1 Trillion dollar bailout

[EvilTOJ]

Do you think I'm talking about 2008? Yes - but also all these things that are happening now happened in 1929 - right before the GREAT DEPRESSION. Better strap the chicken coops to the car and head west folks...

If you people are heading west, go to California. Stay the hell away from here! It rains a lot and it's full of smug, filthy hippies.

 

[Laughing_Gnome_Invisible]

If you people are heading west, go to California. Stay the hell away from here! It rains a lot and it's full of smug, filthy hippies.

Yeah, damn those liberals and their pot smoking Bill Clinton that caused all this mess in the first place! We are doomed! Doomed I tells ya!

 

[TwoHeadsBrewing]

Yeah, damn those liberals and their pot smoking Bill Clinton that caused all this mess in the first place! We are doomed! Doomed I tells ya!

We may be doomed, but come out to CA and smoke all your troubles away! Provided that you have a license for medical MJ!

 

[BierMuncher]

...We get screwed because the cash in my pocket is now worth less....

You think the cash in your pocket is worth less because of this?

Think about what that $1.00 bill in your pocket is right now.

That $1.00 came from your employer who:

• Uses a line of credit to buy supplies, pay overhead and make payroll.
• Relies on his suppliers who also use a line of credit to buy raw materials, pay overhead and make payroll so they can deliver goods to your business.
• Counts on customers (who maybe work for one of your suppliers) to come in on weekends and spend their payroll.
• Turns around and redistributes his earnings by spending in the local economy and paying employees who also spend in the local economy...a local economy that is driven daily by lines of credit.
• Has a vision that new innovations from young, educated talent who got through school using a line of credit might make his business more robust and adaptable for the future.

You close all of those lines of credit that drive these activities, (which trust me as someone who is in the industry…is a very real possibility right now), and your $1.00 is now worth about 20 cents.

Now…try to take that 20 cents and do something with it.

• Your favorite restaurant…closed.
• Your local pub…closed.
• The car dealership…closed. (How many people do you know pay cash for a new car?)
• The partially constructed mall…deserted.

Is this starting to sound familiar?

No…if you think that the Feds buying up distressed real estate is going to be an inconvenience, just consider the alternative when banks say:

• We’re out of the student loan business.
• We no longer offer auto loans.
• Your business line of credit is temporarily suspended.
• You will need 50% down for a new home.

The banks have already stopped lending to each other and are precariously close to pulling the trigger on all lending in order to protect their cash assets.

Do try and remember one thing. This is not a junk bond bail out. This is real property, bought at distressed prices, that will appreciate over time.

 

[Dr Vorlauf]

The fact that the government forced mortgage companies to make loans to those who did not qualify is infuriating.

Even worse that the inflation that we are seeing now is what I see in my business ( call it a leading indicator industry ). I have seen prices go up on some materials by 400 % since April. I wonder what that is going to do to the price that the consumer will ultimately pay?

 

[Boerderij_Kabouter]

I haven't read the thread, but I was emailed the solution by some guy:

A BETTER PLAN

A friend of mine who is a retired USAF ex fighter pilot sent this to me.He makes total sense so let's petition the loonies in Congress to seriously consider it!

I'm against the $85,000,000,000.00 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in a "We Deserve It Dividend."

To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.

So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.

Of course, it would NOT be tax free.

So let's assume a tax rate of 30%.

Every individual 18+ has to pay $127,500.00 in taxes.

That sends $25,500,000,000 right back to Uncle Sam.

But it means that every adult 18+ has $297,500.00 in their pocket.

A husband and wife have $595,000.00.

What would you do with $297,500.00 to $595,000.00 in your family?

Pay off your mortgage - housing crisis solved.

Repay college loans - what a great boost to new grads Put away money for college - it'll be there Save in a bank - create money to loan to entrepreneurs.

Buy a new car - create jobs Invest in the market - capital drives growth

Pay for your parent's medical insurance - health care improves

Enable Deadbeat Dads to come clean - or else. Remember this is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehmann Brothers and every other company that is cutting back. And of course, for those serving in our Armed Forces.

If we're going to re-distribute wealth let's really do it...instead of trickling out a puny $1000.00 ( "vote buy" ) economic incentive that is being proposed by one of our candidates for President.

If we're going to do an $85 billion bailout, let's bail out every adult U S Citizen 18+!

As for AIG - liquidate it.

Sell off its parts.

Let American General go back to being American General.

Sell off the real estate.

Let the private sector bargain hunters cut it up and clean it up.

Here's my rationale. We deserve it and AIG doesn't.

Sure it's a crazy idea that can "never work."

But can you imagine the Coast-To-Coast Block Party!

How do you spell Economic Boom?

I trust my fellow adult Americans to know how to use the $85 Billion We Deserve It Dividend more than I do the geniuses at AIG or in Washington, DC.

And remember, the plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.

And if you are so inclined, send a copy of this to your Congressmen and Senators in Washington!
=============

 

[jspence1]

isn't this the way to raise the price of bread to $3000

 

[ChshreCat]

What's most annoying is that the bailout is going to bail out the rich. The money will go to the bankers to buy out the loans they never should have given people. So the rich will stay rich. But all the poor schmucks who can't make their payments will still get foreclosed. But, it'll be the government that forecloses on them. So you have poor families being thrown out on the street so that the top 1% (Dubya and his friends) can keep their lifestyle.

 

[ohiobrewtus]

or just turning on the printing presses and devaluing the dollar.

THIS is the 800# gorilla. You think the dollar is weak now? Wait 12 months and see where it is.

 

[KingBrianI]

What's most annoying is that the bailout is going to bail out the rich. The money will go to the bankers to buy out the loans they never should have given people. So the rich will stay rich. But all the poor schmucks who can't make their payments will still get foreclosed. But, it'll be the government that forecloses on them. So you have poor families being thrown out on the street so that the top 1% (Dubya and his friends) can keep their lifestyle.

interesting viewpoint. i choose to think that the idiots who took loans they shouldn't have are getting what they deserve. maybe the escalade with the 22s was a bad idea too. and the $1500 stereo system you put in it. the fact is, most of the people having their house foreclosed are idiots and need to have this slap in the face to bring them back to reality. it's time people start living within their means again.

 

[ChshreCat]

interesting viewpoint. i choose to think that the idiots who took loans they shouldn't have are getting what they deserve. maybe the escalade with the 22s was a bad idea too. and the $1500 stereo system you put in it. the fact is, most of the people having their house foreclosed are idiots and need to have this slap in the face to bring them back to reality. it's time people start living within their means again.

And that's an interesting viewpoint. But what about the majority of them who are working three jobs and just wanted to have a home for their kids so they don't have to live in a crappy apartment in a bad neighborhood? The ones who just wanted a home to park their 15 year old used cars in front of while they get their 6 hours of sleep between shifts?

 

[KingBrianI]

i don't know any of those. i do know a few people who bought houses with 100% loans with adjustable rate mortages because their financial skills are lacking and are now hurting because of it.

 

[ChshreCat]

Those folks need the bailout more, IMHO. Give them help paying of their debts, they pay that money to the banks and everyone is fine. Except of course all the taxpayers who are paying for the bailout in the first place. But if my tax money is going to help this situation, that's where I'd want it to go. Take care of the families first, not providing golden parachutes to millionaires.

 

[delboy]

What's most annoying is that the bailout is going to bail out the rich. The money will go to the bankers to buy out the loans they never should have given people. So the rich will stay rich. But all the poor schmucks who can't make their payments will still get foreclosed. But, it'll be the government that forecloses on them. So you have poor families being thrown out on the street so that the top 1% (Dubya and his friends) can keep their lifestyle.

Strongly agree!

 

[EvilTOJ]

I haven't read the thread, but I was emailed the solution by some guy:

Some really long chain letter

This makes all kinds of sense and seems like it could work to me. Can anyone explain why this wouldn't work? I mean besides the fact that the government is never ever going to just give that kind of money to the proles, workable or not.

 

[Boerderij_Kabouter]

This makes all kinds of sense and seems like it could work to me. Can anyone explain why this wouldn't work? I mean besides the fact that the government is never ever going to just give that kind of money to the proles, workable or not.

That's the crazy part to me as well. When it is broken down like that it puts the amount of money they are talking about in perspective. I told my brother about it last night, and he would believe me that that's how much money 700 billion dollars is. I had to get out a calculator and show him how it worked out. Even then he was like, "who the hell is going to pay that much? The government doesn't even have that mush money out of pocket." exactly, exactly.......

We are heading to grimy place with all these bailouts to people who cause problems for themselves. [sarcasm] go ahead, live in a place where your house is likely to be destroyed every 10 years, those idiots up in Wisconsin will foot the bill just as much as everyone else! Hey need a loan you have a snowballs chance in hell of paying back? Go for it, what do you have to lose.[/sarcasm]

This whole scenario reminds me of parents who give there drugy high-school kids a $100 allowance and then are surprised that they can continue to do drugs. "where do they get the money?" idiots......

 

[JustDave]

A BETTER PLAN

A friend of mine who is a retired USAF ex fighter pilot sent this to me.He makes total sense so let's petition the loonies in Congress to seriously consider it!

I'm against the $85,000,000,000.00 bailout of AIG.

Instead, I'm in favor of giving $85,000,000,000 to America in a "We Deserve It Dividend."

To make the math simple, let's assume there are 200,000,000 bonafide U.S. Citizens 18+.

Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.

So divide 200 million adults 18+ into $85 billon that equals $425,000.00.

My plan is to give $425,000 to every person 18+ as a We Deserve It Dividend.

$85,000,000,000 / 200,000,000 is only $425.

 

[Boerderij_Kabouter]

Arrrrrrgh! You are right, I must have missed a set of zeros in me drunken calculations last night..... tanks Davie!!!!

 

[EdWort]

[ame=http://www.youtube.com/watch?v=VgctSIL8Lhs]YouTube - Fox News Special Report on The Banking Crisis[/ame]

 

[CBBaron]

$85,000,000,000 / 200,000,000 is only $425.

Exactly, The government has already done the bailout Americans plan in the form of a tax stimulus check you received last spring/summer. And that money was a straight expense on the governments books. This time they are buying assets.

Craig

 

[BierMuncher]

And that's an interesting viewpoint. But what about the majority of them who are working three jobs and just wanted to have a home for their kids so they don't have to live in a crappy apartment in a bad neighborhood? The ones who just wanted a home to park their 15 year old used cars in front of while they get their 6 hours of sleep between shifts?

Close to the industry, I can tell you these instances are few and far between.

Most "real people" finding that their ARM mortgage increased are being counseled and worked with by their mortgage company to stay in their homes and work out a plan. Mortgage companies are not in the real estate business (by choice).

The majority of distressed real estate assets come from "investors". People who had enough equity in their first home, to buy up a second property, spend some (borrowed) money to fix it up...in the hopes of reselling within 12 months and making a profit. (Anyone remember the popularity of “Flip That House”?).

I'm not talking about dilapidated properties in need of major renovation...these are properties that are move-in ready and simply need some fresh paint. In some cases people were buying brand new spec homes and sitting on them… counting on a continued 10% annual increase in property values as a reliable investment.

What these "investors" failed to realize is that a lot of the increase in home values was due to the excess buying power created by the subprime customer. Mortgage companies had a slew of subprime customers who wanted to "keep up with the Joneses". Investors in Wall Street were eager to buy up these subprime mortgages as investment tools because they were yielding huge returns. GSE’s like Freddie and Fannie wrote new criteria to accept hybrid style loans like SISA (State Income, Stated Assets), SIVA (Stated Income, Verified Assets), No-Doc Loans and worst of all…pick-a-payment mortgage products. These products made it easier to buy homes. More buying power pushed prices up…creating the need for even more aggressive loan products… so on and so on. People were even tapping into their (artificial) home equity to fund personal businesses.

One flaw. All of these risky products were built under the premise that the excess buying power of the subprime customer would be sustained. What they failed to remember is that subprime customers are subprime for a reason. They have crappy credit. A history of not paying their bills. Little to no assets. Little to no equity.

Well…you can’t change the spots on a leopard and subprime homeowners did what they always did…or didn’t do. They failed to make mortgage payments. Payments were delinquent. Foreclosures ensued. Homes went up for sale…and the value of that “investment” was now dropping as fast as “Price Reduced” signs were going up in neighborhoods.

No…this is not about Joe six-pack who should have signed up for a fixed rate mortgage when 30-year rates were below 6%.

This is about people who saw the rising tide of real estate values as a reliable…high yield investment and banked all of there equity on a good, short term return. Now…as for the people out there who signed on a dotted line of an Option ARM (pick a payment) mortgage…they made the choice.

 

[zoebisch01]

Hmm...let's recount. Government 'bails out' companies, money shifts to...government. Said government sets up governmentally controlled, non-reviewable (neither by courts, audit, etc) financial institutions to the tune of over half the money in circulation. Does nobody else see this as absolutely absurd???

 

[BierMuncher]

Hmm...let's recount. Government 'bails out' companies, money shifts to...government. Said government sets up governmentally controlled, non-reviewable (neither by courts, audit, etc) financial institutions to the tune of over half the money in circulation. Does nobody else see this as absolutely absurd???

Not nearly as absurd as the alternative.

The great depression was driven primarily by banks refusal to extend credit.

The current state of these sinking assets sucking up capital on financial institutions balance sheet is leading to their urgent need to protect cash assets. Last week banks stopped lending to one another. The next very short step is their refusal to extend credit to the public.

Think about everybody within a 50 mile radius of you unable to borrow another dollar to go about their daily business. Now that is absurd.

 

[zoebisch01]

Rock and a friggin hard place. We are definitely on a tight rope.

 

[EdWort]

BierMuncher, will you buy me a hamburger today, If I give you a dollar on Tuesday?

I certainly hope they revoke Clinton's Community Reinvestment Act which forced banks to to give mortgages to uncredit worthy people...

It's amazing how mortgages were given out without income verification, copies of tax returns, or even a decent credit history and then resold to an even dumber investor.

 

[Aubie Stout]

China banks told to halt lending to US banks-SCMP
Wed Sep 24, 2008 9:52pm EDT

Trading will never be the same.BEIJING, Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.

"The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said.

A spokesman for the CBRC had no immediate comment. (Reporting by Alan Wheatley and Langi Chiang; editing by Ken Wills)

12345678910

 

[BierMuncher]

...Sept 25 (Reuters) - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis

Step One.

Anyone still concerned about their "tax payer burden"?

If we go to step two...well...let's hope we don't go to step two.

 

[EvilTOJ]

What step is 'the public panics and does bank runs?' like they're doing with gasoline in the south?

 

[TwoHeadsBrewing]

Not nearly as absurd as the alternative.

The great depression was driven primarily by banks refusal to extend credit.

The current state of these sinking assets sucking up capital on financial institutions balance sheet is leading to their urgent need to protect cash assets. Last week banks stopped lending to one another. The next very short step is their refusal to extend credit to the public.

Think about everybody within a 50 mile radius of you unable to borrow another dollar to go about their daily business. Now that is absurd.

I contend this notion that people need to borrow money in order to sustain their life, or even a decent standard of living. Our country has become addicted to debt, and living outside of one's means. Save first, spend later...not the other way around. We've become accustomed to impulse purchases, immediate gratification, and racking up debt. We don't need financing, for cars or anything else except for a home.

About 3 years ago, I was swamped in debt. I had just finished college and had some student loans come due, I bought my first house and overextended myself financially. I also had several thousand in credit card debt. All of these factors combined almost drove me to borrowing money from friends and family. I was so broke I was putting groceries on my credit card at the end of the month because I didn't have any cash leftover after paying bills. Luckily, my brother in law bought me a book called the Total Money Makeover. The whole premise of this book is that debt is NOT NECESSARY, and besides buying your first home you should not EVER go into debt. The author, Dave Ramsey has some simple steps and rules to taking control of your finances and paying off your debt in a matter of months. And it works, I'm almost debt free aside from my home. Both of my cars are paid off, my credit card debt will be paid off in another 5 months, and my student loans will be payed off within the year.

There is a saying in that book, actually a quote from one person who followed the plan, "I'm sick and tired of being sick and tired!". This is exactly how I felt; no money at the end of the month, getting deeper into debt every month, living a lie by purchasing things I didn't really have the money for, and worst of all pissing the chances of financial safety for my family down the drain. I finally realized that debt is a "stupid tax" on people who don't have the will power to save up for the things they need. If you're struggling to make ends meet, and are willing to change the way you live to improve your life, this book has some very common sense methods to get you out of debt, start saving, and living life comfortably within your means.

Here's another really good quote from the book:
"We buy things we don't need, with money we don't have, to impress people we don't even like."

 

[CBBaron]

I contend this notion that people need to borrow money in order to sustain their life, or even a decent standard of living. Our country has become addicted to debt, and living outside of one's means. Save first, spend later...not the other way around. We've become accustomed to impulse purchases, immediate gratification, and racking up debt. We don't need financing, for cars or anything else except for a home.

All very true, however the banks "refusal to extend credit to the public" includes those home mortgages and more importantly business loans. That will seriously curtail job creation in this country which can really cause some financial problems.

I am glad to see at least Biermuncher is looking at the bigger picture here. First the proposal is not to give these large corporations money, but to buy assets from them that they are having trouble selling. If things go great the government can even make money from the bail out. More likely we will lose some money but not $700B.
Second consider the alternative of allowing those companies to continue down the path that has started. It starts looking very much like 1929.
And it does look like there is an effort in the package to prevent huge golden parachutes for the top executives in these failing companies. Well will have to see if it actually has some results.

Something on this scale is definitely needed and soon. The problem is balancing the need against the cost and preventing abuses.

Craig