Bailout package *passes* house

[HATEFACE]

NO U R A ECONOMIC CREATIONIST!!

[Grand Fromage]

Cipher... you do realize what you're advocating is exactly what was done in 1929, right? Down to the idea of letting the banks fail serving as punishment for the Wall Street asshats?

[Mulu]

If the government is going to be the guarantor of all loans, why on earth would institutions NOT continue to gamble on high risk, high reward investments?

The investment banks are gone. You know that, right? Bought out or folded or transformed into commercial banks. Those banks, the ones that now exist, have stricter rules to comply with. The days of investment banks that can do whatever they want are gone, already, before the new bail out bill or any new regulations even get passed. Which I suppose you could say is the market doing its job, except the government had a very heavy hand in ensuring the outcomes, having brokered many of the sales.

Which means the "problem" (investment banks trading overpriced derivatives from bundled mortgages) is solved, for better or worse, in that they won't be engaging in that specific behavior again, and all that is left to deal with now is the "damage."

As for liquidity, real estate has value. It's not worth zero so the question is not whether houses can ever be bought or sold again but at what price investors and banks will feel confident that property is sufficiently UNDER valued to be considered a safe investment. That's what a correction amounts to, and if you believe that a bubble exists in the housing sector, then you must realize that this bailout simply guarantees that we - the taxpayers - bear all the losses for the correction rather than the institutions holding the assets.

I would prefer changes to the bankruptcy laws to rewrite all that bad paper and make those loans affordable where possible, thus punishing the lenders or at least current loan holders for their overreaching, but Bush would never sign such a bill. Part of this is political realities, what can and cannot get passed under the current membership in Congress and the White House, and for that matter what can and cannot get passed on the eve of an election.

As for credit markets, it's a lot more than home loans. It's largely intra-bank loans and loans to corporations that are being held up by the liquidity crisis. Business to business transactions being put on hold throw a wrench into our economy, a big one, that will have cascading and long lasting effects. The country really is on fire, you know. If this problem isn't solved, the next crisis will involve the $46 trillion in credit swaps as the rug gets pulled out from under the financial sector. As much as I detest the Bushies and their tendencies to exaggerate to get their way, sometimes the sky really is falling.

[ç i p h é r]

Cipher... you do realize what you're advocating is exactly what was done in 1929, right? Down to the idea of letting the banks fail serving as punishment for the Wall Street asshats?

In a very general sense, but we're not in 1929, the stock market is a LONG way from crashing, and our bank deposits are federally insured. All things certainly aren't equal. Still, I understand where you're coming from. I don't want to destroy the country either, but I really want the folks responsible for the fraudulent behavior and the malfeasance that led to this to be held accountable. Seize their assets. Throw them in jail. Toss away the key. And pay back those who're footing the bill.

Mulu, yeah I know they've either folded or transformed themselves, and I also realize that business accounts are at far greater risk than individual accounts, but even then, if you look at the $700B number being proposed that will supposedly restore confidence and fix the liquidity issues, it's a drop in the bucket. Our GDP is in the double digit trillions of dollars. So honest question: how bad can this really be for the economy overall? I don't think anyone knows but people are afraid for the worst.

[ç i p h é r]

http://cosmos.bcst.yahoo.com/up/player/ ... 1&src=news

[HATEFACE]

Cipher, there's no use arguing.

[Mulu]

It's all becoming academic now, the bailout will pass. The Senate just had to add enough Christmas ornaments to make it appealing, and of course cost probably twice as much. Because those conservatives, Rep and Dem, will shoot down a $700 billion dollar bail out, but they'll vote for a trillion dollar bail out so long as the money is going to causes they like.

As revised by the Senate, the package would extend several tax breaks popular with businesses. It would keep the alternative minimum tax from hitting 20 million middle-income Americans, and provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.

The bill would not point to offsetting spending cuts to pay for the AMT and disaster provisions, but it would have revenue offsets for part of the energy and extension measures. The failure to offset many of the tax cuts angered the House's band of "Blue Dog" Democrats.

The increase in the deposit insurance cap was a bid to reassure individuals and businesses with accounts in banks and similar institutions.

The Senate specializes in high-stakes legislating-by-enticement, and the long list of sweeteners it added was designed to attract votes from various constituencies.

Tax cuts new and old are favorites for most House Republicans, the main target of intense lobbying to gain support for the measure. Help for rural schools was aimed mainly at lawmakers in the West, while disaster aid was a top priority for lawmakers from across the Midwest and South.

Another addition, to extend the deductibility of state and local taxes for people in states without income taxes, helps Florida and Texas, among others.

And there were plenty of obscure tax breaks to go around, like one for certain wooden arrows used by children, and another benefiting litigants in the 1989 Exxon Valdez oil spill.

Senate leaders were expected to try adding another goodie before the final vote: extending a tax break for homeowners who do not itemize their tax returns.

[paazin]

Cipher... you do realize what you're advocating is exactly what was done in 1929, right? Down to the idea of letting the banks fail serving as punishment for the Wall Street asshats?

Well, there was the added step that the government actively cut all spending and raise taxes, that it could keep its budget in the green.

And that tariffs went up to exorbitant levels internationally, stifling nearly all non-domestic trade.

[ç i p h é r]

I especially like this provision in the bailout plan:

The revised bailout bill also includes a “Mental Health Parity” provision, which would require health insurance companies to cover mental illness at parity with physical illness.

Thank God, because frankly, seeing the "bailout plan" of the supposed "worst financial crisis since the great depression" devolve into an earmark and personal agenda fiasco is in fact making me ill. Now that's forward thinking!

[HATEFACE]

http://www.youtube.com/watch?v=1RZVw3no2A4

Comments fluff?

[Mulu]

I especially like this provision in the bailout plan:

The revised bailout bill also includes a “Mental Health Parity” provision, which would require health insurance companies to cover mental illness at parity with physical illness.

Thank God, because frankly, seeing the "bailout plan" of the supposed "worst financial crisis since the great depression" devolve into an earmark and personal agenda fiasco is in fact making me ill. Now that's forward thinking!

ROFL

[Mulu]

You know Hateface, that video you liked to left out more information than it included. Of course, that's why you like it. For example, a subprime mortgage does not *have* to have a variable interest rate. That was the private lenders doing, a predatory lending practice. Also the volume of loans was strongly spurred by the Fed keeping the prime interest rate far too low for far too long. At the point where you could get a mortgage for below 5% interest, who wouldn't buy a house that qualified? And at *any* price, hence the spike in real estate value.

Mortgages historically were closer to 8% interest.



Notice that the interest rate dropped after Bush took office. It was that low interest rate that really drove the boom, coupled with an even lower credit rating requirement for Fannie and Freddie guarantees under Bush than there was under Clinton. Funny how your "truth squad" leaves out all of those facts. They also conflate Fannie and Freddie with repackaged loan securities, but that was purely an invention of the private sector. Regulations may have prevented that, hard to say, but repackaging loans into derivative securities and then giving them a "AAA" rating is the actual smoking gun in the financial sector meltdown. Without that, we'd just have some bad loans that need to be rewritten in bankruptcy court. No global financial crisis at all, no $700 billion dollar bail out, as Fannie and Freddie only own about $200 billion in bad loans and not all, or even most, will fail. Of course, you'll ignore these facts that same as your "truth squad" did. Ignorance is bliss, eh?

It's interesting, the increasing price of oil seems to be the driving force behind working class Americans going broke, as it makes everything more expensive. So maybe the foreclosure crisis really is due, in part, to invading Iraq? Hmmm.

So, to recap:
Artificially low prime interest rate + Artificially low credit rating requirements for loans = Housing Boom. Real Estate Speculators + predatory lending practices = Housing price spike. Variable interest loans + inevitable bubble burst + much higher cost of living due to oil price spike and general economic slowdown = foreclosure crisis.

Repackaging loans into derivative securities falsely given a AAA rating and sold by the trillions of dollars + foreclosure crisis forcing realization that the securities are worth far less than they were being sold for = financial sector crisis.

Congress + Election year politics + financial and foreclosure crisis + cascading bank failures = Barnum and Bailey Circus.

[Mulu]

Back on the issue of the credit crunch:

The number of people filing for new jobless benefit claims rose to a seven-year high in the latest week and factory orders showed a steeper-than-expected drop in August.
/
Investors pummeled shares of economic bellwethers, including Caterpillar Inc , the maker of heavy equipment, whose stock tumbled more than 5 percent.

Shares of General Electric slid more than 9 percent after the diversified manufacturer announced that it had priced a share offering to raise cash below Wednesday's closing stock price.

Technology shares weren't spared. Shares of tech services giant International Business Machines Corp fell more than 4 percent.

The weak data is "all an indication of how much damage this lack of activity in credit markets over the last year has done to the U.S. and global economy," said Alan Lancz, president of Alan B. Lancz & Associates Inc in Toledo, Ohio.

/

"None of this is positive for the U.S. consumer, either. It's almost a perfect storm and it's starting to hit home," Lancz said.

The Senate passed the bailout two days after the House rejected an initial plan that triggered the biggest slide in U.S. stocks in more than two decades.

But despite the bill's success in the Senate, credit market constraints persisted on Thursday. The commercial paper market -- short-term loans -- contracted for the third straight week, as business lending and borrowing effectively shut down.

/

"If this bill doesn't pass in the House, it's game over. The House tomorrow has an opportunity to potentially stave off a complete economic collapse," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

[Fionn]

Unfortunatly, I think that last line's right - and there will be plenty of opportunistic riders on this bill that cannot fail :( Why is it always an emergency with this administration? He's worse than my ex...

[Lusipher]

A small tidbit on the economy--- Game companies are also feeling the pinch. EA lost 1.5 billion in a single day. Activision/Blizzard lost 3.5 billion in the same day of trading. Can you imagine losing that much money in one single day?