agreeing with profjohn. :Q tossing 25 billion at the big three to keep them from failing now might be worth it in itself.
agreeing with profjohn. :Q tossing 25 billion at the big three to keep them from failing now might be worth it in itself.
This is the possibility I am sort of considering except I am wondering if there is a middle ground where they can file Ch. 11 and with the government supporting them they can also minimize job losses as well as help avoid leading to Ch. 7. Some job losses will occur, but I think that is inevitable no matter what we do at this point. If done properly, government support (not just talking about money alone. Also need to pressure some major restructuring) along with Ch. 11 does have the possibility of saving more jobs that it does losing. There may also be ways to do something similar without it directly involving Ch. 11 although I am unsure and am leaving that up to the experts to present to me should they wish to explore that idea. I will draw my opinion afterward.
Ch. 11 is not the evil people should be fearing. Ch. 11, or anything for that matter, leading to Ch. 7 is the real evil we need to avoid.
i like to thin of it as trying to keep the collapsing house of cards on the table, so we don't have to collectively crawl under the table to find all the cards again.
No, it is time for both to work in unison. Let the Fed help assist in creating opportunity with proper regulation where necessary and let the people follow through. Everything beyond that is merely a question of confidence which many people differ.
StageLeft
No Lifer
- Sep 29, 2000
- 70,150
- 5
- 0
I compare it to having three girlfriends at the same time, and one catches you with the other one out in public, but instead of owning up to it you deepen the ruse by telling the one you're with that the other is a murderer and you both sprint away and then the one you called a murderer you later tell that the one you were with is a big-brother program type girl you take care of from the mental ward and that's why you had to act as you did. Then while telling this murderer type about that, the third girl happens to come up to you at dinner, so you then grab the murderer one, run out in traffic, and throw her in front of a bus. Then you take the third one and go see a movie, at which point you run into the first. Wait, are you confused yet? Well good, because it's like that.
Throckmorton
Lifer
- Aug 23, 2007
- 16,829
- 3
- 0
This.
Let them fail. Instead of throwing money at that, throw money at other sectors that would actually use it to help the nation. If you have looked at the Civil Engineers yearly report about the US infrastructure it's pretty bad.
If we took 1/2 the $7.5 trillion promised we could cover the repair and upgrade of a significant amount of our infrastructure. It would create a lot of jobs, and a nations infrastructure is a key part of the strength of the nation as a whole.
What we need is a "New Deal" for the 21st century.
I am thinking more along the lines of doing both. That doesn't mean I support just handing out the 25 billion though as I have expressed in previous posts.
Investing in infrastructure is a separate, but also very necessary part of the grand scheme of things.
retrospooty
Platinum Member
- Apr 3, 2002
- 2,031
- 74
- 86
Fern
Elite Member
- Sep 30, 2003
- 26,907
- 174
- 106
Strange.
The Treasury decides not to use the $700 billion for the Troubled Assets Relief Program, so now the Fed steps up with it's own TARP?
Unlike the Treasury, the Fed will not be using tax dollars. But if someone here is a student of the Fed & Treasury I'd like to see some thoughts on the different effects of having the Fed do this program (TARP) as opposed to the Treasury.
Fern
I think the Treasury realized that $700 billion was not enough to be effective in any way to ensure liquidity. So what they did was to change TARP to invest equities (like the preferred it bought from Citi), then guarantee Citi's assets to a certain degree (immediate cash cost = $0). The fed backstops the rest.
In my opinion, I think Treasury and Fed realized that the govt can't raise the funds to temporarily hold all the paper out there, and they might as well keep it within the banking system through the Fed. It's almost the equivalent to all the banks pooling their cash together to support each others' balance sheet.
I also think they realized if they used Treasury money to support the system and it failed, the government would definitively go into default, whereas if the Fed purchase plan failed at providing liquidity, at least they didn't use Treasury funds (i.e. debt raised by taxpayers) and there would be a less of a chance of default and they can just scrap the fed altogether and start the banking system over.
Fern
Elite Member
- Sep 30, 2003
- 26,907
- 174
- 106
See above bolded.
By the Fed taking this action instead of the Treasury I see two immediate effects:
1. We've just doubled up on the amount. Congress gave the Treasury the *OK* for $700B; now the Fed, which doesn't need Congressional approval, just put up another $600B. I'm thinking if the Fed acted first Congress would NOT have authorized the funds for the Treasury; $700B is huge and was tought to pass, but $1.3 trillion?
2. Crap, I already forgot #2
Fern
/agree....We have a ton of decaying/old infrastructure in this nation that needs upgrading if not overhauling along with certain areas that need expanded infrastructure. Being that the fed is the largest buyer of goods and services something needs to be done to keep folks working and out of the unemployment line so that they can then start spending and keep on fueling our economy.
Originally posted by: Fern
See above bolded.
By the Fed taking this action instead of the Treasury I see two immediate effects:
1. We've just doubled up on the amount. Congress gave the Treasury the *OK* for $700B; now the Fed, which doesn't need Congressional approval, just put up another $600B. I'm thinking if the Fed acted first Congress would NOT have authorized the funds for the Treasury; $700B is huge and was tought to pass, but $1.3 trillion?
2. Crap, I already forgot #2
Fern
Bold 1) Sucky part is that we can't really know for sure the reasoning behind Treasury's actions, but I still think they backed away from buying paper with the TARP was because they needed trillions to do that (and the Treasury doesn't have trillions nor can it sell that much treasuries all at once) so they are using the $700 billion to buy cheaper equities ($20 billion at a time like for Citi). I don't think it was the complexity, I think it was the sheer size.
Bold 2) Fed does not raise funds as you describe it through treasuries. The Treasury dept sells treasuries to fund govt. The Fed is basically a bank for banks - a place where banks are required to deposit a part of their reserve. So you can imagine, they hold a fraction of the entire money supply. The Fed is using those reserve funds to purchase and backstop MBS and CP.
btw this is a great time for the fed to sell their treasury holdings - it's at bubble prices with 30 year yield 3.5%
Bold 3) The Fed increases and decreases target interest rates (when you hear the fed raised rates, etc) they are buying/selling treasuries at the open market, NOT new treasuries. Only the Treasury dept through Congress can they raise treasuries to fund govt.
People are forgetting that these liquidity moves are all asset exchanges. The fed is stepping in and rolling loan renewals because everyone in the market is too scared to. The banks aren't "using their own money" which is exactly why the fed is coming in and doing it themselves.
I tell you one thing, I am part of the 95% and I better get my tax cut Obama promised.. HE PROMISED!!!!!!!
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