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What Devilstower said in an earlier post can't be repeated enough. The $700 billion figure isn't an explainable one, given the purported problem at hand of "bad mortgages".

And that's where we get that math problem. 1% of all mortgages -- the amount now in default -- comes out to $111 billion. Triple that, and you've got $333 billion. Let's round that up to $350 billion. So even if we reach the point where three percent of all mortgages are in foreclosure, the total dollars to flat out buy all those mortgages would be half of what the Bush-Paulson-McCain plan calls for.

Then we need to factor in that a purchased mortgage isn't worth zero. After all, these documents come with property attached. Even with home prices falling and some of the homes lying around unsold, it's safe to assume that some portion of these values could be recovered. In the S&L crisis, about 70% of asset value was recovered, but let's say we don't do that well. Let's say we hit 50%. Then the real outlay for taxpayers would be around $175 billion.

Which, frankly, is a number that Wall Street should be able to handle without our help. After all, the top firms on Wall Steet payed out $120 billion in bonuses alone between 2000 and 2006. If they've got that kind of mad money, why do they need us to step in now? And why do they need twice as much as all the mortgages that are even likely to implode?

Indeed. And despite what we've been told, then, we can only presume that the problem is in fact not all the bad, scary subprime mortgages. And it's not. Yes, a lot of people are finding themselves upside-down on their houses right now, but Paulson isn't proposing we do squat to solve that -- and even the "controversial" Democratic counterproposal, that we actually do at least a little something to help those people, after they've already gone bankrupt, is pathetically weak.

Instead, we're getting a Wall Street bailout not of the mortgages, but of the absurd, speculative, economy-wrecking derivatives based on those mortgages, derivatives that investors and banks ravenously sold each other at unsupportable and quite-probably-crooked prices. Those derivatives, generally speaking, are "bets" on the state of the underlying mortgages. And they didn't just bet wrong -- they bet irrationally, based on presumptions of near-zero risks to those underlying mortgages. And worse, the big banks even -- bafflingly -- got special permission to overleverage themselves 40 to 1, all but assuring collapse if those derivatives went south. Which they did.

Fine, then, but how is that self-induced bubble an unweatherable economic crisis for the rest of us? Yes, those banks may fail -- as they should. It'd be a crime if they didn't, given their mismanagement of their accounts. But the real problem is that those banks are, literally, too big to be allowed to fail. Their failure would present a liquidity problem for the rest of the market. They can do anything -- they could even burn money on the street -- and the strong preference of government would be to bail them out for it, because the alternative is financial chaos.

The subprime mortgages aren't the problem. And the overleveraged firms shouldn't be a problem. The problem is keeping the rest of the economy afloat no matter what happens to the firms in trouble.

The problem is that there's a lot of different ways to do that, and it's not at all clear that Paulson's way is the best. Paulson proposes to bailout the firms in question, by giving them the Mother Of All Do-Overs. We taxpayers will buy, from banks both in trouble and not in trouble, up to $700 billion dollars worth of the overpriced, now-worth-much-much-less derivatives in question. That will provide a real (inflated) price for the derivatives, and lo and behold -- the firms will be saved, because we've now created a market for their unmarketable, worthless products. They stay afloat, because the taxpayers pay them to do it. And, importantly, since all the banks now know that if any of the other banks are hemorrhaging money through these bad derivatives, the taxpayers will bail them out at some decent price, all the banks trust each other again, and feel free to loan each other money again, and the liquidity problems are solved. In theory. If the Fed can keep up with all the bad paper being tossed at them.

But while that's unquestionably the best possible plan Wall Street could themselves possibly come up with -- it doesn't just save their bacon, it makes large parts of their debts simply vanish -- it's an obscenely expensive thing, and is rife with problems. The temptation for profiteering on the part of the corporations is going to be huge, and quite doable. The underlying mortgages are still defaulting, and more importantly the bursting of the housing bubble has put millions of people into an insupportable amount of debt, and those are not going to be happy consumers, so the economy is still going to go very south, very quickly.

And it smacks, strongly, of the very same dynamic that has governed the last few decades of American history. We're transferring yet another giant chunk of money from the general public to the most wealthy. In this case, a trillion dollars or so worth.

All the while, we're being told that we can't be punitive about this, and punish the firms in question. We can't set new regulations. We can't take equity in the firms we're giving so much money too. We can't do squat except buy their bad paper, and hope to hell that they survive, while the rest of us wallow in the steep recession almost certain to come as a result of the housing bubble collapse.

Is that the best approach? I'm not convinced, and I'm more than a little angry at the Democrats for, once again, accepting what they are given and trying to tweak it rather than coming up with true counterproposals. Propping the housing market up from the bottom may be much cheaper than trying to prop up the entire derivatives market from the top, and would seemingly have the same stabilizing market effects. Taking equity in firms in exchange for taking their crappy, non-marketable products would, yes, seem the absolute least we could do -- there must be an upside for the taxpayer in providing this trillion-dollar investment at the expense of ballooning our national debt and crippling public sector works for a decade or more. But that's still weak tea, all things considered.

Not being talked about as much, though, is that we must allow overextended companies to fail. It is an essential part of our economy that economy-threatening recklessness on the part of speculators not be rewarded, and especially not be rewarded by the government. Any actions to stabilize the economy should indeed inject liquidity -- but it's not clear that injecting liquidity through the very companies most in trouble is sustainable or even rational.

More than that, I think Americans can and should be quite furious at the way this extraordinarily business-friendly proposal has been steamrolled through under premise of imminent crisis, with no serious debate of any more balanced alternatives. It is another black mark in the legacy of the Bush years -- for both parties. If the Congress really passes the Paulson plan with, as it looks now, absolutely no substantive debate of alternative plans, it has once again shirked its most basic duties, and is an embarrassment to the nation it supposedly represents.

One thing is for certain, though. No matter how bad a deal looks, doctrinaire Republicans can always be counted on to come up with an "alternative" that would be ten times worse. Their "alternative" plan, the one they're holding out for? Cut corporate taxes -- again -- and remove even more regulations on those companies -- again. Because that'll release the magic money fairies and the problem will be solved. And no, I'm not kidding. Except about the fairies. Maybe.

There's been nothing about the Washington reaction to this that has inspired confidence. And now that the fight has turned explicitly political -- with no regard whatsoever for the underlying economics -- I can only imagine it getting less substantive from here.

Originally posted to Daily Kos on Fri Sep 26, 2008 at 07:00 AM PDT.

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Comment Preferences

    •  The longer this goes the less votes there will be (7+ / 0-)

      for any plan.  Diary push for diary that i did on winners and losers for WaMu an hour ago.

      How do you know a Republican is lying? Ask one: If the Republicans can lower gas prices for 60 days before an election, why won't they do it all the time?

      by ca democrat on Fri Sep 26, 2008 at 07:03:22 AM PDT

      [ Parent ]

      •  More diary whoring (22+ / 0-)

        My idea for a National Investment Bank that would provide an answer to Hunter's important point above that the problem is keeping the rest of the economy afloat no matter what happens to the firms in trouble.

        •  What I don't get (19+ / 0-)

          is why it wouldn't be just as viable and perhaps more effective to redirect that money to the bottom, and refinance into regular mortgages as many people as possible, the ones who have jobs and could pay something but just can't pay outrageous ARM. That would keep more people in homes, keep up the values of the homes around them and slow the collapse of entire neighborhoods.

          We're retiring Steve LaTourette (R-Family Values for You But Not for Me) and sending Judge Bill O'Neill to Congress from Ohio-14:

          by anastasia p on Fri Sep 26, 2008 at 07:09:35 AM PDT

          [ Parent ]

          •  Bob Corker (R) TN just swiftboated McCain on FOX (15+ / 0-)

            LOL he told the dumb blonde bimbo that he felt that McCain torpedoed the deal yesterday... trying to find video it just happened live on Faux

            Dennis: Come and see the violence inherent in the system. Help! Help! I'm being repressed! King Arthur: Bloody peasant! Dennis: Oh, what a giveaway!

            by wargolem on Fri Sep 26, 2008 at 07:10:59 AM PDT

            [ Parent ]

          •  It is viable, preferable, and dangerous (17+ / 0-)

            to the status quo.
            Aside from the preconceptions Hunter laid out in the Paulson version, the last thing these guys want to see is another New Deal set of initiatives. That'll put them back in the wilderness for another 40 years.
            So, Paulson it is. And it has the great side effect of bankrupting any New Deal initiative from an Obama administration. Lays a nice groundwork for 2012.

            It sickens me that such self-interested ruthlessness is in complete control of our government/economic system.

            On Liberation Day, 1/20/09, Americans will greet us with flowers and candy

            by kamarvt on Fri Sep 26, 2008 at 07:17:01 AM PDT

            [ Parent ]

            •  Just say no. (11+ / 0-)

              Or failing that, just support mortgages, not derivatives.  That seems simple enuf.  Paulson should be happy, because Buffett already bailed out Goldman.

              And the biggest dominos have already fallen.  Merrill, WaMu, AIG, Lehman, Fanny, Freddy.  This is a bailout whose time has passed.

              The nitwit Republicans may be doing us a favor by killing this deal.

              The sleep of reason brings forth monsters. --Goya

              by MadScientist on Fri Sep 26, 2008 at 07:44:37 AM PDT

              [ Parent ]

              •  I agree (5+ / 0-)
                Recommended by:
                melo, esquimaux, Fireshadow, kyril, Caramel

                "The nitwit Republicans may be doing us a favor by killing this deal."

                John McCain has decided he'd rather lose his integrity than lose an election. - Obama campaign

                by mrobinson on Fri Sep 26, 2008 at 08:15:46 AM PDT

                [ Parent ]

                •  Unfortunately that would make McCain look (0+ / 0-)

                  like the "Hero Maverick".

                  The October surprise?

                  McCain, Republican Party, Palin = Captain, Sinking Ship, Anchor.

                  by Pescadero Bill on Fri Sep 26, 2008 at 08:19:31 AM PDT

                  [ Parent ]

                  •  BTW everyone (2+ / 0-)
                    Recommended by:
                    JML9999, Terra Mystica

                    the 700 billion I$ explainable...and NO it's not about "bad mortgages"

                    •  That explanation makes more sense (0+ / 0-)

                      on the calculation and implication side.   None of the current political mouthings have made any case as to why this was so important or disastrous.

                      If the views on your link (slowing economy with $1T annual deficit, and no bond buyers) are remotely credible, that would outline a truly devastating (for all of us) situation.

                      But it equally would mean that ALL these current politicians would be shown to have completely sold out the country, the little guy, the future.  A lot of people here and in the 'sphere have thought that it would take a catastrophe to wake people up.  This may be it.

                      •  So borrow $700 billion (0+ / 0-)

                        to bailout the bond buyers so that they can buy more bonds?  Where does the $700 billion come from, except by selling bonds.

                        This is a weird circular argument.

                        The sleep of reason brings forth monsters. --Goya

                        by MadScientist on Fri Sep 26, 2008 at 10:02:20 AM PDT

                        [ Parent ]

                        •  Definitely a ponzi scheme, which is a circular (0+ / 0-)

                          argument of sorts.  

                          I believe that we are, and have been, borrowing unsustainably in the R years since Carter.  A reckoning has been put off by various mechanisms, but a reckoning there has to be.  The economy is bumping along so the deficits have stayed in the $600B range during Bush, but if the economy turns down substantially that could easily go to $1T.  So the scenario of borrow today while the borrowing is good, in order to make borrowing next year doable when money may be really tight is plausible to me.

                          This makes more sense to me than all these explanations of economic catastrophe for Main Street unless we buy $1T of mortgage backed securities when the vast majority of the underlying mortgages are sound, and the real property will still be there, though somewhat devalued.  Sounds more correction than catastrophe.

                          Maybe this "get it while we can" scenario is too doomsday, but there's something missing from the discussion so far.  Something we're not being told.  The dire predictions don't match the effect on most people, imo.

            •  You know, I'd love to have another New Deal (0+ / 0-)

              . . . so long as we don't have to go through another Great Depression to get it.  $350bn is a lot of money, but if we get equity in the companies we help and the economy improves, then we stand a good chance of getting most of it back.  If we do nothing and we head into a serious recession, has anybody considered out how much that will cost us?

              I am sympathetic to those wishing we could do the bailout from the bottom up, but I don't think it's feasible, because in that scheme, we definitely don't get the money back.  (We can't exactly acquire an equity stake in Jim Johnson of Waycross, GA.  We could buy his loan, of course, but that is more or less what the original Paulson plan was.)  I'd love to give bankruptcy judges the power to re-work loans.  I understand that you can't have everything you want in a negotiation like this, however.  At the moment I am no absolutist.

              And I understand that the Democrats, despite "controlling" Congress, are really abridged in the Senate because of their numbers there and also have to work against the White House, in a situation where nothing gets done if it doesn't have full bipartisan support.

              There are some folks out there too willing to ascribe the most craven motives to the folks in our caucus who are trying to do the right thing, and handling themselves fairly well to this point, I'd say.  Keep working to get them a bigger majority and maybe you'll like the outcomes better.  In the meantime, have a little faith that they are, in fact, negotiating on an even footing with the scary Republicans, who really aren't all that scary.

          •  conservative morality (3+ / 0-)
            Recommended by:
            ca democrat, kyril, Mrs Olbermann

            (republicans) think it is "immoral" to ask a neighbor who has done everything right to bail out another neighbor who has been irrresponsible.

            The force of public opinion cannot be resisted when permitted freely to be expressed. Thomas Jefferson

            by Thea VA on Fri Sep 26, 2008 at 07:19:00 AM PDT

            [ Parent ]

            •  Except of course (9+ / 0-)

              when the neighbor who did something wrong is enormously wealthy, and all the responsible neighbors are relatively poor, in which case it is a given.

              Got a problem with my posts? Quit reading them. They're usually opinions, and I don't come here to get in arguments.

              by drbloodaxe on Fri Sep 26, 2008 at 07:35:19 AM PDT

              [ Parent ]

            •  don't you agree with that (2+ / 0-)
              Recommended by:
              esquimaux, DarkestHour

              I certainly do. Giving my tax dollars to pay for ultimately what was somebody's decision to buy a BMW, go on a cruise of the Mediterranean, and inability to balance their checkbook or read the terms of their mortgage (the biggest purchase of their lives) IS immoral and wrong. Regardless of the fact that the banks are ultimately at fault for allowing the money to be lent in the first place.

              •  I have a pretty simple test (3+ / 0-)
                Recommended by:
                melo, DarkestHour, Terra Mystica

                for whether or not it's ok with me. If, without my tax dollars, the person is in imminent danger of being hungry, homeless, or unable to obtain medical care, it's reasonable to help. If children are involved, or if the person is a veteran or disabled or severely ill, help is urgently needed.

                Wall Street has failed to qualify on any of those counts. Many homeowners might, however, squeak by under the "homeless" provision. But I'd like to see an income provision; any individual or family with over $50k in income will have no trouble securing adequate rental accommodations, and is therefore not in desperate need of a bailout.

                During times of universal deceit, telling the truth becomes a revolutionary act. - George Orwell

                by kyril on Fri Sep 26, 2008 at 08:23:35 AM PDT

                [ Parent ]

            •  There seems to be an underlying assumption (4+ / 0-)
              Recommended by:
              slave138, Thea VA, Fireshadow, deboChicago

              that the buyers of the houses did something wrong.

              If by that we mean: they fell for a scam that should be illegal but is not because of certain laws that were passed in the last 10 years, then sure.  It's wrong to fall for scams.

              But remember this is 70 trillion dollar deal, we're talking about.  The absurdity of that number should indicate that the problem is systemic and a lot -- a LOT -- of professionals were highly motivated to trick people into accepting mortgages they could not afford.

              Stop blaming the victim.

          •  More than that . . . (35+ / 0-)

            For my social policy degree, I did have to endure the study of economics and pass qualifying exams in that "discipline." What I principally learned, as I have made clear enough, I think, is that economics is largely a crock. However, there are some people who practice the profession who are not ideologues or theologians, and who do actually try to make a study of reality, rather than imposing their a priori theories on an unreceptive universe.

            One of them is James K. Galbraith, with whom I essentially agree:

               It's more hype than real risk. A nasty recession is possible, but the bailout will not cure that. So it's mainly relevant to the financial industry.

            Actually, a nasty recession is more than possible, it will happen. It is happening already. The housing bubble was the last spasm of our latest Gilded Age, which is now over. We've been living beyond our means, on money borrowed from foreigners, and we can't do that any more. People who spent their lives nurturing small businesses will see their creations destroyed. People who struggled all their lives to build a modest nest egg will see their retirement dreams evaporate. Hunger and want will grow in the land. This will not happen because the credit markets lock up and hedge funds and investment banks fail. It will happen regardless.

            There is much that the federal government can do to ameliorate the pain and hasten the day of recovery. In addition to enhancing the safety net for the people who will be seriously hurt, we need to invest in a sustainable future, in real job creating and wealth producing activities. What we don't need to do is rescue the socially destructive, unproductive and parasitical financiers of Wall Street from the horrible prospect of losing a portion of their billions and ending up as mere millionaires.

            The legislation the Congressional Democrats are talking about now is certainly more defensible than the outrage Henry Paulson tried to impose on us, and it might even have some desirable elements such as help for distressed homeowners and limits on executive compensation. Best of all, they're talking about committing only a portion of the money, maybe $150 billion, and taking another look before they pony up the rest. A case can be made for passing something like that, so everybody calms down and the markets stabilize and we can get past this and go on to a serious discussion about the nation's future. But right now, we aren't having that.

            •  Please read the above comment AGAIN! (8+ / 0-)

              It makes sense.  Thanks cervantes. :)

            •  Excellent Summary and Forecast (4+ / 0-)

              Thank you for saying exactly what I have been thinking but just did not have the words to say.

              "It's been headed this way since the World began, when a vicious creature made the jump from Monkey to Man."--Elvis Costello

              by BigOkie on Fri Sep 26, 2008 at 07:52:13 AM PDT

              [ Parent ]

            •  Seems logical (1+ / 0-)
              Recommended by:

              This seems like a middle ground band-aid to get us to the next administration. It will be there task, along with the new congress, to come up with a more comprehensive long-term way to address the issues. Frankly, I'd rather have that on the desk of the Obama administration.

              As for the $150 billion that could be spent between now and then, we can only hope that:
              - A good bit of that money comes back to the treasury in time
              - It creates enough liquidity that individuals and small businesses can borrow money again. According to Automotive News, the biggest reason for the significant drop in new vehicle sales over the last two months has been the inability of prospective buyers to get loans. That's important. In addition to the fact that millions of people are employed in jobs related to the building, distribution, and sales of new vehicles, the single biggest way to improve average fuel economy and reduce greenhouse emissions today is to continually update the fleet of vehicles on the road.

              Just say, "Thanks, but no thanks," to John McCain's campaign to nowhere.

              by mdb on Fri Sep 26, 2008 at 08:11:15 AM PDT

              [ Parent ]

              •  This may sound a little naive . . . (2+ / 0-)
                Recommended by:
                whitis, DarkestHour

                . . . but if the issue is that people can't get loans, then why can't the Federal government just take the $700 bn and make the loans directly?

                If you don't stop lying about me, I'm going to have to start telling the truth about you. Barack Obama

                by dbratl on Fri Sep 26, 2008 at 08:18:32 AM PDT

                [ Parent ]

            •  Very well said! (0+ / 0-)

              I couldn't agree more. You really nailed it.

              "We aren't looking for charity. We are looking for justice. The journey of equality moves on."

              by CarolJ on Fri Sep 26, 2008 at 08:27:44 AM PDT

              [ Parent ]

            •  Thank you for stating this (0+ / 0-)

              Best of all, they're talking about committing only a portion of the money, maybe $150 billion, and taking another look before they pony up the rest. A case can be made for passing something like that, so everybody calms down and the markets stabilize and we can get past this and go on to a serious discussion about the nation's future. But right now, we aren't having that

              Another thing, theating the taxpayer as an investor  is a very good proposal. There is a lot on money to made.

          •  Bingo, anastasia! (8+ / 0-)

            I'm glad that at least devilstower and Hunter dareto speak truth to the stampede. No bailout needed. Another AUMF moment for stampeding dem's. The correct, and election-winning approach has been perfectly articulated by Marcy Kaptur and diaried here by gsadamb.

            Anyone who thinks that $700 billion to tanking, overleveraged greed mongers is going to play well on election day had best go listen to that beautiful, short, nail 'em to the wall speech. Can't recommend it highly enough to those of you who may have missed it. And if you have seen it, but not gone back for a refresher course in how this should be handled by the dem's, including BHO, go back and get the breath of fresh air that's been sorely lacking in all this rush to bailout.

            Fear is the mind killer - Frank Herbert, Dune

            by p gorden lippy on Fri Sep 26, 2008 at 07:23:41 AM PDT

            [ Parent ]

          •  I'm totally with you (11+ / 0-)

            I don't get it, either.  Administratively it might be tougher (distributing money to millions instead of a few big players) but the payback would be verifiable and enormous.  And, if the mortgages were being paid and home values stabilized, wouldn't the crash of the derivatives that Hunter is talking about be softened somewhat?

            The more I learn about this bailout, the more I think it is a stupid, stupid idea.

            Help people with their mortgages and let the prosperity trickle up.

            •  Don't we then still have the problem... (3+ / 0-)

              of the housing bubble just being pushed back?  I see that this could prevent the sudden crash of the worst case scenario and this seems to be one of the best ideas I have heard, however, looking just a little further down field I see Wall Street numbers, profits, and home values as over-inflated all enabled by this derivative credit Enron-like game.

              I guess I am saying this needs to be paired with strict regulation and a plan to make up somehow for the derivatives that are essentially imaginative (there will be hell to pay when investors realize that the value of things just isn't there).

              That is for the next admin, though, so I support the above.

            •  I don't get it either but I don't get more (1+ / 0-)
              Recommended by:

              than you don't get, not that I am bragging.

              I have no idea how know what should be done. I knew enough to know the initial proposal was nuts but then I started getting lost.
              Until I read this I didn't know we were going to be buying the derivatives and I don't think most people know that.
              Until a few days ago I never heard of credit swaps.

              Now I listen to republicans say they have to buy insurance and I think "Huh?". Weren't these credit swaps sort provide coverage if the assets lose their worth? Like...well insurance?

              There is so much I haven't heard anyone in congress or any of the pundits talk about...including anything about derivatives. They make it sound like it has to do with the sub-prime mortgages themselves.
              Then they act like the fault for them lie with the bad lenders and greedy borrowers.
              But in 2003 the OCC, a federal agency (Office of the Comptroller of the Currency) popped out of obscurity to stop the states from passing laws or doing any litigation men to protect people from predatory lenders. They created rules so that state consumer protection laws could not be enforced against banks. All 50 states joined together to fight this but the bush admionistration didn't flinch.
              How was that allowed and where are the voices decrying this now...that we can't put any authority to the very administration that used an agency that just assured banks kept balanced books for the last 100+ years to instead prevent consumer protection which in the long run...through however these derivatives relate to the initial mortgages... feed into and let grow enormously this certain crisis/mess/hullabaloo we face now.

              OK maybe they aren't related or people would be yelling about it. Even though they aren't trying to point out and fix whatever is to blame now...well this is like a flashing red light that says "Don't Let This Administration Touch this Money... and then go slap yourself cause you must have known about this too congress."

              2000 and frigging 3. Let more people get loans that will rip them off and likely fail and banks and traders and layers and layers od people make big profits and then when the scam is about to crumble...let the same people they refused protection to pay to save the system and animals who wanted to eat them....cause it seems like these loans were needed for the rest of the profit taking to take place.

              I should go take a nap. There is way too much I don't get.  

          •  I don't think we would even have to (1+ / 0-)
            Recommended by:

            refinance. We should just set up a revolving loan fund to help homeowners keep current in their payments while they either refinance or sell. The loans should be a "silent second (or third whatever the case may be) backed by a lien on the house. The loans would be accrue interest (at a low rate) and would be due whenever the home is sold, but could be paid back early without penalty.

          •  I think the answer might be two fold. (1+ / 0-)
            Recommended by:

            First off, that home that was mortgaged for 400k is really only worth 200k tops. That means the asset that banks and brokerage firms were putting down as hard collateral is only worth half what they claimed. The bubble burst and now prices are settling back to reality leaving these businesses with huge losses on their books. All you would be doing by giving the home owners the money is re-inflating the bubble. A fine idea, but it won't make up for the fact that the banks and firms were using this weak collateral as if it were hard cash.

            Thus, pretending they had this hard cash, started lending money they didn't actually have based on the faulty premise that home prices would always stay high and people would always be able to pay their mortgages. I think the new Republican regulations allowed them to even claim as hard cash what the homes they had on their books would be worth in the future based on current (during the height of the bubble) trends. They then essentially were making loans to other businesses on the presumption that the homes would go up in value. Speculative loaning on a very weak speculation. Some lent out something like 40 times what they were actually worth based on homes and mortgages that weren't even actually worth what they were claiming. They've emptied their piggy banks thinking the housing market was for real and that new money would always be flowing back in.

            WRONG. (Though i'd bet they were secretly getting assurances that the FED would back them up. Assurances from the equally inept and corrupt cabal running our country)

            At least that's my layman's understanding.

            And finally this is all due to the repugs deregulating, or regulating in a much weaker or absurd fashion, the whole financial industry.

            McCain, Republican Party, Palin = Captain, Sinking Ship, Anchor.

            by Pescadero Bill on Fri Sep 26, 2008 at 08:17:14 AM PDT

            [ Parent ]

          •  Housing isn't the whole story (0+ / 0-)

            lots of small business (e.g. gas stations, farms, etc) rely on credit on stay in business?  A collapse of the credit market will force lots of these people out of business which will be bad for everyone.

          •  Yes, redirect the money to the bottom (0+ / 0-)

            where the home mortgages are.  However, the search for these in all the paper on Wall Street will take time and manpower.  How about putting a moratorium on foreclosing and putting the money in escrow while the lower level [real] workers sort the mortgages out.  Salaries at these failing companies need to be frozen at no more than $60,000 per year with performance-based bonuses allowed.  In effect, companies receiving the bail-outs wil  become government employees. Companies that do not agree to these terms can seek financing elsewhere as did WAMU.  Strict regulation of all institutions needs to be enforced and tax breaks for the fat cats who made money or will make money on this crisis needs to be prohibited.  

          •  This is an interesting question that has come up (0+ / 0-)

            I am not happy that is about the derivatives.  But I suspect the gun being held to the head is Oct. 1, when a lot of hedge fund investors could pull and say they want to be paid, then the hedge funds call on the banks and we have got a problem.  Otherwise, the great haste here makes no great sense.

            Now it is fair to ask what happens if they obligations come due to the banks - they could say, no, hold off, we cannot pay now, and I can see greedy rich people send it to the courts, which still freezes the money.

            But I honestly don't know what happens if the hedge fund run comes and the banks just say no.  If they say yes then the economy is in for a wild ride.

            What surrounds us therefore is a vast tapestry of lies, upon which we feed. Harold Pinter

            by dlcox1958 on Fri Sep 26, 2008 at 12:46:49 PM PDT

            [ Parent ]

        •  Even more diary whoring (4+ / 0-)

          I diaried a proposal a few days ago that the fix should come from the bottom up, that is to help homeowners fix their mortgages, to in effect, address the root cause of the problem by shoring up the value of the assets, which are the bundled mortgages.  I'm not a professional economist with easy access to the numbers, but I estimated that the arrears of the 4 million mortgages expected to default in the next two years, along with restructuring the loans at lower fixed interest would cost about $100 billion, and make the securities secure because defaults would have a chance to return to long term default rates, which the financial system could always deal with because it is predictable.

          Here's my diary on fixing Main Street

          It is time to renounce fear and go out and kick some Republican Ass

          by Ohiodem1 on Fri Sep 26, 2008 at 07:17:23 AM PDT

          [ Parent ]

          •  Housing prices HAVE to come down (8+ / 0-)

            They are artificially inflated in many places.  And, sorry to say, someone making $50K a year has no business living in a $300,000 home....they just don't.

            I prefer the plan making the rounds on the internet:

            $450,000 to each US citizen over 18 years of age.....taxes must be paid on it.  The citizen is free to do whatever s/he wants with the money.  

            Assuming a tax rate of 30%, 1/3 of that money comes right back to the government.  The rest is used by many, many people to pay off mortgages, credit card debt, student loans, etc., and some may even invest, injecting that oh-so needed liquidity back into the market.

            It is, by far, the best decision out there.  And it is simple and easy to understand.

            JP Morgan Chase can burn to the fukin' ground and let one of the smaller, better-run companies take its place.

            •  Let's see, with $600k (4+ / 0-)

              my wife and I could pay off our mortgage, fix all the stuff that needs fixing, new landscaping, pay off the credit cards, do some investing in safe securities, fund our funerals and old age, provide capital for a small business, buy Earth friendly cars, upgrade all kinds of things, take a vacation and confidently retire early.

              In general, that would dump billions into America for things that matter.  I like it, but it makes too much sense for politicians to do it, and if you dumped that much money into the economy, it might make more people Republicans.  Wouldn't that be an unintended consequence!

              It is time to renounce fear and go out and kick some Republican Ass

              by Ohiodem1 on Fri Sep 26, 2008 at 07:49:38 AM PDT

              [ Parent ]

            •  Yeah, but price shouldn't overshoot too much (1+ / 0-)
              Recommended by:

              Remember that growth was really concentrated on the coasts, and then again heavily concentrated in bubble markets like SoCal and Florida.  They have already come down 20-40% in those places, and there's not a lot of point letting them get down another 40% of the original price before trying to turn the curve around.  In some places, like DC, there was substantial appreciation, but that was only 10-15% above income growth.

              To me the key is to let the air out in an orderly and expeditious way.  That's why the bankruptcy components are so important - it's precisely the bankruptcy system that has the best handle on people's true incomes.  What needs to happen there is to allow people to file home-related bankruptcies without penalties for a window of 5-10 years.

              Also isn't $450K to each American age 18+ about $90 trillion?  

              •  Here's the only speaks to (1+ / 0-)
                Recommended by:

                the AIG bailout money....doesn't even address the much, much larger one being proposed now:

                Why an $85,000,000,000 bailout of AIG ?

                Instead, why not give $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

                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 economic incentive that is being proposed by the politicians now.

                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 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 the geniuses at  AIG or in Washington DC .

                And remember, The Family plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.

                •  Yeah, they got the math wrong (1+ / 0-)
                  Recommended by:

                  $85billion divided by $200M is $425.00, not $425,000.000.  That's a stimulus plan, not a mortgage rescue plan.

                  Second, AIG operates in a huge number of credit markets, many of them not mortgage-related.  Keeping the company alive and/or unwinding all or parts of it in an orderly way is the key.  I don't know if I agree that it was "too big to fail", but I don't think we could just take that money and do something else with it.

                  Third, even if we had $85 trillion to lend, I still think that there's been plenty of moral hazard on Main Street as well as Wall Street.  Why should I bail out my co-worker who made a risky bet on condo in Miami just because he makes $100K instead of $10M?  Should we really be encourage his kind of speculation with more bogus lending?  It's one thing to get people out from underwater on their houses - the main goal there is that the value of the assets themselves can go live in reality, and people can get back to holding mortgages they can really afford that help them build real assets and not funny money.  Adding a bunch more free money (which is really what people thought they had with house-flipping and re-financing schemes) to this problem makes it worse not better.

            •  Damn... (1+ / 0-)
              Recommended by:

              I'd tear down my dilapidated existing house and build a new, energy-efficient one instead, and have it completely paid off.  I'd pay off my car.

              I'd put some in savings, and keep the rest.  Might even be able to go finish up my college degree, if I keep my daily living expenses low enough.

              Wow... this would be one hell of a winning proposition, for a hell of a lot of folks.

              "You can't teach an old dogma new tricks." Dorothy Parker

              by AnnCetera on Fri Sep 26, 2008 at 07:59:01 AM PDT

              [ Parent ]

            •  that's ... 10 trillion dollars! (1+ / 0-)
              Recommended by:

              any guesses on the rate of inflation for that year? I think we would be well north of 100%.

            •  Our prices doubled during Bush (1+ / 0-)
              Recommended by:

              admin, along with the rest of the nightmare. I thought $250,000 was a crazy price in 2001 for a craftsman cottage [like the one my parents bought for $4,000 in the 30's and sold for $12,000 in the 50's] - but now it is half a million! Up by $250,000 in 7 years in Seattle!

              John McCain has decided he'd rather lose his integrity than lose an election. - Obama campaign

              by mrobinson on Fri Sep 26, 2008 at 08:25:50 AM PDT

              [ Parent ]

        •  What's this money for? Take 15%-- this must be (0+ / 0-)

          promised to Bush, and an unnamed surrogate at a secret location.  This money will quickly transferred into gold so that when the bottom falls out, these two may live happily ever after in the country called Paraguay.  And if they get bored, then they will be able to build a Red (Black) Hole and take over the solar system.  It is only up to Barack Skywalker-Obama, and the Force, to stop these evil wingers.  

          When power leads man toward arrogance, poetry reminds him of his limitations. JFK

          by yowsta on Fri Sep 26, 2008 at 07:44:23 AM PDT

          [ Parent ]

        •  Yes, but two things (1+ / 0-)
          Recommended by:

          One is that in a country where there's been 30+ years of brainwashing about how inefficient and bad government is, the public is not ready for sensible solutions like a government investment bank, because they too obviously show the hand of government (rather than having the actions of government be explained by the Oracle at Delphi Fed Chairman).  So while that's a much better long term solution, the public needs to be moved in that direction.  Even if Obama has FDR's understanding of how to bring public opinion along bit by bit (may the heavens grant that he does), he would only be able to eventually build support for something like that in a second term.

          The second point - bottom up fixing - is the part where I'm least clear.  Yes, we need to reset the value of the mortgages (and properties) back to their real sustainable value - i.e. median income, but fixing the mortgages from the bottom up is not something the government can just go do.  The bankruptcy judge proposal is exactly the right one, because the key question is getting the mortgage back into alignment with the borrower's ability to pay - bankruptcy courts are already the most expert at figuring out a person's true income, so they're in the best position to do this.  The only thing the government can and should do is to make sure this happens expeditiously, transparently and justly.   But along the way, all that speculative derivative paper wealth held by banks, sovereign wealth funds and institutional has to be destroyed, without stopping the flow of legitimate credit.  Since we're now a nation of debtors, that's where things get ugly.  If many of these people are showing huge holes on their balance sheets where paper money once was, don't the have a fiduciary obligation to fill that hole with something?  Recall also that a lot of the individual borrowing was speculative as well, and there's no particular justice in helping a speculator just because they speculate in hundreds of thousands not hundreds of millions.  All of it undermines the basic compact of lending - shared assumption of risk.

          The part I don't understand is whether the government is buying the mortgages themselves, or the securities.  Who owns the mortgages themselves?  Are the bank runs happening because people are trying to "redeem" the securities for cash?  

          I thought up to now that the banks and GSEs do actually own the titles to the mortgages, and the securities are what were sold all around.  If that's the case, wouldn't buying up securities be like trying to buy back iPods by buying rights to their distribution from Apple?  On the other hand, if the government took the title to the mortgages, would they still have to offer "redemption" or buybacks to those that hold them?  Would that put them in double jeopardy?  Doesn't someone need to unwind the tranching because of all the bad assumptions that were baked into the models?

        •  More diary whoring II (0+ / 0-)

          How Bush's Treasury Dept. messed up the financial system:

        •  Why not keep it simple (0+ / 0-)

          Keep the mortgages from being foreclosed with a moratorium on the payments until the economy gets back on its feet.

          The sooner we have liquidity, the sooner the moratorium is over and the banks and real estate speculators start making money again.

          The total monthly payments involved are much less than the total foreclosure price.

          Live Free or Die --- Investigate, Impeach, Incarcerate

          by rktect on Fri Sep 26, 2008 at 09:53:31 AM PDT

          [ Parent ]

        •  Whoring my own (0+ / 0-)

          "A noun, a verb..." and P.O.W Thanks, Joe Biden

          by UneasyOne on Fri Sep 26, 2008 at 10:46:07 AM PDT

          [ Parent ]

      •  WHAT IF?? (0+ / 0-)

        What if Obama has a plan he is waiting to unveil. If McCain is serious about not coming to the debate and it becomes a Town Hall, is there a better time to reveal an Democratically created plan to 30mm Americans?

        And even if McCain shows, he could still do it.

        Not saying he will, just saying that would be cool.

        This entry is right though- stabilize the mortgages and let Wall Street take it on the chin over their failed securities.

        Make the mortgages worth something, and let the system reboot on its own. Painful, but could be effective.

        Come on O, bring a plan tonight!!!

    •  Republican Alternative ... (2+ / 0-)
      Recommended by:
      ca democrat, Mrs Olbermann

      From the AP This morning:

      What caught some by surprise, either at the White House meeting or shortly before it, was the sudden momentum behind a dramatically different plan drafted by House conservatives with Minority Leader John Boehner's blessing.

      Instead of the government buying the distressed securities, the new plan would have banks, financial firms and other investors that hold such loans pay the Treasury to insure them.

      I would like to understand the pros and cons of going the insurance route versus the equity/warrants route. The latter sounds fairer, but we need a discussion with more light on the alternatives.

      Celebrate women but hate choice? Revere MLK but despise community organizers? Pretend we've won the war but can't withdraw? Republican much?

      by Bronxist on Fri Sep 26, 2008 at 07:07:44 AM PDT

      [ Parent ]

      •  The scheme doesn't solve liquidity n/t (6+ / 0-)
      •  From what I heard the GOP wants (5+ / 0-)

        less federal oversight over the funds, no bailout for individual homeowners, no required restructuring of ARMs that are in default, and a capital gains tax cut (I kid you not). All they forgot was to cancel the inheritance tax.

      •  A very good blog ... (1+ / 0-)
        Recommended by:

        ... to be reading at present is Arnold Kling.  

        He's a libertarian economist with deep practical experience and academic training related to the heart of this matter.  

        Agree or disagree with Kling, you'll come away with a better understanding of what's happening.  

        A conscientious man would be cautious how he dealt in blood.

        by decon on Fri Sep 26, 2008 at 07:19:37 AM PDT

        [ Parent ]

        •  I'm surprised ... (2+ / 0-)
          Recommended by:
          AnnCetera, abraxas

          I checked it out ... I might be mistaken, but this blog sounds very trite and superficial in the usual libertarian style.

          For instance this is their prescription for our woes:

          Just make sure that banks can continue to make good loans, especially to small business. Once again, I'll get on my hobby horse of lower capital requirements. Lower capital requirements for bank lending to small business. The down side of lower capital requirements is that they raise the risk of bank failures, but we have a good system in place for monitoring banks and resolving failures.

          Enough said .... LOL.

          Celebrate women but hate choice? Revere MLK but despise community organizers? Pretend we've won the war but can't withdraw? Republican much?

          by Bronxist on Fri Sep 26, 2008 at 07:42:19 AM PDT

          [ Parent ]

          •  Are you laughing at Atrios? (1+ / 0-)
            Recommended by:

            Wake-Up Calls

            No, the fact that a highly regulated bank was, as prescribed by law and regulation, seized in an orderly fashioned and sold off with no cost to taxpayers is in no way a "wake-up call" suggesting that Congress needs to give large amounts of money to the largely unregulated shadow banking system.

            Snicker all you want.  Kling (and Atrios, and the many, many economists of all ideological persuasions who oppose this abomination) actually knows what he's talking about, and he's anything but trite and superficial.  

            A conscientious man would be cautious how he dealt in blood.

            by decon on Fri Sep 26, 2008 at 11:42:09 AM PDT

            [ Parent ]

      •  Equity Default Swaps (2+ / 0-)
        Recommended by:
        AnnCetera, ilex

        the thing that got us into this mess, are a form of "insurance".  Even the name Default Swaps should give the purchaser some hint about the fact that they are being backed by risky assets.

        It is time to renounce fear and go out and kick some Republican Ass

        by Ohiodem1 on Fri Sep 26, 2008 at 07:19:43 AM PDT

        [ Parent ]

      •  What about a "Wall Street Fat Cat Cash Amnesty"? (0+ / 0-)

        Let all the perpetrators of this fiasco anonymously return their ill gotten "bonuses" to a special fund that can be used to bail out the companies they pillaged.

        •  Executive windfall reclamation tax. (1+ / 0-)
          Recommended by:

          No anonymous about it, take back 75% of all income executives received above, say, 300k a year from everyone involved with the mess.

          Got a problem with my posts? Quit reading them. They're usually opinions, and I don't come here to get in arguments.

          by drbloodaxe on Fri Sep 26, 2008 at 07:38:22 AM PDT

          [ Parent ]

      •  Kling's summary (1+ / 0-)
        Recommended by:

        Read Kling

        My Talking Points
        Arnold Kling

        For not doing a bailout:

        1. We don't need to bail out Wall Street to protect Main Street. All we have to do is make sure that sound borrowers, especially small businesses, have access to credit. Banks can do the job, although regulators may have to reduce capital requirements.
        1. The mortgage securitization industry is brain-dead. If it does not revive on its own, we should not spend taxpayer money trying to resuscitate it.
        1. The stock market seems to want a bailout. While I hope for higher stock prices, I think that public policy needs to take into account more than just daily fluctuations in the Dow. In 1971, the market gave a huge thumbs-up to wage and price controls, which turned out to have damaging economic effects that persisted for years.
        1. There is no reason to rush. President Bush wants to ram this through without deliberation, because that is how he operates. The Democrats want to act without deliberation, because putting the financial sector under government control is what they want. The rest of us would be better off if the issue were carefully debated first.

        A conscientious man would be cautious how he dealt in blood.

        by decon on Fri Sep 26, 2008 at 07:22:19 AM PDT

        [ Parent ]

        •  Point number 1 ... (0+ / 0-)

          does not make sense to me.

          Main Street does not give out mortgages, car loans, business loans ...

          Saying "banks can do the job" sounds trite ... what bank -- Washington Mutual?

          If people can't get mortgages then that will hurt home improvement, construction workers, home movers, labor mobility and a host of things that Main Street is dependent on, right?

          Celebrate women but hate choice? Revere MLK but despise community organizers? Pretend we've won the war but can't withdraw? Republican much?

          by Bronxist on Fri Sep 26, 2008 at 07:37:50 AM PDT

          [ Parent ]

          •  asdf (1+ / 0-)
            Recommended by:
            Terra Mystica

            Actually small community banks on "Main Street" are exactly the institutions that do make these kinds of loans. This is where people go to get a mortgage, and they can still do that today.  The bailout does very little, if anything for these banks.

            Making sure that regular people and small businesses have access to credit and bailing out Wall Street are two entirely separate matters.  

            A conscientious man would be cautious how he dealt in blood.

            by decon on Fri Sep 26, 2008 at 07:49:55 AM PDT

            [ Parent ]

            •  They don't exist ... (0+ / 0-)

              If you notice what was happening over the last few years, these very institutions have been mostly gobbled up by the larger national banks!

              Celebrate women but hate choice? Revere MLK but despise community organizers? Pretend we've won the war but can't withdraw? Republican much?

              by Bronxist on Fri Sep 26, 2008 at 08:03:44 AM PDT

              [ Parent ]

              •  Look at the data .... (0+ / 0-)

                ... for FDIC regulated institutions and you'll see that you are plainly wrong.  The historical data clearly shows that Community banks and small lending institutions have proliferated.  

                If this is a reality based conversation, that's the reality.  

                A conscientious man would be cautious how he dealt in blood.

                by decon on Fri Sep 26, 2008 at 10:43:23 AM PDT

                [ Parent ]

      •  They want Tax breaks (0+ / 0-)

        To pay the insurance.

        No system exists.

        I, for one, would love to see Federal Insurance replace all risk based commerce.

        No more personal taxes, only premiums one the individual's risk.

        Taxation on all forms of Commerce would remain in their general form.

        Those who cannot afford their "American Premiums" would benefit via a structure similar to the "earned Income Credit".

        Afterall, when commerce fails, it always comes back to WE THE PEOPLE.

        This just cuts the bullshit from the equation.

        Think about it long and hard.

        Political pardons are unacceptable Mr Bush,and so is hiding your daddy's secrets behind exectutive orders,free the truth now.Econ 3.50&Soc. 5.79

        by wmc418 on Fri Sep 26, 2008 at 07:24:04 AM PDT

        [ Parent ]

        •  Everyone has to pay taxes. (1+ / 0-)
          Recommended by:

          I'm beyond tired of the guys wearing flags who refuse to pay taxes or sign up with the military.  
          Enough is enough.  Why should firemen pay a higher tax rate than billionaires?  There should be no billionaires because no person on earth needs that much money when others are starving or going without health care.  Having that much money is all about a sick ego problem, and I think we all know the cure.  

      •  it benefits the politicians because (1+ / 0-)
        Recommended by:

        they can lowball the estimated number of claims the program would actually end up paying, and make it sound like a relatively cheap proposition. Of course, if they did due diligence on the securities they're insuring and then charged a fair market rate, it would be too expensive for anyone to buy the insurance.

        •  Thanks! (1+ / 0-)
          Recommended by:

          This is exactly what I discovered since.

          In fact, the House Republicans are trying to sell it as a plan that won't require taxpayer money -- upfront.

          Of course, they leave that last word out.

          Celebrate women but hate choice? Revere MLK but despise community organizers? Pretend we've won the war but can't withdraw? Republican much?

          by Bronxist on Fri Sep 26, 2008 at 08:25:47 AM PDT

          [ Parent ]

    •  She does look like a Bunny Rabbit (2+ / 0-)
      Recommended by:
      mimi9, Mrs Olbermann

      Remember when Bugs Bunny put a towel on his head and applied lipstick ?  That's pretty much Caribou Barbie right there.

      Is that sexist of me ?

    •  Thanks for a great and probing diary, Hunter (0+ / 0-)

      What surrounds us therefore is a vast tapestry of lies, upon which we feed. Harold Pinter

      by dlcox1958 on Fri Sep 26, 2008 at 12:47:16 PM PDT

      [ Parent ]

  •  Wouldn't they be "magic money angels"? (3+ / 0-)

    we are all of one consciousness experiencing our selves subjectively, life is only a dream and we are the imagination of ourselves- Bill Hicks

    by Relevant Rhino on Fri Sep 26, 2008 at 07:02:40 AM PDT

  •  Republican response to everything: (9+ / 0-)

    "raid the treasury!!!"

    Talk about looters at a crisis...

    When liberals saw 9-11, we wondered how we could make the country safe. When conservatives saw 9-11, they saw an investment opportunity.

    by onanyes on Fri Sep 26, 2008 at 07:03:09 AM PDT

    •  all part of their bigger war and fits perfectly (10+ / 0-)

      How do you know a Republican is lying? Ask one: If the Republicans can lower gas prices for 60 days before an election, why won't they do it all the time?

      by ca democrat on Fri Sep 26, 2008 at 07:05:49 AM PDT

      [ Parent ]

    •  So you're not paying attention? (3+ / 0-)

      It's Republicans who stopped it.

      •  Stopped what? (3+ / 0-)
        Recommended by:
        onanyes, yowsta, abraxas

        Some republicans are for paulson plan, aka shove money to the rich.

        Other republicans don't think it goes far enough, and prefer 'deregulate more' and 'drop capital gains', aka shove money to the rich.

        They just don't agree on HOW to loot.  They're all behind looting in general.

        Got a problem with my posts? Quit reading them. They're usually opinions, and I don't come here to get in arguments.

        by drbloodaxe on Fri Sep 26, 2008 at 07:41:32 AM PDT

        [ Parent ]

      •  some don't want the CEO's (2+ / 0-)
        Recommended by:
        Gorette, flowerfarmer


        Be very wary of what deal is eventually reached:

        But the devil is in the details. From what I've heard, the kinds of limits being discussed could easily be cosmetic, such as limits on golden parachutes or limits on net increases in direct salaries during the duration of the bailout. Public equity could also vaporize into conditional warrants, giving taxpayers (and the Treasury) the option to cash in on certain classes of stock or applying only where firms get direct government aid rather than where they fob off their bad debts on the public.

        There will be some skirmishing over whether homeowners in danger of losing their homes should be given some breaks, but here too it's important to watch the details. Wall Street doesn't want any provision that allows distressed homeowners to wiggle out of their mortgage obligations, even though Wall Street is wiggling out of its own bad debts.

        Congress knows the public is furious. That's why it's insisting on the above-mentioned provisions. But Congress and the Administration, and Wall Street, also know that the public -- and the media -- can easily be hoodwinked into believing that certain limits and protections have been built into the deal when, on closer inspection, they haven't. Wall Street is masterful at creating the appearances of value when there's no value there, and many of our representatives in Congress are well-versed in the art of creating the appearances of public gains when the gains are mostly private. So the media has to dig hard and look at the details of this deal.

        When liberals saw 9-11, we wondered how we could make the country safe. When conservatives saw 9-11, they saw an investment opportunity.

        by onanyes on Fri Sep 26, 2008 at 07:42:45 AM PDT

        [ Parent ]

    •  Yeah, but they're white and wear suits & ties. (2+ / 0-)
      Recommended by:
      onanyes, ca democrat

      So they can't be looting, they must be "finding" money in the treasury.

      Beware the everyday brutality of the averted gaze

      by mataliandy on Fri Sep 26, 2008 at 07:19:18 AM PDT

      [ Parent ]

  •  My $0.02 - screw Wall St. No bailout for gamblers (11+ / 0-)

    It isn't as if they have ever thought much of the average American.  

    Remember, these are the SOB's who want to privatize Social Security and dismantle FDR's New Deal.  

    Don't be so afraid of dying that you forget to live.

    by LionelEHutz on Fri Sep 26, 2008 at 07:03:19 AM PDT

    •  I agree, but let's also (1+ / 0-)
      Recommended by:

      lambast McCain for helping to "derail" the "agreement" that was reached by the Dems and Bush.  

      Of course, without the bailout, the Dems can't later say they were "lied" to and forced to pass a bill that they didn't like (as in Iraq war, Patriot Act, etc.).

      And no will will have to call BF's bluff blaming the minority Repubs in the house since last time I checked the minority in the House doesn't get to filibuster.

    •  Agreed. Take them down with the rest of us. n/t (1+ / 0-)
      Recommended by:
      •  House Republicans are insane and evil. (0+ / 0-)

        Sorry, I can't find a better way to describe what they're doing.  They would rather have the economy tank than risk losing their own reelection, so they play the game of letting Democrats pass legislation that they can later use to attack them.  Between now and November people won't really know how well all this turns out, so blame it all on Democrats.  There are surely enough stupid ideologues out there ready and waiting.  I need to move someone where people grow up.

    •  Exactly (1+ / 0-)
      Recommended by:

      The world's stock markets are just giant gambling casinos, full with gambling addicts thinking only of how to make a quick buck.

      Bring on the Crash. Let's then build a new economic system that actually works to benefit and serve everybody. Every five seconds a child dies because she or he was hungry, while we in the developed world use 75% of the world's food resources and 83% of all other resources. This inequality due to greed, unfettered marketforces, and our complacency is the real crime- and most likely the true root of our global problems.

  •  Youre not figuring the derivatives (13+ / 0-)

    And "Insurance" and all the sidebars attached to these mortgages.
    Thats why Paulson wants all the money with no oversight----to make sure his wall street friends make their money back at taxpayer's expense.

    If Liberals really hated America we'd vote Republican

    by exlrrp on Fri Sep 26, 2008 at 07:03:51 AM PDT

    •  they took everything and bet the farm... (9+ / 0-)

      they took those bad mortgages and "bet" on them 40 to 50 times.  That's why insiders don't know how much money it will take to solve the problem.  This is what happens with deregulation and no oversight.  The con-artists game the system.  The problem is that they will take the whole system down if we don't try to fix it.

      all of deserves to be fired.  the administration, the bankers, the congress, everyone.  this is nothing but pure greed.

      and we are screwed if we do nothing.  so we have to figure out a way to do something.  fyi, the dems "say" they got the oversight and the ownership stuff they wanted.

      of course we won't know until we see the actual bill.

      •  Hard to deflate a bubble _THIS BIG_. (5+ / 0-)

        There certainly is some merit to the notion that they should fail.

        But they'll bring the rest of us down with them.  And that sucks.

        Happy little moron, Lucky little man.
        I wish I was a moron, MY GOD, Perhaps I am!
        -Spike Milligan

        by polecat on Fri Sep 26, 2008 at 07:11:45 AM PDT

        [ Parent ]

        •  Let it burn... (4+ / 0-)
          Recommended by:
          mataliandy, esquimaux, big annie, ilex

          I do not see the drama nor the need now that Fannie, Freddie, and WaMu are gone.

          We essentially own Fannie and Freddie, and Morgan swallowed WaMU.

          We do not need to bailout solvent banks, and the mortgage giants are now ours anyway.

          The politicking has made me suspicious that this is a scam.  There is no urgency, and that tells me that people have been badly played.

          Obama shows leadership....over a bogus issue?  Barney Frank is the smartest guy in the room....over a concocted ploy?  It's like they have fallen for a sick little game.  

          I wonder.

          Today, 9/23/08, 4169 Americans, and untold Iraqis are dead, tens of thousands more maimed. Bush lied, how soon before your family pays the price for that?

          by boilerman10 on Fri Sep 26, 2008 at 07:22:53 AM PDT

          [ Parent ]

          •  Maybe they are right and you're wrong? nt (0+ / 0-)
            •  Perhaps I am, but how urgent is it if (2+ / 0-)
              Recommended by:
              esquimaux, big annie

              the administration has been working on it for months?  It is a matter of trust and I don't trust Bush/Cheney to tell the truth about anything.

              Bush is facing a revolt from his own side.  If there is agreement one minute and a revolt the next, it looks like politics to me.

              If there is time for politics, there is no urgency.

              Let us slow down, put out the fires in peoples hair and release the details about why and for what this 'bailout' is needed.  If there is time to play political games, there is time to explain this to the public, in detail.

              Today, 9/23/08, 4169 Americans, and untold Iraqis are dead, tens of thousands more maimed. Bush lied, how soon before your family pays the price for that?

              by boilerman10 on Fri Sep 26, 2008 at 08:04:01 AM PDT

              [ Parent ]

          •  They sold us an illegal, unjustified, immoral War (2+ / 0-)
            Recommended by:
            esquimaux, DarkestHour

            of choice, just like this.  And congress may have learned nothing.

          •  I guess you never read about the Great Depression (2+ / 0-)
            Recommended by:
            polecat, mmiddle

            If this economy unravels, you'll probably lose your job.

            •  I'm self employed. (0+ / 0-)

              Yes, I read about the Depression and had parents who grew up in it.

              I recommend Studs Terkle's "Hard Times" to anyone who can read and is interested in the G. D.

              But being self-employed has proven to be pretty good..I am getting older and have a prospect lined up to take over the business.  

              People still need running water, and flushable toilets.

              Want independence?  Learn a trade, and go do it.

              Today, 9/26/08, 4173 Americans, and untold Iraqis are dead, tens of thousands more maimed. Bush lied, how soon before your family pays the price for that?

              by boilerman10 on Fri Sep 26, 2008 at 08:17:26 AM PDT

              [ Parent ]

              •  Then you might lose your customers. (0+ / 0-)

                No man or business is an island.  We rise or fall together.

                Seriously, you should read up on the Depression.

                Start with Keynes.

                Happy little moron, Lucky little man.
                I wish I was a moron, MY GOD, Perhaps I am!
                -Spike Milligan

                by polecat on Fri Sep 26, 2008 at 09:59:06 AM PDT

                [ Parent ]

      •  Fix the mortgages (1+ / 0-)
        Recommended by:

        and you cancel all the bets, since they were all bets on mortgages going bad.

        Got a problem with my posts? Quit reading them. They're usually opinions, and I don't come here to get in arguments.

        by drbloodaxe on Fri Sep 26, 2008 at 07:42:48 AM PDT

        [ Parent ]

        •  that's what I thought (1+ / 0-)
          Recommended by:

          but what I've been reading from calculated risk and irvine housing blog, other liberal blogs and some of the sanier people on CNBC is that it's past that now.  That's where we were two years ago.  Now it is not a mortgage problem it's a banking system problem.  If you do nothing then everything stops.  WaMu was teetering for weeks now.  Look at Wachovia and National City next.  Maybe tonight?  Maybe next week?  Maybe never?  Who knows???  And, the uncertainity stops everything.

          The Dems are trying the best that they can.  (at least that is what I need to believe until we see the bill...)  I don't want a rush.  But, I also want my boss to make payroll next week too.

      •  Actually, it was only 30 times (1+ / 0-)
        Recommended by:
        VBeach Dem

        Malkiel explained the math in his Forbes opinion piece a few days ago:

        "To make matters worse, they were highly leveraged (often at a 30-to-1 debt to equity ratio). Thus, a 4% loss rate would more than wipe out any equity they had.

        So if even 4% of the mortgages in the underlying aggregation failed, the whole thing was trash.

        And people were writing open puts on these babies? When I was a stockbroker, I was taught that open puts were the most risky and irresponsible thing that you could do. Of course, that is probably what made them so popular in the shadow banking system.

        So what we are paying for is not the bad mortgages. It is the 30-to-1 bets that were placed on these doggies. We are paying for the losses that these high-rollers took at the dogtrack. That's it.

        I think Nouriel Roubini's HOME plan to back up these mortgages directly is the way to go. It solves all the problems of foreclosures, the buffeted consumer, the property crisis, et al.

        It doesn't solve the problem of the money that these investment banks owe to the folks that bought the "securities."

        The big explanation on the Right is that this is ALL mortgage failures, with the majority of the defaulters being minority and poor people lavished with mortgages they didn't deserve by the Clinton administration. The Fed's data of Nonprime Mortgages shows that 57% of the subprimes and 81% of the Alt-A are current on their mortgage payments.

        And 55% of the subprimes were cash-out mortgages! These weren't poor people buying home they couldn't afford - they were middle-class people using their home as a piggy bank to cover credit card debts, take vacations, perhaps remodel. (Remember all those ads from 2006?)

        The ugly canard that this whole crisis is based on brown people living in houses they can't afford is a crock and should be called that, loudly.

        Circumstances rule men; men do not rule circumstances. -The Histories of Herodotus, Book 7, Ch. 49

        by Louise on Fri Sep 26, 2008 at 08:03:54 AM PDT

        [ Parent ]

        •  It doesn't make the whole thing trash... (2+ / 0-)
          Recommended by:
          Louise, limulus

          It just wipes out the holder's equity in the position.

          This means that they have to post more equity, or they're in default.  Eventually, if things keep getting worse, they'll run out of the ability to post more equity, and they'll default.

          The portfolio still has value at this point -- quite possibly a ton of value.  It's just that the person holding it is insolvent and has to liquidate it as fast as possible.

          This fast liquidation lowers prices on the asset even further, triggering margin calls for other folks, and the process repeats.

    •  Exercise: Assume Paulson is an honest broker (6+ / 0-)

      just this one time.

      Let's also assume that the $700B is based upon actual numbers -- like the current overextension of the Fed.

      Do you honestly think the FDIC pulled WaMu last night as a ploy?

      I think this (unlike Iraq) is a real crisis and that liquidity is necessary.  I think that Dodd and Obama are right in that we need to do something about it, with appropriate protections.

      To a tiny degree Ron Paul is also right -- if we let them fail, it will be bad for the short term, but in the long term it is the right thing to do.  Can we afford the "BAD" part of that equation?

      If people are looking for surety, it isn't possible to get it.  We know we're in for a beating.  The question is how bad and for how long.

      I can't say that I'm exactly thrilled about the "bailout."  But if we have to do it, I want grownups running the show and I especially want this to happen with as much PAINSTAKING TRANSPARENCY as is possible.

      Oh -- Paulson an honest broker?  Really hard to imagine, but we have enough independent data to see this picture and it is pretty bleak.  I think the descriptions of the problem provided to the banking committees is probably accurate.  And no I don't trust him to administer this.  But I don't think he's wrong about the problem.

      Happy little moron, Lucky little man.
      I wish I was a moron, MY GOD, Perhaps I am!
      -Spike Milligan

      by polecat on Fri Sep 26, 2008 at 07:10:25 AM PDT

      [ Parent ]

      •  I agree letting some (maybe not all) of them fail (1+ / 0-)
        Recommended by:

        might actually be the way to go. Throw in some liquidity to help lessen the damage but do it on a limited basis. It will hurt in the short term, but in the place of these too-big-to-fail investment banks we can put in alternatives with strict regulations.

        That might be the only long term solution that will actually work. The current solution seems to near-sighted.

        The new republican slogan: privatizing profit / socializing loss.

        by ryan81 on Fri Sep 26, 2008 at 07:26:43 AM PDT

        [ Parent ]

      •  That's the kicker here. (2+ / 0-)
        Recommended by:
        esquimaux, ilex

        It's a double game.  Yes, we have a crisis at some institutions, but one by one they are falling.  Morgan ate WaMU.  We own Fan/Fred now.

        We don't need to rescue Morgan just yet.  And as for the urgency, with Bush and McCain, and with Lindsey emerging from his closet to play politics, I don't see the urgency of this so-called urgent problem.  If there is time to play 'Rescue McCain' and narrative change there is no urgency.  

        We have a problem, but how bad is it if Bush and the Repubs tip their hands playing politics?  

        Today, 9/23/08, 4169 Americans, and untold Iraqis are dead, tens of thousands more maimed. Bush lied, how soon before your family pays the price for that?

        by boilerman10 on Fri Sep 26, 2008 at 07:29:16 AM PDT

        [ Parent ]

      •  Paulson is Bush's man (1+ / 0-)
        Recommended by:

        I can not under any circumstance assume he is an honest broker

        this has been a magic trick and Bush is the magician  


        One who performs magic for entertainment or diversion  

        I use my quiet voice....

        by caps lock on on Fri Sep 26, 2008 at 07:48:40 AM PDT

        [ Parent ]

        •  Remember the boy who cried wolf? (3+ / 0-)
          Recommended by:
          polecat, caps lock on, Clear Thinker

          When the wolf was really coming nobody believed him.

          •  Our problem is to deside (0+ / 0-)

            if it is the wolf at the door or is it the boy crying

            I am very suspicious
            if we do nothing and the banks consolidate then a few banks control all moneys

            It we do something and give them the money they ask for is it theft?  

            This is what 8 years of Bush has done to me

            I use my quiet voice....

            by caps lock on on Fri Sep 26, 2008 at 08:25:10 AM PDT

            [ Parent ]

          •  Exactly (1+ / 0-)
            Recommended by:

            This is exactly the problem trinite. The wolf is at the door and even the President's own party doesn't believe him.

            While I have little respect for Bush, Paulson and Bernanke are world class thought leaders. Neither are political animals. Knowing what I know about the credit markets, I believe them when they say we are on the verge of locking up. And if that happens, $700 billion is going to look like chump change.

      •  Fed pulled WaMu because McCain pulled a stunt (1+ / 0-)
        Recommended by:

        Bair said it this morning: when the talks failed yesterday due to the GOP hissy fit, the FDIC faced a major crisis with WaMu. The bank's immediate liquidity crisis meant that they would fail without a major cash allocation that night - and if the bailout didn't pass, they were toast. And the FDIC would be approaching negative reserves if it had to cover all WaMu's deposits, especially after the IndyMac failure in July.

        FDIC went to find a WaMu buyer when its own reserves faced decimation;

        That's not the Fed's stunt. It was McCain's and the House GOPs' in their effort to look in control.

        Circumstances rule men; men do not rule circumstances. -The Histories of Herodotus, Book 7, Ch. 49

        by Louise on Fri Sep 26, 2008 at 08:08:22 AM PDT

        [ Parent ]

        •  I didn't get hurt when it failed (0+ / 0-)

          [as a depositor] and was purchased at a discount. There was already a silent bank run online.

          John McCain has decided he'd rather lose his integrity than lose an election. - Obama campaign

          by mrobinson on Fri Sep 26, 2008 at 08:42:40 AM PDT

          [ Parent ]

    •  "At One Time" (1+ / 0-)
      Recommended by:

      That's where the "at one time" part of the $700 billion comes in.

      If you've ever used a slide rule, you can probably picture starting that little plastic window at one end of the ruler, then sliding it along, up the scale until you reach the other end.

      So there's a 700 billion dollar window that slides along the ruler that just happens to be over 62 Trillion (note the "T") dollars long...

      Beware the everyday brutality of the averted gaze

      by mataliandy on Fri Sep 26, 2008 at 07:27:29 AM PDT

      [ Parent ]

    •  Bears and Bulls make money; Hogs get (1+ / 0-)
      Recommended by:

      slaughtered; in some ways this is reminiscent of the insurance companies in the 70s buying up prime farmland because of rising commodity prices, driving the sale price beyond the production returns of the land.
      People who had never seen a farm rushed to invest while family farmers were unable to compete for land. Finally, commodities dropped, insurance companies found themselves with a large inventory of nonproducing farmland.

      No bailout then though they would have appreciated it; they had to sell the land at a loss and then explain to shareholders what happened. Real losers were the premium payers as the cost of this debacle were passed on to the people who bought the insurance companies' financial instruments.  

  •  So what are they covering up? (8+ / 0-)

    there is no need to rush unless there is a hidden failure underneath all this mess.

    •  The legit credit market is important (1+ / 0-)
      Recommended by:

      in keeping the wheels greased. The problem is that this phoney money market has been intertwined with with what we need so that cutting it loose is next impossible in the short term. Long term: only if Congress gets its act together and stops acting like children.

      Government didn't get smaller under the Republicans; it just lost its stature.

      by Andhakari on Fri Sep 26, 2008 at 07:28:37 AM PDT

      [ Parent ]

    •  Millions lost their homes to illegal behavior!! (0+ / 0-)

      The greatest gift you can contribute to the goal of world peace is to heal.

      by wavpeac on Fri Sep 26, 2008 at 07:45:55 AM PDT

      [ Parent ]

    •  And that's why the republicans are holding out-- (0+ / 0-)

      it's like seven card stud (a trillion $'s a card), and they are bluffing to see if they can get added extra's like Ceo's getting their money, no oversight-- or maybe just a little, and whatever else that this neophyte doesn't understand.  
      Of course, the repubs could be just trying to sucker the dems with voting with Bush so taht they can say, "Look who really stood by Bush!"  I don't trust any of the greedy slobs!

      When power leads man toward arrogance, poetry reminds him of his limitations. JFK

      by yowsta on Fri Sep 26, 2008 at 07:58:40 AM PDT

      [ Parent ]

  •  It's a completely random number anyway (8+ / 0-)

    They might as well have said, "We need a billion-kajillion dollars."

    Shelby reads your comment and nods thoughtfully.

    by Shelbyville Manhattan on Fri Sep 26, 2008 at 07:04:21 AM PDT

    •  We need 4 brazillion dollars. Send Bush to (3+ / 0-)

      Brazil to get them.

    •  Maybe not: $700B is what is in US circulation (4+ / 0-)

      Here's a Wiki link, scroll down to the chart. I don't know what the significance is, but it is rumored that they picked this number because it is the amount of cash in circulation.


      "We, two, form a multitude." --Ovid

      by CanyonWren on Fri Sep 26, 2008 at 07:16:59 AM PDT

      [ Parent ]

    •  We Need Every Penny in US Currency (3+ / 0-)
      Recommended by:
      ilex, CanyonWren, WattleBreakfast

      Go get all the money you have in your house - dollar bills, pennies, whatever. Do me a favor and bring the coins to the bank and get 'em changed into bills - they get heavy. As a matter of fact, get everything converted into singles. Get everyone in your family to do the same.

      Count that money.

      Let's say you have 100 dollars. Keep $7 of it, and put the other $93 into that big red wheelbarrow I've conveniently placed by your front door.

      OK, I'm now taking the wheelbarrow to your neighbor's house, and waiting while he does the same thing. Then to the next house, and so on. If I pass any homeless people, I'm taking their money, too. Ditto for apartment dwellers.


      I've now got the biggest wheelbarrow to ever grace the face of the Earth. It's REALLY big. This wheelbarrow is more than 250 feet wide, 200 feet deep, and 450 feet tall - plus a little extra for the handles and wheel.

      Being about the size of a NYC block full 'o skyscrapers, it's a bit tipsy. Next time I'll get one that's wider and not so tall, and maybe add some more wheels...

      There are 300 million people in the US, and I just took almost every penny they had - $0.93 from every $1. If everyone in the your family combines what's left (unless you're one of the homeless folks), you may be able to squeeze a nice last dinner out of the remainder.

       title=What I took is $700,000,000,000.

      Does that number look familiar?

      It's the amount being asked for in the bailout. Ironically, it turns out that there is currently $750,000,000,000 in circulation as cash in our economy.

      :: And Then Some More:

      $700 bil almost covers the little blue bar in this chart:

      The red bar is the actual problem.

      The green bar is the entire world economy.

      We'll be paying off the red bar, and the blue bar, and a couple of bars that aren't even here, like the $10 trillion OTC derivatives failures, in $700B increments. But we're only being told about the blue bar.

      We're about to replace the National Anthem with this cheerful little ditty:

      "Brother Can You Spare a Dime?"

      Beware the everyday brutality of the averted gaze

      by mataliandy on Fri Sep 26, 2008 at 07:33:51 AM PDT

      [ Parent ]

  •  Extreme gall. (12+ / 0-)

    Suggesting that we should be cutting taxes on the rich in the middle of this process.  The same people that have benefitted the most from the finance bubble.


    Happy little moron, Lucky little man.
    I wish I was a moron, MY GOD, Perhaps I am!
    -Spike Milligan

    by polecat on Fri Sep 26, 2008 at 07:04:32 AM PDT

  •  Where has all the money gone? (3+ / 0-)

    I think we have to find out where all the lost money has gone.  Someone must have made a killing somewhere.  Is it in oil or what?

  •  Mccain threw a bet of his life (0+ / 0-)

    If he wins he cleans the clock of Congressional Dems and by proxy, of Obama. If the market doesn't crater today McCain gamble probably has paid off and he's going to come out of this looking pristine.

    We have to see which way the market goes to decide if this final bet has made McCain a political millionaire or sent him broke.

    •  Which is why McWimpy grandstanding in DC (1+ / 0-)
      Recommended by:

      is the worst thing to do for america: there's no way the Dems will allow themselves to appear to be led by a grandstanding McWimpy.

      Government didn't get smaller under the Republicans; it just lost its stature.

      by Andhakari on Fri Sep 26, 2008 at 07:21:10 AM PDT

      [ Parent ]

      •  Don't bet on this (2+ / 0-)
        Recommended by:
        Thea VA, Gorette

        If McShame's 'plan' gains support in the broad republican base and Paulson + Chimpy wimp out then McCain looks peachy and the Dems as always, will line up like duckies in a row. The whole thing was a republican ploy to catch Dems with pants around their ankles while they're taking it in the ass from Bush/Paulson. Devilishly clever play from the rethugs. When the dust settles THEY will be looking strong for standing up to the lamest duck, stupidest moran of a president in history. As long as the market doesn't implode.

        •  With a plan that cuts capital gains taxes? (0+ / 0-)

          The public's going to think that's a winner?

          And remember: If you don't like the news, go out and make some of your own. - Scoop Nisker, the Last News Show

          by North Madison on Fri Sep 26, 2008 at 07:36:18 AM PDT

          [ Parent ]

          •  The spin will be (2+ / 0-)
            Recommended by:
            slinkerwink, ilex

            That McShame stood up to Bush and protected the tax payer money from a reckless cheque written out to an irresponsible fool of a president. It will be a hard narrative to beat for the Democrats. It will have to involve nuances of the packages and nuance isn't something that the American voter is good at.

            •  It'll be a hard narrative to WRITE (0+ / 0-)

              Much less for him to pull off...

              Sorry, my view of it is that McSame hasn't the ability to pull the collective wool over the American peoples eyes.

              Hell, he spent 40 minutes in silence in the meeting... THAT is going to be a hard narrative to beat.

              "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

              by feloneouscat on Fri Sep 26, 2008 at 09:16:16 AM PDT

              [ Parent ]

            •  not when people are losing their jobs (0+ / 0-)

              I see your point, but as people become homeless, they are not going to be looking at the nuances. They will blame McCain for pushing things to that tipping point.

  •  Eminent Domain- seize their assets (1+ / 0-)
    Recommended by:
    Thea VA

    If they can do that to generate income or tax revenue, they should do that in this case.

    Screw wage caps, surely there are workarounds for that.

    Listen to Noam Chomsky's Necessary Illusions. (mp3!)

    by borkitekt on Fri Sep 26, 2008 at 07:05:16 AM PDT

  •  What's the money for? (4+ / 0-)

    I should label you UNAMERICAN for even asking that but if you hand over the blank check right now, I'll let it slide.

  •  Clear thinking (1+ / 0-)
    Recommended by:

    is clearly lacking on the part of plan proponents for the size of the bailout.  Either they are panicked or they are obfuscating.

    It is difficult to get a man to understand something when his salary depends upon his not understanding it - Upton Sinclair.

    by Seymour Glass on Fri Sep 26, 2008 at 07:06:18 AM PDT

  •  Also charge for stock transactions (7+ / 0-)

    1/4 of 1% pays for this in 3 years.  Keep it for six years and pay off part of the debt while we're at it.

  •  This is a giant FU to Obama, and his agenda. (12+ / 0-)

    Bankrupt the system so nothing gets done in the next four years, and get power back in 2013.
    It is indeed a trap, IMHO.

    St. Ronnie was an asshole.

    by manwithnoname on Fri Sep 26, 2008 at 07:06:24 AM PDT

    •  Back to the Future (0+ / 0-)

      Friday, November 6, 1992

      Clinton Must Woo Bond Traders

      NEW YORK - Having wooed and won U.S. voters, President-elect Bill Clinton now begins a courtship of the bond and currency traders of the world.

      This powerful, hard-to-please crowd of speculators, hedgers, bankers and business managers is set to play a central role in any and all of his efforts to revive U.S. economic growth.

      The new president and his advisers can propose any number of strategies aimed at creating jobs and reviving confidence.

      Especially in the honeymoon period after he takes office in January, Clinton is expected to get ready cooperation from a Congress firmly in control of the Democrats.

      But economists say he will need support from the markets, where a continuous "vote" of buying and selling determines the cost of borrowing money and the value of the dollar in international commerce...

  •  Onbe more time, with feeling now... (7+ / 0-)


    any plan that doesn't start with increasing homeowners' incomes so they can make mortgage payments thereby stabilizing the values of their homes and the housing market is BULLSHIT.


    Dear Mr. President, There are too many states nowadays. Please eliminate three.
    P.S. I am not a crackpot.
    -Abe Simpson

    by fromer on Fri Sep 26, 2008 at 07:06:32 AM PDT

  •  The Underpants Gnomes run the Treasury (10+ / 0-)
    1. Collect $700 billion
    1. ???
    1. Profit!

    Not only do we not know what the money is for, we don't have any way of knowing whether they're going to do what they say they're going to do with it, because they don't say what that something even is.

    But we're gonna have "oversight" of it.

    Against what benchmarks? How can we judge whether they've been successful in their endeavors when nobody knows what their endeavors are supposed to be?

    People ask what happens if we don't do this bailout. But what happens if we do? Does anybody know even what the bailout backers hope will happen?

  •  They weren't going to give them $700 bil (2+ / 0-)
    Recommended by:
    Julie Gulden, abraxas

    They were going to give them $150 bil.  To start with.

  •  Saddam's missiles can hit us in 45 minutes (7+ / 0-)

    and no, this is not an off topic comment

    Barack the Blessed, McCain the Depressed

    by vanguardia on Fri Sep 26, 2008 at 07:07:47 AM PDT

  •  we're buying junk (5+ / 0-)

    Not a financial expert, but what I gather from what I've read so far, this bailout in whatever form thus far is to buy junk. Um, why?

    Since we're helping the fatcats, uh, anyone want to help me with my mortgage? I don't owe that much but I could use the relief.

    Jes sayin.

    -7.38, -5.23 "Though the storm may be raging, and the billows tossing high, Lord I feel like going on."

    by CocoaLove on Fri Sep 26, 2008 at 07:07:53 AM PDT

    •  Yeah I agree. I don't have a mortgage but I owe (3+ / 0-)
      Recommended by:
      limulus, ilex, melpomene1

      a little over $100,000 in medical bills. How about helping me out there. I could definitely use it.

      The new republican slogan: privatizing profit / socializing loss.

      by ryan81 on Fri Sep 26, 2008 at 07:31:15 AM PDT

      [ Parent ]

    •  wow, your home is junk? (0+ / 0-)

      Mortgages are the true holder of the property we call homes.  While some houses are junky, most aren't.

      •  If only it were that simple. (2+ / 0-)
        Recommended by:
        limulus, melpomene1

        Paulson is looking to by mortgage based securities and derivatives.

        The mortgages were sliced up into tranches.  The riskiest lowest tier tranche takes the first hit.  If we buy up the bottom tranches, which are surely what the banks will want to sell us, then we essentially buy a loss.  The highest tranche may eventually pay out, but that doesn't mean that the lowest one will.  That is one reason the bankers are opposed to "cram downs" - bankruptcy judges lowering the overall amounts of mortgages.

  •  There has to be a plan... (1+ / 0-)
    Recommended by:
    auron renouille

    It's all about consumer confidence.  I can't believe people aren't understanding the importance of getting something done.  The difference is the difference between lending 20 bucks to a close friend and lending it to a close stranger.  It's subtle, but a huge difference.

  •  You should send this to every Democrat in (4+ / 0-)
    Recommended by:
    ilex, JeffW, melpomene1, docta puella

    Congress with multiple copies to Obama.  

  •  We're supposed to be terrified (3+ / 0-)
    Recommended by:
    Thea VA, ilex, ryan81

    of a liquidity crisis, banks falling like dominoes, causing all shareholders to lose all, and a run on the dollar.

    If so, then WHY is there a flight to Treasuries as "quality" with the (so far minor) downturn in stocks?

    Yesterday, when the market movers thought there would be a deal, T's went DOWN.......

    Seems to me that the markets fear that the Paulson plan (or something like it) will be APPROVED, and that the resulting run on the dollar (due to US Govt insolvency) will drive down Treasuries and drive up interest rates.

    "I do not choose to run for President in 1928" Calvin Coolidge

    by dabize on Fri Sep 26, 2008 at 07:08:10 AM PDT

    •  My bank failed yesterday (5+ / 0-)

      And I still have my money. So far I've lived through three bank failures since 2001. Every time my deposit account was sold to another bank and life continued on with nary a blip.

      I was listening to a rebroadcast of one of the call in shows on NPR last night where they were talking to financial experts about what to do. A caller brought up a great question, which was "Small investors and individuals are being told to stay put and don't move out of the market while professional institutional money managers are moving huge piles of money out of the market (and in, and out, and in, and out). Why are they panicking while telling us we shouldn't worry?"

      No one had a good answer for that question.

      So many impeachable offenses, so little time... -6.0 -5.33

      by Cali Techie on Fri Sep 26, 2008 at 07:40:47 AM PDT

      [ Parent ]

      •  people are smart,smarter than pols think(n/t) (1+ / 0-)
        Recommended by:
        •  I'm not so sure about that (0+ / 0-)

          The GOP has been betting on the stupidity of the American public and it's been more or less working for them for over 20 years.

          So many impeachable offenses, so little time... -6.0 -5.33

          by Cali Techie on Fri Sep 26, 2008 at 07:44:27 AM PDT

          [ Parent ]

          •  well.........possibly,but also that folks won't (0+ / 0-)

            punish the pols.  And just "drop out" of being involved, including voting.  I have an intelligent sister, who said, (I was shocked, not sure why, I'm older.)"I don't pay any attention to politics." Proudly.  I pointed out that her property tax, water bills, are directly local city council work and if she complains again, I'll remind her.

            •  That's another thing the GOP banks on (0+ / 0-)

              general apathy.

              People are too busy or lazy to be engaged. They complain about taxes and lack of services, but that's about as far as it goes. Few are willing to actually DO something about it. If more people were engaged we would never have another Republican administration ever.

              So many impeachable offenses, so little time... -6.0 -5.33

              by Cali Techie on Fri Sep 26, 2008 at 08:24:13 AM PDT

              [ Parent ]

              •  I dunno about "lazy",busy and "turned off", how (0+ / 0-)

                get them back?  I saw Michael Moore's (free) movie online Sept. 23 "Slacker Uprising".  Liked it.  It's free to any school library, as well as free to all online to view or download for 3 weeks.  He was, in 2004, for getting folks to register/vote, aiming at 62 cities/campuses.  

                 Maybe not "get them back" as I started out with, but "get them" involved.  Then there's the "theft" factor. Greg Palast says the election is already stolen.  I take it with "a grain of salt",but the vote havoc/theft by Republicans is getting "habit forming".....and major danger.

      •  You almost didn't have your money. (0+ / 0-)

        I'm sympathetic to the argument that perhaps the US economy can survive the lack of a bailout.  Don't get me wrong, I think it's possible.

        But I think it's nuts to be so cavalier about the consequences, and to think that the risks are being over-stated.

        Newsflash: your money in WaMu was teetering on the edge.  Every cent of it, including the $100k portion supposedly insured by FDIC.  The FDIC insurance fund is almost depleted courtesy of the IndyMac failure earlier this year, and WaMu was something like 10-50x the size of IndyMac.  If no financial institution had stood up to bid on WaMu's assets when the FDIC knocked on the door, your savings account in WaMu would be gone in a puff of smoke.  Kaput.  

        You got lucky.  We're still early in the process, so JPMorganChase decided to take a chance on buying WaMu.  But if this goes on for another few months, we're going to run out of financial institutions willing to take a chance.  

        Wachovia is now also on the brink of collapse.  Will someone buy it out?  Can FDIC cover its depositors?  Most likely.  But what if it doesn't?

        Armageddon isn't guaranteed (or even likely), but it's possible.  And I personally think that's very scary.

        •  Panicking will only make it worse (0+ / 0-)

          Like I said, I've survived three of these. There is no way the government is going to let people lose all of the money they have deposited in a bank.


          Why? Because if it happens the economy will totally collapse as everyone will immediately withdraw everything in their deposit accounts and there isn't enough cash in the system to cover it all. The banking system will immediately shut down all the way to the last branch and ATM and it will stay that way until everyone calms down, that is if it doesn't lead to a revolt against the government. Let me repeat:


          Looking at the market today I don't think there's that much to panic about and WaMu failing may have been what was needed since apparently when it comes to banks they made the worst decisions and it seems from news reports that triggered a slight easing of credit between banks. The people who really got screwed in this deal were the capital investors who poured billions into WaMu in the last few months. They lost everything they put in and have no hope of getting any of it back.

          One way or the other the market and the economy will recover. We're going through a painful time and it's probably going to become even more painful for most of us as valuations come back down to a more reasonable and sustainable level.

          I've been wondering though, when a bank like IndyMac fails and no one picks up the pieces, what happens to the loans and mortgages? Are they managed by the government or do they evaporate like people's money? It seems a bit unfair to depositors and investors if some entity is still collecting on the loans and keeping the $$.

          So many impeachable offenses, so little time... -6.0 -5.33

          by Cali Techie on Fri Sep 26, 2008 at 02:22:32 PM PDT

          [ Parent ]

    •  DOW is now slightly positive (3+ / 0-)
      Recommended by:
      slinkerwink, ilex, abraxas

      and Treasury yields are still down.

      Folks out there don't seem  too concerned that todays events are going to lead to a collapsing dollar or collapsing markets.

      I'm starting to think that this is exactly what one would expect if those doubting the urgency or the appropriateness of a Paulson-style bailout are right.

      Just saying.

      "I do not choose to run for President in 1928" Calvin Coolidge

      by dabize on Fri Sep 26, 2008 at 08:01:12 AM PDT

      [ Parent ]

  •  His math was wrong yesterday and is still wrong (2+ / 0-)
    Recommended by:
    Seeds, ilex

    today.  Currently 6% of all mortgages (totaling $11.x trillion) are delinquent or in default.  And these mortgages were divided up into numerous instruments that were then sold and have since not only lost value, but have stopped trading.  So the problem is actually a much bigger number than the $700 billion (which is why the Treasury is asking to be able to sell assets it buys and buy more with the proceeds).  The idea behind $700 billion is that it is hopefully enough to recapitalize some of the banks and get lending started again.

  •  Exactly (9+ / 0-)

    Let's not even talk about mortgages.

    Someone said earlier that the credit default swap market is 45 trillion dollars. It's because you can make multiple bets on the same bundled package of mortgages. Someone is cashing in their chips.

  •  McCain The Gambler (2+ / 0-)
    Recommended by:
    Cali Techie, ThompsonLazyBoy

    John McCain "hopeful" he'll attend a presidential debate. No other candidate has ever missed a nationally televised debate.

    Here we are now Entertain us I feel stupid and contagious

    by Scarce on Fri Sep 26, 2008 at 07:08:39 AM PDT

  •  What is the size of the derivatives market? (1+ / 0-)
    Recommended by:

    I really have no idea.  I have heard numbers that dwarf the $700 billion in Paulson's plan.

    Would this money really do any good?  How can the derivatives market be worth more than the mortgages it is based on?  These companies don't even know what this stuff is worth.  This sucks.

    Wasilla- Come for the meth, stay for the MILFs.

    by Bob Novak Douchebag of Liberty on Fri Sep 26, 2008 at 07:08:53 AM PDT

    •  One estimate I saw (4+ / 0-)
      Recommended by:
      Cali Techie, drbloodaxe, ilex, leonard145b

      was $45 trillion.  More than the GLOBAL GDP.

      That's approx what companies had valued the derivatives at, on their books.

    •  Wow (0+ / 0-)

      I so totally don't understand all this.

    •  I blame it all on Hillary's cattle futures (7+ / 0-)

      We are finally seeing the full effect of that transaction, and she really should apologize for blowing up the entire world finance system.

    •  That's because (7+ / 0-)

      The Mortgage Backed Securities (MBS) are only a tiny fraction of the whole derivatives/CDS/CDO market, about 1% if I remember correctly.

      The bigger problem is the CDS market, essentially a market for insurance on investments in questionable companies.  It's Enron all over again, except this time, everyone was in on the deal.

      There's a nice primer floating around there on CDS, but I can't remember the URL.  Essentially, the problem was that these CDS's were so lucrative for the firms underwriting them, that they got greedy and started to make VERY aggressive assumptions about the underlying creditworthiness of the assets in question, thereby making the risk of default lower than the true risk.  By doing so, they were able to charge lower premiums than their competitors and rack up more fees and bonuses for their firm.

      The other problem, of course, is that the pricing models for these CDSs, in general, assume that the risk of any one asset or company defaulting is independent of any other asset or company defaulting.  Obviously, that is not the case, for example, in the mortgage industry.  As one lender fails, many will fail, because the underlying problem is that homeowners can't make their mortgage payments.

      It's like writing insurance for a hurricane prone area, and thinking that you'll only have to pay out on one policy.  Incredibly stupid.

      And of course, in general, once this market got so big, it's inevitable that unforeseen complexities will rear their ugly heads and cause instabilities.  These people were playing with fire, and they knew it.  But the fees were just too good to pass up by the firms, and the companies buying these vehicles were similarly lulled into a false state of complacency by being able to shore up their balance sheets and bottom line, thus leading to better quarterly profits and stock prices.

      Enron writ large.  That should be the frame.

      People should not be afraid of their governments. Governments should be afraid of their people.

      by viget on Fri Sep 26, 2008 at 07:28:20 AM PDT

      [ Parent ]

    •  Chris Cox (2+ / 0-)
      Recommended by:
      limulus, ilex

      indicated in his recent congressional testimony that the size of the credit default swap (CDS) market was estimated at $58 trillion (dwarfing the sum of the total mortgage market, all treasuries, and the stock market).

      I sure hope that the Paulson plan doesn't include taking over any of these obligations.  It would seem much better to just dissolve that entire market (an obvious pyramid scheme to begin with (created by de-regulation - think Phil Gramm)).

  •  asdf (8+ / 0-)

    ``I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,'' said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.

    The economists and the people are saying no to this bailout.  The market hasn't crashed.  In fact, Wall St. and economists are starting to talk about solutions that don't involve the taxpayer.

    Again, the Democrats are not listening to the people.  They are fully aware that they have gotten thousands of calls and emails against the bailout, but they charged ahead anyway.  Now they look like fools.  Harry Reid is going to hold a press conference at 10:30 and apparently he's going to put the brakes on this process and work on it into next week.

    The market is going along and not crashing.  A lot of people have egg on their faces.

    "The true measure of a man is how he treats someone who can do him absolutely no good." --Samuel Johnson

    by joanneleon on Fri Sep 26, 2008 at 07:09:35 AM PDT

  •  Let's not forget Goldman and MS stock price! (4+ / 0-)
    Recommended by:
    JuliaAnn, rlharry, ilex, melpomene1

    A friend of mine mentioned how much of the Wall Street bonuses were paid in STOCK.  Essentially, Richard Fuld of Lehmann lost approximately 1/4 of all bonuses paid to him, because it was paid in stock, and ultimately became worth about $100,000 (chump-change for these guys).

    So I am wondering whether all of this is not so much to take the debt off the books, but to prop up the investment bank's stock price, recover a great amount of the bankers' bonuses, and dump the stock on others for the long-term.  

    It's a thought.  Especially in light of what you say about the mortgages.

    All politics is class-warfare.

    by dhfsfc on Fri Sep 26, 2008 at 07:10:38 AM PDT

  •  CNn reporter (5+ / 0-)
    Recommended by:
    sapper, duha, drbloodaxe, ilex, Muggsy
    just said the 700 billion could but up all the morgages that are in default. Wouldn't that both keep people in their homes and bailout the banks holding the paper?
    •  that makes too much sense (2+ / 0-)
      Recommended by:
      ilex, docta puella

      Yes, the NSA can hear you.

      by Muggsy on Fri Sep 26, 2008 at 07:13:35 AM PDT

      [ Parent ]

    •  I wondered about this, (1+ / 0-)
      Recommended by:

      but I don't think that's so. I just did some guesstimating and all the figures I came up for paying off these things was more than a trillion.

      BTW, I agree that with the 700 billion we're spending, it's like paying the finance charge on a monthly payment on a credit card. You're not cutting into solving the problem.

      I'm no economist, but concerning "toxic" loans, I don't think throwing money at them detoxes them in any way. What you attack are the real loans, the mortgages themselves, get them back up on their feet, renegotiate them so that homeowners don't get thrown out or forfeit their mortgage, and put them on a reasonable fixed rate.

      All the toxic loans, just like all the margin buys, Wall Street takes care of in its own catastrophic way. I just don't see how we can avoid that.

      "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

      by sapper on Fri Sep 26, 2008 at 07:16:54 AM PDT

      [ Parent ]

    •  edict:all solutions must come from supply side! n (0+ / 0-)


  •  Brecht once said (2+ / 0-)
    Recommended by:
    sapper, ilex

    What is the burgling of a bank to the founding of a bank?

    Barack the Blessed, McCain the Depressed

    by vanguardia on Fri Sep 26, 2008 at 07:11:10 AM PDT

    •  I did a collage once (2+ / 0-)
      Recommended by:
      vanguardia, ilex

      about five years ago had Gen. Tommy Franks pasted over a bunch of other glued-down stuff.

      the newspaper headline clippings read "I am a police officer robbing the bank"

      Somehow the metaphor stuck in my head lo these few years. Every time I think about the Bush administration.

      "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

      by sapper on Fri Sep 26, 2008 at 07:19:51 AM PDT

      [ Parent ]

      •  Ronald Biggs would blush (0+ / 0-)

        He just robbed a train

        Barack the Blessed, McCain the Depressed

        by vanguardia on Fri Sep 26, 2008 at 07:22:51 AM PDT

        [ Parent ]

      •  nice. Can you possibly find/post the art?(n/t) (0+ / 0-)
        •  Sigh. No scanner. (0+ / 0-)

          I've got 25 sketchbooks of crap I can't show anybody. : (

          "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

          by sapper on Fri Sep 26, 2008 at 07:53:45 AM PDT

          [ Parent ]

          •  I'm total beginner with laptop,and still can't (1+ / 0-)
            Recommended by:

            move my photos from my birthday digital camera gift, into my computer.  I saw that photos can go on DK if they come via one of the sites that stores them. (I'm still decoding the FAQs.  Long time artist.)  I like the Gore Vidal quote.  Why "can' anybody" your artwork?  Curious and not judgmental.  I am still into "show and tell",but haven't come to terms with posting anon.vs using my name/artwebpages.....and I don't have a scanner either.

            •  Not shy. Just technologically retarded (0+ / 0-)

              and not currently able to get anything larger than sketchbooks. No studio. Kids running around with razorblades and making a hot mess out of my corner o'stuff.

              But they'll grow up eventually.

              "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

              by sapper on Fri Sep 26, 2008 at 08:35:18 AM PDT

              [ Parent ]

              •  went to your page;sportwriter(I'm Mets fan),histo (0+ / 0-)

                ry (I was a history student/teacher until I could begin my art career.)  Have military in my family.  Am much older.  Went to a state college on GI Bill at 16 (dad was disabled/then deceased WWII vet/enlistee). Spouse was not in military, but cousins were drafted into army for Vietnam:one disabled by agent Orange and the other by same boot camp epidemic as my dad, a generation later:spinal meningitis.  My losing a dad when I was ten made me a "peacenik".   Good luck on finding space to do your art.  (I had space and kid agreed to  my "off limits without invitation" and I didn't go into kid's space unless I knocked.)  

  •  If the Dems focus on what should be done (1+ / 0-)
    Recommended by:
    Julie Gulden

    and what needs to be done, and forget about the nonsense from the McRepubs, they'll do fine.
    It's the R's that "need" this, not the Dems.
    If the Dems just push forward, the R's will see that they have to catch up fast.

    Government didn't get smaller under the Republicans; it just lost its stature.

    by Andhakari on Fri Sep 26, 2008 at 07:11:28 AM PDT

    •  But as it turns into a mudfest (1+ / 0-)
      Recommended by:

      The chance for an intelligent plan drops.
      Do we wait for a depression and then say "I told you so"?  Lotta good that does us.

      Moderation in all things-NOT

      by Julie Gulden on Fri Sep 26, 2008 at 07:15:27 AM PDT

      [ Parent ]

    •  The most important thing they can do (0+ / 0-)

      is demand reform of the bankruptcy laws.
      Sen. Casey has been a strong voice on this from the start and why Obama is taking that off the table is anathema to me.
      In PA, our bankrupcy judges have the ability to broker negotiations b/t lenders and borrowers to keep thier homes and pay their mortgages.
      In Philly alone, this has saved more than 1 million families from losing their homes and their dignity.

      Facts are stubborn things- John Adams

      by Veritas36 on Fri Sep 26, 2008 at 08:05:39 AM PDT

      [ Parent ]

  •  Brown paper packages tied up with string? (1+ / 0-)
    Recommended by:
    Phil S 33

    Raindrops on roses and whiskers on kittens
    Bright copper kettles and warm woollen mittens
    Brown paper packages tied up with string,
    These are a few of my favorite things.

    Cream coloured ponies and crisp apple strudel,
    Door bells and sleigh bells and schnitzel with noodles
    Wild geese that fly with the moon on their wings,
    These are a few of my favorite things.

    Girls in white dresses and blue satin sashes,
    Snow-flakes that stay on my nose and eye-lashes,
    Silver white win-ters that melt into spring,
    These are a few of my favorite things,

    When the dog bites,
    When the bee stings,
    When I'm feeling sad,
    I simply remember my favorite things,
    And then I don't feel, so bad.

    "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

    by sapper on Fri Sep 26, 2008 at 07:12:10 AM PDT

  •  time to organize a Just Say NO campaign? (7+ / 0-)

    This is pure bullshit.
    "buying depreciated assets that are weighing down the balance sheets of these large financial institutions"

    Buying their mistakes.

    Buying their "all or nothing" betting debt.

    good grief, Kucinich's is the only sound plan there seems to be!

  •  Dems now defending Bush (5+ / 0-)

    it seems to me that the Democrats are blaming the Republicans for not getting on board the Bush bail out?  Even Obama said yesterday that he is willing to fold on his  provisions (bankruptycy, stimulus) to get the deal done. And how did this switheroo happen? We were punked!

    Go see Matt Stoller at Open Left...he is pissed and rightully so.

    Yes, the NSA can hear you.

    by Muggsy on Fri Sep 26, 2008 at 07:12:43 AM PDT

    •  I agree (2+ / 0-)
      Recommended by:
      ilex, melpomene1

      I have seen more democrats on TV talking about this "bailout" much more than the Republicans. How did this happen? I wish Frank, Dodd and Company would stay away from any and all cameras. It is now being portrayed as the democrat's want the bush plan and the republicans are, for the most part, opposed. How did this happen?

      Yes if we are not careful we indeed will get punked!!!

  •  Where the money will go (3+ / 0-)
    Recommended by:
    Devilstower, ilex, SolarAngel

    $700 billion almost covers the little blue bar in this chart:

    The red bar is the actual problem.

    The green bar is the entire world economy.

    We'll be paying off the red bar, and the blue bar, and a couple of bars that aren't even here, like the $10 trillion OTC derivatives failures, in $700 billion increments. But we're only being told about the blue bar.

    Beware the everyday brutality of the averted gaze

    by mataliandy on Fri Sep 26, 2008 at 07:13:27 AM PDT

  •  We need an adult to manage all these children. (1+ / 0-)
    Recommended by:

    We need a leader with the maturity to weigh all sides and come up with a plan which stops the evil transfer of wealth to those who caused this "meltdown".

    A reckless old coot who pretends he is just a maverick will not do.
    Hmmm. I wonder who might be cool enough to handle this with reason? I wonder who might be able to rally the nation with hope of good things to come?
    I wonder who might be willing to take the leadership in a time when we need change in a big way?


    The turtle was tight in its shell for a long time. But at last its legs waved in the air, reaching for something to pull it over. -Steinbeck (Grapes of Wrath)

    by Ma Joad on Fri Sep 26, 2008 at 07:14:17 AM PDT

  •  how would be bailing out homeowners be more fair? (3+ / 0-)
    Recommended by:
    sapper, duck, Seeds

    I didn't get an ARM with 0 downpayment on a home that was twice the cost of the market the year before because I was careful. I don't see why it's more noble to bail out middle class morons instead of upper class morons. Does that make me a bad person? I like Dodd becauseat least we hen have a chance of ownership in banks.

    •  though to clarify, some support needed - not bail (1+ / 0-)
      Recommended by:

      outs but only single homes. If you default on your vacation home, screw you. I think the Dodd plan has enough in it though get cramdowns if Republicans won't play ball.

      •  Screw that (1+ / 0-)
        Recommended by:

        I bought a house I could afford with a traditional 30 year loan. I am NOT bailing out some ass't manager at Wendy's who thought s/he deserved a $250K house on a $35K salary. That's just as dumb as bailing out those who bought credit swaps or whatever they're called.

        --Sent from my Blackberry, "the miracle John McCain helped create." (not really, for both)

        by duck on Fri Sep 26, 2008 at 08:15:17 AM PDT

        [ Parent ]

    •  No, you're not a bad person. (1+ / 0-)
      Recommended by:

      There are no good alternatives. I didn't get an ARM with 0 down payment either. My wife and I have bad credit, even though we earn a whole lot, our cars are paid off. I think it's her student loan that she can't pay. Whatever, we are in a position where I'd rather rent than put up with people putting us in a house we don't want with a deal we can't afford.

      Anyhoo, there doesn't seem to be a solution, only a deference to one problem or another. The strategy here is to pass a bill that may prevent a huge crash (it may not do anything of the sort, though), and have it palatable enough for 535 people to not throw up at.

      Doing so in 10 days is herculean, and as we're seeing it play out, damn near caustic. If there's any blame, put it on the current resident at 1600 Pennsylvania Ave.

      Whatever happens, rest assured, we're all going to hurt for a while.

      "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

      by sapper on Fri Sep 26, 2008 at 07:26:20 AM PDT

      [ Parent ]

    •  middle class morons (2+ / 0-)
      Recommended by:
      abraxas, TNThorpe

      Some of them/us got carried away with the idea that an investment in real estate would provide a "nest egg" for retirement.  It seemed like a good idea and then the "dealers" pushed bad mortgage deals on them.  This is where the fraud occured.  If the buyers saw upfront how high the TRUE payments would be to live in that house they would never buy it.  

      The truth is that the Bush Administration propped itself up for years on the real estate and construction bubble.  Now they are blaming the little guy.  It is highly offensive.

      The force of public opinion cannot be resisted when permitted freely to be expressed. Thomas Jefferson

      by Thea VA on Fri Sep 26, 2008 at 07:46:04 AM PDT

      [ Parent ]

    •  Think about what happens to entire (0+ / 0-)

      neighborhoods and communities littered with "For Sale" signs and REO signs in the front lawns.  How does that help stablize the economy?

      Per Dodd, 65% of the sub-prime borrowers, actually qualified for prime fixed-rate, fixed-term loans.
      Loan Officers, Mortgage Brokers and Real Estate agents often abandoned their fiduciary responsibilites to these buyers by committing fraud.
      Speculators were gobbling up new construction and artifically inflating valuations for a quick buck.
      Speculators, in huge numbers, were taking out these exotic sub prime loans.

      (I work in the housing industry and saw it going on since 2003)

      Facts are stubborn things- John Adams

      by Veritas36 on Fri Sep 26, 2008 at 08:15:44 AM PDT

      [ Parent ]

    •  The Fed is a private bank (0+ / 0-)

      You will not own anything at the end of the day. The "Federal Reserve" is a private bank that is going to buy junk with no money. You and I merely get the bill with interest.

      This buy out is foolish. is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. 1776

      by Samart on Fri Sep 26, 2008 at 08:33:40 AM PDT

      [ Parent ]

  •  The amount had been cut by 2/3 (2+ / 0-)
    Recommended by:
    scrutinizer, sumo

    The number was always ridiculous.  Dodd and Frank cut that number and Bush wasn't even talking about vetoing it:  that tells me some measure of real crisis exists.  Although the parallels to Bush crying wolf are relevant, this was different:  with FISA it was an immediate crisis but Bush was going to veto it if it wasn't his initial bill.  Same thing with Iraq.  Economics is not hidden in an unclassified report.  I know there are some economists out there saying there's no crisis.  Hell, Paulson and Bernanke were saying that two weeks ago.  Everyone with half a brain knows we were heading to some kind of wall here -- a question of when and how serious is a matter of degree, not that the problem truly exists.

    I'm pushing Paul Krugman's column today:  


    •  Money quote from Krugman (0+ / 0-)

      ...Furthermore, one non-rank-and-file Republican, Senator John McCain, is apparently playing spoiler. Earlier this week, while refusing to say whether he supported the Paulson plan, he claimed not to have had a chance to read it; the plan is all of three pages long. Then he inserted himself into the delicate negotiations over the Congressional plan, insisting on a White House meeting at which he reportedly said little — but during which consensus collapsed...

  •  What strategy allows you to turn the ship around? (0+ / 0-)

    The House R's are the only one's who could claim a win if no bailout package passes and the world doesn't come to an end.  The problem is that all of the D's -- including Obama could be harpooned with having supported 700B in unnecessary spending.  

    How can they credibly change positions now?  I can see allowing the current deal to be killed, but then you need to somehow frame a smaller more acceptable alternative -- and claim ownership of it (not the "McCain plan).  I just don't see it happening.  Is 700B the price of getting elected?

    I'll reitterate that I am not in the do nothing camp -- I'm in the need to be convinced -- need to hear lots of specifics and less fear mongering camp.

  •  You can't bail yourself out of a depression (3+ / 0-)
    Recommended by:
    Julie Gulden, ilex, docta puella

    It's probably time to accept that we are in for some very dark economic times.  The treasury has effectively been looted and we can give ourselves a loan to cover the difference.  

  •  When a tornado hits, (4+ / 0-)
    Recommended by:
    JuliaAnn, sapper, Julie Gulden, ilex

    do you throw everything you have into the air to block it, or do you save what's really valuable?

    "In the immortal words of Jean Paul Sartre, 'Au revoir, gopher'. " -Bill Murray as Carl Spackler

    by jhop7 on Fri Sep 26, 2008 at 07:16:36 AM PDT

  •  My tin-foil hat (1+ / 0-)
    Recommended by:

    All along, the Republican puppet-masters wanted 0% Capital Gains Tax.  So they planned this little $700 billion diversion, not because they ever thought it would work, but just because in comparison, their real goal seems so much cheaper to us who don't realize how much 0% Capital Gains IS our money and probably more than $700 billion.

    The force of public opinion cannot be resisted when permitted freely to be expressed. Thomas Jefferson

    by Thea VA on Fri Sep 26, 2008 at 07:16:56 AM PDT

  •  thank you. (1+ / 0-)
    Recommended by:

    It's nice to know I'm not going crazy.

    Blasphemy is a victimless crime.

    by pullbackthecurtain on Fri Sep 26, 2008 at 07:17:04 AM PDT

  •  head to head or bi-partisan (1+ / 0-)
    Recommended by:

    seems this isn't a crisis the House Republicans warrants bi-partisan cooperation... do they know something we don't?

  •  Banks may be too big to fail (2+ / 0-)
    Recommended by:
    mcurry, ilex

    But their Executives are not too important to replace.

    Not only that, but they are, too important to let off the hook.

    Whether these individuals are gulity of crimes is a question for a time in the near future, what these individuals are today are, at the least, Material Witnesses.

    Any bailout should send cold shivers down the spines of Wall Street by including the sequestration and active interrogation of the workings of each financial instrument and the businesses and individuals that created, and made a market in them.

    Henry Paulson's arrogant notion that those with capital continue to lord control and power over the failed institutions is not operative any longer.

    These people are mendicants, people of poor judgement, guided by greed and selfish principles, playing the game of Capitalism.

    Over the past few years, those who loved the game "clean and unfettered" by regulation have failed to make Capitalism continue to move forward.

    Now at their moment of crisis, Paulson represents the very image of the aristocrats, his ideas come from the failed world of 21st Century Capitalism.

    Americans, needs to save themselves with their hard earned money, Wall Street, on the other hand, must understand that beggars, even those controlling billions of dollars, are at the mercy of hundreds of millions of Americans and act accordingly.

    Political pardons are unacceptable Mr Bush,and so is hiding your daddy's secrets behind exectutive orders,free the truth now.Econ 3.50&Soc. 5.79

    by wmc418 on Fri Sep 26, 2008 at 07:17:39 AM PDT

  •  The bailout is needed (5+ / 0-)

    I can't believe we are still arguing if a bailout is needed.

    Of course wall street can absorb the losses, and they may very well will.

    The problem isn't absorbing losses,it is bringing liquidity back into the market. Because of the balance sheet and the unknown value of their declining mortgage contracts, there isn't enough capital to be raised to LOAN MONEY OUT.

    The problem is the assets are illiquid, even if they are not in default
    . If they can't sell the paper, then they can't raise new money to loan out.

    That,in turn, makes money expensive. That prohibits many people from buying homes,which in turn reduces demand and results in declining home values, which is a disaster to the American people which end up with negative equity, and upside down.

    This lack of lending and capital raising effects credit for small business. They can't get loans and that won't move the economy forward.

    The economy runs off credit, and it has all but shutdown.  

    •  Boy you got that fuels everything (1+ / 0-)
      Recommended by:
    •  Chasing 25% returns while holding 6% notes (1+ / 0-)
      Recommended by:

      That is why Wall Street is in panic.

      The shadow banking system bit itself in the ass, when the ponzi scheme ran out of layers in the pyramid.

      45 Trillion owned by those hunting giant ROI's finally realizing the paper is for returns of less than 10% and even the adjustable instruments cannot rise as the holders of the notes are tapped out.

      The UNIVERSAL DEFAULT on credit cards took mortgage money away too, and no one has discussed that impact.

      Political pardons are unacceptable Mr Bush,and so is hiding your daddy's secrets behind exectutive orders,free the truth now.Econ 3.50&Soc. 5.79

      by wmc418 on Fri Sep 26, 2008 at 07:33:03 AM PDT

      [ Parent ]

      •  following that logic... (2+ / 0-)
        Recommended by:
        JuliaAnn, ilex

        leads back to the issue of company closes idling 1000 workers, multiplied by manifold amounts.

        Pardon my simplistic example, but when America was told to stop manufacturing and start delivering pizzas to each other the economy started to wobble.

        Credit scmedit...unless the nation is put back to work, and that damn quickly, no amount of cash infusion from this or the tenth generation from now will rescue this financial system.

        Bailout?  I want more details and believe it is a scam.  Given Bush's track record, Cheney's meddling and the sudden abundance of politicking and sniping from Republicans, I suspect the urgency being talked about is not so urgent at all.

        Let it burn...if the need is so great, there will be calls for action.  

        Today, 9/23/08, 4169 Americans, and untold Iraqis are dead, tens of thousands more maimed. Bush lied, how soon before your family pays the price for that?

        by boilerman10 on Fri Sep 26, 2008 at 07:44:06 AM PDT

        [ Parent ]

    •  But that doesn't go along with what everyone (0+ / 0-)

      here wants to hear. No one here even wants to admit that the problem started with the government pressuring the lenders to loosen up on the qualifications for a loan. Now you know why these things are done behind closed doors, to lessen the politization of the discussions.

    •  We should be able to inject liquidity (1+ / 0-)
      Recommended by:

      instead of buying bad paper and rewarding Wall Street CEOs. Let the government fund its own lending bank with the $700 billion then. I do not think bailing out these bad players is effective or wise.

      My God, the American people have been stolen from for the last 8 years (and even longer) while levees fail and bridges fall ... and we are so shell-shocked into being happy with our moldy crust of bread we do not see what is happening in front of our eyes.

    •  Show me (0+ / 0-)

      Everyone keeps saying "Credit will disappear!"

      Show me where that's happening. Show me. The Dow is down only 28 points at 11:30 a.m. It's been a week and a half. No stock brokers jumping out of windows, no reports of credit drying up en masse on the consumer market. Are auto loans still being made? Are housing loans still being made? Can small businesses still get loans? Seems to me the answer is still "Yes".

      The major financial players in this drama - AIG, Morgan Stanley, Merrill Lynch, Freedie, Fannie, Goldman Sachs, Bear Stearns have been stabalized. Lehman's was allowed to go under, at seemingly no wide-spread ill effects.

      Show me where this is happening. I am becoming more and more convinced we do NOT need to do this.

      And who, EXACTLY, gets all these billions? This bailout doesn't include the aforementioned firms. So who IS getting a quarter of a trillion from us?

      No one has made a convincing case to me we need to do this.

      --Sent from my Blackberry, "the miracle John McCain helped create." (not really, for both)

      by duck on Fri Sep 26, 2008 at 08:40:31 AM PDT

      [ Parent ]

  •  "The Plan" failing could be a good thing. (5+ / 0-)
    Recommended by:
    sapper, duck, pontechango, ilex, docta puella

    I have been skeptical from the outset( and quite angry) of the need for this. Some of the technical aspects of the problem and fix are quite frankly, beyond me. Couple this with my complete lack of faith in our presidents veracity and objective has made it diffucult to support this.
    Now that the Republican house members have made this partisan, I can think of no better time to define who's ideology brought us here. If McCain has the ball's to show up tonight Obama should do just that. The Dem's comments on the "deregulater" have been muted so far, that needs to change.

  •  is obama signing off on this P.O.S. bill? (1+ / 0-)
    Recommended by:
  •  Unlike the internet bubble (1+ / 0-)
    Recommended by:

    the real estate bubble lacks imagination.

  •  Well said. (1+ / 0-)
    Recommended by:

    As I said, this is like trying to put out a fire on the Hindenburg. We need to let Wall Street burnt itself out and rebuild from the real assets they creatively built upon.

  •  It's 1636, in Holland, and we're talking tulips (5+ / 0-)
    Recommended by:
    decisivemoment, duck, ilex, sumo, 7P

    It's a bubble.

    And Paulson and the rest are asking and expecting us to bail out their speculator friends who bought into an expanding bubble.

    We just need to slow things down, so they can get their money out and we can pick up the bill.  

    Yeah, right.  The longer any bailout is delayed, the better.  Prices need to come down - a lot - to get rid of the bubble.

  •  This is simply the Republican's way (0+ / 0-)

    of privatizing - stealing - Social Security by other means than an upperdown vote on Social Security.

    "I'm John McCain, and I approve this charade."

    by semiot on Fri Sep 26, 2008 at 07:20:21 AM PDT

  •  I agree. I am completely baffled on why there is (5+ / 0-)
    Recommended by:
    sapper, duck, make a difference, ilex, TNThorpe

    not even a debate on alternative approaches to the problem than just bailing out the same people that created the problem. Especially when most economist seem to agree that this plan will not work. At best it postpones the eventual collapse and will possibly make that collapse a lot worst when it does almost inevitably happens. This just really shows who they really represent.

    At the very least they can include measures to re-regulate the market and break up these too-big-to-fail investment banks. Because as many people have pointed out too-big-to-fail is too-big-to-exist. I thought we learned this in the 30's.

    The new republican slogan: privatizing profit / socializing loss.

    by ryan81 on Fri Sep 26, 2008 at 07:20:38 AM PDT

    •  What can we say. (1+ / 0-)
      Recommended by:

      We must thoroughly enjoy kicking that can.

      "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

      by sapper on Fri Sep 26, 2008 at 07:33:10 AM PDT

      [ Parent ]

    •  Because we aren't bailing out the people (1+ / 0-)
      Recommended by:

      that caused this.  They're long gone.  We're trying to keep the economy running by providing needed liquidity.

      This isn't about bailing out the crooks on Wall Street.  It's about keeping our economy functioning.

      •  peeing into the ocean on this thread (0+ / 0-)

        i agree, but i don't think you'll get far on this thread. save your breath.

      •  You're right- they are gone (0+ / 0-)

        cooking up another bubble- what emerging market will the sabotage next?  Maybe alternative energy?
        Doesn't the congressional off shore drilling moratorium expire on the 30th?

        Facts are stubborn things- John Adams

        by Veritas36 on Fri Sep 26, 2008 at 08:36:11 AM PDT

        [ Parent ]

      •  But it IS (0+ / 0-)

        This isn't about bailing out the crooks on Wall Street.

        I believe it is. We are removing completely the very crux of capitalism - you have the right to succeed, but also to fail. We're not letting companies suffer the consequences for their stupid decisions. We're bailing them out. And they will repay us the same way a teenager does when a parent saves them from the consequence of a decision - they make an even worse one next time.

        --Sent from my Blackberry, "the miracle John McCain helped create." (not really, for both)

        by duck on Fri Sep 26, 2008 at 08:45:57 AM PDT

        [ Parent ]

    •  heard an interview with Brent Bodowsky on radio (0+ / 0-)

      last night (Mark Riley has him as a regular guest,WLIB,NYC) and he was saying, I think, that nobody has a "handle" on what's going on.  I don't agree with everything he says, but he makes some good, clearly stated points (columns in TheHill website).  If something can't be said simply (not a simplistic short statement but clear, simple sentences), it's got a lot of b.s. That's my opinion.  Brent B. is clear.

      Comments & diaries on DK cover so many points:no info. on debt, plans, etc and good thinking going on DK.  Naomi Klein is good and all over the net.

  •  Titanic Captain: We need more icebergs! (2+ / 0-)
    Recommended by:
    Julie Gulden, ilex

    Some pundit or another said last night that the republican argument that "what got us into this mess was TOO MANY regulations" (I can't believe anyone could say that with a STRAIGHT FRIGGIN FACE)

    (and I saw this house representative R woman say exactly that, with a straight face, on national news)

    was exactly akin to the captain of the titanic saying "well what we need here... is more icebergs!" as the ship goes down.

    Best not-very-substantive observation on this crazy situation I've seen yet...

    Magic money fairies, tee hee...

    I'm off to the grocery store with a wheelbarrow full of dollars to buy a loaf of bread! see ya!

    To be, rather than to seem.--NC State Motto

    by make a difference on Fri Sep 26, 2008 at 07:20:51 AM PDT

  •  Yes, and how am I explain this stuff (2+ / 0-)
    Recommended by:
    make a difference, ilex

    to people when I'm canvassing for Obama when even I am wary and skeptical of what the Democrats are up to?  Especially the Nader-sympathetic voters.  This is very demotivating.

    •  was thinking similarly,hints:Brent Bodowsky(The (3+ / 0-)

      Hill), Paul Krugman (NYTimes), Bernie Sanders on the topic before last night are hopefully, pieces of the answer and things to tell when canvassing.  Also, it's "a work in process" and input is welcome from anyone who has ideas or some knowledge of history, such as Helen Thomas who has articles on CommonDreams, Naomi Klein (in many places) and this morning, "Democracy Now" ( had a good segment.

      I appreciate Hunter's excerpted points in the diary.

      I have come to a couple of conclusions: if something can't be explained simply, it's mostly (or all)b.s.

      The US public should have input (demonstrations yesterday were to the point and legislators,etc. notice, even if press coverage will be slight).  

  •  Thanks, Hunter, for an excellent (4+ / 0-)
    Recommended by:
    Vegend, JuliaAnn, ilex, melpomene1
    summary and analysis of where any rational voter stands now.

    There is a chance that there is something else afoot in the markets--having to do with China and their dollar holdings, or another derivates category for example--that is also pressuring the Democrats into an agreement: but we do not know what that would be, exactly, leaving us with your analysis: It would be much better to prop-up the housing markets, so stabilizing their derivates while helping the mainstreet working class--ehr,pardon me-- middle class.

    Habeas Corpus:See Hamilton quoting Blackstone in The Federalist Papers, number 84.

    by Ignacio Magaloni on Fri Sep 26, 2008 at 07:21:35 AM PDT

    •  Yes, I think that's the dirty little secret (3+ / 0-)
      Recommended by:
      Ignacio Magaloni, ilex, melpomene1

      The closed door meeting from everyone emerged ashen-faced. Why would Democrats not leave the GOP holding this bag? I think if they were spooked it was because they were told someone was calling our bluff -- demanding payment on what is bad paper -- and the fallout could make them all quiver in their gated communities.

      There is a missing link to this chain of evil -- one to which we the people are not privy.

  •  Watch CNBC, they're doing a good job (4+ / 0-)
    Recommended by:
    Rp, slinkerwink, scrutinizer, Seeds

    today of trying to explain why this is necessary in layman's terms, and why it is needed for 'mainstreet'. And it is absolutely necessary to get something done fast. It's a matter of lending among banks. They don't have confidence in each other, therefore commecial paper is locked up.  Mom and pop stores can't get loans. It's not trickle down economics, it's more like a virus spreading throughout. It isn't a Wall Street bailout.  It is a mainstreet bailout, in a roundabout way. If it doesn't happen soon, we're in deep deep shit.

  •  I have not been one to give up hope. (5+ / 0-)
    Recommended by:
    JuliaAnn, eggowar, Thea VA, ilex, melpomene1

    But this is too much.  The Republicans have decimated our economy over the past 8 years.  They have stolen everything in sight, starting a war that has in large part fattened the wallets of government contractors, allowing $9 billion to simply be driven into the Iraqi desert never to be seen again, and on and on.

    We are $10 TRILLION in debt.  That's one-zero-zero-zero-zero-zero-zero-zero-zero-zero-zero-zero-zero-zero dollars.  That is up from $4 trillion at the end of the Clinton years.  Budget deficits are an absolute laugher now.  

    If we hand these assholes this money, we are a banana dictatorship.  Just like all those countries we've laughed at and mocked all these years.  

    Congress is beyond feckless.  Those companies should be allowed to burn.  Avail themselves of the bankruptcy laws on the books.  Let the ongoing CRIMINAL INVESTIGATIONS go a little further.  Recoup some losses from some of the profiteers.  There's a lot that can be done over time.  But handing more money to those who've stolen everything in sight, in a hurry up mode, is absolutely the wrong move.

    Don't just do something.  Sit there.  

    "Lawyers, I suppose, were children once." To Kill A Mockingbird

    by DC Scott on Fri Sep 26, 2008 at 07:22:04 AM PDT

  •  Sorry, but the premise of the diary is wrong (5+ / 0-)
    Recommended by:
    Rp, slinkerwink, scrutinizer, sapper, Seeds

    The government wouldn't be paying for the loss on defaulted mortgages. That loss belongs to the owners of the mortgage securities, and will remain with them.
    What the government would be buying is the illiquid mortgage securites, and paying for them at value. That is the discounted price, considering the defaults and the drop in home prices.
    Determining the value is a significant problem, but it can be overcome if the bill is written correctly.
    If the government does buy the securities for value, then it ultimately will not lose.
    I realize that on a liberal blog, we like to denounce Wall Street and the special interests. But what we are talking about here is protecting a functioning economy so ordinary Americans can keep their jobs.

    •  We don't denounce Wall Street. (1+ / 0-)
      Recommended by:

      It's the heart of our capitalistic economy. Hell, we love Wall Street. A hard-pumping Wall Street means money is circulating well. People are getting their home loans. Businesses big and small are receiving money to expand their businesses. Goods and services are being traded.

      What we object to is this insane notion that people will sometimes stab an adrenoline shot into the heart of our system, and disrupt the general pace of our economy with this rush. Money gets pumped faster, faster, loans go in and out, percentage rates get adjusted, traders, fixers, bankers start thinking collectively irrationally. If everyone thinks the same, it's not fundamentally oor morally wrong, right?

      Speedups. Slowdowns. Swings, dives, And all the while there's this moral and tangible plaque that develops, and when it bursts, money gets thrown at it, and begins to solidify and block other transactions, and soon the entire flow of money is clogged.

      Heart attack. A metaphor pulled out of my ass this morning. All what could have been done to prevent a Wall Street heart attack is long past. You can't prevent a physical heart attack tomorrow by suddenly stuffing yourself with oatmeal today. That's what this bill feels like, in addition to any other worthless analogies.

      "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

      by sapper on Fri Sep 26, 2008 at 07:47:57 AM PDT

      [ Parent ]

      •  I like your metaphor: This is antioplasty (0+ / 0-)

        By clearing the build up of mortgage securities out of the heart, it will allow the blood to flow normally.
        Keep in mind the government will be buying these securites for fair value.

    •  Contradiction (1+ / 0-)
      Recommended by:

      First you say this:

      The government wouldn't be paying for the loss on defaulted mortgages. That loss belongs to the owners of the mortgage securities, and will remain with them.

      then this:

      What the government would be buying is the illiquid mortgage securites, and paying for them at value. That is the discounted price, considering the defaults and the drop in home prices.

      If the government is buying these assets, it stands to reason that they would then be the "owners" of said assets, and you accept that "the loss belongs to the owners."

      With respect to the price, if the assets are "illiquid", then at this point the fair price would appear to be zero. The reality is that they are not illiquid, the holders just do not want to sell them at the prices being offered by willing private market buyers. Why? Because they're apparently not worth nearly as much as they're claimed to be on their balance sheets.

      So...either the government will pay a fair price for these assets, in which case the sellers will be exposed as bankrupt, or they will pay an inflated price for them, in which case the government will take another step towards its own bankruptcy. Given that the person who will make this decision is the former Chairman of Goldman Sachs, I'd put good money that it will be the latter.

      •  Not true (0+ / 0-)

        Point 1 - Assume the original value of the assets was 1.00. The banks have already written this number down to say .50. When you saw the banks booking losses over the course of the last year, this is why.

        The government would start with the banks current valuation of .50, and go through some process to determine if a particular bundle is worth that. More than likely, they'll need outside expert help to determin this.

        The underlying loans backing up these bundles are still paying, although at lower levels the packagers of the bundles anticipated. therefore they have some value, just how much is the critical devil in the details.

        restore confidence in the lending system again and allow some normalcy to return to the system, and those payment levels within the bundles will return to something better than they are now. at that point, the government would hold a bundle they bought at say .40-.60 and could sell it for something like .61-.80. additionally, the government could hold stock in the banks they've helped this way, which could also be sold at a profit as the banks recover their values. all this would offset some of the cost to taxpayers.

        to your other point,  it is possible for the government to pay for a bundle at .40 and lose if payment levels drop further. it's also possible for the government to pay too much for the bundles now and not be able to sell them at a profit. but as holders of the assets they would be collecting revenue on the reduced payments levels within the bundles.

        if this goes through, it will probably take a decade to determin wether the whole complicated set f transactions turned a profit or loss.


        •  But Paulson has basically admitted (0+ / 0-)

          that if he pays anything close to fair "value" for these securities, then the program will only further accelerate the problems on Wall Strret as other banks holding similar assets will have the true (low) value of those assets revealed for all to see.

      •  Getting to the heart of the issue (0+ / 0-)

        For a given mortgage security, some of the houses have gone into foreclosure and others are worth less than the balance of the loan.
        That will be reflected in the price the government pays.
        Let's say I buy a car for $20,000, put a lot of miles on it, and bang it up pretty good.
        I sell it to you for $5,000.
        I'm taking the $15,000 writedown because of my driving habits.
        In exchange for $5,000, you are getting a car that is worth $5,000.
        Similarly, the government won't be absorbing losses for the mortgage holders, but will be paying fair value for what they have left.
        It's an important topic and it is right to debate it thoroughly, but I hope we can get to a more informed discussion of what is being proposed.

        •  That's not what we're talking about though (1+ / 0-)
          Recommended by:

          What we're talking about is that you bought a car for $20,000 with no down payment and a seven year term. You drove the sh*t out of it and banged it up, now it's worth $5,000, but you still owe $18,000. If you sold it to me, you'd have no car, but still owe the bank $13,000 and have to declare bankruptcy. Meanwhile the car sellers in town are hurting. So you demand that I (the gov't) pay you $18,000 for the car, so that you can go buy another one unencumbered by your debt, while I get to try to squeeze $18,000 in utility out of a $5,000 car. Good for you and the car dealer, bad for the government (and by extension the taxpayers).

    •  thank you very much (0+ / 0-)

      tried three times to write a post that said this, but gave up each time. you did much better.

      people don't know how our banking system works, and therefore can't relate the elements of this plan or any other alternative to the problem or to their own finances.

      put it this way. i'm trying to sell my house right now and buy another. all sides of these transactions are among qualified buyers with 20% downpayments and good credit histories. the problem in the system right now is so bad that there is a very real risk that none of the parties involved can get their needed financing from the banks, and therefor we'll all be sitting on houses (assets) with real value that can't be bought and sold. that's what an absence of liquidity means. and our inability to get this transaction done will have an impact on all the related parties who earn a living in this: the realtors, moving companies, attorneys, banks, etc.

      take this example and apply it to the banks themselves and the other banks they do business with, with all of them sitting on assets with real (if deppreciated value), and that is where we are.

      the plan being trashed on this thread seeks to take the depeciated assets off the banks balance sheets (hopefully at no more than their current value) so they have confidence in lending to each other again. that will restore normal system liquidity and keep the normal economic activity we take for granted going.

      those advocating doing nothing should really explain how liquidity will be restored naturally. and those objecting to Obama's position should really explain how his requiremens for oversight of the valuation process, equity participation for taxpayers, in particular, do not go right to the heart of what's in our best interest.

    •  Government isn't buy anything... (0+ / 0-)

      ...a private bank called the "Federal Reserve" is buying the junk. You and I just get the bill with interest.

      This is the biggest transfer of wealth in recent history.

      The "Fed" is private. They are not federal and have doubtful reserves. is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. 1776

      by Samart on Fri Sep 26, 2008 at 08:37:31 AM PDT

      [ Parent ]

      •  Fed Not A Private Bank (0+ / 0-)

        I think the proposal is to have the Treasury buy these securities. The Treasury is a cabinet-level post within the executive branch.
        The Fed might actually be better at buying the securities, but I don't think that is the proposal. Though it is not directly managed by the Executive Branch, it is owned by the people of the United States.  

  •  Inadvertently hilarious quote from Lehman ex-CFO. (1+ / 0-)
    Recommended by:

    there's an interview up at Fortune with Erin Callan, who was very fortunately chucked out of Lehman Bros. just before everything went to hell in a handbasket. now she's in charge of global hedge funds at Credit Suisse, probably making as much money every working day as i make in a typical quarter.

    she is apparently very, very sad and emotionally broken up about everything that has happened.

    and among other things, explaining how "Wall Street could have been so blind," she remarks:

    The challenge in financial services when you have to answer that question is that you are in a confidence-based business.

    Indeed. Unbeknownst to herself -- perhaps she lacks the breadth of cultural literacy to realize it -- she has just admitted that Wall Street is a con game.

    I am further of the opinion that the President must be impeached and removed from office!

    by UntimelyRippd on Fri Sep 26, 2008 at 07:23:00 AM PDT

  •  Does anybody know the details of the Dems plan? (0+ / 0-)

    I see a lot of criticism for the Democrats 'counter proposal' even though I haven't seen only cursory details of that plan.

    Perhaps my larger question is:  is the Dems plan still in the nature of a bailout in the sense that their plan would just inject money into Wall Street?

  •  This money is like all money - to take from many (3+ / 0-)
    Recommended by:
    feloneouscat, ilex, Fools on the Hill

    small pockets and place into a few very large pockets. After all , those who don't work and never have obviously "deserve" the fruits of others' labors , don't they?

  •  Wonderful developing media narrative :) :) (2+ / 0-)
    Recommended by:
    feloneouscat, Abra Crabcakeya

    Even for a party whose president suffers dismal approval ratings, whose legislative wing lost control of Congress and whose presidential nominee trails in the polls, Thursday was a remarkably bad day for Republicans.


    Government for the people, by the people

    by axel000 on Fri Sep 26, 2008 at 07:25:35 AM PDT

  •  You got my vote! (5+ / 0-)

    Almost 10% of people are behind in their mortgage payments and more people are getting behind everyday because of job losses.  The only way to stop this spiral downward is to bailout the people with the mortgages and also create jobs with new alternative energy projects.   We need to do this or we will see a crisis in this country regardless of any big bank bailout giveaway.  The big bank bailouts will be endless.  

  •  This is the best (1+ / 0-)
    Recommended by:
    diary I've read here in a long time.
  •  Disappointment in the Democrats (5+ / 0-)
    I share that, Hunter, and I'm usually a defender.

    But the problem is that Democrats have spent this entire election campaigning on two basic themes:  1) A change away from the Bush economic polices, and 2) That Democrats side with the middle class.

    But now, we're showing the public that we represent neither.  

    We're about to sign off on Bush's economic plan (in fact a massive acceleration of it)-- that's completely undermines the message that Democrats represent change on the economy.

    And we're about to get branded as siding with Wall Street instead of the middle class.

    Polls have consistently shown Democrats as favored on the question of who sides with the middle class.  If we lose that edge, we could lose everything in this election.

    "Journalistic conventions make it hard for reporters to deal with a big, complicated lie." -- Michael Kinsley.

    by dcg2 on Fri Sep 26, 2008 at 07:28:27 AM PDT

  •  I agree with the gist of this diary (4+ / 0-)

    And consequently I don't understand why Obama is looking like is all in to support this plan.  Why is he not speaking out more critically of the enormous size of the bailout and of the top-down instead of bottom-up  strategy?  I think there is enormous political upside to coming out and voicing an opinion that there needs to be alot of pain felt by the wall street executives that are responsible for this mess.  Is Obama too much aligned with wall street on account of their campaign contributions?

    •  Obama waits... brilliantly. (0+ / 0-)

      Dodd and Obama are in contact with one another.
      We and he know that de-regulation is the cause.
      No one has voiced the bottom-up over top-down view more than Senator Obama. He cannot come out and voice a specific plan without input from Dodd. Dodd need sto have a compromise of sorts to get votes. Obama is not too aligned with Wall Street or they would all be supporting him in the campaign. It is not just Wall Street execs that are hurt by the stock market meltdown. Pensions of the masses are at risk.

      The turtle was tight in its shell for a long time. But at last its legs waved in the air, reaching for something to pull it over. -Steinbeck (Grapes of Wrath)

      by Ma Joad on Fri Sep 26, 2008 at 07:42:04 AM PDT

      [ Parent ]

  •  One way to guarantee success (0+ / 0-)

    Pursue fraud in the trading of credit default swaps, with disgorgement of assets.

    Allow any licensed attorney to be a "private attorney general" in pursuit of fraud, with a contingency payment of 33% of amounts recovered.

    Set the pit bulls on these crook speculators and break out the popcorn.

  •  You are correct. It will get much less (5+ / 0-)

    substantive from here.

    I am going to share with you all here a street level example of exactly what a con job is being played on the American pepul, and this is just one scenario that played out since the beginning of this credit crisis. In fact, several people at Merrill lost their jobs, fired over a year or more BEFORE the crisis began last summer for saying that Merrill quit taking on any more CDOs (collateralized debt obligations, the "big bucket" here).

    Financial firms have been systematically destroying capital, writing it down throughout this credit crisis they manufactured, wiping down their book values. They went bankrupt, literally, and recapitalized themselves at the same time, without having to file Chapter 11, swinging deals with the likes of Singapore (Temasek, the sovereign wealth fund of the gov. of Singapore, has bought nearly 10 billion of Merrill).This firms risk and hedging strategies should have been under FBI investigation. And that is just one firm's shenanigans.

    Every firm out there at the core of this financial crisis was "levered up" to the gills. Any CDOs sold to hedge funds, depending on how the deal was structured, could come back onto balance sheets by year-end. Or not. The point is, the capital has been effectively shifted and transferred, most of it offshore already, and the American taxpayer's feet would have been held to the fire. Not to mention the corporate bond holders, stockholders etc. depending on how far the shares fell.

    They deliberately and with intent destroyed their own capital base in an attempt to feather their own nests. I do not believe, in my heart of hearts, that Poulson, Bernanke, or anyone in congress can fully concieve of the depth and breath of this swindle, let alone properly assess either the amount of money involved here or the effect it will have on the economy.

    I say, let the credit market freeze. Take the hit. Let the stocks fall. Do nothing. Take a few days to breath. The trend is the trend until the end, and then, we must move to pick up the pieces with whatever intellectual capacity is left in place after the dust settles.

    The more the Repubs and Bushco push for immediacy the less likely I would be to acquiese to their request. Whatever they have hanging in the balance here I don't believe the American people should pay for. The American people will however have to pay the price for electing these goons in the first place, I can't do anything about that. I am sorry for your loss, if you lose something. We have already lost everything we have, so I'm afraid I'm out of sympathy chips at the moment.


    No noose is good noose, they said as they put the rope around the neck of the person who couldn't read the sign: Keep off the grass!

    by LRLine on Fri Sep 26, 2008 at 07:29:36 AM PDT

  •  they want a horse...they come out with a (3+ / 0-)
    Recommended by:
    JuliaAnn, feloneouscat, ilex

    blueprint for a donkey. Your congress at work, folks.

  •  Americans need to come to grips with the (3+ / 0-)
    Recommended by:
    mcurry, make a difference, ilex

    country's second-rate status when it comes to our debt.

    Most of it is owned by overseas investors.

    What's the money for? Buying up the loans at such a high premium that the derivatives which insured those loans come up to par and effectively expire.

    Because otherwise, instead of having bank profits which allow for more liquid lending in the USA, we're going to have the holders of the derivatives take trillions out of the USA.

    Who owns those derivatives? Our foreign lenders.

    So, asking the question, what's it for, may be good, but I'd like to see the American public be able to handle the answer: Arab and Chinese banks own derivatives that are worth trillions right now. if we don't do the bailout, we'll have to pay them (or if we don't our economy will collapse as they pull out of the USA).

    You know, I'm all for transparency, and I think the blame should be placed, but I think the bailout needs to happen, and if it can be destroyed by a pitchfork revolt when the reasons for its massive size are revealed, then transparency doesn't serve a purpose.

    I certainly hope the truth comes out soon, but hopefully only after the bailout is agreed upon.

    Look at these people! They suck each other! They eat each other's saliva and dirt! -- Tsonga people of southern Africa on Europeans kissing.

    by upstate NY on Fri Sep 26, 2008 at 07:29:53 AM PDT

    •  the revolt was by Rep.but that's not what you (0+ / 0-)

      meant.  I went to college, on Lake Ontario before the nuclear power plant was built.  The economy up there is pretty bad,yes?  

      I think protest by people is good.  Lets the pols know the folks don't like being "rushed" into another Republican plan.  Their track record isn't so good with "rush jobs".

  •  Paulson crys liquidity crisis (1+ / 0-)
    Recommended by:

    Meanwhile Fed is doing reverse repos; result is a draining of liquidity from the market.

    Temporary Open Market Operations

    •  Neutralizing the liquidity injections. (1+ / 0-)
      Recommended by:

      The Fed is neutralizing their injections of liquidity to prevent inflation.  This move is advantageous to our creditors (i.e. China) but while it maybe be better for Americans as individuals it isn't necessarily good for America as a debtor nation.

  •  Where the hell are the blue-ribbon economists? (4+ / 0-)
    Recommended by:
    JuliaAnn, ilex, abraxas, TNThorpe

    Why the hell wasn't a commission of our best economists put together last week to come up with a set of possible plans, rather than this super-secret Paulson plan being just thrown out there as a negotiation point?

    Why is Goldman-Sachs' Paulson in charge of this whole thing? Why don't the Dems demand his resignation?

    This stinks more every passing day - and not just on the Repub side. They're putting us into massive debt without even the semblance of democratic transparency.

    That's what stinks the most about the McCain response - his thinking that transparency and debate are irrelevant to the functioning of government, that they are just a side-show.

  •  If Hunter's right... (1+ / 0-)
    Recommended by:
    Julie Gulden

    isn't McCain in a great position?  Obama already seems to be on board with the bailout. Everyone's sitting on the edge of their seats watching what McCain might do, because he's put the debate on hold. He could very well come through as the knight in shining armor if he takes the leadership on some alternative plan.  McCain has seemed like an impetuous idiot for the last 48 hours, but I fear things could start going his way.

    Biting nails...

    •  Why do you say Obama is on board with THE bailout (0+ / 0-)

      What bailout? There is no deal yet?
      He is waiting for Dodd's work to try to get bottom up orientation and clear regulation and sanctions.

      The turtle was tight in its shell for a long time. But at last its legs waved in the air, reaching for something to pull it over. -Steinbeck (Grapes of Wrath)

      by Ma Joad on Fri Sep 26, 2008 at 07:48:48 AM PDT

      [ Parent ]

  •  The $ doesn't add up at all, I'm a MBA-CPA (6+ / 0-)

    This must be for the default credit swap derivatives.  And they aren't even talking about them.

    WHAT'S GOING ON?  By 4 non-blondes!

    80 percent of success is just showing up - Woody Allen.

    by Churchill on Fri Sep 26, 2008 at 07:31:35 AM PDT

    •  poor blondes.(n/t) (1+ / 0-)
      Recommended by:
    •  I'm no money person, but I agree -- that's (1+ / 0-)
      Recommended by:

      my guess as to what got the Congress people so scared and stunned (Kos keeps asking what it is) -- that the $55 trillion or $62 trillion swaps market is busted, and the $700 billion is just a "good faith payment", a "gesture," to try to convince foreign interests not to ruin America 100% by pulling out all investments right now.

      And nobody is talking about it, because nobody wants it to happen. If you google "credit default swaps" (as I've been all week), you'll find various stories, mostly re: "rush to reregulate." You'll also find this old June dKos diary, "The Federal Reserve's secret illegal meeting with banks," where diarist relikx writes "about a closed-door meeting held earlier this month [again this is JUNE] with the Clearing Corp. (made up of all the top investment banks) where new rules were made for the $60 TRILLION credit default swaps market." relikx also asks if there's a taxpayer funded bailout in our future.

      Wow, here's a brand-new blog item at the WaPost by E.J. Dionne that does begin to connect the dots, posted 10 minutes ago::

      The simple truth is that Washington is petrified about this crisis and will pass something. There are dark fears floating through the city that foreign investors, particularly the Chinese, might begin to pull their billions out of our system.

      Scarier than the bad mortgages are those unregulated credit default swaps that financier George Soros has been warning about. There are $45 trillion of those esoteric instruments sloshing around the global financial system. They were invented as a hedge against debt defaults, but even the financial smart guys don't fully understand their impact or how to price their real value.

  •  Foreign Investors? (2+ / 0-)
    Recommended by:
    jennifer poole, ilex

    To what extent is this deal designed to restore confidence to foreign investors and creditors? I read somewhere that the Chinese directed their banks to stop doing interbank lending to the US. It would strike a nerve with voters to say the least if they thought this bailout was aimed at satisfying China. I haven't heard any estimates about how much, or what portion, of this bailout actually serves that purpose. Just sayin'.

  •  The Swedish Plan Actually Worked (1+ / 0-)
    Recommended by:

    I'm having a hard time understanding this debate. The Swedish Plan worked in the real world. Here it is:

    Here's the key point:

    "By the end of the crisis, the Swedish government had seized a vast portion of the banking sector, and the agency had mostly fulfilled its hard-nosed mandate to drain share capital before injecting cash. When markets stabilized, the Swedish state then reaped the benefits by taking the banks public again.

    More money may yet come into official coffers. The government still owns 19.9 percent of Nordea, a Stockholm bank that was fully nationalized and is now a highly regarded giant in Scandinavia and the Baltic Sea region.

    The politics of Sweden’s crisis management were similarly tough-minded, though much quieter.

    Soon after the plan was announced, the Swedish government found that international confidence returned more quickly than expected, easing pressure on its currency and bringing money back into the country. The center-left opposition, while wary that the government might yet let the banks off the hook, made its points about penalizing shareholders privately."

    And as for a free market solution, you could at least actually understand it before criticizing it. Here's one from Reason:

    Finally, even the Paulson Plan is not well understood. Here's how it could work:

    "And so, instead of mild medication and rest, it became apparent that quadruple bypass surgery is necessary. The extreme measures are extended government guarantees and the formation of an RTC-like holding company housed within the Treasury. Critics call this a bailout of Wall Street; in fact, it is anything but. I estimate the average price of distressed mortgages that pass from "troubled financial institutions" to the Treasury at auction will be 65 cents on the dollar, representing a loss of one-third of the original purchase price to the seller, and a prospective yield of 10 to 15 percent to the Treasury. Financed at 3 to 4 percent via the sale of Treasury bonds, the Treasury will therefore be in a position to earn a positive carry or yield spread of at least 7 to 8 percent. Calls for appropriate oversight of this auction process are more than justified. There are disinterested firms, some not even based on Wall Street, with the expertise to evaluate these complicated pools of mortgages and other assets to assure taxpayers that their money is being wisely invested. My estimate of double-digit returns assumes lengthy ownership of the assets and is in turn dependent on the level of home foreclosures, but this program is, in fact, directed to prevent just that."

    The fact is that we have three clear alternatives.

    Finally, here's Paul Krugman:

    "Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option. Right now, players throughout the system are refusing to lend and hoarding cash — and this collapse of credit reminds many economists of the run on the banks that brought on the Great Depression.

    It’s true that we don’t know for sure that the parallel is a fair one. Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take.

    So the grown-up thing is to do something to rescue the financial system. The big question is, are there any grown-ups around — and will they be able to take charge?"

    Now is the time to choose, and there are clear alternatives.

    Trying to make the libertarian Democrat a reality

    by Don the swing voter on Fri Sep 26, 2008 at 07:34:29 AM PDT

  •  It's basically a hold-up (2+ / 0-)
    Recommended by:
    ilex, IamLorax

    The banks are holding the economy hostage and demanding $700bn.

    If this goes through, I'd better never ever hear a single Republican prattle on about "redistribution of wealth."

    So many impeachable offenses, so little time... -6.0 -5.33

    by Cali Techie on Fri Sep 26, 2008 at 07:35:04 AM PDT

  •  3% of just subsidize these... (2+ / 0-)
    Recommended by:
    ilex, pragprogress

    If the derivatives leverage mortgages at rates of 20-30:1, then using bail-out dollars to bail-out sub-prime homeowners leverages the taxpayers' money. Skip the middle man and pay off or subsidize defaulting mortgages. If there are no defaulting mortgages, there's no crisis w/ derivatives. Duh.

    "There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy" Hamlet, 1:5

    by synductive99 on Fri Sep 26, 2008 at 07:36:07 AM PDT

  •  Who's it for? (4+ / 0-)
    Recommended by:
    JuliaAnn, mcurry, ilex, speedingpullet

    Who, exactly, is getting bailed out?

    AIG is taken care of.

    Lehman's is gone. (And notice the lack of brokers flying out of windows, too)

    Goldman Sachs has Buffett's $5B to tide them over.

    Bear Stearns got its bailout months ago.

    Fannie and Freddie are nationalized.

    Washington Mutual got bought.

    Morgan Stanley coverted to a retail bank.

    Merrill Lynch has been merged with Bank of America.

    Who, exactly, are we supposed to be bailing out for $700 BILLION since none of those are included?

    --Sent from my Blackberry, "the miracle John McCain helped create." (not really, for both)

    by duck on Fri Sep 26, 2008 at 07:36:25 AM PDT

  •  Remember when the Twin Towers fell, they lied: (1+ / 0-)
    Recommended by:

    "50 Thousand Dead! As many as Vietnam! This is an act of war!"
    We were told we must respond quickly.  The answer to an act of war was War!

    This is the same thing.  They are crooks, liars, and scam artists.

    To reward them for this thievery would be a disgrace.

    You can't choose sides on a round planet.

    by IamLorax on Fri Sep 26, 2008 at 07:37:59 AM PDT

  •  I am Wall Street (1+ / 0-)
    Recommended by:
    auron renouille

    The trouble I'm having with these "fuck Wall Street. Let them fail" arguments is that most Americans are part of Wall Street today. My wife and I depend on the markets to remain stable for part of our current annual income. We need that income. I think there are a lot of middle Americans in that position.

    I'm all for exploring alternative plans and being leveled with by those in the loop but to view this as some sort of cynical, ultra-conspiracy by wealthy Wall Street elites while we watch major banks failing is a dangerous talking point for the dKos front pagers to be advancing.

    •  But what if it is a cynical, ultra-conspiracy? (1+ / 0-)
      Recommended by:

      There is no guarantee that this plan is going to save your income. It is so dicey, that you should be wildly sceptical yourself.

      •  Well... (0+ / 0-)

        ... they're doing a whale of a job of pretending it's the real deal what the the largest bank failure in U.S. History happening as I write this. That's one heck of a phony conspiracy. Thanks, but I'll take my chances on a plan that might keep the markets stable over a class conspiracy theory that accomplishes nothing at all.

        •  Not only do you not get it........ (0+ / 0-)

          you don't get that you don't get it.

          You have hitched your wagon to a Ponzi scheme
          run by parasites- sorry about your income.

        •  But in a capitalist society (0+ / 0-)

          Good businesses survive and bad businesses die.

          THAT is the nature of it. You either believe in it or you don't.

          WaMu failed because it was a bad business. Pretty much end of story.

          As for a conspiracy, yes, I believe that there is a whole lotta lying going on about what this "bailout" is really for - and it is NOT about saving the economy.

          So, yes, I can understand your concern about the "fuck Wall Street" - but to be fair, what they are saying IS PURELY CAPITALIST.

          Personally, I'm a socialist so I believe it is all fucked up to begin with. :)

          "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

          by feloneouscat on Fri Sep 26, 2008 at 09:37:23 AM PDT

          [ Parent ]

    •  maybe not conspiracy,but a way to make $,and neve (1+ / 0-)
      Recommended by:

      r be held accountable, or have regulation.  Do you think the guys you list care about the small investor? Ever did?

    •  Most Americans are not part of Wall St (2+ / 0-)
      Recommended by:
      mcurry, ilex

      to any large degree.  If you're a small investor on Wall St, my guess is you're screwed whether a bailout happens or not.  And it's not unreasonable for all the have-nots in the U.S. to demand that if anything gets bailed out, it would be jobs. (ala Jerome's proposal).

      •  All Americans are part of Wall Street (1+ / 0-)
        Recommended by:

        You don't even have to own any stock but you are still affected by the markets because it's integral to our economy. The "have-nots" jobs depend on it staying healthy and stable. This is not a Wall Street bailout, it's a Main street bailout by proxy. Main Street cannot function without credit. When the largest U.S. banks start failing that's a clue there is something to this.

        •  Like a hookworm infestation (1+ / 0-)
          Recommended by:

          in a herd of cattle.  If ones' got it they all got it.

        •  Rubbish... it is a Wall Street bailout... (0+ / 0-)

          I will not accept the meme that "I was part of the stupids".

          I mean seriously, buy and selling trash as if it were good? Give me a BREAK!

          And if it is that important, then NATIONALIZE the assets and sort out the wheat from the chaff later.

          Idiots need to pay for their mistakes, not profit from them.

          "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

          by feloneouscat on Fri Sep 26, 2008 at 09:42:16 AM PDT

          [ Parent ]

    •  The problem is, you're gambling (2+ / 0-)
      Recommended by:
      feloneouscat, Catesby

      and the first rule of gambling is never bet what you can't afford to lose.  Just because it's been working for people doesn't change the math or the reality.

      For too long folks have been convinced that there are 'safe' ways to gamble.  That's just BS IMHO, yes you can spread your bets and reduce your threat but none of it is safe and it's a mistake to depend on it.  

      I have money in the market too. But I still don't think we should be saving Wall Street.  I realized it was a gamble when I put that money in there.

      And before you think I'm some rich fat cat, my job went to Canada without me four years ago and I've gone back to school and have had to learn to live on PhD compensation in my mid fifties.  

    •  I agree... (0+ / 0-)

      I'm an attorney in SoCal but I've been underemployed for too long... I'm hoping this goes through (in a heavily modified fashion, with oversight and limitations) so that firms and agencies have the confidence to start hiring again... everyone's losing their shirt out here, everyone's afraid to make any moves until something clears up.

      "What Washington needs is adult supervision" - Barack Obama

      by auron renouille on Fri Sep 26, 2008 at 09:38:06 AM PDT

      [ Parent ]

  •  That's why we should have had an HOLC (2+ / 0-)
    Recommended by:
    feloneouscat, ilex

    See my diary on "trickle up bailout".  If bad mortgages had the ability to distroy the system, why weren't we re-financing loans with government money?  The RE loan market is only 13 Trillion dollars total, and nine-ten percent is delinquent.  In the face of a trillion dollar cost of bailout, clearly we could have offered a re-fi to every single homeowner.

    McCain: I guess he had to go to Washington to remind us of the very worst kind of politician.

    by Inland on Fri Sep 26, 2008 at 07:38:18 AM PDT

  •  WHY?........? (3+ / 0-)
    Recommended by:
    JuliaAnn, ilex, IamLorax

    because they are anti-American parasites doing what what anti-American parasites do best..... parasitizing America.

    Crisis my ass-this is the Parasite's Perfect Plan
    it is the savings and loan scam writ large with a cherry on top.

  •  Republican framing (3+ / 0-)
    Recommended by:
    annan, ilex, abraxas

    "House Republicans have not agreed to any plan at this point," Boehner said Thursday.

    Instead, they issued a statement of economic rescue principles that calls for Wall Street to fund the recovery by injecting private capital - not taxpayer dollars - into the financial markets. Easing tax laws would prompt investors to put in their own dollars, they said.

    The plan also calls for: participating firms to disclose the value of the mortgage assets on their books, ending Fannie Mae and Freddie Mac's securitization of "unsound mortgages," reviewing the performance of the credit rating agencies and having the Securities and Exchange Commission audit failed companies to ensure their financial standing was accurately portrayed.

    House Republicans also want to create a panel to make recommendations for reforming the financial industry by year's end.

    Now notice how cutting capital gains taxes that would go mainly to the richest 1% of the country gets magically transformed into an infusion into the financial markets. This is bunk. The fact of the matter is people are looking to bail out of stocks before this train wreck finishes and cutting capital gains taxes will just put more money in their pocket.

    Also notice how Republican plans for more deregulation is framed as "reforming the financial system". Sounds good, doesn't it? Think John Q. Public is on to their con game yet?

  •  Hunter, (2+ / 0-)
    Recommended by:
    Vegend, ilex

    I literally don't know what i would do without your work. I know less than McPalin do about economics- which is saying something- but reading your summaries is immensely helpful. And i follow you. I think.


  •  The underlying problems need to be (2+ / 0-)
    Recommended by:
    mcurry, ilex

    explained better.  

    The sub-prime meltdown is a spark and credit default swaps/unregulated leverage are gasoline poured all over the financial world.

    Wall Street CDS/speculation/leverage was a house of cards and the sub-prime meltdown was a stiff breeze.

    The bottom up solution is probably best.  Limit the rate of forclosures/defaults and then unwind the wreckless leverage through strict regulation.  The big question is whether this can be done quick enough to avoid castastophe.  Would have been nice if the powers that be had anticipated this and acted sooner.

    This comment has been crossposted at AT&T: 611 Folsom St, San Francisco, CA - Room 641A.

    by ManahManah on Fri Sep 26, 2008 at 07:40:38 AM PDT

    •  yes, to "be explained better" and "bottom up" sol (2+ / 0-)
      Recommended by:
      JuliaAnn, ilex

      ution (first time I heard that my inner brat thought, "bottoms up solution" as in drinking).  The folks on the bottom are being left out of a lot of people's suggestions.

      Twin towers coming down:lots and lots of questons, from the gold underneath that got "saved" to why ...(make your own list) NYC residents still want an independent commission............

  •  Here's a simple plan (3+ / 0-)
    Recommended by:
    Meteor Blades, slippytoad, ilex

    Rather than let idiot companies live, let the idiot companies die, and solve the problem of what the fallout of idiot companies dying.

    A) Solve the liquidity problem by... providing liquidity. Directly. Let the govt. provide loans, with strict(er) regulations. Let banks compete to buy those (safer) loans. The ones who can't "get their money up" will die. The ones who didn't overextend will not die.

    B) Fund FDIC enough to cover the losers' depositors.

    C) Restructure onerous mortgage terms. Convert everyone to a 6% max fixed interest rate. This will reduce the number of distressed mortgages, and those forclosures that do occur will not be due to predatory lending practices.

  •  The money is (2+ / 0-)
    Recommended by:
    feloneouscat, ilex

    to put the bad paper in quarantine to be sold later.

    I think a lesser amount would suffice as per Chuck Schumer and Bob Corker's suggestion.

    It is to prevent on run on the banks that are insolvent.

    Overthrow the Government ~Vote~

    by missliberties on Fri Sep 26, 2008 at 07:40:42 AM PDT

  •  This bill just reeks with dirty politics (1+ / 0-)
    Recommended by:

    My idea

    Some democrat and republican congressman are covering there tracks

  •  Why do we allow companies to grow so large (2+ / 0-)
    Recommended by:
    relentless, feloneouscat

    We keep hearing that these companies have grow too large to allow them to fail. So our solution is to merge them with other companies to make them even larger.

    There should be some law or regulation that will make it less efficient for companies to grow large. The way the system is currently set up, economies of scale increase profits the larger you get.

    We should have a real corporate tax that is progressive to discourage companies from growing so large.

    •  you must be joking. (1+ / 0-)
      Recommended by:

      Let's also have real personal income taxes to discourage people from making too much money.

      I know that your intentions are noble, but the logic is flawed.

      •  Actually, the idea has merit (1+ / 0-)
        Recommended by:

        Ideally you would want to have a system such that no failure of one company (or small group of companies) would take down the entire economy.

        It is a concept known as "diversification" - used quite frequently in ranching and farming - but apparently Wall Street only pays lip service to the idea (as do many in the money game).

        Let's also back up a bit - economies of scale exist, but they are value neutral. Ideally, it is better to have many small companies than one large company - the failure of a small business is unlikely to affect the system overall.

        The Founders made it quite clear that they did not want an aristocracy in this country. Yet, the belief that you can make as much money as you want has created an ersatz aristocracy.

        Were the Founders alive today they would point their fingers and say "see, you created an aristocracy, and like the aristocracy of our day, they aren't the sharpest knives in the drawer".

        The intentions are both noble and the logic is correct.

        "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

        by feloneouscat on Fri Sep 26, 2008 at 09:52:38 AM PDT

        [ Parent ]

        •  Unfortunately, many small companies instead of a (1+ / 0-)
          Recommended by:

          few large ones, would not be able to succeed in the world market. It might have been possible in our founders times, but not in our shrinking world. Taking away the potential to "get rich" in this country will surely make us "poor"

          •  I disagree (1+ / 0-)
            Recommended by:
            Purple Hazer

            And, you know as I do, it is a flat out lie.

            Many small business succeed in the world market. I am working at one that doesn't have more than 100 employees that ships products to multiple countries.

            The line "large companies are the only ones that can succeed in the world market" is old, tired, and is frankly untrue.

            "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

            by feloneouscat on Fri Sep 26, 2008 at 11:36:09 AM PDT

            [ Parent ]

            •  small business can succeed where they find their (1+ / 0-)
              Recommended by:

              niche market (generally speaking). When it comes to economies of scale, they are often doomed. If not, then they would still be around. They are disappearing like the dinosaur.(in comparison to the past)

              •  Palm had economies of scale (0+ / 0-)

                In regards to PDA. According to you they should be reigning supreme.

                They are not.

                Economies of scale can not be substituted for good business judgement.

                In the same way that large companies are not the only ones that do international business. True, GATT, NAFTA, etc. are GEARED towards large business, but that is NOT economies of scale.

                "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

                by feloneouscat on Fri Sep 26, 2008 at 01:25:16 PM PDT

                [ Parent ]

                •  Of course good business sense trumps all (0+ / 0-)

                  Have you seen a neighborhood pharmacy lately?..or small grocery, electonics store, etc.

                  •  Yes, WE have neighborhood pharmacies (0+ / 0-)

                    And small grocery stores. MY ISP is a Mom and Pop business.

                    What is your point? How does this relate at all to economies of scale and international business?

                    Your argument seems to be for a small number of large businesses: but that does not create a hardy or healthy, business environment. Thirty automobile manufacturers are preferable to three.

                    This is the diversification that the business gurus LOVE to talk about but don't seem to like. One of the fundamental problems with U.S. business is that large is seen as to be good: but it is a lot like sowing the same type of corn - it leaves you wide open to disease and failure.

                    "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

                    by feloneouscat on Sun Sep 28, 2008 at 02:23:31 PM PDT

                    [ Parent ]

  •  Fuck Wall Street in the Ear (0+ / 0-)

    Fuck 'em with something hard and sandpapery.

    Let them eat their fucking bonuses.

    "There he goes again! Who's laughing now, betch?" -- Jimmy Carter

    by slippytoad on Fri Sep 26, 2008 at 07:42:35 AM PDT

  •  So far I've not heard much (0+ / 0-)

    about restructuring under Chapter 11. Couldn't WaMu have done that instead of letting itself be seized by the regulators?

    Why can't they file Chapter 11 bankruptcy? They would still be allowed to operate and also get relief from the bad debt. Is that how that works?

    John McCain: Country Club First!

    by Batbird on Fri Sep 26, 2008 at 07:43:10 AM PDT

  •  $700b is nothing (1+ / 0-)
    Recommended by:

    The outstanding mortgages is $14 trillion.  Where did this money come from?  To keep it simple, pretend it’s all Certificates of Deposit, CDs.  Most of this was lent out except for a reserve.

    So what happens when the Chinese, the Saudis, and your average American cash in their CDs.   Well first the bank pays it out.  By law, they are required to keep a cash reserve for their customers in order to get FDIC insurances.  As the bank now has much less reserves because that’s the money that left, it needs to raise cash.  So they need to sell mortgage paper to raise funds.  And there are no buyer’s today.  The bank is then insolvent (bankruprt).

    So, $700b is only 5% of the total number of mortgages.  Would this help?  Yes, consider WaMu.  Numbers are circulating that they lost $30b to $170b in deposits.  If the government had bought $30b to $170b in mortgages, WaMu would not have gone under.  The government would have had these mortgages and could have redone the bad loans.  Then sold them for a profit at a later time.

    Instead, MPMorgan got the loans.  They are raising the capital keep the WaMu branch solvent.  And you can bet they won’t be as generous in mortgage redos.  And now we have an even bigger bank that is now far to big to fail.  We the people lost big time.

    The reality is the $700b line of credit that Paulson wants is psychological.  They won’t use it all.  They want to give the impression that America can handle any kind of a run on the banks.  Truthfully, it would take $14 trillion to guarantee that.

  •  High time for a Progressive plan! (2+ / 0-)
    Recommended by:
    feloneouscat, ilex

    Republicans are balking at a Paulson plan that has been slightly tuned to provide minimal oversight, accountability and targeting. Democrats should say fine, Republicans won't support their own plan. Here's ours..and it should be the kind of plan that FDR would have submitted. Hell, for negotiating purposes, it should begin as the sort of plan Eugene Debs would have submitted, the kind of plan that Main Street Americans can look at and agree with. And then they should ram it down the Republicans throats.

  •  Underlying problem: Punitive damages (2+ / 0-)
    Recommended by:
    mcurry, BehereBenow

    There are literally thousands, hundreds of thousands of folks who lost thier homes to illegal practices. I think some of the problem is what do you do for these people. THis is not being discussed in the media or anywhere, but it is happening.

    The problem is that some of these folks rightfully deserve a home. They lost their homes to illegal and fraudelent behaviors. The government knows this. When I called the hotline for help that the gov't set up they were so overhwelmed with calls that it took 3 weeks for them to return mine. When I spoke to them I told them it's worse than the media is reporting they did illegal things. THe woman I spoke to said "We are becoming aware of this, this problem is bigger than we knew".

    I agree that the billions are also for them, but I think you like many who don't really know what they've been doing, understate the problem. People lost their homes because these companies paid other people's taxes, or because they misapplied payments. Then they charged fee's and made it look like these loans were of far more value-sometimes double the value that they were, then sold them, to companies who found out they weren't worth the amount of money they said they home is 120,000$ home, but they probably valued my mortgage at 150$ because that's what they say I owe with all their bogus fees and penalities. Somebody buys that loan only to find out that it's not worth that. Yes, some of those in foreclosure...have a house that has value...Clinton stated that as a result it's better to bail out the homeowner because their homes are worth something.

    But, there are literally hundreds of thousands who already lost thier homes because of these illegal behaviors. THe gov't is obligated by law to give something to these people for what was done. This is the part of the story that is NOT being told.

    The greatest gift you can contribute to the goal of world peace is to heal.

    by wavpeac on Fri Sep 26, 2008 at 07:44:03 AM PDT

  •  Minorities and Community Organizers bailed out (0+ / 0-)

    The right wing talking point today is that the bailout deal was sunk because Dems wanted to give 20% of the money to ACORN and other minority organizations. WTF!! This is getting BIG TRACTION and draws the battle on cultural/social lines. Never mind that it is probably not true.

    ...there's a rose in the fisted glove and the eagle flies with the dove - Stephen Stills

    by NuttyProf on Fri Sep 26, 2008 at 07:44:21 AM PDT

  •  Liquidity (0+ / 0-)

    If the claimed problem is liquidity, simply expand gov't backed home loans to every Amercian for the next two years.  End of liquidity issue, with no cost to taxpayers.

    •  the banks are nearly insolvent (0+ / 0-)

      It's not the homeowner.  The banks don't have the required cash reserve to cover thier deposits. and they can't raise money by selling mortgage paper.

    •  Liquidity is just another name for greed. (1+ / 0-)
      Recommended by:

      They are unwilling to free up money, because they want to make a killing on it.

      As long as the situation is in free fall, no one wants to invest. It's not just in the US: HSBC is waiting for American banks to drop to pennies on the dollar to swoop in and scoop them up.


      •  Just like the old RTC (0+ / 0-)

        Where S & L's were bought for pennies on the dollar (here in Texas I believe Bluebonnet S & L was bailed out and bought TWICE by the same person - IIRC).

        Why don't we just open up Fort Knox and let them take as many gold bars as they can carry?

        "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

        by feloneouscat on Fri Sep 26, 2008 at 09:58:54 AM PDT

        [ Parent ]

  •  Why no deal will happen. (4+ / 0-)

    Apparently, the fringe right in congress, which, unlike Bush, still has to face the voters, is so accustomed to their "individual responsibility" answer to everything that they can't resist shitting on all the uppity, presumptuous peasants who don't know their place and who dared to try to buy homes for themselves, and so they and their base are chanting no bailout, nohow solely in anticipation of the pleasure of watching foreclosures on the irresponsible peasants. It's all they know how to do. The fact that doing so may be right and popular for other reasons is just cake frosting. So they're in the "no" column and yelling hard about it.

    In fact, the less-than-fringe right is coming to realize that campaigning on the "fiscal responsibility" that conservatives used to stand for may well be the thing to save their asses in November, and so they aren't pushing hard for a yes vote either. They hope Democrats will carry all the water and take all the blame.

    Neocons, including Bush, will settle for nothing less than pre-emptively emptying the entire treasury and giving it to wealthy neocons in preparation for an Obama Administration, so that Obama cannot afford any liberal reforms like healthcare.

    Some few Democrats, like my own DeFazio and Marcy Kaptur, know what's what and are appealing to New Deal principles to bail out homeowners instead of the banksters. They won't be on board either.

    A majority of Democrats are lining up to capitulate, as usual. However, the partisan Democrats want to wait four more months until Obama's treasury secretary will be the one to make decisions, and the ones who want action now know that they'll have to justify themselves at the polls, and insist on some oversight, and some relief for the hard-hit poor--the exact thing that the neocons cannot accept at all.

    So the two forces that would inflict this on us cannot agree. Because of Republican foot-dragging, the bailout cannot pass without large majorities of Democrats, and anything passed by Democrats will have anti-neocon strings that Bush will veto.

    Hence, no deal.

    That's my probably overoptimistic take on it, anyhow.

    REPUBLICANS: The Older White Meat.

    by AdmiralNaismith on Fri Sep 26, 2008 at 07:46:27 AM PDT

    •  You forget that there is but a very few... (1+ / 0-)
      Recommended by:

      truly old money-ed publicly playing this game.

      Your "fringe right" is but new money.

      The old money is laughing at them in turn.

    •  I think it's a staged "disagreement" so that (1+ / 0-)
      Recommended by:

      people will believe the lie that Republicans in Washington think independently of Bush.

      It's an election ploy IMHO.  Walk lock step with Bush all the way till just days before the election and then they stage a "fight" with Bush to distance their party from their own disasterous idiot.


      You can't choose sides on a round planet.

      by IamLorax on Fri Sep 26, 2008 at 07:54:09 AM PDT

      [ Parent ]

      •  Result: no bailout (1+ / 0-)
        Recommended by:

        It's only a "fight" if the Republicans stick to their newfound conservative principles and don't go along with the bailout.  If that happens, no bankster bailout.  

        Next result--when President Obama wants a mere $300 billion for national healthcare next year, it won't look like such a lot of money.

        REPUBLICANS: The Older White Meat.

        by AdmiralNaismith on Fri Sep 26, 2008 at 08:13:58 AM PDT

        [ Parent ]

  •  Rest comfortably (0+ / 0-)

    No need to worry my friends. The buck stops with the decider, and if he was not a recovering alchoholic, he would sit down in a diner with you over a pitcher of PBR and esplain it to you.

  •  Chase snaps fingers, gets $10B by stock offering (3+ / 0-)
    Recommended by:
    suresh, JuliaAnn, abraxas

    You know, I get the sneaking suspicion that a) the financial institutions could raise capital by diluting the equity of their stock and b) they won't do so as long as there is a chance the Secretary will make it so they don't have to.

    McCain: I guess he had to go to Washington to remind us of the very worst kind of politician.

    by Inland on Fri Sep 26, 2008 at 07:47:54 AM PDT

  •  Developers/builders walk away with $700 billion (1+ / 0-)
    Recommended by:

    Why aren't land developers and homebuilding corporations paying their share of this bailout? These people are walking away with $700 billion in their pockets while taxpayers get stuck with the hangover from their party. There should be a hefty bailout tax placed on all of these companies.

    In my community developers and builders are the richest people and many of them are fabulously wealthy. They control local and state politics for their benefit, rape the environment, and gouge people looking for an affordable place to live.

    •  I was wondering why N. Florida had so many empty (0+ / 0-)

      developments:  Huge empty office parks, empty housing developments with row after row of houses- buildings upon buildings right next to each other and no one in them.

      I thought, why on earth would you build another mega office complex right nest to two others you can't fill?

      Now, I know why.

      You can't choose sides on a round planet.

      by IamLorax on Fri Sep 26, 2008 at 07:59:02 AM PDT

      [ Parent ]

  •  I agree that the reason has been poorly explained (1+ / 0-)
    Recommended by:
    VBeach Dem

    but I do think we need a bailout.  The problem is that the companies are holding distressed assets that they cannot sell to raise cash.

    Basically, without getting too technical, the problem is that the internal mortgage market (not the bank-to-consumer one, the bank-to-bank one) is not working because of a very specific liquidity problem.  And the market can't correct the problem itself because it's in a liquidity-less loop and needs some help to right itself.

    Done right, the taxpayers won't lose any money off the deal and might even GAIN some money (again, IF done right, and that's a big IF).

    I wish the talking heads would spend some more time talking economics, but I do think it's right that the banks need help.

    Now, I ALSO think that mortgage holders need help.  But I don't think this problem can be solved by JUST helping the Average Joe who holds a home mortgage.

  •  Easy answer. (3+ / 0-)
    Recommended by:
    JuliaAnn, relentless, lisastar

     $650 Billion is for "consulting fees".  

     $ 50 Billion is for "other".


    "We in the gloam, old buddy," he said, "We definitely right in the middle of it." -Larry Brown

    by BenGoshi on Fri Sep 26, 2008 at 07:49:10 AM PDT

  •  Whiteboard us, don't waterboard us (0+ / 0-)

    I'd like to someone, anyone, on either side, please stand up and whiteboard this out. Connect the dots for me please, and show me your  math. I understand there will be assumptions, but my gut tells me this does not add up. No facts, no money.

  •  For god's sake - the Dems weren't (1+ / 0-)
    Recommended by:

    about to hand over $700 billion to Paulson. They were trying to find some type of short term solution - involving a lot less money - that would also protect the middle class.

    I really can't believe there are some folks here who don't think there is an economic crisis. Could we just stop the Dem bashing?

    •  Saying the dems are bowing to scare tactics... (1+ / 0-)
      Recommended by:

      This is not scare tactics because the issue is real. This is panic exploitation, and anyone who aids in the panic are suspect. Bush's speech had me stunned, when I spoke to a few partners of mine, their reaction was: Is this moron trying to cause a run?" And what little respect they had for Mccain went out the door last night after his antics yesterday.

      We have two choices, bad or terrible. The bad is to let the markets fall drastically yet retain the instutions that allow capital to continue to move. The terrible is to allow self correction with no action. The problem with this current plan is to delay action number two and only partially address action number one.

      The goal(as most understand) is to keep credit going, not to save bondholders from loss. Taxpayer's saving bondholders of these companies is a bad idea. Let them take it on the chin, sort of like BoA did to Countrywide, to absorb the loss but still have an institution remain after the losses are realized. This isn't hard to do.

      Expidite banckruptcy resolutions

      Allow the Govt to take senior claim ahead of stock and bondholders of these failing banks or take a recievership position and only allow a "whole bank" asset selloff (keeping the institution in place)

      Allow debt to bondholders absorb the losses in banckruptcy
      (after all, these holders saw huge earning from shady deals) so why shouldnt they take the majority of the losses.

      and finally, put in place a PAR like system (Property Appreciation Right) that was very succesful for farmers and lenders when this problem happened to them in the past.

      The Dems need to get away from the Paulson plan 100% and go the free market approach but with losses being put on the back of investors. Use the money to create relief for the consumers.

      I don't want a bigger government, I want an effective government!

      by KingGeorgetheTurd on Fri Sep 26, 2008 at 08:02:39 AM PDT

      [ Parent ]

    •  I agree that Dems have stopped the Paulson plan (1+ / 0-)
      Recommended by:

      which is good. Still, there is a feeling among many americans that the crisis isn't as bad as we're being told because we can't see it or feel it. They need to show us what the hell is happening in the financial sector that is creating such panic.

      It DOES worry me that Dodd sees the crisis. Why don't we believe him? I think they have worked out an acceptable plan, especially doing it in tranches or stages. I'd like to see more help for families facing foreclosure though.

    •  We think there is a serious problem (1+ / 0-)
      Recommended by:

      We don't think enough thought went into a solution that puts main street first.

      •  Exactly! (1+ / 0-)
        Recommended by:

        This is an artificial attempt to stabilize current wealth levels of assets that are not really worth it.
        The modified Dem proposal is still to much like Paulson's. After all, the dem modified version is like spending $500 on new tires for a car worth $300? Is that a good investment especially when Goodyear is trying to sell you the car? If you drive it for 3 years, then you got your money from the expense, but what if the car dies a month later? Simple analogy, sorry but that's it in a nutshell. It may be a good idea, but its risky and rewards the wrong people. Not to mention disjoints self corrections.

        The trouble is they are trying to avoid the obvious, our economy is really much smaller than it appears. All of the savings and investments in the US were artificial. The resistance to facing that reality is why a real solution is not being offered. They are trying to protect bondholders (and beleive me, 401K's and MF are part of this) with taxper bailouts to preserve wealth that doesn't really exist.

        So we need to face it, everyone in the US is not as wealthy as they thought. Delaying that reality will only make the shock that much harder to deal with. We can either have a depression or we can allow the charade to stop now and accept our economy has been in decline now for years and people can't afford the lifestyle they have been living.

        Its either smaller homes and compact cars or soup kitchens? Intervention is necessary, but throwing money at bondholders to keep the illusion of wealth up is risky, fruitless and corporate socialism.

        I don't want a bigger government, I want an effective government!

        by KingGeorgetheTurd on Fri Sep 26, 2008 at 08:21:30 AM PDT

        [ Parent ]

  •  Scary (1+ / 0-)
    Recommended by:

    Bush with all the disasters and the Dems willing to follow in his bail out scam.  Obama is acting like Collin Powell.  

    What happened to Washington being broken and corrupted by special interests and powerful lobbyists?  Why is Obama ready to hand $ 700 billion to Wall Street fat cats?

    If the GOP is against the bail out, the Dems and Obama just got punked by Bush. The GOP got a chance to distance themselves from Bush and be the protectors of the people's money from powerful fat cats.

  •  Heh -- great cartoon. (1+ / 0-)
    Recommended by:

    A corrupted government. Patriots branded as renegades. This is how we roll.

    by GreyHawk on Fri Sep 26, 2008 at 07:58:05 AM PDT

  •  Hunter and Devilstower (0+ / 0-)

    Much thx for taking up this theme.  This is what I have been saying to the fine folks up on Capitol Hill.

    1. Do they even understand the problem?
    1. What exactly would they be buying?

    I hope that some sanity is settling and we can force a wider debate.  I don't think the American taxpayer should be stuck owning mortgage futures.

  •  And McCain, doesn't even know how many cars... (1+ / 0-)
    Recommended by:

    he has!!!  He couldn't keep track of that, and he wants us to believe he can wrap his head around the derivatives market crisis/scam???

  •  Obviously, the money is for... (0+ / 0-)

    ... Paulson and Bernake to roll around in naked. That way, no one will ever want to touch it again, and then it's theirs, it's all theirs! MWAHAHAHAHAHAHA!

    It's the perfect crime.

  •  Reid and Dodd Press Conference (1+ / 0-)
    Recommended by:

    Reid and Dodd are doing a press conference right now.  Reid just ripped McCain by saying the infusion of presidential politics has been harmful, and that days ago he asked McCain for his thoughts and never got anything, instead McCain has showed up and still hasn't given his thoughts but just spent time in front of the cameras.  LOL!  They've also said that both Republicans and Democrats have agreed to Obama's points on taxpayer protections, executive compensation, etc.  McCain has added NOTHING.  He's simply chickening out of the debate.

    If the Jerry Springer show only aired in Mexico, would every Republican move down there? I think they might.

    by WallStreetNobody on Fri Sep 26, 2008 at 08:04:01 AM PDT

    •  it won't matter. The Dems will get painted (0+ / 0-)

      as being in favor of the Bush bailout plan, even though they've modified it heavily and reduced the amount to $250 billion.

      •  so will senate republicans (1+ / 0-)
        Recommended by:

        senate republicans are supporting the plan as well.

        LOL!  Just heard CNBC say JOHN MCCAIN BLINKED!  He will attend the debate even though there is no deal on the bailout, contrary to what he promised the American people.  LOL!

        If the Jerry Springer show only aired in Mexico, would every Republican move down there? I think they might.

        by WallStreetNobody on Fri Sep 26, 2008 at 08:29:19 AM PDT

        [ Parent ]

  •  YOU are overlooking that IF several big banks.... (0+ / 0-)

    fail and shake the confidence of depositors, we may see a run on all banks as people scramble to get their money out. The FDIC and other funds are insufficient to stop a widespread panic.

    So you do minimize the widespread impact of a bank panic, and the credit freeze which does appear to be worsening.

    The banks have packaged the bad mortgages with good ones, so it is impossible to determine their value and/or unload them at this point. That is creating a credit crunch, interest rates are rising which will cut off loans to regular businesses and consumers.

  •  What Will Probably Happen (0+ / 0-)

    The congress will probably pass a bill. Why? Because they don't want to be seen as sitting on the sidelines and doing nothing if the economy really tanks.

    Some Republicans will vote against the bill, because they can stand up for their principles knowing that the bill will pass.

    The blogosphere will be against it, because no one is going to hold them responsible if inaction leads to a disaster.

    Trying to make the libertarian Democrat a reality

    by Don the swing voter on Fri Sep 26, 2008 at 08:04:45 AM PDT

  •  tack on (0+ / 0-)

    "and, Bush and Cheney et all will be impeached..."
    and the congress phones will stop ringing.

    If we cannot elect this man, we don't deserve him.

    by lisastar on Fri Sep 26, 2008 at 08:05:02 AM PDT

  •  Why are the Stock Markets open for business? (1+ / 0-)
    Recommended by:

    It does make one question that logic behind this bailout and what the Treasury Secretary was accounting for in his so-called numbers. You also have to factor in that Paulson discussed this with the "most inept team in the United States", the Bush Adminstration, before coming foreward with his numbers to Congress. So there is a strong bet there that his original numbers were much lower in fact.

    His original plan may have been more targeted on saving money, but once the Bush cronies got into the numbers they always round up and multiply a few times to account for "Congressional Depreciation" of the final funding level.

    The issue around "why Wall Street can't do this themselves" given their own flush private funds is simple. These guys only do investment when it's a sure bet. But when it's risky they will "take their ball and go home". This is where Wall Street and Free Market Econonomics fails completely. Regulations and Controls need to take over the market under these conditions. And why in the hell hasn't Wall Street temporarily shut down the Stock Markets? I mean, what the hell are they thinking? The markets are SUPPOSED to be in the throws of a unforeseen financial crisis of epic proportions and these bozos are STILL allowing people to trade openly on the market? If thats the case, then perhaps there ISN'T A CRISIS after all!

    Someone should have "hit the circuit breakers" on the Stock Market when this first started! And why didnt they? This smells to high heaven like a scam of sorts to bilk the taxpayers and to derail the coming democratic presidency. But would they go to these extremes to do that?

    Why do I ask? Of course the would. Too many nutcases in absolute power at the moment.


    "Anyone who is capable of getting themselves made President should on no account be allowed to do the job." - Hitchhiker's Guide

    by Wynter on Fri Sep 26, 2008 at 08:06:37 AM PDT

  •  let's not lose sight of the macro picture (1+ / 0-)
    Recommended by:

    like it or not, without help the banking system is going to crash. the economy with it.

    the dems in congress had worked hard to force through provisions to protect taxpayers -- ceo pay limits, giving us an equity stake so we get paid back, and on and on.

    And oversight -- no blank checks.

    Bush, Paulson and Bernanke hated that stuff. but they had to agree.

    that's the deal McCain busted up to try to steal this as a populist reformer. that's the role democrats are really playing.

    we're for fixing. he's blowing it up.

    TheRamFiles: The only thing McCain changes these days is his mind.

    by ron ray on Fri Sep 26, 2008 at 08:07:48 AM PDT

  •  Push of a button – It’s a wonderful (0+ / 0-)

    He is another way to picture what’s happening.  There is a run on the banks by thousands of folks in their PJs.  With a mouse click, I move my CD to international bonds.  Poop, the money is gone and the bank needs to raise cash.  And there is not corresponding person moving money into the CDs.

    Fortunately, it is actually happening in slow motion.

  •  Inject liquidity through buying preferred stock (1+ / 0-)
    Recommended by:

    This way the taxpayer is protected from bankruptcy and the credit can still flow.  This is what James Galbraith is proposing.  It makes sense to me.  It's a variation of loaning them money with interest.  We could do that as well as long as the loan is protected from default.

    In addition, we must move quickly to re-capitalize FDIC.  If there will be more failures, the American public life time savings must be protected.

    Congress - stop monkeying around with Paulson's "plan".  Laugh at the GOP plan - it is an outrage.
    Call in top economists like Galbraith and come up with a plan that puts main street first.

  •  The Washington Mutual failure (0+ / 0-)

    and buy out yesterday meant that (1) no depositors (me) lost a dime of savings or even an interruption of service, and (2) the ones who were wiped out were  investors in their stocks.


    Yes, those banks may fail -- as they should. It'd be a crime if they didn't, given their mismanagement of their accounts. But the real problem is that those banks are, literally, too big to be allowed to fail. Their failure would present a liquidity problem for the rest of the market. They can do anything -- they could even burn money on the street -- and the strong preference of government would be to bail them out for it, because the alternative is financial chaos.

    My bank failed in the biggest bank failure in our history and some people gained and some lost. Let the failing banks - if you can even call them banks anymore and not corporations - fail.

    The subprime mortgages aren't the problem. And the overleveraged firms shouldn't be a problem. The problem is keeping the rest of the economy afloat no matter what happens to the firms in trouble.

    John McCain has decided he'd rather lose his integrity than lose an election. - Obama campaign

    by mrobinson on Fri Sep 26, 2008 at 08:12:45 AM PDT

    •  If one bank fails, you can have this result... (1+ / 0-)
      Recommended by:

      but if it spreads to a general panic, then no amount of FDIC funding will be enough. This a game of confidence where you use FDIC to shore up or protect a few banks and its depositors. A general run will overwhelm us. That is the very real possibility here.

      •  But also keep in mind (0+ / 0-)

        That a group of bank runs like what happened in 1929-1933 was what caused economic conditions to flop around eratically over the eight years that followed. The New Deal helped here and there, but the panics crippled the economy for nearly a generation.

        Knowing that, the government has a very, very keen interest in insuring that your finances are secure. Ignore the FDIC's funding status. The government will fund that corporation above all else, because it's the most obvious depression-stopper.

        "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

        by sapper on Fri Sep 26, 2008 at 08:25:33 AM PDT

        [ Parent ]

        •  WWII really got the US out of the Depression... (1+ / 0-)
          Recommended by:

          but there is NO way the FDIC could keep a generalized financial panic in check, no matter how much you want it to. The whole FDIC system is based upon stopping a few bank failures from turning into a general panic. Once that panic has begun, it is too late. Basically, we are being told that we are on the brink of that generalized panic.

          But we aren't really being given the info that led to that conclusion. I don't trust Paulson, but Sen. Dodd I do, and he believes it.

  •  Why not just pay all the defaulting mortgages? (4+ / 0-)
    Recommended by:
    IndySteve, sapper, MA Liberal, bushondrugs

    Wouldn't that be cheaper by at least half?  And then the derivatives wouldn't be a problem since the mortgages would be sound.  Am I missing something here?

    •  There's a LOT of them. (0+ / 0-)

      Doing so would be in the teens of trillions. Even getting them out of default is unrealistic.

      "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

      by sapper on Fri Sep 26, 2008 at 08:20:39 AM PDT

      [ Parent ]

      •  Subprime mortgages are only 2-3% at most of (1+ / 0-)
        Recommended by:

        total mortgages. That adds up to about $300 billion. Where are the teens of trillions located?

        •  Thought you meant all mortgages (0+ / 0-)

          I lean toward getting all the ARMs settled into fixed rates, and taken out of default or near-default. But I'm not an economist, have no idea if that would resolve the illiquidity issue among big banks.

          "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

          by sapper on Fri Sep 26, 2008 at 08:27:34 AM PDT

          [ Parent ]

          •  Ha, I am an economist and I don't really know (1+ / 0-)
            Recommended by:

            either. The sad fact is, even Bernanke is acting on a hope and a prayer. IF the liquidity issue extends into widespread insolvency, then we are screwed.

            Nothing could stop that once it gains steam.

            Getting the bad mortgages out of the system (and helping out the families) by buying them up (for $300 billion) and refinancing them will likely free up the credit freeze, along with regular loans from the FEDs to make markets more liquid.

            The gov't. would own the loans and be receiving at least something back as families repaid them. For those that still go to foreclosure, we could release them to the market in a steady way so as to stem the decline in housing prices and collapse in construction that is occurring.

            It will cost us something but not the entire $300 billion.

            •  Well then, I'm glad that McCain (0+ / 0-)

              swooped down from the sky and derailed the whole operation. His "idea" (I sincerely doubt he thought of it) is in favor of capital gains cuts and more deregulations? CBS reported that.

              "Half of the American people never read a newspaper. Half never vote for President. One hopes it is the same half." - Gore Vidal

              by sapper on Fri Sep 26, 2008 at 08:45:53 AM PDT

              [ Parent ]

    •  I have been advocating this for weeks now.... (0+ / 0-)

      and yes, accompanied by some more liquidity by the FED it should stabilize things without letting Wall Street off the hook.

      The only problem I see is the time it would take to unravel all the mortgages and do it quickly enough. Millions of mortgages all bundled up in derivatives with good mortgages will take some time.

      you almost need an exceptional step like a mortgage moratorium on defaulting mortgages and a government takeover of those, whereby you could quickly change the terms to keep families in the homes and make the derivatives revalue. OF course, that also bails out Wall Street but not so directly.

  •  Dodd and Frank have done an admirable job (0+ / 0-)

    trying to make this a much better action. Why do we disbelieve them? Forget Paulson, he is compromised, but Bernanke has extensively studied the Depression and credit contractions. His warnings give me pause. There is a very REAL possibility that credit contraction will cause a downward spiral that could soon be too large to control.

    You have completely overlooked the history of speculative bubbles and financial panics. DOING NOTHING IS the worst action of all. Private markets don't correct themselves easily or without spreading pain among the most disadvantaged in our society.

  •  Let the bubble burst (1+ / 0-)
    Recommended by:

    Home prices will drop to realistic levels and people will start buying them again.  It isn't my job to bail out predatory lenders, investors, speculators, and irresponsible people who bought homes they couldn't afford.

  •  This IS the October Surprise (0+ / 0-)

    We're all missing the obvious here...and I wish I had time to diary it.

    Let's face it, we've been set up here.  The Bush Administration puts forth a ridiculous plan to "save" the economy.  Since the economy is on the verge of collapse and Democrats control the Congress, the Dems are forced to do something.  The American public becomes enraged that tax dollars are going to save the Investment Class.  Republicans push back..."revolting" against Bush, and thus separating themselves from his administration, and delaying the passage of anything to save this mess.  In the meantime, Dems scramble to put together something that will create some solvency, but NOTHING at this point can "save" us from the past 8 years of destruction on our economy.  

    Since Bush & Cheney are already the "bad guys" in the public eye, they can push this plan all they want...and their own party can push back and appear to create a huge gap between The Bush Administration, Inc. and traditional Republican "economic values."  Meanwhile, the Dems HAVE TO do something to fix this crisis before the market plunges into a depression.  As long as this is stalled until September 30th, the markets will remain down.  Whatever happens after that is irrelevent.

    Why?  September 30 will mark the end of a quarter....and come mid-October, people en masse will receive their quarterly reports on their 401k's, IRA's, etc....and will see a HUGE loss.  Republicans will blame the economic problems on the Democrats....either being that they didn't act fast enough...they don't care about your money, only the "elite" Wall Street Bankers...etc.  They will remind you that McCain was in Washington trying to help solve the crisis, while Obama was hosting a Town Hall in Mississippi because he wouldn't agree to postpone the debate until after a solution to the economic crisis will found.

    If the Dems push back with the Republicans, they will be painted as a "do-nothing" Congress...the majority didn't bother to react to the crises...and Republicans will take credit for trying to pass something, but blocked by the Dem's control.

    This will be twisted and turned and manufactured to blame the Dems for the economy...and the public will see it on their quarterly statements.

    This is the Republican's last chance to paint John McCain as a maverick who revolts against Bush, is a man of action and will take control of this election...and I'm afraid to say that it just might work.

    "Reality proper has a way of insisting itself upon you." ~Al Gore

    by Troubled on Fri Sep 26, 2008 at 08:18:56 AM PDT

  •  In your face, suckers! (2+ / 0-)
    Recommended by:
    relentless, ilex

    I have been talking to my husband and friends about this, this OUTRAGE, the final outrage to be perpetrated against the American public by the crooks running our government.  I still cannot believe the AUDACITY of attempting to give away the treasury to their oligarchic cronies right before PrezNut leaves office.  

    The fact that they have been screaming that the world will come to an end if we don't hand over our wallets, all the while the SAME BANKS who are taking them are at the same time kicking in doors and putting our neighbors out on the street.  

    Damn it, if they want our money, then they should be told they can't have any more houses!  Why do they get to do both, grab our property AND our wallets.

    I'll say it again, I'm outraged!  And I can't believe our elected "leaders" are falling for this bullshit!  The Republicans want to save the banks, lower capital gains taxes AND refuse to increase unemployment benefits or give homeowners who are in trouble any relief.  What more do they have to do to us before the public at large realize these guys DO NOT have our interests at heart.  Not only do they not have the public interest at heart (Oligarchs are excluded from the definition of "public"), but they are actively working against us!!  Why don't they just hold a press conference where they moon us and scream, "In your face, suckers!"  This is so much more blatant than the  give-away to pharmaceutical companies during "Medicare reform" that it would be funny, if it weren't so diabolical!

    <<Takes a breath>>


    'Man is born free, yet he is everywhere in chains.' - Jean Jacques Rosseau. The Social Contract, 1762 -8.0/-5.9

    by Nyaa on Fri Sep 26, 2008 at 08:19:13 AM PDT

  •  Quick Question: When did Joe Lieberman Disappear? (1+ / 0-)
    Recommended by:

    Has he jumped from the McCain Train?

  •  Over the past 5 years... (0+ / 0-)

    ...dozens, if not hundreds of hedge fund managers and execs have been made multi-millionaires, or billionaires, in the deregulated Wall Street festival of greed.

    The $700 Billion bailout is being design by Republicans so that those new billionaires will be able to keep their wealth. (in offshore, tax-free accounts, no doubt.)

    I think we should be seizing some assets.

  •  There is no solution (3+ / 0-)
    Recommended by:
    greendem, ilex, KS Rose
    This is a bet.  There are two sides.  There can only be two outcomes.

    1) The people who bet that people would not pay their mortgages will win.

    2) The people who bet that people would pay their mortgages will win.

    It appears to me that the problem is that NO MATTER WHO WINS, the side that loses does not have the money to pay their bets.

    So, some gamblers bet all their chips on one of these two outcomes on a forty to one bet or thereabouts, and now they have lost all their chips, and are required to come up with forty times that amount to pay off the debt.

    And, somehow, the taxpayers are supposed to borrow 700 billion dollars from their grandkids to pay off these debts.

  •  The problem isn't "bad mortgages" (2+ / 0-)
    Recommended by:
    trinite, Clear Thinker

    The problem is credit drying up.

    The bail out is intended to loosen credit constrictions that are constipating the economy and threatening to burst its pipelines.

    By all means, let's have a rational discussion about the right way to do this.

    But the number of straw men being erected in order to torpedo this is astonishing.

    If credit stops, the economy collapses. Simple as that. EVERYONE needs credit in today's economy, big businesses and small, corporations and individuals.

    That is the problem, and that is what needs to be fixed. One perfectly rational way to do that is to provide money so lenders can lend again. With the proper oversight, proper execution, and proper regulation, it may work.

    One day posterity will remember, this strange era, these strange times, when ordinary common honesty was called courage. -- Yevgeny Yevtushenko

    by RandomActsOfReason on Fri Sep 26, 2008 at 08:21:48 AM PDT

    •  just a symptom of the real problem (0+ / 0-)

      gotta get the root or this will continue....

      •  When you treat a critical patient (1+ / 0-)
        Recommended by:

        you first stop the bleeding - then you treat the underlying condition.

        I'm not disagreeing that we need to fix a whole bunch of economic messes - but first we need to keep American businesses going by unfreezing credit, so that they can borrow money to purchase raw goods so they can keep their factories open and profit from the value-added and so forth.

        One day posterity will remember, this strange era, these strange times, when ordinary common honesty was called courage. -- Yevgeny Yevtushenko

        by RandomActsOfReason on Fri Sep 26, 2008 at 08:43:05 AM PDT

        [ Parent ]

        •  VERY TRUE (0+ / 0-)

          this is critical and business needs money....then set up a resolution borrowing trust and lend not give money to greedy, corrupt wall street and expect the businessman to get a fair deal...

          •  That is certainly worth discussing (1+ / 0-)
            Recommended by:

            I don't know how practical that is, how quickly it can be done, or how quickly it will get credit to businesses. One counter-argument is that we already have a credit system in place, however disfunctional, and unfreezing it may be quicker and even more cost-effective.

            I don't know if that is the case, just thinking out loud.

            I also don't know if we have the votes in the Senate, the House and, frankly, the White House, to get that done. But it sounds like an option to discuss.

            One day posterity will remember, this strange era, these strange times, when ordinary common honesty was called courage. -- Yevgeny Yevtushenko

            by RandomActsOfReason on Fri Sep 26, 2008 at 09:35:19 AM PDT

            [ Parent ]

            •  if you cut out the middleman (wall street) (0+ / 0-)

              the money will flow faster, the question is where do businesses get credit from?  answer: there local banks, allow local bankers the liquidity to lend to business and cut out middlemen....

    •  Wait a minute, credit freeze is DUE to the (0+ / 0-)

      housing mortgage problem. You take those failing mortgages over, and have a public agency refinance them, the credit problem will unfreeze. The FED can pump liquidity into the system (through their lending windows) with low-interest loans as is their usual function. Once mortgages are functioning (or perceived as moving toward functioning) they can be properly valued on the books and banks will be free to start lending again.

      •  I think it is more complex than that (0+ / 0-)

        I understand the temptation to seek a single cause for everything and find a silver bullet to solve the problem, but I believe we need to separate out the short-term urgent issue from the long-term systemic one.

        We need to stabilize the credit situation now, and then look at longer term systemic reforms.

        And, frankly, I'd prefer we do that after January, with Obama in the White House and a stronger Democratic majority in Congress.

        Not only because we have a better chance of getting deep reforms passed, but because we need bipartisan consensus now in order to get something passed immediately. We can't afford to get bogged down in fundamental issues of partisan ideology, which will happen once we start talking about deregulation, nationalization, etc.

        One day posterity will remember, this strange era, these strange times, when ordinary common honesty was called courage. -- Yevgeny Yevtushenko

        by RandomActsOfReason on Fri Sep 26, 2008 at 09:32:48 AM PDT

        [ Parent ]

    •  Why Paulson's plan will work (0+ / 0-)

      Your post is exactly why Paulson's plan, or something akin to it will work; it adds liquidity to the system, fixes lender balance sheets and enables short term-liquidity to return to the market so that longer-term credit can be offered freely. Without this, companies don't get loans to invest in their businesses, people don't get loans to buy cars, houses, etc. and the economy comes to a hault, because capital is not flowing. This is the reality of how our economy operates.

      We should not be fighting Paulson's plan, we should be seeking to improve it.

      The Republican "insurance" plan won't work because it doesn't facilitate the return of liquidity.

      McCain is playing russian roulette with out economy. If you battle the Paulson plan, you enable him.

  •  bailout is nightmare (1+ / 0-)
    Recommended by:

    700 billion dollars?!  Outrageous...

  •  In all fairness . . . (0+ / 0-)

    All the while, we're being told that we can't be punitive about this, and punish the firms in question. We can't set new regulations. We can't take equity in the firms we're giving so much money too. We can't do squat except buy their bad paper, and hope to hell that they survive, while the rest of us wallow in the steep recession almost certain to come as a result of the housing bubble collapse.

    This is not at all what the Democratic plan looked like.  I sure there were flaws with that plan, This would be a more useful post if you discussed it as it is instead of fighting the original Paulson plan strawman.

    If you don't stop lying about me, I'm going to have to start telling the truth about you. Barack Obama

    by dbratl on Fri Sep 26, 2008 at 08:22:08 AM PDT

  •  Random info: who has more gold than Ft Knox? (1+ / 0-)
    Recommended by:

    The NYC Federal Reserve, just down the way from Wall Street.

  •  40-70% devaluation (0+ / 0-)

    this started with reaganomics and ends with bushco, new money in less than 2 years, new flat tax plan that is fair for everyone....

  •  McCain's ploy (1+ / 0-)
    Recommended by:

    This post from Tech Ticker clearly explains McCain's strategy.  Obama MUST NOT let him succeed:

    Given the ongoing crisis in the credit markets, a bailout plan will likely be struck today or Monday -- whether McCain plays ball or not. Assuming this happens, McCain will:

       * Take credit for brokering a compromise (assuming the final deal is palatable to Americans)
       * Crow that he was the candidate who tried to stand up against the bailout of Wall Street fat-cats
       * Note every five minutes in the next six weeks that the enormous sop to Wall Street hasn't saved anything (if the bailout works, it won't work until long after the election is over)
       * Blast President Bush, who everyone hates anyway, thus reinforcing his "change" message
       * Say he's the only guy with the balls and experience necessary to deal with this crisis.

    And on the off chance that a deal doesn't go through in the next couple of days, McCain can just rail about the outrage of the Democrats' desire to bail out Wall Street at the expense of Main Street and say he's the only one standing up for the little guy.

  •  OMG...... (0+ / 0-)

    ....DramaKing is totally showing up!!!!

    PARTY TIME!!!!!!!!!!

    What does this have to do with this case? Nothing. Ladies and gentlemen, it has nothing to do with this case! It does not make sense! The Chewbacca Defense

    by dehrha02 on Fri Sep 26, 2008 at 08:26:42 AM PDT

  •  Gambling & a potential solution (0+ / 0-)

    Where I come from, when you gamble (particularly with other people's money) and you lose, you come with the money or big men come to break your appendages.

    My proposal is this:

    If we need to "bail out" the investment banking industry, let's go to the source to fund it. The deregulation brought about by the Graham, Leach, Bliley Act of 1999 is the root cause for this alleged crisis we find ourselves in. Therefore, if you have been an executive in the banking industry since 1999 and you have received a bonus or bonuses (or a golden parachute) in any amount greater than $10 Million, we will be redistributing 20 percent of your bonuses and we would like you to produce the money within 21 days. This money will be utilized to give a tax break to every American with an income of less than $250,000 per annum. Any additional monies will be used to pay down our trade deficit with our "allies" who hold billions in, now, allegedly virtually worthless T-bills. Also, every sub-prime mortgage that has been speculated upon will be renegotiated to provide the mortgage holder to reestablish the terms of the mortgage at a more favorable rate in order for them to keep their homes.

    In addition, any investment bank found to be "too big to fail" will be found to be in breach of anti-trust statutes and will be broken up into its constituent departments and either sold off or allowed to remain open as separate entities.

    We should allow this shadowy winner-take-all banking system that has leached our money for the last hundred years to die off and fail. This is the perfect time to restructure how we as a nation do business economically and now is the time to seize that opportunity. I doubt that any of our alleged "representatives" on the hill will listen though.

    "This is where some of my dreams become realities. And where some of my realities become dreams." -Willie Wonka

    by green917 on Fri Sep 26, 2008 at 08:26:53 AM PDT

  •  call me a commie (1+ / 0-)
    Recommended by:

    But if a bank is too big to fail, its too big to be privately owned

  •  McCain will debate (0+ / 0-)

    Let's see if the media gives him a pass.

    I think they will.

    Shotgun weddings and Sugar Mommas. Republican family values in 2008.

    by duha on Fri Sep 26, 2008 at 08:27:43 AM PDT

  •  This whole thing stinks (0+ / 0-)

    There is, IMO, not really much of a crisis. Not that there isn't anything wrong, I just think it's being blown out of all proportion. As you say above, it shouldn't cost more than maybe half of what they want. What will they do with the money? People will still be foreclosed on.I'll still have credit card debt. Who benefits? The rich.
    Let them sell their assets, let there be a full internal audit of every company who wants money. Then, and only then, will there be a payout.
    This is so fishy it is beyond belief. All one has to do is look at what they've tried to do - get a bill passed that just says "give us the money and no one gets hurt. But you can't see what we do with it and we don't have to tell you."
    Like the Iraq war, Patriot Act, and FISA, Americans are being scared into giving up their country, piece by piece.
    As Randi Rhodes said this week, "We've been raped, and now they want us to buy our own rape kits."

    "In a time of universal deceit -- telling the truth is a revolutionary act."

    by MA Liberal on Fri Sep 26, 2008 at 08:29:50 AM PDT

  •  Well who's scared? (0+ / 0-)

    Not Main Street.
    Wall Street,
    Why is Wall Street scared, because Bank's aren't lending. Ah So really Bank's are scared.

    Well then sell the bad bank's they and their share holders lose.

  •  So true. (0+ / 0-)

    Not being talked about as much, though, is that we must allow overextended companies to fail. It is an essential part of our economy that economy-threatening recklessness on the part of speculators not be rewarded, and especially not be rewarded by the government. Any actions to stabilize the economy should indeed inject liquidity -- but it's not clear that injecting liquidity through the very companies most in trouble is sustainable or even rational.

    That's what happened during the Panics of 1837, 1857 and 1893, and again in 1929. We seem to have come out of those crises just fine.  What is amazing is that it took so long for us to get here again.  

    Having credibility when making an argument is the straightest path to persuasion.

    by SpamNunn on Fri Sep 26, 2008 at 08:30:44 AM PDT

  •  China banks told to halt lending to US banks (1+ / 0-)
    Recommended by:

    BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

    Oh wait. We have nothing but LIBERAL REPORTERS working in a LIBERAL MEDIA here in America!! How could I have forgotten that?

    by hopalong on Fri Sep 26, 2008 at 08:30:48 AM PDT

    •  When the fun falls thru (0+ / 0-)

      and the rent comes due

      Hey, its good to be a young man
      And to live the way you please
      Yes, a young man is the king
      Of every kingdom that he sees
      There's an old and feeble man not far behind
      But it surely will catch up to him
      Somewhere along the line.

      Billy Joel

    •  wow, if this is the beginning of a Chinese.... (1+ / 0-)
      Recommended by:

      pullout, we are screwed. Sorry, but the Chinese are the key to getting us out of this mess. They have massive surpluses (from our trade deficit) to buy the US Tres. bonds to provide the funds to do anything.

      Of course, they are locked into our debt-laden economy because if we go down, so do they.

    •  Holy crap. (0+ / 0-)

      It's starting.  The crash is really, truly starting.

      "The old boy's network. In the McCain campaign, that's called a staff meeting."

      by Simian on Fri Sep 26, 2008 at 09:10:25 AM PDT

      [ Parent ]

  •  Hahahah....MSNBC just said McAin't will do (1+ / 0-)
    Recommended by:

    the debate.  What a maroon!  Lose/lose

  •  This is why many Dems need removal, also. (0+ / 0-)

    Lots of work for 2010!!!

    You don't negotiate with fascists, you defeat them in the name of democracy. --Ambr. Joe Wilson

    by FightTheFuture on Fri Sep 26, 2008 at 08:35:45 AM PDT

  •  Capital Gains taxes (0+ / 0-)

    I'd love to see how the Republicans propose to encourage economic activity in financial services by eliminating capital gains taxes on assets that are so depreciated and so worthless that they wouldn't be due for any capital gains taxes anyway.

    Talk about the tooth fairy and magic ponies.

  •  We need to save this thread for posterity. (0+ / 0-)

     It speaks for itself.

  •  UPDATE--THE DEBATE IS ON!!!! (1+ / 0-)
    Recommended by:
  •  Derivatives and Astrophysics (2+ / 0-)
    Recommended by:
    IndySteve, AnnCetera

    I dated an Astrophysicist PhD candidate about a decade ago.

    She had amazing stories about Wall Street head hunters coming around campus and scooping up math-wiz Astrophysics students and giving them $200,000 grand starting salary to come work for investment banks.

    If you were smart enough for space calculus, you could come help them create derivative schemes so complicated nobody would ever be the wiser. The trick was to keep the money moving. If regulators ever showed up you had to be able to say, "Gosh, that mortgage is bundled and already sold to another entity, go ask them."

    The derivatives market was set up as an elaborate shell game where every middle man takes a cut and moves the money to the next guy. (A lot like our current privatized health system.) Its an elaborate Ponzi scheme. This is what you get when you believe in deregulation. Very smart pirates take over and devise systems that are so complicated only the pirates get away with the booty.

    Bernake and Paulson were on his knees last night trying to save a system that is unnecessarily complicated. Let's go back to funding home ownership the old-fashioned way. The current financial system in the USA needs to die. Mortgages should be with banks, period. And they should live there for the full 30 or 15 year terms. The era of turning everything into securities in an elaborate shell game must end.

    "Be yourself; everyone else is already taken." - Oscar Wilde

    by greendem on Fri Sep 26, 2008 at 08:42:07 AM PDT

    •  Well, a downside to going back to old style (1+ / 0-)
      Recommended by:

      banking is that less would be available. When a bank holds its mortgages, rather than selling them to Fannie mae or to larger banks, is that their loans are restricted to deposits. There is a way to regulate the system without going back to the 1950's.

      •  I want the mortgage (1+ / 0-)
        Recommended by:

        My parents bought in 1963.

        When my latest mortgage went through, it was sold three times before I made the second payment.

        I wasn't even sure who owned it for a few weeks.

        This is craziness. It has to stop.

        "Be yourself; everyone else is already taken." - Oscar Wilde

        by greendem on Fri Sep 26, 2008 at 09:05:01 AM PDT

        [ Parent ]

  •  if you think that the loss on those mortgages (0+ / 0-)

    is going to be $180b, then you are smoking crack. It's going to be much, much larger. A lot of those loans are Home Equity Lines of Credit that are worth zero. That means no recovery value. Just take a look at WaMu. The immediate writedown that JPM will take on those mortgages is somewhere between $35b - $50b.

    The problem goes way beyond mortgages although the housing problem is the biggest part of the overall problem. Current estimates of total financial writedowns are somewhere between 1 trillion - 2 trillion. Marc Faber is out today with a total loss estimate of 5 trillion.

    The problem we are facing is simply off the charts and to suggest that the problem amounts to $180b is laughable.

  •  BAILOUT (0+ / 0-)

    Consider the biggest march on Washington, DC ever - the representatives who support a BAILOUT should be tarred and feathered!!!!

  •  We lack truthful information (1+ / 0-)
    Recommended by:

    We lack information. My son who has friends working on Wall St. says they don't understand. they don't have enough information either. It's not the mystery of economics here that has us baffled- it's the details of the con we don't get. The details are being hidden, just as any bank heist details are hidden. How many times have your seen The Sting?

    John McCain has decided he'd rather lose his integrity than lose an election. - Obama campaign

    by mrobinson on Fri Sep 26, 2008 at 08:47:41 AM PDT

  •  KO Agrees with $100B (1+ / 0-)
    Recommended by:

    He said it so quick last night that I had to stop (Tivo) and back it up to replay it, but he concurred with the fact that only $100 billion of this is really due to "bad" mortgages. He went on to say that the rest of the mortgages would be considered worthwhile investments. At a devalued price, yes. But not worthless.

  •  Learn economics, folks (5+ / 0-)

    I've been reading this site for some years, never felt that I had much to add. Now, though....

    This is a LIQUIDITY crisis, folks. The indirect cause is related to the foreclosure crisis, but the direct cause is the basic fact that so few people actually understand the mechanism of the various mortgage-backed securities out there that they essentially have no price. Thus, the financial firms that own these instruments have no way of knowing how much money they actually have in assets, and so just aren't willing/in a position (depending upon the regulatory structure governing them) of making much in the way of new loans.

    These loans not only let individual consumers buy things as diverse as education and refrigerators, houses and vacations; they also are what many businesses use to buy inventory and even make payroll. No liquidity, just like the engine of the metaphor, the whole economy will ground to a halt.

    Like it or not, existing financial institutions have the ability to underwrite these loans, and have existing relationships with the firms that need them. Let them fail, and while you're getting that new engine online, a whole bunch of collateral damage will occur in the economy.

    I don't like that this is where we are. But rather than just bitch about it or call a pox on all your houses and let the chips fall where they may, I argue that the effort would be better spent writing into whatever comes out of this the rules of what's gonna happen next time, like, oh, we just seize all firms instead of bailing them out, reduce the salary of all the officers to what members of Congress make (and no bonuses), and administer them for the public good.

    That way, the stakes are clear the next time deregulatory fever takes hold: the next time things crash, market capitalism will start to be dismantled.

  •  Why do I find myself cheering for the Republicans? (2+ / 0-)
    Recommended by:
    greendem, speedingpullet
    I don't like this deal no matter how many provisions Frank and Dodd get added. Although I don't completely agree with the Repub plan either, I hope they keep the opposition to Bush's plan until it dies and other plans can be considered.

    "No his mind is not for rent, to any god or government. Always hopeful yet discontent, he knows changes aren't permanent. But change is." -Neil Peart

    by Boisepoet on Fri Sep 26, 2008 at 08:54:38 AM PDT

    •  You shouldn't....their proposal is more (0+ / 0-)

      supply side bullshit. Do you trust Dodd? I think he has integrity and that the proposal he has helped put together is likely the best we can do at this point. Hell, we should have had leadership and acted sooner. But doing nothing now is something we'd look back on and say why did Congress do nothing. Hooveresque.

      •  Don't like the Repub plan, but any plan dictated (0+ / 0-)

        by Paulson is suspicious at best. We've already seen that the 700 bil figure was BS. They refuse to show their cards as to why this must be passed by this weekend. The idea that Dems can put lipstick on a pig and make it a good bill by adding populist amendments is just lunacy.

        Congress needs to stay in session and address this, but they don't need to start with the President's crooked cronies plan and add some niceities just to make it pass.

        "No his mind is not for rent, to any god or government. Always hopeful yet discontent, he knows changes aren't permanent. But change is." -Neil Peart

        by Boisepoet on Fri Sep 26, 2008 at 09:43:13 AM PDT

        [ Parent ]

    •  Dems. have already changed Bush's plan. (0+ / 0-)

      Don't trust the GOP with your money.

  •  a lot of "excitable bloggers" n/t (0+ / 0-)

    "No way, no how, no Palin war with Russia." --KariQ

    by andrewj54 on Fri Sep 26, 2008 at 08:56:34 AM PDT

  •  You're wrong, and here's why. (2+ / 0-)
    Recommended by:
    Simian, andrewj54

    There's a simple retort to your entire post.

    Your entire premise is that 3% of all mortgages will fail... because this is a "historic high".  Newsflash, we're about to shatter that record.

    As of this point, 2.75% of all mortgages are already in default.  We're already at that point.  Furthermore, an additional 6.41% of mortgages are currently late.  Historically, once a borrower goes late on their mortgage payment (especially in a time of economic downturn), the vast majority will not recover.

    Add that up, and you'll realize that as of September 2008, around 9% of US mortgages are on their way to foreclosure.  And we're really only at the tip of the iceberg, with many expecting the real-estate downturn to continue indefinitely.

    Let me give you a helpful number.  When JPMorganChase purchased Washington Mutual this morning, they wrote-off 23% of WaMu's net lending portfolio.  That's right, JPMorganChase is right now assuming that 23% of the mortgages in WaMu's portfolio are going to fail.

    Now, what's 23% of $11.1 trillion?  That's a closer approximation of financial loss the US economy is looking at.

  •  I saw Obama on TV (1+ / 0-)
    Recommended by:

    and he said that not all of the money would be used at once

    and this is a DIFFERENT point then Schumer suggesting allocating the money a chunk at a time with review

    Obama said that the money would be used to buy assets AS NEEDED and then sell them, so that it's not at all clear how MUCH money would be needed at once.


    "No way, no how, no Palin war with Russia." --KariQ

    by andrewj54 on Fri Sep 26, 2008 at 08:59:02 AM PDT

  •  again, information needed (0+ / 0-)

    and debate on alternate plans.

    John McCain has decided he'd rather lose his integrity than lose an election. - Obama campaign

    by mrobinson on Fri Sep 26, 2008 at 08:59:03 AM PDT

  •  Missing the point. (1+ / 0-)
    Recommended by:

    This is one of those times when the populist reaction has the potential to damn the population it aims to serve.

    Hunter and Devilstower miss the point; this is a liqiudity crisis in the capital markets, not a crisis of forclosures, although the prospect of future forclosures is what causes the prices for these mortgage assets (CDOs, CMOs, etc.) to be depressed. Mark to market accounting rules force those that owne thse assests to write them down, making thier balance sheet look weak, causing other institutions to pull short term loans. And when short-term liquidity between institutions dries up, long-term credit to companies to invest in their buiness and infrastructure, credit to consumers to buy goods and services also dries up. And this is what will cause the economy so suffer a fate much worse than the $700 billion price tag of Paulson's proposal. That number will look like chump change, if we run our economy into a brick wall by denying that the problem is in the credit market.

    Finally, about that $700 billion, even that misses the point. Paulson proposes buying asset backed securities. It is NOT A BAILOUT! We give the seller cash, they give us a security; an asset, which we can later sell. The prices of these securities are depressed right now because the prospect of future forclosure is expected to be high; probably higher than what will occur in reality. The net result is we'll likely make a profit on these when we sell them at a later date after the clouds have cleared.

    Net-net, this shouldn't be called a bail-out; it should be called a credit market stabilization plan.

    And if you fight the Paulson plan, you enable McCain to play a game of russian roulette with the economy through the House Republican "insurance" plan that doesn't fix the core credit market problem.

    So please, get off of the populist - help everyone stay in their house - pedestal. Recognize the core problem is a credit market crisis and Paulson's solution will make more sense to you.

    •  I Agree, however .... (0+ / 0-)

      I Agree, however, why wasn't this done in the private sector?  This kind of "bailout" done privately isn't rare in kind, just in magnitude.  Is this such a magnitude, and is overseas investor confidence so low, that this has to be done in the public sector?

      If so, we may be in deep kimchi no matter what, it seems to me.

      •  It is a fair question, but,.. (0+ / 0-)

        ... you may have heard phrase "to catch a falling knife". Unfortunately, the only private sector buyers of the mortgage securities in question are the same institutions that are already overburdened by them. No-one knows where the valuation bottom is on these securities is, and so, none of the institutions with capital are prepared to purchase them. If they do, the risk is that the prices of these securities continues to fall (the falling knife), causing additional writedowns, weakening balance sheets further, etc. It becomes a vicious cycle. Much of this is caused by our accounting rules and by the short term earnings focus of most large fincnial institutions. They don't have the ability to look into the future beyond the tip of their noses.

        Only the federal government has the long-term investment horizon and the capacity to absorb the size and scope of this problem.

        Point of all this being that the private markets are not functioning as you and I would hope. And while we might wish this not to be the case, there is no denying it.

        I see no choice but for the feds to step in. And while I don't like it one bit and I abhor the deregulatory environment that put us in this pickle in the first place, we can't put our heads in the sand and hope the private capital markest work it all out. That path leads to disaster.

        None of this guarantees that Paulson and company can pull us out of this; but I'm convinced it is better than doing nothing.

  •  Magic Money Fairies... (0+ / 0-)

    Apparently would be "Joe Consumer" who is doing his damndest to keep a job, pay for fuel, food, and rent.

    But the rich want us to step in and save their collective asses... why?

    Come back when I give a flying f...

    "Bubba, what did I tell you about starin' into the sun? You want to become a Democrat or somthin'?"

    by feloneouscat on Fri Sep 26, 2008 at 09:13:24 AM PDT

  •  No bailout for Wall Street. Bailout Main Street! (1+ / 0-)
    Recommended by:

    My initial response to this issue is that it is too big and too important to allow this lame-duck administration and this congress to address. The American people are going to be voting for an entirely new government in November, and that vote should be a referendum on the last thirty years of trickle-down economics.

    Now, if you want to do something about it. This whole thing was precipitated by the housing bubble. It's not just foreclosures on sub-prime mortgages. It's the entire system. The bubble is bursting. Houses that were selling for 500K are now worth much less in most places. All those mortgages based on those bubble prices are upside-down. Sub-prime, near-prime and prime. Add to this the incredible over leveraging of all credit and we have a real problem. This is a direct result of the bubble economics of Alan Greenspan and the trickle-down, Milton Friedman, Raganomics that have been operating in this country for nearly thirty years.

    Sure the government has to do something, but handing $800,000,000,000 to 1.5 trillion dollars to the very same companies that helped cause this mess is not the answer. If you want to deal with this problem, you have to deflate the bubble in a controlled manner. The only way to do that is to lower the mortgages across the board. Pay the same or less money being talked about to lower all mortgages by 75% across the board. The public will still be on the hook for 25% of their loans, and the value of their homes can be safely lowered to reflect reality. This combined with a return to rational regulation of the banking industry might just stave off the economic collapse. Plus it would be a tremendous keynesian infusion of needed cash to those that can use it.

    If we're going to be giving that much money away, let's give it to the people who really need it.

    "Politics is the art of controlling your environment." - HST

    by angrycalifornian on Fri Sep 26, 2008 at 09:20:07 AM PDT

    •  Lower all mortgages by 75%? (0+ / 0-)

      Have you looked at the math?  Again, it's mentioned in the original post.  Mortgages outstanding in the US = $11.1 trillion.  Lowering mortgages by 75% means magically coughing out $8 trillion, 4 times the cost of the Iraq war.

      Or, approximately $23,000 for every man/woman/child in the US.  I don't really think that's going to fix many problems, here.

      •  Only if you actually pay for it... (0+ / 0-)

        Write the debt down and basically refinance the mortgages for 25% of their original cost. Take the costs associated with the write down out of the hides of the wall street banks.

        "Politics is the art of controlling your environment." - HST

        by angrycalifornian on Fri Sep 26, 2008 at 09:55:53 AM PDT

        [ Parent ]

  •  Over on Yahoo Finance (0+ / 0-)

    Blind squirrel?


  •  Let FICA Handle It (0+ / 0-)

    OK, here is where I get confused. People say this would be a financial disaster if nothing is done. But no one has explained why. The stock market will crash, they say. So What? The market has crashed before, but it recovered. It took a big hit in 1987, but it recovered quickly (and the late 80s were a much, much better time for the average worker than the 70s). As kids we learned that the 1929 crash caused the Great Depression. But as adults, we learned it was more complicated than that. There is no reason that one had to lead to the other.

    We put safeguards in place so that a collapsing bank would not hurt depositors. They work. The nations biggest bank failure, ever, just occurred this morning. But it didn't even cost FICA a dime, let alone the government. There is no run on banks, no domino effect, no financial collapse.

    That isn't to say it is all good. The stockholders are hosed. If you had stock in WAMU, it is now worthless. Creditors are also hosed. Depending on the type of loan made to WAMU, you may get pennies on the dollar or nothing at all. But once those have cleared the books (as they are when a bank goes belly up), the remaining assets and liabilities are worth enough for Chase to buy them. In other words, all those bad, terrible, under water, subprime loans we've heard about are still worth accepting as long as you don't have the derivatives to worry about.

    Let the bad banks fail. Let FICA bail out the depositors. If FICA finds itself in trouble (because  the value of the properties is less than the value of the mortgages) then we can bail out FICA. As part of that, we figure out a way to get folks to continue paying on their house, even though it is worth less than what it was when they originally bought it. Doing that sounds a lot cheaper, and a lot better for the country.

    •  FICA? FDIC? (1+ / 0-)
      Recommended by:

      I assume you're referring to FDIC, and not FICA.

      The reason WaMu didn't "cost FDIC a dime" is because FDIC doesn't have many dimes left.  Dig through the news.  After the IndyMac failure earlier this year, the FDIC insurance fund was basically emptied... and WaMu is much, much larger than IndyMac.

      In other words, FDIC had to find a solution that didn't involve paying depositors.  So, as a result, it worked out an unprecedented backroom deal with JPMorganChase.  All in all, a happy story all around (assuming JPMorganChase doesn't fail...).

      But again, the key point here is, FDIC is depleted.  WaMu isn't going to be the last bank to fail.  Wachovia is now teetering on the edge, and others will inevitably follow... especially without a bail out.  

      If the US doesn't get rid of the toxic assets on these banks now, it's going to bring everyone down... INCLUDING average ma/pa depositors.

      •  Yes (Doh!) You are Correct (FDIC) (0+ / 0-)

        I should drink my tea before typing or I'll make a lot of embarrassing comments. Thank you for figuring out my ramblings.

        That being said, I do believe bailing out FDIC (as we taxpayers must do if they run out of money) might be a better deal for the country than bailing out the banks themselves. I don't think the assets are as toxic as everyone suggests. I do think the swaps and derivatives are a worse problem than the bad loans. When a bank fails, I assume that those guarantees (along with a lot of other promises, stock holder assets, etc.) dissolve.

        I haven't run the numbers, but based on the estimates given by others (which may, granted, underestimate the number of mortgages in trouble) I don't think it is that bad. Stocks would plummet. A lot of companies that loaned money to those banks would also be out luck, but that is what happens when a bubble collapses. The Nasdaq isn't close to recovering from its high, but no one talked about bailing out A lot of good, very productive companies (and many good workers) got hurt with the tech collapse, but things recovered. I'm not convinced that we couldn't handle this situation in a similar way: let many banks collapse and then see other banks, who haven't been involved with these loans, step in.

  •  You know how blackmailers are. (0+ / 0-)

    Until you stand up to them they will keep coming back for more. I'm surprised they didn't ask the spineless Dems for 1.1 Trillion.

    I hope I'm having a Mid Life Crisis; or else this is gonna need a prescription.

    by ghett on Fri Sep 26, 2008 at 09:41:18 AM PDT

  •  It's not about mortgages. (1+ / 0-)
    Recommended by:
    It's about mortgage-based securities including default swaps.

    The whole house of cards was built on mortgages, but they greatly expanded the paper value of the mess. Now, unless the treasury makes it worth something like what they claimed it ws worth, they don't have the money to lend for business and housing needs.

    "I'm not opposed to all wars; I'm opposed to dumb wars." -- Obama in 2002

    by Frank Palmer on Fri Sep 26, 2008 at 09:51:41 AM PDT

  •  Anyone really think Wall Street didn't make a ... (0+ / 0-)

    a fortune on oil that increased five fold in 7 years.  They didn't share those profits with the people.

  •  Bring back regulation (2+ / 0-)
    Recommended by:
    AnnCetera, trinite

    I was in college as a finance major at the time when the banking consolidation was starting to gather steam.  One of the aspects of deregulation that we discussed at the time was the "Too Big To Fail" problem that it could cause.  At the time, there were only a couple of firms on the planet that were considered too big to fail.  Now, because of the mergers, there are dozens of firms that fall into that category.  This country needs to reverse course and break up many of these large entities so that there will not be so many "Too Big To Fail" organizations, because if you are too big to fail then there really is no downside to making really risky moves because you know in the end you will get bailed out.

  •  CALL THEIR BLUFF! (0+ / 0-)

    This problem has to be solved from the bottom up. Please, Please, Please Obama & Democrats, DON"T fall for this sucker bait. Don't give these Billionaires a Bail out, let them liquidate, if this is real, CALL THEIR BLUFF! This Con-Servative free market ponzi scheme has to end, Bring back FDR's policies.
    And see my animated short film "Free Market Baloney" on you tube, here's the link;

    And see more cartoons at

    This Crisis is just Economic Shock and Awe!


  •  If it’s a bailout, I’m against it. (0+ / 0-)

    I sincerely hope those who feel that no immediate proactive action by the government is needed are right because at this point it seems that’s what we’re going to get.

    To my mind it’s very unfortunate that this crisis occurred six weeks before an election, not the Presidential one, but all those House seats. It meant that the members of the House were all right up against the immediate public opinion of the deal as seen through the media filter, there was no time to explain or convince. So, both parties are frantically politicizing the problem.

    We got the typical media hysteria and public opinion became overwhelming negative. What I see is that all our "leaders" in Washington, on both sides, just didn’t lead on this. They let all the government actions to date and the proposed action be termed "bailouts" by the media. That’s a pejorative term and most of the public now believes that what is being proposed is giving $700 Billion of our dollars to rich people and corporate executives. The President’s speech a couple of days ago was too little too late.

    One example. We "bailed out" AIG. Most people I’m sure believe that we just gave money to rich people and fat cats there. In fact, we loaned AIG $85 Billion at 10% interest and it is far more likely than not that this loan will be repaid and soon. If it isn’t, we get an 80% interest in a company with a lot of assets and profitable businesses. That’s an investment to my mind and a good one at that.

    How different the discussion would have been if the current proposal was being discussed as an Economic Recovery package rather than a bailout. Words matter. They craft people’s perception. If it’s a bailout, I’m against it. If it’s an economic recovery proposal, I’ll consider it.

    "Be kind, for everyone you meet is fighting a great battle." Philo of Alexandria (20 BCE - 50 CE)

    by JayHub on Fri Sep 26, 2008 at 11:04:07 AM PDT

    •  Only one House member in trouble (0+ / 0-)

      Of the Members of Congress involved in the negotiations, the only one facing any trouble at all is Paul Kanjorski (D-PA 11). Dude is in a very serious fight, and the GOP challenger is making hay over Kanjorski's pro-active and bipartisan work. By contrast Frank, Bachus and Pryce are all in good shape. Ditto for Dodd and Shelby on the Senate side.

      Hopefully Kanjorskie will fare better than Marjorie Margolies-Mezvistky did after doing the right thing in 1993.

  •  Simple answer? They think we're stupid n/t (0+ / 0-)

    I will make a bargain with the Republicans. If they will stop telling lies about Democrats, we will stop telling the truth about them. -- Adlai Stevenson

    by DrWolfy on Fri Sep 26, 2008 at 11:09:36 AM PDT

  •  Overton window: Right face! (0+ / 0-)

    In the public outcry over what to do about the economy,
    most voices are demanding some huge benefit for rich people and big corporations.

    --Behold the October Surprise.

  •  Tax Wall Street To Fund Bailout (0+ / 0-)

    Reinstate the Securities Turnover Excise Tax ("STET") to pay for the bailout. Thom Hartmann explains that a .25% STET would produce about $150 billion in its first year and it has the additional benefit of encouraging healthy investment, instead of the current "toxic speculation."
    Now, the stock market is simply a no cost gambling casino for the super rich. We financed 4 of our wars with the STET and stabilized our stock market from the mid-30's to 1966. Plus, with the STET, we don't have to borrow from China for the bailout.

  •  Judd Gregg Republican (0+ / 0-)

    thinks they are going to put it together.

    He said they will require participating Firms to disclose how many mortgages they hold.

    He also said it was a non starter, that a bankruptcy judge should renegotiate mortgages. That is too bad, where bankruptcy judges have the ability to broker negotiations between lenders and borrowers to keep their homes and pay their mortgages it has saved over a million families from losing their homes and their dignity

  •  Qui Bono? (0+ / 0-)

    The issue is not the derivatives: it is who bought them (chiefly China, Japan and Russia) and how willing they will be to continue to loan us money since we have an anemic savings rate.

  •  Part of the money will bail out (0+ / 0-)

    Ambac and other insurance companies.  They blame the ratings companies for rating the mortgages too high.  Apparently ratings agencies like Moodys rated them AAA, when they should have been given a F-.

    Ambac CEO Callen said on Bloomberg today, "Address ratings agencies.  They have to be accountable and transparent and they are not.  

    He says bond insurers would benefit from the bail out.

  •  How does a computer graphics artist respond... (0+ / 0-) times such as these? By making a silly video:

    I would have done something more substantive if I had more time, but I have to get back to money-making work, and to my anxiety attacks.

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