Is the Wall Street Bailout a Scam?

[rufuspaul]

just got met by the post above, but again, where is anybody else in this thread acknowledging the consequences if we don't do this bailout?

look up what the experts say would probably happen and tell me if that sounds like a rosy picture.

Definitely not, and there lies the conundrum. We know we need to do something, but what and when? Why 700 billion? Where did that number come from? Why now and not 6mos. ago or 6 mos. from now?

I just see shades of Bush policies from the past:
Patriot Act: We need to pass this NOW before the terrorists attack.
Iraq War: No time for debate, we need to act NOW before Sadam blows us up.

[gts]

We've already stated that it's just a rumor. What is a fact is that he hasn't taken a stance for or against it (while, of course, criticizing Obama for not providing leadership).

he said he opposes it if there are no restictions placed on it, if they put restrictons in place like he mentioned then he's onboard...
it's called being responsible, you don't just hand a blank check over to a bunch of assclowns who just ran a multi billion dollar company into the ground...

[Real Men Wear Green]

I just see shades of Bush policies from the past:
Patriot Act: We need to pass this NOW before the terrorists attack.
Iraq War: No time for debate, we need to act NOW before Sadam blows us up.

It's the Bushie M.O.: The correct response to any crisis is to quickly pass a bill that no one will examine too carefully because they're all panicked and just want an immediate response. That way, we can give millions and billions more to our rich friends in Halliburton, or (in this case) Wall Street.

One of the things I like most about Obama is that his deliberate, well-thought-out approach is the exact political opposite of Bush.

[Real Men Wear Green]

he said he opposes it if there are no restictions placed on it, if they put restrictons in place like he mentioned then he's onboard...
it's called being responsible, you don't just hand a blank check over to a bunch of assclowns who just ran a multi billion dollar company into the ground...

Actually, he did not say what would keep him from voting against the bill in the three or four questions he's fielded over the last month.

[hwliuLAP]

I'd be surprised if anyone on this board knew for sure what would happen if there's no bailout...mainly because, no one seems to know, period. Jim Cramer predicts the Apocalypse, and he's almost always right, so I believe him, but what I personally find frustrating is that only the well-schooled economists really understand what's going on. The rest of us are kind of clueless and just picking someone to trust.

as a top 10 business school with finance and economic consulting major I would tell you that the bailout is very much needed at the moment.

I think it'd be safe to say that everyone understands that economy works in a cycle through supply demand check writing and check clearing. The biggest problem right now is that we are being f-ucked over from the mortgage crisis. People stopped paying their bills, so all of a sudden the housing market crashed, and the "market value" of all the houses has dramatically gone down. With that, during Spring, just about every single major bank had to had major write down of their assest because all of a sudden the market value of what they have written down as an asset doesn't worth even close to what it was. You can't really say this is "their fault" as they couldn't just predict on the crash of the housing market.

So the value of the firm has gone down, then we have to look at it from the people who are home owners standpoint. What they did was they would own a home, refinance it for a longer term at a lower rate to take that money out and spend it now or pay their credit card. But after that's done, they still keep on spending on their credit card and have outstanding balance on it, but this time the home doesn't worth much anymore, and it's getting to a point where you save more by giving away the house.


The Bank isn't getting the money, the people aren't paying the money, the market value of all the houses has just crashed, so that messed up everyone's accounting badly as well, which is why you have been hearing all these "write down" That isn't caused by over estimating the value of an asset by being affected with what is exactly going on.



So now all the asset value has dramatically decreased, which f-ucked up your asset to debt ration, in which most company uses that as a judgement as to how much cash you need in order for a firm to stay liquid. Since this ratio has gone wrong, most financial firms are now not liquidated enough anymore, because they can't get anything out of their investments.


So unless we help them to liquidfy all those assest, the economy is going down the drain since essentially there will be no money that is being floated around considering financial firms are what keeps the money going, and since the economy is a cycle, if we don't stop the floating of all cash flows, we will stop our growth completely.

from an economy standpoint, the biggest reason on why you wouldn't want to do this bailout is because of inflation. Not saying this isn't a concern, but with the global economy being in recession as well, the demand is gonna go down, so the prices will fall, thus the inflation problem is not as dangerous as the problem we are facing right now.


I hope that clears up some point.

[rufuspaul]

as a top 10 business school with finance and economic consulting major


I hope that clears up some point.

Well, you're obviously not an English major , but thanks for the tutorial. Maybe you can help us understand the $700billion figure. Where did that come from?

[Real Men Wear Green]

Thanks for the info, but one thing:

I think it'd be safe to say that everyone understands that economy works in a cycle through supply demand check writing and check clearing. The biggest problem right now is that we are being f-ucked over from the mortgage crisis. People stopped paying their bills, so all of a sudden the housing market crashed, and the "market value" of all the houses has dramatically gone down. With that, during Spring, just about every single major bank had to had major write down of their assest because all of a sudden the market value of what they have written down as an asset doesn't worth even close to what it was. You can't really say this is "their fault" as they couldn't just predict on the crash of the housing market.

Isn't that why they have credit checks? They ran one on me just to rent half an apartment, and I know that you get one when you go for a house. The sub-prime insanity is the major factor that lead to the mortgage crisis, and if a bank financed a home for someone that a credit check would have shown was a bad risk then I don't think it's at all unfair to blame them for being greedy for short-term on-paper gains and extreme stupidity. I understand that this can have a domino effect on other businesses that had nothing to do with the foolishness, but the sub-prime lenders definitely aren't innocent in this.

[gigantes]

I'd be surprised if anyone on this board knew for sure what would happen if there's no bailout...mainly because, no one seems to know, period. Jim Cramer predicts the Apocalypse, and he's almost always right, so I believe him, but what I personally find frustrating is that only the well-schooled economists really understand what's going on. The rest of us are kind of clueless and just picking someone to trust.

i think it's very understandable to feel frustrated for that reason. yet at the same time, there are areas in life where we really have no choice but to trust the experts.

just to give a cheap analogy, if we have a warning pain in the abdomen and if we're not delusional then we go see the experts (ie, ER and doctors) and if they tell us that we need the appendix out or else, we trust the experts and get it taken out... again, assuming we're not delusional.

que non?

[tontoz]

Well, you're obviously not an English major , but thanks for the tutorial. Maybe you can help us understand the $700billion figure. Where did that come from?

Two weeks ago Paulson said major government action wouldn't be necesary then he turns around and (in the last week of Congress) asks for $700 billion to spend as he pleases.

Something definitely doesn't smell right.

[Dash]

Wednesday, September 24, 2008

Dear Friends,

Whenever a Great Bipartisan Consensus is announced, and a compliant media assures everyone that the wondrous actions of our wise leaders are being taken for our own good, you can know with absolute certainty that disaster is about to strike.

The events of the past week are no exception.

The bailout package that is about to be rammed down Congress' throat is not just economically foolish. It is downright sinister. It makes a mockery of our Constitution, which our leaders should never again bother pretending is still in effect. It promises the American people a never-ending nightmare of ever-greater debt liabilities they will have to shoulder. Two weeks ago, financial analyst Jim Rogers said the bailout of Fannie Mae and Freddie Mac made America more communist than China! "This is welfare for the rich," he said. "This is socialism for the rich. It's bailing out the financiers, the banks, the Wall Streeters."

That describes the current bailout package to a T. And we're being told it's unavoidable.

The claim that the market caused all this is so staggeringly foolish that only politicians and the media could pretend to believe it. But that has become the conventional wisdom, with the desired result that those responsible for the credit bubble and its predictable consequences - predictable, that is, to those who understand sound, Austrian economics - are being let off the hook. The Federal Reserve System is actually positioning itself as the savior, rather than the culprit, in this mess!

[hwliuLAP]

Thanks for the info, but one thing:

Isn't that why they have credit checks? They ran one on me just to rent half an apartment, and I know that you get one when you go for a house. The sub-prime insanity is the major factor that lead to the mortgage crisis, and if a bank financed a home for someone that a credit check would have shown was a bad risk then I don't think it's at all unfair to blame them for being greedy for short-term on-paper gains and extreme stupidity. I understand that this can have a domino effect on other businesses that had nothing to do with the foolishness, but the sub-prime lenders definitely aren't innocent in this.

The biggest problem was that "risk" and "credits" are all relative majors. someone who has had good credit in the past may be f-ucked over by the housing crash simply because they are paying more for what their house is worth anymore. Like you said, it's a domino effect, and sometimes when the bad credit people tips over the first piece, and you don't have others who are strong enough to stop the effect, it just keeps on going, eventually the government is that very last piece to stop us from completely crashing.


I'm not saying those financial firms aren't at fault for this, but to me what's more important is to understand what is needed right now and get us out of this hole then make legislations and see the after math to understand where and why and how exactly did it go wrong. If we are going to be stucked at the logistic of this, then it's just not healthy for the economy, people have to understand that the pace of the economy moves much much faster than passing a law. By the time you pass a law that is trying to reflect what happened, it may not be affective anymore.

[hwliuLAP]

Well, you're obviously not an English major , but thanks for the tutorial. Maybe you can help us understand the $700billion figure. Where did that come from?

English is my 2nd language, well, not really, I just hate language and grammer in general .


I can't really tell you how exactly did they come up with the amount of 700 billion, but I can tell you that they want to make a clear statement to the market that once this check is written there will be no more liquidation problem anymore and to gain back consumer confidence in the market.

[gigantes]

Why 700 billion? Where did that number come from? Why now and not 6mos. ago or 6 mos. from now?

700 billion because my understanding is that under federal regulations that's the maximum that can be invested. if the economic chairman had his way it would perhaps be a trillion dollars, not a 700 billion dollar investment. articles floating around on the subject will clarify this, which is where i got this info in the first place (sorry they're from yesterday and i don't have the links).

why now? because the loaning institutions just collapsed in the last couple weeks. if they hadn't, this crisis would probably not be happening right now.

govt is generally non-proactive about impending crises. and as you rightfully point out, this makes it harder to sort between BOGUS crises like the typical bush ones and REAL crises like this appears to be.

ie, we must not let the fact that the boy with the dunce cap has been calling wolf the last 7-8 years prevent us from doing something when an actual wolf shows up. this is a monster wolf from what the experts say, not the paper wolves that karl rove and crew typically trot out in their second-rate halloween display.

[Real Men Wear Green]

i think it's very understandable to feel frustrated for that reason. yet at the same time, there are areas in life where we really have no choice but to trust the experts.

just to give a cheap analogy, if we have a warning pain in the abdomen and if we're not delusional then we go see the experts (ie, ER and doctors) and if they tell us that we need the appendix out or else, we trust the experts and get it taken out... again, assuming we're not delusional.

que non?

I'm only entrusting a doctor with my life, not 700 billion dollars...slightly more seriously, on most subjects, we can do 30 minutes of internet search and have a fairly good grasp of the situation. Including health, like an issue with the appendix. But the economic issues and this subprime stuff? I took macroeconomics and have an ok basic understanding, but there's so much terminology and cause/effect analysis that people in general just don't think about...I suspect that we're going to be inundated with info over the next few weeks that will lead to a more solid understanding now that the walls are burning down, but the vast majority of the population has been blindsided by a crisis that we don't understand. The Congressional banking committee or commision or whatever those guys Tester and Co. call themselves didn't see this coming, and they're supposed to be experts (they blame the Fed for nmot reporting to them on it). These companies claim to have this that and the other asset and we oftentimes have no clue whatsoever (look at Enron). Under these conditions, I don't like having to just trust the expert. My life really isn't even worth 1 billion dollars, let alone 700...

[hwliuLAP]

I guess this is my question, especially to all those damn politicians.

You want to debate principle or you want to discuss how to give the Americans food to eat and a home to sleep.

until any politician would simply learn what exactly is going on, instead of "quoting" some "financial analyst" or "economic expert" their statement is simply falsed.


because as many statements about how the bailout shouldn't be used, I can simply find even more experts to show that it is needed.

Warren Buffet said it best "the economy is everyone's business" and his dumping in 5 billion to goldman to help clear the doubt of the last 2 wallstreet firm possibly going down.