Bailout - Yea or Nay?

[Admiral Valdemar]

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.

And that's just the mortgage issues. Imagine what will happen with other financial instruments unwinding and the derivatives worldwide going kablooie. The problem with no credit is only getting worse, even if money is pumped in, that won't change until equilibrium is met. With food and fuel adding to the costs, mortgage defaults and walking away will just get more common.

I do believe the sum total is many times the global GDP, never mind the US one. To imagine the US can deal with this, without inflating away its currency and defaulting on all debt is ludicrous.

The whole system is bullshit. If it were a properly regulated market, it would never have gotten into this state. The fact that the financial sector (as illustrated in a recent FT.com article) is blaming the government for this mess is hilarious. So they bow to their every demand to deregulate, and then when the shit hits the fan, they get the blame? Like they do when they try and regulate even? Damned if you do...

We are not going to stop a depression now. Anyone who thinks otherwise probably thinks this Paulson plan is pretty sweet. What we can do, is try and form a new economic model that doesn't lead back to this same problem. For all the benefits of capitalism, it's got some major problems to do with wealth distribution and the basic grasping of physics and long-term planning. We'll be in this same boat again if we don't learn from such mistakes.

It's comedy gold that we have the world's biggest developed economies powering themselves by rearranging virtual money supplies.

[aerius]

The latest numbers I'm seeing puts the global derivatives market at something like $700 TRILLION. According to theory it all "nets out" somehow, but in practice the counterparties blow up and people are left holding a bag filled with shit.

[Admiral Valdemar]

Oh. Last I checked it was around $500T, but that was a few months ago. Oh well, the CDS problem is around $60T, I recall.

[Edi]

Somebody explain to me what the hell Racoon City is. I wouldn't mind a recap of what Silent Hill was either, though I have some idea.

[Admiral Valdemar]

Somebody explain to me what the hell Racoon City is. I wouldn't mind a recap of what Silent Hill was either, though I have some idea.

Would you like to dine with zombies for the evening, or would you prefer the delightful company of a damned town's occupants in Hell?

The choice, dear viewer, is yours!

Incidentally, there are stories floating around about stores running out of MREs and guns/ammo with people talking about sealing themselves off from the world if this gets any worse. Course, a lot of it is hot air, but I couldn't resist thinking of zombie hordes coming about from financial Armageddon.

Let's be honest, the bankers wouldn't need to worry. Their brains have long since decomposed.

[Tiriol]

Somebody explain to me what the hell Racoon City is. I wouldn't mind a recap of what Silent Hill was either, though I have some idea.

Raccoon City, so far as I know, was the city which was governed by the Umbrella corporation before being overrun by the Resident Evil zombies (at least in Resident Evil: Apocalypse movie). Silent Hill I'm not so sure, but I think it was the name of the town which was instrumental in the Silent Hill horror games.

[apocolypse]

That's an awesome pic AV.

[apocolypse]

Somebody explain to me what the hell Racoon City is. I wouldn't mind a recap of what Silent Hill was either, though I have some idea.

Raccoon City, so far as I know, was the city which was governed by the Umbrella corporation before being overrun by the Resident Evil zombies (at least in Resident Evil: Apocalypse movie). Silent Hill I'm not so sure, but I think it was the name of the town which was instrumental in the Silent Hill horror games.

Yeah. It's a town that's completely fucked, for lack of a better word. Great games, especially SH2.

[Admiral Valdemar]

That's an awesome pic AV.

Would be more awesome if the doofus who made it didn't misspell "Raccoon". I digress.

My point was that neither option is palatable, only the bailout one has the added effect of seemingly being useful to some people, while only helping us reach the bottom of the abyss that much quicker (and likely more painfully; see the Smoot-Hawley Tariff Act).

I'm actually somewhat uplifted by the prospect of so many Americans, and their reps, being against this bill. And if they aren't, just mention that it will also be bailing out stupid British, French, Australian and Russian (among others) bankers as well. With your 401k plan.

[aerius]

Saw this one on another forum. The crisis explained - Really.

[apocolypse]

That's an awesome pic AV.

Would be more awesome if the doofus who made it didn't misspell "Raccoon". I digress.

My point was that neither option is palatable, only the bailout one has the added effect of seemingly being useful to some people, while only helping us reach the bottom of the abyss that much quicker (and likely more painfully; see the Smoot-Hawley Tariff Act).

I'm actually somewhat uplifted by the prospect of so many Americans, and their reps, being against this bill. And if they aren't, just mention that it will also be bailing out stupid British, French, Australian and Russian (among others) bankers as well. With your 401k plan.

I was about to write my representative to protest the bill, but it may be that there are plenty of others doing it at the moment. I can't seem to use several parts of the House site right now. I keep getting error messages for some of the options.

[J]

Yahoo link

McCain decries bailout earmarks

Andy Barr Thu Oct 2, 12:11 PM ET

John McCain expressed outrage over earmarks in the Senate bailout package, a bill he voted for Wednesday night.

“It's insanity, and it's obscenity because it's a waste of taxpayers' dollars, and it goes on,” McCain said on MSNBC.

“And until we stop it, until we get, frankly, a president who will say I'm going to veto those bills, I'm going to make the people famous that put them on there, famous — and by the way, Joe, you know that this problem has grown and grown and grown,” McCain added. “There's a sharp difference, a total difference between myself and President Bush on the issue of pork barrel and earmarks and out-of-control spending and the growth of government without paying for it. Don't forget that part.”

The bill includes tax breaks for rum producers in Puerto Rico and the Virgin Islands as well as producers of wooden arrows used for children’s toys.

Asked why he voted for the bill, which passed 74-25, if it was “insanity,” McCain said he did it because the country is on the “brink of economic disaster.”

Defending his vote, the Arizona senator pointed to the “plenty of other bills that I fought against.”

“I voted against the Medicare prescription drug program,” McCain declared. “If you look at the Citizens for a Sound Economy, the National Taxpayers Union, the Citizens Against Government Waste, I have been a hero to them because I have fought continuously, continuously against these.”

“I fought the leadership of my party and I have had success,” the Arizona senator added. “I saved the taxpayers $6.8 billion on a tanker deal that was going to cost the taxpayers that much because of this cozy deal. It ended up with people in jail.”

McCain then attacked Barack Obama, who he said “has never stood up to the leadership of his party on any issue. Not a one.”

Thank you for voting to pass the No Bankers Left Behind bill, complete with a zillion earmarks.

[Admiral Valdemar]

But McCain HATES earmarks! They're his Kryptonite. Oh the hilarity.

[Nephtys]

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.

I would like to correct your statement. The Fed threw it in, AFTER the bill failled to pass, and the markets were already crashing due to investor confidence loss from that scare. It's not a causation.

[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.

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.

42 million for a company of HP is still a drop in the bucket for them, as despicable as such a large package is. It's not what lead to the current national-scale crisis, and not on the same level, although it does show something else.

...'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.

Since when does 'rescuing the economy' mean 'giving money to everyone'? That's what Bush has clearly tried to do with stupid little 300 dollar cashbacks and whatnot, and that's done jack shit. You support the economy by making sure the organizational infrastructure around credit, morgages and what not DO NOT MELT DOWN and don't cause more chain reaction meltdowns. Giving the middle class and lower class money means jack shit if the national scale financial sector is in shambles, which'll kill more jobs than anything else.

So please. Because 'companies' are recieving the money so they don't go belly up doesn't mean this isn't to benefit everyone.

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.

[/quote]

And the world has changed a hell of a lot since the 1930s. The infrastructure of the US is plenty sufficient. WE don't have a crisis of 'not enough roads', even if stuff like more powerplants and such would be something we'd like. What is important right now is that the structure behind investment, credit and other VERY basic foundations of business... big and small, are at stake. Any view that 'Golly gee whiz, we're pissing away cash on invisible things' doesn't take into account that there are structures that must be viable for the economy to succeed.

[Admiral Valdemar]

6.10, 10.10 & 23.10.

Some very important numbers. The first is the date of the auction for FM²'s CDS holdings. The second one is the date for Lehman Bros. The third, WaMu's.

FM²'s auctions are said to be at least $500bn. Lehman's is another $350bn. That wipes out the bailout alone, assuming the holders of these derivatives cannot pay when finally dealt a bad hand come next week (and since this is a solvency crisis, not liquidity, I'd laugh at the idea of anyone coughing up the full sums). If they can't, then the government will have to shoulder the costs, and that means another bailout in the trillions is needed to see us through the rest of the month.

Anyone who thinks the government has even attempted to save the economy simply hasn't got a clue. This changes nothing.