The Gov. bail out

It is another attempt at bullshit "trickle down" reganomics. AKA "Voodoo economics"

What we really need to do is get the US to buy out all the debt from the banks. And indeed, do what you are talking about. Like buying and selling assets from the bank. As well as create employment relief for all the people that will loose their jobs from this. (like it or not, but rich asshole CEOs still have families)

But OH NOOESSSS THAT WOULD MEAN THAT THE GOVERNMENT WOULD ACTUALLY HAVE TO PARTICIPATE IN THE US'ES AFFAIRS! AND THAT WOULD BE UN REPUBLICAN NOW, WOULDN'T IT?

No, you don't quite have the concept right. Printing 700 billion would be disastrous and cause massive inflation. The government will use tax money or finance the project via debt.

What the government is doing is actually buying batches of subprime mortgages from financial institutions.

The problem started when a lot of these mortgages began to default. Financial institutions panicked, because no one was quite sure how many were going to fail, and their values fell and they became difficult to sell. If the financial institutions have assets but can't sell them, then they have less money to lend and less money to settle their accounts.

These subprime mortgages batches aren't necessarily worthless, it is just that there is a lot of uncertainty about how much they are worth, and the forclosures made financial institutions nervous. Thus, if a bank needs to raise money, they can't effectively sell their assets. So the government comes in, offers to buy lots of these batches at a price much more generous than scavengers on the market will currently offer. The banks get liquidity, which prevents to financial sector from freezing up and allows banks to engage in transactions and settle accounts.

So then, the government is left with these mortgages, which are not worthless by any means. In fact, the main problem is that no one is confident in assessing them, and the markets are nervous due to the turmoil. So, the government pays in $700 billion, and then they own these mortgages. They can collect on the ones that do pay, forclose on homeowners who don't, sell the mortgages back to banks at a later date once their value has become clearer.

So, while the government does initially pay out $700 billion, they aren't signing a blank check or giving away free money. They will get some assets that will later enable them to recoup some of this money. In fact, it is possible, but not likely, that the government could actually make a profit. Most estimates have the value change at about +/-200 billion, with losses seen as more likely.

Of course, the bill hasn't been completely worked out, and other stipulations, such as the Dems wanting the government to grant some forgiveness to delinquent homeowners, could incur additional costs.


On another note, I am very disappointed with the media on their coverage of this issue. While there are certainly reasons to oppose the bailout, journalists have been portraying the whole issue as the government personally handing a $700 billion check to wall street CEOs and then railing against executive greed and arrogance. Sure, executives have things to answer for, but this is a complete mischaracterization and not at all productive.

This whole mess makes me think of the manga Akumetsu . . . and makes me want to kill people.

As whitelion already said


As the value of our money falls the price of oil will go up since the dollar is pinned as the measurement of oil. Along with oil prices goes up (also gas prices) the prices for food and everything else will go up along with the price of oil since we rely on diesel trucks to move goods around the country. The bottom line on this part is everything is going to get a lot more expensive and many economist believe America is heading for a great depression. One major difference between the 1930's depression is this time we don't have the industries and such to pull ourselves up by the bootstraps.

We be fucked. Just prepare yourself for the worst but, hope for the best.

So, the House voted down the bailout and DOW fell another 700+ points.

Frankly, I'm very disappointed. I am for the measure certainly, I think it's insane not to try anything at this point. That's what Hebert Hoover did in thee 1930s, and we saw how that worked out.

But even more so because of why the bailout failed. It failed because the media, through mischaracterization of the measure and mindless railing against the "evil" CEOs, managed to misinform a huge number of people, who then pressured their congressmen. And of course, plenty of congressmen are willing to put their own re-election first, regardless of whether they think the bailout is actually good for the nation or not.

NOBODY I talk to understands this measure, outside of economists. Even political science majors at my school give the same tired and misinformed rants about CEO greed and all that nonsense. It's frustrating.



Why do you think the dollar is pinned a measurement of oil? The value of the dollar is affected by the trade deficit, that is, ratio of imports to exports, as one would expect in a basic supply and demand model. Oil is major import, but not the sole determining factor. Confidence in the US government also affects the value of the dollar, but generally, most people believe that the US government is much less likely to have to engage inflationary money printing, so it's usually not a big issue. However, if things continue like they are, it could some into play.

I also don't see where you are coming from about the industries pulling us out of the great depression. Many of the markets and industries caused problems through speculative investing. The government made things worse with tariffs. FDR did many questionable and some bad things, but ultimately, he did make life better for a lot of the people being hit hard by the depression. In the end, the war jump started demand from industries and ended the depression, and the long term effects of many of FDRs ideas could never quite be judged accurately.

What I was trying to say is the market sets the price of oil in dollars. They don't use francs, pounds, yen,etc. When the markets try to figure out how much a barrel of oil is worth then price it in dollars then they make the conversions to the currency of other countries. Its how the world gauges the value of oil. It doesn't affect the world because as dollar falls in value their money is growing stronger when you trade the currencies against one another.




America doesn't produce anything really. Back in the great depression we had the industries to make things. Which is a roundabout way of saying we import more than we export (industries give us things to export). We also didn't have massive debt that we do now. The difference now is we don't make things like we used to. The entire economy is basically trading debt and credit between everyone. Every real industry has been outsourced and all the major industries that remain are being run into the ground by monkeys in suits.

i think they should pump the 700 billion into the share market first.. because at the rate their goin now the US is heading for another depression..
the way the media presents it, they make it seem like without the 700billion America will be doomed and now even the australian government is still pressing for america to do it..
Australia will be affected too.. ahhh

Everyone will be affected. Europe is in a recession and if America hits a depression which may or may not be a lot worse than the 1930's depression. It'll ripple through the world since all countries are interdependent.

I'm still really confused by this issue - who's at fault? And why aren't we hearing more about who really is at fault?

This problem didn't just happen. It's not like a hurricane or earthquake. People, somewhere down the line, messed up big, and I'd like to know who it was. And I'd like people to talk more about who messed up, and why they messed up. That way, maybe this sort of thing won't happen again, and we could understand better what we should do.

by my understanding.. its like everyone's fault.. i think its discussed in the topic lehman brothers.. go look it up
hmm seems like so many bad things are happening in the world..
first the earthquake in china, now the stock market crash.. then we hav china with poisoned milk..
we're all gonna die!! haha

Just four more years to go . . . :twisted:

lol so does everyone else believe that the world will really end in 4 years??
if yes then we can do shit like no tomorrow.. haha

It really sucks for those who will retire in less than 10 years since their retirement will only suffer and make it worse for them. Everyone is going to suffer, but I don't think we'll go into a depression. I never really liked how the media portray a problem, never rely on the media for such coverage entirely.

This wouldn't have happened if these Mortgage Companies hadn't give out loans to so many people without background checks and they try to bundle it and sell it back, but it failed. Now you got a crisis and the wrong president to handle this. :x

Everyone in general is at fault. The companies that gave out these bad loans (business,House and Cars) made bad business practices causing them to fail, people paniced and withdrew their money thus removing the disposable capital for the bank, weakening dollar, rising energy prices.

There are many smaller reasons and a few major reasons. I have even heard rumors that Hedge funds are part of the problem too though I never looked into it. The whole thing is just everyone got caught with their hand in the cookie jar and mom is pissed.

The was actually this deal too where financial groups would take out insurance policies on other financial groups, kind of like high stakes wall street gambling. I oversimplify, but that's the basic idea.



So, the bailout finally passed. I think that most of the lawmakers, regardless of ideology or constituency, realized there wasn't really a choice anymore. We had to try something, and even Ben Bernanke, who isn't exactly eager for the government to meddle in the business world, was for the measure. They decided that the opportunity to stop the financial markets from completely grinding to a halt and bringing on a deep and long depression was worth both the money and the precedent being expended. I personally agree. What is really needed is some level of certainty, which only the government is large and powerful enough to provide. The precedent being set is dangerous, certainly, but the consequences of a collapsed financial market would send ripples through the world and could have potentially disastrous effects.

Hopefully the passing of the bill will give people some hope, because yeah, SOMETHING had to be done soon. Why does Henry Paulson still have his job as Secretary of Finance though lol.

It's too bad we can't really point the blame at any specific group of people. We could take all their money and put it into the bailout plan. It probably wouldn't amount to much, but it'd make me feel better =).