The Bailout Frenzy

Time magazine has an interesting article with a compelling argument (for me at least) as to why we should not do this $700 million bailout.

http://www.time.com/time/business/article/...00.html?cnn=yes

Robert Reich has also been throwing up some good arguments as to why it isn't a good idea, at least as it is currently envisioned.

I initially believed what the administration, many in congress, and the pundits were saying about the bailout being necessary to preserve our economy. As I have read more about it, I have become more and more convinced that it is a bad idea. I was happy (and a bit surprised) to see that the two NH Congresscritters (both Dems) voted against the bailout. I'll certainly encourage them, and the two Senators to continue to do so.

By the way, did anyone notice that we are bailing out the US Auto industry again as well? 25 Billion to "retool" for more fuel efficient vehicles. $25 Billion to do something that everyone else has seen coming for years. It's actually kind of tough to find info on this as the larger "crisis" is taking up most everyone's time but here is one.

Robert Reich is good too. He ran for governor in Mass a handful of years back, I was disappointed he didn't make past the primaries.

The dow tanked over 700 points yesterday. The single biggest drop. At lunch, it was up 378. If you ask me, Wall Street was playing to the governments fears yesterday, but the smart guys realized that big of a drop meant money was to be made.

I'm starting to think this is a bad idea as well. The money should not go to the top, but should go to the bottom. Where was the government when I needed them? That's rhetorical. I don't want their F'n help. I will take responsibility for myself thank you.

As for the 25 Billion for retooling.... F them! I'm buying a Made In America! Toyota for my next car. It's ridiculous that the government has to give them money to retool their plants to make more efficient cars. It's even stupider when you consider they are already making more fuel efficient cars for foreign markets. I am so tired of this government should take care of me mentality that I could just puke.

I felt the need to write someone. This is what I get.... Looks like we are not alone in this.

https://forms.house.gov/wyr/welcome.shtml

Write Your Representative

The House of Representatives is currently experiencing an extraordinarily high amount of email traffic. The Write Your Representative function is therefore intermittently available. While we realize communicating to your Members of Congress is critical, we suggest attempting to do so at a later time, when demand is not so high. System engineers are working to resolve this issue and we appreciate your patience.

Swiped Directly from the Slashdot post about this very topic. FYI, I posted it first. Neener! Neener!

Dear Constituent,

We know you are a human being, or at least you believe that matters to us, but sadly, our mailboxes are too small and cannot possibly handle the number of emails you people wish to send. We lose them anyway and we never read them so why bother. Also, when we built the mailboxes, we only anticipated hearing from 0.001% of our constituents, not this whopping 1.02% contact ratio we're experiencing!

We have assessed the situation and believe that you fall under one of the following categories:

1. You are whining about something that we did to hurt your feelings.
2. You want us to do something.
3. You have a complaint.

Here are some generic responses to help you cope:

Category #1: (You are whining about something that hurt your feelings.)
Sorry. Vote for me in 2008!

Category #2: (You want us to do something.)
We are already doing everything we can. KTHXBYE. Vote for me in 2008!

Category #3: (You have a complaint.)
GTFO. Canada is that way -------> Vote for me in 2008!

Therefore, while we will gladly take your taxes from you, we have some bad news. We can't hear you. La la la la la la la la what? can't hear you! la la la la la...

No no... that's all you have to say.

Besides, we'll do whatever we want to anyway.

Vote for me in 2008!

Kind Regards,
Your Douchebag Government

It's nice being a person was politically active in a small state. I conveyed to my congress person my opinion personally and got a response because she knows me.

Marketplace Senior Editor Paddy Hirsch explains how Collateralized Debt Obligations (CDOs) contributed to the current financial mess.



http://ca.youtube.com/watch?v=eb_R1-PqRrw

btw, the bailout seems to have worked. The Dow is only down 700 or so points today 🙄

Sarge wrote:btw, the bailout seems to have worked. The Dow is only down 700 or so points today 🙄

Whats the general consensus around here for the bailout? As far as I'm concerned I don't see it having much effect and was a bad idea.

Of course as I understand this, without the added congressional bonus' that this is only a guarantee of those funds. Its just staggering to hear 700B of bad debt is out there due to bad risks and speculators. If you noticed the house was place it will hit first. Everyone that didn't want this to happen could change their vote come election day.

I've seen this in action in my neighborhood. They were giving out loans to people with welfare checks to get them out of the projects, then these people had no D/Pmt, and basically squatted for two years until the Sheriff tossed them out. F, when I bought my houses I had to pony up 10% and register every single dime of equality and debt I had. The net effect here is housing prices have tanked thanks to 2 or 3 run down empty houses.

Maybe the housing market will fall completely in and push the interest rates up to JCarter's tenure. The pendulum must swing back to center. Kinda sux for me since I make my money in this industry, but things have went to far to the left.

The Dow ended the day down "only" 369 points, so it wasn't as bad as it looked to be earlier.

I've gone back and forth about the bailout, but overall I think it was a bad idea as conceived and carried out. It certainly has not stabilized things yet, although maybe it wasn't supposed to do it overnight either.

Do I have a better idea? Not at all. Would I recognize a better plan? I hope so.

I would like to see a plan that helps stop the foreclosures. Find a way to keep people in their homes by refinancing their loans into fixed rate mortgages for their current value. Give a bit to the banks and mortgage companies to offset this hit, but nothing to the holders of the CBOs and similar high-risk investments. Right now, the bank forecloses but there is no one that wants to buy so they essentially end up writing off the debt. This way, maybe more would be recoverable by setting people up with sustainable loans. I watched this really kind of depressing video earlier about how widespread the foreclosures are in just one area of California:

http://www.planetizen.com/node/35375


As an aside, I don't think the bad mortgages are at all limited to the poor, although certainly in some areas, it is a large part of the problem. In many cases, it is just people who bought more house than they could afford, no matter their income. If you go to a Bank or a Credit Union to get a loan, they have strict rules they have to follow regarding how much they can lend. The mortgage companies like Countrywide are not regulated in this way and were offering crazy deals to people. For instance, when my wife and I lived in California we were both working full time at relatively high paying jobs in the area. We were offered a mortgage limit from a local Credit Union for I think around $150 as being "what we could afford" given our income and debt at the time (1 car loan). We didn't end up buying anything there, but when we came east a couple of years later, the picture had changed. Even though our total income was much less as my wife was only working part-time, we were offered $350,000 as an upper limit through mortgage companies. Fortunately we bought for under $150,00 as that was what we thought we could afford.

The point is that when the bank or whomever crunch the numbers and tell you what you can afford, people tend to believe them, even if it isn't in your best interest because they are the experts. Combine that with the adjustable rate mortgages that scale up your payment significantly after 3-5 years, and you really get in trouble, especially when your house value starts to be lower than what you bought at.

Some good points Sarge. Probably for every inner city botch, there are those others that have moved to suburbia and bought 300k homes that weren't worth a dime over 100k. Add to that extra high property taxes and you have a loan you can no longer afford.

I don't have an idea for any other plan either, I just don't like the idea of bailing out bums or speculators. I could almost see helping some that overspent, but again, why should we have to bailout people for being stupid.

Besides, the only way this 700B is even going to help is if the housing market recovers and the price of houses become stable again. I don't see that happening anytime soon.

A few things I see and I know some of this from first hand experience.

Certain markets pushed to high to fast. In Virginia, the closest we could get to my job was 30 miles and it was the absolute upper limit of what we could borrow, much less whether or not we could afford it.

Real Estate agents sold the dream. I know as we allowed ourselves to be convinced that the market was doing well and there was no way our house would drop in value. We lost $50k in one year. I'd hate to see what it is almost 2 years later.

Then there are credit card companies. When I lost my job and had trouble paying, they raised my interest to 30%. Thank Congress for passing that bill and thank the CC company lobbiest that helped push it through.

The problem is we have been sold a bill of goods that Credit is good and borrowing is just a way of life. It's bullshit and I am going to make sure my daughter understands that lesson and knows what it means to save your money to obtain something worth while.

Sorry, we started taking Financial Peace University by Dave Ramsey and it's really opening my eyes. If we can stick to our plan, we will have the Credit Cards paid off by the end of the year and canceled. Then we will be able to start saving for a house again after 2 years of not even thinking we might be able to get another one.

I wonder if the government will ever figure out how bad credit really is...... Oh yea, that 700 Billion is going to be raised through T-Bills via the Treasury. That means the 700 Billion is actually going to cost us over a Trillion dollars to pay back. Yea, it was a bad idea in my book.

While I know better than to think I am any sort of economist, There are a few things I have noticed. I honestly don't know what to think about the bailout, though the record on bills that were "needed" now is not too good. What scares me the most is I don't think the average person realizes this is our money that will be taken from us through taxes and with interest. I.e. every person in america just took out a 30 yr mortgage on their share. If we don't pay it we pass all that interest on to our children.

So the big fear with this is that large corporations and businesses that rely on credit for daily transactions would not be able to get credit and this would cause a ripple effect. What was not mentioned is that mom and pop businesses don't typically rely on that credit. They may need a business loan or capitol for expansion every few years. The local bankers have said there was still money for that behavior. So chains and large business has trouble, local mom and pops have an advantage. Now couple this with higher gas prices, a growing effort by people to shop more local and nearer to their homes. Could we have seen the revival of small local owned business?

My guess is with the bill we will see a small bump of good followed by a tough long recession. Of course the market will fluctate daily until there is some idea of what happens. My guess is the next 6 mo will be up and down, much like 9/11

Without the bill I think it's much the same, it will fluctaute daily, but probably not for as long. We would hit a long but not too deep recession.

Much like 9/11 we will see profiteers pointing out who the evildoers were, these will be the easy scapegoats who have some guilt. The real people responsible will get a slap on the wrist. We will some some horrible legislation on the mortgage and financial industries, that targets exactly the wrong people. The culprits of our current situation will use the loopholes left in the lousy legislation to continue bad lending. Eventually we will see countries unwilling to buy our debt, at which point the dollar will lose some of its status. At which point us lowly people will have changed our habits and will not need credit and the market will largly symbolicly collapse on itself. From this we will have finally cleaned house and we will slowly work into prosperous times and a strong economy. All of this in the next 30 years, so start buying your canned goods now, it's gonna be rough.


Without the bill we would have seen a

Found an excellent, if somewhat lengthy, commentary on what the bailout does for "Main Street". The gist of which is....very little.

10 Reasons why the bailout fails Main Street

That was very interesting. I agree with most of it, but I see no evidence that the problems are going to be fixed by this congress or a future congress unless we demand change. Real Change, not the fake stuff that some candidates spout.

www.change-congress.org

The "Dr. Housing Bubble" guy continues to have very interesting things to say about the US economy. This is just one more piece of the puzzle as to how we got into the current mess.

Saving Money is for Economic Girlie Men

Wasn't sure if this is should have gone in this thread or the "Fail" thread.

Label this as "Transparency Fail" and it part of the agreement between the Feds and the Bank of New York Mellon Corp as part financial institution rescue program that was supposed to be "open and transparent program with appropriate oversight.''


http://bailoutsleuth.com/2008/10/the-end-o...arency-already/

That was awesome!