180 Degrees - I did some thinking

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Originally Posted by Extra Stout

9%.

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That's delinquent, but regardless, I'll grant the number.

Bailout or not, those people are probably out on their asses, and can't get a loan, regardless of the market, right? Or with the bailout, is there going to be enough money for the cycle to start again? What safeguards are there going to be in place to prevent it?

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Originally Posted by 101A

Does the centralization of the credit markets to the Federal govt. not raise any red flags for you?

May prevent some economic disaster now, but at what cost? What can future (wise, prudent), lawmakers do with what is being proposed now, that we cannot imagine?

How does letting the people off the hook that did this, and leaving them in charge, help anything?

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This is not the complete centralization of credit markets. This is the absorbtion of losses.

You assume that the US government will not unwind its position as time goes on and wants to retain the position of holding onto this debt with no evidence to support this.

Letting these assholes stay where they are means not letting their institutions fail. It isn't "save the assholes" it is "save the institutions and investors".

If investors in the US didn't elect so many "rubber stamp" boards of directors that represent managment interests over shareholder interests, we probably wouldn't be in this mess.

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Originally Posted by RandomGuy

You assume that the US government will not unwind its position as time goes on and wants to retain the position of holding onto this debt with no evidence to support this.

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Please link the abundance of evidence that the U.S. govt. cedes power and control readily:

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Originally Posted by 101A

Does the centralization of the credit markets to the Federal govt. not raise any red flags for you?

May prevent some economic disaster now, but at what cost? What can future (wise, prudent), lawmakers do with what is being proposed now, that we cannot imagine?

How does letting the people off the hook that did this, and leaving them in charge, help anything?

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The centralization of the credit markets to central banks is the situation today. It already happened. Everyone else stopped trading.

The proposal at its heart is for the Treasury to buy subprime mortgage-backed securities so that banks can trust that the next bank is solvent, and begin trading with them again. This will get the money markets moving, keep short-term credit alive, and prevent economic meltdown.

Yes, the Democrats tried to throw the kitchen sink into the proposal -- credit cards, car loans, etc., in a huge "vote for me and keep all that shit you bought on credit for free" scam. But that is not the proposal on the table now.

I guess there are unintended long-term consequences that could suck. But I think the contraction of the U.S. economy by 20-30% at least, with no prospects of ever getting back to the quality of life that has existed from 1945 to present for the bottom half of the population, is vastly worse than whatever those unintended consequences might be.

It's not really fair that some of the people who executed this scam might escape punishment. Franklin Raines probably deserves a life sentence, but nothing will happen to him. However, I think most people probably aren't willing to move into a favela just to insure that Daddy Warbucks gets what's coming to him. And what's coming to him? That he has to cut back to just one Aston Martin and sell his place in the Hamptons?

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Originally Posted by RandomGuy

If investors in the US didn't elect so many "rubber stamp" boards of directors that represent managment interests over shareholder interests, we probably wouldn't be in this mess.

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I've never voted for an incumbent board member (or one "recommended" in a prospectus).

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Originally Posted by 101A

Please link the abundance of evidence that the U.S. govt. cedes power and control readily:

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Ah... the cynic's response.

It is not my burden of proof.

You implied that the government would keep these assets and attempt to remain "in the credit business" after winding down the losses.

Your burden of proof.

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Originally Posted by Extra Stout

The centralization of the credit markets to central banks is the situation today. It already happened. Everyone else stopped trading.

The proposal at its heart is for the Treasury to buy subprime mortgage-backed securities so that banks can trust that the next bank is solvent, and begin trading with them again. This will get the money markets moving, keep short-term credit alive, and prevent economic meltdown.

Yes, the Democrats tried to throw the kitchen sink into the proposal -- credit cards, car loans, etc., in a huge "vote for me and keep all that shit you bought on credit for free" scam. But that is not the proposal on the table now.

I guess there are unintended long-term consequences that could suck. But I think the contraction of the U.S. economy by 20-30% at least, with no prospects of ever getting back to the quality of life that has existed from 1945 to present for the bottom half of the population, is vastly worse than whatever those unintended consequences might be.

It's not really fair that some of the people who executed this scam might escape punishment. Franklin Raines probably deserves a life sentence, but nothing will happen to him. However, I think most people probably aren't willing to move into a favela just to insure that Daddy Warbucks gets what's coming to him. And what's coming to him? That he has to cut back to just one Aston Martin and sell his place in the Hamptons?

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Now THAT'S a reasoned argument.

Thanks.

I still say fuck 'em.

I've formed a tribe; I'm ready for the coming anarchy.

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Originally Posted by 101A

I've never voted for an incumbent board member (or one "recommended" in a prospectus).

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You are part of a vanishingly small minority.

Most BOD's are elected, if memory serves, with 94% of shareholders approval.

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Originally Posted by RandomGuy

Ah... the cynic's response.

It is not my burden of proof.

You implied that the government would keep these assets and attempt to remain "in the credit business" after winding down the losses.

Your burden of proof.

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http://www.heritage.org/research/fea...ending-per.gif


That's spending per household, by the Federal Government.

Your turn.

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Originally Posted by 101A

That's delinquent, but regardless, I'll grant the number.

Bailout or not, those people are probably out on their asses, and can't get a loan, regardless of the market, right? Or with the bailout, is there going to be enough money for the cycle to start again? What safeguards are there going to be in place to prevent it?

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You're right. Their out on their asses regardless. The cycle can't start again because the lending criteria is so tight. These people at best can jump back in the game after 8 years or 10 if they filed bankruptcy. With that said I figure the number to more like 15 years from now because I know first hand that foreclosures and bankruptcies typically follow someone well past the statute of limitations.

Each time a bad debt is sold to a new debt collector it appears like a new debt that wouldn't expire until 5-8 years from that date. That cycle can continue on for years if not decades until the debt is sold so cheap that no one wants it and they write it off for good.

If you're smart about your credit and do your homework to have some of that stuff removed you can be back in as little as 7 years. Almost no one knows how to keep tabs on their credit and what their rights are. This is why you see people with repos, bankruptcies and chargeoffs that never go away. 40 years old with bad debt from when they were 19.

A foreclosure is a foreclosure it won't go away with a bailout.


but were talking about bailing out short term lending immeadiately not the consumer.

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Originally Posted by 101A

That's delinquent, but regardless, I'll grant the number.

Bailout or not, those people are probably out on their asses, and can't get a loan, regardless of the market, right? Or with the bailout, is there going to be enough money for the cycle to start again? What safeguards are there going to be in place to prevent it?

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The point of the "bailout" is not to restart the housing bubble. It is to keep the financial system from collapsing.

The way the rules work, when the value of these subprime MBS's is written down, the value of other assets like prime MBS's also must be written down. There is a ton of uncertainty on just what these securities are worth, and that introduces a huge risk premium. That has to be reflected in the asset value. Since nobody knows what the bottom of the housing market is, the risk premium is basically open-market.

To sum it up, the way the system works, the losses incurred by the banks are vastly larger than actual money that was lent out to subprime borrowers. Just stopping subprime borrowing does not begin to solve the problem. If it did, the problem would be solved already.

As far as safeguards to prevent it... as long as there are politicans who are trying to find creative ways to hand out money to their constituents in exchange for votes, there will always be a risk of something like this happening again.

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Originally Posted by Extra Stout

The point of the "bailout" is not to restart the housing bubble. It is to keep the financial system from collapsing.

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With that said the financial system can't gain significant ground by simply stopping the bleeding.

Even if they come up with some kind of reasonable plan the long term is still catastrophic failure because not only have they cut out of the meat of this countries lending the average consumer is out of the game for half a decade if not a full 10 years.

Despite popular belief the well off or close to rich can't maintain with out median income spenders. It drives so much.


Edit: are you saying their trading 700 bil for a slow collapse rather than a fast one?

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Originally Posted by Extra Stout

My understanding is that if nothing is done, within two weeks all short-term and revolving credit will shut down. So for you individually, at first it means your credit and debit cards will stop working, and you won't be able to write checks. You'll have to pay cash for everything. That is, if you can get your money out. Within a few weeks, Bank of America, Citi, and Chase will declare bankruptcy.

Oh, and even if you have cash, it will be hard finding a place to use it. Most businesses float their operating expenses for 30 to 60 days on credit because that's how long it takes to process the invoices. When that stops, their whole business model stops. So basically all economic activity will stop, at least for a while. Your company won't be able to make payroll, so don't expect to get paid for a while. Don't expect to go to H-E-B for food, because they'll be closed. Hopefully you know a farmer and can pay cash, or you have a bunker somewhere where you've stored canned goods.

You'll also need firearms, because there will be hungry and desperate people ready to use violence to get some food or some money.

Be sure to avoid heavily populated areas in the cities where the food riots will be happening. Really, it would be better to flee the cities. Stock up on gas now, because once credit shuts down, the gas stations will be closed too.

Conditions will be kind of like Iraq circa 2005 for a while, but really, it's worth it to let the market work itself out. Nations have to be allowed to fail just like businesses.

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Sounds like someone is heavily invested in financials.

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Originally Posted by BacktoBasics

With that said the financial system can't gain significant ground by simply stopping the bleeding.

Even if they come up with some kind of reasonable plan the long term is still catastrophic failure because not only have they cut out of the meat of this countries lending the average consumer is out of the game for half a decade if not a full 10 years.

Despite popular belief the well off or close to rich can't maintain with out median income spenders. It drives so much.

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Oh, no doubt even in the best-case scenario the economy will be in the tank for 10 years or so. Don't get me wrong. There is no magic pixie dust that will prevent a long recession. We're in for it.

Right now, we're just trying not to collapse into a third-world country.

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Originally Posted by Extra Stout

The centralization of the credit markets to central banks is the situation today. It already happened. Everyone else stopped trading.

The proposal at its heart is for the Treasury to buy subprime mortgage-backed securities so that banks can trust that the next bank is solvent, and begin trading with them again. This will get the money markets moving, keep short-term credit alive, and prevent economic meltdown.

Yes, the Democrats tried to throw the kitchen sink into the proposal -- credit cards, car loans, etc., in a huge "vote for me and keep all that shit you bought on credit for free" scam. But that is not the proposal on the table now.

I guess there are unintended long-term consequences that could suck. But I think the contraction of the U.S. economy by 20-30% at least, with no prospects of ever getting back to the quality of life that has existed from 1945 to present for the bottom half of the population, is vastly worse than whatever those unintended consequences might be.

It's not really fair that some of the people who executed this scam might escape punishment. Franklin Raines probably deserves a life sentence, but nothing will happen to him. However, I think most people probably aren't willing to move into a favela just to insure that Daddy Warbucks gets what's coming to him. And what's coming to him? That he has to cut back to just one Aston Martin and sell his place in the Hamptons?

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Good argument. Though I did contact my rep and tell him that if they pass a bill then it needs to include a clause holding all the CEOs of the banks that put us in this position accountable with prison time.

I doubt anything will come of it, but I encourage others to voice the same to their reps. A bailout will get passed whether we like it or not.

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Originally Posted by whottt

Sounds like someone is heavily invested in financials.

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Well, my 401(k) probably is. It lost $5,000 yesterday. My spare cash is going straight to GOLD.

Anyway, I would guess 95% of the country has absolutely no clue what money markets even are, much less what they do or what happens if they dry up.

Even if that bailout passes the same thing is eventually going to happen again.

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Originally Posted by BacktoBasics

With that said the financial system can't gain significant ground by simply stopping the bleeding.

Even if they come up with some kind of reasonable plan the long term is still catastrophic failure because not only have they cut out of the meat of this countries lending the average consumer is out of the game for half a decade if not a full 10 years.

Despite popular belief the well off or close to rich can't maintain with out median income spenders. It drives so much.


Edit: are you saying their trading 700 bil for a slow collapse rather than a fast one?

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Not to mention we'll be going through the same thing next year when commercial property loans tank. We're just seeing stage 1 right now with residential mortgages. Expect another 1-2 trillion for the commercial lending problem as well (that we'll all be asked to cover for the good of the country again :rolleyes ).

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Originally Posted by Aggie Hoopsfan

Not to mention we'll be going through the same thing next year when commercial property loans tank. We're just seeing stage 1 right now with residential mortgages. Expect another 1-2 trillion for the commercial lending problem as well (that we'll all be asked to cover for the good of the country again :rolleyes ).

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On a side note I had to take a two and half hour drive through a bunch of small towns on my way the Hebbronville. I can't say I was shocked but every city I drove through Kingsville, Alice, Benavides, San Diego and Orange Grove looked like ghost towns. Commercial buildings like gas stations, restaurants, clothing stores and just about any kind of none residential building you can think of was boarded up and closed down. We're talking about towns from 2k to 20k residents. Alice and Kingsville didn't look as bad as the smaller towns which seemed to be on the verge of not existing anymore. Hell Corpus is looking a bit sparse these days.

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Originally Posted by Aggie Hoopsfan

Good argument. Though I did contact my rep and tell him that if they pass a bill then it needs to include a clause holding all the CEOs of the banks that put us in this position accountable with prison time.

I doubt anything will come of it, but I encourage others to voice the same to their reps. A bailout will get passed whether we like it or not.

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Actually, I am thinking that is the one thing that can get the public at large to support a bailout. People are pissed and want blood.

Congress realizes voting for the bill is a political liability hence the attempted deal yesterday of basically getting people who were not in tight races to vote yes.

You give the public a few heads on a platter and they likely will come around.

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Originally Posted by 101A

[graph showing increase in federal spending omitted]

That's spending per household, by the Federal Government.

Your turn.

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That is insufficient to prove your assertion.

You would need quotes from someone stating that the Government should be owning, widely lending, and selling mortgages in perpetuity, and that the Federal Government should set up a nationalized bank to do so, and that it is their intention as well as some consensus to carry through with this.

Your graph is sufficient proof of a reasonable possibility of increases in Federal Spending in the future, however. I will fully acknowledge this as reasonable possibility. Unfortunately for your assertion it is mostly irrelevent.

You could assert that it is part of an unconscious "creep", but again would have to point out the mechanism that would allow for continued ownership and purchases far into the future. The bailout does not do that.

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Originally Posted by Aggie Hoopsfan

Good argument. Though I did contact my rep and tell him that if they pass a bill then it needs to include a clause holding all the CEOs of the banks that put us in this position accountable with prison time.

I doubt anything will come of it, but I encourage others to voice the same to their reps. A bailout will get passed whether we like it or not.

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Originally Posted by Ocotillo

Actually, I am thinking that is the one thing that can get the public at large to support a bailout. People are pissed and want blood.

Congress realizes voting for the bill is a political liability hence the attempted deal yesterday of basically getting people who were not in tight races to vote yes.

You give the public a few heads on a platter and they likely will come around.

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How can Congress sentence the CEOs to prison? That's the job of the Judicial branch.

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Originally Posted by RandomGuy

That is insufficient to prove your assertion.

You would need quotes from someone stating that the Government should be owning, widely lending, and selling mortgages in perpetuity, and that the Federal Government should set up a nationalized bank to do so, and that it is their intention as well as some consensus to carry through with this.

Your graph is sufficient proof of a reasonable possibility of increases in Federal Spending in the future, however. I will fully acknowledge this as reasonable possibility. Unfortunately for your assertion it is mostly irrelevent.

You could assert that it is part of an unconscious "creep", but again would have to point out the mechanism that would allow for continued ownership and purchases far into the future. The bailout does not do that.

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My premise is the govt. usurps an grabs more and more power; and seldom, if ever, relinquishes it. That was just the first graph I found, a reasonably compelling one, that supports that. $$$$ = Power, and the govt, spends more and more of it.

Do you see any of the Patriot Act provisions being removed? What about Federal programs that are more and more inefficient, that have annual cost overruns, and spending projections increased, only to have those projections increased again the following year. What about "No Child Left Behind" - which expands more and more requiring more accountability (oversight) in Washington for LOCAL schools. What about the U.S. Supreme Court Telling The Florida SC how ITS OWN CONSTITUTION should be interpreted!!! You sight for me any instance that the U.S. federal government has ceded power back after it grabbed it; I can go on ALL day showing how it takes it.

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Originally Posted by Spurminator

How can Congress sentence the CEOs to prison? That's the job of the Judicial branch.

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Without getting into too much civics class (Federal prosecutors are in the executive branch); the problem is, probably, that the people in question didn't violate any existing laws.

Oh, hell, while we're giving all this new power to the govt., let's throw in retroactive legalization privileges. That way, they can rewrite the law books, and prosecute people for all kinds of things we don't like now that they did in the past. That can't possibly be a bad idea, huh RG?

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Originally Posted by Extra Stout

Yes, the Democrats tried to throw the kitchen sink into the proposal -- credit cards, car loans, etc., in a huge "vote for me and keep all that shit you bought on credit for free" scam. But that is not the proposal on the table now.

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For free? I thought the proposal was to return (some) bankruptcy laws to the point where all the debt could be dealt fairly by the bankruptcy courts. It doesn't mean you can anything for free. It means that creditors should have prudence because you won't have the guarantee of keeping the debtor in debt forever under legalized usury.

Bankruptcy should mean you get to start over with a clean slate. You start over with shitty credit and few possessions, but without the debt burden. It's hard to start over though when you are still in debt over your head.