Is the Bailout Failure a Good Thing?

[Joe270]

I've had strong reservations about this bailout from the beginning.

Yes, I absolutely understand the money supply restrictions which would, without a doubt, happen if the bailout doesn't happen.

I absolutely believe that some form of a bailout will need to happen, I'm just not sold on this hasty package.

There's another problem which really bothers the hell out of me: the banks and bad mortgage holders seem to have reacted to this bailout long before it ever even got mentioned in the first place. Something was going on before the public, or even most of congress for that matter, knew anything.

My business deals with foreclosures. Since late May, the foreclosures released for sale have dried up. What was on the market is largely still on the market, but very, very few new foreclosures have hit the market or MLS system.

Cases in point:

Countrywide: Approximately 14,000 properties for sale worth about 3 billion. The largest mortgage company in the country, and it only has REO (Real Estate Owned, means foreclosed)properties amounting to less than the amount of listed REO properties in the Vegas area alone?

I ain't buyin' it. Something's fishy.

Bank of America: Lists fewer than 850 properties as REO sales. This is from the second largest mortgage player in California, Arizona, and Nevada, three of the worst hit areas, plus loads of other states?

Something is really fishy.

I'm wondering if the deal was set a few months ago and the banks reacted, withholding assets from their books to dump them onto the taxpayers. I can't find the weblink, but I saw a posting which estimated that only about 10% of the foreclosures are on the market right now.

That matches, pretty much, what I see in Vegas every day. I can identify an REO from a couple blocks away, usually. When I pass by them, I can confirm that ID by seeing the notices. Only about one in ten of those properties has a sale sign out front or a realtor notice on the garage or front window, as required.

Are they holding out for a bailout or are they only selling their worst properties, waiting for the market to improve to sell the others? Or are they trying to protect their most promising properties to sell themselves while they unload their deadwood onto the taxpayers?

No matter what, they acted very strangely, and still are.

So the failure of the bailout plan might shake out some of the nuts out of the banking trees, because we aren't seeing all the pecans in there.

The failure will give legislators more time to investigate what is going on, and provide extra time where the banks will have to honestly state their holdings.

The failure of this bailout might result in a better plan, one which, I hope, has jail time for the officers of the corporations in question.

There is no doubt that the American public has no clear understanding of what is going on, and I rather doubt that congress has a very clear picture, either. Of course, if the banks have already done an end-run and flanked this bailout by hiding their assests, then we can't have a clear understanding of what's at stake.

[Stew21]

I am not a financial/economic-minded person, but I can tell you that I hated the idea of the bail out. Hated it.
The road is going to be rough, but...


Trish, hopeful.

[Captshady]

Do those being foreclosed on get any bailout? No, the trend among lending corps were to pressure and con people into big balloon payments and floating interest rates. The salesmen probably showed them lovely charts about how the interest rate rarely goes up, and quoted all these statistics about how better off they were going this route. The salemen got fat commissions off writing the loans, as they were told to, through pressure and probably sales contests all the way up the chain. There sits mister better than you with his million dollar salary and is multi million dollar severance package.

Experience tells me that this bailout is no loan, it's a gift of 700 billion. And the economy will still tank because gas prices suck nuts and prices of everything have sky rocketed.

The "little guy" ... still gets foreclosed on, gets nothing but a higher tax bill and a worse economy at the end of this all.

[MattW]

Experience tells me that this bailout is no loan, it's a gift of 700 billion. And the economy will still tank because gas prices suck nuts and prices of everything have sky rocketed. My impression is that the negotiations to this point put more teeth and structure to the plan so that it was not a gift, the companies paid a price, and remuneration was assumed. Whether it was enough or fair could be debated - I don't know enough to speak.

The "little guy" ... still gets foreclosed on, gets nothing but a higher tax bill and a worse economy at the end of this all.Agreed, but those are two other failings that should have been acted on as well. Seems now that the only thing that will get congress to act (but not legislate) is the pending collapse of the economy (and threats to the wealth of their biggest reelection donors).

[Don]

Yes, the Bailout failure was a good thing.

Here's why (http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html) in a nutshell.

[InfinityGoddess]

Bailout for the folks on Wall Street that behaved badly = bad. The fact that it failed = good.

[Joe270]

Don,

Why these groups don't have to declare bankruptcy is a point which needs investigating as well. I had to, so why didn't the feds bail me out? It was nothing near $700 billion dollars, that's a fact.

Posting your link:

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

He's not quite making the same point, but he's pretty close.

Still, the banks made the move to preserve the assets, or minimize them months before any bailout talks.

[Unique]

The failure will give legislators more time to investigate what is going on, and provide extra time where the banks will have to honestly state their holdings.


That works for me.

[Enzo]

The failure of the bailout is going to be bad news for thousands, if not millions, of stock market investors around the world, including me.
If the Dow can crash by 7 percent or so in one day, so can other markets around the world.
Here in Asia, unlike in the West, it's not just the Warren Buffett types who play the market, it's often people with low income, like taxi drivers, housewives, young couples, pensioners, etc.

[Unique]

I'm sorry, enzo. People do that here, too.

I don't personally because it seems like gambling to me and I don't gamble. Period.

Every time I invested (through work) I ended up with less than I started with. And these were supposed to be 'spread the risk' type investments. Mutual funds or whatever they're called.

I finally told myself *&^ this noise. I'd rather have a candy bar in my mouth today than a maybe something 20 years from now that might not happen any way. I never planned to retire. I'll work til I die or if I'm too infirm, I'll hike out to the woods and crawl into a body bag and zip it shut.

finito. wish me luck.

They say, 'if you only believe...' well, I didn't and I still don't. YMMV

[Don Allen]

Joe, I just heard a wonderful term put to this crisis that may help a lot of people understand this a bit better, forget bailout and think in terms of "Credit Contraction" this has never been about bailing out Wallstreet as much as it is about insuring the flow of capital from market to market.* Actually Wallstreet gets fucked in so much that the institutions that fall into the "Credit contraction" will come under goverment control and eventually lose all their assets guaranteed by this action, people don't understand that Wallstreet players would make more money by feasting on the dead corpses of these giants as their good assets were auctioned off in B.K.** Paulson has done a terrible job of explaining and selling this to the american people.

[Don Allen]

Having said that, rebublicans have done a terrible disservice to the country today, their inaction cost 1.3 trillion dollars and as we speak the world markets are crumbling, 4% in Australlia and 5% in Japan, we may have a problem tommorrow..........

[Unique]

Paulson has done a terrible job of explaining and selling this to the american people.

agreed.

But the bail out - or what ever you want to call it is to ensure that the system continues in the way it has been. Some of us think it's been broken and more of the same doesn't give good value.

[Don Allen]

We all agree that this action is terrible. But this action is also terribly necessary.

I equate it to owning a shit car that ran out of gas. I hate the car but I need gas to get where I'm going. In a nutshell, the economy is the shitty car, the 700 billion is the gas, and we got to fill up in order to get this vehicle to a mechanic for fixen.

[Unique]

Nope. Not for me. Sometimes things need to be replaced. I think this is one of those times.

Propping up a shaky house is often more expensive than rebuilding from scratch. And you still have a crap house.

My opinion, of course. But hey, I remember when we went off the gold standard so what do I know, anyway.

[Don Allen]

I understand how you feel, but, to be honest, this is a bad one Unique, I'm scared to death that once the crap starts rolling, even action by congress won't be able to stop it. All kidding aside, a 2 maybe 3 year depression, but,,,, this could and will spread globally. And the consequences from the mid east, to Russia, to China are horrendous. See, what i know people don't get, is that once the shutdowns start, paychecks stop, spending stops, WHERE IS THE MONEY TO GET THINGS STARTED.... 700billion won't do it. Thats why this money in the system now is damn important. In addition, and I've said this ten times before on other threads, the likely hood of hyperinflation in a massive shut down would be the result making the dollar worthless. This is bad....

[Unique]

Don -

I know. I just finished How It Happens by Pearl S. Buck last weekend.

It's about Germany WWI & how it led to WWII, hyperinflation and all that.
I know it's bad. In some ways we're worse off than in the Depression because no one does things for themselves anymore.

Grow food? Make clothes? Set broken bones? We pay other people for that.

It could get really, really bad in a big fat hurry. I know that. But I also know that throwing money at a problem doesn't make it go away.

Think before you strike - remember that? Right now people do not have any faith in this system of things. I didn't study economics but I've been running my own household for quite some time. It's basically the same. Just bigger. And more complex.

I never thought globablization was all that great an idea. But nobody asked me. :shrug:

[LimeyDawg]

Having said that, rebublicans have done a terrible disservice to the country today, their inaction cost 1.3 trillion dollars and as we speak the world markets are crumbling, 4% in Australlia and 5% in Japan, we may have a problem tommorrow..........
True, but these are paper figures, unless all those investors need their money tomorrow. The markets are cyclical; those with the sack to stay in will recoup their money, but it will take time, so there's not a whole lot of cache in the movement of the markets. Historically, they've always rebounded.

[Unique]

True, but these are paper figures, unless all those investors need their money tomorrow. The markets are cyclical; those with the sack to stay in will recoup their money, but it will take time, so there's not a whole lot of cache in the movement of the markets. Historically, they've always rebounded.

Exactly.

The whole thing reminds me of a term I heard a long time ago (and still don't understand - imaginary numbers (circa 1970)


In all, 65 Republicans joined 140 Democrats in voting "yes," while 133 Republicans and 95 Democrats voted "no."


This tells me it's not really a 'political' thing. I think they really aren't sure what the best course of action is. And I do believe it's more than "just" elections coming up.

If you get 100 calls and 250 emails telling you, 'don't do this' - even if you're convinced you should - what do you do? Go with your instincts or what the people you represent asked you to do? I'd hate to be a Congresscritter this week. :(

And the market swinging so wildly - up & down for the last few days on speculation ... speculation. Hmmm... where have we heard that word before?

[Joe270]

The failure of the bailout is going to be bad news for thousands, if not millions, of stock market investors around the world, including me.

Sorry you're on the losing end, Enzo, but I lost $100,000 bucks in TCMS back in 2000, and the government didn't bail it out and save my investment.

There is no reason for the investors to get rescued here, either. You pays you money and you takes you chances. There is absolutely no reason to bail out these shareholders over others who have lost money over the years.

That's a bullshit proposition. If this passes, I want my hundred grand back, too.

Part of my point is that these companies and banks damn well knew they'd be thrown a lifering, and they prepped for it.

The taxpayers are in for a really good shellacking here.

[MattW]

Part of my point is that these companies and banks damn well knew they'd be thrown a lifering, and they prepped for it.

The taxpayers are in for a really good shellacking here.It would be nice if our financial security wasn't so intimately tied with these institutions and we hadn't set a precedent with other big bailouts.

Auto makers, airlines, and big banks have pretty good odds (better than 75%) that they can drive the company into the ground, and every taxpayer will chip in to prop them up. Set that expectation, and the same pattern of behavior will emerge.

[Unique]

Today's headline: Taxpayers will pay anyway

well no shit. tell me something I didn't know.

That's a bullshit proposition.


If this passes, I want my hundred grand back, too.



And that reminds me ... my step mom invested in KMart before it went into Chapt. 13 or whatever financial wizardry actually occured.

She invested because she believed in the company and wanted it to continue. >POOF< Her money disappeared and yet KMart still exists. Did she get her money back? Hell, no. Does she still own the stock? Hell, no.

Basically - "your paper is worthless. you got screwed. tough shit"

She had the paper; now that the company has "recovered" so to speak, her 'paper' theoretically should be worth something. But no - >POOF<

And that's the way the system works.

My neighbor calls it the 'Golden Rule'; he who has the gold, makes the rules. Yepper. Sounds about right.

[Ken]

interesting link provided by Don:

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

Was wondering about this from it:

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Who would the creditors be?
And would it really be possible for them to run the financial instituitions when they came into possession of them?
(It would be nice to think so, as that makes the current crisis seem a bit less dire.)

[Unique]

Who would the creditors be?

good question. the way I understand it, it would be the US government.
Which could be a good thing - or a very bad thing - depending.

Depending on what? oh - insider trading, corporate/govt. backscratching, etc. etc.

[Ken]

I sorta thought so, but wouldn't that be kinda like a catch-22?
Bailout and bankruptcy resulting in more or less the same thing.

[Captshady]

I don't see it affecting the country like the great depression did. There's not a lot of jobs that are going to require layoffs. Those jobs are in China now.

[maestrowork]

It's bad, and real bad but we'll get over it. It'll be a long recession but hey, the last one wasn't too bad. But no, I don't think there will be another depression. I really don't.

[Captshady]

Yep. I still think the bailout is going to happen. I still think the bailout will do nothing to stop the recession. It'd be like pushing the reset button.

The problem with the bailout is future bailouts.

[maestrowork]

Yep. I still think the bailout is going to happen. I still think the bailout will do nothing to stop the recession. It'd be like pushing the reset button.

The problem with the bailout is future bailouts.

That's assuming the government won't be bankrupt before then.

I'm not so sure about a comprehensive bailout package. I'd rather they decide on a case to case basis, much like they did with AIG. They didn't bail out Bear Stearns.

[Unique]

I'd rather they bail out the little guy.

Instant cash flow.
I'd be more than happy to infuse some "cash" into the system. I need a new pair of jeans and some gas - but hey!

I can afford the gas (if I can find any) but not the jeans. One or the other but not both.

How about a moratorium on taxpayer payments - mortgage, credit cards, etc. NOT hey, Unique, let us loan you more money - (no thanks) but hey, Unique - we'll let you actually use some of what you get on yourself instead of giving it all to us in "payments"

If it were me - I would reset all counters to zero and start over. (Hear the screaming? You can't do that!)

Why not? Instant cash flow. For everyone.

[WendyNYC]

Here's the issue I have with that CNN article:

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.


Sometimes the company DOES just disappear. And even if it's purchased by someone new, who's to say that it will be another American company or institution? And if many companies are purchased by Middle Eastern or Asian buyers, what does that mean for us, exactly?

[Monkey]

http://www.msnbc.msn.com/id/26948627/

James Wilcox, a professor of financial institutions at UC Berkeley’s Haas School of Business, has been surprised by people’s reaction to the plan, which called for setting up a system to let the government buy up billions of dollars in bad mortgage-backed debts from banks and other financial institutions. But he understands why people are feeling confused and unhappy about it.

“Basically, almost no one bothered to explain to people why they should be in favor of it,” he said.

Indeed, for many the current financial crisis still feels somewhat abstract. Even as the crisis has toppled financial institutions such as Lehman Bros. and led to the failure of banks including mammoth Washington Mutual, for many Americans the most obvious impact has been that their homes or retirement accounts lost value.

If the financial crisis spreads further, however, economists say they could start to see more day-to-day impacts, such as that they can’t get a car loan or home equity line of credit, or that their credit card limits are reduced.

If the crisis continues to spread unchecked, they also could find that their employer isn’t able to borrow the money it needs to buy new equipment or inventory, expand its operations, hire new employees or even pay the ones it already has.

That could lead to higher unemployment and lower consumer spending, and further weaken an already delicate economy.

“We are in a credit crunch and it’s starting to crunch America’s businesses, large and small,” Wilcox said.

As I see it, we have several problems. 1) If Wall Street continues teh suxxor, credit can seize up, and many businesses rely on that credit on a day-to-day basis. That leads to businesses shutting down and people getting laid off. 1a) Gas stations, which are often not exactly lucrative, are nonetheless essential. 2) Bailing out Wall Street would likely entail a huge infusion of cash, which could lead to hyperinflation. 3) The global economy is following the US down the tubes. Not good for outsourcers or importer/exporters. Or for the prospect of peace. 4) Historically, these sorts of market issues sort themselves out, eventually. But this is the first time since globalization, and IMO, globalization may hurt much more than it helps. 5) People hate the bailout AND are mad that it didn't happen. The government is going to be seen as eeeeviiill no matter what it does.


Personally, I'm pushing the contractor to finish my off-grid house and buying some chickens. My container garden is expanding like crazy. I'm putting money in jars. Basically, I'm buckling down for the storm and urging others to do what they can to do the same. It's like a hurricane; if you're in the predicted path, you take precautions. If it doesn't hit you, you're fine, but if it does, at least you were prepared.

ETA:
*sigh*
Don, can you pass the tinfoil hat, please?

:D

[Don]

http://www.msnbc.msn.com/id/26948627/
ETA:
*sigh*
Don, can you pass the tinfoil hat, please?
:D
Watch for the new line of clothing coming from DON, INC. It will include not only tinfoil hats, but a full line of anti-bullshit clothing, hats, and earcovers.

Also, the DON Network will be premiering shortly, in response to LimeyDawg's cry for an unbiased source of information regarding those 545 scurrilous cretins we call FedGov.

:roll:

[Unique]

Hey - this isn't the joke thread!

Why am I laughing?