(POL) Stimulus'ed out yet? You ain't seen nothin yet...
 

You know what? I give up. I can't pay attention to all this. It's voodoo economics. It's nearly Zimbabwe-in in insanity.

BBC NEWS | Business | US unveils new $1.5 trillion plan

US Treasury Secretary Timothy Geithner has unveiled a comprehensive bank bail-out plan worth at least $1.5 trillion (£1.02 trillion).

Under the plan, the size of a key Federal Reserve lending program will be expanded to $1 trillion from $200bn.

In addition, a public-private investment fund of $500bn will be created to absorb banks' toxic assets and could be expanded to $1 trillion.

"Critical parts of our financial system are damaged," Mr Geithner said.

"Instead of catalyzing recovery, the financial system is working against recovery, and that's the dangerous dynamic we need to change," he added.

The new plan is aimed at restoring confidence in the damaged financial system and restarting bank lending.

The key question now is how eager the private sector will be to participate both in the new investment fund and the new Federal Reserve lending programme.

Meanwhile, the US Senate has backed an $838bn economic stimulus package which will now have to be reconciled with the House of Representatives version.

It's going to cost $15 for a loaf of bread after all the inflation occurs from these bailouts. I have a feeling our wages won't rise at the same level...

I think we're inflating to equilibrium or close to it....were not working from baseline IMO right now.

Seems like it would make as much sense to just start printing more money.
Which is probably going to have to happen anyway since I'm not sure how they plan to tax us enough to pay for all of this without needing bailouts on the single individual level.

It's getting to the point where I'm starting to wonder if this was all carefully orchestrated & planned to finally accomplish a large scale income redistribution scheme.

It's become 100% crystal clear that the Democrats had some unbelievable motives in winning this presidency and they are going to destroy any sense of a free market. It's horrible to watch this happen and know nothing can be done about it. It's also amazing how quickly this is happening. They are destroying the United States of America. Period. (and yes, Republicans helped their last 8 years)

lol - really...the paranoia is astounding. it's not a partisan thing.

to think that somebody engineered this, and that anybody is excited about it

Flasch: Here's the thing. I'm independent, leaning left. I am the people they have to have firmly on your side because there's no way in hell the right-side of the ledger is going to view this as anything but anathema.

And they've completely lost me. The numbers just don't register. They have no meaning. It's more money then you could ever see in a lifetime. It's funny money.

There has to be a point where if the lending market won't budge, like Sisphyus of greek mythology, we decide "We're not going to push that boulder up the hill no more" and just step aside and let it go before it starts back on its own side and runs us over on the way.

rowech: I have my biases, but give me a break. The people to blame is thiose people who believed that tweaked the right way, everyone could make more money then inflation. Pursuit of the almighty dollar, and damn the long term consequences, Freed of oversight, and rules, and enforcement, the money making wheel would forever spin faster and faster.

News flash. TANSTAAFL.

The Machine over the last eight years got unbalanced, overloaded and pushed faster then it could go and now the smoke is pouring out of it, and there's the sounds of metal stressed beyond the breaking point, and you want to blame the new mechanic who just got on scene?

That's the thing, the "solution" are old-school, nothing new and to be expected. Especially when they feel they MUST do something RIGHT THIS MINUTE. No time to fix the root causes, just throw enough money at the symptoms and they hope that something will stick.

It is amazing to me that they have this much money to spread around. Times sure have changed when everyone was critical of the Rep Congress spending money like drunken sailors.

You are talking about the current bailouts and stimulus bills, right?

Bucc: I'm critical too. I do agree with Rowech (to a point) that we have to take our medicine, now matter how bad it tastes (even with some spending sugar to try to take our mind of it). I just say the burden of fault isn't where he claims it is.

edit (to your last post) No. I'm talking about the Gordon Gekko-ish "Greed is not only good, but it's the only way" and "Free Markets are the answer to every question" methods of the last decade, combined with enforcement and regulatory dismembership, that led companies to constantly chase the short term dollar at the expense of general health

that may be true, but i fail to see how you can assign responsibility for that to one political party or another.

shit, you don't see the liberals on the board claiming that it was all the fault of the administration that has been in power for the last 8 years, although you're happy to claim that it was part of some master plan by the party that's been in power for less than a month.

it's not one party or another. both parties have a vested interest in the economy continuing to run smoothly. and honestly the financial + monetary policies of the fed and the treasury are largely independent of the political parties

Guess you missed the part where I said both parties had part of the blame.

I disagree. $ has been disappearing at an enormous clip. I go back to the shoe box in the closet to prove the point. We're literally only print a portion of the money that has simply gone away, ne'er to be spent again so I do not believe that hyper-inflation is on the other side of this.

NOW, if you want to argue our country's bond rating vs. the willingness of the world to lend to us or use the $ as a debt instrument than we have a different tact but I do NOT agree that we're over-inflating at this time.

Could I be wrong? yes, but to say that we are now is wrong IMO. The gov't will have a much easier time controlling inflation than trying to fight what is going on now, which is deflation.

Give me a break, rowech: 95% of your post was decrying one side of the issue, damning them all to hell and sundry, and then "oh yeah. The other side sucks too".

I'm livid at what the Democrats are doing to handle this situation. It's unfathomable.

However, both sides are completey responsible for putting us into this mess.

And I was refering to the pursuit of the almighty dollar in federal give-aways, and damning the long term consequences of interest debts and inflation; coupled with lack of oversight, rules, and enforcement in how the bailout and stimulus will be spent or being held accountable. It is simply the federal money making wheel continuing to spin faster and faster.

Dumb question. Why is deflation so bad? Does that mean I can by two bags of chips and a soda for a dollar?

Yeah ... problem is, you won't have the dollar because you work(ed) for the chip and soda manufacturer.

And to a point, I agree with you, Bucc. Let's say this. The wheel has been unbalanced too far one way, and now in an attempt to right the ship, they're tilting it too far the other way.

I saw some quotes in the article that led this that made me sick to my stomach.

"Investors want clarity, simplicity, and resolution. This plan is seen as convoluted, obfuscating, and clouded," said James Ellman, Seacliff Capital president.


"It's not big enough. There are few details. The administration is trying to buy time and they don't get the fact that we need to get something yesterday," said Joseph LaVorgna, chief US economist at Deutsche Bank Securities in New York.

They don't want details.. really. They don't want black and white. They want a quick band aid, with loads of loopholes and get-bys so they can do whatever they want with it.. They think they have a better idea on what to do with the money then anyone else. So give it to them, and they'll do it right this time, honest.

We do need spending to a point. I looked at the things cut from the Stimulus bill, and by and large, I don't have a problem with them being cut. I look at a list of the things remaining, and a lot of it, I have no problem with it. But we need to be carefully aligning the system back into place, not whackin it with a great big hammer.

the same policies the republicans were trying you mean? :banghead:

I don't know if I agree with that view, it seems very selective. I look at the last 40 years and basically seen the same thing over and over, just more federal spending and increased federal powers. There were times of boom and bust (early 70s were bad, so were the early 80s, early 90s and early 00s..wait a minute...could this be a cycle?). The federal govt has never been smart about doing a lot of things economically because they usually just add more layers of complexities to an already complex set of laws, rules and expenditures.

and you wont buy it for a dollar because you think it'll be $.90 in two wks....obviously a coke and chips may be on a different timeline but you get the idea.

Like gasoline prices? ;)

deutsche bank securities isn't likely to benefit from the bailout money directly Foz. they're not lining up for TARP funds. And they're so diversified - I'm not sure what their books are looking like lately off the top of my head, but i don't recall seeing anything about them being in any type of unusual trouble. And Seacliff Capital is an investment manager not a bank or anything.

edit: check that, here's some baseline numbers off wikipedia

Revenue	▼ € 13.490 billion (2008)
Net income	▼ € -3.896 billion (2008)
Total assets	▲ € 2.202 trillion (2008)
Total equity	▼ € 34.442 billion (2008)

Bucc: I'm talking about a regulatory environment that enabled companies to "cook the books" and report things that just weren't true, cuz, "Gosh darnit, we have to report a bigger profit or the investors will flee." and get away with it.

That enabled a regulatory environment that enabled Bernie Madoff. No one thought that "wait, here's a guy who constantly beats everyone else, no matter what the market.. and he won't say how he does it, because it's "too complicated to explain".. something may be wrong here.." Instead it was.. "Hey! Free Money! I'd better sign up with him! He can do magic, no matter the enviroment".

And let's not forget the housing credit market. People gambled that people with bad credit would forever be able to pay off their loans, and cooked the books on it, reporting bad debt as good.. because after all, they've been able to pay so far....

(edit: I'm off line for a bout a half hour, heading home)

I've seen nothing so far to convince me this isn't a REPEAT of the Jimmy Carter administration. We hit double digit inflation then and I have no doubt we'll see it again...perhaps at an accelerated rate since we're talking about a titanic boost in already astronomical deficit spending plus an unprecedented grab of power from the private sector by the government.

And since everyone keeps hoarding money figuring things will always be cheaper, the economy spirals downward.

In addition, if you have borrowed money, the real rate of interest you will pay becomes higher during deflation. It's good for lenders, but bad for borrowers.

And those have only happened in the past 8 years???? (looking up the dates for Enron...hmmm...and the dates for the early 1990s California housing bust) I see that just a continuum of the same trend that has been spiraling downwards (with periods of booms and busts) for quite some time (since the advent of easy credit).

And how is it any different than the beginning of the Reagan presidency, where the administration was having to deal with the slumping economy they inherited from the other party, and decided to spend their way out of it?

Which goes back to the old adage that everyone seems to know and quote, but no one seems to follow, "If it looks too good to be true...it probably is."

And the Dem Congress under Tip O'Neill was legendary in giving away federal dollars, as long as he gave Reagan his military expenditures.

The Nixon administration's economic policies launched the malaise of the 1970s IMO...the Carter administration's "fixes" exacerbated the problem. So far things are looking creepily similar.

We're about to see the death of modern capitalism, one way or another... not that modern capitalism is a good thing, I've pointed out the flaws and how it has strayed for months now (and that was just scratching the surface). The thing is the politicos and banks are going to ride this horse right to the breaking point before economics itself lays down a smack down.

For the deflation crowd out there, do you think prices rose in the last two decades at the rate of imaginery bank leveraged money? Guess what, no... if you follow through the math on a massive money printing scheme to replace bank leveraged dollars, you get REAL inflation (as in I go to the store with a wheelbarrow of dollars to buy groceries). Deflation only exists in the artificially inflated values of the banks, hell even the damn market realizes this, it is why shorting the banks has been a valuable major gamble every time I did it. If we keep trying to replaced super-leverage with 'official government backed leverage' we are going to be in for one hell of a DECADE, not just a couple years.

BTW, this is hardly a surprise. It became clear before the first bailout (heck go back to the first company level bailout) that this was going to be a never ending cycle of handouts. Incentives, its not just for theoretical games anymore! If the path to money looks easier through government handouts than cleaning up your business, you are gonna be damn sure to see these lazy 'leaders' get in the welfare line. They are no better than all the people they criticized as 'go get a job you bums' who were in line for welfare cheese.

What "fixes" so far have exacerbated the problem? There hasn't been a stimulus bill passed yet, so there is no way to say one way or the other what the impact has been.

You have been trying to link Obama to Carter since way back in the primaries, and you've already made up your mind that Obama=Carter, no matter what happens.

yes, it was funny money from top to bottom, from the CDO's to the MBS' to the Leveraged loans to the Collateral to the appraisals to the prices to the taxes paid, it was an inflationary bubble that when pricked started to trickle into other asset classes. Now that the the money movement has gotten through pretty much as many asset classes as there are/were there is no place left to hide. We now have the deflationary effects which the gov't HAS to fight to get us to land at some sort of equilibrium.

One could say that the magnitude of all of this, compared to the Nixon or Reagan years, is quite different. But not exactly. The GDP has gone up 500% since 1980, and personal consumption has increased 5-folds as well. All with a US population increase of 34% and a rapid increase in the global economies.
http://www.infoplease.com/ipa/A0104575.html

The proposed fixes in the "Stimulus" Bill. If everything works like you seem to think it will and we become the U.S. of Shangra-La, feel free to crow all you want. I think it's a disaster waiting to happen and will put us in an economic mailaise for the next decade.

I'm not a fan of massive deficit spending, the one area I fault Reagan for not standing up to the Democrats and vetoing some of those budgets they sent to his desk like he said he would.

The Fed operates with money it takes from us or borrows. In business, when you operate that way, you ALWAYS reach the point where there just aint no mo money to be had. Even if they raise taxes on everyone, the Fed is still going to have to start printing more money, and inflation is going to go through the roof.

I'd rather have the government buy up a whole bunch of property on the cheap with that trillion dollars, than give it to a failing market to save us. We are going beyond Keynesian economics here to something that is just plain imaginary and paying lip service to having any basis in rationality.

As an independent, both Bush and Obama have been spend crazy and taking the wrong road. They even seem to have the same general interests pushing their primary buttons (they just differ in some of the special interests they are going to dole out cash towards).

Speaking of inflation.

http://www.reuters.com/article/newsO...5160AM20090210

U.S. offers $2 trillion bank plan but stocks slump

By Glenn Somerville
WASHINGTON (Reuters) - U.S. Treasury chief Timothy Geithner on Tuesday unveiled a new bank rescue plan that would put $2 trillion to work mopping up bad assets and restoring credit, but stock markets plunged on fears it would not work.

Global markets had intensely awaited Geithner's ideas for a plan mixing private and public funding to stabilize a financial system tottering under the weight of bad mortgages, but were disappointed over the scant details provided.

The Dow Jones industrial average ended down 4.6 percent -- its biggest one-day percentage drop since December 1 -- with bank stocks hit particularly hard. U.S. government bonds rose as investors scrambled for safe-haven debt.

Where have I stated that the proposals are the magic fix? What I'm saying is that nothing has been done yet, and there has yet to be any impact felt. You've already pronounced them a dismal failure before anything has even been agreed upon.

Besides, wasn't it Dick Cheney, Republican Alpha Male, who reminded us that "Reagan proved deficits don't matter"?

Actually the Senate has passed their version of the "Stimulus" package. So now its only a matter of the Senate and House Democrats getting to the point where they can join hands and sing Kumbayah.

Back of the napkin calculation:
$2 trillion
Assume 400 million peasants.

That is 5000 per peasant. That number of peasants is so large it should probably cover most of the tiny, baby peasants too. How big of a mess are the banks in that each and every one of us paying in 5000 would still not be enough to fix it?

How come only 50 billion of that is going to preventing foreclosures, which are the nominal reason for our economic meltdown?

Can you say leverage + imaginary instruments that do not even exist = 2 trillion?

Can you say "screw the banks and their games, clean up real assets those imaginary instruments are based on (only getting 50 billion btw) and let companies dealing in monopoly money with each other bite it"?

We can survive without the massive banks believe it or not, it'll be a hell of a mess, but it could be executed cleanly if we tried. But the banks and their bad decisions clearly cannot survive without us, at this point they are probably at the cancer level going to take us down with them.

LOL, atta boy Chucky...

#1 - nice to see you backtracking now and admitting that there is nothing that has been passed already that has exacerbated the problem, just that you think that it will moving forward. Not to make this a personal attack, but I'm curious as to your credentials to be able to pass judgement on macro-economic matters.

#2 - history lesson for you: Those massive Regan-years budgets were driven by military spending.

I do agree with you on a lot of this. Wasn't it you in the other thread who said something about the amount of money being thrown at this being enough to payoff everybody's mortgage?

Actually, based on the graph, it looks like the spikes in military spending under Reagen were less than under Eisenhower and Nixon...course those spikes correspond to Korea and Vietnam.

Looks like the deficit really got going during the Carter administration, and obviously you can't attribute those deficits to out of control military spending.

I guess the Dems were content to give Reagan his military expenditures as long as they didn't have to cut any of their social spending, but that did make those red bars grow.

They should have just bought all the bad mortgages 3 months ago with the other stimulus. If the people fail to pay them off, just treat it like student loans and make you never be able to bankrupt the debt away.

But this is just sillyness of an epic scale right now.

What are you talking about?? :confused: :confused::confused:

My point was that massive military spending during the Regan years was the equivalent of social spending (and actually in most of the years outstripped it), and that was what resulted in the massive spending bills during the Regan years.

I'm not even sure how you're trying to spin that into "well the democrats should have given up some of their social spending," but I guess I shouldn't be surprised coming from you.

Please please tell me that's what you're trying to say?? :D Please tell me you're trying to argue the common misconception that it was the Regan-era military buildup which broke the back of the Soviet Union and forced it to implode?? :D

Because otherwise I'm not sure what point you're trying to get at.

Rumored mortgages is 10 to 15 trillion (I think that is the largest I've seen).

Rumored bailouts (company + larger packages) + FED lending is up over 9 trillion by now. This new guy I think pushes it to 11.

I will admit, I need to actually research a source, its not a statistic I track for 'bizness' purposes.

Some stats I do track:

SDS - Short S&P 500
= +6.9 (9.47%)

SKF - Short Financials
= +22.5 (18.43%)

SRS - Short Real Estate
= +9.34 (17.54%)

Paying off all the mortgages won't fix the financial sector. One, there's a lot more bad debt than just residential mortgages. Two, the way the loans were packaged and leveraged has left banks owing 10 times or more than the underlying value of the loan.

After all I've read I think the two options are nationalization ala Sweden or giving obscene amounts of cash to the fuckers who got us in this mess. Unfortunately, IMO, it seems as if the Fed and Treasury folks are more concerned about maintaining civil relations at dinner parties than in protecting tax dollars.

nationalization is a step they don't want to take though, because in the short-term it will massively discourage private investment in the financial sector (and by private i mean all non-governmental $), and even if the banks are eventually re-privatized it will be one of those things always lurking in the backs of people's minds as a precedent that has been set, and thus will have an effect on the risk people are willing to take and what-not

although i think i personally am for some degree of nationalization

The problem with all that leverage is it is called in when the money stops trickling in. Its the promise of future payments that allows it to survive (nasty beast that it is), not really the payments itself. That is why government stepping in with the mortgages with a giant clearinghouse of doom (yes I like my doom adjective) would have made a difference. Assume all the loans in danger, make them payable by the consumer, or if that fails, give the government title of the land and have it make the payments.

To prevent sheer stupidity, the government eventually needs to take apart those loans and use its negotiating power to either cancel them or package them down to a price they were willing to pay for a bunch of land and houses. With these toxic assets, it would be the responsibility of the toxic asset holders to register the instruments and demonstrate it maps to a particular mortgage, at which point they get a remapped income stream after the mortgage is reworked.

The key is, the government could probably keep various segments of these mortgages alive for a year or so before renegotiating, at an expense less than the total amount of the mortgages. If they decide it is the best for the country, they could have kept the payment scheme exactly as is for some time period in order to keep the 'toxic assets' away from death (and the subsequent margin calls and spiraling debt crisis, assuming it is all subprime related). It also puts the government in the position of killing a lot of fraudulent debt outright when the time was right (controlling payment schemes and requiring the companies to assist in untangling their true value). Also you avoid outright defaults of the mortgages, which trigger re-adjustments in their value, and probably somewhere down the line an automatic adjustment in the toxic assets derived from them when the income stream is not being delivered. Companies, in too deep, did not want to deal with consumers whatsoever, they wanted to play their standard line of being all invincible... instead they triggered the defaults that ironically triggered their own much larger defaults.


Note, this does not handle massive debt that was not ultimately backed by mortgage debt. While the popular line was it was dumb poor people getting mortgages they could not afford that sent the economy tanking, it could easily be argued that even completely healthy mortgage sector would not have helped if the daisy chain explosion started in some other exotic instrument category.

Also, yes, government taking on the mortgages may also trigger a re-eval of their value, even if they commit to some short term period of maintaining the payments. Since there is an expectation they will be reworked, and that the new price would probably be less (perhaps a lot less). I still think the resulting market price would be higher than the price we are getting with massive foreclosures and all the ripple effects that has. And as a side effect of the plan, the government owns a bunch of assets (rather than banks) that they could probably survive holding onto a lot longer than the banks. And presumably auction off for some reimbursement of tax dollars down the road.

I just don't see this wealth redistribution you're talking about. All these bailouts keep going to the rich. Throwing a token $500 tax cut or some better student loans at the poor is nothing compared to the phenomenal piles of money we're throwing at large companies to "fix" them and I'm pretty sure that money isn't going to "trickle down" to the workers. That's staying in the pockets of upper management after the companies are somewhat recapitalized (not that it will likely even work).

Oh, and it's going right back into the pockets of investors- not long term ones- they're losing money hand over fist- but the ones who like to game the system. The ones who are already rich and just looking to turn their millions into billions.

SI

That still presents a huge problem, tho. Giving out 5000 to every person doesn't fix the problem of no jobs. Particularly if, in this climate, most everyone will either hold onto the money or pay off some debt. That really doesn't help people who are behind on home loans- they'll be right back where they are now soon enough. And then that doesn't address the upside-down loan problem.

That's why just throwing tax cuts back at people will be throwing it into a giant pit. Not that a lot of these other plans aren't either.

SI

Considering that by and large this mess was created in the late 90s and early 00s, 6 of those 8-10 years were GOP Congress and GOP President- I'm going to say that no, both sides are not equally responsible.

SI

LOL. Yes let's not make it a personal attack. Not in FINANCE like some bright bulbs around here...but then, my portfolio nest egg hasn't suffered nearly so much as some of my friends because after seeing some of the warning signs, I disregarded what my financial adviser told me I should be doing and put it in what I thought were safe investments.

Have a Bachelors and Masters, work for Tribune company, and like to think I'm well read. Plus I'm a lot older than you and have been around the block a few more times. Let's face it, I was getting laid while you were still pooping in your diapers.

LOL - hey now. I was out of diapers very early, so you might be wrong about that. :p

Glad to hear you haven't suffered as bad as some others though.

My only point was to try to draw things away from people on either side declaring "this is what MUST be done, and I know!" because in reality, nobody on this board has the PhD's or high-level macroeconomic policy experience to know what must be done and what will work.

Do I think Geithner's plan has some flaws - certainly. And I'm certainly open to discussing them and suggesting better. But I also recognize that Geithner, Paulson, Bernanke, et al got to where they are because they're (in most cases) smart guys. And they know more than I do, and they have good relationships with people who have even more knowledge then them.

So I'm down with critcizing the plans that are out there (certainly I am), but I don't suggest that I have the magical solution.

Yes, the Democrats were up in arms about the mortgages being offered during the Bush administration. Time after time they pointed out the errors in policy.

(Insert picture of Barney Frank and Chris Dodd wearing shit-eating grins)

Both sides were to blame. That's a fact.

Who had three weeks in the Time-It-Would-Take-For-Obama's-New-Change-Hope-Bipartisan-World-To-Last pool?

They would have lost. It wasn't more than two weeks before the unicorn herd was butchered.

quoted for posterity :D

I do believe I was screaming about Bush's SOtU address back in the day, no?

That's wealth redistribution too. ;)

Our economy basically has a terrible case of "the flu". Our options are:

1. Keep shooting cough syrup and Tylenol to remove the symptoms, but never let our fever break and the system heal.

2. Deal with a rough few nights (maybe 1-2 years in this case), let the fever break and our body recover.

For some reason, we seem unwilling to let the illness take its course, our body correct and we can move on healthier. Instead, we are terrified of the symptoms and never ending up going through a little pain and letting our body kill the illness.

I'd disagree and say your tolerance of pain will be different than each and every other person as will theirs as will the gov't. collective.

yeah, cept that's not a great analogy Arles.

not when "pain" in this case means millions out of work and evicted from their homes and living on the streets with their children, and consequently unable to retire when they are older until their bodies start to break down and they develop more health problems because of that.

We can't afford 1-2 years of that without trying to arrest it. Sure if it happens despite what we're trying to do to fix it, okay. But we can't just make the conscious choice to do nothing. The ramifications of that choice are too staggering - and I don't think a lot of people necessarily realize that. Whether it's because a lot of people have their heads in the sand, or have the "it won't happen to me" syndrome, or what, there is a lack of realization of what a serious depression would do to this country - particularly to the working poor, the lower middle class, etc. Now maybe a lot of people here aren't living "on the edge" - but i'm also willing to bet that some are and aren't comfortable saying it, or that some don't realize the effects that this would have on their comfortable lives, as far as dragging them down closer to the breaking point, or increasing crime in their neighborhoods, or whatever.

The economy isn't your body in this analogy of sickness. It's your lungs, or your heart, or your brain. Something you can't just "sit back and take the pain" in for a prolonged period of time, because it will kill you.

Do you know what the consequences are of the bill that was passed yesterday? I certainly don't, and certainly can't say whether it's better or worse than doing nothing.

After all, the government certainly did "something" a few months back and now the president is saying, well, we've got to do something more or else the world is going to end.

Politicians of all stripes use crises to enrich themselves. To accept what they are selling is foolish at best.

Some of us believe that the passing of the original TARP plan helped, a lot. It only unwound when Paulson vocalized a different intent. He torpedoed all of the stability it was providing and I, for one, blame him for sinking it.

Flasch and Daddy have both now voiced this opinion and I'm sure they're not the only people that believe this. It's a very frightening thought that some people believe that doing nothing is not a viable option in times of crisis.

equal yet opposite of yours. I just wish I had a blog to help me, hang on and Ill create some stats to back up my side. Your statements equally frighten me.

Yeah, look how well that worked out for Nero while Rome burned.

i believe even Nero did something, no?

The problem is that it is very clear that some horrible decisions were made to get us into the mess, and the people making those decisions made a ton of money. And the government doesn't seem to want to do a darn thing to punish those responsible for getting us into this mess, and in many cases are REWARDING them for doing so. There has been an attempt by this administration (maybe the one thing I applaud them for) to limit executive compensation for those that take stimulus money, which has banks considering giving it back, meaning they did not really mean it in the first place. Look at the salaries AIG paid out after getting their huge check!

You want to gain my confidence in the economy? Stop rewarding those who got us into this mess, and stop changing what you think we need to do every day. First it was buy the bad securities, then it was hand over money to banks, now it's infrastructure spending, and all the while the folks who created this mess are taking their money and running. Bring some accountability to the table and maybe I'll believe you. Until then I just see a bunch of people lining up at the trough rather than anyone actually trying to FIX anything.

But in this instance we have ample evidence that there are things the government can do to help get capital flowing again. Without arguing the merits of any particular piece of legislation or Treasury guideline, can you at least see that "doing something" is appropriate when we have plenty of reason to believe that will be better than doing nothing?

Exactly. Doing nothing is a much better alternative than the half-ass attempts at a fix that we've received over the past year or so that have accomplished nothing. We're a couple trillion further into the red with nothing more to show for it.

For any kind of leader, be it political, business, military or otherwise, it is never a viable option to do nothing during a crisis. The first rule of crisis management is to assess the situation and develop a game plan for dealing with the crisis. The only time doing nothing is an option is when all other avenues have been exhausted, and the crisis is deemed terminal.

Yes, in ideal circumstances where we know the policy would benefit the economy, there's no reason not to do it. Unfortunately, there hasn't been a single proposed or passed bill over the past year that has done a lick of good, which is disasterous. Taking your proposal one step further, what if they actually do put forth a bill that may do some good 3-6 months from now? The confidence in Congress is so low that people may reject it simply because of who's writing the bill. It's a bad situation only made worse with the failed bills that Congress has been pushing through.

But that's different than what I'm saying. I'm saying that the alternatives presented are worse than the status quo and that they need to go back to the drawing board to create legislation that actually improves the economy. That's much different than saying to do nothing at all. It's an indictment of just how poor the leadership and foresight of the current Congress is more than anything else. We've got far too many 'yes' men on the Hill. We need some actual leaders.

Can you please keep your story straight?

How do you know nothing has done a lick of good? It seems to me that TARP and the FED loans, as mismanaged as they likely are, did stem the financial panic. Look at this info about how close we came to large scale bank failures in Sept.


It seems to me that it's foolish to declare all options as failures or successes. Some of this will work and some won't. Hopefully enough works so that we're in a far better position than doing nothing. Given the repercussions of doing nothing, declining tax income, global instability, millions without healthcare, etc., I think it's prudent to try and find a way to increase the velocity of capital.

For those who think it's best to suffer a severe recession or depression right now, there's really no middle ground for us to find.

then Paulson opened his frickin' mouth :)

Here a post from The Motley Fool that backs up and is a source for JPhillips' above quote:

http://caps.fool.com/blogs/viewpost....24249416869148

Actually, I don't think that's the problem, specifically. I think that's what's making us all angry, though.

The problem, specifically, is that the people who made these horrible decisions are still being allowed to actively shape (or oppose) the government's response to the issue. Starting with Paulson's entreaties to the financial sector, continuing with this week's parade of bank presidents saying "Woohoo, look at what we've done with your money! Can we have our bonuses now?"

As I said way, way back (in Edward64's "Recession" thread) we should have followed the Sweden model, like so:

1. The government creates a "bad bank" like the Resolution Trust Corporation for the purpose of buying potentially bad assets.

2. The government offers an asset purchase program for banks, where the government will purchase their bad assets at a price it feels is fair, and will also recapitalize the banks (through low-interest, long-term loans) in return for significant equity.

3. Banks not participating in the government's plan can seek recapitalization through other means or can fail.

4. Banks that fail are sold off to the government's buyer of choice (using Fed/SEC leverage).


The root cause of all of this uncertainty remains the assets on these banks' books that are of questionable value. The uncertainty will never be removed until all of these assets are dealt with. How people are losing sight of this is beyond me.

The banks, however, are resisting any plan such as this, because they want a) top dollar for their bad assets and b) no further government involvement in their affairs. I'd argue they're deserving of neither consideration. These idiots were the prime movers in this financial collapse and their desires should be completely immaterial.

Those two statements are not mutually exclusive.

What if the economy has cancer and the only course for survival is chemotherapy? Would you then have the same outlook?

The severity of the crisis really seems to be at the core of the issue. If you believe this is just another recession it makes sense to see the solution to be little intervention. If you think the crisis threatens the world economy, which would in turn threaten global stability, a large scale intervention makes sense.

And some would choose to die with "The Wealth of Nations" in their hands.

This message is hidden because Mizzou B-ball fan is on your ignore list.

Does that help? :)

I think the stimulus is needed. We can definitely argue around the parameters of said deal- there's a lot of room to mess with.

What I really wanted to see before all this money is handed out is a giant rewrite of the regulation (or, more specifically, lack thereof) that got us into this mess in the first place. Then we are throwing good money after good not good money after bad.

Doing nothing still is not an option unless you completely don't grasp the situation.

SI

+100000000000000

This is the proper solution to this. Although I think with step #2 you could even modify it to say that the government would take the "toxic" assets off the hands of the banks and either

a) hold the toxic assets in trust for the banks for 12/24 months and indemnify them from further losses on these assets in exchange for assuming a significant portion ( >75% say) of the profit (say from today's price) once they are sold (or figured some other way, whatever)

or b) (and i saw this in a WSJ article i posted earlier) do it in exchange for the creation of X million new shares of stock to be disbursed to the public (every taxpayer gets so many shares which they can then buy/sell/hold) -- I'm not really sure exactly how this would work or that i'm a fan of it


But yes, this is the core of the problem and it's what all of the plans so far have failed to address, and it's maddening

Again, my problem with this is that without fixing the root cause of the root cause- the lack of regulation that got us here- what's to keep banks from tomorrow going out and buying up more crappy short term assets? And then we'd be right back here in a couple more years as they try to quickly make up for the bad performance of this past year.

SI

If not having a grasp of the situation means that I don't trust the leadership skills of Pelosi, Reed, Dodd, and Frank to put forth a bill that actually addresses the situation when they totally ignored the warning signs a few years ago, then I'm guilty as charged. I'd rather the economy break itself than allow those people to expedite a process that they're obviously unequipped to fix.

As JPhillips said, a bill that actually fixes the problems would be wonderful, but that hasn't come out of this group in any way thus far. It's a fine example of politics as usual.

This is why the flu analogy doesn't work:



If 1990 was a cold and 2001 was a flu- what's this?

SI

What were the warning signs?

I though this is what the 1st bailout was basically going to do.

sweet jeebus that video is frightening

allegedly. until paulson's cronies got him to change the focus of it to be "$700bn of money that you can't track or ask for reports on" so they could funnel it away

AHA! And now I see where the issue is. This is a political issue for you as opposed to a fiscal one. Welp, now I know where you come from and can rationalize how nutso you seem to be in this particular thread. It's not that youre nutso, its that youre partisan (again). Thank you for clarifying.