700 Billion Dollar Question

That 700 Billion is in addition to the $400 Billion they have already spent with bailouts, so in reality, we are talking over a Trillion in bailouts.

1. That $700 Billion will buy mortgages, bad mortgages, they will be put in a vault somewhere, until they can create a NEW government agency that will look at what to try to do with these bad pieces of paper. So the only ones that benefit are the CEO's and the companies that used to own these pieces of paper.

2. The money doesn't exist, so more debt, they will sell bonds to try to raise the funds to pay for it. Interest will be on top of the $700 Billion.

3. We are in a Republican administration, there is NOTHING but a redistribution of wealth under a Republican administration.

4. See #3, No One is ever held accountable under the current leadership.

5. You answered your own question.

 

If the money is actually going to buy bad mortgages it may not be possible to know who is getting it. What happened with the sub-prime mortgages is that they were bundled into securities, each of which was backed by thousands of mortgages. But then shares were sold in those securities, and then those shares were bundled into other securities. The result is that thousands of securities each own bits of thousands of mortgages. If the government buys the securities, it will be taking bad debt off the hands of the holders of those securities.

It's kind of like if you bought junk bonds, and the company that issued them goes bankrupt and your bonds are worthless, and then the government buys them from you. Except that when it's giant transnational corporations that bought the junk bonds (in this case securities backed by bad mortgages) the government does not want those corporations to lose money because of the ripple effects to the economy.

However, I don't understand yet just exactly what the bail-out is going to consist of. I don't think they've passed the bill yet, so the details may still be in flux.

 

Both the Dems and the Repubs are rich folks who have a stake in the mainstream economy, and both receive their bribes (oops, sorry, that should be "campaign contributions") from the same wealthy white men and transnational corporations, and have their interests at heart.

 

Yeah Daniel, except the recipients of the largest donations were Obama and Chris Dodd. (Yes Republicans did receive donations but the Dems received them at a 3/1 margin)

That aside, barney Frank should have NO say in where this money goes as he led the blockade of reforms (proposed by the Bush administration) to Fannie and Freddie in 2003 which led to this whole debacle.

That said, NO money should go for any bonuses or buyouts of execs and any company receiving the money will have to limit exec salaries. (if not all salaries)

Also, that shifty bastard Paulson definitely needs someone to watch over him, but I don't think Congress can do that since Congresses required banks (especially Freddie and Fannie) to make bad loans in order to avoid "redlining" accusations. This is the root cause of the collapse which was magnified by removal one of the few pieces of good regulation which prevented bans from owning a lot of any securities companies.

 

Because they have spines of Jello?

 

The government has no choice but to approve it. They can impose conditions, however, and that's what they are working on right now. This problem was created by Washington (mainly the Republicans starting in 2000), and Washington has to solve it--at the taxpayers' expense, of course. The debt is tremendous. I can't believe how so-called "conservatives" can run up a trillion dollar debt in 8 years.
It will take 20 years to recover from this.
One thing they should do is regulate the sale of oil futures again (sell only to buyers of oil)--or oil prices are going to skyrocket when the dollar falls further after these handouts of printed money. And they complain about spending a few billion on health care. Wow. Reality check.

 

Republicans ran up a $14 TRILLION+ Deficit in 8 years, mainly because Democrats were never in the majority the entire time, Republicans had their way the full 8 years, and the Democrats wouldn't stick together, normal for them, but thats usually good when they are in the real majority, in this case they never were.

 

Congress was never involved in the $400+ Billion buyout, so now what?

 

$700 Billion...

With that said, it seems to diminish the costs of the Iraq war. Realizing that only 5% of that amount would stabilize Social Security for the next 60 years.
The hallmark of the current administration is fiscal "irresponsibility". It's easy to do things when you can distract the commander-in-chief with shiny objects... It's going to take MORE than 20 years to recover from this. Isn't one of the candidates wanting to de-regulate the health care system just like the financial institutions? Good luck with that...

IMHO, the "cat is now out of the bag", We're going to feel a ripple effect for years to come, and we haven't seen the bottom of this mess yet. It's just starting... BTW, how's everyone's 201K doing?

 

This is incorrect. Banks were never required to make NINA loans to avoid redlining charges. Banks made NINA loans because investors, eager for big profits, and believing stupidly that property values never go down, were demanding mortgage backed securities in much greater numbers than the legitimate mortgage market could supply.

NINA = "No Income No Asset." Banks were giving huge mortgages to people who had no income and no assets, and giving them with no down payment. The banks knew the mortgages were bad when they made them, but didn't care, because they were selling the mortgages as fast as they could make the loans. They were hard-selling loans to people who had not even considered borrowing money, and banks were even falsifying documents. Some borrowers were involved in the fraud, but mostly it was the banks, eager to cash in on the demand for mortgage-backed securities.

Listen to the program titled "The Global Pool Of Money" on the radio program This American Life. It's available free on their web site: thisamericanlife-dot-org.

 

The people who invested in the bad mortgages via the mortgage-backed securities will benefit from the bail-out. Depending on how the program operates, banks who actually made bad loans and were stuck with them when investors suddenly stopped buying the securities and the banks could not unload the bad mortgages, may benefit. Whether some benefit may trickle down to you, I honestly do not know, but I doubt it will be much. If the program manages to reassure the investment world, and thereby stops the slide of stock prices, then anybody who owns stocks will benefit, especially if they need to cash out of the market soon, as for example if you are nearing retirement and your pension is in stocks.

 

The other issue, is, I believe that banks will be forced to stop lending.... to each other and to other businesses. That will cause a slow down because businesses won't be able to raise capital to do various and sundry things. Personally, I find the whole "gotta have it now" to be very suspicious and the above the law part is absolutely ridiculous. It just stinks of more malfeasance probably to cover up the rest of the malfeasance.

 

You are right, something REALLY STINKS now, if its to the point of its got to be done this week, there is a big something waiting in the wings.

 

Ding Ding Ding

Yep, a liqidity trap wouldn't be good.

Giving $700 Billion to a former advisor to Nixon and current advisor to Bush doesn't sound like a good move and the approach reminds me of a car dealer trying to get you to sign on the line RIGHT AWAY.

Nasty conundrum but Bernanke I tend to listen to.

 

there needs to be far more oversight on this thing. this whole "i can do whatever i like with it and nobody can touch me for any result or screwup" thing really did not fly in congress, and i'm quite glad to see it.

this thing is the frosting on the cake of poorly-thought-out expensive decisions from recent years. i'm relieved that it wasn't just pushed on through but challenged.

 

Frankly, they ought to raise the necessary funds by seizing and liquidating all assets of the CEOs/upper managerment at the firms in question. Then, extracting free/slave labour from said individuals until they perish from overwork/starvation. Then their emaciated carcases should be rendered into to biodiesel to extract the maximum value out of them. These sorts of people are a waste of air. It's really nausiating that these deuchebags can run a scam, run a huge investment firm into the ground, racking up massive losses, and then get the sack with over $100M in severance. Is it any wonder that this happened? Where was the bloody incentive to actually do a good job and manage the company properly. That lot makes me sick. They really ought to be held accountable and made to pay... dearly.

 

You are so right!