This is a very interesting thread…
Apparently, if you support this bill you are part of the irresponsible segment and you hope the U.S. fails…
Question:
What happens to the value of the dollar, and everyone’s savings and assets, if the GDP and tax revenues shrink by a third, and the U.S. Govt. is no longer able to service it’s debt obligations?
Hint: Think Japan circa early 1990’s.
This will pull down everybody. It doesn’t matter if you were good or responsible. Everyone will feel this one.
[quote]bdog527 wrote:
This is a very interesting thread…
Apparently, if you support this bill you are part of the irresponsible segment and you hope the U.S. fails…
Question:
What happens to the value of the dollar, and everyone’s savings and assets, if the GDP and tax revenues shrink by a third, and the U.S. Govt. is no longer able to service it’s debt obligations?
This will pull down everybody. It doesn’t matter if you were good or responsible. Everyone will feel this one.
[/quote]
for how long? we need a proper correction.
[quote]bdog527 wrote:
This is a very interesting thread…
Apparently, if you support this bill you are part of the irresponsible segment and you hope the U.S. fails…
[/quote]
Do you support the bill because you believe the only alternative to its passage is what you sketch out below?
Agreed that we need a proper correction.
This bill will be the difference between a correction and a depression.
Nobody is even talking about the $630B that the Fed just printed and injected into the system.
[quote]hedo wrote:
AssOnGrass wrote:
I must admit I am at a crossroads here today. I work in an industry heavily dependent upon people’s discretionary income (personal trainer).
The months as of late the client pool has been drying up as the people making under 100k per year has been less likely to pay for services. These people probably made up about 30% of my client base. The other 70% have been a little more resistant to the economic downturns as they have the funds to weather the small things. My concerns are that these clients who are more “wealthy” are generally very smart with their finances and will stop training when their discretionary income starts drying up. Hell I even train a real estate lawyer and his wife (an engineer who lost her job a month ago). Also I had a client who worked for a bank… needless to say she lost her job too and stopped training.
I am trying to hold strong in my ideals that this plan is not the right thing to do in the long run. Unfortunately I know if things get much worse I will be without a job as the business partner of my manager got in too far over his head opening up an additional studio before things were running on auto pilot at the studio I work at.
I don’t know what the point of this post really is… just stating where a lot of American’s minds are at right now I guess.
AOG
No business owner is happy with the state of affairs right now. It’s tough being in a business that relies on discretionary income when fear sets in. The business will not go away for good though. Try and weather it out. If you can’t then find something else to pay the bills. Highly motivated people are always in demand.
I have a many employees in my company and we run a successful small business. I’ve also been flat broke twice and technically bankrupt. Just need to stick to your ideals.
Bottom line. I don’t see a lot of the problems that I am reading about. Credit hasn’t dried up for us. We aren’t heavily leveraged either but credit is still available. Orders have slowed a bit but it is Q4 and things always slow down this time of year. Big financials are screwed but they have made a lot of money over the years. Time to pay the piper for Wall Street.
[/quote]
Yeah I will weather the storm. It was more a worst case scenario for myself if shit hit the fan… Hell if I had to I’d get a job at the utility company laying cables to pay the bills and keep up with my personal training at nights I’d gladly do it. It’s not going to cripple me, but these are the things a lot of people have running through their minds.
The difference is I won’t bitch about it if/when I lose my job. I’ll look at it as opportunity.
Perspective:
Bailout: $750B
Taxpayers: About 138 Million
$750B/138M = ~$5400 per taxpayer
How much did you lose today? Some of us would have benefitted from just bailing out.
I know, it’s not that simple, but it’s interesting.
My portfolio will rebound, just like always.
[quote]bdog527 wrote:
Hint: Think Japan circa early 1990’s.
[/quote]
Even more interesting is Akio Morita’s hand in turning around the Japanese economy, and pretty much predicting the current state of the US economy.
If you read “The Japan that can say no” you would shit your pants when you realize it was written in the early 90s.
fucked one way or another.
Solution: Buy GOLD. Lots of it.
[quote]bdog527 wrote:
This is a very interesting thread…
Apparently, if you support this bill you are part of the irresponsible segment and you hope the U.S. fails…
Question:
What happens to the value of the dollar, and everyone’s savings and assets, if the GDP and tax revenues shrink by a third, and the U.S. Govt. is no longer able to service it’s debt obligations?
Hint: Think Japan circa early 1990’s.
This will pull down everybody. It doesn’t matter if you were good or responsible. Everyone will feel this one.
[/quote]
Katzenjammer-
I support this bill because it’s the only plan I have seen so far that has a chance of working and something is needed urgently.
SteelyD-
No one is talking about it because it’s not an effective solution to the problem. Until these bad debts are taken off of the banks balance sheets money will not be lent and investment will continue to contract.
Everyone is ignoring the possiblity that the taxpayer actually stands to benefit from this plan. If the Treasury buys these debts at .30 to the dollar there is a very good chance at some point they will be able to sell them for breakeven at least, or possibly a profit.
I’m all for tough love, believe me. But I’m not for economic collapse. That benefits no one but the top .01% and I’m not one of them.
There is a significant demand for these assets at the currnet prices but an inability to raise capital to purchase them. The taxpayer has that ability and we could make a good profit.
[quote]bdog527 wrote:
This bill will be the difference between a correction and a depression.
[/quote]
This bill may in fact make things worse: it does nothing to address the fundamental problem at the heart of the crisis.
And then, what if Czar Paulson spends all this money and the problem isn’t solved?
There are MANY problems with this bill - most of them well known (such as how will Paulson establish fair value, etc - or, what happens if this plan doesn’t work?), some less well known: for example, what is to prevent banks from shifting assets and making creative use of their balance sheets to justify a greater portion of the bailout (leading to a new scandal, a boatload of hearings, etc.)
The fact that so little actual debate of alternatives has been allowed should give you pause. And so should their shameless scare-mongering.
[quote]bdog527 wrote:
Katzenjammer-
I support this bill because it’s the only plan I have seen so far that has a chance of working and something is needed urgently.
[/quote]
How many plans have you seen so far bdog?
Just to be clear…I’m not claiming that the plan is perfect, rather, that it is the best I’ve seen yet.
The only other plan I’ve seen is the alternative plan that creates a govt. insurance program to insure the bad debts. I don’t think that will work for the same reason you cannot get flood insurance in hurrican prone states. As long as these assets remain on the banks books they will not lend, no lending means economic contraction which will spiral out of contral, a la great depression.
I sincerely hope that I am wrong.
The Paulson plan should target bad loans, not burned investors.
By Howell E. Jackson
from the September 25, 2008 edition
Cambridge, Mass. - Desperate times may call for desperate measures, but that didn’t stop Treasury Secretary Henry Paulson’s plan from getting a chilly reception in Congress this week. Senators from both parties assailed the $700 billion bid to restore confidence in financial markets, declaring it unacceptable. “We have to look at some alternatives,” Sen. Richard Shelby of Alabama said.
The good news is that there is a very promising alternative to consider �?? one that could be grafted onto the Paulson plan. It represents a much better investment of $700 billion, it’s been used successfully before, and it would help troubled homeowners more directly.
At the heart of this crisis lie two sides of the same coin: Heads are the bad home loans. Tails are the toxic securities that financed these mortgages. The former is what’s pushing many homeowners into foreclosure. The latter is what’s sinking Wall Street.
The Paulson plan primarily deals with the tail side of the coin �?? the investors who got burned handling hot subprime securities. A better plan would start with the head �?? the bad loans themselves.
The Treasury Department’s chief strategy is to buy back large quantities of toxic mortgage-backed securities. These purchases would remove troubled assets from the balance sheets of selling institutions, and (hopefully) clarify the prices of similar securities held by other investors.
How this price clarity would come about is unclear. Will the government’s purchases be considered accurate measures of market value or merely fire sales by frantic firms facing bankruptcy? The ownership of underlying mortgage pools will still be highly fragmented. The mere shifting of ownership of large quantities of securities may do little for price discovery, and could serve simply to transfer government resources to selling institutions.
A more effective strategy would be for the government to target the source of the toxicity by buying actual loans, not the securities that back them. It could do so by taking ownership of entire mortgage pools, starting first with the lowest quality (and most toxic) ones.
With congressional authorization, the Treasury could force the purchase of these assets through eminent domain and make an immediate payment of an estimate of the loans’ current fair value, which would then be later reviewed for adequacy by a judicial forum.
This approach has several advantages.
First, purchasing whole pools of loans would force liquidation of the mortgage-backed securities used to finance those loans. Investors would get an immediate distribution of the government’s cash plus any residual interest that results from after-the-fact judicial valuation. Critically, whole issuances of the most complex mortgage-backed securities would disappear, and the market would receive strong pricing signals for comparable instruments.
A crucial component of this plan is that it moves whole loans (and not fractional securities) under government control. Once it holds these loans, the government can take charge of workouts and refinancings. This is the approach that the Home Owners Loan Corporation took in the Great Depression, and the Federal Deposit Insurance Corporation (FDIC) is already operating such workout programs for loans held by failed banks under its control.
If the Treasury bought these toxic pools, it could offer relief for borrowers who were misled or abused, and then deal more harshly with speculators. This strategy would empower the government to aid troubled homeowners, not just Wall Street.
A further benefit is that it could change the incentives now facing loan-pool trustees. One reason the market has struggled to adjust to falling housing prices and increasing foreclosures is that mortgage-backed securities trustees have been reluctant to renegotiate individual loans, out of uncertainty and fear of litigation. Facing the threat of forced sales to the US government and with clear guidance on how much the government is likely to pay for their loans, such trustees will be highly motivated to renegotiate loan terms on their own, further clarifying market values and enhancing price discovery.
We also need to think harder about financing the cost of government intervention. Under the Paulson proposal, the American taxpayer would pick up the bill for whatever the government loses on its $700 billion of asset purchases.
Congressional Democrats are attempting to soften the blow by requiring the government to receive an equity interest from selling firms. While laudable, this approach significantly complicates the transactions, and it doesn’t fairly spread the costs of the program to all the financial institutions that will benefit.
A cleaner approach would follow the model that Congress set up in 1991 for the FDIC when it spent extra funds to shore up systemically important commercial banks: Impose an after-the-fact assessment on the entire industry to defray the costs. Congress could do the same thing with the Paulson proposal.
Once the government’s losses are clear, the Treasury should assess some share of the costs �?? for example, one half �?? on all of the financial institutions eligible to participate in the program, based on some objective formula. This would be a fairer approach to cost sharing than what is being proposed. It would also give the financial-services industry a strong incentive to help the government keep costs down and avoid similar interventions in the future.
The challenges facing the Treasury and Congress are formidable and urgent. But even in the face of such pressures, it’s important to consider alternative approaches that may offer a more efficient and more equitable way out of the nation’s difficulties.
�?� Howell E. Jackson is a professor of law at Harvard Law School. A coauthor of “Regulation of Financial Institutions,” he has served as a consultant to the US Department of Treasury.
Thanks for the recommendation analog_kid. I’ll check it out.
[quote]bdog527 wrote:
Thanks for the recommendation analog_kid. I’ll check it out.
[/quote]
It’s a good read. Here’s a link:
http://www.totse.com/en/politics/the_world_beyond_the_usa/japan.html
If it is such a good deal for the gov’t to buy up all this shit, why do think no one in the free market would buy it up.
What’s going to kill the market is the indecisiveness of the idiots in Washington. If they would just quite fucking around already the market could start to react. There will be zero liquidation or correction and long as they keep their thumbs in their asses.
[quote]dhickey wrote:
If it is such a good deal for the gov’t to buy up all this shit, why do think no one in the free market would buy it up.
What’s going to kill the market is the indecisiveness of the idiots in Washington. If they would just quite fucking around already the market could start to react. There will be zero liquidation or correction and long as they keep their thumbs in their asses.[/quote]
Exactly - From Andy McCarthy at NRO: The troubled entities are not selling at the price the market will bear because they (understandably) think they will get a wildly inflated price from the government - once again, perverting the market: penalizing responsible actors, rewarding the bad actors who brought us to this point, and keeping those bad actors in business.
Here’s a question: why are Dems supporting this bill despite the fact that it does not address the underlying problem?
I suspect that if they allowed a bill to be debated on the floor that actually addressed the underlying problem, this would make clear to voters the source of this mess. So the Dems blame Bush, the Market, some alleged Wall Street greed, and back a bailout plan that glosses over their own culpability.
[quote]SteelyD wrote:
Nobody is even talking about the $630B that the Fed just printed and injected into the system.
[/quote]
Its all over Reuters, as I’ve posted. Seems the only way to save the patient is by drowning him in paper money.
[quote]rbpowerhouse wrote:
fucked one way or another.
Solution: Buy GOLD. Lots of it.
[/quote]
Especially when it was $270/ounce. :>
Yes, paper money is being destroyed. The only way to get people to keep using it is by using more and more government force. Soon, all this paper will hit the streets, inflation will soar, and the wonderful new POTUS Obama will declare price controls. That’s when we should finally realize that this system is dead.
But, what the heck…who is John Galt?