Bailout working?

[OriginalWheelman]

http://news.bbc.co.uk/2/hi/business/7724325.stm

Instead of buying up the banks' toxic debts, as first proposed by the rescue deal, the bail-out fund will continue to be used to buy shares in the lenders to help boost their balance sheets.

"BAIL-OUT PROGRESS3 October - $700bn rescue bill passes through Congress14 October - Plans announced to buy $250bn in banking stock26 October - First $115bn spent buying shares in eight lenders10 November - $40bn to buy stake in insurer AIG"

I can support this, so long as the dividends are used appropriately.

Mr Paulson's comments regarding America's three main carmakers - General Motors, Ford and Chrysler - are likely to disappoint House of Representatives Speaker and leading Democrat Nancy Pelosi.

On Tuesday night she called for the government to spend some of the $700bn on the three firms, who are all now struggling against big losses and falling sales.

"In order to prevent the failure of one or more of the major American automobile manufacturers, Congress and the Bush administration must take immediate action," said Ms Pelosi.

There is, however, a great deal of opposition to a bail-out for the car industry.

"Once we cross the divide from financial institutions to individual corporations, truly, where would you draw the line?" said Jeff Sessions, Republican Senator for Alabama.

Good point. The government is here for the people, not the corporations. The only logic I can understand for the financial bail out was to save people's houses, however, if the banks folded, would the owners then have to repay the debt? Maybe we should let them fold and a bunch of people get free houses. Eliminating mortgage payments for a few million people should stimulate spending.

[audtatious]

Doubtful that the company folding would allow free houses....

Anyway:Bailout Price Tag: $3.5T So Far, But 'Real' Cost May Be Much Higherhttp://finance.yahoo.com/tech-...SPC,C

[WDRacing]

So...who's paying for all of this? How will "I" be paying this off eactly? Since I'm in good standing creditor wise and pay regular mortgage payments etc, should I get some kind of TAX break?

Why am I being held responsible for the entire Nations idiocy?

[audtatious]

You and me both. I only have a house and car bill. I only buy things when I have cash for it (or pay the credit charge immediately).

I simply don't see how "taxing the wealthy" will pay for everything when they are only talking about a few percentage points.

In 2006, the IRS collected around 2.2 trillion dollars. Let's say it increases to 2.5 trillion for 2008. The top 10% pay 70% of the tax burden with the top 6% paying 60%. That means the top 6% paid 1.5 trillion of the burden with 1.75 trillion being paid by the top 10%. The top 6% paid at an appx 36.9% tax rate. It is suggested that they be taxed at around 39%.

Now, with the above, how can we implement UH, and all the other projects that have been promised without going further into debt? Some people claim "ending the war" will fund stuff because we spend 10 billion a month on the war effort (which also includes infrastructure rebuilding and such)so that only adds up to 120 billion a year in savings. That will at least cover the "UN Global Poverty Act" which Obama has promised 845 billion over the next 13 years (That's 65 billion a year).

I don't get it. We need to cut spending and all the bailout crap and get to a balanced budget regardless of who is in office.

[OriginalWheelman]

(which also includes infrastructure rebuilding and such)

Which is being done by American contractors.

We need to cut spending and all the bailout crap and get to a balanced budget regardless of who is in office.

[audtatious]

Looks like Freddie Mac has posted a $25.3 billion loss in the third quarter this year.

http://news.yahoo.com/s/nm/200...mac_2

[smockers83]

Good point. The government is here for the people, not the corporations. The only logic I can understand for the financial bail out was to save people's houses, however, if the banks folded, would the owners then have to repay the debt?

The bailout was to put liquidity back into the credit markets. That was the main reason for it. The economy is currently hinged on the credit market right now. If the credit market freezes up again like it did earlier this year, the economy is going to freeze up. If it heats up, the auto industry could actually survive because a lot of their problem is the credit industry. Dealers can't get financing to buy the cars from the plants and consumers can't get financing to buy the cars off the lots, all due to the credit situation.

If we want to balance the budget, history only tells us that the current tax code won't do it and we have to shift towards a tax code such that of what Obama has in mind.

We won't know if its working until its all said and done.

[Cold_Zero]

Smockers, I thought that before the $700 billion bailout plan was even talked about the Fed and the Europeans were pumping in billions of dollars into the domestic/foreign markets to put liquidity back into the market?The $700 billion bailout was to buy up 'toxic' assets in pool securities to shore up the hemorrhaging that the major Financial companies have been experiencing since early last year. Not necessarily to pump money into the liquidity markets to get credit flowing again. A lot of the money has been given to the major banks, which they sat on and a few used it to buy up some competitors. And now we are talking about investing in the major financial firms and possibly the Big 3 Auto manufacturers.

So let me get this straight, people.-No toxic assets have been bought up and put into a pool so that they can be rehabbed, as per the original idea. We have been doing basically the same thing that the financial markets have been doing for the past year or two now. Except now the US Government has replaced the private and foreign investors infusing major amounts of cash into our financial institutions. -Major amounts of money were given to the banks to create instant liquidity so that we could jump start lending in the US. Very little of it has been lent out, let along spent. What money that has been spent by the larger financial institutions has gone to buying up smaller institutions thus further exposing us to more risk by not being properly diversified. Maybe if you are"too big to fail" you are just plain too big! (Taken from Robert Reich).-Now we are going to directly invest in the companies that have helped create this financial problem?

I got a great idea, give me the rest of the $700 billion dollars and I will personally stimulate the economy with my mad spending spree.

Seriously, this does stink of a planned attempt at the Federal Government level to control major markets and industries. When the government gets its claws in you, it can tell you what to do. We have a system in place to handle these failing companies. It's called bankruptcy court, being bought out by a private equity firm or mergers. I think when the 700 billion dollars runs out, it wont have been enough for the politicians and the people being bailed out and they will come back again for more money. What are we on the hook now for with this bail out, 3 trillion dollars?

Now there is talk that the major metropolitan cities are going to ask Congress for bailouts. Indianapolis just got $29 million dollars from Congress to invest in home ownership/urban renewal in Indiana's 7th Congressional District. Of which none of the money comes out our way in the district. And I am sure that California is going to come knocking on Congress's door for a major bail out of their state's problems.

Sorry guys, I am just frustrated at the current mess we are digging ourselves into. And I know that my daughter and her children and grand children are going to have to pay for this 'bailout.'

[Cold_Zero]

If the Liquidity crisis was caused in most part by the Sub Prime Mortgage crisis, why isn't the Federal Government doing more to stop foreclosures which initially has caused the problem and which continues to fuel the problem? Prior to the mid 1980's when massive amounts of people were defaulting on student loans and writing off the loans through bankruptcy. Doctors and Lawyers would go out, run up their credit, sometimes transfer cars and houses to friends and family and then file bankruptcy to have their student loans discharged. President Ronald Reagan and the Congress signed into law changes the federal student loan programs so that you had to pay back your student loans or face sever penalties and punishments.

It has been too easy for people in this country to buy homes that they could not afford and then turn around and walk away from the debit. Same thing has happened with Credit Cards. I have heard ads on the radio of organizations that will help you walk away from your house and for a fee walk you through the foreclosure process! OMG! If you stem the foreclosure rates by making it a little harder to just walk away from your house, would that help the problem?

[WDRacing]

People place alot of blame on the lenders and not enough blame on the people signing their name. We don't hold people accountable for their bad decisions. From the single parent family to the huge conglomerate corporation, we fail...utterly. GM goes under...so be it. Honda, Nissan, Toyota, Dodge or Ford can buy up the factories, rehire the workers and press on. We don't need a company that can't sustain itself. If you fail, it's because you made bad choices...NOT MY DAMN FAULT. So why the hell am I paying?

Why am I paying because you can't afford the house you bought? Not my fault you're to stupid to realize what variable rate means. Not my fault you didn't READ the damn contract. You signed, your liable. So we had banks and other various lenders throwing out retarded approvals...in the end, it's personal accountability. You know how much you make, you know what bills you have...sign the line and assume the responsibility. Defaulting on a loan should incur some severe penalties, like hard labor camps. Don't make any money, grab a shovel and a wheelbarrow, start here and dig until tomarrow. Don't like it, lethal injection...your choice.

Why should I take my hard earned money and give it to you via taxes so you can sqaunder it? You were stupid the first time around, you'll be just as stupid the next time. Especially since we keep bailing out the companies that would have failed.

F#$% Them...

[audtatious]

It's like a lot of things. Have stupid/lazy kids in class then you need to lower the standards so they feel better (while taking away initiative from "smart" kids). Little Johnny is sad because his team lost every game this year? Give everyone a participation trophy instead of real rewards so they can fail in "real life" as they now have set expectations. Can't afford your house or apartment? Don't pay. It will take 3+ months before they can make you leave and you can live off their backs for a while. Hell, do it over and over again and you may not have to pay but 4 months rent and live 8 months free. Who cares as it's someone else's problem and you deserve it.

[Cold_Zero]

Brian,Not that I am arguing, but coming from the lending, origination and guarantor side of things I think first and foremost the lenders should be on the hook. But I can't argue with the fact that you are right, the responsibility is ultimately shared by both the lender and the borrower.

[audtatious]

True, but the borrowers were not penalized for not accepting the loans whereas the lenders were penalized if they did not meet some quota set forth by the Gov.

[WDRacing]

I have equal amounts of hate for the predatory lending SOB's homie. I was given a false payment sheet when I signed this mortgage. They had my PMI listed as Escrow. So they weren't actually paying my taxes...

But it was MY fault for not doing the math correctly. Would I murder the guy that drafted the paperwork, you bet. I'd do so many awful things to that SOB that you could write a 500pg book describing how much he suffered.

But I hold people just as responsible. Americans are stupid, we live beyond our means every day. It's become the accepted standard of living. Well...we all want change, it starts with us.

[ishkabibble]

True, but the borrowers were not penalized for not accepting the loans whereas the lenders were penalized if they did not meet some quota set forth by the Gov.

The mortgage crisis was not caused by CRA-approved loans.

[audtatious]

Not fully, you are correct. CRA lending sure helped. You have multiple things going on with these, IMO. You have banks who tend to not want to give out loans to people who possibly can't afford them because of risk. You have mortgage agents who don't care what happens after the loan making lots of money by selling people homes. You have special interest groups pressing forth for more of these kinds of loans and you have people themselves who are willing to sign on a dotted line in order to get what they want regardless of whether they can afford it or not.

It turned into a free for all but who is to blame more?

[ishkabibble]

It turned into a free for all but who is to blame more?

Lots of parties are partly to blame, but the bubble in opaque derivatives is what caused Wall Street to tank. Pointing the finger at the CRA is just another right wing talking point.

I'm not pro-CRA. I just don't feel it was the main cause.

[audtatious]

Since economists can't point to a single thing that caused the problem then I doubt you or I will either. It's a contributing factor that I can point to as ridiculous. Call it what you will.

[ishkabibble]

Since economists can't point to a single thing that caused the problem then I doubt you or I will either. It's a contributing factor that I can point to as ridiculous. Call it what you will.

I dunno, you seem to focus on the CRA being the cause.

[audtatious]

And you seem to want to focus on other aspects. Let's just blame it on good 'ole Bush.

[smockers83]

Since economists can't point to a single thing that caused the problem then I doubt you or I will either. It's a contributing factor that I can point to as ridiculous. Call it what you will.

Securitization of loans. Securitization reduces the banks' incentive to make high-quality loans. The low-quality loans, with missed payments and defaults, stretch the money supply so thin that cash isn't available to lend out, hence the credit crisis.

The $700 billion bailout was to buy up 'toxic' assets in pool securities to shore up the hemorrhaging that the major Financial companies have been experiencing since early last year. Not necessarily to pump money into the liquidity markets to get credit flowing again. A lot of the money has been given to the major banks, which they sat on and a few used it to buy up some competitors.

As per the Treasury and Fed yesterday in hearings, the money spent so far was given to banks that were healthy enough to come out on top as well as banks that need capital. Healthy banks were given the money even if they said they didn't need it so that they wouldn't become unhealthy and completely crash the system. This instills liquidity back into the credit markets, which is what they have been targeting with this legislation.

[ishkabibble]

And you seem to want to focus on other aspects.

I want to understand the true cause. Unlike you.

[480sx]

Remember that great plan that congress passed to buy up all these bad loans at a reverse auction, that whole deal? Yea well it looks like that was all a load of crap because money is just being strait given to banks, AIG, ect. I was trying to find a source for this, i heard it on NPR today. However there is no listing of what i heard from what i see..

I sent NPR an email trying to figure out where that news story is housed, ill try to get back to you guys on it.

On a side note, how about the 'big three' auto makers asking for a bailout and pretty much being denied? Dont you think that the majority of americans would support SOME form of a auto industry bailout? Simply considering 'we'(lol) already passed a massive bailout. I would think that the majority of Americans would be all for sending some of that money to the big three. What do you guys think?

[ishkabibble]

I think most Americans support the idea, but most Americans are too ignorant about the situation for their opinion to be worth anything. We need to go through the pain of our auto industry collapsing, just like the UK did.

The Dow closed below 8k today, proving the sayers of "the bottom is in" wrong. I'm thinking we still have another ~30% decline from current levels to go, especially if the automakers fold.

[audtatious]

I want to understand the true cause. Unlike you.

Then what is the true cause, oh wise one? Republicans, corporations, Bush and not enough investment into those with bad credit and no money?

[audtatious]

I think most Americans support the idea, but most Americans are too ignorant about the situation for their opinion to be worth anything. We need to go through the pain of our auto industry collapsing, just like the UK did.

Majority of Americans do not seem to support the bailout. As you stated we are too ignorant so can you please tell us what to support and what to do? We need someone who has all the answers to lead us and you seem to be him?

Have you actually thought about politics? You seem to have it down pretty well. just don't call people ignorant, use "Ill Informed".

[480sx]

Ignorant is the perfect word to describe most Americans IMO. If you want to be PC and try to be nice then be my guest, but dont push that on other people. Your really just trying to war on a partisan level and its..

Also, you completely missed the discussion that we were having because you most likely skimmed my post(kinda doubt you even bothered to do that), so your post is pretty null and void.

[audtatious]

Excuse us ignorant people for stepping on your edjumacated toes. I'm sure glad people like you and Ish are around to help steer us and tell us what we should know and do. I'll shut up now and let you and others dictate to the rest of us.

[ishkabibble]

Then what is the true cause, oh wise one? Republicans, corporations, Bush and not enough investment into those with bad credit and no money?

It's not the CRA, no matter how many times you say so.

[ishkabibble]

Excuse us ignorant people for stepping on your edjumacated toes. I'm sure glad people like you and Ish are around to help steer us and tell us what we should know and do. I'll shut up now and let you and others dictate to the rest of us.

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