How is this determined? You see the flaw here....
He can't buy to low because it could make the bank fail. He can't sell to high because there is no more suckers left to pass it onto.
No flaw. It's determined by whatever he tells the banks he's going to buy it for.
See this is how negotiations work. First the buyer will make an offer. The seller will then analyze the offer then either accept or come back with a counter-offer. The cycle repeats until the parties reach an agreement.
Come on guys... This buy low sell high is crap. I have traded equities and options for the past 4 years. Its impossible to buy low and sell high on every trade. In every trade someone will gain money and someone will loose money. The question is who is loosing money? If its the banks then they will fail... If its the government then it will fail. There is not even close to enough money left in the FDIC to handle the next wave of bank failures. My question is where is the money going to come from to insure all that lost money?
The Great Depression in the US ended with the war economy of WW2. I suggest an invasion of Canada or Western Europe. Canada would fall easily and we already have military resources in Europe. No need to worry about this stuff if we have the courage to invade.
Uhh they need to come together so they don't lose money, destabilize our economy (or let it crash), and cause a global economic depression.
Lets assume for a minute that China doesn't want to sell, but the other 2 do. The other 2 dump, which devalues the dollar, which means each T-bill is worth less. China has one of two options at this point. Dump its own T-bill reserve at a substantial loss, or buy up the T-bills from the other two for cheap (assuming the US gov doesn't go buy them up instead).
Option A) China dumps. Then they lost money, and combined with the other two will *most likely* cause the US to go into a massive depression. If this happens it will destabilize the entire global economy for many reasons. It will also cause the US to import less from those 3, because less people will be buying. China slows down in growth, and with other countries scared about their T-Bills most likely having dumped their own reserves, other countries markets will panic and go into a recession at the very least.
Option B) China buys. They buy a huge investment, and because they have even more money invested in the US they do whatever they can to help prevent the US from failing. If the dollar becomes worthless, they now have trillions of worthless IOUs. How does this help them?
So the US market is very important to the Chinese. If it fails, China loses. The same can be said for any of the other countries. The only one I might worry about is N Korea, because the leader is not exactly stable. He might not think long term/best interest of his country, but I highly doubt it.
Do you really think that the bank is going to say pay us only 20 billion it wont be enough and we will still fail... Or they are going to say we need 80 billion to not fail? Of course Paulson is going to bend over and give the bank what they want. You better believe Paulson once he gains this financial authority will rape the vast majority of Americans.
HOLD
TO
MATURITY
nothing is certain in life man. one thing is certain. death. so we should all off ourselves?
My point is you do not know what this bailout is, nor how it would work. Educate yourself about it before you go assuming things.
As much as you are ignorant you do bring up a valid point. It will be very interesting the game of chicken the bank and treasury will play. I can't wait to see how this plays out. I personally do not believe Paulson will bend over. But we shall see.
YOu dont know what it is either. Do you think from reading a simple guide thrown together by the New York Times your now an expert? The bill is still being finalized and there is so many loopholes and so much broad authority that no one knows anything especially the media.
Im not trying to be ignorant... Im trying to be logical here guys. Who takes the losses and who gains? There is always 2 sides of the trade. Do we honestly think that the FED and Treasury can magically find equilibrium where no one gets screwed? (Impossible).
I would hope there is complete transparency because if Paulson does anything suspicious there will be a mob outside the treasury asking for his head.
Plus Paulson didn't become CEO of Goldman by being a pushover in negotiations. I am confident he will try to extract maximum value for taxpayers.
Do you really think that the bank is going to say pay us only 20 billion it wont be enough and we will still fail... Or they are going to say we need 80 billion to not fail? Of course Paulson is going to bend over and give the bank what they want. You better believe Paulson once he gains this financial authority will rape the vast majority of Americans.[/quote]
Where is it stated we have to save *every* bank? The government is holding the high hand right now. If the banks want to stay afloat they don't have much choice in the matter, because the government is the only way they can get the money they need. The goal is to save the economy, not save every bank.
Banks will take the initial loss because Treasury isn't buying this crap at par value. They will be bought at a discount. If prices increase over time, yes "no one will be screwed"
Where do you *think* Paulson, decades at Goldman Sachs and former CEO, back in the private sector in a few months, has his loyalties?
They'll be bought *over market value* by the government, otherwise the companies would just sell them on the market.
If anything being the CEO of Goldman Sacks makes Henry Paulson less creditable to Americans and fairness. Do you think Paulson is looking out for the vast majority of American people or helping his friends and the well connected first? Again who is going to get screwed in this? The banks or the american people?
Where is it stated we have to save *every* bank? The government is holding the high hand right now. If the banks want to stay afloat they don't have much choice in the matter, because the government is the only way they can get the money they need. The goal is to save the economy, not save every bank.[/quote]
Because if we dont save the majority of banks then we will need to PRINT MONEY, to handle the FDIC. There is not enough money left in FDIC reserves to insure the amount of banks about to kick the bucket.
*I would also like to note*
Who gets to decide a banks failure then? Henry Paulson.... Maybe he will save his friends banks first.
I would hope that when he gave up his lucrative post of CEO of the most successful and respected investment bank in the world and completely divested out of it for a government post, I would hope that he did it for noble reasons.
Trust but verify. This is why transparency is absolutely critical. I do have faith in Paulson and transparency will hopefully support it.
Par value = $100
Market value = $0
Over market value = somewhere between $0 and $100
The market is $0. There are no buyers because the market is illiquid, hence $0 market price.
I never said I was an expert, nor did I say that was 100% what is going to happen. Nobody does know 100% what the bill will be, because as you said it's not finalized. However, that doesn't mean it isn't known what the *general* plan is. The plan is NOT to say "hey here is free money paid for by the taxpayer", it is a "we will buy x amount of your bad mortgages at y cost. We will hold on to them until they mature, and we come out ahead or even (we might lose some money on it, but its nothing compared to a financial collapse)."
Like I stated before, transparency is critical. Don't assume Paulson will "help his friends." He probably only personally knows a handful of bank CEOs and are not friends with any of them.
The American people are the last to be screwed. They get to keep their jobs and their bank deposits remain safe. It's not like most Americans even pay into the system anyway.
Where do you get this "print money" bullshit? The US Government doesn't print money. Zimbabwe does.
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