to BUY all the bad loans. Why can't the gov't just insure the bad loans? Seems like that'd be more cost effective?[/quote]

Well one of the issues they're having is actually pricing the bad loans. In other words determining how much they're worth or how worthless they are. So from an accounting standpoint it's tough to add that type of asset to your sheets.

Their are all types of challenges with this crap.

Re: $700 B Bailout
 

What I don't understand is how this whole thing has gone so far and unnoticed by so many people. You have the president, congress, all the other people in Washington but then more shocking is all the people on Wall Street which did not see this coming. I'm not talking about the people who profitted from this but all the annalist who study this stuff day after day.

Re: $700 B Bailout
 

On CNN they are reporting that the house and senate have announced agreeing upon the principles of [URL="http://money.cnn.com/2008/09/25/news/economy/deal_reached/index.htm?postversion=2008092513"]the bail out[/URL]. Amazing how fast these clowns can start working together when money is involved.

Re: $700 B Bailout
 

[quote=firstdown;481000]What I don't understand is how this whole thing has gone so far and unnoticed by so many people. You have the president, congress, all the other people in Washington but then more shocking is all the people on Wall Street which did not see this coming. I'm not talking about the people who profitted from this but all the annalist who study this stuff day after day.[/quote]
everyone, and i mean everyone, was making money( and tons of it) ill bet you cant find one member of congress that had not taken money from Fannie or Freddie. everybody getting paid, who is going to be the hero? none of those clowns that we've elected.

Re: $700 B Bailout
 

[quote=dmek25;481004]everyone, and i mean everyone, was making money( and tons of it) ill bet you cant find one member of congress that had not taken money from Fannie or Freddie. everybody getting paid, who is going to be the hero? none of those clowns that we've elected.[/quote]

I'll bet take that bet about congress taking loans from Fannie or Freddy. How much?

Re: $700 B Bailout
 

What kills me is the ZERO Accountability that has been observed in this situation. Everybody just talking about what a crisis this is and no one wants to go after those responsible. The only plausible reason for that is that our legislators ARE some of the ones responsible, either by direct intervention or inaction due to lobbying.

Re: $700 B Bailout
 

[quote=BleedBurgundy;481008]What kills me is the ZERO Accountability that has been observed in this situation. Everybody just talking about what a crisis this is and no one wants to go after those responsible. The only plausible reason for that is that our legislators ARE some of the ones responsible, either by direct intervention or inaction due to lobbying.[/quote]
What laws where broken. Just because someone did a poor job and gave out a bunch of bad loans does not make it illegal. Is your stock broker breaking laws when he invest your money in poor stocks an you loss money? No. Have laws been broken? At this point we don't know but I'm sure we as tax payers will pay for a big long investigation into al of this.

Re: $700 B Bailout
 

[quote=firstdown;481017]What laws where broken. Just because someone did a poor job and gave out a bunch of bad loans does not make it illegal. Is your stock broker breaking laws when he invest your money in poor stocks an you loss money? No. Have laws been broken? At this point we don't know but I'm sure we as tax payers will pay for a big long investigation into al of this.[/quote]

Paying for an investigation into this is the one thing I approve of them spending my money on. If this was just a matter of a big "mistake," that's one thing, not that it removes accountability. BUT- if it turns out (and it will) that these firms were intentionally employing shady business practices that resulted in the collapse we've seen, I want those responsible held accountable. Jailed, assets confiscated, the whole 9 yards. Will it happen? Not in a million years. Maybe one or two examples will be made, but by and large I can't see any true measure of punishment coming down on "all" of those responsible.

Re: $700 B Bailout
 

[quote=12thMan;480997]Well one of the issues they're having is actually pricing the bad loans. In other words determining how much they're worth or how worthless they are. So from an accounting standpoint it's tough to add that type of asset to your sheets.

Their are all types of challenges with this crap.[/quote]

The cost of insuring the loans would almost certainly be less than 700 billion. If it costs 500b then we saved 200b. The caveat has to be that the gov't gets the properties that defaulted. Banks get thier money. The gov't gets the houses and sells them off.

Re: $700 B Bailout
 

[quote=BleedBurgundy;481008]What kills me is the ZERO Accountability that has been observed in this situation. Everybody just talking about what a crisis this is and no one wants to go after those responsible. The only plausible reason for that is that our legislators ARE some of the ones responsible, either by direct intervention or inaction due to lobbying.[/quote]

EVERYONE was responsible. Banks, legislators and regular people. We all share in the blame on this to varying degrees.

Re: $700 B Bailout
 

[quote=firstdown;481006]I'll bet take that bet about congress taking loans from Fannie or Freddy. How much?[/quote]
over the last 10 years lobbyists from Fannie and Freddie have dished out approx. 170 million to anyone that would listen. let me guess, you think the old maverick hasnt touched any of that tainted money?

Re: $700 B Bailout
 

[quote=dmek25;481037]over the last 10 years lobbyists from Fannie and Freddie have dished out approx. 170 million to anyone that would listen. let me guess, you think the old maverick hasnt touched any of that tainted money?[/quote]
I was not even thinking along those lines. I thought you were saying they borrowed money from them but now I see your talking donations it makes more sense. The Maverick did some 4 to 5 years a go introduced legislation to have more over site on Fannie and Freddie which did not get passed so he did try.

Re: $700 B Bailout
 

[quote=FRPLG;481035]EVERYONE was responsible. Banks, legislators and regular people. We all share in the blame on this to varying degrees.[/quote]

Not this guy. I didn't over burden myself with bad credit and I didn't buy a house I couldn't afford. So, uh, no. But, I do agree with you in principle that there is a lot of blame to go around. I don't want idiots who lied on loan applications or simply purchased a home which was obviously above their income level to be bailed out either. I'm sorry, but the way I was raised was that if you make a mistake, you pay the consequences. I know, that's so passé.

Re: $700 B Bailout
 

[quote=firstdown;481054]I was not even thinking along those lines. I thought you were saying they borrowed money from them but now I see your talking donations it makes more sense. The Maverick did some 4 to 5 years a go [B]introduced legislation to have more over site on Fannie and Freddie[/B] which did not get passed so he did try.[/quote]
i would like to see a link. because Sen. McCain has been one of the biggest proponents of deregulating. which in turn was part of the cause of this mess

Re: $700 B Bailout
 

bill clinton (who i'm not a big fan off) had a really good idea of what's going on from what i saw on the daily show... about reviewing the loans to see if a lower payment could save the loan from failing outright, about loaning with interest or taking part of the upside, instead of just handing them free money for screwing up royally.

interview starts at the 9:30ish mark if you want to skip straight to it, 11:00 for actual bailout bit:
[url=http://www.thedailyshow.com/full-episodes/index.jhtml?episodeId=185193]The Daily Show Full Episode | Tuesday Sep 23 2008 | Comedy Central[/url]

Re: $700 B Bailout
 

I may be completely off on this, but it was explained to me by a guy who's heavily into the market and real estate this way: The loans that the banks have on their balance sheets have a value, because of the housing bubble and sub-prime lending frenzy loans that were valued at 100% of value are now valued between the banks at about 10% of value. The real value, all things considered should be about 50-70%. If the Fed comes in and buys up these loans at their current value of 10-20%, holds them until the market corrects and trends upward, then resells them at their "real" value of even 50-70% then the Fed (us taxpayers) should make money. Again, I don't know if this is correct or not.

The real problems I have with the bail-out are; the company officers with golden parachutes. I would like to see a very low cap on their buy-out packages. Give them a choice - accept the bail-out and cap or don't and expect to be Federally prosecuted for whatever charges the Feds can throw at them. The other problem is what saden brought up about accountability. It can't be with one person or office within the Fed. It must be some sort of independent/bi-partisan group providing the oversight. As much as I don't like gov't regulation, in this area it's desperately needed.

Re: $700 B Bailout
 

[quote=FRPLG;481035]EVERYONE was responsible. Banks, legislators and regular people. We all share in the blame on this to varying degrees.[/quote]

Right on.

The banks were stupid enough to make sub-prime loans to people that they knew couldn't afford them in the long run, and the people taking the loans were stupid enough to do it in the first place. It's rampant greed on the part of everyone involved. As much as people want to bitch about the high-paid CEOs, there should be equal bitching about the idiotic people who took these loans in the first place. It takes two to tango - the banks share half the guilt.

Now the federal government is forced to step in and start fucking with the market. It terrifies me when the government suddenly owns 80% of one of the largest banks in the country.

There really is not "good" solution to all of this - it's robbing Peter to pay Paul, we're just trying to figure out which one to rob and which one to pay.

I CPA that I'm good friends with says that he thinks the best solution is for the government to repeal a substantial number of the corporate taxes that are in place for about two years. The lessened tax burden allows the banks to recover and start backing their own loans. It's more of an easing of the pressure than a bailout. Of course then you have to deal with decreased tax revenue for two years which is it's whole own problem.

Re: $700 B Bailout
 

[quote=BleedBurgundy;481057]Not this guy. I didn't over burden myself with bad credit and I didn't buy a house I couldn't afford. So, uh, no. But, I do agree with you in principle that there is a lot of blame to go around. I don't want idiots who lied on loan applications or simply purchased a home which was obviously above their income level to be bailed out either. I'm sorry, but the way I was raised was that if you make a mistake, you pay the consequences. I know, that's so passé.[/quote]

No I totally agree. And I am one of those who has a reasonable house bought at a reasonable price and a nice 30 year loan I can easily afford. Trust me, it is gonna piss me off if we let all these people with 800K houses on 70K year incomes keep their houses when they never should have bought them in the first place. It is THEIR fault for buying the house and it is the BANK's fault for giving them the money to do it and it is our gov't fault for not maintaining proper regulatory control to stop either of groups of idiots for letting this happen.

Re: $700 B Bailout
 

[quote=mheisig;481179]Right on.

The banks were stupid enough to make sub-prime loans to people that they knew couldn't afford them in the long run, and the people taking the loans were stupid enough to do it in the first place. It's rampant greed on the part of everyone involved. As much as people want to bitch about the high-paid CEOs, there should be equal bitching about the idiotic people who took these loans in the first place. It takes two to tango - the banks share half the guilt.

Now the federal government is forced to step in and start fucking with the market. It terrifies me when the government suddenly owns 80% of one of the largest banks in the country.

There really is not "good" solution to all of this - it's robbing Peter to pay Paul, we're just trying to figure out which one to rob and which one to pay.

I CPA that I'm good friends with says that he thinks the best solution is for the government to repeal a substantial number of the corporate taxes that are in place for about two years. The lessened tax burden allows the banks to recover and start backing their own loans. It's more of an easing of the pressure than a bailout. Of course then you have to deal with decreased tax revenue for two years which is it's whole own problem.[/quote]

I listen to Dave Ramsey. Look him up if you haven't heard of him. He is looking more and more like a genius nowadays.

One factor he was discussing stems from the fallout of Enron. This is a cautionary tale about trying to control business and the way they conduct their business.

Anyways, after the Enron debacle a huge new law was pass called Sarbanes-Oxley. Most have probably heard of it. It has a lot of provisions trying to legislate ethics.

One regulation it implements is that publically traded companies have to restate their assets value on a daily basis. Good idea. But it forces them to use market value. This is sometimes a good idea and sometimes not. In the case of the mortage industry it is a very poor stipulation.

Say a company like Merrill-Lynch owns 30B in bonds secured with sub-prime loans. This means the values of the loans is 30B and the value of the houses those laons are for at one point added up to 30B. Nowadays with a downturn in the market those houses are worth say 25B.

But the market value of those bonds may only be 10B since they involve poor loans. So ML has to take a 20B loss in states assets because the market value is so much lower. This hss caused the market for these types of securities to tank and essentially seized up the market. If the gov't would lift that provision for a the time being then ML could have increased their stated assets by billions and freed up the market to work a little more naturally.

A case of the gov't implementing something that seems good but has terrible unintended consequences.

We need to be careful about how we legislate fiscal responsibility. It doesn't work sometimes and can lead to an even worse problem.

Re: $700 B Bailout
 

I HATE this decision. Here I am, making wise decisions, and I have a credit rating of over 750, my wife nears 800, while others make poor decisions with poor credit ratings. Some of this problem came due to the fact that the general public's credit ratings have been dropping over the years, and in order for Mortgage companies to survive, they had to take these chances. What I do not understand at all is the fact that when I first bought my house, I had to pay PMI (private mortgage insurance) cause my loan was more than 80% of my house's worth. So if I defaulted, it would have been covered by the PMI. What the hell happened to that?

Re: $700 B Bailout
 

Well AIG is one of the main PMI insurers and that is basically what brought them down. I think Matty can speak more intelligently to this since he works for them.

Re: $700 B Bailout
 

[quote=FRPLG;481335]Well AIG is one of the main PMI insurers and that is basically what brought them down. I think Matty can speak more intelligently to this since he works for them.[/quote]

See, it's Matty's fault.

Re: $700 B Bailout
 

[quote=FRPLG;481335]Well AIG is one of the main PMI insurers and that is basically what brought them down. I think Matty can speak more intelligently to this since he works for them.[/quote]

I guess that makes sense, maybe I just don't know enough about this situation. Just seems to me like our tax dollars are going to the greedy to bail them out. Maybe I am wrong on that.

Although, on a side note, it does seem the government is using real estate to make a profit. If they buy all the notes, eventually the people will buy, and will buy at market price, meaning the gov. "SHOULD" make a profit.

Re: $700 B Bailout
 

I wish I could speak on what exactly brought AIG down. We had an online townhall meeting yesterday with our CEO and I specifically asked if he could explain what credit swaps are and how it caused this crisis and my email went unanswered.

Re: $700 B Bailout
 

[quote=jsarno;481352]I guess that makes sense, maybe I just don't know enough about this situation. Just seems to me like our tax dollars are going to the greedy to bail them out. Maybe I am wrong on that.

Although, on a side note, it does seem the government is using real estate to make a profit. If they buy all the notes, eventually the people will buy, and will buy at market price, meaning the gov. "SHOULD" make a profit.[/quote]

If this was a corporation doing that, I would have absolute faith that that would happen. It's almost foolproof. BUT- This is the G.O.V. we're talking about. They'll find a way to fuck it up. Have no fear.

Re: $700 B Bailout
 

[quote=dmek25;481060]i would like to see a link. because Sen. McCain has been one of the biggest proponents of deregulating. which in turn was part of the cause of this mess[/quote]

[url=http://www.govtrack.us/congress/record.xpd?id=109-s20060525-16&bill=s109-190#sMonofilemx003Ammx002Fmmx002Fmmx002Fmhomemx002Fmgovtrackmx002Fmdatamx002Fmusmx002Fm109mx002Fmcrmx002Fms20060525-16.xmlElementm0m0m0m]GovTrack: Senate Record: FEDERAL HOUSING ENTERPRISE REGULATORY REFORM... (109-s20060525-16)[/url]

Re: $700 B Bailout
 

This thread needs Schneed's contribution

Re: $700 B Bailout
 

[IMG]http://picayune.uclick.com/comics/wpcbe/2008/wpcbe080924.gif[/IMG]

Re: $700 B Bailout
 

[quote=SmootSmack;481434]This thread needs [B]Schneed's contribution[/B][/quote]
yeah, we need some arrogance, and my way is right, and no one else knows what they are talking about, makes for hearty discussion:(

Re: $700 B Bailout
 

[quote=dmek25;481492]yeah, we need some arrogance, and my way is right, and no one else knows what they are talking about, makes for hearty discussion:([/quote]

But wait, you and saden have already contributed....

;)

Re: $700 B Bailout
 

[quote=dmek25;481492]yeah, we need some arrogance, and my way is right, and no one else knows what they are talking about, makes for hearty discussion:([/quote]

It's not bragging if you can back it up.

Schneed has a very keen grasp of the financial industry and explains it very well, from the personal to the corporate/national levels. His knowledge adds tremendous value to these parking lot threads, if you're willing to listen.

Re: $700 B Bailout
 

[quote=SmootSmack;481434]This thread needs Schneed's contribution[/quote]

That was actually who I had in mind with this thread. I expected him to chime in.