Wall Street

[mkemse]

Should the United States Goverment Bail Out Wall Street??

[Ragoczy]

Not as currently proposed, which (as of this evening) gives the Treasury Secretary the authority to dole out $700 billion with no oversight and specifically prohibits review by Congress or the Courts.

As a somewhat laissez-faire capitalist, most of me says let the bastards fail, they did it to themselves. On the other hand, I think of the investors in those companies.

What we have to remember is that there is no "corporation" that can be hurt by this, because corporation is a legal construct. There's no Jabba the Hutt-like creature out there that's going to be the one hurt. Corporations are owned by their stockholders and they're the ones who take the hit. I know the common perception is that most stock is owned by bald guys who wear tuxedos and smoke cigars while chortling about how they ripped off the dumb masses (say it three times fast), but the reality is that most stock in the US is in mutual funds and most mutual fund shares belong to individual, middle-class investors. It's the IRA and 401K of the school teacher, the fireman, the small-business owner -- that's who takes the hit here.

I have no sympathy for the homeowners who bought too much house or stupid mort-gages; nor any for the corporate executives who drove their companies into the ground -- but, damn, the guy who plugs 3% into his 401K should have a reasonable expectation that any loss won't be because it was effectively stolen.

[Stealth694]

I have to agree with Ragoczy.
These people were being paid more per year than an average person will ever earn in 10 lifetimes. But they were still so greedy they had to "Cook the Books" so they could have more money, that they will probably never spend.
Personally I feel that all CEO's, Board Members and Upper Management should be stripped of their private fortunes and have that money paid back to the companies that hired them.

[Ragoczy]

It isn't often that I say "there oughta be a law", I think the less law the better, but this is freakin' ridiculous:

http://www.foxnews.com/story/0,2933,428641,00.html

The CEO of Washington Mutual, which just failed and was bought by JP, has been on the job 17-days -- so the failure really isn't his fault, he just got there. But now he's out of a job because the previous dumb asses ran the bank into the ground. But that's okay, with his hiring bonus and firing bonus, he'll gross $20 million for the 2.5 weeks on the job.

Meanwhile, the FDIC will be putting some money in to cover depositors.

[ThisYouWillDo]

I voted to bail them out.

Let the bastards fall is one thing, and I agree with that sentiment. But why should ordinary people suffer as a consequence, as they will?

Bail them out. But attach strings. Either they pay back the loans they are given, plus interest, or they belong to the nation - for as long or as little time it takes for the nation to sell/break up or do whatever else they want.

Americans will be paying around $5,000 a head to save Wall Sreet's ass. That's a huge investment for private individuals, and Wall street better say "Thank-you" nicely.

TYWD

[irishman112145]

It time people took responsibility for there own actions. We need a change of represantation in this country. Look how many are in jail or onthere way to jail. The get to comfortable with the people who infulance them and that is wrong. They work for the people and not the special intrest groups.

[js207]

I voted to bail them out.

Let the bastards fall is one thing, and I agree with that sentiment. But why should ordinary people suffer as a consequence, as they will?

Bail them out. But attach strings. Either they pay back the loans they are given, plus interest, or they belong to the nation - for as long or as little time it takes for the nation to sell/break up or do whatever else they want.

Americans will be paying around $5,000 a head to save Wall Sreet's ass. That's a huge investment for private individuals, and Wall street better say "Thank-you" nicely.

TYWD

I feel sure there's a better position somewhere in between. Maybe a few companies need to be bailed out, but I suspect most could be dealt with through a combination of Chapter 11, takeovers/mergers and actual bankruptcy, without the need to pour hundreds of billions of dollars of the taxpayers' money in. Yes, investors would be bearing some costs - as they would under the bailout plan, as taxpayers - but no more than the amount they invested, usually far less, instead of the thousands of dollars each the bailout takes.

[mkemse]

The President did say today that if this whole situation did not effect the whole Economy they he would let fanie mae ect fall but he said there is too much at stake
if they do bail them out at $700 Billion my best guess is nobody will see a Tax Refund for years, there will be no money left not to mention how long it will take to pay all this plus the national debt off, many many grand and great grandchildren will be aying for all of this

[Kuskovian]

There is only one time in the history of the Untited States that our Country had no debt.

It was during Andrew Jackson's administration.

If they bail out the Big guys are they going to bail my business out?

Shouldn't this be handled just like any other Chapter 11?

[MMI]

... Yes, investors would be bearing some costs - as they would under the bailout plan, as taxpayers - but no more than the amount they invested, usually far less, instead of the thousands of dollars each the bailout takes ...

I don't disagree. Investors won't lose a lot compared with the losses the taxpayer or the ordinary creditors and depositors will bear.

Let investors loose the lot: theirs was money at risk anyway. But a bailout is to protect the ordinary users of banking services - people with little or no choice about how their money was used and nowhere else to place it (except under the floorboards). A bailout is to protect other companies - employers, people's jobs. It is to protect the economy of the States ... and, frankly, of the world too. America can quite legitimately look to the rest of the world this time and ask for a small contribution.

I'd rather a bailout than another Depression. Even a small one.

[Ragoczy]

I don't disagree. Investors won't lose a lot compared with the losses the taxpayer or the ordinary creditors and depositors will bear.

Let investors loose the lot: theirs was money at risk anyway. But a bailout is to protect the ordinary users of banking services - people with little or no choice about how their money was used and nowhere else to place it (except under the floorboards). A bailout is to protect other companies - employers, people's jobs. It is to protect the economy of the States ... and, frankly, of the world too. America can quite legitimately look to the rest of the world this time and ask for a small contribution.

I'd rather a bailout than another Depression. Even a small one.

No, the bank depositors are already insured by FDIC for $100,000. These bailouts are to keep the investment houses solvent.

[allalone46]

Normaly I would say no. However do to the government's polliseys coused the problem in that the banks hd to or be put out of buisness by the government to do what if it were up to them they wouldn't have done it.

[craven]

it is a really tricky one this, i have no sympathy for the fat cat bosses who have creamed off their bonuses and lucrative salaries, without in some circumstances really understanding the nature or implications of some of the transactions that their organisations were and are still involved in. I agree with earlier comments, to strip these individuals of their personal fortunes would be just, however it would in practice be very difficult to do.

Legislation should though be introduced that ensures that in the event of these types of circumstances occurring failure is not rewarded, to be paid large sums of money to exit businesses that they have destroyed is obscene and defies the ethos of capitalism, no they should be turfed out with only their cardboard boxes of personal belongings like their employees have to endure.

I sort of also do not have a huge amount of sympathy for the share holders, the value of shares can rise as well as fall, we all know this, it is what playing the market is essentially about, had they made huge gains they would not be looking to hand over some of their profits in an altruistic gesture, no they would have thought how wonderful the whole market was and how smart they were for playing it so well, so sorry, they took the risk they should shoulder the pain.

Now as for the bail out, hmmm yes in a true capitalist system companies should live and die by the sword, the problem here is the size of the exposures and the interconnecting web or labyrinth that is global finance.

To have let AIG fail for instance would have in my opinion been catastrophic, the impact upon the global economy would have had significant and far reaching repercussions, the company i work for places insurance on behalf of company's our clients place over $20B or premiums with AIG alone, all of those companies would find themselves uninsured and having to purchase again at least the legally required insurances, many of these are them selves struggling in the current financial environment, so it is fair to say that a reasonable amount of them could have failed themselves. Yet further job losses resulting in the workers from these companies losing their jobs, this in turn resulting in these workers then struggling to meet their own financial liabilities, for example their home loan payments, and thus the cycle perpetuates itself as yet more banks then begin to suffer from bad debts.

This however is insignificant in comparison to the $360B of sub prime lending that AIG had reinsured for the main banking houses, a concept i still struggle to understand, the main reason for a bank to exist being to lend money, and live off of the interest earned as a result, thus the bank needs to be an expert in assessing the risk and potential for its lenders to be able to pay back loans owed. This would in my view make banks the best organisations to judge credit risk, their very existence being to make money from the successful lending of loans.

With this in mind then why if a bank came to you with a parcel of debt would you be in any way interested in insuring the thing for them, they know their risks better than anyone, they make as much money as they can, we all hear of banks annual profit figures, they are never small and they seem hell bent on increasing these year on year. So why as an insurer, NOT a banker would you look at a book of debts, that the bank who assessed them initially was not comfortable with, lets be honest if they were would they be spending premiums, that would otherwise boost profits and therefore bonuses, i think we all know the answer to that one! and as the insurer say yes i am happy to insures these potential bad debts for you. It defies logic, the banks as experts feel that their risks are too great to carry in house, then lets be honest these are quite simply very bad risks!

The banks basically realised that they were hugely exposed and looked to offset their risks, they passed the shit sandwich so to speak no other phrase for it. In doing this they created the king domino, AIG, not to have bailed out this company would have taken out loads more institutions and companies globally, I am not sure what a global financial meltdown would have looked like but can imagine it, and letting AIG go to the wall would have preempted this.

The economy of the world is now so interdependent that to not bail out one part could well result in many other parts failing, the dominos are i am afraid all reliant upon one another, therefore even though it is not in the nature of capitalism i feel there is no option other than to bail out these organisations, to let any fail will result in world wide pain.

BUT a thorough review and overhaul of the practices needs to be conducted, never again should such "sharp" and unregulated practices be allowed to happen, some people have made themselves very rich, obscenely so at what now looks likely to be the American Tax payers expense, unfortunately their companies in effect are holding the US government to ransom, to not bail them out is unthinkable for the US and the rest of the world.

Find the guilty executives, name and shame, and make sure that they are never able to hold office or similar positions ever again, these are the real villains, polished and elegantly dressed, blackberrys instead of guns they have caused untold pain, and they should be punished.

[Ragoczy]

Normaly I would say no. However do to the government's polliseys coused the problem in that the banks hd to or be put out of buisness by the government to do what if it were up to them they wouldn't have done it.

What government policies do you think caused this problem?

[Stealth694]

Its to bad what happened in India this week could not happen to the CEO's ect.

A company in India closed down without warning, leaving around 250 people out of work.
When they were told in essence " What can you do about it???".
The people became a Mob and stormed the Administration building.
The CEO of that company and several other admininistrators...
WERE BEATEN TO DEATH!!!

I know it will never happen but you got to admit,,, it would make some of these greedy Fat Cats think twice.

[mkemse]

Its to bad what happened in India this week could not happen to the CEO's ect.

A company in India closed down without warning, leaving around 250 people out of work.
When they were told in essence " What can you do about it???".
The people became a Mob and stormed the Administration building.
The CEO of that company and several other admininistrators...
WERE BEATEN TO DEATH!!!

I know it will never happen but you got to admit,,, it would make some of these greedy Fat Cats think twice.

I guess that "beats" with no pun intended giving them Golden Parachutes

[MMI]

No, the bank depositors are already insured by FDIC for $100,000. These bailouts are to keep the investment houses solvent.

I don't know anything about the FDIC insurance, but if it's anything like the "protection" offered under UK compensation schemes, it's only available to private depositors. The Company that pays your salary won't be protected. The businesses it gets its supplies from won't be protected either, nor will the businesses it sells to. Furthermore, the protection is capped: $100,000 in your case. There are very many people who have deposits with banks in excess of that amount. Often those funds are used to finance commercial enterprises. That investment will no longer be available. The economy will not expand. Your company will find it harder to get new business. Perhaps you'll be one of the guys who are laid off.

At least, eventually, after six ... nine months ... maybe longer? you'll get back the few thousand dollars in your bank account from the FDIC - assuming you have the necessary documents to prove you did have money in your account in the first place, and that you are who you say you are.

But it's too late now. There's to be no bailout.

So, last night, a concerted effort was begun to turn this global Credit Crunch around, and while Asia was prepared to lend to US banks again, while central banks around the world poured new money into the markets, while Belgium, Germany, UK and Iceland took failing banks into public ownership, trusting America would in turn, put its own rescue plan in place, USA slept. When it awoke, it baulked at the part it had to play, preferring to vent its spleen on the capitalist pigs that it had up to this point held up as epitomising the American Dream.

The Republicans' fear of socia1ism is greater than its duty to the nation's, and the world's, well being, it seems.

Well, I'd like to propose a new poll: Did America f^ck up and let the rest of the world down, or did it really f^ck up and let the rest of the world down?

And non-US readers will again have no say.

... And now your politicians have to go back and think of a new plan. They will probably end up raising interest rates so high they'll have snow on them, and they'll have to print so much extra money, the dollar won't be worth tuppence and inflation will soar. Look at what happened in Japan in the 90's. It was painful.

[Ragoczy]

The Republicans' fear of socia1ism is greater than its duty to the nation's, and the world's, well being, it seems.

For the record, since we're pointing at political ideologies, 40% of Democrats in the House voted against the bailout. The Democrats, on their own, have the votes to pass it, but almost half rejected the plan.

Further, Republicans have been warning about the meltdown of Fannie-Mae/Freddie-Mac for the last five years, wanting more oversight and regulation, but Democrats saw nothing wrong with the situation because 100% financing to high-risk borrowers is good to them. The facts are in the Congressional Record for the the 2003, 2004 and 2005 debates on Housing Reform.

[MMI]

I note your comments.

As a socia1ist, I have no love for the Democrats either, and if they f^cked up, they must be castigated too.

Neither do I have any affection for Wall Street. But I know that to let it fall would do unimaginable damage to the whole US economy

It's a global crisis and the health of the American financial system is the lynch-pin that everyone else's financial system is hung on

[Ragoczy]

Keeping in mind a little perspective about the problem, the Dow dropped 777 points today -- I'm sure everyone's heard it reported as the "biggest point drop in history" and the media's just loving to report it that way. But it was a 7% drop -- the 1987 drop was 30%, but to listen to the pundits, this was worse. Why?

[Stealth694]

The entire Administration, House and Senate are getting scared.. For 8 yrs all they did was bicker like a bunch of kids, Now its time to do something and they are screaming "I AM NOT RESPONSIBLE" This Mess took yrs to create and will take more yrs to clean up.
Still I think a little less haste and more planning might be smarter than just giving Wall Street a Golden Parachute and telling them everything is alright.

[mkemse]

I don't know anything about the FDIC insurance, but if it's anything like the "protection" offered under UK compensation schemes, it's only available to private depositors. The Company that pays your salary won't be protected. The businesses it gets its supplies from won't be protected either, nor will the businesses it sells to. Furthermore, the protection is capped: $100,000 in your case. There are very many people who have deposits with banks in excess of that amount. Often those funds are used to finance commercial enterprises. That investment will no longer be available. The economy will not expand. Your company will find it harder to get new business. Perhaps you'll be one of the guys who are laid off.

At least, eventually, after six ... nine months ... maybe longer? you'll get back the few thousand dollars in your bank account from the FDIC - assuming you have the necessary documents to prove you did have money in your account in the first place, and that you are who you say you are.

But it's too late now. There's to be no bailout.

So, last night, a concerted effort was begun to turn this global Credit Crunch around, and while Asia was prepared to lend to US banks again, while central banks around the world poured new money into the markets, while Belgium, Germany, UK and Iceland took failing banks into public ownership, trusting America would in turn, put its own rescue plan in place, USA slept. When it awoke, it baulked at the part it had to play, preferring to vent its spleen on the capitalist pigs that it had up to this point held up as epitomising the American Dream.

The Republicans' fear of socia1ism is greater than its duty to the nation's, and the world's, well being, it seems.

Well, I'd like to propose a new poll: Did America f^ck up and let the rest of the world down, or did it really f^ck up and let the rest of the world down?

And non-US readers will again have no say.

... And now your politicians have to go back and think of a new plan. They will probably end up raising interest rates so high they'll have snow on them, and they'll have to print so much extra money, the dollar won't be worth tuppence and inflation will soar. Look at what happened in Japan in the 90's. It was painful.


The Federal Deposit Insurance Corporation (FDIC) is a United States government corporation created by the Glass-Steagall Act of 1933. It provides deposit insurance which guarantees the safety of checking and savings deposits in member banks, currently up to $100,000 per depositor per bank. The vast number of bank failures in the Great Depression spurred the United States Congress to create an institution to guarantee deposits held by commercial banks, inspired by the Commonwealth of Massachusetts and its Depositors Insurance Fund (DIF).

The FDIC insures accounts at different banks separately. For example, a person with accounts at two separate banks (not merely branches of the same bank) can keep $100,000 in each account and be insured for the total of $200,000. Also, accounts in different ownerships (such as beneficial ownership, trusts, and joint accounts) are considered separately for the $100,000 insurance limit. The Federal Deposit Insurance Reform Act of 2005 raised the amount of insurance for an Individual Retirement Account to $250,000.


I also heard that after the BailOut was killed in Congress that they may appraoch the Trasury for a direct Loan, or a "Bandade" fix as they put it, whether they will wether that is true , only what I heard, as well as tomorrow being another rough day on Wall Street

Only time will tell what happens now here

[MMI]

Keeping in mind a little perspective about the problem, the Dow dropped 777 points today -- I'm sure everyone's heard it reported as the "biggest point drop in history" and the media's just loving to report it that way. But it was a 7% drop -- the 1987 drop was 30%, but to listen to the pundits, this was worse. Why?

Banks are going under like a row of Titanics, and major corporations are having difficulty raising necessary finance so that, if things don't turn around soon, airlines will stop flying and car manufactureres will stop building cars. But because the Dow Jones Index didn't fall so much yesterday in percentage terms as it did once before (despite a record points drop), then everything must be alright.

There speaks a true politician! Fine. But I'm still taking my money out of the bank.

[Dr_BuzzCzar]

Regardless of who each of us would like to blame, and there is plenty of blame to go around between both major parties, the fact remains that we are in a tough economic situation. There's plenty of finger-pointing time to be had after we get things settled down.

A consultant I once used had a phrase that I adopted. He would say we need to make decisions with "accurate speed", meaning speed is of the essence but accuracy trumps. In our case the first bill's failure may turn out to be not so bad if we get it right the next time. I've not read the 108 page bill so I can't say for sure.

In any case, it appears that there is imminent danger of the credit market constricting to a dangerous point. Keep in mind what that means. It means the local car dealer can't put cars on his lot without buyer's credit, and if he has enough cash to put the cars there he can't sell them because of no credit for his buyers, so he can't generate cash and pay his employees. It means you can't buy a car, or boat, or house, or furniture unless you can pay cash because there's no credit to be had. American business runs on credit. Like it or not that's a fact. If we don't solve the credit crunch situation then we are staring at a severe worldwide recession that may or may not further degenerate into a depression.

This is castor oil. It tastes bad, nobody much likes it, but we need it. I've written my congressman and senators voicing my displeasure with the necessity but letting them know that its a necessary Yea vote and I expect them to do whats' right.

[Ragoczy]

Banks are going under like a row of Titanics, and major corporations are having difficulty raising necessary finance so that, if things don't turn around soon, airlines will stop flying and car manufactureres will stop building cars. But because the Dow Jones Index didn't fall so much yesterday in percentage terms as it did once before (despite a record points drop), then everything must be alright.

There speaks a true politician! Fine. But I'm still taking my money out of the bank.

I didn't say "everything must be alright", I suggested a bit of perspective and the fact that the media is playing up the point drop, despite the percentage loss being lower. That's actually important, because of the way the Dow works -- the actual dollars lost by investors, as a percentage of total holdings, was less than in 1987. The nature of the Dow and it's growth guarantees that at some point there will always be a "record points drop", simply because a lower percentage becomes more points.

The media likes a crisis and they like to play it up for all it's worth -- pointing that out doesn't mean I'm denying there's a problem, simply that looking at all the facts about the problem might be worthwhile.

[MMI]

First of all, if it's dollars you want to count, the day the Dow dropped 777 points, the value of the companies listed on Wall Street fell by more than a trillion dollars. That's more than had ever before in a single day too. So, points, or value of quoted corporations in dollars, it was a record fall. Maybe my perspective is a little wrong, but I think that it's telling us that something serious is happening, and it would be burying your head in the sand to ignore it. If the percentage drop was only 7%, and there have been larger falls on rare occasions before, it's still far more in a day than is normal.

And, besides, as DrBuzzCzar usefully points out, we are looking at the wrong index if we are watching the Dow. Its current volatility is being caused by the fact that there's not enough hard cash or available credit to allow ordinary commerce and trade to proceed. The banks that have folded weren't insolvent as such, they just ran out of liquid funds. That's why all the central banks have been pouring extra money into the markets and making emergency lines of credit available. When the Dow falls these days, it's because it's writing off the businesses that don't have enough liquid funds left and can't borrow more.

Then along come Barclays, BankAmerica and others of that ilk to pick over the remains. If these predators survive, they'll have picked up valuable assets for a song. But there's a good chance they won't because Congress has said that now the sick must cure the sick, ignoring the possibility that there could be a financial plague out there.

Comrade Bush wanted to inject his $700bn as a temporary palliative: it wasn't a cure. It was just one dose, and it might not have been enough. But one way or another, he'll have to do something eventually.

Otherwise, as I said before, it's higher interest rates, stagflation, bankruptcies and rec-/depr-ession.

[Ragoczy]

First of all, if it's dollars you want to count, the day the Dow dropped 777 points, the value of the companies listed on Wall Street fell by more than a trillion dollars. That's more than had ever before in a single day too. So, points, or value of quoted corporations in dollars, it was a record fall. Maybe my perspective is a little wrong, but I think that it's telling us that something serious is happening, and it would be burying your head in the sand to ignore it. If the percentage drop was only 7%, and there have been larger falls on rare occasions before, it's still far more in a day than is normal.

There's also more total dollars invested than in '87. I was simply pointing out that that particular event was not so significant as it's being reported. If someone making $1000 a month takes a 20% hit ($200) it's of more overall significance than someone making $10,000 a month taking a 10% loss ($1000), even though the "dollars" are greater.

What I was trying to get across is that, although it's a large drop, it isn't as though the market hasn't taken, and recovered from, drops as or more statistically significant. Trying to point out that the media, in their choice of what to report and how to report it, can influence the story and people's reaction to it.

People's reaction and confidence in the economy, already low and justifiably so, is going to be different to hearing "almost as bad as 1987" than to hearing "worst in history".

This same irresponsible journalism permeates much of the reporting about the current situation. Congress is being flooded with calls to oppose the plan because it's being reported as $700 billion or more cost. Few are reporting that much of what that money would go to would be to take on the high-risk securities -- much of which consists of real-estate. It isn't being reported that the government would then own that real-estate and would recoup some of the initial cost.

None of this means that I don't think there's a problem or that something shouldn't be done, just that it's typically best to assess the actual facts instead of reacting in a panic.

You may be taking all of your money out of the bank; I, today, moved all of my cash and bond money to stocks. I'll probably show a loss tomorrow and the next day and even next week, but I'm thirty years from retirement and someone who bought a shitload the day after Black Monday and held it is in a pretty good position today, even after the drop. If I have no confidence that the value of a diversified portfolio of stocks will be much, much higher twenty years from now, then the alternative vehicle isn't cash -- it's guns and bullets.

[ThisYouWillDo]

I'm sure we all understand what you are saying. Nevertheless, all of the movements in the Dow Jones on Monday were adverse, and none of them were the same as what happened in 1987.

Perhaps that's telling us that 1987 and 2008 aren't truly comparable. After all, the 1987 crash was caused by computerised investment programs all selling their portfolios at the same time in response to the same signal, whatever that was. But it surely wasn't due to the fact that speculators felt that the whole financial system was about to collapse due to banks holding doubtful mor_tgages (why was this word edited out?) which were no longer acceptable as security for further lending. Banks were not refusing to deal with each other on the interbank lending markets. Banks were not in a situation where they had to get nationalised/bought-out or die.

In 1987, although the market might have been distorted and in need of a radical adjustment, none of the major financial institutions - the ones capable of seriously damaging the world's economy: like AIG, Lehman Bros or HBOS - were in any kind of jeopardy. They could put their hands on all the money they needed and meet their obligations as they fell due.

Not in 2008.

I note your investment strategy. I'm too old to have such a high risk profile: I'm opening an account at Northern Rock, which was nationalised a few weeks ago. At least I have the Government to support it. I hope your plan works out for you, but I cetainly wouldn't bet the house (bad metaphor?) on a single throw at this particular dice table.

[mkemse]

I'm sure we all understand what you are saying. Nevertheless, all of the movements in the Dow Jones on Monday were adverse, and none of them were the same as what happened in 1987.

Perhaps that's telling us that 1987 and 2008 aren't truly comparable. After all, the 1987 crash was caused by computerised investment programs all selling their portfolios at the same time in response to the same signal, whatever that was. But it surely wasn't due to the fact that speculators felt that the whole financial system was about to collapse due to banks holding doubtful mor_tgages (why was this word edited out?) which were no longer acceptable as security for further lending. Banks were not refusing to deal with each other on the interbank lending markets. Banks were not in a situation where they had to get nationalised/bought-out or die.

In 1987, although the market might have been distorted and in need of a radical adjustment, none of the major financial institutions - the ones capable of seriously damaging the world's economy: like AIG, Lehman Bros or HBOS - were in any kind of jeopardy. They could put their hands on all the money they needed and meet their obligations as they fell due.

Not in 2008.

I note your investment strategy. I'm too old to have such a high risk profile: I'm opening an account at Northern Rock, which was nationalised a few weeks ago. At least I have the Government to support it. I hope your plan works out for you, but I cetainly wouldn't bet the house (bad metaphor?) on a single throw at this particular dice table.


I believe the points being made is that althou the Dow lost 700 points the percent loss which is what anaylists look at was small, yes -777 was the largest single point loss but the 6% percent loss did not even make the top 10 list of worst day in Dow Histiry, everyone is saying don't look atthe point loss look at the percentage loss, when you do that which is how it is analized, the loss was in reality not as bad as the -77 made it appear

[Logic1]

My guess about the vote gotten turned down is the "small fact" that there is an election in November and who wants to take a hard decision that half of his/her voters will hate? That sure is a great way to kill your chances in the upcoming elections.

I personally think that there really NEEDS to be a bailout and if not then I guess the whole world is in serious trouble.
my 5 eurocents from a European pov.

[mkemse]

My guess about the vote gotten turned down is the "small fact" that there is an election in November and who wants to take a hard decision that half of his/her voters will hate? That sure is a great way to kill your chances in the upcoming elections.

I personally think that there really NEEDS to be a bailout and if not then I guess the whole world is in serious trouble.
my 5 eurocents from a European pov.

Yes I agree. allot of Senators & Reps. that voted NO on the Bail Out said they did so because they are all in tight Races and their Constituates said NO WAY so they voted no, if there was no election this year, the results would have been different

[Ragoczy]

My guess about the vote gotten turned down is the "small fact" that there is an election in November and who wants to take a hard decision that half of his/her voters will hate? That sure is a great way to kill your chances in the upcoming elections.

That's a good guess -- and one of the things wrong with politics today.

Politicians and voters don't seem to understand that the elected official isn't there to just do whatever the majority of his constituents wants -- if that was the case, we wouldn't need them, we'd just vote on everything. That's pure democracy and it's bad. Their role is supposed to be using their knowledge and best judgment to represent their constituency -- and sometimes that includes making a hard, unpopular choice. If more voters could accept that, instead of getting all pissy that their rep didn't vote the way "most" people wanted him to, then we'd have better representation and better government overall.

[leo9]

I may be wrong, as I'm only hearing about this from the UK, but I heard opponents of the bailout from both sides saying that they would have voted for it if it had been the bailout alone, but the proposal's authors couldn't resist the usual practice of stacking it with other measures they wanted to push through - starting with a package of tax cuts, which sounds like a great idea for a Government that's about to borrow like never before.

Unfortunately, in order to bring round the holdouts they will probably now try another business-as-usual tactic and sweeten them by adding in their favourite pork items, thus repelling a different bunch of people.

Over here we call this "rearranging the deckchairs on the Titanic".

[Ragoczy]

I may be wrong, as I'm only hearing about this from the UK, but I heard opponents of the bailout from both sides saying that they would have voted for it if it had been the bailout alone, but the proposal's authors couldn't resist the usual practice of stacking it with other measures they wanted to push through - starting with a package of tax cuts, which sounds like a great idea for a Government that's about to borrow like never before.

Unfortunately, in order to bring round the holdouts they will probably now try another business-as-usual tactic and sweeten them by adding in their favourite pork items, thus repelling a different bunch of people.

Over here we call this "rearranging the deckchairs on the Titanic".

The Senate version of the Bill, which passed the Senate today, has a lot of crap in it. The original Bill was three pages long (this is the one that gave one guy control of $700-billion with no oversight or accountability) -- the Senate Bill is about 400 pages.

In it is a provision to require insurance companies to pay for covering mental illness. Believe it or not, I think there's a connection. See the problem's root cause was people who thought it was okay to buy houses they couldn't afford, okay to lend to people who couldn't pay the money back and people who thought it was okay to create derivatives of those stupid loans that neither they nor the buyers understood. All of this is clear evidence that those individuals were nuckin' futz, so if their insurance companies had been required to provide coverage for their therapy, clearly none of this would have happened. See, the Senate knows what it's doing.

So, instead of working on tight, targeted legislation to fix a serious problem, the idiots are tacking on earmark after earmark.

Yes, this is standard practice and helps legislation get passed ... "vote for my bill and your district gets $1-million ... but is it the way things should work? Shouldn't legislation stand or fall on its own merits, not on how much other crap can be used to buy votes?


As a partisan aside: Maybe we should elect a President who hasn't been porking up on earmarks and promises to veto legislation with the fucking things in it?

Off the topic of the legislation, but regarding tax cuts. It's been historically proven that some tax cuts, specifically capital gains, increase tax revenues to the government. This is because of increased economic growth and churn that results.

[Thorne]

My guess about the vote gotten turned down is the "small fact" that there is an election in November and who wants to take a hard decision that half of his/her voters will hate? That sure is a great way to kill your chances in the upcoming elections.

I personally think that there really NEEDS to be a bailout and if not then I guess the whole world is in serious trouble.
my 5 eurocents from a European pov.

That certainly pays a part in it. And so does the fact that people really don't like the idea of turning over that much money to corporations without any kind of oversight. Look at how much money has been lost in Iraq and Afghanistan! And that's with oversight!

Yes, there does need to be a bailout, but they need to make sure that the average investor is the one who benefits, not some overpaid manager who doesn't stand to lose anything to start with, and is likely to come out smelling like a rose no matter what happens.

[MMI]

A year ago, you'd have held such overpaid managers as the epitome of America's work ethic and the heros of capitalism who fully deserved every cent they made.

What's happened?

[mkemse]

The Senate version of the Bill, which passed the Senate today, has a lot of crap in it. The original Bill was three pages long (this is the one that gave one guy control of $700-billion with no oversight or accountability) -- the Senate Bill is about 400 pages.

In it is a provision to require insurance companies to pay for covering mental illness. Believe it or not, I think there's a connection. See the problem's root cause was people who thought it was okay to buy houses they couldn't afford, okay to lend to people who couldn't pay the money back and people who thought it was okay to create derivatives of those stupid loans that neither they nor the buyers understood. All of this is clear evidence that those individuals were nuckin' futz, so if their insurance companies had been required to provide coverage for their therapy, clearly none of this would have happened. See, the Senate knows what it's doing.

So, instead of working on tight, targeted legislation to fix a serious problem, the idiots are tacking on earmark after earmark.

Yes, this is standard practice and helps legislation get passed ... "vote for my bill and your district gets $1-million ... but is it the way things should work? Shouldn't legislation stand or fall on its own merits, not on how much other crap can be used to buy votes?


As a partisan aside: Maybe we should elect a President who hasn't been porking up on earmarks and promises to veto legislation with the fucking things in it?

Off the topic of the legislation, but regarding tax cuts. It's been historically proven that some tax cuts, specifically capital gains, increase tax revenues to the government. This is because of increased economic growth and churn that results.


The Origianl Document you speak of that was 3 pages long, was simply an Outline from the Treasury Secrartary, it was not the full Bill itself, just an outline of what was needed

[MMI]

The original Bill was three pages long ... the Senate Bill is about 400 pages.

I bet the latter consists of the original 3 pages (with maybe some words and numbers changed) plus 397 pages of "get-out clauses" so that everyone involved can point to one of them to prove he/she was right the first time round, and that the new bill is both different from, and better than the original.

Whether it will be adequate remains to be seen.

It's just after midnight GMT as I write, and I haven't heard if the bill has passed yet. But I noticed as I checked NPR's website that some economist says that mor-tgages might not have been the cause of the problem, but American borrowings from abroad. Hmmm. We in Britain might agree. After all, we've nearly lost 3 banks because they lent to America and in return took an interest in American sub-prime mor-tgages!

<Note to the Ops> I know you've banned the word "s o c i a l i s t" because you hate me, but why on earth is "M o r t g a g e s" censored?

[TheDeSade]

All good observations on this situation. What it basically boils down to is a bunch of legislaters removed all the controls and regulations governing most of the financial operations in our economy all the while touting how the free market capitalistic system would rebulate itself and self correct as it went along. Well, greed and avarice reared its ugly head and now the system is trying to correct itself and the same bunch of politicians are working their asses off to save the financial tails of the same bunch of greed ridden individuals who were in charge of the financial system in the first place. Instead of letting the system self correct, they are going to step in again, patch it and be damned who they hurt as long as their old boy network keeps enjoying the same set of class distinct privileges.

My two cents worth. Let the system work. Let the bankruptcies happen, let the liquidations commence. It will hurt, it will set our economy back, but in the end, it will correct the problems and point out exactly what needs to be done to properly control the situation in the future.

[Ragoczy]

All good observations on this situation. What it basically boils down to is a bunch of legislaters removed all the controls and regulations governing most of the financial operations in our economy all the while touting how the free market capitalistic system would rebulate itself and self correct as it went along. Well, greed and avarice reared its ugly head and now the system is trying to correct itself and the same bunch of politicians are working their asses off to save the financial tails of the same bunch of greed ridden individuals who were in charge of the financial system in the first place. Instead of letting the system self correct, they are going to step in again, patch it and be damned who they hurt as long as their old boy network keeps enjoying the same set of class distinct privileges.

Let's at least set the factual basis for why controls on the m.ortgage market, Fannie-Mae/Freddie-Mac in particular, were removed and not reinstated.

Not only were lending standards allowed to be relaxed, but those GSEs were required to make risky loans to high-risk borrowers in order to increase homeownership among people who really should have been renting. That executives there took advantage of the bonus structure to under those conditions isn't surprising, though still despicable.

Not all lawmakers were in on this. The Bush administration warned about lack of oversight more than a dozen times over the last several years. During Congressional hearings, many lawmakers spoke of the need for more oversight and warned of the looming potential for disaster -- others, like Cynthia Mackinnie (sic?) said they saw no problems and touted how "innovations" like 100% financing had helped so many high-risk borrowers, praising Frank Raines who made something like $90-million during his tenure.

I'm repeating myself, but it bears repeating: If you feel strongly about this issue, feel that it never should have happened and can't be allowed to happen again, then remember that there's an election coming up. One candidate warned about this problem and wanted more regulations in 2003, 2004 and 2005. The other has received the second-highest amount in contributions from the GSEs and has Frank Raines as one of is financial advisers.

[leo9]

A year ago, you'd have held such overpaid managers as the epitome of America's work ethic and the heros of capitalism who fully deserved every cent they made.


Not I. More than a year ago, I and a lot of US liberals were calling them fraudsters who were getting obscenely rich by undermining the economy. But nobody wanted to listen to subversive anti-capitalist talk like that.

[mkemse]

All good observations on this situation. What it basically boils down to is a bunch of legislaters removed all the controls and regulations governing most of the financial operations in our economy all the while touting how the free market capitalistic system would rebulate itself and self correct as it went along. Well, greed and avarice reared its ugly head and now the system is trying to correct itself and the same bunch of politicians are working their asses off to save the financial tails of the same bunch of greed ridden individuals who were in charge of the financial system in the first place. Instead of letting the system self correct, they are going to step in again, patch it and be damned who they hurt as long as their old boy network keeps enjoying the same set of class distinct privileges.

My two cents worth. Let the system work. Let the bankruptcies happen, let the liquidations commence. It will hurt, it will set our economy back, but in the end, it will correct the problems and point out exactly what needs to be done to properly control the situation in the future.

I may be mistaken but I think John McCain led the way on having the controls lifted, pease correct me if I am wrong on this

[Ragoczy]

I may be mistaken but I think John McCain led the way on having the controls lifted, pease correct me if I am wrong on this

Which controls? For the GSEs (Fannie-Mae/Freddie-Mac) and mortgage industry, McCain was calling for more regulation and oversight and warning of what's happening now in 2004/2005. Obama was taking a shitload of money from their lobbyists.

[lucy]

... it will correct the problems and point out exactly what needs to be done to properly control the situation in the future.
Ummm, not likely. According to a couple of economic professors from the U.S. who investigated economic crises over the last 500 years there is only one thing that was always the same in these events: The politicians/leaders/rulers didn't learn nothing at all and made the same mistakes over and over again.

[Thorne]

A year ago, you'd have held such overpaid managers as the epitome of America's work ethic and the heros of capitalism who fully deserved every cent they made.

What's happened?

Sorry, but I've never considered these guys as the epitome of anything but greed. Just like sports figures, and sports managers and so many other useless leeches. It's a rare case indeed where a manager, especially one who has never worked in a factory, or in construction, or done anything but juggle numbers in a book, earns anywhere close to what they get. How many times have we seen when management drives workers to improve production, work more hours and then, when things get a little slow, they lay off the people who are actually making the money while putting themselves up for large bonuses?

No, the heroes of capitalism are the small business owners who are out in the shop every day, working alongside their employees, and making sure that those employees get a share of the credit.

[Thorne]

The politicians/leaders/rulers didn't learn nothing at all and made the same mistakes over and over again.

DUH! Is anyone surprised by this statement?

[mkemse]

DUH! Is anyone surprised by this statement?

No

[MMI]

A year ago, you'd have held such overpaid managers as the epitome of America's work ethic and the heros of capitalism who fully deserved every cent they made.

What's happened?

Forgive me, everyone, please. I was under the misapprehension that the ability to make vast fortunes if you were skillful, or lucky, or able to use your own situation to your advantage, was what the free-enterprise culture was all about.

I withdraw my previous comment.

[Ragoczy]

Forgive me, everyone, please. I was under the misapprehension that the ability to make vast fortunes if you were skillful, or lucky, or able to use your own situation to your advantage, was what the free-enterprise culture was all about.

I withdraw my previous comment.

It's about entrepreneurship and succeeding or failing on one's own merits. Middle-management and CEOs who've never built a company of their own are unfortunate by-products.

[Thorne]

It's about entrepreneurship and succeeding or failing on one's own merits. Middle-management and CEOs who've never built a company of their own are unfortunate by-products.

Exactly!

You aren't wrong, MMI. Not at all. But what you're saying doesn't apply to these kinds of people. Even the sports stars I noted in my last post can't be totally to blame, I suppose. If the teams are willing to pay those salaries, and the fans are willing to pay the prices to see the games, I suppose that's a free market.

But a career manager, with no real idea of how to build a business, comes in and makes wholesale changes, mostly for the sake of change, then gives himself elaborate bonuses and leaves just before the bottom falls out, is not someone to look up to. He's a parasite. Unfortunately, other middle-managers who want to be just like him will make his path easier. And we pay the price.

[leo9]

But a career manager, with no real idea of how to build a business, comes in and makes wholesale changes, mostly for the sake of change, then gives himself elaborate bonuses and leaves just before the bottom falls out, is not someone to look up to. He's a parasite. Unfortunately, other middle-managers who want to be just like him will make his path easier. And we pay the price.

In this country we call them "seagulls". Fly in, crap on everyone below, and fly out again.

[leo9]

Forgive me, everyone, please. I was under the misapprehension that the ability to make vast fortunes if you were skillful, or lucky, or able to use your own situation to your advantage, was what the free-enterprise culture was all about.


It was supposed to be about doing all of the above honestly and without legalised fraud. Which is what the selling of toxic securities always was, though no politician dares to say so because they legalised it.

Take away all the controls and regulations, and the vast fortunes are made by criminals. That's why "small government" never works for long (only for as long as it takes for the honest businessmen to be pushed aside), but has a powerful and well funded lobby.

[Ragoczy]

Take away all the controls and regulations, and the vast fortunes are made by criminals. That's why "small government" never works for long (only for as long as it takes for the honest businessmen to be pushed aside), but has a powerful and well funded lobby.

That isn't what I or anyone I know means by "small government". Government's proper role is to protect the individual.

By "small government", what's typically meant is keeping government programs small and ensuring people have the opportunity to be self-reliant rather than reliant on government.

[Thorne]

In this country we call them "seagulls". Fly in, crap on everyone below, and fly out again.

LOL! I like that! And they're noisy, to boot!

[chainmale]

The question of "bailing out Wall Street" isn't even entirely accurate. If any of you bought a home in the last six years you benefited from the easy terms and low rates....no one is entirely innocent. Only an anarchist would truly want the worlds financial system to collapse. At least the US is taking massive action, how many years has Japan been in recession? Its also Europe's problem as well, see Fortis.

[leo9]

The question of "bailing out Wall Street" isn't even entirely accurate. If any of you bought a home in the last six years you benefited from the easy terms and low rates....no one is entirely innocent.

But if it were only home loans that were being guaranteed, it wouldn't cost $800M (which, face it, Uncle Sam doesn't actually have at this moment, so the - unintended? - consequence is that now the Gov't is in hock to the banks too). What makes it so expensive are the loans banks made to other banks which turned out to be waste paper. In any honest financial system this would be called fraud, not supported by the Government.


Only an anarchist would truly want the worlds financial system to collapse.

I'm sure that twentyfive years ago, people in Russia were saying "Only an anarchist would want the Soviet system to collapse".


At least the US is taking massive action, how many years has Japan been in recession?

Which, since Japan hasn't actually been hurting badly as a result, proves that massive action wasn't actually necessary.

[george1948a]

In my opinion i do not think the Govt. should bail out Wall Street. Believe it or not, 700 billion does not come close to cleaning up toxic debt owned by various institutions. At best this is a stop gap measure that will end up only prolonging the inevitable.

Its my belief that the market should take the hit, all of us will take the hit with it, i have already lost a great deal of stock value and have a 401k that is sinking like a stone in the ocean. I just do not believe we can borrow our way into prosperity.

[MMI]

Chaos is inevitable now is it? Only if the situation is mishandled ... Ummm, maybe "inevitable" is right, after all!

I agree that $700 bn isn't enough to solve the problem. It isn't enough even to solve USA's problem. Who knows how much is needed?

I may have a very simplistic understanding of what's going on - in fact, I'm sure I do - but so far as I understand it, we are facing a situation where virtually every banking institution in the world has become tainted by "toxic" investments and now does not know the true value of its balance sheet. They have to fund these investments by borrowing from other banks, and, of course, no bank will lend to any other company which cannot show what its true value is. Central banks are providing funds as lenders of last resort for fear of the consequences otherwise.

The first thing to do is to face the problem. This isn't global warming. We don't have years and decades to argue about whether it's really happening or not. But a flood of major bankruptcies within the financial system would be as devastating to the economy as a flood from melted icecaps would be to coastal populations

It seems to me that the most expedient course of action would be for all governments together to take control of the banks' activities (I don't mean to take them over or to nationalise them, simply take temporary powers to force banks to do as the governments tell them). Then the banks would be made to lend to each other on an equitable basis until all liquidity problems are sorted out, and meanwhile, the value of the mortgages they hold should be realistically assessed, and the banks made to write down the values of their portfolios accordingly. Any capital readjustments necessary to meet prudential requirements should then be made, or banks failing to meet their capital adequacy requirements should be merged into each other or wound up.

Finally a repayment plan for returning the subsidies that have been forced out of us should be worked out and agreed, even if this means the State becomes a shareholder.

Once the mess has been sorted out, the governments could (if they wished) relinquish their temporary powers.

[MMI]

After the mess has been sorted out - and surely it will be - every pundit given an opportunity to air his views has said, the banking system will survive, but will be very different from what it was before - - - After the mess has been cleared up, should we lobby our politicians to pass laws to make all banking companies mutual organisiations, where they are owned by depositors rather than by stockholders, and each depositor will have one vote when it comes to governing the institution and making appointments, regardless of the size of his deposit account?

[MMI]

From a speech by the Prime Minister of Iceland on Monday


Fellow Icelanders

The Government of Iceland, the Central Bank and the Financial Supervisory Authority have over the past days and weeks worked ceaselessly to find a solution to the enormous difficulties which threaten Icelandic banks, in good cooperation with the banks. Various parties have been involved in this work, for example the pension funds and representatives of the labour market. The Government has, for its part, aimed for the sale by Icelandic banks of foreign assets and a reduced presence abroad, so that the Icelandic state, so small in comparison with the Icelandic banks, would have the capacity to support them. We should bear in mind in this connection that the huge measures introduced by the US authorities to rescue their banking system represent just under 5% of GNP. The total economic weight of the Icelandic banks, however, is many times the GNP of Iceland.

Thus a decision on wide-ranging rescue measures for the Icelandic banks is not only a matter of tax payers shouldering a heavier load temporarily, but concerns the position and future of the Icelandic nation as a whole.

...

God bless Iceland.


Today in the UK, Icesave, an internet bank owned by Landsbanki Islands hf, stopped customer withdrawals and was taken into receivership (a step short of bankruptcy). Landsbanki itself has been taken under the control of the Icelandic government, which says that depositors will be fully protected. It is unclear whether that undertaking was intended to include non-Icelandic depositors: it should, but does it? The Prime Minister was vague. But is it a sign that individual nations will be forced to adopt "beggar-my-neighbour" policies to protect local interests?

The trouble is, Landsbanki isn't the only Icelandic bank in trouble. All of them are. And the liabilities of all the Icelandic banks exceed the total wealth of that country many times. In a word, Iceland is bust.

But with goodwill, careful husbandry of the country's resources, and a huge loan from Russia, it will survive.

Does anyone still need a sign that these problems aren't as bad as they are being made out to be? Is anyone still relaxed? Iceland may only be a small country, with a total population the size of a large city, but if it can go under, so can any other small country. Luxembourg, perhaps? And if enough small countries are unable to meet their debts, so, too can big countries.

The poll is closed now, and it is surprising how much the gap between the two positions closed as events unfolded. But, overall, it still shows a preference to let the banks sink or swim on their own. I wonder how much longer people will continue to hold that view.

Meanwhile, this was an interesting thread and I am glad we had the opportunity to challenge each other's views on it.