Government Bailouts.

[Savaric]

Originally posted by Gromgor
That number is more than 2,300 times the number of people in the US. $700B is like them handing out to every single person a check for $2,303.96

Have to remember not everyone is a working adult or a taxpayer (illegal aliens- we have about 15 million of them). All this talk of economic tailspin is because a lot of the big money that runs this country stands to lose a lot. Fuck them. It should set off alarm bells when a couple of companies collapse that the entire country risks economic corrosion. These corporations are so freakin' huge they endanger our economy?

They handed out loans to people that had no business getting them. Now that the housing market has shit, a lot of people are defaulting on their loans. So now they have all these houses that are not worth as much. Beyond that, I don't know.

[kestra]

They handed out loans to people that had no business getting them. Now that the housing market has shit, a lot of people are defaulting on their loans. So now they have all these houses that are not worth as much. Beyond that, I don't know.

Some are blaming the families receiving the loans, and not the banks that issued the loans as the root cause of this problem. It's up to the people seeking the loans out to do their homework; but it's also more the responsibility of the loan institutions to do the right thing and give loans to those who can manage them. I've been waiting for years to get an acceptable credit score in order to be approved. My mortgage broker has been thankfully, dishing out the tough love; telling me it's not time yet to apply.

Also, it seems pretty arrogant that top executives are getting huge payouts in the mutli-millions while thousands of others are getting the shaft. Also, secretary Paulson has inserted a non-reviewable clause into the bail out.....WTF??

[Ilusan]

Yeah. Its gross and leaves a sour taste in my mouth that negligence no longer has any consequences. This is a very substantial problem that points to issues beyond just giving out bad loans. It points to the disappearing middle-class's shouldering the weight of economic responsibility but receiving little to no benefits from the system. Thats my general consensus, anyway. I'm pasting a snippet of the latest article I've read here. Another solution drawn up by the GOP who are fervently against the pricetag of the current bailout proposal. What do you guys think?

"A group of GOP lawmakers circulated a less government-focused alternative. Their proposal would have the government provide insurance to companies that agree to hold frozen assets, rather than have the government purchase the assets. Rep Eric Cantor, R-Va., said the idea would be to remove the burden of the bailout from taxpayers and place it, over time, on Wall Street instead. "

My question is how long can you freeze such assets? Does this simply delay the problem further down the road? It mentions nothing of any consequence for the money-reaping execs either, though niether does the current plan besides a cap on pay. I'm with Halyanne, if our money is used to bail them out, we should see some sort of benefit and those who fucked us should reap the consequences, bad lenders and borrowers alike.

Edit: Ac ouple more snippets..
"Rep. Peter DeFazio, an Oregon Democrat, has been circulating a letter to other lawmakers calling for a 0.25 percent transaction fee on the sale and purchase of stock and more exotic transactions such as those involving credit default swaps, options and futures."

and further down in the same article...thismade me laugh and cringe at the same time:

"Emerging from a meeting with fellow House Democrats on Thursday, DeFazio said, "Everybody's angry. This is like a giant screw job by Wall Street. They're holding a gun to their head and saying, 'If you guys don't help us, we're going to blow our brains out and take you with us.'"

Frightening, because they can.

[Riek]

Originally posted by Savaric
All this talk of economic tailspin is because a lot of the big money that runs this country stands to lose a lot. Fuck them. It should set off alarm bells when a couple of companies collapse that the entire country risks economic corrosion. These corporations are so freakin' huge they endanger our economy?

The problem is, a huge chunk of these corporations are banks, mortgage lenders and financial investment firms. This means, if they go down the drain, most of their assests do also.

Are you personally going to be happy when your 401K and the deed to your house are now owned by a Russian oligarchy that bought the assets in the ensuing firesale, especially when they decide to onsell them or force you to forfeit? Now, multiply that impact by a hundred million people.

I am in no way absolving the horrible risk assessment that was performed on these types of investments, but am saying that if you let these companies fail, then the economy will fail. Unless you own all your assets outright, Financial Institutions ARE the economy.

[Malacasta]

Riek, I agree with you that these institutions going down the drain could possibly trigger something big (though I've read all sorts of differing opinions on what that means for the average punter) but where is this 1 trillion dollars going and what does it mean? If it's going to buy the failed mortgages (which might be what? 100 billion?) then what's the rest of the money for? If it's going to buy out some of the credit swaps, then which ones? Isn't there 63 trillion dollars exposed from the credit swaps? Which banks do we choose to save? If we're only going to save 5% of the banks, then is that really any different to saving 0% of the banks? Does 5% really increase confidence that much?

I mean, I don't know whether I'm asking the right questions cuz I don't really understand the entire situation, but 700billion or 1 trillion or whatever it is, seems entirely arbitrary to me, and if it's arbitrary, who is it helping and why is that particular recipient more worthy than another recipient?

[Savaric]

Originally posted by Riek
I am in no way absolving the horrible risk assessment that was performed on these types of investments, but am saying that if you let these companies fail, then the economy will fail.

Says who? George Bush? American politicians? Economy won't fail. Might have a recession at worst, big business learns a valuable lesson. This type of shit is what brings about change, because broken equipment needs a good kick once in a while.

On the eve of the biggest fraud in history. That's my two cents.

[Belair]

I don't believe the bailout can be characterised as a simple equation of handing middle-class US taxpayers' money to mismanaged companies and the fools who ruined them. Considering how displeased the electorate is with the current situation, one could reasonably hope that the bailout will come with meaningful conditions and a strict scrutiny on the performance of such individuals. As I understand it, the FBI has already begun investigations.

"This type of shit" may indeed bring about change, as the issue certainly affects enough people. Ideally, a more relevant regulatory system will flow from the package, much to the financial benefit of the US and the world.

Anyway, I guess we'll find out more tomorrow morning (US time).

PS. Thanks for the link, Mala.

[Kraxe]

Reading some of the assumptions and what people 'know' and have read about the causes and fallout of all this is actually fairly funny.

First of all, blame. There are two parties that are responsible for this mess; government and banks. Banks lent irresponsibly, chasing ever more profit, and the governments let them, changing the rules and regulations that enabled the banks to lend ever more and more money. Customers bear very little of the blame. Customers are people and people have always taken whatever the banks are willing to give them. The banks forgot this in their eagerness to make profits. Normal people are not to blame, they are just being what they are and true to their nature. Banks know this, but might be forgiven a little bit (but not much) because they too are following their nature which is to make profit. The government knows this too and are 100% responsible because they are supposed to work in the best interests of the people that voted them into power. The Government (all of em in fact, all as bad as each other)is ultimately responsible for this mess.

ok, now that we've done the blame game, let's move onto something interesting, what the bailout plan is.

Um, nobody knows yet.

That's a huge problem. Paulson went in with no idea more than throw even more money at the banks by buying up the toxic debt. If this had been thought out even a bit in advance it might have gone down better than it initially did, but it got spun out of all proportion and became a burden on taxpayers, etc. Basically it became a political can of worms. It was a massive mistake to ever present it as a 'rescue' of banks. Trust me it wont be. Just look at the latest rescues of banks and you'll see what I mean. Lehman Brothers cut up and sold to the vultures, AIG (ok an insurance company) basically nationalised to get an $85 billion dollar loan, and Washington Mutual sold to JP Morgan for a pittance.

The bailout plan was simply poorly conceived with no thought as to how it would be hijacked through the political process.

Strictly speaking banks don't need money. What they need is security. They need to know they aren't going to have to hold all their capital or raise more to support the falling values and rating of their current debt instruments and other financial holdings. Once the banks know they aren't going to go out of business overnight then things can get moving again. The big question is how is that going to happen. How are the Fed (and other financial centres) going to unfreeze the money markets around the world?

Liquidity injections are not working. We already know that. They've been tried for a while and they do nothing more than allow banks to bolster their balance sheets for a while. Something else then.

How about stopping the housing slump and taking some of the foreclosed properties off of the market?

It's clear the banks aren't going to be lending anything soon so the quick, simple solution is to cut to the heart of the matter. Seize all mortgages that are in delinquency, knock the interest rate down to something small, even zero, but maintain at least a minimum payment of the original capital. As for foreclosed properties, compulsory purchase of all of them over 3 months on the market, via an auction to allow private enterprise and the public to take part too if they wish. Then rent em out.

That's what the bail out plan left out. A plan to help the economy.

Finally, the cost. 700 billion or whatever is actually an insignificant amount. The taxpayer won't notice it. the cost to each taxpayer is around $7000 each. but taxes wont go up much if at all to cover this. Really, teh taxpayer won't notice this much, except for perhaps in the price of goods going up thanks to the weakness of the dollar again due to the fattening of the US deficit.

If a bailout is not forthcoming, then that $7000 that so many people being polled in the streets think they could do a lot with wont go far. Within a year, maybe a lot less, you would see massive unemployment as loads and loads of companies go out of business. That $7000 which you were going to pay in taxes anyway regardless would have kept you in employment, in a home and away from the soup kitchens. Yep, it could get that bad.

But don’t worry. This is not a bailout of banks. This will cost them too. Again, this plan was far too frivolous in its conception. The banks will end up having to pay in warrants - pieces of paper the government can swap for a share in the ownership of whoever issues the warrants (not as bad as AIG’s 80% of the company I hope, that too would end banking as we know it), possibly they will have to pay a tax on their dealings too. This deal will not get through without at least some token punitive deal in ‘favour’ of the taxpayer. However if it is too punitive, the deal simply won’t work and we are all screwed.

Yes, the world will survive a financial meltdown. But really, for the sake of a little tax that you are going to pay regardless, it would be better not to get too close to the edge of the abyss in case the edge gives way.

[Kraxe]

Originally posted by Malacasta
who is it helping and why is that particular recipient more worthy than another recipient?

Participating institutions will likely be any that have bought financial instruments backed by US debt of some kind, be it residential mortgages, commercial mortgages or some other form of commercial paper. I can't even begin to think of who might be covered by this though, but you can see as far and as wide as the credit crisis has spread, well essentially that's who might be covered

While it will be on offer to a lot of companies and institutions there will be a cost, most likel in warrants. Basically any company that wants to partake will have to give up a percentage of itself to the US government. Shareholders are going to love that I can tell you

[Ilusan]

Originally posted by Kraxe

If a bailout is not forthcoming, then that $7000 that so many people being polled in the streets think they could do a lot with wont go far. Within a year, maybe a lot less, you would see massive unemployment as loads and loads of companies go out of business. That $7000 which you were going to pay in taxes anyway regardless would have kept you in employment, in a home and away from the soup kitchens. Yep, it could get that bad.

After sleeping on it last night and knowing our media and their tendency towards "shock and awe" tactics, I woke up feeling a little more objective and wondering how inflated this crisis is being reported vs. the REAL problem. My objection to the above quote is rather simple-minded, but is this $7000 really money we would have spent on taxes anyway? If inflation for the added debt causes the dollar to drop then taxpayers get hit a second time with rising costs and something/a lot of things getting cut from the budget that tax payers may feel strongly about on either side of the political spectrum, especially since the Pentagon just received a record budget for the 2009 fiscal year. yes, the institutions get "punished" too, but the current bailout, like kraxe said, did nothing to stimulate the economy only stave off the disaster. I'm conflicted because im glad the bailout didnt pass as it stood, but something needs to pass. I'm guessing the real question now is, how much are american tax-players willing to lose to keep the system we have in place. Too bad we we really dont have any say in that matter.