If there is anything the current generation of industry/economic and government leaders are good at, it is passing the buck.

Interesting to see that on the majority the Republicans in the house voted against the bill while Democrats were for it.

Stocks up 300 when the bill was passed, down ~500 to -157 at days end. Don't count your chickens.
Rate cuts? More cheap credit? That's what led to the last bubble, exacerbated into this bubble when it wasn't allowed to properly deflate, and now we're going down the same path again? Christ, look at the current accounts deficit with respect to foreign trade. I'm one who has played this down in the past bacause I felt eventually it would swing the other way - and it did. The US dollar fell precipitously against world currencies and suddenly imports were becoming expensive and our exports were competitive. But now Congress is working on short-sighted 2 year timelines and won't let the cycle bottom out so we can have positive trade surpluses and begin to recover before Social Security and Medicare balloon in 7-10 years when the baby boomers begin retiring.

We're doomed. Dooooooooooomed I say!

Indeed. It doesn't seem to add up so far.

Another email from Congressman John Campbell (48th district of CA).

Economist: Bailout Makes Little Economic Sense : NPR

Morning Edition, September 26, 2008 · One opponent to the $700 billion financial rescue plan is Allan Meltzer, a former Fed economist and a professor at Carnegie Mellon university in Pittsburgh, Pa.

Meltzer tells Steve Inskeep he's against the proposal because he thinks if Wall Street created the problem, then Wall Street should solve it.

So these Congressman are seriously claiming that this isn't a "bailout" because they're paying less than what the assets were worth 2 years ago?

Good news disguised as bad. The auto industry is so incredibly backwards, and in dire need of being shook up.

Yeah...thats the type of "details" you dont really hear about until after the fact. So...30-60% of the value from 2 years ago?? Shit...my house is only worth 60% of what it was 2 years ago.

I really dont think these people have any idea how deflated the assets these debts are tied to truly are. Sure...we'll sit on them and wait for them to increase in value.

I really hope I'm wrong...but how many times does the government miss obvious and glaring data that's in front of their faces...let alone actually having to dig a little.

St. Cronin - how do you see the auto industry as incredibly backward?

The problems that I see are primarily in design and marketing/sales. On both ends the industry leaves huge amount of profit lying on the floor.

Ok - I'm more apt to blame the consumer, but that's me. The auto industry can't help being a few years behind, really.

Detroit is completely trying to weasel out of the MPG guidelines.. I'd like to see a portion of any auto bailout mandating high MPG vehicles.

it's standard "buy on the rumor, sell on the news" behavior. nothing to worry about.

For investors we need a floor put in next week.

Ok so you would prefer that the world economy falls apart now and be willing to raise your children in that kind of environment for the next decade or two as opposed to doing something now to stave off and then have a chance to fix the problem so that our financial system doesn't end up failing at any point. Do any of you people who say you're willing to take on a deep, deep recession or even depression have any idea what living through that might be like? I hardly think it would be such a noble idea when you, your family or friends are among the 20%+ unemployed during such a time. If not wanting to experience that is "selfish short-sightedness" then sign me up for that camp.

For the billionth time - this bailout doesn't fix anything. The market did exactly what everyone knew it would do upon the bill passing and I'm sure it will continue to be volatile in the coming weeks and months. What the bailout needs to do is free up credit and give our lawmakers time to consult with people who truly understand the economy and figure out how to fix the problems that still exist today. And you know what, maybe its a massive failure and we head for a deep recession/depression anyway. Spending up to $700 billion isn't going to hurt any more than things like Freddie/Fannie, AIG, whatever we've spent on the war, the $400+ billion that was borrowed at the Fed discount window this week alone...I'm just happy at least they made an attempt to do something to inspire some confidence in our financial system. Now we can't really do anything but sit back and hope it works.

159,000 more people unemployed in one month, now 760,000 in the year, might well have something to do with the fall in the market.

I don't think that's quite how it works. Companies aren't doing well so they have to lay off people, similarly their stock prices go down. Stock prices don't have a causal effect on employment for the most part.

SI

Unemployment has a causal effect on the stock market - it illustrates that the economy is on a downward path and profits will follow so investors sell the stocks.

It's the worst figure for 5 years and released on the same day as the vote. The vote initially caused a rise on Wall St but then the unemployment figures took over and forced the stocks down. It's particularly bad because it's across all areas of the economy bar one.

You guys will love this one: the exception is government :)

No.

The term "bailout" was one used by the press not congress but it stuck. The press today understands that bad news sells and tends to report news with, at best, a bad spin. Also the press doesn't like to insult it's readers and so didn't want to present the problem as something they had some responsibility for. While the banks should not have lent money to those who couldn't make the repayments those who took out the loans are also responsible. They were aware they wouldn't be able to keep up the payments (the banks figured they could repossess and sell the house and recover their money - but they didn't figure on a house price downturn that meant the houses were worth less than the mortgage).

By calling it a "bailout" the press reported it as all the fault of the banks and not the individuals - their readers.

But it isn't just a bailout to banks, it's a rescue of a failing economy. You may have noticed banks, insurance companies, financial institutions going broke - big ones: AIG, Merryl Lynch, Lehman Brothers. Each time a bank goes bust other banks pick up further bad loans (in addition to any of the "toxic packages" they may have).

It snowballs, one bank's failure triggering another - on and on down further into recession and maybe depression.

Stopping it is like stopping a boulder rolling down a hill. When it's at the top and rolling slowly you can stop it but once it gets going it won't stop till it hits the bottom.

That's why this bill had to be done quickly even if it wasn't the best possible bill. That's why Gingrich backed it even though he thought it was a bad bill and railed against it a week earlier - the economy is so close to that tipping point it had become essential to act immediately.

And the unemployment figures illustrate that that tipping point is close. Unemployment indicates a failing economy. In the first 8 months of this year there were 600,000 lost jobs. So approximately 80,000 a month. It had gently accelerated to 105,000 in August. They were expecting 110,000.

It turned out to 159,000 - a 50% increase over expectations. In other words a big acceleration of the downturn. The boulder is beginning to accelerate down the hill.

So the "bailout" is in fact not the whole truth - it only refers to the banks. But in truth it's the economy that needs rescuing not just the banks. And with the economy the American people - their jobs, their savings in stocks, their pension schemes etc.

Just to put a number on that last. I was watching a financial advisor on tv after the Monday stock market fall. They pointed out that a pension scheme that had been worth $500,000 three weeks ago was now only worth $350,000.

In other words, some poor bugger who's been putting money into his pension plan all his life has just seen his retirement saving slashed by $150,000.

It's to avoid that sort of thing continuing to happen the "bailout" was necessary.

It may not work. It may be too late. It may be that the momentum of the recession is now too great to reverse. Let's hope not for all our sakes.

Not to get all survivalist here, but we have property off the beaten path a bit where we could self-sustain for many years if we had to. I'm not too worried about a bunch of greedy Wall St bastards ruining things. Those of you stuck in the big cities might have a rough go for a while, but those of us with the means to get off the grid could end up doing just fine with a simpler life for a while.

Whether that survival plan has to be put into operation or not, just about everything that has been fed to us via FUD (fear, uncertainty, and doubt) during this administration has ended up being a bad idea that many had regrets about. So, given that track record, I'll take my chances with the free market over another FUD-driven government response to a problem.

I was in favor of some sort of 'bailout' scheme that brought the money to individuals on Main Street, or put caps in place to stop the madness on Wall Street (mainly the top dogs running off with all the money and leaving everyone else with the problems). Absent of that, they can all just go fuck themselves. Every time that a manufacturing plant closed here and the work went to Mexico, or somewhere in South America, we heard lots of talk about the 'free market', 'free enterprise', and all that jazz. It's well and good to hold those ideals when times are good, or when it is good for big business to say such things. It takes real belief in that as an economic system to stand by it when times are bad, and when big business is in a death spiral. Anybody who voted for, or supported at all, this bailout scheme has surrendered their right to use the 'free market' argument from this day forward. They demonstrated, when times were tough, that they really preferred a different approach. The real test of bravery is not when everything is wonderful and the roses are in full bloom. It's when you don't know what tomorrow brings, but are willing to stand by your principles nonetheless.

Past 2 weeks has been a roller coaster, so much has happened. For a recap of what we've been going through, check out the 20 days of pain ...

The crisis: A timeline - Sunday, Sept. 14 - Trouble brews (1) - CNNMoney.com

Sure, this constitutes an emergency situation because the government/big business has sold the 401k, IRA, etc, as vastly superior and reliable retirement offerings than the pensions of the past. When that system comes tumbling down, driven by the very financial institutions at the heart of the system, it will be a very hard sell. Imagine if people had bought the idea that even "Social Security" was to be put into this system. They might be worse off with it right now than they are with the current system.

I agree with this. Better to try do something now. I suspect it would not just be a depression but a global depression.

It's just disgusting that Congress couldn't even restrain itself when it came to this bill, which is under the greatest of scrutiny -- "sweetened" with all kinds of giveaways. Even our new "agents of change" didn't raise a fuss. Hard to believe they're going to come in and "put the people's interest ahead of special interests."

Beyond that, it's discouraging to see Congressional watch groups BEGGING our lawmakers to take at least 72 hours to actually read the bill. They had an online petition, but it was obviously all for naught.

Why bother taking the time to actually read a $700B "Troubled Asset Relief Program?" I know, what a naive question.

Somewhat a tangent, but am interested in this (enjoy post acopolytic novels). Could you detail your setup? It would imply some farm land, fresh water, electric generator?

Didn't we (and them) learn anything from the way the PATRIOT Act went down? Apparently not. The Executive Branch runs to you with a truckload of FUD, and we're left to learn about, and deal with, the (supposedly) unintended consequences.

Not in an open thread. Perhaps via PM...

As much as I don't like the feeling, this is a case where I find myself more in agreement with Mac.

I'm personally familiar with several instances in the past few years where there was a pretty direct relationship between RIF's and stock price. The indirect element in each case was that no one said "we have to cut personnel because the stock price is down" but rather "we've got to do something to make investors happier, let's cut expenses" and in each case the first place cut was labor cost - without hesitation and without much thought to anything else. IMO that's sort of "indirectly direct" to coin a phrase.

For the billionth time, you're STILL obsessed with this assumption that this makes things better and not worse. That's an opinion and it's fine, but don't you see that we DON'T AGREE WITH THAT...

The arrogance of the supporters are still here, especially when you say things like "Do any of you people who say you're willing to take on a deep, deep recession or even depression have any idea what living through that might be like?"...YES AND THAT'S WHY WE'RE AGAINST THIS, BECAUSE WE BELIEVE THE FALL BE WILL BE GREATER WITH THIS BILL THAN WITHOUT IT.

You can disagree and that's fine, but don't assume that anyone who has concerns about just don't give a shit what happens to economy, it's insulting. I've glad you've stopped the whole "anyone against this doesn't care about people" angle but this isn't much better.

Did you miss the quotes from the two Congressman?

"The assets will be bought from companies at probably 30%-60% of what they paid just a year or two ago. If I offered to buy your house that you bought 2 years ago for half what you paid for it, would I be bailing you out? I don't think you would look at it that way."

When you buy shit that nobody else will buy, at a cost it's not worth, it's a bailout, I don't care how it's spun.

The Congressman is clearly trying to make the case that it's not a bailout because they're paying less than what something is worth TWO YEARS ago, which is just dumb.

I agree that it's not merely a bailout of the banks, but I don't think anyone really thinks that. Your debut in this thread was to helpfully explain to us all that the intention of this bill was to bail-out the whole economy. We get that. Still do. Doesn't make it a good idea. I'd be against a massive bailout of individual regular mortgage lenders as well. They SHOULD lose their houses, and rent if they can't afford ownership (like some of us have been doing all along). They SHOULD lose their privileges for easy credit and home ownership in the future, that's how the system works. And yes, I realize their (and the banks') stupidity effects us all. But artificially propping them, and all of us, does us no good in the long run.

German bank announces collapse of 35 billion euro rescue - Yahoo! News

And I am glad to see that Molson is for a redistribution of wealth model and that is not meant with any sarcasm at all. When taxes are proposed to go up on those who can afford to weather an increase in taxes so that the average standard of living in this country isnt dipping below an acceptable threshold, he will be supportive of such a measure. Im on board with you in that regard.

LOL who the hell is this guy? David Koresh? Oh, and...

GET OFF MAH LAND!!!!

Nope. Just somebody whose plan for a total collapse of the economy involves more than begging the government to spend hundreds of billions of dollars to only pass the buck to a future generation.

Ok do me a favor and lay out for me what you see happening if the bill does make things worse and what you felt would have happened had the bill not been passed.

That's easy - the banks, financial institutions continue to collapse due to a lack of credit movement, except now the currency is diluted and national debt is increased by $700 billion.

Plus interest, as tax revenues continue to drop that will only be a bigger problem.

It was probably silly to put numbers to it because no one knows the intrinsic value of these assets but they're not "shit" - many of these mortgages at the base of the packages are alive and well, others that have defaulted are still worth the value of the house even if it is below the money borrowed. It's because they have a high risk potential that they have little appeal to traditional financial institutions and therefore little market value - what someone will pay.


He's illustrating the idea that they're being bought at a knockdown price in a way that people can understand. Perhaps it's clumsy but the idea he's expressing is sound.


I'm very much in agreement with that. If you think that the part you said I "don't get" is that most Americans believe it is a bailout of the banks then let me disabuse you of that. I understand fully that the vast majority of Americans are not impressed at all by these arguments.


That would be cutting off your nose to spite your face. The cost to the average American (and citizens of the world, which is why I'm so interested) would be enormous. The acceleration of the unemployment numbers, the 35% drop in Ford sales in just one month (not the stuff of recessions but the stuff of depressions) indicate that the recession is accelerating. Failing banks are not like failing companies that have only limited affect on others. When a large bank fails millions of companies are hit. They can't get the money to pay their workers, they can't restock on materials, they can't maintain their equipment and so on. That's the current "credit crunch".

The whole thing spirals down.

By taking these "toxic assets" off the balance sheets of the financial institutions they stand a better chance of survival and the economy a better chance of avoiding a much deeper recession. Credit is restored and businesses start functioning again.

Punishing those who have caused this will come from the much greater supervision and regulation of their activities which has to follow this. The "free market" ideologues will oppose it -the truth is the only thing 'free" about free markets is the freedom of individuals to manipulate the markets to their own ends. Only governments are prevented from interfering but commercial interests are not. It's a self-serving philosophy from the top end of town. The increased oversight and regulation must occur.

Fortunately even McCain realises this (despite his previous belief in deregulation) and the next President, whoever it is, will hopefully institute significant changes even if they're not done before.

It may not be very satisfying to see the perpetrators not more deservedly "punished" but there is considerable danger in this.


You may have noticed that most recessions - the dot com crash for example - don't involve this sort of intervention. That's because banks are not involved - the market corrects itself without too much pain.

But when banks are involved it's a different matter. The last time banks went belly up was 1929. The reaction then was precisely what you are asking for - punish those who brought it about. The perpetrators were certainly punished but so was everyone else. Unfortunately this brought about the greatest crash in modern economic societies outside of the two world wars. There was absolute misery for all for 4 years. Unbelievable misery! And in the end it was government spending - Roosevelt's New Deal - that brought America and the rest of the world out of the economic dark ages and back to growth.

The danger now is that that could be repeated.

It won't of course, because we now know far more than then and what we do know is that only government can make available the funds needed to avoid this situation. And that it is best done early because far more will be needed if it's delayed.

That's why it became so necessary to pass the bill even though it was not necessarily what anyone wanted. Delay would have been worse than the flaws in the bill.

We now wait to see if it's enough and early enough. There's no guarantee it is.

I think a lot of people believe that it was the war that actually brought America out of the depression.

If you'd still been in a depression by 1941 you'd have never been able to get into the war.

My understanding is that the depression was brought to an end (the beginning of the recovery) in 1933 with with the New Deal but others may correct me on that (I'm an Australian and this is American history ;) .

Wiki:

I'm not super knowledgeable about ... well, about anything. :) I don't know what actually brought us out of The Great Depression, but I've heard people argue that it was the war and other people argue that it was the New Deal.

Also from Wikipedia:

My big fear is the devaluation of our currency, inflation, and infinite economic stagnation surrounded by deeper and deeper recessions. If my view, a recession is a 100% certainty, and this kind of stuff just drags it out longer, at a great expense which adds to the economic collapse even more.

If the bill hadn't been passed (and this overall policy of bad-market appeasement continues), I'd expect a much briefer (though harsh) recession, a total correction of the housing/credit market and then sharp recovery.

As briefly as I can put it...And like I said, that's just an opinion, I certainly wouldn't bet on anything, and there's plenty of people much smarter than me that are on both sides of this, so my opinion is pretty much worthless. And the bill isn't the the end of anything - like Iraq, now that it's done, how things actually play out is the important thing. To me though, it seemed very much like we're barreling towards a disaster when I hear people willing to support ANYTHING. When the flaws are pointed out, it's "well, that's all we have". The supporters of this can't even acknowledge the possibility that Congress could in any way do ANYTHING to make this worse - if our Congress was doing it, it MUST be OK. It's a dangerous state of affairs.

It's not anything it's anything that takes these assets out of the banks' balance sheets. That's probably an overstatement but whatever is done it must prevent these "toxic assets" from driving down the credit market.

What you may not be aware of is that world banks have been pouring money into the credit market for around 14 months now without affect. On the 18th September world banks poured $180 billion into the international credit markets, I read today that the Australian fed has introduced $11 billion (that's equivalent to nearly $200 billion by American standards) into the Australian banking system to replace the money they can't get from the international credit system.

So this is not the first attempt to solve the problem. But pumping money into the system - similar to the House Republican's suggestion of a loan - simply hasn't worked. The problem is that the banks are frozen like rabbits in the headlights because they're afraid to do business with other banks because of these "toxic assets". There is a complete lack of trust between banks that is freezng up the system. I understand there isn't even a shortage of money - just a shortage of willingness to trade.

Any solution simply has to take these things out of the system to bring confidence back to the market. Only government is big enough to absorb these - all private entities would fold under the weight.

I think you'll find there are very few people who argue this action will worsen the situation outside of "free market" ideologues who, like left wing ideologues who denied that the collapse of the Soviet Union was caused by socialism, are desperate to convince themselves that their ideology could not be the cause of this. That is the nature of ideology - its supporters are always the last to recognise the flaws.

I think you'll find most commentators would agree that reduced supervision and regulation, which is what these argue for, would be pouring petrol on the fire. It comes out of this idea that leaving market forces to themselves will fix anything. As I said early on that's like allowing the bubonic plague to run its course because in the end it will reduce the population down to a level where the plague is no longer sustained and everything will be ok again. Economic recession/depression is the market's solution to this sort of problem.

Natural forces, including market forces, are not always benign to humanity and sometimes we have to oppose them. In this case it means regulating the financial system so that some humans can't manipulate the markets for their own gain or amusement.

It's my understanding it was the war and the massive amounts of weaponry the US sold to the rest of the world.

What gets me is the House. First, the bailout isn't good enough, but once pork is added, those chosen few say, "now this is something I can get behind!" So, preventing a worldwide economic collapse isn't enough to get them to vote, but once $192m for rum producers in the Virgin Islands is added that bill is "A-OK!"

Disgraceful.

leaving out some important stuff that was added too but I get it that that wouldnt help prop up the anti-argument.

AMT extension
FDIC elevation

But would it have passed without the pork? That's the point. If it's really so important couldn't congress have decided enough is enough and actually do something for the country as opposed to their own backyard? Nope, not even when it comes to Armageddon, 2nd Great Depression, End of the World as We Know It, etc.

It's pathetic.

And oddly, doesn't that only help the rich? Correct me if I'm wrong. I thought this was all about Mr. Main Street.

In terms of taxes generally, liberals don't believe in any kind of trickle down theory, but here, it apparently suddenly makes sense to them.