[scottwww]

Originally Posted by dth656

well, if its socialist to dramatically increase regulation of this stuff, then i'm for it. doesnt anyone remember Long Term Capital Management and how that ended??

Correct me if I am wrong. It seems to me that appropriate regulation is not socialist. In some cases, regulation is opressive, but probably doesn't define socialism.

Involving tax payer money in operating businesses, and especially in using tax payer money to take (partial) ownership in business is socialist.

[scottwww]

Originally Posted by Voltigeur

Oh it's centuries in terms of credit (Italians were great innovators as were the Fuggers), but that's not to be extrapolated to a globally-integrated financial system that transmits data (interconnectedness) almost instantaneously.

And we have a monetary system that's so much more complex.

If the present system is so wonderfully complex, then why the meltdown? It might be interesting to read your spin.

[scottwww]

Market Summary
Dow 10,830.67 +465.22 (4.49%)
Nasdaq 2,088.16 +104.43 (5.26%)
S&P 500 1,163.06 +56.67 (5.12%)

Just before the close, with the markets making up so much ground, what's to say this isn't because not having another huge bailout isn't the nuclear bomb that has been touted?

Perhaps the bailout legislation is simply a ruse to give government for socialistic power. Those people would sink to any low to grab up more power.

Or is it just a Dead Cat Bounce?

[Hawkeye]

I say don't pass. Let the banks that were stupid go under and the ones that remain learn from them. If they do pass it I hope they say that money cannot be lended to people with < (say 700) credit score for a home or < (say 650) for a vehicle. Make people actually start understanding what money management is and the banks be a little more responsible about who they give loans to.

[achien]

beware the dead cat bounce!!!

fundamentals are still shitty, traders are most likely covering their short positions.

Originally Posted by scottwww

Market Summary
Dow 10,830.67 +465.22 (4.49%)
Nasdaq 2,088.16 +104.43 (5.26%)
S&P 500 1,163.06 +56.67 (5.12%)

Just before the close, with the markets making up so much ground, what's to say this isn't because not having another huge bailout isn't the nuclear bomb that has been touted?

Perhaps the bailout legislation is simply a ruse to give government for socialistic power. Those people would sink to any low to grab up more power.

Or is it just a Dead Cat Bounce?

[Kbueno]

Originally Posted by scottwww

link
In conclusion, there are three good reasons why Congress should reject this legislation:

a. It is immoral - Dumping bad debt on the innocent taxpayers is an act of theft and is wrong.

b. It is unconstitutional - There is no constitutional authority to use government power to serve special interests.

c. It is bad economic policy - By refusing to address the monetary system while continuing to place the burdens of the bailout on the dollar, we can be certain that in time, we will be faced with another, more severe crisis when the market figures out that there is no magic government bailout or regulation that can make a fraudulent monetary system work.

a)Immoral is not the right word. In essence your helping those who were greedy or just plain stupid. It's not theft, unfortunately we're all in this together.

b)Government stepping in and buying housing in the great depression was a good thing and gave people hope again. The constitutional authority is the people imho.

c)Totally agree, these practices need to be regulated, unfortunately, but a bailout is needed (and rather quickly).

[achien]

"If credit freezes, say goodbye to growth. Many small businesses will no longer be able to tap their lines of credit at their respective banks, and they will no longer be able to access credit at any favourable terms. "

Scare Monger tactics...

In the short-term, it will be a little more difficult (or expensive, in the form of high interest rates) to borrow money. In the long-term, banks are in the business of lending money, so they can only hold back lending for a short period of time.

Originally Posted by kosseg

The bill is essentially there to reinstill confidence in the credit markets by setting a floor and stimulating banks to continue to lend. If credit freezes, say goodbye to growth. Many small businesses will no longer be able to tap their lines of credit at their respective banks, and they will no longer be able to access credit at any favourable terms. This will trickle down to the individual american whose boss can no longer meet payroll because they don't have access to the bank credit that they usually use to pay their employees.

Wall Street effed up big timed, but it wasn't just the big commercial/investment banks that are at fault; it's a whole slew of groups ranging from the bond rating agencies, to the mortgage brokers, to the individuals themselves who spread themselves way too thin trying to "keep up with the Joneses" (completely cliche term obv.).

With the proper left of centre amendments (including reduced CEO compensation, equity stake, etc.) this plan is a hell of a lot better for Main street than most people have been led to believe.

This is a good read:

http://seekingalpha.com/article/9787...not-completely

[Voltigeur]

Originally Posted by scottwww

If the present system is so wonderfully complex, then why the meltdown? It might be interesting to read your spin.

That's the problem. No spin. Complexity vastly increased the risk.

It's because we wrote poor mortagages, then securitized & sold the shitty mortgages as RMBS; created CDOs, then CDOs^2 & ^3 (leverage on leverage) , not to mention a CDS market that got far beyond insuring actual credit risk but instead can be used to speculate, to synthetically short a distressed stock; or one can short the stock and offset my risk going the other way on the CDS.

These risks got 'hidden' by valuations/ratings that did not accurately reflect the risks, and sold as securities throughout the system and unwinding the securities and OTC contracts say, in an AIG (which had an outsize book of CDS business), equates to a great deal of uncertainty about counterparty default risk among banks & other financial entities.

Banks and other parties in the financial system levered up big time. That way you can make single digit ROE deals look good by 'juicing' ROEs into the mid-teens.

Our shadow banking system - that's to say investment banks, hedge funds, SIVs/conduits, LBOs, private equity - got to be bigger than our 'real' banking system, which created outsize risk relative to the underlying economic activity. Suffice it to say this bloated system is going to contract in a period of deleveraging coupled w/ Schumpterian creative destruction (financial consolidation).

[achien]

This, I agree. This is essentially a shell game, a scam (the more complexity, the more confused investors get). Mixing the good assets with the bad, and then 'packaging' and selling the "final product" to entice their customers (investors).

One of my friends who worked for Lehman Brothers HK. They flew him over in Business Class for "Sales Training". Guess where part of those toxics ended up in HK?

Originally Posted by Voltigeur

That's the problem. No spin. Complexity vastly increased the risk.

[scottwww]

Originally Posted by Voltigeur

That's the problem. No spin. Complexity vastly increased the risk.

Certainly the misuse of derivatives and leverage are great factors in the failure. What bank was that who was saved at great expense a few years back because of the abuse of derivatives? Wasn't that Barclays bank?

What else do you think played a large role in this systemic failure?

[in5ane_3]

This bailout plan should have happened IMO to keep the economy from getting worse than it already is. People taking out loans that they couldn't pay, taking out loans with 0 down and interest only payments, really messed up the banks. Yes, the banks are at fault for this because they are ultimately those who make the final decision. Also, the government is partly to blame for not regulating these privately owned firms. Becuase of people requesting for these loans and the loans being approved by the banks, the banks are headed for trouble.

What a lot of people don't understand is that with this bailout plan, the government will buy out all of those bad mortgages that the banks are stuck with. Later, these banks and firms will buy back all of the mortgage packages that the government bought. In the bill, I believe, says that the government is expecting a .70 cent return on every dollar spent in the bailout plan.

If this plan doesn't pass it could spell disaster, the US dollar will fall and the banks would probably fail. You could then expect to pay $400 a gallon for gas (exaggerated) because of the fallen US dollar.

Now, some may argue that the people should be receiving the money instead of the corrupt banking firms. If the government starts handing out $200,000 checks to people with bad mortgages you think they'll actually pay their mortgages off? There really is no way to regulate how the people spend the money but if these private firms get it, then it could be closely regulated by the government.

[scottwww]

The U.S. Senate announced that it will vote on the 700 billion dollar bailout on Wednesday evening (10/1/2008). The U.S. House of Representatives will take up the matter again on Thursday.

Call (202) 224-3121 for the U.S. capital switchboard operator.

Ask for YOUR Senator by name and state. Tell them what you think.

http://www.house.gov/house/MemberWWW.shtml
http://www.senate.gov/general/contac...nators_cfm.cfm

[Voltigeur]

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Voters may ring up their Rep etc and rail against using taxpayers' monies, but unless a plan is put in place this will have real economic consequences for Main St in terms of higher interest rates, a withdrawal of willingness to invest in the US (affecting USD and rates) and so forth.

The whole notion that the market will just sort it all out at no net cost to the economy is a crock. The market got to run wild for a while and look what we ended up with (and I believe in relatively free markets, just not run riot free).

As the poster said above: a decent plan will, in time see a return on capital. There's actually some assets out there that have been too aggressively discounted due to illiqudity coupled w/ fear.

We may see a temp change in accounting rules to allow some changed book values of assets, that was the rumour going 'round later today.

[Voltigeur]

-

As an aside, I was in a room on the Hill 3 years ago w/ about 25 economists, hedgies and investment managers and Bernanke came in to speak (this was just before he was elevated to the Chair of the Fed) and he was asked about the gone-crazy mortgage risk and he basically said that the authorities needed to step in to encourage lenders not to push these subprime loans so hard - just talking when there's money involved doesn't do the trick, not that Bernanke had any power at the time...

[TurboFan]

Originally Posted by frahuang

I'm sure there will always be someone ready to take my mortgage payment first day each month.

Thats not the problem. The problem lies in the fact that with out the liquidity, there will be no one left with available, unregulated capital to fund new mortgages. That means no houses bought or sold, unless you are paying cash. That means no builders work, no trades people work, appliances are not bought, title companies have no work, it keeps going.

[TurboFan]

Originally Posted by scottwww

Correct me if I am wrong. It seems to me that appropriate regulation is not socialist. In some cases, regulation is opressive, but probably doesn't define socialism.

Involving tax payer money in operating businesses, and especially in using tax payer money to take (partial) ownership in business is socialist.

No one in this country will allow pure capitalism - we've never had it, and we never will. There needs to be regulation, to protect ourselves from one another. They're called laws, and that is not the same as socialism.

[BMWI6]

Originally Posted by TurboFan

No one in this country will allow pure capitalism - we've never had it, and we never will. There needs to be regulation, to protect ourselves from one another. They're called laws, and that is not the same as socialism.

[scottwww]

Originally Posted by scottwww

The U.S. Senate announced that it will vote on the 700 billion dollar bailout on Wednesday evening (10/1/2008). The U.S. House of Representatives will take up the matter again on Thursday.

Call (202) 224-3121 for the U.S. capital switchboard operator.

Ask for YOUR Senator by name and state. Tell them what you think.

http://www.house.gov/house/MemberWWW.shtml
http://www.senate.gov/general/contac...nators_cfm.cfm

I can't get any calls answered by the Capitol Switchboard. So I sent email to my two U.S. Senators.

Please VOTE NO on any bill that resembles a bailout or is called a relief program.
Please VOTE NO on any bill that resembles a further expansion of socialist or fascist ideas.
Please VOTE NO on any bill that comes to a vote of the U.S. Senate on 10/1/2008.

I oppose any bill that will involve further use of taxpayer money to try to reduce the current financial crisis.

I categorically oppose any bill that is designed to involve taxpayer money for acquisition of any investments.

[scottwww]

If you don't know how your U.S. Representative voted yesterday, here is the link to the roll call:

http://clerk.house.gov/evs/2008/roll674.xml

[Voltigeur]

-

Vote NO and live w/ the economic consequences - let's try that one.

Don't think that a NO vote won't hurt us one way or another - not least of which is that the Fed is acting to use taxpayers' money today to avoid a total meltdown, $400B at last count. I'd rather have some more structured response, otherwise those liquidity injections will go on whether you hassle your Rep or Senator or not.

People need to read something like BCA's (non-partisan) study of financial systems' failures to see some examples of what has worked (e.g. Sweden's in 1992) and what did not (e.g. Japan after their property bubble blew up in late '80s).

[scottwww]

"Mr. Chairman we do not have a crisis at Freddie Mac, and particularly at Fannie Mae..."

[Voltigeur]

-
Clueless execs - of which there have been a few no doubt (MER, BSC, FNM, FRE ...) - does not now obviate a need to act in crises.

I'm not wanting us to go in to a deep recession - my bottom line.