The $700 Billion Bailout Package

A major recession is inevitable. We should let the free market work and get it over with now. The longer we push it back, the worse it is going to be when it finally happens. I predict a hyperinflationary depression within the next few years that will make the depression of the 1930s look like a picnic in comparison. This bailout will be remembered as one of the dumbest moves in U.S. history.

I'm actually not in favor of this bailout. I believe it is a very dangerous precedent belying a socialist structure, but, as I've said previously, I believe this is inevitable for a former economic juggernaut whose halcyon days have passed it by, while its citizenry lays comatose, more concerned about economic reparations of all sorts and what their government can do for them. Not too much fun arguing over how to split up a dwindling pie.

The SEC should get in the Bond and Securities rating business and the ratings should be governed by law. Moody's and others are the problem. They are the same fat cats screwing the American public and they should be going bankrupt too and losing their homes, life savings, cars, etc. like the rest of America is having to suffer through.

iflyboats wrote:

A major recession is inevitable. We should let the free market work and get it over with now. The longer we push it back, the worse it is going to be when it finally happens. I predict a hyperinflationary depression within the next few years that will make the depression of the 1930s look like a picnic in comparison. This bailout will be remembered as one of the dumbest moves in U.S. history.

We should have let the free market work it out to begin with, and we would never have been in this mess. We should never have bailed out Bear Stearns, allaying and delaying the pain of purging bad assets when the problem wasn't as enormous.

That is point lost by many.

We would be taking on a lot of risk and I have to review the auction process to make sure I understand what is being proposed. What price is paid for the toxic paper is key to this.

And I worry that the paper might be sold back quickly for too low of a price to Wall Street. That is why oversight is needed.

sounds like you are going to come out of this saying that we should have let free markets work itself out and deny that the free market and poor regulations caused this mess.

I, like Bernankle, am for reform of regulations. Some areas need to be better regulated and other areas don't need to have duplicate regulations.

Government interference via the GSEs and the Federal Reserve's printing press are most certainly what ENABLED this mess to begin with by cultivating massive distortion in the credit markets and creating a general lack of price transparency. The private sector does not get exonerated in this debacle, but the markets certainly weren't "free." That is lost on all the ideologues on here.

Please correct me if I am wrong, but aren't a lot of these "toxic" products toxic because of the current lack of a market, rather than a lack to true value? To the best of my understanding, these products are based off of packaging of mortgages (and various pieces of mortgages) into bundles that are then sold/resold. Once default rates increased and people realized many of the poor lending practices utilized by companies like Countrywide, their value came into question and their market dried up. No one wanted to take a chance on products that couldn't be accurately valued and whose value flucuated based on the troubled housing market.

However, assuming our financial systems don't collapse in the near future, these products are still worth something. Say there is a default rate of 20% (A very large percentage. Many should have percentages closer to the general default rate on mortgages.) on some bundles, you will still receive payments on 80% if you hold them over the long-term. By purchasing these products for a relatively cheap price, holding them for an extended period of time, and then slowly releasing them back into the markets, the government can possibly make money on the deal.

I have to say that I am amused as I peruse the various threads on here. People preoccupied with what kind of schools they can get into with such and such a time and SAT score, and how fast they can run a 10k... Comatose...

Sagarin wrote:

We should have let the free market work it out to begin with, and we would never have been in this mess. We should never have bailed out Bear Stearns, allaying and delaying the pain of purging bad assets when the problem wasn't as enormous.

Your ignorance is almost as silly as your continual whoppers you've posted here about your perfect timing as a trader.

Bear Stearns, as a prime broker and clearing agent to "everyone" had way too much counter-party risk and entanglements that would have crippled virtually every market today.

Andre wrote:

Please correct me if I am wrong, but aren't a lot of these "toxic" products toxic because of the current lack of a market, rather than a lack to true value?

No, you are not wrong. But they are toxic for more reasons than the one you described.

It's not only mortgages and the housing market involved. And you, or anybody else has no idea what the purchase price of this crap will be. In fact, Bernacke said he doesn't want to purchase them at "fire sale prices" meaning the tax payer may start taking it in the ass at the time of purchase.

true. It may take years to make money on them. It would depend on how much they are purchased for and what they are sold for or if they are held until they mature.

After the medicare presciption drug plan, I worry this administration would buy the paper for say 30 cents on the dollar and hold them a short time and sell them back to Wall Street for 35 cents on the dollar next year when they are worth say 60 cents on the dollar. They would say that they made money but they gave their friends on Wall Street a great deal.

It is far too early as someone else noted to predict if this will be a loss for taxpayers or not.

Carnivore,,

Must have missed the part about where you are squirrelling away your money. You to Sagarin.

That's mainly what I'm interested in just at the moment.

There is a lot of blame to go around. Ra

Are you one of those people who want to abolish the Federal Reserve? Or do you think their stated goal should be different than it is?

Guess what, Sagarin, whether our country gets into a deep recession or not, I still care about education, running, art, science, my friends, my family, and plenty other things. Stock prices, bank regulations or credit availability won't change a thing.There is more to life than money.

Sagarin wrote:

I am amused as I peruse the various threads on here. People preoccupied with what kind of schools they can get into with such and such a time and SAT score, and how fast they can run a 10k... Comatose...

I agree we should not bail these guys out but for different reasons, I just do not believe this is the only alternative and I am not sure if Bush or the Dems are telling the truth.

Did you notice Beranke is saying the bailout should help us stave off a recession and Paulson is saying it will help stave off a depression ?

Hell no, let the chips fall where they may, and I bet they find another alternative.

Sagarin wrote:

I have to say that I am amused as I peruse the various threads on here. People preoccupied with what kind of schools they can get into with such and such a time and SAT score, and how fast they can run a 10k... Comatose...

What does this mean? We are all about to die and should not focus on anything 'petty'?

If you look at the "net add" column in the link below, the Fed has actually contracted the money supply by $125 billion in the past four days:

http://www.gmtfo.com/RepoReader/OMOps.aspx

some of you don't have a clue how deep this thing goes or how the whole credit crisis started.

it is too far now to be fixed without intervention...yes it's terrible how some of the people who caused this are getting bailed out, but we, the consumers are also to blame.

banks allowed people to take out 2nd mortgages on their home. not only 2nd mortgages, but some were even allowed to take out over 100% on their homes. Some of these people used this money to go on vacations or pay off other debt. when interest rates were raised and the price of homes went down, they couldn't afford their homes.

builders are also at fault because they built way too many homes and overextended themselves. once the sub-prime loans went out the door along with rising interest rates, these homes were left unoccupied.

the point i'm trying to make is that you can't blame this on any one party...everyone is to blame. it started with the lowering of interest rates and it snowballed from there.

i think the bailout is a necessary thing because once the banks go out, other companies will also have to write down their assets and who knows how far it will go from there.

for people concerned about CEO's getting off the hook...it will not be the same way in the future. there's no way the government will allow them to get away with what they have in the past and in the present.