The $700 Billion Bailout Package

I'm not 100% certain either (is anyone ever 100% certain) - I have substantial credentials as an economist- and all I can say is, my view is that a bailout substantially reduces the chances of an economic collapse, perhaps more importantly i respect paulson, bernanke and much of the fed and they have more information on the current state of economic affairs than anyone so I am inclined to agree with their assessmentso while I don't KNOW for sure i can say with some certainty that this investment would be a good one to make

OldXCguy wrote:

anEconomist wrote:

people suprise me... the bridge is on the brink of falling down, the engineers know the best fix to keep it from falling yet on the bridge are people who don't know diddly about the situation shouting don't listen to the engineers

not until the bridge falls will they see how bad that sucks

So you KNOW that giving Paulson $700 billion to run the Wall Street investment banks is going to keep the bridge from toppling? Are you sure he's not going to need twice that amount? Or half or much less than half of that amount? I respect your knowledge of economics, but many valid objections to the current plan have been presented, not the least of which is that the massive weight of $700 billion could be what topples the bridge. How would that be for irony?

Thanks for your civil and thoughtful reply. I didn't mean mine to be quite as harsh as it reads. I also have a great deal of respect for the Fed, just not sure that I want to give them all that money without restrictions. Where's Greenspan when you need him?

Can someone please explain to me WHY lawmakers can't tie this bill to new laws to change lending rules?

This would have never happened if it weren't for eliminating the old rules that required:

(1) 20 percent down

(2) maximum of 28/36 percent for mortgage-to-income ratio and total debt to income ratio

(3) verification of income

Also, if a person wants an adjustable rather than fixed rate loan, make it a requirement that the maximum possible future monthly payment under an adjustable interest rate cap still qualifies for acceptable mortgage-to-income ratio given their current income levels.

All this talk about making the CEOs, banks, and brokers accountable doesn't mean squat without a new yardstick that you can hold them to -- THE LAW

go f*** yourself, stone.

you're an arrogant, self-serving prick.

anEconomist wrote:

no crap... i don't think anyone (including those on wall street) see a bailout as something that should be done solely to help out those on the street

paulson and bernanke know that banks and the main street economy are connected... they don't want real live people (as you call them) hurt anymore either

people suprise me... the bridge is on the brink of falling down, the engineers know the best fix to keep it from falling yet on the bridge are people who don't know diddly about the situation shouting don't listen to the engineers

not until the bridge falls will they see how bad that sucks

The "engineers" on Wall Street should have known that the bridge (i.e., the mortgage underwriting) was a POS years ago. The "engineers" decided that generations worth of underwriting data didn't matter anymore. The "engineers" assured everybody that everything was "contained."

In the real world, if an engineer builds a bridge that falls down, that engineer loses his/her job. That engineer can be held personally liable for damages. No one will ever trust that engineer again. Heck-- in cases of criminal negligence, that engineer can go to jail.

Fine-- I'll accept the conclusion that the Wall Street "engineers" have lead our nation to the brink of an abyss and that the potential harm is so vast that something must be done. I will not accept the conclusion that these same "engineers" are to be trusted to do it...

They aren't. The first group were sewage and waste engineers. The new ones build roads and bridges. No one has recommended that wall street be allowed to fix the mess it made, but rather other individuals such as bernanke and the Fed who hopefully can be trusted.

I certainly trust them more than the instincts of the American people and "main street". look where that has gotten us...

Clearly Paulson, Bernanke, et al, caved to political and economic pressure by continuing to lower the Fed Rate and exasperating the problem we find ourselves today. They were not right then but somehow you believe them to be right tomorrow? That is blind faith.These guys don't know anymore than our congressmen. The people who really know what is going on are those who actually have liquidity. And you cannot trust them either because they are looking out for their own best interests. Carnivore, you and other economist will just say what they want you to say so that they can charge as much as they can for their money. I've said it once and I'll say it again; all this uncertainty surrounding a bailout is playing right into their hands. We need to cut bait and start working on the turnaround. The smartest people to do this are the people who have the cash and the ones who want the cash not the ones who just look at it.If you have a good business plan that provides timely and valuable goods and services you will find credit. If you don't you will need to reorganize under our bankruptcy codes and eliminate all the unnecessary waste until you can get funding or get out of business. Yes jobs will be lost and new ones will be created. The only cost to our society is that you won’t be able to fake it anymore – good riddance. I heard all this same doom and gloom during Enron, Tyco, Global Crossing, World Com's collapse. Bankers were stunned and there was a retraction of debt for a while. But if there is one truism in business: if you've got cash sitting around doing nothing, it will burn a hole through your soul - what little one you have left.

anEconomist wrote:

I'm not 100% certain either (is anyone ever 100% certain) - I have substantial credentials as an economist

- and all I can say is, my view is that a bailout substantially reduces the chances of an economic collapse, perhaps more importantly i respect paulson, bernanke and much of the fed and they have more information on the current state of economic affairs than anyone so I am inclined to agree with their assessment

so while I don't KNOW for sure i can say with some certainty that this investment would be a good one to make

uhh, i wasn't calling people on wall street the engineersYes, I think they are smart and know what is going on as well but their incentives were not aligned with those of the country (or the long term benefit of their companies for that matter)... they were good at engineering themselves plenty of money (most have walked away already)the engineers i was referring to is the fed, bernanke, paulson, and other regulator/academicsthe fed isn't free from blame for this mess either but in this situation, they are the ones who know how to keep things propped upnot 535 guys on capitol hill who have no clue about banking, finance and macroeconomics

a)I believe greenspan was the one who lowered the fed rate for a long period of time - not paulson or bernankeb)Given the information he had at the time he may have been right to do so.I gave up academia - I actually work for a hedge fund now - we have been doing well and continue to do well. We stayed clear (much like GS did at the right time) of subprime and mbs... if anything a shake-out in the financial industry is good for our company. However, I don't believe sticking it to a few reckless banks (whose shareholders aren't going to walk with much no matter what) is worth risking substantially higher unemployment and general economic contraction.Maybe it has been too long since this country has seen very hard economic times (hmm, could that be because we have people who know what they are doing at the treasury and the fed)... but they can return. I think most forget that.

I, for one, have no faith in the Fed. Thinking they're the ones to solve this as akin to asking the arsonist to help put out the fire. They're the ones that got us into the mess, they aren't going to get us out.

At best they'll lessen the impact for a short period of time, but at some point this stuff has to got to get cleaned up and a bailout isn't going to do what needs to be done.

anEconomist wrote:

a)I believe greenspan was the one who lowered the fed rate for a long period of time - not paulson or bernanke

They just stuck to the script.

b)Given the information he had at the time he may have been right to do so.

Maybe it has been too long since this country has seen very hard economic times (hmm, could that be because we have people who know what they are doing at the treasury and the fed)... but they can return. I think most forget that.

This is my point, more or less. By tinkering with the cost of funds they, not only delayed the inevitable but, actually added to the problem. I know most people blame Greenspan but Bernanke could have at least skipped a couple of interest rate cuts. This may have provided us a softer landing. Instead I think he got caught up in the heat of the moment just like everyone, except thankfully, your Hedge fund. That is what I find most distasteful about this blind faith in the FRB because these guys do not appear to be above the fray.

I don't dispute that the fed/basel accords/other regulators may have made some mistakes in the last few years.But you guys are some tough critics... basically they have been at least somewhat responsible for about 17 years of prosperity, including excellent growth, low inflation - referred to as the great moderation.Arguably the last 20 years have been some of the best economically speaking for this country... now all of a sudden no one has faith in them.Sheesh, i would hate to think how you would have treated the fed pre Volcker.

Mtn Dew wrote:

I, for one, have no faith in the Fed. Thinking they're the ones to solve this as akin to asking the arsonist to help put out the fire. They're the ones that got us into the mess, they aren't going to get us out.

At best they'll lessen the impact for a short period of time, but at some point this stuff has to got to get cleaned up and a bailout isn't going to do what needs to be done.

George Bush has been in office for 7 1/2 years. The first six the economy was

fine.

A little over one year ago:

1) Consumer confidence stood at a 2 1/2 year high;

2) Regular gasoline sold for $2.19 a gallon;

3) the unemployment rate was 4.5%.

4) the DOW JONES hit a record high--14,000 +

5) American's were buying new cars, taking cruises, vacations

overseas, living large!...

But American's wanted 'CHANGE'! So, in 2006 they voted in a Democratic

Congress and yes--we got 'CHANGE' all right. In the PAST YEAR:

1) Consumer confidence has plummeted;

2) Gasoline is now over $4 a gallon & climbing!;

3) Unemployment is up to 5.5% (a 10% increase);

4) Americans have seen their home equity drop by $12 TRILLION DOLLARS and prices still dropping;

5) 1% of American homes are in foreclosure.

6) as I write, THE DOW is probing another low~~

$2.5 TRILLION DOLLARS HAS EVAPORATED FROM THEIR STOCKS,BONDS & MUTUAL FUNDS INVESTMENT PORTFOLIOS!

YES, IN 2006 AMERICA VOTED FOR CHANGE...AND WE SURE GOT IT! ...

REMEMBER THE PRESIDENT HAS NO CONTROL OVER ANY OF THESE ISSUES, ONLY CONGRESS.

AND WHAT HAS CONGRESS DONE IN THE LAST TWO YEARS, TO CHANGE THINGS FOR THE BETTER? ABSOLUTELY NOTHING.

NOW THE DEMOCRATIC CANDIDATE FOR PRESIDENT CLAIMS HE IS GOING

TO REALLY GIVE US CHANGE ALONG WITH A DEMOCRATIC CONGRESS!!!!

JUST HOW MUCH MORE 'CHANGE' DO YOU THINK YOU CAN STAND?

Mtn Dew wrote:

I, for one, have no faith in the Fed. Thinking they're the ones to solve this as akin to asking the arsonist to help put out the fire. They're the ones that got us into the mess, they aren't going to get us out.

At best they'll lessen the impact for a short period of time, but at some point this stuff has to got to get cleaned up and a bailout isn't going to do what needs to be done.

OMG! MD we may have had our first meeting of the minds...mind if I smoke?

None of that can be argued with unless, of course, you add in this year and the years to come. Unfortunately for the FRB you can't measure your success by cherry picking the time periods. This is why they must employ policies that will have long term results and not be swayed by the need for short term fixes. Why was the FRB so afraid of a recession? Riding out a small head cold would have been just what the doctor order rather than contracting this massive infection we now have.

anEconomist wrote:

I don't dispute that the fed/basel accords/other regulators may have made some mistakes in the last few years.

But you guys are some tough critics... basically they have been at least somewhat responsible for about 17 years of prosperity, including excellent growth, low inflation - referred to as the great moderation.

Arguably the last 20 years have been some of the best economically speaking for this country... now all of a sudden no one has faith in them.

Sheesh, i would hate to think how you would have treated the fed pre Volcker.

anEconomist wrote:

uhh, i wasn't calling people on wall street the engineers

Yes, I think they are smart and know what is going on as well but their incentives were not aligned with those of the country (or the long term benefit of their companies for that matter)... they were good at engineering themselves plenty of money (most have walked away already)

the engineers i was referring to is the fed, bernanke, paulson, and other regulator/academics

the fed isn't free from blame for this mess either but in this situation, they are the ones who know how to keep things propped up

not 535 guys on capitol hill who have no clue about banking, finance and macroeconomics

So long as the taxpayers-- and those 535 guys on Capitol Hill-- end up owning large enough chunks of Wall Street that they actually have the balls to tell a CEO that the annual pay package is not in the 10's of millions, I would agree that you have different parties...

Otherwise, you're just giving the money back to the same fools who got us here...

cherry picking - 20 years - is that still cherry picking?perhaps we might not have so tough in the next few years...i don't think a correction is out of order, and I am certain that the fed would agree (not publicly) but at the same time i don't think they want to welcome in a depression, as i don't neitherbut then again how can you dispute Jefe in CO who clearly has a better grasp of the situation than paulson and bernanke - i mean their economic resumes are just awful

sorry for spelling mistakes... time is limited on letsrun

The fed is not responsible for the creation of real wealth in America. At best they've created the illusion of wealth.