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

[SportsDino]

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%)

[JPhillips]

Originally Posted by stevew

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.

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.

[DaddyTorgo]

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

[DaddyTorgo]

although i think i personally am for some degree of nationalization

[SportsDino]

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.

[sterlingice]

Originally Posted by JonInMiddleGA

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.

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

[sterlingice]

Originally Posted by SportsDino

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.

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

[sterlingice]

Originally Posted by rowech

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.

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

[SFL Cat]

Originally Posted by DaddyTorgo

#1 - 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.

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.

[DaddyTorgo]

Originally Posted by SFL Cat

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.

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.

[Mizzou B-ball fan]

Originally Posted by sterlingice

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

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.

[Ronnie Dobbs2]

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

[Mizzou B-ball fan]

Originally Posted by Ronnie Dobbs2

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.

[DaddyTorgo]

Originally Posted by Mizzou B-ball fan

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.

quoted for posterity

[Flasch186]

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

[Fighter of Foo]

Originally Posted by sterlingice

I just don't see this wealth redistribution you're talking about. All these bailouts keep going to the rich...The ones who are already rich and just looking to turn their millions into billions.

SI

That's wealth redistribution too.

[Arles]

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.

[Flasch186]

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.

[DaddyTorgo]

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.

[Fighter of Foo]

Originally Posted by DaddyTorgo

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.

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.

[Flasch186]

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.

[Mizzou B-ball fan]

Originally Posted by DaddyTorgo

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.

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.

[Flasch186]

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.

[cartman]

Originally Posted by Mizzou B-ball fan

It's a very frightening thought that some people believe that doing nothing is not a viable option in times of crisis.

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

[Flasch186]

i believe even Nero did something, no?

[gstelmack]

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.

[JPhillips]

Originally Posted by Mizzou B-ball fan

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.

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?

[Mizzou B-ball fan]

Originally Posted by gstelmack

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.

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.

[cartman]

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.

[Mizzou B-ball fan]

Originally Posted by JPhillips

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?

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.

[Mizzou B-ball fan]

Originally Posted by cartman

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.

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.

[cartman]

Originally Posted by Mizzou B-ball fan

It's a very frightening thought that some people believe that doing nothing is not a viable option in times of crisis.

Originally Posted by Mizzou B-ball fan

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.

Can you please keep your story straight?

[JPhillips]

Originally Posted by Mizzou B-ball fan

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.

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.

On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn't be further panic out there.

If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.

We are no better off today than we were 3 months ago because we have a decrease in the equity positions of banks because other assets are going sour by the moment.

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.

[Flasch186]

then Paulson opened his frickin' mouth

[cartman]

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

[flere-imsaho]

Originally Posted by gstelmack

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.

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.

[Mizzou B-ball fan]

Originally Posted by cartman

Can you please keep your story straight?

Those two statements are not mutually exclusive.

[JPhillips]

Originally Posted by Arles

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.

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.

[Ronnie Dobbs2]

Originally Posted by cartman

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

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

[Fighter of Foo]

Originally Posted by cartman

Can you please keep your story straight?

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

Does that help?

[sterlingice]

Originally Posted by gstelmack

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.

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

[DaddyTorgo]

Originally Posted by flere-imsaho

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.

+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

[sterlingice]

Originally Posted by flere-imsaho

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.

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

[Mizzou B-ball fan]

Originally Posted by sterlingice

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

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.

[sterlingice]

Originally Posted by Arles

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.

This is why the flu analogy doesn't work:



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

SI

[Ronnie Dobbs2]

What were the warning signs?

[Surtt]

Originally Posted by flere-imsaho

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.

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

[DaddyTorgo]

Originally Posted by cartman

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

sweet jeebus that video is frightening

[DaddyTorgo]

Originally Posted by Surtt

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

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

[Flasch186]

Originally Posted by Mizzou B-ball fan

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.

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.