The $700 Billion Bailout Package

Thanks for the history lesson, but this is a far different crisis than the S&L scandal. Dufus, this is not about "hiding" losses. This is about providing transparency, not eliminating it, and allowing for the market to finally "clear." As of now, companies are mandated to say that all of this debt is essentially worthless, even though that is simply not the case. Do you really presume that ALL of the collateral backing the paper is worthless? In the world of finance, values are determined by discounting future cash flow streams to the present. What you are essentially advocating is that the future cash flow streams from the various tranches of risk are nonexistent, and that just simply isn't the case.

I'm not one for tampering, believe me (unless it's to undo some horrendous, overzealous regulation), and I visited this idea sometime ago on a previous thread (not because it's just now playing in the media), but I am honoring this in light of the conversation about what role the government should play. I am a much bigger proponent of capitalists solving this problem, believe me. Mark-to-market accounting, GIVEN the current credit constipation, is ARTIFICALLY deflating assets. It's not real "accounting," it's misrepresentation. Nevertheless, I also believe that the sequel to the original bill will get passed, albeit with a provision for suspended mark-to-market. The stock and credit markets appear to be sniffing this out, at least in the short run.

Nice partisanship with the McCain reference BTW. Do you really want to get into this? We could start with Obama's inexorable ties to this entire mess via the GSEs, the former felonious Fannie Mae chairman and Obama advisor Franklin Raines, the "oversight" of the GSEs provided by one Barney Frank, ACORN, Chris Dodd's nepotism with lenders and conflict of interest on oversight, and on and on and on....

Let the economy rid itself of the weak?

Hmmm..

Every month, the US import bill is about $60 billion’s more than it’s export receipts.

A billion here and a billion there - it soon adds up to trillions.

When the dust settles - someone is going to have to stop living beyond their means.

This is just plain wrong - banks themselves always need credit (deposits) but they are often extremely profitable.Liquidity can be a real problem and cause companies to go under even though the company otherwise healthy

Jefe in the CO wrote:

If a business has to use credit to stay solvent than that means the banks are funding losses.

[/quote]

If a business cannot make it, it should liquidate labor, liquidate stocks, liquidate real estate. . . . It will purge the rottenness out of the system.

The ability to liquidate in a timely manner at fair market prices is often the very problem.

Melon head wrote:

If a business cannot make it, it should liquidate labor, liquidate stocks, liquidate real estate. . . . It will purge the rottenness out of the system.

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.

This is a delusion, outright. At no point in the last 20 years have we had anything resembling a healthy economy. We have created the illusion of wealth through rabid consumption using borrowed money. Meanwhile, we haven't produce shit except fast food and lawyers. The Fed enabled and encouraged this behavior by allowing us to export our inflation.

Perhaps you need to look at some actual economic numbers, little things like employment, inflation, income, gdp... did you want to teach us all how people didn't actually have jobs and they weren't actually spending money...certainly there may have been a credit bubble recently and we may well see a year or two of poor growth (although that has yet to be determined) but that certainly doesn't erase the pastbut why bother, there is no arguing with irrational blather

iflyboats wrote:

This is a delusion, outright. At no point in the last 20 years have we had anything resembling a healthy economy. We have created the illusion of wealth through rabid consumption using borrowed money. Meanwhile, we haven't produce shit except fast food and lawyers. The Fed enabled and encouraged this behavior by allowing us to export our inflation.

:

Jefe in the CO wrote:

Dude, you're too close to the fire; it's singeing your brain.

If a business has to use credit to stay solvent than that means the banks are funding losses.

Wow, someone who doesn't understand the most rudimentary functions of the financial system tries to entertain everyone with a cute insult.

You have no idea how banks make money. You have no idea how companies meet payroll or finance operations. You have no idea how the city and state you live in function financially. You rant about the "slick cats on Wall Street" but have no idea what the industry really does.

Your industry is changing now. Banks are shutting down and selling themselves. People are being layed off. You industry really messed up. Now we all have to change. Businesses will have to modify their use of credit to stay afloat. Many will fail because of the lack of credit. This is part of the natural correction that has to occur ever now and then. The U.S. will survive.

Perhaps you need to look at some actual economic numbers, little things like employment, inflation, income, gdp... did you want to teach us all how people didn't actually have jobs and they weren't actually spending money...

We had more people employed by government than in manufacturing. We have more service sector paper shufflers like lawyers, accoutants, and financial advisors than people who actually produced anything of value. Spending money doesn't create a healthy economy, producing it does.

Uhhhh, ok now you're starting to sound hysterical. I am curious as to why you chose to focus on the "slick cats on Wall street" comment and left out the comment on the Government, bankers and lunch bucket crowd out.Anyway, my comment on funding losses is not meant to address financial institutions. The gist of your prose was that small businesses will go down in flames because of the impending credit freeze and anyone who disagrees with this statement doesn’t know jack.I say they will not. The healthy ones will have more than enough collateral and options to remain attractive to lending institutions that still have liquidity. It’s not all a bed of roses though because there will be a consolidation of the banking industry and loans will be more expensive and harder to come by. It is also true that businesses that rely heavily on credit (and yes there are many examples of these as you so smartly pointed out) will be put under a lot of strain.All your screaming and bellyaching about the financial markets unraveling leads me to believe that you are about to lose your job. Good luck reinventing yourself, the last thing anyone needs in this time of duress is a smartassed, pissant telling them what they don’t know.BTW – I’ve worked my way through 3 failing S&L’s that rebounded before the RTC shut us down. I’ve worked 9 years in corporate restructuring raising over half a billion dollars in loans and equity for bankrupt businesses that had run out of time and options. In that nine years I’ve only endured one conversion to Chapter 7 and have had a big hand in preserving over 15,000 jobs (this is a bit of a misnomer but still an accurate count). I now head up 4 businesses and over 100 employees with no access to capital (I had to restructure and sell off a business unit to accomplish this). So I know first hand that it is possible. So piss off…

In the biz wrote:

Wow, someone who doesn't understand the most rudimentary functions of the financial system tries to entertain everyone with a cute insult.

You have no idea how banks make money. You have no idea how companies meet payroll or finance operations. You have no idea how the city and state you live in function financially. You rant about the "slick cats on Wall Street" but have no idea what the industry really does.

I agree with YOU, YOU are the only person who knows anything about this crisis.

It is all about YOU. YOU work in the business so only YOU know anything.

YOU are the last person I would ever want on my staff.

In the biz wrote:

It is racing through Europe like wildfire now. So far over the past two days European governments have bailed out Dexia Sa, Fortis, and Hypo Real Estate holding AG. There is more on the way. The Euro had it's biggest move and drop against the USD since it's inception today.

Yes it is; this is a global problem...here's a great analogy on another forum I read today that should make a little more sense to people...(not my analogy but I like it)

"Those of you familiar with the "buddy system" in mountain climbing can relate to this. It makes perfect sense. Now picture a similar system but involving many HUNDREDS of climbers - all roped together. Those ropes are derivatives - swaps especially. This system makes the fall of a single climber far more survivable - multiple people can spread the weight between them. That is why the idiot financial authorities have claimed the system is more "robust" in the face of crises - to an extent it's even true.

Now consider what happens if you get some major disruptive event. Instead of one climber falling, you get a handful to a dozen. IF they are sufficiently disconnected from one another, the intervening climbers can handle the load. But if you get a critical mass in one place a chain reaction of failures can start, with 3-4 falling taking down the next climber in the chain and adding to the momentum of the collapse. That MAY be what we are looking at right now, which is why Karl is exactly right that killing the derivatives monster is an absolute top priority.

If we get a chain failure, the survivors will be either the lucky or very foresighted - those who drove a couple of pitons into the mountain, hooked themselves up to it solidly and cut the ropes before they were dragged down. The problem here is that the solid mountain is government finance and our Congress appears to be doing everything possible to ensure the mountainside crumbles as well."

jeb

Demoncrats are up to their ears in this shit.

So, the Senate has passed it on to the House for a Friday vote --- it will be interesting to see how the Markets, not only in the USA but around the World, will call this one. As a non-economist, it's fascinating to hear "experts" debate all sides of this issue, as if they are 100 % sure they are right. How does that work?

Coming from you, I'll take that as a compliment.

Oooh, I'm all excited to learn from someone who calls me a moron. Can't wait, can't wait!

Yeah, for the life of me I can't understand why people are not in handcuffs right now.

CEO's and Dems should be doing the perp walk.