Some details on the bail out bill

[Ecomike]

http://publications.fidelity.com/investorsWeekly/application/loadArticle?pagename=IW080929govtrescue&fca_id=20084190p07

These is an interesting read (above) for those interested in the details of the financial markets and the current problems with re-kick starting the system.

"Second, the market pricing mechanism for most of these assets has completely broken down. Because many institutions have been trying to unload the same types of troubled assets at the same time, the selling has over-whelmed the buying, resulting in fire-sale prices or the complete lack of trading at any price. Determining the exact values for these complex securities, in an atmosphere where the price discovery mechanism of the market has broken down, will be a Herculean task."

http://publications.fidelity.com/investorsWeekly/application/loadArticle?pagename=FEA080915mareupdate2

[XJEEPER]

Here's some more detials.

The Senate is going to vote today on a modified bill that the House voted against......perhaps I didn't pay close attention during to Schoolhouse Rock.

Here's amy point.....


Vote - the bill is voted on. If passed, it is then sent to the other chamber unless that chamber already has a similar measure under consideration. If either chamber does not pass the bill then it dies. If the House and Senate pass the same bill then it is sent to the President. If the House and Senate pass different bills they are sent to Conference Committee. Most major legislation goes to a Conference Committee.
So why is the Senate voting on a modification of the bill, if the House has not voted on it and it failed?

Seems like a violation of Constitutional Law........

[RichP]

The senate is going to try to pass it, maybe less senators are up for re election or something that makes them immune from constituents pressure, then thats supposed to force the congress to also pass it. Squeeze play and nasty, these peckerheads will stoop to new lows to pass this and on general principals I'm against any legislation being pushed this hard. I'll not vote for anyone who votes for it and neither will anyone in my family.
If these scumbags had pushed with the same zeal for tighter borders, emigration enforcement, job creation and stopping corporations from hemorrhaging jobs overseas overseas we'd be in the black by now.

[Bent]

http://publications.fidelity.com/investorsWeekly/application/loadArticle?pagename=IW080929govtrescue&fca_id=20084190p07

These is an interesting read (above) for those interested in the details of the financial markets and the current problems with re-kick starting the system.

"Second, the market pricing mechanism for most of these assets has completely broken down. Because many institutions have been trying to unload the same types of troubled assets at the same time, the selling has over-whelmed the buying, resulting in fire-sale prices or the complete lack of trading at any price. Determining the exact values for these complex securities, in an atmosphere where the price discovery mechanism of the market has broken down, will be a Herculean task."

http://publications.fidelity.com/investorsWeekly/application/loadArticle?pagename=FEA080915mareupdate2

You beat me too it. I agree with you; very interesting read.

[Deadman 94 xj]

Very informative read.
My question is why would anyone vote against it?
Our economy is based on credit, everything from business to supplier transactions to me buying a house.
If lenders run out of capital to leverage against, than the economy goes down the drain. Small businesses, farmers, and my ability to get a student loan are all affected as well.
Where is the alternate solution?

[XJEEPER]

Do your research, there are several links to alternate plans.

Why vote against it? It's is %&!*#$ SOCIALISM!!

Time to educate yourself, Commrade.

[Deadman 94 xj]

Do your research, there are several links to alternate plans.

Why vote against it? It's is %&!*#$ SOCIALISM!!

Time to educate yourself, Commrade.

I don't agree. Socialism would be bailing out the mom & pop on the corner.
Stepping in and stopping a financial crisis is IMO exactly what government regulation is intended for.
Don't get me wrong, those responsible for bad assets should be held accountable. To let it crash and burn, no matter how entertaining, would be a mistake.

I asked about another solution in an effort to educate myself, you did not help my quest.

[Deadman 94 xj]

Do your research, there are several links to alternate plans.

Why vote against it? It's is %&!*#$ SOCIALISM!!

Time to educate yourself, Commrade.


It doesn't matter...if Obama's for it than I'm against it. :laugh: :patriot:

[Ecomike]

I don't agree. Socialism would be bailing out the mom & pop on the corner.
Stepping in and stopping a financial crisis is IMO exactly what government regulation is intended for.
Don't get me wrong, those responsible for bad assets should be held accountable. To let it crash and burn, no matter how entertaining, would be a mistake.

I asked about another solution in an effort to educate myself, you did not help my quest.


I'm impressed with your answer! Hell of a Good answer. Just what is your major?

You might consider running for office someday, we could use such clear thinking in Washington, IMHO, it would be a novelty.

By the way, I don't know where some of you people get the idea that salvaging or repairing a financial system, a system that the entire world depends on, would be or is socialism. It is my understanding that socialism is an entirely managed economy, no free enterprise. Something you people don't seem to get is that if Washington leaves the financial system in the shape it is in, like it did in 1929-1932, it eventually leads to US treasuries being dumped on an ill-liquid market, making them worthless, which is the very thing that caused the bank holiday in 1933 when the government closed all the remaining banks ( about 22,000 of them were gone by 1933) and Washington recapitalized them with US treasuries backed by the US Taxpayer.

Not acting now with a bail out, is likely to cause more socialism or socialistic legislation to be passed in the near future as the economy collapses, than the current bail out plan would cause. From what I am hearing, if they do it right the final cost maybe ZERO $$s, and would restore the free market.

[Ironmen77]

By the way, I don't know where some of you people get the idea that salvaging or repairing a financial system, a system that the entire world depends on, would be or is socialism. It is my understanding that socialism is an entirely managed economy, no free enterprise. Something you people don't seem to get is that if Washington leaves the financial system in the shape it is in, like it did in 1929-1932, it eventually leads to US treasuries being dumped on an ill-liquid market, making them worthless, which is the very thing that caused the bank holiday in 1933 when the government closed all the remaining banks ( about 22,000 of them were gone by 1933) and Washington recapitalized them with US treasuries backed by the US Taxpayer.

Not acting now with a bail out, is likely to cause more socialism or socialistic legislation to be passed in the near future as the economy collapses, than the current bail out plan would cause. From what I am hearing, if they do it right the final cost maybe ZERO $$s, and would restore the free market.

http://network.nationalpost.com/np/blogs/fpcomment/archive/2008/09/29/bailout-marks-karl-marx-s-comeback.aspx

[Ecomike]

It doesn't matter...if Obama's for it than I'm against it. :laugh: :patriot:

The funny (or sad) part is that Obama, McCain, Bush and eventually a majority of Congress (House Representatives and Senators) have and or will support a bail out plan in the very near future. The only question is what the final bill will include.

[RichP]

The funny (or sad) part is that Obama, McCain, Bush and eventually a majority of Congress (House Representatives and Senators) have and or will support a bail out plan in the very near future. The only question is what the final bill will include.

What will it have, as much pork as they can stuff in, protection for the boys who screwed it up in the first place. Until I see some golden parachutes replaced with orange jumpsuits I'm against it. Hell, even romans got to see some bad guys eaten by the tigers or pulled apart by horses.... as long as we are doing bread and circus's lets see some blood...

[8Mud]

I really think the whole thing is being over simplified in the press and from the politicians. Listen to what they aren't saying and think at the same time where is all the money going? I realize they spend the same dollars many times over, but just some things to think about.
The government was printing money to finance the Iraqi war and at the same time borrowing more. The government borrowing was directly competing with other borrows and driving the cost of borrowing money up at home.
The Saudis and others are on a building spree in the Gulf (trillions), the US inflation went up and exchange rates down, the Saudis reacted by raising the price of oil etc. The workers on the Saudi projects were actually refusing to take dollars anymore (first hand knowledge).
The US has pulled the same gambit before, when too much money ends up overseas and the overseas corporations start investing into other countries (besides the US) or holding onto the money and not reinvesting it in the US, the US devalues it's currency (prints more). The overseas debt holders see there US holdings, sink in value fast. It's worked many times in the past.
I'm not an economist, but from my reading the experts are often unsure of what is going on, besides vague indicators (often months old).
Too many entities trying for the same money driving the cost up, the flow interrupted by sinking much of it into physical assets (that aren't selling or producing), the end/beginning of the fiscal year (1 Oct.), the price of energy going up (drastically), the market being manipulated in strange and new ways.
The bailout may just be the tip of a very large iceberg and actually a very small part of the solution for a multitude problems.

[Ecomike]

What will it have, as much pork as they can stuff in, protection for the boys who screwed it up in the first place. Until I see some golden parachutes replaced with orange jumpsuits I'm against it. Hell, even romans got to see some bad guys eaten by the tigers or pulled apart by horses.... as long as we are doing bread and circus's lets see some blood...

I am fond of pork, unless there is steak on the table!:D

[Ecomike]

I really think the whole thing is being over simplified in the press and from the politicians. Listen to what they aren't saying and think at the same time where is all the money going? I realize they spend the same dollars many times over, but just some things to think about.
The government was printing money to finance the Iraqi war and at the same time borrowing more. The government borrowing was directly competing with other borrows and driving the cost of borrowing money up at home.
The Saudis and others are on a building spree in the Gulf (trillions), the US inflation went up and exchange rates down, the Saudis reacted by raising the price of oil etc. The workers on the Saudi projects were actually refusing to take dollars anymore (first hand knowledge).
The US has pulled the same gambit before, when too much money ends up overseas and the overseas corporations start investing into other countries (besides the US) or holding onto the money and not reinvesting it in the US, the US devalues it's currency (prints more). The overseas debt holders see there US holdings, sink in value fast. It's worked many times in the past.
I'm not an economist, but from my reading the experts are often unsure of what is going on, besides vague indicators (often months old).
Too many entities trying for the same money driving the cost up, the flow interrupted by sinking much of it into physical assets (that aren't selling or producing), the end/beginning of the fiscal year (1 Oct.), the price of energy going up (drastically), the market being manipulated in strange and new ways.
The bailout may just be the tip of a very large iceberg and actually a very small part of the solution for a multitude problems.

While your analysis (tip of the iceberg analogy) may be right, It will be the tip of the iceberg if they don't unfreeze the credit markets. I for one am hoping it's a very small, tiny iceberg that melts quickly.

[RichP]

While your analysis (tip of the iceberg analogy) may be right, It will be the tip of the iceberg if they don't unfreeze the credit markets. I for one am hoping it's a very small, tiny iceberg that melts quickly.
Whats this frozen credit stuff everyone is talking about, I called my two banks today and asked if I could get a 60 day $25,000 bridge loan to cover production of some workstations and I had a signed Purchase order from such and such a company. They ok'd the loan over the phone and would have transferred it into my checking account over the phone. One of my customers just got a $80,000 loan to cover paving his parking lot, painting the building, remodeling the entire interior and some other new stuff. So far I see no credit crunch. Oh, one of my banks is wachovia too. So far I'm not seeing it, only hearing people panic who did not just do a simple check with their bank. In fact both my banks said I was ok up to $100K.

[Ecomike]

Whats this frozen credit stuff everyone is talking about, I called my two banks today and asked if I could get a 60 day $25,000 bridge loan to cover production of some workstations and I had a signed Purchase order from such and such a company. They ok'd the loan over the phone and would have transferred it into my checking account over the phone. One of my customers just got a $80,000 loan to cover paving his parking lot, painting the building, remodeling the entire interior and some other new stuff. So far I see no credit crunch. Oh, one of my banks is wachovia too. So far I'm not seeing it, only hearing people panic who did not just do a simple check with their bank. In fact both my banks said I was ok up to $100K.

I must admit I got a $10,000 credit card offer, with a 12 month 0.00% interest rate offer from WaMu a few days ago., along with similar offers from Bank of America, Wells Fargo,....etc.

[JNickel101]

Bailout is socialism b/c its a step towards a "nationalized bank"

i'm tired, i'm not saying anything else...stupid east coast time...

[Ecomike]

Bailout is socialism b/c its a step towards a "nationalized bank"

i'm tired, i'm not saying anything else...stupid east coast time...

Some body correct me here, but wasn't Fed (Federal Reserve Bank System) created as THE nationalized bank of the USA, back around 1914?
I think your about 90 years to late to fight the national bank battle.

[WrenchMonkey]

Whats this frozen credit stuff everyone is talking about...

See, that's the part I just don't get.

Sure, a bunch of banks are losing a lot of money, because they made loans they shouldn't have (Actually, because they bought debt they shouldn't have)

But no money-man is so stupid that he can't tell the difference between some yahoo that bought twice as much house as he could afford, and a legitimate business that uses credit as part of its day-to-day operations.

I should hope that the banker would think twice about lending to the yahoo again, but to refuse a loan to the legit business would only shut down the bank's own business.

I can see the banks getting pickier about making loans (and god knows they need to be!) but it would be self-defeating for them to stop all transactions cold.

I think the whole thing is a rotten attempt to over-hype the situation, to avoid the consequences of their bad decisions.

But what do I know...

Robert

[Tom R.]

See, that's the part I just don't get.

Sure, a bunch of banks are losing a lot of money, because they made loans they shouldn't have (Actually, because they bought debt they shouldn't have)

But no money-man is so stupid that he can't tell the difference between some yahoo that bought twice as much house as he could afford, and a legitimate business that uses credit as part of its day-to-day operations.

I should hope that the banker would think twice about lending to the yahoo again, but to refuse a loan to the legit business would only shut down the bank's own business.

I can see the banks getting pickier about making loans (and god knows they need to be!) but it would be self-defeating for them to stop all transactions cold.

I think the whole thing is a rotten attempt to over-hype the situation, to avoid the consequences of their bad decisions.

But what do I know...

Robert
I agree. Although it was reported that Pres. Clinton and some leading Democrats pressured the lending houses to lessen their standards so that anyone could get a home loan (subprime loans), the CEOs reaped millions of dollars on the deal. So I think it was done cooporatively.

Regardless, people are still spending money, getting loans, etc. Banks already follow standards when making loans to people & businesses. That's why responsible clients can still get loans easily. Without the scare-mongering, the most damage will be a temporary hiccup on affected investments and, depending on location, a drop in home values. The market needed to correct itself anyway.

As for Wallstreet, those who will benefit from the bailout aren't moving because they hope the fed money will provide more pennies on the dollar than what creditors will pay.

Whether the bailout is socialism or not, that money will be made up in higher taxes that most of us will end up paying one way or another. Not for me.

By the way, here's Dave Ramsey's plan, which he suggests everyone send to the their Senators and Representatives:

Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three steps:

Common Sense Plan.

I. INSURANCE

A. Insure the subprime bonds/mortgages with an underlying FHA-type insurance. Government-insured and backed loans would have an instant market all over the world, creating immediate and needed liquidity.

B. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a 6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the balance. This brings homeowners current and allows them a chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or the sale of the property to pay off the bad loan. In the event of foreclosure or short sale, the borrower will not be held liable for any deficit balance. FHA does this now, and that encourages mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures and ruined lives.

2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and executive team members as long as the company holds these government-insured bonds/mortgages. This keeps underperforming executives from being paid when they don’t do their jobs.

C. This backstop will cost less than $50 billion—a small fraction of the current proposal.


II. MARK TO MARKET

A. Remove mark to market accounting rules for two years on only subprime Tier III bonds/mortgages. This keeps companies from being forced to artificially mark down bonds/mortgages below the value of the underlying mortgages and real estate.

B. This move creates patience in the market and has an immediate stabilizing effect on failing and ailing banks—and it costs the taxpayer nothing.


III. CAPITAL GAINS TAX

A. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

B. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down. This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to
stand up, speak out, and fix this mess.

[Ecomike]

Whether the bailout is socialism or not, that money will be made up in higher taxes that most of us will end up paying one way or another. Not for me.



I disagree that it will increase taxes. Warren Buffet on PBS interview with Charlie Rose last night said the US Gov. will make money off the deal in the long run. All they need to do is raise the national debt, borrow the money and buy and pull those assets off the market long enough for housing prices to start going back up instead of down. Then they can slowly sell those assets back to the market at a profit.

[JNickel101]

...and start the process all over again.....I still fail to see how bailing out Wall Street will all the sudden make these ARMs affordable to the idiots who can't pay their mortgages now.

Dave Ramsey's solution would cut losses, convert them to FRMs, making them affordable to the people who took them out in the beginning.

I'm only about 2 hours from DC right now, I have half a mind to go down there and sit outside, badgering congressional members as they walk by, asking them why the hell none of them proposed the Common Sense approach...

Assholes....

[Ecomike]

...and start the process all over again.....I still fail to see how bailing out Wall Street will all the sudden make these ARMs affordable to the idiots who can't pay their mortgages now.

Dave Ramsey's solution would cut losses, convert them to FRMs, making them affordable to the people who took them out in the beginning.

I'm only about 2 hours from DC right now, I have half a mind to go down there and sit outside, badgering congressional members as they walk by, asking them why the hell none of them proposed the Common Sense approach...

Assholes....

There may be a problem with that approach, in that bank standards for loans are getting tighter now, so their internal policies probably don't allow them to make those loan changes to some whose credit has already been devastated with a a foreclosure notice already, and late payments.
In reality, the Fed and Treasury are the only ones left with enough credit power to intervene.

I have no problem with the Fed/treasury helping individuals rebuy or hold on to those houses (converting ARMs to FRMs, which does also need to be done for the next million set to convert soon), but right now we need an overnight plan that can stabilize the market literally overnight, not a plan that takes 12 to 24 months to implement.

TIME is the enemy right now. The plan (if I understand it correctly?) you propose should have been done 18 months ago when there was time for it to work.

[FarmerMatt]

Time is the only thing we need right now. I'm beyond frustrated to the point of anger. The pork in this bill is absolutely outrageous. Tax breaks for wooden arrow mfg's?? You've got to be fckin kidding. I'm voting Barr & if my congressman votes for this one like he voted for the last one than I'm voting for who ever is running against him no matter what party their with...

[Bent]

Time is the only thing we need right now. I'm beyond frustrated to the point of anger. The pork in this bill is absolutely outrageous. Tax breaks for wooden arrow mfg's?? You've got to be fckin kidding. ... if my congressman votes for this one like he voted for the last one than I'm voting for who ever is running against him no matter what party their with...

Hear hear!




Edit: My Congressman and Senators called and informed.

[Bent]

Bill details and Senate vote details from last nights action.

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=2&vote=00213

[RichP]

Bill details and Senate vote details from last nights action.

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=110&session=2&vote=00213

Yea, our two, casey and specter will vote for whatever they can line their pockets with. Specter has never met a bill he didn't like no matter what his voters wanted.

[Deadman 94 xj]

I'm impressed with your answer! Hell of a Good answer. Just what is your major?

You might consider running for office someday, we could use such clear thinking in Washington, IMHO, it would be a novelty.



Ha, thanks. It only happens once in a blue moon. Major is Supply Chain Management doubled up with info systems management.

It'll be interesting to see if the bill gets passed by the house on Friday. There's a lot of pressure with the re-elections.