Thursday, September 25, 2008

What's the hurry?

Are hundreds of banks really going to fail on Monday if the Congress doesn't agree to borrow $700 billion to bail them and Wall Street out?

We have yet to see a list of banks that would fail if the government doesn't "do something."

I think we are being railroaded and just about everyone I have read or talked to today agrees.

The free market also means the freedom to fail.

This is the Crown Jewel of the Bush Administration.





18 comments:

Zen said...

But Chris dodd and Barney frank say this bailout is the best thing our gov. can do. So it must be right???

Well it isn't. It is a mistake on a scale beyond comprehension!!!!!
bunch of fookin cornwad politicians.

Kayak Dude said...

Did anyone see the compensation plans for the four CEO's at the failed companies slated for our tax $? It averaged $30 million. $30 million a year and they ran their companies into the ground...only to get bailed out by our "leaders" with our tax $. This is not right and should not be allowed.

Anonymous said...

the problem will be lack of credit. people have already recv'd notices that their credit limits have been reduced. large compaines that rely on credit for purchases and payroll may not be able to get it if there is a freeze on credit.
unfortunately something needs to be done. the 700b is not a gift, it is a loan, hopefully it will be along the lines of chrysler. but who knows.

the fbi is starting to investigate some of these ceo's, so we shall see what, if anything, happens.

NEPAConseravtive said...

G,
Did you know about this ?

Barack Obama Gay Sex Scandal

http://www.youtube.com/watch?v=nqxmn1ZuMw4

I'm shocked !

D.B. Echo said...

NEPAConservative, if you think that's bad, you have to watch this:

http://www.youtube.com/watch?v=oHg5SJYRHA0

Now THAT's shocking!

Michelle D said...

Is PNC one of those banks? Cuz like, I need my f-ing money. Next step is to withdraw it all and hide it under the mattress. Oh wait. Now everyone knows my secret. Damn. Maybe I'll hide it in my sock instead.

D.B. Echo said...

I'm going to withdraw all my money and hide it in my wallet. Or maybe my pocket. My change pocket.

NEPAExpat said...

Just Google "1926 Florida real estate crash" or if you feel like spending a few dollars buy "The Great Crash" by Galbraith.

We've seen it all before and excess credit focused on real estate eventually leads to chaos in the system. Real estate is a HORRIBLE investment because it is the most common investment bought on margin. When credit dries up (because creditors feel like they won't get paid), the money supply contracts. That eventually leads to a cratering of the economy because the government is hellbent on saving bad assets versus investing those that can grow the economy.

Too bad no one told Paul Kanjorski before he took all the blood money. Don't worry, Republicans will probably make him their patron saint when the other side asks for more regulation. They'll just say the old hack should be able to handle oversight first.

NEPAExpat said...

FYI...

Washington Mutual is toast. It's the largest bank failure in history. At some point, the FDIC runs out of money. We'd be kidding ourselves to say they are prepared.

We can't change the course of the bailout, but I highly recommend getting your hard cash out of Wachovia ASAP. FDIC is undercapitalized and by law they have up to 3 months to return money below the $100k limit.

Anonymous said...

YOUR POST IS NOT ONLY B.S. BUT ALSO A TOTAL WASTE OF MY TIME. YOU HAVE ABSOLUTELY NO KNOWLEDGE OF THE MARKETS.

Coal Region Voice said...

When you bet $40 and only can lose $1.....that's not bad at all. If your keeping score at home:

GHWB - S & L Crisis - Thank God Neil made out ok at Silverado.

GWB - Great Depression II

McCain - Social Security? Healthcare?

professor milburn cleaver, opa said...

Unfortuately, as Mr. McCain's heart was in the proper place as far as bypassing the debate is concerned, pure politics has given him no choice but to eat his own words. It would be ridiculously futile for the McCain campaign to have Mr. Obama present this evening fielding questions from the Liberal Mr. Lehr with an empty dias next to him. For Mr. McCain it would have been pure political suicide.
As far as our financial situation is concerned, the Webmaster is partially correct as the markets live and/or die purely on speculation. Let me demonstrate: Let us suppose that a well respected art critic publishes a convincing article on the paintings of Jackson Pollock. And let us presume that the critic classified the paintings as nothing more than splats of paint that any five year old could have accomplished in a brief afternoon. Now let us suppose that the owners of some of these masterpieces panic and sell them for a "song". Overnight the reputation and power of Pollock's work is gone, simply because of speculation. Alas, such is the case with our financial markets.
As many of you are aware, I have no use for those on welfare, but if I must be honest, they have no use for me, either. But students, there is a huge difference between everyman welfare and what the Liberals refer to as "Corporate Welfare". If we view our nation as a human brain then our financial institutions are most certainly its cerebellum. Without them, we all shall collapse. Without the bailout, everyday Americans will not get credit, see massively rising prices, lose jobs as the businesses who employ them will not be able to acquire credit. Etc. etc.
Of course, it is time for the lending institutions to refrain from awarding loans to the little children for a 25,000 dollar vehicle whilst they earn minimum wage working at Burger King; It is because of these instances that we are in this silly mess to begin with. Class dismissed.

NEPAExpat said...

Anon,

We know you were probably asleep in class when they presented the money and banking section of Macroeconomics I. When banks make loans, money is created. The problem with the last few years is that people began treating a necessity like an investment...and like an investment, it falls to its intrinsic value after depreciation (PV of monthly value of rent * x number of months depending on quality of location).

If real estate was such a good "investment", why is there such favorable tax treatment required to induce transaction volume? Between the $500k cap gains amnesty and mortgage deduction insurance, real estate brought in a bigger bunch of get rich quick scamsters than the dotcom era could ever produce. At the very least, we see real value in the technology we found. There's no value in encouraging the real estate pyramid scheme unless you drank the Amway kool-aid.

Since no one can afford to pay in cash, leverage is required. We're now seeing what it is like when leverage unwinds on a mass scale not seen since the late 20's.

Anon, maybe you should experience the virtues of an oversight free market. Your opinion would certainly change if Pennsylvania went to a deregulated utility market next winter and an enterprising energy trader looking for a big kill finds a way to arbitrage the electricity market and in return leaves thousands of people without light on a January morning. Wake up and realize that in a market system ethics go out the window. That's why we have a government in the first place. It's not supposed to pull an Ed Hochuli and decide winners and losers on its own. The pure intent was to give a level playing field so that markets could work with mitigated consequences.

Anonymous said...

There is a scientific law called the Law of Conservation of Mass, discovered by Antoine Lavoisier in 1785. In its most compact form, it states: Matter is neither created nor destroyed. Now, it is however moved from place to place. When a loan is made money is not created; it is simply moved from one place to another.

This crisis was created by the greed and stupidity of traders who thought they were cleaver. When you secure a mortgage at a bank that note is not usually held by the bank. Since money is neither created nor destroyed the bank needs to sell that instrument to a financial institution so it can recoup its money to make more loans. I secured my loan at Fleet bank but was shortly informed that Wachovia was taking over the payments.

When you make loans based on zero down, or 5% down, there is not enough equity in the loan for the risk taker, hence the reason the bank wants to unload the loan. Usually there is a much higher interest rate associated with such loans so the financial services industry sector justifies buying such risky mortgages with the potential to earn more money than the going rate. Middle executives at these companies were able to convince their bosses that it was worth the risk.

Why do I say greed? Appraisers were told how much they needed to appraise the houses at so they could convince the loan officers internally to make the loan. Home prices continued to climb and just like a pyramide scheme as long as the train keeps rolling you don't see the exposure accumulating on the other side. The junk pile kept getting bigger. There was pressure to put anybody and everybody into a home. Of course the pundits will blame Bill Clintona and George Bush but the reality is that greed inside the corporation for higher bonuses fueled most of the speculation into mortgages by these financial service institutions

Eventually we had a pricing bust and prices started to drop. For most affected by this crisis the value of the home is less than they owe on the home. They are upside down. They can't make payments becuase in addition to the appraisal mess purchasers were allowing the paperwork to include the downpayment in the purchase price of the home. Lenders get to keep the points paid to originate the loan so they weren't afraid, nor were the realtors, to ask for such shenanigans.

When the equity in the home decreased it set up in motion a impetus for people to simply walk away from the loan causing the housing foreclosure crisis. People don't pay; banks are stuck paying with their own money on the funds they borrowed to purchase the junk.. and here we are.

Here's a link to a great video about it. It's ten minutes long but I think most of you know how to use the pause button to take that bathroom break. http://www.youtube.com/watch?v=H5tZc8oH--o

Barry said...

Hello Anon,
In the Law of Conservation of Mass Antoine Lavoisier makes a tragic flaw in his argument. Once matter is created he is fundamentally correct. However he fails to account for the first cause of the matter. He and his ilk cannot account for an uncaused first cause.
If you wish to argue Lavoisier then explain matter ex nihilio.
Best wishes,
Barry O’Connell

Anonymous said...

Interesting string- One question though- Don't the people who took out the loan have some blame in this matter. I am talking about the person who took out a $100,000 mortgage when they were making $10 per hour (I saw this on Oprah, now stop laughing) or the person who took out the $400,000 mortgage when they were making $100,000 between them. Should the banks also be held responsible- Absolutely. I am a free market person but this was not a free market. So the question is what do we do know. I like the idea of the House Republicans and have the bad assets insured by the people who created the mess- Wall Street. I also like the idea of the taxpayers getting an equity position in the companies and no golden parachutes for top executives. If the top executives don't like it- F them. Give them 15 minutes to pack there bags and have security remove them from the buildings. The current WAMU CEO is getting between 13-18 million for 3 weeks of work. Before any of you get any bright ideas I have already submitte my resume for the job.

We need to have leadership in the Presidency and in Congress. We will have a 10 trillion dollar debt as of January 1, 2009. We have two parties that have given us a budget defeict of $420 billion this year and they were proud of that. By the way that does not include the costs of the war- presently 10 billion per month. They are promosing us better programs and tax cuts. When the house comes down can somebody wake me up so I can enjoy OZ (fantasyland) also.

pj the wb lefty said...

Interesting how W, who many of you GOPers out there just fawned over for 8 years, is now just dismissed. His team comes out with a plan...how come you're all not all gung ho on it?
He could do no wrong according to you for the last 7 years...what makes this so different?

Anonymous said...

Pj- We all had hope that he would lead on conservative values. I was one of them. I thought he would continue to grow the economy and reduce the debt. I was wrong about him and all the Republicans. I am not switching parties because I still beleive we need to control our economic future and I don't think the Dems have a plan and either do the Republicans. We are paying 220 billion in interest on our debt. Imagine what we could do with that money- secure Social Security, invest in our infrastructure, develop new energy technology- That is for the first year and imagine what we could do the next year. I want a leader who will stand up and tell us the problem and how everyone (rich, poor, white, black) is going to have to pitch in and fix the problem. We have neither with Mccain or Obama. Just more promises of more programs and reduced taxes. I like lower taxes but I also see a light at the end of the tunnel and this is going to be one big train wreck.