The Great Recession - post mortem

[st.cronin]

Originally Posted by path12

The main problem as I understand it is that all of this will drastically reduce credit for banks, businesses and individuals. Given that our economy has been pretty reliant on spending over our means, this is a big problem because if credit isn't available, consumer spending stops, jobs vanish -- which leads back to more people having to foreclose on their houses, etc, etc.

Ok this is what I have heard as well, but what I don't understand is why good credit risks would be cut off. The problem as I understand it has been banks extending credit to bad credit risks - so the solution would seem to be to cut off the bad credit risks. I don't really understand why that would be bad for the economy, or why it might be necessary to tighten credit too far in the other direction, making it too hard for good credit risks to get credit.

Does this make sense? Am I being obtuse about something really obvious?

[path12]

Originally Posted by st.cronin

Ok this is what I have heard as well, but what I don't understand is why good credit risks would be cut off. The problem as I understand it has been banks extending credit to bad credit risks - so the solution would seem to be to cut off the bad credit risks. I don't really understand why that would be bad for the economy, or why it might be necessary to tighten credit too far in the other direction, making it too hard for good credit risks to get credit.

Does this make sense? Am I being obtuse about something really obvious?

Most of it comes back to the mortgage crisis. Banks leveraged and re-leveraged and re-re-leveraged their debt because of low interest rates meant money was easy to come by -- and prices just kept going up as the real estate bubble grew. What ended up happening was that all of this leveraged debt wasn't backed with anywhere near enough actual real assets.

So when the real estate bubble popped and the debt started going bad, there isn't enough money for the banks to cover it. So banks aren't willing to lend to each other, because they have no confidence that they will get that money back. And if banks aren't lending to each other, they sure as hell aren't going to risk more money on loans to customers, no matter how credit-worthy they may seem right now.

I don't know if that answers your question or not.

[darkenigma510]

Originally Posted by st.cronin

Ok this is what I have heard as well, but what I don't understand is why good credit risks would be cut off. The problem as I understand it has been banks extending credit to bad credit risks - so the solution would seem to be to cut off the bad credit risks. I don't really understand why that would be bad for the economy, or why it might be necessary to tighten credit too far in the other direction, making it too hard for good credit risks to get credit.

Does this make sense? Am I being obtuse about something really obvious?

Thanks banks are too scared right now to lend to each other, let alone find "good credit risks"...The current financial system is one based on confidence and trust and right now both are scarce

[darkenigma510]

Originally Posted by Anthony

obviously all these wars aren't helping matters - i wonder if this is a great opportunity to pull troops and call it a day and label it "in the interest of preserving a sensitive American economy". it'd surely stop the bleeding. i think you'd have to be a fool to try to argue the American economy in its current state can handle footing the bill for the combined Middel East wars. i think it's time we start shifting our interests inward. i think this is a big reason why all the Iran rabble rousing rhetoric from the summer has calmed down to an inaudible whisper - going to war with Iran was already going to be a tough sell, but now? given our economy?

I have felt this way for awhile...that the US would be better off stop bieng the world policeman and take care of its own internal matters...

[path12]

One other problem that hasn't got a lot of press. As of a couple of months ago, the FDIC had about $70 billion dollars in its insurance fund.

The failure of IndyMac cost about $7 billion of that, leaving somewhere around $63 billion.

WaMu is like 10 IndyMacs. Wachovia is like 7 or 8 more.

[st.cronin]

Originally Posted by path12

Most of it comes back to the mortgage crisis. Banks leveraged and re-leveraged and re-re-leveraged their debt because of low interest rates meant money was easy to come by -- and prices just kept going up as the real estate bubble grew. What ended up happening was that all of this leveraged debt wasn't backed with anywhere near enough actual real assets.

So when the real estate bubble popped and the debt started going bad, there isn't enough money for the banks to cover it. So banks aren't willing to lend to each other, because they have no confidence that they will get that money back. And if banks aren't lending to each other, they sure as hell aren't going to risk more money on loans to customers, no matter how credit-worthy they may seem right now.

I don't know if that answers your question or not.

Well, it does and it doesn't. Lets say I'm a bank, not Morgan Stanley, that has money to lend. Why wouldn't I want to lend it? Lending to good credit risks is still a profitable enterprise.

[cthomer5000]

I've shifted my portfolio to invest heavily in producers of carboard boxes, malt liquor, and fingerless gloves.

[path12]

Originally Posted by st.cronin

Well, it does and it doesn't. Lets say I'm a bank, not Morgan Stanley, that has money to lend. Why wouldn't I want to lend it? Lending to good credit risks is still a profitable enterprise.

I agree with you in most circumstances. I'd ask this question: What can you consider a good credit risk given the current environment?

As part of that current environment remember that prime and Alt-A loans re-adjust next year (and the London Interbank Rate, which most loans are tied to has gone up again), plus we are starting to see the signs of commercial real estate following the path of residential. Mall vacancies in general are skyrocketing with some of the retailing bankruptcies lately (Mervyns, Boscovs, Steve & Barrys, Bombay Co, etc).

Is it better to lend that money out right now or make sure you can cover any future loan losses you already have on the books?

[st.cronin]

Originally Posted by path12

I agree with you in most circumstances. I'd ask this question: What can you consider a good credit risk given the current environment?

As part of that current environment remember that prime and Alt-A loans re-adjust next year (and the London Interbank Rate, which most loans are tied to has gone up again), plus we are starting to see the signs of commercial real estate following the path of residential. Mall vacancies in general are skyrocketing with some of the retailing bankruptcies lately (Mervyns, Boscovs, Steve & Barrys, Bombay Co, etc).

Is it better to lend that money out right now or make sure you can cover any future loan losses you already have on the books?

If this is indeed the issue then I understand.

[BishopMVP]

Dealbreaker - A Wall Street Tabloid - Business News Headlines and Financial Gossip seems like a good site for well, news on what deals are in the works. The new leader in the clubhouse for Morgan Stanley?

Morgan Stanley is in talks to possibly be acquired by Chinese bank Citic, sources in the U.S. and China have told CNBC.
No deal is certain at this time, however, and sources said that none was likely to be finalized Wednesday.

And for WaMu news

Washington Mutual has officially put itself on the block. The bank, which was downgraded to junk Monday night, reportedly hired Goldman Sachs to start the auction several days ago. Potential bidders include Wells Fargo, JP Morgan Chase, and HSBC, if you've got some spare change.

Originally Posted by path12

One other problem that hasn't got a lot of press. As of a couple of months ago, the FDIC had about $70 billion dollars in its insurance fund.

The failure of IndyMac cost about $7 billion of that, leaving somewhere around $63 billion.

WaMu is like 10 IndyMacs. Wachovia is like 7 or 8 more.

The FDIC has a $30b line of credit from the treasury, and beyond that the full $1.6t or whatever of bank savings (remember Platinum members, only up to $100k a bank, and not most securities) is guaranteed by Congress if it came to that.

Originally Posted by path12

The other problem is the very real risk of the government being forced to drastically increase the money supply in order to service this debt. That leads to the weakening of the dollar and inflation. Though there are those who argue that a Japan style 15-year recession/depression with deflation is the net result.

Has anyone seen a number on the estimated number of NPL's (non-performing loans) at this point? Japan was between 15-20% last economic meltdown and China has been estimated around 25% officially and as high as 50% unofficially, while the numbers I remembered for the US were in the 3-5% range. So does anyone have a (presumably higher) estimate of NPL's, or is this really just all the investment banks leveraging themselves with each other so much when one domino falls all do?

[BishopMVP]

Originally Posted by Edward64

I'm not sure if you are attirbuting blame to W for the current financial mess we are in? I disagree if you are.

You blame Paulson, but not Bush or Greenspan? I'm confused.

Side note - any chance we can keep the whole Iraq war debates out of this thread? We already have 30 threads for that.

[Flasch186]

I think the money ties to wars in general is fair game if it's about it's effect to the balance sheet, no? Ill agree that the motivations and such should be left out but certainly you have to count those dollars when seeing how we got here and perhaps how we get out.

[Edward64]

Originally Posted by BishopMVP

You blame Paulson, but not Bush or Greenspan? I'm confused.

You can blame Bush for many things, but blaming him as a direct contributor to this financial mess is a stretch. Care to provide your case?

Greenspan was from 1987 - 2006. Sure he influenced interest rates and had authority to oversee mortgage loans etc. but there are plenty of other people that did not do their jobs well in -reacting, mitigating- to the current situation (which you cannot blame Greenspan for).

Unless your argument is that what Greenspan set in motion would cause this mess we are in -regardless- of what anyone else does, there is a period of 1-2 years where the current responsible parties did not do their jobs.

[Tekneek]

Originally Posted by BishopMVP

Side note - any chance we can keep the whole Iraq war debates out of this thread? We already have 30 threads for that.

I wasn't really debating the war itself, but rather the financial facts that the cost, in my mind, far outweighs whatever may have been gained, which makes it an awfully bad financial decision. That aspect is brought into the spotlight when major institutions are collapsing here, the currency is on the verge of being devalued, and unemployment continues to grow. Whichever side you are on in the war debate, the real debate is whether this government is on a sustainable path or not.

[Tekneek]

Originally Posted by Edward64

You can blame Bush for many things, but blaming him as a direct contributor to this financial mess is a stretch. Care to provide your case?

Not a direct contributor to this exact mess on Wall Street. Direct contributor to any devaluation of the currency that may occur? Absolutely. If the government maintains its credit worthiness and the currency is not majorly devalued by the printing of new money to cover all its expenditures, then Bush just might squeak by (in terms of this financial mess). It certainly seems precarious right now.

[Edward64]

Originally Posted by Tekneek

Not a direct contributor to this exact mess on Wall Street. Direct contributor to any devaluation of the currency that may occur? Absolutely. If the government maintains its credit worthiness and the currency is not majorly devalued by the printing of new money to cover all its expenditures, then Bush just might squeak by (in terms of this financial mess). It certainly seems precarious right now.

I do agree Bush and his policies are largely to blame for our devaluation.

Connect the dots for me because I don't understand it. How is our devaluation a cause (or significant contributor) to this financial mess we are in ... which I believe we mostly believe was a product to the subprime mess.

[Edward64]

I don't think anyone doubts we will be dipping into a Recession now (right?).

If anyone is interested on Depression vs Recession ...

Recession? Depression? What's the difference between a recession and a depression?

So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.
By this yardstick, the last depression in the United States was from May 1937 to June 1938, where real GDP declined by 18.2 percent. If we use this method then the Great Depression of the 1930s can be seen as two separate events: an incredibly severe depression lasting from August 1929 to March 1933 where real GDP declined by almost 33 percent, a period of recovery, then another less severe depression of 1937-38. The United States hasn’t had anything even close to a depression in the post-war period. The worst recession in the last 60 years was from November 1973 to March 1975, where real GDP fell by 4.9 percent. Countries such as Finland and Indonesia have suffered depressions in recent memory using this definition.

[Tekneek]

Originally Posted by Edward64

Connect the dots for me because I don't understand it. How is our devaluation a cause (or significant contributor) to this financial mess we are in ... which I believe we mostly believe was a product to the subprime mess.

It is not a cause of anything, it is a CONSEQUENCE of all of this. It is the PRODUCT that we will be left with at the end of the day, after George and Laura have run off to live in some posh mansion in Dallas or Houston.

[Edward64]

Originally Posted by Tekneek

It is not a cause of anything, it is a CONSEQUENCE of all of this. It is the PRODUCT that we will be left with at the end of the day, after George and Laura have run off to live in some posh mansion in Dallas or Houston.

Okay, sorry for misunderstanding. BishopMVP's original discussion point was placing blame on Bush and Greenspan for the financial mess. I thought this was your position also.

[DaddyTorgo]

before i read these morgan stanley rumors i had a dream that Morgan wouldn't last out the day today - let's see if that holds true.

[DaddyTorgo]

not a surprise that WaMu is on the block - not sure who I think the likely buyer is - IMO WellsFargo would do better to sit on the sideline with regards to WaMu and wait to try to pickup Morgan Stanley when they fall.

[flere-imsaho]

Originally Posted by cartman

I would place more of the blame at the feet of Gramm than I would Greenspan. The crap he authored and got passed into law his last couple of years in Congress led directly to the current financial crisis. Some of the measures passed took a lot of the more esoteric financial vehicles out of the realm of federal governance, leaving the Fed pretty much powerless to do anything about them.

Gramm's legislation (using that "deregulation" word) also removed the barriers set up between banking, investment management and insurance that had been erected after 1929. This allowed a lot of people to make a lot of money off of internet stocks in the late 90s.

So now we know how that all turned out. Without regulation, these industries don't "regulate themselves". They risk everything, including the financial system, to make themselves as much money as possible. J.P. Morgan is probably rolling in his grave.

[ISiddiqui]

It's amazing how Gramm's legislation allowed people to make a lot of money off internet stocks in the late '90s, when it was passed in November of 1999.

Gramm-Leach-Bliley Act - Wikipedia, the free encyclopedia

Of course we could just blame Gramm for this, but:

The final bill resolving the differences was passed in the Senate 90-8-1 and in the House: 362-57-15. This veto proof legislation was signed into law by President Bill Clinton on November 12, 1999.

That 90 includes Senator Biden, btw (though he didn't vote for the original, prior to the hammering it out with the House)

[DaddyTorgo]

Originally Posted by ISiddiqui

It's amazing how Gramm's legislation allowed people to make a lot of money off internet stocks in the late '90s, when it was passed in November of 1999.

Gramm-Leach-Bliley Act - Wikipedia, the free encyclopedia

Of course we could just blame Gramm for this, but:



That 90 includes Senator Biden, btw (though he didn't vote for the original, prior to the hammering it out with the House)

so you want to blame Clinton? Note that it was VETO PROOF

[ISiddiqui]

Did I say I was blaming Clinton?

Jeez, the knee jerk reactions.

[cartman]

It was more than just that one bill, as I alluded to. After G-L-B was passed, Gramm put an amendment into an appropriations bill right before it was voted on that forbid government agencies from regulating the new financial derivatives that have led directly to the sub-prime meltdown. This directly circumvented some of the controls that were in place in the G-L-B measure. During his time as chair of the Senate Committee on Banking, Housing, and Urban Affairs, he shot down any attempts at bringing a bill to vote that would have put any oversight to these new derivatives.

It is convenient to call out the veto-proof vote as absolving Gramm of the blame, but his actions to keep oversight away after the Act was passed put the bulls-eye squarely back on him.

[flere-imsaho]

Originally Posted by ISiddiqui

It's amazing how Gramm's legislation allowed people to make a lot of money off internet stocks in the late '90s, when it was passed in November of 1999.

Well, that wasn't quite my point. The Gramm legislation was the result of years and years of lobbying by the financial institutions to be able to play in riskier waters. Sure it passed only in time for them to take their first bath in the stock market, but it should be pointed out that these institutions didn't suffer as heavily in 2000/2001 as did the clients to which they sold the IPO shares.

But here's the bottom-line, the deregulation that Gramm so steadfastly championed (and his surrogate McCain champions now - unless he's changed his position recently) is a direct contributor to the mess we find ourselves in now. Of course, were it not for the greed of the people running these institutions, we'd probably be just fine with a deregulated market, but as free marketers are fond of telling us, greed is just part of the system.

I'm not asking for a planned economy. I'd just like a financial system with enough controls in place to prevent another 1929 and keep the children (and let's be honest, they acted just like children) on Wall Street in line.

[Tekneek]

Those changes also helped enable Enron to make their final push into oblivion.

[Fighter of Foo]

Here we go...I've been looking for this:
Ex-SEC Official Blames Agency for Blow-Up of Broker-Dealers - September 18, 2008 - The New York Sun

I'm quoting liberally here:

The Securities and Exchange Commission can blame itself for the current crisis. That is the allegation being made by a former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch.


The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley — to more than double the leverage they were allowed to keep on their balance sheets and remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.


Making matters worse, according to Mr. Pickard, who helped write the original rule in 1975 as director of the SEC's trading and markets division, is a move by the SEC this month to further erode the restraints on surviving broker-dealers by withdrawing requirements that they maintain a certain level of rating from the ratings agencies.


"They constructed a mechanism that simply didn't work," Mr. Pickard said. "The proof is in the pudding — three of the five broker-dealers have blown up."


The so-called net capital rule was created in 1975 to allow the SEC to oversee broker-dealers, or companies that trade securities for customers as well as their own accounts. It requires that firms value all of their tradable assets at market prices, and then it applies a haircut, or a discount, to account for the assets' market risk. So equities, for example, have a haircut of 15%, while a 30-year Treasury bill, because it is less risky, has a 6% haircut.


The net capital rule also requires that broker dealers limit their debt-to-net capital ratio to 12-to-1, although they must issue an early warning if they begin approaching this limit, and are forced to stop trading if they exceed it, so broker dealers often keep their debt-to-net capital ratios much lower.


In 2004, the European Union passed a rule allowing the SEC's European counterpart to manage the risk both of broker dealers and their investment banking holding companies. In response, the SEC instituted a similar, voluntary program for broker dealers with capital of at least $5 billion, enabling the agency to oversee both the broker dealers and the holding companies.


This alternative approach, which all five broker-dealers that qualified — Bear Stearns, Lehman Brothers, Merrill Lynch, Goldman Sachs, and Morgan Stanley — voluntarily joined, altered the way the SEC measured their capital. Using computerized models, the SEC, under its new Consolidated Supervised Entities program, allowed the broker dealers to increase their debt-to-net-capital ratios, sometimes, as in the case of Merrill Lynch, to as high as 40-to-1. It also removed the method for applying haircuts, relying instead on another math-based model for calculating risk that led to a much smaller discount.


The SEC justified the less stringent capital requirements by arguing it was now able to manage the consolidated entity of the broker dealer and the holding company, which would ensure it could better manage the risk.

[DaddyTorgo]

market's rallied this afternoon. however the pessimist in me wonders to what extent the rally (partially driven by the huge worldwide injection of 1/4 trillion $) is also a reaction to the news that AIG is being pulled out of the DJIA?

[path12]

I don't think it has anything to do with AIG being out of the DJIA. I think it has to do with the rumor that Paulson is going to set up a regulatory board. I also think it has to do with Britain banning short selling on financials (really a move that hasn't happened since 1931 and from what I can tell didn't work), as well as NY pulling shares of financials off the market somehow (haven't had a chance to look into the details).

[Flasch186]

yup the RTC idea is causing the markets to explode to the upside as it would mean the bad debt is moved off of the risk laden balance sheets and onto the gov't books to be housed until they can be priced and sold. It's the idea that that would cost less in the long run than continuing to let the mortgage markets reverse.

[DaddyTorgo]

Originally Posted by path12

I don't think it has anything to do with AIG being out of the DJIA. I think it has to do with the rumor that Paulson is going to set up a regulatory board. I also think it has to do with Britain banning short selling on financials (really a move that hasn't happened since 1931 and from what I can tell didn't work), as well as NY pulling shares of financials off the market somehow (haven't had a chance to look into the details).

i agree. hadn't refreshed things to see that these developments had happened, and the tv is in the other room. while i work in the financial world my job doesn't require that i stay on top of things up-to-the-minute, so i have a bit of an information-lag

[DaddyTorgo]

as an aside - just to examine my options i searched a couple terms of what i enjoy about my job (the parts of it i enjoy) on a couple job-boards today -- seems like I really should have no fear about striking out in search of another position --- plenty out there

[BishopMVP]

Originally Posted by Edward64

You can blame Bush for many things, but blaming him as a direct contributor to this financial mess is a stretch. Care to provide your case?

Greenspan was from 1987 - 2006. Sure he influenced interest rates and had authority to oversee mortgage loans etc. but there are plenty of other people that did not do their jobs well in -reacting, mitigating- to the current situation (which you cannot blame Greenspan for).

Unless your argument is that what Greenspan set in motion would cause this mess we are in -regardless- of what anyone else does, there is a period of 1-2 years where the current responsible parties did not do their jobs.

I'm not blaming Bush for this, I just can't grasp why you blame Paulson, who's been in place for ~2 years, more than Greenspan who was there for the previous 20, or Bush for the last 8 and who appointed Paulson.

With Greenspan, my main argument would be that, terrified of being blamed for slowing economic growth, he kept interest rates artificially low during the boom years of the stock market, leading to a massive influx of credit from overseas which not only led to a huge imprt/export deficit, but also led to higher inflation and, most damningly, the huge amounts of available credit led to financial institutions taking on ever riskier investments (like subprime mortgages) because of the excess capital they had on hand. But again, I'm not an economist, so feel free to poke holes in that theory while also espousing yours on what Paulson did wrong/should have done differently the last 2 years.

Originally Posted by Tekneek/Flasch's argument

I wasn't really debating the war itself, but rather the financial facts that the cost, in my mind, far outweighs whatever may have been gained, which makes it an awfully bad financial decision. That aspect is brought into the spotlight when major institutions are collapsing here, the currency is on the verge of being devalued, and unemployment continues to grow. Whichever side you are on in the war debate, the real debate is whether this government is on a sustainable path or not.

As I've heard multiple times from anti-war acquaintances, women's studies professors and anyone referring to Eisenhower's Military-Industrial Complex/Cross of Iron speech, military spending is more than all other discretionary spending combined. The key word there being discretionary, because Social Security costs slightly more than military spending (~20%) and Medicare/Medicaid costs about double (~35% of federal spending*). Since the "anti-war" side of the electorate is generally excited to institute a massive increase in health care scope and funding by the national government, any argument on what makes our national government more or less insolvent will likely devolve into another partisan argument with right-wingers arguing national defense is necessary, left-wingers arguing health care is necessary, Bucc arguing neither is and we need to be taking care of it ourselves at the local level, Quiksand stepping in to be the voice of reason, pointing out in a scholarly manner we do need a federal government for basic tasks like the interstate highway system and then the uber-partisans coming in to post misleading quotes to vilify the other sides candidate. (Un)Fortunately, Bubba is gone, but perhaps we can even get a Ron Paul supporter to take Quik's comment on highways and start talking about the NAFTA Superhighway and the NWO/WTO/Amero. Maybe I just have an over-active imagination, but I feel like we've been down that road before and we have the McCain-Obama thread going down that route when I check in.

* This of course doesn't include state and local spending, which are understandably light on national defense spending and high on health care and pension costs.

Originally Posted by flere-imsaho

I'm not asking for a planned economy. I'd just like a financial system with enough controls in place to prevent another 1929 and keep the children (and let's be honest, they acted just like children) on Wall Street in line.

The biggest problem with this line of reasoning is that the biggest failures were at Fannie Mae and Freddie Mac, which were tied closely to Congress and run by a revolving door of Washington insiders.

[Marc Vaughan]

As I've heard multiple times from anti-war acquaintances, women's studies professors and anyone referring to Eisenhower's Military-Industrial Complex/Cross of Iron speech, military spending is more than all other discretionary spending combined.

Out of interest though - are any figures available indicating what percentage of that spending actually is internal or advantageous to America and indeed what revenue has been generated for the country by the war?

That is - money which then goes on to generate further revenue for the country; examples of this could be an order to a US company to build weapons, pay to a soldier who's family is still based in the US so gets spent into the US economy, revenue to US building companies for repairing war damaged buildings in a foreign country etc. ?

(I doubt its more than a fraction of the overall cost involved - but it'd be interesting to know)

[molson]

Originally Posted by Marc Vaughan

Out of interest though - are any figures available indicating what percentage of that spending actually is internal or advantageous to America and indeed what revenue has been generated for the country by the war?

That is - money which then goes on to generate further revenue for the country; examples of this could be an order to a US company to build weapons, pay to a soldier who's family is still based in the US so gets spent into the US economy, revenue to US building companies for repairing war damaged buildings in a foreign country etc. ?

(I doubt its more than a fraction of the overall cost involved - but it'd be interesting to know)

I'm sure its more than a "fraction" - the defense industry is HUGE business.

I'm glad somebody brought this up - people often talk like there's this international walmart we spend money at. A good chunk of defense spending goes directly to US companies, which employ a huge amount of people, invest money, pay taxes, etc.

[Flasch186]

historic night tonight and looks like the taxpayer is about to be on the hook for another $3 Trillion come morning.

[Flasch186]

well might not be tomorrow but it's in the works. Might be a time to sell the news when it comes out though and buy beforehand.

[DaddyTorgo]

Originally Posted by Flasch186

historic night tonight and looks like the taxpayer is about to be on the hook for another $3 Trillion come morning.

hmm? am i missing something?

[Edward64]

Originally Posted by BishopMVP

I'm not blaming Bush for this...

I thought you were attributing blame to Bush per your quote below. What was that in reference to then?

BishopMVP

You blame Paulson, but not Bush or Greenspan? I'm confused.

* * * *

BishopMVPI just can't grasp why you blame Paulson, who's been in place for ~2 years, more than Greenspan who was there for the previous 20, or Bush for the last 8 and who appointed Paulson.

FWIW, my answer was and still stands.

Greenspan was from 1987 - 2006. Sure he influenced interest rates and had authority to oversee mortgage loans etc. but there are plenty of other people that did not do their jobs well in -reacting, mitigating- to the current situation (which you cannot blame Greenspan for).

Unless your argument is that what Greenspan set in motion would cause this mess we are in -regardless- of what anyone else does, there is a period of 1-2 years where the current responsible parties did not do their jobs.

[Edward64]

Originally Posted by DaddyTorgo

hmm? am i missing something?

Woo Hoo. Another wild day with the RTC-like proposal. Last I checked, DOW futures up 300+ points.

I understand why this was proposed now with the global financial institutions seemingly on a precipice ... I wonder if an argument could be made that this should/could/would have been proposed earlier to save Lehman, Merrill, AIG et al.

[Flasch186]

Originally Posted by DaddyTorgo

hmm? am i missing something?

yup, congress met, there is a plan coming together for an RTC, money market funds just got guaranteed today (protecting the $1 value), the market is popping.

[DaddyTorgo]

yeah - right after i posted that i went and looked and saw what was up. thought i came back and edited, but apparently not.

yeah, we'll likely see a little leg-up based on this (duration is anyone's guess), but i think we're far from out of the woods -- only too bad such a solution (which isn't exactly novel or without precedent) wasn't enacted sooner

[BrianD]

Can anyone give a condensed "for dummies" type of explanation for the new plan? I've been trying to keep up the last few days and haven't been understanding the moves and implications as much as I'd like. Thanks.

[ISiddiqui]

Unless your argument is that what Greenspan set in motion would cause this mess we are in -regardless- of what anyone else does

That's my argument. It wasn't if, it was when.

[flounder]

Originally Posted by BrianD

Can anyone give a condensed "for dummies" type of explanation for the new plan? I've been trying to keep up the last few days and haven't been understanding the moves and implications as much as I'd like. Thanks.

Did you lend money to bad credit risks? You're saved.

Did you take out a mortgage you couldn't afford? You're saved.

Did you invest your money wisely and not buy things you couldn't afford? You're screwed.

[Anthony]

this sucks, i want another rebate as a reward for not being a fool with my investments and opting for a mortgage i could afford.

[Anthony]

i wonder how this affects the black friday/post thanksgiving deals? are big box stores gonna have to slash even more prices (afterall, who can think of buying plasma tvs when the world as we know is failing) or if all these bailouts means everyone who screwed up with regards to taking on more mortgage than they can afford can go back to ruining their credit with more unnecessary purchases?

[Galaxy]

Originally Posted by Anthony

i wonder how this affects the black friday/post thanksgiving deals? are big box stores gonna have to slash even more prices (afterall, who can think of buying plasma tvs when the world as we know is failing) or if all these bailouts means everyone who screwed up with regards to taking on more mortgage than they can afford can go back to ruining their credit with more unnecessary purchases?

They won't have any credit to do so.