Now I am Angry....Really...about Paulson
One of the reasons the 700B bailout plan is still under discussion is that, the Demacrate wants to add more privisions to the plan so that the government can have more control on the banks and also have more control on executive bonus and pay package etc. I totally agree with the Dem at such issue. Due to greed, all those high level executives in banking industries took huge risk to expose and pretty much destroyed the financial system, yet, they are rewarded with huge amount of bonus and packages. Imagine without those provisions, the banking executives simply use some of the 700B bailout funding to pay themselves huge aomout of bonus again. Trust me, they will do it shamelessly.
The argument from Paulson and the Republican is, well, if we have those provisions, the banking industry will not accept the deal. Mr. Paulson, are you telling us that, if the executives feel that they can't keep getting those multi million bonus, they would not like their banks being bailed out? Give me a break.
The CEOs of FNM and FRE are pretty much "Laid Off' with multi millions severance package. I guess we should all feel sorry for them. To the public, those guys should be as guilty as the Enron folks who are serving jail time now.
This system is totally screwed up. And tax payers have every bit of reason to be upset and angry.
The argument from Paulson and the Republican is, well, if we have those provisions, the banking industry will not accept the deal. Mr. Paulson, are you telling us that, if the executives feel that they can't keep getting those multi million bonus, they would not like their banks being bailed out? Give me a break.
The CEOs of FNM and FRE are pretty much "Laid Off' with multi millions severance package. I guess we should all feel sorry for them. To the public, those guys should be as guilty as the Enron folks who are serving jail time now.
This system is totally screwed up. And tax payers have every bit of reason to be upset and angry.
Comments
I posted this same article on another thread, but it's relevant here also.
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I am no supporter of the present Bush administration, but to be fair, GW tried to do something about the Freddie / Fannie mess way back in Sept 2003. I'm sure this fact will be something that will be tossed around a bit during the anticipated "blame game" in the next few weeks before the election. With 20 / 20 hindsight, GW looks like a genius, Barney Frank and other Dems, not so much.....
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New Agency Proposed to Oversee Freddie Mac and Fannie Mae
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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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From what I'm reading, it would seem most everyone is disgusted by Paulson's proposal...except Bush who wants it pushed through. The difference seems to be that some democrats seem to believe there is a way to make it tenable, whereas many of the GOP are less convinced.
Of course, you can be certain that most of the WA state representatives will eagerly vote for any bailout that comes up...
I will fully support a bail out if Paulson and all CEOs of Big gangs---sorry banks--- go on the street with " No bonus, no bail out " T shirts... and let the tax payers decide...
I couldn't agree more. All this demonization of Wall Street, for the economic crisis, really gets under my collar. Sure, Wall Street bears a lot of the blame, but those poor struggling mortgage holders bear a HUGE amount of responsibility too!!!! I have very little sympathy for those people losing their homes across America (this sounds mean, I know), but they simply shouldn't have over-extended themselves in buying homes they knew they really couldn't afford.
If anything, it is all those greedy/grubby average citizens that make me MAD!!! Everyone needs to suffer to put things to right, Wall Street AND Joe six pack...
Where's my bailout?!
I don't mean to say you took the wrong path, but this is what you get when you're in the minority. The majority owns real estate, and so legislation will favor them. The majority are in debt, so expecting monetary and fiscal policy to give a crap about savers is likely foolish.
Expect long-term inflation (after the temporary and recession induced deflationary pressure) and expect more bailouts and stimulus packages.
I guess us savers could just take our money and move to a country with fiscal responsibility. <looks around, noting that the responsible countries sent a bunch of their money over hear...>
On second thought, I'll just use it to buy the biggest guns I can find (no worries that we'd ever outlaw those), and when things get really bad I'll start a militia that takes from those without the foresight to purchase semi-automatic assault rifles.
On third thought, this bailout is really only a couple thousand out of my pocket. As outraged as I am, even if it goes through it won't do me "that much harm" just like it won't help the irresponsible "that much". I'll just keep the course, and use cash to buy their house from the bank when it's selling for dimes on the dollar. Besides, I think congress hasn't had a good feel about how huge this problem is yet. If it takes $700 B to bailout the top 20 or so financial firms on wallstreet, just how much $$$ will it take to fix everything? I'm less certain that this will turn out to be much of anything than the rest of you, I think.
I am still going to write my legislators and tell them that if they vote to bailout wallstreet, that I will A) vote against them every opportunity, and
People who are in the market beyond most peoples means buying bad debt right now at 20 cents on the dollar, will sell it to the government at 70 cents thus making a 300% return and return liquidity to the market. Who do you think it is? Wouldn't be GS would it?
Tu Tu Lu
1) Played by the rules
2) Kept my nose to the grindstone
3) Been financially conservative and a good saver
4) Never have caused any burden on anyone else due to my own bad judgement
I get zero "bailout".
In fact I will end up paying for:
1) Everyone who didn't play by the rules (fincancial execs)
2) All those who just wanted quick profit to retire by 30 (flippers, speculators, Harvard sharks, etc.)
3) Financially reckless individuals who knowingly or not, put themselves in bad situations to live lifestyles that could not realistically afford
4) All the bad judgement of other involved in the whole RE debacle
Not only do I NOT want this bailout, it goes against everything I believe in and stand for. It rewards risk, incompetance, and allows companies that should be allowed to fail (remember free market capitalism) to stay afloat and continue to be run by crooks/morons.
I fail to see how anyone could condone the bailout proposed by our "leaders". The same "leaders" who either contributed directly to the problem (e.g. CEO Paulson of Goldman Sachs) or were too stupid to recognize the danger (e.g. Dodd). The same leaders who are trying to ram a dictatorial/czar-like financial "patriot act" down our throats while trying to scare us into a "my way or ELSE" to accomplish what amounts to a financial coupe. This is an act of financial terrorism in and of itself!!!
I hate what America has become. Accountability in this country is dead. Our financial model is to privatize profit and socialize debt.
My only regret is that I cannot distance myself from all the rot and that I will have to pay for the crimes, greed, and poor judgement of others. I have no future. My pension will be gone, my SS will be gone, and my 401K will be worthless (i.e. dollars).
I am not alone...
Is it possible that there might be enough people on the same page with this, that we could form a political party? Or at least a lobby? I'm actually not joking here.
Yeah, this is partly the Libertarian's core constituency.
I'm completely with Moose on this one. I've tried to be prudent and somewhat responsible financially (which is why I'm renting a house right now instead of trying to figure out how to pay off an option-ARM). This whole thing smells of poo. My first reaction after Congress responded to Paulson was favorable; but even after the changes it still strikes me as rewarding imprudence on a very large scale. When I look at the blame sheet for the housing bubble, nearly every group on that list (except RE cheerleaders) gets let off.
But which is worse? $2300/person of new debt amortized over the rest of our life, or seeing some/most/all of our banking system collapse? The biggest risk, IMO, is that governments and SWFs will stop writing us blank checks. There will always be people/companies with enough money to start a new bank.
I don't know...maybe that is just what we need. Cut off the money pipe, and suddenly we'd have to stand on our own two feet. As a nation, it would hurt like a bitch in the short-term, but it might finally be the wake-up call we need.
I'd rather the wake-up call not involve the federal government going insolvent.
No it isn't.
I'm one of the people that have been on the sidelines the whole time. I've been renting, watching this bubble blow up, waiting for it to collapse under its own weight. I've paid off all my debts and have no car/house/college/credit-card loans. I've taken the money I've saved by renting and not paying for an inflated mortgage and have it in trading accounts and entirely in money market accounts in my 401(k).
Having the financial system lock up to the point where companies can't make their payroll, nobody gets any loan, etc is not to my benefit. This bailout is significantly to my benefit since it recapitalizes the financial system and gets the monetary engine back on track. That means that I can take the liquidity that I have and invest it and make a profit off of it.
Having 30% unemployment and another great depression isn't going to help anyone.
And has anyone who is currently screaming about the excesses of the financial system noticed that the market has been working to clean itself of excess? An uncounted number of hedge funds have imploded, BSC/LEH/MER have gone under or been bought out, MS and GS are no longer investment banks and have had to seek recapitalization, WM is gone, WB has been bought, FNM and FRE have failed. How much worse do you need it go get before you've gotten your pound of flesh out of the financial system?
The plan that got voted down *is* your bailout. You're just so blind you can't realize it.
If you look at the US/financial system as one big bank, then the problem is that it is fundamentally right now insolvent. The problem is that 10-20% of $20T in assets which provided collateral to the system has gone bad. Via fractional reserve banking that get amplified into a systemic deleveraging which creates a crisis which gets amplified by a systemic bank run.
Inflation right now is in the rear view mirror. Everything that we see around us right now is destroying liquidity and destroying demand, we just don't have the macroeconomic statistics yet which show that we're in a deflationary environment because they lag. Yesterday alone the Wilshire 5000 lost $800B in market capitalization in a single day.
If we don't recapitalize the system, then the system will fail just like individual banks fail. That is bad for everyone. The problem is that there is no FDIC program for the whole financial system, and SWFs and other large investors simply aren't big enough and have gotten spooked at this point and are largely unwilling to step up until there's a bottom.
The problem is fundamentally leverage in the financial system. Unless you do away with leverage and do away with fractional reserve banking entirely, then you can always be hit with a deflationary crisis due to falling asset values. Unless you are an Austrian, the only way out of a deflationary financial system failure is to recapitalize the system and to fight the spiral with inflationary monetary and fiscal policy.
And if you subtract off a few recent panic-drive flights into commodities, the market overall understands this. Oil and Gold have come down off thier all-time highs. This is because even though the government may be printing up $700B, the monetary destruction and decrease in monetary velocity along with aggregate demand destruction are currently much stronger forces. Pretty soon this will start showing up in terms of demand destruction for commodity goods like copper and steel as fewer buildings get built, fewer cars get built, etc. With an oversupply of cars and buildings, manufacturers will be force to slash prices in order to see some kind of return on their manufacturing investment, even if it is just a smaller loss. In that kind of environment currency actually does better. Gold gets a certain amount of flight-to-safety, but the $700B will not ignite hyperinflation in this environment -- the biggest risk actually is that it leads to spiking interest rates, but there's such a large demand for treasuries that we may be able to absorb that much debt being offered. Even if we don't, then the result is simply that higher interest rates will act as even more of a brake on the economy.
Many experts and layperson's understood this. There is a great post over at Naked Capitalism that outlines this much more clearly than I ever could here.
As the post closes, the ill conceived plan laid out by Paulson was prioritizing "Doing Something Now" over "Doing Something That May Actually Work".
Lanny
Besides, I think most people are more or less past the "pound of flesh" stage of the game. Per Aesop's parable about the grasshopper and the ant, we just spent 5 years watching the grasshoppers eat everything they had, everything they could borrow, and anything else they could get their hands on. Those of us who are ants don't really want to see the grasshoppers starve to death this winter, but that doesn't mean we want to let them fritter away our own store of food for the winter.
The best alternative that I've seen floated is that the FDIC should be getting this money, not the Treasury (which is far too political to be effective, IMO). The FDIC has a better idea of what banks need help, how much help they need, and whether helping them will really help at all. And, they have a history of doing it.
Yep. I'm on board with this one too. I think the only reason the Treasury didn't want to do this is that they would there lack the direct control over the process. And if there's anything we know about this administration it's that they have a strong desire for over reaching with regards to executive power. Paulson's original bill had the "you can't question me" part to it, after all... Anyone know what Paulson did in his previous job? (don't answer that question)
If anyone's actually reading this, please write to your senator and simply say "give the money to the FDIC, let them figure this mess out, and make them do it quickly".
I doubt that a political party that is devoted to protecting Constitutional rights and freedoms of Americans is entirely comprised of people of low intellectual capacity. Such efforts are worthy and should be held in high regard, it would seem.
What I would like to know is who here has the best predictive track record, and also, what is that person's prediction for next 6, 12 and 24 months?
For the stock market, specific industries, specific countries, and the US housing market.
I hear you.
What about apathy? There will always be snakes out there, but at what point does it become our fault for not eradicating the snakes when we have the opportunity and don't take it?
I didn't mean to imply "low intellectual capacity", just that there's a lot of radicals and nutjobs, as defined by the rest of the politicos. I actually support a lot of what the Libertarian party and libertarian ideologies represent. But you have to admit there's some real wacky people that are libertarians. I supported what Ron Paul preached and I loved the grassroots movement he has created, but (and I know this is heresy to many) he's seems kind of a nut to me. I would love to have someone with his ideals in power, but I'm nut sure about him specifically.