The Great Recession - post mortem [Archive] - Page 3

DaddyTorgo

09-24-2008, 12:31 PM

I need to vent, here. Directly from Paulson's proposal, I insert here the entirety of Section 8:

"Sec. 8. Review.
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 is it. Under the Paulson plan, he is accountable to no one. So, to your point, Marc, since his decisions are not reviewable by a court of law, and his proposal allows him to buy and sell anything he wants at any price, Paulson could buy $750 billion in mortgage-backed securities, sell it to himself for a penny, and, under this proposal, there is no legal action possible.

That said, I do not believe he intends to do that; but it is absolutely ridiculous to write a law that would give someone that ability.

The only "accountability" under Paulson's proposal is to provide a report to Congress twice a year. In that regard, the report isn't required to include any specifics. The following text would comply fully with the legal requirement for the report to Congress: "Dear Congress: I spent all $750 billion. I complied with the law and, boy, did it sure help out a lot of folks. Smooches, H. Paulson."

The language proposed by the Administration is a joke. Not that I would expect anything else from this crew.

I gotta agree. There needs to be accountability in it, and oversight of it. Regardless of how long that makes it take and what damage occurs in the meantime.

That said -- I don't blame it on the administration. By all accounts it was a Paulson/Bernanke creation. And I agree with you, I don't think they INTEND to do anything wrong with it, but to essentially give them a $750bn blank-check would be horrifically poor stewardship by our elected officials, and would personally ensure that I (i'm sure among plenty of others) would never vote for them again.

Fidatelo

09-24-2008, 01:13 PM

I like Mark Cuban's idea of making the entire process transparent to every US Citizen, with his example being essentially a giant corporate eBay auction of every asset so that Americans can be assured that they are getting top dollar.

sterlingice

09-24-2008, 01:35 PM

Ok, stupid question. I'm looking at this from a 20000 foot view so maybe I'm just missing some of what is going on at the ground level. Without some future lending regulation put into place, how does this not happen in the future. Things get better in a few years and there is money to be lent again, how do we avoid getting back into this mess. And, by mess, I'm referring strictly to the housing problem- not the banking issue.

As I see it, we've lost a lot of value on paper. Houses that were once valued are valued at, by the time things bottom out, roughly 40% less. So, a lot of people lost a lot of money. However, if we do something to artificially inflate these values, don't we just end up here in 20 years again when the people sell these homes and there is no one with the money to buy them up because their real value is well below what they are "valued" at?

SI

Marc Vaughan

09-24-2008, 02:01 PM

As I see it, we've lost a lot of value on paper. Houses that were once valued are valued at, by the time things bottom out, roughly 40% less. So, a lot of people lost a lot of money. However, if we do something to artificially inflate these values, don't we just end up here in 20 years again when the people sell these homes and there is no one with the money to buy them up because their real value is well below what they are "valued" at?

As I see things this isn't about house prices and the actions being taken won't inflate house prices one iota.

This is about propping up the financial institutions so that a domino effect doesn't occur, what the Fed is worried about is multiple futurebank failures or simply the continuation of the current seizing up of the loan markets.

This not just impacts the financial companies themselves but also pretty much every other company as most will utilise banking institutes in some way and much of company expansion is leverages via. loans and suchlike.

Flasch186

09-24-2008, 02:33 PM

Jack Welch spoke in ominous tones today. :(

Galaxy

09-24-2008, 03:01 PM

Interesting note is Warren Buffett and his company purchased $5 billion worth of stock in Goldman Sacs.

Flasch186

09-24-2008, 03:12 PM

ahem, preferred stock that is non-convertible with an option to buy 2 billion more at any time in the next X years for ~119/share. It's a pretty sweet deal for Berkshire but im not sure it's exactly the vote of confidence were looking for.

Galaxy

09-25-2008, 11:45 PM

cartman

09-25-2008, 11:51 PM

Add Washington Mutual to the next seized government asset, with help from JP Morgan. Any price tag on what the government will spend on this?

Looks like bailout plan is in the crapper due to politics as usual.

The figure I heard was in the neighborhood of $250 billion.

And the bailout plan is heading to the crapper due to the Republican caucus in the House. Not surprising, since that is the most politically sensitive group at this time. They have been manhandled by the Bush administration for the past 7 years, and they are all facing re-election. This is their last chance to show some backbone and go back to the fiscally responsible roots that they were originally elected on. The Republicans in the Senate are a lot less exposed than their counterparts in the House.

st.cronin

09-25-2008, 11:55 PM

Gas was very cheap around here today, about 3.25 in some places.

cartman

09-26-2008, 12:23 AM

Just saw this on another site. The amount proposed for the bailout ($700 billion) is almost equal to the amount of the US national debt at the end of the Carter administration ($930 billion). Wow.

Galaxy

09-26-2008, 12:39 AM

Nice.....

Shkspr

09-26-2008, 02:04 AM

Just saw this on another site. The amount proposed for the bailout ($700 billion) is almost equal to the amount of the US national debt at the end of the Carter administration ($930 billion). Wow.

That's like $3 trillion today, though, right?

BishopMVP

09-26-2008, 05:16 AM

And the bailout plan is heading to the crapper due to the Republican caucus in the House.The Democrats do still have a majority, right? Time for them to grow a backbone. The R's don't have the numbers to filibuster.

(Of course that avoids the point that, from what I've seen, this isn't a good plan and could be done either A) much better if they want to spend that much money or B) much cheaper if they're going for the same goals the $700b plan has.)

((The other thing I found unintentionally funny was its effect on the campaign advertisements. I saw an Obama ad today claiming McCain was planning on offering $4 billion in tax breaks for oil companies. A month ago I would have been outraged at $4billion. Today my first reaction was to shrug it off - that's 3 weeks interest at best; a pittance - before I thought it through and realized they said $4,000,000,000.)

JPhillips

09-26-2008, 07:23 AM

Why should the Dems give the Republicans something to run on for the next month? I wouldn't vote for anything that didn't have the support of at least 50% of the Republicans.

flere-imsaho

09-26-2008, 10:22 AM

I've been hearing more about how the Swedish government did a similar bailout in the early 90s. Basically they agreed to recapitalize the banks, but the other part of the agreement was that the government would get very big equity stakes (similar to the 79% Paulson got from AIG) which they later sold off for big money that helped defray the cost of the bailout.

Seems like common sense to me. (http://www.time.com/time/business/article/0,8599,1843659,00.html)

The Swedish example offers one way to minimize such "moral hazard" and potentially recoup some of the funds taxpayers are being asked to spend to help get the credit markets rolling again. The idea, says Lundgren, is not to just give money, but "to get some ownership (in return), and eventually be able to get some revenue back." By taking a stake in its enfeebled banks, Sweden was able to minimize the taxpayers' burden in the long run.

Sweden's financial crisis in the early 1990s stemmed from a 1985 deregulation of credit markets, which set the stage for overexpansion and bubbles in the real estate and finance markets. When those bubbles burst in the early 1990s, Sweden's currency crumbled and interest rates spiked to 500% overnight. Of the country's seven biggest banks, five needed either government bailouts or big injections of money from shareholders. The value of the country's real estate market plunged 50-60% in 18 months. "The whole Swedish banking system was off-balance," Lundgren recalls.

The government tried several stop-gap measures to no effect and in late 1992 opted for a complete re-booting of Sweden's financial system. Conservative Prime Minister Carl Bildt's administration sat down with the center-left opposition and came up with a bipartisan, multi-tiered approach. The government issued blanket insurance for a period of four years to creditors in all the country's 114 banks. It established an agency to oversee all banks that needed recapitalization and told them to immediately write down their losses.

Most importantly, the government stipulated that in order to become eligible for government funding, banks would have to give up something — namely equity — in return. In the case of one leading bank, the mere prospect of the government taking a stake was enough to persuade shareholders to dig deeper and raise money on their own. For the rest, the government was able, once the markets rebounded, to sell off the stakes it had acquired, making a profit that was effectively returned to taxpayers' coffers. At one point the government controlled more than 20% of the entire banking system.

The cash that Sweden poured into its banks at the time amounted to about 4% of the country's Gross Domestic Product. The comparable share of the U.S. GDP would be about $850 billion, or not much more than what Paulson has recently proposed . But in Sweden's case at least one half of that money, and possibly more, depending on the source, was recouped by subsequent equity sales.

One of the attractions of this Swedish model is that it reduces so-called "moral hazard" — effectively rewarding poor or reckless risk assessment — by forcing financial institutions that took the highest risks to pay towards their own rescue. And it allows the state to recoup the money that it expends to buy up the bad debt at the core of the problem.

sterlingice

09-26-2008, 10:30 AM

Sounds like a good idea. What are the down sides and how has their economy performed since?

SI

flere-imsaho

09-26-2008, 10:43 AM

Well, it recovered the financial system, and that's the main thing. I believe the economy has generally done well since then, although it's not too similar to the U.S. because a) it's heavily integrated into the EU and b) it's much more of a regulated economy than America's. I believe they've had some issues recently due to an explosion of welfare/health-care type costs due to very liberal immigration policies (Sweden has a very large immigrant/asylum population).

I think the main downside is that this means the banking system is, for a time, heavily owned by the government, which a lot of people don't like. I personally don't mind it, since there's a roadmap out of government ownership anyway.

flere-imsaho

09-26-2008, 10:51 AM

More extensive NYT writeup including more info on how it turned out afterwards (see towards the end of the article):

http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?_r=1&oref=slogin

Marc Vaughan

09-26-2008, 10:55 AM

Do bear in mind that the tax rates in Sweden are around double what they are in America ... but in return you get a very good health system and social security etc.

sterlingice

09-26-2008, 11:03 AM

More extensive NYT writeup including more info on how it turned out afterwards (see towards the end of the article):

NY Times Advertisement (http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?_r=1&oref=slogin)

Sounds like a good idea. I like the idea that we get some money back for it and that it removes a lot of the moral hazard. If this is what the GOP is proposing as an alternative- get your arses to the table because I think the American public would be behind this.

Oh, and I think the public still wants their pound of flesh from CEOs and board members so that clause isn't going away.

SI

sterlingice

09-26-2008, 11:03 AM

Do bear in mind that the tax rates in Sweden are around double what they are in America ... but in return you get a very good health system and social security etc.

Yeah, but how does that relate to the government banking bailout?

SI

ISiddiqui

09-26-2008, 11:25 AM

On the other hand:

The Paulson Plan Will Make Money For Taxpayers - WSJ.com (http://online.wsj.com/article/SB122230704116773989.html)

My analysis suggests that Treasury Secretary Henry Paulson (a former investment banker, no less, not a trader) may pull off the mother of all trades, which could net a trillion dollars and maybe as much as $2.2 trillion -- yes, with a "t" -- for the United States Treasury.

Well, unlike Mr. Buffett or any hedge fund, the Treasury and the Federal Reserve get to cheat. It's not without risk, but the Feds, with lots of levers, can and will pump capital into the U.S. economy to get it moving again. Future heads of Treasury and the Federal Reserve will be growth advocates -- in effect, "talking their book." While normally this creates a threat of inflation and a run on the dollar, and we may see dollar exchange rates turn south near term, don't expect it to last.

First, with Goldman Sachs and Morgan Stanley now operating as low-leverage bank holding companies, a dollar injected into the economy will most likely turn into $10 in capital (instead of $30 when they were investment banks). This is a huge change. Plus, a stronger U.S. economy, with its financial players having clean balance sheets, will become a safe haven for capital.

Europe is threatened by an angry Russian bear. The Far East, especially China, has its own post-Olympic banking house of cards of non-performing loans to deal with. Interest rates will tick up as the economy expands -- a plus for the dollar. Finally, a stronger economy driven by industry instead of financials means more jobs, less foreclosures and higher held-to-maturity payouts on this Fed loan portfolio.

You can slice the numbers a lot of different ways. My calculations, which assume 50% impairment on subprime loans, suggest it is possible, all in, for this portfolio to generate between $1 trillion and $2.2 trillion -- the greatest trade ever. Every hedge-fund manager will be jealous. Mr. Buffett is buying a small piece of the trade via his Goldman Sachs investment.

Over 10 years this could change the budget scenario in D.C., which can also strengthen the dollar. The next president gets a heck of a windfall. In the spirit of Secretary of State William Seward's purchase of Alaska for $7 million in 1867, this week may be remembered as Paulson's Folly.

cartman

09-26-2008, 11:48 AM

This might be the best plan I've heard so far:

http://www.weeklyworldnews.com/celebs/bailout/

:D

Marc Vaughan

09-26-2008, 12:03 PM

Yeah, but how does that relate to the government banking bailout?

SI

Its related because within Sweden nationalisation is a much more acceptable practice than within America, hence the reaction to such a plan might be taken differently here than it was in Sweden (and much of this crisis is 'mental' in its runs on the institutions and nerves from other banks which are making this even worse than it would otherwise be imho).

molson

09-26-2008, 05:18 PM

Gary Gorski

09-26-2008, 06:43 PM

Not sure if this has been covered here yet, but I read something yesterday about how smaller, regional banks are doing quite well amongst the carnage. They had largely avoided subprime lending and it's been business as usual.

I think I'm back behind square one in terms of why a bailout makes sense. These bloated companies failed. Credit is now tougher to get sure, but it's out there if you're qualified. Why doesn't the failure of these bloated banks just create an opportunity for more smaller, more well run banks? Is it the transition period we're so worried about?

It's a panic thing - wealthy people (and believe me, the FDIC definitely has me covered many, many times over so I'm not in that boat) are pulling their money from the banks. If you're taking millions out of <insert super large well known bank here> because you think they're in trouble why would you have confidence to go stick it in a regional bank where your money isn't any more guaranteed?

The banks need the deposits so they can lend money to keep the economy rolling. Failure of massive banking organizations like WaMu is hardly going to inspire the confidence of those with that money the banks so badly need to go put it anywhere but where it will be the safest.

You're definitely right in that not every financial or banking institution is bad but the fear in the market is there and we need something like the bailout or the FDIC to raise the guaranteed amount to bring the confidence back to the entire financial system right now.

SirFozzie

09-26-2008, 06:45 PM

Saw a post on RCP that the bailout will not be voted on until Wed... at the earliest?:

Ah, here's the exact quote:
ABC's George Stephanpoulos reports: Senate sources say a Senate vote on a bailout bill "unlikely" before Wednesday.

Masked

09-26-2008, 07:30 PM

Galaxy

09-26-2008, 11:03 PM

Mark Cuban is certainly voicing his thoughts on the bailout, and even proposals:

blog maverick (http://blogmaverick.com/)

Tekneek

09-27-2008, 12:09 AM

Logan

09-27-2008, 09:18 AM

Forget the bailout. I read/heard that the $700 billion is roughly around $2300 per person (of any age) in the US. I'll just take the $2300 per person and let the financial institutions crash and burn.

And then you can take your $2300 and spend it on...?

I love people's shortsightedness.

Tekneek

09-27-2008, 10:00 AM

And then you can take your $2300 and spend it on...?

I love people's shortsightedness.

It was mostly a joke, but will we really have nothing to spend our money on? Hell, I wouldn't mind just holding it until (and if) it is ever worth anything again. Put it this way, I'd rather have the money than the kind of people that have been running these financial institutions. Looking at their SEC filings over the past few years, they have been throwing money around like it was candy and acting as if there would be no end to their big lifestyle. Those kind of people aren't part of the solution.

Surtt

09-27-2008, 10:50 AM

It was mostly a joke, but will we really have nothing to spend our money on? Hell, I wouldn't mind just holding it until (and if) it is ever worth anything again. Put it this way, I'd rather have the money than the kind of people that have been running these financial institutions. Looking at their SEC filings over the past few years, they have been throwing money around like it was candy and acting as if there would be no end to their big lifestyle. Those kind of people aren't part of the solution.

$2300 will not get you very far if you lose your job and can not get a new one.
YMMV

Tekneek

09-27-2008, 10:55 AM

$2300 will not get you very far if you lose your job and can not get a new one.
YMMV

I would get more than that. We are a family of 5, so we would get $2300x5. See, it is per person of any age, not per adult. Plus, I've already gone roughly about 9 months unemployed this year (though now currently employed). I think I can handle it.

You don't have to be a real financial wizard to read about the mismanagement that these financial institutions have engaged in for years. It's all available for free over at U.S. Securities and Exchange Commission (Home Page) (www.sec.gov) and you can easily google every term you aren't familiar with to understand every bit of each document. The dollars involved would make your head spin, especially the amounts they throw at some of the worst executives out there. When the last CEO of WaMu is slated to walk away with around $18 million after just a few weeks on the job, it is obvious that these businesses weren't really concerned about running a tight financial ship.

Anthony

09-27-2008, 11:06 AM

Tekneek

09-27-2008, 11:08 AM

the last rebate we got this year as part of the economic stimulus was limited to actual taxpayers from 2006. unless you have your kids working in a sweatshop and they have actual income to declare, thus making tax filing a necessity i don't see how you would expect your kids to get this hypothetical $2300.

of course, tekneek isn't a very intelligent person so i won't waste much more time entertaining this folly of an idea of his.

Nope. I was talking about the amount of money per person that the bailout represents. That has nothing to do with taxes, rebates, or any other bullshit. It has to do with the population compared to the bailout amount. Sure, not a very intelligent person that has seen the math and doesn't have his head stuck up his own ass. Like I really need a lesson on intelligence from the biggest asshole to ever roam this board.

Surtt

09-27-2008, 11:15 AM

I would get more than that. We are a family of 5, so we would get $2300x5. See, it is per person of any age, not per adult. Plus, I've already gone roughly about 9 months unemployed this year (though now currently employed). I think I can handle it.

I am glad you would make out OK.

$24,800/year is the poverty line for a family of 5.
I would not be comfortable with a one time payment of $11,500 to take care of my family.
As I said YMMV

Tekneek

09-27-2008, 11:17 AM

I am glad you would make out OK.

$24,800/year is the poverty line for a family of 5.
I would not be comfortable with a one time payment of $11,500 to take care of my family.
As I said YMMV

Comfortable? No. But there are no guarantees that you will still be able to find work after that bailout pays out either. I am much more comfortable with the money in my own hands than in the hands of the jokers that walked right into this disaster.

Surtt

09-27-2008, 11:29 AM

Comfortable? No. But there are no guarantees that you will still be able to find work after that bailout pays out either. I am much more comfortable with the money in my own hands than in the hands of the jokers that walked right into this disaster.

I agree.
I think the price of commodities (gas, food, etc.) is what is pulling down the economy.
The blue collar class doesn't have enough disposable income to keep buying iPods.

But as much as I hate giving these Wall Street types a bail out, I think it is a necessary evil. No mater what else happens, if Wall Street goes down, it will take our economy with it.

Tekneek

09-27-2008, 11:37 AM

But as much as I hate giving these Wall Street types a bail out, I think it is a necessary evil. No mater what else happens, if Wall Street goes down, it will take our economy with it.

Have you given any thought to the possibility that we might have to take a hit if we really want to fix things? Sometimes in life you have to pay a heavy price to make a better tomorrow. Pretending we can keep throwing money around to solve every problem is bound to catch up to us and give us a bigger fall than we are facing today. Supposedly, we are a nation that is willing to pay the price to make things better for everyone. Apparently not this generation. We're going to keep throwing money around and pass the buck. Our government, which we elect ourselves, is making almost no attempt to pay its own debt. I cannot see how we can blame one party over another, since they have both had their day in the sun recently and failed to control spending to the levels required. At this rate, we are simply delaying the inevitable rating downgrade that the US will receive, and then the bottom will really fall out.

Galaxy

09-27-2008, 11:43 AM

Comfortable? No. But there are no guarantees that you will still be able to find work after that bailout pays out either. I am much more comfortable with the money in my own hands than in the hands of the jokers that walked right into this disaster.

You won't find any work if banks don't have any capital to loan any money to businesses and people. It's a necessary evil, and hopefully legislation is passed to tighten up lending and capitalization standards.

Tekneek

09-27-2008, 12:10 PM

You won't find any work if banks don't have any capital to loan any money to businesses and people. It's a necessary evil, and hopefully legislation is passed to tighten up lending and capitalization standards.

Suppose it doesn't matter much what individuals think anyway. This economy and government is driven by what the big entities want and not what John Q. Public wants. While I generally believe in free markets, I don't mind punishing sectors that refuse to regulate themselves. Therefore, I would like to see a wage cap levied upon any institution that takes bailout funds. This cap would limit compensation to no more than 10x that of the lowest earner at that business, regardless of whether they are a direct-hire, temp, on contract, etc. This would rein in these executives who try to run off with the pie while driving the company into the ground. If they want to make big bucks, they will have to share that pie with everybody else.

JonInMiddleGA

09-27-2008, 12:27 PM

This cap would limit compensation to no more than 10x that of the lowest earner at that business, regardless of whether they are a direct-hire, temp, on contract, etc. This would rein in these executives who try to run off with the pie while driving the company into the ground.

Actually, a 10x cap like that would leave no one capable of running the company willing to take a job in the sector. A 100x cap maybe.

Galaxy

09-27-2008, 12:30 PM

Actually, a 10x cap like that would leave no one capable of running the company willing to take a job in the sector. A 100x cap maybe.

Wouldn't this give privately-held companies a real advantage (which would really benefit private-equity companies who would take public companies private) over publicly-traded companies?

Tekneek

09-27-2008, 12:32 PM

Actually, a 10x cap like that would leave no one capable of running the company willing to take a job in the sector. A 100x cap maybe.

So? Don't take public funds.

Tekneek

09-27-2008, 12:33 PM

Wouldn't this give privately-held companies a real advantage (which would really benefit private-equity companies who would take public companies private) over publicly-traded companies?

This would really help companies that didn't get themselves into trouble and have to take welfare payments from the taxpayers. Those who managed themselves well enough to stay on their own feet could still set their own rules.

Gary Gorski

09-27-2008, 12:44 PM

Why not make executive bonus based on a 5 year period instead? Are you surprised that if you tell the CEO that he gets $x millions for a one year performance that many of them did whatever they needed to do to get that bonus while they could with no regard whatsoever for the future of the company? Why should you put a cap on how much money someone can make? If they can build a business that makes enormous amounts of money year after year then reward them for doing so.

Tekneek

09-27-2008, 12:47 PM

If they can build a business that makes enormous amounts of money year after year then reward them for doing so.

If the lowest paid person didn't contribute to that and deserve to ride that wave with them, why not just fire them?

Gary Gorski

09-27-2008, 12:48 PM

So? Don't take public funds.

Nobody really has a choice at this point - its either this bailout happens and these institutions are saved and hopefully can begin to fix the massive mess they are in or the economy is in big trouble. As much as I hate the idea of bailing out the people who caused this mess I'd still prefer to have our economy functioning and not be thrown into the Great Depression II

Gary Gorski

09-27-2008, 12:52 PM

If the lowest paid person didn't contribute to that and deserve to ride that wave with them, why not just fire them?

I'm not sure what you are saying. Are you advocating firing minimum and low wage employees so that your proposed 10x cap would be a slightly larger amount of money?

Tekneek

09-27-2008, 12:57 PM

I'm not sure what you are saying. Are you advocating firing minimum and low wage employees so that your proposed 10x cap would be a slightly larger amount of money?

If that is what you think is a better idea. If they aren't contributing to this success that has earned big raises for you, why would you keep them anyway? Just toss the dead weight overboard, or bring them along. Make the hard choices that these executives never seemed to want to make.

Tekneek

09-27-2008, 12:58 PM

Nobody really has a choice at this point - its either this bailout happens and these institutions are saved and hopefully can begin to fix the massive mess they are in or the economy is in big trouble. As much as I hate the idea of bailing out the people who caused this mess I'd still prefer to have our economy functioning and not be thrown into the Great Depression II

Would it hurt them to force a cap on wages during this tough time? If they are so desperate for cash that they are panhandling in D.C., they can accept limits on executive compensation to get through it.

Tekneek

09-27-2008, 01:05 PM

Let me put it this way... If I am so desperate for cash that I run to a higher authority (parents, boss, government, etc) looking to be bailed out from my mistakes, I don't get to decide what conditions are attached to this money. I either decide to accept responsibility and fail on my own, or I accept their money and whatever new conditions it brings with it. So, equally, they can decide to fall on their sword and collapse, or swallow that tough pill and navigate through the crisis. If they demonstrate their talent under those conditions, they will do alright in the end. If they are too attached to excessive compensation to care, then we're better off in the long run for not helping to finance them.

Surtt

09-27-2008, 01:07 PM

Would it hurt them to force a cap on wages during this tough time? If they are so desperate for cash that they are panhandling in D.C., they can accept limits on executive compensation to get through it.

Do you think it is realistic to expect people to take a pay cut for say 20 million to $120,000 (minimum wage x10) ? These are the same people who's greed got us in this mess.

Galaxy

09-27-2008, 01:13 PM

If that is what you think is a better idea. If they aren't contributing to this success that has earned big raises for you, why would you keep them anyway? Just toss the dead weight overboard, or bring them along. Make the hard choices that these executives never seemed to want to make.

CEO's actually require talent, experience/education, and decision-making ability. Well a line-level employee does contribute to the success to a firm, they are replaceable and don't have to make the decisions that executives do. Does this mean that you have crappy CEOs? Of course. Just like you have first-round busts in the NFL. You can vote to buy and sell shares in companies. You can vote for your board members.

The problem isn't so much CEO and what they earned, it's the way we value stocks and the way CEOs are compensation. If a CEO is paid $100 million a year in compensation, but what he has delivered in results merits such pay (both short-and-long term), I have no problem with that.

However, everyone is responsible for this mess. Home-owners who didn't have the money to purchase homes and people who took credit out of their homes to buy the latest cars and vacations, a government that loosen regulations, and a reserve board that kept cheap money flowing way too long.

JonInMiddleGA

09-27-2008, 01:22 PM

So? Don't take public funds.

But why would you want to leave the option open for public funds and then make it certain that the company will be unable to attract capable leadership?

Once the public funds are available if you want control of the hires, I see no
no problem there. You want to determine the appropriate compensation for those hires? Not an issue, you're an owner.

But the 10x factor you propose? Ludicrous to the extreme.

Let me put it in some perspective. I bill at an hourly rate of $100/hr just to do media planning & placement, about that 10x lowest you proposed. While I'm damned good at what I do, there's also a much larger pool of people who can do what I do than they're are who can navigate the waters of running a Fortune 500 type company. Scarcity affects cost.

Tekneek

09-27-2008, 01:27 PM

Do you think it is realistic to expect people to take a pay cut for say 20 million to $120,000 (minimum wage x10) ? These are the same people who's greed got us in this mess.

Yes, it is. They need to learn their lesson and not be above taking a hit for their actions.

Tekneek

09-27-2008, 01:28 PM

However, everyone is responsible for this mess. Home-owners who didn't have the money to purchase homes and people who took credit out of their homes to buy the latest cars and vacations, a government that loosen regulations, and a reserve board that kept cheap money flowing way too long.

Hmmm. Is it really the fault of a homeowner who got a mortgage, or the fault of the lender that gave it to them? Assuming they did not falsify the requested documentation for the financing. If I make bad loans without properly vetting them, it is my fault.

Galaxy

09-27-2008, 01:29 PM

Hmmm. Is it really the fault of a homeowner who got a mortgage, or the fault of the lender that gave it to them? Assuming they did not falsify the requested documentation for the financing.

Both.

Tekneek

09-27-2008, 01:31 PM

Scarcity affects cost.

Except it is not exactly market driven. I am simply not ever going to buy that the going rate for a WaMu executive was really $18 million for 3 weeks of work, especially when it resulted in the largest banking collapse in US history.

Tekneek

09-27-2008, 01:33 PM

Both.

I don't think I agree. If I make a bunch of bad loans without making sure I had a good chance of getting paid back, I'm the bigger chump. Perhaps there is some blame to be shared, but I find it to be more like 70/30 at best, with that 70 on the side of the lender.

JonInMiddleGA

09-27-2008, 01:35 PM

Yes, it is. They need to learn their lesson and not be above taking a hit for their actions.

What hit? The existing management will simply walk away & find higher paying jobs in another sector. And an insufficient number of people capable of pulling off the recovery (that you now have a directly vested interest in, having invested public funds) are going to work for relative peanuts simply out of the goodness of their heart.

Hells bells Tek, there's a scarcity of competent leadership at the current compensation levels, why on earth would you want to reduce that pool even more?

Believe me, I don't disagree with you that there's some absurdity in executive pay levels. Work with the number of extraordinarily well paid idiots I've dealt with over the past decade & that problem becomes quite clear. It isn't the notion of some sort of cap that I'm taking issue with, it's the complete disconnect with reality that a 10x cap suggests that bothers me.

Tekneek

09-27-2008, 01:39 PM

Believe me, I don't disagree with you that there's some absurdity in executive pay levels. Work with the number of extraordinarily well paid idiots I've dealt with over the past decade & that problem becomes quite clear. It isn't the notion of some sort of cap that I'm taking issue with, it's the complete disconnect with reality that a 10x cap suggests that bothers me.

Yet, I have read that the top executives at companies in Europe average out to around 11x that of the lowest earner. In Japan, it is similar (though perhaps as high as 20x). In the US, it is around 40x. The difference in compensation from the top of Toyota to the bottom has been pointed to as one of the reasons they continue to perform so well compared to the Big 3 here, which tend to at least double the difference in compensation (compared to Toyota, which amazed me, because I was always supposed to believe that the difference had more to do with the excessive compensation paid to the union workers).

Surtt

09-27-2008, 01:45 PM

Yes, it is. They need to learn their lesson and not be above taking a hit for their actions.

My point was:
They will not take the hit voluntarily and you can not force them.

So, what is the point of offering them a bail out with terms they will not accept?
If their company tanks, they will still walk a way with more then your proposed pay cut.

Tekneek

09-27-2008, 01:47 PM

My point was:
They will not take the hit voluntarily and you can not force them.

So, what is the point of offering them a bail out with terms they will not accept?
If their company tanks, they will still walk a way with more then your proposed pay cut.

And we take their picture and post it around the nation at every soup line that we are lining up for when the economy collapses. This way we remember them properly for the decision they made. We don't let these people be forgotten in history like we did the last time that unbridled greed drove us into a massive depression.

Surtt

09-27-2008, 01:55 PM

And we take their picture and post it around the nation at every soup line that we are lining up for when the economy collapses.

I thought the whole point was to avoid this.

Marc Vaughan

09-27-2008, 05:04 PM

Galaxy

09-27-2008, 06:00 PM

Galaxy

09-27-2008, 06:04 PM

I don't think I agree. If I make a bunch of bad loans without making sure I had a good chance of getting paid back, I'm the bigger chump. Perhaps there is some blame to be shared, but I find it to be more like 70/30 at best, with that 70 on the side of the lender.

Let's put it the other way: I walk into the bank to get a loan for a house that costs a $400,000. I don't have to put down a down payment, with a meager income and little savings, don't you think, "I don't think I can afford this?". Nope, you just want it.

I think people wanted to keep up with the Joneses, and they seem willing to get do whatever they can. And it's not just mortgages. It's HELOCs, cars, vacations, credit card debts, ect. This doesn't mean that banks weren't greedy, but that everyone shoulders the blame.

JonInMiddleGA

09-27-2008, 06:21 PM

It's HELOCs, cars, vacations, credit card debts, ect.

Color me stupid but ... what's a HELOC?

Galaxy

09-27-2008, 06:32 PM

Color me stupid but ... what's a HELOC?

Home Equity Line of Credit.

Gary Gorski

09-27-2008, 06:33 PM

I'm expecting Wachovia to fall while they're procrastinating over what should be done ...

Once that happens the press will look for the next victim, rinse and repeat until something is done to help prop up the system.

The WaMu debacle* has imho hurt things hugely because all the banks who might have considered merging now look upon the 'lame ducks' in the same way vultures circle an injured animal ... they're waiting for them to fall so they can get their pickings easily.

*I'm still trying to get my head around exactly why the regulators forced the bank down when it falling and leaving god knows how many billion in debt defunct must have hurt other institutions hugely - making them much more suspectible to failing themselves; While WaMu was a functioning entity the debt had at least a chance of being made good upon.

Just out of curiosity why do you expect Wachovia to fail? As of this moment they're talking about making a legitimate deal with another bank as opposed to being bought for pennies by one of the "vultures circling the carcass".

I'm assuming WaMu was forced down because the people who had large sums of money with them pulled it out and the bank was then undercapitalized. I'm not sure why else they would have to come in and take over right then. However it's not like nobody saw it coming. There was speculation for quite some time that WaMu would not survive.

GrantDawg

09-27-2008, 06:38 PM

Just out of curiosity why do you expect Wachovia to fail? As of this moment they're talking about making a legitimate deal with another bank as opposed to being bought for pennies by one of the "vultures circling the carcass".

I'm assuming WaMu was forced down because the people who had large sums of money with them pulled it out and the bank was then undercapitalized. I'm not sure why else they would have to come in and take over right then. However it's not like nobody saw it coming. There was speculation for quite some time that WaMu would not survive.

Self-fullfilling prophecy. They have a little time, but as people see them as the next failure, it will get worse.

Gary Gorski

09-27-2008, 06:44 PM

Self-fullfilling prophecy. They have a little time, but as people see them as the next failure, it will get worse.

Oh I agree, fear will eventually bring down Wachovia as well as probably most other financial organizations the longer we wait for something to be done. I would expect that if the bailout is not done very quickly then Wachovia probably has no choice but to sell before they are sold by the feds but from what I've seen their failure isn't imminent, at least not today, like WaMu's was.

GrantDawg

09-27-2008, 06:56 PM

except that some lenders performed what's called "predatory lending" and preyed on innocent people and only held the loan for mere days before it was off of their books. Even Palin said that ;)

There was also the fact the way many of these loans were sold. They hooked people by telling them they'll easily either re-fi or sell with gain in a couple of years, so don't worry about the balloon, variable interest, etc. Then people wake up one day, their payments explode and there is no new loan options. Buyer beware, but the companies selling these loans sold a bill of goods.

Warhammer

09-27-2008, 07:21 PM

There was also the fact the way many of these loans were sold. They hooked people by telling them they'll easily either re-fi or sell with gain in a couple of years, so don't worry about the balloon, variable interest, etc. Then people wake up one day, their payments explode and there is no new loan options. Buyer beware, but the companies selling these loans sold a bill of goods.

This is what happened to me. However, I have some locking options and other things that work in my favor. Plus, the balloon isn't for another 10 years at which time I plan to be out of the house.

GrantDawg

09-27-2008, 07:24 PM

This is what happened to me. However, I have some locking options and other things that work in my favor. Plus, the balloon isn't for another 10 years at which time I plan to be out of the house.

I'm still in a variable, but it has worked for me. It can't go up over .5 a year, and this was the first year it could adjust and it dropped a whole point. Hopefully in the next few months or at least next year I can lock a fixed rate.

flere-imsaho

09-27-2008, 07:28 PM

Tekneek

09-27-2008, 08:52 PM

I thought the whole point was to avoid this.

Supposedly that is what it is about.

Tekneek

09-27-2008, 09:06 PM

Let's put it the other way: I walk into the bank to get a loan for a house that costs a $400,000. I don't have to put down a down payment, with a meager income and little savings, don't you think, "I don't think I can afford this?". Nope, you just want it.

Isn't it the job of the bank to determine who is a good candidate and who is not? When I bought a home, we only put 3% down, but I can tell you that we went around with our broker a few times and had to put up plenty of documentation about our incomes, tax history, etc. They didn't just take our word for it. They even got concerned about some items in our contract and we had to jump through a few additional hoops. Oddly enough, our mortgage was with Washington Mutual back then (2001) until we re-financed.

I think people wanted to keep up with the Joneses, and they seem willing to get do whatever they can. And it's not just mortgages. It's HELOCs, cars, vacations, credit card debts, ect. This doesn't mean that banks weren't greedy, but that everyone shoulders the blame.

It was all about greed. Banks hoped these people might either find a way to pay the mortgage, or that Fannie Mae/Freddie Mac would back it up, or maybe that they would be able to package it up and sell it around to spread the risk. They weren't worried about whether these people were good risks because they thought they had a system that allowed them to bank some value on the mortgage regardless.

sterlingice

09-27-2008, 09:26 PM

NPR's All Things Considered did an excellent story on Friday about how the U.S. financial system (mostly dealing with day-to-day kinds of things) almost collapsed over the past two weeks, which spurred the latest round of activity.

I highly encourage everyone to read or listen to it here: The Week America's Economy Almost Died : NPR (http://www.npr.org/templates/story/story.php?storyId=95099470)

I heard it in the car yesterday and it was very good. Check out the article and read it if you don't want to listen to the audio version that's about 9 minutes long.

SI

Galaxy

09-27-2008, 09:27 PM

NPR's All Things Considered did an excellent story on Friday about how the U.S. financial system (mostly dealing with day-to-day kinds of things) almost collapsed over the past two weeks, which spurred the latest round of activity.

I highly encourage everyone to read or listen to it here: The Week America's Economy Almost Died : NPR (http://www.npr.org/templates/story/story.php?storyId=95099470)

Yeap. When you think about it, it's your money that is on Wall Street. Your 401k, retirement, your savings, ect. They are investing through these banks and investment funds. If they went down without any help, the baby boomers are screwed. And unemployment will skyrocket will no liquidity in the market.

Anthony

09-28-2008, 09:16 AM

Color me stupid but ... what's a HELOC?

haahah, yeah, i thought it was slang for "helocopters".

Neighbor: "oh my God, Bill, is that a helocopter in your driveway."

Bill: (beaming) "yep, i got it with financing at the Wamu on Main St."

Anthony

09-28-2008, 09:20 AM

here's Mr. and Mrs. Bill Fitch, with kids in tow, proudly displaying their new helocopter they were able to afford thanks to their friends at Wamu.

http://www.jerrytrimblehelicopters.com/images/beadlefamily.jpg

Anthony

09-28-2008, 10:01 AM

Nope. I was talking about the amount of money per person that the bailout represents. That has nothing to do with taxes, rebates, or any other bullshit. It has to do with the population compared to the bailout amount. Sure, not a very intelligent person that has seen the math and doesn't have his head stuck up his own ass. Like I really need a lesson on intelligence from the biggest asshole to ever roam this board.

this makes no sense at all. why would people w/ no income or money in financial institutions need to be a part of this nonsense $2300 per person bailout of yours? so a kid in your family who makes money from their lemonade stand and deposits their money in a FDIC insured savings account deserves $2300, the same as a business exec who invests large sums of money with a brokerage firm that has actually failed? the whole purpose of a bailout is to make right all the people affected by Wall St., you just want every citizen in this country to get $2300 for no reason. if you could kindly exit this thread and never come back things would be much better.

Tekneek

09-28-2008, 10:13 AM

this makes no sense at all. why would people w/ no income or money in financial institutions need to be a part of this nonsense $2300 per person bailout of yours?

I did not create any bailout.

so a kid in your family who makes money from their lemonade stand and deposits their money in a FDIC insured savings account deserves $2300, the same as a business exec who invests large sums of money with a brokerage firm that has actually failed? the whole purpose of a bailout is to make right all the people affected by Wall St., you just want every citizen in this country to get $2300 for no reason. if you could kindly exit this thread and never come back things would be much better.

What is so hard about math for you? Going by the estimated population of this nation, which includes people of any age, this appears to equal about $2300 PER PERSON. It's not whether I want it to equal that or not, it is simply that the math appears to work out that way.

Gary Gorski

09-28-2008, 11:15 AM

Maybe a vote today on the bailout (http://www.cnbc.com/id/26923233) - courtesy of CNBC

Anthony

09-28-2008, 01:19 PM

I did not create any bailout.

What is so hard about math for you? Going by the estimated population of this nation, which includes people of any age, this appears to equal about $2300 PER PERSON. It's not whether I want it to equal that or not, it is simply that the math appears to work out that way.

but your math involves people who weren't even affected by the collapse of our economy.

put it this way, i'm going to give you an analogy for your idea and you tell me if you'd still be in favor of it:

i throw a huge party at my house and have 20 people come by. they all park their cars on my property, underneath my massive car port. for whatever reason, the car port collapses and destroys all the cars underneath it. "no problem", i say, "i will personally reimburse you for the damages you suffered".

everyone else in my neighborhood then lines up outside my gates looking for reparations also, even the homeless people who didn't own any cars.

why on earth would the people not directly affected by the collapse be entitled to reparations?

that is your idea.

Tekneek

09-28-2008, 01:34 PM

but your math involves people who weren't even affected by the collapse of our economy.

What people, living in this nation, would not be affected by the collapse of the economy? I can only presume you are talking about some portion of the population that does not eat, wear clothes, or need shelter from the environment. Be as detailed as possible.

put it this way, i'm going to give you an analogy for your idea and you tell me if you'd still be in favor of it:

i throw a huge party at my house and have 20 people come by. they all park their cars on my property, underneath my massive car port. for whatever reason, the car port collapses and destroys all the cars underneath it. "no problem", i say, "i will personally reimburse you for the damages you suffered".

everyone else in my neighborhood then lines up outside my gates looking for reparations also, even the homeless people who didn't own any cars.

How does this have anything at all to do with the bailout being a total amount that appears to break down to about $2300 per person in this nation? I'm not sure where you're failing to understand the math. All I said was that, if the math is right, and the bailout is effectively priced at $2300 per person in the US, I would choose to opt for a per person payout instead of handing it to the industry that created the problem. It really isn't more complicated than that.

why on earth would the people not directly affected by the collapse be entitled to reparations?

I don't know. Since it was your proposal to bring "reparations" into the picture, you must know better than I.

that is your idea.

Nope. My idea has only been that I would prefer the government pay each human being in the nation an equal portion of this bailout money instead of concentrating it on the entities that created the problem. It has nothing to do with you holding a party or taxes or anything else.

Galaxy

09-28-2008, 01:54 PM

Nope. My idea has only been that I would prefer the government pay each human being in the nation an equal portion of this bailout money instead of concentrating it on the entities that created the problem. It has nothing to do with you holding a party or taxes or anything else.

Is it a cool idea? Sure. However, it would do nothing, except maybe starve off the depression that would possibility happen without it.

By giving Wall Street and banks the liquidity it needs, they can secure and save your savings and investments (401K, IRA, stocks, ect). They can give you loans that they wouldn't be able to give you without this package (and I suspect it would be a long time before credit was available it this doesn't happen). They help create jobs we need and a paycheck we need to get the economy moving. Without any liquidity in the banks and investment firms, you won't have these things, and it will get ugly, really ugly. It will have a enormous impact on Main Street USA on if the bailout does or doesn't get passed. Should Wall Street and bank CEOs be held responsible for their roles? Of course. However, it's about how we can avoid another depression and provide liquidity in the economy.

Anthony

09-28-2008, 02:05 PM

i'm dumber because of reading Tek's posts. this thread is bad for my health.

Tekneek

09-28-2008, 02:31 PM

i'm dumber because of reading Tek's posts. this thread is bad for my health.

You know, I'm sorry I ever went to bat for you in the past when you went on some irrational asshole rampage. Now I see through the mirage that made me think you actually had something to offer.

st.cronin

09-28-2008, 02:31 PM

Tekneek

09-28-2008, 02:39 PM

It will have a enormous impact on Main Street USA on if the bailout does or doesn't get passed.

It is important to note that not all economists agree with this position. More than a few out there believe Wall St could fix it themselves, if they simply decided to. Instead, the possibility of a bailout looming over the horizon has motivated them to do something else.

Mac Howard

09-28-2008, 07:21 PM

but lending to people with good credit has always been profitable, and there's no reason that should suddenly change.

The reason is that the money isn't there for the small banks to borrow to lend it out.

In fact here in Australia, where we haven't had banks failing or anything like the problems you are suffering because of greater oversight and regulation, nevertheless the Australian government has just released $4 billion (equivalent to $60 billion by American standards - we have one fifteenth the population) specifically for the use of small banks and non-bank lending organisations to borrow to keep the housing market from tanking. That's because the credit system has frozen and the small banks simply can't borrow the money to re-lend.

Fortunately we hear this morning that a deal has been made and we can breathe a sigh of relief. The next step will be "just how effective will this buyout be?".

molson

09-28-2008, 07:37 PM

The reason is that the money isn't there for the small banks to borrow to lend it out.

I agree, and I'm certainly not against the bail-out (or what little I understand about it), but I really don't think that EXTREMELY difficult credit at this point is a bad thing for the long-term health of the economy, nor is a recession.

Recessions, historically in the Untied State, are very short. It feels as if we're so afraid of a natural economic correction that we're willing to spend years in a sluggish economy for an outside chance of avoiding a limited recession.

I think sometimes, the free market is about allowing oneself to fall and recover.

Mac Howard

09-28-2008, 07:50 PM

I agree, and I'm certainly not against the bail-out (or what little I understand about it), but I really don't think that EXTREMELY difficult credit at this point is a bad thing for the long-term health of the economy, nor is a recession.

Recessions, historically in the Untied State, are very short. It feels as if we're so afraid of a natural economic correction that we're willing to spend years in a sluggish economy for an outside chance of avoiding a limited recession.

The consensus opinion of economists outside of the US is that you (and we) would suffer much more than a short recession had this deal not gone through. The main doubt is whether this buy out will succeed but there is no doubt the situation would be dire without it.

I think sometimes, the free market is about allowing oneself to fall and recover.

But that's a bit like saying we shouldn't fight a disease epidemic because the reduction in population will eventually sort that out too.

Nature's solutions, including economic ones, are not always conducive to humanity's interests.

DaddyTorgo

09-28-2008, 07:52 PM

Nikkei's up 0.40% (50pts) in the first 45 minutes...hang seng opens soon

molson

09-28-2008, 07:54 PM

But that's a bit like saying we shouldn't fight a disease epidemic because the reduction in population will eventually sort that out too.

Nature's solutions, including economic ones, are not always conducive to humanity's interests.

Definitely, and that's kind of enlightening for me because I do think of the world's bigger picture in those kind of terms - i.e, when Bono talks about curing every disease known to man, my first thought is how the hell the earth would manage a population of 50 billion people.

This time and this year are so unimportant in the bigger picture - I obviously could never run for office.

Mac Howard

09-28-2008, 08:01 PM

Definitely, and that's kind of enlightening for me because I do think of the world's bigger picture in those kind of terms - i.e, when Bono talks about curing every disease known to man, my first thought is how the hell the earth would manage a population of 50 billion people.

This time and this year are so unimportant in the bigger picture - I obviously could never run for office.

There are no easy solutions. What bugs me are those who say there are and insist they know exactly what the solutions are. In the end we need to react to what happens and try to learn from it so as to avoid seeing it repeated.

Gary Gorski

09-28-2008, 10:55 PM

Nope. My idea has only been that I would prefer the government pay each human being in the nation an equal portion of this bailout money instead of concentrating it on the entities that created the problem. It has nothing to do with you holding a party or taxes or anything else.

Like others have said what good would this do? Do you really want $2300 + Great Depression II? At least with the bailout you are not only hopefully avoiding a global economic collapse but because the taxpayers are going to be contributing the money for it we're investors in the rebuilding of Wall St. That way the profits get spread around all the taxpayers rather than one massive bank and its shareholders. Look at the sweet deals JPM got on WaMu and Buffett got on Goldman. Those deals are to be had on some of these other banks and hopefully we'll be able to look back at this period in time 5 years from now and say that there were some great, great bargains on Wall St. for investors.

DaddyTorgo

09-28-2008, 11:17 PM

nikkei's down 0.50% and hang seng is down 2% -- going to be an interesting day today (monday)

JPhillips

09-29-2008, 07:34 AM

Wachovia is no more. Sounds like they failed and were bought out by Citi at the same time. Citi takes some liability, but FDIC takes a bunch and gets some Citi preferred stock.

Gary Gorski

09-29-2008, 07:39 AM

From TheStreet.com

"The FDIC in a press release stressed that Wachovia did not fail. Citi will take the hit for up to $42 billion of losses on a $312 billion pool of Wachovia loans, while the FDIC will take responsibilities for additional losses. Citi granted the FDIC $12 billion in preferred stock and warrants for assuming the risk.

Wachovia will continue to own brokerage AG Edwards and asset manager Evergreen Investments. Other terms of the deal were not disclosed."

Flasch186

09-29-2008, 07:44 AM

Jeez, figure out which bank to short next and you could get rich....oh yeah, cant short :)

Gary Gorski

09-29-2008, 07:46 AM

Jeez, figure out which bank to short next and you could get rich....oh yeah, cant short :)

You could always buy puts :)

molson

09-29-2008, 09:49 AM

If anyone wants to read this thing, you know, so in future arguments, you can say, "hey, have you even READ the bailout plan?", here it is:

http://graphics8.nytimes.com/packages/pdf/business/20080928bailout_text.pdf

Flasch186

09-29-2008, 09:50 AM

You could always buy puts :)

good point :)

brutal day today.

Gary Gorski

09-29-2008, 10:10 AM

brutal indeed - they haven't even opened Wachovia, Apple's been getting crushed and who knows when/if the bailout will get passed. If anyone's interested you can listen to the House debate the bill at cnbc.com

MikeVic

09-29-2008, 10:29 AM

This is why I shouldn't have gotten involved in the market at all... I'm so worried my mutual fund will just keep dropping now. :(

Gary Gorski

09-29-2008, 10:52 AM

You can't beat yourself up over investing - especially in something like a mutual fund. I mean its one thing to sink a bunch of money into some long shot company expecting to become a millionaire but what we're seeing today are truly extraordinary circumstances. I think that over a long period of time there are few if any asset classes that have outperformed the market as a whole.

Fidatelo

09-29-2008, 11:05 AM

This is why I shouldn't have gotten involved in the market at all... I'm so worried my mutual fund will just keep dropping now. :(

Try this on for size:

According to the propaganda presented to me when I first started, a 20 year-old who invested $2000 a year in mutual funds for 10 years, then just left it until retirement at 65 (so 20k total invested), would come out ahead of someone who put nothing into mutual funds until age 30, then put $2000 a year away until retirement (70k total invested). This was based on compounding and dollar-cost averaging and a 8% yearly return and all the other crap the bankers spew out as being pretty much guaranteed. I believe they estimated that your money would double every 7 years or so.

I've been working for 10 years now, and have been putting money into mutual funds (RRSP) the entire time (with the exception of a 6-month or so period when I moved and wasn't sure of my finances). In fact I think I started back when I was in college, so it's likely been more than just the 10 years. I've put into several different funds during that time, but I've never sold anything, always just taken the long-term view and hold like I was told to. Over time I have slowly increased my monthly contributions from $25 up to $700.

I am now 30 years old. As of today, My book value (the amount of actual money I've invested, so essentially what I'd have under my mattress if I avoided banks at all) is over $5000 higher than the actual value (what I'd get if I sold everything right now). In 10+ years of investing prudently, I have lost money. I will never get those 10 years back. I will never be able to have my money compound the way it was supposed to. I could have put that money in my mattress, taken a trip to Europe, and been in the exact same position.

I no longer know what to believe. I know the worst thing you can do is panic and sell low, but how much longer can I sit and watch my life savings do nothing for me? Sure, I'm still only 30 years old, and when they show you all those lovely charts with the ever-rising line, it spans out over 40+ years. But do I wait another 10 years before acting? What happens if I'm in the same position when I'm 40? At that point I'd almost be screwed.

It's becoming increasingly clear that all these supposed financial experts don't have a fucking clue. I am not impressed.

Galaxy

09-29-2008, 11:18 AM

At least oil has fallen back to just under $100/barrel.

Galaxy

09-29-2008, 11:21 AM

It is important to note that not all economists agree with this position. More than a few out there believe Wall St could fix it themselves, if they simply decided to. Instead, the possibility of a bailout looming over the horizon has motivated them to do something else.

How do they propose Wall Street fix itself?

molson

09-29-2008, 11:26 AM

Try this on for size:

According to the propaganda presented to me when I first started, a 20 year-old who invested $2000 a year in mutual funds for 10 years, then just left it until retirement at 65 (so 20k total invested), would come out ahead of someone who put nothing into mutual funds until age 30, then put $2000 a year away until retirement (70k total invested). This was based on compounding and dollar-cost averaging and a 8% yearly return and all the other crap the bankers spew out as being pretty much guaranteed. I believe they estimated that your money would double every 7 years or so.

I've been working for 10 years now, and have been putting money into mutual funds (RRSP) the entire time (with the exception of a 6-month or so period when I moved and wasn't sure of my finances). In fact I think I started back when I was in college, so it's likely been more than just the 10 years. I've put into several different funds during that time, but I've never sold anything, always just taken the long-term view and hold like I was told to. Over time I have slowly increased my monthly contributions from $25 up to $700.

I am now 30 years old. As of today, My book value (the amount of actual money I've invested, so essentially what I'd have under my mattress if I avoided banks at all) is over $5000 higher than the actual value (what I'd get if I sold everything right now). In 10+ years of investing prudently, I have lost money. I will never get those 10 years back. I will never be able to have my money compound the way it was supposed to. I could have put that money in my mattress, taken a trip to Europe, and been in the exact same position.

I no longer know what to believe. I know the worst thing you can do is panic and sell low, but how much longer can I sit and watch my life savings do nothing for me? Sure, I'm still only 30 years old, and when they show you all those lovely charts with the ever-rising line, it spans out over 40+ years. But do I wait another 10 years before acting? What happens if I'm in the same position when I'm 40? At that point I'd almost be screwed.

It's becoming increasingly clear that all these supposed financial experts don't have a fucking clue. I am not impressed.

Wow. You'll never hear this story in one of those Edward Jones IRA pamphlets.

This goes back to my point about delaying recessions. Over 40 years, an economy will rise and fall, have moments of growth and recession. UNLESS you screw around with it too much. If a government makes huge sacrifices to merely delay a recession for a few years, you might as well tear up all these 40-year projections.

MikeVic

09-29-2008, 11:27 AM

That sucks Fidatelo! It makes me want to get out of this thing completely!

Gary Gorski

09-29-2008, 11:49 AM

PilotMan

09-29-2008, 12:04 PM

Yeah, Fidatelo, you and I are in similar situations. My outlook is still very long term. I am quite diversified, and still have taken a bath over the last couple of years. Still, I think that I am buying at pretty good prices, and when things rebound, they will rebound better than 8% and hopefully can bring that overall curve back up a little. Especially that I will own more stock right now, than if the market would have started to go up on that nice line that we were looking at. Even in our 30's there is a lot of time for things to change.

Fidatelo

09-29-2008, 12:24 PM

Wow that's terrible Fidatelo - what kinds of funds were you invested in? Were you diversified? I know of people who had major portions of their 401k funds wiped out because they were nearly 100% invested in tech type funds during the dot com bubble. Plus we had 9/11 and now this massive drop in the market - it has not been a good ten years for the market on the whole and I think that the people who tell you to just invest and forget about it are doing customers a major disservice. Sure if you started in 1958 - yeah 40 years later you've got a nice chart to show. In that time the dow has gone from 601 to 10,900 (today) and as high as about 13,500 as opposed to about 10 years ago when the dow was at 9,000. I believe that over time my investments and 401k contributions will appreciate significantly but I am less certain of that now than I was say a year or so ago.

Here are all of the funds I own units of, with the average unit cost and current price in brackets:

RBC Canadian Dividend (avg: 45.181 | cur: 44.125)
RBC Canadian Equity (avg: 17.216 | cur: 23.934)
RBC Canadian Index (avg: 21.700 | cur: 22.710)
O'Shaughnessy Cdn. Equity (avg: 15.907 | cur: 14.603)
O'Shaughnessy U.S. Growth (avg: 18.251 | cur: 13.038)
RBC Life Science & Technology (avg: 9.919 | cur: 4.878)
O'Shaughnessy Intl Equity (avg: 11.652 | cur: 8.783)
Non-redeemable GIC (n/a)

The amount I've put into each has changed over time, with Life Science & Technology being one that I put into a lot early but gave up on adding to a few years ago, and contributes about $2000 of my losses. My 'big 3' of O'Shaughnessy Cdn Equity, RBC Canadian Equity, and O'Shaugnessy Intl Equity equate for about 65-70% of my portfolio.

Obviously I am fairly equity heavy, but for my age that is supposed to be the case as I understand it. I'm also less exposed to the US than my advisor would like, but so far that gut-instinct of mine to stay more within Canada has actually kept me ahead.

I'm sure with enough detail people could pick it apart and point out each area that I screwed up, but the point is that I have followed all of the basic rules that were explained to me from the start: invest early and often, to benefit from dollar cost averages; don't panic and sell at the first sign of trouble (dot-com bust for example); don't over-manage (buy and hold); diversify (own several different funds); be aggressive (because I'm young). The handful of times I have ignored the advisors I have actually been rewarded for it.

In the last couple years I have started to think that I'd be better off just getting a few market indexed funds, so that I'm always in line with the market (as I believe that fund managers that can beat the market are pretty few and far between, and most probably lose). But now I'm thinking that maybe the market itself will never produce the results I need. Especially when you consider that life spans are increasing. If I live to be 100+ years old, and the market takes another 5-10 years just to get back to the historical high point (which is essentially where a large part of my money went in), there is no way I'll be able to retire at 55 or maybe even 65.

miami_fan

09-29-2008, 12:33 PM

I know it is toxic to ask about the past but I am going to do it anyway. I keep hearing that the bailout plan has to be done right now or else we are going into a depression. With the benefit of hindsight, what could have been done before this point? I noticed that this thread started back in March. Could we have done say a hundred billion dollar plan in March that would have kept us from this point? Could there have been more regulations passed? Forced sales? More printed money? Maneuver interest rates up or down more? I ask because it seems that this whole situation jumped from everything is great to everything is okay to the sky is falling in a matter of months. This, in spite of, what now seems to be overwhelming evidence that we were heading to this point.

Gary Gorski

09-29-2008, 12:45 PM

I'm certainly no financial manager (and have zero knowledge of the Canadian market) so I wouldn't know if you're in good funds or bad funds but at least you've got different funds and you don't have your eggs all in one basket. You seem to have good knowledge of what you are doing and what you were told is pretty much the standard line that financial managers seem to give out. I think you're also right not to just go with what the advisor says simply because he or she says it. They're sales people at the end of the day and it seems that unless you're putting a massive amount of money to work with them that they're really not going to spend the time caring about people with average portfolios. At the end of the day you're the only one who will be 100% guaranteed to look out for your money and the fact that you know what you own and put some thought into it is a good sign that you will find a way to grow that money over time.

I also don't think that the market can produce the historical results that it did. You have to think about how much our economy has grown in the past 50 years. Is it really possible to continue that growth for the next 50? I'm not saying there won't be growth but look at the numbers on the dow I posted. It's 18 times higher today than it was in 1958. There's no way it can continue on like that in the next 50 years. I still think in the end money can be made in the market but I think its alot harder now especially if you're looking for the returns they show on those charts.

Galaxy

09-29-2008, 12:47 PM

Alright, the idiots in the House have decided to crash the economy by not passing the bill and playing politics.

molson

09-29-2008, 12:49 PM

Alright, the idiots in the House have decided to crash the economy by not passing the bill and playing politics.

Or perhaps, they've inadvertendly saved the economy (for now). Time will tell.

Galaxy

09-29-2008, 12:50 PM

Or perhaps, they've inadvertendly saved the economy (for now). Time will tell.

Could be. It's just too political (what else is new?) and this is something that shouldn't be played around with.

Gary Gorski

09-29-2008, 12:50 PM

House rejected the bill - dow was down 600 at one point here

Galaxy

09-29-2008, 12:53 PM

So, why are Republicans voting against it?

Gary Gorski

09-29-2008, 12:59 PM

Not sure - now cnbc has changed the story to say it appears they have rejected it but voting is still going

Flasch186

09-29-2008, 01:00 PM

the vote can remain open and votes can switch sides until they close it.

BTW WTF did McCain accomplish exactly?

Mizzou B-ball fan

09-29-2008, 01:01 PM

House rejected the bill - dow was down 600 at one point here

It's back up quite a bit. Sanity has been restored from a 15 minute panic fit. There's a bunch of investors that just made a killing with a quick buy-up of stock.

MikeVic

09-29-2008, 01:01 PM

What the hell, is that how voting works? I want to be in this House. I'd flip my vote back and forth a million times.

Galaxy

09-29-2008, 01:01 PM

the vote can remain open and votes can switch sides until they close it.

BTW WTF did McCain accomplish exactly?

McCain? Are you in the right thread?

Mizzou B-ball fan

09-29-2008, 01:02 PM

the vote can remain open and votes can switch sides until they close it.

BTW WTF did McCain accomplish exactly?

The bill that was considered before McCain showed up had even less of a chance of passing. Democrats can look within their own party for the failure of this bill. The Republicans had no way to stop it if party lines held.

Flasch186

09-29-2008, 01:04 PM

sorry wrong thread but im pissed and shooting off a shotgun. Ignore the McCain stuff.

DanGarion

09-29-2008, 01:05 PM

WTF. We are loaning money to the Automakers now too...?

Congress Approves $25 Billion In Loans For Automakers...

Galaxy

09-29-2008, 01:08 PM

sorry wrong thread but im pissed and shooting off a shotgun. Ignore the McCain stuff.

I was wondering where McCain came from. :)

Flasch186

09-29-2008, 01:08 PM

its over.

Gary Gorski

09-29-2008, 01:09 PM

It's back up quite a bit. Sanity has been restored from a 15 minute panic fit. There's a bunch of investors that just made a killing with a quick buy-up of stock.

down 600+ again - this is scary stuff

Mizzou B-ball fan

09-29-2008, 01:09 PM

WTF. We are loaning money to the Automakers now too...?

Congress Approves $25 Billion In Loans For Automakers...

There were a few earmarks in there in addition to that one. I wouldn't have been shocked to see it pass if they would have taken that junk out.

Galaxy

09-29-2008, 01:09 PM

WTF. We are loaning money to the Automakers now too...?

Congress Approves $25 Billion In Loans For Automakers...

I see that.
The Associated Press: Senate sends big spending bill to Bush to sign (http://ap.google.com/article/ALeqM5injFfO8MlwJfFFF_n29IR630N94AD93FC4C01)

DanGarion

09-29-2008, 01:09 PM

No chance in passing this bill at all... according to CNBC.

Mizzou B-ball fan

09-29-2008, 01:11 PM

down 600+ again - this is scary stuff

It will be relatively volatile. The investment firms have triggers for buying and selling if the market goes up or down a certain amount. That's one of the main reasons you'll see so much change. It tends to overexaggerate the changes if you watch from minute to minute, but it evens out in the end.

Mizzou B-ball fan

09-29-2008, 01:12 PM

No chance in passing this bill at all... according to CNBC.

Voting was closed several minutes ago and there's more than enough votes to kill it.

Surtt

09-29-2008, 01:12 PM

I see that.
The Associated Press: Senate sends big spending bill to Bush to sign (http://ap.google.com/article/ALeqM5injFfO8MlwJfFFF_n29IR630N94AD93FC4C01)

Wasn't that in the budget bill (not the bail out one)?

DanGarion

09-29-2008, 01:13 PM

I see that.
The Associated Press: Senate sends big spending bill to Bush to sign (http://ap.google.com/article/ALeqM5injFfO8MlwJfFFF_n29IR630N94AD93FC4C01)

Well this is what an article I found on it say.

A bill that provides financial help for the big three automakers is headed to the president's desk.

The senate passed a massive spending bill that includes $ 25 billion of subsidized federal loans for automakers.

The low interest loans are intended to help the companies develop new technologies and retool factories to produce more fuel-efficient cars. President bush is expected to sign the bill despite some reservations.

Gary Gorski

09-29-2008, 01:13 PM

its over.

so now what? We just continue to do nothing and hope things change? As much as some of these congressmen and women think they're punishing Wall St for being stupid and greedy its not going to be such a great lesson as that punishment spills over to Main St.

Galaxy

09-29-2008, 01:15 PM

so now what? We just continue to do nothing and hope things change? As much as some of these congressmen and women think they're punishing Wall St for being stupid and greedy its not going to be such a great lesson as that punishment spills over to Main St.

That's what I people don't understand. While it's direct to help Wall Street, it is about Main Street. It is about our investments, our jobs, and our credit. Pass the bill, and work out new regulation to fix the problems in a future bill so this doesn't happen again. At least get credit available. Paulson and the bill supporters have done a shitty job on explaining this to Main Street, and why they need this to pass.

Flasch186

09-29-2008, 01:18 PM

I pray Ive been wrong, for all of our sake.

Fidatelo

09-29-2008, 01:19 PM

I also don't think that the market can produce the historical results that it did. You have to think about how much our economy has grown in the past 50 years. Is it really possible to continue that growth for the next 50? I'm not saying there won't be growth but look at the numbers on the dow I posted. It's 18 times higher today than it was in 1958. There's no way it can continue on like that in the next 50 years. I still think in the end money can be made in the market but I think its alot harder now especially if you're looking for the returns they show on those charts.

I think you're exactly correct here, and this is what worries me. If my money has not grown at all in 10 years, and if we can all pretty much agree that it's not going to be growing much for the next 1 or 2, and then we agree it will take some time to get back up to where it was, and then finally we agree that there is no way our market can possibly grow at rates similar to the last 50 years... how the heck does a person get the necessary returns to ever retire? And yet more and more people have their entire future sitting in the market, pension plans are slowly becoming a thing of the past, and who knows about social security/old age/whatever... ugh.

I hope this doesn't come off like whining. I'm young, I have a good job, and am probably going to be fine. It's just kind of frustrating that everything we've been lead to believe seems to just be a bunch of bullshit, and that the so-called experts don't really have a clue. I guess I just feel like I've been scammed (along with a few hundred million other people).

ISiddiqui

09-29-2008, 01:24 PM

Yeah, people who are pissed at the "giveaway" don't realize that if these institutions fail, it's going to hurt them FAR more than extra taxes will. FAR more.

Mizzou B-ball fan

09-29-2008, 01:25 PM

That's what I people don't understand. While it's direct to help Wall Street, it is about Main Street. It is about our investments, our jobs, and our credit. Pass the bill, and work out new regulation to fix the problems in a future bill so this doesn't happen again. At least get credit available.

I think that the general population has reached the point where they want the new regulations in place when $700B is going out the door. Congress can blame their previous spending habits on this backlash.

Gary Gorski

09-29-2008, 01:29 PM

I think you're exactly correct here, and this is what worries me. If my money has not grown at all in 10 years, and if we can all pretty much agree that it's not going to be growing much for the next 1 or 2, and then we agree it will take some time to get back up to where it was, and then finally we agree that there is no way our market can possibly grow at rates similar to the last 50 years... how the heck does a person get the necessary returns to ever retire? And yet more and more people have their entire future sitting in the market, pension plans are slowly becoming a thing of the past, and who knows about social security/old age/whatever... ugh.

I hope this doesn't come off like whining. I'm young, I have a good job, and am probably going to be fine. It's just kind of frustrating that everything we've been lead to believe seems to just be a bunch of bullshit, and that the so-called experts don't really have a clue. I guess I just feel like I've been scammed (along with a few hundred million other people).

I honestly can't say I can blame you for feeling like you've been scammed. All I can say is that I feel really, really bad for the people who are close to retirement age and watching this happen. Hopefully they've moved into less risky investments but I know some of them don't have any idea what they are invested in and will be horrified to see their 401k or IRA statements.

That's what our brilliant lawmakers either can't figure out or don't care about figuring out. Yeah, people on Wall Street screwed up. Mortgages companies duped people into buying houses they couldn't afford - they didn't care because they just had to close the deal and sell it to some bank and yeah people should have known better but they were out right lied to in some cases. It just is horrible that the people that will be hurt the most are the ones who had nothing at all to do with this nonsense. The people who are losing their homes, savings, investments, retirement accounts...they don't deserve to be punished for Wall St's greed and stupidity.

Fidatelo

09-29-2008, 01:34 PM

I honestly can't say I can blame you for feeling like you've been scammed. All I can say is that I feel really, really bad for the people who are close to retirement age and watching this happen. Hopefully they've moved into less risky investments but I know some of them don't have any idea what they are invested in and will be horrified to see their 401k or IRA statements.

Agreed, the people in the 45-55 age bracket are going to be hit the worst. Hopefully they made enough when they were younger to offset it, but in many cases I doubt it.

Galaril

09-29-2008, 01:37 PM

molson

09-29-2008, 01:41 PM

Yeah, people who are pissed at the "giveaway" don't realize that if these institutions fail, it's going to hurt them FAR more than extra taxes will. FAR more.

Or they might just disagree that it's the best course of action to take.

It's not just the direct effect of "extra taxes" that people are worried about.

Fighter of Foo

09-29-2008, 01:46 PM

flere-imsaho

09-29-2008, 01:47 PM

It's back up quite a bit. Sanity has been restored from a 15 minute panic fit. There's a bunch of investors that just made a killing with a quick buy-up of stock.

Not to single you out, MBBF, but I wanted to nitpick here for a second.

These people you refer to are not investors, they are speculators. It annoys me to no end when the news says things like "investors got panicked and dropped the DOW 300 points today". Investors are people who invest in companies, putting money into them for the long, or at least medium-term.

These people are gamblers, speculators, hoping to make a quick buck off of short-term changes.

Daimyo

09-29-2008, 01:48 PM

Mizzou B-ball fan

09-29-2008, 01:49 PM

Not to single you out, MBBF, but I wanted to nitpick here for a second.

These people you refer to are not investors, they are speculators. It annoys me to no end when the news says things like "investors got panicked and dropped the DOW 300 points today". Investors are people who invest in companies, putting money into them for the long, or at least medium-term.

These people are gamblers, speculators, hoping to make a quick buck off of short-term changes.

I don't see any problem with speculators as long as they aren't allowed to buy and sell without actually using their own money. I believe that short-selling is currently off-limits, so these people are actually risking their own money on these bets.

I totally agree with you about short-selling.

DaddyTorgo

09-29-2008, 01:52 PM

*settling in with my martini to watch the end of the world*

Galaxy

09-29-2008, 01:54 PM

This is just election year politics. With most of the population against this bill the most prudent course of action for anyone up for election was to vote against it. Even if you supported the bill in principle the ideal outcome was to vote against it and hope everyone else voted to pass it.

The democrats couldn't force it through on their own because that would have given the republicans too an huge advantage. It had to be a bipartisan effort.

Are Americans against it because they don't understand "Wall Street" and the credit market, but because they are bailing out "Wall Street billionaires" (seems to be a common card the Dems like to trump out) with taxpayer money? Do they understand what could happen if it doesn't pass?

JonInMiddleGA

09-29-2008, 01:54 PM

So the Republicans basically didn't vote and the Democrats did. So, does anyone know exactly what the Repubs problem was with this bailout? Wwas it about the new taxes or more because they didn't like the added regulation proposed. CNN was saying that alot of the Republican constituents were against this (who wasn't?) and they were afraid of the the voters fallout back in there districts. I am not even all that sure why the Democrats were so for it with the golden parachutes for executives? Wwere those still in the bailout or did they get taken out?

Best I can tell, the reasons for not supporting the bill varies -- from "my constituents don't like it" to "too much money, not enough oversight" to "we shouldn't be bailing out private companies" to "doesn't go far enough, particularly in allowing restructuring of mortgages".

The phrase "deeply flawed" comes to mind, seems as though there were quite a few things to choose from when looking for reasons not to vote for it and it wasn't hard to find one or more problems that fit depending upon your point of view.

edit to add: here's a snippet from a cnn.com piece (http://money.cnn.com/2008/09/29/news/economy/bailout/index.htm?cnn=yes)that illustrates the variety of opposition

But the bill did draw some opposition during the morning debate.

Rep. John Culberson, R-Texas, said the measure would leave a huge burden on taxpayers. "This legislation is giving us a choice between bankrupting our children and bankrupting a few of these big financial institutions on Wall Street that made bad decisions," he said.

Other conservative Republicans argued the bill would be a blow against economic freedom.

Thaddeus McCotter, R-Mich., said the bill posed a choice between the loss of prosperity in the short term or economic freedom in the long term. He said once the federal government enters the financial market place, it will not leave. "The choice is stark," he said.

But there were also Democrats who opposed the bill for not doing enough to help those who taxpayers facing foreclosure or needing unemployment benefits extended, or taxing Wall Street to pay for the rescue package.

"Like the Iraq war and patriot act, this bill is fueled by fear and haste," said Lloyd Doggett, D-Texas.

Gary Gorski

09-29-2008, 01:55 PM

For those of you here who oppose the bailout how do you handle the situation now? Do you simply let these institutions fail and see what's left standing in the end? Do we forclose on whatever % of the population cannot pay their mortgage and definitely won't be able to do so if they lose their job? Is there a way to stop the bleeding or do we just wait and see where the bottom is?

ISiddiqui

09-29-2008, 01:56 PM

Or they might just disagree that it's the best course of action to take.

It's not just the direct effect of "extra taxes" that people are worried about.

I'm thinking they may change their mind when the banks start failing and they can't get loans for the "cheap" houses out on the market.

DaddyTorgo

09-29-2008, 01:56 PM

albionmoonlight

09-29-2008, 01:58 PM

JonInMiddleGA

09-29-2008, 01:58 PM

Are Americans against it because they don't understand "Wall Street" and the credit market, but because they are bailing out "Wall Street billionaires" (seems to be a common card the Dems like to trump out) with taxpayer money? Do they understand what could happen if it doesn't pass?

For starters, see my answer just above about reasons politicians failed to pass it. I imagine those could apply to the voters as well. And not on that list might be the biggest one of all: I've seen little beyond vague predictions of dire consequences in the way of making a case that this is necessary and/or desirable.

And even though I've given this relatively limited attention since last week, I'd say it's a safe bet that I still understand it better than the average man on the street (which isn't meant to say much for me or them mind you).

One thing that seems relatively certain to me, if the man on the street was supportive of the plan it would have had a much better chance of passing today. Maybe those in favor of it were lobbying the wrong people.

DaddyTorgo

09-29-2008, 02:00 PM

okay i just want to emphasize: i'm not glad that the markets are cratering and people here are stressing and losing money and what-not.

but it's like being given a ticket on a time machine trip to watch the titanic...it's amazing

MikeVic

09-29-2008, 02:01 PM

Those scientists should've just collided the protons or whatever already.

Fighter of Foo

09-29-2008, 02:07 PM

I don't see any problem with speculators as long as they aren't allowed to buy and sell without actually using their own money. I believe that short-selling is currently off-limits, so these people are actually risking their own money on these bets.

I totally agree with you about short-selling.

The LACK of short sellers is why the dow was down 700 points earlier today!!!!!!! Short selling stablizes markets. Roughly 1/7 of all the companies on the NYSE are on the can't short list.

Gary Gorski

09-29-2008, 02:08 PM

I've seen little beyond vague predictions of dire consequences in the way of making a case that this is necessary and/or desirable.

What about the thought of the quick plunge to -700 today for the dow as being a warning of what could happen should there be no action taken? I think there is still some hope out there that now that everyone has had their chance to grandstand and put their no vote on the record maybe a bill could squeak through and that could be keeping the market only down as far as it is right now.

I realize that there's just speculation or predictions of what could happen but we saw the market drop hundreds of points in less than a minute as soon as news broke that the bill likely had failed. Don't you think that's cause to think something much, much worse can happen if there's no hope whatsoever of something getting done?

molson

09-29-2008, 02:13 PM

What about the thought of the quick plunge to -700 today for the dow as being a warning of what could happen should there be no action taken?

That's just like a sports betting line basically. It's not what speculators think will happen, it's what speculators think others will think will happen.

What you don't hear is how exactly inaction will bring about The Great Depression, except that "credit won't be available". I think it's closer to "credit will be more difficult to get", which is exactly the correct free market response to all this.

Coffee Warlord

09-29-2008, 02:13 PM

What about the thought of the quick plunge to -700 today for the dow as being a warning of what could happen should there be no action taken? I think there is still some hope out there that now that everyone has had their chance to grandstand and put their no vote on the record maybe a bill could squeak through and that could be keeping the market only down as far as it is right now.

I realize that there's just speculation or predictions of what could happen but we saw the market drop hundreds of points in less than a minute as soon as news broke that the bill likely had failed. Don't you think that's cause to think something much, much worse can happen if there's no hope whatsoever of something getting done?

A decision this key to the markets is obviously going to cause some serious action in said markets. Investors have been staring at screens and the news all day waiting for that exact moment to make a move. You can't judge the repercussions of NOT passing this bailout by looking at 10 minutes of market action.

Mizzou B-ball fan

09-29-2008, 02:15 PM

What you don't hear is how exactly inaction will bring about The Great Depression, except that "credit won't be available". I think it's closer to "credit will be more difficult to get", which is exactly the correct free market response to all this.

Exactly. The credit market is ridiculously out of whack. We need a correction. I'd rather take a hit now than delay the inevitable.

Flasch186

09-29-2008, 02:18 PM

MBBF

Care to look again at the markets there bud?

Also that's just the face of it. the credit market is whack but this correction you want will be much much more than a 'correction.'

molson

09-29-2008, 02:21 PM

I'm thinking they may change their mind when the banks start failing and they can't get loans for the "cheap" houses out on the market.

Damn it, so there will be a period of time where it might more difficult (or even impossible) for people to overextend themselves and live beyond their means??

My grandfather paid cash for his small Philadephia row house in the 1950s (he was a factory worker and saved up his cash for a few years). Not saying the path from here to there would be pleasant or even necessarily desirable, but the housing market MUST collapse. It deserves to collapase. It SHOULD collapse. There will be winners and losers, both long and short term to such a collapse, but trying to prop it up will just delay the inevitable.

I'm not saying some kind of a bailout isn't a good idea (I haven't read the proposal, and probably wouldn't understand it fully if I did). This just seems like one of those acts historians will look back at in 50 years and say, "why the hell did they think THAT would work?"

Flasch186

09-29-2008, 02:22 PM

wrong.

Gary Gorski

09-29-2008, 02:24 PM

That's just like a sports betting line basically. It's not what speculators think will happen, it's what speculators think others will think will happen.

What you don't hear is how exactly inaction will bring about The Great Depression, except that "credit won't be available". I think it's closer to "credit will be more difficult to get", which is exactly the correct free market response to all this.

How can banks lend money if they don't have enough money? How many banks will be left standing? Three? Four? Will anyone be left other than JPMorgan, Bank of America and Wells Fargo? If there's only a couple of banks and even if they do have the ability to lend who will they lend to? Certainly only the companies with the cleanest of balance sheets - which means that all of the companies that are good down to the ones that are awful will no longer have access to funds they need to run their businesses. Not being able to run their business means defaulting on payments to other businesses and the loss of jobs. People who have lost their job will not be able to pay for their homes, cars or anything else thereby defaulting more things for the banks. And if there are only a few banks left who's to say they will make credit affordable? If you don't have the competition where is the incentive to make good rates? If all these banks fail then why are the people who have the most money going to have faith in the few remaining to deposit their money there so it can be loaned out?

That's what we need now - we need to be calmed down and we need to temper the fear in the market. The bad financial institutions are going to fail - but the fear is going to take down good ones and alot of other companies and thereby individual people along with it.

ISiddiqui

09-29-2008, 02:26 PM

Damn it, so there will be a period of time where it might more difficult (or even impossible) for people to overextend themselves and live beyond their means??

How about it'll be almost impossible for responsible people to get loans to purchase houses or cars? Which will, of course, tank the economy, lead to massive layoffs and potentially begin the 2nd Great Depression.

But, as long as it teaches people a lesson, that's ok.

GrantDawg

09-29-2008, 02:28 PM

Dow down 6%. S and P down 8%.

sterlingice

09-29-2008, 02:30 PM

Gary Gorski

09-29-2008, 02:31 PM

A decision this key to the markets is obviously going to cause some serious action in said markets. Investors have been staring at screens and the news all day waiting for that exact moment to make a move. You can't judge the repercussions of NOT passing this bailout by looking at 10 minutes of market action.

You're right, this decision is going to cause great effect to the markets. We're down more than 700 now again, the VIX is spiking to levels the market hasn't seen in years. This doesn't seem to be some kind of temporary bump in the road and its not just taking down the financials - everyone's going down with it. These are real companies with real employees who could end up losing their jobs - its much more than some traders/investors/speculators making or losing money "playing the market".

Surtt

09-29-2008, 02:32 PM

Not saying the path from here to there would be pleasant or even necessarily desirable, but the housing market MUST collapse. It deserves to collapase. It SHOULD collapse. There will be winners and losers, both long and short term to such a collapse, but trying to prop it up will just delay the inevitable.

It is not the housing market that is collapsing, it is the stock market.
Lots of responsible people who had nothing to do with the housing boom/bust are loosing their life savings.

Federalization of Fannie Mae and Freddie Mac
Merrill Lynch sold to Bank of America amidst fears of collapse
Lehman Brothers files for bankruptcy.
Federalization of American International Group.
Washington Mutual was seized by the FDIC.
etc...

No one knows what will happen, but we have had a historic run of bank failures.
It is not just a market correction.

Galaril

09-29-2008, 02:33 PM

this is fucking awesome, in a train-wreck, hypothetical kind of way.

although it sucks for my parents, and for anyone else with exposure to the market. from a "disaster watching" standpoint it's historic.

Yup, though I am feeling sorry for all the older people who are watching their retirements dwindle before their eyes I can't help but smile at the fact a couple fo my very very well off relatives who have done better than they deserve for themselves and have flaunted there money with bigger and bigger house and cars had evryhting in the market and our losing there shirts.

molson

09-29-2008, 02:33 PM

How about it'll be almost impossible for responsible people to get loans to purchase houses or cars? Which will, of course, tank the economy, lead to massive layoffs and potentially begin the 2nd Great Depression.

But, as long as it teaches people a lesson, that's ok.

Maybe the government should just print money and hand it out.

It's not about "teaching people a lesson". Propping up a system that can't be sustained is just silly. We might as well have the discussion for the next bailout now - would you be in favor of another $700 billion next year? And the year after?

Regular people can't afford housing without borrowing obscene amounts of money. That's the problem. That will still be the problem after the bailout. That will still be the problem until the housing market hits rock bottom.

albionmoonlight

09-29-2008, 02:35 PM

How about it'll be almost impossible for responsible people to get loans to purchase houses or cars? Which will, of course, tank the economy, lead to massive layoffs and potentially begin the 2nd Great Depression.

But, as long as it teaches people a lesson, that's ok.

I don't know where I come out on the bailout.

But I don't think that your statement is really that far off from the position of the people against it. I am afraid of loaning the Chinese $700 billion of our grandchildren's money and not learning anything from the experience.

Maybe the thinking is if we have to land hard one way or the other, maybe it is better to do it now and in a way that gets people to change the destructive behavior than postpone the fall for a generation while we continue to dig a deeper and deeper hole.

Gary Gorski

09-29-2008, 02:39 PM

Maybe the government should just print money and hand it out.

It's not about printing out money to hand out - you've got a majority of businesses and people who rely on access to credit to survive. Maybe you've done well and saved a boatload of cash in case of emergency but most people have not and certainly most businesses don't have it. Think about a typical small business - they rely on a line of credit from the bank to buy supplies and pay their employees which they pay back when they get paid for their goods and services. If that credit gets cut or taken out how do they pay their supplier or employees? They won't be getting paid for their goods/services since their customer won't have credit either.

Something has to be done - maybe the bailout, maybe not. Maybe something like raising the FDIC insurance to 2-3 million instead of 100,000. Something has to be done by the government. They are supposed to be the leaders of this country - we need our leaders to do something to show they have 100% faith in our country. We don't need them to just print money - we need some show of confidence to stabilize things.

flere-imsaho

09-29-2008, 02:39 PM

I don't see any problem with speculators as long as they aren't allowed to buy and sell without actually using their own money. I believe that short-selling is currently off-limits, so these people are actually risking their own money on these bets.

Well, I've always kind of had a problem with stock market speculation. Maybe I'm an old fogey, but the way I see it, the purpose of the stock market, originally, was to allow people to invest in corporations and corporations to raise needed extra capital by allowing people to invest in them. There was a direct relationship between how well a company did and the return on investment people saw when they invested in a company. It was an actual relationship.

Nowadays you've got guys like Jim Cramer who treat the whole thing like one big game. A game played by people with ADD. It's always about the next quarter's earnings, no one cares about the long-term, and we'll find more and more escoteric ways to make money off of any movement in the market.

So much so that Wall Street has failed to mirror the "real" economy for, how long? But since so much money is tied up in there, we all get hurt when the "players" over-reach with their little game.

That's why I say these people aren't investors. They're playing a game, and they could care less what happens to the companies in which they briefly own stock.

digamma

09-29-2008, 02:43 PM

One theory I read somewhere is that because the bill is polling at toxic levels, no one wants to own it. And, because no one wants to own it, no one is stepping up to spin it (by, for instance, calling it a "recovery plan" instead of a "bailout")

In fact, because most pols want to get milage out of opposing it, you have a lot of people spinning the bill negative and no one spinning it up.

Unwillingness to spin or inability to explain? There is an easy story to tell if you oppose the bill...$700B cost to tax payers. It is harder to explain why the bill is a good thing. You quickly devolve into a discussion of credit markets and liquidity that almost no one can follow.

ISiddiqui

09-29-2008, 02:45 PM

I don't know where I come out on the bailout.

But I don't think that your statement is really that far off from the position of the people against it. I am afraid of loaning the Chinese $700 billion of our grandchildren's money and not learning anything from the experience.

Maybe the thinking is if we have to land hard one way or the other, maybe it is better to do it now and in a way that gets people to change the destructive behavior than postpone the fall for a generation while we continue to dig a deeper and deeper hole.

Well the latest bill had it in installments and if things were getting better, then you'd only be on the hook for a bit of the total. One can learn a lesson by doing a bailout, but also attaching some stronger regulation or laws upon the banking industry, such as making sure they keep more money and preventing leveraging to such an extent.

molson

09-29-2008, 02:45 PM

we need our leaders to do something to show they have 100% faith in our country.

Wouldn't a massive bailout be the opposite of showing faith in the country?

What happens when the Chinese decide our credit is worthless? Who pays for the next bailout if we succesfully avoid market correction?

At some point, the money just becomes completely pretend. THAT'S when the economy really collapases, when the currency is worthless. Having less access to credit isn't as scary as having full access to credit for a worthless currency.

Coffee Warlord

09-29-2008, 02:46 PM

Flasch186

09-29-2008, 02:52 PM

Well Maria Bartiromo says, "We're going to get this bailout package" maybe not today, "but we're going to get it." Here's hoping she's right.

sterlingice

09-29-2008, 02:52 PM

You absolutely, positively, cannot prop up such a fucked up industry indefinately. One way or another, there WILL be a sharp drop.

A blank check from the government at best postpones the inevitable and dumps a vat of taxpayer money into a black hole, causing a short term period of stability/business as usual, followed by a sickening crunch of doom.

No, I don't have an answer as to how to lessen the blow. While I'd love to just say fuck'em and let them die in the graves they dug for themselves, I am aware that SOMETHING has to be done.

I am, however, of the opinion that allowing some of our largest financial institutions to fall under the lunatic whims of the government is madness.

I think, politically, this needs to be done the right way rather than the rush way. People want their pound of flesh, not just from the CEOs and board members but from Wall Street itself.

So use that political capital to force through the needed banking regulations as part of the bill. That's something that would sway a lot more voters toward the bill. "Here, I know we screwed up. Here's how we're going to fix it" and add the important "And here's how we're not going to let this happen again".

People just figure this will happen again just like S&L in the 80's or the tech bubble in the 90's. And, guess what, it will happen again, but at least let's clean up one of the most important industries we have and let something else fail in the future.

SI

molson

09-29-2008, 02:52 PM

Gary Gorski

09-29-2008, 02:54 PM

Wouldn't a massive bailout be the opposite of showing faith in the country?

What happens when the Chinese decide our credit is worthless? Who pays for the next bailout if we succesfully avoid market correction?

At some point, the money just becomes completely pretend. THAT'S when the economy really collapases, when the currency is worthless.

No, I think the bailout temporarily stabilizes things in the short term and gives us a chance to figure out how to fix the mess (assuming they do that - if they do the bailout and then think everything's fixed then we're definitely screwed)

I really do think that the end consequence of the financial system imploding is going to be a massive jump in unemployment. People who have done everything the right way - worked hard, got a good mortgage, made their payments - some of those people will lose their jobs because of this. Why should they be punished along with the greedy and incompetent people running these failed financial firms?

ISiddiqui

09-29-2008, 02:56 PM

People just figure this will happen again just like S&L in the 80's or the tech bubble in the 90's. And, guess what, it will happen again, but at least let's clean up one of the most important industries we have and let something else fail in the future.

Of course people fail to realize that the US government made good money from the S&L takeovers.

And everyone seems to think the US is going to make a good deal of the $700 billion back, if not MORE (A WSJ article said this could make the US government $1.2 trillion!)

sterlingice

09-29-2008, 02:59 PM

Of course people fail to realize that the US government made good money from the S&L takeovers.

And everyone seems to think the US is going to make a good deal of the $700 billion back, if not MORE (A WSJ article said this could make the US government $1.2 trillion!)

Yeah, I saw that one. Again, the economy is too big to wrap my head around but if that's true- make the deal in a heartbeat and help us wipe out some of that debt :D

I don't want money coming back to taxpayers- just put us back to the rate we were at before this happened. And then use that spare to pay off the debt. We're going to have to do it at some point so sooner is better than later.

SI

Ajaxab

09-29-2008, 02:59 PM

Unwillingness to spin or inability to explain? There is an easy story to tell if you oppose the bill...$700B cost to tax payers. It is harder to explain why the bill is a good thing. You quickly devolve into a discussion of credit markets and liquidity that almost no one can follow.

I think this is a critical point. I wonder if even the most astute economists fully understand the economy. Things are just so incredibly complex given all the variables involved. That's why it's baffled me how some praise a president for a growing economy or criticize a president for an economy that isn't doing so well. It seems ludicrous to suggest that one person is responsible for what the economy is or isn't doing, yet so many people point fingers at the president (and by extension his party, whoever that might be during that period) and vote accordingly.

Cramer, and others like him, would not seem to help this mentality given their tendency toward short-sightedness.

molson

09-29-2008, 03:00 PM

Why should they be punished along with the greedy and incompetent people running these failed financial firms?

They shouldn't be punished. Don't make this about those who are for the little guy v. those who are against him. NOBODY wants regular people to lose their homes, or their jobs. But is it worth it to save a house today to lose thousands tomorrow?

There's room for difference of opinion, of course, in terms of how many houses are lost today v. tomorrow under varying plans. All I'm saying is that just because someone's a little concerned about a massive panicked government handout that feeds directly into the problems that brought us here in the first place, it doesn't mean that they take glee in people's present-day economic misfortune.

VPI97

09-29-2008, 03:01 PM

Of course people fail to realize that the US government made good money from the S&L takeovers.

And everyone seems to think the US is going to make a good deal of the $700 billion back, if not MORE (A WSJ article said this could make the US government $1.2 trillion!)
I read that article, too...but there was still a question there as to whether the mortgages the gov't would buy could be valued at a few pennies on the dollar or whether they were truly worthless (big difference). I'd be in favor of using a $700b check in order to get a bigger return at a later date, but other that that article, I haven't seen anyone explore that angle to such a depth that it would convince me that a "blank check" would benefit the country and leave us less exposed than a $700b loan would.

Daimyo

09-29-2008, 03:04 PM

From fivethirtyeight.com (http://www.fivethirtyeight.com/2008/09/swing-district-congressmen-doomed.html), here is the breakdown of the vote based on the incumbent 's election status:

<table border=1><tr><td>Status</td><td>Yea</td><td>Nay</td><td>% Yea</td></tr><tr><td>Vulberable</td><td>8</td><td>30</td><td>21.1%</td></tr><tr><td>Not vulnerable</td><td>174</td><td>196</td><td>47.0%</td></tr><tr><td>Not running</td><td>23</td><td>2</td><td>92.0%</td></tr></table>

Vulnerable indicates incumbent congressmen in races rated as "toss-up" or "lean" by Swing State Project. Not running indicates incumbent congressmen not running for re-election (nearly all republicans). Not vulnerable is everyone else.

Anthony

09-29-2008, 03:18 PM

It is not the housing market that is collapsing, it is the stock market.
Lots of responsible people who had nothing to do with the housing boom/bust are loosing their life savings.

Federalization of Fannie Mae and Freddie Mac
Merrill Lynch sold to Bank of America amidst fears of collapse
Lehman Brothers files for bankruptcy.
Federalization of American International Group.
Washington Mutual was seized by the FDIC.
etc...

No one knows what will happen, but we have had a historic run of bank failures.
It is not just a market correction.

only a bank going out of business affects the avg person. one bank being bought by another bank doesn't affect the people with savings in the aquired bank. of all the examples you gave above, i would say the Lehman one is the most dire since it wasn't bailed out. only the people actually investing in those particular companies were hit the hardest since the price per share declined in most cased 90%-95%. otherwise it's been business as usual for those other entities you cited.

Surtt

09-29-2008, 03:31 PM

only a bank going out of business affects the avg person. one bank being bought by another bank doesn't affect the people with savings in the aquired bank. of all the examples you gave above, i would say the Lehman one is the most dire since it wasn't bailed out. only the people actually investing in those particular companies were hit the hardest since the price per share declined in most cased 90%-95%. otherwise it's been business as usual for those other entities you cited.

I was trying to point out that the string of failures (they would have failed if not bought) was not something that happens during a normal "market correction."

SirFozzie

09-29-2008, 03:31 PM

MSNBC is reporting as breaking news that they won't take another whack at it till Thursday.

molson

09-29-2008, 03:37 PM

MSNBC is reporting as breaking news that they won't take another whack at it till Thursday.

Tommorrow's probably a good day to buy.

DaddyTorgo

09-29-2008, 03:51 PM

jeezus -- not till Thurs? they should close the fucking markets till then, or there won't be much to save...although tbh i think if that's true then today was the worst of it and tues/weds will be lesser drops (~200pts)

DaddyTorgo

09-29-2008, 03:57 PM

interesting viewpoint

Commentary: Bankruptcy, not bailout, is the right answer - CNN.com (http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html)

this part for sure i agree with

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.
If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth

stevew

09-29-2008, 04:01 PM

MSNBC is reporting as breaking news that they won't take another whack at it till Thursday.

Is it still because of the jewish holiday?

Surtt

09-29-2008, 04:14 PM

interesting viewpoint

Commentary: Bankruptcy, not bailout, is the right answer - CNN.com (http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html)

[QUOTE]The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.
The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

I am not sure I follow the logic.
1. The government is responsible because of "implicitly promises"
2. The lenders trusted the government backing.
3. Lenders should be punished for the government's mistake?

molson

09-29-2008, 04:19 PM

[QUOTE=DaddyTorgo;1847060]interesting viewpoint

Commentary: Bankruptcy, not bailout, is the right answer - CNN.com (http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html)

I am not sure I follow the logic.
1. The government is responsible because of "implicitly promises"
2. The lenders trusted the government backing.
3. Lenders should be punished for the government's mistake?

It's more like:

1. The government is responsible.
2. The lenders trusted the government backing
3. The government should learn from prior mistakes and not punish lenders by over-meddling and
screwing the economy up even more.

Galaxy

09-29-2008, 04:30 PM

Coffee Warlord

09-29-2008, 04:36 PM

Which why it is really an investment plan, not a bailout plan.

It's an investment into a company whose assets are of questionable value (if any value at all), purchased by a "company" (USGov) whose record in managing money is, to say the least, shit, in a deal written up by political hacks whose 1) primary concern is getting re-elected and 2) know next to nothing about economics.

What could possibly go wrong?

molson

09-29-2008, 04:38 PM

It's an investment into a company whose assets are of questionable value (if any value at all), purchased by a "company" (USGov) whose record in managing money is, to say the least, shit, in a deal written up by political hacks whose 1) primary concern is getting re-elected and 2) know next to nothing about politics.

What could possibly go wrong?

Did you mean for (2) - know next to nothing about economics?

Seriously, these hacks putting together something like this - in a panicked rush - is just terrifying.

Coffee Warlord

09-29-2008, 04:39 PM

Yeah, I corrected myself...apparently slightly too late for you. :)

Marc Vaughan

09-29-2008, 04:39 PM

Which why it is really an investment plan, not a bailout plan.

< cyncism >

Yeah but the media get more interest and excitement by making it appear its a waste of tax payers money then they would actually reporting what the intent is ...

Of course the fact that their scaremongering has terrified the public (who largely can't be bothered to find out details themselves) and thus scared congress out of supporting the bill and thus further fubaring the economy doesn't bother the media in the slightest .... I hate the fact that the media report the bills as being a bail out of fat cats when the intent is actually for the good of the economy as a whole imho.

After all they'll probably get good ratings as even more economic turmoil unfolds.

< end cyncism >

I agree that the initial give Paulson $700bn and he promises to be good plan was a tad ludicrous, however the idea of the goverment getting equity in companies seems largely sensible to me to be honest and isn't that far from nationalising the banks (which I know is a 'dirty' concept to some people). The institutions run correctly will make comfortable profits as they have in the past, yes initially they may not but in the long term it'd not just be good for the economy but by owning a profit making corporation the goverment would have higher income in the future*.

*Allowing them to be more fiscally balanced or to give a windfall tax or similar should the companies be floated and returned to the public sector.

Tekneek

09-29-2008, 04:45 PM

Like others have said what good would this do? Do you really want $2300 + Great Depression II?

Perhaps if this money could only be used to pay off debts and/or deposit into a bank (raising their assets). If you limit it to taxpayers alone, the payout would be significantly larger than $2300 and could still accomplish a lot. You put restrictions on how this special money can be spent. Heck, you can call it a credit that gets applied to credit cards, mortgages, or can be put into long term CDs. That way it is put into the system, but it is done by individuals and the populace in a way that they might be more likely to support.

At least with the bailout you are not only hopefully avoiding a global economic collapse but because the taxpayers are going to be contributing the money for it we're investors in the rebuilding of Wall St. That way the profits get spread around all the taxpayers rather than one massive bank and its shareholders. Look at the sweet deals JPM got on WaMu and Buffett got on Goldman. Those deals are to be had on some of these other banks and hopefully we'll be able to look back at this period in time 5 years from now and say that there were some great, great bargains on Wall St. for investors.

Perhaps. We will see what happens. Given the news of the afternoon, it looks like we may end up with a different solution.

Coffee Warlord

09-29-2008, 04:47 PM

The institutions run correctly will make comfortable profits as they have in the past, yes initially they may not but in the long term it'd not just be good for the economy but by owning a profit making corporation the goverment would have higher income in the future*.

US Government and correctly managed institutions are two terms that rarely, if ever, go together. Especially with a LOT of money to be made.

Flasch186

09-29-2008, 04:48 PM

stevew

09-29-2008, 04:49 PM

Did you mean for (2) - know next to nothing about economics?

Seriously, these hacks putting together something like this - in a panicked rush - is just terrifying.

This is the equivalent of hiring Dusty Baker to be your manager when you have 5 young arms who've never thrown over 150 innings. Disaster.

ISiddiqui

09-29-2008, 04:54 PM

If these assets are worth something, however, private parties should want to buy them

Which private parties have the money though? Especially without leveraging?

Tekneek

09-29-2008, 04:54 PM

I noticed that this thread started back in March. Could we have done say a hundred billion dollar plan in March that would have kept us from this point?

Bush kept saying the economy was fine until the past few weeks. That could be major reason why nothing was likely to happen. Despite all available evidence, people like Bush and McCain were insisting that all was well until very recently.

CamEdwards

09-29-2008, 04:55 PM

a GOP member came out and said he expects a bill to pass late Thursday or Friday and basically scoffed at the idea that things are on the precipice. HE stated that as a fiscal conservative he cant spend this money without the things the GOP house needs, for example, a reduction in the Capital Gains Tax....you shouldve seen Dylan Ratigan's reaction on CNBC and Jeff Mackey almost wanted to jump through the camera and choke the Congressman.

The ABC news Capitol correspondent was saying that he still expected a deal by Thursday/Friday as well. Looks like the Senate could take up the matter on Wednesday, and if it passes get it to the House on Thursday.

Flasch186

09-29-2008, 04:55 PM

that's true. Unbridled Capitalism works until it doesn't.

CamEdwards

09-29-2008, 04:59 PM

that's true. Unbridled Capitalism works until it doesn't.

We've found a winner for most generic statement ever. "insert blank" works until doesn't! Instant epiphany!!

I'm not sure you could point to a time in American history when we've had "unbridled capitalism". There's always been some level of government interference and regulation.

Flasch186

09-29-2008, 05:03 PM

right we've had great regulation and rules that have been enforced. Worked great. Go back to page 1 and start again.

Galaxy

09-29-2008, 05:05 PM

It's an investment into a company whose assets are of questionable value (if any value at all), purchased by a "company" (USGov) whose record in managing money is, to say the least, shit, in a deal written up by political hacks whose 1) primary concern is getting re-elected and 2) know next to nothing about economics.

What could possibly go wrong?

Would the government, aside from oversight, be running the "fund" (so to say), or would it Paulson and a group of business-minded people be running it?

I like Mark Cuban's idea: My BailOut Solution - I’m In For At Least $50mm « blog maverick (http://blogmaverick.com/2008/09/26/my-bailout-solution-im-in-for-at-least-50mm/)

Galaxy

09-29-2008, 05:11 PM

Perhaps if this money could only be used to pay off debts and/or deposit into a bank (raising their assets). If you limit it to taxpayers alone, the payout would be significantly larger than $2300 and could still accomplish a lot. You put restrictions on how this special money can be spent. Heck, you can call it a credit that gets applied to credit cards, mortgages, or can be put into long term CDs. That way it is put into the system, but it is done by individuals and the populace in a way that they might be more likely to support.

Perhaps. We will see what happens. Given the news of the afternoon, it looks like we may end up with a different solution.

And how is that going to help the economy and get the financial sector flowing again? It's the Refund scheme, Part II, from this summer all over again, expect your going to restrict people what they can their money (which they gave to the government in the first place) on. I would rather have jobs and credit flowing, instead of a few $1,000s in a refund.

Bigsmooth

09-29-2008, 05:19 PM

The LACK of short sellers is why the dow was down 700 points earlier today!!!!!!! Short selling stablizes markets. Roughly 1/7 of all the companies on the NYSE are on the can't short list.

This seems rediculous to me. Betting on a company/stock to fail is good for the market? There has to be a better way to stabilize the damn market. Come on, people that are shorting stocks make money off of other shareholders losses. Short selling stocks reeks of organized crime IMO. Make no mistake, some bastards made millions off of our failing 401k's. I mean, isn't banning short selling of those 799 companies implying that short selling will crush a stock? Maybe if they ban short selling across the board, the market willl stabilize?

SirFozzie

09-29-2008, 05:27 PM

BTW, I'm no friend of the Republicans (as I've long said), but today pisses me off. Either they're spinning the fact that it failed and don't want to look like they were playing politics with the economy (which is crap, if you can't support it, come out and say so).. or they're telling the truth and they're so butthurt by someone's meaningless statement that they're willing to cut off their nose to spite their face..

Especially with at least some of the members of the GOP trying to sneak capital gains tax cuts in there.. WHAT. THE. FUCK.

Bigsmooth

09-29-2008, 05:31 PM

Galaxy

09-29-2008, 05:32 PM

miami_fan

09-29-2008, 05:33 PM

< cyncism >

Yeah but the media get more interest and excitement by making it appear its a waste of tax payers money then they would actually reporting what the intent is ...

Of course the fact that their scaremongering has terrified the public (who largely can't be bothered to find out details themselves) and thus scared congress out of supporting the bill and thus further fubaring the economy doesn't bother the media in the slightest .... I hate the fact that the media report the bills as being a bail out of fat cats when the intent is actually for the good of the economy as a whole imho.

After all they'll probably get good ratings as even more economic turmoil unfolds.

< end cyncism >

I agree that the initial give Paulson $700bn and he promises to be good plan was a tad ludicrous, however the idea of the goverment getting equity in companies seems largely sensible to me to be honest and isn't that far from nationalising the banks (which I know is a 'dirty' concept to some people). The institutions run correctly will make comfortable profits as they have in the past, yes initially they may not but in the long term it'd not just be good for the economy but by owning a profit making corporation the goverment would have higher income in the future*.

*Allowing them to be more fiscally balanced or to give a windfall tax or similar should the companies be floated and returned to the public sector.

The first thing that comes to mind is most of the public have been told or believe that govt is evil and the private sector should be left alone to succeed and fail on its own. All of a sudden, the "evil" govt wants to give tax dollars (that Joe Public doesn't believe should be there anyway) to banks that the public can't get money from now.

I agree with all those who have said that the supporters of this bill have done a horrible job of explaining what it does. I personally have learned a hell of a lot more reading this thread over the last week than anything that I have listening to most of the experts.

SirFozzie

09-29-2008, 05:35 PM

I didn't hear about that CGT part. Both sides are pathetic (see the spending bill passed earlier that gave the automakers $25 billion in nice loans this weekend.

See post 719 above for the details.

Tekneek

09-29-2008, 05:41 PM

And how is that going to help the economy and get the financial sector flowing again? It's the Refund scheme, Part II, from this summer all over again, expect your going to restrict people what they can their money (which they gave to the government in the first place) on. I would rather have jobs and credit flowing, instead of a few $1,000s in a refund.

If you require it be used in the financial industry, how is it different? It must be used to pay credit card debt, loan/mortgage debt, or put into long term CDs. All of these put money into the financial industry. The total is the same, plus it frees taxpayers of the debts they owe to these institutions, which removes that strain on their own resources. It accomplishes the double play of putting capital back into the banks while freeing up discretionary income for individual taxpayers.

GrantDawg

09-29-2008, 05:43 PM

The first thing that comes to mind is most of the public have been told or believe that govt is evil and the private sector should be left alone to succeed and fail on its own. All of a sudden, the "evil" govt wants to give tax dollars (that Joe Public doesn't believe should be there anyway) to banks that the public can't get money from now.

I agree with all those who have said that the supporters of this bill have done a horrible job of explaining what it does. I personally have learned a hell of a lot more reading this thread over the last week than anything that I have listening to most of the experts.

Oh, no doubt. There is much more info in this thread than in say "Newsweek." But a lot of comments show how little the average joe understand about how businesses run. Most businesses of any size run on some line of credit to pay payroll, buy supplies, etc. and get paid back when receipts come in. Lock down credit, and many people will not be seeing a paycheck.

Tekneek

09-29-2008, 05:43 PM

SirFozzie

09-29-2008, 05:49 PM

Is this about the claim that Nancy Pelosi suddenly has tremendous influence in the way the GOP votes on critical issues facing this nation?

Yeah. "We would have saved America, but twelve of us couldn't stand our beloved policies being questioned, so we're going to let America rot. Nyah! (sticks out tounge)."

Galaxy

09-29-2008, 06:06 PM

Didn't the Democrats have about 90-some members vote against it? If so, why did they vote against it?

Surtt

09-29-2008, 06:07 PM

If you require it be used in the financial industry, how is it different? It must be used to pay credit card debt, loan/mortgage debt, or put into long term CDs. All of these put money into the financial industry. The total is the same, plus it frees taxpayers of the debts they owe to these institutions, which removes that strain on their own resources. It accomplishes the double play of putting capital back into the banks while freeing up discretionary income for individual taxpayers.

The problem is home loans that are bad and need to be written off not credit accounts in good standing.

If some one owes you $500 and is paying it off slowly. If he pays it off sooner it doesn't really mater. You will get your money either way.

But if some one owes you $500 and skips town, you are sol. Having some one else pay it off makes a big difference. It is the difference from getting paid or not.

GrantDawg

09-29-2008, 06:10 PM

Didn't the Democrats have about 90-some members vote against it? If so, why did they vote against it?

Politics. Share the blame. That was the whole point of this. The agreement was both parties would vote 50-50 or something close to it so that it is not one party's plan.

Flasch186

09-29-2008, 06:11 PM

Didn't the Democrats have about 90-some members vote against it? If so, why did they vote against it?

because:

See the votes are mostly counted in the back hallways before the actual vote occurs. SOOOOOO, the ones who are in heated elections coming up would vote "no" while people who are comfortable in their races or are not in races at all vote "yeah." Same on the GOP side. Then add in variances and you get the results today.

Bigsmooth

09-29-2008, 06:12 PM

Another good take:

Let Risk-Taking Financial Institutions Fail - TIME (http://www.time.com/time/business/article/0,8599,1845209,00.html?xid=rss-nation)

Also, the voice of reason, Ron Paul:

YouTube - Bailout Fails! (http://www.youtube.com/watch?v=lFh6PU6qM9Q&eurl=http://cshdtrust.com/forum/index.php/topic,134.525.html)

DaddyTorgo

09-29-2008, 06:13 PM

because:

See the votes are mostly counted in the back hallways before the actual vote occurs. SOOOOOO, the ones who are in heated elections coming up would vote "no" while people who are comfortable in their races or are not in races at all vote "yeah." Same on the GOP side. Then add in variances and you get the results today.

what he said

SirFozzie

09-29-2008, 06:18 PM

Lawmakers quickly point fingers after bailout fails - CNN.com (http://www.cnn.com/2008/POLITICS/09/29/bailout.fallout/index.html)

Confirmed that the earliest a bill will come up is Thursday.

The House will not be in session Tuesday and Wednesday, but behind-the-scenes work will continue until it reconvenes on Thursday.

SirFozzie

09-29-2008, 06:20 PM

Politics. Share the blame. That was the whole point of this. The agreement was both parties would vote 50-50 or something close to it so that it is not one party's plan.

Yup: From the link in my last post

"They lost 2-1 on their own side, voting against their president, their presidential candidate and against every leader in their own party," one Democratic source said.

Pelosi said the Democrats lived up their side of the bargain. "We've entered into those conversations in a spirit of bipartisanship, with the understanding that each side would have half of our votes to pass the bill," she said.

"When the legislation came to the floor, the Democratic side more than lived up to its side of the bargain," she added. "While the legislation may have failed, the crisis is still with us."

Galaxy

09-29-2008, 06:21 PM

Another good take:

Let Risk-Taking Financial Institutions Fail - TIME (http://www.time.com/time/business/article/0,8599,1845209,00.html?xid=rss-nation)

Biggest problem:

"Let financial institutions fail, merge or be bought out. The faltering institutions will see their shares devalued and will be likely to be taken over by stronger institutions — as has already started happening. This consolidation of the financial sector is both efficient and inevitable; government action can only delay the adjustment."

Other banks can't buy them out if they don't have the credit or money to do so. Healthier banks, who aren't exactly "strong" as it is, are buying other assets with help from the government.

If the government bought out actual mortgages, does that mean people that had these mortgages get free homes? What if, which would include a lot of them, can't make mortgages payments even when the government's bailout? People seem to think that Wall Street and Main Street (like the idiots in the picture on that page) are separate. They are tied at the hip.

Galaxy

09-29-2008, 06:23 PM

Politics. Share the blame. That was the whole point of this. The agreement was both parties would vote 50-50 or something close to it so that it is not one party's plan.

Ah, thanks.

Tekneek

09-29-2008, 06:28 PM

I will take a buyout as long as I get to erase some debt in the process. I'll take that over the government having an equity stake. It's not like I will ever see a penny from those transactions, even if it does come out positively. The government will just create some new bullshit to blow the money on and continue trying to destroy their credit rating and devalue the currency.

Which taxpayers got their share of the S&L assets the government apparently made a profit on? Did you get dividends on your ownership share? Get a payment when your ownership stake was sold? That may be why many people don't know the government made money on that deal. It might very well be because the government didn't let them share in the proceeds.

VPI97

09-29-2008, 06:39 PM

If the government bought out actual mortgages, does that mean people that had these mortgages get free homes? What if, which would include a lot of them, can't make mortgages payments even when the government's bailout? People seem to think that Wall Street and Main Street (like the idiots in the picture on that page) are separate. They are tied at the hip.
No, it just means that the gov't would have more flexibility in changing the terms of their loan than a private institution could offer. Let's say that if those mortgages are being valued at a 5% recovery rate (the actual value is the big question mark), the gov't could make money by altering the terms in order to get a 15%-20% recovery rate. Pretty good investment for the country. The 80% that are still unrecoverable would still lose their house though...can't save everyone.

However, if these mortgages are valued at 5%, but are actually more like 0%-2%, then taxpayers are on the hook for the difference. Bad investment for the country and not worth the effort in the first place.