$700 Billion + $787 Billion in Bailout Money

[Kroze]

Where and what happened to it

Well that's my topic for the paper I'm writing (why the bailout was a terrible idea). Do you guys have any recommendation as far as books to read to do my research?

 

[TecHNooB]

highway robbery is what happened

 

[Baked]

You should go to your city's main library and as the librarian at the help desk. They have a master's degree in finding books.

 

[FoBoT]

Keynesians will tell you that it was not enough $$$ , they'll tell you that the more spending/debt the better off the economy will get, you can't really spend too much
check out our good pal larry summers for some tips
http://economistsview.typepad.com/e...s-why-the-stimulus-package-was-too-small.html

...worrying about overdoing fiscal policy was like my losing too much weight and becoming anorexic — a conceivable possibility, but very far from the dominant risk.

and of course paul krugman is a good source to help you also
http://krugman.blogs.nytimes.com/2011/09/05/on-the-inadequacy-of-the-stimulus/

It just wasn’t big enough to do the job.

 

[zinfamous]

The bailout was absolutely necessary.

Your paper will suck, if you go in arguing against an absolute necessity.

 

[zinfamous]

Keynesians will tell you that it was not enough $$$ , they'll tell you that the more spending/debt the better off the economy will get, you can't really spend too much
check out our good pal larry summers for some tips
http://economistsview.typepad.com/e...s-why-the-stimulus-package-was-too-small.html

and of course paul krugman is a good source to help you also
http://krugman.blogs.nytimes.com/2011/09/05/on-the-inadequacy-of-the-stimulus/

It's true, though. Then again, it's hard to say if spending more would have made much difference in encouraging job growth.

With recessions, the general idea is to shed jobs, rather than do what Germany does and actually subsidize to keep employment (a cheaper, and far more effective way to spend spend spend).

companies cut hours and pay, but retain employees. Less pay is far better than no job and no pay. The Feds subsidize lost wages, at a direct expense to keep jobs and workers working, and well....Germany was the only major country hit by the recession that saw no real unemployment problem.

 

[Kroze]

You should go to your city's main library and as the librarian at the help desk. They have a master's degree in finding books.

What's a library?

 

[crashtestdummy]

Start here.

To even disagree with Keynes, you need to start with an understanding of why it is that he thinks stimulus can keep an economy from crumbling. You could also spend some time reading Friedman and Hayek, to get the range of opinions on the issue of stimulus.

The truth is, it's very difficult to tell what would have happened to the US economy had the stimulus bill never happened. The closest we can get is to look at Europe. European countries have responded to the recession with significant austerity, while the US responded with stimulus (and now minimal austerity). Right now, the US looks like it got the better end of the deal, but there are many other factors that make this comparison difficult (particularly the rigid monetary policy created by the euro).

Additionally, of course, the US will have to pay back the stimulus money it borrowed in some form, but we're also borrowing at a rate below inflation right now. I don't think the debt is a short term problem.

 

[FoBoT]

yes, whatever you do, don't look at Greece and their debt situation , that economy is so small, something is different and so their near insolvency from debt isn't the same thing

 

[Kroze]

The bailout was absolutely necessary.

Your paper will suck, if you go in arguing against an absolute necessity.

Well it's a research paper, it's my opinion and I plan on supporting it

bailouts
- create a bankruptcy for profit model in which firms have an incentive to go for broke at society's expense rather than making smart decisions for the firm and its shareholder? Why wouldn't you go bankrupt with little or no repercussion when you know the government (tax payers) will pay for it?

- the bailout money ($700 + $787 billion) have no stipulation and oversight as to what the firm can do with it. basically a blank check. Executives ended up getting large bonuses while laying off thousands of employees (Bank of America).

- meddling with the free market or interfere with the orderly reallocation of labor and capital repeat the mistakes Japan made in the 1990s, also known as the "lost decade".

- bailout increases corruptions. When politicians have too much power over economic resources, more lobbyist are created to fund their favorite politician.

- Bailout rewards poor choices made by execs, profits are privatized while losses are socialized. How is that fair?

 

[Kroze]

It's true, though. Then again, it's hard to say if spending more would have made much difference in encouraging job growth.

With recessions, the general idea is to shed jobs, rather than do what Germany does and actually subsidize to keep employment (a cheaper, and far more effective way to spend spend spend).

companies cut hours and pay, but retain employees. Less pay is far better than no job and no pay. The Feds subsidize lost wages, at a direct expense to keep jobs and workers working, and well....Germany was the only major country hit by the recession that saw no real unemployment problem.

The problem is that companies in the US didn't cut pay, they just lay off employees.

 

[mshan]

I believe Andrew Ross Sorkin's book ("Too Big to Fail") is the official book Wall Street approves of: http://www.amazon.com/Too-Big-Fail-W...2906507&sr=1-1

I read somewhere that Bethany McClain's book ("All The Devils are Here") is also supposed to be really good: http://www.amazon.com/All-Devils-Are...ref=pd_sim_b_6

And he is someone who says he was formally a central banker and European Markets regulator blogging about the crisis as it unfolded: http://londonbanker.blogspot.com/2008/10/financial-eugenics-paulson-plan-for.html (there is almost 4 years of intermittent follow-up postings to that, too; e. g. http://londonbanker.blogspot.com/2012/01/survivor-bias-and-tbtf-tyranny.html)

I suspect in both cases (2008 and 2011), what the real fear in market was disorderly collapse of shadow banking system (?) e. g. http://www.zerohedge.com/news/shado...-why-breaking-tyrrany-ignorance-only-solution)

 

[Kroze]

I believe Andrew Ross Sorkin's book ("Too Big to Fail") is the official book Wall Street approves of: http://www.amazon.com/Too-Big-Fail-W...2906507&sr=1-1

I read somewhere that Bethany McClain's book ("All The Devils are Here") is also supposed to be really good: http://www.amazon.com/All-Devils-Are...ref=pd_sim_b_6

And he is someone who says he was formally a central banker and European Markets regulator blogging about the crisis as it unfolded: http://londonbanker.blogspot.com/2008/10/financial-eugenics-paulson-plan-for.html (there is almost 4 years of intermittent follow-up postings to that, too; e. g. http://londonbanker.blogspot.com/2012/01/survivor-bias-and-tbtf-tyranny.html)

Thanks! found an interesting view in one of the article.^_^

The basic plan is to set up a federal money laundering operation. Bad assets come in, get laundered by the Treasury and put in a new AAA “wrapper” (as it’s termed on the call), and good assets go out, issued as Treasury guaranteed securities. Whether the final value of the legislation this week is $700 billion or $150 billion is irrelevant as long as the laundering operation can accommodate the throughput, as that number is only a cap on total extensions at any one time.

​

 

[mshan]

I believe that was the original 3 page blank check Paulson wanted so he could drive dump trucks of money up to his Wall Street buddies, buy up all their toxic assets and dump them on U.S. taxpayer, no strings attached and no possibility of retrospective review of his actions by say Congress. I think it was revised to the capital injection (buying preferred shares in banks etc.)plan after public outcry. You have to read complete blog posting and his followup postings afterwards.

I haven't read it, but I suspect the "All The Devils are Here" book might be a good place to start.

Good cartoon on Subprime Crisis: http://www.businesspundit.com/sub-prime/

And here is some hedge fund manager's original take on subprime crisis (I believe he was looking to profit mightily from collapse): http://www.zerohedge.com/news/presenting-original-kyle-bass-subprime-presentation

We all hear subprime this and subprime that, but I kind of suspect real issue, both in 2008 and again in Europe last fall / winter, was fear of collapse of this so called shadow banking system (40 - 50 to 1 leverage, using short-term borrowed money that had to be rolled over frequently, little if any underlying collateral, and a highly profitable web of re-hypothecation tying everyone together in this very shaky house of cards (?)

"Time and again, otherwise canny investors fall for the salve that in a liquid market, they can always get out, therefore what’s the problem? At Lehman, in the mid 2000s, executives took comfort in the notion that that the bank was in the “moving business” not the “storage business.” Then, the mortgage market froze, and everyone was in the storage business.

Liquidity is a backward-looking yardstick. If anything, it’s an indicator of potential risk, because in “liquid” markets traders forego trying to determine an asset’s underlying worth - - they trust, instead, on their supposed ability to exit. Investors now in low-yielding U.S. Treasury bonds may, one day, discover this lesson for themselves.

It’s hard to overestimate the extent to which the siren of liquidity has seduced even ordinary Americans. During the housing bubble, anyone who took out a mortgage they couldn’t afford, upon advice they could always refinance, was tacitly assuming they could trade their old loan for a new one. They were counting on continued liquidity in the mortgage market--and so were the banks that lent them the money."

http://www.bloomberg.com/news/2011-...ns-of-long-term-capital-roger-lowenstein.html

Problem with just let them fail argument is that you assume once system crashes, it will successfully reboot. What if it doesn't? And what politician (one actually in power and who has to make decisions) is really going to let that happen (their solutions might be different, but I really doubt in real world just let the system crash and reboot would even be considered). e. g. I heard car radio interview quite a while ago from some book author who said Lehman bankruptcy was actually clearing smoothly, but there was some unsecured senior debt (?) that caused money market funds to break the buck and really let crisis start to spin out of control.

And I think you might need to distinguish between what was done or advocated to stop the acute global financial panic in fall 2008 from subsequent stimulus plans to prevent onset of second Great Depression and arguments now about whether Fed should be trying to bring down unemployment now.

And this blogger thinks Japan deliberately chose deflation vs. Helicoptor Ben flying over Tokyo dropping newly printed 5000 yen notes to try and induce inflation: http://brontecapital.blogspot.com/2008/07/deflation-and-bank-bailouts-in-japan.html

 

[IcePickFreak]

I'll admit, when they said it would "trickle down" to us peasants I didn't think it'd be warm & yellow.

 

[God Mode]

It went to no one. It was fake money to leverage and replace what the crooks stole so they could prevent a bigger crisis. It was a giant smoke and mirrors event.

 

[yh125d]

I haven't fact checked NdGT on this quote, but there was more money spent on bailouts then the entire 50 years budget of NASA


No wonder this country is in the shitter compared to what it could be

 

[Kroze]

I'll admit, when they said it would "trickle down" to us peasants I didn't think it'd be warm & yellow.

 

[Delita]

The SigTARP quarterly reports (as well as their other publications) have lot of good info in them.

http://www.sigtarp.gov/reports.shtml