The Great Recession - post mortem

[Gary Gorski]

Originally Posted by molson

If the media didn't hype up today as THE DAY everything had to happen, the losses wouldn't have been as great. Once there's a deal, the stock market will quickly recover (and then it will continue it's inevitable decline once again).

I don't think that the media hype caused this day - the drops in the market are caused by fear - we're at the point where the numbers don't even count anymore. It's a witch hunt for who's next to go down and we're not talking about regular companies - we're talking banks. If Ford goes down then people who owned Ford stock are wiped out and thousands are out of a job. When the banks go down not only do the same things happen but everyone else who has money in the bank starts to get worried about their money. You get people with very large sums of money getting nervous to protect those dollars and you get bank runs and you get the overnight closings of banks (like WaMu) or banks with no choice but to deal like Wachovia. People are worried about themselves and their money and where they can safely put it - every day that goes by without a reassurance and with yet another bank failure only makes people more jittery and more likely to pull their money out and to cause another bank to fail and so forth. The growing fear caused today and will continue to drive the market until its stemmed. Yes the media plays a part in it but not as much as the people with all the money who are suddenly doing whatever it takes to keep as much of their money safe as possible.

[VPI97]

Originally Posted by Flasch186

hmmm, I'd say the people that are experts giving congress advice are, well, experts.

I'd say that the people giving congress advice are their campaign managers.

[Buccaneer]

Originally Posted by VPI97

I'd say that the people giving congress advice are their campaign managers.

I'd also say that the primary job of Congresspersons is to ensure re-election.

[Flasch186]

touche but I was talking about gurus like Buffett

[Surtt]

Originally Posted by Buccaneer

I'm curious. To those that are strongly advocating immediate actions, are you heavily vested in financial markets for personal net worth? I am trying to understand the difference in attitudes of those that are vs. not.

I am not.

[VPI97]

Originally Posted by Flasch186

touche but I was talking about gurus like Buffett

http://www.qando.net/ - Explaining Buffet’s support for the bailout (update)

[Gary Gorski]

Originally Posted by Buccaneer

I'm curious. To those that are strongly advocating immediate actions, are you heavily vested in financial markets for personal net worth? I am trying to understand the difference in attitudes of those that are vs. not.

I'll also add FWIW I'm not selling the stocks I own (although I don't own any financials) - I invested money I had hoped would grow and allow me to invest more later on. For the small amount I have there's no point in bailing now - I might as well wait for the turnaround. For people who actually make their living trading and the like I suppose that its got to be extremely gut wrenching unless you've timed it right when to be long and short over the past few months. I'm just worried about what might happen to the entire economy and the job and housing markets - not so much about what happens to the couple of shares of stock I own.

[Flasch186]

well im not so skeptical that no one can give advice anymore when theyre as knowledgeable on the subject as anyone.

[Marc Vaughan]

Originally Posted by Coffee Warlord

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

It can definitely be done - if you look throughout Europe you'll find a history of profit making nationalised companes and indeed in England its been semi-frequent for a company to be nationalised, made profitable sent back into the private sector only to go bust again and be recyled again ...

Generally the companies involved are either flag bearers for the country (ie. associated with England - eg. Rolls Royce), natural monopolies (ie. British Rail) or have a fundamental import to the overall economy (normally a large centralised work force in one area - ie. British Steel).

I think there's definitely historic data indicating this approach is probably the safest and most sensible way to defuse this issue - indeed as might have been mentioned on the forum already Sweden went through a similar situation a while back and solved it by nationalising the banks involved.

[DaddyTorgo]

indeed - we mentioned sweeden a couple pages back. didn't know that it was an occurence in the UK though

[Galaxy]

Originally Posted by DaddyTorgo

indeed - we mentioned sweeden a couple pages back. didn't know that it was an occurence in the UK though

I believe Canada and it's provinces still own a handful of crown corporations. VIA Rail and CBC are the two big ones. Air Canada and Petro Canada used to be crown companies.

[Marc Vaughan]

Originally Posted by DaddyTorgo

indeed - we mentioned sweeden a couple pages back. didn't know that it was an occurence in the UK though

Its become a lot less trendy since Maggie was in power as she pushed a very heavy privatisation scheme into the country and backed it up with good feeling by flooding the cash from the company sales into the economy (so most people associate privitisation with 'good' and ignore the bad which came from the lack of ownership afterwards).

You might have noticed though that as this crisis unfolds a couple of the banks in the UK have been nationalised (Northern Rock a while back and Bradford and Bingley very recently), I'm not sure if the approach we're taking is 'learning' from Sweden or just us falling back on our roots ... but I think its a sensible approach myself.

BBC NEWS | Business | Bank shares fall after B&B move

[Buccaneer]

I saw this in another thread and was struck by this. That is another fear I have of any Congressional legislation - their one-size-fits-all mentality. There are a lot of sound and well-run financial institutions, esp. the ones that did not foolishly dive deep into high-risk endeavors.

It is extremely important that the bailout not damage well-run companies

[Raiders Army]

Originally Posted by SirFozzie

You need to stabilize the patient before you do invasive surgery.

tru dat

[wade moore]

Originally Posted by Flasch186

hmmm, I'd say the people that are experts giving congress advice are, well, experts.

Bucc, I am not heavily invested but have a 401K and some stocks. I sell homes so I am on the front lines and see the people everyday that are being touched on 'main street'. Good question though.

I'm going to say this knowing that (especially with some past history) that this may come off as an attack on you, I really don't mean it that way at all - so try not to take it that way.

You are also very, VERY personally invested in the success of the lenders and more specifically the housing market. I think it's naive to not take everything you post here with a grain of salt because you are so directly personally impacted by this.

I also notice that most of the other people in favor of the bailout in this thread so far seem to not be invested in the market - i'm not so sure that is a coincidence.

Those that seem to be financiallys table, have some investments, and likely not relying completely on credit - seem to be skeptical on the bailout.

I myself would count myself as that - skeptical. Some aide here may be the right thing, but what I know fo this 700b bailout it seems like the wrong plan. I don't know a ton of detail but the continued effort to bailout copanies, individuals, etc who made poor decisions seems wrong to me. I tend to think the market needs to correct itself a bit, but I do worry that it will correct too far.

I wish the people elected to deal with these big issues would use experts, their intelligence, etc, etc to figure this otu rather than looking at the ballot in Novemeber.

[Flasch186]

no offense taken. On the idea of being bias towards the bailout due to selling houses I would argue that Im closer to the maelstrom and have 'expert' insight into this leg of things. Say what you want about the financial implications to my portfolio personally but I'm "on the inside" of this and it is a monster created by....well that's for the 'mortgage bailout' thread. agreed on the problem and dislike that politics is playing in their decisions on the hill but I think the results desired by us differ.

[GrantDawg]

Originally Posted by Marc Vaughan

It can definitely be done - if you look throughout Europe you'll find a history of profit making nationalised companes and indeed in England its been semi-frequent for a company to be nationalised, made profitable sent back into the private sector only to go bust again and be recyled again ...

Generally the companies involved are either flag bearers for the country (ie. associated with England - eg. Rolls Royce), natural monopolies (ie. British Rail) or have a fundamental import to the overall economy (normally a large centralised work force in one area - ie. British Steel).

I think there's definitely historic data indicating this approach is probably the safest and most sensible way to defuse this issue - indeed as might have been mentioned on the forum already Sweden went through a similar situation a while back and solved it by nationalising the banks involved.

Shhhhhhh!!! That's "socialism" and it is always evil and wrong. Free-market is the only way to go! De-regulate and ignore big companies that are the cornerstone of our economy and let them self-destruct. Who needs jobs and such anyway?

[wade moore]

Originally Posted by Flasch186

no offense taken. On the idea of being bias towards the bailout due to selling houses I would argue that Im closer to the maelstrom and have 'expert' insight into this leg of things. Say what you want about the financial implications to my portfolio personally but I'm "on the inside" of this and it is a monster created by....well that's for the 'mortgage bailout' thread. agreed on the problem and dislike that politics is playing in their decisions on the hill but I think the results desired by us differ.

Yeah, to be quite honest a pretty heavy housing dip wouldn't phase me in the least. I know that i got a loan that my family can afford for a long period of time even in a tough economy - so even if I end up "upside down" i can ride it out.

[Flasch186]

Originally Posted by wade moore

Yeah, to be quite honest a pretty heavy housing dip wouldn't phase me in the least. I know that i got a loan that my family can afford for a long period of time even in a tough economy - so even if I end up "upside down" i can ride it out.

however, just because someone is touched by the crisis in some way doesnt mean that they cant have an opinion and somewhat of an educated one. Just because Buffett bought into GS doesnt mean all of a sudden he got stupid or shady....Im not buffett but Im just making a small, very small, point. Im glad for you and yours on the home front....I wish that all the foreclosures surrounding you didnt effect you too. BTW a housing dip, after the initial shock, would actually help me as selling homes in first time home buyer price range is much much much easier than move up buyers.

[Buccaneer]

Originally Posted by wade moore

Yeah, to be quite honest a pretty heavy housing dip wouldn't phase me in the least. I know that i got a loan that my family can afford for a long period of time even in a tough economy - so even if I end up "upside down" i can ride it out.

"Expert" side of things in a local market that, like other Florida metro areas, is falling. It's just one small, very biased experience that becomes the basis for debating - hence the grain of salt.

[adubroff]

Originally Posted by wade moore

I myself would count myself as that - skeptical. Some aide here may be the right thing, but what I know fo this 700b bailout it seems like the wrong plan. I don't know a ton of detail but the continued effort to bailout copanies, individuals, etc who made poor decisions seems wrong to me. I tend to think the market needs to correct itself a bit, but I do worry that it will correct too far.

I like any post with the phrase "correct too far".

Are you of the belief that we'll have a clear warning and chance to act before we potentially overcorrect?

[Flasch186]

Originally Posted by Bucc

"Expert" side of things in a local market that, like other Florida metro areas, is falling. It's just one small, very biased experience that becomes the basis for debating - hence the grain of salt.

which just so happens to be in contrast to your position....convenient.

[Buccaneer]

Originally Posted by Flasch186

which just so happens to be in contrast to your position....convenient.

Except I am under no delusions that my opinions are worth any more than a grain of salt.

[Coffee Warlord]

Originally Posted by Buccaneer

Except I am under no delusions that my opinions are worth any more than a grain of salt.

I'm kinda hoping my opinions are worth at least a grain of pepper.

[Buccaneer]

Originally Posted by Coffee Warlord

I'm kinda hoping my opinions are worth at least a grain of pepper.

Consider that a low sodium is better, I go along with a grain of pepper.

[wade moore]

Originally Posted by adubroff

I like any post with the phrase "correct too far".

Are you of the belief that we'll have a clear warning and chance to act before we potentially overcorrect?

No. I think we decide whether we take the gamble or not, I don't think there's some point where there's some obvious decision point. Now seems like as good of one as any.

If we gamble that the market should correct itself we have to cross our fingers that it doesn't go "too far".

I'm far from an expert on this. I know I generally believe in minimal government involvement. I know that I have problems with people/companies being "rewarded" for "bad behavior".

I also know that a horrible collapse could do irrepeirable damage to the united States. This is why I say I'm at the point of "skeptical" about the bailout, but not necessarily 100% against it.

[DaddyTorgo]

NIKKEI 11,199.02 -544.59 -4.64%

HANG SENG 17,262.74 -617.94 -3.46%

[adubroff]

Originally Posted by wade moore

I also know that a horrible collapse could do irrepeirable damage to the united States. This is why I say I'm at the point of "skeptical" about the bailout, but not necessarily 100% against it.

I think even people who are for it, and I'd count myself among them, are skeptical of the bailout. I don't think anybody knows exactly what will happen if we do it, nor do I think anybody knows what will happen if we don't. Economics is a social science, and unfortunately difficult to model effectively. My greatest fear is that we're going to end up doing something along these lines anyway, but that we'll wait too long and miss our window.

[wade moore]

Yup. I think this is a very, very confusing time for economists - let alone us regular Joes.

I think those in this thread and elsewhere that are just so confident and cocksure that they have the right answer are very naive.

[adubroff]

Originally Posted by wade moore

Yup. I think this is a very, very confusing time for economists - let alone us regular Joes.

I think those in this thread and elsewhere that are just so confident and cocksure that they have the right answer are very naive.

It's also possible that neither course could work, or that both courses could work somewhat equally....

[Flasch186]

Originally Posted by wade moore

Yup. I think this is a very, very confusing time for economists - let alone us regular Joes.

I think those in this thread and elsewhere that are just so confident and cocksure that they have the right answer are very naive.

If you consider me and Gary as cocksure you should read our posts again. We're hoping the bailout will give us time to be able to do what it takes to fix things and have said we dont know if it will work but we sure are scared of the 'do nothing' fix. you may not have been talking about us though.

[Flasch186]

Wilbur Ross -

And it needs to be done quickly. "I think the people who voted against it should be ashamed of what they did. In order to save a $700 billion investment -- not spending, but investment --they caused investors a trillion dollars. That means for each of the guys that voted against it, it cost the investing public $4 million today," Ross said.

Ross believes that we will see consequences of the bailout's rejection in the money markets, the debt markets and the stock markets. The failure of the vote will simply make matters worse and ultimately cost more.

Larry fink, Blackrock -

Laurence Fink, who heads the largest U.S. asset management company, BlackRock, expects a proposed bailout plan ultimately to be profitable, but said Congress was "playing with fire'' by voting it down.

Laurence Fink, chairman and chief executive officer of BlackRock

Fink, an expert in the asset backed securities that lie at the heart of the recent problems of many banks, worried that banks are not able to lend at the moment and that a bailout plan must be approved quickly to restore confidence.

He also said there is deleveraging in financial markets, which has been accelerated by fears of heavy losses at hedge funds.

"I'm disappointed,'' Fink told CNBC after the U.S. House voted to reject the Treasury's proposed bailout. "I think Congress is playing with fire. Hopefully, this is just politics.''


...and if youre looking at guys like this like theyre bias is to have the market do better so he makes more money, id point to:

For BlackRock [BLK 191.00 -10.01 (-4.98%) ], which manages $1.4 trillion in assets, Fink said the current market decline represents a buying opportunity not a "time to run away.''

This reset is GREAT for guys like this who can buy a ton of depressed assets so in some cases when they save, "Save us Y2J" there is some sliver of benevolence in there.

[molson]

Completely lost in the shuffle is that "something" has already been done.

Fed makes billions available to battle crisis - Yahoo! News

[Mac Howard]

I can't quite believe some of the posts above. Guys, this bail-out is FOR YOU!

If you have shares, it's for you (or your shares will plummet in price). If you have a house, it's for you (or the value of your house will drop like a stone). If you have a pension plan, it's for you (your money is invested in the stock market). If you have a health scheme, and insurance scheme, it's for you (your money is invested similarly). If you have a job, it's for you (unemployment will leap up). If you run a business, it's for you (you won't be able to get money to grow your business or maybe even pay your employees). If you have debt - credit card, loan etc - this is for you (the bank could call in the debt).

Wake up, guys. This is not about rewarding or punishing the perpetrators of this, it's about saving your own skins (and mine). The credit market is frozen. There is currently no money to do anything. The banking system is close to collapse.

700 billion? You just lost 1.2 trillion today alone! Worldwide, that was closer to 5 trillion!

[molson]

Originally Posted by Mac Howard

I can't quite believe some of the posts above. Guys, this bail-out is FOR YOU!

If you have shares, it's for you (or your shares will plummet in price). If you have a house, it's for you (or the value of your house will drop like a stone). If you have a pension plan, it's for you (your money is invested in the stock market). If you have a health scheme, and insurance scheme, it's for you (your money is invested similarly). If you have a job, it's for you (unemployment will leap up). If you run a business, it's for you (you won't be able to get money to grow your business or maybe even pay your employees).

Wake up, guys. This is not about rewarding or punishing the perpetrators of this, it's about saving your own skins (and mine). The credit market is frozen. There is currently no money to do anything. The banking system is close to collapse.

I think we all understand the intention of it (this isn't a "bail out us, not the banks!" kind of crowd). And I don't think there's anyone that thinks the government should do absolutely nothing. The question is what's the right course.

What's scaring me is the mentality of - "YES - that's SOMETHING, let's do it". It doesn't seem to matter what the something is. We just want action of any kind. Surely, some actions must be better than others.

[Mac Howard]

Originally Posted by molson

I think we all understand the intention of it (this isn't a "bail out us, not the banks!" kind of crowd). And I don't think there's anyone that thinks the government should do absolutely nothing. The question is what's the right course.

What's scaring me is the mentality of - "YES - that's SOMETHING, let's do it". It doesn't seem to matter what the something is. We just want action of any kind. Surely, some actions must be better than others.

Is anyone offering you another solution other than do nothing? It is essential that something is done NOW! You're merely rationalising your procrastination.

Last week you carried out a buyout for 85 billion. Had you done it 5 days earlier it would have cost you 20 billion. As more and more banks collapse the cost soars. It's estimated that up to a thousand banks could collapse if nothing is done. If something is done quickly then that could come down to a couple of hundred. The more that collapse the bigger the cost. Two more went last night in Europe (Britain and Belgium) and that was before the failed vote. It is essential something is done very quickly even if the action isn't the optimum.

This vote has already cost you 1.2 trillion. How much more do you want to lose before you act?

[molson]

Originally Posted by Mac Howard

Is anyone offering you another solution other than do nothing?

Sure, there's been plenty of suggestions in this thread, and the fed took other actions today that I just posted about. There were alternative buyout proposals floated out last week.

We're talking about an amount of money that approximately equals what the entire Iraq war has cost to this point. And will it even stop banks from failing?

[Mac Howard]

Originally Posted by molson

Sure, there's been plenty of suggestions in this thread, and the fed took other actions today that I just posted about. There were alternative buyout proposals floated out last week.

There is no serious alternative out there.

We're talking about an amount of money that approximately equals what the entire Iraq war has cost to this point. And will it even stop banks from failing?

You just lost 1.2 trillion on the stock market today. How much tomorrow and the day after? How much before you stop procrastinating and stem the bleeding?

You're not giving 700 billion away - you're buying assets at a rock bottom price. They're not rock bottom because they're worthless but because no one has the money to buy them because of the credit freeze, the risk associated with them and the banking system has run out of trust. But they're all backed by bricks and mortar - houses - when the housing market recovers (and it will) the value of these will rise and you may well make a significant profit. Why do you think the big end of town persuaded the house Republicans to suggest a loan? Because the very people responsible for this could buy them and then sell at a profit later. That'll punish them!

[JonInMiddleGA]

So ... there's X number of bad mortgages out there right? And those total to Y amount of dollars. Anybody able to point me to some stats about who/what/where those mortgages are? Basically I'm looking for some figures & demographics about these "bad mortgages and other deficient assets held by troubled financial institutions" (as AP put it this morning).

[Mac Howard]

Originally Posted by JonInMiddleGA

So ... there's X number of bad mortgages out there right? And those total to Y amount of dollars. Anybody able to point me to some stats about who/what/where those mortgages are? Basically I'm looking for some figures & demographics about these "bad mortgages and other deficient assets held by troubled financial institutions" (as AP put it this morning).

My understanding, Jon, is that the value of these packages is very difficult to lay alongside individual mortgages. These mortgages have been packaged, sold, split, repackaged, sold, split and amalgamated with other packages, sold, repackaged etc. At each stage the value of a package becomes less directly related to individual mortgages and more of a saleable asset in itself to the extent that it's extremely difficult now to determine their value. In fact, in some, the packaging has been so deceitful that it's virtually impossible to realise that they're based on mortgages at all - the buyer isn't aware he's buying an iffy product at all. That's why the 700 billion is so flexible - 250 billion now, 100 billion next and who knows what next up to a maximum of 700 billion. The first task will be to unravel the packages and rediscover the mortgages and consequently their value.

The one advantage for the buyout is that there's simply no other buyer and the government can almost dictate its own price -though there has been a warning that if they pitch it too low some banks will squirrel away some of the assets to rise again when prices have risen. But the government can certainly buy the packages at a rock bottom price.

There is of course genuine money in these packages. The house associated with a defaulted mortgage doesn't suddenly become valueless - it could still be worth a significant proportion of the mortgaged value. Donald Trump appeared on Larry King live last week and explained exactly how to make money in this situation (it probably had all the integrity of the looters in New Orleans after Katrina mind you )

This 700 billion is not money thrown away - it could bring significant profits for taxpayers eventually depending on just how the eventual sale is handled - a Republican administration would probably feed them back into the market to their "grateful" friends as quickly as they reasonably could to satisfy their free market philosophy while a Democrat admin would probably try to make as much as they could to fund their nationwide health program

Incidentally just to show you how the rest of the world sees this, here is the opening paragraph from The Times of London - a right wing, free markets newspaper:

In one form or another, the package will surely be passed in the next few days, since the alternative would be the failure of every leading bank in America, the inability of the US Government to honour its guarantees to retail savers and the bankruptcy of many large US corporations, probably including General Motors and Ford. For the rest of the world, particularly for Britain, a definitive collapse of the US bailout would mean nationalisation of all leading banks, insurance companies and other financial institutions – and that unthinkable international impact is another reason why we can be fairly certain that a bailout of some kind will be passed quite soon.

[molson]

Originally Posted by Mac Howard

You just lost 1.2 trillion on the stock market today. How much tomorrow and the day after? How much before you stop procrastinating and stem the bleeding?

So does your argument rely on the stock market being down again today?

Comparing the $700 billion to that 1.2 trillion is a little silly. Most of the latter can be made up in a few hours.

[Flasch186]

So LIBOR is off the charts today (LIBOR) - Wikipedia, the free encyclopedia. Well how does this effect anything, Flasch? Countrywide is one of the biggest mortgagers in the entire country (even under BAC's umbrella) and almost ALL of their ARMS (Adjustable Rate Mortgages) were pinned to the LIBOR (+ points). So that squeeze on the ARMS coming up? Just got harder and faster. It also makes that credit that molson says is here today, here tomorrow, essentially gone today and really gone tomorrow....You have no idea how credit is the oil for the machine.

Now the equities market is going to hang on under the 'hope' that something gets done Thursday but the patient (as described above) is on life support.

[Flasch186]

Originally Posted by molson

So does your argument rely on the stock market being down again today?

As pointed out to Arles in the other thread the markets, the equity markets are just the most visible window into how it is interacting. It's actually a small window in. If you REALLY want to know look at the Taf/R auctions, LIBOR spreads, note yields, etc. A look deeper and you may actually see where the rest of the world is coming from. In Mac's post above, did you see that the ramifications is nationalization of ALL lending institutions, insurance companies....you have no idea how intertwined it all is.

[flounder]

Another thing to keep in mind is that not all banks are doing poorly.

Banks throughout the United States carried on with the business of making loans yesterday even as federal officials warned again that their industry is on the verge of collapse, suggesting that the overheated language on Capitol Hill may not reflect the reality on many Main Streets.

Many smaller banks said they were actually benefiting from the problems on Wall Street. Deposits are flowing in as customers flee riskier investments, and well-qualified borrowers are lining up for loans.

“We collect money from local savers, and we lend it in the local community,” said William Dunkelberg, chairman of Liberty Bell Bank in Cherry Hill, N.J. “We’re doing fine. There are 9,000 financial institutions out there, and most of them are small and most of them are doing fine.”

Dunkelberg, a professor of economics at Temple University and chief economist for the National Federation of Independent Business, added that a recent survey of that group’s members found that only 2 percent said getting a bank loan was the great challenge facing their businesses.

[Mac Howard]

Originally Posted by molson

So does your argument rely on the stock market being down again today?

Not at all. The markets in Asia and Europe were chaotic to begin with today but eventually wiser heads prevailed and the consensus was that the bailout package would go ahead anyway and markets recovered much of their original losses. I suspect the American market will recognise also that Congress views this vote with the same horror that others have and realise that they'll come back later this week and make certain this time.

here's the article I referred to in my previous post which reveals their thinking:

Banking crisis: the bailout will still go ahead one way or another - Times Online


But I'm not sure that those who saw their shares plummet will view the 777 point drop with quite your equinimity, molson.

[molson]

Originally Posted by Flasch186

As pointed out to Arles in the other thread the markets, the equity markets are just the most visible window into how it is interacting. It's actually a small window in. If you REALLY want to know look at the Taf/R auctions, LIBOR spreads, note yields, etc. A look deeper and you may actually see where the rest of the world is coming from. In Mac's post above, did you see that the ramifications is nationalization of ALL lending institutions, insurance companies....you have no idea how intertwined it all is.

I totally agree with that, I just wonder then, why you and Mac are using the stock market impact as evidence of how necessary the bailout is (with Mac and others implying that the stock market will plunge every day until there's a deal)

[molson]

Originally Posted by flounder

Another thing to keep in mind is that not all banks are doing poorly.

Big banks were painted as the enemy last week, with many even suggesting government imposed size-caps. Now all of the sudden, massive banks are considered critical to the economy.

[Flasch186]

Originally Posted by molson

I totally agree with that, I just wonder then, why you and Mac are using the stock market impact as evidence of how necessary the bailout is (with Mac and others implying that the stock market will plunge every day until there's a deal)

because it is the most visible market that people are involved with and it is the skin on the patient. It is a clear representation of a companies worth....and more.

[Gary Gorski]

Originally Posted by molson

So does your argument rely on the stock market being down again today?

Comparing the $700 billion to that 1.2 trillion is a little silly. Most of the latter can be made up in a few hours.

It can't be made up in a few hours - stocks were sold yesterday. People took their losses. Hedge funds got margin calls - sure for the people who are still holding their stocks today they technically haven't "lost" anything until they decide to sell so they can hold on and wait for the market to eventually come back - whenver that will be.

But look at something like Wachovia - there's no timeout they could call or somehow redo things. There's a finite amount of time you stay solvent as a business. People took a beating on Wachovia especially after their CEO was just out there recently talking about how they would be fine and Cramer was right on that bandwagon. That money is gone and it can't be made up.

[Mac Howard]

Originally Posted by molson

I totally agree with that, I just wonder then, why you and Mac are using the stock market impact as evidence of how necessary the bailout is (with Mac and others implying that the stock market will plunge every day until there's a deal)

Read my previous post.

Even Congress has begun to realise (or at least a sufficient number of them) that this bailout simply has to happen. Last Friday that well known neo-socialist lefty Newt Gingrich railed about the bailout and that more deregulation is the answer. Today we learn that even Gingrich has come over to support the bailout.

There is a feeling now that that house vote was a pigs ear of a deal with Pelosi carelessly sabataging it with a silly partisan speech and alienating some of the Republican participants and that that mistake will not be made again.

The problem with this vote is that the American public just doesn't seem to catch on to the seriousness of the situation and neither party wishes to be seen to be the promoter of the bailout and suffer the electoral consequences soon and so they're trying to rig a 50-50 vote. That's tricky in the circumstances of a huge bias towards the dems.