Bush bailout for Dummies

[..]

Letting the treasury handle it is alot different from setting up something like the RTC. Treasury is run by the Prez.

You couldn't set up an RTC. The comparison is invalid. There's no assets to sell. That's the problem I have with this whole thing -- it's a gift, not a punishment.

 

Regards,

SD

[mongon]

I have an alternative. Lets take all the billions the gov committed to spend already (about $800b) and add it to the $700b they are planning to spend on the new bailout which by the way will not nearly be enough. Once the plan is in place, all the banks who have been sitting on these mortgage securities and delaying reporting the inevitable are going to come in from the cold and present an honest report of their balance sheets so they can dump the bad loans on the taxpayer and keep all the good loans for themselves. They can then go back to issuing 30% interest rate credit cards to those same taxpayers and we should not prohibit banks from acting like loan sharks because this is a free market but I digress.

 

So lets take the $1.5 trillion plus that is going into the bailout and instead not do it.

 

I wonder how taking the bad debt problem from the financial system and shifting it to the taxpayer really helps taxpayers. The addiction to debt was the downfall of the system, now it will soon be the downfall of the U.S. gov. Just like with AIG or Fannie Mae, sooner or later investors lose confidence in the company that has a huge pile of debt. Then the company crashes spectacularly. The same will happen to the US gov.

 

If we let the market do its work, banks will fail, finance companies will fail, house prices will go even lower. And then poor people will be able to buy houses. The whole bailout is designed to maintain the price of houses. Its price fixing. Let the market impose its discipline, everything will become cheaper and the housing crisis will soon end when working people can afford a home again. And while we are at it, lets terminate the federal reserve. We didn't have a federal reserve for the first 150 years of the republic, we can do without its $1.5trillion fuck ups and inflation and bubbles that it fails to prevent.

 

 

[kamui]

McCain issued an order that no one shall work as a lobbyist that is working on his campaign. Has Bambi done the same?

 

As McCain keeps pointing out, Bambi was the second largest recipient of Fannie/Freddie cash in all of Congress. Me thinks trying to tag only one side as beholden to lobbyists is not going to fly.

 

Come on, McCain has above 100 lobbyists working on his campaign. Even his top surrgates are lobbists.

Both, Obama and McCain received huge amount of money from the financal market.

[..]

See Mongon, we agree!

 

Cheers,

SD

[Bangkoktraveler]

I have an alternative. Lets take all the billions the gov committed to spend already (about $800b) and add it to the $700b they are planning to spend on the new bailout which by the way will not nearly be enough. Once the plan is in place, all the banks who have been sitting on these mortgage securities and delaying reporting the inevitable are going to come in from the cold and present an honest report of their balance sheets so they can dump the bad loans on the taxpayer and keep all the good loans for themselves. They can then go back to issuing 30% interest rate credit cards to those same taxpayers and we should not prohibit banks from acting like loan sharks because this is a free market but I digress.

 

So lets take the $1.5 trillion plus that is going into the bailout and instead not do it.

 

I wonder how taking the bad debt problem from the financial system and shifting it to the taxpayer really helps taxpayers. The addiction to debt was the downfall of the system, now it will soon be the downfall of the U.S. gov. Just like with AIG or Fannie Mae, sooner or later investors lose confidence in the company that has a huge pile of debt. Then the company crashes spectacularly. The same will happen to the US gov.

 

If we let the market do its work, banks will fail, finance companies will fail, house prices will go even lower. And then poor people will be able to buy houses. The whole bailout is designed to maintain the price of houses. Its price fixing. Let the market impose its discipline, everything will become cheaper and the housing crisis will soon end when working people can afford a home again. And while we are at it, lets terminate the federal reserve. We didn't have a federal reserve for the first 150 years of the republic, we can do without its $1.5trillion fuck ups and inflation and bubbles that it fails to prevent.

 

 

 

I think we are fucked!

 

The USA brings in less then1.3 trillion dollars from personal taxes.

 

Figure it out, I can't!

 

 

[Old Hippie]

The real/additional problems might well come when more banks fail...no ideas if the current plan takes that possibility into account.

[mongon]

When they bailed out Bear Stearns, they said this will stem the tide. When Paulson asked Congress for authority to bail out Fannie/Freddie, he said once the market sees that I have the authority, confidence will return and investors will invest in Fannie again and I most likely will never need to use this authority. 6 weeks later he didn't just use some of that authority to provide liquidity, he nationalized both companies.

 

Then came AIG, but its just an $85b loan and "the taxpayers might even turn a profit."

 

Now, this "comprehensive" plan will be sure to do the trick, investors will have confidence again (you see, just talking about it made the markets soar on Friday) and taxpayers might even turn a profit. Yeah.

 

Now for reality. We are in a declining housing market. The situation will get far worse before it gets better. There is so much bad paper out there that $700b will not solve the crisis. But once taxpayers invest $700b, they will need to protect that $700b so they will have to invest whatever it takes to bring the market back and inflate home prices so that mortgages held worldwide will once again have some value. But until then banks are not going to lend money because these mortgages will continue to fuck up their balance sheets. You heard it here: Paulson will be back looking for alot more money, unless he manages to use guarantees to circumvent the $700b limit.

[mongon]

And in the end, producing this much Treasury paper to make this happen is going to fuck up the economy. The unknown is whether this medicine will be worse than the disease or not quite as bad.

[kamui]

Don't forget a very important fact:

The US economy is financed and driven in large parts by private consumption. Over decades the consumption was financed by massive loans.

Now everything comes together with the mortgage crisis, the high oil price and the financial collpase:

As a result more poeple will default on their laons and almost probably many will reduce their general consumption. This will speed up the downward spiral of the US economy and you will see the outcome everywhere.

 

Not only the mortgage market was a bubble, the whole industry for personal loans is a bubble. Almost probably we will see more banks on the verge of bankruptcy in the upcoming months.

 

And of course with a recession looming Washington will receive much less tax to finance the bank bailout program.

 

PS: As a very small side note, I still remember when one-two decades ago I saw some US Americans open their purse in a shop somewhere in Europe and how surprised I was to see how many credit cards they had in their purse.

At that time I was wondering what the cards were needed for. Now in know they were not debit cards but 'loan cards', each card representing a different loan.

[kamui]

Don't forget a very important fact:

The US economy is financed and driven in large parts by private consumption. Over decades the consumption was financed by massive loans.

Now everything comes together with the mortgage crisis, the high oil price and the financial collpase.

 

Not only the mortgage market was a bubble, the whole industry for personal loans is a bubble. Almost probably we will see more banks on the verge of bankruptcy in the upcoming months

 

As a result of higher prices and lower incomes more people will default on their loans and almost probably many will reduce their general consumption. This will speed up the downward spiral of the US economy and you will see the outcome everywhere.

 

.

 

And of course with a recession looming Washington will receive much less tax to finance the bank bailout program.

 

PS: As a very small side note, I still remember when one-two decades ago I saw some US Americans open their purse in a shop somewhere in Europe and how surprised I was to see how many credit cards they had in their purse.

At that time I was wondering what the cards were needed for. Now in know they were not debit cards but 'loan cards', each card representing a different loan.