Why You Should Hate the Treasury Bailout Proposal (1 Viewer)

[wamland]

Maybe I don;t understand, but what is that going to do right now?
I mean the "crisis" seems to be that credit is drying up right now and if something isn't done soon then we are looking at a serious economic recession/depression.
So if you expand insurance and apply right now, isn;t that what the Administration's plan is without the idea of forcing insurance on down the line?

I'm not sure myself and it looks like not much has been leaked. I don't know if they are trying to create some sort of incentive for banks to gobble each other up with an insurance to back up their acquisitions.

 

[dapperdan]

Listening to C-Span on the way home I heard the house Republicans talking about their plan. I haven't found anything on line yet but it looks like they want an insurance system that is already partially in place expanded to all the industries. They said that it should be paid for by wall street.
I would love to hear the specifics of this because it sounds like something I could get behind. I have heard rumblings that they are trying to throw in some tax breaks for big business and a repeal of the estate tax along with it. Sounds like if they can leave that garbage out then they may have something.

I think if McCain can pull off something like this where it doesn't cost the taxpayers any money then he will have won the election. I see this vote being as important as the Iraq War vote. That sank Clinton and this can make or break either of the candidates.

I honestly cannot believe that the Republicans are serious about their proposal. The primary issue facing the system right now is not mortgage insurance. This is simply an idiotic proposal. I've got to broaden my vocabulary, the only descriptive words that are coming into my head right now are idiots and idiotic. I've got to believe that they proposed this idea as a stall tactic so that McCain can be seen as riding to the rescue, that's all I can figure, because the proposal itself is just laughably stupid.

The Republicans are playing with fire right now.

 

[Inkspot47]

What we need is to quit screwing around and make the positions extremely well paid. And it shouldn't fall under gov't spending, but rather investment.

They are going to cap the CEO's pay. Are you saying we should uncap politicians pay?

 

[wamland]

I honestly cannot believe that the Republicans are serious about their proposal. The primary issue facing the system right now is not mortgage insurance. This is simply an idiotic proposal. I've got to broaden my vocabulary, the only descriptive words that are coming into my head right now are idiots and idiotic. I've got to believe that they proposed this idea as a stall tactic so that McCain can be seen as riding to the rescue, that's all I can figure, because the proposal itself is just laughably stupid.

You may ne right and I have no idea of the specifics of the proposal. The replay of the house republicans press donference is coming up at 11P. so I will try and listen more closely.

http://www.c-span.org/Watch/C-SPAN_wm.aspx

 

[dapperdan]

Maybe I don;t understand, but what is that going to do right now?
I mean the "crisis" seems to be that credit is drying up right now and if something isn't done soon then we are looking at a serious economic recession/depression.
So if you expand insurance and apply right now, isn;t that what the Administration's plan is without the idea of forcing insurance on down the line?

Jim, you've got it right.

There are lots of issues. Insurance is an issue. But it's definitely not THE issue. THE issue is getting money back into the credit system to unjam the credit markets, especially commercial paper. That is THE issue. The government needs to begin making direct purchases of these illiquid assets to get the money flowing through the system again. Get cash back in the hands of banks, with the understanding that the banks are going to loan the money, not horde it. There is a lot of hording going on right now.

 

[UK SAINTS]

Jim, you've got it right.

There are lots of issues. Insurance is an issue. But it's definitely not THE issue. THE issue is getting money back into the credit system to unjam the credit markets, especially commercial paper. That is THE issue. The government needs to begin making direct purchases of these illiquid assets to get the money flowing through the system again. Get cash back in the hands of banks, with the understanding that the banks are going to loan the money, not horde it. There is a lot of hording going on right now.

Loan the money to whom? The same people/businesses that can't pay their existing loans?

And why the government (taxpayers)?

If this is such a good deal (investment), why not let those willing risk-takers take the opportunity?

Although, I do agree that the Republican proposal (if there is one) doesn't seem to make sense.....

 

[bclemms]

Jim, you've got it right.

There are lots of issues. Insurance is an issue. But it's definitely not THE issue. THE issue is getting money back into the credit system to unjam the credit markets, especially commercial paper. That is THE issue. The government needs to begin making direct purchases of these illiquid assets to get the money flowing through the system again. Get cash back in the hands of banks, with the understanding that the banks are going to loan the money, not horde it. There is a lot of hording going on right now.

There was also a lot of hording going on when the FED kept pumping money into the system before. There was also a lot of hording going on when the slashed the discount rate.

I still haven't read one solution to the inflation problems this will likely cause. People that haven't gone belly up on their mortgage and are scraping by can't afford to pay more money at the pumps, grocery store and heating bills. So when these people lose their home because of this bill do we bail the banks out again in 6 months?

What happens when people quit spending because we put more pressure on them? It will have to impact the real economy.

I just wish we get could get these questions from the Congress to Paulson and get some answers, not that they would tell the truth or answer it directly anyway but at least the real questions would get asked.

 

[dapperdan]

Loan the money to whom? The same people/businesses that can't pay their existing loans?

And why the government (taxpayers)?

If this is such a good deal (investment), why not let those willing risk-takers take the opportunity?

Although, I do agree that the Republican proposal (if there is one) doesn't seem to make sense.....

Uh, where in my post did I mention the government loaning the money to anyone?

They're not loaning money. They're purchasing assets.

 

[jpcdolphan]

...


I still haven't read one solution to the inflation problems this will likely cause. People that haven't gone belly up on their mortgage and are scraping by can't afford to pay more money at the pumps, grocery store and heating bills. So when these people lose their home because of this bill do we bail the banks out again in 6 months?

...

Unfortunately, the only practical way to curb inflation (IMHO) is through higher interest rates. That would bring some pain with it, though.

 

[dapperdan]

There was also a lot of hording going on when the FED kept pumping money into the system before. There was also a lot of hording going on when the slashed the discount rate.

I still haven't read one solution to the inflation problems this will likely cause. People that haven't gone belly up on their mortgage and are scraping by can't afford to pay more money at the pumps, grocery store and heating bills. So when these people lose their home because of this bill do we bail the banks out again in 6 months?

What happens when people quit spending because we put more pressure on them? It will have to impact the real economy.

I just wish we get could get these questions from the Congress to Paulson and get some answers, not that they would tell the truth or answer it directly anyway but at least the real questions would get asked.

bc, there was not nearly the level of bank hording of cash that is occurring right now. All you have to do is look at the jump in interest rates in the commerical paper market.

I will speculate as to why...The timing of this crisis, imo, directly relates to the Merrill Lynch sale of CDOs and CDS notes when Merrill was cleaning up their balance sheet to be sold. They dumped those assets as anywhere from $0.22 to $0.05 on the dollar, the best analysis I've seen had it at $0.05 in real money. But the rationale for the sale was that they had to get those assets off the books immediately, because no one would even consider buying them out with those assets on the books. Once they dumped the assets, they opened the books, and the deal was done. But in establishing a $0.22 price, for example, even if it was sold under duress/ fire sale, it doesn't really matter. It's forcing other banks to write down their CDOs, and the banks are flat out of money. The horse is out of the barn. This is one time that I would like to see accounting regulations temporarily suspended/relaxed.

If you could get the government to step in to make a large purchase of CDOs, you could essentially reset the maket price and avoid these huge hits to banking reserves. Then we could see lending begin to flow again.

Inflation, btw, is not the problem. We've got a massive deflationary black hole that's staring us right in the face.

 

[JimEverett]

Unfortunately, the only practical way to curb inflation (IMHO) is through higher interest rates. That would bring some pain with it, though.

That is not the only way, or even the most practical way.
One easy way would be to force China to stop pegging their currency to the dollar at artifical levels. Float the Chinese currency and suddenly the U.S. becomes a little more attractive to invest in, China a little less, and significantly fewer dollars leave the country for China.

 

[JimEverett]

Inflation, btw, is not the problem. We've got a massive deflationary black hole that's staring us right in the face.

That is my thought as well.
If we are faced with a credit crunch then it is deflation that is the potential problem.
If the idea is that by easing credit you will create inflation, I don;t buy it at all, but even if there is a chance it seems like an easy chance to take.

 

[jpcdolphan]

That is not the only way, or even the most practical way.
One easy way would be to force China to stop pegging their currency to the dollar at artifical levels. Float the Chinese currency and suddenly the U.S. becomes a little more attractive to invest in, China a little less, and significantly fewer dollars leave the country for China.

I don't think the yuan is pegged to the dollar anymore.

 

[UK SAINTS]

Uh, where in my post did I mention the government loaning the money to anyone?

They're not loaning money. They're purchasing assets.

Not the government loaning the money.

You said that there would be an understanding that the banks would loan the money. I'm just asking to whom the banks would loan the money?

Didn't the government "persuading" the banks and mortgage companies to loan to questionable people cause this problem in the first place?

 

[wamland]

Well after watching the press conference again, it looks like i should have known better. The republican plan looks flimsy at best and they have no specifics as to any cash infusion. Then Barney Frank had a conference where he had a copy of the republican plan that consisted of one piece of paper. Also stating that Paulson had already rejected the idea of insurance.
Then come to find out that the congressional republicans refused to come to the bi-partisan meeting of the leaders of congress. So much for rolling up the sleeves etc.

You may be right about drumming up a fake split between the party's for McCain to swoop in and save the day. If it is true, then that is an even newer low. It is also a high possibility that republicans can use this in November to tell their constituents that they proposed a plan to save wall street without it costing the taxpayers a penny and the democrats shot them down. I can see the ads already.

Tomorrow should be interesting to say the least.
Accounting as sport.

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/25/AR2008092500268.html?hpid=topnews