Posted on 09/20/2008 11:41:57 PM PDT by KingJaja
THE US Treasury’s $700 billion (£380 billion) plan to bail out the banks could undermine the dollar, economists warn.
The plan, details of which were unveiled yesterday, will seek congressional approval to raise the total amount the US government can borrow from $10.6 trillion to $11.3 trillion.
It also gives Hank Paulson, the US Treasury secretary, immunity from legal challenge under the plan. The US Treasury will buy mortgage-related securities “from any financial institution having its headquarters in the United States”, draft legislation said. Securities issued before September 17 will be eligible for inclusion.
Word of the proposals created a mood of euphoria in financial markets on Friday. But analysts warned of the risks.
Tim Bond of Barclays Capital, while conceding that the rescue was necessary to avoid the risk of depression, said: “The volume of fresh government borrowing and the fast expansion of the Fed’s balance sheet are both negatives for the dollar, carrying a potential risk of increased inflation.”
(Excerpt) Read more at business.timesonline.co.uk ...
Increased Inflation vrs. Depression.
Pick your poison. The government bailout is insane.
I think we’re in between a rock and a hard place. Thank you DemocRATS!
You don't have much time to act regarding Paulson's Bailout Plan.
This plan, as it is written, will give Hank Paulson UNLIMITED & UNCHECKED FINANCIAL POWER OVER THE UNITED STATES OF AMERICA!
That's right. President Bush won't be able to stop him; Nor Pelosi or Reid. He will be able to do as he pleases with NO OVERSIGHT! Do you really think this 700 BILLION number is all? That is a sanitized number so it won't scare the masses.
The true number is over a TRILLION and that's probably a floor - the ceiling could be upwards of double that...two TRILLION, or more? Let me write out just one billion (like a check) so you guys can truly appreciate this number.
$1,000,000,000,000
Why is there no outcry on FreeRepublic over this??! This is going to choke the next generations with impossible debt burden.
I see that many here are disturbed and you are complaining about it on these threads - but you must contact the people that can possibly save us from this nightmare bailout scheme RIGHT NOW!
You know, we FReepers fought hard on the immigration debacle and we WON. People here were hopping mad and weren't about to let The Gov't jam that stupid legislation down our throats!
Folks, this bailout scheme will harm our country immeasurably worse.
YOU MUST ACT NOW TO SAVE OUR COUNTRY! Get on the phones, and let your congresspeople and senators know that 'We The People' vehemently object to this financial coup that is about to take place.
CONTACT YOUR REPRESENTATIVES NOW! It might be too late by Monday morning - you should be calling them NOW - and tomorrow - yes Sunday! They are going to try and ram this through before the market opens on Monday. Call all of their offices. Leave messages. Talk to your family and friends and tell them to do the same.
I don’t buy into this blame the Democrats thing.
Bush was in charge for eight years and so was Reagan. Reagan always had a democrat controlled congress, Bush had a Republican controlled congress for most of his eight years.
The Presidency is a position of responsibility, Reagan took up that responsibility and moved America in a new direction (in the economy).
Bush did not.
The phrase ‘the buck stops here’ must stand for something.
Bush is ultimately responsible, period.
You are right the rats screwed us again. Someone eariler posted what the S&L crisis of the 1980s cost us. It was not as high as many estimates. The assets the US will buy will have some value maybe more than we pay for them over time.
Are you familir with tranches? This "plan" that is being proposed will be piling the bad debt into a series of $50 billion dollar tranches. The ratings on these will be pitiful. Just how do you expect to "make money" on this sewage?
When you buy a pile of poo, it is still a pile of poo a few years from now.
Yes and that is why the US is not buying a pile poo, rather a portfolio of high risk paper. The US was forced to take over a lot of bad S&L debt in the 1980s, but it was not worthless.
BTW, I did a calculation of what a 1930s style contractions would cost the US population. It was about 10 times the high end estimates that this bailout might cost us.
Since you offered NO OTHER SOLUTION WHATSOEVER, go scratch!
I love the one comment that included the line, “The mother of all band-aids.” That was classic.
Stop spamming every thread with this.
SNIP
Ditto.
While I don’t agree with the bailout, in any form, I don’t necessarily by into the idea the money is gone.
The Gov’t is buying up these questionable assets at a steep discount and hopes to sell them later. These mortgage bundles do not, cannot contain mortgages which are ALL no good and since the failure rate of (prime) mortgages is in the area of .91% according to Forbes, the Gov’t may be able to recover part or all of this money. This is a loan and not a handout after all.
Considering all mortgages the delinquency rate is about 5% (this is not foreclosure, just delinquency) This means that fully 95% of mortgages are in compliance and performing as drawn.
http://www.chicagofed.org/publications/fedletter/cflaugust2007_241.pdf
Depending on the discount these mortgages are being bought for the government can recoup the money over time. The important thing here if they go forward as they seem they will is for the sh*theads in the Congress to not ad ONE DIME in pork to the money needed for this grandiose plan to save us all.
Well, There was regulation for FNMA and FMAC proposed and it was killed by the libs. There are procedures that are in place that allow the stopping of any legislation by the Party out of power, in this case the Dems, unless the Party IN power has a veto proof majority, which we did not.
So with that in mind how could the Republicans have rammed through the needed legislation as drafted by John McCain, many years before this debacle unfolded? How then is this in any way the fault of GWB?
Now, the president (who, unless things have changed, still has veto power) does nothing. The Republicans (who still have voices and clout, and could raise a big stink over that) do nothing. The bill goes through, armed forces are slashed, and in 2009 something big happens just when the USA is least able to do anything about it.
Whose fault is it? Sure, the Democrats brought the 'no military in America' bill. However, while they can be said to be worthy of blame, it ALSO means that the president and the opposing party were either asleep, incompetent, or in cahoots.
This is why in the whole crisis thing you are largely hearing the Democrats pointing fingers (because they like passing the buck). The reason GWB and the Republicans are not doing the same is simply because it would boomerang on them. A few people tried to stand up, but for the most part neither party knew jack when this was happening.
“The government bailout is insane”
Totally insane! They move directly from strict market discipline, to free money for all their best buddies. Buy gold, and don’t sell until it hits $10,000 per ounce, which it probably will.
Your calculation assumes that we'll just sweep everything under the rug & then things will be back to (ab)normal after the bailout. Normal being, extreme leverage, liar/ninja loans, securitization, etc.
I suggest that the economy will still contract, & without a Pavlov response from the Market, this virus will get worse & spread to Commercial Paper/Real Estate, Credit Cards, Car Loans, etc. Even worse, it will have consequences for US Gov't debt.
Some Depression era economists suggest that the reason the Gov't/Dollar survived was its inaction, not over-reaction.
Presidents execute laws.
Legislatures create them.
As Dana Perino pointed out “I would ask you to go back and look and ask Speaker Pelosi or any of the other Democrats who are pointing fingers, what specific regulation did they want that we blocked? What specific regulation did we eliminate?”
But ultimately the fault of this lies at the feet of those that loaned money they had to know could not be paid back. Houses were selling at anywhere from 6 to 11 times the buyer’s annual income. That is unsustainable at its core.
Gov’t can’t stop bad business decisions any more than it can end poverty.
If you add in the upcoming (baby boomer) unfunded Social (in)Security and Medicare payouts that are projected (and that are probably underestimated because we are living longer) the real debt figure is more like $58 Trillion and that was before the "bailout".....
“COULD?”
I think it is Quadrillion.
Quadrillion is next, then, quintillion, hexillion, heptillion, octillion, nonillion, decillion, unodecillion, duodcillion, and so on.
When it gets to a gazillion is when the she-ite really hits the fan......
We should not forget the last major US financial meltdown, the S&L Crisis, occurred during the administrations of Ronald Reagan and George Herbert Walker Bush. As in the current situation, the 80’s and 90’s debacle resulted from unsound real estate lending practices. A substantial federal bailout was required to support the financial system. This bailout contributed to high deficit spending by the federal government in the early 1990’s.
John McCain, the current Republican candidate for president was rebuked by the Senate Ethics committee for exercising poor judgment in intervening with federal regulators on behalf of the notorious Charles Keating, head of Lincoln Savings.
It is noteworthy that all of the great financial meltdowns of the last century have occurred during Republican administrations:
Panic of 1907 — Theodore Roosevelt (6th year of his presidency)
Great Depression — Herbert Hoover presided over the stock market crash of 1929, the first year of his administration. The prior two administrations (Coolidge and Harding) were Republican.
S&L Crisis 1986-1989 — Ronald Reagan and George HW Bush. Resolution Trust Corporation created in 1989, first year of the Bush administration, to bail out the S&L’s and restore confidence in the financial system.
Subprime Mortgage and Financial Meltdown of 2008 — Seventh year of the George W. Bush administration.
Republican administrations tend to believe in the working of the free market and are light on regulation of the markets. Unfortunately, unbridled speculation leads to bubbles which when popped result in widespread economic trauma. The 1929, 1989, and 2008 financial crises have resulted in significant government intervention in the markets.
Could it be the stronger oversight during Democrat administrations results in less speculative activity and therefore a smoother running economy?
I am a lifelong Republican and believer in free markets. However, the past few weeks have caused me to look back at history.
I do agree, with your final comment — Bush is ultimately responsible. He had seven years to work on the economy. In six of those years he had a Republican majority in both houses of Congress. Plus, he failed to use the veto pen to reign in Congress.
They didn't even have to actually filibuster, just say they would and the bill was dropped. It was a very frustrating time for us conservatives who wanted to see our governmental trifecta put to good use to return America to its conservative roots. Alas, it wasn't to be. I remember yelling at the TV, and here too, that we should stop rolling over and playing dead with every threat of a filibuster, that we should force their hand and make them mount a good ol’ fashioned “Mr. Smith Goes to Washington” filibuster.
You forget that the Dems were in the minority in both houses for the first time in nearly 50 years. They did not take it gracefully. Remember how they dragged their feet in giving up the offices they had occupied for so long? How they demanded that Republicans “share power”?
It's fun to blame it on Dubya, but the opposition was masterful in the use of rules, especially in the Senate, that they had spend half-a-century putting in place, for just exactly the situation they found themselves in!
Remember how before this it was unthinkable that a Party would use the filibuster to make the approval of a Supreme Court justice require sixty Senate votes? Or more recently how they jury-rigged the Senate sessions to deny Dubya the ability to make recess appointments?
Or how about even more recently, Pelosi et al heading for the hills when we desperately need energy legislation. No House Speaker had ever cut off the lights and cameras just to keep the minority from scoring political points during a recess.
The list goes on and on. They became the jilted lover who dug in and yelled that if they couldn't have the girl, no one would, and threatened to shoot her.
The Republicans deserve a lot of the blame for where we find ourselves today, but the Democrats are the ones who started it and have kept it up for 12 years. Meanwhile, Dubya has been fighting tooth and nail to keep us free from terrorist attack and to keep us totally engaged in the WOT. He's taken everything they've thrown at him and to a large extent given better than he's taken!
True, but the value of that pile is enhanced if the animal had eaten a very valuable precious jewel! Depending on how it's handled, and that's a HUGE IF, sale of the foreclosed properties will provide some income to offset the losses.
I have little to no confidence the government will be able to set up an organization that can dispose of the properties in a way that is anything less than chaotic.
There are jewels all through the pile of poo, the trick will be finding them!
They will probably fire up the presses and print $1,000 bills again only this time in the quantity of the hundred!
Screw the bailout of the banks and stock market and those that live on credit.
the real debt figure is more like $58 Trillion and that was before the “bailout”.....
___________________________________
And we’re not finished bailing yet. Airlines can’t continue to operate without help. Travel industry will have massive layoffs. Auto companies are not going to make it without help. We haven’t seen the end of banks needing bailouts. Unemployment and inflation will go up and we’ll be paying through the nose for extended unemployment benefits to people permanently unemployed.
Hope everyone enjoys their deflated dollar pay cut so that corporations can make risky decisions and not have to declare bankruptcy. Oh, and this will be the reason they roll back the Bush tax cuts, as well. Count on it.
False.
But if the remedy (more regulation of FNMA, FMAC) was brought up by the Republicans and the bill didn’t have the necessary votes because the Rep did NOT have a filibuster proof majority, then how can the blame lie with them?
You know the president can’t approve laws on his own so why bring him into it? He did recognize the problem and he did call for action but 9it was up to the Congress to provide the action.
No offense, but you are really reaching. Research the derivatives market.
Also, where are the gov’t spending cuts that should accompany this? Where are the provisions to make loan originators more responsible (i.e. make them service the loans they write, instead of turning around and immediately selling them)?
Have Fannie & Freddie require 20% down on all new loans. Abolish the FHA. Stop the Ponzi scheme.
All we are doing with this is propping up and encouraging non-conventional lending practices.
Bush was born as a “little rich kid” and knows nothing about real work. All that he has been taught is to throw money at things when they do not work. Remember the Bush brothers bailout? But Bush is not the only one to blame here, it is both the Democratic party and the Republican party, for this has been going on for years.
That’s to much for me to wrap my brain around or even fathom it.
All I am saying is that if the argument is that the 'Democrats had control of congress, we did not have a filibuster proof majority, and it is thus their fault' then we have a weak position unless we can articulate it very well (which would require silver tongues). After all, if there is nothing we could do, then the next question is why were you there in the first place? Again, there is a reason the GOP has not shafted this crisis up the collective a$$e$ of Democrats ....simply because it would take just a simple sneeze to shower both parties with crap. This is why most political participants are just shooting off the odd barb here and there, but nothing remotely resembling a full-on attack (although you can be sure the Democrats are preparing a full blast as we speak).
BTW, Newt Gingrich wrote an interesting piece on the whole thing.
Anyways, I am not trying to shift blame or assign blame. Why? Simply because this entire mess cannot be ascribed to one party ....unless the other party was useless. Sure, they had filibuster proof majorities. I understand that. However, are you sure 'we could do nothing' is the best answer? Even if you could do nothing, why did you not at least all shout from the mountain top? Apart from a few voices, the halls and walkways could transmit the sound from dropping a pin from the Beltway all the way to North Dakota! Unless a 'filibuster proof majority' also prevents people from making a big stink about something (if a big stink had been raised, the Democrats would currently be dead in the water).
Anyways, McCain still has the advantage over Obama, and Obama is still mucking up like a waddling duck trying to run at 180MPH. Unless we mess up we can still get the election. That is the good news.
Yep. Let's hope that we don't need funds for something that is actually Constitutional, like funding the military to protect the country from foreign invasion.
In regard to the auto industry, I heard last week that Pelosi promised $50 billion to the big three. What chaps me about this is all three are doing fine in their overseas operations worldwide, just not here. Toyota, Honda, Mercedes, etc, all seem to be able to build cars in the USA just fine. Why not the big three? Three little letters, U.A.W.
We've got the mother of all BOHICA moments coming. I hope there's enough Vaseline to go around......
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