$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.
first post (Score:2, Insightful)
Free market (Score:5, Insightful)
The major effect of this bill is that it is causing fiscal conservatives to blow gaskets. They can't accept the fact that the free market is what caused this mess.
It is funny to hear them complain about how people on Wall Street became "greedy." I'm not a financial expert but I think that is part of the design. Everyone on Wall Street works for their own self interest. That is how the invisible hand is supposed to work. But conservatives complaining about the essential 'feature' of the free market is sort of twisted.
Unless gas prices are affected... (Score:4, Insightful)
Lower my income tax
Regulate fuel prices to a reasonable level
Give me free health care
Give me free college just like the African Americans and Latinos and Single Moms and Sudanese and pretty much everyone who isn't a white male/female with no kids
Other than that, big deal. 700 billion dollars that I basically receive no real benefit from, while people who are already rich just get richer. Yay America.
I know you're scared, but please think. (Score:5, Insightful)
You know it's an amazing coincidence. You're saying the exact same thing that Henry Paulson and his cronies say. I'm sure that it is just that - a coincidence - and that you independently came up with the identical position completely on your own.
I also suppose that if Henry Paulson said you needed to come to his house and blow him or the economy would go under you'd think, "No time to think!" and head right over to do it. If that's not the case, then why did you fall for his, "Sure, I'll give you a life preserver - throw me your wallet first!" scheme? There is time to think. Henry Paulson has said he has no plans to spend any of the $700B for FOUR WEEKS. Why the rush to pass it into within days?
Something everyone seems to miss (Score:4, Insightful)
There is also a provision extending IRS powers extending its immunity from a variety of laws.
Read more here: http://blog.bobbarr2008.com/2008/10/03/bailout-bill-invades-your-wallet-and-your-privacy/ [bobbarr2008.com]
Re:Friday (Score:4, Insightful)
Re:Unless gas prices are affected... (Score:3, Insightful)
2/3 of your oil is imported from other countries. How do you imagine the government could regulate your fuel prices to a "reasonable" level?
Re:its not a BAILOUT !!!! (Score:5, Insightful)
Then let private firms buy it up and make that money... why the panic?
Re:Biggest Con Ever (Score:5, Insightful)
They're not dumb, they're just evil. They have learned that they can get away with anything, and we'll allow it. No interest in principles, no interest in truth. This is the product of modern political and social pragmatism - a free-for-all, every man for himself. Lie, cheat, steal, whatever it takes to maintain your grasp on the teat of the American public tax pool. The alternative is to make it on your own, using your rational mind to survive and fulfill your goals; but, reason is outdated, obsolete.
Re:bailout / rescue (Score:5, Insightful)
Re:its not a BAILOUT !!!! (Score:5, Insightful)
Re:Friday (Score:4, Insightful)
On the other hand, they have the whole weekend off to plan for it.
It happens every year (Score:5, Insightful)
Between 1 and 1.3 trillion dollars has been spent on military projects and war for the last few years, depending on how you look at old debt. The money is not clearly accounted for, against constitutional principles, and it only goes to serve large corporations.
Where is the public outcry? Where are the Republican talking heads when the budget is being discussed?
The bailout plan may be awful, but it's by no means the biggest con ever. The biggest con ever has been going on since the end of WWII, and it has cost American money and lives, and in no small number. Any of these transparently partisan personalities are just squawking for advertising dollars and votes, same as always.
Re:its not a BAILOUT !!!! (Score:5, Insightful)
Then let private firms buy it up and make that money... why the panic?
Because private firms are under pressure to make money NOW, and always turn a profit. No private enterprise would ever go for this type of long term investment with zero profits in the foreseeable future. Government, however, can wait. It really doesn't matter if it takes ten years for the money to return.
It is in the general interest of the public to resolve these type of situations as fast as possible, because in the end, it's (as usual) Joe Sixpack that's going to suffer if a larger chunk of Wall Street goes belly up.
Re:Free market (Score:3, Insightful)
I haven't heard anyone complaining about wall street greed except for the class-warfare liberals.
One thing that should emphasised clearly (Score:1, Insightful)
At the moment, it's a fact that banks are not willing to lend to each other in meaningful amounts.
Proponents of this bill and the majority of others will say that so-called "counterparty risk" is a large part of this - the risk that the bank you lend to effectively falls over unexpectedly the following day, as has happened to a small number. The theory is that a profit of 0.2% per year on the amount lent isn't sufficient to make up for counterparty risk.
Proponents of the bill will claim that this is mostly because of the subprime loans that some/many financial institutions hold. By buying up these mortgage products, you remove them from the banks, thereby reducing the perception of counterparty risk.
What should be emphasised in extremely big letters is that this is NOT A HANDOUT OF $700BN. The government buys the products, and in buying them receives the right to the interest payments of homeowners.
But doesn't a lot of homeowners go bankrupt, you say? Absolutely, which is why the government will not pay 100% of face value. A large 'haircut' will be applied on what the government offers.
Only in the scenario that 100% of homeowners go bankrupt and their homes sell for 0 each will the government lose 100%. If the government haircut is 20%, and the default rate is less than 20%, the government will actually make a profit i.e. receive more than $700bn for what it pays. If 30% defaults then the loss is 10% reduced by income from foreclosure sales.
In addition, the interest rate payments on these loans are substantially higher than on government debt that must be issued to buy them.
Everything about this deal will from now on center around exactly how large the haircut will be. It's thus up in the air whether it will be a _transfer of money_ from the government to banks, it's only guaranteed to be a _transfer of uncertainty_. Headlines saying that it's a giveaway of 700bn taxpayer money are all misleading.
Of course, there's a lot of other issues speaking against it. What's the effect on the debt markets of issuing $700bn? Will this really push down the money market rates? If banks don't get paid enough, will they have to recapitalise, and if so, will they be able to?
But on this specific point, people should be aware that the government gets uncertainty and not neccessarily a loss, and everything here-on out, from the size of government loss/profit, to bank takeup rate, to bank needs to raise capital, to possibly job losses if they can't, depends on the "paid-for" foreclosure rate versus the "actual" foreclosure rate.
Re:bailout / rescue (Score:5, Insightful)
First of all, I hate this kind of argument by analogy, although the analogy happens in this case to point in the right direction.
Secondly, not all "carping" is bad. We should be skeptical. This isn't the first time we've heard "wolf" called by this administration.
What is going on is that credit markets are breaking down. Credit hasn't "dried up". It doesn't work that way. Credit can't disappear, any more than the world can run out of oil. What happens to these commodities is that they become too expensive to be useful. That's what is happening now to credit, and upshot is that the Fed is losing control of the money supply, and that is very, very bad because controlling the money supply is the main way we have avoided having economic downturns spiral out of control ever since the Great Depression.
It is a very serious situation, and we need to start fixing it fast, but in any case the fix doesn't have to be accomplished overnight. It can't be. We have a situation that grows graver every day, but not say grave that at bad move today is better than a mediocre one tomorrow. It's all about balancing less than perfect action against diminishing returns.
I think there are better ideas out there than this bill, but getting enough support to put them into action runs up against diminishing returns. On the other hand, the bill sent to us last week was dangerous.
"Carping" improved the TARP component of the bill considerably, putting in place a mechanism by which distressed assets are secured by stock warrants to control taxpayer risk, aligning taxpayer and shareholder interests. I originally though the CEO payout provisions were Democratic red meat, but in this context it is good for shareholders too because it keeps CEOs from stabbing the shareholders and taxpayers alike in the back.
So "carping" got us a much better bill than we had a week ago last Friday. The pork incentives to get those last dozen votes, frankly, sucks, but as Barney Frank pointed out: if you don't want politics in this process, you shouldn't hand it over to 535 politicians.
Re:Free market (Score:1, Insightful)
Wrong. In a free market, mortgage banks could choose which credit agency they wanted to give them a credit ranking on their securities. If the ranking was low they could then choose another credit agency that wanted their business more and would give a higher ranking. Yep, this occurred. The loans weren't given out because the government mandated it. They were given out because the mortgage banks could package crappy subprime loans into a CDO that the credit agencies would rank as AAA. The federal fair housing laws had no effect. It was the mortgage banks themselves that chose to make the bad loans knowing that they could sell them off on the stock market and not have to worry about them. Nothing, not even the federal fair housing laws, forced them to make so many bad loans.
This proves how much Americans will sit and take! (Score:5, Insightful)
What I find MOST incredible about this whole bailout, is the fact that nationwide polls of the general populace indicated between 70% and 75% were AGAINST the legislation, yet the Senate passed it through with FLYING COLORS, and House of "Representatives" were swayed to voting for it in a matter of only a few days. All it really took was throwing in a few key financial incentives and bonuses to the appropriate special interests, and some empty promises by potential presidents to be.
The whole time, these "Representatives" were being flooded with demands from the American people NOT to vote for the bailout - but they turned a deaf ear to everyone, and made bold claims like "I may not be re-elected because of this, but I'm confident I did the right thing for America's future anyway." One moron said he changed his vote from NO to YES, simply because "I talked with potential president to be, Obama, and he personally assured me he would enact legislation after his election that's in alignment with what I want to see." (WHAT?!? You were VERBALLY promised some B.S. by a guy who MAY or MAY NOT become president, so that's more important to you than listening to the people who elected you and trusted you to represent their wishes?!)
When HUGE taxpayer expenditures like this are voted through and signed into law in less than a week, despite 3 out of 4 Americans being strongly against them - it's clear we no longer live in a Democracy at all! This seems like as good a reason for an overthrow of our government as what we dealt with back around 1776! Yet people will not only sit back and accept it, but probably not even vote in protest for a 3rd. party like the Libertarians. (Incidentally, Bob Barr has been speaking out against this bailout the whole time, unlike our Democratic or Republican contenders. The man gets MY vote for that reason alone. At least he's in support of the will of the PEOPLE still!)
No alternative? (Score:5, Insightful)
Then they come back and basically vote on the same bill again, but this time a few house members take the bait [wikipedia.org] and it passes. Some of the amendments being totally weird and not really having anything to do with "bailing out" Wallstreet, such as subsidizing rum, wool research and wooden arrows for children?!? I'm not making this shit up! [google.com]
Then we have McCain [youtube.com] sitting in a interview riling against the pork barreling and at the same time taking credit for convincing his Republican buddies to back this "sweetened" bailout plan.
And the really ironic thing is that we have old-school (i.e. fiscally conservative) Republicans opposing the bill as well as far left dudes like Kucinich [youtube.com]. Not to mention Paulson's conflict of interest [wikipedia.org] in this whole mess.
Re:Free market (Score:5, Insightful)
The invisible hand of free markets probably works as long as everyone does act in their own self-interest AND everyone has the same access to reasonably accurate and complete information.
If anything, this current crisis should deeply underscore that institutions cannot be trusted to:
Of course, if we would let everything and everyone fail outright in a horrific manner, maybe just maybe everyone would learn deep lessons. Nobody would deposit anything in any bank that wasn't bending over backwards to do all of the above.
Re:This proves how much Americans will sit and tak (Score:3, Insightful)
Seriously it is quite an achievement (Score:5, Insightful)
Bush and collegues came into office promising to implement Grover Norquists ideas for contracting govenrment. The graphic phrase most often used was they would have to "strangle it in the bathtub" which was Norquist's shorthand for meaning that to reduce spending they had to basically remove govenement agencies and kill off revenue.
Fast forward we have years of the biggest govenement expansion ever. Some bandy the word "socialist" over the bailout. But actually that misses the big picture.
Suppose your goal was to move the governement more towards a corporatist outlook and to really strangle spending how could you do this.
You do it with debt. This 700 billion will be paralytic both in crippling elective goverment spending as well as it's ability to raise future debt. Oddly It does not actually go on the books as debt even but it is a liability.
And even if some day the loans and options they are buying pay off, it's accomplished the tow key goals.
1) strangling it in the bathtub. There cannot be any socialist expansion during Obama because there simply is no way to finance it either with direct revenue or borrowing.
2) a movement towards corporatism. The Government will rise and fall with the value of the companies it holds options in. What's good for the US really is what's good for AIG and JPmorgan, and the rest. Even the people admisistering the hen house in both the SEC and Treasury came from Goldmann Sachs.
The 1930's was when Corporatism was invented and the country practicing it, italy, was consider a miracle. the rest of the world was reeling in the depression. Senators and congressmen hailed the Moussilini miracle and went on fact finding missions to figure out how to import this here. Adolf Hitler was swept into power in part by nationalism that awoke in the aftermath of WWI but also because he too offered the fascist miracle for germany.
THe trains did run on time. THe auobahns emerged. It was spring time for hitler and germany too.
SO we now have an odd time in the US. We are backing our way into fascism. We have all the ingredient. Cheney and his patriot acts have created police powers that are unprecendented in our history of civil liberties. Even our allies like britain have gone to a surveliance society and now ponder 2 days detenciton with charges.
THe second fork of facism is corporatism where the state manages for the good of the corporations and vica versa. (the reason corproatism was such a miracle was precisely because of the vica versa. The people were really better off in the rising economy of italy).
So while hitler managed to once and for all kill the term "facism" at one time, it's potential for being an ecomomic engine was admired.
I note I'm not triggering Godwins law here because I'm not comparing my oponent to Hitler. Instead I'm saying that we are indeed backing into something that is facism in everything but name only, both the good and the bad.
Re:bailout / rescue (Score:5, Insightful)
There is plenty of blame to go around. Yes, the CEOs, but everyone else too.
First, all the people that thought houses were investments whose price could never go down. Wrong.
Second, all those people bought houses they couldn't afford at ludicrous interest rates, based on the idea that a bank would never give them a loan they couldn't afford. Wrong.
Third, the banks that gave these ludicrous loans in the first place. Stupid.
Fourth, the unscrupulous assholes who raced to find people to give these loans so they could sell the loans as investments.
Fifth, the federal reserve for keeping the interest rates so low that the global pool of money had to find themselves an investment other than government bonds.
Sixth, the global pool of money for investing in these loans without carefully looking at what they were buying.
Seventh, all the wall street banks that also invested in all these things heavily and not seeing that they weren't worth their price, and their CEOs.
Eighth, the government for not seeing this happening earlier and stopping it before it was too late.
Ninth, the previous government (Clinton, sorry) for trying to let every American own a home. Heart was in the right place, should have asked an economist first though.
How many times did you hear in the last ten years that property was a great investment that couldn't fail and that everyone should buy some as soon as possible? That was bad advice, every one of those people were wrong.
Basically we all did this for not looking more skeptically at what we were investing in, and living beyond our means. But the economy is not the financial industry, the financial industry is just the fiendishly complicated mechanism that loans the rest of the economy money so it can function. Letting the entire economy fail to teach Wall Street a lesson sounds stupid to me.
I lived within my means, I don't have any debt, and I'm pissed at everyone for screwing this all up so badly. But I want the economy keep going so that the means which I am capable of living within can continue coming, and here we are. Put me down for my share of the bailout, and do me a favor, keep wall street on a tighter leash. I lost a lot of faith in the free market over the last year, it was the market's mindless lemming me-too-ism that completely screwed the pooch here.
Re:Free market (Score:4, Insightful)
The four steps to making a bad idea law. (Score:3, Insightful)
It's all just part of the template for putting bad ideas into law.
Step 1: A bad idea is formed.
Someone has a bad idea for a bill. This could be a special interest group looking to get Congress to pass some horrible bill to have the government fleece the people for cash to enrich a select few. Sometimes it's the executive branch looking to grab some "emergency" powers by predicting doom and death if Congress doesn't just GIVE unchecked power to fight the terrorists allowed to flourish under their watch, the devastation wrought by a combination of natural disasters and fiddling while Rome burns, or the economic fallout of their fiscal policies.
Lucky us, we got both! Paulson's original proposal was only three pages long because what it basically said was, "Gimme some cash with no oversight, and we'll make the problem go away" -- just like the reconstruction of Iraq! But...
Step 2: Congress balks
Okay, so maybe Congress doesn't like the idea. Either Congress wakes up to the idea that "emergency" powers stick around for a long time and always reach further than Congress intended or maybe some central ideological point of principle keeps them from voting for it or, more likely, they don't see enough kickbacks for their campaign donors yet (more on that below).
So, a compromise plan is worked out. The big interest groups get to have a little say, and the leadership on both sides of the aisle crack their whips on members to vote in favor of a bill no one likes. The bill balloons up to over 100 pages as some semblance of balance is struck.
But people are still willing to stick up for their ideological principles, so we move onto step 3...
3) Sugar-coating with pork.
The one lesson the Senate has learned over 200 years of existence is that if you wrap a lump of dung in enough pork and sweeteners, you can get almost any politician to swallow it.
And so 300 pages of earmarks, tax cuts, and other pork projects are tacked onto the bill as it's welded with another "must pass" spending bill. We've seen the former tactic before when the energy bill that's been bandied about the presidential debates was passed, and we saw the latter tactic of welding horrible idea into the intelligence and war spending bills of the past few years. Nothing gets a Congressman to put aside principles quite like salty, salty pork and the fear of being called out for voting against something unrelated but necessary in the next election.
4) Bury it and hope the media forgets.
So, now you've got tax cuts for arrow & rum makers wedged into the bill and much needed subsidies to rural counties in western states that lost timber revenue that couldn't survive a normal floor vote into the bill. How do we sneak all this pork in without enraging already frothing at the mouth "plebes" who are upset at the fiscal irresponsibility of it all?
Well, we can pass it on a Friday. That worked this time. Other times, we might want to leave it to a voice vote so that no one's name can be attached to the bill and force them to take responsibility for their vote. This time, though, we *want* politician's names attached to the vote. This train wreck had to happen somehow, so we want the people who got the pork to be able to go home and thump their chest about how they fought for their constituents to get their piece of the pie -- their turn at the trough. So, we pass it on Friday and hope the weekend gives time for the outrage to move onto acceptance.
And this is what we call democracy! USA! USA! USA!
Re:Unless gas prices are affected... (Score:2, Insightful)
Re:So... (Score:4, Insightful)
My biggest issue is that this bailout let's the people responsible for that mess get away with impunity. That's just not right, IMHO.
Re:Ridiculous (Score:3, Insightful)
I don't disagree with your statements (I recall a phrase like "If it is believed, it will be"), but I don't think that's what happened here.
A few days ago, as reported by Slashdot [slashdot.org], the White-house had to stymie the flow of e-mail from constituents due to the first bill. I would bet my bank account (all $20 of it) that the majority of those were negative about the bill.
Like much of the past four years, this is not something wanted by the people; it was by the fat cats on Wall Street and other parts of the financial industry. Any Republican that voted for this bill should be hung, as it goes completely against the idea of "small government" and free market. That so many voted against the bill raised my spirits this week (I'm fiscally conservative, socially liberal), but now they've gone and dashed them again, durn it all.
Financial Industry: "Daddy, I stabbed myself in the foot with a fork! I want a new foot!"
Government: "Well, we can disinfect it and apply a bandage and it will heal over time. You'll learn your less"
FI: "But I want a new foot NOW! Then I can stab it again later and it won't hurt as much, and I'll just ask for a new foot then."
GV: "Well, alright. Would you like a new pony on the way back?"
It might just be frustration speaking, but I'd like to see Bush and most of his cabinet strung up on all sorts of charges the moment they step out of office. Will never happen, of course, but a man can dream.
Re:Seriously it is quite an achievement (Score:5, Insightful)
Jealous (Score:2, Insightful)
Re:So... (Score:3, Insightful)
My point was not that the market did not need some adjustment... only that there are many better ways to do it. This was fiscally irresponsible, will end up costing you A LOT in the long run, and helps those who do not need help while abandoning many of those who genuinely do.
Remember, too, that the people who made the loans are AT LEAST as responsible as those who took them... and probably a lot more, since they were supposed to be THE EXPERTS who knew better. Or should have. So... ethically, why should they get bailed out but the others not? Answer: an ethical reason does not exist. Remember that you are choosing to spend not just your own hard-earned money, but mine, too. And I am not so damned sure you should have the right to do that.
I have been a victim of economic downturn, so I know what it is like. I was making good money as a professional but got caught in the tech crunch that happened at the turn of the century. I was not working for some self-inflated
I got two other jobs, but they were low-paying, and even between the two of them they did not pay my mortgage (which was hardly excessive... it was a modest used home). Then, the person who was buying my house reneged on the contract, and I ended up being foreclosed because it was too late to find another buyer. So, I was one of those "defaulters", but not because I was defrauding anybody. On the contrary: two separate parties defrauded ME, and I was working my ass off in both a night and day job.
So don't lecture me about working hard. Been there, done that. Got shafted anyway.
I am back to making good money again in a better professional position than I had before. But that is beside the point. This bailout does not do ANYTHING real to solve the problems of the economy, and it will cost a lot of people who did not do anything wrong, while paying off a lot of people who did.
I will take the ethical choice, thank you very much.
Re:first post (Score:4, Insightful)
Re:You're the weakest link, Goodbye! (Score:2, Insightful)
Speaking for the rest of the world - d'uh. When the economy is fucked, we'll always appreciate a bailout at someone elses expense.
Re:Of course (Score:3, Insightful)
I repeatedly emailed, faxed, and phoned both my House and Senate reps about my vehement opposition and that I'd vote them out if they supported the Paulson plan. Their staff dutifully took down my position and both of them approved the bailout, voting against the 100-to-1 opposition of their constituents to the plan.
They've both been notified that I'll be spending my time and money to remove them from office as soon as possible by any means necessary.
Vote them out of office. Every single Congressional member who supported this bailout bill should be voted out of office as soon as possible.
Re:Oh I get it. (Score:2, Insightful)
Well, since policies pushed by Democrats like CRA [wikipedia.org] by the likes of Clinton, Schuemer, people on Obama's staff, and that idiot Franks...to basically strong arm banks into giving loans to people that were bad risks, and to do everything they could to block legislation to try to regulate Freddie and Fannie (this meltdown was predicted years ago)....I guess it is up to the Democrats to try to bail the problem out.
I'm not saying the republicans were innocent in all this...and much of it was sparked by many other greedy fashions, but, I do think Dem. policies and Dem's in power did a great deal to cause this meltdown. It just seems funny that everyone jumps to blame it on Reps...especially in light of Bush and McCain trying to do some regulation of the entities that caused a great deal of this problem.
Disagree with a lib and you are evil (Score:2, Insightful)
This is the difference between conservatives and liberals. Conservatives think libs are well-meaning but horribly misguided. Liberals think conservatives are evil (and this gets modded as insightful rather than flamebait!). And it's the conservatives who are "intolerant."
For the record, it was Democrats who got us in this mess [wsj.com], not Republicans. Democrats created these government-sponsored ATMs (Freddie and Fannie), the CRA [wikipedia.org], and your fair-and-balanced media won't report on Chris Dodd's [latimes.com] and Barney Frank's [foxnews.com] (sorry, only Fox News is reporting this one, so had to use them) ties to Fannie Mae and Freddie Mac, how those government sponsored enterprises acted as ATMs, and how Dems forced banks to lend to those with bad credit. And how they fought John McCain's 2005 home mortgage reform bill. But now it's Republicans' fault? THIS IS A GOVERNMENT-CREATED PROBLEM [wikipedia.org] that Republicans tried to regulate and Democrats wanted unregulated. But don't let the facts get in the way of a good story.
The lack of reporting on what really caused this scandal is a scandal in itself. Reading these threads shows me how the media has not done its job.
Re:Seriously it is quite an achievement (Score:3, Insightful)
Well said. Perhaps I should have been more clear, however. I didn't mean the people bartered away our freedoms, I meant as a nation (politicians, leaders, all) we have given away the things that made this nation great. Freedom doesn't require electing the right people. Freedom requires electing the right people and then hounding them to do the right thing.
Re:Seriously it is quite an achievement (Score:5, Insightful)
I saw a lot of people saying no to this bill. A lot of people against it. But no one have come forward with any plans that, after analysis, would be any better.
This bill is far from a good thing. However, it was a stopgag measure to refrain thing from getting worst. No serious analyst ever say this would make thing all right.
Coming from a country that spends trillions on military, I actually see this bill as something positive. Yes, it was far from being a good thing, but it was a necessary thing. I'm pretty sure all those thousands that lost their jobs on September wish this bill was passed earlier. Not to mention all the people that lost a good part of their life savings.
Trying to separate Wall Street from the rest of USA, a country where something like 40% to 50% of the people have money invested in stocks (directly or indirectly) is just plain stupid.
Re:Seriously it is quite an achievement (Score:4, Insightful)
Then they'll have to introduce the Rentenmark a few years later.
LOL, free market? (Score:4, Insightful)
Wait, what? What a stunning display of ignorance of how the whole subprime lending system worked. In a "free market" the government does not intervene. Fannie Mae and Freddie Mac, government sponsored enterprises (AKA, "ATMs"), are no more "free market" than the post office. In this "free market," both FMs artificially inflated both credit and housing markets (just as government student loan programs have done to tuition) by pouring money into the system, and representing to the banks "don't worry, we are backed by Uncle Sam, what could go wrong?". In a "free market", government regulations like mark-to-market [wikipedia.org], which caused massive bank paper losses, don't exist. In a "free market," you don't have a CRA [wikipedia.org] telling lenders how they have to loan their money. In a "free market" you don't have corrupt senators like Chris Dodd [latimes.com] and Barney Frank [foxnews.com], who are on important congressional banking oversight committees (which themselves wouldn't exist in a "free market"), leaning on lenders to make subprime loans, and fighting attempts to reign in these out-of-control Government-Sponsored Monstrosities. [wsj.com].
Here's what Chuck Schumer said back in 2003, when Republicans wanted more oversight of said Government-Sponsored Monstrosities:
Senate Banking Committee, Oct. 16, 2003:
Sen. Charles Schumer (D., N.Y.): And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.
Source [wsj.com].
So Schumer himself opposed reform on the grounds that the "free market" is the wrong approach. Massive government intervention and regulation was the status quo. But now it is the "free market's" fault? WTF?
Yeah, sounds like a "free market" alright. Just like public housing is a free market.
Re:Blame where blame is due (Score:3, Insightful)
Liberal policies that attempted to move everyone (read: the renting lower and lower-middle class) into homeownership en masse resulted in huge unsustainable upswings in real estate prices.
I'd call bullshit on this except that is far too mild a term. NOBODY was forcing banks to make interest only loans to speculators, or to give out loans to people without any sort of documentation whatsoever, or to buy bundles of loans from mortgage brokers who were originating loans from any breathing life form. Quite a few banks maintained sane loan origination practices during this time and are doing fine just thank you. Hear about any Credit Unions in trouble? They are closer to the mortgage market than anyone. There IS a reason Wells Fargo and Bank America are cleaning up now - they had good managers and had sound risk management processes and did not bite the poisoned apple of absurd leverage and the mirage of big profits.
Up until just a few months ago the architect of this bailout plan (total misnomer - it is neither a bailout or a plan) was issuing assurances that there was plenty of capital in the system and there would be no problem. Now there is a major panic with the possibility of the Last Trump at any second. Somehow he's sold Congress on a 700 billion crapshoot. My guess is that this will be completely and utterly useless and the private sector will work out a solution like they usually do. Will there be pain? Of course. But there is nothing that will stop it.
Re:Free market (Score:3, Insightful)
Of course, if we would let everything and everyone fail outright in a horrific manner, maybe just maybe everyone would learn deep lessons.
Unfortunately the stakes are too big now to allow everything to fall outright. The last time just about everything failed was the 1930s. As badly as the U.S. was hit by the Great Depression, many other countries that relied on trade with the U.S. got hit even worse. Two of those countries were Germany and Italy. Economic turmoil played a large role in allowing Hilter and Mussolini to assume power and wage a war to restore what they considered their rightful role as a world economic and political power. Tens of millions ended up dead as a result. The unprecedented scale of Hitler's genocide and the Americans' introduction of nuclear weapons caused the world to get together afterward and vow to never allow such a scenario to happen again. Today, China's dependence exports to the U.S. and its rapidly growing military and desire to become a world power would be the foremost area of concern in the wake of a U.S. economic collapse; given existing military tension between the U.S. and China over Taiwan and other issues, these two countries creating a World War III scenario becomes a realistic possiblity if everything hits the fan.
Our current problems come from not only missing regulations, but also from half-baked degregulation attempts and ill-formed regulations. Passing new regulations rushed into effect for the sake of winning an election won't fix anything and can in fact make these problems even worse. Making a concerted effort to come up with the right regulations is the proper response.
The current economic situation of these banks is untenable, but the main players need to be either restructured or liquidated in a controlled manner. It may not even be possible to achieve this, but it's unconscionable not to try. It's regrettable to think that we're in a situation where the failure of a couple of major banks can cause a good chunk of the American financial system (and rippling through most of the rest of the world as well) to collapse, but that's where we're at right now. If this legislation is legitimately intended to futher this goal it's worthwhile. The bailout of AIG prior to this act was only for the purpose of keeping the company alive long enough to sell off many or all its assets at decent prices so that AIG didn't take its creditors down with it. I don't know but I hope this reasoning applied to the rest of the financial sector is the rationale behind the bill. If the bailout simply keeps unprofitable companies going indefinitely on the taxpayer's dime, then the bailout will be a failure and will only make the situation worse by pushing the U.S. government itself closer to failure (by running an unsustainable deficit) while not improving the financial health of our private sector.
The most troubling aspect of this bill is the fact that it didn't provide for the creation of a committee of financial experts to examine what parts of financial policy led to our current situation and what reforms would be required to prevent the recurrence of such a scenario. Like the 9/11 Commission, these members would operate with motives other than winning elections and would be tasked to generate a no-punches-pulled report on the flaws in our regulatory system, what policy holders messed up and details on those mistakes, and the measures necessary to correct the regulatory problems. U.S. policymakers did almost nothing in the wake of the savings and loan bailout of the 1980s and make only rudimentary reforms to corporate accounting practices after the accounting shenanigans that took place around the turn of the 21st century. Not only they not learn from these experiences, they actually consciously un-learned lessons from the Depression by repealing the Glass-Steagall Act and other deregulatory measures.
I hope that we haven't passed the point of no return and that we're doomed to a full-scale economic collapse,
Re:Disagree with a lib and you are evil (Score:3, Insightful)
Sorry, but you're an idiot. I consider myself more conservative than any Republican in the last 50 years. Both parties have become a joke - they're both pushing for a welfare-state. The words "Liberal" and "Conservative" have become synonymous. I won't be voting for either Obama or McCain, and certainly not some idiotic Libertarian candidate. They're all for the destruction of individual rights.
how can they increase FDIC limits? (Score:1, Insightful)
How can 250k FDIC limit be credible when wamu would have almost completely wiped them out. The only reason the FDIC is still in business is because the last few failures were instead fire sale sold off to the preferred few.
Re:Seriously it is quite an achievement (Score:5, Insightful)
There were plenty of alternatives proposed that were less intrusive, safer, and better targeted to unfreeze liquidity to buy us time to fix the real problem of reckless, unregulated trading in fraudulently valued housing derivatives.
All were all rounded rejected by Paulson and taken off the table without further debate. If you doubt this, do some research. The rush to pass this via fear-mongering is typical administration bullying at its worst.
The Paulson plan is a naked power grab. Stop trying to sugar-coat it. It's a last ditch effort to save investment bank cronies from getting crushed from the upcoming recession by buying their junk at prices way above market value.
Re:It's only a matter of time. . . (Score:4, Insightful)
We HAD a perfectly good solution to that, but the anti-smokers ruined it.
Re:Friday (Score:4, Insightful)
I agree with you on most of your writing. There are things fundamentally flawed in our western culture. However, I don't agree with the last sentence:
The sooner you all fall to pieces, the sooner we can start clearing your poisonous influence out of our nations.
You cannot hold America or Americans responsible for this influence. What the people in Europe choose to do is *their* responsibility, not any American's. People in Europe can refuse to participate, but they don't. Not because any American forces them, but simply because they're tempted by greed in much the same way.
Re:Unless gas prices are affected... (Score:5, Insightful)
Regulate fuel prices to a reasonable level
How would increasing fuel prices help you? Unless it forced you to other forms of transport...
Re:It happens every year (Score:4, Insightful)
Re:Disagree with a lib and you are evil (Score:3, Insightful)
ties to Fannie Mae and Freddie Mac, how those government sponsored enterprises acted as ATMs
A lie. Fannie Mae specifically didn't have any US backing on the paper it gave out. And probably the same for Freddie Mac.
But don't let the facts get in the way of a good story.
and how Dems forced banks to lend to those with bad credit
I keep hearing this. Show me one example where a bank was forced to loan out money to someone and where they instead couldn't have said "fuck this I am not lending any more money with these kind of unprofitable regulations."
Re:first post (Score:5, Insightful)
No, free market capitalism is when private companies reap all the benefits and ordinary tax payers take all the risks.
Atleast that is what always seem to happen.
Meyer Mishkin... (Score:4, Insightful)
There were plenty of alternatives proposed that were less intrusive, safer, and better targeted to unfreeze liquidity to buy us time to fix the real problem of reckless, unregulated trading in fraudulently valued housing derivatives.
All were all rounded rejected by Paulson and taken off the table without further debate. If you doubt this, do some research. The rush to pass this via fear-mongering is typical administration bullying at its worst.
The Paulson plan is a naked power grab. Stop trying to sugar-coat it. It's a last ditch effort to save investment bank cronies from getting crushed from the upcoming recession by buying their junk at prices way above market value.
Ooook... time for some ranting:
This has long since become much more than an attempt to save Investment bankers and corrupt mortgage banks. This crisis is now threatening banks that are quite solid, never behaved irresponsibly, were not exposed to the sub-prime mess and that are essential to the proper functioning of the USA's, Europe's, Asia's and generally the rest of the worlds economies. The banks this 'bail out' is meant to help are the ones that provide the capital for small and medium size businesses on Main Street America to function, the ones that pay people's salaries. One can only hope that it succeeds in protecting them, and the rest of us, fro what m the screw-ups of the Investment banks, the mortgage industry, the risk assessment companies and politicians (both Dems. and Reps.) who made some very poor decisions, failed to properly monitor the investment banks and the mortgage industry and didn't pull the emergency brake in time. The reason that people like you can make comments like the one above is that you yourself haven't felt the effects of is happening... YET! It will take a while for the this infection to eat it's way through the rest of the banking community, through the businesses and eventually to you yourself (think layoffs on a hitherto unknown scale) and by the time it finally does and you finally start to get it it will be to late to stop it. I think Frederic Mishkin (via NYT reporter David Leonhardt) summed this up rather nicely with his Meyer Mishkin story. [nytimes.com] Do I think it sucks that the profits of players on Wall Street always get privatized while their mistakes always get Nationalized? Yes! Do I think it sucks that these bozos get a golden... no, these days it's more like a jewel encrusted, gold engraved, platinum parachute even if they have totally screwed up? Yes! Do I want a rerun of 1929? NO! If this is the price to pay to prevent a rerun of 1929 then I'll pay it, very, very, grudgingly. One thing is for sure, I will do my best to support anybody willing to see to it that the people responsible for this mess pay for it. That being said I have no high hopes that more than a few of them will ever be punished.
And that concludes my rant...
Re:You've left a lot out (Score:3, Insightful)
While you seem to have all the answers and the rest of us that might even dare to argue with you must be complete liberal twits..could you possibly give this a look - Who Caused the Economic Crisis [factcheck.org]
Not that I'm trying to make a defense of the Democrats, they do share the blame for this. But I've been listing to my share of Fox News and the story seems to be that there are many people to blame for this, but lets get those dirty democrats and nail them to the wall as much as possible.
Re:Friday (Score:4, Insightful)
That might be the sentiment of some. But the reality is that despite our failures, despite our "decadence" or "immorality", despite the current crisis, people living in free democracies are still much, much better off that people who do not. And I don't just mean better off financially. I mean better off socially, culturally, and yes morally.
Many people around the world live in simple poverty. But not living in a democracy will typically mean you live in subjugated poverty. Even if you are better off, you still live in subjugation. Ask the women who live in just about any third world or developing undemocratic country. Ask the ethnic or religious minorities. Ask the homosexuals. Ask the academics. Ask the journalists. Ask them if they're willing to risk western "corruption" for freedom and democracy? Better yet, ask yourself, and hope that you are not found wanting.
You may disagree with many things in western society. Hell, I disagree with quite a few of them myself. But freedom and democracy are not and never have been a negative or poisonous influence on any society that has accepted them. Whatever may have failed the west in the last few months, our basic values have not.
Perhaps it is nessesary, but... (Score:3, Insightful)
I have to wonder how a government who doesn't believe in hand-outs (no free health care etc.) can possibly approve of such a large bail-out to Wall Street of all organizations -- the place that is the most full of people who are usually against such things. All it does for me is prove that many of the people in Wall Street are just selfish hypocrites at the end of the day. By many of their own philosophies, if Wall Street crashes, it should be left to dye -- survival of the fittest and all that, right? Because that just as much applies to poor decisions as it does to being poor. I'm all for making sure the US economy doesn't collapse, even though I don't live there and I disapprove of it's military actions, but this whole thing still strikes me as repugnant.