Paulson: We're Gonna Fix the Economy

[BIG PIZZLE]

Is the government going to buy millions of homes?

Possible financial crisis fix sends stocks soaring
By PATRICK RIZZO, JEANNINE AVERSA and MARTIN CRUTSINGER, AP Business Writers 9 minutes ago

WASHINGTON - The stock market finally found reason to rally Thursday, and Congress promised quick action as the Bush administration prepared a plan to rescue banks from the bad debt at the heart of the worst crisis on Wall Street since the Great Depression.

Details of the plan were still being worked out, but Treasury Secretary Henry Paulson emerged from a nighttime meeting on Capitol Hill to say he hoped to have a solution "aimed right at the heart of this problem."
As word of a government plan began to reach Wall Street earlier in the day, the Dow Jones industrial average jumped 410 points, its biggest percentage gain in nearly six years.

The rebound also came after an infusion of billions of dollars by the Federal Reserve and world governments aimed at getting nervous banks to stop hoarding money and lend again.

Stocks had fluctuated throughout the day, without severe swings in either direction, until CNBC reported the administration might back a new agency to take bad assets off the books of struggling financial institutions, much like it did in the aftermath of the savings and loan crisis of the 1980s.

After the discussions Thursday night, Paulson said the goal was to come up with a "comprehensive approach that will require legislation" to deal with the bad debts, or illiquid assets, on bank's balance sheets. He did not provide any details, but the plan taking shape called for Congress to give the administration the power to buy distressed bank assets.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said that probably would not mean creating a new government agency.

"It will be the power — it may not be a new entity. It will be the power to buy up illiquid assets," Frank said. "There is this concern that if you had to wait to set up an entity, it could take too long."

Frank said his committee could begin drafting legislation as early as Wednesday.

Paulson, Fed Chairman Ben Bernanke and other officials planned to work through the weekend on a solution. House Speaker Nancy Pelosi said that once the administration had presented its proposal, "we hope to move very quickly" to come to an agreement.

There was no immediate word how much the rescue plan might cost.

The banks still standing are staggering under the weight of billions of dollars of bad loans and mortgage debt arising from the wave of home foreclosures in the United States, and lending has tightened around the world in response.

Before the sun rose on Wall Street on Thursday, the Fed said it would boost by as much as $180 billion the amount of cash it would supply to foreign counterparts that are short on dollars. For banks in the United States, the Fed supplied $105 billion in short-term loans later in the day.

But, at least initially, those efforts did little to unfreeze the global credit markets. Banks remained extremely reluctant to lend money.

The No. 2 official at the International Monetary Fund, John Lipsky, said the past few days were "searing manifestations of a financial crisis that has expanded to historic proportions." He predicted the turbulence would continue for "some time to come."

British financial regulators also banned short-selling the stock of financial companies listed on the London Stock Exchange. U.S. regulators tightened rules on short-selling Wednesday.

Christopher Cox, chairman of the securities and Exchange Commission, told lawmakers the SEC may put in a temporary emergency ban on all short-selling — not just the aggressive forms it already has targeted, according to a person familiar with the matter, speaking on condition of anonymity because no final decision had been made.

The ban might apply to stocks of selected financial companies, to all financial companies or even possibly to all public companies. Short-selling, which has been practiced on Wall Street for decades, is not illegal per se.

The Fed said it had authorized the expansion of swap lines, the process by which it supplies reserves to other central banks, to include amounts up to $110 billion for the European Central Bank and up to $27 billion for the Swiss National Bank.

The Fed also said new swap facilities had been authorized with the Bank of Japan for as much as $60 billion, $40 billion for the Bank of England and $10 billion for the Bank of Canada.

For more than a year, investors around the world have watched with growing alarm as the U.S. economy, the world's largest, has struggled to right itself amid massive home foreclosures, many of them from mortgages issued to homeowners with bad credit.

The turmoil has swallowed some of the most storied names on Wall Street. Three of its five major investment banks — Bear Stearns, Lehman Brothers and Merrill Lynch — have either gone out of business or been driven into the arms of another bank.

The Dow's gain of nearly 4 percent on Thursday sent the average back above 11,000 and nearly erased its losses from a day before.

But as the uncertainty wore on, investors continued to flock to Treasury securities, considered a haven in times of crisis, and the price of gold rose yet again. And worries about even the safest investments intensified as Putnam Investments abruptly closed a $15 billion money market fund because institutional investors had pulled their cash.

Bush canceled out-of-town fundraising trips to Alabama and Florida to stay in Washington and huddle with Paulson and the heads of the Fed and the Securities and Exchange Commission.

In an appearance earlier in the day, the president acknowledged "serious challenges" in the markets and said: "The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence."

The credit troubles reverberated around the globe. Asian stocks closed lower. European stocks rose but struggled to hold on to the gains. Russia closed its stock exchanges for a second day, and President Dmitry Medvedev pledged a $20 billion injection into financial markets.

In the United States, investors worried for another day about the health of the banks still standing. Earlier in the week, venerable Lehman Brothers was forced into bankruptcy, and Merrill Lynch was driven into the arms of Bank of America.

On Thursday, Morgan Stanley scrambled to strike a major deal or raise more cash that will reassure investors and prevent more damage to its battered stock. Its CEO, John Mack, reached out to China's Citic Group overnight about a possible investment, according to a person familiar with the talks.

Morgan Stanley is also considering a combination with retail bank Wachovia Corp. and an investment from Singapore Investment Corp., one of the world's biggest sovereign wealth funds, said the person, who spoke on the condition of anonymity because the discussions were still ongoing.

On Capitol Hill, lawmakers in both parties became increasingly vocal about their concerns with the Bush administration's handling of the current crisis.

Administration officials refused to attend a closed-door briefing with House Republicans this morning, leaving their congressional allies in the dark about the government's $85 billion emergency loan to insurer American International Group, House GOP leader John A. Boehner said.

And Sen. Chris Dodd, D-Conn., the Banking Committee chairman, was irritated that Paulson twice canceled appearances he was to have made before the panel this week.

[Ghostrider]

I wonder if this was all a huge plan to increase government control of the people and their money? They have been saying for a long time we all have too much debt amd save way to little.

[Morfin]

Screw Paulson. Screw Bush for appointing a Wall Street guy like Paulson. Screw Wall Street. And all the rest. And screw Dodd. Sure, now that the shit has hit the fan, he and Congress want to act all tough.

[BIG PIZZLE]

I wonder if this was all a huge plan to increase government control of the people and their money? They have been saying for a long time we all have too much debt amd save way to little.

It was just a huge fuck-up and it's gonna take years to fix no matter what they do.

[Mustard]

Call me an opportunistic vulture if you want... but how can I capitalize off of this?

[BIG PIZZLE]

Buy lots of AIG and wait 20 years.

[Mustard]

That seems far too simple...

[Kerjack]

I've never wanted to kick so many people in the nuts as I do right now. We get screwed and all the people responsible are getting free passes.

[Kerjack]

The credit troubles reverberated around the globe. Asian stocks closed lower. European stocks rose but struggled to hold on to the gains. Russia closed its stock exchanges for a second day

Also am I the only one that thinks this is stupid? "European stocks rose but struggled to hold on to the gains" yeah.... thats... unusual.

[Claydon]

Burn baby burn.

There is opportunity here gents, its called CHEAP FUCKING REAL ESTATE.

My credit union was all wet when they saw the wife's and my gross income, they wanted to talk mortgages with us. This shit is going to get a little worse, a couple more firms will fail but it will stabilize and most likely things will start to look a little better by the middle of next year.

Then we all will sip mimosas from our beach front homes in malibu.

[Claydon]

oh and congress has a recess as of the 26th.....those mother fuckers had BETTER not recess until all of this bullshit is worked out.

[Archetype]

That seems far too simple...
Buy into as much Pounds or Euros as possible, then wait til the entire US goes under and buy the presidency.

[Mustard]

oh and congress has a recess as of the 26th.....those mother fuckers had BETTER not recess until all of this bullshit is worked out.
Reading this, I'm convinced that they won't.

Its fucking Congress for fuck's sake.

[vasili denisov]

Call me an opportunistic vulture if you want... but how can I capitalize off of this?
There's some helpful advice here. Not the "believe in your soul" or "you're indestructible" crap, the other thing.

gSq8ZBdSxNU

[kid_vidrio]

Uhhh, youtube is keeping some 80's acts from disappearing completely?
Interesting metaphor Vasili. Like a chainsaw cutting through a phone book.

[freegood]

By "fixing" I guess he means throwing all Free Market libertarian ideals out the window and nationalizing the fucked up banks and stopping naked short selling through the SEC?

[Claydon]

Amazing, the market finished the week only down 35 points.

What a historic week folks.

[Rover]

By "fixing" I guess he means throwing all Free Market libertarian ideals out the window and nationalizing the fucked up banks and stopping naked short selling through the SEC?Just in time for Cold War II. Now our nationalized economies will provide the equal footing for us to determine once and for all whose military strength is supreme.

[Grieves]

Just in time for Cold War II.The U.S. cannot afford another Cold War.

Anyways, the rug's probably going to be pulled out from under us so fast our heads will spin.

[Yelram]

The U.S. cannot afford another Cold War.

Anyways, the rug's probably going to be pulled out from under us so fast our heads will spin.
Its a "green" war, its all about the money traders. They are tricking the US government into helping prevent the fall of the market mainly to keep the Euro trading high, they're waiting for the point when the Euro can buy as many dollars as it can, then they buy all the dollars, deflate the Euro, and they more or less OWN large chunks of the US.

[Grieves]

The U.S.A. was bought from it's people with fake money.

Somewhere a Native American laughs.

[Mustard]

After studying this issue, I feel comfortable going on the record and saying that I believe it would be in our nation's and economy's best interest to approve the 700 billion dollar bailout in regards to these forclosed mortgages and the financial institutions that are carrying that paper.

If anything, the government would be buying these mortgages, and then just sit on them. When that happens, people will stop forclosing, and the housing market might turn around after a year or so. Also, remember that this 700 billion isn't just being wasted. We (the taxpayer who is footing the bill and the government that represents us) are getting something for our money, and if things are done right, we might actually come out ahead on this. Seriously folks, thats totally possible. This "bailout" is far better than the alternative of doing nothing and watch the US housing market and the banks along with them fall in on themselves.

Congress needs to approve this. I think they need to do it as soon a possible.

[Yelram]

After studying this issue, I feel comfortable going on the record and saying that I believe it would be in our nation's and economy's best interest to approve the 700 billion dollar bailout in regards to these forclosed mortgages and the financial institutions that are carrying that paper.

If anything, the government would be buying these mortgages, and then just sit on them. When that happens, people will stop forclosing, and the housing market might turn around after a year or so. Also, remember that this 700 billion isn't just being wasted. We (the taxpayer who is footing the bill and the government that represents us) are getting something for our money, and if things are done right, we might actually come out ahead on this. Seriously folks, thats totally possible. This "bailout" is far better than the alternative of doing nothing and watch the US housing market and the banks along with them fall in on themselves.

Congress needs to approve this. I think they need to do it as soon a possible.


So where are they handing out the kool-aide?

[Mustard]

Yelram, this is the deep end of the pool. I would advise you to keep out of it unless you have evidence to support a contrary argument.

[Yelram]

Yelram, this is the deep end of the pool. I would advise you to keep out of it unless you have evidence to support a contrary argument.
Heres the argument, CAPITALISM there, do I need to hyphenate it for you? You prevent one company from going under, it wont help the others. You are going to see a domino effect from this bail-out. All of the other companies and people that would have made money from this are instead going to have to deal with inflated currency, and higher taxation. The smart people who used their money wisely LOSE, and the flippant idiots that thought they could get something for nothing WIN. In capitalism, the slightly stronger feed off of the weak, much like in the jungle. Its like we have swooped in and saved the weakest gazelle, and in response, a slightly more agile, well developed gazelle will die.

[Mustard]

Heres the argument, CAPITALISM there, do I need to hyphenate it for you? Notwithstanding the fact that the solution is the far bigger issue than the problem that got us into this mess...

Capitalism wasn't the problem. Deregulation was the problem. Predatory lending was the problem. Idiots asking for and being approved for huge 30 year mortgages they couldn't afford were the problem.

You prevent one company from going under, it wont help the others. You are going to see a domino effect from this bail-out. You mention domino effect, but you're looking at it from a glass half empty viewpoint. What you need to comprehend is that with this 700 billion dollar package will prevent banks who bought this paper from going under, and as a result that will create a domino effect stopping the rest of the economy from following the lending and banking industries into the toilet.

All of the other companies and people that would have made money from this are instead going to have to deal with inflated currency, and higher taxation.While I don't discount that higher taxes and inflation will occur, take a look at what the government plans on buying for its 700 billion dollars. They are buying assets. Assets have the potential to make money. If this is done correctly, the American tax payer should get an equity stake in this deal, and could potentially make more money than was spent to correct the problem in the first place.

The smart people who used their money wisely LOSE, and the flippant idiots that thought they could get something for nothing WIN.This isn't about winning or losing. Get that straight immediately or this whole discussion with you is moot. This is about pulling the lending and banking markets out of the garbage heap and back into good standing, thereby enabling them to continue to do the business that banks and lending institutions do what they need to do. Currently, the market is terrible because of all of this near-worthless paper, and it is stifiling the ability for banks to lend any money whatsoever, even to other banks. That is what this is all about. This isn't a baseball game, totally devoid of consequences... this is about the fate of our economy for at least the next 10-15 years.

In capitalism, the slightly stronger feed off of the weak, much like in the jungle. Its like we have swooped in and saved the weakest gazelle, and in response, a slightly more agile, well developed gazelle will die. Isn't that quaint... you, lecturing me on economics. hahaha

Ahem, moving on. The people who are being saved is pretty much every person that does any kind of banking in the entire United States, and maybe even around the world for that matter.

I would like to close by stating that I endorse the "bailout", which might be the first thing I have endorsed that has come out of this Administration since the invasion of Afghanistan. The time to dwell on this issue has come and passed. If something substantial is not done within the next two weeks, another bank may fail, and the United States matter of factly cannot stand another bank failure. Think about that.

[cAsE sEnSiTiVe]

....and the slow but steady fall of the private sector begins

[Pike Bishop]

The irony is, we wound up here because of the deregulation that started with Reagan.

[freegood]

After studying this issue, I feel comfortable going on the record and saying that I believe it would be in our nation's and economy's best interest to approve the 700 billion dollar bailout in regards to these forclosed mortgages and the financial institutions that are carrying that paper.

If anything, the government would be buying these mortgages, and then just sit on them. When that happens, people will stop forclosing, and the housing market might turn around after a year or so. Also, remember that this 700 billion isn't just being wasted. We (the taxpayer who is footing the bill and the government that represents us) are getting something for our money, and if things are done right, we might actually come out ahead on this. Seriously folks, thats totally possible. This "bailout" is far better than the alternative of doing nothing and watch the US housing market and the banks along with them fall in on themselves.

Congress needs to approve this. I think they need to do it as soon a possible.

I disagree. Republicans are sitting back and letting the Dems pass the bill so that they can turn around and claim the Dems gave away the farm and screwed the public over. Without serious concessions, if the Democrats fast track this bill, they deserved to get assraped for the next 50 years.

The bill as it is now is a raw deal. Here's a link on some of its sore points.
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html

While I agree a bailout is necessary, without concessions to make these greedy fucking douchebags pay, we're just barreling towards the next disaster faster than we already are. They fucking celebrated in the dow on Friday for chrissake. These fags know nothing of remorse. Where's the let the markets decide bullshit now? No government regulation what?

[Mustard]

I disagree. Republicans are sitting back and letting the Dems pass the bill so that they can turn around and claim the Dems gave away the farm and screwed the public over. Without serious concessions, if the Democrats fast track this bill, they deserved to get assraped for the next 50 years.

The bill as it is now is a raw deal. Here's a link on some of its sore points.
http://www.nakedcapitalism.com/2008/09/why-you-should-hate-treasury-bailout.html

While I agree a bailout is necessary, without concessions to make these greedy fucking douchebags pay, we're just barreling towards the next disaster faster than we already are. They fucking celebrated in the dow on Friday for chrissake. These fags know nothing of remorse. Where's the let the markets decide bullshit now? No government regulation what?
By all means, there should absolutely be clauses that clearly state this money can't be used to give huge bonuses and golden parachutes to fatcat executives, punishable as felonies if they are discovered doing so.

Also, anybody with two brain cells to rub togehter will understand that it was a combination of Reagan's deregulations, Clinton's deregulations, and Bush 43's falling asleep at the wheel that made a good deal of this all possible, and not the 2006-current congressional democrats. That assertion would be heinous and absurd, even in jest. This whole thing has been decades in the making starting with Reagan and being perpetuated by Clinton and Bush 43's ineptitude. But lo and behold... I think the Administration I loathe so much finally got something right here, but hey, even a blind squirrel finds a nut every once in awhile, right?

So to summarize: "Bailouts" yes. No money for execs, yes. A check on what paper (vintage, principal, terms, etc.) is bought and how much is being paid for it, yes. Doing nothing and letting the banking and lending institutions collapse along with the housing market as more and more people foreclose because its actually in their better interest to do so... NO! Action must be taken and soon. Hopefully it looks something like this.

[freegood]

An emerging consensus against the Paulson Plan: Government should force bank capital up, not just socialise the bad loans

Jeffrey Frankel (http://www.voxeu.org/index.php?q=node/102)
23 September 2008

Here one of the world’s leading international economists, a former member of Clinton’s Council of Economic Advisors, comments on the growing consensus that the Paulson Plan has got the wrong end of the stick.


In times of war, there is a tendency for both political parties to rally around the president – as we saw (all too well) in Iraq after September 11. In times of financial panic, there is often a similar inclination. The two presidential candidates, for example, are being very careful in their statements.
I don’t blame them. The issues are too complex to be taken on inside the context of a political campaign. Both candidates realise that the danger of a verbal misstep that the other side can try to blame for worsening the crisis is far greater than the likelihood that either one will come up with a brilliant solution that will gain widespread support or solve the problem, let alone both.
Having said that, opposition to the $700 billion plan proposed by Treasury Secretary Henry Paulson on September 19 has coalesced quickly. And from both ends of the political spectrum. Sebastian Mallaby pursues the Iraq analogy in “A Bad Bank Rescue (http://www.washingtonpost.com/wp-dyn/content/article/2008/09/20/AR2008092001059.html)” in the Washington Post:“…in buying bad loans before banks fail, the Bush administration would be signing up for a financial war of choice. It would spend billions of dollars on the theory that pre-emption will avert the mass destruction of banks.”
The explicit lack of oversight or checks and balances in the Treasury proposal is very worrisome – and it worries Congressional Democrats.
But the nature of the bailout, how the money is to be used, is what bothers me most of all. As Mallaby says:“Within hours of the Treasury announcement on Friday, economists had proposed preferable alternatives. Their core insight is that it is better to boost the banking system by increasing its capital than by reducing its loans.”
Examples are not tied to economists from a particular political viewpoint or party. He mentions the proposals of Ragu Rajan (FT.com (http://www.ft.com/home/uk)) and Luigi Zingales (http://voxeu.org/index.php?q=node/1670) that the government could tell banks to cancel all dividend payments. And proposals by Charlie Calomiris (http://voxeu.org/index.php?q=node/1683) and Doug Elmendorf (Brookings (http://www.brookings.edu/)) that the government could buy equity stakes in banks themselves, rather than just buying their bad loans.
Similarly, in today’s New York Times opinion page we had Paul Krugman (http://voxeu.org/index.php?q=node/258) on the left side of the page and Bill Kristol on the right side of the page. What Mallaby calls the core insight is also the crux of Krugman’s logic (“Cash for Trash (http://www.nytimes.com/2008/09/22/opinion/22krugman.html)”):“…the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to – a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.”
Sounds right to me. Don’t socialise the losses without socialising the gains.

[Grieves]

The Next Crisis (http://www.nysun.com/opinion/the-next-crisis/86469/)

Sums up my feelings nicely: A government agency is going to buy bad loans and make a profit selling them. Give me a break.

[Mustard]

Look, here it is again, the best I can describe it:

This plan is for all of us. This plan can and will avert a certain and imminent economic failure that will bring down all sorts of banking and financial institutions. This will in turn cause... bank runs! Remember reading about the Great Depression? That was the last time we had bank runs. Well now we have instituted credit and lines of credit... more or less unheard of 100 years ago. So nowdays if banks are so afraid of lending money to people for things like houses, cars, college, jetskis, and water buffalo safaris that nobody can get a loan, guess what happens? Everything fails. Everything! Well, except for maybe farms. It will be very real, and very much like it was 75-79 years ago.

The whole purpose of this bill is to prevent the US economy (along with maybe even preventing the whole global economy from going into recession in this day and age) from failing. Just use your imagination for a moment if you will and think of a USA where 90% of the banks and financial institutions have failed, and you can't cash your check or get money out of an ATM or from a bank teller because the confidence in the USD is nill (because the USD is a fiat currency, thanks Richard Nixon!). We're talking going back to silver and gold for currency... (personally thats actually a good thing as far as I'm concerned).

Look, everyone knows me. I'm not known as a chicken little "the sky is falling" type. But I wouldn't be saying these things if the prospect wasn't very real. By all means, the legislation should have language that doesn't make the fatcats fatter, in fact they really should be forced to work for a deferred check for being proponents in getting us into this mess.

But you know what, fuck it all. If the worst thing happens after Paulson's plan fails and the banks fail and our economy (wrapped up in bad paper and our fiat currency) tanks like the Exxon Valdez, maybe that won't be such a bad thing? Maybe it will just be easier to go back to the 1800s, grow and kill my food, and anyone else who comes calling? Yeah... I could do that. With a realistic 50/50 chance of that actually happenning if nothing is done, the question is... Can you?

[Area Man]

The problem we are seeing now is that our financial system is based on debt. This massively leveraged debt is starting to have a snowball effect, and could possibly lead to economic collapse. Everyone is very scared of this collapse because it would be far reaching and devastating to many people, including many very very wealthy and powerful people and their businesses.

While this bailout may well deal with this particular crisis for the time being, the goal on some level of paulson and bernake will be to return the country to some version of the status quo: where the economy is still based on massive amounts of debt. Sure, they'll probably start some new government agencies dedicated to oversight, and the rules will get stricter for a while... but if you are spending money to save institutions that have proven to be failures, we certainly must be trying to hold onto the status quo.

This financial system depends on continuous, exponential growth in order to sustain itself. Everything is done on borrowed cash. The entire premise of a loan is based on the idea that over the duration of the loan, the borrower returns the principal, as well as the interest on top of it. This interest depends on the growth of our economy. If everyone is loaning money out, and everyone wants more back.. how else could this happen without growing the economy as a whole?

As our money is leveraged and re-leveraged using the tiny reserve ratio of our banks, each loan is a promise for growth in our economy. Even as the most wealthy nation perhaps ever, exponential growth cannot be sustained.

So back to our current situation. We are faced with a choice of allowing our deeply flawed system to collapse now, or patching things up (if we can) and then waiting for the next disaster down the line. That might be home loans again, or maybe credit card debt this time. Or perhaps our 9 trillion dollar national debt.

One way or another, the shit will have to hit the fan.

[freegood]

Look, here it is again, the best I can describe it:

This plan is for all of us. This plan can and will avert a certain and imminent economic failure that will bring down all sorts of banking and financial institutions. This will in turn cause... bank runs! Remember reading about the Great Depression? That was the last time we had bank runs. Well now we have instituted credit and lines of credit... more or less unheard of 100 years ago. So nowdays if banks are so afraid of lending money to people for things like houses, cars, college, jetskis, and water buffalo safaris that nobody can get a loan, guess what happens? Everything fails. Everything! Well, except for maybe farms. It will be very real, and very much like it was 75-79 years ago.

The whole purpose of this bill is to prevent the US economy (along with maybe even preventing the whole global economy from going into recession in this day and age) from failing. Just use your imagination for a moment if you will and think of a USA where 90% of the banks and financial institutions have failed, and you can't cash your check or get money out of an ATM or from a bank teller because the confidence in the USD is nill (because the USD is a fiat currency, thanks Richard Nixon!). We're talking going back to silver and gold for currency... (personally thats actually a good thing as far as I'm concerned).

Look, everyone knows me. I'm not known as a chicken little "the sky is falling" type. But I wouldn't be saying these things if the prospect wasn't very real. By all means, the legislation should have language that doesn't make the fatcats fatter, in fact they really should be forced to work for a deferred check for being proponents in getting us into this mess.

But you know what, fuck it all. If the worst thing happens after Paulson's plan fails and the banks fail and our economy (wrapped up in bad paper and our fiat currency) tanks like the Exxon Valdez, maybe that won't be such a bad thing? Maybe it will just be easier to go back to the 1800s, grow and kill my food, and anyone else who comes calling? Yeah... I could do that. With a realistic 50/50 chance of that actually happenning if nothing is done, the question is... Can you?

I don't think many disagree of a bailout. How that 700 million dollars (not a ceiling, mind you) of taxpayer funded money on an already weak dollar is used is the issue.

Paulson's plan is not ironclad. For those who don't know what the fuss is about, pretty much we give the Treasury Sec. unprecedented powers without any committee or liability (yup no lawsuits) to oversee him. Then he has the godly responsibility to dole out the money as he sees fit.

So the gov prints up money it doesn't have, then it owns a bunch of mortgages, not houses, with negative value (proving ownership would be tricky because they were sliced up into pieces (MBS) and those pieces were securitized into hot dogs, roast beef, prime rib and what not), then.... who knows?

You gotta remember, the houses these mortgages cover are from liars loans, no income no job loans, or other risky loans that should've had no business of being made. So if they were made at the height of the boom, and housing prices are ~60-80% of value, that's a hole to climb in order to break even. The MBS that definitely make money...well the banks/hedge funds keep those.

The best part is that "fair market value" has been exposed as above value because the whole deal is predicated upon keeping the facade of valuable level 3 assets while banks dump and unload their debt into the clear.

So then what... We default? Sovereign banks riot? Inflation goes boom? No one knows.

It still doesn't address the problem of a crippled housing market which is the root of the crisis. A liquidity dump is hinged upon these banks not having enough cash on hand, but if banks are insolvent due to their assets being worthless from bad loans, then it's an insolvency problem that Congress would potentially have to address yet again.

At that point Republicans could let those homeowners with bad loans/credit rot while claiming they're worried about "moral hazard".

[Mustard]

To be tragically brief, it is the near-worthless paper that will be bought by the 700 billion in taxpayer money. This paper will then be owned by the federal gov't, which is the only institution that has both the means and the patience to do this deal. The gov't doesn't want people to foreclose anymore, so I'm sure a moratorium on foreclosures will have to be a clause. In addition, the gov't doesn't want people to leave their homes, so the gov't will be (I'm sure) more than willing to renegotiate the loans that are more managable for a large percentage of those whose houses have depreciated in value, thereby making it worthwhile for people to stay in their homes instead of just abandoning it.

More people staying in their homes will serve to turn around (slowly but surely) the housing markets. Less and less homes are being built as it is, so naturally supply will go down as demand goes back up. Given a year, I think things will be past the worst and heading back on an overall upward trend.

As far as the banking side goes, here it is in a nutshell. People owe the banks money. Millions of foreclosures have happened, and the banks that are stuck with this near-worthless paper, which they have bought and paid for, now do not have those "accounts receivables" and since they have hardly any money flowing inward, and too much debt as a result of basing their expected proceeds from this paper which now is not coming, well, they can't pay their bills, so they go bankrupt. The companies are liquidated and all the liabilities they can pay off are paid off, and everyone else gets stuck with the bill. Then the financial institutions that were owed money from the failed banks all of a sudden don't get the money they were planning on getting anymore, and suddenly they are in the exact same spot the banks were just in. Too much debt, not enough income. This causes another round of failures or bankruptceis, and now the proverbial snowball is really moving downhill in a hurry.

It doesn't take much to see where it goes from there. I have to go though, sorry to make it short and quick.

[freegood]

CDS?

[Mustard]

are for suckers?

[Pollo]

I know it's also posted in P&C, but I'll also put it here.

Bailout deal (http://news.yahoo.com/s/ap/20080925/ap_on_bi_ge/financial_meltdown) reached:

WASHINGTON - Warned of a possible financial panic, key Republicans and Democrats reported agreement in principle Thursday on a $700 billion bailout of the financial industry and said they would present it to the Bush administration in hopes of a vote within days.
http://us.bc.yahoo.com/b?P=LmuE70WTVvqeJei9SNvSSgEnRAVwdkjb2HsAB13L&T=1d8s9n9pm%2fX%3d1222367355%2fE%3d8903535%2fR%3dn ews%2fK%3d5%2fV%3d2.1%2fW%3dH%2fY%3dYAHOO%2fF%3d30 08765083%2fH%3dY2FjaGVoaW50PSJuZXdzIiBjb250ZW50PSJ pdDtCYW5raW5nO0hvdXNlO1doaXRlO1BhdWxzb247V2FzaGluZ 3RvbjtSZXB1YmxpY2FuO2NyZWRpdDtnb3Zlcm5tZW50O2luc3V yYW5jZTtlcXVpdHk7SXQ7QW1lcmljYTtwb2xpdGljcztkZWJhd GU7cmVmdXJsX3d3d195YWhvb19jb20iIHJlZnVybD0icmVmdXJ sX3d3d195YWhvb19jb20iIHRvcGljcz0icmVmdXJsX3d3d195Y Whvb19jb20i%2fQ%3d-1%2fS%3d1%2fJ%3dC4519345&U=13fcd87j5%2fN%3dBwk.Adj8fW4-%2fC%3d669939.12833252.13149724.1414694%2fD%3dLREC %2fB%3d5450427%2fV%3d1
Emerging from a two-hour negotiating session, Sen. Chris Dodd, D-Conn., the Banking Committee chairman said, "We are very confident that we can act expeditiously."

"I now expect that we will indeed have a plan that can pass the House, pass the Senate (and) be signed by the president," said Sen. Bob Bennett, R-Utah.

The bipartisan consensus on the general direction of the legislation was reported just hours before President Bush was to host presidential contenders Barack Obama and John McCain and congressional leaders at the White House for discussions on how to clear obstacles to the unpopular rescue plan.

Tony Fratto, the White House deputy press secretary said the announcement was "a good sign that progress is being made."
"We'll want to hear from (Treasury) Secretary (Henry) Paulson, and take a look at the details. We look forward to a good discussion at the meeting this afternoon," he said.

On Wall Street, financial markets grew more upbeat as the Dow Jones industrial average at times rose more than 300 points.

Key lawmakers in Washington said at midday that few difficulties actually remained, although no details of their accord were immediately available.
"There really isn't much of a deadlock to break," said Rep. Barney Frank, D-Mass, chairman of the House Financial Services Committee.

But there were fresh signs of trouble in the House Republican Caucus. A group of GOP lawmakers circulated an alternative designed to attract private capital back into the credit markets with less government intrusion.

Under the proposal, the government would provide insurance to companies that agree to buy frozen assets, rather than purchase them directly as envisioned under the administration's plan. The firms would have to pay insurance premiums to the Treasury Department for the coverage.

"The taxpayers haven't done anything wrong," said Rep Eric Cantor, R-Va., adding that rather than require them to bear the cost of the bailout, the alternative "pretty much puts the burden on Wall Street over time."

Rep. John A. Boehner, R-Ohio, the minority leader, was huddling with McCain on the rescue. Earlier, asked whether the GOP presidential nominee could corral restive Republicans to support the plan, Boehner said, "Who knows?"

And Rep. Spencer Bachus of Alabama, the only House Republican in the bargaining meeting, did not directly say he agreed with the other lawmakers who emerged describing an imminent deal.

"There was progress today," said Bachus, the senior Republican on the Financial Services panel.

Bush told the nation in a televised address Wednesday night that passage of the package his administration has proposed is urgently needed to calm the markets and restore confidence in the reeling financial system. His top spokeswoman, Dana Perino, had told reporters earlier Thursday that "significant progress" was being made.

House Speaker Nancy Pelosi, D-Calif., said Bush's agreement with Democrats on limiting pay for executives of bailed out financial institutions and giving taxpayers an equity stake in the companies cleared a significant hurdle.

The core of the plan envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.

It was not yet clear how lawmakers had resolved lingering differences over how to phase in the eye-popping cost — a measure demanded by Democrats and some Republicans who want stronger congressional control over the bailout — without spooking markets. A plan to let the government take an ownership stake in troubled companies as part of the rescue, rather than just buying bad debt, also was a topic of intense negotiation.

Bush acknowledged Wednesday night that the bailout would be a "tough vote" for lawmakers. But he said failing to approve it would risk dire consequences for the economy and most Americans.

"Without immediate action by Congress, America could slip into a financial panic, and a distressing scenario would unfold," Bush said as he worked to resurrect the unpopular bailout package. "Our entire economy is in danger."
Obama and McCain called for a bipartisan effort to deal with the crisis, little more than five weeks before national elections in which the economy has emerged as the dominant theme.

Presidential politics intruded, nonetheless, when McCain on Wednesday asked Obama to agree to delay their first debate, scheduled for Friday, to deal with the meltdown. Obama said the debate should go ahead.

[freegood]

Now if they could only take 6 days to bailout homeowners in bad mortgages and another 6 days to bring out a national energy plan.

[Claydon]

Now if they could only take 6 days to bailout homeowners in bad mortgages and another 6 days to bring out a national energy plan.

yah an energy plans, when the doucebags of SF will let the drilling ban expire but leaves it to the states to decide if companies can drill in federal waters which will never happen. you mean that kind of energy plan?

[Desperado]

But there were fresh signs of trouble in the House Republican Caucus. A group of GOP lawmakers circulated an alternative designed to attract private capital back into the credit markets with less government intrusion.

Under the proposal, the government would provide insurance to companies that agree to buy frozen assets, rather than purchase them directly as envisioned under the administration's plan. The firms would have to pay insurance premiums to the Treasury Department for the coverage.

"The taxpayers haven't done anything wrong," said Rep Eric Cantor, R-Va., adding that rather than require them to bear the cost of the bailout, the alternative "pretty much puts the burden on Wall Street over time."

Rep. John A. Boehner, R-Ohio, the minority leader, was huddling with McCain on the rescue. Earlier, asked whether the GOP presidential nominee could corral restive Republicans to support the plan, Boehner said, "Who knows?"

And Rep. Spencer Bachus of Alabama, the only House Republican in the bargaining meeting, did not directly say he agreed with the other lawmakers who emerged describing an imminent deal.

"There was progress today," said Bachus, the senior Republican on the Financial Services panel.


ummm this could be far from over.

[Claydon]

Just saw Sen. Shelby come out of the white house saying there is no agreement.

[Desperado]

Just saw Sen. Shelby come out of the white house saying there is no agreement.

Shelby: No agreement (http://politicalticker.blogs.cnn.com/2008/09/25/shelby-no-agreement/)
Posted: 05:03 PM ET
http://i2.cdn.turner.com/cnn/2008/images/09/25/art.cnnlive12.cnn.jpg Shelby said no agreement has been reached.

http://i.l.cnn.net/cnn/.element/img/2.0/mosaic/base_skins/baseplate/corner_wire_BL.gif

WASHINGTON (CNN) – Republican Sen. Richard Shelby emerged from President Bush's economic bailout meeting Thursday afternoon saying, "We will not have a deal."
Shelby, a senator from Alabama, said he had a five-page paper from 44 leading economists that says "we are rushing to a deal."
One of Shelby's top aides told CNN earlier Thursday that the senator from Alabama had planned to make the statement. Shelby does not like the plan and wanted a public platform to voice his views, the aide said.

[Desperado]

I was gonna try to sum this up, but almost all the info is needed to really understand what is going on.


No bailout agreement after White House meeting

(CNN) -- Sens. John McCain and Barack Obama both left President Bush's financial bailout meeting at the White House after 5 p.m. Thursday without making statements to reporters.
http://i2.cdn.turner.com/cnn/2008/POLITICS/09/25/campaign.wrap/art.obamawhitehouse.ap.jpg Barack Obama, right, attends a meeting at the White House with President Bush, John McCain and other politicians.


http://i.cdn.turner.com/cnn/.element/img/2.0/mosaic/base_skins/baseplate/corner_wire_BL.gif


Officials said Obama will make a statement at the Mayflower Hotel.
The McCain campaign said Thursday night that he will remain in Washington for the night "as he continues to take action in brokering a deal that will address the crisis as well as protect the taxpayer. No further travel plans have been made at this point."
Dana Perino, the White House press secretary, released a statement saying, "The president appreciates the bipartisan members of the congressional leadership and the two presidential candidates coming to the White House today to discuss how to finalize the financial rescue package. There is a clear sense of urgency and agreement on the need to stabilize the financial markets, and prevent a massive financial crisis from affecting everybody in America."
The statement went on to say that the group will continue to work on a deal.
But according to Sen. Richard Shelby, R-Alabama, who attended the meeting, "we will not have a deal."
Sen. Chris Dodd, D-Connecticut, who also attended the meeting, said Thursday that the meeting was contentious and blasted what he calls McCain's inaction.
"I'm not quite sure what John McCain said at the meeting. He said something. ... He had no indication he was for any particular plans. I don't know where he is on all of this," Dodd said.
The meeting included the following key players: Bush flanked at the table by Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi, Obama and McCain on opposite ends of the table, House Minority Leader John Boehner and Senate Minority Leader Mitch McConnell also between the two presidential candidates and Vice President Dick Cheney across from Bush.
In a statement at the beginning of the meeting, Bush said he hopes for a deal to bail out Wall Street "very shortly."
He said the nation is in a "serious economic crisis" that needs to be dealt with "as quickly as possible" and that the historic meeting is "an attempt to move the process forward."
But according to several Republican aides, there is still major opposition to the "agreement on fundamental principles."

The fact that House Republicans are still not coming on board poses a major obstacle for any kind of deal. Pelosi and other House Democratic leaders have repeatedly said that this is Bush's bill and that he and other GOP leaders need to get Republicans to support it.
McCain, who announced Wednesday that he was suspending his presidential campaign until a bailout plan was worked out, met with some Republican House members to try to bring more of them on board to back the agreement, according to a source in the room and one who was briefed on the meeting.
The gist of the meeting, according to sources, was that these members "aren't there yet" on the plan the Senate Banking Committee worked out and say there needs to be greater protection for taxpayers.
One Republican aide said that "not much has changed in the last 24 to 48 hours. I think it has to be pretty radically altered for House Republicans to support it."
This aide stressed, "at the end of the day, these members represent the people who sent them here, and the people who sent them here are so overwhelmingly opposed to this."
This aide said the calls coming into GOP offices are 90 to 1 against the plan.
Boehner, R-Ohio, has tapped a group of House Republicans to develop alternative ideas.

Earlier, Boehner released a statement that said, "I am encouraged by the bipartisan progress being made toward an economic package that protects the interests of families, seniors, small businesses, and all taxpayers."
It's unclear whether McCain agreed with this approach, but one aide said he put the principles "in his satchel to take over to the White House."
Republicans recognize that there is pressure building to get something done before the end of the week. "There sort of a tacit understanding among everyone that it has to happen before Monday," a third GOP aide said.
House Republican leaders are scheduled to meet at 5:30 p.m. ET in Boehner's office to talk about next steps and what comes out of the White House meeting.
Obama (http://www.cnn.com/ELECTION/2008/candidates/barack.obama.html) turned down McCain's suggestion that they both suspend their campaigns to focus on securing a deal on a bailout plan. He also passed on McCain's suggestion that they postpone Friday night's first presidential debate in Oxford, Mississippi.
Democrats fear that McCain will take credit for bringing reluctant Republicans around to agreeing with a bailout plan in order to bolster his argument that he would be a better leader in crises than Obama.
"The Democrats, of course, are very afraid that McCain is going to swoop into these delicate negotiations on Capitol Hill at the last minute and when they reach an agreement, he's going to claim credit for having brought those negotiations to a successful conclusion," CNN senior political researcher Alan Silverleib said.
A McCain source insists that the Arizona senator is aware of the politics involved and recognizes that Democrats -- and even some Republicans -- are wary of having it appear that McCain is brokering a deal.
The McCain source said his role in the meeting was to listen so he would know the lay of the land among Republicans before the White House meeting.
Both candidates touched on the economic (http://topics.cnn.com/topics/National_Economy) crisis at former President Clinton's Clinton Global Initiative conference before heading to Washington.
McCain told the audience that it is not the time to engage in presidential politics.
"It's time for everyone to recall that the political process is not an end in itself, nor is it intended to serve those of us who are in the middle of it. In the Senate of the United States, our duty is to serve the people of this country," he said.
"For the Congress, this is one of those moments in history when poor decisions made in haste could turn crisis into a far-reaching disaster if we do not act."
Obama also pressed his position on the crisis plaguing Wall Street -- and Main Street -- to Clinton's group.
"It's outrageous that we find ourselves in a position where taxpayers bear the burden and the risk for greed and irresponsibility on Wall Street and in Washington," he said. "But we also know that a failure to act would have grave consequences for the jobs, and savings, and retirement of the American people."
Obama also touched on his decision to keep on campaigning.




"Our election is in 40 days, our economy is in crisis, and our nation is fighting two wars abroad. ... The American people, I believe, deserve to hear directly from myself and Sen. McCain about how do we intend to lead our country," Obama said.
The initiative, founded by Clinton in 2005, is described as a "nonpartisan catalyst for action" bringing global leaders together to try to solve "some of the world's most pressing challenges."

[Mustard]

Bank runs are already happening, and will continue each and every day until a deal is reached.

The shitty side of this is that nobody can see the bank runs happening, because there are no lines like back in 1929. Internet banking anyone? People are moving their funds that aren't able to be protected under the FDIC into T-Bills by the boatload. Since these are in effect e-bank runs, guess what? No media coverage.

The FDIC seized WaMu's accounts last night, expect it to happen more and more next week if no "bailout" is reached in Congress. 7 days. Give it 7 days. To avoid a real depression, God I hope a deal is reached soon.

[mongo]

the wamu by school had a line out the door and around the corner this morning. crazy fucking shit.

[Morfin]

To avoid a real depression, God I hope a deal is reached soon.

That the overall economy is at risk is hyperbole created by the President and Congress. Let capitalism and the law of the jungle prevail. Yee-haw. No deal. No bail-out.

[Claydon]

the wamu by school had a line out the door and around the corner this morning. crazy fucking shit.

what a bunch of stupid fucks, not one penny was lost in the sale of wamu. If you had 500,000 bucks in that bank yesterday, you would have 500,000 today.

fucking sheeple

[Okie Medicvet]

If I had over one hundred grand in any one bank account, you are damn straight I would be taking the excess out of that account and putting it into another. I wouldn't have more than the insured amount in any one bank, period.

[Hanover Fist]

If I had over one hundred grand in any one bank account, you are damn straight I would be taking the excess out of that account and putting it into another. I wouldn't have more than the insured amount in any one bank, period.

These aren't like savings accounts Okie. People with over 100k in a bank usually have it tied up in CD's. When buying CD's you tend to look for the bank that gave the best rates of return. The more you invest, the better the interest rate that you get.
If you have 1 million dollars to invest, you aren't going to put it in the investment that gives you 3.5% you are going to put it in the investment that pays you 5%. Before the current fiasco those were some of the most secure investments you could make, the only thing that makes it look risky now is hindsight.

[dadaelus]

http://i38.tinypic.com/nbw10y.jpg

[Ghostrider]

Boom - Bust it is a cycle and the longer you boom the bigger the bust, happened to dot coms and it was bound to happen here. And Sink it wasn't 30 year loans that screwed us, it was interest only loans, arm loans, and who knows what other loans that were designed to get someone into an extremely overpriced house they could not afford.

[taters]

THE BAILOUT JUST FAILED IN VOTE


206 yes, 227 no
What we are seeing was just a consensus by Republicans (who figured, our saviors) that they would not support the bailout, in which they saw as a form of government socialism and interfering with the market (let the weak companies fail, as basic capitalism demands), and about 1/3 of democrats, which essentially feel bailing out the banks is rewarding them for unethical behavior.

Wow. Republicans do the right thing for a change and save our asses. Granted, for the wrong reasons, but still.

Low and behold the 'we follow'-crats (lead by hillarycrat extraordinaire, Nancy Pelosi) are trying to pressure their rogue members to fall back in line and follow them and the president. Who would have ever figured this could happen? Is the finally the birth of an actual libertarian or fiscalist party of fiscal conservatives and social democrats? In a perfect world, but probably now. We can dream though...

[Okie Medicvet]

I've never wanted to kick so many people in the nuts as I do right now. We get screwed and all the people responsible are getting free passes.


Yup. The fatcats get their 'golden parachutes' and Ameircans about to or who have lost their homes get kicked in the ass.

[Claydon]

Yup. The fatcats get their 'golden parachutes' and Ameircans about to or who have lost their homes get kicked in the ass.

yah because so many of these americans are soooo innocent.

give me a fucking break okie, millions of people signed off on loans they KNEW they would never be able to pay back. Why do you think so many of these people defaulted within a year.

[heelsguy]

well, I figure the market will recover when it has inflicted precisely the right amount of pain it needs to

[Mustard]

To be tragically brief, it is the near-worthless paper that will be bought by the 700 billion in taxpayer money. This paper will then be owned by the federal gov't, which is the only institution that has both the means and the patience to do this deal. The gov't doesn't want people to foreclose anymore, so I'm sure a moratorium on foreclosures will have to be a clause. In addition, the gov't doesn't want people to leave their homes, so the gov't will be (I'm sure) more than willing to renegotiate the loans that are more managable for a large percentage of those whose houses have depreciated in value, thereby making it worthwhile for people to stay in their homes instead of just abandoning it.

More people staying in their homes will serve to turn around (slowly but surely) the housing markets. Less and less homes are being built as it is, so naturally supply will go down as demand goes back up. Given a year, I think things will be past the worst and heading back on an overall upward trend.

As far as the banking side goes, here it is in a nutshell. People owe the banks money. Millions of foreclosures have happened, and the banks that are stuck with this near-worthless paper, which they have bought and paid for, now do not have those "accounts receivables" and since they have hardly any money flowing inward, and too much debt as a result of basing their expected proceeds from this paper which now is not coming, well, they can't pay their bills, so they go bankrupt. The companies are liquidated and all the liabilities they can pay off are paid off, and everyone else gets stuck with the bill. Then the financial institutions that were owed money from the failed banks all of a sudden don't get the money they were planning on getting anymore, and suddenly they are in the exact same spot the banks were just in. Too much debt, not enough income. This causes another round of failures or bankruptceis, and now the proverbial snowball is really moving downhill in a hurry.

It doesn't take much to see where it goes from there. I have to go though, sorry to make it short and quick.

Bank runs are already happening, and will continue each and every day until a deal is reached.

The shitty side of this is that nobody can see the bank runs happening, because there are no lines like back in 1929. Internet banking anyone? People are moving their funds that aren't able to be protected under the FDIC into T-Bills by the boatload. Since these are in effect e-bank runs, guess what? No media coverage.

The FDIC seized WaMu's accounts last night, expect it to happen more and more next week if no "bailout" is reached in Congress. 7 days. Give it 7 days. To avoid a real depression, God I hope a deal is reached soon.

That the overall economy is at risk is hyperbole created by the President and Congress. Let capitalism and the law of the jungle prevail. Yee-haw. No deal. No bail-out.
Well Mr. Morfin, you got your wish for now, and now the Dow is down 777 points, the S&P is down 106 points, and Nasdaq is down almost 200 points. For fucks sake, even BofA just lost 6 points, goldman sachs is down 17, wachoivia is virtually worhtless down 8 to less than 2. Everything is down over 10%, if not more, or way more. So many people lost so much money today... IRAs just tanked hard, so its not just a Wall Street problem, ya dig?

Look everyone, this is super simple to understand if you just remove the political overtones. A lack of confidence equals a lack of credit which equals a lack of capitalism. Capitalism is driven by credit, and confidence is required for credit to work. These are economic fundamentals 101, not some impossibly difficult economic principle to understand. Guess what just flew right out the window?

If no action is done and a package isn't able to be achieved... What are they gonna do, revote? Not gonna happen. Recraft the bill? Why bother, because apparently congress is fundamentally opposed to this bill. Fuck congress. Fuck them all.

[Mustard]

http://img148.imagevenue.com/loc1176/th_22568_US_Capitol_FAIL_122_1176lo.jpg (http://img148.imagevenue.com/img.php?image=22568_US_Capitol_FAIL_122_1176lo.jpg )

[Yelram]

Well Mr. Morfin, you got your wish for now, and now the Dow is down 777 points, the S&P is down 106 points, and Nasdaq is down almost 200 points. For fucks sake, even BofA just lost 6 points, goldman sachs is down 17, wachoivia is virtually worhtless down 8 to less than 2. Everything is down over 10%, if not more, or way more. So many people lost so much money today... IRAs just tanked hard, so its not just a Wall Street problem, ya dig?

Look everyone, this is super simple to understand if you just remove the political overtones. A lack of confidence equals a lack of credit which equals a lack of capitalism. Capitalism is driven by credit, and confidence is required for credit to work. These are economic fundamentals 101, not some impossibly difficult economic principle to understand. Guess what just flew right out the window?

If no action is done and a package isn't able to be achieved... What are they gonna do, revote? Not gonna happen. Recraft the bill? Why bother, because apparently congress is fundamentally opposed to this bill. Fuck congress. Fuck them all.

What you dont get, is that the market goes down... AND UP, if you dont think there are tons of people out there waiting for the correct second to buy up this "worthless" stock with their own money, you are on crack. This is the type of situation that makes millionaires out of ordinary people. There are companies that will see no problem from this but a temporary drop is stock worth. Capitalism, in and of itself, is NOT driven by credit, our current system, unfortunately, is. This will help in the long run. BURN BABY BURN!!!

[Mustard]

You have no idea what you are talking about Yelram. Go away.

[Yelram]

You have no idea what you are talking about Yelram. Go away.
Oh how many businesses do you run? And I dont mean the fucking krispy kremes down the street fatass. I suppose that the stocks will just keep going down right? And then when they hit zero, the government can come and pay them off with our money. And then the government and wallstreet will merge into one right? Forget this free market crap, it only leads to businesses that are not producing going under(/sarcasm). Its always liberals who think more market intervention will correct market intervention. Its like trying to level a bucket of water by tilting it side to side.

[Hanover Fist]

A very smart money person once told me. People make money when the market moves. Whether it goes up or down makes no difference for the shrewd investor as long as it moves. The only time everyone loses is when there is no market movement at all.
If you had large amounts of Wells Fargo and Johnson Controls in your portfolio, you'd probably be pretty happy right now.

Wells Fargo today after the -777 sell off of almost everyone. I only brought up JCI because I was informed a few years ago to buy it by someone I trusted, unfortunately I was pretty broke at the time. I wish I had had about $25-30k to buy their shares at the time.
http://i38.tinypic.com/e5o3vb.gif

[Mustard]

You have no idea what you are talking about Yelram. Go away.

[Pharon]

Wells Fargo today after the -777 sell off of almost everyone.
Wells Fargo is down 11% for the day. What's your point?

[Hanover Fist]

Wells Fargo is down 11% for the day. What's your point?

An investor doesn't look at day to day trades, they look at the big picture. WFC will far and away be the winner when all is said and done.

[Pharon]

And what are you basing this opinion on, exactly?

[Hanover Fist]

And what are you basing this opinion on, exactly?

Because they didn't get into the derivative market, they aren't exposed to bad loans and have plenty of capital to acquire all the banks that did. Their CEO even made a point before Congress in 2004 stating the fact that it cost them billions but they knew it wasn't a sound practice. He then pointed out that the fact that Wells Fargo wouldn't get involved in it should have been a tip to regulators that the practice was very suspect.

[Mustard]

An investor doesn't look at day to day trades, they look at the big picture. WFC will far and away be the winner when all is said and done.
This will be especially true if a bailout package happens. Wells Fargo, BofA, Goldman Sachs, and JP Morgan will all be sitting in a very favorable place.

[Hanover Fist]

http://us.labs.reuters.com/article/newsOne/idINN1732009220080918

[Yelram]

Brilliant thesis on the market there Sink, we need to get you out of that dead end hourly wage job you're in and get you writing legislation!!!! But seriously, the people with money know that very soon will be the key time to buy, and there will be a surge in the market.

[Yelram]

This will be especially true if a bailout package happens. Wells Fargo, BofA, Goldman Sachs, and JP Morgan will all be sitting in a very favorable place.
And please oh swami, explain why they would be better off WITH the bailout package? One would imagine that they would be better off WITHOUT it, being that these other companies wont have enough capital to hold on to their "worthless" investments.

[Rover]

The House adjourned for Rosh Hashanah. Somehow I'm beginning to think that if this economic bailout were absolutely necessary, if it truly were an "economic Pearl Harbor", that the Congress wouldn't take 2 days off for the Jewish New Year.

The Japs just bombed Pearl Harbor!

Hold on, we need to wait for the Matzo, it's almost done.

What are there maybe 10 orthodox Jews in Congress?

EDIT: Nevermind, I just looked it up. 30 Reps and 13 Senators. Maybe the Jews really do run things.

[Mustard]

Yelram, your words are worth less than nothing. There is no reason to speak to you. Go away.

[Claydon]

the house is taking a break for the jews.

congress = fags

[Claydon]

So, has anyone tried to get through to the house's website. i haven't been able to get through to my congressmen's website in 4 days.

[redsox39]

Call me an opportunistic vulture if you want... but how can I capitalize off of this?

Welcome to the Conservative Dark side....

[Ghostrider]

whatsamatter sink, Yelram got your tongue?

[freegood]

Call me an opportunistic vulture if you want... but how can I capitalize off of this?

If you had bet heavily last week like all those other investors who gleefully shot the market up that Friday on news of a government handout, then you would've been part of that trillion dollar bloodletting. The incompetence of Congress makes me smile sometimes.

So now does the average investor go double or nothing on the next bailout attempt? Or has playing with fire burned any sense for risk?

The bailout is a raw deal for taxpayers. It's because it's a raw deal that the market could make back most of what it lost today a few days after a bill has been passed.

Ron Paul is right. Printing money has become a drug habit and every single one of us is hooked.

Would I enjoy the unpredictable alternative? Fair question, but I'm not going to enjoy paying off trillions of dollars of debt these fuckers are printing up now way into my 60s either.

[Mustard]

whatsamatter sink, Yelram got your tongue?Hahahaha, thats funny! Thats a good sense of humor you have there.

If you had bet heavily last week like all those other investors who gleefully shot the market up that Friday on news of a government handout, then you would've been part of that trillion dollar bloodletting. The incompetence of Congress makes me smile sometimes.

So now does the average investor go double or nothing on the next bailout attempt? Or has playing with fire burned any sense for risk? Well, I think that all depends on whether or not you're betting that a bailout plan will be reached. These are the best scenarios I've read about so far, and so I shall share with you the best methods to secure assets.

If you're an optimist, and you're an average investor, I wouldn't invest anything new, and I would ride it out, because with a bailout plan reached, Wall St. will react favorably and stocks will go back up in all certainty.

If you're a pessimist, and you're an average investor, I wouldn't invest anything new, and I would take a good look at my portfolio, and choose all of the companies that sell discretionary items, or companies that require massive amounts of borrowed credit to operate, and sell it all off. Then I would look at the rest and keep 80%, sell the other 20%. Of the proceeds recovered, I would put half into gold, and the other half into insured bank accounts and keep that as cash *just in case* a bailout deal is reached. Every two weeks that go by and no bailout is reached or until the time is right to buy good companies, I would sell 10% of the remaining stocks, and split that evenly into insured bank accounts and gold.

This is what I would do if I was an average investor of either mind from everything I've read from multiple places. I'm pessimistic about the bailout plan now, as my faith in congress to do anything worthwhile is now at 0%. With the limited amount of companies I have an interest in via my grandfather, this is what I plan to do immediately.

The bailout is a raw deal for taxpayers. It's because it's a raw deal that the market could make back most of what it lost today a few days after a bill has been passed.

Ron Paul is right. Printing money has become a drug habit and every single one of us is hooked.

Would I enjoy the unpredictable alternative? Fair question, but I'm not going to enjoy paying off trillions of dollars of debt these fuckers are printing up now way into my 60s either.
I hate to sound like a broken record, but even though I agree that the bailout plan can be a raw deal for taxpayers, it is a whole hell of a lot better an alternative than not having any package at all.

Ron Paul is a really smart man, and I respect a whole lot of the things he has to say, including the "drug habit" statement. You won't find me disagreeing with much of what he has to say, and almost zero of what he has to say regarding these economic issues.

I can tell you affirmatively that I would not enjoy the "unpredictable alternative". Not at all. I enjoy my way of life. I enjoy living in this country, with its immense possibilities that are granted to me via capitalism. I don't want to see a staggering collapse of the DOW to 8000ish in the next few weeks... can you imagine what effect that will have on millions of pension funds and IRAs? Today even was horrible as the market lost approximately $1,100,000,000,000 dollars of worth, and congress is to blame for not passing this bill that will lead ultimately to a few more trillion in losses in the upcoming weeks.

The alternative is bleak and grim... the bailout package is going to hurt, but at least the gov't will be buying assets it can potentially make money in the long run with by sitting on them, working with the home owners, and then selling them back on the open market when the market is willing to pay more than they were when the gov't bought them for.

If you look at the bailout plan as an investment plan instead, you'll realize that its actually not the most horrible, terrible thing ever. And heck, maybe if its done right... (yeah, right, I know, laughable idea) the taxpayers via the government might actually make a buck or two.

[Yelram]

Hahahaha, thats funny! Thats a good sense of humor you have there.

Well, I think that all depends on whether or not you're betting that a bailout plan will be reached. These are the best scenarios I've read about so far, and so I shall share with you the best methods to secure assets.

If you're an optimist, and you're an average investor, I wouldn't invest anything new, and I would ride it out, because with a bailout plan reached, Wall St. will react favorably and stocks will go back up in all certainty.

If you're a pessimist, and you're an average investor, I wouldn't invest anything new, and I would take a good look at my portfolio, and choose all of the companies that sell discretionary items, or companies that require massive amounts of borrowed credit to operate, and sell it all off. Then I would look at the rest and keep 80%, sell the other 20%. Of the proceeds recovered, I would put half into gold, and the other half into insured bank accounts and keep that as cash *just in case* a bailout deal is reached. Every two weeks that go by and no bailout is reached or until the time is right to buy good companies, I would sell 10% of the remaining stocks, and split that evenly into insured bank accounts and gold.

This is what I would do if I was an average investor of either mind from everything I've read from multiple places. I'm pessimistic about the bailout plan now, as my faith in congress to do anything worthwhile is now at 0%. With the limited amount of companies I have an interest in via my grandfather, this is what I plan to do immediately.


I hate to sound like a broken record, but even though I agree that the bailout plan can be a raw deal for taxpayers, it is a whole hell of a lot better an alternative than not having any package at all.

Ron Paul is a really smart man, and I respect a whole lot of the things he has to say, including the "drug habit" statement. You won't find me disagreeing with much of what he has to say, and almost zero of what he has to say regarding these economic issues.

I can tell you affirmatively that I would not enjoy the "unpredictable alternative". Not at all. I enjoy my way of life. I enjoy living in this country, with its immense possibilities that are granted to me via capitalism. I don't want to see a staggering collapse of the DOW to 8000ish in the next few weeks... can you imagine what effect that will have on millions of pension funds and IRAs? Today even was horrible as the market lost approximately $1,100,000,000,000 dollars of worth, and congress is to blame for not passing this bill that will lead ultimately to a few more trillion in losses in the upcoming weeks.

The alternative is bleak and grim... the bailout package is going to hurt, but at least the gov't will be buying assets it can potentially make money in the long run with by sitting on them, working with the home owners, and then selling them back on the open market when the market is willing to pay more than they were when the gov't bought them for.

If you look at the bailout plan as an investment plan instead, you'll realize that its actually not the most horrible, terrible thing ever. And heck, maybe if its done right... (yeah, right, I know, laughable idea) the taxpayers via the government might actually make a buck or two.


Please show me what is going to happen if we dont bail them out, please show me. Cats and dogs falling from the heavens, while we cannibalize our close neighbors??? You've bought the hype, hook line and SINKer, and you're ready to throw money we dont have at the problem to "fix" it. Sounds like a socialist trying to interfere with a market self-correction to me. When you inflate the price of housing to a point where noone can afford a house, WTF do you expect to happen? I've heard contractors talking about this bubble popping for 6 years now. They knew they couldnt sell a two bedroom ranch for a half mill, so what did they do? Most of the contractors I know are doing additions right now, no new houses, no spec houses, they saw it coming a mile away. For any idiot to believe that this thing just appeared out of the clear blue and we need to act now to fix it is total horseshit. The people who know how to keep their chickens in line are laughing all the way to the bank. There are people waiting to scoop up these foreclosed homes, and the companies that got involved with the derivatives market deserve what they have coming, just like the ones who DIDNT and had to LOSE MONEY while these other assholes were ripping people off trading around worthless paper, NEED TO BE REWARDED. You are in essence saying "Do whatever the fuck you want businesses, we'll come and bail you out". Its a government assisted monopoly.

[Okie Medicvet]

I just wish that the bailout plan went to the people who needed it, not to corporate fatcats, not to the companies that swindled the low income homeowner who could afford the payments...as long as they didn't balloon out of control until they lost it all..

oh and here is some protest footage that for some reason never appeared on any msm.

http://hubpages.com/hub/Protests-on-Wall-Street---what-the-news-media-isnt-showing-you

[freegood]

I can tell you affirmatively that I would not enjoy the "unpredictable alternative". Not at all. I enjoy my way of life. I enjoy living in this country, with its immense possibilities that are granted to me via capitalism. I don't want to see a staggering collapse of the DOW to 8000ish in the next few weeks... can you imagine what effect that will have on millions of pension funds and IRAs? Today even was horrible as the market lost approximately $1,100,000,000,000 dollars of worth, and congress is to blame for not passing this bill that will lead ultimately to a few more trillion in losses in the upcoming weeks.


It's a market shrinking on money that shouldn't have been there in the first place. When you blow up 40-60 trillion out of nowhere in non-traded assets (it never tested the market after selling), when the bottom falls, the top comes crumbling down in Babel-like proportions.

I'm sure a $700,000,000 plus package will be passed, but this is money we don't have and the next president will inherit this albatross knowing that all the campaign promises for tax cuts or increased spending he made now can not and will not be kept.

And like it or not, our current way of life...from 95-08 is unsustainable. You can't charge up everything on credit and expect foreigners to bail you out all the damn time. If you thought oil and gold were volatile the last 6 months, we might be headed towards a wilder ride.


The alternative is bleak and grim... the bailout package is going to hurt, but at least the gov't will be buying assets it can potentially make money in the long run with by sitting on them, working with the home owners, and then selling them back on the open market when the market is willing to pay more than they were when the gov't bought them for.

If you look at the bailout plan as an investment plan instead, you'll realize that its actually not the most horrible, terrible thing ever. And heck, maybe if its done right... (yeah, right, I know, laughable idea) the taxpayers via the government might actually make a buck or two.

These are all non-recourse mortgages from the bottom of the shit barrel. There is no government purchasing power for the best market price. We are paying them a market premium above price to keep up the illusion that that market is solid. Finding the best deal would collapse that market because, as I mentioned before, not many of these level assets were rarely traded.

That is where the comparisons of a government controlled hedge fund fails.

So let's assume the recession is not as bad but house prices continue to fall. If it falls further 10%, that'll mean more people with negative value mortgages and more incentive for them to give their overleveraged homes to the bank instead of paying it off. Yet we're paying top dollar for that specific MBS tranch to prop up the market.

And all this...all of this is without any riders or attachments for true reform or punishment to Wall Street for generating this mess. It's beyond disgusting. It's financial terrorism on a metaphorical level. Give me money or I'll rape your retirement fund. That is my biggest issue. Giving them money is okay if they have learned their lesson. I doubt they have, and that sets up another crisis within 5-10 years with the debt obligations we have (10 trillion debt AND 40+trillion in entitlements)

You can not assume we're going to make money from this deal. The expected returns of 15% came during the bubble when no one thought housing prices would fall, and we still haven't reached bottom yet.

[Mustard]

Ok, that is it. I'm done trying to convince you guys. If no bailout plan is reached (which in all likelihood says some deal will be made, probably straight down party lines to appease the dems who control the house) then we'll come back to this thread in 6 months and see who was right and who was wrong. Just don't say I didn't try to warn you.

I covered my ass already, I hope for the sake of your families you have all done the same.

[billysocal]

Does that mean we get 6 months of quiet?

[Mustard]

Hahaha! Snarky comment aside, yes, you get 6 months of quiet from me on this issue.

[Grieves]

We're fucked with or without the bailout.

I just think the bailout adds insult to injury.

[Okie Medicvet]

I think you're right. With our without the bailout, we are collectively screwed.

[Kerjack]

Maybe when everyone is struggling the people will actually start to give a shit about their neighbors again.

Silver lining people.

[Claydon]

What I hope comes out of this is that americans start living within their means and start saving rather than just spending like drunken sailors.

Perhaps this may rub off on the government and the government starts spending what it collects. Doubtful however, especially with Barry being president.

[Hanover Fist]

Well if worse comes to worse, I know the people in my neighborhood who don't believe in guns, I'll take their shit first.

[Claydon]

Well if worse comes to worse, I know the people in my neighborhood who don't believe in guns, I'll take their shit first.

Get your MREs yet?

[mongo]

We're fucked with or without the bailout.

I just think the bailout adds insult to injury.

this is pretty much my thinking at this point.

[Yelram]

Ok, that is it. I'm done trying to convince you guys. If no bailout plan is reached (which in all likelihood says some deal will be made, probably straight down party lines to appease the dems who control the house) then we'll come back to this thread in 6 months and see who was right and who was wrong. Just don't say I didn't try to warn you.

I covered my ass already, I hope for the sake of your families you have all done the same.

Do you know what the word "convince" means? It means you have to have some sort of argument to the contrary, WHICH YOU DONT. You are just regurgitating the same things the talking heads are saying, you arent giving any sort of perspective, or reasoning, just regurgitation. Again, the man on the street, the common man, is not going to see any sort of crazy money cascading effect, the thought of that is entirely silly. And everyone knows it. Thats why you "invest" as in "IT ISNT A SURE THING".

[freegood]

Ok, that is it. I'm done trying to convince you guys. If no bailout plan is reached (which in all likelihood says some deal will be made, probably straight down party lines to appease the dems who control the house) then we'll come back to this thread in 6 months and see who was right and who was wrong. Just don't say I didn't try to warn you.

I covered my ass already, I hope for the sake of your families you have all done the same.

You don't have to convince me. Even if I were angry about it, the only recourse most people have would be to vote out the Congressman who approved it months later.

I do hope that giving the taxpayer the raw deal is not the only solution. Nor is the current plan as it is the only viable solution.

[Kerjack]

The only Paul I'm listening too is Ron.

[Okie Medicvet]

The only Paul I'm listening too is Ron.

McCartney's gonna be pissed off when he hears this.

[Tenpinger]

She just yacks on!

[footsies]

Aren't we just delaying he inevitable?

[Pollo]

I know it's mentioned in P&C, but I'll also post it here.

New bailout bill (http://news.yahoo.com/s/ap/financial_meltdown) approved from the House, now awaits Pres. Bush's decision.

WASHINGTON - With the economy on the brink and elections looming, Congress approved an unprecedented $700 billion government bailout of the battered financial industry on Friday and sent it to President Bush for his certain signature.

The final vote, 263-171 in the House, a comfortable margin that was 58 more votes than it garnered on Monday. The vote capped two weeks of tumult in Congress and on Wall Street, punctuated by daily warnings that the country confronted the gravest economic crisis since the Great Depression if lawmakers failed to act.

Bush was poised to make a statement on the historic vote.

"We all know that we are in the midst of a financial crisis," House Republican Leader John Boehner of Ohio, said shortly before casting his vote for government intervention in private capital markets that was unthinkable only a month ago.

"And we know that if we do nothing, this crisis is likely to worsen and to put us into an economic slump like most of us have never seen."

Speaker Nancy Pelosi, D-Calif., said the bill was needed to "Begin to shape the financial stability of our country and the economic security of our people."

Stocks were up on Wall Street, where there was a lot of anticipation of the vote but where investors also were buffeted by a bad report on the job market. The Labor Department said employers slashed 159,000 jobs in September, the largest cut in five years and further evidence of a sinking economy.

Even before the measure cleared Congress, the White House sought to dampen optimism of its immediate impact on the economy. "This legislation is to fix a problem in our financial markets," said spokesman Tony Fratto. "It's not sold as giving a boost to the economy, but rather preventing a crisis in our economy... If it works as we hope it will, credit will be able to begin flowing again."

The House vote marked a sharp change from Monday, when an earlier measure was sent down to defeat, largely at the hands of angry conservative Republicans.

Senate leaders quickly took custody of the measure, adding on $110 billion in tax and spending provisions designed to attract additional support, then grafting on legislation mandating broader mental health coverage in the insurance industry. The revised measure won Senate approval Wednesday night, 74-25, setting up a furious round of lobbying in the House as the administration, congressional leaders, the major party presidential candidates and outside groups joined forces behind the measure.

It worked — augmented by a sudden switch in public opinion that occurred after the stock market took its largest-ever one-day dive on Monday.

"No matter what we do or what we pass, there are still tough times out there. People are mad — I'm mad," said Republican Rep. J. Gresham Barrett of South Carolina, who opposed the measure the first time it came to a vote. Now, he said, "We have to act. We have to act now."

Rep. John Lewis, D-Ga., another convert, said, "I have decided that the cost of doing nothing is greater than the cost of doing something."

Critics were unrelenting.

"How can we have capitalism on the way up and socialism on the way down," said Rep. Jeb Hensarling of Texas, a leader among conservative Republicans who oppose the central thrust of the legislation — an unprecedented federal intervention into the private capital markets.

It was little more than two weeks ago that Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke concluded that the economy was in such danger that a massive government intervention in the private markets was essential.

The core of the plan remains little changed from its inception — the Treasury Department would have $700 billion at its disposal to purchase bad mortage-related securities that are weighing down the balance sheets of institutions that hold them. The flow of credit has slowed, in some cases drying up, threatening the ability of businesses to conduct routine operations or expand.

At the same time, lawmakers have dramatically changed the measure, insisting on greater congressional supervision over the $700 billion, taking measures to protect taxpayers, and insisting on steps to crack down on so-called "golden parachutes" that go to corporate executives whose companies fail.

Earlier in the week, the legislation was altered to expand the federal insurance program for individual bank deposits, and the Securities and Exchange Commission took steps to ease the impact of the questionable mortgage-backed securities on financial institutions.

In the moments before the vote, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, pledged "serious surgery" next year to address the underlying causes of the crisis.

If anything, the economic news added to the sense of urgency.

The Labor Department said initial claims for jobless benefits had increased last week to the highest level since the gloomy days after the 2001 terror attacks. The news of the payroll cuts came on top of Thursday's Commerce Department report that factory orders in August plunged by 4 percent.

Typifying arguments the problem no longer is just a Wall Street issue but also one for Main Street, lawmakers from California and Florida said their state governments were beginning to experience trouble borrowing funds for their own operations.

Pelosi said, "We must win it for Mr. and Mrs. Jones on Main Street."

One month before election day, the drama unfolded in an intensely political atmosphere.

Democratic presidential candidate Barack Obama, a supporter of the bill, made calls to members of the Congressional Black Caucus, who publicly credited him with changing their minds.

Rep. Elijah Cummings and Donna Edwards, both Maryland Democrats, were among them. They said Obama had pledged if he wins the White House that he would help homeowners facing foreclosure on their mortgages. He also pledged to support changes in the bankruptcy law to make it less burdensome on consumers.

"It's not too often you get the future president telling you that his priority matches your priority," said Cummings.

Obama's rival, Sen. John McCain, who announced a brief suspension in his campaign more than a week ago to try and help solve the financial crisis, made calls to Republicans. His impact was not immediately clear.

Republican Rep. Sue Myrick of North Carolina, who said she was switching her vote to favor the measure, said of McCain: "They told me he was going to call me. He didn't."

Looking ahead to election day, she added, "I may lose this race over this vote, but that's OK with me. This is the right vote for the country."

The White House issued the latest in a series of grim warnings of the risks of defeat. "If the financial markets fail to function, American families will face great difficulty in getting loans to purchase a home, buy a family car or finance a child's education," it said in a written statement.

The vote on Monday staggered the congressional leadership and contributed to the largest one-day stock market drop in history, 778 points as measured by the Dow Jones Industrial Average.

Across the Capitol, Senate leaders reacted quickly, deciding to sweeten the bill with a series of popular tax breaks as well as spending on rural schools and disaster aid. They also grafted on a bill to expand mental health coverage under private insurance plans.

At the same time, the change in federal deposit insurance and the action by the SEC on an obscure accounting rule helped produce a steady trickle of converts.

[vasili denisov]

Schwarzenegger to U.S.: State may need $7-billion loan

By Marc Lifsher and Evan Halper, Los Angeles Times Staff Writers
October 3, 2008
SACRAMENTO -- California Gov. Arnold Schwarzenegger, alarmed by the ongoing national financial crisis, warned Treasury Secretary Henry M. Paulson on Thursday that the state might need an emergency loan of as much as $7 billion from the federal government within weeks.

The warning comes as California is close to running out of cash to fund day-to-day government operations and is unable to access routine short-term loans that it typically relies on to remain solvent.

The state of California is the biggest of several governments nationwide that are being locked out of the bond market by the global credit crunch. If the state is unable to access the cash, administration officials say, payments to schools and other government entities could quickly be suspended and state employees could be laid off.

Plans by several state and local governments to borrow in recent days have been upended by the credit freeze. New Mexico was forced to put off a $500-million bond sale, Massachusetts had to pull the plug halfway into a $400-million offering, and Maine is considering canceling road projects that were to be funded with bonds.

California finance experts say they know of no time in recent history when the state has sought an emergency loan of this magnitude from the federal government. The only other such rescue was in 1975, they said, when the federal government lent New York City money to avoid bankruptcy.
http://www.latimes.com/business/la-fi-calif3-2008oct03,0,5726760.story?track=rss

[Kerjack]

Oh goodie.

[Hanover Fist]

I could use a 7 billion dollar loan while they're at it myself. I would hate for my economic downturn to have a negative impact on the countries economy as a whole.

[Kerjack]

Hanover promises to spend the first 6 billion as fast as he can!

[Grieves]

Ek7zc0lJxbM

[Pike Bishop]

Does anyone know if the bill includes new regulations for the derivatives market? I mean, without any this is just going to happen again in another 10 years or so when everyone forgets how stupid all of this was...

[Pharon]

Not sure, but it did make sure to include "terms extending tax breaks for motor-sports racing tracks, makers of wooden arrows for children and the rum excise tax for Puerto Rico and the Virgin Islands."

http://www.miamiherald.com/news/politics/AP/story/712533.html

[Pollo]

didn't see the need to make a new thread since it's a result of the bailout.

Wells Fargo buys Wachovia (http://news.yahoo.com/s/ap/20081004/ap_on_bi_ge/wells_fargo_wachovia), Citi objects to it:

NEW YORK - A battle broke out Friday for control of Wachovia, as Wells Fargo agreed to pay $14.8 billion for the struggling bank, while Citigroup and federal regulators insisted that Citi's earlier and lower-priced takeover offer go forward.

The surprise announcement that Wachovia Corp. agreed to be acquired by San Francisco-based Wells Fargo & Co. in the all-stock deal — without government assistance — upended what had appeared to be a carefully examined arrangement and caught regulators off guard.

Wells' original offer totaled about $15.1 billion, but since the value of its shares closed down 60 cents Friday, the deal is now valued at about $14.8 billion.

Only four days earlier, Citigroup Inc. agreed to pay $2.1 billion for Wachovia's banking operations in a deal that would have the help of the Federal Deposit Insurance Corp.

The head of the FDIC said the agency is standing behind the Citigroup agreement, but that it is reviewing all proposals and will work with the banks' regulators "to pursue a resolution that serves the public interest."

Citigroup, which demanded that Wachovia call off its deal with Wells Fargo, said its agreement with Wachovia provides that the bank will not enter into any transaction with any party other than Citi or negotiate with anyone else.

Barring legal action, the future of Wachovia will be determined by the bank's shareholders and regulators, which both have to approve a final deal.

It was clear which they preferred Friday, as Wachovia shares climbed as high as 80 percent.

The FDIC is talking out of both sides of its mouth, said Roger Cominsky, partner in law firm Hiscock & Barclay's financial institutions and lending practice. The agency says it stands behind the deal with Citigroup because it hasn't been nixed yet, he said. "But at the same time, they are saying they are reviewing all proposals."

By law, he said the FDIC is required to find the least-costly resolution for taxpayers. The Wells Fargo deal would not rely on any assistance from the government.

The Federal Reserve, which has regulatory oversight of the three big banks, said it hasn't had time to review the proposed sale of Wachovia to Wells Fargo but will work to ensure that all creditors and depositors of Wachovia are protected.

The Fed said regulators will be working with Wachovia and Wells Fargo "to achieve an outcome that protects all Wachovia creditors, including depositors, insured and uninsured, and promotes market stability."

Under Wells Fargo's deal, Wachovia shareholders would receive 0.1991 shares of Wells Fargo for every share of Wachovia stock they own, valuing Wachovia at about $7 per share. This is a nearly 80 percent premium over the stock's Thursday closing price of $3.91. Shares closed at $10 on Sept. 26, the last trading session before the deal with Citigroup was announced.

"This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," Robert Steel, Wachovia's president and chief executive, said in a statement.

In its planned takeover of Wachovia, Citigroup said it would assume $53 billion worth of debt and agreed to absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio. The FDIC agreed to cover any remaining losses in exchange for $12 billion in Citigroup preferred stock and warrants.

"Wells' deeper and more considered due diligence has probably revealed fewer risky assets and a larger number of higher valued assets than originally thought," said Anant Sundaram, professor of finance at the Tuck School of Business at Dartmouth College in an e-mail to The Associated Press. "Although it is still too early to tell, this could presage a significant shift in market sentiment toward the value of companies such as Wachovia, and may suggest that there has been an overreaction in the downdraft that we saw in the past few weeks. It is a huge shot in the arm for market confidence. It is also a signal that market forces are capable of resolving some aspects of the crisis without undue congressional, and hence, taxpayer, intervention."

The fight for Wachovia comes at a turbulent time for banks and financial firms as they grapple with the ongoing credit crisis, which led to the recent bankruptcy of Lehman Brothers Holdings Inc. and the failure of Washington Mutual Inc.

It also comes at a time of unprecedented government intervention in the financial markets.

Wells Fargo may have decided to make a move as the passage of the government's financial bailout plan seemed imminent, said Donn Vickrey, co-founder and chief analyst at Gradient Analytics.

"At the time they made the decision, it looked a lot more likely that it would pass," he said. "You have the possibility of offloading these loans at a price that is higher than current values."

The failure of the government's proposed $700 billion bailout for financial institutions Monday cast doubt on whether Citigroup would be able to rid itself of some of Wachovia's bad debt.

The proposal would have allowed Citigroup to sell Wachovia's distressed mortgage-related assets to the government for a profit.

Congress approved a sweetened version of the bailout plan Friday and President Bush quickly signed it.

The core of the plan remains little changed from its inception — the Treasury Department would have $700 billion at its disposal to purchase bad mortage-related securities that are weighing down the balance sheets of institutions that hold them.

But in analyzing the deal, Wells Fargo assumed it would not sell any of the loans to the government.

"We couldn't assume that they would necessarily give us prices equal to what we think the values are," said Chairman Dick Kovacevich in an interview with The Associated Press.

Wells Fargo said it expects to take a $74 billion hit on Wachovia's $498 billion loan portfolio. That values the portfolio at 85 cents on the dollar. But the most troubled real estate loans, known as pick-a-pay — where borrowers got low introductory rates and were allowed to defer some interest payments until later years — are worth only an estimated 74 cents on the dollar, according to a fact sheet released by Wells Fargo.

The bank said it expects to incur the majority of credit costs in the next two years, and for the transaction to add meaningfully to earnings after that.

One factor that did play in to the deal was the clarification of a tax rule issued this week by the Internal Revenue Service.

On Tuesday, the IRS issued guidance on a rule allowing companies to offset losses from companies they acquire with tax breaks applied to their profits after the takeover.

"It was an element that gave us clarity on an area of uncertainty," Kovacevich said.

The potentially bigger tax offsets could boost the income of banks that buy other banks with losses from mortgage assets.

"We suspect that the new IRS guidance allowed Wells Fargo to place a higher bid for Wachovia today than it might have been willing to a few days ago," said Jeff Harte, an analyst at Sandler O'Neill & Partners, in a note issued Friday.

Essentially, Wells Fargo could use the $74 billion of tax losses on Wachovia's loan writedowns to offset its own income, which means the bank's taxes could be much lower for several years, said Deutsche Bank analyst Mike Mayo.

In connection with the agreement, Wachovia is issuing Wells Fargo preferred stock representing 39.9 percent of Wachovia's voting power. This increases the probability that the transaction gets consummated quickly and that Wells Fargo will receive a positive shareholder vote, Wells Fargo said.

Wells Fargo plans to issue up to $20 billion of stock, primarily common stock, to maintain a strong capital position.

Charlotte will be the headquarters for the combined company's East Coast retail and commercial and corporate banking business. St. Louis will remain the headquarters of Wachovia Securities.

The combined company will have total deposits of $713 billion and more than 6,500 locations — more than any other bank in the U.S.

While there is some overlap in states like California and Texas, the deal essentially opens up the entire East Coast to Wells Fargo, giving it a footprint in new markets such as New York and Miami.

In terms of total assets, a combined Wells Fargo-Wachovia would have $1.37 trillion in estimated pro forma assets as of the end of this year. As of June 30, Bank of America Corp. had $2.72 trillion in assets including those of Merrill Lynch & Co., which it is acquiring. Citigroup had $2.10 trillion and J.P. Morgan Chase & Co. had about $1.78 trillion, including WaMu's assets.

"This is the transaction that we thought should have been done and makes sense," Mayo said. "The biggest loser, in our view, is Citi, and we suspect that there is no breakup fee since their agreement with Wachovia was not finalized."

Citigroup has not turned a profit for three straight quarters, and lost a total of $17.4 billion in that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.

While Wells Fargo has logged three straight quarters of profit declines, the bank has been weathering one of the nation's worst credit crises much better than most of its competitors, in part because it had less exposure to the subprime mortgages whose failure undermined the financial sector.

Wachovia shares rose $2.30, or 58.8 percent, to close Friday at $6.21. Wells shares slipped 60 cents to $34.56, and Citigroup shares dropped $4.15, or 18.4 percent, to $18.35.

[footsies]

Wells won the battle but Citi is still going after damages. What damages could they possibly have?