The $700 Billion Bailout Package

I suppose this was the beginning of the crisis.

How can a president be so dumb as to not foresee the consequences of such an idiotic policy?

http://uk.youtube.com/watch?v=eW9viaJatpo

Personally, I hope, when the dust settles, you Yanks will reconsider throwing your weight around all over the world where you’re not wanted, Iraq, Afghanistan, Georgia, etc and trim your ‘defence’ (that word’s a laugh) budget to suit your cloth.

Pulling out of Iraq would save at least $200 billion and why do you have to spend more than $700 billion (ironically the ‘bail out’ sum) more than the combined total of the rest of the world’s defence spending on your armed forces?

Where’s the threat to mainland USA?

Well, there does seem to be one - but not from Iraqis, Taliban, or Russians - it’s from south of the border - and with all that military hardware - you’re still incapable of defending yourself against it!

This is the true cost of this debacle; the Brits telling us, "nana, nana, booboo, we told us so..."Oh well, you reap what you sow...

Ron Paul schools Bernanke on the bailout:

http://www.youtube.com/watch?v=dv6rQ0U01Yc&feature=related

Ron Paul is the only one who makes sense to me.

Wolfgang Djarum IV wrote:

Do you see a Bond market dislocation on the horizon? How long will "they" keep buying our hyper-expanding debt? Somethings gotta give huh?

Deflation's the bigger concern right now. The balance between deflation and inflation is like sitting on the top of an egg, perilously close to falling off the precipice either way. Well, I believe we have fallen and Bernanke, who, in theory, is an expert on the Great Depression and was the most concerned and dovish member of the Fed in the wake of the tech debacle, will open the fire hydrant if he has to to prevent a Japan-like malaise. And that's all well and good until the water runs out. So, yes, I see a "dislocation" on the horizon. However, I believe we are seeing this theory that the world no longer catches a cold when the US sneezes debunked. In so much as we continue to consume, the world will continue to lend, albeit with a much higher risk premium. But that money still has to find a home.

The flight from commodities is telling you that deflation is the graver risk. The only reason gold has been catching a bid lately is because of a flight to safety, not as some harbinger of inflation. But, eventually, there will be a bond market dislocation as you well put it.

4runner wrote:

Sagarin wrote:

And I repeat: How much is a gallon of water worth to a dying man in the desert who is so dehydrated and sick that his throat has closed up from anaphylactic shock, so he can't drink anyway without medical intervention? Oh, and the water source is capped and requires special tools to access?

It is worth nothing. It is not "liquid."

Ha ha

Cute. Nope, it's still very much liquid. It hasn't evaporated, though it may be close to freezing. Look, I appreciate the spirit of what you are saying. I am addressing this from the standpoint that there are other solutions beside a proposed, massive government bailout, though this may end up being one of the concessions. After all, that's what this thread is about. I am not willy-nilly advocating abandoning mark-to-market, because, clearly, corporations can exploit that tool to reinflate unrealistic valuations (though, given the amount of scrutiny they are under, this is a real stretch).

BUT, under the current set of extenuating circumstances, we are artificially deflating value in the same manner that the market can often artificially inflate value. If you are looking for one "outside the box" technique to offer some reprieve, this is surely it. The accounting itself is undermining capital ratios, forcing an irrational wave of selling and leading to a self-perpetuating downward spiral, like a run on the bank.

I feel sorry for you. The education you recieved must have been subpar if you think that showed Ron Paul owning Ben Bernanke.

This whole bailout is due to institutional trade organizations holding the financial system we have right now hostage. It's extortion. The 778 point drop when the house failed to pass the bill was their DIRECT shot across the bow. They're holding this country HOSTAGE right now, with a $700B ransom at the end. Is going to help Joe Baggadonughts American. Only in them keeping the job they have today. If it doesn't pass, then the financial institutions will pull out their money, tank the stock market, and wreck the lives of MILLIONS.

I'm a little embarassed to admit this but that is the first time that I've actually listend to Ron Paul. From my perspective he is absolutely dead on. (Does that make me a closet Paulista?)I'd be interested to hear anEconomist's take on that exchange. Are you out there anywhere?

iflyboats wrote:

Ron Paul schools Bernanke on the bailout:

http://www.youtube.com/watch?v=dv6rQ0U01Yc&feature=related

Suppose there is no bailout, don't you fear that a couple of banks will gobble up so many of the smaller banks that the couple surviving banks will know they will be too big to fail? They will then be lax with their risk management and get in trouble down the line. In other words, don't you think there would likely be a moral hazard problem if there is no bailout right now and we will eventually have to bailout a super large bank?

I don’t see how suspending mark to market is going encourage banks to lend to each other. Bank A doing the lending has a lack of confidence in lending to Bank B. Why would Bank A have more confidence that Bank B will remain solvent and be able to pay the loan back to Bank A with mark to market suspended?

Moral hazard is always a risk. Oligopolies are always a risk. The government effectively created one via its GSEs, distorting the entire credit market to begin with. The biggest risk is one big theocracy now. In the end, capitalist policies that promote and foster free market competition serve the greatest amount of good on average. Yes, some banks will fail, and they should. Others will survive, but they will get mere pennies for their distressed assets.

Go back and read this thread. I never said this would solve the lending issue. It would merely create an environment of stability, until the market can clear. No matter what we do, banks will be reticent to lend. The risk premiums are going much, much higher.

Jefe in the CO wrote:

I'm a little embarassed to admit this but that is the first time that I've actually listend to Ron Paul. From my perspective he is absolutely dead on. (Does that make me a closet Paulista?)

I'd be interested to hear anEconomist's take on that exchange. Are you out there anywhere?

There is more than an ounce of truth to what Paul preaches, though he's a bit of an extremist, and extremists don't play well in the sandbox with their constituencies. More saliently, a vote for Paul is a vote for Obama, which would be ok if we had another ideologically polarized "Contract with America" Congress.

Keith Stone wrote:

[quote]:

So Mr God, if you know all these things that us mere mortals couldn't possibly fathom, why weren't you and your ilk sounding the alarm a year ago? Even us stupid people could see a year ago that credit was tightening, that loans were going bad, companies were doing drastic cutbacks, etc. If the stupid people were seeing this, how come you Gods just sounded the alarm last week?

Wow Keith, your even more emotional than when you argue the vital importance of 7 hour marathoners in races.

OK, I'll wrap up my dialog with you. First off, you should really consider taking an adult education class to improve your reading comprehension. But I don't think that would help, because you will continue to read certain parts of a sentence and pick the words that suit your stick up for the blue collar guy act.

You see, stupid, if you go back and look at my posts, nowhere did I defend the behavior of the idiots at the investment banks, the rating agencies,mortgage brokers, banks or the consumers that took out loans they couldn't afford.

You see, stupid, my whole argument for the bill is based on the fact the credit markets are locking up and the people that are going to get hit hardest, are the regular working people who had nothing to do with this mess and are going to lose jobs and chunks of retirement funds if nothing is done to stop the bleeding now

I'll use the same analogy I used before. You have a fire in your house. What are you going to do, call the building inspector to punish code violations while the house burns down? That's what you are doing. My position is that it's more important to put the fire out so you still have a house and deal with the damage after everyone is safe.

"You and you ilk"? Again, you've outed yourself as a complete idiot. People in the business who's stature is a million times what mine is or anyone else around here like Bill Gross have been screaming we've been headed for trouble for years with the shadow banking system that developed. Warren Buffet longer than that. Have you ever read the Economist, or are the words too big for you? They've been warning for years we were headed for a problem. I guess you missed all that though due to your massive responsibilities as a fifth rate race director.I've been telling my clients the stock market has been artificially inflated for years. You know why nothing was done? Everyone was making money, including you and your ilk who went around bragging about their 401k full of those phony gains and all they were able to do with their equity line of credit and their summer homes and real estate flipping business.

Another thing you idiot. You imply in your post that I am one of the evil "Wall Street slicks" that you've decided is wholly to blame for this. Hate to disappoint you, but I have a small business based in the Midwest and my opinions on the credit market are based on what clients here and overseas are seeing where they are and the difficulties the tight credit conditions are already causing and also trading products based on them. Tell me, who are your contacts?

I'd go into an explanation of how the LIBOR rate soared today or how much the Fed has borrowed the last few days or how the small manufacturing plant close to me is teetering on the edge, but you don't want to hear that, you've already figured this whole thing out and know who to blame.

So I'll end our discussion. Have fun googling articles for regurgitated "anti Wall Street" rhetoric that you will use in response to this post.

Maybe you'll realize some day that if you weren't so hysterical that there is probably a lot of common ground in our beliefs if you weren't so eager to punish the whole country to further your vendetta against "the man."

Here's a link that might help the comprehension skills.

ha ha ha ha!!!!

POD!!!!

So you are a liar ? you aren't in the biz ?

keep it up with the insults, it just makes you look bad.

I feel sorry for you. The education you recieved must have been subpar if you think that showed Ron Paul owning Ben Bernanke.

You're so right. Bernanke and the other central planners have obviously done a brilliant job of managing our economy. Who the hell does Ron Paul think he is to question the authority of those who have led us to our current position of prosperity and stability?

Congress should pass laws tightening lending so that risky loans can no longer be made. Short selling etc. should be curbed. Relief shelters, hot meals, tents, campgrounds, trailer homes, National Guard troops, etc. for laid off Wall St. employees, those with foreclosed homes, etc. should be provided by charities and local governments.

But no bailout money should be allocated by the U.S. government for Wall St. firms, banks, or any company that goes under as a result. That's a natural part of the bursting bubble. Let the firms go under. Someone will be there to buy up the remaining hard assets.

Regulation not Bailout wrote:

Short selling etc.

I have news for you. A stock, commodity or future will not fall for long if the fundamentals didn't warrant it.

Short selling bans are worthless.They are a classic case of shooting the messenger.

The reason stocks are getting crushed is not because of short sellers, it's because their balance sheets are complete garbage.

John Mack, Morgan Stanley and the Hedge Funds they guarantee have made billions by shorting various things.

But what happens when Morgan Stanley and Mack are outed as over leveraged due to moronic risk taking and they are getting shorted? He cries to the SEC that is the short sellers fault, not his or his companies lack of control.

Don't fall for mis direction.