Posted on 09/24/2008 10:34:43 AM PDT by HAL9000
Breaking News - Republican officials say the Bush administration will accept executive-pay curbs as part of the bailout. President Bush plans to address the nation Wednesday at 9:01 p.m. EDT on the financial crisis.
You know I thought that Bush’s explanation of this was kind of on a kindergarten level. I would not put to much stock in his exact words. He is not the guy that understands it all. I think as you say. It was made a whole lot more clear by Ben, and Paulson...What they really are going to do. As you know they made it very clear that they don’t want to buy these things at anywhere near fire sale prices. And they are going to loose value- Not gain.
Found this at Red State about Harry Reid and thought you would enjoy. Here’s the response from the McCain campaign, by the way:
“Yesterday, Harry Reid said that consensus couldn’t be achieved without John McCain’s leadership. John stepped up and is providing that leadership. Now Senator Reid seems to have changed his mind for reasons we’ll let him explain. But what he should understand is that this isn’t about Harry Reid or John McCain or Barack Obama. It’s about the American people and, in the words of Warren Buffet, the financial Pearl Harbor they’re facing. John’s committed to doing his part to help avert that calamity. We hope Senator Reid is too.”
Harry Reid is a duffus!
The values will continue to drop because of the shortage of people willing to lend money. I don’t think it will get back to what it was but you might recover if you can afford to hold on until this comes to an end.
We just hope that our prayers for people that aren’t as lucky as us are answered.
Exactly. And the huge increase in the debt that this bailout will cause has a good chance of causing a bond market dislocation.
Here is an explanation of what the treasury and bond market is likely to do if this bailout passes. I wrote it on another board earlier today:
The more we borrow, the more likely that we will default on our debt, and the more we water down our currency making the existing yields on the bonds too little to be worth lending for in a currency that’s losing value.
So the lenders (foreigners, mostly) say “no more” and we have to raise the rates we pay them in order to attract them back.
This rise in rates means that an increasing portion of our budget is spent on debt service and not on more productive things.
It also means that now that the foreigners can get a higher rate of interest on the gov’t debt they buy, the market for existing lower-rate non-gov’t and gov’t debt will drop, tanking bond prices across the board.
New bond issuers will have to raise the rates they pay their lenders to attract interest in their bonds, raising debt service costs for them too.
This will spread to mortgages as well. Mortgage rates will rise, causing an increase in the rates ARM and Option ARM holders will have to pay, forcing even more of them into foreclosure and making those assets that we issued that debt to buy even more worthless.
As interest rates rise, the economy goes into the toilet because the increased cost of debt service takes money away from everything else.
And the dollar will be worth about as much as toilet paper with green ink and dead guys faces printed on it.
So what it really boils down to is that we’re completely screwed either way, whether this bailout goes in or not.
We have a choice of death by deflation, or death by inflation and currency collapse.
Game over.
LQ
No disagreement here. The wrong plan will only make things worse.
There’s really only two clear ways to solve this:
1. A simple, no-frills plan unladen with regulations or pork that strikes at the heart of the problem, as Bush proposed tonight.
2. Take Newt’s suggestion and grow our way out of this: repeal the Sarbanes-Oxley Act, reduce caps gain taxes to zero, etc.
Your plan would be a common sense approach. Too bad that’s not what’s on the table. This bailout scam, and I don’t believe that’s too strong of a term, essentially makes mortgage lenders well. The government will not be buying these securities at market price, but at face value.
The underlying problem here is a bunch of garbage securities that no rational investor would touch with a ten foot pole unless they could purchase them at a steep discount. The owners of the garbage debt don’t want to accept the market value of the securities, and investors aren’t going to pay a premium for it. So nothing moves.
As I understand it from the hearings. The plan here is buy these things at “Hold to Maturity” value. OK well that is pretty much saying at the original value. But lets say that they discount them some.
The next thing they are going to do is re-sell them to there buddies at a discount from there. This clears up more funds to buy more garbage. And every time they do this then they loose money. And I think the plan is to keep doing this until they max out the taxpayer loan. So basically they are going to loose almost all of the money. Of course they are not going to tell you that. And in the end they can just say well “We thought we were going to make money”, and then what can you do? Nice bankers game. Tax payer = sucker!
Yes they were, and now they'll steal more to save the very people that ran their countries into the ground.
The government? These corrupt idiots were in charge of regulating and overseeing this disaster...
Ya got Barny Frank up there right now saying, "If you don't hand over the money, you won't be able to buy that new car or furniture".
Good Grief!
We are witnessing the biggest expansion of government in American history.
I think you have a typo. It is "0" not "O"
A majority of the bad housing debt is actually limited to just a few states I believe.
Mark to market accounting requirements for mortgage backed securities means this paper is going to continue to decline.
Jim Cramer (I know, he is a big Dem) points out this is the issue, and if a floor can be put under the mortgage backed securities, the free market will rescue itself.
Cramer supports the bailout, but it may be simpler to suspend the mark to market requirements on distressed securities, as a recent Forbes editorial recommended.
If the government could be trusted, an RTC type organization would work perfectly. But you know they will pork up this bill with a bunch of give away programs (I'm sure My Boy Lollipop Barney Fa ... rank will add some special mortgage program for the transgendered to the bill).
My bigger fear is do nothing, let the financial markets continue to decline, and then have people demand even more socialism.
This is 1929 in live slow motion. We have the ability to stop this thing if we want. Realize, if it is not stopped, and economic uncertainty continues, there is strong chance Obama will come into office with a mandate for an aggressive socialist program.
My stomach turns at the prospect of Obama, bought a paid for by Fannie and Freddie, becoming President because of their utter incompetence. This should not happen in America.
I'm not sure what the answer is, but the market is no longer rational. Mortgage backed securities comprised of less than 20% subprime loans are trading at less than 20 cents on the dollar, and the market is not correcting for this. Merrill Lynch sold itself out because of fear of becoming a victim of short selling reverse "pump and dump".
I do know this. If you have money, now is the time to shop the foreclosure firesales for good rental property. I think that is the biggest ROI investment right now.
Bush is proposing the biggest expansion of government in American history.
The problem is is that they CAN'T max out the taxpayer loan as there is no cap on it.
As the original proposal was written, the 700 Billion is only a revolving credit limit. Paulson (aka "Skeletor") can hold a maximum 700B of those bad securities at any one time. But he can repeatedly buy 700B of them and sell them for 100B for a loss of 600B any number of times, as the original 3 page bailout proposal was written. Unless they've added something new, there is no cap on the losses!
That is just one of the many reasons I'm opposed to this whole "plan".
LQ
newnhdad,I hate to say it but people can not afford the heating bills this winter.I work in a thrift store and it sometimes makes me cry.We can hang onto our 2nd property and are OK.It’s kinda like nobody cares and we are all hanging in a noose of their orgy for money.They didn’t play fair and said F you.
That's a ginormous "if" you have there.
WaMu will not be the only bank taking the dirt nap....it will be a waterfall of banks...can the FDIC handle this???
Uncle Sam IS the FDIC.
And don't forget the childrens ... no bailout will make all the childrens cry
Why cant we try a plan that first removes Capital Gains taxes, Sarbanes Oxley, Elimination of Sub Primes, and relaxation on certain accounting rules and use a smaller fund of lets say 100B to short term loans to companies that need them? Try it for 3 months and see what happens.
Why are they going straight to the socialist solution?
NO BAILOUT FOR WALL STREET
NO BAILOUT FOR FORD
NO BAILOUT FOR GENERAL MOTORS
NO BAILOUT FOR STUDENT LOANS
NO BAILOUT FOR CAR LOANS
NO BAILOUT PERIOD
Isn't that the truth. I cracked up when I read this.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.