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I am all for cutting down medicare, it is just completely absurd to see a country that only caters to the dying batch leaving the infants and children uncovered. Every dollar of Medicaid cut has to be matched by the Medicare cut.
Scrap medicare. Scrap medicaid. Tie voting power to effective tax rate!
I am NOT against universal healthcare. The only way for that to happen is to get rid of healthcare for special interest groups like the elderly.
Seems like Paulson knelt on his knees begging for the plan to be approved. I hope someone has captured that moment on camera.
http://www.nytimes.com/2008/09/26/business/26bailout.html
This is scary. If that egoistic bastard is in this desperate situation then this is even worse than what most people on this blog have imagined.
All the more reason to not support the bailout. If the economy is going to be utterly ruined, then the less tax payer money we waste on bankers, the better.
StuckInBA,
that was my reaction too. I don't buy the Paulson is evil viewpoint. I actually kindof like Bernake too.
I'm pretty sure they know whats going to happen either way. If nothing else, they are going through the motions so that they go down in history as having "tried".
Can anyone else feel the sea change going on? The public is starting to turn.
We are finally talking about the right things as a society.
Capitulation breeds fear first, then optimism with a new sense of direction.
How many of you believed Paulson when he said in the hearings "Guess what? Taxpayers are already on the hook".
His argument, which does scare the hell of me if it is true, is that without this bill, credit freezes up. As someone with no debt and no mortgage, it is tempting to think "F*ck 'em! Let the banks die". But that could very well mean my employer cannot make the next payroll because their lines of credit have been revoked. No more paychecks, no more health benefits, no more 401k...talk about cutting off your nose to spite your face.
Jesus, this sucks. This board has been predicting similar outcomes for years now, and getting the label of the "tin-foil-hat-crowd". How dare we say that real estate does not always increase in value? How dare we throw around words like "inflation", "recession" and "depression" when the party was in full swing? That it is coming to fruition is both gratifying and horrifying. We are truly stuck between a rock and a hard place if Paulson is telling the truth.
What's the trust level out there about a former Goldman Sachs chief executive getting an open line of credit from the taxpayers to keep the sky from falling on Wall Street? Do we believe him?
That sounds great TOB. It brings a little light to the gloom we're in.
Trust is a particularly sensitive issue for Americans now. After the Bush administration's most recent "sky is falling and we must invade Iraq/Afghanistan and suspend the Constitution" stunt, it is understandable that many Americans will not trust this latest "crisis" as fact. How many trillions are we willing to gamble again?
That it is Paulson pulling the alarm this time is not much better, given his background. I will let go and go with trust for now. I think he's not nearly as evil as the Bush/Cheney crowd.
Fuzzy :
This will change the American society. After a long and arduous road, we might emerge as a better nation. We might.
We are well past the denial phase. We are rushing through the anger phase and are now at the border of bargaining phase.
Till now, many people had a hope that this is a temporary downturn. People like us were still being treated as lunatics. Now it is dawning upon folks what exactly is the severity of the situation and what grave danger we are facing.
Now when the president, the treasury secretary, the Fed chief and the congressmen are acting like paranoids - people know that we were not the chicken littles.
This will force them to hear the hard, logical point of view. Back to basics, baby, back to basics. The road to prosperity is via hard work and financial prudence. Ponzi scheme eventually fail. They are destined to fail.
It will take a long time before we repeat the financial euphoria. Think how long it took after depression to have a bubble of some kind. The process of rebuilding is going to be slow, very slow. But it will happen. And in a sane way.
When rest of the country was celebrating their million dollar equity - I was very pessimistic. Now that people think of being in an apocalypse - I am oddly optimistic. This slap in the face - or maybe kick in the balls - was needed to get out of hangover.
It's time to FaceReality of The Other Side. Get used to it. It's going to be a while.
Thanks StuckInBA. I've been so used to doom-and-gloom for these past few years and particularly these past two weeks, I think I need a kick in my proverbial balls to get through the hangover.
Imagine a US economy not based on spiraling debt and ponzi schemes? Imagine a nation of savers instead of a nation of debt-enslaved, mind-numbed drones? It's actually quite inspiring.
Lowly :
I do not trust Paulson. I have a hard time trusting anyone in power or anyone who wants to be in power.
More than the dollar amount - the way this plan was pushed - it just stinks. The timing of it - just before the congress recess is very fishy. Why didn't he present this plan 3 weeks ago instead of claiming that the banking system is sound ?
The language - very arrogant. If you don't pay top dollar for the sh1t, banks may not participate. If you limit their executive pay, banks may not participate. If you demand anything in return like equity, banks won't participate. So the banks are doing us a favor by accepting our money ?
I don't think the whole economy will simply freeze if we do not give this blank check to Paulson. People who think that they can control the course of economy are as stupid/arrogant as the scientists in Jurassic Park. They thought they can create the beast and control it and profit from it. But it's eating them instead - and unfortunately many innocent bystanders.
Economy evolves. It functioned fine 2000 years ago - all over the world. It functioned after the great depression. And it will function now. It will be a very different economy where people may have to pay cash instead. And they might need to even save - gee what a concept !
If there is no car loan available, prices of cars will come down to a level where people can afford it with cash. The process won't happen overnight and won't be pretty - and it won't be as simple as that. Yes. But we will adapt. Human race is amazing in adapting itself.
Don't let fear rule you.
Lowly :
I was responding to your previous question about trusting Paulson. Our messages got posted almost at the same time.
Yeah, StuckInBA, I think we're on the same wave length. I don't fully trust Paulson. It's the usual lesser of two evils bargain that we routinely confront.
Anyone know why something like Sweden's 1992 bank buy-out - not bailout! - wasn't considered? (Yeah, I know...)
They had a fairly similar though necessarily smaller mess going on, and the Swedish taxpayers managed to come out of it without taking nearly as much of a bath as we're being asked to (and they stand a good chance of recovering even more of their money). On the other hand, the bank shareholders got bitchslapped.
http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html
"Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.
That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well."
I'm not even sure I'd want us to do what Sweden did, but it makes me less ill than thinking about what Paulson & Co. want from us.
Lowly,
This is not cutting off your nose to spite your face. The fact is, the Pualson plan will NOT solve the problem. It is throwing good money afterbad.
The recession and possible depression is here because it should be. Delaying price discovery, a-la Japan, will make this more painful as capital continues to be misallocated.
There simply is not enough borrownig capacity to solve the leverage problems - and since we seem to be honoring those credit default swaps (wo did you see that loan to Citi to pay lehman to pay citi to settle the CDS?)
What we get with the Paulson plan, in addition to the horror of watching that arrogant jerk play daddy to the entire country, is a bigger debt burden - for NOTHING.
We are talking 700b in front of bond-holders who all knew they were taking risk.
Peopl will learn to stop chasing returns if they understand that risk is, umm, risky.
WOW
Great articles in the NYT, Hurray for Krugman for blasting Paulson.
Hurray for Fischer at the Fed fr blasting Bernanke.
We seem to have awoken from our stupor!
Look - thngs will get bad. They will. Then they will get better. We can build an economy and a society we are proud of.
Keep the pressure on Congress! There is still hope as long as you can keep them from reaching an agreement!
Dear Brown, Kaptur and Voinovich,
We live in a Republic. Your job is to represent your constituents when making legislation. A majority is opposed to a Wall Street bailout. There are protests all over the nation in opposition to this legislation! Why are you guys still discussing a bailout like it is even a possibility? The people have spoken loud and clear! Do not pass a bailout and don’t even discuss a bailout. I would rather deal with the consequences to the situation that we are in than bailout Wall Street.
Not only is the majority against a bailout, this legislation is unconstitutional. Refer to Article 1 section 8 of the US Constitution. You will see that the powers of Congress are laid out for “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measuresâ€. Abdicating your powers to the Executive branch is illegal! This is exactly what happened during the Iraq War bill. Do not break your oath of office and the Constitution by passing this Wall Street bailout.
Japan tried to save it self during a credit deflation in the late 1980’s and it caused a painful 10+ year long recession. I would rather get the pain over with and purge the market of inefficient uses of money. The faster we get back to good practices for economic growth, the faster we can deploy capital for investment and growth.
Do not throw more good money after bad money! You will probably not keep your job when the next election comes around if you go against the wishes of the people of Ohio.
TOB that video of the protest is amazing. If only for half a day, this is the first time I've been proud of the country I live in for years.
Keep it up people.
OO Says:
for small amount buy locally, find a coin dealer that has been in business for many years.
Any names of such, near the "fortress"?
Paul Says:
Whoooo Hooooo - ME TOO!!!!! I hated those ads; Good ridden s.
And I heard ads for Wamu CDs on the AM radio on the way to work - late yesterday morning. Literally like a couple of hours before they went under.
Mish International Monetary Inc
1154 University Dve
Menlo Park, CA 94025
Phone: 650 324 9110
they are also authorized dealer for Perth Mint, that's why I consider them reputable. Perth Mint is doing the legwork to make sure they are not flight-by-night type.
Whoooo Hooooo indeed. I think those words should never come out of the mouth of any man. They are barely passable as an indication of girlish enthusiasm. Those ads were below pathetic.
When all is said and done, I think one of the more interesting outcomes of the housing bubble will be that we learn how significant the concept of short selling is to the financial markets. If we look at the last few days, there has been a huge amount of "bad" news, but the market had been relatively stable. I think it is fair to say that Paulson and Bernanke and Cox achieved the effect that they desired when they enacted the "799+" short-selling ban.
Democrats what to pass bill without Republicans.
Two leading Senate Democrats said Congress will eventually pass a Wall Street rescue plan, and blamed House Republicans and presidential candidate John McCain for derailing an agreement on Thursday.
"We're going ot get this done—and stay in session long enough to get it done," Senate Majority Leader Harry Reid told reporters. "The time is now, for House Republicans to come to the negotiating table and for presidential politics to leave the negotiating table."
Sen. Chris Dodd, chairman of the Senate Banking Committe who appeared with Reid, also pledged to hammer out an agreement.
Can they be any more stupid? Or are they posturing to do this as insurance for a market crash without actually coming through with it?
Mandie,
I'm 100% sure we should do a variant of what the Swedes did: Offer to take a preferred equity position in any institution that requires additional capital in order to realize losses on mortgage-based assets..
The institution must use the capital to make a write-down of the specific impaired assets, and can then dispose of the assets to private investors on the open market, or hold them, a they see fit.
The price of preferred shares should be determined by some function of the market value on AND around the date of asset disposal (and/or writedown), details TBD. Of course, safeguards against price manipulations around those dates must also be enacted.
The key is to align tax-payer interest as a stakeholder with the regular shareholder interest, and the management interest. That is the only way to get the desired outcome, which is to protect the taxpayer downside and to participate in the upside. In short, the bailout should take the form of an INVESTMENT for a RETURN.
Note: I'm not talking about the type of "aligning management and shareholder interest" which is doublespeak for "handing out lot of options and restricted stock to management". :-)
I think it is fair to say that Paulson and Bernanke and Cox achieved the effect that they desired when they enacted the “799+†short-selling ban
The shorts are just scapegoats, you need shorts to maintain a good equilibrium for the price of the stocks. The market is "stable" because the bail-out is priced in already. If the bailout does not passed, market will tank even with no shorts.
Why wouldn't you short the financials when they are leveraged 30-1, seems like easy money until they changed rules in the middle of the game. When the dollar goes, they can add more rules restricting commodities and gold, etc.
http://money.cnn.com/2008/09/26/news/economy/bailout_impact/index.htm?cnn=yes
Jerry Howard, CEO of the National Association of Home Builders, said the Wall Street bailout is crucial, even though he doesn't believe it will solve the credit crunch that was hitting his members before the crisis started.
For this reason, Howard said as soon as Congress returns to work from its upcoming recess, his trade group will be asking for another package of between $40 billion and $90 billion directed towards the housing market.
Pigs will fly if they get this money, but then again, anything can happen will these crooks from Washington.
well, I think the anger and resistance we've seen on financial blogs is not representative of the general American people. The D and R must have their internal polling to gauge the inclination of their constituents.
Main street of course dislikes Wall Street, but they are not aware of how badly they are screwed by the latter. i actually think the opposition you are seeing so far are from a self-selective group of people who tend to make more than proportional share of voices than silent mass. Most Americans simply don't care.
Remember that Ron Paul was a sensation on youtube, and if youtube viewers were representative of the general public, he would have won by a huge margin? Most Americans don't even know about Ron Paul. Guess what, US has a broadband penetration rate of less than 20%, ranking 16th in the world, so most people actually don't watch youtube.
This is just a posturing game for both parties to appeal to those swing state.
cb,
You may notice that I am not disagreeing with you. I simply stated that for Bernanke/Paulson/Cox, the short ban has had the intended effect. I did not express a judgment that it was the right thing to do.
Why haven't we seen any jokes along the lines of "Snoopy McCain ejected out of his campaign jet and parachuted to the relative safety of his Capitol Hill office, after going down in flames during an intense dogfight with Baron von Obama".
Perhaps it is a little too strong of a joke to apply to a war hero, but it seems like an obvious one in retrospect.
or something along the lines of
"McCain bailed out of his campaign jet airplane to seek refuge in the relative safety of his congressional office"
OO,
I saw some tv interviews where elected officials referred to a surge of phone calls from constituents that oppose the bailout.
It may be that constituents support bailout , but in another form, with lots of safeguards.
justme,
Letterman ripped McCain apart on his show
http://www.youtube.com/watch?v=XjkCrfylq-E
StuckInBA says:
If there is no car loan available, prices of cars will come down to a level where people can afford it with cash.
Correct! Or at least cars will be affordable at the new wage rates with 20% down and 3 year loans.
Capitulation breeds fear first, then optimism with a new sense of direction.
We ain't going to see optimism for a long, long time.
OO. is Mish International Monetary Inc related to our beloved Mish Shedlock?
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One patrick.net reader suggested a simple antidote to Treasury Secretary Paulson's proposed theft of $700 billion from taxpayers: a mortgage strike.
Since Paulson is trying to steal more than $5,000 from every taxpayer and give it to the banks that blew all their money on bad mortgages, the obvious response from each mortgage-holding taxpayer should be a refusal to pay at least $5,000 of their mortgage.
Such a mortgage strike should start exactly when Paulson's $700 billion theft starts, and should continue until his theft is exactly nullified. The banks that wasted their money should fail. Customer accounts should be protected up to the promised FDIC limit of $100,000 per account, but there is no public obligation to protect foolish bankers from their own mistakes.
If Paulson's theft passes Congress in the face of nearly unanimous public shock and disapproval, then it is clear that representative democracy has failed and the strike is justified.
Such a failure of representative democracy would also mean that it is time to ammend the Constitution to entirely eliminate our corruptable Congress and establish direct democracy, with web-based, non-anonymous, verifiable voting by the public on all legislation. We do not need representatives who do not represent us.
Patrick
#housing