I wish the WA state system wasn’t rigged so I could have an alternative to vote against McDermott, and not have to vote Republican.

At least the state isn’t allowed to rig the presidential ballot. I’ll have Nader or McKinney to vote for. Both of them are strongly opposed to this give away to the rich and the multinational corporations.

When their deposit reserves come back after selling debt that they are sitting on they will be able to buy.

- 5 years of income tax relief for home buyers that currently do not own a home.

Even if the crocks gets saved it will feel like it’s rewarding the innocent in a comparison. The historic lesson will be that it’s rewarding to be financially conservative. With the current lending standards in place you will not have a flood of able buyers but a steady controlled stream that can not cause a new bubble since homes will be bought of people who can afford them.

Yeah, so don’t worry and vote for me.

If the US scores in Iran – we just rob them of natural resources. Just so it doesn’t look like a robbery – we can send them consulting services regarding say democracy. We can preach them how to be a democratic state. Also we can put some christian values into the bag.

The guy in the gold bowtie is Earl Blumenauer from Portland, not Eugene. And he’s no wingnut.

I think the calls, faxes, and emails have influenced their opinion, they don’t want to be voted out! See Markor, you can make a difference. No one wants to lose their seat.

When your peeps are calling with ratios of 100-1 in staunch opposition to the bill, the Reps will listen!

I have not read Shiller’s article and I do value his opinion. If you link it to here I will be more than willing to read and comment on it.

Jay,

The banks/financial institutions have to first have better transparency. They need to open their books and say “here is what we have”. Once that occurs, an attempt can be made to mark these assets to market. The problem right now is that none of these financial institutions have been transparent as to what they have had on their books.

BSC,WaMu, Wachovia, LEH, etc, ALL said they were adequately capitalized up until the point that they failed! How can we attempt to mark any of these assets to market when the institutions won’t even tell us what they are, and why should the tax payer be left holding the bag?

The free market will ALWAYS determine value via supply and demand. If there is no demand, the assets should be marked to ZERO and the institutions should be forced to take the hit, not the taxpayer.

I’m with you. Jay is using phrases such as “assuming”, “hopefully”, and “if”. Not exactly the reassurances you want with 700 billion on the line.

I think people should be considering the exact opposite. What if the plan does NOT work? We’ve already thrown over 400 billion at the financial markets between Freddie and Fannie, AIG, BSC, and the home owner bailout bill, and none of it has come even close to working. Why should another 700 billion work now?

The G says “We’re going to buy your toxic MBS at a higher than market rate, please line up and tell us what you want to sell”. The financial institutions, realizing that this is their opportunity to dump their crappy assets, line up to sell FAR more than 700 billion.

Bill Gross (king of the Pigmen) actually believes there is more than 1.2 trillion worth of assets that actually will need to be bought before all is said and done. I believe that 1.2 trillion is a low ball estimate. This bailout could actually shine a line on a problem that is far more severe than anyone realizes. Before all is said and done I anticipate Paulson coming back to Congress for yet another whopping check that will make the first bailout seem tame.

You got every single item I posted absolutely wrong. The plan won’t work, it may even make things worse. The problem isn’t mark to market, the problem is mark to model. These assets are not accurately marked, and no one knows exactly what they are worth.

The G is going to be paying way above market value for nearly worthless assets. If the assets were worth anything, the market itself would be buying them. Instead, none of these financial institutions want these POS toxic MBS, particularly in a housing market that still has a LONG way down.

The Chinese have already hinted at the fact that they may stop buying Treasuries if this bailout goes through. If that happens, we may see a massive spike in Treasury yields and mortgage rates go through the roof.

I don’t think I should have to explain how pumping 700 billion into the financial markets is inflationary and contributes to a falling dollar, this should be macro 101.

Hope and possibilities is not what I want to hear when you are investing 700 bn dollars. If they can’t definitely make assurances that this plan will work then let the market take care of itself.

It’s true that they don’t know if their plan would work. Does that mean that they shouldn’t have pushed for it and instead did nothing? I don’t think so. I think they proposed what they thought would work best without being too manipulative. (They could have, for example, forced everyone to stop all foreclosures and rewrite all risky or “unaffordable” mortgage terms so that the borrower can service the loan for duration. Talk about moral hazard there. But then again, maybe something like that would be coming if this plan does not work).

Hopefully it will work. There are some promising signs, although the mood seems to be very much skeptical. Read: Vulture Funds Plan to Buy Assets Ahead of Bailout

And another one about whether failing to bail out Lehman led to bigger bailout: Lehman’s Demise Triggered Cash Crunch Around Globe

And regarding CDS, why should it ever be included in the buyout? CDS’s are an entirely different class of assets than asset backed CDOs or MBSs. They need to be regulated in the way that risks associated with them must be disclosed to shareholders, but no one in his/her right mind would consider them to be in the similar risk levels than any mortgage based assets, and I doubt even the most aggressive banks sought them as assets to hold on their balance sheets. Maybe as protection, but they can probably totally write them off and be fine.

Paulson and Bernanke admitted that they were not sure this plan would even work. Paulson stated in his 60 minutes interview that the financial markets will be in turmoil for the next several years.

Also, the bailout doesn’t address Credit Default Swaps.

Russia returning to gold standard? Where the heck are they going to come up with all the gold then? They would have to purchase nearly $400 billion worth of gold, which probably will skyrocket the gold price so much that it will cause deadly hyper inflation in Russian economy before it can ever complete needed purchases. Actually, that move might help out the U.S. a lot by unloading some of her gold reserves of the U.S. (about 18 times more than Russia’s) at highly inflated prices.

So the bailout is the “addictive substance”, then what is the disease? As for the moral hazard issue, the government has shown that it won’t bail out everyone by letting Lehman fall, which has had unintended consequence of escalating fear in the capital markets, and that partially contributed to the current bailout plan being presented. Moral hazard is indeed a serious issue, but unfortunately I don’t think we have that luxury of sticking to principles anymore. Besides, institutions that participate in this plan will have to pay by taking losses on their investments and diluting their equity by issuing warrants to the government. It’s not exactly a free ride.

Returning to gold standard would be totally impractical at this time, and frankly, don’t you think there are better reasons for it than a disputed quote from about a century ago?

After the S&L crisis, did a whole lot of new S&L or banks open?

After the tech bubble burst, were the failed companies replaced by a new wave of tech firms?

What makes you think that new banks will quickly replace the roles of old banks (majors at that)? Because it’ll be as easy as rehiring old employees and leasing the office space used by the old banks?

You think the bailout is a bad idea because

1) Possible bond market dislocation
Not sure what you mean by dislocation, but Treasuries have been trading below inflation (i.e. at negative interest rates) lately. I cannot possibly imagine how the bailout will make the situation worse.

2) Falling dollar
People keep bringing up this. But it’s illogical. If this plan works, dollar will strengthen. Again, demand for Treasuries is such that buyers are willing to accept negative interest rates. You are deducing falling dollar from what evidence?

3) Rising inflation
Ultimately, this plan comes down to increasing money supply so we won’t end up in a depression hopefully. And you get “rising inflation” from all that.

4) Contaminating Treasuries
Contaminating? Because those “toxic” assets will spread the “toxins” to the Treasuries somehow? Of course, the U.S. government stands to lose hundreds of billions if the economy and mortgage situation significantly deteriorate (plus there’s the issue of abuse), but we can handle such loss.

5) Suspending mark to market in favor of mark to model (what got us in the mess in the first place)

Are you saying mark to market is what got us in the mess in the first place? That would make some sense because that DID contribute quite a bit to the problems we’re having. I for one think that we need to use mark to model for many of these securities and there must be strict disclosure and review regulations for the models because mark to market accounting simply doesn’t work when there’s no liquidity in the market. For that very reason, until the market for these securities becomes restored, it would be pointless to use mark-to-market with the bailout.

6) Adding more debt to an already insurmountable amount (would raise the debt level to over 11.131 trillion) and would in fact pass the burden to future generations to pay for a mess we created.

Assuming that the government wouldn’t get scammed badly here, it really won’t affect the future generations because the government is not spending money but making investments. If done well, the future generations would benefit with reduced deficit.

Therefore, people should stop fuming about the bailout but instead be vigilant about demanding that the government implements the plan wisely. Consider yourselves investor in a company out to acquire distressed bonds. Of course it sucks that you were forced to invest in that company, but since you didn’t really have a choice, shouldn’t you at least try to make a profit with your investments?

But then again, most Americans don’t really bother to learn about the world or the economy or the science but more interested in the latest sport scores or Brangelina gossip. It’s a country that voted for Bush and reveled in the idea of Palin as a Vice-Presidential candidate because they seemed like really nice folks who people can all relate to, trust, be friends with and/or “like”, and the people that do apparently care about the issues easily trample over facts and reality to defend their beliefs and ideology. Maybe we do deserve to fall, crash and burn.

I’d vote for Ron Paul if I thought he had a snowball’s chance.

Had you caucused / voted for him in the primaries, he might have had a snowball’s chance. He withdrew his candidacy some time ago.

I wrote to all my congress people to let them know that I would be voting against them in November if they supported the bailout prior to the elections.

I don’t want to see anyone rushing into anything. I think the roll of the congress is to put the brakes on this goofiness and apply some diligence to the decision-making process. That should take some time.

You completely miss my point. Whoever votes for this IS the most evil of the two candidates. Or at least I know for a fact that they are evil. The other candidate has not yet proven to be evil, they still have some potential to be good.

Anyone that votes for this is a proven commodity and will be voted against regardless of party affiliation.

Heh, I was going to point out that the basic math was wrong (comes out to $425 not $425,000 per person), then I noticed you deleted it with the handy comment edit option :^)

Matthew: Wow as I thumb through the proposal more carefully I am truly amazed. We (the tax payer) are going to suspend mark to market and pay higher than the assumed market value for these toxic assets.

You can assume too that there will be no limit on executive pay, including severance pay, all at taxpayer expense. There are so many ways around that, and I’m sure the loopholes have been intentionally left open.

If Reichert votes for the bailout, I’ll have more reason to vote for Burner, but I was going to vote for her anyway.

Rome is burning.

Matthew: BOTTOM LINE, THEY ARE ALL BOUGHT AND PAID FOR BY WALL STREET. VOTE THEM ALL OUT!!!! THERE IS NO LESSER OF TWO EVILS!

How? They will not be voted out. You think if 99% of the voters are angrily opposed to this bailout, a third-party candidate has a chance greater than nil of winning? I don’t. It doesn’t matter how angry the voters are, the vast majority of them will still vote Republican or Democrat. They will not support or even understand preferential voting (so that a vote for a third party is not a vote for the worst of the two-party candidates). Americans are simply too dumb. That’s what got us in this mess in the first place. What you’re suggesting require a new generation of voters, who are smarter than the current lot.

Ironic that Reid, Pelosi, Dodd, and Frank seem to be championing a Paulson bailout and encouraging this to get passed ASAP. Why are the Democrats so eager to hand over the keys to the Republic to a former CEO of Goldman Sachs and a staunch Republican?

Lesser of two evils my arse. My guess is that you see nearly 100 percent of Democrats voting for this just as they voted for the homeowner bailout.

BOTTOM LINE, THEY ARE ALL BOUGHT AND PAID FOR BY WALL STREET. VOTE THEM ALL OUT!!!! THERE IS NO LESSER OF TWO EVILS!

Matthew: Once again you have established yourself a political ideologue, incapable of independent thought or reason. Vote your party line, regardless of how your party candidate feels about important issues. Great strategy.

But I didn’t say or suggest to vote a party line. I said only that one should vote for the best viable candidate, which is perfectly logical. To not vote for the best viable candidate is to increase the odds of ending up with worse representation, no matter how bad that representation may be.

I’d love to see the two-party oligopoly broken. But most Americans simply don’t care enough or are not smart enough to make that to happen. In that case you make lemonade out of the lemons.

AndyC: Could you explain to me why this bailout is such a terrible idea? Also, could you explain how the market will continue to function in an illiquid business environment?

Could you explain to me why, for someone with a leaking aorta, just doing constant transfusions is such a terrible idea? Also, could you explain how the patient will continue to feed her family if she has to be out of work for surgery?

Once again you have established yourself a political ideologue, incapable of independent thought or reason. Vote your party line, regardless of how your party candidate feels about important issues. Great strategy.

Possible bond market dislocation
Falling dollar
Rising inflation
Contaminating Treasuries
Suspending mark to market in favor of mark to model (what got us in the mess in the first place)
Adding more debt to an already insurmountable amount (would raise the debt level to over 11.131 trillion) and would in fact pass the burden to future generations to pay for a mess we created.
We are one more bailout away from the Chinese, Japanese, and Middle East from flipping us the bird and no long buying our debt. If this happens, say hello to 75%-90% tax rates in order to finance our debt.
The current plan is going to do nothing to stimulate the economy. We may see a short term bump in the equity markets, but it won’t create jobs, stop foreclosures, or make housing more affordable.
The economists that don’t have any stake in the game (academics) are opposed to the bailout, as is the Congressional Budget Office (CBO). The CBO stated that the bailout could actually make the problem WORSE.

These companies have not revealed what assets they have on their books. By how scared Paulson and Bernanke have been looking lately, I’d say the problem is far worse than anyone has anticipated. The tax payer is going to be left holding a bag of sh!t!

People would start new banks by, for example, buying up the offices that JPM sells as redundant. Problem is, with the government handing out money like candy to banks with toxic loans, a new bank can’t compete. A strong signal that there will be no bailout would cause new banks to form quickly, using all the recently laid off employees. The old banks saddled with the junk would have trouble operating because other banks would be unwilling to lend them money, so the new banks would thrive.

Matthew: Best viable candidate? How viable is a candidate if they jeopardize the future of this nation by allowing the tax payer to be the fall guy for these ill priced garbage assets?

Their viability has nothing to do with what they stand for. For president, we have only two choices. (A third-party vote is a vote for the opposite of what you stand for.) Of the two choices, if one wants to kick a thousand toddlers in the face, and the other wants to kick just a hundred toddlers in the face, you vote for the latter one.