What Will The Largest Government Bailout Of Private Industry In US History Look Like?

A bailout of some kind is coming, but no one seems to know what it will look like and who it will help. The Wall Street Journal says that Senate Banking Committee Chairman Christopher Dodd of Connecticut has some ideas that might not go over too well with the Treasury Department.

The WSJ says that Dodd wants the government to receive shares in the firms that are dumping their questionable debt on taxpayers, as well as a provision to help distressed homeowners, whereas the White House is calling for a “clean” bailout that would allow the Treasury to grant “nearly unfettered powers” to its Secretary. The New York Times says that the Bush plan, “could prove to be the largest government bailout of private industry in the nation’s history.”

CNN reports that most of the regular people that they’ve talked to are extraordinarily pissed about the bailout and think that, while ignoring the problem may not be practically possible, that Wall Street doesn’t deserve any help:

“Companies, like individuals, should be held responsible for their decisions,” wrote Jorge from El Paso, Texas. “This buyout does not address the other problems in the pipeline such as personal credit default and market slowdowns in most industries. No new jobs will be created.”

“It is time for the financial institutions of this country to be called to the mat. We should be expecting and demanding responsible and ethical business practice, not rewarding it at the expense of taxpayers.”

And John from Springfield, Va., said the government action actually hurts the people it is intended to help.

“The government does not have $700 billion dollars. WE have $700 billion, and it is being taken from us. If this is passed then the next administration and the next will be extracting this one from the people who are supposedly being protected by this bailout.”

Other consumers vowed to get rid of any politician that supported a bailout:

“I will be watching to see which of our representatives vote for this bailout,” said R. Kidd in Troy, N.C. “Let the American people see how many we can fire come election time.”

And many readers, including Danny from Texas said we should stop typing and start dialing the lawmakers who are prepared to give the OK to the bailout.

“Call your Congressman. Stop blogging, posting comments, and call your congressman. This is the patriotic thing to do. Let them hear your opinion, show them this is still America and that you will not stand for this!!”

President Bush took today as an opportunity to ask Congress not to tack on any unnecessary nonsense to the bailout, and politely asked them to hurry:

Americans are watching to see if Democrats and Republicans, the Congress and the White House, can come together to solve this problem with the urgency it warrants. Indeed, the whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector, and retirement accounts.

Failure to act would have broad consequences far beyond Wall Street. It would threaten small business owners and homeowners on Main Street.

Everyone recognizes that it’s not easy to write a bill of this magnitude in a timely manner, and all those who have worked so hard over the weekend and continue this morning deserve the thanks and appreciation of every American. Working together, I am confident we can enact the legislation necessary to prevent lasting damage to our economy and meet the unique challenge facing us today.

President Bush’s Statement [NYT]
Dodd’s Bailout Draft Could Give Companies’ Shares to Government [WSJ]
Mad as hell – taxpayers lash out [CNN]
(AP Photo/Ron Edmonds)

Comments

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  1. spyz88 says:

    I’m sorry but these new comments are retarded…

    • coan_net says:

      @spyz88: I can live with the comments – but I still hate those quick-link stories at the top of the page…. which push the real stories 1/2 way off the monitor making me have to automatically scroll down my screen just to start reading any story. Now those are retarded!

      (Put them on the left hand side or something – not the top of the page. Webpage design 101 is get the information out as quickly and easily as possible – don’t hide the important stories 1/2 way down a page so you can put up page headers…….. )

      • ShortBus says:

        @coan_net:
        1. Use Firefox
        2. Install the Stylish add-on (it’s like Greasemonkey, but for CSS rather than Javascript).
        3. Use this CSS snippet I wrote to get rid of that annoying page header:

        @-moz-document domain(consumerist.com) {
        #header { display: none !important;}
        #container { top: -21em !important;}
        }

      • jackal676 says:

        @coan_net: Totally agree about the quick links. They’re too bulky, they look like ad boxes, and they swallow up the site logo. Not pretty.

        Has anyone heard any rationale behind the “may not be reviewed” clause in this bailout? I mean, seriously? They didn’t even try to hide it in legal jargon; it’s just right out in the open, bold as day. Aside from the proposition itself, I can’t think of a bigger slap in the face or a larger red flag for unapologetic mismanagement. Not only do the irresponsible crooks get a second chance to play with our money, but their congressional cronies who cover the tracks get to write in their own no-accountability clause? This is the kind of stuff that makes me lose hope. We are all openly treated like doormats while our futures and securities are being stolen right out from under us. America the Beautiful.

    • dlab says:

      @spyz88: Agreed – Consumerist – any chance you’ll reconsider? Who do I need to write to?

  2. JiminyChristmas says:

    Would you vote for this?

    Sec. 8. Review.

    Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

    It’s insanity to ask Congress write a check to the Treasury for $700,000,000,000 with no strings attached and perfunctory oversight. Should we just call him Comissar Paulson from here forward?

    And lest anyone forget, this is still the Bush Administration we’re talking about. “Trust us, we know what we’re doing.” is a laughable proposition coming from these people.

    • Kounji says:

      @JiminyChristmas: Are you kidding? I can’t believe they’re going to do something like this, its the patriot act all over again.

    • Darklighter says:

      @JiminyChristmas:
      Checks and balances? What checks and balances?

    • ARP says:

      @JiminyChristmas: Exactly- Deregulation/lack of rules/lack of enforcement was one of the causes of this mess. So now the administration comes to us and essentially says, “We completely screwed this up, but give us money with no strings attached or it will be all your fault.”

      I hope the spineless Dems don’t cave on this.

      Either we don’t bail them out at all. Or, we bail them out and put in the regs and oversight we needed long ago.

    • blackmage439 says:

      @JiminyChristmas: I sure as hell wouldn’t! This is bigger bullshit than giving retroactive immunity to Blackwater. I was just about to donate to Obama’s campaign, but I think I’ll wait and see his vote on this.

      Also, Commissar doesn’t do him justice; Fuhrer has a much better ring to it.

    • Trai_Dep says:

      @JiminyChristmas: Yup. The same party that got us into this mess is now asking for dictatorial powers un-reviewable by courts or Congress to make sure that, say, Halliburton (or their Wall Street equivalent) isn’t getting billions from our pockets for free. It’s crazy and nonsensical and can only come from a group that is living in a bubble.
      One of the key provisions that alarms me to no end is that US taxpayer wages would go to foreign companies, without review or explanation. So we’re supposed to hock our and our children’s paychecks so that foreign investment bankers receive a sweet, sweet 2009 bonus? It’s bad enough if any US firms’ execs get this, but foreign ones? Can’t Chinese i-bankers rape their own working people, and leave us alone?

    • Xerloq says:

      @JiminyChristmas: This is truly scary, but hopefully the SCOTUS could stomp down on this one hard.

    • Hongfiately says:

      @JiminyChristmas: The really bad thing about it is that Paulson is only Treasury Secy until January 20. Then it’s… well, we don’t know. So we’re giving a $700 billion check to we don’t know who, nor do we know what their priorities will be in disbursing the money.

      • JiminyChristmas says:

        @Hongfiately: I can’t remember which Congressman said this yesterday, related to Paulson’s short tenure, but the gist was this:

        With the bailout Paulson has proposed he is throwing a pass he will be able to catch himself.

        Paulson’s plan would be a great boon to the over $700,000,000 in personal wealth he already has. Really, someone ought to figure out how much the Paulson plan is worth to Paulson himself.

        Likewise, if Paulson gets to play Master of the Universe until Jan. 20, 2009 that will give him one hell of a nice looking resume come next year. How many billions or hundreds of millions of dollars would he be poised to make in the private sector if this whole thing goes his way?

        • Hongfiately says:

          @JiminyChristmas: That’s about right on the mark.

          I’m completely against this bailout. Double the $700 billion and you’re probably close to what this thing will actually cost the taxpayers. Anyone holding this bad paper needs to eat it. If we want to talk about short-run reforms or repealing mark to market requirements, I’m amenable to that discussion. But I have no interest in bailing out people who bought up securitized pieces of sub-prime mortgages of people who had no business getting a mortgage (and we just did a $300 billion bailout for that this summer). Nuh uh. No how. No way.

          We’re electing the entire House, 1/3 of the Senate, and the President of the United States in just a few weeks. No way in hell do I want this lame duck Congress and administration commit themselves to $700+ billion more tax dollars.

    • Zkdog says:

      @JiminyChristmas: That is only the tip of the iceberg. Also note that this is not a one time deal. The Treasury would have the ability to loan out UP TO $700,000,000,000 (wow that’s alot of zeros…) over a two year time frame. That in turn is revolving, so once some of it is paid off, they can loan it back out again.

      Personally, I’m about to get married, work a full time job, own my own business and sell for a commission with an appliance dealership online and can only BARELY make my bills each month.

      Wall Street and the elite rich need to reap what they sew. How about tossing a bone to the little guy for once?

      (And not some B.S. stimulus check)

  3. moore850 says:

    it will look like…
    a mistake in retrospect?
    a rush job?
    a landslide for Obama?

    • Counterpoint says:

      @moore850: How could it be a landslide for Obama, when he has taken a ton of cash from one of the main causes for this crisis, Fannie & Freddie. They were the first domino to fall & cause this mess, and Dodd, Frank, Obama, and etc failed to act in 2005 to stop it before it became this huge issue.

      This is unfortunately one of those things where we have to bite the bullet and bail-out these companies (which I hate the concept of), because of how much worse it will be if we don’t. This all could have been saved if we would have acted earlier, though.

      • Darklighter says:

        @Counterpoint: Obama didn’t take money from Fannie & Freddie. These claims are ludicrous, since it’s illegal for a company to donate to a political candidate. Obama received money from employees of Fannie & Freddie acting as private citizens. Here’s some hard data from CNN.

        • Counterpoint says:

          @Darklighter: Ah yes, good ole objective CNN. Almost as credible as if I used Fox News for a source on my side.

          Let’s through political contributions out of the discussion then. Do you deny that Democrats opposed & voted down a 2005 bill that would have regulated Freddie & Fannie and helped stop a lot of the reckless lending that is causing this mess? Or that McCain was one of the cosponsors of bill S.190 ([thomas.loc.gov]) and was on the right side of the issue way back then?

          • Counterpoint says:

            @Counterpoint: Obviously meant “throw” for word #2 in paragraph #2… new comments and no edit button still?

          • ARP says:

            @Counterpoint: Interesting- so what you’re suggesting is that in 2005, a year in which the Democrats controlled NONE of the 3 branches of government, they somehow voted down a bill ALONG PARTY LINES?

            • chauncy that billups says:

              @ARP: Dems made it clear that it would come down to a partisan vote, and Dodd, Clinton, et. al worked to render it useless. It thusly died in committee.

              • ARP says:

                @bilups: Thanks, but hat still doesn’t make sense because if it came to a partisan vote, Republicans would still win as they controlled Congress. They would also win in any committee since they were the controlling party, they can set the agenda and have more votes.

                • Hongfiately says:

                  @ARP: If you don’t have 60 reliable votes in the Senate, you don’t bring a party line vote out of committee. In the Senate, bills must be agreed to by Unanimous Consent. A single Senator may object and hold the floor in opposition to the bill in question. It takes the affirmative vote of 60 Senators to invoke cloture, which means a 30 hour clock has started and once it runs out, a vote is taken. This is why the positions of Majority and Minority Leader are so critical. Leaders have to know what the other side wants and know what their own members want and/or will accept. If this is run well, a lot can get done via unanimous consent. If it isn’t run well, lots of stuff will bog down.

  4. chemmy says:

    It will look like shooting yourself in your foot.

  5. clessness says:

    Only the largest bailout in US history? I can’t think of any larger bailouts in the history of the world. Anyone know of a bigger one abroad?

  6. UTnick says:

    they are bailing everyone out here. just the companies that are “essential” to keep others companies around.

    if a body has an injured limb — you try to save that limb for the good of the body.

    no one is rewarding bad decisions here. they are just scrambling to save our butts. even other foreign banks are making US dollars available to save the economy. its not just the US that thinks it’s a good idea.

  7. spyz88 says:

    I really dont think they should bailing out these companies. I will definitely be watching to see what politicians vote for it and when they do, my vote will be to vote them out. We need to take the power back with our vote!!!

  8. Darklighter says:

    Other acts this administration has urged congress to rush include the Patriot Act and the latest FISA act. I, for one, would like congress to take a little time to do this right.

  9. Fuzz says:

    Remeber the last time we heard these phrases (roughly):

    “nearly unfettered powers”
    “acting quickly and decisively”

    and this one:
    2008:
    “The risk of doing nothing far outweighs the risk of the package”

    2001:
    “The risks of doing nothing, the risks of assuming the best from Saddam Hussein, it’s just not a risk worth taking.”

    and remember how that one turned out? I can’t believe people still listen to a word that windbag says, and then actually agree with him! Unbelievable. But go ahead, give the markets more power and a bin full of money, with no oversight or provisions, and do it as quickly as possible. Trust us. right.

  10. mrosedal says:

    The whole situation is one large cluster fuck. There seems to be no good answers and right now it seems that the bailout is the only option to take. You may not like it, but I don’t see any better way. It is unfortunate though.

  11. nicemarmot617 says:

    The most annoying thing about this is that they’re not even addressing the real problem – the credit rating agencies. They’re the ones who rated all those sub-prime mortgage securities like they were platinum. No, no, these are Republicans. If we just throw money at it, it’ll go away.

    • Counterpoint says:

      @nicemarmot617: Actually, if you want to blame it on a party, it’s the Democrats who forced banks to lend money to risky (sub-prime) lenders in order to ensure more poor people & minorities got loans. Most times, these risky borrowers didn’t even have to provide proof of employment / income!

      Republicans actually tried to get *more* regulation on Fannie & Freddie in 2005, but were blocked on a party-line vote. Fannie & Freddie going under drug all these other companies with them.

      • ThickSkinned says:

        @Counterpoint: I think there is more than enough blame to go around for both parties. Yes, the democrats started it, but if the republicans were so worried about things, they should have tried harder and sooner to fix things.

        Also, Fannie & Freddie going belly up is just the tip of the iceberg. [freakonomics.blogs.nytimes.com] Check out this article for the best explanation so far on the whole mess.

        • Counterpoint says:

          @ThickSkinned: I hate these new comments… seems you have to talk about things in different areas since things float to the top, it’s not really threaded, etc…

          Anyways, there isn’t much the minority party in Congress can do to pass laws if the majority party votes the down in party-line votes. Republicans tried to pass regulation, most notably in 2005 but were defeated by Democrats. (as I’ve unfortunately had to post way too much)

          • stenz says:

            @Counterpoint: Republicans were the majority party in 2005. There was no way the Dems could defeat them except thru filibuster.

            • Hongfiately says:

              @stenz: Which happened. If you don’t have 60 votes, you don’t bring a party line committee vote to the floor. The Republicans didn’t have 60 votes, therefore no vote on the bill.

              Democrats didn’t bring in cots and read the phone book all night, but the effect was the same.

      • Optimus says:

        @Counterpoint: I have to say that’s the biggest load I’ve heard in a long while:

        1) The Reds are for DE-regulation, so your second paragraph isn’t worth the electricity charging its pixels, unless you happen to have a reference to such supposed attempts.

        2) As previously stated, The Red Party was in control of Congress that year, and they were threatening to enact the “Nucular” option, thus rendering any unbelievable and unlikely Dem filibusters against regulation null and void. The fact is, they chose to let that one die.

        3) To what was it Fuhrer Dubya redefined the “American Dream(R)(C)TM”? I believe he changed it to “Owning a home” from it’s original “Escape death/persecution and pursue happiness.” Fact of the matter is that he was trying his best to keep We the People fat and happy while he ripped the infrastructure out from under us. The only saving grace for Dubya’s rape of America is that it all came crashing down before he left office. I suppose that’s what he gets for calling a war hero a liar.

        Disclaimer: Don’t misunderstand this “ripping of a new one” on the Red Party to suggest that I am a Jack-Ass (Dem). This is specifically a revealing of fact, tempered with an emotional dislike of liars and an emotional dislike of anyone like Bush, who would destroy our great nation’s economy for his own benefit and that of his caste.

        I’d just as soon “rip a new one” on the Jack-Asses were they to do similar… like recently every time they cave in to Red Party whining with complete disregard for what’s best for the country, and a complete lack of “Nucular” option threats.

  12. The Great Aussie Evil says:

    Time to buy a house in Ontario.

  13. grapedog says:

    brain hurts…

  14. Mira Mi Huevo!!! says:

    This is the time to make our voices heard…

    Call up your Rep and let him have it, they work for us not the other way around.

  15. thebluepill says:

    There are currently 183m US Tax Payers, $700bn = $5,072.46 PER TAX PAYER!

    In 2007 there were 2.2 Million foreclosures in the US; divided by $700bn = $318,000!

    The Median Home Price in 2007 was $218,900..

    Yes, they could have bought and paid for every single Home that was in foreclosure in 2007, and a most of 2008 with that money!

    Instead you have potentally 2.2m People/Families out of their homes in 2007, and many more in 2008, and the damn bankers get all of the money?!?!

    • ViperBorg says:

      @thebluepill: Sounds like Bush logic to me.

    • lightaugust says:

      @thebluepill: Dammit. When I pointed that out in April on a similiar discussion I took a lot of shit for wanting to bail out people who borrowed what they shouldn’t have. That bailout would have stabilized this problem and let people keep their houses. This bailout does nothing as a long term solution. Stock market’s still gonna fall, credit markets are still gonna slow. And anyone who thinks this stops at anything short of a trillion, well, we might just be greeted as liberators, too.

      And I agree, if you haven’t already called your representative on this, please put down the internet…

  16. hankrearden says:

    Oh, that’s right.

    Since I bust my ass and make more than Sen. Obama feels is appropriate, I can shoulder more of the burden for bailing these idiots out than the rest of the U.S. citizens…who are also getting boned.

    This is an outrage. I am not responsible for the ineptitude of these firms. Let them figure a way to pay it.

    This is not what Americans are working for.

    • ElPasoAgresso says:

      @hankrearden: Wow you must be in the top 1% then, since that is the only bracket Obama will be raising taxes on.

      With an income like that you probably won’t feel any pain or suffering in a great depression or a world war, much less for any contemporary issues. That explains your attitude.

    • ElPasoAgresso says:

      @hankrearden: If you are in the top 1% (the income level where Obama is raising taxes)then you won’t feel a great depression or a world war, what to speak of any contemporary issues that pertain to 99% of America.

    • ElPasoAgresso says:

      @hankrearden: Nice…the first doesn’t post; now they both post at the same time.

  17. Corporate bailouts, yes! Free healthcare, no!

  18. costanza007 says:

    i’m from the government and i’m here to help.

  19. ironchef says:

    Damn Red States. All your fault for letting that loser into office.

  20. ElPasoAgresso says:

    Why does everyone get bailed out except me! I haven’t even gotten my stupid stimulus check yet!

  21. u1itn0w2day says:

    And a provision to help distressed homeowners.

    BULLCRAP!!!-you mean help someone who ‘desired’ to live in home,over paying 2-3 times it ACTUAL value and taking a BS loan that if they would have READ it would’ve known your interest is going to increase.

    If you help these pretend homeowners out are you going to help them out when their insurance goes up,when their taxes go up,when they buy a big screen too many or when they need simple basic maintenance and repairs?

    FREE MARKET-prices will fluctuate DUH.Then I hear alledgedly professional TV media saying ‘oh we got to get the price of the houses back up’-BACK UP TO WHAT-the artificial prices created by FRAUD.

    If you ever bought generics,bought on sale,clipped coupons,paid off credit cards or used a 10-15 year old TV,or bought like a Ford Focus before it was stylish or simply waited until you could actually afford it you should be INSULTED by this.

    • kathyl says:

      @u1itn0w2day: The people who bought overpriced homes and/or took out “equity” loans on imaginary, inflated equity are indeed culpable in this whole thing, but I am here to tell you that a lot of people involved in the crash of the real estate market did none of those things.

      I owned a home that was purchased at a reasonable price after a lot of looking around to find someone who hadn’t jacked the price of their house up to ridiculous levels. I owned more than half of that house at closing, based on the (reasonable for the location and size of the house) closing price. I didn’t take out any other loans against that equity. I own my (fuel-efficient) car. I’m careful where this stuff is concerned, and I could see that holding more debt than necessary on my most expensive investment was a silly thing to do.

      Then we had to move, and had to (try to) sell the house. I am competing with a market flooded with foreclosures and in a world where banks suddenly are terrified to approve anything but the most scrupulously qualified buyers. Even with the flexibility to drop my price because of how much of the house I owned, it’s still been on the market nearly a year with little hope in sight.

      The crap housing market is hurting EVERYONE, even people who kept their heads and then got very unfortunately lodged right in the middle of this mess despite doing everything “right”.

      So yes, people who took out second and third mortgages or equity loans on houses with inflated values that are now crashing are mostly responsible (along with the banks and realty market that facilitated it) but please remember that the ripple effect from their screwups is belching onto reasonable people too.

      • u1itn0w2day says:

        @kathyl: I emphasize but no matter what the cause sometimes you just have to take your losses and run which I’ve had to do.

        Have you considered renting or trying an alternate solution to moving?Otherwise you just have to wait it out.We just had a house in our neighborhood take over 2 years to sell,just sold in August before Wall Street’s troubles.There’s another house less than 100 ft away that has also been on the market 2 years plus.(Both were on the market before the meltdown became mainstream news).

        I’ve worked for companies affected by business cycles-I’ve been layed off several times or on the verge of being layed off for years.They say good things come to those who wait.

  22. metsarethe... says:

    The ignorance on the subject is quite impressive…

    1. For the people who are against the “bailout” are you aware of the ramifications of just letting Fannie/Freddie + AIG fail?

    2. 700 bn is the number being thrown around but th gov’t isn’t writing a check for this amount, it will be whats avaiable if needed

    3.Bush, Mccain nor Obama are the right people to solve this problem but hopefully whoever is in office will surround themselves with the people who know enough about finance/econnomics to make the right decision

    • JiminyChristmas says:

      @metsarethe…: Umm, I think the ignorance includes your own.

      1. I think people here are aware that Fannie/Freddie ($200billion bailout) and AIG ($85billion “loan”) are water under the bridge. Those deals are done. The current debate is the $700billion cash for trash plan on the table. One can have varying opinions on the merits of the former versus the latter.

      2. The Paulson plan allows for, and I quote:

      The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time.

      Ergo, $700billion is far from being an absolute ceiling on the Treasury’s proposed authorization. They could easily churn through more than that over the course of the bailout.

      Imagine if you will, sitting down to a slot machine with $700. You lose all $700. Likewise imagine that you get $300 in payouts along the way, and you put it all back into the machine to keep the game going. At the end, you’ve lost a total of $1,000. Now, add nine zeros and that’s how you could blow a trillion dollars with only $700billion to start with.

  23. JiminyChristmas says:

    I’m glad to see I have lots of company in my revulsion with the Bush administration’s preferred bailout plan. I’ll say it again: remember who we’re dealing with.

    For instance, try this lede from a March 2007 story in the NYT.

    Responding to criticism from many corporate executives and business groups that rule changes in the wake of the Enron scandal had gone too far, Treasury Secretary Henry M. Paulson Jr. suggested on Tuesday that the administration was considering a more business-friendly approach to regulation.

    Paulson, et al. are hoping we all have short memories and sit down and shut up while they act like they are the grown-ups in charge. Also, let’s not forget what Sec. Paulson did to make ends meet before his Treasury gig: He was CEO of Goldman Sachs, where he amassed personal wealth of over $700,000,000. Gee, might he have a small personal stake in how this whole bailout thing works?

  24. azntg says:

    I’m perfectly fine with the concept of government bailout for worthy private individuals when absolutely necessary. (Worthy as in a lower-class, lower/mid-middle class people who took reasonable care, but fell behind due to how the market treated them). However, I’m not happy the concept of government bailouts as it applies to corporations and other large entities.

    However, if one is required as a last resort, there MUST BE STRINGS ATTACHED. Regulatory oversight, court review possible, strict provisions that does not allow the money to go into private hands in the recovery period, etc. NO DEAL OTHERWISE.

  25. bmorg003 says:

    This has been boiling in the pot since 1980, and this bail out will only serve to hold the lid on a little harder for a little while longer, while the heat continues to grow. At some point this will all begin to boil over, and we can’t hold the lid on this forever. Both parties are complicint in this, and at this point there’s very little that we can do about it, we,ve already dug the hole so deep that there’s almost no way out… For a goo interview on someone who really understands what’s going on, see this: [www.pbs.org] be warned though, don’t expet a happy ending… This will only get worse before it gets any better, and anyone who tells you anything else is lying to you… Goodnight and goodluck…

  26. zolielo says:

    No bailouts. Direct extra market manipulation is counter productive to long term dynamics. Indirect bounds limit extreme corner solutions.

  27. FrankReality says:

    This is probably the best short summary of how this situation came about – it’s worth the read.

    [theanchoressonline.com]

    The net of it is this:

    “There is plenty of blame to go around. Well-intentioned people started the ball rolling – with a very noble idea; break down the wall of discrimination that was keeping middle class minorities from owning their own homes. That was a good notion; others exploited the good intentions, and also strong-armed banks to do more and more. Wall street got greedy. The folks funny Fanny & Fred got greedy. We homeowners and the general public got greedy. Everyone wanted easy money and lots of credit, and no one wanted to think to much about what was backing it up; whether there were sufficient securities behind all the loans.”

    To finish up – after this mess with the bad loans, suppliers of capital because extremely cautious with their lending practices – everything from student loans to business operating loans because much harder to get and interest rates went up greatly. Investment banks typically run with nearly all of their assets invested – they typically require short term loans for operating/working capital. All of a sudden, operating capital wasn’t available to them. Thus, the Treasury stepped in to make operating loans available.

    In all fairness. I haven’t seen the specifics of the proposal.

    I do not like creation of yet another government agency to run the program – we had two rogue government corporations which created the mess in the first place. I have no confidence in another such corporation actually fixing the problem.

    I have a serious dislike for the US Government to own parts of private businesses e.g. the purchasing of a large amount of AIG.

    I do not trust Congress to fix the situation without causing even bigger problems.

    I have difficulty with letting people who made poor decisions escape responsibility for their actions regardless of whether they were home buyers who bought in the bubble, lenders who didn’t require buyers to have some equity at risk (e.g. down payments) and executives (of Fannie Mae and Freddie Mac) who were compensated by the size of the loan portfolio not the quality of the loans.

    If the government is going to create yet another organization to manage the bailouts, it needs to be a temporary organization. And whoever/whatever gets the bailouts needs to pay them back with interest. I don’t want the government stuck owning a bunch of repossessed homes.

    I do believe that Freddie Mac and Fannie Mae should no longer be independent corporations with the government backing them. It is unacceptable for them to be corporations yet be backed by the US Government. They deserve the death penalty – they are beyond reform – and either replaced by a private corporation without government backing or a government agency reporting to the executive branch’s Treasury Department – it is unacceptable to have corporation/government partnerships where the corporation makes all the money but the government gets all the risk. This agency’s purpose is to stabilize the current mess and get the government out of the mortgage business entirely within five to ten years.

  28. inferno493 says:

    While Paulson was CEO at Goldman Sachs he took his entire bonus in company stock. Hmmmmmm, ulterior motive???

  29. wgrune says:

    For all of you saying you hate the new comments, just take a deep breath, click “Classic view” at the top of the comments, and quit complaining. That is all.

  30. SpdRacer says:

    I know this post is from yesterday but this was just said today. From BBC News:

    “BBC Business Editor Robert Peston said the US Treasury Secretary’s proposal to buy bad mortgage debts from banks represented “the mother of all bail-outs”.

    He said that during the hearing Fed chairman Mr Bernanke disclosed that the Treasury would attempt to buy these debts from banks at close to their “hold-to-maturity” value, not the market value.

    “In practice, it means banks who sell their debts to the Treasury would receive cash equivalent to something like twice the value in their books of these poisonous assets,” our correspondent said.

    “In other words they would book a profit from selling to taxpayers.

    “It would represent a massive injection of new capital into the US banking system – for which taxpayers would receive nothing in return, except for the assurances from Mr Paulson and Chairman Bernanke that their banking system would not collapse,” he added.”

    The important part here is that the banks and others who caused this mess are likely to profit from screwing the world over!