The S Hits The Fan
http://money.cnn.com/2008/09/18/news/ec ... tm?cnn=yes
Bailout time! Big time. I wish we had a real old-timer on this board. Someone who actually lived through the depression as a teenager...so they could compare and contrast. I've got a hunch the comparison would be a tad to close for comfort though.
Bailout time! Big time. I wish we had a real old-timer on this board. Someone who actually lived through the depression as a teenager...so they could compare and contrast. I've got a hunch the comparison would be a tad to close for comfort though.
Comments
1. Buy a bunch of crap I don't need, but that I want.
2. Buy a house for the price of 10 times my income.
3. Don't pay for any of it.
4. Get the government to foot the bill.
5. Repeat 1-4 necessary.
- It won't keep house prices from falling
- It highly likely won't prevent foreclosures
- It won't right the economy
You're left with the only things it does:
- Socialize banks' losses
- Delay the depression
So, for the ultra low price of $1 trillion we can keep banks afloat. That raises the question, "what would it cost to keep housing prices from falling?"
Hyperinflation
Answer: All current home owners get a huge tax credit from now to eternity. Any home that changes ownership loses that tax benefit.
Furthermore, it is important that the new laws give immediate and absolute power to the ex CEO of Goldman Sachs (Paulson) over the complete financial system as we need fresh and independent leadership during this crisis.
And lastly, the new Financial Czar (and the FED) will have complete judicial immunity both personally and with respect to all policy decisions/actions.
"Accountability is to be avoided at all costs"......Paulson (ex CEO of Goldman Sachs speaking on behalf of himself and hard working financial executives everywhere)
Oh, and nobody gets to review the bill before it is signed. It will be just like Iraq...trust us...the WMDs are there!!!
black hole.....indeed
Whats the name of a system that allows those in authority to set themselves up above the laws of the land....
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Dirty Secret Of The Bailout: Thirty-Two Words That None Dare Utter
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A critical - and radical - component of the bailout package proposed by the Bush administration has thus far failed to garner the serious attention of anyone in the press. Section 8 (which ironically reminds one of the popular name of the portion of the 1937 Housing Act that paved the way for subsidized affordable housing ) of this legislation is just a single sentence of thirty-two words, but it represents a significant consolidation of power and an abdication of oversight authority that's so flat-out astounding that it ought to set one's hair on fire. It reads, in its entirety:
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Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
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In short, the so-called "mother of all bailouts," which will transfer $700 billion taxpayer dollars to purchase the distressed assets of several failed financial institutions, will be conducted in a manner unchallengeable by courts and ungovernable by the People's duly sworn representatives. All decision-making power will be consolidated into the Executive Branch - who, we remind you, will have the incentive to act upon this privilege as quickly as possible, before they leave office. The measure will run up the budget deficit by a significant amount, with no guarantee of recouping the outlay, and no fundamental means of holding those who fail to do so accountable......
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Despotism? This is a hard one...
""The financial markets are in quite fragile condition and I think absent a plan they will get worse," Bernanke said.
Wow....this guy is brilliant.
"I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way."
Gee, ya think? And that is precisely what SHOULD be allowed to happen. The party is over and now it is time for some belt tightening. If we truly want the economy to recover in a "normal, healthy way" then we NEED to go thru some pain.
This artificial propping up of the economy is precisely why the FED should be dumped.....they speak out of both sides of their mouth and are free and easy with taxpayer dollars while putting no accountability on financial executives. Where is all their usual "let the market handle it" rhetoric?
It is ironic that Bush has been out touting the U.S. model of free market capitalism and removal of regulations to foster free trade around the world. I hope the rest of the world is taking note that these same free market capitalism cheerleaders have suddenly turned to advocates of economic socialism when their own pigdom is threatened by their own excesses.
Pathetic......
Just pointing out that's a code phrase for depression. And from his phrasing, he's not calling it possible or probably, but certain.
In other words, unless taxpayers infuse $1 trillion to wallstreet, Bernake is certain there will be a depression.
... bit late for that, isn't it?
A deflating bubble is bad, according to Bernanke and Paulson. Geniuses.
I read it as a $1 T to *stave off depression. That likely won't be enough to stave off recession.
*stave off : means delay for as long as possible in this context.
Can't wait for this interest rate to trickle down to Seattle Homes. Most in-city homes must be Jumbo these days, no one has the cash for the $600,000 houses common around Seattle.
CNBC is reporting that the "Fate of Bailout May Rest With Republican Sen. Shelby" (http://www.cnbc.com/id/26856069). Senator's fax number and a suggested message to the senator can be found here: http://globaleconomicanalysis.blogspot.com/2008/09/fate-may-rest-with-shelby.html. With http://MetroFax.com you can send up to 1000 faxes per month for $12.95 (there is $10 activation fee).
I can't seem to find his exact words and different articles are quoting it differently. But it's too late to stop a recession, and "preventing" a depression at this juncture will probably just make the eventual collapse worse.
If you don't have any effective medicine the only thing you can do is let the disease run its course.
Paulson & Bernanke are nothing but quacks pushing dubious cures. Heck, they even acknowledge they don't know if their proposals will work.
I'm no fan of the current Bush administration, but this NYT article (published 11 Sept 2003) puts a little different perspective on the situation.
New Agency Proposed to Oversee Freddie Mac and Fannie Mae
The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.
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The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.
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The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac -- which together have issued more than $1.5 trillion in outstanding debt -- is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.
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''There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises,'' Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan........
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........Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could
sharply reduce their commitment to financing low-income and affordable housing.
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''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''......
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Normally, I would agree. If this were a stimulus package or some such thing, of course people would overwhelming vote to get money now so that my generation can pay it off with interest in the future.
But it's not. I haven't seen any official polls, but public sentiment on the online polls seems to be overwhelmingly against the bill as it stands now. The results of a recent CNN poll were something like
8% want the bailout with no oversight.
41% want the bailout only if US Gov becomes major owners in exchange for federal funds
51% want no bailout at all.
If over 90% of the population really dislikes the bill as proposed by Paulson/Bernake, then it's actually political suicide to vote for it. This won't pass anywhere near as easily as it seemed it would a week ago. What's funny, is that a year ago people were disgusted with this "do nothing" congress. Today, I hope they keep that title.
Hagel's bill, or perhaps another proposed by someone else, has a fighting chance... Especially if Congress can agree on a way to give taxpayers a financial stake in turning these companies around, as that would not be as much of a Wall St handout - and also lower the ultimate cost.
Not to mention the potential blame game: If Congress doesn't vote for this and things go to hell (moreso than they already are), then they will get the blame. If they vote for it and things go to hell, they can blame the administration. If they vote for it and it works, they can take at least part of the credit. Passing this bill is a win for Congress regardless of outcome. Most of them will be out of office before the bill really comes due.
I hate to admit it, but I thought GW's speech last night was good. I liked most of what he said. He hit several key points expressed many times by us Bubbleheads as to what went wrong, including the now obvious fact that real estate does not always appreciate! In so many words, he even said that he understood that "responsible" people are pissed off about the bail out. A surprising sentiment, coming from him, but then again it was just a political speech.
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Video; Bush economic address
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But, this financial crisis is not entirely his fault. Much of it was set off with the deregulation that happened during the Clinton/Republican house/senate years or by Greenspan's irresponsible fiscal policy. That said, our national debt nearly doubled during his 8 years in office, and many of those were "boom" years. If our current national debt were closer to $5 T than $10 T, this bailout would be less difficult for me to swallow.
I agree with you to a point, however with the exception of the above words about Fannie/Freddie, he did nothing to try and stop this from happening. Rather he continued playing his "our economy is strong" fiddle for the last few years.
He's still the man at the top and he's never taken responsibility for anything that has happened during his 8 years. Whatever happened to "The buck stops here"?
He tried, but was blocked by Congress, especially Barney Frank, who is now Chairman of the House committee that is overseeing the bailout.
As I said, "the exception of the above words about Fannie/Freddie". That's the only thing that he tried to fix the coming storm.
So nice of Congress to slip in this week, virtually unnoticed, the $25 billion bailout to crappy American car manufacturers. Also the oil drilling right off the coasts, as if the oil oligopoly is going to ever lower prices when they have no competition.
I can only hope that Obama is true to his word to clean up junk in gov't. Even if he really wanted to, though, he'd get bogged down by the opposition.