OK Let's Think This One Through

[Jim O'Bryan]

Ok

We can bailout billionaires and hope it trickles down. Something we know has never worked.

Or, we can bailout the homeowners, which would give them 700 billion to pump into the economy.

Hmmm, Hmmm,?

OK

How tough is this?


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[Stephen Eisel]

Ok

We can bailout billionaires and hope it trickles down. Something we know has never worked.

Or, we can bailout the homeowners, which would give them 700 billion to pump into the economy.

Hmmm, Hmmm,?

OK

How tough is this?


.

Jim, what would you suggest?

[Jim O'Bryan]

Jim, what would you suggest?[/quote]

You and me, sitting on the edge of the Emerald Canyon, I'll bring the scotch, you bring the cigars, and we can have a really good laugh about how screwed we all are.

Or

Why bailout the nightmare, when you can cure the illness.

It would seem that is the government paid the loans off, that would go back to the companies that made bad loans, killing two birds with one check.

This would make the institutions solvent, and give the property owners a ton of money to put into the economy. Which in turn would cause employment numbers to go up. It could even be done slowly over 30 years, which would make it much less stressful on all of us.

You pay off the companies who screwed immediately up and hope it trickles down!

That is insane.

How do we know they will not just take massive bonuses and close, like the airlines did with their bailout. How can you forget this stuff?

But what do I know?

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[Tim Liston]

Honestly, Jim, I suspect that the bailout was necessary, and probably this weekend as you mentioned in one of your other bailout threads. We were starting to see that money market funds were "breaking the buck" as they say. I think it was pretty much assumed, and probably correctly, that a run on money market funds would take place next week. I suspect that the redemption of $3.5 trillion in money funds in one week would have been rather catastrophic.

Jim, if you really wanna cure the illness, you have to find a way to make people live within their means, and help dispel the notion that it’s possible to get something for nothing. That is at the very root of the problems we face. The banks, brokerages and fat cats did not rack up massive debts. People did. The banks, foolishly and much to their detriment, just made it possible.

Plus there’s a hole in your logic. If you give money to the people in debt, and they use it to pay back the banks, the people no longer have the money they were given. The banks would. No boost to the economy. I think what the bailout does is stabilize things, so there is no massive run on all the financial institutions, and perhaps make it possible for the banks to forgive their debtors, at least in part. Which they will have to because so many folks are in no position to repay. Either way, the banks end up with the money, and we all end up with inflation. And the debtors end up with a windfall. That’s not right either.

You’re right about one thing. Any way you look at it, we’re screwed. Especially the folks who didn’t get in over their heads, saved the money they made, and want their kids to have a future.

[Jim O'Bryan]

Tim

While I understand everything you are saying, and you are way sharper at this than I.

The real panic was that loans were failing. So if the government was to promise to make them good, the panic is over. What is being spoken of here, is bailing out the company for all of their bad loans. I take that to mean, the ones that have already failed.

What I am speaking of is guaranteeing the mortgages. The effect on the country would be nearly nothing over 30 years.

This would give everyone thee time to think this through. Maybe if the government steps in to save your ass, they have the right to help you budget. The can take a part of your pay automatically, and/or put you to work.

You pay off the loan, so the debtor is cleared, and the institution is paid. 2 for 1. Then the debtor has money to put into the economy. Let's not forget, many of these debtors have good jobs, they just got in over their heads.

Another one would be for the government to step in and demand all credit cards limit to lower than "mafia rates." This would instantly put more into the economy relieve stress as well. They would still make a healthy profit, it would just save everyone the phone call to ask for lower rates.

While I am willing to admit we all spent money like drunken martians* we have to get this going, and it is really not that tough, as long as we are willing to borrow the money.

Tim, you tell me, which makes more sense, borrow $3 trillion today, and owe that and the interest.

OR

Borrow bits and pieces over 30 years as needed?

* Last time I used drunken sailors, I got too many calls and letters.


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[Tim Liston]

Jim I'm in and out from storm cleanup today. Just have a minute.

Without the bailout, there would have been a $3.5 trillion run on all financial institutions who have money market funds on deposit, next week. I truly believe that.

Such a redemption would not have been possible. 5% would have gotten their money, then the banks and the govt would have had to suspend redemptions. As in you no longer have access to your money, no matter how badly you need it, to pay bills, tuition, mortgage, whatever. And, quite possibly, when you did get access, you would not have gotten all of it, possibly not even close, because the liquidation of the underlying securities (commercial paper, agency paper, etc.) would have been disorderly.

Trust me I don't know all that much about the banking system, but I honestly believe that the bailout was in most people's best interests. As much as I detest it. You and I have never seen a massive bank run. That would have been much much worse.

I'll check back this evening.

[Stephen Calhoun]

The banks, brokerages and fat cats did not rack up massive debts.

.

Huh!?! Are you sure? You're stating for example, that Bear Stearns wasn't buried in crap mortgage-backed paper.

***.

Actually, there are flesh-and-blood people on both sides of the mortgage loan equation.

Banks et al, got caught holding tens of billions of dollars of junk paper, reflecting a collapse in returns on all sorts of securitized mortgage debt. Then there were all the middlemen: the various counterparties to credit swaps, debt derivatives, and all the other "innovative" mortgage-backed instruments. I name these: all the greedy moving parts to this implosion of liquidity and credit.

***

Ask yourself why anyone would make an ARM loan, and, also know that if the underlying asset depreciated they'd be forced to raise the monthly payment to beyond what the borrower could pay.

***

Okay, do you blame the seller of a lemon for selling the lemon to the sucker? Or do you blame the buyer cum sucker for not perusing the lemon enough?

Blame can be shared, but my opinion is that a lot of loan brokers told the prospective borrower, in effect:

"This isn't a lemon, trust me."

[sharon kinsella]

That right. And the foreclosed homeowners are SOL.

Not right, not right at all.

[Jim O'Bryan]

Tim

I believe the volatility in the market and financial institutions is based on the number of bad loans being held.

So if the US government was to guarantee the payment, and legislated a halt to all of the practices that got us here. It would have to slow the bleeding, or even stop it. In effect a one time bailout of Americans(businesses and people) that need it.

To make sure this works, simply add the department to the IRS. If you need the bailout, you turn all financial info over to the IRS, and agree to audits year to year until the loan is paid back. No one gets anything for free, all money comes back.

As the "plan" (three pieces of paper double spaced, giving full discretion on how to spend $700 billion to one person) now sits. The money could be spent to only bailout "foreign banks." The money could be used to hire an accounting/finance group like "Haliburton" to handle the pay outs.

This is not a plan, it is the equivalence of a new "War in Iraq In The Financial World"

So the question now is, what is easiest and cheapest to swallow. $3.5 trillion over 30 years, MAYBE. This would be to secure all home loans IF needed. Or $1.5 trillion we have and are now getting ready to spend in one day, with no plan but tons of interest.

Pay off China only, and that is all you have accomplished. Pay off the loans, and you have saved America, and kept China happy.

Of course when a group is trying to steal every last penny out of America for the next 40 years, and leave us bankrupt and broken, does it really matter?


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[Tim Liston]

It's not just me saying that we were at the brink of a meltdown caused by a run on the money markets. According to this just-published New York Post article, we'd have melted last Friday, but for the promised intervention.

Click here for a link to the NY Post article.