Paulson says government reversing direction on $700 billion bailout

[1prophet]

Paulson says government reversing direction on $700 billion bailout

Paulson said the government?s $700 billion financial rescue package won?t purchase troubled assets from banks after all. He said that plan would have taken too much time and the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

But he was noncommittal about direct support for the auto industry, saying it was a "critical industry" but that the bailout plan was not designed for them.

While the market had been pleased by the government?s decision weeks ago to buy banks? stock, investors still hoped to see the financial industry relieved of the burden of the mortgage assets whose decline in value helped set off the nation?s financial crisis

updated link

WASHINGTON - In a stunning turnabout, the Bush administration Wednesday abandoned the original centerpiece of its $700 billion effort to rescue the financial system and said it will not use the money to purchase troubled bank assets.

?Our assessment at this time is that this (the purchase of toxic assets) is not the most effective way to use funds,? Treasury Secretary Henry Paulson told a news conference.

What exactly did Paulson see that made him change his mind or is the present administration looking to dump the mess on the Obama administration?

 

[bamacre]

Well, whatever they decide to do with the money, I'm sure it'll end up being a boon for the world.

 

[RightIsWrong]

WTF mate?

So they basically have stolen hundreds of millions of tax payer dollars under the guise of one thing and are using it for something completely and totally unrelated? How are they not in jail already? This is the epitome of insider trading.

 

[bamacre]

Originally posted by: RightIsWrong
WTF mate?

So they basically have stolen hundreds of millions of tax payer dollars under the guise of one thing and are using it for something completely and totally unrelated? How are they not in jail already? This is the epitome of insider trading.

Yeah, I wish it were only "hundreds of millions."

 

[brencat]

Frankly, I'm happy they won't be buying toxic mortgage securities since I was dead against the bailout from the beginning. But I read they're thinking of using the money instead to support other consumer-related credit problems such as credit-card debt and auto-loan debt. Not crazy about that either TBH. Need more details before I render an opinion though.

Edit: Here's a link to one story about the potential new use of funds:

Bloomberg Article

 

[Lemon law]

My only comment is that congress has dumped a 700 billion dollar blank check on Paulson, it was not wise to do so, and now it time to take it away if no plan exists. Pass legislation preventing foreclosure now, inject only a small amount of cash in now, and the answer may be to declare that all bets placed in the derivatives international casino are all null and void. Once we know where the remaining damage is, then and only then can we come up with a rational plan.

Paulson's job was to see this problem coming years ago and to prevent little problems from becoming big problems, he utterly failed that public trust, and it baffles me why we should trust the man who broke it to fix it. Get a clue, the man who broke it should never be trusted to fix it. Fire his ass now before he gives away the store.

 

[JS80]

lol that man is a master if all it took to jumpstart the credit markets was pretending to buy MBS (and that was his intention).

 

[RightIsWrong]

The more time I have had to digest this, the more that I wish that every major bank would have failed. Sure we would have faced an economic crisis like we have never seen before. But it might have been better than what we have now.

It appears that every step that the fed has made has been to prop up the financial institutions and not to help out a single investor or homeowner.

Every investor that has lost money is still out of every penny that they lost. Every homeowner that is getting their loans reworked is getting it done on terms that benefit the banks.

I am no longer of the belief that any company, institution or sector is "too big to fail". We are supposed to be a capitalistic society and in a capitalistic society....if you do not know how to run your business or are completely inept or corrupt....YOU FAIL! Someone will be there to take your place and the jobs lost by one will either be recreated by the survivors or recreated by some other startup in the same industry or another that is now a viable option because of the demise of the first.

There is always an out for the company and never one for consumer. If a mortgage lender messes up on the contract...it is deemed a clerical error and they get 14 days to correct if. If the consumer messes up on their part, they are being fraudulent and face 2-99 years and/or $10,000 fine. Lose your house and have PMI insurance? Guess what, after the PMI has collected premiums from you to insure that you are covered if you ever have to default and they then have to pay out....they come after you for reimbursement. If you get your loan modified....they just adjust your payment lower by making your loan into a 40 year loan instead ensuring that the banks still get all of their money and a whole lot more in the form of a decade more of interest payments.

Every single bill that has passed has been under the guise of helping the consumer and every single one has been used to do the polar opposite.

 

[RightIsWrong]

I wanted to add that the only way this system can be fixed is via its complete and utter dismantling and starting anew with the lessons hopefully learned from it. Our generation would have had to suffer through an economic depression for years, but it would probably be better than throwing good money after bad and allowing the criminals whose greed was the basis for this entire fiasco being the ones suggesting the best course of action to fix it.

 

[brencat]

Originally posted by: Lemon law
Pass legislation preventing foreclosure now, inject only a small amount of cash in now, and the answer may be to declare that all bets placed in the derivatives international casino are all null and void. Once we know where the remaining damage is, then and only then can we come up with a rational plan.

What are you smoking? So we should reward those too stupid to know they couldn't afford a $700k mortgage on $50k of annual income? Reward those who stretch themselves to buy that BMW and never save a penny? Comon man. Consumers are just as much to blame for trying to keep up with the Jones'. You make it sound as if 4 out of every 5 mortgage loans in the last 4 years was fraudulent and that just isn't the case.

And your comment about nullifying credit derivatives trades is impossible and a non-starter. Your word is your bond -- and the buyers of protection are licking their chops like vultures now, as they should be. But if you want total collapse and an instant Depression, by all means let's try your plan.

 

[RightIsWrong]

Originally posted by: brencat

Originally posted by: Lemon law
Pass legislation preventing foreclosure now, inject only a small amount of cash in now, and the answer may be to declare that all bets placed in the derivatives international casino are all null and void. Once we know where the remaining damage is, then and only then can we come up with a rational plan.

What are you smoking? So we should reward those too stupid to know they couldn't afford a $700k mortgage on $50k of annual income? Reward those who stretch themselves to buy that BMW and never save a penny? Comon man. Consumers are just as much to blame for trying to keep up with the Jones'. You make it sound as if 4 out of every 5 mortgage loans in the last 4 years was fraudulent and that just isn't the case.

And your comment about nullifying credit derivatives trades is impossible and a non-starter. Your word is your bond -- and the buyers of protection are licking their chops like vultures now, as they should be. But if you want total collapse and an instant Depression, by all means let's try your plan.

What about the word of the government with their intent for the bailout package? What about the words of the leaders of these corporations who pillaged their own companies' shareholders by not revealing the full extent of their exposure?

It becomes more and more evident that the only person that should be held to their word and face the consequences of their actions is the consumer. The corporation and those who lead it are never held to the same standard.

Edit: Why are we supposed to reward those that got us into this mess but not those who are also suffering as a result of it? It would be cheaper to pay off every ARM in full than to pay the banks to continue down this slow death march.

 

[NoStateofMind]

RightIsWrong, welcome to reality. I do not say that as a poke at you, but a few of us saw this BS coming. Maybe not in exact detail, but we knew there was a sham going on and they weren't going to use lube.

Originally posted by: bamacre
Well, whatever they decide to do with the money, I'm sure it'll end up being a boon for the world.

This.

 

[DomS]

you know, it's funny.....we fuck the banks over by forcing them to lend in areas they used to redline...then we bitch at them when those loans start going into default and dragging the banks down. idiots.

 

[dullard]

Is this anything surprising? What hasn't been a bait-and-switch in the last 8 years?

The president said that we will only go to war as a last resort in Oct 2002. "If we go into battle, as a last resort..." Bush Oct 16, 2002. "And, as a last resort, we must be willing to use military force." - Bush March 8, 2003. Congress wrote Public law 107-243 that said FIRST that the congress supports the president's efforts in the United Nation and should continue those efforts (section 2) but LATER supports war if it is necessary to enforce UN resolutions against Iraq (section 3). Bingo: war declared shortly afterwards.

Paulson said that buying Fanny or Freddy shares is like a "bazooka" that scares off enemies even if its never used. "If you?ve got a bazooka, and people know you?ve got it, you may not have to take it out. ? By increasing confidence, it will greatly reduce the likelihood it will ever be used." - Paulson July 2008. Bingo: ~6 weeks later Paulson buys shares in Fanny and Freddy.

I could go on and on with other examples but I have to leave soon.

Each time the pattern is the same: paint a dreary picture, give one option and push it strongly, give a drastically different backup option as last resort, get approval, and instantly go to the last resort option.

Moral: You really shouldn't trust what they say if they have a backup plan.

 

[Ozoned]

Originally posted by: 1prophet
Paulson says government reversing direction on $700 billion bailout

Paulson said the government?s $700 billion financial rescue package won?t purchase troubled assets from banks after all. He said that plan would have taken too much time and the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

But he was noncommittal about direct support for the auto industry, saying it was a "critical industry" but that the bailout plan was not designed for them.

While the market had been pleased by the government?s decision weeks ago to buy banks? stock, investors still hoped to see the financial industry relieved of the burden of the mortgage assets whose decline in value helped set off the nation?s financial crisis

What exactly did Paulson see that made him change his mind or is the present administration looking to dump the mess on the Obama administration?

Maybe he saw the bottom line. Who holds most of these worthless morgage backed securities? I'm guessing that foreign governments and foreign business's hold the larger percentage of them. If so, the scam worked!

 

[SagaLore]

Originally posted by: RightIsWrong
The more time I have had to digest this, the more that I wish that every major bank would have failed. Sure we would have faced an economic crisis like we have never seen before. But it might have been better than what we have now.

So what we have now is worse than the great depression?

 

[SagaLore]

Originally posted by: DomS
you know, it's funny.....we fuck the banks over by forcing them to lend in areas they used to redline...

Who forced them?

 

[SagaLore]

This thread just makes me

 

[sandorski]

Originally posted by: SagaLore

Originally posted by: DomS
you know, it's funny.....we fuck the banks over by forcing them to lend in areas they used to redline...

Who forced them?

Some people keep confusing Freddie/Fannie with the rest of the Banks. Freddie/Fannie had Mandates to provide a service to the Poor, the other Banks were just De-REgulated to the point where they could(important distinction) access the same demographic.

 

[halik]

Originally posted by: 1prophet
Paulson says government reversing direction on $700 billion bailout

Paulson said the government?s $700 billion financial rescue package won?t purchase troubled assets from banks after all. He said that plan would have taken too much time and the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

But he was noncommittal about direct support for the auto industry, saying it was a "critical industry" but that the bailout plan was not designed for them.

While the market had been pleased by the government?s decision weeks ago to buy banks? stock, investors still hoped to see the financial industry relieved of the burden of the mortgage assets whose decline in value helped set off the nation?s financial crisis

What exactly did Paulson see that made him change his mind or is the present administration looking to dump the mess on the Obama administration?

The banks weren't lending the TARP money out to consumers, instead they were saving it for acquisition. That was happening regardless whether the bank needed that money or they were fully capitalized.

In any case, the move to do the TARP did fix the credit markets as it removed uncertainly and irrational fear of CP and interbank lending. Now that corporate credit is going, we need consumer credit... otherwise we will never get outta the recession.

 

[IHateMyJob2004]

So, people do know that buying banks now means that you can sell them later, correct?

 

[StageLeft]

You have to laugh. I don't care who you are. They have no idea whatsoever what they're doing with the money, none at all. Paulson is like my younger brother who one year got too much money for his birthday and it was burning a hole in his pocket, he literally had to spend it even on a silly purchase so he spent $80 on habitrail for his hamster.

 

[woodie1]

To the best of my knowledge we have never been in a situation like we are now. It seems to me that the government is gonna need some leeway to try and minimize the damage/shore up the financial system. Congress passed a 450 page bill authorizing this $700B so lets see what happens.

BTW, I was and am still against all this bailout crap starting with AIG.

 

[Ozoned]

Originally posted by: 1prophet
Paulson says government reversing direction on $700 billion bailout

Paulson said the government?s $700 billion financial rescue package won?t purchase troubled assets from banks after all. He said that plan would have taken too much time and the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

But he was noncommittal about direct support for the auto industry, saying it was a "critical industry" but that the bailout plan was not designed for them.

While the market had been pleased by the government?s decision weeks ago to buy banks? stock, investors still hoped to see the financial industry relieved of the burden of the mortgage assets whose decline in value helped set off the nation?s financial crisis

What exactly did Paulson see that made him change his mind or is the present administration looking to dump the mess on the Obama administration?

Maybe, he just jumped on the Change bandwagon. Heh heh. I can just hear him in the back of the room, I'll show you fvcking hayseeds some change.

 

[chess9]

Originally posted by: Lemon law
My only comment is that congress has dumped a 700 billion dollar blank check on Paulson, it was not wise to do so, and now it time to take it away if no plan exists. Pass legislation preventing foreclosure now, inject only a small amount of cash in now, and the answer may be to declare that all bets placed in the derivatives international casino are all null and void. Once we know where the remaining damage is, then and only then can we come up with a rational plan.

Paulson's job was to see this problem coming years ago and to prevent little problems from becoming big problems, he utterly failed that public trust, and it baffles me why we should trust the man who broke it to fix it. Get a clue, the man who broke it should never be trusted to fix it. Fire his ass now before he gives away the store.

LOL! Amen, bro. The fox is guarding the hen house, has eaten half the chickens, and the farmer is snoozing.

-Robert