Posted on 09/24/2008 11:10:00 PM PDT by Revel
Bailout Could Deepen Crisis, CBO Chief Says Asset Sales May Lead to Write-Downs, Insolvencies, Orszag Tells Congress
By Frank Ahrens Washington Post Staff Writer Thursday, September 25, 2008; D04
The director of the Congressional Budget Office said yesterday that the proposed Wall Street bailout could actually worsen the current financial crisis.
During testimony before the House Budget Committee, Peter R. Orszag -- Congress's top bookkeeper -- said the bailout could expose the way companies are stowing toxic assets on their books, leading to greater problems.
"Ironically, the intervention could even trigger additional failures of large institutions, because some institutions may be carrying troubled assets on their books at inflated values," Orszag said in his testimony. "Establishing clearer prices might reveal those institutions to be insolvent."
More.....
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/24/AR2008092402799_pf.html
(Excerpt) Read more at washingtonpost.com ...
“Who knows what kind of civil unrest we could be facing when you factor in the morality of society today.”
That’s one of my major concerns. Grandma freezing to death in her one-bedroom home this winter because her investments collapsed will not be well received.
I wouldn’t want to be the meter man going house to house turning off the juice.
Lehman was leveraged at 30:1 - investment banks have led us to this crisis and we have a former Goldman Sachs CEO (and a proven liar) that is “guiding” us out of this mess.
How does that work?
Where do you get that number of 250 billion? Fannie and Freddie mortgage debt alone is 5.1 trillion. The government already took on all of that. Whatever amount of that which goes bad- the tax payer eats. And that is just those two companies.
Instead of a run on banks, which the FDIC can manage, there will be a run on the dollar, which can only be managed by restricting the money supply, which could create a recession.
As I understand it then Fannie and Freddie were leveraged up to 80:1
And congress kept pushing them to do more.
>>I suspect that’s just a down payment on a very big problem... maybe bigger than our government can solve. <<
I have absolutely NO doubt this is bigger than our government can solve. It is very much the equivalent of spending good money to save bad, and both will be lost.
This will only exacerbate the problem. I’m beginning to understand the reality of Revelation 18:4
“One OUT that I have heard discussed, is removal or altering of the mark to market accounting rules on these assets. That rule change in and of itself would do more to save the banks than the $700 billion would.”
Very bad idea. This hiding the sausage is why the markets have no confidence in anyone now. The good institutions suffer along with the bad one. This is exactly the opposite of what needs to be done. It causes the companies to appear to be worth more than they are. That is fraud!
” the kaos following a total economic collapse in a country with 300 million people mostly living in large urban centers is difficult to even imagine. It would dwarf the hardships brought on by the collapse of 1929.
Who knows what kind of civil unrest we could be facing when you factor in the morality of society today.”
Bring on the dpression, the bailout would make it worse, and no I don’t care if the stock market totally colapses.
Because they don’t expect everyone to come and get there money back all at once. So they basically lend money invested multiple times. Go to YouTube and watch the video series titled “Money as Debt”. Then you will understand.
That explains why they can lend out depositors money.
So they basically lend money invested multiple times.
Show me how. Pretend a new bank opens today. The only deposit is 100 $1 bills. The reserve requirement is 10%, so 10 of those singles go into the vault. $90 is available to loan.
Please show how the bank can loan out more than $90. Show how it is physically or financially possible. With no more deposits. Take your time.
Go to YouTube and watch the video series titled “Money as Debt”. Then you will understand.
I watched that video. It was funny....and wrong.
....who is also reported to have earned a personal fortune of up to $5B creating the mess in the first place. I would assume a lot of the is held as stock in Goldman Sachs. I am sure we can sleep well knowing he would never let that small conflict of interest sway his decision making. My plan: Suspend mark to market, repeal Sarbanes Oxley, eliminate capital gains, put some sensible regulations in to set values on derivatives and extend FHA mortgage insurance to all mortgages classified as sub prime. That way we only pay for those that actually default. Once congress gets this done, they should return to sniffing baseball players jocks for possible steroids use.
Check out:
http://en.wikipedia.org/wiki/Fractional-reserve_banking
The section “Money Creation” basically lays out how an initial $100 deposit can pump much more than that into the financial system.
“I watched that video. It was funny....and wrong.”
Well then there is no point in my trying to convince you of anything. Carry on.
Thanks for the link. Does it explain how “for every dollar a bank has, it can lend out ten dollars”?
Seeing as I understand how it works and you obviously don't, you're right. LOL!
Orszag is a passionate Communist, not really an economist.
Derivative traders?
Here's the way the game has been played:
(1) The players make shady deals that give the illusion that they're making lots of moneyThe US economy has been looted while we weren't looking. Burn these guys. Put them in jail.(2) On the basis of these deals, they pay themselves $Millions in commissions, stock options, and bonuses
(3) They use derivatives to provide the illusion that the company is making money, to justify paying more money to the players
(4) When the illusion can no longer be maintained, they try to leave the taxpayers holding the bag. Meanwhile, the CEOs and hedge fund managers already have their bonuses and commissions stashed away in offshore accounts.
Very Good summary of that part. Off to get some things done now. I am so behind :)
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