The BIG Bailout

[Jim]

I have to admit I am 100% confused about spending $700 Billion to bail out wall street. And, I have been watching it very closely.

It doesn't help that Bush says we need to do it and Democrats agree. And yet, Republicans are against it. I see that it has turned very political and that was to be expected. But, who is right and who is wrong?

I would have much rather seen a new stimulus package where every US family received $5k. That would save about $200 Billion and it seems to me that it would have the same effect. Then again, there would be no chance of payback. Oh WTF..my head starts spinning when I think about it too much.

Anyway, being totally honest with each other, I think most of can see that when we first discussed our business as being recession proof over a year ago, those that said we would be, were wrong. But that seems to be a different discussion at this point.

So, if the taxpayers bailout wall street, will banks loosen up credit and make life go back to normal? Or, is it just a complete waste of money?

[Bobc01]

I've been keeping an eye on it too and it looks to be a waste of money.

Why should the tax payer keep having to bail banks out of debts they risked knowing the goverment would do what they're doing now.

It was said in a news program here that banks take the risks knowing if they got in the shit the goverments would rescue them and the only way to prevent it happening again would be to regulate the banks more.

Ofcourse it won't happen because there's too much "let's say interests " between banks and political parties.

[Jim]

I agree about the "interests" but then, why are the Republicans not on board? The whole fight does seem to be politcal.

And, what happens if the bailout doesn't happen? Already people are waking up all over seeing that they no longer have a credit card. Obviously, the lack of credit cards is not good for an industry that depends so heavily on cc sales.

[docholly]

The only way any of it would make sense would be that each 'at risk' mortgage was re-evaluated.. that an assessor would go to the house and give a "true value" to it.. not the inflated value of 2-3 years ago, then the banks would adjust accordingly. So if some fool making 65K per year bought a 500K house which at true market value would be worth 280K, then the banks would assess it at 280K, give a mortgage based on that @ whatever rate the "powers" that be come up with. I've never gotten over the fact that workers at $10-12.00/per hour thought they could actually afford a 1/2 million dollar house. Too bad if they lose their equity.. that's the price for being sooo stupid.

It's not going to do much good to just "throw" money at the existing problem. I also don't like the fact that Paulson et.al. at the Treasury would not be accountable for the billions. When the president 1st announced it, i swear I could see the Puppetmaster (cheney) holding his strings ..so they could have a grand send off with gold falling out of their pockets. I was NEVER ever a conspiracy theorist prior to Bush/Cheney..always my country..right or wrong.

With WAMU going under last night, can Wells Fargo, Citibank etc be far behind???

True Republicans believe in a market based economy, supply and demand and capitalism. less government, more states rights. Government bail out is the last thing they would want which just reinforces my long held belief that Bush/Cheney are impostors. Fake Republicans.

Something has to be done, but throwing 700 Billion dollars at the same people who caused this, might not be the answer.

[JustRobert]

I have a problem with the bail out. My gut feeling says it is a bail out for the wealthy, again.

This just makes my head spin and there is going to be no good answers. Whatever plays out, I think in the end we are screwed.

[Bobc01]

Originally Posted by Jim

I agree about the "interests" but then, why are the Republicans not on board? The whole fight does seem to be politcal.

Election tactics probably knowing there's an election coming up.

I always laugh when one party opposes something then a year down the line proposes the exact same thing they were disagreeing on.


I can bet there's alot of people working hard at the moment on exploiting that money.

[SirMoby]

Originally Posted by docholly

True Republicans believe in a market based economy, supply and demand and capitalism. less government, more states rights. Government bail out is the last thing they would want which just reinforces my long held belief that Bush/Cheney are impostors. Fake Republicans.

Look at what the OCC in conjunction with the DOJ during 2003 -to 2005 to make sure that these bad loans stayed profitable for a short period of time.

The problem is that through new OCC auditing standards that were changed for the first time in 140 years allowed banks and hedge funds to value paper loans not even at the $500,000 value of years ago but the future estimated value of perhaps $1,000,000. While they hold a loan on a property worth $250k they could actually declare $1,000,000 in assets which would allow them to borrow 10 times that or basically 40 times what they really had.

When people wonder how Bush's daddy's company The Carlyle Group could lose so much money over night, or suddenly Bears Sterns could have $30,000,000,000 in bad debt it's not because people are defaulting, it's because the OCC allowed them to declare 30, 40 and some estimates 100 times the value of real assets.

Normally banks and funds had to have 10% to 15% in actual assets for what they were borrowing. From 2003 until now they only needed 1% to 3% so if values on that money borrowed dropped 2% these companies were broke.

I've been trying to remind people since 2000 of the S&L Crisis, the families that profited and the law makers in power. No one cared.

[Greenguy]

Originally Posted by SirMoby

Look at what the OCC...

What does XXXJay have to do with any of this?























is there really a need for a down here?

[JustRobert]

Originally Posted by docholly

So if some fool making 65K per year bought a 500K house which at true market value would be worth 280K, then the banks would assess it at 280K, give a mortgage based on that @ whatever rate the "powers" that be come up with.

Oh No, If they were stupid enough to buy an overpriced house they should be responsible enough to pay it ALL back. Nobody forced them to buy it, it was there choice.

Nobody wants to take responsibility for their actions any more. Pisses me off

Now if the banks want to cut a deal with these stupid buyers and say extend the 30 yr mortgage to 45 or 60 yrs so it reduces the monthly cost to be more maneagable, but they still owe the $500K, so be it.

[Toby]

There has to be a market correction at some point. It's simply inevitible. This bailout only postpones and shifts the effects of that correction. Sooner of later the price has to be paid. Until then it's all just playing games with numbers.

[Ramster]

What SirMoby says is so true.

Banks are going under because "they are being written down" and they are being "downgraded". Being downgraded makes it impossible for them to borrow money against their assets (since the assets have been lowered in value) to get cash they need to pay immediate expenses so they go under. Regarding Washington Mutual it happened exactly like that "On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse". The next day it's gone.

Regarding Jim's question. No I do not think they should do a bailout! God only knows where the fuck that money will end up. How will they monitor the money? WHere will it spent? Who authorizes the money? Bad idea all around I think. If anything set the money aside to do what they've done in recent weeks. Step in with cash to take over companies and assets.

And the taxpayers need not worry. IMO the money will not be taken from taxpayers exactly. Are they not using taxpayers money and that money will not be used elsewhere (for school, roads or where ever) until (if) it is paid back. THat part I'd like to know about for sure.

[LD]

Deregulation and poor policy caused the mess...Why don't they talk about doing something about that? It smells too much like the Iraq war and WMDs to me.

Interesting the conservative Republicans are voicing the biggest opposition. In this case I think they are correct. Senator Shelby (R) AL is one I am not often in agreement with, but I think he's right on on this:

Secretary Paulson presented Congress with draft legislation that would grant him sweeping authority to spend up to $700 billion in taxpayer money to buy illiquid securities. The stated goal of this scheme is to return confidence and liquidity to our credit markets. I do not believe this is the right approach. We did not get into this situation in a matters of days, and we are not going to fix it in a matter of days.

http://latimesblogs.latimes.com/mone...ican-le-1.html

[Bill]

Originally Posted by Jim

Anyway, being totally honest with each other, I think most of can see that when we first discussed our business as being recession proof over a year ago, those that said we would be, were wrong. But that seems to be a different discussion at this point.

People said that?

Bwah-hah-hah-hah-choke-sputter-cough.

But you're right, thats a whole nuther discussion.

---

I thought what Ben Stein said about credit default swaps being the real problem, the HUGE problem hidden behind the mortgage bailout, is relevant.

http://finance.yahoo.com/expert/article/yourlife/109609

"Here s one big part of the answer. First, the alert reader will notice that Ben Stein said many times that the amount of money at risk in the subprime meltdown was just not enough to sink an economy of this size. And I was right...to a point. The amount of subprime that defaulted was at most - after recovery in liquidation - about $250 billion. A huge sum but not enough to torpedo the US economy.

The crisis occurred (to greatly oversimplify) because the financial system allowed entities to place bets on whether or not those mortgages would ever be paid. You didn't have to own a mortgage to make the bets. These bets, called Credit Default Swaps, are complex. But in a nutshell, they allow someone to profit immensely - staggeringly - if large numbers of subprime mortgages are not paid off and go into default.

The profit can be wildly out of proportion to the real amount of defaults, because speculators can push down the price of instruments tied to the subprime mortgages far beyond what the real rates of loss have been. As I said, the profits here can be beyond imagining. (In fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...)

These Credit Default Swaps have been written (as insurance is written) as private contracts. There is nil government regulation of them. Who writes these policies? Banks. Investment banks. Insurance companies. They now owe the buyers of these Credit Default Swaps on junk mortgage debt trillions of dollars. It is this liability that is the bottomless pit of liability for the financial institutions of America."

There are as much as $60 trillion (with a T) at stake in the totally unregulated CDS market - and those "bets" have to be paid by somebody, and nobody realy knows how many of those bets have become due.

The point is, we are deep in uncharted territory. Our economy stopped being about productivity, and has become "virtual" - based on financial manipulations nobody really understands.

Ben Stein ends with this....

"As I said, the pit of loss is bottomless. Warren Buffett, the smartest man of all time in the world of finance, has called financial derivatives - of which Credit Default Swaps are a prime example - "weapons of financial mass destruction." And so they are. As with the hydrogen bomb, no one thought they would ever be used to end the world. But unless someone figures a way out - and maybe the new RTC is and maybe it isn't - we are in real peril. This should never have happened. Now that it did happen, should the taxpayer pay to make the billionaire speculators whole on their bets? What the heck is to be done?"

[Jim]

It is fun to look back, isn't it?
It was only back in March but good enough.
http://www.greenguysboard.com/board/...ad.php?t=38960

[docholly]

Our economy stopped being about productivity, and has become "virtual"

That's a huge part of the problem. No new manufacturing.. and the "new" business is shuffling $$ back and forth in a virtual world.

Whatever the outcome is, it's going to be long and messy and whoever gets in office in January is going to have to be less self-serving that those currently in office.

The whole thing is making me writhe in fetal position several times per day.

[elKabong]

Unfortunately bailing out Wall Street is something we're going to have to do even though we'll have to do it while holding our noses because of the bullshit smell.

If banks don't grant credit due to fear of losses then business' will collapse, which causes the economy and the stock market to collapse, which causes unemployment and loss of wealth...

The normal reaction is to be angry and want to punish those that got us in this mess, but unfortunately punishing them will start the dominoes falling that will eventually hurt ourselves even more. Bailing them out is a tough pill to have to swallow, but it's got to be done, the details just have to be worked out.

[Mr Spock]

What I find interesting is that experts talk of sub-prime losses running into trillions of $ (how much is a trillion anyway) , what is the market value of every house in the US? Surely not that much.

I find it pathetic that all the politicians on Capital Hill are wringing their hands agonising over poor taxpayers and protecting them form greedy bankers, isn't it these taxpayers who borrowed above their capacity to pay and have now caused this

Instead of a banking bailout I propose a porn solution - all sluts working for i-banks must be seconded to the porn industry and suck cock until the economy improves

[elKabong]

Originally Posted by Mr Spock

Instead of a banking bailout I propose a porn solution - all sluts working for i-banks must be seconded to the porn industry and suck cock until the economy improves

I'll vote for that plan...

[Useless]

Originally Posted by Mr Spock

I find it pathetic that all the politicians on Capital Hill are wringing their hands agonising over poor taxpayers and protecting them form greedy bankers, isn't it these taxpayers who borrowed above their capacity to pay and have now caused this

Oddly enough, no.

Second, according to what I hear from my betters in the world of finance, the most serious problems are not with the bundles of subprime mortgages themselves — a large but not lethal quantum as far as I can tell — but with derivatives contracts tied to subprime and other dicey debt.

http://www.nytimes.com/2008/09/28/bu...20stein&st=cse

But even if this crisis was the fault of a few hundred thousand foreclosures, would you blame the folly of the homeowners or the outright idiotic practices of the banks that would risk destroying themselves by knowingly giving those people the loans which they could so obviously not afford?

Also, our government is NOT "wringing their hands agonizing over poor taxpayers and protecting them from greedy bankers." They are working to keep the "greedy bankers" in business by using the money of the "poor taxpayers."

[Bobc01]

I'd blame the banks and large performance bonuses paid by selling loans.
It's the bank and bankers fault and the US treasury for not keeping an eye on it, just as it is here with the Bank of England not having the power to cap the level of debt.

Just imagine, some of that $700 billion will be paid in large salaries to the arseholes that caused all this at your expense.
The same kind of bailouts are happening here with Bradford & Bingley and Northern Rock.
The Conservatives want bankers to be responsible for their own fuckups which is what should of happened long ago....

http://uk.news.yahoo.com/rtrs/200809...e-fa6b408.html

[Ramster]

Starting to hit worldwide now more than people may think

"In Europe, Belgian-Dutch banking and insurance group Fortis sealed a multinational bailout over the weekend, while the British government on Monday announced it would nationalise troubled mortgage lender Bradford & Bingley.

Sentiment was also hit after German authorities provided 35 billion euros (50 billion dollars) in guarantees for an emergency credit line by a consortium of private banks to German bank Hypo Real Estate.

A fourth European bank, Franco-Belgian group Dexia, could also be on the verge of a state rescue deal after the group saw almost one quarter of its stock market value wiped out on liquidity concerns.

In another sign of banking woes, Denmark's Roskilde Bank said it had been sold to Nordic bank Nordea and two regional Danish lenders, Arbejdernes Landsbank and Spar Nord Bank.

Global central banks on Monday pumped extra cash into the financial system as part of continued efforts to keep credit flowing."

[Mr. Blue]

Originally Posted by Toby

There has to be a market correction at some point. It's simply inevitible. This bailout only postpones and shifts the effects of that correction. Sooner of later the price has to be paid. Until then it's all just playing games with numbers.

That's basically the gist of it. I tend to believe that delaying the inevitable will just worsen the situation...so I'm kind of on the fence regarding this bailout. Also whenever politicians say we must do something, it generally makes me question it even more.

[RedCherry]

Originally Posted by Bill

The crisis occurred (to greatly oversimplify) because the financial system allowed entities to place bets on whether or not those mortgages would ever be paid. You didn't have to own a mortgage to make the bets. These bets, called Credit Default Swaps, are complex. But in a nutshell, they allow someone to profit immensely - staggeringly - if large numbers of sub prime mortgages are not paid off and go into default.

The profit can be wildly out of proportion to the real amount of defaults, because speculators can push down the price of instruments tied to the subprime mortgages far beyond what the real rates of loss have been. As I said, the profits here can be beyond imagining. (In fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...)

I just see a bunch of people standing around a craps table that has 2000x odds betting on the no pass line when someone is rolling loaded dice.

All I want in this is a free-up of the credit market. I'm afraid if banks / businesses / joe blow's ability to get credit dries up, we are going to have an economic slowdown that is hideous in this country.

Ok, maybe it is a market correction and should be allowed to happen, but I think if sub prime speculation had been regulated, the market would have corrected over time, and not hit us all at once like it is now with the banks failing.

I don't know enough about all this to know what the best plan is, but I hope whatever they do, they leave the "insurance" aspect in this plan so that within 5 years if the companies bailed have made money, the taxpayer gets a slice of that profit.

[T Pat]

It looks like it isn't going to pass and the stock market is in free fall

[Useless]

I would LOVE a detailed explanation about how this will truly effect the average American, from the financial gurus, if the bailout doesn't pass. I keep hearing threats of doom and gloom, but without any real clarification of what the doom really is.

At this very moment, I'm quite happy that I don't have any money.

EDIT: THE BILL HAS FAILED. ANARCHY!!!