Bailout: Not popular but the right call
Now that the bailout has passed, will it help get the economy back on track? Please answer this question only. We have already posted thousands of great comments from people who don’t like the bailout for various reasons. We hear you. But we now want to know if you think it can work. (Back to story)
The brillant people that got us where we are are the same people that want all this money im not to sure we should trust them.
No. The bailout will not help.
People are relying too much on credit.
Hey! If you ain’t got the money – then you can’t have the goods. Tough luck!
The over use of credit has made America weak.
The slogan used to be – never show your weakness – shore up any weak spotsand become strong.
America has been infiltrated by criminally, fraudulent ‘money experts’ who have been allowed to wreck their havoc while those who should have been regulating finance have been either asleep or in bed with these criminals. Will anything be done? I think not. What should be done? The ‘regulators and the Wall Street Gurus’ should be thrown into jail and their assets seized.
Why should America be afraid of terrorists when the whole country can be brought down through their banks?
Now America is bleeding to death making many other nations sick.
I second that. I even went as far as to call my Senators and Representatives and I told them that if they voted yes, then I was not gonna vote for them…guess what? They didn’t listen! lol!!!
Ron Paul – Join the Revolution! He’s brilliant and WILL make a REAL difference!
A bailout may have been neccessary, but not this bailout.
I vowed not to vote for anyone who voted for this bail out. Since both McCain and Obama voted for the bail out I am left to choose between Ron Paul and Ralph Nader for President.
This bail out will deepen and lengthen the coming recession and at the same time contribute to higher inflation and interest rates.
To all those who argued that the House’s “no” vote on the bailout last Monday was the reason the market fell 777 points, I have a rather large “I TOLD YOU SO” for you.
We will have our correction, bailout or no bailout. Now, thanks to our fearless leaders in Washington, we will have our correction and an additional $700 billion in new debt to go along with it.
LOL
First the4 government tells us they need to act at once now they are telling us they will need 2 months before they can act.
They are hiring the same people who got us into this mess to get us out.
LOL
they are just going to make things so bad and so worse that no one will be able to fix it. Get ready for your money to be stolen by the government instead of the Wall Street bankers oh they are going to be the same people never mind.
I say get your money out of the major banks and into local banks. Quit putting money into 401k plans and take it all out while it has some value.
Please I beg you to save what little money the thieves have left you before it’s too late.
The “rescue” attempt will be implemented, in some form or another. That’s a given. The $700 billion, or the $850 billion, or the (pick your own number) untold other billions that have already been directed at the problems, have all come up pretty short at solving anything. That is plainly obvious even to the casual observer.
So, now that all the hysterics are over (for now), where to we go? The answer is relatively simple (and it will be painful), the American citizen (generally speaking) will now stop spending beyond their means, and hopefully start saving again. This is NOT what the government or the retailers will want, BUT this MUST happen. America’s citizens need to re-build their balance sheets (unfortunately there are no government bailouts heading in that direction). We are on our own folks.
The American citizen has been basically living a lie, for a long time. We have been self-delusional. No matter what you want to think, you can’t (or shouldn’t) buy a $400,000.00 house on a $40,000 salary. I read a story a couple years ago that a waiter making $22,000 a year was approved for and bought a $600,000.00 house in California. That’s nuts, but that was how it was back then, totally nuts. Blame the banks for giving the money, blame the government for hyping the idea of home ownership for everybody, blame the brokers for putting the deals together, blame the real estate agents for putting pressure on you to buy NOW, etc, etc, etc. Blame everybody for everything, but also look in the mirror and blame the person looking back too.
OK, so we had a lot of fun, but the party’s over, and it’s hangover time, and it’s gonna be a bad one. Buckle down, take your medicine, and start re-building. This has always been the case, and it will always be the case.
Unfortunately, the marketing machine for retail will now start cranking up the inducements to start spending again (with what money???), but isn’t it funny that the horror stories are already starting that it’s going to be a bad season for the retailers. For God’s sake, Christmas decorations are already up in stores and it’s not even Halloween yet.
The only way out of all this debt mentality, is to resist all that hyper-marketing nonsense and buy what you can afford, ONLY when you can afford it. The “I gotta have it now” mentality is what has brought us to the brink, so look over the edge, get really scared, and take a giant step back. It’ll hurt for a while but we will all be better off in the future.
Good Luck to everyone.
It is ironic future generations will probably call these times laissez-faire again… like the late 20s
NO it can’t help! This move is going to further weaken our economy and drive inflation into a state of hyperinflation beyond anyone’s wildest dreams. We, the sheople, just gave Hanky Panky Paulson a big ole FAT blank check. Oh, and tell me again WHO is in trouble and WHO did he use to work for? Goldman Sachs! That’s right. Do you smell it now? Well, I do not know about the rest of you sheep out there, but Goldman Sachs NEVER did anything for me. Why should I have to pay more taxes and higher prices for their gambling losses?
The bailout won’t work because the fundamental lack fairness.
TO THE NO-BAILOUT CROWD,
The pretense for the bailout was to “free the credit market”.
To protest the Bailout, I stopped using my credit cards for everyday purchases.
PLEASE JOIN ME.
How else can we demand prosecution? Money is the only thing these people (bailout crowd and Government) care about).
At the very least, you’ll feel happy and your pocket will benefit. (smile)
It won’t work because the government intervention is UNFAIR.
A sense of fairness is important for society to exist. Otherwise, the system of government breaks down, i.e. Communism.
In it’s quest, to secure housing for the unqualified, others suffered. So called, Good Intentions brought greed, corruption, and the laws of Supply and Demand. Prices more than double. At which, only subprimes loans will do.
Choice: join them or go without. Reasonable people went without, saved money, and built credit; hoping for better times. That is, LOWER HOME PRICES because logically the higher prices were unsubstainable.
It is tremendously hurtful to bailout these people.
As in Communism, why should anyone work hard when your neighbor can get just as much if not more, doing less, lying and cheating all the way.
It is a problem, when “We the People” lack faith in the prosecution of those involved. We believe a cover-up is more likely.
The rationale for the Bailout was to free the “credit markets”. My protest is to no longer use my credit card for everyday purchases. I hope to see prosecution. At the very least, my pocket will benefit.
I HOPE THOSE OF LIKE MIND JOIN ME.
No, pragmatism didn’t trump ideology. Fantasy trumped pragmatism.
It wont help. It doesn’t deal with the problem, it is more of the problem.
Free flow of credit (even if this created that, which it wont) wont help. People are still in debt up to their eyeballs. They still can’t keep up with it. They still don’t have extra money. America still doesn’t build anything.
An amusing side note though. The bandits finally got the Powers That Be to open up the treasury chest to them. The big surprise though, the chest has already been raided. Its been empty for a long time.
But maybe this will drop the dollar enough that we will finally shift our current accounts deficit.
The “bailout” will not improve the economy, stock market… Beyond not making economic sense, these interventions are injecting chaos into the market. All they have to do interfere a little more and a self-perpetuating downward cycle will be started.
BTW — an emergency rate cut will not work either except maybe to enrich the hedge funds and proprietary trading desks.
Blah, blah, buy and hold, stocks always go up, dollar cost average, 80/20 blah, blah…
Right call for whom? This author continues to be wrong and has no accountability. Maybe he’s a banker?
Anyway, someone pointed out earlier that his degree is in Psychology and I checked. It’s true. It seems strange that an unqualified person is doling out his opinion.
OK lets answer the question will the bail out help the answer is no. Any time you give into terrorists their demands never stop.
I say throwing the Wall Street bankers in jail and taking their money and processions from them like we do drug dealers is a step in the right direction. Then we should put Paulson and all the other executive branch people including George Bush in jail and take their money also for letting it happen along with Congress.
You do realize that the Wall Street bankers stole our money by selling made up properties to each other and then selling them to made up people as nothing was checked on these loans. If the giovernment buys them we the tax payer will never get paid back.
Capitalism is dead and Communism is alive and well in America. All hail George Bush the supereme Soviet leader. The financial system is going down big time.
Instead of addressing the real problem that Americans are under paid by a factor of ten compared to how much things cost. That is what cause the first Great Depression and is causing this one.
Barney Frank that silly person in the House says he wants the government to get the prices of houses back up to $400,000 each and the wages of Americans down to only $12,000 a year and then everything will be fine.
LOL they are so clueless. If they just let the banks go bankrupt and then start all over again laoning money to real people instead of the rich Wall Street bankers everything will be fine.
Otherwise we are going to be hurting for the rest of our lives as China has now become more powerful than us and we will never caught them by bail outs to Wall Street crooks who need to be in jail.
Say goodbye to America say goodbye to the dollar and sy goodbye to your way of life. It’s all down hill from here.
WOW the Wall Street bankers held back giving loans to black mail Congress into giving them 700 billion dollars.
Pretty good of our leaders to give into terrorists.
Everywhere we turn we hear:
“Something had to be done.”
“This is better than nothing.”
“Time is of the essence.”
“Hold your nose if you have to, but vote for the bill.”
“We cannot leave it up to the markets.”
“The markets have failed.”
“There is a credit crunch, and this is a good first step to returning liquidity to the system.”
“If we don’t act now, Main Street cannot get the credit to pay its bills and payrolls.”
“Let’s get the consumers back in the stores with the credit they need to buy the cars, and houses, and vacations they need — that will keep the rest of America (and the world) employed.”
“Christmas, and the election, are right around the corner. We cannot afford to be in a lending, spending, and borrowing funk.”
Ladies and gentlemen, I am no genius. I know me. I have lived and worked with me. I am my own friend. So let me assure you, I am no Congressman Ron Paul.
So please see what Representative (R-Texas) Dr. Ron Paul thinks at http://www.lewrockwell.com/paul/paul481.html and at http://latimesblogs.latimes.com/washington/2008/09/ron-paul-bailou.html and at http://www.usnews.com/blogs/the-home-front/2008/4/15/ron-paul-sees-bailout-writing-on-the-wall.html – this last one is from April, 2008, believe it or not.
His “Don’t Want No Shackles on Me” video and speech is at http://www.campaignforliberty.com/ – “I got the blues about Tyranny” — “Don’t like that National ID” — “Down with Big Brother” — “It’s all about Liberty”.
OK, let me say this, if we absolutely, positively, “HAVE to do something”, let’s at least understand the context within which we’re doing it.
This context entails the printed-paper-money-from-our-wonderful-invention-the-printing-press environment we live in (from Bernanke’s 2002 Helicopter Money-Drop Speech).
This is also in the context of so-called fiat currency and fractional-reserve banking (itself a very long-run Ponzi scheme, subject to instability, although few of us would think so).
If we are going to use 700 billion why not directly help the homeowners who are under water?
Many of the senators and representatives who voted either for or against the bill said that they regretted that the bill did not directly help those in most need — the people in danger of losing their homes.
I agree. These people were duped into buying homes at a time when the paper-money system was sending wrong — that is, manipulated, signals via pricing.
Those signals said “Houses are going to keep going up in price — better buy now, rather than wait.”
If such signals had not artificially originated from the Federal Reserve, then such buyers could more legitimately be blamed for their own foolishness and greed.
But they were at least partially duped by a faulty system and by the Federal Reserve.
So why not identify the top 4 million houses “under water” with people who bought during the artificial Housing Bubble? Why not help them?
700 billion can help, on average, with an amount of $175,000.
No need to support in every case with that precise amount. What might be done is to use a percentage in local markets that housing has dropped — this would mean more assistance in those markets that had bigger bubbles.
But the exact formula and methodology can be worked out by smarter people.
The point is that this would correct the market for the mistakes of the FED for having kept interest rates low for so long. The FED is the primary place were these market pricing distortions originated from.
Demand and Supply are ALWAYS artificially manipulated when the FED in its “wisdom” thinks that our economic activity need to be artificially “stimulated”. The question needs to always be asked — can the FED be so SMART as to be a good, wise Social Engineer? Most of us, by now, given the evidence we NOW have, would say NO WAY!!!
Of course other corrective actions are also required.
We need a mortgage contract to always be directly tied between mortgager and mortgagee — it does not mean a mortgage cannot be resold, but it means you should not “pool” and sell such financing willy-nilly to “reduce risk” and “to provide a bigger pool of financing” to help realize the American Dream. This pooling was something Alan Greenspan was supportive of.
Wherever did we get the idea that we should allow ANYONE to create ANY KIND of novel Financial Instrument that they wanted to? Sure there’s “money in it”.
But with no oversight?
With no vetting by regulatory groups?
When drug companies create new drugs, we expect exacting PROOF as to the safety and efficacy of the new drug before it is brought to market. We need to understand the risk of that new drug in its interactions with the human organism.
Should we expect any less from a novel Financial Instrument before it is allowed to enter the Financial Bloodstream of our Economy?
Excuse me, but those “toxic assets” are now worth $700 billion! Banks and other institutions will be falling over each other trying to buy them up, so they can get the big bucks from the government. The Fed should just sit back and watch them bid the values up.
no it wont work, even the congress knew it woul;dnt work before they passed it. It will do nothing but transfer losses from specific institions to the brooader eceonomy.
You already know the answer Paul.
Debt incurred to finance transfer payments (interest, pensions, etc.) is of dubious quality.. Any enterprise, private or public, is in dire straits if it has borrowed in order to make such payments
The significant economic purposes for which a debt was contracted, or the manner in which it was financed, is of inestimatable value in evaluating it’s impact.
For example if the debt was acquired to finance the acquisition of a (new-security), the proceeds of which are used to finance plant and equipment expansion, rather than the purchase of an (existing-security) to finance the construction of a new house, rather than to finance the purchase of an existing one (as will Paulson’s planned $700 bill bailout), or to finance (inventory-expansion), rather than refinance (existing-inventories).
The former types of investment are designated as “real” as contrasted to the latter, which constitute “financial” investment (existing homes). Financial investment provides a relatively insignificant demand for labor and materials and in some instances the over-all effects may actually be retarding to the economy. Compared to real investment,it is rather inconsequential as a contributor to employment and production. Only debt growing out of real investment or consumption makes an actual direct demand for labor and materials.
It should be recalled that the charges on debt are related to a cumulative figure; and since the multiplier effects of debt expansion on income, the ingredient from which the charges must inevitably be paid, is a non-cumulative figure, it would seem that the time will inevitably arrive when further debt expansion is no longer a practical or possible expedient, either to provide full employment or to keep debt charges with tolerable limits.
Those who are wont to minimize the ill effects of the deficit are prone to compare the size of the deficit with nominal GDP, as if the volume of nominal GDP were independent of the size of the deficit. Unprecedentedly large deficits “absorb” a disproporti0noately large share of nominal GDP.
Present deficits are unprecedented no matter how measured, and the past gives us no reliable guide to the future effects of deficit financing, beneficial or otherwise.
To appraise the effect of the federal budget deficit on interest rates, it is necessary to compare the deficit, not to GDP, but to the VOLUME OF CURRENT SAVINGS made available to the credit markets. The current deficit is absorbing about 24% of gross savings.
The more alarming aspect of the deficits is not the effect on interest rates but the effect of high interest rates on the level of taxable income and the volume of taxes required to serve a cumulative debt now exceeding $9.7 trillion. Both high interest rates and high taxes induce stagflation, thus eroding the tax base and increasing the volume of futures deficits.
Any deficit, by definition, creates a demand for loan-funds. The larger the deficit, the higher interest rates will be, or the less they will fall.
Any given deficit should be evaluated in terms of: (1) the size of the deficit in the context of the size of future deficits, and the accumulated debt relative to the means and costs of financing the whole: (2) how the deficit is financed: (a) from savings or (b) commercial bank credit, i.e., newly created money; and (3) the purpose for which the deficits are incurred.
Prorating the federal deficits over the entire spectrum of federal expenditures, it can be said that virtually all of the current deficits are attributable to defense spending, military and civil service pensions, interest on the debt, and welfare and unemployment benefits. Social security for now is not include in the above list since only a very small proportion of social security benefits are financed from non-social security taxes. From an economic standpoint, only interest is “untouchable”.
If current projections of Federal Deficits materialize in this, and the next few years, interest rates (both long and short-term) will be driven up sharply by the increased demand for loan funds. I.e., any recovery in the economy will present a “Catch 22” situation. An upturn in the economy will add increased private demand for loan funds to the insatiable demands of the Federal Government. The consequent rise in interest rates will effectively abort any recovery.
Raising taxes to accomplish a reduction in the deficit would be counter-productive. Most of this debt is short-term. Combine this with the factor with the constant roll-over of some of the long-term debt and it becomes obvious that the burden of higher interest rates will be compounded. The burden becomes a function of the major portion of the debt, not just the current deficits. The burden, in fact, becomes exponential. In other words, if the trend is not stopped, the debt inevitably has to be repudiated.
It would seem that somewhere, somehow, if total net debt (not just Federal Debt) keeps rising faster than production (Real-GDP), the burden of interest charges at some point now indefinite and unknown, but nevertheless real, will become too great to carry.
This entire bailout operation will not work, despite what you may say Paul. The real problem in this chaos has always been about stopping the flow of bad debt, keeping it isolated or contained instead of letting it affect the entire economy. But instead, we get a stupid plan made by stupid politicians for stupid companies. Buying up the bad debt is like scraping the surface skin off of a wound; it doesn’t heal it or stop it, but rather opens the door for more bad debt to flow.
Unless you and all these political ‘experts’ have an answer on how to stop bad debt in its entirety, then you’re all wasting your time on these kinds of articles. This plan was nothing more then a clever device by politicians to have something to take home for the campaign trail, and for Bush to get out of office before the real collapse begins.
The next President will be burdened with this problem all right – it will bury them and their career, along with our nation. The sun is setting on the U.S., there is no doubt.
It may help, but it will be slow. It depends on the implementation.
If we bailout the real banks (regulated, insured banks), it will work slowly over time.
If we bailout the ‘non-banks’ (uninsured, unregulated Wall Street firms), the bailout money will disappear, evaporate, vanish.
To get the economy back on track, we need to let housing prices correct back to their natural, pre-bubble levels of about 2000; stop interfering with the market as it corrects.
At the same time, we need to get back to actually doing things and making things. Cut back on imports, increase exports, and stop wasting so much.
Back to basics …
No. Regardless of what anyone says, I believe taxpayers got tricked again by President Bush. He pushed us into an unecessary war and now he’s pushed us into another financial crisis/mess. As a semi-retired senior who is forced to keep working, I rather take my chances and do nothing and let the chips fall where they may.
He can’t leave Washington soon enough. Another win for Pres. Bush and the CEO’S. Who will pay this BILL?
No, this will not work. And because it passed, nothing further will be done. Everyone is going to go home to campaign. The momentum of public oversight will be lost and the pressure to act will be gone. If this had failed, the pressure to “act” would still be on and they would have had to stay in Washington and come up with an alternative. Now that is not going to happen, and people have been defeated in their faith that they have the ability to affect change. They will not take the time in the new year to pay attention and voice their opinion the way they have in the past week. They also now know how much of a farce budgetary arguments are. If we can create 700 billion out of nothing, why cant we put more money towards, for example, struggling military families who are falling apart because of extended tours, the stress of combat, separation, loss of income and loss of parental influence. The return on better adjusted, less stressed and better educated families should be the kind of investment we make to stabilize our economy. A better work force, with real production and real peace of mind, not an adrenaline induced economy whose product is faulty financial instruments. If credit is the connection between crisis and the American family, why not create a government funded contingency for the American family directly, instead of hoping the psychological effects of 700 billion dollars will inadvertently help individuals while propping up a faulty system. Paul, I hope they are paying you enough for your part in all of this. My conscience wouldn’t be able to take it.
BAILOUT CROWD,
Admit it ! ! ! You are quit surprised.
You thought the market would go through the roof.
You did not expect the market to fall.
In fact, the DOW was up 279 before the vote to approve the Bailout. Immediately, after approval the Dow began falling. Within, a few hours it ended down 348.
P.S. The Bailout cost $850 BILLION.
The BAILOUT makes about as much sense as “wooden arrows”.
No, I actually agree with Ron Paul – this is going to usher us into a deeper recession or even a depression. The fact is – the Federal Reserve does not have the funds to pay for this bailout. We are propping up bad debt with debt. How smart is that.
This is an absurb question and, Paul, your columns have become increasingly absurd! This ‘plan’ will not and cannot get the economy on the right track. Paul, instead of listening to the self-serving politicians (leaders?) and self-serving money managers, please try and pay attention to the dispassionate experts who (regardless of their political pursuasion) have stated that this bailout will not have any desired effect. It will only temporize the coming deleveraging! Did you hear nutbag Pelosi after the vote today? This was nothing but political opportunity taking…”Wall Street the party is over.” Weak minded and complict Paulson will now buy up credit card debt, bad auto loans, and mortgage securitites in volume; the feds will not make anything in the acutions and will pass it on to the taxpayers. The intent of this was to keep undesevered and unqualified borrowers in their cars, homes, and plastic…and to keep Paulson’s corporate pig friends from having to get uncomfortable. That’s why the Dems are dancing tonight (the former, not the latter). See where we are a year from now, Paul and tell me the economy is on the “right track.” You are pathetic.
Absolutely not. While I am sure there will be some winners from this fiasco, the move generally speaking is in the wrong direction. People in general are poor at risk mitigation and even worse and buying into magic fixes.
i don’t think it’s gonna help. whoever is behind on their mortgage is still behind. whoever lost their job is still unemployed.
what this country needs is some manufacturing that actually produces something of value. Interest on loans is not value.
As much as I hate the 25B that was given to the mismanaged auto companies it will do more good than the 700B given to the banks.
guys, we are turning commie!
the next step if for main street to realize that it was they who caused this mess. for years they have been told they do not save enough and they have ridiculous levels of debt — that can only go on so long and once the downfall begins it becomes the avalanche we see today.
how many of them bought houses way beyond their means and then went out and took lines of credit on the equity.
this was not predatory lending this was stupidity.
Good Lord, “disgust” doesn’t even come close to what I feel over this bill. Even more pathetic is how some of our “esteemed” leaders pathetically caved and voted because of earmark bribes. Way to stick to your principles guys. If find it hard to see how an earmark for wooden toy arrow makers makes it a better bill and one worth voting for.
Fellow Americans, it should be abundantly obvious that the majority of our leaders do not care about our interests. And that shouldn’t be surprising, either. After all, the big banks can afford to buy off your representatives with campaign checks worth hundreds of thousands of dollars. The opinions of “We the people” are merely an annoyance, certainly nothing worth listening to.
Well, I wonder how many secret meeting where held in private offices on the eve of the vote.
Americans who think this will solve ‘their’ problems – well, not so fast.
The banks are not going to reduce credit card rates, nor are they going to lend to people who do not qualify for loans.
Your government should have capped credit card rates, paid the difference between what sub-prime rate was to the current rate, found a way to help keep people in their homes – even if it was only to rent to them.
Car dealers will go broke, not because they cannot get financing, but due to buyers finally realizing the the party is over.
Just like Canada, people like to live way beyond their means. Until this changes, the problem and the recession will always be here.
The writer says:
“I understand the desire for retribution here. But I don’t get why anyone would actively root for more severe economic pain just to teach wealthy bankers a lesson.”
Are you not understanding that this is the worst piece of legislation ever devised? The pain will now be longer and more severe.
Do you not understand that there is no $700B, so it will have to be printed, further devaluing the money I earn (now at a much higher rate than my raises can cover)? It’s not about “teaching bankers a lesson”, but sure they should’ve gone bankrupt. They would have gotten bought up from the private sector and kept many on in their jobs. When there is pain, it SHOULD hurt. Taking pain killers isn’t always the best medicine either.
This act will WORSEN the crisis. Why? We’ve now added $1 TRILLION to the National Debt in 1 year! That’s a record. Think about it. Is your money and retirement in trouble now? Just wait. $450B existing deficit for 2008, plus $700B. That’s $1.15 TRILLION! We’re toast. And your cheering the fact that “something had to be done” regardless of the long-term consequences.
I didn’t ask for this, but now I’m paying for it. WE NEED FISCAL RESPONSIBILITY, AND WE NEED IT NOW. It may already be too late.
And to all the goofballs who thought that the market would bounce on this news, congratulations, you’ve been duped again.
The chances of taxpayers seeing the 700+ billion come back in 5-years is slim to none. If the junk securties were worth anything the private sector would have jumped into the ring weeks ago and bought at least some of them. I would like to know how the fed is going to piece the mortages back togeather, sort the good from the bad and then collect or foreclose on the deadbeats with out spending anouther 100 billion. The people that should be reimbursing us, along with the institutions involved (slim chance on that legislation passing), are the congress men that allowed fannie & freddie to make loans to people that normally would not qualify for a home (any democrats come to mind?). I think any congress man or woman who was remotely involved in the fannie or freddie fiasco, from lack of oversight or voted on any legislation that loosened lending standards should resign.
Bastards. That is all they are. A pox on both houses and Paulson! First they get us into this mess, then they put a gun to our heads and take all of our money. I am sick and tired of the patronizing media who ridicule us for just not understanding what needs to be done. Well, maybe we do understand. There are many economists who say this is the wrong approach. It is better for us to go into a recession now than bankrupt the future for our children. And the media needs to stop calling us idiots.
Let’s see Paul. You’ve been wrong for months, telling us that things weren’t as bad as they seemed. Now you admit it IS bad, and claim a bailout is necessary.
You’re also telling us that this bailout was the right call. I’m ready to make a bet with you that the bailout as it was passed will have no noticeable effect on the economy. You’re wrong yet again. 6 months or one year down the road the issue will have to be revisited and another “rescue plan” will be needed after the failure of this one becomes obvious. See you then Paul.
I do not know what will happen. Hopefully, this action will help calm down the markets but who knows what spring traps were placed into the legislation. It’s just frustrating. You think Congress is seriously devoted to deliberating the financial crisis and you find out about these less important side deals within the legislation.
I feel bad for the people losing their jobs. Yet I am not sure if large companies with the capacity to harm the markets on such a grand scale should be left to cause further harm. We’re talking about destroying people’s investments and retirement plans. This is the second time reckless finance has happened within the past ten years and dealt a devastating blow to even conservative of investors. It’s crazy.
Although, I see your point. Ideally, the shareholders would be able to just replace the leadership rather than lose the employees unless the leadership developed a business culture that is irreparable.
No one knows if this will work. No one even knew what got us into this mess in the first place, except for in hindsight. Only time will tell.
Buffett knew we were headed in the wrong direction due to problems with the opacity of securitized debts. He called them financial Weapons of Mass Destruction.
Buffett will be laughing at us from the other side for a long time before we’ll have an accurate measure of the halflife of fallout from CDOs, SIVs, MBS, ABS, etc., ad nauseam.
If it were true that we could actually trust our government to pass a bill that will fix the mess, then the government would have had the foresight to prevent it. Nobody knows if this bill will work.
I say give Warren Buffett the helm, and carte blanche to do whatever he deems necessary. He wouldn’t candy coat anything, and we’d all get our medicine. We are all complicit for either believing in or enabling the hypocrisy of debt-based consumerism.
Thanks for listening, Paul.
I am disgusted by this. I didn’t support a bailout in the first place, much less one that is (still) dramatically slanted in favor of the elite. Yes, those who took out the loans are responsible, as well, but the banks are the ones who approved the loans. If they hadn’t offered the loans, no one would’ve taken them.
So now we’ve propped up the system (if this bailout even works, which is unlikely IMO). Now we can continue to spend more than we earn each year, keep housing prices inflated to the point that responsible people can’t buy a home, and keep the trade deficit high enough to keep China and everyone else happy. Meanwhile, we’ll devalue the dollar (in the long run) by drastically increasing our national debt, cause investors to run (again) to commodities, and stoke up the inflationary pressures again.
So yeah, the bailout passed. Pardon me if I call BS on the doomsday predictions coming from the “experts” who encouraged the reckless economic behavior in the first place. You’ll also pardon me if I don’t jump up and down when I think about the tax inevitable tax increases I’ll have to pay during my lifetime because of this and other irresponsible fiscal policies. And finally, excuse me if I don’t jump up and down and cheer about our government enabling another round of irresponsibility.
The bailout will not work as long as the US government allows short selling of common stocks. This is controlled by the hedge funds managers and the daily financial mafia. The proof is what you have seen today after the bailout approval by the president, and the return for shot selling next week.
We were already in for roughly $700B before the ‘bailout’. As of about two ours ago we went to $1.4T. Given how government programs tend to grow I think were on our way to $5T before things ’stabilize’ (bailout / stimulus part 3, 4, …).
Let’s be honest, do you trust a government with an IOU of roughly 10T, before we started the stimulus / bailout process, to be able to manage this mess (I don’t).
Was this the right call, of course not. The US and world economies MUST suffer through the pain of the bust portion of the business cycle. The longer we put it off the worse it will get.
This is a ‘huge step in the WRONG direction’.
This was not ‘poorly sold’. It was just plain idiotic.
It is not a ‘necessary step’. It is not only an unnecessary step — it is also an immoral, life-hurting step.
Thinking people did not reject the bailout plan to make bankers ’suffer’. That is silly.
We can ‘bail’ as fast as we want to.
It won’t matter.
The tears and fears cannot long be held in abeyance.
The water is coming in a lot faster than we can bail it out.
We don’t seem to care how big the hole in our Titanic is, we won’t look at it, and we won’t try to repair it.
All we have now committed to doing is a lot of furious bailing come hell or high water.
It won’t stop anything — both hell and high water are at the front door.
This effort is useless, with much wasted money, and wasted effort.
The congratulations are premature and in vain.
This will look especially ludicrous to those who follow us on the long and painful road of history.
Have we really managed to appease the credit gods?
Is this financial ‘peace for our time’?
Hardly.
The Credit Bubble monster is laughing at us.
I think it will get “business-as-usual” back on track. So, we get more of the same for a few more years. Business-as-usual” is already alive and well. The AIG American General group just spent $165,000.00 for an executives-only weekend getaway at the St. Regis Monarch Beach Resort in California. If there is no change in behavior on Wall Street, then how can ANYONE see how this bailout as getting anything “back-on-track”?
Haha, suckers!!!
At least here in Europe, our government buys/nationalizes the whole bank! That way, you know what you get, and the chances of selling it at a later date is far, far greater then some crappy loans/securities which no-one can put a certain price on.
So, I guess the answer to your question is, maybe, but there would have been far more efficient ways to spend that money. And your government totally failed to see it, implementing a solution focused at bailing out bankers instead of people.
But oh well, it’s your government, not mine!
I predict the billions for banker’s bailout will have the same result on the economy as the stimulus bill did. Nothing! The only effect the average working person like myself will see is higher taxes from it, the rich just got richer on Wall Street while we little people got soaked!
The bulk of the bill has nothing to do with the bankers, it’s full of the normal pork. I will be voting against everyone in office this year, they all need to go!
My bank account is overdrawn ! This affect mah ability to gets me some credit !
I needs a Bailout ! Ima go call the prez !
For anyone who is interested in history just look at Rome, the Dutch, the Spanish and Great Britain. It was poor finances that brought down those world powers. Without a doubt, we are next. As a matter of fact, we are now there!
This bailout was just one more giant leap in that direction. $700Billion…..from where? This country is broke!
From the time of the rulers of ancient Egypt, the powerful have stuck it to the masses. There is absolutely no reason at all to believe the US is exempt from this past history.
Watch what happens to the value of your money now. I agree with the other post on the poor job of the media. They REFUSE to discuss the real negative effects of this bill on the value of our money.
This bailout makes no sense in any of the mainstream short term or long term economic models. Plug this stuff into Mundell-Fleming (short-term), IS-LM (Short term) and the Solow (long-term) models and you see where it will lead us. Just look at the market’s reaction today. The dollar will depreciate further, our economy will not recover and this bailout package will haunt our children. It fundamentally doesn’t make sense.
As for this “crisis” being a result of “The age of total laissez-faire economics”, I would ask anyone to tell me when pure capitalism was allowed a chance. The government is everywhere in our financial and money system. The Fed controls the money supply, interest rates and reserve ratios at our banks. We have numerous regulations aimed at controlling our banks and financial institutions. Some of them are ineffective, some are overbearing. Look at two of the biggest failures we had… Freddie Mac and Fannie May. Both government sponsored entities, both had the oversight ignored. We do not nor ever had true laissez-faire economics. It might be time to listen to the economists from the Austrian school and get rid of Keynes, Freidman and look at Hayek.
No, it is not going to do the job. When the measure failed stocks dropped by 700 points and recovered 300 points the following day. Now, the measure gets signed into law and the market falls 157 points. It is not off to a good start. Perhaps they passed enough other measures to get the credit markets going again. The $300billion for mortgage releif was the best bet, now we will never really know what did it. There are just so many things Congress threw at the problem. In the end, this was bad debt, is still bad debt and will continue to be bad debt.
It’s now official, the US can no longer refer to itself as a free market system. Corporate america is now subsidized by the government. CEO’s who are paid millions to be visionaries of their corporation who turn out to be nothing more than a glorified janitor, walk away with millions.
I’ll bet my house that CEO’s will extract their share of the $700 billion taxpayer block of money that has now been allocated. Due to corporate and political advertising dollars, media such as CNN will never report this information until much much later when it is too late to act.
Paul, face it…you are nothing more than a paid scribe with marching orders from your corporate CNN heads. For everyone except Paul, expect the media to continue drumbeating how good this is for the economy. They will fill in little bits and pieces around voter dissatisfaction with this bailout while finishing each story with the comment of how this is needed in the economy.
CNN….where were you during this entire sub prime mortgage mess? You bring in the experts now to discuss the problems. If they were experts, why did you not lead with stories on how all of the activity around sub prime loans and housing were eventually to be the catalyst bringing down the economy? What you see people is a failed state when it comes to the media.
The only thing this bailout will accomplish is to make the warren buffets of the world even richer. Oh, and also enrich some of the same companies that caused this mess. They are already bidding to manage the ‘toxic’ assets (on behalf of the government) that they created.
This bailout was a nasty, disgusting pill for the US taxpayers (and many members of Congress) to swallow, but we absolutely had to do it. The age of total laissez-faire economics is over, and this move was critical to preventing the financials market from spiraling inward to implosion. Still, it was only a first step. Congress will have to swallow bigger, nastier pills if it truly wants to help Main Street. I agree that this act helps Main Street, but who are the spin doctors fooling? It was aimed at Wall Street, and the benefit for America’s homeowners is a nice side effect of avoiding financial devastation that happens to look really good.
If the government truly wants to help homeowners, action will be taken to prevent excessive foreclosure, despite the cries of pain from the financials market. To paraphrase and add to a saying from a very intelligent man, you made the toxic kool-aid, so shut up and drink it. because everyone else already had to.
Absolutely not. All it will do is temporary prop up institutions and boost balance sheets for shaky banks. In the end the fact that housing prices are over inflated compared to incomes and that the ratio of M3 to debit is hugely out of proportion will get us in the end.
Basically even if you account for a 5% growth in wealth there is no way that either consumer or commercial debit in the US could ever be payed off.
So now what. Deflation of wealth, debit write off, bankruptcy and we start over.
Depends what you mean by ‘help’. It may treat some symptoms but not, NOT! the disease. The consumer gets very little out of this and their pain will show up in reazil sales and a variety of other measures.
i don’t know. there is a lot of talk about how this package is hitting the root of the problem. but the credit freeze wasn’t the root, only a byproduct among byproducts caused by a very extensive bubble, on wall street, housing etc.
that the credit freeze will thaw out isn’t going to fix the value declines already in place.
if history has taught us anything, (and not the stuff that is in social studies text in 4th grade), it’s that government intervention has always-ALWAYS- prolonged economic “situations”. i do not know off hand any economic crisis where the government hasn’t stepped in…so this kind of intervention doesn’t really have any comparative thing to measure against it… only those other crises where the government has intervened. and in those cases, the elongated era of slavery abolition, the Great Depression, Labor Movements, and the more recent market flux in the 70’s 80’s and 90’s. all of this revolved around controls on money/markets. all of these involve government action, and aside from the relatively minor recessions from the 70’s on, lasted several years.
one thing is certain. nothing is certain.
Paul, go and drink some more coffee and wake up. The FED has injected over $700 billion in liquidity into the market and credit is still locked up for those who don’t/will not qualify. The people who have relied on credit for the past 8 years who have been living outside of their means are now tapped and can not get credit. If you have GOOD credit you still have access to credit. This was your typical George Bush fear mongering to scare people into allowing them to steal $700 billion from tax payers money to clean up the balance sheets of Morgan Stanley and Goldman Sachs. Hell Paulson is going to need a job after he is done fleecing the public in 90 days.
for the past few months paul has been a cheerleader telling us things arent that bad
things are so good paul that we just handed over 700 billion to a man who has not made a right call in two years
the economy is stromg the subprime is contained
the housing market will bottom in spring 2007
when you have a bazooka you wont have to use it
please paul put the pom poms away
Cmon Paul, after the beating this forum took from the bailout question this week do you really think the responses are going to be much different with this question??
No, it won’t work. $700B will only buy assets of 2 or 3 big Wall Street firms. It is not enough to clean the affected banks and investment firms balance sheets. As not enough assets will be bought (at whatever price), bad assets (ie from high risk mortgages rated by the rating agencies as AAA paper) will continue to flood the market. It won’t give any confidence to investors. They still don’t know which bonds are backed by good assets and which ones are not.
Suspension of mark to market rule will only give more doubts to investors. Nobody would know if a Bank has enough assets (or the value of those) to support their leverage.
$700B is that a small patch that won’t change the market (or investors) lack of confidence. It is just a political gesture to help the main campaign contributors.
We have just socialized bad management and corporate greed at the cost of “We the People”! Our founding fathers are flipping over in their graves at this travesty of legislative bile that has now become a law. The 2nd version was just a pork laden version of the 1st greased up enough to get it to run through the house unscathed. Even if you candy coat a steaming big turd, it’s still a turd once you get past the crunchy shell. Now “We the People” get to take a big bite of it while the corporate criminals that instigated this whole thing laugh all the way to the bank. I can only hope that other fed up “Americans” do as I have and identify every senator and congressperson from their respective states who voted yes for this tripe, and if they are up for re-election give em’ the boot! I’m also checking on a grass roots petition to the Untied Nations to have George W Bush charged for war crimes against humanity for Iraq. Maybe the Hauge can do what needs to be done and let him swing from a rope.
Of course it will work; it will send more taxpayer money into the hands of Wall Street porkers who will funnel a bit of the gravy back to pols. Will it help the economy? Just look at the Dow.
IMO this isn’t just about wealthy bankers. They’re not the only guilty parties here. It’s also about the guilty borrowers who over extended themselves and were the ultimate cause of this problem. This bailout has some provisions, no matter how weak, that will allow the government to reward these deadbeats for their irresponible borrowing.
I can’t believe the day the bailout was passed the market still dropped. Goes to show what Wall Street thinks of it (while they laugh all the way to the bank).
If things aren’t improving by Novermber 24th anyone who voted for this bill will not be receiving my vote no matter what party they belong to. My 401K is already down 24% this year…it better have at least stabilized come 11/4. Same with unemployement. I better start seeing credit losening. Etc.
If it brings back confidence to the markets, raising animal spirits and releases the flow of liquidity in the banking system so the rest of the economy can function – then yes.
But there is no guarantee. That is the problem – the world needs to act to stave off this becoming worse.
We are near the edge, and only now trying to back off from it rather then jumping and seeing what happens.
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The issue isn’t whether the U.S. status will decline, as it most certainly will. The more important question is: what should the future international monetary system look like?
Part of the answer is that it should include a Single Global Currency, managed by a Global Central Bank within a Global Monetary Union.
See the website of the Single Global Currency Assn., at http://www.singleglobalcurrency.org.