Like I said before, this bill is not finalized. Right now you are simply speculating that there would be no accountability, etc...
Hot off the press...
"The bill gave the Secretary (Paulson) much too much authority," Mr. Frank said. "We restored the notion of judicial review and accountability; we have created in our legislation...a very tough oversight board independently funded to check" the program's operation.
Now, neither you nor I know specifics. But it looks like congress is working to make sure there are some checks and balances in this bill.
The purpose of this bailout isn't to help CEO's. In fact, CEO's may take a pay cut and never be eligible for exit bonuses.
And another thing which may be in there would be for judges to have the power to adjust mortgages downwards to help people avoid foreclosure.
You believe confidence IS the entire problem?
You have to be kidding me. The problem of "confidence" stems from another problem. And that problem was the credit-orgy perpetrated by the government during the late 90's and for the past eight years.
The problem is in the bad loans made by stupid banks to people who couldn't afford the loan to begin with. The problem is not just one of the banks, but of the consumers who forgot that they should save money.
To try and minimize this entire thing into a "crisis of confidence" is just wrong.
It doesn't matter how confident you are, a bad investment is a bad investment.
Renewed confidence doesn't take away from the fact that banks are holding trillions in junk assets. And thus, it would be in the best interest of an opposing bank to not lend to the bank who has the bad assets.
How do you take away that fear? By minimizing the bad assets on various banks balance sheets, that's how.
Oh - as far as trying things over and over again - this type of bailout has never been done. The bailout in 89 was different in many ways from this one. And the problem was very, very different from the one we have today.
The bailout in the great depression was also very different, as was the cause of the great depression.
We are in a very unique circumstance, and lawmakers are looking for a unique approach to possibly fix the problem. It won't be cheap and there will be alot of political haggling, that's for sure.
The bailout package isn't final.
It won't be a final for who knows how long. So jumping to conclusions based on what the package says right now is a little premature.
The package could change significantly by the time everything is agreed upon and signed. And I wouldn't doubt that it was a different beast.
For example, a provision being argued upon is that any bank who accepts this package, must cut their executive pay. I totally agree that this should be the case.
That's just one major point of debate. There are many others - including the one you highlighted of the Treasury having no checks (Which i disagree with).
This isn't as big a deal as everyone is making it out to be.
Throughout history, this nation has crafted various "Rescue" packages to help rid banks of bad assets.
It happened during the great depression. And it also happened during the credit crunch in the 80's and early 90's.
The important thing to consider when looking at this is the alternative. As of now, a big bank goes down nearly every week. 12 banks have gone under. And let's not forget about mortgage institutions like fannie and freddie, or even countrywide.
If this isn't done, we'll continue to see more and more banks suffer the same fate. This could squeeze so muhc money out of the market, that unemployment would rocket, wages would be cut, economic activity would scale back massively, and, well, we would have another situation which could be as bad as the great depression.
I wish i was over hyping this or joking. But it's true.
I've studied finance for years now. I'm a writer and well published. And from what i've seen, if this doesn't get controlled, the repercussions are far worse than a $700 billion bailout package.
"hat do you want them to go to jail for? The games played, like mark to market tricks and related bookkeeping aren't illegal. Shorting and speculating isn't illegal. Responding to greedy people too stupid to know if it smells too good to be true it probably isn't or that there is no way to buy a house you cant afford without it biting you in the butt eventually isn't illegal. Stupidity is endemic. We cant legislate against it and can't afford to protect people from it."
MY TAKE: How about for blatant fraud? everyday they go on cnn talking about how they have "sufficient liquidity" then two days later, they go bankrupt. So, you're telling me the ceo didn't just completely lie in what he said?
So you think it was fine for banks to issue loans to people who didn't prove their income? Or how about to less than credit worthy borrowers on adjustable rate mortgages? These banks didn't think of the repercussions and consequences. And the consequence is the entire economy, on the brink of collapse. You don't think somebody should be held responsible? It's about time corporate America realized there are consequences when you have that much power.
You seem like a very responsible guy. That's great that the loan worked perfectly for you. But enough of America isn't like you, to the point where these assets are being written off.
Who's fault is it? it's the banks! they loaned the money and knew there was alot of risk. and because of their mistake, the economy is in the crapper.
Banks aren't supposed to take on risk. It was the Fed's fault for not better regulating that.
all the companies put under conservatorship saw their ceo's kicked out.
also, the ceos for freddie and fannie were even denied their "exit" package.
It's the ceos fault as much as the governments for not properly regulating. thus this is a failure of not just private industry, but the government as well.
Also, the stockholders lose their ass. it's the bondholders (you know, foreign government, pension funds across the us, etc..) that get saved.
Now imagine if every pension fund in america suddenly took a huge hit, and people weren't able to access their retirements again? what kind of mess would that cause?
Just to clarify, i think these ceo's should go to jail. that's how upset i am with them. and i am also upset that this is what has to happen. But i dont want to see a great depression. i dont want to see how it would destroy familes and lives. i dont want to see how badly the world would be screwed if it happened.
it's easy to say we shouldn't do this, but to deal with the great depression instead is far, far worse.
I don't think any of the ceos or chiefs of the company's taken over should have any benefit.
But i think the consequence of not doing some of these bailouts is far far worse than anyone can imagine.
And in fact, would be worse to the taxpayer should they opt for the route you suggest.
What would you rather see.. some greedy guys make out ok. or another great depression? Think about how a depression would impact you, and the people you love.
And then tell me what would have been better.
let me count the ways in which you are wrong...
First, the fed banks an 11% interest on that short-term AIG loan. PLus they own 79% of aig shares at a dirt cheap price. AIG will sell some assets, pay the Fed back, and then their share price will move higher.
The Fed sells their shares of AIG and make out huge.
This disaster you speak of, you have no idea just how bad it could be. It's easy for most people to say we need the disaster because they never went through the Great Depression. Ask anyone alive in those days if the world should ever see a time like that again and you'll get a resounding "no".
The US government will notgo bankrupt. you can count on that. And in five to ten years, when you look back you'll notice that tax payers may have even made money from these events.
"Never. You let the market correct itself. The Government should never interfere in the free-market unless it invades other people's rights and only to lower taxes/deregulate."
MY TAKE: What free market are you talking about? Because the one we're in today has never been free.
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"We never would have these bailouts if the Federal Reserve wouldn't give these line of credits away. What's interesting to me, and people don't seem to talk about, analysts anyway, the Price Purchasing Power of the U.S. Dollars now. It amazes me that all the Stock Market Channels like CNBC or FBN never disclose how much our dollar is really worth. We can bet our bottom dollar, literally to, that our dollar will be worthless by Christmas (not that it's worth something these days)."
MY TAKE: Have you seen the dollars rally lately? All indications point to a strengthening dollar, not a weakening one. You see, the whole world is behind the US about a year (when it comes to the market) So we've been slowing for a year, but now so is europe, china, japan, etc... This is slamming the value of their currency and increasing the value of the dollar.
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"So the Federal Reserve, this year alone, has printed half a trillion dollars to bailout companies. That bailout money is not through taxpayer money, earmarks, etc. it's through creating money out of thin air."
MT TAKE: The Fed didn't create money out of thin air. they had a huge nearly trillion dollar bank account. and they are using it to LOAN not CREATE money. In essence, they are adding no liquidity, meaning the funds are sterilized against any inflationary pressures. Just read up a little bit more about it and you'll see for yourself.
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"If these companies fail it would be devastating at first but time would eventually pass and, again, the market would correct itself. I agree with Peter Schiff when he said that we need a hard-line recession to people get a grasp of what is going on: "People need to spend less, save more and produce more."
I agree, we do need a recession, but we don't need another Great Depression. But Peter Schiff also thinks we don't need any market regulation either. Last time i checked, we're in this mess because the Fed never regulated banks lending practices properly. And in fact, this whole mess is due to less regulation in the financial industry over the course of the past 20 years (think graham,leech act).
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"This is just the beginning of the economic storm. Just think about our national debt now and our monthly budget. We're not even through September and look at what we have to spend: $85 Billion AIG, $225 Billion War on Terrorism, $10 Billion to Georgia, $10 Billion to Texas (I think that's correct) and we are going to have a new war going on with Pakistan (As Obama has promised and guaranteed us)."
MY TAKE: That $85 billion to AIG will be paid back.. at an 11% interest rate. It seems to me the government is making out like a bandit. And should AIG stock move higher, the government can sell their 79% stake and make even more money.
In the end i understand the need for what's happening today. I don't completely agree with the way the Fed has done it. But i think the repercussions (a worldwide depression that could start huge wars as foreign economies US debt all becomes worthless at once) if we don't do it are far worse.
I also happen to think that the government will end up profiting from most of these bailouts. They aren't just handing out free money. they are all on loans, and for the most part, the fed is buying assets at ridiculously low prices. these are assets that - although they won't do well - should mature at a higher value then what the fed paid to acquire them.
Point 1: He is certainly entitled to it, he did pay in. But, considering how much he is talking about how the system is broken, why should he contribute, even if it is a $24k a year contribution to debt? He's rich, he doesn't need the money, nor is he retired. My point is that social security lost its entire purpose years ago. McCain is proof and point.
Point 2: Of course it would. $24k a year (three to four taxpayers pay for his SS checks), $240k after ten years in deficits that have to be repaid (plus interest). Will he be responsible for the downfall of SS? of course not. But it's people like him that add considerably to the problem SS faces.
It's not a matter of whether he's entitled to it or not. It's a matter of whether it's responsible to tell your constituency one thing and do another. He talks about fiscal discpline and reforming SS.
But there he is, taking those checks willingly even though he doesn't need too.
It's just greed, really.
