$700 Billion Bailout Signed Into Law 857
Many readers reminded us of what no-one can have failed to hear: that the Congress passed and the President signed a $700B bailout bill in an attempt to avert the meltdown of the US economy. The bill allocates $700 billion to the Treasury Department for the purchase of so-called "toxic assets" that have been weighing down Wall Street balance sheets. This isn't particularly a tech story, though tech will be affected as will virtually all parts of the economy, and not just in the US. Among the $110B in so-called pork added to the bill to sway reluctant legislators are extensions of popular tax benefits for business R&D and alternative energy, relief for the growing pool of people subject to the alternative minimum tax, and a provision raising the FDIC's ceiling of guaranteed deposits to $250,000. Some limits were also imposed on executive compensation, though it's unclear whether they will be effective.
Video on details of the plan (Score:3, Informative)
Re:Oh I get it. (Score:5, Informative)
I'm sorry, I don't think we've met. Yes, I don't like Vista. But it's not a religious stance against Microsoft. In fact, I hold 4 Microsoft certifications (MCSE, MCSD VB6, MCSD C#.Net, MCDBA) and work on Microsoft products all day every day. In fact, I did a 6 month contract programming job for Microsoft themselves as a side job.
Certainly a very busy man.
Read the Bill For Yourself (Score:3, Informative)
If you want to check out all of details directly it's only 724 KB to get the PDF of HR1424, the full bill [senate.gov].
You can find an index to most of the tax break provisions starting around page 261.
Looks like they got the Republican tax agenda in there.
Some may also like to check out the wikipedia entry for HR1424 [wikipedia.org].
Re:Oh I get it. (Score:2, Informative)
Hahaha... I have worked for banks, perhaps even the same bank - and I can assure you that almost EVERYBODY is a "vice president". In fact, if your are note a "senior vp" or a "executive vp" or a "super duper vp" than I guess you are just the "entry level vp".
Re:Biggest Con Ever (Score:5, Informative)
I find this statement unfathomably ironic in the light that the majority of Republicans voted against it while the majority of Democrats voted for it.
That was the 110 page version. The 451 page version pretty much got the whole Republican tax plan shoved into it. http://news.slashdot.org/comments.pl?sid=985597&cid=25257489 [slashdot.org]
I'm a Vice President in IT. (Score:3, Informative)
I work on programming and enhancing strategic investment platforms for both fixed income securities and equities.
So yes, you can be both a Vice President and a member of IT. I've even been a Vice President and Chief Technology Officer in the past.
Re:Unless gas prices are affected... (Score:3, Informative)
"so why are so many American dumb enough to think that the government magically finds money and that the hundreds of billions or even trillions a year needed for "free" health care won't be paid for with tax dollars?"
Not so dumb. The government magically found $810 billons just now ...
Re:Biggest Con Ever (Score:5, Informative)
Not only that, this article [nytimes.com] (sorry, NYTimes reg required) details how Henry Paulson, back in 2004, asked the SEC to deregulate Goldman Sachs and other banks to allow them to take on this toxic mortgage debt in the first place.
We have just been ripped off by the most elaborate con in the history of the world. We let a banker tell us "let us break the rules so we can make more money", then when he did and the bottom fell out, we gave him even more money to keep him from going out of business.
My only hope is that the voters check for who is voting for this and get rid of them next election.
The big risk = the great move to Ireland (Score:3, Informative)
So what is their strategy to deal with it? They have created a class of company (unlimited liability) which basically has to file almost no public accounts. A similar wheeze was used in Germany some years back in the KG & Co. in which one member of a partnership was a limited company. The object is to get US and other corporations to make their corporate HQs in Ireland, and so hide their profits in this offshore bank scheme. Look it up.
By getting US corporations to relocate to Ireland they hope to avoid recession in the economy and ensure the bank guarantees will never be called in. But clearly that will reduce the tax income from corporations in the US, and worsen the crisis there.
I am only just joking when I suggest that some of the pork should have been invested in invading Ireland. Saddam may not have had WMDs, but Ireland seems to be trying to develop WMEDs (weapons of mass economic destruction). Perhaps Osama Bin Laden hasn't been caught because he's actually been in a Dublin pub, plotting the downfall of the US.
Re:Biggest Con Ever (Score:5, Informative)
Yep, I've heard those and one other rumour.
(Disclaimer: I work for a highly secret govt. agency with unlimited resources).
Basically, a race of aliens threatened to build a new hyperspace-expressway through our solar system unless we provided the capital to bail out the luxury planet building markets. Apparently, the galactic economy recently collapsed and most of the universe is in a pretty bad recession.
Personally, I'm not sure how much of this is true but I agree, it's probably a combination of all three.
Comment removed (Score:4, Informative)
still a lot of Rs voted against it (Score:3, Informative)
link to house roll call vote on the "billionaire's socialism bill of 2008" [myway.com]
Personally, I don't want to hear a peep out of any congress weasel who voted for it, or business goon who wanted it (or takes the cash), about "free markets" and "capitalism", because this bill is neither. Those people are big fat hypocritical liars.
Voting yes were 172 Democrats and 91 Republicans.
Voting no were 63 Democrats and 108 Republicans.
anyway, here is my state vote record
GEORGIA
Democrats - Barrow, N; Bishop, Y; Johnson, N; Lewis, Y; Marshall, Y; Scott, Y.
Republicans - Broun, N; Deal, N; Gingrey, N; Kingston, N; Linder, N; Price, N; Westmoreland, N.
across the board Nays by the Rs
I speak for many when I say.. (Score:3, Informative)
At last! Hallelujah! I'm European so this isn't my money that's involved, therefore a bailout is better for me and the world's economy than no bailout, and it doesn't cost me a thing anyways. Sorry you guys have to pay the cost, but look at the good side of things. Thanks to this whole thing happening at the right time it only makes you more likely to get a decent administration this time.
Seriously, I look at this chart [uiowa.edu] as if it was the temperature curve of this election, and if you rely on it then this whole crisis made Obama's estimated odds of being elected skyrocket. All the Diebolds in the world couldn't save the day for John "I was a P.O.W. for 5.5 years" McCain and Sarah "I'll make you keep your foetus even if the father is your uncle" Palin.
Zeitgeist: Addendum (Score:3, Informative)
Re:Seriously it is quite an achievement (Score:4, Informative)
Even our allies like britain have gone to a surveliance society and now ponder 2 days detenciton with charges.
For the record, Britain is pondering 22 days detention without charges.
Re:Seriously it is quite an achievement (Score:5, Informative)
Re:why do europeans have a hard-on for Obama? (Score:3, Informative)
Re:Something everyone seems to miss (Score:3, Informative)
http://usinfo.state.gov/journals/ites/0904/ijee/realuyo.htm [state.gov]
http://finance.senate.gov/sitepages/leg/121605summ.pdf [senate.gov]
The first connects the IRS with anti-terrorist investigations. I doubt great detail is needed to show how that can and likely has been abused. The not-so-recent news about the clear and abundant abuses of national security letters and other such Patriot Act devices show an obvious tendency in this regard. Somehow, the IRS had its mission expanded to include anti-terrorism.
The second shows abundant areas where personal information is being shared all over the place... ostensibly to prevent terrorism?
Re:first post (Score:3, Informative)
Where are you getting all this from? It's like you're from some alternate reality. The government way "proactive" during the Great Depression, right from the start. That's why it lasted as long as it did. If you want to know what really happened, here's a full analysis of the contributing factors: America's Great Depression [mises.org]. You don't have to agree with the economics, but at least pay attention to the historical aspects, which are fully cited.
Re:Free market (Score:3, Informative)
No, you are wrong.
1) Fannie and Freddie don't make loans, they only buy them from other institutions. They did not touch subprime loans at all until the late 90's, when Clinton encouraged them to.
2) Community Reinvestment Act applies to retail banks only, and is at most 50% responsible for subprime lending between the 90's when Clinton turned it up to 2004 when Bush turned it back down (Note that subprime lending continued after 2004).
http://www.house.gov/apps/list/hearing/financialsvcs_dem/barr021308.pdf
In case you didn't know (Score:1, Informative)
Banks MAY not even need to hold reserves.
http://www.nowpublic.com/world/hidden-emergency-economic-stabilization-act-2008
Re:Seriously it is quite an achievement (Score:4, Informative)
What I object to was the inclusion of so much unrelated crap in the bill. Relief for a racetrack? For a maker of kids' toy arrows? For PR Rum distillers? What kind of nonsense is this? Try visiting "dealbreaker.com", and reading some of the stories there. People withdrawing all their money from their savings/chequing accounts, and hiding it in their safe deposit boxes (or burying it in the backyard, for all we know). The run on physical gold (try buying some gold coins or bars today - good luck finding any). Then, go rent a copy of "It's A Wonderful Life", and try to understand what Jimmy Stewart's saying when he's trying to prevent a run on the building and loan. If a bank has no capital, it can't lend. If everyone tries to withdraw all their cash from the bank, it breaks the bank because it lends out all that cash to others. Without access to capital, the economy freezes up.
For example, with the busy Christmas retail season coming up, many smaller retailers are unable to get the short term loans they need to finance their inventory. Other industries need short term loans to cover the inevitable lag between the time they purchase raw materials, and sell finished goods. They're having trouble finding loans as well. Something had to be done.
Was this bill the best way to do it? I, and many others, think not. It was too diffuse, too laden with pork, and most of all, too rushed. And to me, the worst culprits in the whole mess (the ratings agencies Moody's and S&P) got off scot free. If they had done their job, and not rated the crappiest tranche of CDO's as "AAA", none of the pension funds, smaller banks, and many other mutual funds would not have been allowed to buy them, and much of this mess could have either been prevented, or contained to much smaller amounts. But the ratings agencies didn't do their due diligence, and everyone else has been so conditioned that the ratings were always correct, they didn't bother to do their due diligence either.
I'm Canadian, and our big banks have avoided most of this mess simply because those banks write most of the mortgages here, and they do put people through wringers before they OK a mortgage. The banks ensure you have a steady job, some money to put down, etc., before forking over the cash. DUE DILIGENCE. Remember those two words, apply them to your own investments, and you'll never go broke. It's when you get lazy, and think others are going to look after you, that you get burned.
Re:You've left a lot out (Score:4, Informative)
Who created Fannie Mae and Freddie Mac, the true "merger of state and corporate power" in this crisis? Democrats.
Bzzzt, thank you for playing. Freddie Mac was creating in 1970 under Nixon.
Of course, neither of them caused this problem at all. They did not fail, they were not mismanaged, they did not purchase loans that failed, almost all their loans are just fine.
Ihey were created to purchase and securitize home loans, and that is what they did. The fact that housing prices dropped and resulted in them not having enough assets to cover the loses was an intended point of them existing. If it hadn't been them, it would have been the banks.
The actual problem was the drop in housing prices, which was actually caused by the current Administration. No banking system that operates primarily on mortgaged houses can survived a sudden drop in housing prices, which is why you don't let housing bubbles get that big.
Who further extended this by creating the CRA [wikipedia.org]? Democrats. Who expanded its mission [wikipedia.org] into accusing bankers of racism ("redlining") and extorting them to make more bad loans, or else be investigated? Democrats
The CRA only covers banks, not independent mortgage companies, the people who made 75% of subprime loans. That is, only 25% of all subprime loans were given out by institutions that were governed at all by the CRA. And, on top of that, the CRA doesn't actually demand that many are in bad areas, so of that 25%, less than 10% of them were actually requirements of the CRA.
So you're talking about 2.5% of all subprimes loans being mandated by the CRA, and, ironically for you, those loans are failing at slightly less than other subprime loans. (Probably because they're loans given out in bad neighborhoods so are actually examined more. Duh.)
And your 'lawsuit' comment is bullshit. Even the banks covered by the CRA do not get sued for not making enough CRA loans. They cannot be sued for that, at least not via the CRA. In fact, there's almost no enforcement at all of the CRA.
(Of course, anyone can sue anyone for any reason, but people who cannot get bank loans are unlikely to be able to launch a lawsuit.)
And if you actually knew anything about loans, you'd see Obama got a perfectly normal loan. Of course he got better than an 'average rate'. No one gets the 'average rate' unless they have 'average credit'. He, OTOH, has excellent credit, a lot of savings, and no debt at all, and three points below average is a completely normal interest for that. (And 'jumbo loan' just means it's a non-conforming-because-it's-too-large loan that Fannie and Freddie won't buy.)
Problem: Incomprehensible unregulated derivatives (Score:5, Informative)
There was an article in last Sunday's Washington Post that described one house on the market after a foreclosure. The article was very instructive about what was really going on. The entire financial mess is a result of the gambling casino mentality of the derivatives market moving over into housing and mortgages. The mentality of the derivatives market was allowed to exist and continue as a result of financial market deregulation.
Many financial experts, most notably Warren Buffett, the Sage of Omaha, have for years warned that there are derivatives nobody understands and that they will cause trouble. Based on the article, it is clear that we now have mortgages nobody understands and derivatives on those mortgages that nobody understands, either. Derivatives in the form of "portfolio insurance" caused the stock market crash of 1987. Since then there have been several occasions (such as Long Term Capital Management) in which derivatives threatened to collapse the world financial system. Well, they've done it again.
The article
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/27/AR2008092702587.html [washingtonpost.com]
describes how the homeowner was solicited to refinance her home and took the bait. The interest rate was a teaser. Over a year into the
mortgage she discovered that it was a "negative amortization loan" where the principal increases every month. The transaction probably came nowhere near compliance with Truth in Lending laws. It is shocking that such a piece of financial garbage exists. However, Wall Street wanted mortgages to feed the highly profitable derivatives market and there was a lot of pressure to produce the mortgages, no matter how.
The article doesn't cover what happened next, but the mortgage was likely bundled into a collateralized mortgage obligation that likely had
credit default swaps written on it. Here are some relevant Wikipedia links:
http://en.wikipedia.org/wiki/Collateralized_mortgage_obligation [wikipedia.org]
http://en.wikipedia.org/wiki/Credit_default_swap [wikipedia.org]
http://en.wikipedia.org/wiki/Derivative_(finance) [wikipedia.org]
http://en.wikipedia.org/wiki/Negative_amortization [wikipedia.org]
It turns out that many of the derivatives are really side bets on prices of financial securities, and that the total outstanding value of the derivatives often exceeds by huge factors the total outstanding value of the securities. Furthermore, the derivatives are highly leveraged.
According to a recent program on NPR's This American Life there are about 4 Trillion in bonds and about 60 Trillion in derivatives betting on whether the bonds will pay off.
In the absence of strict regulation, the "free market" becomes the Fraud Market. This mess can be laid squarely at the feet of financial deregulation and Fraud Market Conservatism. Adam Smith's "unseen hand" doesn't work. The financial markets are much more in keeping with Charles MacKay's book "Extraordinary Popular Delusions and the Madness of Crowds". This has been proven over and over, and is now being proven once again.
One part of the eventual cleanup will need to be a shutdown of the derivatives casino. Some of these financial instruments are valuable to
producers and users of real commodities, but most of them need to be eliminated. Whatever remain need to be understandable and should not be
side bets. Eventually, the tails will stop wagging the dogs.
once upon a time in Germany... (Score:2, Informative)
After WWI, the German (Wiemar) government decided to
honor German Imperial War bonds despite advice to the
contrary.
Soon, Germans were converting their bonds into cash
since, as obligations of the German government, they
were the equivalent of cash, less a discount for
interest and time.
Soon Germans were pushing wheel barrows full of cash
to the store to buy a loaf of bread. (see:
http://en.wikipedia.org/wiki/Hyperinflation [wikipedia.org]
It seems that the government simply printed money in ....
order to redeem the war bonds. There were other causes
such as the loss of the Ruhr and gold based reparations
but, in the final analysis, is was the printing press.
Soon the US Treasury will begin buying mortgage backed
securities from the banks. To do this, they will sell
bonds, backed by the full faith and credit of the US
government.
The Federal Reserve Bank will buy these bonds, either
directly at auction or indirectly through the open
market so that the flood of bonds doesn't cause a drop in
the price of bonds and, hence, a serious increase in
interest rates.
To buy the bonds, the Fed will print money, either the ....
funny looking paper stuff or a lot of electronic credits
sent to banks through FedWire. Either way, lots of new cash
will enter into the system
I suspect, however, that it won't be long before we'll
be using those old Weimar wheel barrows ourselves to
fetch our loaves of bread.
The moral? Yeah, right. What's morality got to do with
government?
Re:You've left a lot out (Score:3, Informative)
Do a little more research. Obama was the #2 candidate of donations from Fannie.
So "Yes" It may be only .0000001% (exaggeration) of total funds, but when you look at it as he was the number two man "on the payroll" that is scary. It explains a lot about how he acted during this whole mess. By acted I mean his total lack of acting. It is painfully obvious to all but the most hardened Obama supporters that he is on the take. It is now apparent that McCain is also somehow involved in this mess as well. I am sure all the Obama supporters will be able to link us to the Fannie people that are McCains advisers...
In short we cannot EVER have another government supported entity again. This coupled with the fact that both parties wanted to give housing to people that couldn't afford it is what started this whole mess. No amount of regulation would EVER have solved this problem, Fannie and Freddie had and have too much power, and used that power to buy politicians. Obama was one of them and one can only assume that by "Change" he means more corporate buyouts.
Re:first post (Score:3, Informative)
1. It is not historically accurate (let alone even possible!) that 100% of all of FDR's economic policies for the 8 years after Hoover's administration, were all and solely continuations of Hoover's policies. Do I need to even mention all of FDR's job creation and public works programs? As only one set of examples.
2. Even if FDR had only pursued the exact same policies as Hoover, FDR still could have pursued those same policies in better and more constructive ways. So to just not even go over FDR, is a further huge hole in this "government intervention is always bad - just look at Herbert Hoover" theory.
3. To say that WWII helped eliminate the depression because it "made further domectic intervention impossible" - well, that notion is in contradiction to actual historical fact. Quite the opposite - WWII caused a *****huge***** expansion of government intervention and control of business in **all** areas - not just limited to stocks and banks but all areas of domestic production. The entire boards of companies were directly taken over by the US Government - with some company heads being physically removed by actual soldiers. Government-controlled rationing was put into place for gas, food, and even sugar. Automobile factories were turned into airplane and bomb factories.
The position of most economists is that WWII helped shake off the last vestiges of the Great Depression, by putting a vast amount of people to work, and causing tons of actual goods and services to be expended. Then the post-war expansion was enabled by the US becoming the West's sole economic and military superpower.
This makes much more sense than a dogmatic "government intervention is always bad no matter what" model. That model simply does not match up with observed historical *and* current reality.