Let it crash

@DontTreadOnMe,

DontTreadOnMe wrote:

right. and the problem is that you buy a house for 850k. today it's worth 650k. if the thing keeps falling apart, you could wind up on the hook for 850k while living in a house that's eventually worth 450k.

Oh, I understand. But I think that in many cases like that, unless someone is planning to stay in their house for a long time and can pay their mortgages without hurting, folks often will let the bank take it. That's the cycle I was talking about.

Quote:

since a lot of people have bought a house with the long term goal of selling it at retirement, moving to a smaller home and using the profit as retirement, in the long run there'd be a lot of folks who did nothing wrong paying out the ear for it.

don't see how that's helpful.

Not all markets are that volatile. Many are actually quite stable. Where I used to live in PA, housing prices have been at the bottom for 20 years now.

Quote:

it just seems to me that some people here are seeing letting it go up in flames as a way to punish the cigar chompers. but in reality, those guys are always landing on their feet. it's not just the poor that will have their situation worsen; a lot of middle class people who have worked hard all of their lives have been takin' it in the neck for a few years now with the loss of pensions, health benes and such. letting the banks fall apart will only serve to blow away whatever security those people have left. not that it would be easy to get an equity loan. umm, maybe it is, i dunno.

I understand that but that's not where I'm coming from. I'm concerned that we're going to **** this up majorly in such a way that my kids are going to be saddled with high taxes, low wage jobs, and a shitty standard of living when they become adults. I don't want them to be slaves.

Quote:

there's no denying that the problem is spooky. part of the spookiness is that as usual, bushy has waited till the last possible second to pay attention; this is when he always suddenly jumps up and starts yelling "we have to fix it now! now! now!". that's part of how we got in this mess to start with.

barack has a more measured view that we shouldn't jump out of the pan into the fire. we do need to stop the dominoes, but we will be better off if we actually stop the bike and get off before trying to fix the tire this time.

sorry for the metaphor bananza.

I agree with all that.

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@Foxfyre,

Foxfyre wrote:

To keep the boat afloat long enough to give the economy time to correct itself appears to be the only option we have at this time.

That's the thing. I don't think we are allowing the economy to correct itself. We are specifically guarding against it, in fact, and have been for several years.

Quote:

And hopefully they will never again allow financial institutions to encourage risk free investment. There is no such thing.

Apparently there is, if you're big enough to warrant a federal bailout.

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@Foxfyre,

the SEC and investment banks
--------------------------------------

Quote:

Published: Friday, July 25, 2008 | 1:12 PM ET
Canadian Press: Marcy Gordon, THE ASSOCIATED PRESS
WASHINGTON - Having investment banks follow the same rules as commercial banks would hurt the U.S. financial system and drive risk-taking business outside of government oversight, the head of the Securities and Exchange Commission said Thursday.

As Congress considers overhauling the regulation of financial markets, SEC chairman Christopher Cox told a House hearing that "imposing the existing commercial-bank regulatory regime on investment banks would be a mistake."

it seems that in july the SEC did not think it was their job to regulate investment banks - anything change in the meantime ?
hbg

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@hamburger,

Thanks, hbg, I was just coming back to this. He explained that the SEC was beginning to exchange information with the Fed and vice versa on these types of deals but there is no specific charter for anyone to oversee these transactions. He said that the SEC would do so if they had such a charter but they don't. No one called him on it so I gather he knew what he was saying.

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@hamburger,

Yes, there is a difference between a commercial bank and an investment bank. But that isn't the same thing as saying that there is no intended oversight of the investment bank. Obviously it didn't happen. But there was a means to do that.

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@FreeDuck,

The government set the ball rolling to encourage banks to make bad loans and to encourage the people to take advantage of them. That is what has brought us to this point. Had we let the free market work, that would not have happened. Now we have to put things back the way they should be before the free market can work.

So, I think 'bail out' is not the right term. Rescue while continuing to hold accountable would be the right term. It's like bailing your kid out of jail but then grounding him for a month. The people who owe the money are not being forgiven their debts. In most, maybe all, they will be expected to repay them. But the debt will be reorganized and repackaged to forestall a foreclosure and make that possible. The expectation in the long run is that the taxpayer will ultimately get stuck with a small fraction of the $700 billion and may not get stuck with anything at all; in fact it is possible the tax payer will make money. It is a calculated risk, but it is being well thought out.

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@FreeDuck,

Treasury Opens Vault; Gangs of Robbers Rush In

The government’s humongous bailout for fat cats is a looming disaster;
the only way to make it acceptable is to multiply its disastrousness by a factor of two or three.
As for the taxpayers, let them eat cake.
http://www.independent.org/blog/?p=200

Credit is Flowing, Sky Is Not Falling, Don't Panic

In democratic societies, every great surge of the government’s size, scope, and power rests on a foundation of fear and the present occasion is no exception. The president, the secretary of the treasury, congressional leaders, and the vultures now swarming Washington to pick the remaining flesh from the taxpayers’ bones would have us believe that unless the colossal rip-off now being formulated in Congress is enacted, the future will be too horrible to contemplate.
Journalists, as usual, are doing their part to create an atmosphere of fear. Reports characterize the bailouts as “a bid to unlock the flow of credit” and make reference to “the frozen credit markets.” It’s hyperbole, don’t believe it.
But we must also recognize that the rapid growth of credit during the years from 2001 to 2007 was scarcely a healthy development. In fact, this effusion of credit fueled the housing bubble and countless other malinvestments that now must be liquidated, because without a continuation of the very-easy-money regime, these projects cannot be brought to completion or, if already complete, operated without further loss.
That malinvestments must now be liquidated merely reflects the mistakes made in the past, induced by bad government policy at the Fed and other credit-related agencies, such as Fannie and Freddie. Of course, some of the necessary adjustments will be painful for the parties directly involved. But the huge bailout now being concocted in Congress will only compound the errors of the past by keeping some malinvestments on life support, deferring the day that lenders must write off bad debts, and preventing the entire financial system from returning to a semblance of economic viability without ongoing subsidies and bailouts that impoverish the taxpayers and threaten the entire economy.
http://hnn.us/blogs/entries/54828.html

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@squinney,

squinney wrote:

I don't understand all of this at all. I still don't think anyone has explained in real day to day terms what it would mean if we don't front these companies 700 billion dollars. Can anyone tell me what it would mean to me if I woke up tomorrow and the government said "Thanks, but no thanks" to the bailout? How would my day change?

You would hear about the stock markets taking a hit. This trend would likely continue as more and more institutions already in trouble began to collapse because: People would begin clamoring to get their money out of mortgage-backed stocks as they plummeted, exasperating the already low values, and sending more and more banks into the shitter. Meanwhile, there would be a lack of understanding of just who was at risk, and folks would begin to believe neither banks nor markets were safe in general. This panic would become a self-fulfilling prophecy as companies that were still above water had their cash stripped by frightened investors, mom and pop, you and I. But, gold would hit an all time high!

Meanwhile; I have to question the idea of speeding the devaluation of the housing market. A major part of the problem was people rushing out to buy houses when they were overvalued, simply because they were going up. While bankers facilitated these loans; this doesn't absolve those who signed on the dotted line of their responsibility for doing so. So now what do you do when you owe 125% of your home's value? 150%? The honorable thing to do is pay the piper... but what about those who won't? Those who can't? Some tell the bank to come and get it (clever folks with currently good credit buy a second home first.) But what is the bank supposed to do when and if they do repossess?

Everyone wants to believe that the money they made flipping their property while the bubble was building deserve that money. Much like a Ponzi Scheme, those clever enough to get in and out before the collapse do indeed make a tidy profit, and it really isn't fair to ask those who didn't profit from it to subsidize the losses of those who tried to and lost (along with the honest Joe's who were too ignorant to realize we were in a bubble.) For this reason; I'd be inclined to agree with Freeduck's idea if not for the even more sinister ramifications mentioned by Robert and Thomas.

I haven't worked out the details; but I'd like to see the bill written as the most responsible piece of legislation in my lifetime. Namely; legislate in a payment plan... not just for this debt... but for the entire debt. I'm thinking stiff inheritance tax married to the debt. If we can't get society to agree to pay their own bills while they're alive; we should collect it when they die. Stealing from everyone's kids and grand kids to give it your own is wrong. This will inevitably tax the very people who've profited the most from the collective's irresponsible behavior that's been going on for decades.

Unless folks would rather just pay off the debt like a mortgage: It's only 10 Trillion Dollars or so. Hell, if we can lock in at 5%; $65,995,600,000 a month ought to cover it… roughly $440 a month for every working American for 20 years.

A good President would insist something responsible be added as a condition. At least a line-item veto and...

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This (and Robert's US-like-France, but this one has grown) is the only serious topic about the US economic situation, with both analysis and complaints from real people.

Bookmark. Will certainly post later.

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@Ramafuchs,

“What Wall Street Should Be Required to Do, to Get A Blank Check From Taxpayers

The frame has been set, the dye cast. Treasury Secretary Hank Paulson, presumably representing the Bush administration but indirectly representing Wall Street, and Fed Chief Ben Bernanke, want a blank check from Congress for $700 billion or possibly a trillion dollars or more to take bad debt off Wall Street’s balance sheets.
Never before in the history of American capitalism has so much been asked of so many for (at least in the first instance) so few
http://robertreich.blogspot.com/2008/09/what-wall-street-should-be-required-to.html

If you think the Bailout of All Bailouts (whose details will be worked out over the coming week) won't saddle American taxpayers with billions, if not trillions, of risky obligations, you don't know politics -- especially in an election year when members of Congress are eager to get home to campaign; when the incumbent lame-duck president (who was he?) has all but vanished, leaving his hapless Treasury Secretary, a former investment banker, to take the lead and the heat; when voters are in high anxiety over the economy and Wall Street is melting down; when the executives of every financial powerhouse in America have staked lots of money on campaigns in both parties and have indundated Washington with lobbyists.
In other words, watch your wallets. The tab here could be very high. If everything goes extremely well, markets move upward, and the risky loans become far less risky, it's possible that taxpayers (that is, the Treasury) might actually make money. But if the bottom falls out, American taxpayers could be on the hook for trillions of dollars. What then? The federal debt soars. What then? Interest rates go out of sight. What then? Foreigners lend us less money. What then? We're cooked.
http://robertreich.blogspot.com/2008/09/coming-bailout-of-all-bailouts-bill.html

We no longer have a government “of the people, by the people, for the people.” We have a government run by and for Big Business, and Big Business has gotten control because its affiliated banks have monopolized the business of issuing the national money supply, a function the Constitution delegated solely to Congress. What hides behind the banner of “free enterprise” today is a system in which giant corporate monopolies have used their affiliated banking trusts to generate unlimited funds to buy up competitors, the media, and the government itself, forcing truly independent private enterprise out. Big private banks are allowed to create money out of nothing, lend it at interest, foreclose on the collateral, and determine who gets credit and who doesn’t. They can advance massive loans to their affiliated corporations and hedge funds, which use the money to raid competitors and manipulate markets. If some players have the power to create money and others don’t, the playing field is not “level” but allows some favored players to dominate and coerce others. These giant cartels can be brought to heel only by cutting off their source of power " the power to create money " and returning it to its rightful sovereign owners, the people themselves.
http://webofdebt.wordpress.com/monetary-proposal/

1 Reply

@Ramafuchs,

Rather than the congress, this issue should be brought up to the vote of the public who are the ones that will be the financiers of this bailout.

There is a basic truism to spending money owned by others; they are almost always irresponsible. When they spend their own money, they're still irresponsible. That's the reason many consumers are in debt as never before, because credit was too easy.

Now, congress wants to exacerbate the problem by creating more credit. Where does this end?

Some can't even borrow their own money, because the bankers will set the limits. Something is drastically wrong with this picture. They're spending our money, but we can't borrow it, and we know for dang sure that future generations might be in the hook for all this liability.

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@FreeDuck,

FreeDuck wrote:

Quote:

I understand that but that's not where I'm coming from. I'm concerned that we're going to **** this up majorly in such a way that my kids are going to be saddled with high taxes, low wage jobs, and a shitty standard of living when they become adults. I don't want them to be slaves.

This is also one of my major concerns; we're doing something today without knowing the long-term impact on our children, grandchildren, and future generations. This bailout move at a time in our economy (the world's for that matter) leaves a whole lot of "what if's" that can't be answered. If we burn down a house today, it's not fair to shift that responsibility to future generations.

Nobody can guarantee that won't happen.

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@cicerone imposter,

Long term--short term-baloney. Let's get down to brass tacks. The corrupt Bush administration is to blame for all of this financial implosion. Let the Goldman Sachs high flyers and the Buffett greedy ones go down in flames-then elect Barack Obama as president--Barack Obama-president of the United States--will convene a crew of experts from Harvard--cut out the greedy CEO's and put the power in the hands of the government where it belongs.

Then the people will finally be well served. There is no reason in the world
for some CEO to be paid three hundred times more than one of his workers.

Let's get some balance in our society!

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@barackman28,

Can you show me where Buffett has done anything unethical or illegal?

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@cicerone imposter,

BUFFETT? Do you really think he is on the side of the poor? How do you think he would react to a Health System like England's which takes care of all?
How do you think he would like a tax system which would peel off some of his billions to be given to the poor?

He would not. He is just one of the exploiters of the poor and downtrodden!

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@barackman28,

Instead of more bluster, why not accept CIs challenge?

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@cicerone imposter,

On 4 November 2008, the United States will elect a new president whose fresh team will seek to guide the country through the inescapably stormy times ahead. So why is it necessary now to rush through a bailout of at least $700bn - taxpayers' money, which Americans will be paying off for years?

The answer is that it is not necessary. Because the plan as it stands is designed to re-consolidate a system that has simply not delivered for vast sectors of the population, and which in addition puts the whole economy at risk every few years. Indeed, the fact that the mere announcement of the decision to ask for a bailout on 19 September sent stock markets into a sharp rise is a symptom of the underlying problem rather than a step towards its solution - for this indicates that a new boom-bust sequence can be triggered at any moment.
http://www.opendemocracy.net/article/the-new-new-deal

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@roger,

Do you really want the country to be run by people like Buffett?

Bluster?

It is no bluster to say that Buffett is one of the richest Americans.

It is no bluster to say that Buffett has aligned himself with the CEO'S and WALL STREETERS by buying so much Goldman-Sachs stock.

It is no bluster to say that Buffett knows nothing about the suffering of blacks and hispanics.

.When Barack Obama becomes President I hope that he will not allow people like Buffett to tamper with our economy. I am sure that Senator Obama will look carefully to pick people who know about the sufferings of black and hispanic peoples---Governor Deval Patrick and Governor Richardson would be a good start.

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@barackman28,

barackman28 wrote:

-then elect Barack Obama as president--Barack Obama-president of the United States--will convene a crew of experts from Harvard--cut out the greedy CEO's and put the power in the hands of the government where it belongs.

If I believed that were his plan; Barack Obama wouldn't be getting my vote (though he is.) "put the power in the hands of the government where it belongs"... are you completely out of your mind? The power belongs to the people. You are describing Tyranny; not Liberty. Barack sees things a damn sight clearer than barackman28. Hell, so does McCain.
Laughing

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@OCCOM BILL,

Are you saying that the Bush "bailout"plan is not putting power in the hands of the government?

Are you saying that the greedy insurance companies and the medical buracracies will not have to accept new regulations from the government so that our health system can be truly one that helps all people instead of only the rich?

Are you saying that the Congress and President Obama(as he has promised) will not be able tocut taxes on the lower 95% of wage earners by taxing the greedy and overpaid CEO's?

Something is wrong in a society where one man or woman can make three hundred times more in a year than one of his or her workers!

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