The $700 Billion Bailout Package

Yeah, the bible, terrible place to get personal financial advice.

Really dumb advice like: Store up for lean times, don't chase after riches, don't co-sign for someone, avoid debt, slow and steady instead of the fast buck.

What a dumb book to get financial advice from.

Is szeto French for ignorant?

So what?

John Q wrote:

If banks did eliminate mark to market, why do you think banks would start lending money to other banks?

I don't necessarily think they would, though some serious balance sheet repair would make them less averse. More importantly, it could prevent this cascade of selling that is perpetuating further erosion, until the market clears. But will they lend? That is the KEY question that I've been alluding to for the better part of a year. I'm not sure any of this helicopter drop can stave off a deflationary malaise. Risk premiums on lending will go much higher and stay higher for quite some time.

But make no mistake about it, we will attempt to hyperinflate our way out.

It seems to me that the fed will be forced to start up the printing press on overtime if the bailout does not pass.

If the bailout does pass, I see less chance of a lot of printing a ton of new dollars. But I was looking at the monetary base and saw the fed was busy last month.

They will be forced into using the crude tools at their disposal if a bailout does end up passing.

This is terrible for the GOP. Obama has been handed the 2008 election. The balloon has burst and has rained untreated raw sewage on the W. Bush Chickenhawk Administration. Idiot George and his Yale and Harvard degrees thought he could skate out of office and leave the next sucker with his catastrophe. Now this collapse is a permanent part of the W. Bush legacy. But I predict W. Bush will have his laugh next year in February when Al Quada and Taliban launch a Tet-Like Offensive next year to oust the U.S. Crusaders from Islam.

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.

OK, 'splain this to me. You and your herd of headless chickens are stampeding about telling us the sky is falling. We must all s**t out pants immediately because the gods of economics command it?

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?

Excuse me if I look at all the so called "experts" who are explaining this to us as a bunch of thieves or morons. If it is the crisis you claim, it didn't just happen last week. So that means one of two things, either you folks ignored the crisis until your nuts were in a vice, which means you're idiots, or you delayed 'splainin' to us mortals until 45 days before the election so you could ram a goody package down the throats of a bunch of panicked politicians.

Either way, why on earth should someone trust these so-called "experts" as you claim to be. Either you f**ked up big time and just figured it out, or your trying to f**k us up the ass. In either case, you have an extremely hard time making a credible case.

"Now this collapse is a permanent part of the W. Bush legacy"

Really? I didn't know W. Bush was in office when the CRA was enacted.

I thought that was J. Carter.

Whodathunkit.

Wow, I thought they limited Prezes to two terms.

I guess "dumb" Bush got around that little constitutional amendment since he's so "dumb" that he apparently gets away with anything he wants.

Hmm, how can someone be so "dumb" yet fool so many and get away with so much.

Riddle me that one lib man?

Joe Carter hit the only deciding-game come-from-behind walk-off homer in World Series history in 1993. W., however, is in the process of hitting into the world's first septuple play concerning the economy to end his second term. Even if scattershot Clinton-era and earlier Democratic policies had more to do with the recent downturn than, say, the entire career of Phil Gramm, W. had 7 whole years to fix things.

A fitting end for a man who was born on third and thought he hit a triple. And then decided to steal second.

Sagarin wrote:

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 have a really problem with this line of argument-- that suspending mark-to-market accounting is appropriate because the "real value" of the assets is higher than the market value.

It is no secret that some assets are more liquid than others. Heck-- my nine year old understands that almost every child will trade for chocolate but only some children want Yu-gi-oh cards. No matter how valuable the cards are in some markets, they are less valuable in other markets. Liquidity influences price.

Saying that the "real value" of mortgage securities is higher than what the current market is paying means that the people who bought these securities were entitled to ignore liquidity risk.

Why is ignoring liquidity risk O.K. but ignoring other risks of loss not O.K.? Banks/IB's are paid very well by any measure to understand all the risks associated with any instrument-- and in fact they probably got a discount on these securities when buying them because everyone knows that they aren't liquid. If the U.S. gov't removes that liquidity risk, it is an unwarranted windfall to the buyers of these securities...

As for increasing transparency-- do you really, truly believe that or are you just trying to win an Internet debate?

anEconomist wrote:

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

As if the buyers/sellers of these securities didn't know that.

As if the prices of these securities even three years ago didn't reflect that.

Why is liquidity risk worthy of being treated differently from any other kind of risk?

Sagarin wrote:

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.

How much is a ton of gold worth to a thirsty man in the middle of the dessert?

It is worthless...

It is a perfectly reasonable proposition that these securities-- cash flows notwithstanding-- are indeed worthless...

4runner wrote:

I have a really problem with this line of argument-- that suspending mark-to-market accounting is appropriate because the "real value" of the assets is higher than the market value.

Saying that the "real value" of mortgage securities is higher than what the current market is paying means that the people who bought these securities were entitled to ignore liquidity risk.

There is NO current market for these securities and that IS the point. Doesn't make them worthless. Definable cash flow streams still exist.

4runner wrote:

How much is a ton of gold worth to a thirsty man in the middle of the dessert?

It is worthless...

It is a perfectly reasonable proposition that these securities-- cash flows notwithstanding-- are indeed worthless...

You don't know a lick about finance do you? Cash flows nothwithstanding... QFE

warren buffett wrote:

Joe Carter hit the only deciding-game come-from-behind walk-off homer in World Series history in 1993. W., however, is in the process of hitting into the world's first septuple play concerning the economy to end his second term. Even if scattershot Clinton-era and earlier Democratic policies had more to do with the recent downturn than, say, the entire career of Phil Gramm, W. had 7 whole years to fix things.

A fitting end for a man who was born on third and thought he hit a triple. And then decided to steal second.

Right, but apparently he's so "dumb" that he's the mastermind behind destroying the whole country.

Man, we can only hope to be so "dumb".

Can't have it both ways people, either he's an idiot or he's a mastermind. Idiots don't make good masterminds.

It is so very interesting to see idiots at work, though.

"The president is in control of everything and anything that goes wrong is his fault, especially if he's a Republican. The opposite is true for Democrats."

LOL. Too much.

4runner wrote:

Sagarin wrote:

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.

How much is a ton of gold worth to a thirsty man in the middle of the dessert?

It is worthless...

Totally disingenuous example. How much is a gallon of water worth to a dehydrated and dying man in the desert who is so 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. I guess the water is pretty much worthless...

warren buffett wrote:

Joe Carter hit the only deciding-game come-from-behind walk-off homer in World Series history in 1993. W., however, is in the process of hitting into the world's first septuple play concerning the economy to end his second term. Even if scattershot Clinton-era and earlier Democratic policies had more to do with the recent downturn than, say, the entire career of Phil Gramm, W. had 7 whole years to fix things.

A fitting end for a man who was born on third and thought he hit a triple. And then decided to steal second.

You liberals overplay your hand and don't fully understand the delicate balance between price stability, growth, and the pitfalls of government intervention in thwarting the former two, but I have to admit I chuckled at this.

4runner wrote:

How much is a ton of gold worth to a thirsty man in the middle of the dessert?

Probably not much until he finishes, especially if it's a rich, chocolaty souffle.

Worst President ever. Easily. And in retrospect- this financial armegeddon will bring Reagan down to his rightfully low place in history since he was the original force behind all this deregulation, and that bad policy has finally come home to roost.