Will Write For Room And Board (incoming rant)

[wyrmking]

The general consensus of most people is that the money is going to be given to the companies flat out. It is not. The problem with the banks, and in a way, wall street as well, is a thing called "illiquidity" which is a fancy way of saying they don't have a lot of liquid assests, ie "paper money", but they have a lot of fixed assests, ie properties and houses.

Now liquidity plays a major role in how a government, not just America's, determines how much wealth it considers you have. How "liquid" someone is matters. "Liquid" items are stocks, cash, loans, etc. Fixed assests are houses, bank branches, etc. The problem with the economy in America actually started just after 2000. A Republican congressman pushed to deregulate the morgage market at the end of 1999. That man's name is Phil Gramm. Unfortunately he succeeded as he added it to another bill just as one president was leaving and another was coming into office. Over the subsequent years, the morgage market had more and more regulations removed. The result of all this deregulation is that banks made bad loans and there were no regulations that said "bad move, you shouldn't/can't/don't want to do that." So the banks gave out liquid assests for fixed assets. When the morgages failed, the banks repossessed all the property.

What part of the bailout does is set up a fund to buy some of these properties. It could possibly buy part of the companies as well. With the AIG bailout, which was 70 billion, it turns out that the government bought 80% of AIG. Buying up the properties will do two things, 1) it gives those who control the properties more liquidity again and 2) gives the government a chance to recoupe some of the money in the future when it resells the properties once the market recovers. The American government has bought up property before to stave off a recession and when they sold the properties down the road, they more than recovered the money. The government might also be buying parts of other businesses. If they did that, then they would recieve parts of the profits.

The reason I named the person responsible is because he has had a major impact in presidential politics this election. Until May, Phil Gramm was the financial advisor for John McCain and helped develop McCain's economic policy. McCain called Gramm "one of the best economists" he knows. And McCain has not changed his policy, other than calling for more regulation over certain eras, which was set up by Gramm. Needless to say that I worry if he gets into the White House.

I only hope that this kind of action does not need to happen again.

Wyrmking

[MommyDoom]

*MommyDoom stuffs her head in the sand*

[Fel]

The bailout was defeated in the House today.

Naturally, the stock market dived 777 points in reaction to it, but I consider that a GOOD thing.

I know it's going to hurt some 401Ks in the short term, but those people in the 401s need to remember that that's a LONG TERM investment, and stocks are good long term investments. Those investments will bounce back, unless you committed everything to a financial stock like Wachovia.

I am one that's willing to endure a little pain over the next year in order to hold to the tenet upon which this nation was founded.

[storyreader2005]

The bailout was defeated in the House today.

Naturally, the stock market dived 777 points in reaction to it, but I consider that a GOOD thing.

I know it's going to hurt some 401Ks in the short term, but those people in the 401s need to remember that that's a LONG TERM investment, and stocks are good long term investments. Those investments will bounce back, unless you committed everything to a financial stock like Wachovia.

I am one that's willing to endure a little pain over the next year in order to hold to the tenet upon which this nation was founded.

I'm really wondering what was really lost? AIG and others got into the loan/investment/real estate/whatever and made a huge, HUGE number of loans to people who it turned out couldn't make the monthly payments (well DUH, did you really expect Middle America to be able to afford $900 monthly payments?). When that happens the typical lending institutions, read banks, would foreclose/repossess whatever was bought with that money and then sell it for whatever remained of the balance on the loan. Were these loans made where they couldn't somehow reclaim the remainder of the balance? If they were that STUPID they deserve to get bit, the greedy short-sighted bastards.

[PsychoWulf]

The loans where for more money than the property was worth at the time of repo. For instace a house in NH that has an estimated value of $200,000 and had a loan for that, actualy has a resell estimate of $130,000 and $7,000 in yearly taxes around where I live (city taxes as the house is paid of from a fixed 20 year loan).

[Mac The Knife]

A friend emailed me a link to a youtube video that showed how far back this crisis was started http://www.youtube.com/watch?v=NU6fuFrdCJY

[Spec8472]

I know it's going to hurt some 401Ks in the short term, but those people in the 401s need to remember that that's a LONG TERM investment, and stocks are good long term investments. Those investments will bounce back, unless you committed everything to a financial stock like Wachovia.

The exception being where you're either just about to, or just have retired - and your superanuation (AU sort of equivilent of 401Ks) is being drawn down. You're losing actual money continually, and unelss you're continuing to work you can't get that back.

[wyrmking]

The subprime market was not the problem. The problem was the deregulation of the subprime market. Saying that the subprime market is the problem is like saying that the creation of steel is problem with guns. I know people will say that if it was not there then it could not cause problems. Same thing could be said about many thing over the course of history, gunpowder and dynamite to name a few.

The removal of the controls on the subprime market is problem. And a free market economy is a misnomer. A true free market economy would not work. The reason being that anything is worth only what you are willing to pay for it. If you are only willing to pay a dime for house, then that is what the house is worth to you. Unfortunately it is not worth that to others. There has to be some control on the market or things fall apart. As was the case with the subprime market.

The subprime market, when created, had a list of controls which worked. Which was the reason why we had no problems when it was created. It was when those controls were removed that the problems started. The controls were removed starting in 2000. The problems started shortly thereafter.

And about the bailout. I know some people are happy it failed. I am not one of them. The economy lost 1.2 trillion dollars today. Which was paid for by everyone who had retirement accounts. Another thing that happened is the halting of all loans. Some of which could cause a business to fail, which leads to more people out of jobs. Which leads to families having less money to spend, which leads to less money getting spent at business, which leads to more businesses closing, and so on and so on.

What bothers me the most is how it failed. It seems, at least to me, that there were republicans who voted against it because their feelings got hurt. I thought that they grew up out of that when they left high school. Unfortunately their feelings cost the country 1.2 trillion dollars. There is one economist that says that it could take up to 8 years for us to recover.

Oh, and tell that family of 4 that just lost their home that you are happy that what could help them failed.

Wyrmking

[wyrmking]

Don't think that I want the bailout to happen as it stands, but there does need to be help. I just wish that it does not get passed or shot down due to ignorance or because their "feelings got hurt." I am for helping shore up the economy but not for shoring up some executive's bank account after they made bad decisions.

Wyrmking

[Fel]

I've been seeing some scuttlebutt in the blogrolls about a new no-bailout plan being proffered that unties mortgages to the fair market value rule, allowing them to be valued at their face value and not their "fair market value." I think that would actually do the trick since it fixes the PROBLEM and not the SYMPTOM.

Now that one should be passed, if it does indeed come to pass.

[dwightkbrowncts]

To me it looks like the whole world is in a recession. That no where you go you will be affected by it.

[dellstart]

To me it looks like the whole world is in a recession. That no where you go you will be affected by it.

Yes , welcome to the Global economy!

[wyrmking]

There are more reasons that the rescue (I refuse to refer to it as a "bailout" as that evokes fear and worry which we do not need more of) needs to happen. I know the Republicans who voted against it are trying to take the high road but unfortunately that is sending everyone else down the low road to bankruptcy, business failings, homelessness, and unemployment. Wall Street can crash for all I care. But unfortunately Wall Street is tied to the credit market which is MUCH MUCH more important than most know.

The current situation of the economy has caused the credit market to freeze. Which is much worse than the Dow Jones dropping 1,000 pts in a day. The lack of credit will cause students to have to leave school as they won't be able to extend their student loans. There won't be car loans so that person who needs a new car to get to work won't be able to get it so no money for food or rent. Many businesses rely on short term loans to pay for utilities, to pay salaries, to pay for invoices. The damage to the economy gets worse and will take longer and longer to recover the longer the rescue does not get passed.

AT&T has announced it is having problems getting the loans it needs. If AT&T goes down, I guarantee that the country will feel it as they cover most of America and even runs some of the data farms that China uses. I am sure that a lot of bank traffic uses the lines and switching stations that ATT runs. I wonder how well people will like it when they can't call, can't email, or can't use the internet.

Just remember that Wall Street is only part of it. Both Democrats and Repbulican senators who voted to pass the bill stated that the rescue needs to start from the bottom and go up. Meaning that it should go for the home owners first and then on up, with Wall Street being last. Both Presidential Canidates agree. Remember that the average person on the street is going to feel it more than the CEO on Wall Street when the economy goes south.

Wyrmking

[Mad Monk]

$700 billion needed to kickstart the economy? If they gave each US citizen half a million dollars (thats about right I think), That would also enable people to buy their cars / finish college / buy a reasonable house and get the money flowing again.

Oh, I forgot, that is too simple a solution, besides with the inefficiency of the state, by the time the money comes to the individual, there would only be half a dollar left.

[Lochar]

According to the latest census, the population of the US is 30,5302,000. THat works out to more like 23 million a person.