The Bailout Bill

[Fashion Lad!]

Our financial crisis doesn't have that much of an effect on other countries... well...

Germany said on Sunday it would guarantee all private German bank accounts – currently worth €568bn – in a dramatic move to prevent panic withdrawals as fears over the worldwide financial crisis spread to Europe’s largest economy.

A European summit on the global financial crisis opened Saturday with Britain's leader saying strong banks should be protected and "whatever is necessary" must be done to restore stability.

South Korean Prime Minister Han Seung Soo warned that the new crisis could result in protectionism, citing reports that the turmoil could plunge the world into a recession similar to the Great Depression of the 1930s.

“Without a doubt, the current instability in the financial markets could have a devastating, domino-like impact on the real economy in this globalized world,” he said.

No, this does not seem like it is just America's problem... and it does seem to be very clearly a world-wide problem.

[Rapscallion]

"Strong banks need to be protected" - er, strong banks shouldn't need protecting, surely?

On a more serious note, it's the people who invest in those banks who need protecting. What we also need are laws passed to stop those who gained fat bonuses very recently from getting those awards for failure. The upper management of large companies should be able to see when their company is in decline and be able to try and do something about it. If they fail to turn it around and cost the citizens of a country their savings, the executives should not get any bonuses. It's also possible that they could have inflated their performance targets by acting in ways that hurt the company in other areas, thus promoting a failure. Sod the bonus then.

I don't think just removing bonus payouts from the unworthy would work to deter others, though. I think we need to get all the executives involved in failure in this instance, get them to a press conference in public in front of the white house, and shoot them in the shins. You know, as a warning to the next few generations...

Because while we don't like it, we still need credit to function.

Limited amounts of credit, sure. Large item purchases where the goods can be collected in the case of default, definitely - talking cars and houses here. The rest of it? When credit was easy to get, I saw many adverts extolling the virtue of borrowing to fund a holiday or something else ephemeral.

I'm now one of the Harry Houseowners of the UK. I went to the building society and asked about a mortgage - they were astounded when they found out that I had a deposit. Truly - they were gobsmacked. Most people could squeeze a thousand or two - I had twelve thousand quid and about four thousand for moving costs. How did I do that? I worked my arse off and saved up. I don't have any other loans and my credit card is paid off every month. I'm a rarity, though I saw my parents struggle with credit cards used as cashflow for long enough and there's no way I'm going down that route.

Need credit? Not as much as most people think we need it, though it will take a massive culture shift to change that.

Rapscallion

[AdminAssistant]

Yes, my friends, it seems like Europe is in a similar mess - just not collapsing as quickly and spectacularly as we did.

Honestly, I'm not TOO sympathetic with the 'taxpayers', especially the ones who have been using this free and easy credit to live way, WAY beyond their means and now, all of a sudden, the gravy train's stopped and they cry, "Waah! I'm a victim!" How is your inability to manage your finances my problem? The way I see it, these banks were just enablers in many (not all) cases.

[protege]

The only 'taxpayers' I have sympathy for...are those who were responsible for their cash, but through no fault of their own (losing their job because of the economic slowdown, for example) are in trouble now.

[Slytovhand]

I think there's so much 'panic' out there, that the truth and the facts are going to be distorted.

As for the use of credit... well, we can't get a house loan unless we've got at least 10% deposit! And I've been hearing you need even more.. not to mention stable work history for at least a few years.

Why sell a house on credit to an 85 year old? Cos knowing that she's going to pass on soon, you can collect on the house and sell it to someone else - other than the price dropping, it's all profit.

And lastly, why is the government responsible (other than fining banks for not giving home loans where they shouldn't if they were smart)??? I mean, it's a capitalistic society. So what if a company hires someone with a massive payout agreement - isn't that the right of those boards of executives? Ok - stupid, but still their right. Unless those top dogs are doing something illegal, why does it have anything to do with them? I find it weird that people want less government involvement and more free trade, and then when this stuff happens, they complain that they didn't do anything about it.

Besides, the stock market has been massively overpriced for years (decades??). It was always going to happen that someday those stocks would suddenly hit reality. That's the nature of stocks - they are an investment to say that the company will profit... it doesn't truly represent the value of the company. Especially when the value of the company and the profits don't really take into account those multi-million payouts

I just read an article by one of our local papers and I loved this bit:

This is a rescue plan devised by people who didn't see the crisis coming in the first place - otherwise they would never have allowed subprime loans to be created. If they didn't understand
the problem with subprimes, then it's possible they don't understand the system they're now trying to rescue.

Even the amount nominated, almost US$150 billion more than the US has spent on the war in Iraq, was not chosen in any scientific way. A US treasury spokeswoman told Forbes magazine: "It's not based on any particular data point. We just wanted to choose a really large number."

[protege]

So what if a company hires someone with a massive payout agreement - isn't that the right of those boards of executives? Ok - stupid, but still their right. Unless those top dogs are doing something illegal, why does it have anything to do with them?

Sure, it is their right. However, if a firm is tanking, why should a CEO still get his bonus...at the expense of his company? If anyone else screws up, do they still get rewarded? Of course not--that's why people are pissed about CEO pay.

[Slytovhand]

Oh - I'm not saying people shouldn't be pissed - I'm just saying that it doesn't have anything to do with laws or governments.


Btw -

if a firm is tanking

then it should be taking all the aggro and letting the mages do the high DPS, while the Hunter kites, and the rogue CC's!

[Boozy]

There's probably an aspect that I'm missing. Please, somebody tell me why the entire country should be paying these buffoons so much more money?

Capitalism is based on the free flow of credit. The credit crunch was basically threatening the entire system. The subprime crisis had cost these banks and firms so much that they no longer had capital to lend. Once credit stops being offered, the economy quite literally stops.

So there was a desperate need for an influx of capital to get money moving again, and to ease the panic. The banks had stopped lending to each other. Financial industries formerly considered completely safe (ie commercial paper) had either shut down completely or were now lending a fraction of what they were before at near usury rates. And the stock market was getting so bad that money market mutual funds, the safest investments out there, were actually losing money.

Basically, the bailout bill saves the US from economic collapse.

[protege]

And the stock market was getting so bad that money market mutual funds, the safest investments out there, were actually losing money.

Since I work for a financial company (a brokerage), we've been following what's going on. We've actually seen our trading operations nearly *stop* whenever news comes out about the crisis. Nobody's really buying things now--many firms are simply reducing their investing, or simply waiting until the dust settles.

[Fashion Lad!]

I think there's so much 'panic' out there, that the truth and the facts are going to be distorted.

There is a lot of panic. Asian Markets, Brazil, Russia and especially European markets have been hit particularily hard.

Now, to say that no one predicted this happening. Well, people have been saying that the housing bubble will pop soon. And the housing bubble is at the center of all of this.

[PREFACE: please note, I understand that this is a complex issue. There is plenty of blame to go around in both parties, across wall street, and main street. But as we examine the primary political players who are involved-the Democrats, more than the Republicans, were on the wrong side of the issue.]

What happened? Why were we never regulating these companies?? Well...
-April 2001 the Bush Administration warned of red flags regarding Fannie And Freddie

-April 2001 the Bush Administration warned of red flags regarding Fannie And Freddie (beginning of video)

-2002 Budget request warned that the size of Fannie and Freddie is a “potential problem"

-2003 the white house warning was upgraded to a systemic risk that could extend beyond the housing market

- Fall 2003 the Bush administration pushed congress hard for an agency that would regulate and supervise Fannie and Freddie

- Then ranking member of the House Financial Services Committee, Barney Frank, pushed back, stating-“we are not in a crisis”.. and…“the federal government should be doing more to get low income families into houses”…and…“too many people had a sky is falling mentality”

-In 2005, Alan Greenspan stated: “Enabling these institutions to increase in size-and they will once the crisis in their judgment passes-we are placing the total financial system of the future at substantial risk”

-As a counter to Greenspan, NY Senator Charles Schumer stated: “I think Fannie and Freddie over the years have done a incredibly good job and are an intrinsic part of making America the best-housed people in the world…if you look over the last 20 or whatever years, they’ve done a very, very, good job"

-IN 2006 SENATOR JOHN MCCAIN CO-SPONSORED LEGISLATION FOR MORE REGULATION, ON THE FLOOR OF THE US SENATE, HE STATED: “FOR YEARS I HAVE BEEN CONCERNED ABOUT THE REGULATORY STRUCTURE THAT GOVERNS FANNIE MAE AND FREDDIE MAC…AND THE SHEER MAGNITUDE OF THESE COMPANIES AND THE ROLE THEY PLAY IN THE HOUSING MARKET….THE GSE’S NEED TO BE REFORMED WITHOUT DELAY"

-McCain’s bill made it out of the Senate banking committee with a party-line vote, all democrats voting against it.

Give credit were credit is due.

No one saw it coming??? History has not been kind to you.

Now, because of all this. The United States tax payers own Freddie Mae and Fannie Mac.

Now, this timeline is basically all over the internet. The fact is, people did see this coming. People did try and prevent it. This has been an issue for many years. The war in Iraq has little to nothing to do with this. Now the government also has to step in and re-write loans so people can keep their houses. Now the type of intervention I enjoy, but, it needs to be done.

And the government will get to regulate these companies. And for down payments, people will probably be needing to make a 20% down payment on a home in some situations. The goods is, if you can call it good news, houses will come back down to earth with their prices as bit.

[AFPheonix]

Sure, it is their right. However, if a firm is tanking, why should a CEO still get his bonus...at the expense of his company? If anyone else screws up, do they still get rewarded? Of course not--that's why people are pissed about CEO pay.

I really don't care if the CEO gets his bonus or not. The only way I'd care is if the company benefited from government assistance and the CEO was subsequently fired and then received a massive financial package. At that point, it's my money going in his pocket, and that frankly wouldn't be ok with me.

[protege]

Then there's this--those idiots at AIG just spent $443,000 at a spa resort just *days* after the bailout. Anyone see a problem with that?

[Pedersen]

Why, no, protege, why should I? I'm glad that I and my wife have an additional $4600 in debt (which is more than a vacation costs for us), so that they can have an executive retreat while we try to find ways to save enough so we can go on vacation.

Isn't everybody else glad that the executives at AIG are doing their part to help save the economy from this crisis by spending all this money at a resort hotel?

[Greenday]

Why, no, protege, why should I? I'm glad that I and my wife have an additional $4600 in debt (which is more than a vacation costs for us), so that they can have an executive retreat while we try to find ways to save enough so we can go on vacation.

A what?

Last time I went on a vacation was almost 6 years ago. I don't see one happening for a long time. Paying off my college loans will suck as it is. But I'm glad to see someone gets to go on vacations as a result of my work.

[protege]

Here's a link of the expenses they racked up. It must be nice to have that kind of cash to throw around Seriously though, how the hell can they justify this...especially after their execs were on TV the past few days bitching and moaning about how the company's not doing well, and then get a bailout? WTF?