So this "Bailout"...

[eedre]

$700 billion from where? Seems like if this passed, we'd experience a period somewhat like administering a single morphene drip to the economy - but overall, would do nothing in the long run to shorten the downturn... or it would do nothing but cause the lengthening and/or worsening of the current state.

I'm making lots of assumptions, but somehow - I'm glad it failed.

Thoughts?

[ryco]

I'm glad it failed too. What a mess.

[Stu L.]

My question is, what makes them think that giving the banks working capital will make the customers able to repay their debts? Making new loans just can't help. To me, it doesn't just doesn't work. But I haven't read too deep into it, so maybe it's explained somewhere and I just haven't found it yet.

[whoatherechunk]

most politicians should just go to jail. what do they care? they have swank lifestyles and can easily bail themselves at any time. working class americans are getting screwed.

[GeneralElectric]

Actually the $700 billion is from a government fund. Its not really a "bailout" which is a stupid phrase coined by the media.

Basically, with the $700 billion, the government would buy off these assets from failing banks for cheap and then resell them to them later for either what they paid for them or a profit depending on when they sell them back.

Hope this clears things up.

[knarleybass]

I wish I could buy my loans for pennies on the dollar.

[GeneralElectric]

Thats pretty much what theyre doing.

[santucci218]

i want free money.

[lowendmafia]

This bailout idea was garbage. 2 out of 3 Americans were opposed to it and our congressional electorate actually voted for their constituencies. So now, with the DOW down 777 points and the Jewish holiday Roshashana over the next two days, we are stuck in a credit seizure. So what do we do? I think the best move is to suspend the mark-to-market (basically artificially pricing assets based on current market value rather than their actual purchased value) on wall street and replace it with a 3 year rolling average. Temporarily suspending the mark-to-market will (potentially) stop the bleeding on wall street and give congress time to come up with at better bill, perhaps forcing the people responsible for the crisis to fix it themselves without our money. At this point, who really knows?

[mrokern]

Originally Posted by GeneralElectric

Actually the $700 billion is from a government fund. Its not really a "bailout" which is a stupid phrase coined by the media.

Basically, with the $700 billion, the government would buy off these assets from failing banks for cheap and then resell them to them later for either what they paid for them or a profit depending on when they sell them back.

Hope this clears things up.

That's the idea...

There are a couple of assumptions critical to the plan, though. The first is that the banks will loosen lending requirements once they have their worst debts off their books. Would they actually do this, or would they continue with the current credit criteria in order to drive their holdings back up?

Issue two is the 700 pound gorilla in the corner. If this doesn't work as planned and assumed by some lawmakers, costs will continue to stay above market value. If we have learned anything from history, it is that an economy can only survive so long when costs and market value are too far apart. If the costs of goods and services are not allowed to drop to match market value, there would be a much, much, much worse hit to the economy not very far down the road. People think we're getting close to hitting the bottom, but we're not even close to what could happen if the above would prove true. It's not likely, but you could see a total crash of the credit side of our economy...and that is a HUGE part of our economy. Nothing like seeing $500,000 homes become worth $100,000. And you thought a lot of folks jumped out of windows back in '29.

No matter what, some people are going to take it in the shorts. There's no way around that right now. The question is, will it be financial institutions and their shareholders, or average joe schmoe? I realize that lots of average joes are losing money right now as well, but that is the risk you accept when you invest. At the end of the day, it's educated gambling.

-Mark

[Armueller2001]

So what happens if the American taxpayer doesn't bail out these companies that failed?

[GeneralElectric]

The taxpayer isn't bailing anyone out. There have been protests filled with stupid... ahem.. I mean misinformed people.

The $700 billion fund has existed for just such a purpose for years.

[mrokern]

Originally Posted by Armueller2001

So what happens if the American taxpayer doesn't bail out these companies that failed?

I'm sure we've got some much better experts around here than moi. My specialty (and college education) is in Political Science, so the politics surrounding this are more my area. I'll share my thoughts without heading down that path, though.

We're running a risk that the credit industry is going to blow up either way. We're basically in a damned-if-we-do, damned-if-we-don't scenario.

If we don't do it, you could see a lot of businesses start to fail or at least scale back due to unavailability of credit. You'd have to move back to a cash model. Not necessarily the worst thing, considering where the credit model has gotten us...but you'd see the economy sink lower before stabilizing and unemployment would definitely go up.

If we do it, we could allow the credit industry to recover and therefore go back to business as usual. The problem is that if this doesn't go off exactly as hoped, we could be setting ourselves up for a major collapse in a year or two (trust me, what we've seen so far is nothing close to what could happen). G.E. raises a good point. Listen to what the economists (not the news ones, the REAL ones) are saying. They aren't talking about "taxpayer" bailout, they're concerned about the longer-term ramifications that this could have.

My personal thought? They're going to have to do SOMETHING. It goes against every Libertarian bone in my body, but it's the truth. Hopefully they can step up with a plan that minimizes risk and damage to the government. After all, let's not kid ourselves....if the government comes up $700 billion short in the future, fund or not they are going to replace it from all of us in one form or another. They also need to make sure that there are indeed ramifications for any company that caused this. Shareholders for those companies need to get hit, and get hit hard. It's unfortunate, but it's the only way to guarantee self-regulation. When you lose your butt, you tend to get pissed and pay a lot more attention to WHY you lost your butt.

-Mark

[jokn388]

Posted in a wrong thread:

http://www.nytimes.com/2008/09/21/bu...1draftcnd.html is the bill itself. You should read it over.

"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."
That's pretty scary that the one guy will effectively control all the money. He can do whatever he wants, and does not have to own up to any poor decisions...... how is this acceptable?

[mrokern]

Originally Posted by jokn388

Posted in a wrong thread:

http://www.nytimes.com/2008/09/21/bu...1draftcnd.html is the bill itself. You should read it over.

"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."
That's pretty scary that the one guy will effectively control all the money. He can do whatever he wants, and does not have to own up to any poor decisions...... how is this acceptable?

It's hard for me to read that kind of stuff without seeing red. I won't get into the politics of trying to write avoidance of oversight into law these days (since I'd like this thread to stay open), but suffice to say that I don't believe wording like that is what our founding fathers had in mind when they wrote the Constitution.

-Mark

[j-raj]

Divide the $700 billion that they were going to use, amongst the people of the US with debt/mortgage/etc., encouraging them to pay off their outstanding obligations. That will bail out the people, some of the institutions and they'll pour $ back into the engine/economy.

[nickn]

Originally Posted by j-raj

Divide the $700 billion that they were going to use, amongst the people of the US with debt/mortgage/etc., encouraging them to pay off their outstanding obligations. That will bail out the people, some of the institutions and they'll pour $ back into the engine/economy.

This is America we're talking about. People will just take the money and go buy a new TV.

[j-raj]

Originally Posted by nickn

This is America we're talking about. People will just take the money and go buy a new TV.

exactly, pouring $ back into the economy... bring it on.

[j-raj]

Originally Posted by j-raj

exactly, pouring $ back into the economy... bring it on.

oh wait, a TV? well pouring some of the money in this economy and some into another.

[Ívar Þórólfsson]

Closing this one.

The last bailout thread was moved to the lobby.