The U.S. Decides to Bail Itself Out?
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By the Time I Finish This, It Will All Change...
I was going to wait about a week for the dust to settle before writing about Treasury Secretary Hank Paulson's plan to create a U.S. governmental agency to buy up bad mortgage debt in an attempt to stabilize Wall Street and calm world markets. At this writing, on Sunday September 21, the plan is projected to cost around $700 billion and few of the details have been worked out, although according to NYT columnist Joe Nocera, the actual cost could end up closer to $1 trillion.
The bail out plan would be based on George Bush senior's solution to the the Savings & Loan crisis of the 1980's. The Resolution Trust Corporation was created by Bush Sr. in 1989 to buy up toxic S & L assets after aggressive deregulation caused similar issues on a smaller scale. According to the NYT:
The mission of the [Resolution Trust] corporation was to dispose of the assets as quickly as possible for maximum value. Its goal was to reduce taxpayer exposure.
Resolution Trust closed or reorganized 747 institutions holding assets of nearly $400 billion. It did so by seizing the assets of troubled savings and loans and then reselling them to bargain-seeking investors. At the peak in early 1990 there were 350 failed savings and loan institutions under the agency's control.
By 1995, the S.& L. crisis abated and the agency was folded into the Federal Deposit Insurance Corporation, which Congress created during the Great Depression to regulate banks and protect the accounts of customers when they fail. The total cost to taxpayers was later estimated at $124 billion.
Clearly, $124 billion is nowhere near $1 trillion, and the nature of the problem was somewhat different as well, but the Resolution Trust Corporation did seem to solve the Savings & Loan crisis, and Henry Paulson and Ben Bernanke are hoping it will work on this much larger crisis as well.
Can It Work?
Well, anything is possible. So yeah, maybe it can work.
On the other hand, here are some concerns that I've read in the past several days while cruising the internet:
1) The assets in question are more complex and there are more of them. Most of the assets bought up by the RTC were real estate assets, which, today's market notwithstanding, tend to hold value and can be sold at a profit once home prices rise. They are real tangible things--houses, buidlings, property. While this buy now/sell later principle is the general thinking behind the current plan too, it is important to note that the assets in question now are complex derivatives that are difficult to understand at best and even more difficult to place a value on given the current climate. Part of the reaon for the panic in the financial world right now is the opaque nature of these complicated investment vehicles. In other words, during the boom times, investment bankers packaged bad mortgages and sold them and resold them in such complicated ways that it is hard to track exactly where the bad debt is and what the consequences of holding it are.
If you buy a bad mortgage and sell the actual property when housing values increase, that's a plan. But how do you put a price on an investment vehicle even professionals have difficulty understanding completely? How do you resell that down the line? Can you resell it? The truth is, nobody knows. It's uncharted territory. The S & L crisis was eventually resolved by buying up $300 billion worth of hard assets at a cost to the American taxpayer of $124 billion. The investment vehicles at issue today run into trillions of dollars. The risk is that the RTC-like new organization will buy them up, and then be stuck with them, costing the taxpayers more than three Iraq Wars and constituting what amounts to the largest corporate welfare check in history.
2) The size of the national debt. The national debt is already completely out of control, twice as big this year than last not even counting Fannie & Freddie & AIG, and tacking another trillion or so onto it will arguably have negative effects that have the potential to be as severe as the current crisis. We keep hearing that "the alternative would be far worse," and that's probably true. Still, it isn't as though this plan is a magic bullet. We aren't hearing much about the consequences, we are only hearing about the urgency, but we will definitely suffer consequences. One of the first and scariest that comes to mind is runaway inflation, a common occurrence when a country takes on too much debt too fast and has to print more money because of that.
3) Institutions may fail anyway. The aggressive attempt to correct the root of the problem instead of just reacting to each separate financial meltdown is, I think, probably necessary at this point. However, once the government starts buying up this toxic sludge, the institutions they buy it from will have to declare the difference between the government's price and the value on their own books as a loss, which can in turn lead to a regulatory requirement that they raise more capital. They may or may not have an easier time doing this. If they can't raise the extra capital they still could fail. If the government overpays for the assets, the taxpayer gets screwed. So it's by no means foolproof, and the reason for that is the gigantic amount of this sludge out there to be purchased.
4) Short sellers are not the problem. We've all watched the Discovery channel specials about weak and sickly caribou being taken down by wolves and we've heard the theory that this culling actually keeps the herd healthy. (Or am I thinking of the Republican Presidential race? It's so confusing.) Think of short sellers like that. Short sellers flag a company having problems and draw attention to it. This creates transparency in the market and draws attention to issues in the market. I'm not going to explain short selling, I don't think it's all that necessary. Suffice it to say that the illegal forms of the practice were already illegal before the ban but no one enforced the law. (SEC, are you out there?) Now it's all been put on hold, reducing transparency in the markets even further. Translated: Now it will be that much harder to see who is in trouble next.
5) Where is the accountability? When the House spent a year debating 'moral hazard' in regard to individual people in foreclosure it was easy to find lots of self-righteous remarks in newspaper letters and online forums about how stupid people should suffer the consequences of their stupid actions, even if forcing them to suffer those consequences destroys the tax base of cities, ruins neighborhoods, and leads to an unstoppable downward economic spiral. Congress wasted a year debated the damage done by stupid wage earners who buy houses and don't pay for them.
Then, when Fannie & Freddie, the two hugest mortgage lending corporations in the world, were about to fail due to cooking the books and backing predartory loans, Congress passed a package to bail them out right now. It didn't even take a week. Those homeowners? Oh, those guys can get help if they are about to be foreclosed but have good credit and the lender volunteers to refinance. Who in foreclosure has good credit? How many lenders are willing to refi on a foreclosed property?
Similarly, prices for energy, gasoline, food, housing, health care, and consumer goods have been rising rapidly while wages decline and the complaints of the American people have fallen on deaf ears. We get it, we're on our own. Message received loud and clear. But Wall Street completely screws itself through unbridled greed, lack of responsibility, and noncompliance (or enforcement) of the few regulatory safeguards that remain and we are supposed to bail them out? Why is Anthony Mozillo of Countrywide not in prison? Why are none of the CEOs of the financial institutions losing billions being held to account for their own poor performance? Lots of people see a vicious double standard here and are way less than happy about it. As time goes by, I think this will become more and more of an issue, and it could get really ugly.
My Own Feelings About It All
Ok, I'm mad now. I've really about had it with Washington and Wall Street both.
Nancy Pelosi and the Democrat-controlled Congress say they will push for some things for ordinary people to be included in the plan, specifically extended unemployment benefits and real help for people in foreclosure instead of pretend help, but they will be under the gun to shove this thing through fast, so, they will probably cave so as not to look like the party that destroyed America.
To me, this looks a lot like blackmail, but what am I going to do about it? Not much. I mean, Bernanke hasn't called me lately and neither has George Bush. Why is it that George always makes himself scarce when the poop hits the fan? I think he's finishing "My Pet Goat" this week and can't be bother by all this silly economics stuff, but maybe that's for the best.
Are we going to make it to the election?
Seriously, I'm not sure. I guess we'll find out.
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Comments
No, this doesn't have anything to do with your hub, but I HAD to share this because this is giving me a new reason to love this country!
http://www.theaustralian.news.com.au/story/0,25197
Democracy in action!
My feeling is that this 'package' is too slick and too easy (if it goes through). Wall Street has suffered no pain, so why should they change their ways? The average taxpayers will simply notice that the panic seems to be over and by the time consequences (inflation, cuts in Govt spending) come through they'll have forgotten what the causes are, and be diverted easily to blame something else (like immigration) Is that too cynical?
Hope--Thank you for reading my hub and saying hello.
Talented_ink, that is s awesome! God, wouldn't it be great if anyone made that bastard do anything? That IS inspiring!
Paraglider, I don't think it's too cynical, I think it is ab accurate description ofwaht is happening. They are counting on ordinary people not understanding the situaton and just plodding on as if nothing has happened. But I think the economy may not be fixable at this stage by this sort of sleight of hands. They've been shuffling these cards every way possible for a long time now--I think the house may fall down anyway.
It's obvious even to a layperson like me that the current plan is designed to screw over the tax payer and reward the wrongdoers, reward the worst offenders most, in fact! And I've been reading reactions from actual economists all morning, which are making me even madder.
Hell in a handbasket, that's where we're going, and I don't even know how we can turn it around. Not electing a man who was praising the benefits of deregulation less than a month ago seems like an obvious first step, but I have serious doubts than even Obama could do any more than not make things actively worse. The system is too entrenched. We need a do-over button. :(
In case you missed them, here are a couple of the articles I've been reading. The Greenwald is pretty accessible; the other took me some rereading.
If you're looking for the major path to this financial meltdown, you need look no farther than the 1999 repeal of the Glass-Steagall Act. The primary cheerleader for the repeal was Phil Gramm, who was until recently McCain's chief economic advisor.
But wait . . . as usual, the Democrats were eager to pile on to this reversal of New Deal regulatory "protection" -- fully 38 of 45 Senate Democrats voted for the repeal (which passed 90-8), including some famous names usually associated with "protecting the public" politics by the easily gulled: Dodd, Kennedy, Kerry, Reid, and Schumer. Of course, there was the inevitable shout of "yea" from the ever-servile corporate factotum Joseph Biden. And, the repeal was signed into law by the guy who was president in 1999.
That “easily gulled” kind’a says it all about those who would "protect" us.
Taxpayers, JUST SAY NO!
That is what I thought when I read this morning's headline, Taxpayers to Foot the Bill. I can tell you that I, for one, am not about to cover another of W's bailouts. I am going to take legal action. I didn't vote for him and I bore the burden of Republicans calling me anti-American because I did not support the war. I do not invest in the stock market and now I am supposed to bail out people who earn $40 million in severance pay when SHE fails Hewlett Packard? OMG.
I swear we need to get a class action law suit against the government.
TAXPAYERS JUST SAY NO! Or this will be the start of a civil war and it won't be black against white.
WHEW! Great article Pam! How do we get around the problem without an RT type of vehicle? We're damned if we do, and most certainly damned if we don't.
On the issue of accountability - when have you ever known us to not to burn the witches? It's just that at the moment we're wrapped up in the MBS tar baby. Once a solution (or something that is arguably a solution) is in place I wager the AG will go into high gear.
Great article, keep'em coming.
Bud, I agree with you about the repeal of Glass-Steagall--everything you say here is right on target, and to my mind it's what comes of corporate lobbying. I want to see laws about corporate personhood revoked. Corporations are not persons, persons are persons. Our government is owned by Big Oil, Big Banking, Big Pharmaceutical, and the insurance industry. You can only get so much blood out of a stone--you can send the bill for all this mess to the taxpayers but that doesn't mean they can pay it. What if we tied our wealth to real goods and services instead of moving paper around an imaginary monetary universe? My thought is that might help a bit. But what do I know?
Storytellersrus, sign me up! I'm feeling worse and worse about paying my taxes, not because I don't believe in taxing people---I think there are good reasons to do it and good reasons to participate. The reason I am feeling less inclined to pay my taxes is the government is using them for things that strike me as evil and harmful to me personally. I haven't quite worked out how I'm going to keep the house we live in and feed us without a tax-withholding job, but it is on my mind more and more. This thing is the last straw.
FoursX2, thank you! Good point on the witch-burning issue. I think that's part of the "Ban ShortSelling!" thing--someone has to shoulder the blame. Oh, I know! Let's blame those pesky short sellers! But naked short selling was already illegal and the SEC wasn't doing it's job, so whose fault was that? Thanks for your comments!
My head is about to explode after last week and I think the neurons, (or whatever's in there) have short-circuted so I don't feel well enough to get into one of my crazy tirades. I will say that, agree wit you or not, your work is always well thought-out and put together with evidence to back your theories.
To respond to one little point, Cox at the SEC was in charge and did nothing to react to the short-selling fiasco until he was pressured to DO SOMETHING! Rules in place do nothing unless they are enforced. I still think we need to re-institute the uptick rule that used to be in place. It needs to be reinstituted, and Cox needs to go for sleeping on the job!
As far as the comment from Storytellersrus, if all of these companies involved did go out bankrupt, hundreds of thousands of people would be out of work and only a handful are the high wage earners. There is a very real possibility that, like the last time the FED did this, that the government will actually MAKE money on the deal...then, of course, they will squander it anyway, but that's not the point. What the government offered AIG, for example, is a bridge loan, (not gift) that AIG HAS the assets to repay. The gov then took over %80 of AIG. If they don't screw it up, AIG will sell off some assets and repay the loan.
The owners of the insurance policies that they have sold will then be solid so that our little grannies or whomever owns the policies will not go home emptyhanded as happened a few years ago when several big life insurance companies went broke.
Everyone is so fired up between the election and the Freddie and fannie busts AND the Iraq mess that none of us want to pay taxes. We already pay so much in taxes, up to 50%, in many cases. I don't know about you but I don't want to work anymore than I do now to give more to the gov to waste. O'bama, no matter if you like him or not, wants to raise taxes, I'm afraid that McCain's administration, like it or not, would have to do the same. I'm thinking early retirement....
This is excellent. People need to know this stuff. They need to know /why/ they're suffering and angry.
Again in this system, the rules were already in place, but everyone ignored them. Result: crisis, put out the fire and don't enforce accountability for those people who were breaking the rules - in fact, obfuscate them even more. Corruption and a lack of a demand for accountability torpedo America again, and it boils down to collective apathy on the part of the people not holding politicians' feet to the fire.
The same kind of theft-by-obfuscation happened in the Middle East. The U.S. went up to the sheikhs wandering around in the desert, and said, "Hey! We'll buy your oil, how cool is that?" The sheikhs of course got very very rich very very quickly, adopting Western ways and styles - it was a real Bedouin Hillbillies kind of situation. In the 80's these sheikhs had money essentially coming out of their ears from all the oil we were buying from them. What to do with it? Umm, invest it! Yeah, that's it! We'll invest it in companies in the U.S., and as they take off they'll also buy even more oil from us, right? But what these sheikhs weren't counting on was that the money they invested in corporations was then invested in another corporation on down the line, and another and another, and lost in an inscrutable labyrinth of shell corporations. When the sheikhs went to get their money back out, they found that these shell corporations were long gone, gone under, and that their money was untraceable. In this way, the U.S used shell corporations to essentially con these nomadic sheikhs out of their oil and their money, in a streetwise little American tradition we've come to call "the shell game". I can imagine what happened next - the U.S. either held their money (not to mention the basis for their whole economy) hostage outright, or else told these Middle Eastern folk that they could recover their money if and only if they had these sheikhs' help - which would explain why Hussein was working with Bush, we're over there now, and Middle Eastern terrorism is the flavor of the month when it comes to an excuse for implementing "regime change" over here in the U.S. - totalitarianism.
And they're doing the same thing to people here by obfuscating things clamping down on illegal short selling. Again the Bush/Cheney philosophy that it's not the problem that's the problem - it's the people finding out about it. If nobody knows, everything's fine! Can't you just see Bush and Cheney in a New York ghetto, running a sidewalk hustle of Three Card Monte?
Regarding Cheney shredding his paperwork while in office, I'm sorry, I'm confused. I thought if you weren't doing anything wrong, you had nothing to worry about. Wasn't that what this administration taught us when it brought us warrantless wiretapping?
Oh, and $1 trillion isn't going to be that tough to pay off. Between 2001 and 2008, tax cuts Bush made for the richest 1% of Americans amounted to $546 billion. So we'd just have to undo those tax cuts, and undo them again, and we'd be out of it. Any takers? No? Right, I guess we'll just have to tax everyone else for the money instead.
Keep writing this stuff! Unless people can acknowledge what's going on, there'll never be any action taken.
Hi Madison and Satori.
Madison, I don't disagree with anything you said here--I maybe wasn't any too clear talking about the short sellers. I know Cox wasn't enforcing the laws already on the books--that was my point, that the reaction was a bit hypocritical given the very tardy nature of it. I know what you mean about taxes. Until this year I didn't really concern myself with what the government was doing with the money, but lately I'm none too happy about any of it. It seems to me that I am not getting much in return for my federal tax dollars. Look at the biggest expenditures right now--Iraq and this financial mess. I don't want to pay for any of that. Then we've got Gitmo, and oil company subsidies, and al the money they are spending on spying on us instead of terrorists...it disgusts me.
Satori, this week has been the pits. I'm so tired. I worked yesterday and it was an especially abusive day for a Saturday--lots of cussing and tirades about the financial system and greedy bank CEOs while the sups hover over me frowning because I'm not pulling in any new money. Then I get home, watch these clowns lie to us on the news. I'm really, really sick of all of it right now. I slept about four hours last night. It's really getting on my nerves, all of it.
I doubt people will take any notice. A few people like me will get all worked up and the rest of the population will take no notice until unemployment hits double digits and we see bread lines again. I'd like to believe this will work out but my guy tells me this fix won't work. It's too smooth, too vague, too last minute, too gun-to-your head blackmail. I have a bad feeling about it. For the first time Bill and I had a discussion about getting passports and getting an exit strategy together. Just because I'm paranoid doesn't mean people aren't really out to get us. Thanks for your thoughts. Always good to hear from you.
I'm mad and frustrated, but I guess I'm resigned that the worse is still to come. I think the bail-out is necessary to stop the bleeding. But radical surgery is needed to correct the problems. Who will stand up? Forget about their political status and work for the good of the people?
I was telling a friend the other day: I guess our parents and/or grandparents made it through the depression and so can we. We may have to.
Satori,
Bedouin Hillbillies, LOL, that's freakin' hilarious! I love it.
Just a note, I was listening to the comments that O'bama made to Maria Bartoromo this evening, and he said that "i would like to see the American taxpayers benefit on the upside of this," referring to the taxpayer bailout of the big corps this last week. I gather from that that Mr. OB also feels that, if handled properly, we (the people) could actually get our money back.
Oh, and I'm not sure Bush knows what short selling is, he he!! I think his boys treat him like a mushroom; keep him in the dark and feed him s__t.
Pam, you need a martini and put your feet up! I'm headed for the same.
Oh, by the way, Paris is lovely this time of year, I'll meet you guys there! I've always wanted to go to La Sorbonne, it's never really too late, is it????
MP
kerryg says, “the current plan is designed to screw over the tax payer and reward the wrongdoers”
That’s the beating heart of capitalism. It’s designed from the top down to ennoble evil. Greed, deception, fraud, ruthlessness, arrogance and total disdain for the “common” people are desirable traits. The more viciously these traits are applied to an individual's actions, the more extravagant the rewards.
storytellersrus says, “TAXPAYERS JUST SAY NO! Or this will be the start of a civil war”
The wheel has turned round again. Oppression, totalitarianism, revolution. Over and over in a mindless, destructive and bloody cycle. Once a certain line has been crossed, the outcome is almost inevitable. That line was crossed with the stolen election of 2000.
pgrundy says, “I want to see laws about corporate personhood revoked. Corporations are not persons”
Bingo! We opened the floodgates of rampant capitalism as the result of an 1886 Supreme Court case called Santa Clara County v. Southern Pacific. A statement by the judge, a mere two sentences, gave corporations the same rights as persons under the fourteenth amendment. It’s been all downhill from there. From that moment, America was basically doomed.
In a sad way it’s good to know there are so many who realize how dire our situation has become. If enough people understood what seems to be clear to the folks speaking here, there might just be a massive uprising that would turn Washington upside down and shake out all the trash.
As it is, I don’t think anything can stop this runaway train. In fact, I think it’s already gone off the cliff. It just hasn’t crashed on the rocks at the bottom yet.
LOL CWB, sometimes I am in full agreement with you :) Or almost full, but this is really not that important. :)
Excellent hub. Well informed and well documented.
I fear greatly for the American economy.
Australia, England and others who bought this AAA rated wrapping paper will not fare well either.
A well used saying in Australia is: "If America sneezes we get a cold"
This looks more like the flue.
I'm not against paying taxes either. But this administration has made a mockery of "the gift of taxpayers," as if he were entitled to a percentage- workers be damned.
You asked what others could do regarding "Taxpayers, just say NO!" Call your senators and representatives! http://hubpages.com/hub/Taxpayers-just-say-NO
I have a link to your Hub on my site... thanks for doing the technical work :)
Thanks for helping an Ozzie understand more clearly the problems you are having in America. You made my head spin and hope to God you are exaggerating, but unfortunately I don't think you are.
Are you really serious about the Passport thing?
Paraglider beat me to the punch. Cant emphasize enough the evil the Bushwackers have done, especially bushwaker the lesser.
Wow, I woke up this morning to all these comments. Thank you everyone. It's heartening to see I'm not the only person in the U.S. (and out of the the U.S.) upset about this.
Storytellersrus, thank you for the link!
agvupes, I'm semi-serious about the passport thing. As of this past year we can't go back and forth to Canada without a passport--it didn't used to be that way--and we don't have passports, so we need them anyway since we live close to the border. We don't have money to leave, but if I see this thing get any darker I'm gathering my brood up and getting them to safety whatever it takes. You get old, you get less optimistic. I want things to work out, but seriously, look at the clowns running this country. How likely is it?
CWB, there's a great movie called "The Corportation"--it's a documentary that gos over how it all came about and the consequences. Also Nader goes over it at his website. I like Ralph. I'm voting Obama but Ralph is the only one saying all the right things.
Madison, I've heard Obama talk about this possibly being positive down the line, but I remain skeptical. I hope it is, but it's hard to have much confidence at this point. I saw Paul Krugman on Bill Maher today and he was like, "OMG we are so screwed." He didn't say that in those words but he said this is the worst thing he's ever seen in a lifetime of studying and teaching economics at Princeton, and that it will easily rival the Great Depression. Look for two or three years at least of bad times, and that's if things go well.
Die Dre, hot dorkage, earnestshub, and Misha, thanks for sharing your views and reading and discussing. What a drama!
As usual, you've done an excellent job with this hub, Pam! You have an incredible gift for distilling complex and critical social issues into an easily understandable and engaging format. I love the fact that you're informing people about these important issues, and stimulating such interesting discussions in the process.
With that said, I share your disgust and heartache over the blatant, self-serving capitalism at work here. It's amazing how quickly the government can make things happen when it comes to tossing ridiculous amounts of money at greedy, mismanaged, huge corporations, as opposed to how long it takes to overcome numerous gridlocks that stand in the way of potential social progress. Government for the people seems to have been replaced with government for the "corporations who are people" and not so much for the human beings.
You mentioned The Corporation, which is a great movie. To borrow one of their main themes, a corporation, viewed as a person, would need to be classified as a psychopath due to a lack of social conscience and a single-"minded" desire to profit off individuals, no matter how much they may pollute the environment, destroy local businesses, or manipulate individuals to get there.
So why have these psychopaths become more important than people? And what can we do to reverse these unconscionable trends?
I'm trying to stay positive about this, and I hope to write a hub about the good that may emerge from all this garbage over time... but I just can't see it at the moment because my vision is clouded with anger.
Again, thanks for writing this!
Hi Melissa, thank you for your comments. I like to watch the commentary on New York Times articles and opinion pieces, and one fellow left a comment today in which he pointed out that this gutting of the financial systerm could be deliberate and that it isn't even the first time it has ever happened just before an adminstration left office. Here's his comment:
"During the last two months of the Nicaraguan Sandinista administration—after having lost the 1990 election—emptied the central bank coffers and anything they could lay their hands on. The abuses of those two months have come to be known in Nicaragua as La Piñata (a papier-mâché animal full of candies and coins that children plunder after whacking it into pieces). The stated objective of la Piñata was to leave behind them a financial mess and leave the incoming administration with no money to implement badly needed programs to improve the welfare of Nicaraguans. While estimates of the looting go as high as $700 million in an impoverished nation, the full amount will never be known. Incredible as it may seem, the Bush administration is about to steal a page from the Sandinista playbook. Presumably the price tag will not exceed 700 billion. I fear that the full cost of the Bush Piñata will never be known either.What is baffling is how the Congress is willing to grant a gargantuan budget to an investment banker—currently on leave and “serving” the country—who was a member of the same crowd that created the financial chaos we lived through last week. Equally baffling is that he will get the blank check from Congress, just as the distinguished gentlemen and ladies gave to Bush to wage a pre-emptive war with a country that had nothing to do with 911. The Congress is about to buy a pig-in-a-poke from an individual who is telling them up front that he should be accountable to no one.The Bush administration is about to fool the American people twice."
I thought that was a really chilling take on it, but by no means too paranoid. It rings true to me--I've felt all along that this administration was just looting the financial carcass of the country they helped kill, starting with the no-bid Halliburton contracts in Iraq and after Katrina in Louisiana, and continuing with the deregulation frenzy that started with Reagan, stepped up under Clinton with the repeal of the Glass-Steagall Act, and reached it's apex under GWB with the housing bubble and lack of enforcement of the few regulations that remain. Now, with this bail-out package, Paulson is asking for immunity from prosecution and scrutiny in buying up this toxic sludge through private companies and distributing the fees, profits, and pay as he sees fit--acountable to no one. That's insane.
I agree that corporate American is psychotic, and so is this administration. Pirates all, and they should be treated as such. I would rather live through a second Great Depression than see these bastards get their way. Thank you for your thoughts--I'll look forward to your hub!
Do these words sound familiar to anyone: "No taxation without representation?" Well, I would say that a part of representation is being trustworthy with how you spend that tax money. Democrat or Republican, I don't give a damn. The solution will NOT come from a politician. I am going to vent my cynicism for a moment at politics in general and say that the current political animal that is the American system is adept at spinning and placating and selling us the snake oil we demand so they can get their term, or another term, and so on. Words of civil war were stated and I don't think that's a bad idea, but the kind of war we need to wage is one in which we use the very weapons they are using (that way no blood needs to be shed).
I have heard a few times recently (past year or two) that there is no actual law that requires us to pay taxes. If this is the case, what kind of message could "we the people" send by suddenly refusing to give over our hard earned money to thieves and pirates? Do you think we would have the attention of the suits on Wall Street and the Big Wigs in Washington?
Again, I know this is being written with some vehemence, but let's be truly honest: the change we need, that we hope for, will not come from Obama or McCain (I've heard that some of Obama's financial advisors were big dogs in Fannie May & Freddie Mac, and McCain obviously has no real shortage of money with 6 homes to choose from....). I know that we have to have someone in that seat, a person to pull the trigger on the guns provided, but WE need to be the ones to provide the bullets.
All that being said, one way or another I agree that we are headed for a depression. I also believe that we will make it out, but the real question is what will we see on the other end? If we go into the coming dark days with the mind set that some politician will come along on his white stallion and save us, then we will have learned nothing and will reap whatever craziness pops up after. Instead, we need to enter this time taking steps towards making sure that our taxation is no longer being used against us. The past few decades have been akin to me taking money from my neighbor and using it to by the matches and gasoline to burn down his house, then tell him that he needs to pay for all of the repairs.
I'm not an economist or some astute political analyst. I know something of human nature, though, and until the people in power truly understand that they serve us, not the corporations, we will continue to see this ugliness pre-depression and post-depression. I don't know, if there really isn't a law that says we have to pay taxes, I'm thinking that 2-3 months of an entire nation withholding would be a good warning shot that those really responsible for this mess be dealt with and that we demand a real fix to the problem.
I'm tired of paying financially, emotionally, physically with my labor, and ethically for the utter wickedness of men and women with too much power and no one willing to hold them accountable. Besides, I'm paying into social security right now, but flip a coin as to whether that will be around when I reach that point and time in life!
I do have one up on you, though, Pam...I have my passport. :)
"The past few decades have been akin to me taking money from my neighbor and using it to by the matches and gasoline to burn down his house, then tell him that he needs to pay for all of the repairs."
Well said! I agree with everything you say here. In fact, if the pass this thing as presented I will be researching how to do exactly what you are saying here, and I'm sure I'll have no trouble finding like-minded others. I don't mind paying taxes, but not for this. This is sickening. Let's hope the Democratic Congress finds the spine to at least require some oversight and some provisions for working people. If they cave, I do think there will be a huge backlash. Thanks for your comments Caleb's Dad.
Hi Pam--thanks for sharing the NYT comment. It's always refreshing to realize there are so many intelligent people out there who are committed to spreading the truth. Unfortunately, I think that guy's views are spot-on, and it's sad to think about how much devastation can be caused by a few people's economic aspirations. I think Bush's puppeteers may have him convinced that he'll be able to take his money with him when he dies... I can't fathom any other reason he'd be willing to unleash so much death and destruction during his reign of power for something as fleeting and meaningless as money.
Thanks for the encouragement about my hub. :) Hopefully I can muster up enough optimism to write something comforting without losing sight of what a dire situation we're in.
Great comment by Caleb's Dad!
Great job PGrundy;
You know the financial stuff! I hope that Congress gets the message of the American people before they jump all over this. I see that the market tanked. I feel that is just all puppeteering now. I have been out of the market for two years. Owing that much money to China was all it took for me. We need Ron Paul fast. I see more of the same whoever we get as Pres.
When does Congress vote? This whole mess sucks. Our great grandkids will still be paying for this. The problem is that we can no longer manufacture our way out of this. We are just building kings in the white house while congress says "fine." This Congress is the weakest in history, and so is the president the most incompetent and crooked.
It is so frustrating to me, too, PGrundy. Take care and don't let it overwhelm you. It is all our fault for letting it get like this. It is Revolution time, it seems to me.
Hi viralprospector,
I think we will see a big backlash from working people over this. I told my better half tonight that if they push this through, that's it, I'm finding a way to work for cash only and barter. Not another dime for these evil bastards. Seriously. Thank you for your comments. Let's hope for the best and prepare for the worst.
VP,
FDR said, "If it happens in politics, it was planned that way."
Paul informs us that revolution brings the condemning judgment of God. That's not very desirable if you ask me.
I wish FDR was President now. That would be helpful.
"under the gun" what is the real meaning of this saying...??? i think when one is "under the gun" or guns, one has reached safety, as far as possibly being hit by cannon fire.
Caleb's Dad said {{I have heard a few times recently (past year or two) that there is no actual law that requires us to pay taxes. If this is the case, what kind of message could "we the people" send by suddenly refusing to give over our hard earned money to thieves and pirates?}}
This happened in UK and finally led to the downfall of Margaret Thatcher. People refused to pay the regressive Poll Tax she introduced. I've written about it in my latest hub because I think it is very relevant to what's happening in the US. If I may post a link...
Great post PG....Lord knows I have tried to approach this topic and must say it's nearly impossible to factor in all the knowns and unknowns without cranial melt-down. All of this seem so far away from the less-government/privatization mantra the gop sings. MY mantra is still: this is all tied to wages. Nothing will improve until we repeal NAFTA and the like and bring back/create livable wage jobs where Amercians actually create the things Americans consume. "They" may look down on the 'little people' and view them as marketing targets, but now we are all blowing cobwebs out of our wallets....nothing left to spend. No more profits for shareholders.
"Most of the assets bought up by the RTC were real estate assets, which, today's market notwithstanding, tend to hold value and can be sold at a profit once home prices rise. They are real tangible things--houses, buidlings, property."
Ergo...the Federal Government now proposes to TAKE a vested and legal interest in a whole lot of private property. We know nothing about the content and regulatory oversight within this new agency. All I know is that the last time a new agency (Dept.) was created we got Homeland Security.
For years the Banks have been petitioning congress (unsucessfully thanks to pressure from the likes of the National Assoc. of Realtors) to change the REO laws...that's 'real estate owned' in the banks portfolio, so that they can sell their own foreclosed holdings, or keep them longer, or hold a largely increased total value of REO's. I would not be surprised to see this issue revisited now that big Banks (and the more stringently regulated and transparent banking laws) will be taking over from the investment corp. industry (under-regulated and opaque ex-industry). Citizens and consumers do NOT want this to happen. But this new bail out proposal is just as bad.....we should not be anxious to get rid of the devil we know. And we REALLY don't much about the new devil.
Thank God we have places like hubpages to vent and talk and try to get a message across the vast internet ocean. I just finished Sara Paretsky's "Writing in an Age of Silence". I recommend this book to all my thoughtful reader friends...and especially to writers and librarians.
Oh....and why on earth will average US citizens find this expenditure of tax dollars SO much more offensive and 'unfair' than the billions of dollars spent by their goverment on senseless wars? For years. WHY don't they holler about that a bit?
Mary, thank you for your comments. I'm with you on the war. The war and the loss of real wages and production of anything except debt and imaginary financial instruments have together bankrupted the U.S., and this last ditch effort to loot whatever spoils might remain appears to be the last straw for most Americans. But yes, why now? It isn't as though we haven't been going straight to hell for eight years running here. Longer, actually.
The last thing we need is for banks to have more control over anything, period. I think Bush and friends tried to privatize the war purposely to keep it going. If there was a draft for this war, the outcry would be so loud it would make this bail-out bill look like no big deal. But since it's been all volunteer and mostly poor kids dying, it's been easier for them to push it. Still, even with that about 80% of the people in the U.S. want to see the war ended, like, yesterday.
Thank you for your comments and your always welcome insights.
PGrundy;
If this insane mess is passed by Congress (likely), will that mean that the mortgage holders in arrears will owe the govt. monarch, not the mortgage company?
If so, can you see the IRS holding all refunds if you are behind? Next they will take their drivers' licenses. They do that now in another delinquency. Yep, that helps you get paid up, huh? Hunting licenses, you name it... Forget bankruptcy. If you have a mortgage, it will not be forgiven in bankruptcy. They'll just send over the police to get the check. Am I reading this right, do you think?
Well, they are saying they want to buy up these mortgage backed securities and unload them, and with Fannie & Freddie, who knows? The problem is, we have little reason to trust government at this point, and here we have them taking over so much with out tax dollars, and it's hard at this point to see how hit helps ordinary people. But we do still technically live in a democracy, and I can tell you that every member in Congress has his or her phone ringing off the hook this week and their email boxes are all jammed with complaints from their constituents. So we'll see how this plays out. It won't be boring, that's for sure.
PGrundy;
I agree with you. People are hot! Of course, the media are posturing this as positive, but they can't find anything sensible to use as backup to pitch that BS. Bernanke says we will likely fall into a recession if this is not passed. Ben, we are not in a recession now??? Well maybe not for his buddies? Oh, I guess he meant depression...
I know it has been said repeatedly, but thanks again for giving us a place to voice our total opposition (or not, but no one seems in favor of it).
If anyone else goes broke, they eat it. All these greedy little darlings just need to pack up their tents and go home, instead of asking for taxpayers to heal their wounds and fill their little pockets to boot.
I listened to the congressional hearin until noon today. Where do they find these people who are asking for $700 billion? Something is very fishy with this.
NJoG, I think you speak for a lot of folks. Thank you for sharing your comments. It will be interesting to see how this plays out. I think whatever happens, we are in for some rough times down here at the bottom.
The only Presidential candidate that spoke of the pending economic crisis was Ron Paul.
Let's get him back in the Presidential election as an INDEPENDENT and let's finally vote for someone who knows the problem and who will get to work on this problem.
I believe he would work FOR US and not the elite who run the Federal Reserve and Central Bank.
Anoter great hub Pam, as always.
There are so many hubs on this topic now. People are REALLY waking up and smelling the coffee - and not only in the US.
I'd like to share with you a letter by Ron Smith that appeared in the Mercury newspaper in Tasmania, which is about as far from the US as you can get.
"Forget 1929. 1912 is a better comparison.
Like the original, it is probable that Titanic II (the global economy) has suffered mortal damage below the waterline.
Of course the trillion dollar rescue (about $3300 for every man, woman, and child in the US, paid for via declining hoispitals, schools, and transportation) is really designed to help those at the top of the food chain to secure their escape routes.
When the leviathan finally slips below the waves, those passengers not travelling first class will find, as did their counterparts 96 years ago, that there are not enough lifeboats."
Thank you for your comments marketing-mentor.
Eric, it does feel like the Titanic redux. I think there are a lot of hubs about it because people are angry and scared, both legitimate reactions I'd say. But it's not like any of this is new--they just are whipping people up so they can get their hands on that money. They'll get it too--but I don't think it will stop the ship from sinking. Thanks for your comments.
Thanks for writing a hub about this critical issue- looks like they've known about this for awhile but of course this is being presented as an "emergency" now- and we all know we can make bad decisions based on emergencies- which I bet the TPTB took into consideration when presenting this to the American Public and to Congress. What an absolute sheep in wolves clothing, huh?
Hi Dorsi. Yes it's hard to believe they really couldn't do any better than wait until the last minute to declare crisis and ask for a huge wad of taxpayer money. It's not as if tons of people didn't see this coming. Thank you for your comments. I think they will end up passing this. Seems like extortion to me.
A lot of people are angry. I've heard it said, or seen it written, and I agree, that the Bush administration and their cronies' plan was to rape the economy and walk away laughing. What really burns my hide is that all those mortgage people got rich off of it, and they'l walk away scott free unless something is done. If the next administration does not go after these guys criminally, there is going to be hell to pay.
Hi dafla, I agree. Now McCain is calling off the debate, saying he is going to Washington to 'deal with this crisis' instead. I think it's such a showboat move--and very irresponsible. Barney Frank called it "the biggest Hail Mary pass in the history of football or Marys."
pgrundy, yes, we at the bottom are in for some rough times. one would thnk we at the bottom are the ones who would get the nifty breaks and benefits being we are the "middle class" who carries the country on our backs.
this bail out will only cost each tax payer about $2,333, or, about $10,000 per household. due to Tom's medical bills, we are already over $50,000 in debt, he's on social security, i manage an apartment complex with $600 a month rent credit and $100 a month salary. ah, what's another $10 grand, eh?
i still say, there is something fishy about this. the powers that be have known about this for months if not years, and NOW is the moment they want all of this?
first 100 years are always the hardest, after that i won't give a rat's tutu.
pg, yeh, it's a hail mary pass ... about 40 yards short.
mccain is scared, and he's stalling. what a wimp!
Pam, I've been watching this Hub and its comments since you published.
Let me say that I am grateful to you for bringing these topics to light and also encouraging a robust discussion about them.
My head spins with all this stuff (I think I'm not alone). It's a relief to come here and find extraordinary minds contributing their thoughts and their humor. In the best way, this is what HP is all about.
Thanks for putting up a Hub that encourages this dialog.
H NJoG and Sally, Thank you for your comments. It will be easy to see what W has to say in his speech tonight about it. No it won't! It won't even be a little bit interesting. What a nest of crooks!
This year we've both noticed basic costs really skyrocketing. Last year our highest electric bill was $100, this year even conserving it was $160. Last year heating oil cost us About $2400, this year it is about 30% more expensive (for now) but keeps rising. We bought a wood pellet stove when we realized we might not be able to get the oil we need at any price. Food is more, gas is more--a lot more--and now I have medical bills from two lousy days in the hospital to pay off--thousands of dollars even after insurance, for TWO days!
$700 billion to bail out Wall Street? Sure, why not! Maybe we should give the $2 or $3 trillion, they might need lunch, might need some martinis and some neck rubs while they work hard at robbing us blind. We better give them a little extra.
If they show up for a blood draw I just hope they don't charge me for it. They'll have to get in line behind my other bills.
"We have to bail them out - if we don't, we're screwed."
Alright. So we bail them out. Does this mean we do it unconditionally? That we don't do it as a loan? That we bail the banks themselves out - because we have to, by golly - but don't prosecute the people behind them for their swindling? After all, the idea is that their either criminally incompetant/negligent, or else complete hucksters, and either way their business activities have threatened the country.
I don't know that we'd really want that, per se. A new precedant of business being hit by government on national security grounds, I mean. But when we bail them out with no accountability for their actions, the message is that, "Anything's okay when you're rich." And that thumbs its nose at the whole of America, while staying "on point" with the message of totalitarianism we're getting consistently from government. Which, you know, is okay - if you want to break America. Because it's a very expensive, broken way to send such an insulting message.
Not to mention that we're talking about "bailing out banks" with federal reserve notes - which aren't money, they're debt. We're talking about bailing out debt with debt, in order not to fix the problems, but to make sure we're able to continue them while we dig an even deeper hole with even deeper consequences. Spiffy. But why should I care? Screwed is screwed - we're talking about the lesser of two evils - the lesser of two destructions. How is that incentive to care about the outcome?
Whatever the average American believes, its politicians are either extremely smart or extremely stupid. And either way it is, it threatens to destroy the country. So obviously, in that situation, the thing to do is to continue to sit around watching reality shows and waiting for the politicians to sort out the mess. Right?
There's something wrong with that picture, but I just can't put my finger on it.
Hi Satori. The whole thing is outrageous. The only reason our spineless representatives haven't already rammed it through is half of them (in both parties) are up for reelection and ALL of their phones are ringing off the hook with calls from enraged constituents. Not to worry--if this doesn't fly, we can still declare war on Iran in October and destroy the U.S. that way. So really, there's still time.
This is a VERY complicated issue, that I have stayed away from hubbing about as of yet because quite frankly I didn't know what to think of this plan. I hate the thought of bailing out firms, because I know there will be an endless line. I also do worry though that something must be done or we could see the Great Depression 2.0. I think congress is making some progress in revising the plan some from its original very vague and far too simple form. Oversight is needed and CEO's that ruined their companies should not see a penny more in compensation. I think completely doing nothing would be dangerous because I don't think this is just a bailout of wall street, but rather one that could avert disaster on main street. I think unemployment could jump a huge amount and GDP plunge if nothing is done, because small business and consumers won't be able to get loans. Bottom line here is, something needs to be done, and it could end up working out for the taxpayer in the long run. The big if here is IF congress doesn't screw it up....
Yes 02SmithA, something needs to be done. How about we finally admit that capitalism is the problem and not the solution and start working together cooperatively instead of destroying each other competitively?
No system that rewards corruption and ruthless predation can ever result in anything other than complete disaster.
Wow, Nuklear Power's Brian Clevinger seems to have wryly and accurately summed up the situation. (Nuklear Power being a great trendy webcomic based on the retro 8-bit game "Final Fantasy") I thought you had to see this - it's funny, and pretty accurate as well.
http://www.nuklearpower.com/comics/080925.png
How does one bail oneself out with debt currency? Faux solvency, for faux people.
02SmithA - I can't really agree that it's a very complicated issue. Complicated issues are the province of advanced mathematics, law, science or philosophy. Maybe even politics. But this issue can be understood with elementary arithmetic. It's called bankruptcy. Every small business understands bankruptcy - it happens when your total realisable assets are less than your debts and you've reached the limit of your credit. Wait - there's one more condition - somebody has to notice and call you!
And when that happens, you fold, and make the best of a bad job. You don't expect your creditors to suddenly up your credit limit and refloat you, because you've already shown yourself to be a bad risk.
This is the End Game, now. Has the US got anything to sell? Maybe a few thousand nuclear warheads?
My fiscally conservative underpants are burning themselves as we speak...
I turned on the morning news two hours ago and was greeted by George with that pained expression on his face, speaking to the American people about the tax-payer helping out the economy. From what I've read in these hubs of late, I can imagine the American tax-payer being less than thrilled at the prospect. What a terrible man George is. And is McCain too scared of this debate to go ahead? With his health problems, I can see where he's coming from! He'd probably keel over from the stress of it all.
McCain's trying to steal a march by saying saving America is more important than party politics, and by forcing Obama either to say no it's not, or to follow his lead, both of which options make Obama appear the secondary figure. As a political stunt, it's actually quite a smart one, but I think Obama will survive.
Hi everyone. I watched George last night. Ugh.
You know, I think the people selling this plan have an interest in making us think it is a very complicated issues. Yes, mortgage backed securites, SIVs, credit default swaps--that's all heady stuff and hard to get any mind around it. But I agree with Paraglider that the basic problem is NOT complicated. What aggravates me is 1) Paulson has been wrong every step of the way--as recently as last week he declared everything back on track, and 2) they don't even know if it will work. We could end up with Great Depression 2.0 AND be out $700 billion. Wouldn't that be great?
Rachel Maddow on MSNBC put it into a pretty good story by way of illustration:
It's the weekend after Halloween and you and your sweetie want to go out, but the only babysitter you can find for your five-year-old is your seven-year-old, who isn't all that attentive or responsible. You really want to go out though so you leave the seven year old to watch the five year old, and when you get back you find that five year old has eaten all three bags of Halloween candy collected earlier and has thrown up all over the sofa, the rug, the walls. You confront the seven year old who was supposed to be watching him, and the seven year old replies, "Well there's really only one way to fix this mess now that it's gotten to this point!" You ask, "How?" And the seven year old replies, "More candy!"
OK, you got my attention and frightened the sh.t out of me.
Let me see if I've got this right.?
1. Govenment are giving companies 1 trillion dollars (that sure is a bunch of money) wonder where you would borrow that from.
2. Gives said 1 trillion dollars to scumbag companies who already should have been declared bankrupt. That does not seem like a sensible plan?
3. The poor bastards who can't meet their mortgage payments (probably because the above said companies lent money irresponsibly), once again get the rough end of the pineapple as it where, and get nothing?
You can stop me or correct me any time you like cos, what would I know I'm only a fox.
Hi agvulpes! No, you've pretty much got it right. What they are arguing about right now is whether and how anyone will oversee the distribution of this $1 trillion to the scumbag companies. Initially Treasury Secretary Paulson wrote in a clause exempting himself and whoever he hires from oversight and prosecution. His idea was to hire investment bankers to buy up the bad assets, on the theory that the bad assets are so complicated only investment analysts can understand them.
It seems pretty cheeky to me. It kind of reminds me of what happens when people get in so much trouble with credit card debt that they start paying one credit card bill with another credit card. I think they are relying on scare tactics and the notion that no one can understand this except a select few insiders to get the government to write them a blank check on the citizens' money.
I expect they'll get their way too. First, every representative in Washington has to have a chance to yell at Henry Paulson in a public forum so their contituents will think they care about them. Then, once that has happened, they'll convene and give him what he wants.
"Initially Treasury Secretary Paulson wrote in a clause exempting himself and whoever he hires from oversight and prosecution." that should work.
This must be pretty damn serious when even the comedians seem to be leaving the mess alone. Nothing funny about this, no siree bob.
Keep fighting though you can look back in history and see what "people power" has accomplished.
This is one of those times that I wish the government elect would get their heads out of their you-know-whats, step back, and take a real objective look at things--even going so far as to call in some real financial advisors instead of trying to go it on their own. Those in office aren't always elected for their financial smarts and they don't always know what it's like to be a "real American citizen" because their lives tend to get a bit sugar-coated while in office. Sometimes it's like watching a horse with blinders on trying to make his way around the field.
Bail outs help, but unless real reform is initiated and mandated those bail outs won't mean a darn thing. It will just be another vicious cycle.
You said, "prices for energy, gasoline, food, housing, health care, and consumer goods have been rising rapidly while wages decline and the complaints of the American people have fallen on deaf ears" and I could not agree with you more. It is more and more difficult to make a fair wage these days and just when you think you've got to a point where you can be comfortable, the economy woes start taking their toll.
Pam: "Initially Treasury Secretary Paulson wrote in a clause exempting himself and whoever he hires from oversight and prosecution." Which is a large part of the problem right there. Americans think you can do that. They haven't learned that just because you get something written down on a piece of paper, voted on, and added to a pendulous and convoluted filing system, that doesn't make it valid. In order for something to be valid in law, it must have -lawful authority- behind it, and that authority must come from somewhere. Specifically, from somewhere with the authority needed to authorize it. Contrary to popular belief, politicians can't just redefine their jobs like that, precisely to keep them all from just packing up and heading off to Hawaii, swindling Americans for money and avoiding accountability, or other equally unlikely scenarios. If Americans knew that, we wouldn't be in half the mess we're in - not only with the banks, but in every aspect of politics. Government officials swear an oath of office or other such loyalty oath, and that's a legally binding contract with the People. Breach of contract? Nail 'im with it. But politicians can't just put pen to paper and change, say, the laws of physics like that. The government was created /to secure/ our rights, and that's what it's charged with doing. When it doesn't, there's liability involved. And they can't just duck out of that by writing a piece of paper that says they can - their offices don't come with the authority to do that. On purpose. Pretty crafty, our Founding Fathers.
agvulpes - "People power"? It did work rather well against the Redcoats, didn't it? -gryn-
Alright, enough from me. I'm'na go write myself a trillion dollar check, and see who accepts it as valid.
One small nugget to possibly hold onto, I heard on the radio earlier this week that the FBI is going to be investigating the big shots in these companies, possibly looking into fraud, etc. Dare we hope they actually prosecute if they do find wrong-doing? I guess some hope is better than none. It would make this nasty pill a little easier to swallow if I see some guilty scabs toted off to jail for their illegal and very damaging acts of greed and deception. I will add this to my daily prayers: Lord, if these men are guilty, and I have to struggle to provide for my son and myself for the next several years, can You at least get the scummy varmints responsible for this piracy into a cramped, un-cozy jail cell? Thank You! :)
Hi all,
Caleb's Dad--I saw that about the FBI investigation. Boy I hope they do level charges against some of the these people, but I'm not holding my breath. I don't understand why they are just now starting investigations!
Dabbling Mum & agvulpes, looks like it's a done deal--they just announced a modified version of the bail out that will likely be passed early next week. It will include oversight, an ownership stake in the companies for taxpayers, help for homeowners in foreclosure, and a cap on CEO pay for the companies that seek help. Still, it's upsetting. It was kind of sickening to see Wall Street rally 200 points today just on the news it would likely pass. I think those guys are on crack or something.
Satori, point well taken. I'm with you on that. Why not just write ourselves up a contract saying we can fly? I always wanted to be able to fly. I'm taking my cue from you and paying myself $800 trillion! I need a bail out!
Well, that's it--I'm off to cash my $800 trillion check to myself.
Whew! I feel so much better!
Since I'm battling cancer here, I don't have the energy to truly keep up with all of this, but was wondering if those of you who do, have any theories about how all of these recent financial events fit in with Zeitgeist (the 5 part version on you tube) and the latest addendum?
Jerilee, Satori is an expert on that movie. Hopefully he will come back and go into it.
Satori: it sure did buddy, and on a smaller scale in Australia (eureka stockade), and many other places.
Where is Lone Ranger and Tonto when you really need them?
It seems to have reached that level .
Hey polies your about to let the fox loose in the henhouse.
Hey Pam give me half and my typist will sponsor you?
What you really didn't think foxes could type did you?
Pam, this is very 'delicious' hub about current financial situation of world society, indeed. I loved your pic of domino effect! Sadly, people on the top who are responsible for this disaster will never take responsibility and blame...their pockets are full and they are financially preserved for generations to come...but, there is a saying that we have only leaders we deserve, because we have elected them:)
Thanks solarshingles! I think they will pass something Monday or Tuesday, the market will rally briefy, and then there will be another catastrophe, and things will get bad anyway---AND we'll be out another trillion dollars. And yes, the guys at the top--they'll take care of themselves and their own. The ones who will suffer will be the working class.
What a stupid and tragic predicament ..with ramifications throughout the worldwide economy.
I watched a lot of the testimony of Paulson and Bernanke last week and I didn't feel overly confident that the bailout/rescue plan will make permanent improvements to the system. It may be a short term band-aid at best.
At what price will the Treasury buy the distressed assets? This seems to be a very critical point. There was talk of a "firesale price". Is this somewhere near the current sale price of foreclosed properties/ mortgages? If so, this is a huge problem. The price on foreclosed properties is still FAR TOO HIGH- based on average incomes of prospective home purchasers. Will the Treasury have to sell the properties on the market at a 50% loss and stiff the taxpayer for the loss? At best, they will have to own these empty houses for a generation before they might, maybe, break even.
What will the financial institutions do with the money injected by the Treasury? Having previously worked in the financial industry, I know too well that the name of the game is to drum up loans and mortgages. How will lenders find borrowers who conservatively qualify for mortgages when incomes are decreasing and the baby boomer borrowing population is declining rapidly? Will they have to "incent" borrowers with cheap up front interest rates and low down payment bells and whistles? The cycle will repeat itself with the added problem of everyone having to pay higher income taxes.
Hi bankertoo,
I don't feel all that confident about these guys either. I mean, Paulson has been wrong numerous times just in the last month or two. I think that the underlying problems here run a lot deeper than housing and are more complex. The banking industry itself is badly out of control, and they are loathe to make any changes or rein themselves in because now stockholders expect such ridiculous returns, all the time, that it encourages bad behavior.
I think we are in for a long slump--somewhere between a severe recession and a repeat of the Depression, but so far, I've underestimated how bad things would get time and and again, so who knows? In the meantime, I've decided to get a nursing assistant license and get out of banking totally--get out ahead of the curve. I just hate it. Thanks for your comments.
For insight into a big piece of the cause of the current economic crisis, read Joe Nocera's article "Propping Up a House of Cards" in today's NYTimes. Nocera explains in plain English the cause and effects of the collapse and continuing bailout of AIG.
Hi Ralph--I wrote this way back when Paulson was first saying "Give me $700 billion or I shoot the economy!" It is so much worse now. Thank you for the link to Nocera's latest article. I confess I felt pretty queasy reading it. I'm reading Kevin Phillips book, "Bad Money" right now. It's not light reading, but it's scary reading, so was that Nocera article. How can the U.S. keep this up with AIG & Citi and whoever else is on the list now? (BOA isn't looking so good either.)
The craziest thing is, the toxic assets--the ones Paulson initially said he needed government funds to purchase and quarantine--are still on the books! The credit default swaps, the SIVs, all that crap is still there. Geithner said he was going to get private industry to help buy the stuff and hold it in some kind of bad bank, but no word from him on that since his speech--I wonder if he is having trouble herding up private money to do this. It sounds like buying imaginary elephants or something, it's so nuts.
Hope Wilbanks says:
15 months ago
Very interesting stuff. Thanks for sharing! :)