Bailout bill failing in House

[JS80]

Originally posted by: SP33Demon

Originally posted by: Dari

Originally posted by: SP33Demon

That's actually one of the best ideas I've heard all day: use bankruptcy as a monetary tool and just wipe most of the debt away. That's what we did when we lent money to African countries who we knew would never pay it back. Obviously that would be in layman's terms and it's much more complicated than that, but would banks be so tepid to play nice if all of their toxic debt from the subprime market vanished overnight? Of course, liquidity would still be an issue but the Fed can pump billions (like they did today) into existing programs if it became a problem. And I doubt if all of the toxic debt was just "forgiven", then 700 billion would not be necessary. Thoughts?

You can't do that. It's a crazy idea. Where is the accountability in that? lol, declaring bankruptcy may mean that the companies get a clean slate, but what about the homeowners? Do they get one too? What will that do to shareholders belief in the market when their investment is wiped out while creditors are taken care of?

I don't think a lot of people here understand the purpose of this Treasury plan. It is to buy the assets, not simply give banks money. It is to take assets off the books and slowly bring them back to the market over time, preserving their value and not causing panic.

Seriously, people need to think about the consequences of their own ideas. We've had some from House Republicans, from economists, but Paulson's plan is the best out there. It helps these banks out in the short term while the government rebalances the regulatory banking landscape.

What is stopping homeowners from filing for bankruptcy? No harm, no foul. If you overextended yourself you could then apply for a different type of bankruptcy that would come off your record faster. In addition, any company that had to file for bankruptcy is then placed on a probationary list with new management (maybe through a buyout such as Wachovia was today) as well as lending restrictions (5-10 years of strict auditing). Meanwhile, regulation/deregulation has time to be revamped to tighten lending requirements.

The assets can still be auctioned off, but toxic debt is cleared through the bankruptcy. The 700 billion bill isn't needed, Feds can just pump the economy as needed. Obviously I'm oversimplifying but something of this nature.

It's called walking away on an underwater house and foreclosing. No bk needed.

 

[SP33Demon]

Originally posted by: IHateMyJob2004
Hilarious. You must think you know moire than Warren Buffet .... who thinks a failing of this bill will bring about hte great depression. I can give you a link to his statements if you'd like, just PM me.

No need, I read the news. Yet I find it hilarious if you don't think Buffet has a huge stake in how this will play out. His most recent baby. If I were you, I'd take his comments with a grain of salt.

 

[fskimospy]

The mass bankruptcy idea is utterly insane. The entire problem we are having right now is banks that are reluctant to lend money. Do you think the total elimination of $700 billion (or whatever) worth of debt is going to make anyone ever want to lend another dollar ever? That would be an unmitigated catastrophe.

 

[fskimospy]

Originally posted by: SP33Demon

Originally posted by: IHateMyJob2004
Hilarious. You must think you know moire than Warren Buffet .... who thinks a failing of this bill will bring about hte great depression. I can give you a link to his statements if you'd like, just PM me.

No need, I read the news. Yet I find it hilarious if you don't think Buffet has a huge stake in how this will play out. His most recent baby. If I were you, I'd take his comments with a grain of salt.

Do you honestly think Buffet cares that much about his personal stake in things anymore? I'm sure the guy that recently gave away the majority of his fortune is just so greedy as to try and manipulate the market. Give me a break.

 

[IHateMyJob2004]

Originally posted by: BarneyFife
Since they don't meet until Thursday, does the stock market tank for the next 2-3 days? I'm always glad at times like these because I have no money.

Holy shit, the house is not getting back together till THURSDAY?

 

[smack Down]

Originally posted by: JS80

Originally posted by: smack Down

Originally posted by: Dari

Originally posted by: SP33Demon

Originally posted by: Fern
I don't see how going through bankruptcy will axiomatically require more conservative lending policies? (or even require FDIC payouts etc)

Bankruptcy will likely result result in shareholders losing their investment, changes in management and extinguishment of some debt. The bank would re-emerge stronger and under new ownership (probably owned by creditors).

I think the use of bankruptcy as a tool here should be more fully explored. I'm not convinced as many here seem to be that just throwing huge piles of taxpayer money at the problem to *make it go away* is the right chioce. I understand how Congress might be concerned about the outcry from those investors in these failed institutions; but not all investments are profitable and the bankruptcy avenue is here for a purpose. I.e., tough sh!t if you're heavily invested in the finance/banking sector and take a hit. The portfolio theory exists for a reason.

I believe the negative consequences are being over-hyped and that the *real* point is to save peoples' investments/401(k) plans and pay for it through the backdoor with tax increases (larger gov debt will eventually lead to higher taxes - good freakin luck cutting social/entitlement programs etc). I.e., a person like myself with little stock investments will be underwriting other peoples' investments.

I'm open to *draining the swamp* of these finacial problems and taking our medicine for a time. I realize this will have recessionary effects, but do not believe it will be as bad as claimed by many.

Finance is highly international, I've yet to hear anybody explain WHERE our $700B is really gonna go? Have foreigners purchased US backed mortgage securities? Is our money going to anybody anyplace other than the USA? If so, I say "NO". If they can't determine with 100% certainty that our $700Bwon't *leak* to foreigners I say "NO". Have they even considered this in their panic?

I see a lot people here opining how this needs to be passed etc, yet I see very little at this point about what exactly is in this new compromise legislation. I heard it was over 100 pages, I doubt we'll get details and/or any understanding of what it contains for a while. I don't anybody should be voting "YEA" until they are 100% certain of what they are voting for.

Fern

That's actually one of the best ideas I've heard all day: use bankruptcy as a monetary tool and just wipe most of the debt away. That's what we did when we lent money to African countries who we knew would never pay it back. Obviously that would be in layman's terms and it's much more complicated than that, but would banks be so tepid to play nice if all of their toxic debt from the subprime market vanished overnight? Of course, liquidity would still be an issue but the Fed can pump billions (like they did today) into existing programs if it became a problem. And I doubt if all of the toxic debt was just "forgiven", then 700 billion would not be necessary. Thoughts?

You can't do that. It's a crazy idea. Where is the accountability in that? lol, declaring bankruptcy may mean that the companies get a clean slate, but what about the homeowners? Do they get one too? What will that do to shareholders belief in the market when their investment is wiped out while creditors are taken care of?

I don't think a lot of people here understand the purpose of this Treasury plan. It is to buy the assets, not simply give banks money. It is to take assets off the books and slowly bring them back to the market over time, preserving their value and not causing panic.

Seriously, people need to think about the consequences of their own ideas. We've had some from House Republicans, from economists, but Paulson's plan is the best out there. It helps these banks out in the short term while the government rebalances the regulatory banking landscape.

Shareholders will think it is really stupid to invest in bad companies.

lol no, debt holders, credit givers will think it's really stupid to lend money to anyone and the Earth will stop spinning.

And what will they do stick there money, under their mattress? Sorry but if you have money you have to lend it.

 

[Mill]

Originally posted by: BoberFett

Originally posted by: Mill

Originally posted by: Pliablemoose

Originally posted by: BoberFett
Excellent post Fern. Now give it about five minutes before the "experts" come here to tell you to shut up. You're not as smart as they are. They say we have to do it, and we should just take their word for it.

All bow in silent reverence at the Altar of Wall Street.

Thy will be done.

:thumbsup:

If only this was just a Wall Street issue.

If it's more than a Wall Street issue, then why should we listen solely to that group when trying to fix it? The finance crowd just shouts down anyone who asks for solutions other than "Throw $700B at people with track records of piss poor judgment."

People like Evan Lieb and LegendKiller insist that we just give money to people who have already proven their incompetence and then wonder why there's resistance.

Given their propensity for throwing good money after bad, I have to wonder how well they really do their jobs.

This isn't a Wall Street bailout. This is an attempt to prevent the very small of credit left from drying it up. If that happens it will kill everyone from Big Banks to small businesses and consumers. It isn't a debatable point. Credit is necessary for 98% of all businesses to function. You dry it up and everything goes.

You think if there is no credit that Sysco will still give 30-60 day terms to Ruby Tuesdays or a local school system's lunch program? No, they will want their payment upfront. This will have a large effect on EVERYONE. Everything will dry up and no one will be willing to buy anything or loan anything. This is exactly what has occurred in other financial panics and depressions.

The "group" wanting to fix it *know* about the credit markets. Congress and Ron Paul bots do not.

 

[SP33Demon]

Originally posted by: eskimospy
The mass bankruptcy idea is utterly insane. The entire problem we are having right now is banks that are reluctant to lend money. Do you think the total elimination of $700 billion (or whatever) worth of debt is going to make anyone ever want to lend another dollar ever? That would be an unmitigated catastrophe.

Not implying all debt in this country, only ones that were caught up in the subprime mess. Homeowners have a record for five years, lenders get forced with new management and strict auditing for a decade.

 

[JS80]

Originally posted by: smack Down

Originally posted by: JS80

Originally posted by: smack Down

Originally posted by: Dari

Originally posted by: SP33Demon

Originally posted by: Fern

Fern

Shareholders will think it is really stupid to invest in bad companies.

lol no, debt holders, credit givers will think it's really stupid to lend money to anyone and the Earth will stop spinning.

And what will they do stick there money, under their mattress? Sorry but if you have money you have to lend it.

What's happening right now? Banks have money, they are not lending it. They are sticking in treasuries for 2bps, so yes, they are sticking it under their mattress.

 

[fskimospy]

Originally posted by: SP33Demon

Originally posted by: eskimospy
The mass bankruptcy idea is utterly insane. The entire problem we are having right now is banks that are reluctant to lend money. Do you think the total elimination of $700 billion (or whatever) worth of debt is going to make anyone ever want to lend another dollar ever? That would be an unmitigated catastrophe.

Not implying all debt in this country, only ones that were caught up in the subprime mess. Homeowners have a record for five years, lenders get forced with new management and strict auditing for a decade.

I didn't say all debt, but $700 billion worth of bankruptcies would be catastrophic. All mortgage related debt would be somewhere around $10 trillion. The problem is confidence with lenders. Screwing them out of $700 billion isn't going to restore confidence, it's going to be the final nail in the coffin.

 

[Fern]

Originally posted by: Dari

Originally posted by: SP33Demon

Originally posted by: Fern
-snip-
I think the use of bankruptcy as a tool here should be more fully explored.

That's actually one of the best ideas I've heard all day: use bankruptcy as a monetary tool and just wipe most of the debt away. That's what we did when we lent money to African countries who we knew would never pay it back. Obviously that would be in layman's terms and it's much more complicated than that, but would banks be so tepid to play nice if all of their toxic debt from the subprime market vanished overnight? Of course, liquidity would still be an issue but the Fed can pump billions (like they did today) into existing programs if it became a problem. And I doubt if all of the toxic debt was just "forgiven", then 700 billion would not be necessary. Thoughts?

You can't do that. It's a crazy idea. Where is the accountability in that? lol, declaring bankruptcy may mean that the companies get a clean slate, but what about the homeowners? Do they get one too? What will that do to shareholders belief in the market when their investment is wiped out while creditors are taken care of?

I don't think a lot of people here understand the purpose of this Treasury plan. It is to buy the assets, not simply give banks money. It is to take assets off the books and slowly bring them back to the market over time, preserving their value and not causing panic.

Seriously, people need to think about the consequences of their own ideas. We've had some from House Republicans, from economists, but Paulson's plan is the best out there. It helps these banks out in the short term while the government rebalances the regulatory banking landscape.

IMO, bankruptcy IS accountability.

Buying assets off the hands of banks ia NOT accountability.

I'm not sure that teh Paulson/Bernanke plan is what they are now voting on. But if it is, the government is using our tax dollars to buy these assets from the banks for an amount greater than their FMV; that strikes me as a *give-away* of taxpayer money. They're telling us "OMGz World Depression - your life will suck" if we don't do this, but are THEY benefiting? By "they" I mean the management and investors (shareholders) of these institutions (and politicians who get contributions from them) - yes they are benefiting.

So we pay $700B for these securities hoping that they will be worth something later?

From what I can tell, no one knows the extent of the problem - are we gonna have to do this again? Cuz if we don't and the market keeps collapsing, we'll have to throw more money in or risk losing a bigger portion of the $700B. See how that would sucker us to get in even deeper? Essentially, the federal government would be in the business of propping up real estate/home values to avoid ever- growing losses in this *investment*. Do we wanna go that direction? How does it help new home buyers to live the American dream by having our government artifically prop up values making it harder for them to purchase.

Everybody needs to slow down and examine the consequences. Washington DC is only really successful at creating "unintended consequences" of the worse kind. IMO, look like another doozy may be on the way.

Fern

 

[Mill]

Originally posted by: SP33Demon

Originally posted by: Fern
I don't see how going through bankruptcy will axiomatically require more conservative lending policies? (or even require FDIC payouts etc)

Bankruptcy will likely result result in shareholders losing their investment, changes in management and extinguishment of some debt. The bank would re-emerge stronger and under new ownership (probably owned by creditors).

I think the use of bankruptcy as a tool here should be more fully explored. I'm not convinced as many here seem to be that just throwing huge piles of taxpayer money at the problem to *make it go away* is the right chioce. I understand how Congress might be concerned about the outcry from those investors in these failed institutions; but not all investments are profitable and the bankruptcy avenue is here for a purpose. I.e., tough sh!t if you're heavily invested in the finance/banking sector and take a hit. The portfolio theory exists for a reason.

I believe the negative consequences are being over-hyped and that the *real* point is to save peoples' investments/401(k) plans and pay for it through the backdoor with tax increases (larger gov debt will eventually lead to higher taxes - good freakin luck cutting social/entitlement programs etc). I.e., a person like myself with little stock investments will be underwriting other peoples' investments.

I'm open to *draining the swamp* of these finacial problems and taking our medicine for a time. I realize this will have recessionary effects, but do not believe it will be as bad as claimed by many.

Finance is highly international, I've yet to hear anybody explain WHERE our $700B is really gonna go? Have foreigners purchased US backed mortgage securities? Is our money going to anybody anyplace other than the USA? If so, I say "NO". If they can't determine with 100% certainty that our $700Bwon't *leak* to foreigners I say "NO". Have they even considered this in their panic?

I see a lot people here opining how this needs to be passed etc, yet I see very little at this point about what exactly is in this new compromise legislation. I heard it was over 100 pages, I doubt we'll get details and/or any understanding of what it contains for a while. I don't anybody should be voting "YEA" until they are 100% certain of what they are voting for.

Fern

That's actually one of the best ideas I've heard all day: use bankruptcy as a monetary tool and just wipe most of the debt away. That's what we did when we lent money to African countries who we knew would never pay it back. Obviously that would be in layman's terms and it's much more complicated than that, but would banks be so tepid to play nice if all of their toxic debt from the subprime market vanished overnight? Of course, liquidity would still be an issue but the Fed can pump billions (like they did today) into existing programs if it became a problem. And I doubt if all of the toxic debt was just "forgiven", then 700 billion would not be necessary. Thoughts?

Worked great for Argentina!!!

http://en.wikipedia.org/wiki/A...mic_crisis_(1999-2002)

They still haven't recovered and it is 7 years later.

 

[SP33Demon]

Originally posted by: eskimospy

Originally posted by: SP33Demon

Originally posted by: IHateMyJob2004
Hilarious. You must think you know moire than Warren Buffet .... who thinks a failing of this bill will bring about hte great depression. I can give you a link to his statements if you'd like, just PM me.

No need, I read the news. Yet I find it hilarious if you don't think Buffet has a huge stake in how this will play out. His most recent baby. If I were you, I'd take his comments with a grain of salt.

Do you honestly think Buffet cares that much about his personal stake in things anymore? I'm sure the guy that recently gave away the majority of his fortune is just so greedy as to try and manipulate the market. Give me a break.

Buffet owns 38% of Berkshire. While he may not care about money, you have to be stupid if you think he wants his company to get fcked (as well as his friends who own the other 62%).

 

[IHateMyJob2004]

Originally posted by: SP33Demon

Originally posted by: IHateMyJob2004
Hilarious. You must think you know moire than Warren Buffet .... who thinks a failing of this bill will bring about hte great depression. I can give you a link to his statements if you'd like, just PM me.

No need, I read the news. Yet I find it hilarious if you don't think Buffet has a huge stake in how this will play out. His most recent baby. If I were you, I'd take his comments with a grain of salt.

Oh, he totally expects passage. He also said that if it doesn't pass for some reason that he will start selling US positions.

And if you are referring to Goldman Sacks, you also realize that the deal is not a done deal yet. There is no paper work done yet.

Oh, his recent baby is a Chinese battery manufacturer that plans to start selling electric cars in 2010. You knew that though.

 

[JS80]

Originally posted by: Fern

Originally posted by: Dari

Originally posted by: SP33Demon

Originally posted by: Fern
-snip-
I think the use of bankruptcy as a tool here should be more fully explored.

That's actually one of the best ideas I've heard all day: use bankruptcy as a monetary tool and just wipe most of the debt away. That's what we did when we lent money to African countries who we knew would never pay it back. Obviously that would be in layman's terms and it's much more complicated than that, but would banks be so tepid to play nice if all of their toxic debt from the subprime market vanished overnight? Of course, liquidity would still be an issue but the Fed can pump billions (like they did today) into existing programs if it became a problem. And I doubt if all of the toxic debt was just "forgiven", then 700 billion would not be necessary. Thoughts?

You can't do that. It's a crazy idea. Where is the accountability in that? lol, declaring bankruptcy may mean that the companies get a clean slate, but what about the homeowners? Do they get one too? What will that do to shareholders belief in the market when their investment is wiped out while creditors are taken care of?

I don't think a lot of people here understand the purpose of this Treasury plan. It is to buy the assets, not simply give banks money. It is to take assets off the books and slowly bring them back to the market over time, preserving their value and not causing panic.

Seriously, people need to think about the consequences of their own ideas. We've had some from House Republicans, from economists, but Paulson's plan is the best out there. It helps these banks out in the short term while the government rebalances the regulatory banking landscape.

IMO, bankruptcy IS accountability.

Buying assets off the hands of banks ia NOT accountability.

I'm not sure that teh Paulson/Bernanke plan is what they are know voting on. But if it is, the government is using our tax doillars to buy these assets from the ank for an amount greater than their FMV; that strikes me as a *give-away* of taxpayer money. They're telling us "OMGz World Depression - your life will suck" if we don't do this, but are THEY benefiting? By "they" I mean the management and investors (shareholders) of these institutions (and politicians who get contributions from them) - yes they are benefiting.

So we pay $700B for these securities hoping that they will be worth something later?

From what I can tell, no one knows the extent of the problem - are we gonna have to do this again? Cuz if we don't and the market keeps collapsing, we'll have to throw more money in or risk losing a bigger portion of the $700B. See how that would sucker us to get in even deeper? Essentially, the federal government would be in the business of propping us real estate/home values to avoid every growing losses in this *investment*. Do we wanna go that direction? How does it help new home buyers to live the American dream by having our government artifically prop up values making it harder for them to purchase.

Everybody needs to slow down and examine the consequences. Washington DC is only really successful at creating "unintended consequences" of the worse kind. IMO, look like another doozy may be on the way.

Fern

So the alternative is let them fail, credit markets deteriorate, global depression, 30% unemployment. You would risk that for a measly $700b non-bailout rescue?

 

[fskimospy]

Originally posted by: SP33Demon

Originally posted by: eskimospy

Originally posted by: SP33Demon

Originally posted by: IHateMyJob2004
Hilarious. You must think you know moire than Warren Buffet .... who thinks a failing of this bill will bring about hte great depression. I can give you a link to his statements if you'd like, just PM me.

No need, I read the news. Yet I find it hilarious if you don't think Buffet has a huge stake in how this will play out. His most recent baby. If I were you, I'd take his comments with a grain of salt.

Do you honestly think Buffet cares that much about his personal stake in things anymore? I'm sure the guy that recently gave away the majority of his fortune is just so greedy as to try and manipulate the market. Give me a break.

Buffet owns 38% of Berkshire. While he may not care about money, you have to be stupid if you think he wants his company to get fcked (as well as his friends who own the other 62%).

Of course he doesn't want his company to get fucked. I still see no reason to assume that his statements are intended to manipulate the market in his favor.

 

[SP33Demon]

Originally posted by: eskimospy

Originally posted by: SP33Demon

Originally posted by: eskimospy
The mass bankruptcy idea is utterly insane. The entire problem we are having right now is banks that are reluctant to lend money. Do you think the total elimination of $700 billion (or whatever) worth of debt is going to make anyone ever want to lend another dollar ever? That would be an unmitigated catastrophe.

Not implying all debt in this country, only ones that were caught up in the subprime mess. Homeowners have a record for five years, lenders get forced with new management and strict auditing for a decade.

I didn't say all debt, but $700 billion worth of bankruptcies would be catastrophic. All mortgage related debt would be somewhere around $10 trillion. The problem is confidence with lenders. Screwing them out of $700 billion isn't going to restore confidence, it's going to be the final nail in the coffin.

I doubt it, mainly because big lenders definitely knew what they were getting into (i.e. ones that would still remain solvent). Decapitating management from the culprits + strict auditing on whatever baby company that survives would definitely restore confidence IMO. With the Fed pumping additional liquidity into the market (but not 700 billion), everyone will get a clean start.

 

[RichardE]

Originally posted by: JS80

Originally posted by: Fern

Originally posted by: Dari

Originally posted by: SP33Demon

Originally posted by: Fern
-snip-
I think the use of bankruptcy as a tool here should be more fully explored.

That's actually one of the best ideas I've heard all day: use bankruptcy as a monetary tool and just wipe most of the debt away. That's what we did when we lent money to African countries who we knew would never pay it back. Obviously that would be in layman's terms and it's much more complicated than that, but would banks be so tepid to play nice if all of their toxic debt from the subprime market vanished overnight? Of course, liquidity would still be an issue but the Fed can pump billions (like they did today) into existing programs if it became a problem. And I doubt if all of the toxic debt was just "forgiven", then 700 billion would not be necessary. Thoughts?

You can't do that. It's a crazy idea. Where is the accountability in that? lol, declaring bankruptcy may mean that the companies get a clean slate, but what about the homeowners? Do they get one too? What will that do to shareholders belief in the market when their investment is wiped out while creditors are taken care of?

I don't think a lot of people here understand the purpose of this Treasury plan. It is to buy the assets, not simply give banks money. It is to take assets off the books and slowly bring them back to the market over time, preserving their value and not causing panic.

Seriously, people need to think about the consequences of their own ideas. We've had some from House Republicans, from economists, but Paulson's plan is the best out there. It helps these banks out in the short term while the government rebalances the regulatory banking landscape.

IMO, bankruptcy IS accountability.

Buying assets off the hands of banks ia NOT accountability.

I'm not sure that teh Paulson/Bernanke plan is what they are know voting on. But if it is, the government is using our tax doillars to buy these assets from the ank for an amount greater than their FMV; that strikes me as a *give-away* of taxpayer money. They're telling us "OMGz World Depression - your life will suck" if we don't do this, but are THEY benefiting? By "they" I mean the management and investors (shareholders) of these institutions (and politicians who get contributions from them) - yes they are benefiting.

So we pay $700B for these securities hoping that they will be worth something later?

From what I can tell, no one knows the extent of the problem - are we gonna have to do this again? Cuz if we don't and the market keeps collapsing, we'll have to throw more money in or risk losing a bigger portion of the $700B. See how that would sucker us to get in even deeper? Essentially, the federal government would be in the business of propping us real estate/home values to avoid every growing losses in this *investment*. Do we wanna go that direction? How does it help new home buyers to live the American dream by having our government artifically prop up values making it harder for them to purchase.

Everybody needs to slow down and examine the consequences. Washington DC is only really successful at creating "unintended consequences" of the worse kind. IMO, look like another doozy may be on the way.

Fern

So the alternative is let them fail, credit markets deteriorate, global depression, 30% unemployment. You would risk that for a measly $700b non-bailout rescue?

Would it be the only bailout? How much would the US dollar devalue? What cascading effects would that have on business and employment? You are a fool if you think this is a silver bullet. I still think it should have gone through, but not for reasons that will occur anyway.

 

[smack Down]

Originally posted by: JS80

Originally posted by: smack Down

Originally posted by: JS80

Originally posted by: smack Down

Originally posted by: Dari

Originally posted by: SP33Demon

Originally posted by: Fern

Fern

Shareholders will think it is really stupid to invest in bad companies.

lol no, debt holders, credit givers will think it's really stupid to lend money to anyone and the Earth will stop spinning.

And what will they do stick there money, under their mattress? Sorry but if you have money you have to lend it.

What's happening right now? Banks have money, they are not lending it. They are sticking in treasuries for 2bps, so yes, they are sticking it under their mattress.

And how is give them 700 billion in cash going to force them to lend and not just buy more treasuries?

 

[dmcowen674]

Originally posted by: Fern

I think the use of bankruptcy as a tool here should be more fully explored.

I'm not convinced as many here seem to be that just throwing huge piles of taxpayer money at the problem to *make it go away* is the right chioce.

Interesting to see so many people now saying what I have said for years here.

I got chastised when saying that companies like Wachovia deserve and should go down as well as any company that put itself in the same boat.

 

[Fern]

Originally posted by: eskimospy
The mass bankruptcy idea is utterly insane. The entire problem we are having right now is banks that are reluctant to lend money. Do you think the total elimination of $700 billion (or whatever) worth of debt is going to make anyone ever want to lend another dollar ever? That would be an unmitigated catastrophe.

The big buga-boo is the unknow extent of crappy assets.

Banks will do retail lending to people. They won't lend to other banks, or so we hear, because they do not know to what extent the other the banks might be in trouble because of these securities. Quite likely why they won't lend to some companies either (large corps use investments like these securities in their cash management programs - many are thought to hold considerable amounts of this stuff in their porfolios).

So, the problem at the basic level is the lack of knowledge; how does throwing around $700B make the picture any clearer? It doesn't.

However, when you run these companies through bankruptcy you can fix that. They'll come out bankruptcy with this garbage stripped out; that'll make them certifiably good lending candidates.

Look, banks need to lend money; that's how they make money. Every incentive in the world already exist to encourage them to lend, we just need to clean up the uncertainty WRT to the securities.

Fern

 

[Dari]

Originally posted by: Fern

Originally posted by: Dari

Originally posted by: SP33Demon

Originally posted by: Fern
-snip-
I think the use of bankruptcy as a tool here should be more fully explored.

That's actually one of the best ideas I've heard all day: use bankruptcy as a monetary tool and just wipe most of the debt away. That's what we did when we lent money to African countries who we knew would never pay it back. Obviously that would be in layman's terms and it's much more complicated than that, but would banks be so tepid to play nice if all of their toxic debt from the subprime market vanished overnight? Of course, liquidity would still be an issue but the Fed can pump billions (like they did today) into existing programs if it became a problem. And I doubt if all of the toxic debt was just "forgiven", then 700 billion would not be necessary. Thoughts?

You can't do that. It's a crazy idea. Where is the accountability in that? lol, declaring bankruptcy may mean that the companies get a clean slate, but what about the homeowners? Do they get one too? What will that do to shareholders belief in the market when their investment is wiped out while creditors are taken care of?

I don't think a lot of people here understand the purpose of this Treasury plan. It is to buy the assets, not simply give banks money. It is to take assets off the books and slowly bring them back to the market over time, preserving their value and not causing panic.

Seriously, people need to think about the consequences of their own ideas. We've had some from House Republicans, from economists, but Paulson's plan is the best out there. It helps these banks out in the short term while the government rebalances the regulatory banking landscape.

IMO, bankruptcy IS accountability.

Buying assets off the hands of banks ia NOT accountability.

I'm not sure that teh Paulson/Bernanke plan is what they are now voting on. But if it is, the government is using our tax dollars to buy these assets from the banks for an amount greater than their FMV; that strikes me as a *give-away* of taxpayer money. They're telling us "OMGz World Depression - your life will suck" if we don't do this, but are THEY benefiting? By "they" I mean the management and investors (shareholders) of these institutions (and politicians who get contributions from them) - yes they are benefiting.

So we pay $700B for these securities hoping that they will be worth something later?

From what I can tell, no one knows the extent of the problem - are we gonna have to do this again? Cuz if we don't and the market keeps collapsing, we'll have to throw more money in or risk losing a bigger portion of the $700B. See how that would sucker us to get in even deeper? Essentially, the federal government would be in the business of propping up real estate/home values to avoid ever- growing losses in this *investment*. Do we wanna go that direction? How does it help new home buyers to live the American dream by having our government artifically prop up values making it harder for them to purchase.

Everybody needs to slow down and examine the consequences. Washington DC is only really successful at creating "unintended consequences" of the worse kind. IMO, look like another doozy may be on the way.

Fern

I'm sure you're good at what you do but I'm glad you don't have the final say on this issue. You may not have felt this credit crunch but I can guarantee you will eventually. In fact, just this past Saturday I got a letter from Citibank, my credit card company, stating they were upping the APR to twenty-something percent. I shredded the letter because I alway pay my credit bill in full at the first of the month but this problem is real. If the financial companies feel that the government isn't going to do anything, they may start to horde credit. That is bad in every way imaginable. We already know that people on Wall Street are irrational, imagine what they may do next. If we're not careful foreigners will own a large chunk of our economy.

 

[fskimospy]

Originally posted by: SP33Demon

Originally posted by: eskimospy

Originally posted by: SP33Demon

Originally posted by: eskimospy
The mass bankruptcy idea is utterly insane. The entire problem we are having right now is banks that are reluctant to lend money. Do you think the total elimination of $700 billion (or whatever) worth of debt is going to make anyone ever want to lend another dollar ever? That would be an unmitigated catastrophe.

Not implying all debt in this country, only ones that were caught up in the subprime mess. Homeowners have a record for five years, lenders get forced with new management and strict auditing for a decade.

I didn't say all debt, but $700 billion worth of bankruptcies would be catastrophic. All mortgage related debt would be somewhere around $10 trillion. The problem is confidence with lenders. Screwing them out of $700 billion isn't going to restore confidence, it's going to be the final nail in the coffin.

I doubt it, mainly because big lenders definitely knew what they were getting into (i.e. ones that would still remain solvent). Decapitating management from the culprits + strict auditing on whatever baby company that survives would definitely restore confidence IMO. With the Fed pumping additional liquidity into the market (but not 700 billion), everyone will get a clean start.

The problem isn't with lenders being wary of individual customers or the culprits. It's lenders being wary of lending any money AT ALL. Replacing management at some large firms won't do the first thing.

What I'm seeing in the posts here from Fern and others is people replacing the opinion of the vast majority of economists the world over with a 'gut' feeling about how you think things should be. I find that absurd.

 

[BoberFett]

Originally posted by: Mill

Originally posted by: BoberFett

Originally posted by: Mill

Originally posted by: Pliablemoose

Originally posted by: BoberFett
Excellent post Fern. Now give it about five minutes before the "experts" come here to tell you to shut up. You're not as smart as they are. They say we have to do it, and we should just take their word for it.

All bow in silent reverence at the Altar of Wall Street.

Thy will be done.

:thumbsup:

If only this was just a Wall Street issue.

If it's more than a Wall Street issue, then why should we listen solely to that group when trying to fix it? The finance crowd just shouts down anyone who asks for solutions other than "Throw $700B at people with track records of piss poor judgment."

People like Evan Lieb and LegendKiller insist that we just give money to people who have already proven their incompetence and then wonder why there's resistance.

Given their propensity for throwing good money after bad, I have to wonder how well they really do their jobs.

This isn't a Wall Street bailout. This is an attempt to prevent the very small of credit left from drying it up. If that happens it will kill everyone from Big Banks to small businesses and consumers. It isn't a debatable point. Credit is necessary for 98% of all businesses to function. You dry it up and everything goes.

You think if there is no credit that Sysco will still give 30-60 day terms to Ruby Tuesdays or a local school system's lunch program? No, they will want their payment upfront. This will have a large effect on EVERYONE. Everything will dry up and no one will be willing to buy anything or loan anything. This is exactly what has occurred in other financial panics and depressions.

The "group" wanting to fix it *know* about the credit markets. Congress and Ron Paul bots do not.

No shit Sherlock. What's your point?

As said before, if liquidity is the problem, how does the problem get solved by buying bad debt from morons who have proven themselves incompetent? That's the Wall Street bailout.

You want to solve this and make a bit of interest income for the taxpayer rather than throw even more money down the rat hole of subprime residential loans? Let the failing banks rot. Fuck 'em. Start a federal business loan program (an extension to the SBA?) that can loan corporations money at affordable rates for no more than 30-60 days. These are strictly bridge loans. Any longer term loans should be considered speculative and should be left to actual investors. Liquidity solved, and greedy assholes who rode the mortgage scam to riches get flushed down the toilet.

 

[JS80]

Originally posted by: smack Down

Originally posted by: JS80

Originally posted by: smack Down

Originally posted by: JS80

Originally posted by: smack Down

Originally posted by: Dari

Originally posted by: SP33Demon

Originally posted by: Fern

Fern

Shareholders will think it is really stupid to invest in bad companies.

lol no, debt holders, credit givers will think it's really stupid to lend money to anyone and the Earth will stop spinning.

And what will they do stick there money, under their mattress? Sorry but if you have money you have to lend it.

What's happening right now? Banks have money, they are not lending it. They are sticking in treasuries for 2bps, so yes, they are sticking it under their mattress.

And how is give them 700 billion in cash going to force them to lend and not just buy more treasuries?

They are not giving anyone $700b.

But by purchasing the toxic assets from their balance sheet for a discount price benefits both the bank and the taxpayer.

Most importantly, it will restore liquidity and confidence to the marketplace.