Economic Bailout

[Aargh]

Yes - so how will that happen?

There are several trillion dollars worth of mortgages that people can't pay.

Financial institutions are relying on that money to pay their bills and to pay off loans they owe to other financial institutions. That money isn't coming in, so how do all these financial institutions stay in business? They take every penny that gets deposited and use it to pay their obligations. That money they are using to pay their obligations is money that's normally available for them to borrow to people like you and me for car loans, house loans, credit cards, etc.

Want to buy a car? Sorry, pay cash or don't buy one. There's no money available for a loan. Then Detroit lays off massive numbers of workers, which reduces the amount of money going into financial institutions through paychecks and makes it harder to get a loan. Want to buy a house? Pay cash. There's no money available to borrow. The construction industry tanks, which takes even more income out of the stream and makes it still harder to borrow money.

You also have members of Congress saying the US government will make money on this transaction - maybe 2.1 TRILLION $$ !!! If that is the case, we don't need the bailout.

There is nothing in the private sector that can put up the money and wait for something to happen. Do you actually believe that there's someting worth 3 times as much as what it is selling for and no one will buy it? There are only 2 explanations possible for that. Either 1) it's not worth the asking price, or 2) Absolutely no one and no combination of groups that have the money to buy it.

The financial institutions holding these mortgages have bills and loans they have to pay NOW. If those loans aren't paid, the financial institution declares bankruptcy. Then guess what happens to the the people who don't receive the payments on the loans that are due? They can't pay their bills and the loans they have coming due.

[1979Shocker]

Golden parachute for Washington Mutual CEO

Washington Mutual's new CEO Alan Fishman -- who had been on the job a measly 17 days -- was paid nearly $20 million in the last month.

That includes a $7.5 million bonus when he was hired Sept. 8. And it includes a mind-blowing $11.6 million cash severance now that the company has gone under. That's on top of his base salary -- a cool $1 million a year. Plus, he was eligible for annual bonuses worth up to 365 percent of his base pay.

[ABC]

If these dire scenarios are true, then why are analysts and Members of Congress thinking the Govt will make a 200% "profit" on this bailout.

I'm not buying it.

Are people getting loans today? Yes, they are.

[Ixiah]

A nice little breakdown of the recent and planned expenditures per Reuters:

http://news.cnet.com/8301-13578_3-10051790-38.html

The spending spree will be about 1.8 trillion or $17,000 + per household in the USA.

I know there are a few Ron Paul supporters here - below is a statement he put out after the speech by president Bush.

http://www.campaignforliberty.com/blog/?p=616

[SB Shock]

The spending spree will be about 1.8 trillion or $17,000 + per household in the USA.

If the government send each household a $17,000 bill next week with instructions to either pay it in a lump sum or per a payment plan for the next 10 years - I bet this would never happen again.

[RoyalShock]

I know there are a few Ron Paul supporters here - below is a statement he put out after the speech by president Bush.

http://www.campaignforliberty.com/blog/?p=616

Check page 2 of this topic.

But glad to see someone else visits the CFL site. :good:

[BostonWu]

You also have members of Congress saying the US government will make money on this transaction - maybe 2.1 TRILLION $$ !!! If that is the case, we don't need the bailout.

There is nothing in the private sector that can put up the money and wait for something to happen. Do you actually believe that there's someting worth 3 times as much as what it is selling for and no one will buy it? There are only 2 explanations possible for that. Either 1) it's not worth the asking price, or 2) Absolutely no one and no combination of groups that have the money to buy it.

Other than Warren Buffet you are correct.

You bring up a lot of valid points. :yes:

[ABC]

There is a lot of money in the private sector to do this. And I repeat a fundamental concern of mine. Why the hurry? Where's the details?

So, only the government can get 200% return on its money, not the private sector? That's not believable.

"We need $700 billion tomorrow. Trust us."

http://www.nysun.com/editorials/the-credit-crisis/86697/

"The Federal Reserve's September 18 report on the Flow of Funds reports that $1.4 trillion worth of those money market funds shares are in the hands of households and non-profit organizations and that households and nonprofits hold another $5.9 trillion in time and savings deposits. The Fed reports show further that these figures have soared in the past few years; back at the end of 2004, households and non-profits held just $904 billion in money market fund shares, and about $4.5 trillion in time and savings deposits.

Microsoft is sitting on $25 billion of cash, debt free. General Electric has $3 billion on hand for acquisitions; its chief executive was on CNBC yesterday boasting about how much liquidity GE has. Warren Buffett, having just invested $5 billion in Goldman Sachs, tells the Wall Street Journal, "I still have some money left." "

[Ixiah]

This idea that the government might make money on the bailout reminds me a sales pitch during the Iraq war. Remember them saying that the Iraq oil revenue would pay for the war??

[SB Shock]

This idea that the government might make money on the bailout reminds me a sales pitch during the Iraq war. Remember them saying that the Iraq oil revenue would pay for the war??

Actually it was Iraq oil revenue would be available quickly for reconstruction of the country. That prediction like any politician didn't come to pass as quickly estimated. It not until this year that Iraq now has excessive oil revenue ($80 Billion). No wonder things are settling down there.

[SB Shock]

If these dire scenarios are true, then why are analysts and Members of Congress thinking the Govt will make a 200% "profit" on this bailout.

I'm not buying it.

Are people getting loans today? Yes, they are.

This guy wasn't buying it either.

http://pajamasmedia.com/blog/who-are-we-bailing-out-and-why/

taken from CNN:

In a closed-door session with House Republicans Sunday evening, Minority Leader John A. Boehner called the $700 billion financial rescue deal a “crap sandwich” — then said he plans to vote for it.

Thanks for standing up for your principles dude. I hope your not reelected.

[ABC]

http://blogs.abcnews.com/politicalradar/2008/09/un-american-pla.html

Newt Gingrich:

"You have the former Chairman of Goldman Sachs asking for 700 billion dollars, and in his initial request, asking for it in such an un-American way that I think he should have resigned," said Gingrich. "I think Paulson has terminally misunderstood the nature of the American system. Not just no review, no judicial review, no congressional accountability. Give me 700 billion dollars, 700 BILLION dollars! 'I'll be glad to spend it for you.' That's a centralization of power that is totally un-American."

"Gingrich, who made his remarks on the "This Week with George Stephanopoulos" roundtable, conceded that he would probably vote for the plan if he were still in the U.S. House because Congress was left with little choice. "

[Aargh]

"The Federal Reserve's September 18 report on the Flow of Funds reports that $1.4 trillion worth of those money market funds shares are in the hands of households and non-profit organizations and that households and nonprofits hold another $5.9 trillion in time and savings deposits. The Fed reports show further that these figures have soared in the past few years; back at the end of 2004, households and non-profits held just $904 billion in money market fund shares, and about $4.5 trillion in time and savings deposits.

And we have the winner.

A major source of soaring household holdings was money householders got from refinancing with sub-prime mortgages. It became fashionable (and profitable) to mortgage a house to the hilt and invest the money.

As long as housing values kept climbing, it was possible to refinance every 3 years and start over with a new sub-prime loan. The financial institutions putting up the money to buy the houses claimed the amounts they had coming as assets and leveraged those assets. They borrowed more money than the amount of money they were going to get.

Eventually housing prices stopped increasing. Many people were caught without the ability to refinance or the ability to pay their adjustable rates. The financial institutions who loaned the money had borrowed money against the payments they weren't getting.

The kicker is that the same financial institutions who can't pay their bills and are facing bankruptcy are the financial institutions who already have the $5.9 trillion that households and non-profits have in savings and time deposits. They don't have it in cash. They have it in mortgages that aren't going to be repaid. The big financial institutions are overwhelmingly playing with your money, not theirs.

The government has $800 billion+ to guarantee the solvency of $5.9 trillion in deposits of homeowners and non-profits. If any of the really big financial institutions goes down, it starts a domino effect and their creditors are facing bankruptcy. If the dominoes keep falling, then that $5.9 trillion becomes $800 billion and the government is broke.

The people who control the dollars you have in the bank bet on housing prices going up. They're the same guys who bet on oil prices and drove oil prices to insane levels. They had enough dollars behind them that they were able to control the market for years. Those who didn't feel housing prices would continue going up or that oil prices were artificially inflated bet against it and lost their butts betting against the trends.

Now the people in big trouble are the survivors - and they're the ones betting with your money, not theirs.

The $700 billion is for $2.1 trillion worth of houses. Those mortgage receivables have already been written down and financial institutions take a $1.4 trillion hit with the bailout.

Let's say those houses average $500K. 1,000 houses is $500 mill. 1 million houses is $500 billion. 4 million houses is $2 trillion. Only the worst of loans leaves the government owning 4 million houses that probably can't be sold.

I'm a small government believer, but that's not the system we have. We have free enterprise for all but the most wealthy. The most wealthy have Socialism. It's kind of a reverse Robin Hood. Rob from the poor - give to the rich.

With the system we have, we have no choice but to take it in the shorts. Unless we bail out the people who control our money, we run the risk of losing everything we have in any financial institution.

We have to bail out some greedy, corrupt guys who made bad decisions, but they were gambling with our money. It was probably individual investors who were directing how their money should be invested and took on too much risk that created this mess.