Posted on 09/25/2008 12:47:02 AM PDT by FocusNexus
The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses. Before long, these securities became so unreliable that they were not being bought or sold. Investment banks such as Bear Stearns and Lehman Brothers found themselves saddled with large amounts of assets they could not sell. They ran out of the money needed to meet their immediate obligations. And they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up, and the gears of the American financial system began grinding to a halt.
George is either very misinformed or telling a whopper of a lie on this.
This problem, while big, is not nearly big enough to bring our entire economy down, as well as the economies of the world.
The behemoth problem is the Credit Default Swap bets that were placed on the bond insurance where the bond was backed by worthless trash (mortgage, credit card, auto, and student loan).
When the housing bubble burst, these CDS bets went bad and the investment banks were faced with payoffs larger than all of their assets combined.
Tell the truth George. Our nation is facing a very difficult time and we need a President with the courage to tell it straight. I voted for you twice. Do what is right!
NO BAIL OUT!
We cannot have a sound economy while the house of CarDS is standing. It will either be taken down or come crashing down. To prop it up with $700B will not only be throwing good money after bad, it will also prevent the market from healing itself.
People don't want to lend money if they'll have to fight other creditors to get it back, or if they're not really sure what the borrower's assets are really worth. Crashing the house of CarDS would fix those problems. Doing so while minimizing economic chaos will certainly be difficult, but given the alternative of an uncontrolled collapse (which is guaranteed to happen if the house of CarDS isn't brought down soon), a controlled demolition would seem to be the only hope for this country.
Not one word — not one — about the role of character and responsibility (or lack thereof) in creating this mess.
No, W says we just “got sick”. Damn microbes! So teeny you can’t even see ‘em and look what happened!
Or maybe “fell victim to a financial hurricane” would be a better analogy. We was just minding our own bizness in our house of cards down by the beach when the thing blew in!
Ladies and gentlemen, there is no more conservatism in the GOP. We have met the socialists, and they is us!
“I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street. “
No, George, I’m afraid you don’t even begin to understand.
I think that I agree with you to a certain point. We both agree that the CDS market is what has Washington terrified right now. It's also plenty big enough to destroy our economy, and the economies of the world.
Your other point is that the $700 billion pipe could be used on mortgage-backed securities that have yet to be sold to the bond market, in an effort to soften the blow that we'll definitely be taking with the CDS market.
Is this correct?
If so, here is the reason that I am against the bailout:
I read the proposed bill text as meaning that the $700 billion is more of a cap "at any one time". Therefore, I believe that Paulson's intent is to buy up $700 billion of toxic debt, divide it into $50 billion dollar tranches, and sell it to the bond market. He will then be free to buy another $700 billion of debt, rinse, and repeat - to the tune of trillions upon trillions of dollars (all mortgage, credit card, auto, and student loan bad debt).
The bond market will create bonds from each tranche and these bonds will be rated 'Aaa' since they came from the U.S. government.
The bonds will be sold, bond insurance can be taken out, and CDS bets can and will be placed on the bond, just like we have now.
The difference is that the backer of the bonds will no longer be mortgages, etc., but the American taxpayer.
It will go from really bad right now, to beyond catastrophic later if this bailout is allowed to proceed.
Thoughts?
Is this correct?
No, my point is that the bailout will be used to try to prevent the house of CarDS from descending at all until it collapses totally. The collapse of the house of CarDS will be a good thing. Preventing it is a bad thing.
I don't understand how bailout money could stop the current house of CarDS from collapsing?
The only way that I can think of would be to buy the mortgage-backed securities that a bond represents in order to improve the cash flow so that the bond doesn't default.
If this is indeed the plan of attack then it is an extremely dangerous one. Identifying the securities that are endangering the bonds will be almost impossible since nobody really knows the value that they should be at, due to 'Mark to Market' rules.
If Paulson spent too little on a particular mortgage then it could damage the cash flow that services the associated bond, which could trigger a bond default event, which would trigger the nasty house of CarDS.
Kind of like tip-toeing through a minefield.
4am bump! ;-)
This was the paragraph that sent the "BS" flag flying high - he didn't even attempt to make it clear that reduced lending standards led to this, and the lending standards were reduced due to government intervention and coercion.
It's laid out pretty well in this post: HERE
Be sure to read Ann Coulter's article at the top of that thread. Democrats started this mess, though I'm certain that Republicans are a willing accomplice. Basically, the housing and mortgage runup were a house of cards ready to fall down.
Right out of the Fabian handbook: Hannibal ad portem.
“Not one word — not one — about the role of character and responsibility (or lack thereof) in creating this mess.”
A Bush family tradition. They avoid public confrontations as much as possible up front. I do hope and pray that the FBI isn’t being micro-managed in its investigation.
“No, George, I’m afraid you don’t even begin to understand.”
Frustration? I’m absolutely LIVID.
And how convenient that he left out the negligence and excesses of Washington, D.C.
This is a failure of of both parties—let them pay for it. Cut all of their damn salaries and budgets in half. Let them try to figure out how they’re going to get by and make due.
No more pork. No more taxpayer provided play money for NPR, the UN, La Raza or any other damn group that thinks they somehow have a right to our hard-earned money. Billions to Africa? Screw that.
Has ANYONE heard a word about what sacrifices the liars, cheats and thieves in DC are going to make for the role they’ve played in this boondoggle?
Hell no. Its just you and I—those who work hard and try to comply with both the letter and spirit of the law who get screwed. Again and again.
I’m sick of ALL of these clowns looking at my wallet like its their personal playground for whatever their favorite cause is.
I can’t imagine Reagan doing this - never.
The Australian regulators did the same thing - banned short selling.
Very anti-free market.
Was there a Socialist revolution and no one told me?
Yeah, it started in 1933.....commonly referred to as "the New Deal".....
Oh,and let's not forget that foreign investors were involved in this,he said,not just the banks and brokerages.OK,I don't give a shit.They were involved and happy while mortgages were making them TONS of money,but they're not happy when the market turns.BIG F'n DEAL.I'm not happy when I lose money either.
It was much better than I expected.
It was only HORRIBLE.
He spoke with about as much passion and sincerity as a first generation computer generated answering machine. And what really gave me confidence is the fact that HE LOOKED TERRIFIED!
Why did he look so terrified? Crap, the man has probably stared down a thousand would be assassins and always looked calm, but this time he looked like a kidnap victim who has a gun to his head and was saying something he doesn't believe at all.
After watching him, however, I'm convinced that something needs to be done soon or something terrible is going to happen. In that sense, I suppose he was somewhat convincing.
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