Large Scale Central

700 billion dollar bailout

General Discussion
#1

http://news.yahoo.com/s/ap/20080920/ap_on_bi_ge/financial_meltdown

Yes,
We are bailing out the banks and mortgage companies.
Not doing a thing to help those that lost their jobs and will loose their homes. But we are taking care of the “moneychangers”.
Big surprise.
This is as much money as has been spent on the Iraq war.
Banks have paid less than 1% interest on savings accounts. Borrowed money from the Fed at 2.5%. Lend this money at anywhere from 6% to 30% and up on credit cards.
But they need a bailout?
Once again Bush takes care of his pals.
Ralph

#2

The idea of a government bailout of the banks and finance houses is disgusting. I don’t understand how one penny of my tax money should be used to ‘bailout’ these for profit businesses that have been done in by their own greed. I just don’t see why they should be given a free ride for making bad business decisions. This action has to depress the dollar on the world market and will cost all of us in the form of reduced government spending on needed items and higher taxes at every turn.

I just read that Richard S. Fuld, Jr., the Chairman and Chief Executive Officer at the failed Lehmann Brothers since 1994 and chief executive officer of the Company since 1993 made $45 million in the current year and has averaged $35 million / year since taking over. That works out to ~$21,000 / hour in 2008 and ~$17,000 / hour overall. All the while he was driving the company into bankruptcy. Many of these so-called ‘financial leaders’ are nothing but high rolling thieves driven by greed and allowed to get away with it by their boards of directors, stockholders and government regulators. These guys don’t even have to wear a mask.

The banks in CA that foreclose on a residential property immediately sell the property to another division of themselves for a very low price, thus reducing the property taxes, which are based on the latest selling price. In general they aren’t re-selling the properties cheap, and now won’t have to: The federal government will cover their losses (the difference between what they were owed and what they sell it to themselves for) while they wait for a new sucker to come along. And one projection I heard is for mortgage interest rates to be in the 10 to 15% range by the first of next the year.

A bailout of the banks is just about as anti-American and anti-free enterprise as we can get. The banks made these unsustainable loans: Let the banks suffer the consequences.

Happy RRing,

Jerry

#3

I’m inclined to agree with Jerry. Bernancke and Paulson are basically bankers themselves–that’s their community. They live in hothouse world of big money and a hugely inflated sense of self-importance. They can bluff Congress and Bush into panic bailouts.

What are we doing here? We are basically buying nearly worthless assets at above market prices in order to save these guys from their own recklessness. What will we, the taxpayers, get in return?

Short term, you’ll avoid having your savings/retirement money collapse. If they don’t do this bailout, my retirement fund will collapse. But I’m not near retirement age yet. Even if people’s retirement funds do collapse, they will most likely bounce back. There will be some pain from not bailing them out, but I doubt it will be as much as they say

Unlike Jerry, I have no problem with regulating markets or govt. intervention in markets, but I do have a problem with men who brayed and bragged about the glories of the free market now running behind the govt’s skirts.

#4

Jerry,
I’m glad that someone disagrees with this enough to reply.
700 billion dollars and will probably end up costing even more than they are telling us.
This will be another vehicle for the crooked to bleed billions from the taxpayer.
If these bad loans were owner occupied homes, the banks could have negotiated these loans and avoided many of the foreclosures.
The government is rather quiet about the statistics concerning these loans. I am only speculating, but I believe many of these bad loans are investments that have gone bad.
There is a local builder here that has several dozen homes that are “dried in” and have been for over a year. Unfinished homes with no siding or interiors. But he is still building more while some of the first homes he “built” are going into foreclosure. These construction loans pay out 80% of the value once the home is “dried in”.
Just as with the oil, gas and commodity speculators, we have the real estate speculators costing everyone big money.
Banks lent money for the speculators to gamble and we will be paying for the folly.
The fact is, these speculators are whats wrong with our economy. When they played their games in the stock market, it didn’t cost the average citizen any money. After all, when they run a company up way beyond its value, or way below its value, it does not affect what we pay for that company’s product or service.
But when the speculators jumped into the commodities and real estate it cost all of us BIG MONEY, long before any money spent on bailouts. Our homes cost more, our gas costs more, our utilities cost more, our food costs more. And our money is worth dramatically less.
The speculators gamble, we pay.
Ralph

#5

Ralph,

You said - “I’m glad that someone disagrees with this enough to reply.”

This is always a problem, not replying does not mean that someone agrees or disagrees with what is being said.

#6

That bailout as some potential good other than trying to stabilize a unstable economy. There is a potential that the US will actually make money when the debts are repaid, isn’t that a thought… More to look into I guess

#7
Mark Dash said:
That bailout as some potential good other than trying to stabilize a unstable economy. There is a potential that the US will actually make money when the debts are repaid, isn't that a thought.. More to look into I guess
I could be wrong, but I don't see how we can make money here. This is just another vehicle to abuse the system. Everyone who has anything to do with these properties will take their cut, from appraisers to inspectors to the real estate agents who finally resell the homes. Not to mention repair work. And we all know how inflated the "cut" is on any government project. The government will be paying for work that is not needed and never performed. The oversight needed to control costs will not be there. Ralph
#8

It is now spreading to local governments as well. The State of New Jersey is going to bail out the Newark Arts Center which is loosing money, due to poor attendance. When and where will it stop??? Nick Jr

#9

http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html

Troubling wording in the plan:

“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.”

#10

Real crisis is loss of American principles
by Star Parker

The “power of the federal purse” is a nice abstract way of saying there is open season on citizens and taxpayers. We are the federal purse.

Somehow we have gotten to the point where we citizens have been written out of the equation of our own country and Constitution. Paulson can decide to commit billions of our money – you know, what we work for every day, save, and assume we own – to play lifeguard and we don’t even get a courtesy call asking if its okay.

So I ask, is this the disease pretending to be the cure?

There is, of course, a lot of discussion about the causes of today’s financial turmoil.

It may be politically expedient to blame greedy Wall Street executives. And I have no doubt there’s plenty of greed on Wall Street (or in Hollywood or elsewhere for that matter).

But as unattractive as greedy behavior may be, greed is not illegal.

I have not heard a single announcement about any Wall Street executive being indicted or about any law being broken.

But somehow it is legal and constitutional in America today, our dear country that supposedly has a Constitution that protects citizens and private property, for our private wealth and incomes to be used by politicians as collateral for their social engineering.

As we taxpayers get dragged up to the plate to bail out one firm or another, let’s recall that major culprits in all of this were the two massive Government Sponsored Enterprises, Fannie Mae and Freddie Mac. Dressed in drag as private firms, they wheeled and dealed, getting involved in some way in one of every two mortgages, with us taxpayers behind the scenes guaranteeing their excesses.

Did we learn anything from the failures of Fannie Mae and Freddie Mac? Did we learn that taxpayer guarantees for business is a formula for failure?

How can we say we learned anything if this is exactly what we are doing now to deal with the problems that this very behavior caused to begin with?

Today’s financial crisis is not the worst problem we have. America has survived many crises, some far, far worse than this.

Our most serious problem is a loss of focus on American principles of freedom and limited constitutional government.

It’s a sign of our troubled times that there appears to be no leader – political or business – who even pays lip service to this.

#11

The way this “deal” is configured now, there is no way we, the taxpayers, can make money on it. We are being asked to buy the assets of firms which are in danger of failing. They are failing because they hold a bunch of “assets,” apparently mostly mortgage securities, that are not worth much. Nobody wants to buy them, because they are worthless or near worthless. If we buy them at market prices, the firms will fail–it won’t do any good.

So to save the firms and the stability of the system, we are supposed to buy them at above market rates. That way we prop up the failing system and the loss comes out of our pockets. We get, the way the deal is structured, a bunch of “toxic debt.”

The harm to you and me if we don’t bail them out is mostly, as far as I can tell, that our investments–for me that’s a house and a retirement fund–will collapse in value.

Here’s an alternative–we could let the firms go under, and pay their customers. In other words, take the 700 billion, and instead of giving it to firms that were reckless and irresponsible, give it to their customers. If you have a retirement fund, we could use the 700 billion to secure its value, instead of using it to prop up the banks that messed with it. Let the banks fail–new ones will appear

Fortunately it looks to me like both Republicans and Democrats are beginning to see that this deal smells bad

#12
Bob McCown said:
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html

Troubling wording in the plan:

“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.”


Troubling wording? No, I’d say that is OUTRAGEOUS.
Looks like the bill itself will receive a Supreme Court challenge, due to that wording alone.
Ralph

#13
mike omalley said:
The way this "deal" is configured now, there is no way we, the taxpayers, can make money on it. We are being asked to buy the assets of firms which are in danger of failing. They are failing because they hold a bunch of "assets," apparently mostly mortgage securities, that are not worth much. Nobody wants to buy them, because they are worthless or near worthless. If we buy them at market prices, the firms will fail--it won't do any good.

So to save the firms and the stability of the system, we are supposed to buy them at above market rates. That way we prop up the failing system and the loss comes out of our pockets. We get, the way the deal is structured, a bunch of “toxic debt.”

The harm to you and me if we don’t bail them out is mostly, as far as I can tell, that our investments–for me that’s a house and a retirement fund–will collapse in value.

Here’s an alternative–we could let the firms go under, and pay their customers. In other words, take the 700 billion, and instead of giving it to firms that were reckless and irresponsible, give it to their customers. If you have a retirement fund, we could use the 700 billion to secure its value, instead of using it to prop up the banks that messed with it. Let the banks fail–new ones will appear

Fortunately it looks to me like both Republicans and Democrats are beginning to see that this deal smells bad


Give the 700 billion to the FDIC and make sure depositors are covered. The banks can go under. New banks will open.
Ralph

#14

Dear All,

This makes the Enron debacle look like a penny gumball machine heist.

Instead of golden parachutes, there should be jail terms, certainly longer than Enron.

Any theories as to why no congressional investigative comittees are being launched (by the majority party in control)?

Note that the minority party can’t jaywalk without a comittee being formed to investigate.

Watch for week long news delays to allow time for the media’s favored politicians (with campaign coffers overflowing from Freddie Mac and Fannie Mae contributions) to run for cover.

Sincerely,

Joe Satnik

#15

I think right now both the Democrats and the Republicans are scrambling to verify what they’ve been told by the administration.
It seems to have been a surprise to anybody below the Executive Branch.
Ralph

#16

Ralph,
You don’t seem to have been paying attention to the news. Everyone in Congress is holding news conferences saying,“I’ve been telling them this was going to happen for years, but nobody would listen.” The ones screaming the loudest are the perps.

#17

I understand the FBI is investigating this whole debacle. I hope they uncover any wrongdoers and make them pay bigtime for this regardless of party or status.

#18
Richard Smith said:
I understand the FBI is investigating this whole debacle. I hope they uncover any wrongdoers and make them pay bigtime for this regardless of party or status.
Unfortunately, sometimes things that are immoral are technically quasi-legal... kind of like accepting "campaign donations" from lobbyists during the middle of your 347th unchallenged term...
#19
Steve Featherkile said:
Ralph, You don't seem to have been paying attention to the news. Everyone in Congress is holding news conferences saying,"I've been telling them this was going to happen for years, but nobody would listen." The ones screaming the loudest are the perps.
Nobody expected the President to demand 700 billion dollars a few months before his term ended. They were expecting regular failures with the administration asking for money in each case, as with AIG and the others. Hey, I have been telling you this was going to happen ;) Ralph
#20

If you paid any attention at all to the mortgage industry over the past 5-10 years it wasn’t very hard to predict some kind of bubble burst. For years I would get mailings almost weekly offering to reduce my $2000 mortgage payment to $200. If you read the fine print the interest rate was higher but most of the interest was capitalized. After 10 years of paying you would find yourself owning almost double what you borrowed. That and pushing people who had no idea what they were doing into ARMs with a ridiculously low initial interest rate.

I’m not an economist and I haven’t really studied what’s going on, so I can’t be sure if the bailout is good or bad. My gut tells me we should let the market run it’s course even if it leads to a depression. Then use that 700 billion to help individuals who lost everything to get back on their feet. Just like the Iraq ware there is no clean solution.