The Bailout....

....is complete bullshit. Thankfully it got turned down in round one but revisions are being made to get it to pass through. From what I gather on it, and please correct me if I'm wrong, but the bailout is essentially making the government, and through that, the tax payers, to pay to keep rich investors who took a risk, from losing any of the money that they gambled with by investing. Assuming that what I've gathered from all the political jargon is true, I make far below the poverty line, and will not pay for the mistakes of the upper 2% of our country.

Discuss.

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Originally Posted by xdoylex

....is complete bullshit. Thankfully it got turned down in round one but revisions are being made to get it to pass through. From what I gather on it, and please correct me if I'm wrong, but the bailout is essentially making the government, and through that, the tax payers, to pay to keep rich investors who took a risk, from losing any of the money that they gambled with by investing. Assuming that what I've gathered from all the political jargon is true, I make far below the poverty line, and will not pay for the mistakes of the upper 2% of our country.

Discuss.

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it's not a bailout though, it's buying bad debt in the form of mortgage backed securities from companies so there is enough cash in the market for credit to flow again. What makes you think it's about keeping rich investors from losing money?

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Originally Posted by xsecx

it's not a bailout though, it's buying bad debt in the form of mortgage backed securities from companies so there is enough cash in the market for credit to flow again. What makes you think it's about keeping rich investors from losing money?

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How is it not a bailout?

The top economists from MIT Harvard and the like agreed with these top 3 reasons the bail out is bullshit. They list three objections to the plan, in a statement aimed to the leaders of the House and Senate:

"1) Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted."


Additionally:
Fannie and Freddie, who basically were the cause of the false sense of security in the market pooled subprime mortgages (mortgages given to people who can't pay them so theyre under an incredibly exaggerated interest rate), and people/companies that could invest in these market pools. Since Fannie and Freddie were initially government enterprises there was always a belief in the market that they were without risk, because regardless of whether or not shit went right, investors would still get a cut of interest, because the general belief was that the government would bail them out if things went bad.
The other thing was that money invested in mortgage pools was guaranteed in order to get people to invest in it. So if people payed off their mortgage, investors got a cut of the interest. If people didn't pay off their mortgage, investors got a cut of the interest that was supposed to develop. So it was risk free investing, and people took advantage of it.
Since it was guaranteed money for the businesses investing, and the very real risk of them not getting it that they would fall apart completely the government subsidizied so the market would not collapse, hence the bailout.
It's publically subsidized but privately profitable. It's basically the American public making it so rich people don't lose their money, by saying if they don't do it the market will collapse. Which it will.
That's the point though isn't it? It's capitalism, there is risk. Eliminate the risk and you're collapsing the market anyways because there is no longer risk and it will just get worse. This is NOT, imho, the way to fix it.

Also, just found out when I got into work that it passed through Congress. Bummer. Theory being its at the white house right now.

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Originally Posted by xdoylex

How is it not a bailout?

The top economists from MIT Harvard and the like agreed with these top 3 reasons the bail out is bullshit. They list three objections to the plan, in a statement aimed to the leaders of the House and Senate:

"1) Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted."


Additionally:
Fannie and Freddie, who basically were the cause of the false sense of security in the market pooled subprime mortgages (mortgages given to people who can't pay them so theyre under an incredibly exaggerated interest rate), and people/companies that could invest in these market pools. Since Fannie and Freddie were initially government enterprises there was always a belief in the market that they were without risk, because regardless of whether or not shit went right, investors would still get a cut of interest, because the general belief was that the government would bail them out if things went bad.
The other thing was that money invested in mortgage pools was guaranteed in order to get people to invest in it. So if people payed off their mortgage, investors got a cut of the interest. If people didn't pay off their mortgage, investors got a cut of the interest that was supposed to develop. So it was risk free investing, and people took advantage of it.
Since it was guaranteed money for the businesses investing, and the very real risk of them not getting it that they would fall apart completely the government subsidizied so the market would not collapse, hence the bailout.
It's publically subsidized but privately profitable. It's basically the American public making it so rich people don't lose their money, by saying if they don't do it the market will collapse. Which it will.
That's the point though isn't it? It's capitalism, there is risk. Eliminate the risk and you're collapsing the market anyways because there is no longer risk and it will just get worse. This is NOT, imho, the way to fix it.

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So you're okay with your entire country going into an economic recession? Despite the impact it would have on millions of people and the international markets?

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Originally Posted by mouseman004

So you're okay with your entire country going into an economic recession? Despite the impact it would have on millions of people and the international markets?

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Am I okay with it? Not even a little bit. I understand at least a few of the implications of a market crash. I make my income based on other's expendable income. If people don't spend money, I don't make anything at all. Hundreds of thousands will lose jobs, and homes. For you to assume that because I don't believe a bailout of investors who may have made some misguided decisions is the answer to economic prosperity, that I am okay with my country going into an economic recession seems a bit hasty on your part, though I understand where you would get that from.

Like I previously stated, I am by no means, an economist. I do think that there is another road to market stabilization, but I don't know what it is. My opinions are based solely on my own personal research, and perhaps my views are severely misguided, which is where this thread developed from. I would love to here other opinions. So instead of going after my views, which is a good thing to do because I want to see where I have been led astray in my research, please make points to support this $700 billion dollar bill footed by taxpayers that will be profitting the smaller, richer population of the country.

Quote:

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Originally Posted by xdoylex

How is it not a bailout?

The top economists from MIT Harvard and the like agreed with these top 3 reasons the bail out is bullshit. They list three objections to the plan, in a statement aimed to the leaders of the House and Senate:

"1) Its fairness. The plan is a subsidy to investors at taxpayers' expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted."


Additionally:
Fannie and Freddie, who basically were the cause of the false sense of security in the market pooled subprime mortgages (mortgages given to people who can't pay them so theyre under an incredibly exaggerated interest rate), and people/companies that could invest in these market pools. Since Fannie and Freddie were initially government enterprises there was always a belief in the market that they were without risk, because regardless of whether or not shit went right, investors would still get a cut of interest, because the general belief was that the government would bail them out if things went bad.
The other thing was that money invested in mortgage pools was guaranteed in order to get people to invest in it. So if people payed off their mortgage, investors got a cut of the interest. If people didn't pay off their mortgage, investors got a cut of the interest that was supposed to develop. So it was risk free investing, and people took advantage of it.
Since it was guaranteed money for the businesses investing, and the very real risk of them not getting it that they would fall apart completely the government subsidizied so the market would not collapse, hence the bailout.
It's publically subsidized but privately profitable. It's basically the American public making it so rich people don't lose their money, by saying if they don't do it the market will collapse. Which it will.
That's the point though isn't it? It's capitalism, there is risk. Eliminate the risk and you're collapsing the market anyways because there is no longer risk and it will just get worse. This is NOT, imho, the way to fix it.

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The buying of bad debt and administration of that debt isn't a bailout, by definition. It's taking bad debt off the books of companies to allow credit to be extended to others.
Do you have any understanding what would happen globally if the market collapsed? You also make it sound like only the rich are invested and are the only ones effected and that's simply not the case.

How would you fix it then?

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Originally Posted by xsecx

The buying of bad debt and administration of that debt isn't a bailout, by definition. It's taking bad debt off the books of companies to allow credit to be extended to others.
Do you have any understanding what would happen globally if the market collapsed? You also make it sound like only the rich are invested and are the only ones effected and that's simply not the case.

How would you fix it then?

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As I have previously stated, I dont have a plan. If I did, I would probably not be working at a tattoo shop and a college book store.

No, I don't know everything that would happen on a global level if the market were to collapse. Please don't assume that I think that the status of our market is not an International issue.
I know my earlier post may have come off that way, but by no means do I feel that the market crashing is what needs to happen, because that's just plain not true. I don't feel that way.

I'll ask again, please make points to support this bailout. That's what I'm really looking for, as I can't seem to find too many in my research based on my own understanding.

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Originally Posted by xdoylex

As I have previously stated, I dont have a plan. If I did, I would probably not be working at a tattoo shop and a college book store.

No, I don't know everything that would happen on a global level if the market were to collapse. Please don't assume that I think that the status of our market is not an International issue.
I know my earlier post may have come off that way, but by no means do I feel that the market crashing is what needs to happen, because that's just plain not true. I don't feel that way.

I'll ask again, please make points to support this bailout. That's what I'm really looking for, as I can't seem to find too many in my research based on my own understanding.

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this
http://www.npr.org/templates/story/s...oryId=95099470

Bless NPR. Thanks for the link, Ill read it now and post a response when I'm done.

To be honest, this article doesn't answer the question that i presented to you.

I'm looking for how the bailout, in the long term, is going to stabilize the market. This article merely further explained the situation which, while enlightening, doesn't really answer why this bailout WILL work.

Do you have any articles that will answer this? Or would you be able to give me a summary of how it will?

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Originally Posted by xdoylex

To be honest, this article doesn't answer the question that i presented to you.

I'm looking for how the bailout, in the long term, is going to stabilize the market. This article merely further explained the situation which, while enlightening, doesn't really answer why this bailout WILL work.

Do you have any articles that will answer this? Or would you be able to give me a summary of how it will?

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The article explains why the bailout is necessary. The entire credit market is frozen. Taking the bad debt out of the credit market and allowing people to borrow money again is what is going to stabilize the market in the long term.

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Originally Posted by xsecx

The article explains why the bailout is necessary. The entire credit market is frozen. Taking the bad debt out of the credit market and allowing people to borrow money again is what is going to stabilize the market in the long term.

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It really doesn't seem to say that, just that something needs to be done to solve the problem and allow lending on both a large and small scale to flow freely again to avoid a complete economic meltdown. I do now understand better what your saying, but i still haven't been convinced that they bailout is the right way about it.

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Originally Posted by xdoylex

It really doesn't seem to say that, just that something needs to be done to solve the problem and allow lending on both a large and small scale to flow freely again to avoid a complete economic meltdown. I do now understand better what your saying, but i still haven't been convinced that they bailout is the right way about it.

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The article explains the events that lead Paulson and Bernake to create the bailout. The fear driving the bailout is that the credit market will seize up and money will stop flowing. People will freak out and withdraw money and do everything in cash. Everything I've read is that the bailout may not be perfect but that it will ultimately address the issue and stop the bloodletting and will more likely than not end up making the government money.

Quote:

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Originally Posted by xsecx

The article explains the events that lead Paulson and Bernake to create the bailout. The fear driving the bailout is that the credit market will seize up and money will stop flowing. People will freak out and withdraw money and do everything in cash. Everything I've read is that the bailout may not be perfect but that it will ultimately address the issue and stop the bloodletting and will more likely than not end up making the government money.

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Hopefully it makes the government money, and doesn't so heavily profit the investors who got burned by their decisions, you know?

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Originally Posted by xdoylex

Hopefully it makes the government money, and doesn't so heavily profit the investors who got burned by their decisions, you know?

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they can't. the government is buying the debt and selling it back.

Well I guess thats true, they can't profit. They aren't losing the money they gambled by investing, that's for sure. Of course to businesses invested in those pools, it means they are getting the guaranteed interest gains that they thought they would because of government backing, but i suppose if in the long run it saves the economy its worth the government's intervention.

good discussion dusty. Thanks for the insight.