Fed bailout

I think it's a necessary evil at this point. I like what Paulson has done overall during his tenure and I think the SEC regulation of the stock market and our financial institutions needs a complete overhaul once we're out of this mess...much like health care...much like our tax code...much like social security...much like (you ge the idea).

At what point will the Fortune 500 stop giving $40 million golden parachutes to f$#! ups who had to be run out of town? The more I see of this, the more I'm convinced the leaders of these corporations are the biggest threat facing America right now.

However, one thing that I think gets lost in our "recession, "downturn" or whatever you want to call it. Sure It was caused by bad credit, floated by unscrupulous lenders. But people took the money, and they're just as guilty. The only problem is that that mentality can't can regulated. Our society's "gotta have it now" mentality is doing us in. I'm guilty, too. Although I've never put cigars on a charge card. Yet.

Let me give you a bit of context on this one. For the past 7 years, I have worked in Consumer Real Estate for Bank of America (2 yrs), then Wachovia (2 yrs), then Bank of America again (3 yrs and counting). My primary specialty has been in Products, Pricing, and Secondary Marketing... that is to say, the group that "invents" (really copies) product offerings (such as subprime loans), determines pricing (the interest rate offered and the discount points you would have to pay to get that rate), and the eventual re-sale of booked loans to investors.

From the perspective of these banks and investment houses, this crisis really is as simple and ridiculous as the media would have you believe. We scrambled to offer sub-prime products because houses like Countrywide were running away with all the market-share. We eliminated fees on home equity and loosened our regulations. If we declined a loan, there was something wrong with us, not the borrower.

This crisis has been created because the banks got in a pissing contest with each other over market-share. This is exactly the same as the startups in the dot-com boom measuring themselves by their revenue, rather than their profit. And investors at it all up. People got loans that they'd never be able to repay. The industry fueled itself on speculation and greed (the choice of the word "fueled" was intentional here, but that's another topic). Defaults weren't a concern to the lenders because property values were escalating so fast that the lenders couldn't see the risk.

This collapse has a very direct bearing on my career and my financial well-being. With all that in mind, I am vehemently opposed to the bailout. I think we should hold these lenders and these borrowers to the contracts that they signed. It's a bitter pill to swallow, and as the banks sink, the entire U.S. economy is at risk. But if we don't do it now, we're just adding another brick to this wall that has to eventually come down.

Bailing out leders sends a very clear signal to Big Business -- if you're going to take risks or do something stupid, do it in such a large volume that the nation can't afford to let you fail. Once you've reached this position, you've eliminated risk. The government will come along and bail you out. This is wrong.

The bailout will create short-term damage that will be far less than what would have been caused by the utter collapse of these major instittions. However, it will also feed the long-term damage that will eventually lead to the total collapse of the U.S. economy, and that is the #1 threat to our national security.

Whoah.. what? How so? This is simple. How did we win the Cold War? Russia kept up with us until their economy finally crumbled. They could no longer afford to keep pace with the proliferation of nuclear arms. The situation in this country is far worse. We've spent the last 40 years policing the globe, beating people up, ticking people off, and generally asserting ourselves as suprerior. There is plenty of resentment of the Almighty U.S. If the economy were to collapse to the point that we could no longer afford to defend ourselves, how long until we're totally overrun?

Luko:
I think it's a necessary evil at this point. I like what Paulson has done overall during his tenure and I think the SEC regulation of the stock market and our financial institutions needs a complete overhaul once we're out of this mess...much like health care...much like our tax code...much like social security...much like (you ge the idea).

At what point will the Fortune 500 stop giving $40 million golden parachutes to f$#! ups who had to be run out of town? The more I see of this, the more I'm convinced the leaders of these corporations are the biggest threat facing America right now.

However, one thing that I think gets lost in our "recession, "downturn" or whatever you want to call it. Sure It was caused by bad credit, floated by unscrupulous lenders. But people took the money, and they're just as guilty. The only problem is that that mentality can't can regulated. Our society's "gotta have it now" mentality is doing us in. I'm guilty, too. Although I've never put cigars on a charge card. Yet.

Luko - it wasn't just unscrupulous lenders.... even the most reputable institutions relaxed their guidelines and bent the rules. If the appraisal came in low, the underwriter harrassed the appraiser and threatened to direct business elsewhere unless the appraisal was adjusted. This happened at BofA and Wachovia.

duty... damn dude. couldnt have said it better myself.

you arent that crazy HA!

no seriously, well said. personal responability of the corperations involved and the people involved. Banks shouldnt loan to such high risk borrowers and people shouldnt take out loans they cant afford to pay back.

and it isnt the governments job to regulate free markets...
or private industry

phobicsquirrel

I think it's great that large companies make bad deals and screw up and the govt. gets on the bailout lickity split! However people are losing their homes, losing jobs, family's have to work way too much just to eek by, the list goes on, but is that something that is as important? NO, well there you have it... So yes I'm opposed to it, I say let them sink. The average guy can't even afford get their kids in good schools....

Looks like we've found one of the only political issues on which we actually agree

Duty, I agree with all of your points and it's great to get confirmation of the reasoning from an insider.

But without that bailout, you, better than anyone here, know what the consequences would be and no government would have that on its hands. It would be beyond disasterous.

You make the bailout and then you fix it long-term.

Luko:
You make the bailout and then you fix it long-term.

No... you fix it long-term while you've still got leverage... then you bail them out. If you bail them out first, your leverage in negotiating a long-term fix is gone. This is why the Dems have dragged their feet on this. They want the corporations and execs to suffer, and to install safeguards. The Reps know who their backers are, and they want to protect the execs.

dutyje:
Luko:
You make the bailout and then you fix it long-term.
No... you fix it long-term while you've still got leverage... then you bail them out. If you bail them out first, your leverage in negotiating a long-term fix is gone. This is why the Dems have dragged their feet on this. They want the corporations and execs to suffer, and to install safeguards. The Reps know who their backers are, and they want to protect the execs.

ok, I can concede that approach, I guess I just mean there has to be a bailout. Or we'll be living in tent cities.

These Filthy Hands

I feel that we shouldn't have to pay for the large banks inability to think that giving mortgages to people that couldn't afford them. I think that we should let them burn. The ones left standing will prosper. Survival of the fittest.

sane

duty as kuzi put it "damn dude. couldnt have said it better myself. " I CAN'T wait to see what gas, food, everything will go up to after the feds print the extra cash to cover this bailout and are dollar collapses and be comes worthless. That will be a fun day for everyone.

dutyje:
There is plenty of resentment of the Almighty U.S. If the economy were to collapse to the point that we could no longer afford to defend ourselves, how long until we're totally overrun?

While by and large I agree with your comment, doody, I think this goes a bit amiss. Lots of countries hate North Korea. Pakistan and India hate each other intensely. Post-Soviet Russia has been none too popular. Israel is loathed by just about every single one of its neighbors. China has more enemies than Richard Nixon. None of those countries has been exactly an economic powerhouse for most of their modern existence.

Yet, nobody has overrun any of those countries. Nukes cover a multitude of sins. No matter how poor and unpopular a country is, if it can nuke its attackers, it's extremely unlikely to have attackers. This is why everyone wants nukes.

So while I agree that national security begins with economic security, I think it's an overstatement to say we'll be overrun if our economy collapses.

Lasabar

urbino:
dutyje:
There is plenty of resentment of the Almighty U.S. If the economy were to collapse to the point that we could no longer afford to defend ourselves, how long until we're totally overrun?
While by and large I agree with your comment, doody, I think this goes a bit amiss. Lots of countries hate North Korea. Pakistan and India hate each other intensely. Post-Soviet Russia has been none too popular. Israel is loathed by just about every single one of its neighbors. China has more enemies than Richard Nixon. None of those countries has been exactly an economic powerhouse for most of their modern existence.

Yet, nobody has overrun any of those countries. Nukes cover a multitude of sins. No matter how poor and unpopular a country is, if it can nuke its attackers, it's extremely unlikely to have attackers. This is why everyone wants nukes.

So while I agree that national security begins with economic security, I think it's an overstatement to say we'll be overrun if our economy collapses.

*Immediately goes and sells off car, food, clothes, and buys Desert Eagle*

But as a side-note... You can't hug your children with Nuclear arms... Think about THAT!

dutyje:
Luko:
You make the bailout and then you fix it long-term.
No... you fix it long-term while you've still got leverage... then you bail them out. If you bail them out first, your leverage in negotiating a long-term fix is gone. This is why the Dems have dragged their feet on this. They want the corporations and execs to suffer, and to install safeguards. The Reps know who their backers are, and they want to protect the execs.

I agree with the long term fix while you've still got leverage as well.

However, its not just the republicans. Fanny and Freddie were huge Obama supporters. Obama even has some of their execs on his staff. Im not saying that this ISNT the republicans fault. i AM saying its both of their fault.

i saw this article How the Democrats Created the Financial Crisis: Kevin Hassettand i thought to myself: this is interesting but i still cant imagin this being 100% true. I mean i remember not 3 years ago sitting on the porch smoking a cigar listening to Rush. Rush was touting how the economy was great because we have had X number of months of growth in a row and more revenue in taxes than ever before and unemployment was at 4.9 or 5.1 and how even a record number of minorities have a house now.
I remember thinking to myself "nothing goes up this quickly (the housing market) without falling down just as fast if not faster." Rush was saying it was because of Bush. fast forward 3 years and you have this article.

im pretty sure it was a Bipartisan blunder and both sides are blameing eachother.

meanwhile, back on main street...
the dollar is falling again, oil is climbing again, and people are seriously getting worried.

I read a financial report that is claiming that the quarter we are in is going to be the paek of the crisis. and there was some logic behind it.
In '05 when the people of hte US were still buying houses they couldnt afford, the average first term of the loan was 3 years. After 3 years the price would jump. the number of these type of loans peaked in August and september of 2005. it is now 2008. logicly, this should be the quarters with the most failures. the numbers for the quarter we are in are going to be bad. very bad. but next quarter, in theory, they will be better. Its not gunna be fun, its not gunna be pretty, but we as a nation can survive this.

While Pelosi and Ried make me want to move to Alecbaldwinia (thanks Dennis), I will say some of the demands I heard from Dems (and Reps, too) today for the bailout were great. Taxpayers becoming shareholders. Limits of exec salaries, etc.

Good god in the goosefat this nonsense has to end. People are pissed and I think Congress gets it that we need to overhaul regulation.

But again, one last point. It's not just corporate America who got us here. People who couldn't afford these loans (and for the most part very well knew it) took the money. Joe Bagadonuts is just as responsible.

kuzi16:
Obama even has some of their execs on his staff.

So does McCain. Well, okay, not their execs. Their lobbyists.

Luko:
It's not just corporate America who got us here. People who couldn't afford these loans (and for the most part very well knew it) took the money. Joe Bagadonuts is just as responsible.

True. But Mr. & Mrs. Bagadonuts are the only ones not getting bailed out.

urbino:
kuzi16:
Obama even has some of their execs on his staff.
So does McCain. Well, okay, not their execs. Their lobbyists.

i was making the point to show its not just republicans. we alredy established it was republicans, i dindt need to do it again.

Ah. Guess I didn't read closely enough. Proceed apace.

sane

Warning Rant: Sorry for this but I'm really pissed off with the government right now, I know that WaMu was looking for a buyer and that they kept getting their ratting cut so there insurance was going up and up but I am a firm believer that they would have survived. But no the government had to come in, shut them down and sell of there assets to JPM, in the process screwing over every share holder. I didn't lose much so it didn't affect me that much but I know people that have lost a good amount in the deal and in the f'ing shorts freeze they did last week. Sorry for the rant just needed to put it out there.

urbino:
Luko:
It's not just corporate America who got us here. People who couldn't afford these loans (and for the most part very well knew it) took the money. Joe Bagadonuts is just as responsible.
True. But Mr. & Mrs. Bagadonuts are the only ones not getting bailed out.

My reading of things have been that they are. Programs to help them make mortgage payments, or go for extended periods of time without paying, etc. And, bailouts follow trickle-down principles. It's good for the goose and it's good for the gander.

sane:
Warning Rant: Sorry for this but I'm really pissed off with the government right now, I know that WaMu was looking for a buyer and that they kept getting their ratting cut so there insurance was going up and up but I am a firm believer that they would have survived. But no the government had to come in, shut them down and sell of there assets to JPM, in the process screwing over every share holder. I didn't lose much so it didn't affect me that much but I know people that have lost a good amount in the deal and in the f'ing shorts freeze they did last week. Sorry for the rant just needed to put it out there.

That's the "risk" part of investing... the takeover left a lot of people (including me) sitting on worthless paper. I think the freeze on shoring was a necessary move as well. Just the day before they made that announcement, I advised one of my associates that shorting some financial stock wouldn't be a bad idea. So much for that. The thing is, widespread shorting becomes a self-fulfilling gamble in the exact same way that speculative buying does. Eventually, the bubble bursts and somebody gets stuck. That's no different from the temporary halting of trades in securities as they either plummet or skyrocket. Volatility is one of the biggest risks to the market. With greater access for amateur traders, the risk has been compounded significantly.

dutyje:
sane:
Warning Rant: Sorry for this but I'm really pissed off with the government right now, I know that WaMu was looking for a buyer and that they kept getting their ratting cut so there insurance was going up and up but I am a firm believer that they would have survived. But no the government had to come in, shut them down and sell of there assets to JPM, in the process screwing over every share holder. I didn't lose much so it didn't affect me that much but I know people that have lost a good amount in the deal and in the f'ing shorts freeze they did last week. Sorry for the rant just needed to put it out there.
That's the "risk" part of investing... the takeover left a lot of people (including me) sitting on worthless paper. I think the freeze on shoring was a necessary move as well. Just the day before they made that announcement, I advised one of my associates that shorting some financial stock wouldn't be a bad idea. So much for that. The thing is, widespread shorting becomes a self-fulfilling gamble in the exact same way that speculative buying does. Eventually, the bubble bursts and somebody gets stuck. That's no different from the temporary halting of trades in securities as they either plummet or skyrocket. Volatility is one of the biggest risks to the market. With greater access for amateur traders, the risk has been compounded significantly.

yet again duty, i couldnt have said it better myself.

PuroFreak

This idea is WAY to simple for the government!
I’m against the $85,000,000,000.00 bailout of AIG.
Instead, I’m in favor of giving $85,000,000,000 to America in a We Deserve It Dividend.
To make the math simple, let’s assume there are 200,000,000 bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up..
So divide 200 million adults 18+ into $85 billon that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.
Of course, it would NOT be tax free. So let’s assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes. That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their pocket. A husband and wife has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your family? Pay off your mortgage – housing crisis solved. Repay college loans – what a great boost to new grads Put away money for college – it’ll be there Save in a bank – create money to loan to entrepreneurs. Buy a new car – create jobs Invest in the market – capital drives growth Pay for your parent’s medical insurance – health care improves Enable Deadbeat Dads to come clean – or else
Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.
If we’re going to re-distribute wealth let’s really do it...instead of trickling out a puny $1000.00 ( “vote buy” ) economic incentive that is being proposed by one of our candidates for President.
If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!
As for AIG – liquidate it. Sell off its parts. Let American General go back to being American General. Sell off the real estate. Let the private sector bargain hunters cut it up and clean it up.
Here’s my rationale. We deserve it and AIG doesn’t.
Sure it’s a crazy idea that can “never work.”
But can you imagine the Coast-To-Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington DC .
And remember, The plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
Ahhh...I feel so much better getting that off my chest.
PS: Feel free to pass this along to your pals as it’s either good for a laugh or a tear or a very sobering thought on how to best use $85 Billion!!

phobicsquirrel

I like that plan. But it will never happen. Would be a good move but it doesn't help the politicians, normal americans have no sway in their power.

What a great idea! Except your math is wrong. $85B divided among 200M is only $425. So, we each get $425 and not $425,000.

PuroFreak

Well it wasn't my math, I just copied it from an email I got, but it was a pretty funny idea I thought. We all know even if the math was right that it still wouldn't happen... I mean why would the government give that much of OUR money back to us? Like we know whats best for us or something...