Question about the Bailout

[Ray]

I don't begin to understand the details of how the proposed bailout will work and exactly who the winners and loser will be. I'm also not questioning whether a massive bailout, in some form, is necessary. I know there are arguments to be made on both sides of this, but it seems inevitable at this point, so lets assume for the sake of discussion that its gonna happen and happen soon.

The question is, how is it beneficial to bailout the MAKERS of bad loans and not bail out the TAKERS of bad loans? It takes two stupid parties to agree to a stupid deal, no? The problem with not bailing out the lenders is that the entire financial system potentially collapses. Pretty obviously a large problem. But Paulson and other backers of the proposed plan have been all over the TV arguing that they can't bail out the people who TOOK bad mortgages because many of them should never have gotten them in the first place and are in no position to pay them off. Well, duh. It seems to me that if you help them by refinancing their purchases at a lower market rate (say, what those houses would sell for today, or maybe today minus 10% just for the sake of discussion), perhaps they could. And by allowing them to stay in their homes with a better chance of paying them off, the "bottom" of the housing market isn't quite as low as it would be with however many millions of homes sitting vacant. That being another way the bailout possibly helps the average American taxpayer?

Politically it seems like a no-brainer that if you're gonna help the wealthy Wall St types who engaged in reckless lending practices, you ought to help the poor Main St types who engaged in reckless borrowing practices. I was pretty shocked to hear Paulson defending the need to buttress the lenders but not the borrowers because of the borrowers irresponsible decision making! Without any mention of the lender's irresponsible decision making?

But ignoring the politics for now - that will no doubt be playing out for years beyond this little election season - what are the financial reasons for only helping the lenders and not the borrowers? I'm sure I'm missing something here and maybe there are really good reasons for this apparent imbalance, but I need someone who understands this stuff better than I do to explain it to me. Because it just seems crazy on its face.

-Ray

[csm]

I guess the borrowers can continue to make poor choices from the loans marketed to them.
now all we need to do is bail out the big 3 car makers and we'll be set.

[CNY rider]

Ray

Complicated topic and it would take days to do it justice (well, at the speed I type anyway).
The most coherent info I can offer you is at
calculatedrisk.blogspot.com

They have well written pieces on just this subject. I read them daily.

[Charles M]

I love it....


There's a ***** storm over bad lending...

Now that the fat cats have jumped ship, the administration decides the solution is to take tax payers dollars and do even more bad lending to cover it...

[93legendti]

I don't begin to understand the details of how the proposed bailout will work...

Politically it seems like a no-brainer that if you're gonna help the wealthy Wall St types who engaged in reckless lending practices...-Ray

I think when you frame the issue this way, you might not understand why the bridge loan to AIG is helpful to everyone.

I love it....


There's a ***** storm over bad lending...

Now that the fat cats have jumped ship, the administration decides the solution is to take tax payers dollars and do even more bad lending to cover it...

Congress has no role in this? :confused:

[Ray]

I think when you frame the issue this way, you might not understand why the bridge loan to AIG is helpful to everyone.



Congress has no role in this? :confused:
No, I understand the arguments for why keeping the whole damn system from collapse is helpful to everyone. I'm asking if there's a reason why working both the Wall St and Main St ends of the problem would be LESS helpful to everyone. And might it not even be MORE so?

Congress WILL obviously have a role in this, but for now, I'm just asking about the PROPOSAL, which came out of the administration. I'm trying to figure out what I think Congress should do in trying to get something approved. How close to the administrations plan they should stay, what else they should try, etc? That's why I'm asking. I'm not even assuming the administration proposal shouldn't be approved as is - I just don't know all of the interactions. But it doesn't pass the smell test on its face, which is why I ask if I'm missing something. I'm fully open to the possibility that I am.

-Ray

[David Kirk]

I guess the borrowers can continue to make poor choices from the loans marketed to them.
now all we need to do is bail out the big 3 car makers and we'll be set.

Yeah........ like maybe someone can tell them that if they build quality product that meets the needs of the buyer that they could sell it and make profit!

dave

[cdimattio]

But ignoring the politics for now - that will no doubt be playing out for years beyond this little election season - what are the financial reasons for only helping the lenders and not the borrowers? I'm sure I'm missing something here and maybe there are really good reasons for this apparent imbalance, but I need someone who understands this stuff better than I do to explain it to me. Because it just seems crazy on its face.

-Ray

Big topic to cover in a succinct manner

I believe the current credit crisis goes well beyond real estate. Low interest rates engineered by central banks and reinforced by a tidal wave of overseas savings fueled home prices and leveraged buyouts. Pension funds and endowments, unhappy with skimpy returns, shoved cash at hedge funds and private-equity firms, which borrowed heavily to make big bets.

But credit problems once seen as isolated to subprime-mortgage lenders began to propagate across markets and borders in unpredicted ways and degrees. There was a vast misunderstanding of risk with new complex securities. A more interconnected market and a change in sentiment (crisis of confidence) leads to a situation which has destabilized the financial system.

The devaluation of the underlying assets (including real estate) has already happened. Now we are suffering through the resultant contraction and liquidity crisis as a result. Hence all the discussion about Bank capital ratios.

Helping the individual mortgage borrowers is a long term play that would contribute to asset recovery. Unfortunately the crisis is on our doorstep and somebody needs to put out the fire.

[R2D2]

Big topic to cover in a succinct manner

..... Unfortunately the crisis is on our doorstep and somebody needs to put out the fire.

Beats a depression............

[Climb01742]

as a condition of the bailout, would returning to the former 12-to-1 debt ratio be a good idea, down from today's 30-to-1 ration?

[Ray]

Big topic to cover in a succinct manner

I believe the current credit crisis goes well beyond real estate. Low interest rates engineered by central banks and reinforced by a tidal wave of overseas savings fueled home prices and leveraged buyouts. Pension funds and endowments, unhappy with skimpy returns, shoved cash at hedge funds and private-equity firms, which borrowed heavily to make big bets.

But credit problems once seen as isolated to subprime-mortgage lenders began to propagate across markets and borders in unpredicted ways and degrees. There was a vast misunderstanding of risk with new complex securities. A more interconnected market and a change in sentiment (crisis of confidence) leads to a situation which has destabilized the financial system.

The devaluation of the underlying assets (including real estate) has already happened. Now we are suffering through the resultant contraction and liquidity crisis as a result. Hence all the discussion about Bank capital ratios.

Helping the individual mortgage borrowers is a long term play that would contribute to asset recovery. Unfortunately the crisis is on our doorstep and somebody needs to put out the fire.
OK, so if I get what you're saying, the whole thing may have STARTED with bad loans, but with all of the second and third and fourth tier trading of these bad loans into the heart of the entire financial system (and everyone's reliance on them to increase yields?) its grown to a point where they're no longer the ill that needs to be treated?

You say the devaluation of the underlying assets has already happened, but it hasn't fully happened yet, right? I keep hearing that we don't really know where the bottom will be in the housing market, and it will take finding that bottom to really know how much bad debt is floating around in the system. Wouldn't taking a stab at affecting that bottom by allowing the foreclosed upon to stay in their homes at a reduced price still be a more stable solution than letting these homes sit vacant while the values fall even farther? Or is that just too complicated (and too small a part of the solution) to try to take on before these emergency measures need to be put in place to get money flowing again? Perhaps something for the next administration and congress to take on?

Anyway, thanks for the explanation.

-Ray

[csm]

dave,
tru dat yo. when I bought my most recent car, I really wanted to like a big three car. but after driving cars from all corners of the earth (except Korea; just couldn't do it) I decided on a Japanese car. again.

[goonster]

Congress has no role in this? :confused:

Not really.

Maybe I'm missing something, but the way I see it Congress is being asked to rubber stamp a $700MMM check which Hank Paulson then uses to buy illiquid assets at his sole, non-reviewable discretion.

Keen minds seem to differ on whether that's a really good thing or a really bad thing. I just know that Chuck Schumer's braying about what he wants done with the money is not particularly helpful.

[Lazy Bill]

Ray - follow the money.
Paulson ran Goldman - is he going to just fade away in 6 months?
No, its back throught the revolving door for him and he is making sure there is a plum position ready for him.
Of course it has to be done immediately - he doesn't have much time left.

This threat of a great depression is hard to take at face value after
the fear-mongering on national security we have heard for years.

I always hated playing games when I don't know all the rules,
and who can say what the rules will be later today, let alone tomorrow?
I'm admittedly unsophisticated in the world of "high finance",
but now I see that the best minds in the business have little understanding as well.
Why trust them now considering, the mess they've made?

[Sandy]

[/B]

Yeah........ like maybe someone can tell them that if they build quality product that meets the needs of the buyer that they could sell it and make profit!

dave

I didn't like the market prior to the bailout and still don't, but last week I bought some Ford stock at a little under $4.93. I figured the worst that could happen is I would lose $4.93. But they didn't let Chrysler go under and there is a possibility that the US carmakers will receive $25 billion or more in loans, so I took the chance in buying Ford. Lose Ford and you lose lots of US jobs and an important US company.

I always considered hindsight both meaningless and annoying to even hear. But in the case of the US car manufacurers, hindsight makes sense. How they could continually misread what they needed to produce still staggers my pea brain.


Sandy

[Charles M]

Difference between Ford and Goldman though...

Funny how Goldman survived "just" long enough to eliminate 60% of the competition just as almost a trillion dollars lands.


And (Former Goldman guy) Paulson says "this needs to be quick and clean"...



Funny,

But I bet "Quick and clean" is exactly the language that lenders were using when selling $400,000 houses to people making 32 grand a year.


Even Funnier,

But I bet that's exactly te language used by Bush and Chenney (Oil, Defense and Reconstruction guys) were using when selling Iraq part Deux.

[dnades]

I'm with Ray. I don't get it either. Bailing out the people who made bad loans will only encourage future Masters of the Universe to exploit the market again in the future knowing that they will once again be bailed out. Why is it so complicated to explain why bailing out these companies will benefit everyone? Feels like a shell game to me. In my view the only people who will benefit are those people(and those who associated with them) who made the bad loans and overextended their companies. They really should just take their lumps. It will make for a healthier financial system if those people who made irresponsible decisions are held accountable. Plus you have to wonder how much of the "bail out" is political in nature- you know stick the incoming president with as much crap as possible.

[Climb01742]

interesting that goldman and morgan are opting for greater regulation. draw your own conclusions:

http://www.nytimes.com/2008/09/22/business/22bank.html?_r=1&hp&oref=slogin

[Sandy]

Difference between Ford and Goldman though...

Funny how Goldman survived "just" long enough to eliminate 60% of the competition just as almost a trillion dollars lands.


And Paulson says "this needs to be quick and clean"...



Funny,

But I bet that's exactly the language that lenders were using when selling $400,000 houses to people making 32 grand a year.

I operated a small family business and am retired now. My daughter has 3 master's degrees, our house is paid for, no kids at home, no debt, we don't spend much money, live in a small house, and have cash. My wife some years back wanted to purchase a larger house (at the time my brother-in-law and mother-in-law were living with us). No way was I going to go out and buy a larger home. Satisfied to live in what I have. I would often see so many really gigantic homes near where I live (withing a few miles). Always wondered how so many people could afford them. Apparently, some of them couldn't.....


Sensible Sandy

[michael white]

I didn't like the market prior to the bailout and still don't, but last week I bought some Ford stock at a little under $4.93. I figured the worst that could happen is I would lose $4.93. But they didn't let Chrysler go under and there is a possibility that the US carmakers will receive $25 billion or more in loans, so I took the chance in buying Ford. Lose Ford and you lose lots of US jobs and an important US company.

I always considered hindsight both meaningless and annoying to even hear. But in the case of the US car manufacurers, hindsight makes sense. How they could continually misread what they needed to produce still staggers my pea brain.


Sandy

hopefully they'll take your investment and spice up the front end of the Navigator! Not enough bling!

[Marcusaurelius]

It's all beginning to sound like everyone is playing with monopoly money and oddly enough spending it like they are playing monopoly. I think I have to agree with others: I think it's nuts.

[Ray]

Understand, I'm not questioning the need for a bailout. When I see people as typically divergent as Paul Krugman and (pick any conservative economist) agreeing that this really could turn into economic armageddon very quickly, I tend to take their word for it that we're in one righteous hell of a fix. And I honestly don't believe that allowing a 1930's type depression to kick in if there's anything we can do about it is a good idea. It could happen anyway - even if all of this stuff 'works'. But maybe we can prevent it. To me, its not about growth vs decline, its about a bumpy landing with an engine on fire vs a nose first crash. One is more survivable even if scary as hell. So I don't take the opinion that the whole thing is a scam. The lending and borrowing and securitizing practices of the past however many years HAS been a scam. Now its a matter of digging out from under the mess that created. In a way that both works and is somewhat politically palatable.

There are a LOT of folks out there who didn't directly contribute this problem at all who are really pissed at being the victims after feeling like they haven't done anything wrong and have acted prudently and responsibly. I feel like that myself at times. But I also realize that part of the reason my investments have done as well as they have over the years is tied into this whole mess, so it makes sense that I should feel the downside as much as the upside. I believe I'm diversified enough not to get hurt too badly if the system stays above water, but obviously we're all screwed if the whole thing collapses. I can't even frankly imagine what that would look like. During the depression we got up to a high of about 25% unemployment. And that was in a day when people were used to hard times and doing without much - those folks weren't even CLOSE to as spoiled as just about every American is today. And there was pretty serious upheaval. If we ran into those conditions today, I don't know that our social fabric (being largely synthetic these day, after all) could handle it.

So, if possible, I'd like to keep this to how best to handle a bailout rather than WHETHER to have one or not. I realize I don't have any say in where a thread goes after its launched - just reiterating what I was hoping to learn from any discussion.

-Ray

[Climb01742]

before china would give morgan any money, they wanted an ownership stake. why shouldn't the u.s. gov't get the same deal? no ownership, no dough. otherwise, all we're buying is cash for trash.

[fiamme red]

(From Text of Draft Proposal for Bailout Plan)

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.

Why should this be? Is this a dictatorship?

[Ray]

(From Text of Draft Proposal for Bailout Plan)

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.

Why should this be? Is this a dictatorship?
Yeah, that's a pretty amazing little provision. I don't think the Bush administration is in a position to say "trust us" at this point. I don't know that anyone in a position of public trust should EVER be able to get away with that level of authority, but these guys right now I just don't see happening. From news reports, both Democrats and Republicans are objecting to the lack of oversight in the plan. There are other places where they'll likely differ (executive pay, anyone?), but they both seem to be insisting on some level of oversight.

-Ray

[dauwhe]

before china would give morgan any money, they wanted an ownership stake. why shouldn't the u.s. gov't get the same deal? no ownership, no dough. otherwise, all we're buying is cash for trash.

+700,000,000,000.00

Dave

[michael white]

+700,000,000,000.00

Dave

we just need to figure out how the French did it . . . maybe hire them to do it for us.

[goonster]

Why should this be? Is this a dictatorship?

When you say "dictatorship" I think you mean "efficient application of executive authority," no?

On the one hand, I can understand how this kind of operation can't be allowed to get bogged down by bickering and horse trading. You could quibble forever about how much should be paid for each pile of bad debt.

On the other hand, it's seven . . . . hundred . . . . billion smackers!

[1centaur]

This is not a bailout of Wall Street/fat cats/the people who made the loans. This is a bailout of the system and thus of Main Street and any other street you care to name. Shame on politicians who want to spin that for their own careers.

The reason for Paulson's desire to not have every decision second guessed by a group of 20 politicians should be obvious to those who have observed the events of the past week. A crisis of confidence can swamp companies and the system VERY quickly, much more quickly than any of us can imagine even a group of like-minded, selfless individuals coming to consensus, let alone our self-interested friends in Washington. I don't think he'll get that authority, and I do think oversight is necessary and inevitable at some point, but to start the conversation in the right place for drafting purposes that was a wise choice. I also don't see this as a Bush administration thing - this will mostly be related to the next Treasury secretary.

Why not force contractual changes one loan at a time? Many reasons. Big picture, if government can change contracts for political purposes, business risk will go way up across a broad spectrum and investment will decline along with GDP. Freedom of contract is a very important part of the success of capitalism - markets have a good idea how to price those risks. They don't know when and if their economics will change if the government can just pop in any time for vote gathering (or even selfless) reasons. And BTW, if it really made sense to renegotiate the loan in terms of sustainable economics and not having vacant depreciating assets on the market, do you think the banks could figure that out? I think politicians have been urging those types of moves for the last 12 months, but urging is all they should do, IMO.

Second, mechanics. Do you take the loss out of the lender, who then needs more capital? Do you stop the bank from selling the foreclosed property, raising cash that can be put to more productive uses with better borrowers? Where is the line drawn? Every % diminution in mandated loan balance/rate leaves more people in their homes and forces many out. Then some of those left in will fail to pay - does the government say too bad? If they say that then, why not now? Do you need taxpayer dollars to buy down the loan?

Third, impact and cost sharing. The biggest financial devastation from declining home prices is coming in sunbelt and coastal states (and Michigan). Should taxpayers everywhere subsidize possibly irresponsible homeowners or otherwise unlucky in a few states? Should it be national policy to bail out homeowners mostly in a few states? If Vegas and LA and Florida have a better housing market, will that really help the nation enough to justify the program? How many people at the Federal level should be involved in re-setting loan terms and monitoring how that's going? If your house did not go down in value but your income did, should you be bailed out? Why not bail out people on car loans, particularly SUVs that went down in value? Why not have us all prop up anybody who's going through tough times? My point is that it's materially different to bail out the system than to bail out individuals. With the system, the structure is there to recapture all or most of the investment as markets correct and improve. With the system, everybody benefits. With individuals, is Joe Smith going to give 20% of his home equity to the rest of us as collateral, and then we're going to seize that value down the road rather than letting his poor sick wife use those proceeds? That sort of managed economy creates all sorts of bad incentives. With the banking save, we can be sure regulations will change dramatically going forward so this does not happen again. No such luck with "Main Street" bailouts.

Bottom line, we save the system because we have to. We let individuals sink or swim because we can withstand the national consequences of their pain.

[goonster]

The most coherent info I can offer you is at
calculatedrisk.blogspot.com

Thanks for the link.

Solid gold right here, my friend:

What I really really like is the idea of subjecting CEOs to the same petty humiliation everyone else gets treated to. I suggest that for every separate asset these CEOs sell to the government, they be required to write a Hardship Letter over a 1010 warning (that's a reference to the statute forbidding lying in order to get a loan) explaining why they acquired or originated this asset to begin with, what's really wrong with it in detail, what they have learned from this experience, and what steps they are taking to make sure it never happens again. Furthermore, the Treasury Department will empanel a committee of the oldest, most traditional, and bitterest mortgage loan underwriters--preferably those downsized to make way for automated underwriting systems--to review these letters and opine on their acceptability.

[cdimattio]

OK, so if I get what you're saying, the whole thing may have STARTED with bad loans, but with all of the second and third and fourth tier trading of these bad loans into the heart of the entire financial system (and everyone's reliance on them to increase yields?) its grown to a point where they're no longer the ill that needs to be treated?

You say the devaluation of the underlying assets has already happened, but it hasn't fully happened yet, right? I keep hearing that we don't really know where the bottom will be in the housing market, and it will take finding that bottom to really know how much bad debt is floating around in the system. Wouldn't taking a stab at affecting that bottom by allowing the foreclosed upon to stay in their homes at a reduced price still be a more stable solution than letting these homes sit vacant while the values fall even farther? Or is that just too complicated (and too small a part of the solution) to try to take on before these emergency measures need to be put in place to get money flowing again? Perhaps something for the next administration and congress to take on?

Anyway, thanks for the explanation.

-Ray


The underlying mortgages were pooled and securitized. Securitization spread the risk, but unfortunately the magnitude of the entities and the interrelationships created a house without much of a foundation.

The securitized debt and exotic variants have plummeted in value. Even if you can trickle some life into the mortgage market by supporting borrowers, it will take time. I was speaking to the securitized debt as the asset that will never recover. The securitized variants had a broad market because they were perceived to be low risk. The genie is out of the bottle and most people now realize that this never was the AAA rated debt it was represented to be.

Because the party went on too long, the hit to banking assets (underlying mortgage securities) created a liquidity issue of epic proportions. A separate crisis in confidence magnifies the problems. Tough conditions for an investment bank that operates a business model that involves large degrees of leverage and high risk.

As perverse as it might sound, an economist could argue that many of the affected borrowers already received a benefit of sorts in the form of a discounted mortgage (not properly priced in relation to the risk).

I think the general situation was best described by someone as socialized risk, privatized profit.

[torquer]

hopefully they'll take your investment and spice up the front end of the Navigator! Not enough bling!
A fundamental problem (for me anyway, but then politically I'm to the left of the salad fork) is that Sandy's money didn't go to Ford (unless there was an amazingly poorly-timed IPO, the possibility of which can't be discounted) but instead to somebody else who was cashing out his/her bet. So the money doesn't really produce anything, its just chips in the casino. And some of us just suspect that this $700 billion of our kids' money is just shoring up the casino.

Agree with you about the need to pimp the 'Gator, though.

[Ray]

Thanks for the thoughtful reply. Just a couple of points...

Freedom of contract is a very important part of the success of capitalism - markets have a good idea how to price those risks.

At what point do we get to stop calling it capitalism and get real about what's going on here?

I think the general situation was best described by someone as socialized risk, privatized profit.


That's what it is - now, what shall we call it?

Bottom line, we save the system because we have to. We let individuals sink or swim because we can withstand the national consequences of their pain.

Aside from the moral implications of that statement, it only applies until there are enough of "them" such that "they" become "we". There's a tipping point in here somewhere that "we" REALLY don't want to find.

-Ray

[Mshue]

Ray, you ask what I think is a very important question, which I will get to in a moment. But first, it’s not clear to me that the “bailout” is necessarily a bailout. My understanding is the government will spend up to $700 billion buying assets from financial institutions at something less than face value. The value will be the result of a reverse auction in which those institutions wishing to sell an asset must indicate the price they’re willing to sell at. The government will then start buying assets at the lowest offer price. Not all of these securities are worthless, and my gut tells me that the government, acting as the only bid in a market frozen by fear, could ultimately receive a positive return on its investment (how many times has Buffett made “easy” money buying when no one else would or could?). The government in providing capital in this manner is acting as the lender of last resort and by buying the assets at a discount is exacting a “penalty” rate so as to make it an unattractive option for all but the most distressed financial institutions. (We’ll see whether it is lending against good collateral Walter Bagehot advised.)

Ultimately, the banks need to raise more equity capital in the private sector before things truly start to heal. The problem is that so far those that have made equity investments into financial institutions in the past year have seen their holdings decimated by the cascade of subsequently reported bank losses and writedowns. I suspect that Paulson and Bernanke hope that if they can put a floor under the mortgage and related securitization markets through their plan perhaps banks will be able to convince would be investors that the value of their bad assets has stopped falling and that it is again safe to invest equity capital. I’m not sure this will work and, even if it does, it will be a long time before we’ll know. And I hope that bank bondholders and/or equity holders aren’t bailed out – they’ve made bad investment decisions and should pay accordingly. So far, I believe that Paulson has indicated that his plan will not prevent the dissolution of all banks, but we’ll see.

So what will the government do with its holdings? I understand the plan is to sell them back to the market after things stabilize. I’m skeptical that the market will be able to reabsorb these securities in the next several years. In the meantime, there will be mortgage defaults within the government’s portfolio of securities and one wonders how the government will respond. Will the government foreclose or negotiate (or, if it just owns part of a tranche of a securitization, will it even have the option)? Ray, I think this is what you’re asking. Personally, I like John Hussman’s plan which he outlines near the end of this piece (worth a read anyway) here: http://www.hussmanfunds.com/wmc/wmc080922.htm.

There are lots of details to be worked out on the fly. From my perch this is an extraordinarily serious issue and I sincerely hope that an effective response is not undermined by petty partisan politics (not pointing the finger at one side of the aisle or the other when I say that).

[goonster]

it’s not clear to me that the “bailout” is necessarily a bailout.

It's an unprecedented deus ex machina intervention by the gummint into the free market.

[bigman]

It appears to me that the Republican contraction of regulation and the ensuing greed is at play here. Bush ran on a platform of contraction of government and now we own 79.9% of AIG - bewildering.

Goldman is changing there status from Investment bank to commercial bank which reduces there ability to legally leverage there assets from something like 30 to 1 to 10 to 1. Only makes me think they must have some scary skeletons in the closet.

NINJA loans - no income no job - need I say more. Way to many entities responsible for this mess - from huge corporations, slimey mortgage brokers and stupid consumers.

[Mshue]

It's an unprecedented deus ex machina intervention by the gummint into the free market.

So a "bailout" of the system rather than the banks? Ok, I'll buy that.

[Climb01742]

This is not a bailout of Wall Street/fat cats/the people who made the loans. This is a bailout of the system and thus of Main Street and any other street you care to name. Shame on politicians who want to spin that for their own careers.

The reason for Paulson's desire to not have every decision second guessed by a group of 20 politicians should be obvious to those who have observed the events of the past week. A crisis of confidence can swamp companies and the system VERY quickly, much more quickly than any of us can imagine even a group of like-minded, selfless individuals coming to consensus, let alone our self-interested friends in Washington. I don't think he'll get that authority, and I do think oversight is necessary and inevitable at some point, but to start the conversation in the right place for drafting purposes that was a wise choice. I also don't see this as a Bush administration thing - this will mostly be related to the next Treasury secretary.

Why not force contractual changes one loan at a time? Many reasons. Big picture, if government can change contracts for political purposes, business risk will go way up across a broad spectrum and investment will decline along with GDP. Freedom of contract is a very important part of the success of capitalism - markets have a good idea how to price those risks. They don't know when and if their economics will change if the government can just pop in any time for vote gathering (or even selfless) reasons. And BTW, if it really made sense to renegotiate the loan in terms of sustainable economics and not having vacant depreciating assets on the market, do you think the banks could figure that out? I think politicians have been urging those types of moves for the last 12 months, but urging is all they should do, IMO.

Second, mechanics. Do you take the loss out of the lender, who then needs more capital? Do you stop the bank from selling the foreclosed property, raising cash that can be put to more productive uses with better borrowers? Where is the line drawn? Every % diminution in mandated loan balance/rate leaves more people in their homes and forces many out. Then some of those left in will fail to pay - does the government say too bad? If they say that then, why not now? Do you need taxpayer dollars to buy down the loan?

Third, impact and cost sharing. The biggest financial devastation from declining home prices is coming in sunbelt and coastal states (and Michigan). Should taxpayers everywhere subsidize possibly irresponsible homeowners or otherwise unlucky in a few states? Should it be national policy to bail out homeowners mostly in a few states? If Vegas and LA and Florida have a better housing market, will that really help the nation enough to justify the program? How many people at the Federal level should be involved in re-setting loan terms and monitoring how that's going? If your house did not go down in value but your income did, should you be bailed out? Why not bail out people on car loans, particularly SUVs that went down in value? Why not have us all prop up anybody who's going through tough times? My point is that it's materially different to bail out the system than to bail out individuals. With the system, the structure is there to recapture all or most of the investment as markets correct and improve. With the system, everybody benefits. With individuals, is Joe Smith going to give 20% of his home equity to the rest of us as collateral, and then we're going to seize that value down the road rather than letting his poor sick wife use those proceeds? That sort of managed economy creates all sorts of bad incentives. With the banking save, we can be sure regulations will change dramatically going forward so this does not happen again. No such luck with "Main Street" bailouts.

Bottom line, we save the system because we have to. We let individuals sink or swim because we can withstand the national consequences of their pain.

1centaur, for the $700b, do you think something should be asked for the institutions? this isn't a loaded question at all. genuine curiosity. lower debt-to-asset ratio? some greater regs? some % of equity based on dollars (non-voting, non-executive equity, something like class b shares) to give taxpayers an upside participation in rebound of these firms? i'm just throwing out ideas. i haven't a clue of mechanics. but it seems like the dollars should require some change of behavior, no?

[Ray]

But first, it’s not clear to me that the “bailout” is necessarily a bailout. My understanding is the government will spend up to $700 billion buying assets from financial institutions at something less than face value. The value will be the result of a reverse auction in which those institutions wishing to sell an asset must indicate the price they’re willing to sell at. The government will then start buying assets at the lowest offer price. Not all of these securities are worthless, and my gut tells me that the government, acting as the only bid in a market frozen by fear, could ultimately receive a positive return on its investment (how many times has Buffett made “easy” money buying when no one else would or could?). The government in providing capital in this manner is acting as the lender of last resort and by buying the assets at a discount is exacting a “penalty” rate so as to make it an unattractive option for all but the most distressed financial institutions.
Thanks for that reply. I just got off the phone with an old friend I've referred to around here once before who's been in the financial bidness for 40+ years. He was really freaked out when I talked to him last Thursday and he was really freaked out for the first time in the 30+ years that I've known him. Today, he's much less so. He's not sure it's all gonna work, but he explained the situation much as you just did Mshue. He feels like this lender of last resort role will keep the market from a general panic, which was starting to happen last week. There's obviously been a lot of value lost (or at least perceived value lost), but he felt like this was likely to adequately stabilize the situation. He also suggested it wouldn't be smart for the gummint to get into helping individual foreclosed homeowners because the banks were already doing this to the extent they could (for the obvious reason that its in EVERYONE's interest to keep people in their homes and paying SOMEthing toward resolving their loans, and that banks have been re-structuring those loans like crazy) and this government action will just make it easier for them to remain solvent enough to continue to do so.

I literally don't know enough to make an independent judgment about this stuff, so I have to go with the explanations of the people I trust. And I appreciate all of the thoughtful input here.

-Ray

[DukeHorn]

To 1Centaur

I'll believe it's a bailout of the "system" the minute the Dems get their provision through about executive pay. IF this is about saving our economy then there is no viable rationale why executive golden parachutes need to be honored. Right???

Otherwise, explain to me the "fiction" of bonuses being generated for being "bailed-out" by the US government.

[Ahneida Ride]

If the 1 Trillion bailout is such a great idea, Then how about doing it
honestly ...

There are 300 million USA citizens. Let's assume that 100 million are
tax payers or about 1/3 of the population.
To generate 1 Trillion, each taxpayer must cough up 10,000.

Who is ready to knock on Uncle William's door and demand 10K ?
Any takers ???? I thought not ...

And neither will any politician who ever even vaguely thinks about
being re-elected.

So the back door method is used. A private coporation, the fed reserve,
(which is not federal and hs no reserves) wll create 1 Trillion outa
thin air ... ( and collect interest on it too!)

We all get diluted ... Our purchasing power gets diluted. Oil
jumped by 25 frn today!

The average American is clueless about frn dilution. Prices just keep
going balistic and we just can't figure out why. It's vey simple.
Too many frns chasing too few tanghble assests.

Fractional reserve banking can counterfit an additional 9 Trillion
outa thin air. :eek:

We now live in a society where one is NOT responsible for one's
actions.

[1centaur]

Duke H: If I were a piledriven shareholder of a bank I would not want an executive to make a bonus due to the bailout. I expect common shareholders will not do well here and the executives at the helm will feel that wrath one way or another. I have not followed exactly what the gummint wants on executive pay, but in general I think it's a bad idea for a customer/lender to determine executive pay. The board/owners are supposed to do that. If the gummint wants to determine that amount, they should pay it and they should own it.

climb: Guarantee there will tons of regulatory changes, probably including capital ratio requirements, new ways of assessing asset risk, etc. That's the right quid pro quo and shareholders will be happy to embrace it. Equity ownership is a bit thornier because then the bank can't fail and may act politically rather than rationally. The upside from the acquired securities could give something more to shareholders. Possibly a preferred security that pays a rate of return would work.

Said it before, this is not about Rep. lack of regulation - most of the regs on the books have been around for way longer than Bush, and Fan/Fred activities were lobbied for and by Dems. This is about people figuring out new ways to do things, not understanding consequences, and regs catching up. I've never heard a Rep say banking should be unregulated and I never will, but you wouldn't know that from the spin around Washington in the last week. In the same vein, Ray, capitalism is what it is. Capitalism has never been unregulated; today's capitalism is as much unfettered business as makes sense, a debate which is continuous; most businesses would fail but banking cannot, though individual banks can. Socialism does not fit that definition; communism less so. And I accept your comment on we and they; I was merely pointing out the reality - size matters. The current delinquency rate does not suggest a cataclysmic event such as a banking breakdown.

Finally a technical note to mshue: bailing out shareholders has not been the modus operandi so far - they exist as a convenience more than a reality at Fan and AIG, mostly wiped out at Bear, definitely wiped at Leh, Mer doesn't count; discount asset sales not very equity friendly I suspect. Bailing out debtholders, however, is inevitable - bondholders who don't get paid will file for involuntary bankruptcy, creating the catastrophe we are trying to avoid. You might think that's not rational, but if you are a hedge fund that bought some bonds and shorted the stock (or bought CDS protection) it makes all the sense in the world.

Hope I got them all.

[dnades]

Here's an interview with Senator Bernie Sander(I), Robert Scheer and Dean Baker. Some interesting POV's. Punitive Bailout seems to be a key word in here. http://www.democracynow.org/2008/9/22/sen_bernie_sanders_robert_scheer_and

[theprep]

If you take the bailout ($800 billion) and divide it by average cost of US home (say $250,000):

$8x10EE11 / $250,000/home = 3,200,000 homes could be paid off in full.

Maybe this could solve crisis?

I'm an engineer, not a banker.

[Ray]

If you take the bailout ($800 billion) and divide it by average cost of US home (say $250,000):

$8x10EE11 / $250,000/home = 3,200,000 homes could be paid off in full.

Maybe this could solve crisis?

I'm an engineer, not a banker.
I'm neither an engineer nor a banker, but the theory is that the current proposal may not be a bailout as much as a temporary holding area for a lot of bad debt since the govt should have the money and the time to let things settle that the banks don't have. But ideally, the govt gets most of the money back when the bad assets they buy or guarantee or do whatever they do with them eventually sell back into the market. With your proposal, the right people get helped, but I don't know if it stems the crisis on Wall St or not, it takes a LOOOOONG time to implement, and, at the end of the day, the money doesn't come back to the government. So it truly would be a huge bailout. Which the proposal at least MIGHT NOT be.

I'm sure someone will come along and be a LOT clearer about this, but that's my understanding.

-Ray

[93legendti]

Here's an interview with Senator Bernie Sander(I), Robert Scheer and Dean Baker. Some interesting POV's. Punitive Bailout seems to be a key word in here. http://www.democracynow.org/2008/9/22/sen_bernie_sanders_robert_scheer_and

That's GENIUS stuff! I especially liked this:

"ROBERT SCHEER: Yeah, well, the point is, when Bush and McCain and Paulson, who was head of Goldman Sachs before he was head of the Treasury, say they don’t know how this happened, they designed this system. We had a regulatory regime in place ever since the Great Depression to prevent this kind of meltdown, and that said that stockbrokers, insurance companies, banks, investment banks, commercial banks, could not merge. And in 1999, they passed legislation, the Gramm-Leach-Bliley Act. Gramm is the guy who McCain supported for president in ’96. He was co-chair of his campaign until he complained about the whiners out there, meaning the public. And that legislation is what caused this. It allowed the swaps and everything else..."

Hey Einstein, Pres. Clinton was in power in 1999 - he signed the law. Wasn't Pres. Bush Gov. of Texas in 1999? :D

"...The final bipartisan bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. Without forcing a veto vote, this bipartisan, veto proof legislation was signed into law by President Bill Clinton on November 12, 1999...[4]"

I wonder if Sen. Biden voted for it...

"...Economist Robert Kuttner (among others) has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.[8] Economists Robert Ekelund and Mark Thornton have made similar criticisms, arguing that while "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly"...[9]"

http://en.wikipedia.org/wiki/Gramm-Leach-Bliley_Act

Hmm..looks like Sen McCain voted NO for and Sen. Biden voted YES. No wonder the Dems are blaming Pres. Bush and Sen. McCain. :rolleyes:

http://www.govtrack.us/congress/vote.xpd?vote=s1999-354
Senate Vote on Conference Report: S. 900 [106th]: Gramm-Leach-Bliley Act
Arizona
Aye AZ Kyl, Jon [R]
No Vote AZ McCain, John [R]
Arkansas
Aye AR Hutchinson, Tim [R]
Aye AR Lincoln, Blanche [D]
California
Aye CA Feinstein, Dianne [D]
Nay CA Boxer, Barbara [D]
Colorado
Aye CO Allard, Wayne [R]
Aye CO Campbell, Ben [R]
Connecticut
Aye CT Dodd, Christopher [D]
Aye CT Lieberman, Joseph [I]
Delaware
Aye DE Biden, Joseph [D]
Aye DE Roth, William [?]

[dnades]

Here is the rest of what Scheer said in that quote from 93legend.

ROBERT SCHEER: Yeah, well, the point is, when Bush and McCain and Paulson, who was head of Goldman Sachs before he was head of the Treasury, say they don’t know how this happened, they designed this system. We had a regulatory regime in place ever since the Great Depression to prevent this kind of meltdown, and that said that stockbrokers, insurance companies, banks, investment banks, commercial banks, could not merge. And in 1999, they passed legislation, the Gramm-Leach-Bliley Act. Gramm is the guy who McCain supported for president in ’96. He was co-chair of his campaign until he complained about the whiners out there, meaning the public. And that legislation is what caused this. It allowed the swaps and everything else.

And then, in 2000, hours before the Christmas break, Gramm introduced legislation. I’m holding it in my hand. This smoking gun is available on the internet; you can read it. And what it said is that the swaps is defined in the Financial Service Modernization Act, meaning that instead of going into a bank and somebody said, “OK, we’ll give you a loan, and we expect you to pay it over thirty years. We know your house has the equity. We know you have the means to pay it”—that was the traditional way—instead, they allowed these mergers, and as a result, they could buy insurance on it, they could do these swaps, they could do what they call hybrid instruments. And it is legislation that was never discussed, was—never had hearings or anything, says that all of this stuff is exempted from all previous regulation. The SEC cannot regulate it, the Commodity Futures Board cannot regulate it.

So they gave these institutions, of which Goldman Sachs was critical—so was Citigroup, where Robert Rubin, who was Clinton’s Treasury secretary, he had also come from Goldman Sachs. And, by the way, even though this is Republican-led, there were plenty of Democrats, in fact, a majority of Democrats, who voted for this. And Robert Rubin, who unfortunately is advising Barack Obama—I don’t know how this guy can wake up and—you know, and not be embarrassed and how he can appear on television—and Lawrence Summers, these are the two guys in the Clinton administration who teamed up with Phil Gramm to pass that atrocious legislation.

And now, you know, it seems to me, in terms of the bailout, why don’t they do what Hillary Clinton said during the primaries: just put a freeze on foreclosures? Start out with helping the homeowners and say, “OK, we’re not going to foreclose your house for the next year. We’re going to force the banks to work out reasonable payments. We’ll try to help you hold on to it.” That would have stopped the bleeding here much more effectively than throwing $700 billion at these bandits.



Scheer gets very worked up during this interview and if you keep reading you can see the word 'outrageous' being used frequently. I wish that I had been able to hear it in person. There is always something lacking when you are reading a transcription of a live interview.

[csm]

am I the only one who laughs at the campaign ad for McCain/Palin where the ominous voice over talks about Obama/Biden wanting bigger govt and increased taxes while a model of the capital bldg gets bigger and bigger casting a large shadow over the US? I mean, seriously? after this mess?

[michael white]

am I the only one who laughs at the campaign ad for McCain/Palin where the ominous voice over talks about Obama/Biden wanting bigger govt and increased taxes while a model of the capital bldg gets bigger and bigger casting a large shadow over the US? I mean, seriously? after this mess?

yeah, it is funny. You know those Democrats, they just can't be trusted with money! :)

[csm]

not what I meant. if anything, it was a poke at the republicans. I think both parties are to blame for the mess we are in.

[1centaur]

[/I]
And now, you know, it seems to me, in terms of the bailout, why don’t they do what Hillary Clinton said during the primaries: just put a freeze on foreclosures? Start out with helping the homeowners and say, “OK, we’re not going to foreclose your house for the next year. We’re going to force the banks to work out reasonable payments. We’ll try to help you hold on to it.” That would have stopped the bleeding here much more effectively than throwing $700 billion at these bandits.[/I]

Denying the truth does not solve problems. If banks were forced to work out "reasonable" payments (even assuming that was possible with mortgages sitting in structures), the mortgages would be worth a lot less, so the securities would be worth less, so the capital would be worth less, and you'd still have a problem, except it would be harder for the market to value those securities because the terms of the loans would not be clear and the assumptions behind the structured products would be shattered. Moreover, that "reasonable" standard is a problem - reasonable in that the borrowers could just about afford to stay in the home, or reasonable so that they could easily stay in the home? If the former, is that a good use of their money, propping up a depreciating asset that can't be sold to a regular person because the regular person won't get the low payments? If the latter, why not go to the people who are not defaulting but are stretched some and lower their payments too? That thought was designed to pander.

[DukeHorn]

Dang 93Legend, it's always funny when you try to distort the truth.

Let's look at Gramm Leach Bliley with an unjaundiced eye. Gramm is a Republican, Leach is a Republican, Bliley is a Republican.

The initial vote was as follows:

The bills were introduced in the Senate by Phil Gramm (R-TX) and in the House of Representatives by James Leach (R-IA). The bills were passed by a 54-44 vote along party lines with Republican support in the Senate[1] and by a 343-86 vote in the House of Representatives[2]. Nov 4, 1999: After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. Democrats agreed to support the bill only after Republicans agreed to strengthen provisions of the Community Reinvestment Act and address certain privacy concerns.[3] The final bipartisan bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. Without forcing a veto vote, this bipartisan, veto proof legislation was signed into law by President Bill Clinton on November 12, 1999

I like how in your logical world, legislation proposed by 3 Republicans ends up being Joe Biden's fault. Nice......

PS In case you've forgotten, Phil Gramm is on McCain's "staff". Odd how the new McCain differs from the 90s McCain?

[93legendti]

Dang 93Legend, it's always funny when you try to distort the truth.

Let's look at Gramm Leach Bliley with an unjaundiced eye. Gramm is a Republican, Leach is a Republican, Bliley is a Republican.

The initial vote was as follows:



I like how in your logical world, legislation proposed by 3 Republicans ends up being Joe Biden's fault. Nice......

PS In case you've forgotten, Phil Gramm is on McCain's "staff". Odd how the new McCain differs from the 90s McCain?

I've asked you several times to refrain from personal attacks. If you can't, maybe you should not post, or put me on ignore.

[DukeHorn]

Hmmm, first off I don't think it's entirely personal when I call you out on your logic with factual links and ask you to explain your thinking.

Every time I call you out, I post a link of why I think you're incorrect. If you can't stand the heat, stop posting trash.

Why should I put you on ignore and let you get away with incorrect rants? Again, explain to me how this housing bubble is Jimmy Carter's fault? How is legislation proposed by 3 Republicans then Joe Biden's fault?

Why don't you blame Gramm for the GRAMM Leach Bliley bill? I just find it ludicrous that Gramm's part of McCain campaign and yet somehow your blame sticks to Biden and Obama.

Better yet, why don't you put me on ignore and I'll still refute your points.

[93legendti]

Hmmm, first off I don't think it's entirely personal when I call you out on your logic with factual links and ask you to explain your thinking.

Every time I call you out, I post a link of why I think you're incorrect. If you can't stand the heat, stop posting trash.

Why should I put you on ignore and let you get away with incorrect rants? Again, explain to me how this housing bubble is Jimmy Carter's fault? How is legislation proposed by 3 Republicans then Joe Biden's fault?

Why don't you blame Gramm for the GRAMM Leach Bliley bill? I just find it ludicrous that Gramm's part of McCain campaign and yet somehow your blame sticks to Biden and Obama.

Better yet, why don't you put me on ignore and I'll still refute your points.

Try counting to 10,000 before you explode reading a post of mine quoting SOMEONE ELSE'S opinion and ascribe it as mine. You missed the " ..." marks and cite in my posts.

Short civics lesson. Presidents sign bills. Senators vote for them. A Senator's "aye" vote means he/she is in FAVOR of the bill...like Sen. Biden's vote in question. A "no" vote, like Sen. McCain's, means a Senator is AGAINST it.
No matter how petty and partisan the political commentator, it defies basic adult intellect to blame:

A Senator for a bill he/she voted AGAINST (or abstained from voting);
A President for a law his PREDECESSOR signed.

Here's the quote I posted:

"...When Bush and McCain and Paulson, who was head of Goldman Sachs before he was head of the Treasury, say they don’t know how this happened, they designed this system...And in 1999, they passed legislation, the Gramm-Leach-Bliley Act..."

Here's the quote I found and posted re: the bill's enactment:

"...The final bipartisan bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. Without forcing a veto vote, this bipartisan, veto proof legislation was signed into law by President Bill Clinton on November 12, 1999...[4]"

Understand now?

http://www.govtrack.us/congress/vote.xpd?vote=s1999-354
"Senate Vote on Conference Report: S. 900 [106th]: Gramm-Leach-Bliley Act
Arizona
No Vote AZ McCain, John [R]
...
Delaware
Aye DE Biden, Joseph [D] "

Understand now?

PS, Here's a link to my post re: "Jimmy Carter". PLEASE notice the "..." marks and cite. I posted text from an article. I blame Pres. Carter for a lot, but not this.

http://forums.thepaceline.net/showpost.php?p=591030&postcount=43

[93legendti]

Hmmm, first off I don't think it's entirely personal when I call you out on your logic with factual links and ask you to explain your thinking.

Every time I call you out, I post a link of why I think you're incorrect. If you can't stand the heat, stop posting trash.

Why should I put you on ignore and let you get away with incorrect rants? Again, explain to me how this housing bubble is Jimmy Carter's fault? How is legislation proposed by 3 Republicans then Joe Biden's fault?

Why don't you blame Gramm for the GRAMM Leach Bliley bill? I just find it ludicrous that Gramm's part of McCain campaign and yet somehow your blame sticks to Biden and Obama.

Better yet, why don't you put me on ignore and I'll still refute your points.
http://forums.thepaceline.net/showpo...30&postcount=43 is the post.

Here's the text. Please note the quotation (") marks and cite:


http://www.npr.org/blogs/money/2008...blame.html#more
"...Democrats and Republicans are equally to blame.

In fact, I would say Jimmy Carter probably stands tall as the lousiest economic manager of the modern era (and he's got some real competition). We are still paying the price for his foolishness. (Write your angry letters now).

So, let's pick out the people we do get to blame (thanks to Charles Morris and Nouriel Roubini's writings for help and inspiration).

- Lyndon Johnson, Richard Nixon, Gerald Ford, Jimmy Carter: for spending too much money and pressuring the Fed to pump more cash into the economy to avoid the necessary adjustments caused by the Vietnam War and the oil crisis. The problem didn't go away, of course, it festers and got worse.

- 1970s Fed Chairman Arthur Burns for doing the politicians' bidding instead of responsibly guiding the Fed. He knew better.

- His successor G. William Miller for being a total joke of a Fed chairman. He didn't know better, though he must have suspected he was not the man for the job. (I guess we really have to blame Jimmy Carter for appointing a man with no knowledge or ability to confront one of the greatest financial crises of U.S. history. This was a shockingly irresponsible move by Carter and I shudder to imagine what would happen if a similar corporate hack were running things now.)

- Ronald Reagan for casting the debate as more regulation vs. less regulation rather than smart regulation vs. stupid regulation. Everyone can agree that the U.S. has a lot of stupid regulation that slows the economy without adding any meaningful oversight. Almost nobody argues for regulation. Reagan could have promoted smart, unobtrusive regulation rather than, simply, weaken lousy regulation. That created vacuums of oversight but left in tact many of the arbitrary rules that troubled Wall Street.

- Bill Clinton for allowing the Glass-Steagall Act to be repealed without adding new regulation. It eliminated the legal divide between investment banks and depository banks without realizing that this would require a total overhaul of regulation.

- George W. Bush and his dad, I'd say, get the least blame of any of these presidents for this crisis. I know that many readers of this blog believe it is, somehow, all George W. Bush's fault. Make the case. I don't see it. I think it would have been lessened if he had kept government deficits lower and had seen the brewing housing bubble and had smarter regulation to avoid it. But this bubble was many decades in the making.

- Alan Greenspan, for keeping interest rates too low and not understanding that asset bubbles can be as dangerous as inflation.

- France and Germany and Japan, for having stupid government rules that restrict economic growth and have forced the U.S. to carry the global weight of financial innovation and economic growth. Simply put, France and Germany and Japan weren't doing enough financially exciting things to attract global investors. So, those investors flooded into the U.S. -- the only show on the globe -- and that helped fuel the housing bubble.

- Almost every country on earth. For similarly having stupid economic policies that prevent them from growing and attracting smart investment, further funneling the world's investments towards the U.S., where they can create a bubble.

- China for keeping its currency pegged to the dollar, which forces them to keep buying U.S. treasury bills -- artificially lowering interest rates and fueling the housing bubble.

- Wall Street investment banks for being too trustful of their risk management software that told them the risks they were taking were, well, manageable. Even the people who wrote the software would have told them they were being too trustful. The risks are greater than you think.

- Everyone in Congress for the last 70 years, for allowing Fannie Mae and Freddie Mac to continue as a highly risky walking, talking moral hazard: a company built on the model of giving profits to shareholders while forcing the U.S. government to bear the risk. Outrageous.

- You. For enjoying the boom years without paying attention to the potential risks. For thinking that voting for one party or another somehow encourages more responsible policies. For loving the rapidly growing price of your house and using it to buy stuff. For spending more than you make. For imagining that someone out there, one guy, caused this because they, alone, are uniquely greedy and you are not greedy.

This, of course, is a partial list..."
http://www.npr.org/blogs/money/2008...blame.html#more

So, it is not "my logic" or "incorrect rant". If you must, PLEASE try to respond in a more responsive, accurate and mature manner when you read a quoted text in one of my posts. Thanks.

[johnnymossville]

Bush tried in 2003 to put this back in order, but the sleazy dems with their hands in Fannie's skirt (Freddie's Shorts in Barney Frank's case) didn't want any part of it.

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B 63&sec=&spon=&pagewanted=print

[93legendti]

Bush tried in 2003 to put this back in order, but the sleazy dems with their hands in Fannie's skirt (Freddie's Shorts in Barney Frank's case) didn't want any part of it.

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B 63&sec=&spon=&pagewanted=print

I'm calling you out on your "logic" and "incorrect rant"! :D It's all Sen. McCain's fault! :D


"...''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

''I don't see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,'' Mr. Watt said..."

[johnnymossville]

I'm calling you out on your "logic" and "incorrect rant"! :D It's all Sen. McCain's fault! :D


Rule #1 of Politics, Never let Facts get in the way of a good argument. :p


Even Obama's buddy Raines acknowledged it needed help. Notice how he didn't want the Pres to be able to appoint people to join in the money grab and political lobby for Obama/Dodd/Chuckie scam though. That's hilarious!

[93legendti]

Bush tried in 2003 to put this back in order, but the sleazy dems with their hands in Fannie's skirt (Freddie's Shorts in Barney Frank's case) didn't want any part of it.

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B 63&sec=&spon=&pagewanted=print

I told you Sen. McCain was to blame!!



"Previous Attempts for GSE Reform
In 2003, the Bush Administration sought to create an agency to oversee Fannie Mae and Freddie Mac. The proposal was shot down in congress, and members like Barney Frank said that "these two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,"[12] In 2005, the Federal Housing Enterprise Regulatory Reform Act of 2005 was introduced in the Senate. One cosponsor to the bill was John McCain The bill would've increased government oversight of loans given by Fannie Mae and Freddie Mac. The bill never passed either the House or Senate. A full and accurate record of the congressional attempts to regulate the housing GSEs is given in the Congressional record prepared in 2005. Many attempts were made with only minor results.[13] report(http://digital.library.unt.edu/govdocs/crs/permalink/meta-crs-7896:1 [14]"


http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac

[johnnymossville]

Wahhhhhhhhhhhhhh!!! It's all Haliburton's Fault!!!

[93legendti]

Wahhhhhhhhhhhhhh!!! It's all Haliburton's Fault!!!

Allright, enough "tomfoolery, shenanigans and bally hoo". Let's get back to facts: Republicans are evil. :)

[fiamme red]

I'm calling you out on your "logic" and "incorrect rant"! :D It's all Sen. McCain's fault! :D


"These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''Barney Frank said that in 2003, not 2008. If I remember correctly, didn't Bush & Cheney & Co. tell us in 2003 that Saddam Hussein was an immediate threat to us with his WMD's? What became of that claim?

[johnnymossville]

Barney Frank said that in 2003, not 2008. If I remember correctly, didn't Bush & Cheney & Co. tell us in 2003 that Saddam Hussein was an immediate threat to us with his WMD's? What became of that claim?

You mean kinda like how Bill Clinton throughout the 90's, Hillary, The Dems and the rest of the world except France did?

[Joellogicman]

I told you Sen. McCain was to blame!!



"Previous Attempts for GSE Reform
In 2003, the Bush Administration sought to create an agency to oversee Fannie Mae and Freddie Mac. The proposal was shot down in congress, and members like Barney Frank said that "these two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,"[12] In 2005, the Federal Housing Enterprise Regulatory Reform Act of 2005 was introduced in the Senate. One cosponsor to the bill was John McCain The bill would've increased government oversight of loans given by Fannie Mae and Freddie Mac. The bill never passed either the House or Senate. A full and accurate record of the congressional attempts to regulate the housing GSEs is given in the Congressional record prepared in 2005. Many attempts were made with only minor results.[13] report(http://digital.library.unt.edu/govdocs/crs/permalink/meta-crs-7896:1 [14]"


http://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac

You will discover the Reform Act never got out of a committee that at the time had a majority of Republicans.

[93legendti]

"...More substantively, Biden supported the 2002 resolution that authorized the war in Iraq — a resolution that Obama opposed and, in the primaries at least, painted as “the most important foreign policy decision in a generation.”

Biden was on the wrong side of that thinking, by Obama’s lights. In 2002, he said that America had “no choice but to eliminate” Saddam Hussein..."

http://news.yahoo.com/s/politico/20080823/pl_politico/12735&printer=1;_ylt=Av5DheVA3_5R07aOJiIhE_PCw5R4

[93legendti]

You will discover the Reform Act never got out of a committee that at the time had a majority of Republicans.

That's why it is ALL Sen McCain's fault that his legislation to prevent this mess never got out of committee!!:D :crap: Geez, why don't you guys listen????! :D

[fiamme red]

Bush tried in 2003 to put this back in order, but the sleazy dems with their hands in Fannie's skirt (Freddie's Shorts in Barney Frank's case) didn't want any part of it.

http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B 63&sec=&spon=&pagewanted=printIt's all the gay liberals' fault! :banana:

[93legendti]

You mean kinda like how Bill Clinton throughout the 90's, Hillary, The Dems and the rest of the world except France did?

http://www.cnn.com/2003/ALLPOLITICS/07/23/clinton.iraq.sotu/

Clinton also said Tuesday night that at the end of his term, there was "a substantial amount of biological and chemical material unaccounted for " in Iraq.

"So I thought it was prudent for the president to go to the U.N. and for the U.N. to say, 'You got to let these inspectors in, and this time if you don't cooperate the penalty could be regime change, not just continued sanctions.'"

Clinton told King: "People can quarrel with whether we should have more troops in Afghanistan or internationalize Iraq or whatever, but it is incontestable that on the day I left office, there were unaccounted for stocks of biological and chemical weapons."

http://thepage.time.com/bill-clinton-on-iraq-in-2003/


May 19, 2003- (Associated Press): “Former President Bill Clinton accused President Bush of spending more time fighting the war on terrorism than on domestic issues during a commencement speech at Tougaloo College. ‘I supported the president when he asked for authority to stand up against weapons of mass destruction in Iraq, but we can’t be forever strong abroad if we don’t keep getting better at home,” Clinton said Sunday to a crowd of about 8,000. […] The Bush administration, Clinton said, ‘is still focused on defeating terrorism and weapons of mass destruction, and that’s good, but not good enough. The power of our example is just as important as our military might.’”

April 14, 2003 (Minneapolis Star Tribune): “In his first speech in Minnesota since leaving office, former President Bill Clinton on Sunday praised President Bush’s handling of the war in Iraq. But he criticized Bush’s domestic priorities and urged the administration to offer North Korea aid and a pledge of nonaggression in exchange for an end to that country’s missile and nuclear weapons programs.” [Minneapolis Star Tribune, 4/14/03]

[fiamme red]

http://forums.thepaceline.net/showpost.php?p=588663&postcount=50

I'm sorry. ;)

[93legendti]

http://forums.thepaceline.net/showpost.php?p=588663&postcount=50

I'm sorry. ;)
Don't be...we need a check on the unsupported amount of b.s. that is slung around here as "fact"...you know, like "the housing mess is Bush and McCain's fault".

The good news is that anyday the walking gaffe machine will come out with a quote that it is NOT Pres. Bush and Sen. McCain's fault.

[MMM]

Originally Posted by 93legendti
Short civics lesson. Presidents sign bills. Senators vote for them. A Senator's "aye" vote means he/she is in FAVOR of the bill...like Sen. Biden's vote in question. A "no" vote, like Sen. McCain's, means a Senator is AGAINST it.
No matter how petty and partisan the political commentator, it defies basic adult intellect to blame:


FYI - That website uses "No Vote" to indicate some kind of failure to vote or Abstention. A "Nay" is a vote against.

[Joellogicman]

That's why it is ALL Sen McCain's fault that his legislation to prevent this mess never got out of committee!!:D :crap: Geez, why don't you guys listen????! :D

I don't see where I blamed the mess on McCain, at all, let alone say it is all McCain's fault.

Now that you bring it up, however, McCain says his experience and proven leadership are what the US needs. The US Senate following the 2004 election was 55 Repubs to 44 Dems and 1 independent. Yet in 2005 the bill co-sponsored by one of the more senior member of the Senate majority dies in committee.

If the argument is the bill proves McCain's foresight on the gravity of the mortgage situation, one might be tempted to ask why McCain failed to leverage his experience and leadership to get the bill out of committee and to a vote.

Moreover, the House in 2005 was even more favorable to Republicans. Why didn't McCain exercise his experience, leadership and maverick tendencies to sway some House Reps to carry the day when his more conservative senate colleagues would not?

Truth is, the bill was attacked by the finance industry that was still going to town with the securitized mortgage scam. It died and no one said anything about it. McCain was not the only person responsible for the legislation nore was he the only person responsible for its demise. The fact the bill exists proves nothing about his leadership or prescience.

[Joellogicman]

Don't be...we need a check on the unsupported amount of b.s. that is slung around here as "fact"...you know, like "the housing mess is Bush and McCain's fault".

The good news is that anyday the walking gaffe machine will come out with a quote that it is NOT Pres. Bush and Sen. McCain's fault.

Regulation of the financial industry is a function of the administrative branch - it was under Bush's watch for almost 8 years. Truman said the Buck stops here when it came to his administration. Why should Bush and his team get a pass?

[1centaur]

Plenty of blame to go around.

http://online.wsj.com/article/SB122212948811465427.html

(I think that article expires in a few days for non-subscribers, so its point is that Fannie was encouraged by government to support affordable housing and that one result was way too much subprime and Alt-A being written. Also, all the Republicans on that 2005 committee voted for more regulation and all Dems voted against - no idea why the bill did not make it out of committee.)

It's not like Fannie's mission to support affordable housing FORCED those lenders to make bad loans, it's just that the demand for bad loans was there, from Fannie most of all. Good intentions>bureaucratic miasma>human nature>unintended consequences. Thus has it always been.

[michael white]

Regulation of the financial industry is a function of the administrative branch - it was under Bush's watch for almost 8 years. Truman said the Buck stops here when it came to his administration. Why should Bush and his team get a pass?

Maybe because Truman was one of the last true red-blooded men to take up residence on Pennsylvania Ave.?

WMD; Guantanamo; Abu Ghraib; waterboarding; wiretapping; habeas corpus; "Osama bin Forgotten"; anti-Americanism; deficits; spending; Katrina; Rumsfeld; Cheney; Gonzales; Libby; and now, for a grand finale, the near total destruction of the American Economy. No, the President had nothing to do with any of it.

[93legendti]

Originally Posted by 93legendti
Short civics lesson. Presidents sign bills. Senators vote for them. A Senator's "aye" vote means he/she is in FAVOR of the bill...like Sen. Biden's vote in question. A "no" vote, like Sen. McCain's, means a Senator is AGAINST it.
No matter how petty and partisan the political commentator, it defies basic adult intellect to blame:


FYI - That website uses "No Vote" to indicate some kind of failure to vote or Abstention. A "Nay" is a vote against.
I re-read it, you're right. Sorry, Sen. McCain did abstain (and Biden still voted for it).

[93legendti]

Regulation of the financial industry is a function of the administrative branch - it was under Bush's watch for almost 8 years. Truman said the Buck stops here when it came to his administration. Why should Bush and his team get a pass?
Congress has the oversight, writes checks and drafts legislation...and it was going great until the Dems took over 2 years ago...I know Dodd and Frank (Pelosi, Reid and Obama as well) did nothing, but you claim they had NO power and no oversight?? Fantastic.

http://financialservices.house.gov/jurisdiction.html
http://banking.senate.gov/public/

http://dodd.senate.gov/~dodd/index.php?q=node/3859

[93legendti]

I don't see where I blamed the mess on McCain, at all, let alone say it is all McCain's fault...
I did not mean you imply that you did. I was replying to the earlier rant and incorrect logic that the 1999 bill which Pres. Clinton signed into law and Sen. Biden voted for (and the resulting financial mess) was all Pres. Bush and McCain's fault.

[Onno]

A HUGE implication of the bailout it that, if it goes through, the federal government will be broke (broker?) for many years to come, meaning that big ticket items like health care reform and social security reform will be impossible. This is a sly way of "choking the beast", an explicit goal of many neo-conservatives. That all the cash will go to help corporations rather than ordinary citizens means that those neo-cons will truly have the last laugh.

[Joellogicman]

Plenty of blame to go around.

http://online.wsj.com/article/SB122212948811465427.html

(I think that article expires in a few days for non-subscribers, so its point is that Fannie was encouraged by government to support affordable housing and that one result was way too much subprime and Alt-A being written. Also, all the Republicans on that 2005 committee voted for more regulation and all Dems voted against - no idea why the bill did not make it out of committee.)

It's not like Fannie's mission to support affordable housing FORCED those lenders to make bad loans, it's just that the demand for bad loans was there, from Fannie most of all. Good intentions>bureaucratic miasma>human nature>unintended consequences. Thus has it always been.

In any event, the article does not say there was a regulatory push for low income housing. Rather, it says Fannie lobbyiest used the low argument housing card as one ploy - I am sure there were many others - to keep the House and Senate from imposing additional scrutiny on them.

The article also ignores that no new regulation was necessary to stop Fannie and the banks from securitizing and selling paper they knew was no good. The laws and regulation were there. The paper sellers ignored them and no one watched what they were doing.

It is also not a little disingenuous to tout McCain's support of the bill and Obama's silence when it died in committee. Obama was not on the committee in 2005. Moreover, Obama was elected Senator in '04 while McCain in 1987. The senate is all about seniority. It does not matter who the senator is - even Kenedy could do little about McCarthy - first termers do not get clout in committees - and certainly do not have clout with committees where they are not a member.

[Joellogicman]

Congress has the oversight, writes checks and drafts legislation...and it was going great until the Dems took over 2 years ago...I know Dodd and Frank (Pelosi, Reid and Obama as well) did nothing, but you claim they had NO power and no oversight?? Fantastic.

700 billion in financial problems arose over night?!? Talk about fantastic.

Secured mortgage trading has been exploding since the start of the decade. Foreclosures started creeping up in '05. Things have been bad since well before '06.

The Democractic majority in the house and senate is much smaller than that enjoyed by the Republicans since the contract with america bunch. The Dems do not have a sufficient senate majority to block a filibuster. They do not have enough overall majority to override a Bush veto. Under Clinton, and under Bush until '06, the Republicans did.

Nevertheless, Republicans blame Clinton for whatever happened under his leadership and now blame democrats for Bush's shortcomings.

Might Spin, but it does not Wash.

[Climb01742]

Might Spin, but it does not Wash.

time-out from the debate.

nice turn o' phrase. ya get style points for that.

ok, resume bickering. :beer:

[TMB]

As far back as 1997 and 1998 it was widely acknowledged that the failures of Fannie Mae and Freddie Mac were imminent.

This was during the period when Enron and Worldcom were going down.

Fannie and Freddie were widely known to be offside ( though this may not have been "public" knowledge - it was certainly well known in the accounting / securites industries).

Fannie and Freddie have long been disasters waiting to happen made worse by lax regulatory and reporting requirements / specific reporting exemptions for F&F and worst in industry capital requirements.

The failures of F&F can rightly be worn by everyone, plenty of warning and plenty of blame to go around.

[TMB]

Here's what one of the smartest guys in the business thinks,

<<
Pimco's Gross says bailout to benefit Main Street: report
Wednesday September 24, 11:41 am ET


NEW YORK (Reuters) - The Treasury's proposed $700 billion bailout for financial firms could yield a profit of at least 7 percent to 8 percent and benefit taxpayers, Bill Gross, who manages the world's biggest bond fund, wrote in an opinion piece in The Washington Post on Wednesday.

Gross, the chief investment officer of Pacific Investment Management Co., or Pimco, estimates the average price of distressed mortgages that pass from "troubled financial institutions" to the Treasury at auction will be 65 cents on the dollar. That will represent a loss of one-third of the original purchase price to the seller, and a prospective yield of 10 percent to 15 percent to the Treasury, Gross said.

"Financed at 3 percent to 4 percent via the sale of Treasury bonds, the Treasury will therefore be in a position to earn a positive carry or yield spread of at least 7 percent to 8 percent," Gross argued. "The Treasury proposal will not be a bailout of Wall Street but a rescue of Main Street, as lending capacity and confidence is restored to our banks and the delicate balance between production and finance is given a chance to work its magic," Gross added.

The last few weeks have been marked by the U.S. takeovers of mortgage companies Fannie Mae and Freddie Mac the government bailout of insurer American International Group Inc (NYSE:AIG - News), the bankruptcy filing of Lehman Brothers Holdings Inc (Other OTC:LEHMQ.PK - News), and the pending sale of Merrill Lynch & Co Inc (NYSE:MER - News) to Bank of America Corp (NYSE:BAC - News).

U.S. Treasury Secretary Henry Paulson and U.S. Federal Reserve Chairman Ben Bernanke are pushing Congress to approve a taxpayer-funded plan, estimated at roughly $700 billion, that would let the government buy illiquid assets from lenders.

Gross' estimate of double-digit returns in scooped up mortgage securities assumes lengthy ownership of the assets and is in turn dependent on the level of home foreclosures, "but the Treasury's program is, in fact, directed to prevent just that," he added. Gross manages the $133 billion Pimco Total Return Fund and helps oversee the more than $812 billion in assets at Pimco.

(Reporting by Jennifer Ablan; Editing by Theodore d'Afflisio)
>>

[Joellogicman]

Gross, the chief investment officer of Pacific Investment Management Co., or Pimco, estimates the average price of distressed mortgages that pass from "troubled financial institutions" to the Treasury at auction will be 65 cents on the dollar. That will represent a loss of one-third of the original purchase price to the seller, and a prospective yield of 10 percent to 15 percent to the Treasury, Gross said.

"Financed at 3 percent to 4 percent via the sale of Treasury bonds, the Treasury will therefore be in a position to earn a positive carry or yield spread of at least 7 percent to 8 percent," Gross argued. "The Treasury proposal will not be a bailout of Wall Street but a rescue of Main Street, as lending capacity and confidence is restored to our banks and the delicate balance between production and finance is given a chance to work its magic," Gross added.

The last few weeks have been marked by the U.S. takeovers of mortgage companies Fannie Mae and Freddie Mac the government bailout of insurer American International Group Inc (NYSE:AIG - News), the bankruptcy filing of Lehman Brothers Holdings Inc (Other OTC:LEHMQ.PK - News), and the pending sale of Merrill Lynch & Co Inc (NYSE:MER - News) to Bank of America Corp (NYSE:BAC - News).

U.S. Treasury Secretary Henry Paulson and U.S. Federal Reserve Chairman Ben Bernanke are pushing Congress to approve a taxpayer-funded plan, estimated at roughly $700 billion, that would let the government buy illiquid assets from lenders.

Gross' estimate of double-digit returns in scooped up mortgage securities assumes lengthy ownership of the assets and is in turn dependent on the level of home foreclosures, "but the Treasury's program is, in fact, directed to prevent just that," he added. Gross manages the $133 billion Pimco Total Return Fund and helps oversee the more than $812 billion in assets at Pimco.

(Reporting by Jennifer Ablan; Editing by Theodore d'Afflisio)
>>

My problem with this is much of the mortgage paper causing this problem are on hastily built homes in suburban and exurban areas that may never rebound. Who is going to want to buy an abandoned $250k home in the suburbs of Fresno at even .30 cents on the dollar? Of even .15 cents? If the price of transit and loss of jobs - many of the original buyers of the new homes were either working in the home finance or construction industries - continue as it has, I suspect there will be many that will be abandoned forever.

While the concept of permanently abandoning a community seems novel to many who grew up in booming suburbs, take some time to look at abandoned urban neighborhoods. Even successful cities such as Seattle, Chicago, and NYC have their share. Let alone Rust Belt cities like Detroit or Buffalo.

I guess we shall see. It is a lot of money to be thrown around with out a lot of good information.

[Joellogicman]

time-out from the debate.

nice turn o' phrase. ya get style points for that.

ok, resume bickering. :beer:

Surprised myself with that one. Who knows? Perhaps it will turn out I subconsciously stole it from somewhere.

[Ray]

Congress has the oversight, writes checks and drafts legislation...and it was going great until the Dems took over 2 years ago...
Gosh, it sure was going well. I'd forgotten how well it was going. So well that the Democrats won 7 seats in the Senate and 32 in the House.

Seriously, this pissing match is getting a bit tired. As 1Centaur said, there's plenty of blame to go around. Things are in a bad state and action is needed soon if not sooner and neither side seems well disposed toward the administration's plan. Which is too bad, because this is one time urgent action and maximum flexibility might actually be justified and needed, but Bush has blown so much credibility over the years, that nobody's gonna give him the benefit of the doubt this time. Which might be a big mistake, but understandable.

Meanwhile, the incumbent president's party always, right or wrong, gets the credit when things are going well and gets the blame when they're not. And as often as my side has been victimized by that little fact, I'm more than happy to see McCain revel in Bush's glory for the next month and a half or so.

-Ray

[TMB]

My problem with this is much of the mortgage paper causing this problem are on hastily built homes in suburban and exurban areas that may never rebound. Who is going to want to buy an abandoned $250k home in the suburbs of Fresno at even .30 cents on the dollar? Of even .15 cents? If the price of transit and loss of jobs - many of the original buyers of the new homes were either working in the home finance or construction industries - continue as it has, I suspect there will be many that will be abandoned forever.

While the concept of permanently abandoning a community seems novel to many who grew up in booming suburbs, take some time to look at abandoned urban neighborhoods. Even successful cities such as Seattle, Chicago, and NYC have their share. Let alone Rust Belt cities like Detroit or Buffalo.

I guess we shall see. It is a lot of money to be thrown around with out a lot of good information.


The houses will sell, eventually. The problem with this situation is that it is huge. The inventory of houses and buildings to be sold, will take - my guess - 20 years to be absorbed back into the marketplace.

The problem with not making the decision, is that this is about more than houses, this is really about the Commercial paper market, and short term debt. If that market doesn't get freed up VERY soon, the job losses will be much higher, and the market absorption will take a lot longer.

I have clients, right now, who are facing having to go to layoffs, because they cannot roll over CP. They are not even in the US, but they can't access the CP market to roll over existing paper. There are a lot of those.

This will get very bad, very quickly if lay off notices start flying in businesses other than Banks.

As far as I'm concerned all the reps and senators need to get the h$ll of camera and do some real work.

[Joellogicman]

The houses will sell, eventually. The problem with this situation is that it is huge. The inventory of houses and buildings to be sold, will take - my guess - 20 years to be absorbed back into the marketplace.

The problem with not making the decision, is that this is about more than houses, this is really about the Commercial paper market, and short term debt. If that market doesn't get freed up VERY soon, the job losses will be much higher, and the market absorption will take a lot longer.

I have clients, right now, who are facing having to go to layoffs, because they cannot roll over CP. They are not even in the US, but they can't access the CP market to roll over existing paper. There are a lot of those.

This will get very bad, very quickly if lay off notices start flying in businesses other than Banks.

As far as I'm concerned all the reps and senators need to get the h$ll of camera and do some real work.

It is just too bad we need to make an all or nothing decision about $700 billion dollars so quickly. Guess it all goes back to leaving this fester for so long.

In the meantime, Congress just authorized record spending on the war effort, a (surprise to me - for those who discussed with me earlier, I admit I was wrong and you were right) 25 billion low interest loan to the auto manufacturers, and a bunch of other costly measures that should have been subject to a whole lot more scrutiny than it will get with this $700 billion dollar gorilla in the room.

[TMB]

It is just too bad we need to make an all or nothing decision about $700 billion dollars so quickly. Guess it all goes back to leaving this fester for so long.

In the meantime, Congress just authorized record spending on the war effort, a (surprise to me - for those who discussed with me earlier, I admit I was wrong and you were right) 25 billion low interest loan to the auto manufacturers, and a bunch of other costly measures that should have been subject to a whole lot more scrutiny than it will get with this $700 billion dollar gorilla in the room.



I would, if I were in Paulsen's shoes be doing exactly the same thing - ask for the Enchilada up front - he knows and I think we all do that if has has to come back on a regular basis to keep asking for advances, that the process will grind to a halt - very quickly. Witness this week.

Just a chance for the reps and senators to get back on camera.

They need to do away with the cameras in these committee rooms.

[1centaur]

Here's what one of the smartest guys in the business thinks,

<<
Pimco's Gross says bailout to benefit Main Street: report
Wednesday September 24, 11:41 am ET


NEW YORK (Reuters) "The Treasury proposal will not be a bailout of Wall Street but a rescue of Main Street>>

Gee, and for a moment I thought you were talking about me :) Bill really shouldn't be getting his ideas from the Serotta forum. BTW, the head of Blackrock, which like Pimco stands to make money if it is hired to manage this program, also said today the Treasury would make money on the deal. His background is in mortgage-backed securities. This thinking is based on assumptions that may or may not be true, but underlying everything is the notion that this is not a $700B expenditure (70% paid for by the top 5% of taxpayers, or whatever the latest stats are) as much as the use of $700B along the way to a final cost of much less or nothing - a bargain at $250B if it works. It's sad we will get through the Presidential election and I bet 80% of the population still will think this is $700B of their money (somehow I am not hearing that this is a bailout by the rich...hmmmm) going out the door to underwrite the greed of heartless Lambo drivers in Manhattan.

BTW - US is not broke - still has a triple-A rating which is more than can be said for most countries. Of course, Moody's has been known to be wrong...

http://forums.thepaceline.net/showpost.php?p=592550&postcount=29

[TMB]

Gee, and for a moment I thought you were talking about me :) Bill really shouldn't be getting his ideas from the Serotta forum. BTW, the head of Blackrock, which like Pimco stands to make money if it is hired to manage this program, also said today the Treasury would make money on the deal. His background is in mortgage-backed securities. This thinking is based on assumptions that may or may not be true, but underlying everything is the notion that this is not a $700B expenditure (70% paid for by the top 5% of taxpayers, or whatever the latest stats are) as much as the use of $700B along the way to a final cost of much less or nothing - a bargain at $250B if it works. It's sad we will get through the Presidential election and I bet 80% of the population still will think this is $700B of their money (somehow I am not hearing that this is a bailout by the rich...hmmmm) going out the door to underwrite the greed of heartless Lambo drivers in Manhattan.

BTW - US is not broke - still has a triple-A rating which is more than can be said for most countries. Of course, Moody's has been known to be wrong...

http://forums.thepaceline.net/showpost.php?p=592550&postcount=29

Sorry about that, I should have pointed to you !! :)

But then I would have had to edit the article to put your name everywhere it said Gross.

I get frustrated at the "$700 Billion" mantra being repeated ad nauseum. By the time this works through it will be zero at worst, probably positive. But, other industries and businesses will be spared and still employing people - but only if this gets done - fast. That is the part I am not confident of.

[davep]

If one of the smartest guys on the street thinks the gov't will make money on this, why isn't he putting up some of the $800 billion he manages to buy mortgage backed securities and make a ton of money for his funds?

[rounder]

Well, Warren B just put up $5B of his money. He is one of the smart guys out there. He could be hedging but, who knows, maybe he is on to something.

[jimcav]

Well, Warren B just put up $5B of his money. He is one of the smart guys out there. He could be hedging but, who knows, maybe he is on to something.

is far different from what i heard--once the bad instruments are off their balance sheet thanks to the US Gov't, then they are said to have a decent position.
I think that is what Warren is buying, not investing in the junk.

[1centaur]

If one of the smartest guys on the street thinks the gov't will make money on this, why isn't he putting up some of the $800 billion he manages to buy mortgage backed securities and make a ton of money for his funds?

Given that Pimco may manage some of the pool, I think it's wise to believe they have an MBS analytical staff in place and that they would not have that without having a very large presence in MBS. Further, as a money manager Pimco is typically expected to beat a benchmark every quarter as consistently as possible. Believing something will be worth more than it cost eventually is not the same as saying it fits the usual parameters of a timely investment.

[CNY rider]

Well, Warren B just put up $5B of his money. He is one of the smart guys out there. He could be hedging but, who knows, maybe he is on to something.

Warren bought something that isn't for sale for us mere mortals to buy.
He put up $5 billion and gets a preferred with 10% interest (tax free!), and embedded call options that are easily worth another billion.
He took Goldman to the cleaners, which clearly indicates that they were in serious trouble at some point last week.
Buying Goldman common stock is a whole nother story.

[fiamme red]

Awaiting Your Correspondance - Important Business Matter

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully,
Minister of Treasury Paulson

http://www.theseminal.com/2008/09/23/awaiting-your-correspondance-important-business-matter/

[michael white]

Awaiting Your Correspondance - Important Business Matter

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully,
Minister of Treasury Paulson

http://www.theseminal.com/2008/09/23/awaiting-your-correspondance-important-business-matter/



Dude,
I sure hope you don't think y'all is the only gov't. that ever asked me for a handout. Hell, I get these requests all the time! I must be real popular to all them Ministry of the Treasuries, that's all I can say. Now, can you just go over the part where it says what's in it for me? Mebbe I missed that.

Wait, I think there's something good on TV . . . I'll get back to you.

best,
bubba

[ClutchCargo]

but can any of you show me the way to a bike thread? :confused:



:bike:

[fiamme red]

but can any of you show me the way to a bike thread? :confused:



:bike:For that you'll need to go "across the hall" to the Calfee Forum. :p

[scrooge]

Allright AR, I'm still trying to get what you're talking about. Are you talkinga bout some of the same as this guy on cnn? (http://www.cnn.com/2008/US/09/25/velshi.economy/index.html):
Question: Louise in Wisconsin: When the government puts into the system the $7 trillion, will our dollar be worth a dollar or lose value like the Depression? Watch Velshi say money markets are safe for 401(k)s »

Velshi: Now, we've seen numbers of $700 billion, and some people have said $1 trillion. It is definitely not $7 trillion. I just want to be clear on that. $700 billion is what the government is saying. And yes, Louise, you are right. You can't just add money. We don't have a surplus. We don't have a positive balance. So if you need to come up with $700 billion, you have to print money as it were.
The government has to issue bonds and get that money, and the effect of that is to lower the value of the U.S. dollar, which makes it more expensive for us to buy all those imported goods that we do buy. So you are likely to see a drop in the value of the dollar if this deal goes through.
If the 1 Trillion bailout is such a great idea, Then how about doing it
honestly ...

There are 300 million USA citizens. Let's assume that 100 million are
tax payers or about 1/3 of the population.
To generate 1 Trillion, each taxpayer must cough up 10,000.

Who is ready to knock on Uncle William's door and demand 10K ?
Any takers ???? I thought not ...

And neither will any politician who ever even vaguely thinks about
being re-elected.

So the back door method is used. A private coporation, the fed reserve,
(which is not federal and hs no reserves) wll create 1 Trillion outa
thin air ... ( and collect interest on it too!)

We all get diluted ... Our purchasing power gets diluted. Oil
jumped by 25 frn today!

The average American is clueless about frn dilution. Prices just keep
going balistic and we just can't figure out why. It's vey simple.
Too many frns chasing too few tanghble assests.

Fractional reserve banking can counterfit an additional 9 Trillion
outa thin air. :eek:

We now live in a society where one is NOT responsible for one's
actions.

[Viper]

President Bush sitting front and center, Nancy Pelosi and Harry Reid at his elbows. Man, that's a trio that scares the **** outta me in trying to fix a huge financial crisis.

Bush - I want to kill the evil do-er's.

Mc'Cain - Sir, we're here about the real estate thingy, Wall Street stuff.

Pelosi - Eww, uhh, umm, I'm late for my Botox appointment.

Reid - I don't wanna be an elf, I wanna be a dentist!

O'bama - Iceberg straight ahead!

Mc'Cain - (murmuring to himself) Why I could break the necks of these men!

Armstrong - (whispering to Bubba) Yo, let's dish this wheel and get to the Hudson Hotel, the Olsen twins are ripe!

Bubba - no words, he just flips his bottom lip up, squints at Armstrong and nods.

[RPS]

OK, so if I get what you're saying, the whole thing may have STARTED with bad loans, .......snipped...........
There are a LOT of folks out there who didn't directly contribute this problem at all who are really pissed at being the victims after feeling like they haven't done anything wrong and have acted prudently and responsibly. I feel like that myself at times. But I also realize that part of the reason my investments have done as well as they have over the years is tied into this whole mess, so it makes sense that I should feel the downside as much as the upside.From a recent Scott Burns column:

“The current crisis can be traced to a government policy of the early ‘90s: Expand access to homeownership by reducing lending standards.

It seemed, as they say, like a good idea at the time.

The idea was embraced by Democrats, Republicans and Alan Greenspan. It was also embraced with great enthusiasm by everyone who could make a buck on it – Wall Street, mortgage lenders, mortgage brokers, rating agencies and home buyers. So it went way too far.

Watch for a resurgence in renting as millions of households consider the real risks of homeownership. Homeownership is a great thing, but it isn’t for everyone, all the time.”


Ray, I believe that much of the financial gains of the 90s were based on excesses that were not sustainable. It shouldn’t surprise us that much of that gain is going up in smoke. I hate to see it but it seems inevitable.

[Ahneida Ride]

My point is that the bailout funds will be created outa thin air.
by typing #'s into a computer spreadsheet.

The media never mentions where the bail out funds are comming from.
Never.

We get diluted. Too much water in the orange juice. The American
public just does not understand dilution. "Dollar" dilution = higher prices.


If the bail - out is so critical ... why not tax every eligible American
10K ?

Markets run on fear and greed. The fear factor has now been removed.
There will now be a sucession of bail outs due to financial decisions
focused on maximizing profit and not mitigating risk.

[Viper]

From a recent Scott Burns column:

“The current crisis can be traced to a government policy of the early ‘90s: Expand access to homeownership by reducing lending standards.

It seemed, as they say, like a good idea at the time.

The idea was embraced by Democrats, Republicans and Alan Greenspan. It was also embraced with great enthusiasm by everyone who could make a buck on it – Wall Street, mortgage lenders, mortgage brokers, rating agencies and home buyers. So it went way too far.

Watch for a resurgence in renting as millions of households consider the real risks of homeownership. Homeownership is a great thing, but it isn’t for everyone, all the time.”


Ray, I believe that much of the financial gains of the 90s were based on excesses that were not sustainable. It shouldn’t surprise us that much of that gain is going up in smoke. I hate to see it but it seems inevitable.

I enjoy Ray's thoughts, for a stoner deadhead, he's okay in my book. :)

I also enjoyed Scott Burns' quick summary, he's correct. Within my work office's building, there were three Mortgage Boiler Rooms, sweatshops with High School seniors getting dropped off by their moms and dads, cold calling the nation working mortgage scams.

Does anyone recally when Mr. Charles Olsen tried to get a loan on Little House on the Prairie? I was a kid and this episode popped into my head recently:

http://www.tv.com/little-house-on-the-prairie/ebenezer-sprague/episode/63907/summary.html

Ahneida Ride is on the money, literally, when it comes to the Federal Reserve. Perhaps 99.9% of Americans will have NO CLUE as to how this problem gets fixed, if you can call it fixed. America used to be a land where we felt our midwest farmers fed not only us, but the world, where our southeast and California fed us with fruit, where our cars from Detroit were the best, where Texas might have enough oil to get us by, a few other states like VA and PA might have enough coal for us and our colleges were the best in the world. Our colleges might still be the finest, but other than that, does VT even make maple syrup anymore?

Food
Cars
Energy
When 'Made in USA' mattered, credit cards sat in the wallet for most of the year, unused and Charles Olsen couldn't get a loan.

As President :) I will create as many nuclear reactors as it takes so that within 25 years, 80% of the nation's energy is supplied by this cheap fuel. Building them will take time but this financial investment must be made. I will give tax breaks and loan incentives for our farmers as they can grow clean, healthy crops, so we are not at the mercy of tainted food supplied to us from afar. Just as digital cable has obsoleted analog signals, the US government will demand from our automobile manufacturers that within eight years, 80% of their cars produced must be hybrid technology, America will be the leading manufacturer and consumer of hybrid cars. Education will be our greatest investment, all state colleges in America will be free for the first year, if the student completes their degree and the guaranteed act of tenure our teachers currently receive will be removed; teachers will see an increase in career opportunities and financial reward based upon results of their effort, not merely their merit. The American healthcare situation is not a crisis, the real crisis is the health of Americans! Obesity, diabetes and heart disease are at epidemic rates, if the fast food generation of Americans cannot take care of their health in a better fashion, then they will be left behind.

[RPS]

Markets run on fear and greed. The fear factor has now been removed.
There will now be a sucession of bail outs due to financial decisions
focused on maximizing profit and not mitigating risk.True, but it is not limited to just “markets” as in corporations. This can be said of individuals as well.

Much of the fear factor of failure and making bad decisions was removed a long time ago. Where is responsibility and accountability at all levels in our society? For that matter, where is a sense of shame for screwing up or screwing someone else over? We shouldn’t look at this crisis as a financial problem that exists in a vacuum -- social and political decisions are just as responsible for the mess we are in. IMO it’s impossible to fix the financial problems long term without first fixing society.

We need to encourage productive behavior at all levels, and discourage non-productive behavior that doesn’t create wealth or improve our collective standard of living. I’d start by making everyone – corporations and individuals alike – more responsible for themselves.

Personally, if I knew we could avoid a depression of epic proportions, I’d have the government do nothing even if it means risking a major recession. This crisis may be an excellent wake-up call for many who view the government as an entity other than ourselves.

I’m always puzzled by the notion of having the government do for us what we don’t want to do for ourselves. This crisis is small potatoes relative to health care debt, yet many want the government to pay for care we don’t want to pay ourselves. Isn’t that just asking our neighbors to pay for our health care? Where else would funding come from?


Sorry for the rant -- 13 days without power, internet, and cable made me a little nuts. :rolleyes:

[RPS]

Just as digital cable has obsoleted analog signals, the US government will demand from our automobile manufacturers that within eight years, 80% of their cars produced must be hybrid technology, America will be the leading manufacturer and consumer of hybrid cars.The government should set goals but not dictate how they are met. In this case, what would happen if someone comes up with a better automotive drivetrain that is far superior to hybrids?

Kennedy set a goal to land on the moon, but didn’t tell engineers how to design or build the rockets. Likewise, politicians and the public shouldn’t play backyard automotive engineers. I'd leave that to the experts.

[Viper]

The government should set goals but not dictate how they are met. In this case, what would happen if someone comes up with a better automotive drivetrain that is far superior to hybrids?

Kennedy set a goal to land on the moon, but didn’t tell engineers how to design or build the rockets. Likewise, politicians and the public shouldn’t play backyard automotive engineers. I'd leave that to the experts.

You're right. I just need to have a broadstroke-speech that garners attention, but most importantly, applause. :)

[Ahneida Ride]

"Ahneida Ride is on the money, literally, when it comes to the Federal Reserve."


It ain't money, it's private bank shopping coupons.

Remember Ahneida Ride notes ... backed by Hostess Twinkies ?
dem are real money ...

To create 1 Trillion bail out Ahneida Ride Notes ... the government
would have to bake 1 Trillion packages of Twinkies. or 2 Trillion
individual Hostess Twinkies. A insurmountable task for even the most
prodigious baker.

Ahneida Ride notes are backed by real work .... so the holder of an
Ahneida Ride note is not easily diluted.

Incidently, Ahneida Ride notes State Specifically. for a 1 note...

Ahneida Ride will to the bearer ON DEMAND, ONE HOSTESS TWINKIE PACKAGE ..

Gee .... dollars used to use the exact same verbiage years ago.
If not, no-one would have ever accepted them in the first place.

[93legendti]

Seems like this bailout is dead:http://news.yahoo.com/s/ap/20080926/ap_on_el_pr/ap_poll_financial_meltdown;_ylt=Ao01xb5GnOWa737_R0 tzc3Zh24cA

The Dems, it would seem, have the votes to pass it on their own...I wonder why they do not.

[Viper]

Seems like this bailout is dead:http://news.yahoo.com/s/ap/20080926/ap_on_el_pr/ap_poll_financial_meltdown;_ylt=Ao01xb5GnOWa737_R0 tzc3Zh24cA

The Dems, it would seem, have the votes to pass it on their own...I wonder why they do not.

The larger and longer this crisis of the-sky-is-falling goes on, the greater the benefit to O'bama. Americans will scratch their heads a little more thinking up to November 4th, yeah, I want change!

[Joellogicman]

Seems like this bailout is dead:http://news.yahoo.com/s/ap/20080926/ap_on_el_pr/ap_poll_financial_meltdown;_ylt=Ao01xb5GnOWa737_R0 tzc3Zh24cA

The Dems, it would seem, have the votes to pass it on their own...I wonder why they do not.

If his own party will not support, why should the Dems?

Fairly obvious what is happening. Repubs figure if the plan goes through, then Bush - and they as his usual supporters - get the credit. If the plan fails, blame the Dems for passing it.

[Big Dan]

Change is coming.

:)

[sloji]

"So much of America is in reaction to fear these days that to listen to the media is akin to eating poison. Why bailout the fat cats instead take the hundreds of billions and disperse it to the 300 million americans at 400k a piece and then we'll see stability and peace...until then we'll have less freedom and more war."

WMD WMD WMD WMD WMD WMD WMD Bailout Bailout Bailout Bailout

I think wmd is an acronym for the weapons that media delivers daily, oh wait that's wmdd...ah well it's all a bust.

[Ray]

Seems like this bailout is dead:http://news.yahoo.com/s/ap/20080926/ap_on_el_pr/ap_poll_financial_meltdown;_ylt=Ao01xb5GnOWa737_R0 tzc3Zh24cA

The Dems, it would seem, have the votes to pass it on their own...I wonder why they do not.
This is one of those rare votes where almost everyone in Washing agrees on what needs to be done, but its vastly unpopular with the voters. This "rescue" is probably necessary and very likely the least horrible of very bad options, but it doesn't pass the stink test on any number of levels. And its crazy complicated to boot, so most folks out there (myself included) either don't understand it at all or just enough to be dangerous. Votes like that almost never pass on a purely partisan basis and I can't imagine it EVER passing on a partisan basis when the president wants it, the opposition party wants it, but the president's own party doesn't! It would be pure political suicide for the Dems to vote for it without a lot of Republican support. McCain had publicly stated he was generally for it, "suspended" his campaign, came to Washington to help get it through, and now is supporting the House Republican alternative that doesn't seem to have support with anyone else. He's in a bugger of a spot and I think his "suspension" just raised the temperature to a level that kills most frogs. He could help kill the bill and lose his Wall St constituency or he can try to get the House Republicans to vote for it, thus angering his populist constituency. He's probably in trouble anyway, and getting either of those groups pissed at him is likely more than his campaign can take.

I hope the thing goes through, but I won't be shocked if it doesn't and I just hope the consequences of it not going through aren't as dire as they could be.

-Ray

[gemship]

This is one of those rare votes where almost everyone in Washing agrees on what needs to be done, but its vastly unpopular with the voters. This "rescue" is probably necessary and very likely the least horrible of very bad options, but it doesn't pass the stink test on any number of levels. And its crazy complicated to boot, so most folks out there (myself included) either don't understand it at all or just enough to be dangerous. Votes like that almost never pass on a purely partisan basis and I can't imagine it EVER passing on a partisan basis when the president wants it, the opposition party wants it, but the president's own party doesn't! It would be pure political suicide for the Dems to vote for it without a lot of Republican support. McCain had publicly stated he was generally for it, "suspended" his campaign, came to Washington to help get it through, and now is supporting the House Republican alternative that doesn't seem to have support with anyone else. He's in a bugger of a spot and I think his "suspension" just raised the temperature to a level that kills most frogs. He could help kill the bill and lose his Wall St constituency or he can try to get the House Republicans to vote for it, thus angering his populist constituency. He's probably in trouble anyway, and getting either of those groups pissed at him is likely more than his campaign can take.

I hope the thing goes through, but I won't be shocked if it doesn't and I just hope the consequences of it not going through aren't as dire as they could be.

-Ray


Would be nice to see it pass as I believe it will create this placebo effect of business as usaul for most of blue collar America. Let's face it we all know the dollar is getting weaker,more jobs are going overseas. Bottom line America needs to regain its strength in manufacturing. Let's be a numb, hardass working America.

[1centaur]

Ray said: "It would be pure political suicide for the Dems to vote for it without a lot of Republican support."

First, it's not Bush's plan it's Paulson's plan. To the extent Dems think Bush is dumb, they must presume he does not really understand it.

Second, Rep senators and all the Democrats said we absolutely need this bill, it's important for America, but now they won't vote for it. Hmmm. Doesn't that say something about character? The House Reps said they don't want the bill. If the bill works out the Dems get credit for having character - that's not political suicide. It's only political suicide if it's a bad bill or the Dems can't explain to their voters why they passed it. If they can't, why did they agree to it?

While your political analysis is correct, it is so only in the warped Washington fishbowl where nobody is a public servant, only a self servant. Not telling you anything you don't know.

Finally, a right winger on the radio said a Rep had discovered that the Dems had slid into the bill a provision that the first 20% of profits were to go to ACORN, a political group on the left. I have not gone searching for it, but that can't be right, right? Not after howling about how unfair this was to taxpayers.

BTW, most think A bill will be agreed to by Sunday evening at 6pm. Whatever it looks like, it should be part of a plan to get businesses and people to believe that their bank will not be shut down in the next 2 weeks. Getting rid of bad assets, raising capital, whatever it takes. Investment grade bond trading is almost at a standstill because nobody wants their trades caught in the bankruptcy shuffle. Investment grade (non-bank) companies looking to borrow in the market have to pay very high yields to get their money, yields typically associated with junk bonds. Commercial paper issuance has dropped like a rock. People are moving cash out of banks to get under the FDIC limit. We need order restored so we can get on with just a recession :)

[Joellogicman]

Ray said: "It would be pure political suicide for the Dems to vote for it without a lot of Republican support."

First, it's not Bush's plan it's Paulson's plan. To the extent Dems think Bush is dumb, they must presume he does not really understand it.

Paulsen is Bush's Secretary of Treasury. He would not be there had Bush not offered him to the Senate for approval. The Secretary of Treasury is part of the administrative branch, of which the President is top.

Finally, a right winger on the radio said a Rep had discovered that the Dems had slid into the bill a provision that the first 20% of profits were to go to ACORN, a political group on the left. I have not gone searching for it, but that can't be right, right? Not after howling about how unfair this was to taxpayers.

Pure nonsense. But I guess if it is said on radio it has to be true - not.

[rnhood]

Finally, a right winger on the radio said a Rep had discovered that the Dems had slid into the bill a provision that the first 20% of profits were to go to ACORN, a political group on the left. I have not gone searching for it, but that can't be right, right? Not after howling about how unfair this was to taxpayers.



My guess is that the provision to support fraudulent groups like ACORN is right here (http://publicmarkup.org/bill/dodds-legislative-proposal-treasury-department-aut/1/5/). Can't say I blame the Republicans for trying to keep special interest provisions out of a critically important rescue legislation.

(b.2.C.)SYSTEMATIC APPROACH.In carrying out this paragraph, the Corporation shall utilize a systematic approach for preventing foreclosures and ensuring long-term, sustainable homeownership through loan modifications and use of the HOPE for Homeowners Program established under section 257 of the National Housing Act and any other programs that may be available for such purposes.

(d.1)DEPOSITS.Not less than 20 percent of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).

[Joellogicman]

My guess is that the provision to support fraudulent groups like ACORN is right here (http://publicmarkup.org/bill/dodds-legislative-proposal-treasury-department-aut/1/5/). Can't say I blame the Republicans for trying to keep special interest provisions out of a critically important rescue legislation.[/I]

Bailing out careless lenders and asset traders is a critically important 'rescue.'

Assuring some attention is given to careless buyers is special interest provision.

[Ray]

Second, Rep senators and all the Democrats said we absolutely need this bill, it's important for America, but now they won't vote for it. Hmmm. Doesn't that say something about character? The House Reps said they don't want the bill. If the bill works out the Dems get credit for having character - that's not political suicide. It's only political suicide if it's a bad bill or the Dems can't explain to their voters why they passed it. If they can't, why did they agree to it?
As you note, "success" with this bill is limiting the damage to "just a recession" - there won't be any visible success, just a visible lack of catastrophic failure, and a recession looks bad enough. If this bill works brilliantly, it will still never be popular with the voters. Politically there's no upside, there's only downside. That's why this bill will only pass with bi-partisan support. Not defending it - it just is.

-Ray

[stuckey]

My guess is that the provision to support fraudulent groups like ACORN

ACORN fraudulent? what? They have some issues but they have done a lot of good with helping people who were screwed by banks and workers who have and are being screwed. They have issues but I would not call them fraudulent. A like to there site http://www.acorn.org/

[Viper]

IAs President :) I will create as many nuclear reactors as it takes so that within 25 years, 80% of the nation's energy is supplied by this cheap fuel. Building them will take time but this financial investment must be made. I will give tax breaks and loan incentives for our farmers as they can grow clean, healthy crops, so we are not at the mercy of tainted food supplied to us from afar. Just as digital cable has obsoleted analog signals, the US government will demand from our automobile manufacturers that within eight years, 80% of their cars produced must be hybrid technology, America will be the leading manufacturer and consumer of hybrid cars. Education will be our greatest investment, all state colleges in America will be free for the first year, if the student completes their degree and the guaranteed act of tenure our teachers currently receive will be removed; teachers will see an increase in career opportunities and financial reward based upon results of their effort, not merely their merit. The American healthcare situation is not a crisis, the real crisis is the health of Americans! Obesity, diabetes and heart disease are at epidemic rates, if the fast food generation of Americans cannot take care of their health in a better fashion, then they will be left behind.

I'm seeing red, above.

China.
Cadbury Chocolate.
Melamine.
The latest food scare from China, in today's news.

In 2007, your dogs and cats ate food from China, tainted with melamine. Those dogs and cats died suddenly, do you recall?

In September 2008, thousands of Chinese infants were sickened by milk formula made in China; 53,000 infants reported to be ill and nearly 14,000 hospitalizations from milk tainted with what? Melamine.

Our chocolate *should* be made at the Willy Wonka Chocolate Factory. Or somewhere in PA. Not a Communist enemy which treats it's infants like stray animals.

As your President, I believe our food is of vital, national concern and a clear and present danger exists with our food supplies dependent upon the moral, legal whims of China's manufacturing policies. No longer will American children, infants and adults be at the mercy of food from afar, America can feed the world, it's time America feeds itself:

http://www.iht.com/articles/ap/2008/09/29/business/NA-US-Candymakers-Melamine-Scare.php

The words 'Made in China' will cease to exist under my Administration. You will buy Campy made in Italy, or you will not ride. Levi Jeans Co. will be resurrected under my guidance, your children will wear jeans jackets with rock/alt rock album covers painted on the back of them. The Fonz will have a new show on WABC, where he scams on hot American women while driving around in American hotrods and all the while, food from Al's Drive-In will cook food made in America and serve food made America. I will pull those manufacturing jobs from China, from all of Asia. Yes the prices of those products will rise some, that plasma tv will cost a bit more, but the jobs that tv generates will offset in the macro economy. I will not subscribe to the notion of dealing with our enemies just to make a few bucks while we live in fear of tainted children's toys or food. No. And the offset in today's market regarding shipping, fuel costs as that plasma tv no longer will sit on a tanker across the Pacific will also assist and buffer the cost for the American consumer. Yes, you will be watching Happy Days, here again, on a tv made in America.

That is all.