And the bail out goes right in to the toilet

[sasvermont]

WTF?

We should put Buffett in charge of this mess.


By James B. Kelleher - Analysis

CHICAGO (Reuters) - On Main Street, insurance protects people from the effects of catastrophes.

But on Wall Street, specialized insurance known as a credit default swaps are turning a bad situation into a catastrophe.

When historians write about the current crisis, much of the blame will go to the slump in the housing and mortgage markets, which triggered the losses, layoffs and liquidations sweeping the financial industry.

But credit default swaps -- complex derivatives originally designed to protect banks from deadbeat borrowers -- are adding to the turmoil.

"This was supposedly a way to hedge risk," says Ellen Brown, the author of the book "Web of Debt."

"I'm sure their predictive models were right as far as the risk of the things they were insuring against. But what they didn't factor in was the risk that the sellers of this protection wouldn't pay ... That's what we're seeing now."

Brown is hardly alone in her criticism of the derivatives. Five years ago, billionaire investor Warren Buffett called them a "time bomb" and "financial weapons of mass destruction" and directed the insurance arm of his Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz) to exit the business.

[Karen]

It seems counterintuitive to let the people who got us into this mess in the first place to legislate our way out of it ... or to expect anyone to play nice in an election year ...

Never mind it's "we the people" who are hardest hit by all this ... the $700 billion is coming from whose pockets? Uh huh ...

But I hope that cooler, calmer heads prevail and some compromise or solution is worked out, and soon.

[Marigold2]

I still cannot believe the American people were dumb enough to vote for Bush :eek::eek::eek::eek: twice. :mad::mad::mad::mad:

[Catlady711]

What I don't understand is how they think pouring all that money into bad debts is gonna solve? From one guy I heard on tv he said it's so people could continue to get credit. Well isn't credit what got everyone into this mess? What's wrong with good old CASH!!!

As it is our own government is living on credit, and the FDIC is talking about borrowing against the treasury which is just more credit.

Stop the madness!

I hope they don't pass the money pit bill ever for any amount of money.

[Edwina's Secretary]

What I don't understand is how they think pouring all that money into bad debts is gonna solve? From one guy I heard on tv he said it's so people could continue to get credit. Well isn't credit what got everyone into this mess? What's wrong with good old CASH!!!

As it is our own government is living on credit, and the FDIC is talking about borrowing against the treasury which is just more credit.

Stop the madness!

I hope they don't pass the money pit bill ever for any amount of money.

It is not that simple. Businesses need credit. Take retail for example. They borrow the money to buy the merchandise and then pay back the credit as they sell the merchandise. A manufacturer needs to invest in new equipment. They need to be able to borrow the money.

I don't know many people who can pay cash for a home. Most people take out a mortgage. That is credit.

An absence of credit means businesses cannot operate and people get laid off.

It is careless use of credit...careless granting of credit -- among many, many other things -- that created this mess.

[Lady's Human]

Gruss Gott in Himmel!!!!!

Sara makes a post I agree with!!!

(Hello, Macy's? Yeah, it's Satan. I'm looking for some skis and a nice, down filled Parka?)

Also, the bail out bill as originally written, while flawed (lack of oversight in the original bill), stood to not cost the US Treasury money, but actually could have made quite a bit in the long term.

"700 Billion Bailout" is a misnomer, and it just reinforces my hatred for the crap that passes for reporting in the mass media.

[Edwina's Secretary]

"700 Billion Bailout" is a misnomer, and it just reinforces my hatred for the crap that passes for reporting in the mass media.


Cop out -- blaming it on the media. The media gives the people what they want. Simple pithy reporting. Quick snapshot. Most people aren't looking for indepth analysis and wouldn't read it anyway. Did the media coin the phrase or just report it?

So what would you call it? That fits in a headline.

[Lady's Human]

It's not a bailout, it's more of a loan guarantee package, but bailout is a nice, juicy headline.

Heck, it's not even a $700 Billion package, that's the possible maximum amount under the package that might be put into play.

I know the media gives the people what they want, but the press needs to bear a little responsibility to go with the obvious power they have.

[Lady's Human]

BTW, Sara, it's not a cop out.

The headline CNN, Fox, and others have been reporting bears no resemblance to the actual meat of the story. At least TRY to make it accurate, guys.

[ramanth]

Thank you Sara for explaining it in terms I understand. My knowledge of stocks and such is so poor. :o

All I know is that my employer uses AIG for our 403b's. I'm not sure if I should just ride this out (since I'm young) or take all my money out and reinvest later.

[Puckstop31]

I still cannot believe the American people were dumb enough to vote for Bush :eek::eek::eek::eek: twice. :mad::mad::mad::mad:


I cannot believe you think this is his fault, all on his own.

I am NO fan of him, but you clearly have no idea how this came to be.

Not surprising, BTW.

Remember dear, CONGRESS spends the money.

[blue]

Remember dear, CONGRESS spends the money.

Quoted for troof!

[sparks19]

I still cannot believe the American people were dumb enough to vote for Bush :eek::eek::eek::eek: twice. :mad::mad::mad::mad:


I still cannot believe that the American people believe that this is the result of JUST 8 years... th is has been a long time coming. A lot longer than 8 measley years... even with a war. The US has been giving money away like it grows on trees for too long.

[Edwina's Secretary]

I still cannot believe that the American people believe that this is the result of JUST 8 years... th is has been a long time coming. A lot longer than 8 measley years... even with a war. The US has been giving money away like it grows on trees for too long.

Gosh! I didn't realize what an expert you are on US economics.

How long has it been? Please explain to us...American people...how it came about! Even with that pesky war!

[blue]

Gosh! I didn't realize what an expert you are on US economics.

How long has it been? Please explain to us...American people...how it came about! Even with that pesky war!

I dont see any reason to dissagree with her. Let me try and find the amount of money given out under the Carter administration alone.

[Karen]

There are no easy answers here to any of this. Any single figure is not going to shed light on the complicated, tangled mess that is our current financial situation. Government - all three branches thereof - have certainly all played a role in this, and there is plenty of blame to go around.

And I doubt even people with PhDs in Economics think they know all the answers here. Or that there is any single "answer."

[Lady's Human]

But easy answers make good headlines and get better ratings!

Come on, there has to be a 30 second answer to all this. You can't seriously expect people to pay attention to something longer than a sound bite!

[RICHARD]

Gruss Gott in Himmel!!!!!

Sara makes a post I agree with!!!

(Hello, Macy's? Yeah, it's Satan. I'm looking for some skis and a nice, down filled Parka?)


OH, NO!

Don't go to Macy's to buy your cold weather clothes! Try EMS or North Face brands!:)

FOR YOUR CONSIDERATION!
During the CLINTON admin -around 1999- is when this whole bunch of A-holery started. Check it out! Under BC's watch this whole "let them eat adjustble rates" CF started.

[blue]

And I doubt even people with PhDs in Economics think they know all the answers here. Or that there is any single "answer."

I reccomend Walter E Williams (http://www.gmu.edu/departments/economics/wew/articles.html) for any ecconomic annalysis.

[jennielynn1970]

I cannot believe you think this is his fault, all on his own.

I am NO fan of him, but you clearly have no idea how this came to be.

Not surprising, BTW.

Remember dear, CONGRESS spends the money.

Bush is just a puppet. I doubt he could even put together a sentence about this topic that would make sense (where he would have no help from his tutors due to his IEP that he was given since NCLB was put into place).

Sorry, but GW rode the short bus to school.

[Puckstop31]

Bush is just a puppet. I doubt he could even put together a sentence about this topic that would make sense (where he would have no help from his tutors due to his IEP that he was given since NCLB was put into place).

Sorry, but GW rode the short bus to school.

I know... Why are you telling me this? I am certainly not defending him, but he had little to do with this. He did not help, but he (his policies) are not the root cause.

[Puckstop31]

We could argue about "why" all day. But lets talk about a "fix".

Does anybody honestly wonder WHY it failed yesterday? One would think that Democrats would be all over something like this. Yet Pelosi goes and makes a partisan speech right before the vote. Is she a) that stupid or b) did she WANT it to fail? If so, why?


Some pundits say that the people who voted NAY are the people who are in competitive races. Did they ACTUALLY listen to the people? :eek:

Should we just let it play out and fail? The more I learn, the more I think it SHOULD fail.

[Edwina's Secretary]

Well I think it is the fault of Benjamin Pierce! Why stop at Carter? According to the right wing rag that is a newspaper here in OC it is the fault of every democrat who ever drew breath.

Anyone who has been in a position to create the mess or fail to enact measure to stop it gets a piece of the pie.

Done.

Now let's try and fix it. And no more Newt Gingrich girlie-girl tactics. (Remember when his feelings were hurt because he had to use the rear entrance on the president's jet so he caused the furlough of non-essential government workers?) "Hurt feelings" strike me as rather irrelevant at a time like this.

[sparks19]

Gosh! I didn't realize what an expert you are on US economics.

How long has it been? Please explain to us...American people...how it came about! Even with that pesky war!

LOL MEOW... did someone p!ss in your cornflakes this morning? Cheer up :)

Anyway... I don't have an exact date ... no one does. but this is a far bigger mess than just the last 8 years has created. Did the war help? certainly not but it definitely isn't the sole cause of this. this has been a long time coming but no one thought it would ever happen to them (some still don't)

[Lady's Human]

(Remember when his feelings were hurt because he had to use the rear entrance on the president's jet so he caused the furlough of non-essential government workers?)

It was a tad more involved than one politician's personal pique, ES. The former Speaker of the House wasn't the only one involved with that, nor does he hold sole responsibility.

[momoffuzzyfaces]

The US has been giving money away like it grows on trees for too long.

This brings to mind something that I have been wondering about since the "bailout" stuff started. Say we ok the plan, what will happen when we have another hurricane? or earthquake or other disaster? Or some other country does. Will we be able to help out? Will this bankrupt our entire country completely? :confused:

Should we cut back or stop aid to other countries?

It doesn't sound like the ones who caused the problem will be incovenienced much. :(

[sparks19]

This brings to mind something that I have been wondering about since the "bailout" stuff started. Say we ok the plan, what will happen when we have another hurricane? or earthquake or other disaster? Or some other country does. Will we be able to help out? Will this bankrupt our entire country completely? :confused:

Should we cut back or stop aid to other countries?

It doesn't sound like the ones who caused the problem will be incovenienced much. :(

Good point.

I think either way we are going to pay big time for this... whether we go ahead with the bailout or not... WE are going to be the ones who pay for it. And you're right... the politicians probably won't.

[Edwina's Secretary]

LOL MEOW... did someone p!ss in your cornflakes this morning? Cheer up :)

Anyway... I don't have an exact date ... no one does. but this is a far bigger mess than just the last 8 years has created. Did the war help? certainly not but it definitely isn't the sole cause of this. this has been a long time coming but no one thought it would ever happen to them (some still don't)

Oh my dear you misunderstood. I just hoped you would help us Americans understand what happened since you were so emphatic in your statement.

And politicans, although not my favorite creatures, pay taxes just like the rest of us Americans.

To suggest the problems is all the fault of politicians or the government is simplistic. They may be responsible for enabling but the "getting rich" falls on people on Wall Street!

LH...where's your pique at the suggestion that Carter gave away money? No one person in government holds sole responsibility but you only seem to be bothered but assignments of responsibility when it comes from me. Hmmm...perhaps I should accuse you of racism! :D:rolleyes::D

[Lady's Human]

I missed that comment, Sara, either that or I completely ignored it for some reason.

Pres. Carter didn't have the power to give away money........as stated earlier, that power is in the hands of Congress, not the executive branch.

[Lady's Human]

Durnit, I forgot the mandatory:rolleyes::rolleyes::rolleyes:

:D

[smokey the elder]

There is a high fear factor in the credit markets now, the way I see it (strictly lay observation.) No one wants to lend money at all, because all proper risk assessment has gone right out the window! The LIBOR low-risk short-term loans that are the "lube" of the economy aren't being made, so the economy is "stuck". Money exists; it's just not moving. Closest model: Japan in the 1990s. (Thanks, Robert Krulwich for making this simple enough for a scientist to understand!)

Is the "fear factor" justified, or part of a self-fulfilling prophecy? Just an example, in June we KNEW that oil was going to $150 a barrel....and it did, almost. But, then it came down, because it was apparently unsustainable.

Now the government, led by W, "KNOWS" that we'll enter the next Great Depression if they don't "bail" us out (I think that's a lousy term, btw).

Just FWIW, W "KNEW" there were WMDs in Iraq...interpret that as you will.

[Puckstop31]

No one wants to lend money at all, because all proper risk assessment has gone right out the window!

Yes, because they were MANDATED to give 'bad' loans, by Congress.


Money exists; it's just not moving.

Yes. The fat cats think that they can get a better return on their investment if they wait until the bad loans are 'bailed" out.


Now the government, led by W, "KNOWS" that we'll enter the next Great Depression if they don't "bail" us out (I think that's a lousy term, btw).

Just FWIW, W "KNEW" there were WMDs in Iraq...interpret that as you will.

All the more reason the 'bail out' should not be done. We are ALL going to take it on a chin a bit however.

[Grace]

In the latest issue of NEWSWEEK there is an article explaining how this financial mess happened. I've read it once, and plan to read it again and again - maybe then I'll better understand it all.

In case anyone is interested - HERE (http://www.newsweek.com/id/161199) is a link.

[RICHARD]

From what I understand, which are a few hand gestures and the labels on Top Ramen, is that back in the late 90's the admin at that time saw a disparity regarding the numbers of MINORITY home buyers/owners.

The pres encouraged lenders to approvel loans with little or no downs and the balloon payments to follow.

The industry has been in free falll for the last 2.5 years. THe mortgage/title/bank industry are mostly to blame for this. They lent out tons of money and they were riding the horse to the river while everyone else walked.

In 99 I worked for a title company who had offices all across the So Cal. 35-40? It was a huge operation and the money was there.

The place where it went wrong was the greed and the lax rules that everyone operated by. The amount of money made, wasted and just thrown away was incredible.

A title/mortgage office would open up and the people running the office were given carte blanche to buy some of the silliest office supplies on the planet.

Why settle for plain BIC stick pens when you can order pens that are engraved with your name and phone?

I threw out about 50 thousand business cards all told.

At one office they had just delivered a 3,000 card order and the office closed a few days later!

Reps were stealing customer files and doing deals outside of the company's business.

Reps were quitting and stealing files when they moved on.

IT got to the point where a person was sent to a soon to be closed office, without warning, with a pair of bolt cutters and a note.The evening before the whole office data base would be run and saved at the main office, Then the 'Angel of Death would give the note to the office manager and go to the back room and cut the phone/computer lines to keep the people in the office from deleting files and taking them off site.

There was HUGE MONEY TO be made-people closed deals, made some serious green and said EFF IT!

Money was lent out to foreigners who spoke little or no English and sometimes had their teen agers who spoke better English than the parents would try to explaing what they were signing. There were other reports of people buying homes with no paperwork or any proof of income. Applications were submitted
and if they were denied, a new loan app would come back later in the day with 'new' info on the form.

That was the way it was. I worked for about 6 months total across the year closing escrow offices and had I been paying attention to what I was working with there would have been a chance to help people out keep their homes without screwing them and making honest money on the side.


What a shame that we have hit this low.

[blue]

I missed that comment, Sara, either that or I completely ignored it for some reason.

Pres. Carter didn't have the power to give away money........as stated earlier, that power is in the hands of Congress, not the executive branch.

The executive branch can veto those expenditures.

[Lady's Human]

The executive can veto expenditures, but only by vetoing the entire bill. Line item veto doesn't exist, and the House and Senate would never agree to giving the executive that power.

For a perfect example of this, look at last year's highway bill. It was packed with non-relevant spending, but there were so many pet projects packed into the bill as a whole, there was no way a presidential veto would have stood.

[Grace]

In the Senate - 74 yes, 25 no, 1 absent (Kennedy)

Those voting no -

Allard (R)
Barasso (R)
Brownback (R)
Bunning (R)
Cantwell (D)
Cochran (R)
Crapo (R)
DeMint (R)
Dole (R)
Dorgan (D)
Enzi (R)
Feingold (D)
Inhofe (R)
Johnson (D)
Landrieu (D)
Nelson (FL) (D)
Roberts (R)
Sanders (I)
Sessions (R)
Shelby (R)
Stabenow (D)
Tester (D)
Vitter (R)
Wicker (R)
Wyden (D)

[sparks19]

Well... I don't think it matters either way *SIGH* WE are going to be the ones paying for it whether it went through or not :(

But... I'm just a Canadian living in the US so am not allowed to have an opinion :D

[Marigold2]

I guess this means people will just have to stop using their credit cards and really,really think about what they are going to buy and what they can live without. Maybe taking on a second job, even if it's just for 8 hours a week. Many people are already doing this and still having a hard time and I truly feel for them. It's a lesson for us all. Don't sign a contract unless you have a lawyer to look it over, and if you can't afford a lawyer, you can't afford to buy a house.

[blue]

I guess this means people will just have to stop using their credit cards and really,really think about what they are going to buy and what they can live without. Maybe taking on a second job, even if it's just for 8 hours a week. Many people are already doing this and still having a hard time and I truly feel for them. It's a lesson for us all. Don't sign a contract unless you have a lawyer to look it over, and if you can't afford a lawyer, you can't afford to buy a house.

If you have problems with credit you are correct. Why should the gov rescue you from your bad deccisions?

What corp is buying my mortage? I dont know. I have a fixed mortage so Im not sure I care.

[Puckstop31]

I guess this means people will just have to stop using their credit cards and really,really think about what they are going to buy and what they can live without. Maybe taking on a second job, even if it's just for 8 hours a week. Many people are already doing this and still having a hard time and I truly feel for them. It's a lesson for us all. Don't sign a contract unless you have a lawyer to look it over, and if you can't afford a lawyer, you can't afford to buy a house.

I agree, until the last sentence. Tanya and I live on CASH. She has two small credit cards and I have two small credit cards. Together they have a limit of about $1500. We NEVER use them.

Sure, our home is humble, but I honestly would not have it any other way. We pay our bills, take care of Hannah, eat well and have a little extra to stick away. Life is good.

As for a lawyer.... Ummmm, we just bought a house without a lawyer. I read the whole thing and understand it. Just under 7% fixed. You don't need a lawyer, you just need to not be stupid.

[smokey the elder]

The enormous increase in the cost of oil, and by extension, gasoline, has caused many Americans to change their driving habits.

I would hazard a guess that the tight credit will cause many Americans to change their borrowing/credit card habits. As usual, the people who get you-know-what seem to be the middle class and lower.

The mortgage mess has such a load of complicated features, going back to the mandates. But there was an awful lot of monkey business with the subprime market, aggressive marketing techniques, etc. playing on people's ignorance. "You can buy a house with no money down and be upside-down on your mortgage! Just call 1-800-WEGYPYU!"

IMO, greed, pure and simple, is the biggest bar on this Pareto chart (geeky statistics tool).

[Edwina's Secretary]

This is about much more than credit cards and home mortgages!

The expression "seed money"? The farmer borrows the money to buy the seed to plant the crops. When the farmer sells the crop he/she pays back the loan with interest. If credit is too tight for the farmer to buy seed, he/she plants less and harvests less. Less food supply means prices go up.

A company makes a product but does not have the income until the buyer of the product pays for it. How do they make the payroll for the people who make the product? A short term loan. Too tight credit means they can't get the money to meet payroll.

Tight credit will not change my use of credit cards one iota (yes I have them and use them. But they work for me. I pay the balance off each month so I get the float without incurring any interest. I have never paid interest on a credit card and I use them daily.)

But tight credit will hamper the ability of businesses to do business.

You rent so who cares about mortgages? Whoever built the structure you rent undoubtably borrowed the money to build it. And the builder borrowed the money for the construction.

And if credit is tight -- the building of housing stock -- rental as well as ownership -- goes down. And if there is less housing stock? Rents go up.

How about cars? Tight credit means you will have trouble getting a loan to buy a car -- new or used. Tight credit also means car dealerships cannot borrow the money to buy the cars to have on the lot for you to buy.

So, if the dealers cannot buy cars to put on the lot the car makers are stuck with inventory they cannot move. If they can't move inventory they won't make more cars. And the car factory workers get laid off. And of course it "trickles down" from there because the auto worker now does not have money to spend.

This is a situation that requires us to look beyond our own backyard. No one is an island and no one -- whether you pay cash for everything or not -- is unaffected by this situation.

[Puckstop31]

:eek:

ES, I agree with you. I know that just because we do not use credit cards, we will not be effected by all of this. Further, your description of how you use your CC's is wise. Sad that too many people do not use them as you do.

IF banks REALLY decide to stop giving credit to business, that is when things get rough. Jobs will be the first to go. Because if you cannot get credit to aquire product, you need cash instead... It has to come from somewhere. For instance, my company has a large credit line with Dell. This allows us to aquire product from Dell, install it and THEN bill our client. I am sure our business will take a hit if we would need to collect money before we do the work...

This is why I cannot get behind BO's tax plan. How is increasing taxes on big biz going to help this situation?

----

This bail out plan the Senate passed, pisses me off. How DARE they load up the most important piece of legislation in modern history with LOADS of pork spending? Do any of these clowns REALLY get it?

<sigh>

McCain screwed himself voting for it... Mr. "no more earmarks" my rear...

[Grace]

:eek:

This bail out plan the Senate passed, pisses me off. How DARE they load up the most important piece of legislation in modern history with LOADS of pork spending? Do any of these clowns REALLY get it?

<sigh>

McCain screwed himself voting for it... Mr. "no more earmarks" my rear...

Apparently the Senate feels that by sweetening it up, they would attract more House members to vote for it??

[Puckstop31]

Apparently the Senate feels that by sweetening it up, they would attract more House members to vote for it??

Certainly. But all this proves is our government does not care one cent for US. We should all be outraged and insulted by this bill. AND we should remember who DID vote for it on election day.

We all might just as well write in Mickey Mouse.

Keep your powder dry folks.

[momoffuzzyfaces]

Today the house passed it and the President signed it. I'm already getting emails saying the fed government has approved money for a loan I neither want or asked for. :(