Bailout - Yea or Nay?

[Illuminatus Primus]

If it was up to me, I'd say fuck 'em. Then I'd put that $700B into major infrastructure projects, something that'd benefit everyone, not just the fat cats.

What about the Roubini proposal?

[weemadando]

I got majorly pissed off lately listening to an interview with a shareholder in one of the firms which is tanking complaining about how they're now facing losing all their money. Yeah, because they didn't spend the past 10 years looking the other way and enjoying their nice fat dividend cheques. They can fuck off.

Sure it's not great publicity for the government to be seen telling pensioners to go hang in this manner, but the point for these people is the same as the fat cats. You can't have to both ways...

[Nephtys]

I'm pretty stunned at a lot of random 'Grr, this is money for the wall street fatcats' posts about. You know, the economy affects all of us. If propping up failing financial companies so they won't croak and continue the chain reaction of destroying more sections of the financial industry, so be it. Also note: The bailout plans aren't 700 billion immediately, they're phased, with provisions for repaying the cost once things get better.

Korvan, 'fat cats' aren't the only ones who benefit from fixing the damned economy, you should well know. I can't see how building roads and bridges is going to exactly rescue us from a crisis resulting from bad lending.

[apocolypse]

Yeah, the economy affects us all, but we aren't the ones that created the mess. Conversely, I'm pretty stunned that people support it at all.

[Korvan]

I'm pretty stunned at a lot of random 'Grr, this is money for the wall street fatcats' posts about. You know, the economy affects all of us. If propping up failing financial companies so they won't croak and continue the chain reaction of destroying more sections of the financial industry, so be it. Also note: The bailout plans aren't 700 billion immediately, they're phased, with provisions for repaying the cost once things get better.

Korvan, 'fat cats' aren't the only ones who benefit from fixing the damned economy, you should well know. I can't see how building roads and bridges is going to exactly rescue us from a crisis resulting from bad lending.

I'd be more inclined to put it in nuke plants and other energy related infrastructure rather than bridges and roads, but that's just me. You get two things out of investing in infrastructure, the infrastructure itself, which is badly needed in many places and an economic boost generated by the spending.

I'm just not a big fan of bail outs at all. The whole point of capitalism is efficient distribution of resources. Those who demonstrate an ability to use resources wisely are rewarded with more resources to play with, those that misuse them, get less. The whole bailout seems to be rewarding failure and incompetence.

[Knife]

I got majorly pissed off lately listening to an interview with a shareholder in one of the firms which is tanking complaining about how they're now facing losing all their money. Yeah, because they didn't spend the past 10 years looking the other way and enjoying their nice fat dividend cheques. They can fuck off.

Sure it's not great publicity for the government to be seen telling pensioners to go hang in this manner, but the point for these people is the same as the fat cats. You can't have to both ways...

See, I'm at the point where I'm willing to take personal hits to actually fix the problem. The bailout is to fix the immediate problem and let the flawed system stay so nice folks don't get hurt.

[Stark]

Yeah, the economy affects us all, but we aren't the ones that created the mess. Conversely, I'm pretty stunned that people support it at all.

This is exactly what Neph is talking about. You admit it affects us all and that a giant crash would be bad for the whole world, but suggest doing nothing purely to hurt 'rich people' or 'stupid people'. The emotive language with 'created this mess' is totally wrong - economic decisions like this shouldn't be made on the basis on 'punishing the greedy' or 'making me feel better about not investing' or 'I'm bitter hurt the bankers rar'.

People can be opposed to the bailout without being Class Warfare Warriors out to bankrupt the greedy investors. I'm pretty heavily against the proposal, but I'm not writing off any and all possibile mitigation strategies simply because I hate the upper class (or in this case, people I have declared 'stupid'). I'd say it's a good thing internet nerds don't make policy decisions, but this is an American decision and I'm not sure your administration is necessarily better.

[apocolypse]

Yeah, the economy affects us all, but we aren't the ones that created the mess. Conversely, I'm pretty stunned that people support it at all.

This is exactly what Neph is talking about. You admit it affects us all and that a giant crash would be bad for the whole world, but suggest doing nothing purely to hurt 'rich people' or 'stupid people'. The emotive language with 'created this mess' is totally wrong - economic decisions like this shouldn't be made on the basis on 'punishing the greedy' or 'making me feel better about not investing' or 'I'm bitter hurt the bankers rar'.

People can be opposed to the bailout without being Class Warfare Warriors out to bankrupt the greedy investors. I'm pretty heavily against the proposal, but I'm not writing off any and all possibile mitigation strategies simply because I hate the upper class (or in this case, people I have declared 'stupid'). I'd say it's a good thing internet nerds don't make policy decisions, but this is an American decision and I'm not sure your administration is necessarily better.

Hold the strawman. Half, if not more, that you just attributed to me was not stated, nor do I necessarily even believe it (i.e. "class warfare" and whatnot) Like you, I don't even necessarily have a problem with alternate solutions, just this one.

[K. A. Pital]

There are alternate solutions, and taking the nonsense "support the bailout, or else" approach isn't too helpful.

And what's so bad about punishing the guilty? What's so bad about taking equities and becoming a stakeholder in companies, assraping their CEOs and the idiot investors while at the same time preventing the industry's collapse? Tell me, if you are paying for someone's loss, shouldn't you be a party to his possible profits as well?

This "bailout" should work that way, not the way Paulson wants it to "work" for his butt-buddies.

[Stark]

There are alternate solutions, and taking the nonsense "support the bailout, or else" approach isn't too helpful.

And what's so bad about punishing the guilty? What's so bad about taking equities and becoming a stakeholder in companies, assraping their CEOs and the idiot investors while at the same time preventing the industry's collapse? Tell me, if you are paying for someone's loss, shouldn't you be a party to his possible profits as well?

Theres absolutely nothing wrong with this - although I imagine supporters would say that they'll be profiting anyway on selling the assets they just bought once the market recovered etc. Frankly I'm with putting people in prison, if you could pin anything on individuals, which sounds difficult. The attitude that 'fuck em greedy sons of bitches let the banking system collapse THAT'LL TEACH EM' is simply really simplistic and counter-productive.

Hold the strawman. Half, if not more, that you just attributed to me was not stated, nor do I necessarily even believe it (i.e. "class warfare" and whatnot) Like you, I don't even necessarily have a problem with alternate solutions, just this one.

Uh, you said 'the economy affects us all, but we aren't the ones that created the mess'. This sounds to me like you're saying that EVEN THOUGH you know that the consequenes will be bad for you, nothing should be done to avert economic consequences, because 'we aren't the ones that created the mess'. Who created the mess is a matter for later prosecution, I think it's irrelevant to what we do WITH the mess.

Frankly I thought it was clear that the second paragraph wasn't directed at you specifically, but whatever.

[Korvan]

If it was up to me, I'd say fuck 'em. Then I'd put that $700B into major infrastructure projects, something that'd benefit everyone, not just the fat cats.

What about the Roubini proposal?

Just read up on it. It's interesting. I don't think the home owners should be left off the hook, but some sensible refinancing should be in order.

[Pablo Sanchez]

I'm pretty stunned at a lot of random 'Grr, this is money for the wall street fatcats' posts about.

Its not random, its a symptom of a very real trend in public opinion. The people running the financial markets actively encouraged a housing bubble in the pursuit of short-term profits, which has now led to a complete financial crash. The idea that people whose arrant irresponsibility and greed has put the entire world economy at risk might not only get away without punishment, but also ride golden parachutes down to a soft landing, is repugnant both morally, and let me say, logically. If corporate risk-taking is insured from the public trust, why not take those risks? A minimal consequences bailout serves the short-term interests by shoring up the economy, but in the long term it would probably hurt it.

Of course the economy needs to be rescued in some way, to prevent widespread hardship. We also have to ask ourselves whether the economy as it is constituted can be rescued in a permanent sense. We keep suffering bubbles; two major ones in the past 10 years. This is not a desirable market result, yet the market keeps fucking doing it. Clearly something needs fixing.

[Admiral Valdemar]

Widespread hardship is guaranteed, so the "We must swallow our pride to help people" argument is utter bunk. The bailout is going to achieve one thing, and one thing only, which iq fuck us all even more.

If you seriously think letting there people off will be a good thing, then allow me to propose we just get rid of the rule of law for anyone earning a certain salary (don't worry, it's far more than you'll ever earn) and impose fascism for an encore. Because you're basically accepting that you will NEVER replace this stupid system and are quite happy to try and feebly swim against the tide to stop the inevitable rather than accept the state of play and rectify it so it never happens again.

And that, my friends, is a whole new system, not slapping some wrists and bringing in more ineffectual legislation after the storm.

[Glass Pearl Player]

The attitude that 'fuck em greedy sons of bitches let the banking system collapse THAT'LL TEACH EM' is simply really simplistic and counter-productive.

Focusing on the "That will teach'em" bit, anything that will be done (including nothing) will teach "them" something. Bailing them out will teach them "It's okay to risk other peoples' money and long term security for the possibility of short term profit, if it fails, mother government will hold your hand and heal your sore knees so you can try this shit again".
Basically, there's one question to be answered: Do we tolerate this shit? The answer will be given in the language of the market: money. Paying for the bailout means "Can we have another bubble please", not paying means "There is a problem. Fix it."
While a free market is not the most perfect system ever devised by mankind, it could solve the problems at hand (in this layman's opinion) - given no one interferes and rewards behaviour with wads of cash that is actually harmful.
Thus my opinion: No bailout. One cannot not communicate, and communicating approval is right out.

[ray245]

Can't we design a system where we simply nationalise those companies, and screw those in charge upside down?

Disqualifed them from holding a managing position in any private or government company, and essentially ensure they cannot climb their way up again?

[Edi]

Can't we design a system where we simply nationalise those companies, and screw those in charge upside down?

Disqualifed them from holding a managing position in any private or government company, and essentially ensure they cannot climb their way up again?

More or less yes, if you do it the way Scandinavia unfucked itself after the 1990s crash. But in the US political climate, it is never going to happen. They are incapable of passing such measures for ideological reasons.

[apocolypse]

Uh, you said 'the economy affects us all, but we aren't the ones that created the mess'. This sounds to me like you're saying that EVEN THOUGH you know that the consequenes will be bad for you, nothing should be done to avert economic consequences, because 'we aren't the ones that created the mess'. Who created the mess is a matter for later prosecution, I think it's irrelevant to what we do WITH the mess.

Frankly I thought it was clear that the second paragraph wasn't directed at you specifically, but whatever.

The thread is about the Bailout - Yea or Nay? Not about "other solutions", so I didn't go past the OPs question. I don't support the Bailout, but that doesn't mean "do nothing".

[Coyote]

I find both options ridiculous. Giving huge amounts of money to rich bankers is bad, but so is pointing and laughing when it might be possible to do something, just to spite 'rich people' or whatever. This shouldn't polarise the world into class warfare; whatever is done should be done to minimise the damage, NOT 'punish' the 'bad' 'irresponsible' 'greedy' people.

I think many people are far too eager to cut off their nose to spite their face, simply to make so-called 'regular people' feel better about being poor. The objective is economic stability, NOT punitive policy. That should be done later, when there's no massive crisis looming.

The problem with this is that it would appear to absolve the irresponsible rich folks of any responsibility for their mismanagaement, and give them the confidence to gamble with other people's money just as much or more because 'the government will always bail us out'.

If the government, which ideally is supposed to be the voting public, is going to lay out this much money, then some sort of punitive measures should be included. And not just the usual wash job of finding a few mid-level patsies to do a couple years in jail and a few months' probation, there should be some serious toppling at the highest levels to remind those that ascend to management in the settling dust environment that there are consequences for failure-- and this wasn't merely failure after an honest effort, it was shell-game bubble economy enrichment.

Some sort of bailout should be considered, one idea I heard floated had such provisions as a $250-billion purchase of the bad debts, protection for homeowners that are being threatened with foreclosure but were otherwise making their payments before, a clause for the taxpayers to get the money back in tax returns at a later date when the economy eventually turns around and begins growing again.

[Coyote]

I'm pretty stunned at a lot of random 'Grr, this is money for the wall street fatcats' posts about. You know, the economy affects all of us. If propping up failing financial companies so they won't croak and continue the chain reaction of destroying more sections of the financial industry, so be it. Also note: The bailout plans aren't 700 billion immediately, they're phased, with provisions for repaying the cost once things get better.

But a lot of the CEOs of the big companies are getting very generous benefits packages as they exit the stage; the infamous "golden parachute". Carly Fiorina, who just about ruined Hewlett-Packard (and it may yet implode) got a $42-million dollar "thank you" as she left the company. That's like giving a medal to the pilot who crashes a plane.

...'fat cats' aren't the only ones who benefit from fixing the damned economy, you should well know.

Out of a 700-billion dollar layout, how much do you really think is going to make it to the workers and the ones who've been displaced? The thing that pisses people off so much is the perception of unequal consequences and preferential treatment.

Ordinary people who go bankrupt, bounce checks, or get foreclosed on are punished for their piss-poor financial mangement. Their credit rating goes down, it's harder to get loans, to get insurance, maybe even harder to find some jobs.

But if you're a so-called "fat cat" that loses millions or even billions of dollars in shitty, short-term deals with worse odds than Vegas, those guys get rewarded by having the blame removed form them, the costs shared among the wage-joes, and they even get a fat bonus as they walk into a consulting firm where people will ask them for advice.

Rich people are seen as getting rewarded very handsomely for fucking up royally.
The Middle Class people see themselves getting punished for financial fuckups.

I can't see how building roads and bridges is going to exactly rescue us from a crisis resulting from bad lending.

As for fixing roads and bridges? It is an expenditure of government money that will go to actually building things that the public has an immediate stake in, and sees immediate benefits from. A billion dollars pumped into a failed executive's pocket will probably end up in the Cayman Islands. A billion dollars pumped into infrustructure will give us roads that aren't crumbling and bridges that aren't falling down. The money goes to road crews, construction purchases, etc, and instead of a paper receipt and a promise to do better, you get an Interstate highway. The idea is taken from the government jobs program of the 1930's, to provide work by investing in infrastructure improvements.

[aerius]

Here's the thing, on mortgages alone there's around another $1.5-3 trillion in losses to be taken via defaults & foreclosures by the time housing prices correct to a sustainable level based on various reports I'm reading. Problem is for every dollar in actual mortgages, there's 10 dollars or more in mortgage backed securites, collateralized debt swaps & obligations, and all kinds of other structured investment vehicles & other derivatives. The bailout plan is trying to buy out all those mortgage & loan based investments, and there are countless trillions of dollars worth of them, and thus there's no chance it'll work. The value on those things is greater than the entire US GDP. The bailout money vanishes straight into a black hole, $700 billion literally will not last a month, it may not even last a week. The money is literally vaporized, it doesn't stabilize the system, provide liquidity, or do anything useful, you might as well be dumping the money into a giant bonfire.

[ray245]

Can't we design a system where we simply nationalise those companies, and screw those in charge upside down?

Disqualifed them from holding a managing position in any private or government company, and essentially ensure they cannot climb their way up again?

More or less yes, if you do it the way Scandinavia unfucked itself after the 1990s crash. But in the US political climate, it is never going to happen. They are incapable of passing such measures for ideological reasons.

So in essence, if the US follow what the scandinavians did in the 90s, a bailout is viable?

Sigh, why can't the US simply adopt a more moderate solution, as compared to a yes or no option?

[Illuminatus Primus]

But a lot of the CEOs of the big companies are getting very generous benefits packages as they exit the stage; the infamous "golden parachute". Carly Fiorina, who just about ruined Hewlett-Packard (and it may yet implode) got a $42-million dollar "thank you" as she left the company. That's like giving a medal to the pilot who crashes a plane.

She's also a contributor for Fixed Noise's Business channel, and one of McSame's economic advisers.

[Stravo]

What's happening with this bailout or rescue package (however you want to call it to make it seem more palatable for folks) is that people are not being educated properly on what this is all about. This is not so much about rescuing Wall Street banks that have fucked themselves and us royally but more about easing up something that is vanishing rapidly - credit. There is a huge credit crunch that is coming or already here as a consequence of all this bad debt. What happens when people have loaned out a trillion dollars and most of it is not paid back? They stop lending or worse the money simply runs out.

What does this mean for the average person and not the billionaire corporate raider? It means that you can't get a mortgage to buy a home or a loan to buy a car or a loan to fund your education. You own a small business and need a line of credit to get through the next few months or upgrade your equipment? No one is lending out there right now. Home purchases in the NY area have already been dropping by 40% because no one can qualify for a mortgage. Car sales are dropping like a rock.

This is more of an attempt to inject a massive amount of capital to jump start a dying credit market than to "rescue" Wall Street. This credit crunch was predicted years ago but as usual now the wolf is at the door and Congress is "surprised" and we all have to take a bite out of this shit sandwich.

[aerius]

Except the problem is throwing money at the problem doesn't work, and doesn't ease credit. The Fed dumped $630 billion into the system on Monday and we got the biggest market decline since 9/11. Credit hasn't eased at all, in fact it's tightened up even more as lending rates continue to rise and various spreads continue to widen. Hell, the yield curves are all starting to go upside down. Another $700 billion isn't going to fix anything.

[Illuminatus Primus]

I think aerius is right, we need transparency and accountability in the markets. We need to know what assets people have, what they are buying from whom at what price, their ability to prey, etc. Confidence is required. And doing this will kill some of these institutions, but then at least if we did do a bailout we could realistically triage instead of just hoping Paulson has our best interests at heart.