Bail Out Mess Who To Blame?

[Peter Hansen]

Yes there is plenty of blame to go around ........but listen to this U-Tube Video with an open mind ......and TELL ME .......WHO IS REALLY TO BLAME?
I think the ANSWER is OBVIOUS!!

http://www.youtube.com/watch?v=_MGT_cSi7Rs

[Lyehopper]

Yes there is plenty of blame to go around ........but listen to this U-Tube Video with an open mind ......and TELL ME .......WHO IS REALLY TO BLAME?
I think the ANSWER is OBVIOUS!!

http://www.youtube.com/watch?v=_MGT_cSi7Rs

Thanks for posting the video Pete....

Some peoples, dey jus be sooooo stupid!

[asfd9]

The repubs are on CNN right now blaming the democracts. I guess some of there members were put off about being late to the party.

[Websman]

Thanks for posting the video Pete....

Some peoples, dey jus be sooooo stupid!

Lyehopper Lives! Jejejejejeeeee!

[New-born baby]

Thanks, Webs, for another great post.

[Peter Hansen]

Hey Lye

Thanks for posting the video Pete....

Some peoples, dey jus be sooooo stupid!

Hey Lye .....after viewing the video ....I am sure You will conclude as many of the DEMS ......It's All Bush's fault LOL .....Hee Hawwwww!

[New-born baby]

Excellent Article

MM,
Whaddathink?

CAMBRIDGE, Massachusetts (CNN) -- Congress has balked at the Bush administration's proposed $700 billion bailout of Wall Street. Under this plan, the Treasury would have bought the "troubled assets" of financial institutions in an attempt to avoid economic meltdown.

This bailout was a terrible idea. Here's why.

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.

Don't Miss
Bailout plan rejected
Financial rescue 101: the bill
Commentary: Financial crisis a disaster
In Depth: Commentaries
The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.

The bailout has more problems. The final legislation will probably include numerous side conditions and special dealings that reward Washington lobbyists and their clients.

Anticipation of the bailout will engender strategic behavior by Wall Street institutions as they shuffle their assets and position their balance sheets to maximize their take. The bailout will open the door to further federal meddling in financial markets.

So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.

The opinions expressed in this commentary are solely those of the writer.

[Clarkstondude]

i vote lobbyists

lobbyists were paid for from the bankers, they targeted the dems coz they are plain stupid rich when it comes to money. now that s#$t hit the fan the lobbyists are in far corners cause they caused the mess.

But not so fast, there is soo mush BS behind all this it isnt completely 1 parties doing. yes rep is good for the investor but think can you invest? I'm sure the FRE/FNM plays pulled off good and the WM truckload sale fended just as well. I know i have a new ID here but offer nothing... I see a big problem with your guys picture. It wont work.

fubared. you guys make your own ending while I am making good %. theres nothing mainstream that is going to work the next week, maybe a few bottom bankers at the risk of a draw.

I have been here for a LONG time and since the market dried up this place really changed. From stock picking fools that doubled to market preaching political crap. Sorry guys there is money to be made and you guys are not on it.

this was my biggest post in 10 years or 8 or 6 I dont know. All I know is the money is there, I went from multi to 9K, nice hold em and be stupid as sin... depending on government backed BS.

I am working a new idea that I always thought was c#ap but it works, i am a bottom tugging fool that lost mega K to the system. The very system that made me great took me out and I watched it happen "I wont sell a loss" "It wont go down more" etc etc... what a failure to
my family.

Remember I only started out small K 9K to 240K to 8K nice cycle.

my education in this post... none go bottom fishing which i never believed in. The asshat that called himself motherload... this dude is a bottom fisher, and he is good.

Like I said i worked my way down to 6K from multi, so a 3K investment spread across gave me 40% avg on all 3. His next guess is AXTI which since I cant day trade I opened a few more accounts... I will be back in the real world.

I hate playing with change.. yet without change nothing can happen, I dont care if it's a hundred bucks.

blah blah sorry guys... had this open since I picked up my son.

Jeff

[Karel]

[...]

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

[...]

Thanks, NBB, I think we need more commentary like that, and less finger pointing and YouTube. The reason that I snipped so much of the quote is not that I disagree with those parts, but because in my perception this portion is its weak point. And we can't expect a libertarian like Jeffrey Miron to make it stronger. So the question becomes: what kind of turmoil can we expect as a result of laissez faire? And if that turmoil is rather daunting (and not over "instantly"), would it be possible to diminish it, and at what cost?

And then to weigh the alternatives...

Regards,

Karel

[Karel]

With all the high feelings, it might not be a bad idea to have a look at What got killed (CNN).

There now is talk that the extra time might be used to formulate a better plan. What would be a better plan? As I see it, with the current proposal, the $700B is supposed to be a cap on state involvement, and protected by the underlying value (if any). The banks would not get the original value for the assets exchanged, but market value. The actual cost would be Underlying Value - $700B.

It is difficult to find info on the Republican "insurance proposal". I find no limit mentioned on (or estimates for) the amount the state might have to pay out. With tax cuts too. It is not clear to me that this is easier on the tax payer and less generous to the banks, indeed it may well be worse on both counts. And wouldn't a realistically priced insurance mean crippling insurance costs? Call in the actuaries!

An area of improvement could be to try to do something about the looming foreclosures, but what?

Regards,

Karel

[peanuts]

Do you know what the US Navy does when it becomes too cumbersome and expensive to operate ships in their fleet?

They use them for target practice and then sink them to turn them into reefs for tiny little ocean creatures to call home...

[Lyehopper]

What a waste of scrap steel!

And just think of how much value in scrap steel they waste, SAD!.... Just proves the government pisses away money without giving it a thought.... AND THEY'RE GONNA SAVE THE MARKETS?!!!!

I say FORGET the bailout, let the chips fall where they may. I'm hunkered down and ready for a depression..... If Wachovia sold for a measly $2 Billion, then I should be able to snag STLD (lock-stock-and-barrel) for about $750k in a ca$h deal in a couple of years.... jejejejejejejeeeeeeeee!

[skiracer]

And just think of how much value in scrap steel they waste, SAD!.... Just proves the government pisses away money without giving it a thought.... AND THEY'RE GONNA SAVE THE MARKETS?!!!!

I say FORGET the bailout, let the chips fall where they may. I'm hunkered down and ready for a depression..... If Wachovia sold for a measly $2 Billion, then I should be able to snag STLD (lock-stock-and-barrel) for about $750k in a ca$h deal in a couple of years.... jejejejejejejeeeeeeeee!

Lye,
the correct terminolgy would be "armed and dangerous" lots of people feel the same way throughout the country

[Websman]

Thanks, Webs, for another great post.

You're welcome NBB!

[Websman]

Lye,
the correct terminolgy would be "armed and dangerous" lots of people feel the same way throughout the country

Country boy can survive! Bring it on boys!!! I'm ready for ya!

YEEEEHAAAAAAAAAA!!!!