What really happens if we DONT do the bailout

Seriously.... You are telling me that provate investment banks have become so entrenched in our economy that we cannot survive without them?

As I see it, the fed prolonged the inevitable by artificially propping up the market... when they did this they made the problem worse... Now 700B will somehow fix it...

We are fighting in Iraq (fail)
We are fighting in Afghanistan (wheres Osama? Fail!)
We let PRK get nukes (while we fought in Iraq Fail!)
Pakistan fired on NATO aircraft today (yea, where Osama supposedly is, Fail)
Hurricane Katrina killed hundreds (fail)

Why not give this administration 700 billion in tax money to invest... they have such a great track record.

If you don't do the bailout, the Bush legacy will be in quite the state. Either way, his legacy is screwed, shafted...
The execs won't get the amount of money they expected post bail out.

Canuck wrote:If you don't do the bailout, the Bush legacy will be in quite the state. Either way, his legacy is screwed, shafted...
The execs won't get the amount of money they expected post bail out.

Whats worse, A guy with a net worth of 100 million losing 75 million or a guy with a net worth of 100,000 losing 75,000?

With the level of greed, do you think they will see it that way?

Oh, and if they don't do the bailout, the taxpayers $700 Billion doesn't get spent...

I think one can speculate what would happen if we don't do the bailout but it is just that ... speculation. I think the economy could still crash WITH the bailout. Who knows for sure.

I'm opposed.... I think it's a stupid idea... Canuck has the right idea... it's wether or not we want to spend $700 billion to crassh the market or if we just want to let it crash by itself.

Capitalism isn't about bailouts...

I think the initial problem is people are using the wrong terms.. this isn't a bailout. No one is getting free money here to keep on going like they are.

Look at the AIG deal, the gov't got better terms than Warren Buffet did when he dropped $5B on Goldman Sachs. Now, if you can get a deal for the American taxpayers on better terms than arguably the most brilliant investor of modern time, you're doing something right. It's also not what I'd consider a bail out for the person on the other end. Most people use the terms "Loan shark" when talking about the AIG deal... and we, the taxpayers, are the loan shark.

But.. I digress.. IMO, if this didn't go through, you'd see the financial institutions across America, and then the world start to seize up. A large part of how banks work is that they loan each other money, well, right now, they aren't doing this because everyone is worried the other one is going to go under. Without this deal that would continue to get worse. Then no one would loan money to businesses on any reasonable terms, so small businesses, then large businesses would stop growing. Houses would continue to sit empty because no one could get loans unless you put down 30-40-50%.

Now, that's an extreme view, but it's also very possible, and it still could happen. Only time will tell.

Just the news of this deal sent the markets up over 700 pts in two days last week. Today they are reporting that a deal is set in theory, and the market is up almost 300 pts. That's ridiculous movement for a single day. Without these loans we saw the beginning of what would have happened. The market went down 800 pts in a few days, it would have gotten worse if nothing was done.

When Charlie Gasparino broke the news that this RTC like deal was in the works the market shot up. I think a huge part of what's going on now, and should continue, is that investors and Wall Street see the gov't is wanting to help now. And that is the key.. people want to see action being taken. This might not be the best bill or even idea, we'll won't know for years about that. But something has to be done IMO.

The markets could bounce back with no action, and they could fail with this action. IMO, it's better to try and fail then to not try at all.

One of the more interesting parts is that if the gov't buys these assets at the right value (huge if) the taxpayers could make a pretty penny on this.

I still feel we should let natural capitalism progress. No bailouts. Let the banks fail. Let the system fail. It will come out bigger, better, and stronger.

cardinal5150 wrote:One of the more interesting parts is that if the gov't buys these assets at the right value (huge if) the taxpayers could make a pretty penny on this.

Why do you think this would be? Are you saying 10 years of higher taxes followed by 3 with little to no taxes? How in the heck will the individual taxpayer ever see one penny of this "money on paper"?

cardinal5150 wrote:I think the initial problem is people are using the wrong terms.. this isn't a bailout. No one is getting free money here to keep on going like they are.

I dont see the legislation making the necessary changes that will require any business to not run further into the ground.... Capitalism cannot be held in check by corporate altruism.

Look at the AIG deal, the gov't got better terms than Warren Buffet did when he dropped $5B on Goldman Sachs. Now, if you can get a deal for the American taxpayers on better terms than arguably the most brilliant investor of modern time, you're doing something right. It's also not what I'd consider a bail out for the person on the other end. Most people use the terms "Loan shark" when talking about the AIG deal... and we, the taxpayers, are the loan shark.

We the taxpayers? Seriously... all we are is the bank. For all intents and purposes, this tax money is going to be gone gone gone...

But.. I digress.. IMO, if this didn't go through, you'd see the financial institutions across America, and then the world start to seize up. A large part of how banks work is that they loan each other money, well, right now, they aren't doing this because everyone is worried the other one is going to go under. Without this deal that would continue to get worse. Then no one would loan money to businesses on any reasonable terms, so small businesses, then large businesses would stop growing. Houses would continue to sit empty because no one could get loans unless you put down 30-40-50%.

Wouldn't they also stop making money? Sooner or later someone would realize that they will eventually burn through the cash they are hoarding and given the barren landscape, the end would be near.

Now, that's an extreme view, but it's also very possible, and it still could happen. Only time will tell.

Just the news of this deal sent the markets up over 700 pts in two days last week. Today they are reporting that a deal is set in theory, and the market is up almost 300 pts. That's ridiculous movement for a single day. Without these loans we saw the beginning of what would have happened. The market went down 800 pts in a few days, it would have gotten worse if nothing was done.

When Charlie Gasparino broke the news that this RTC like deal was in the works the market shot up. I think a huge part of what's going on now, and should continue, is that investors and Wall Street see the gov't is wanting to help now. And that is the key.. people want to see action being taken. This might not be the best bill or even idea, we'll won't know for years about that. But something has to be done IMO.

The markets could bounce back with no action, and they could fail with this action. IMO, it's better to try and fail then to not try at all.

The market is up as high as it is because of irrational exuberance and greed. The Market has needed a correction for 3+ years.

One of the more interesting parts is that if the gov't buys these assets at the right value (huge if) the taxpayers could make a pretty penny on this.

The government will make the pretty penny, not the taxpayers. We are just the unvested venture capitalists.

meta4 wrote:

cardinal5150 wrote:One of the more interesting parts is that if the gov't buys these assets at the right value (huge if) the taxpayers could make a pretty penny on this.

Why do you think this would be? Are you saying 10 years of higher taxes followed by 3 with little to no taxes? How in the heck will the individual taxpayer ever see one penny of this "money on paper"?

ASSuming this works out like many believe it could at the right price.. I don't see us paying higher taxes much, if at all, in the short term.... depending who is elected of course. I'd imagine we'll see a cut in gov't spending first, then when money starts coming in I could see gov't picking up spending and depending who's elected either implementing all these nifty gov't programs we apparently need (BO) or lowering taxes (McCain).

But that's more of a hypothesis based on what I've been hearing from the experts.

pez wrote:
I dont see the legislation making the necessary changes that will require any business to not run further into the ground.... Capitalism cannot be held in check by corporate altruism.

From what I've heard there is going to be a tie in to exec pay here, so as long as they are on our dime, they can't get rich. My guess is there will also be some sort of oversight or equity going to the gov't so we/they can control what the companies do as well to prevent the "same ol, same ol".

We the taxpayers? Seriously... all we are is the bank. For all intents and purposes, this tax money is going to be gone gone gone...

It was going to be gone gone gone gone without this deal.. this way we at least have a possibility of getting something back.

[quote]
Wouldn't they also stop making money? Sooner or later someone would realize that they will eventually burn through the cash they are hoarding and given the barren landscape, the end would be near.
[\quote]

Yes, and that's the problem... they couldn't loan money in the first place, and it'd be a chain reaction. And that's where a majority of people lose it.. they don't understand how large of an impact this could have. The only reason we got out of the Great Depression was because the Gov't went to war and we HAD to make stuff. The gov't printed money and dropped it into the economy. Basically the gov't is trying to do the same thing, only earlier.

The market is up as high as it is because of irrational exuberance and greed. The Market has needed a correction for 3+ years.

The government will make the pretty penny, not the taxpayers. We are just the unvested venture capitalists.

And that is unfortunately the general consensus of most Americans. Because they believe they weren't on the hook in the first place. But if the financial institutions were to fail across the board, do you think any of us would have any cash to keep going like we are?

There's a fundamental disconnect here that unless you are watching the markets daily, no one is explaining. Most people assume it'd be like Enron where they'd lose their retirement accounts maybe, but life would go on. Only it more likely than not, wouldn't, at least not as we know it.

Now.. if you don't think there is going to be some sort of committee that will be developed to watch over these funds, especially now, I think you're crazy. There's going to be watch groups out there who focus only on how the gov't gives out money, and when they get it back and what they do with it. If it comes out that the gov't made billions and blew it on toilet seats and raises for congress, again, I think you're crazy. We won't get the cash back in the form of checks, but it'll go towards something that we won't have to foot the bill for.

What that is.. we'll have to wait and see.

Well, as mentioned in the other bail out thread, if I lose my job over this, "extra" stuff like the internet will get cut from my budget, and thus I won't be able to be on the board as much giving my witty and insightful comments (well, scratch that, some might see that as the price they have to pay and then want the market to fail )...

I thought SOX was created and implemented to prevent this sort of thing?

http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act

The Sarbanes-Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted 2002-07-30), also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called SOX or Sarbox; is a United States federal law enacted on July 30, 2002 in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of the affected companies collapsed, shook public confidence in the nation's securities markets. Named after sponsors Senator Paul Sarbanes (D-MD) and Representative Michael G. Oxley (R-OH), the Act was approved by the House by a vote of 334-90 and by the Senate 99-0. President George W. Bush signed it into law, stating it included "the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt."[1]

Canuck wrote:I thought SOX was created and implemented to prevent this sort of thing?

http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act

The Sarbanes-Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted 2002-07-30), also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called SOX or Sarbox; is a United States federal law enacted on July 30, 2002 in response to a number of major corporate and accounting scandals including those affecting Enron, Tyco International, Adelphia, Peregrine Systems and WorldCom. These scandals, which cost investors billions of dollars when the share prices of the affected companies collapsed, shook public confidence in the nation's securities markets. Named after sponsors Senator Paul Sarbanes (D-MD) and Representative Michael G. Oxley (R-OH), the Act was approved by the House by a vote of 334-90 and by the Senate 99-0. President George W. Bush signed it into law, stating it included "the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt."[1]

I swear to God there's not one single company in the USA that is SOX compliant... what a joke.

I agree meta, SOX sucks.

However it was created with the intent to prevent this kind of stuff, right?

Canuck wrote:I agree meta, SOX sucks.

However it was created with the intent to prevent this kind of stuff, right?

No, I would say it was crafted to keep the IT and accounting industry afloat after the "millennium date code" FAIL, and the internet dot com bust. It was a piece of "feel good" legislation that was never implemented fully by (I suggest) any corporations to sufficiently retard the corporate greed, misreporting that leads to problems like we have now.

YOU CANNOT LEGISLATE MORALITY

meta4 wrote:

Canuck wrote:I agree meta, SOX sucks.

However it was created with the intent to prevent this kind of stuff, right?

No, I would say it was crafted to keep the IT and accounting industry afloat after the "millennium date code" FAIL, and the internet dot com bust. It was a piece of "feel good" legislation that was never implemented fully by (I suggest) any corporations to sufficiently retard the corporate greed, misreporting that leads to problems like we have now.

YOU CANNOT LEGISLATE MORALITY

Exactly. It was created to make people feel safe about the markets and investing. I don't think it is the solution by any means.
My point is if they created SOX to supposedly keep corporations on the up and up and it failed miserably in this case, does the creation of another committee mean anything? Or just another whiff of gas up the public's derriere? I am going for the latter.

Indeed.. SOX was created to attempt to regulate morality... in reality it's created a nightmare for every accountant/IT person but also made us a lot of extra dough in the process... it's actually one of the things that this little incident might have effected in a positive way in that they might get rid of it.

SOX was congress saying "look, we did something for the average person" what we have now is the result of congress saying that, and doing very little. At least in part... I just hate SOX in general.

SOX actually created a nightmare for companies in general, not only accounting/IT, because every aspect of an organization is affected.
Same thing with the other program C-TPAT (Customs-Trade Partnerships Against Terrorism) another big joke.
Same goes for the Canadian equivalent PIP (Partners in Protection).