25 Harshest Reactions To the Wall Street Bailout
10 Zen Monkeys has compiled a good set of quotes about the Wall Street Bailout :
No 'cash for trash.' -- Dennis Kucinich, proposing Americans should also take partial ownership of any institutions receiving bailout money.25 Harshest Reactions To the Wall Street BailoutThis is scare tactics to try to do something that's in the private but not the public interest. It's terrible. -- Allan Meltzer, former economic adviser to President Reagan and Carnegie Mellon professor of political economy, quoted in the New York Times
Watching Washington rush to throw taxpayer money at Wall Street has been sobering and a little frightening. -- Newt Gingrich
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McCain couldn't possibly have any clue as to how we're going to get our country out of this financial quagmire. His top economic advisor landed with her own golden parachute!
The sad thing is we really are between a rock and a hard place. We can't just let these businesses go under, because it would damage the economy too much.
So we have to "reward" these companies for their malfeasance or else they'll take us down with them.
Time to start over completely.
Here's what I'd like to see:
* Don't bail out Wall Street
* Use $700 Billion dollars to do the following:
* Establish National Health Care
* Guarantee housing for all Americans
* Forgive all education loans
* End the occupation of Iraq
* Find Ossama Bin Ladin
*Transition the government of the United States to a more European style Democratic socialism
It's obvious that American style capitalism works no better than Breznev era Soviet "communism" or Deng Zao Peng era "communism". I remember back in '89 and '90 how smug some Americans were when the Soviet Union and bloc countries self-destructed. The other shoe has fallen.
We are so screwed. Look! The Russians are already getting in gear to take the reigns.
I don't think that people understand what the $700 billion is for.
Government creates and issues securities to raise money.
Government uses money to buy mortgages that banks are eager to unload because they are underperforming.
Government doesn't care that they are underperforming because the government doesn't use or need them as an income stream.
Government spends more money to rewrite terms on loans to magically transform them into loans with terms the guy at the other end of the mortgage can meet. Banks can't do this for various cost and contractual reasons.
Government sells good loans to market (now stabilized by removal of underperforming assets and various other corrections) and uses the money raised to buy back securities issued in step 1.
Various interlocks are included to encourage fair play and parity by the banks involved (contingency shares, golden parachutes, etc).
The plan does not involve handing out laundry baskets of $100 bills to cigar-smoking men in suits, as most Americans seem to believe.
Lots of potential pitfalls (such as making the Secretary of the Treasury the Real Ultimate Bank Tzar of America, etc).
http://www.npr.org/templates/story/story.php?storyId=94921462
"Scott Talbott, chief lobbyist for the Financial Services Roundtable, represents the banking industry. For him, this will be a crazy week. "This is the Super Bowl and New Year's Eve all rolled into one," Talbott says. "This is historic; this is extraordinary."
Talbott's clients oppose the move by Congress to limit executive pay for institutions that benefit from the bailout. They also object to a plan to allow bankruptcy judges to rewrite individual homeowners' mortgages."
Limit executive pay?? The people who have brought us to the brink (or over) of economic collapse ARE STILL EXPECTING six to eight figure salaries this year? WTF? How much of -500b- -700b- a Trillion dollar bail out will go to the pockets of the executives?
I guess the rich have the benefit of power here. After all, who'd lobby against the banks? Not anyone with a bank account.
I'll do it. I've got a bank account, but it's always empty, so what do I care?
Anyone who believes in the bailouts either has an agenda or has been hoodwinked. How's the Kool-Aid taste, Robotech Master?
Allan Meltzer is the only person (I've seen) on TV (specifically the Jim Lehrer News Hour) who is even remotely respectable on this economics issue. Listen to him, at least.
Nonsense. This is all due to the Corporatism / Fascism in a "mixed economy" combined with the Gosplan like role the Federal Reserve and central banking system play.Socialism doesn't work because of the economic calculation problem. The Fed has the same problem. Interest rates need to be determined among buyers and sellers (i.e. borrowers and lenders) in a free market. Not these centralized mandates which create credit bubbles and thus the business cycle.
@ codesuidae:
Glad to see that at least someone understands basic finance and economics.
The one thing that posters like Cupcake Faerie forget is that their plans have no ROI. If Paulson's plan goes through, there will actually be returns that the government could use.
What will nationalized health care get me? Oh wait, use more of my hard earned money and tax dollars to support some bum on the street who can't take care of himself.
If you do the math for who pays the most taxes, it is corporations and the so-called rich who do. So, what's wrong in using a chunk of taxpayer money (most of which is paid for by the corporations anyway) to save them?
The logic boggles me. If you tax someone to hell for making too much money, and if that money is used on projects that they don't care about, why shouldn't they have a say on what my money *should* go into? Especially as the biggest contributor of government funds?
Yes, it's not free market, and that is a problem. However, no system is perfect, and just about any system may require periodic adjustments. To me, this is just one of them (caused by the greed of everyone - from Wall Street to the average American who wanted to live beyond his or her means). The way I see it, for once, the government is doing what it is meant to.
Now *that* is my only concern.To quote a poster from Dealbreaker -
The problem in two words: corporate welfare
In one word: corporatism
No bailouts!
@2 Good point, yes, the banks probably have to bail out, and past bad behavior possibly rewarded and certainly excused, but that doesn't mean some safeguards for the future can't be put in place. The proposal as written in a masterwork of Cheney-like power-grabbing coupled with immunity from all accountability. The can come up with a better bailout than this -- even if the only give it another week or two -- and even if John McCain is forced to honor is commitment to debate Obama for 90 minutes Friday night.
@#1 (Roschelle):
Carly Fiorina is definitely a beneficiary of the current corporate culture, although I think the golden parachute she received from HP was less a "Heckuva job Brownie" pat on the back than it was a "Take this money and go far, far away and never bother us again". (If only she would...)
Speaking of McCain advisors, however, we shouldn't fail to mention Sen. McCain's former (and I suspect still rather active, if more behind-the-scenes) top economic advisor, former Sen. Phil Gramm. More than anyone else, I think, Sen. Gramm is responsible for setting in motion the wheels that led to the financial meltdown of the past few weeks, due to his place at the forefront of the "deregulation at all costs" mentality of the 90s/00s that Sen. McCain has yet to really recant (if he possibly can after his decades of supporting the deregulation of every industry he has had oversight of).
I don't mean to say that "regulation at all costs" is the answer either; poorly crafted government regulations can be as responsible for as much lost economic potential as the current financial meltdown is demonstrating. But it seems clear to me that there must be a reversal of the current administration's tendency to ignore its legal and ethical responsibilities and the Congress's to look the other way as it does so; and strong regulatory oversight of any hundreds-of-billions-of-dollars bailout package would be a fantastic place to start. Handing the money over without any strings attached would only end up with it replacing the lining of the pockets that have recently (and for good reason) been stripped.
How bad have things gotten when Newt Gingrich sounds like a beacon of sense?
Government creates and issues securities to raise money.
Which is how we've been funding this nation's deficit for decades now. The problem is, the entities buying these securities tend to be foreign nations, who are already holding massive amounts of American currency.
Furthermore, bailing out institutions does nothing to encourage them to change the way they work. The capitalist model assumes that bad business loses money and folds: this is very bad business, and we're giving it money. Greedy managers and bad investors are receiving pay as if they'd been good. The government should not be doing that. No one should.
If we could be certain that Wall Street and attendant business are operating for our good, then sure, give them the money. But even if I could be sure they were honest, I'd never for a minute think they were putting anyone but themselves first: that's not the way business is done.
Lastly, the bailout includes some VERY worrying language about the powers granted to Paulson. It contradicts the rule of law with these words: "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."
NO ONE should have that kind of power. Ever.
@codesuidae you stated, "The plan does not involve handing out laundry baskets of $100 bills to cigar-smoking men in suits, as most Americans seem to believe."
contradicts your third sentence which reads, "Government uses money to buy mortgages that banks are eager to unload because they are underperforming."
that means the banks get paid for their bad business decisions. how is that not handing money to cigar-smoking men in suits who do not deserve that money?
No bailouts.
I do however, like McCain's suggestion that Chairmen at the helm of an institution requiring government aid be paid no more than the highest earning government employee (Which I think is somewhere in/around 400k)
We need Darwin back. Not everyone should be able to afford a house. American Dream? Yes. Shame on Clinton for convincing people they need a house to fit in, shame on the HUD committee for looking for "creative" ways of allowing people to finance houses, and shame on Bush for endorsing and conserving Clinton's malfeasance.
The economy will rebound. The strong will survive. It's disturbing how little the government will allow people to pay for their mistakes. It's perpetuating an unhealthy approach to the American Dream.
You know, Engine Here, I'd like to spend just a few days with you watching for your mistakes, and making you pay for each and every one.
Engine Here... there's a line between evolutionary psychology (or human behavioral ecology and Social Darwinism. It sounds to me like you're crossing that line.
I concur that the artificial slope (or "nudge") of the financial landscape to encourage everyone in the USA to become a homeowner (e.g. artificially low interest rates, tax deductions from a mortgage, etc.) has very destructive unintended consequences. Furthermore, not everyone wants to own a home. But the salient issue is that houses are in fact expensive, and financial wizardry or social engineering really cannot change this fact. (Perhaps prefab architecture can.)
So, I concur that not everyone can (rather than "should") afford a house.
Not when only the symptoms, rather than the disease, are being treated.Furthermore, it's rather frightening when people assume "of course, I'm one of the strong". c.f. Lake Wobegon effect
Am I getting older, or is Newt Gingrich becoming less of a partisan hack? I've heard him on NPR twice this month and my blood barely boiled either time.
@#9 (Metlin):
Good to see you paint with a broad brush as you disparage a large percentage of your fellow citizens (46 million is the estimate I just heard) as bums on the street unable to care for themselves. Would you care to show some proof that everyone who would benefit from nationalized health care is a bum on the street?
Oh wait, you can't. Because actually a large portion of the country's uninsured are people who are holding down jobs and feeding their families.
But, their employer doesn't provide health insurance (not that that is any guarantee of quality care any more) and it's too expensive to purchase health insurance as an individual or a family. These people often get their care in the emergency room, creating a cost that could have been paid for by pennies on the dollar had it been taken care of through preventative medicine.
Lots of them have to then file for bankruptcy or otherwise cannot pay for this care, meaning the hospital has to either eat the cost of the emergency room care or pass it along in higher health care costs to insured customers.
Few hospitals are willing to eat the cost, not only because it affects their bottom line but as they risk losing talented staff to competitors that are willing to pass along the cost and thus can pay higher wages. (Remember there is now a shortage of qualified health care providers that is only going to get worse in the near future.) If they don't eat it, the increased health care costs are then passed along by the insurance companies through higher premiums, driving up the total cost of health insurance, ultimately either driving down pay or forcing employers to go to plans with less coverage or both.
So, actually, even if you already have health insurance, you'll benefit from nationalized health care. How's it feel to be a bum in the street who can't care for him/herself? (Now, maybe you didn't mean to call ALL these people names. But all that means is that because you refuse to allow one bum to have care, then you also won't allow care for millions of nonbums. I understand that it seems like you dislike freeloaders, but all societies have them. Allowing them to die doesn't mean you can keep them from being born.)
Also, I'm often surprised by people who think that there's something wrong or unfair with taxing the incomes of economic corporations and the very rich at a higher rate than the general populace. By their very nature, corporations are institutions that require the social stability and economic opportunity provided by a democratic and capitalistic society to flourish (and the very rich also benefit disproportionately from this, as they have more to lose).
Perhaps they would like to have our society revert to a feudalistic state, with corporate charters granted by a royal personage who holds a divinely-granted mandate to rule and each fiefdom establishes exclusive trade agreements for its dominions? Or how about a Stone Age society where the most common cause of death is homicide, maybe they think that that is the best environment in which to ply their wares? No?
Then perhaps they should suck it up and pay a higher fraction of the costs required for our democratic, capitalistic society to function. Realizing that the most effective way to keep it functioning is by the maintainance of a large, stable middle class and keeping rates of income disparity reasonable would be nice too. I'm not holding my breath though.
Your argument that they deserve to hold disproportionate sway over how tax money is spent requires ignoring that they have already benefitted disproportionately from the society they have found themselves in. However, since economic corporations by their nature seek to accumulate wealth and power, I doubt that they will ever stop seeking to make this argument, at least not any more than the typical American citizen will ever wish to live within their means when it has become convenient to live beyond them. I do however hope that the typical American citizen realizes that this argument holds no water. Pointing fingers at illusions is probably easier, however.
Palin/Couric interview
She is so not ready! Watch video of the interview
Nope. The banks are not getting paid for bad decisions. They are taking a huge loss on their investments. They will be left stable but worse off than banks that weren't stupid.
Dodd's proposal further punishes them by requiring them to provide the government shares in the company equal in value to what the government pays for the security. If the security doesn't get all the governments money back when it is all eventually sold, the shares vest and the government sells that bit of the bank on the open market to recoup the difference. Not sure if this provision is in the 40 page bill Congress is working on, but I wouldn't be surprised, it's a nice interlock to ensure the banks don't 'get away with it'.
Keep in mind that these banks can't sell only the bad mortgages. The mortgages are packaged into lots of several thousand mortgages, 90% of which, on average, are just fine. It's the few bad apples that are dragging down the performance of the security.
The government could/will slice and dice these securities, resell the good stuff at a profit, fix the terms on the bad stuff, then sell it as good stuff. Profit all around, minus the not inconsiderable cost of slicing and dicing, which will go to lawyers and accountants, not banks.
To be more specific about this step:
The government could set up rounds of reverse auctions wherein banks compete to underbid each other to sell the government the stuff they most desperately want to get rid of.
Each round of auctions is limited to a relatively small total, on the order of, say, $10 billion. This makes the government assistance a scarce resource that the banks must compete for.
As banks unload the assets in each round they have some time (say, a week or two between rounds) to re-evaluate their position and the performance of the market. The have time to make rational decisions about how big a loss they think they can take on the mortgages they are selling.
That's a key point. They are taking a loss on the mortgages. They are not receiving a fat basket of profit from the government. They're being given a market where the downside risk of the assets to be sold is immaterial. The sale price of the asset will reflect the banks assessment of how much of a loss they can take, balanced against their desire to underbid other banks.
As rounds progress over the weeks, credit markets unfreeze and everybody has time to think. Banks progressively lose their worst investments. The market starts to figure out what constitutes good prices for this stuff (that's a big point of contention right now, nobody knows what to pay for this crap. There are buyers out there but they aren't offering enough that the banks can sell without destroying themselves).
so the banks are getting paid to take a huge loss on their investments which will allow them to stay in business and make money and face currently unknown or nonexistent consequences (no one knows what the agreement will be and if america will get shares in the banks or whatever else is happening) for their idiocy?
and we really understand that this will begin to fix this economy that, up until last week, our leaders were assuring us was okay and running fairly well? because, correct me if i'm wrong (please!) but very few people predicted this and very few people actually know what is going to happen next despite what our president just went on tv to tell us.
so instead of letting the market work itself out and self-correcting we're doing what we do best which to throw more money at the problem and hope that fixes it?
#17 NELSON C
It's frightening that you assume it's out of the ordinary for someone to own up to mistakes. That's exactly what has gone wrong with this country; no one is to blame anymore. I suppose I see things differently because I expect people to take responsibility for they're screw ups, no matter how bad.
I'm not immune from mistake, far from it, but when I make them, own up to it; it's the only way to learn from it. However, when I'm about to take a loan out for hundreds of thousands of dollars, I make myself fully aware of what I am getting myself into, and make sure I can afford it. You can't seriously expect me to feel sorry for these people. The entire scam relied on the "greater fool theory," and it just so happens we've hit the bottom of the gene pool.
Anyone who graduated high school would've realized there is no feasible way a combined household income of $100,000 was going to pay off an $800,000 loan, I don't care what they were approved for. But they see what kind of house that money can buy them and they're hook hooked like a meth addict.
"so the banks are getting paid to take a huge loss on their investments"
That is one way to put it, yes.
"which will allow them to stay in business and make money and face currently unknown or nonexistent consequences"
Right.
"and we really understand that this will begin to fix this economy"
Well, which part? It'll fix the problem of the credit markets going into lockup, resulting in widespread failure of major corporations (big companies live on credit, Lehman churned through $100 Billion in short term credit every month).
"that, up until last week, our leaders were assuring us was okay and running fairly well?"
Don't assume that all the talking heads have a clue or that the people with a clue have the time or inclination to give them one.
However, it does seem to be true that much of the economy is, for now, 'not bad'. Not great, but certainly salvageable.
"because, correct me if i'm wrong (please!) but very few people predicted this and very few people actually know what is going to happen next despite what our president just went on tv to tell us."
A few people claim to have predicted it, and lots of people have seen this coming for about the last two years. Heck, I was arranging my mortgage at this time two years ago and I was expecting a major mortgage-based crap-storm within about 12-18 months. Betting on it in fact, I picked an 2 year ARM that I was hoping would be resetting during the recovery. I called it a bit early though, so it's resetting to early. No biggy though.
Doesn't really matter though, markets are fundamentally unpredictable. Black Swans and all.
"so instead of letting the market work itself out and self-correcting we're doing what we do best which to throw more money at the problem and hope that fixes it?"
No, that isn't the plan. Self-correction would happen if we didn't do anything. It would involve collapsing and liquidating most of the Fortune 500, foreclosing a bare minimum of 10% of the existing housing market, and other a variety of other such fairly drastic things.
We could choose to go that route, but honestly it would be a lot more painful and long-lasting than using the government to keep things going. Letting the market self-correct would be a bit like cutting off our face to spite our nose. Most everybody loses.
From http://www.naomiklein.org/shock-doctrine/wall-st-protest
No Bailout for Wall Street -- Protest on Wall Street this Thursday at 4pm!
Call to Self-Organize
Note: Naomi Klein is not organizing this protest, she is just helping get the word out about it. If you would like more information, please contact Arun Gupta at ebrowniess@yahoo.com.
This week the White House is going to try to push through the biggest robbery in world history with nary a stitch of debate to bail out the Wall Street bastards who created this economic apocalypse in the first place.
This is the financial equivalent of September 11. They think, just like with the Patriot Act, they can use the shock to force through the “therapy,” and we’ll just roll over!
Think about it: They said providing healthcare for 9 million children, perhaps costing $6 billion a year, was too expensive, but there’s evidently no sum of money large enough that will sate the Wall Street pigs. If this passes, forget about any money for environmental protection, to counter global warming, for education, for national healthcare, to rebuild our decaying infrastructure, for alternative energy.
This is a historic moment. We need to act now while we can influence the debate. Let’s demonstrate this Thursday at 4pm in Wall Street (see below).
We know the congressional Democrats will peep meekly before caving in like they have on everything else, from FISA to the Iraq War.
With Bear Stearns, Fannie and Freddie, AIG, the money markets and now this omnibus bailout, well in excess of $1 trillion will be distributed from the poor, workers and middle class to the scum floating on top.
This whole mess gives lie to the free market. The Feds are propping up stock prices, directing buyouts, subsidizing crooks and swindlers who already made a killing off the mortgage bubble.
Worst of all, even before any details have been hashed out, The New York Times admits that “Wall Street began looking for ways to profit from it,” and its chief financial correspondent writes that the Bush administration wants “Congress to give them a blank check to do whatever they want, whatever the cost, with no one able to watch them closely.”
It’s socialism for the rich and dog-eat-dog capitalism for the rest of us.
Let’s take it to the heart of the financial district! Gather at 4pm, this Thursday, Sept. 25 in the plaza at the southern end of Bowling Green Park, which is the small triangular park that has the Wall Street bull at the northern tip.
By having it later in the day we can show these thieves, as they leave work, we’re not their suckers. Plus, anyone who can’t get off work can still join us downtown as soon as they are able.
There is no agenda, no leaders, no organizing group, nothing to endorse other than we’re not going to pay! Let the bondholders pay, let the banks pay, let those who brought the “toxic” mortgage-backed securities pay!
On this list are many key organizers and activists. We have a huge amount of connections – we all know many other organizations, activists and community groups. We know P.R. folk who can quickly write up and distribute press releases, those who can contact legal observers, media activists who can spread the word, the videographers who can film the event, etc.
Do whatever you can – make and distribute your own flyers, contact all your groups and friends. This crime is without precedence and we can’t be silent! What’s the point of waiting for someone else to organize a protest two months from now, long after the crime has been perpetrated?
We have everything we need to create a large, peaceful, loud demonstration. Millions of others must feel the same way; they just don’t know what to do. Let’s take the lead and make this the start!
AGAIN:
When: 4pm – ? Thursday, September 25.
Where: Southern end of Bowling Green Park, in the plaza area
What to bring: Banners, noisemakers, signs, leaflets, etc.
Why: To say we won’t pay for the Wall Street bailout
Who: Everyone!
@#8 (ZUZU)
The unfortunate situation is that these big banks that are getting the bailouts have large exposures to the money market, and their collapse would cause the money market to disappear up its own fundament.
Why would this be bad? Big companies invest their payroll in the short-term money market to make extra money on the cash they have to have sitting around to pay their employees. Really big corporations have to have hundreds of millions of dollars sitting around for their payroll. If they were to suddenly lost all (or most) of this money because the arse dropped out of the money market, they would not be able to pay their employees, and you would have millions of people not receiving their pay. Which would be kinda bad.
Incidentally, this is probably why they let Lehman Brothers fail - they did not have much exposure to the money market, unlike Merrill Lynch et. al.
@26
"This week the White House is going to try to push through the biggest robbery in world history with nary a stitch of debate to bail out the Wall Street bastards who created this economic apocalypse in the first place."
Whomever wrote that article seems to be mostly clueless, and evidently revels in her hateful attitude.
She should turn on c-span once in a while.
However, it's good that she's trying to stir up some bodies to show up at the protest, lots of people hate this idea, the administration and the industry need to see that.
Go to congress.org and click on the links to send your reps, Bush and Paulson your opinion on the subject. Much of congress has already gotten an earful from their constituents, but more is better.
Surveys on this seem to be all over the map. Online polls seem to be 9:1 against, while more formal polls are closer to 1:2 against.
Most people I talk to about it have only the vaguest understanding of what the problem is or what the $700 billion is for. Makes me glad we have a republic rather than a direct democracy. What a mess that would be.
The invisible hand of capitalism has finally been spotted. -Reaching into all of our pockets!
what folks are failing to address is the fact that in 1999, mccain and his old friend phil gramm wrote the legislation that removed the safety oversight restrictions that had been put in place after the bank crash of the early 1930's, and slammed it thru congress. the economy has been on the slow slide downward ever since. as i recall, mccain had other banking issues in the past as well. can you say "keating five"? i believe g.w.'s brother was another member of that elite group. now they need 700BILLION $'s, no questions asked? this from an administration who claims that getting health insurance for low income children is "socialism". it just gets more surreal by the day...
There are roughly 200 million taxpayers in the country. Why don't they give us the $700B... even $600B... that would be roughly $20,000 each, right? Now THAT is a stimulus check my friend. The kind of check people can go out and buy something with. Maybe even add it to what's left of their savings and buy a home!
Let THE AMERICAN PEOPLE save the economy. Then use the $100B leftover to prosecute the people that got us into this mess!
Copy and paste this and send to your congressman... or one of you nerds can write some website that automates it.
Unfortunately or fortunately we live in a society that is determined by majority vote, and the more people that are involved in the problem and will benefit from a bail out the higher the odds of said bailout are.
We are facing an election, tightly contested, and politicians buy votes, no matter how financially silly a plan might be.
Tom Poser
http://www.snfrncsctnntrp.cm
Though this was posted in a related thread previously, it bears re-examination, as it discusses more thoroughly some of the things Minty@30 and others here have brought up:
Great article in the Huffington Post
@28
"Whomever wrote that article seems to be mostly clueless, and evidently revels in her hateful attitude."
Like the politicians and the pundits who serve them, you are exploiting our fellow citizens' lack of recent memory. Of course we are in a crisis! The most colossal mass of illiquid securities ever created is ready to melt before our eyes. We need to ask:
1) What laws were passed or repealed over the last 20 years or so that facilitated the a) approval of mortgages to people who clearly could not pay them back, b) rolling of these loans into securities that would almost certainly fail, c) further rolling of the securities into unregulated, byzantine financial instruments which we are led to believe are so opaque that they cannot be traced back to the underlying mortgages, and d) selling of limitless amounts of a "debt swaps"/insurance guaranteeing that all of these doomed instruments would be paid back.
2) Why are drugs regulated by the FDA, but new, complex, and extremely risky financial instruments are not? We now know for certain that these instruments are extremely dangerous and costly to our society.
3) How will the "bailout" be used? Who will funcion as co-counsel to the Secretary of the Treasury (or whoever has the decision-making power) to ensure that the money is not used as yet another series of profitable and/or risky deals by private businessmen and companies?
4) Is it legitimate for the beneficiaries of the "bailout" to continue to perceive salaries hundreds and even thousands of times greater than typical, 50th percentile citizens?
5) Why must taxpayers bear the cost of the absolute worst investments in the nation, while the beneficiaries of the "bailout" retain the best? Why not use the money to buy equity interest in the companies and allow taxpayers to share profits as well as liquidate losses?
6) Why is it communism only when the rich aren't the only ones to benefit?
*Transition the government of the United States to a more European style Democratic socialism It's obvious that American style capitalism works no better than Breznev era Soviet "communism" or Deng Zao Peng era "communism". I remember back in '89 and '90 how smug some Americans were when the Soviet Union and bloc countries self-destructed.*
So true... URSS fallen 20 years ago now it's time to reform capitalism... who can't accept this concept is worse than the Russian communists back then... The dream is over not it's time to face reality or USA will miss the train...
@codesuidae
first of all, let me state, i appreciate the dialogue - we didn't revert to to poopyhead/doodyhead arguments. that's nice.
"It'll fix the problem of the credit markets going into lockup"
i'm not sure this is true. a lot of people are saying this might happen, but it might not. my point is $700B is a lot to gamble when no one is really sure it will fix the market.
"Don't assume that all the talking heads have a clue or that the people with a clue have the time or inclination to give them one."
even when the talking heads are economists they aren't sure what's going to happen and we might end up burning down the house - even with the $700B bailout.
---------
does anyone have a hard number on the number of "bad" mortgages out there?
@#9 Metlin
"What will nationalized health care get me? Oh wait, use more of my hard earned money and tax dollars to support some bum on the street who can't take care of himself."
Err...yep, that's sort of the point of universal public health care. I've heard it's based on some crazy newfangled concept called 'compassion'.
Interesting use of the word 'support' too. It sounds like you're equating getting cancer treatment with sitting around watching daytime TV.
#37
As inelequant as it may be worded, I do have to agree with Metlin.
It is not the governments responsibility to be compassionate, nor an obligation of any of its citizens.
We're not talking about a natural disaster here, we're not talking about a war-torn genocidal third world country.
5 out of the top 6 causes of death in the US are preventable. (Mostly because #5 is 'accidents')
#1 Heart disease
#2 Cancer*
#3 Stroke
#4 COPD
#5 Accidents
#6 Diabetes
With the exception of accidents, every single one of those afflictions is a disease of affluence.
I drive past a McDonalds and it almost seems like the lethargy has it's own gravitational field. The government can't tell me my tax dollars are going to pay for a triple bipass for a dangerously obese individual, who has a deplorable diet and dosn't excersie.
Same theme; people don't want to take responsibility for their actions. Don't cry about the cost of your hypertension, diabetes, hypercholesterolemia, angina etc. medication, when you could have put a child through college with the ammount of fast food you've bought, or cigarette's you've smoked.
*(Cancer is a different story altogether, but some of the most common are preventable, and obviously the most leathal are uncommon and not completely understood.)
Rick@34, very good points, I particularly like 1 and 2.
Regarding 2, I wonder if perhaps the science of finance less advanced than that of biology? Perhaps it's harder to experiment with financial tools to collect good data because the environment is harder to reproduce (no mouse models!).
It's hard to justify the sort of cooling effect that sort of regulation would have on the markets though (on the other hand, it's partially the 'heat' of the market that caused the problem).
Maybe only transactions over a certain dollar figure or something should be regulated. Or maybe there should be limits on or improved transparency of the chains of contractual obligation that tend to lock things up.
@36:
"i'm not sure this is true. a lot of people are saying this might happen, but it might not."
True enough. However, the smart guys in the industry say it's the bank's uncertainty about who has a lot of exposure to these things that's causing problems with short term credit (which in turn is threatening to cause massive cascading failures). The reasoning is pretty sound, and it mostly comes from people who are supposed to understand such things.
"my point is $700B is a lot to gamble when no one is really sure it will fix the market."
Also true, and I think that moving that much all at once would be kind of dumb, it should be done in small rounds, as I've said on BB before, to give people time to observe and react. But there is widespread certainty, not just in the industry, that doing nothing is an even bigger gamble with results that are even harder to predict.
If it's gambling it's more like five card stud than craps.
"does anyone have a hard number on the number of "bad" mortgages out there?"
2006 census data says there were 52 million mortgages with median value of $208k. Industry figures put troubled mortgages at about 10%. So we're looking at something on the order of 5 million mortgages or, ballpark, $1 Trillion worth.
More precise figures seem to be hard to come up with as there isn't much available data about who holds what and how it's performing. That's a part of the problem. The mortgage servicing companies probably have most of that data, but there doesn't seem to be a channel for them to route those statistics back up through the chain so that potential buyers can evaluate the risk of the security constituting those mortgages.
well then, how about this for the bailout plan:
Secretary Paulson’s T.A.R.P. plan, the $700 billion used to purchase mortgage backed securities from financial institutions does not guarantee a correction of the four large concerns for our economy - 1) stabilization of the market, 2) improved liquidity for people or businesses, 3) increased investor (both foreign and domestic) confidence in the U.S. economy or 4) payment on the nearly 1.4 million mortgages currently in default in our country.
If there is to be a government sponsored nudge for our economy, perhaps the best way to spend the $700 billion would be to loan the money directly to the homeowners at a fixed, 30-year rate.
That way people get to retain their largest asset and consumer confidence grows, the banks get their money providing an increase in confidence in the banking sector, the investors of the mortgage backed securities get their money and their confidence – along with the confidence of all other foreign and domestic investors – not only stabilizes but increases and the U.S. economy is pulled out of its tailspin.
add another few million mortgages at 200k/mortgage and we should be good to go.
"If there is to be a government sponsored nudge for our economy, perhaps the best way to spend the $700 billion would be to loan the money directly to the homeowners at a fixed, 30-year rate."
There are a few problems with that idea. Worst, it is extremely slow. It took the entire mortgage industry a minimum of several years to sell all these mortgages, and that's with literal warehouses of people doing the work (reference 'Giant Pool of Money' podcast).
Managing them individually is a /lot/ of work, that is why they are packaged up by the thousands for investment purposes. Because of this, the time alone to do the paperwork on all those new mortgages scuttles the idea. It would take years when we need a move that takes weeks.
@ #31: "There are roughly 200 million taxpayers in the country. Why don't they give us the $700B... even $600B... that would be roughly $20,000 each, right?"
Are people really incapable of working a calculator? This is the second time I've seen junk like this, on two different message boards. $700B divided by 200M taxpayers is $3500 a piece.
Wouldn't it have been nice if Newt had given a shit about the people of this country when he was in office?
Seriously he pushed exactly these kind of no regulation economics while in office.
WTF is anyone asking him his opinion in the first damn place
so you don't think with the 1.4 million in default right now that we couldn't figure out the paperwork fairly quickly when the paperwork is already being figured out by the people/banks/investors being defaulted on?
and then we couldn't handle another 1 or 2 million over a period of a few years?
stagger it like you were saying before?
well, it all seems moot anyway. looks like during my mid-afternoon nap they announced some kinda deal.
gotta go read up on it.
engine here, i spent the requisite 3 minutes reading your post @#38, and let me tell ya, that is three minutes of my life that i will never get back! was there an actual point to it? i have a good friend who suffers from schitzophrenia. your rants sound an awful lot like he does on days when he had decided not to take his meds. as a heads up, you may want to get that checked out.