700 Billion Bailout Plan Fails

[kengs333]

Look were not going into a depression. This is the economy fixing itself because people livining on 30 thousands a year were getting loans on 170 thousand dollar homes. DER? If you followed the Financial market over the last few days.. Yeah we had a fallout but we also had the biggest gain ever in a single day. Here is a little secret Movement of the Idex is a good thing. It provides opportunity to Buy and when times are good an opportunity to sell high. Its called the market fixing itself. So top panicing. The politicians are doing the only thing politicians know how to do. Throw money at a problem and see if it fixes itself.

Isn't a depression part of the process of an economy "fixing itself"?

This, then, is the meaning of the depression phase of the business cycle. Note that it is a phase that comes out of, and inevitably comes out of, the preceding expansionary boom. It is the preceding inflation that makes the depression phase necessary. We can see, for example, that the depression is the process by which the market economy adjusts, throws off the excesses and distortions of the previous inflationary boom, and reestablishes a sound economic condition. The depression is the unpleasant but necessary reaction to the distortions and excesses of the previous boom.

http://www.mises.org/tradcycl/econdepr.asp

The fact that bush_cheney2004 thinks that yours was a "good post" is an indication that you likely have misinterpreted the situation.

Edited October 1, 2008 by kengs333

[kengs333]

Injecting another 700 billion into the economy backed by nothing is asking for trouble. The basic economic problem was credit expansion in the first place. So the solution is to extend more credit to the financial sector? A recipe for future disaster.

Yes.

A bailout is a temporary patch in an economic storm that will not last the storm. this patch will not make the storm go away and make everything better. The ship must find harbor in dry dock and some real repairs need to be made.

Yes.

[bush_cheney2004]

....The fact that bush_cheney2004 thinks that yours was a "good post" is an indication that you don't know what you're talking about.

And this response is proof that you know far less. Please take your seat in the peanut gallery and enjoy your popcorn while the big dogs play.

[kengs333]

And this response is proof that you know far less. Please take your seat in the peanut gallery and enjoy your popcorn while the big dogs play.

okay, if you say so...

[stevoh]

Ok, so they are presenting a "slightly modified" bailout plan today that many are anticipating will pass.

However, I don't see that the reasons for denying its passage have changed, ie, the voters are still mostly against this bill, and that was the reason many of the house republicans say they voted against the bill.

Why will this one pass when the voters opinion of the bailout hasn't changed?

[Riverwind]

Why will this one pass when the voters opinion of the bailout hasn't changed?

Because many of the nay sayers probably thought they could vote against it without actually stopping the bill. The dynamics have changed. The stock market plunge was eye opening and they only need to find a few that are willing to change their mind because 'circumstances have changed' in 3 days. Edited October 1, 2008 by Riverwind

[stevoh]

Because many of the nay sayers probably thought they could vote against it without actually stopping the bill. The dynamics have changed. The stock market plunge was eye opening and they only need to find a few that are willing to change their mind because 'circumstances have changed' in 3 days.

Ah, ok. And I also read that those same house republicans are now saying that the phone calls to their various offices are now more in favour of the bailout than against. It might work out well for them, they look like they stood up for their electorate on the first bill, and now are reflecting changing attitudes on their second, so they have probably achieved their personal goal, increasing the odds of re-election (for themselves, not McCain).

And that is the problem. It seems like those same house republicans voted against this bill to save their own skins, where as a vote FOR the bill would have potentially saved McCain from his current poll slide. They chose their own political careers over that of the republican party, as a whole.

McCain took a huge chance with his campaign cancellation and vocal support of the last bill. It actually had me worried, if it had passed, then his main flaw (in voters minds), the economy, would have seemed like more of a strength. However, his name is now associated with a failed bill, and even if this one passes, and McCain takes credit for it (which is more than likely), the effect of the bill passing will now have a muted effect on his polling results, and his apparent command of the economy.

And further damage to his campaign effort comes from being associated with George Bush on this decision, but against his own party. It makes it seem like he is no more of an effective or respected leader within the republican party than Bush. When both the sitting president and the presidential nominee for the same party fail to convince the majority of their OWN party to vote a certain way, there is a major problem with leadership.

[bush_cheney2004]

...Why will this one pass when the voters opinion of the bailout hasn't changed?

Well, it hasn't passed yet. There were many opponents on both sides of the aisle (e.g. the Congresional Black Caucus wasn't impressed by Obama's pleas either). The longer this drags out, the less influence panicked process can have.

Save the banks...turf Barney Franks!

[kengs333]

Ok, so they are presenting a "slightly modified" bailout plan today that many are anticipating will pass.

However, I don't see that the reasons for denying its passage have changed, ie, the voters are still mostly against this bill, and that was the reason many of the house republicans say they voted against the bill.

Why will this one pass when the voters opinion of the bailout hasn't changed?

I'd like to know how these people are doing investment-wise. The consequences of not passing the bailout could certainly have been anticipated. And then the next day everybody decides to take a holiday...

[moderateamericain]

No were in a recession. Not a depression. There is a difference Kengs

[msj]

Looks like the bill has passed in the Senate.

But its a funny bill: attached to another bill which includes legislation about a tax break for makers of arrows for kids.

[August1991]

Looks like the bill has passed in the Senate.

But its a funny bill: attached to another bill which includes legislation about a tax break for makers of arrows for kids.

And Puerto Rican rum:

Of course throwing $700 billion to more than a Trillion dollars at Wall Street is a dumb idea to begin with. Giving money to greedy idiots that caused the problem to begin with don't need more money, they need to go bankrupt.

The revised Senate bailout bill that will be voted on today contains some very strange additions. Wool Research, Wooden Arrows designed for use by children, Race Tracks, Virgin Island and Puerto Rican Rum to name a few.

New Tax earmarks in Bailout bill

- Film and TV Productions (Section 502)

- Wooden Arrows designed for use by children (Section 503)

- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Section 504)

Tax earmark “extenders” in the bailout bill

- Virgin Island and Puerto Rican Rum (Section 308)

Link

Only one third of the Senators are up for re-election. The House may have another view of this.

-----

Then again, here's the fear:

It’s not enough to say that markets could freeze up, loans could become impossible to get and the economy could slide into its worst downturn since the Great Depression. For now, the crisis has had little effect on most Americans, beyond their 401(k) statements. So to them, the specter of a depression can sound alarmist, and the $700 billion bill that Congress voted down this week can seem like a bailout for rich scoundrels.

Mr. Bernanke and his fellow worriers need to connect the dots. They need to use their bully pulpits to teach a little lesson on the economics of a credit crisis — how A can lead to B, B to C and C to Depression.

Let’s give it a shot, then.

NYT Edited October 2, 2008 by August1991

[Pliny]

Ok, so they are presenting a "slightly modified" bailout plan today that many are anticipating will pass.

However, I don't see that the reasons for denying its passage have changed, ie, the voters are still mostly against this bill, and that was the reason many of the house republicans say they voted against the bill.

Why will this one pass when the voters opinion of the bailout hasn't changed?

This was a good post, Steve. Your second one sounded, in my opinion very Canadian politically.

In this post, you said that "voters" were "still" mostly against this bill which was the reason many of the house republicans voted against it. So because the Democrats voted mostly in favor (140 to 95) does that mean they do not vote to represent their constituents?

As a Canadian you probably thought they should follow the leader and vote the party line.

The Senate had no problem passing the amended Bill. They are all older and have too much at stake on Wall Street to vote no. They keep on making the statement it is necessary to pass the Bill for the good of the country.

It's the only thing that will save the country.

Chris Dodd chaired the committee that worked on the newly amended Bill and he looked very smug after the vote in the Senate. I guess he isn't representing most of the voters in his constituency who are "still" mostly against it. Why are they working so hard to push this through when they know it isn't what the poeple want?

Dianne Feinstein, prominent Democrat from California said that she had 91,000 calls to her office regarding the bailout and 80 some thousand of those calls were against a bailout.

Stevoh wrote:

They chose their own political careers over that of the republican party, as a whole.

They chose to vote with their constituents and not the party. Of course, that would affect their political career.

In Canada it would be odd that they didn't vote to favor the party and that is a problem with leadership, right Steve?

To answer your question about why this Bill will pass even though as you state, the voters opinion hasn't changed, it is because politicians are all money men with investments on wall street. They do not wish to see their investments tank. They are not Economists, although there are many financial advisors and economic experts who will, if they have a voice, advise passage of the bill, once again, because of their own, or their clients', investment portfolio. It looks good on the books.

If, and there is a very slim chance because it is America, the politicians will vote with their constituents wishes (Canada would have a definite consensus on passing the Bill), and vote the Bill down, then there will be a collapse of the financial market. This will have global consequences but it is now or later. Looks like it will be later. Perhaps the Great BHO will steer America through this depression. He is probably looking for a spot to build a dam as we speak. It would be better to take the medicine sooner than later, in my opinion.

Edited October 2, 2008 by Pliny

[Pliny]

Then again, here's the fear:NYT

That NYT article forgot to mention that the government in 1929 did all they could to stop the fall just as they are doing today. All their meddling then didn't help and it won't help today. Because they have financial interests in keeping the market from failing and they are the only ones that can intervene, they will, they have the power to protect their interests, but they like to confuse their interests as being everybody's interests. They don't seem to look too far into the future.

When was the AIG bailout? Seems like such a short while ago. It was necessary to shore up confidence in the market though, most certainly. Fight fire with fire - too much credit expansion - throw on some more.

[August1991]

That NYT article forgot to mention that the government in 1929 did all they could to stop the fall just as they are doing today.

On the contrary, the Fed in 1930 did the exact opposite of what the Fed in 2008 is doing. In 1930, the Fed followed a "sound money" policy which lead to a deep and prolonged depression.

The situation is different now because it concerns teh housing market rather than equity markets.

Without the bailout (and bailout is the wrong term - teh Treasury wants to set up a government agency that will buy up this crappy mortgage paper and then hold on to it until, maybe, it's worth something), the banking sector might be able to cope with this crappy paper on its own. But there's also a risk that while it copes with the problem, the rest of the economy will go into a recession.

In the judgment of many, it's not worth the risk when there's a solution at hand. Hence the argument for this $700 billion "line of credit".

----

You know the old story. Kid away from home at college fro the first time. Runs up a big credit card debt. Mom & Dad step in and help the kid out. Knowing this, the kid runs up another debt. Once again, Mom & Dad step in and help the kid. The third time, Dad objects to writing the cheque but Mom insists. What happens if they let the kid "cope on his own"? He might learn how to manage his cheque book, or he might drop out, never finish his college education and become a homeless person - all because his Dad refused to help out at a critical moment.

This will have global consequences but it is now or later. Looks like it will be later. Perhaps the Great BHO will steer America through this depression. He is probably looking for a spot to build a dam as we speak. It would be better to take the medicine sooner than later, in my opinion.

I had the same thought today. The next President may be receiving a poisoned chalice. If things go very bad, it will likely take about six months or more before anyone really notices anything in their daily life.

At the same time, I realized that Americans are going to be voting in a month and their choice now is not obvious at all. It is possible that this single issue will far over shadow all others.

Edited October 2, 2008 by August1991

[Topaz]

Well, I was listening to the two guys from Texas and they really don't like what's happening in DC. What I didn't realize was GW had already gotten 600BIL not too long ago and this package has an extra 100BIL!!!! So its 800BIL!! The war is costing 1Bil a month, dear God, these people will always be in debt and I really don't know how they will get out of it unless they sell themselves to China! I also heard that Cheney took all his investments out of the country before this all started and I wonder how many other politicians really lost any money on this??

[PoliticalCitizen]

You know the old story. Kid away from home at college fro the first time. Runs up a big credit card debt. Mom & Dad step in and help the kid out. Knowing this, the kid runs up another debt. Once again, Mom & Dad step in and help the kid. The third time, Dad objects to writing the cheque but Mom insists. What happens if they let the kid "cope on his own"? He might learn how to manage his cheque book, or he might drop out, never finish his college education and become a homeless person - all because his Dad refused to help out at a critical moment.

Wow...

You sound so sympathetic towards the amoral egoists who got rich by robbing the poor and destroying the country's economy...

[Liam]

I can't go back to read all the posts here (one of us has to work ), but my thoughts on the "bailout":

1. The Administration screwed up by putting out there what appeared to be a blatant power grab for control of the economy (no oversight, no judicial review EVER of Treasury's actions, etc.). Sorry, but when the boat is sinking, you get everyone to bail, you do not give the bursar total control.

2. Everyone, from Congress to the Administration to the Media doomed the plan by continually referring to it as a bailout, which begs the question "of whom?" and the simple talk radio answer became "Wall Street billionaires" which was not accurate. If the issue was framed in terms of stabilizing the credit market and maintaining liquidity so as to not destry the economic interests of the middle class which needs the credit markets to remain stable, which is what it was supposed to do, it would have sailed through.

3. Pelosi miscalculated by trusting Boehner to deliver the votes. She and Hoyer should have only allowed the last bill to hit the floor of the House if they had enough votes and a comfortable margin to work with.

4. Pelosi's speech was unwise but, in historic terms, was not nearly as partisan and scathing as the permanent victims of the GOP establishment claim. She ripped Bush apart and praised the Dems. Her big error was not thianking the House GOP for their work.

5. Anyone who wants to damage the interests of the country based on hurt feelings should not be a member of Congress. Plain and simple.

6. Monday's market turmoil (down $1.3 trillion) was just a sideshow to the real problem: the seizing of credit markets. If that happens, Monday will look like a picnic.

7. I am very disappointed with the Senate bill. This is our economic Pearl Harbor -- the Senate ought to be able to act swiftly and cleanly and directly on the merits of government's proposed response without all the geegaws and add-ons (darts? PR rum?). More pork and special interest influence and vote peddling. Disgusting.

8. The House had better pass something which addresses the problems. Increases to FDIC is okay, I'm not so sure the ending of the marked-to-market rule is wise. It's brushing the dust under the carpet.

(added late: 9. I would support a measure that would provide an ownership stake for the taxpayers in order to help recoup the costs and would also like to see strict regulatory limits on the mortgage industry and on the resale and speculation associated with loans as investment vehicles. I would also support aggressive legislation which allows for "clawing back" of platinum parachutes -- they stopped being mere gold a decade ago -- when a CEO retires and his failed company runs to Washington for a federal handout.)

Edited October 2, 2008 by Liam

[Shady]

7. I am very disappointed with the Senate bill. This is our economic Pearl Harbor -- the Senate ought to be able to act swiftly and cleanly and directly on the merits of government's proposed response without all the geegaws and add-ons (darts? PR rum?). More pork and special interest influence and vote peddling. Disgusting.

I agree. And don't forget about the wooden arrows too.

[August1991]

Wow...

You sound so sympathetic towards the amoral egoists who got rich by robbing the poor and destroying the country's economy...

I gather you don't have kids or have never sent one to college.

The US government offered its guarantee on mortgage paper. The financial system depends on trust. A country's economy relies on its financial system. Mortgage paper (or its derivatives) represent about 50% of the US financial system.

----

In many (impoverished) societies, it is better to ensure that one person doesn't get $10 more even if it means that society loses $1000. Or, IOW, it is bad if my neighbour gets $10 more than me and I'm prepared to sacrifice $1000 to ensure my neighbour doesn't get this unfair advantage.

IOW, PoliticalCitizen, you are describing the politics of envy.

Historically, the US is not a society of envy. Americans take a practical view of such moral questions. In the long run, the politics of envy impoverishes a society.

[PoliticalCitizen]

I gather you don't have kids or have never sent one to college.

The US government offered its guarantee on mortgage paper. The financial system depends on trust. A country's economy relies on its financial system. Mortgage paper (or its derivatives) represent about 50% of the US financial system.

----

In many (impoverished) societies, it is better to ensure that one person doesn't get $10 more even if it means that society loses $1000. Or, IOW, it is bad if my neighbour gets $10 more than me and I'm prepared to sacrifice $1000 to ensure my neighbour doesn't get this unfair advantage.

IOW, PoliticalCitizen, you are describing the politics of envy.

Historically, the US is not a society of envy. Americans take a practical view of such moral questions. In the long run, the politics of envy impoverishes a society.

Yeah, sure, tell me about compassion...

The greedy fat bastrads got a free ride while a 90-year old woman had to shoot herself to get any kind of help...

http://www.cnn.com/2008/US/10/03/eviction.suicide.attempt/

[PoliticalCitizen]

Well it looks like the markets just had their first major bounce.

But some say it's just a bit of sunshine before the tornado... and there will be a crash.