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$700 Billion Bailout Signed Into Law
Many readers reminded us of what no-one can have failed to hear: that the Congress passed and the President signed a $700B bailout bill in an attempt to avert the meltdown of the US economy. The bill allocates $700 billion to the Treasury Department for the purchase of so-called "toxic assets" that have been weighing down Wall Street balance sheets. This isn't particularly a tech story, though tech will be affected as will virtually all parts of the economy, and not just in the US. Among the $110B in so-called pork added to the bill to sway reluctant legislators are extensions of popular tax benefits for business R&D and alternative energy, relief for the growing pool of people subject to the alternative minimum tax, and a provision raising the FDIC's ceiling of guaranteed deposits to $250,000. Some limits were also imposed on executive compensation, though it's unclear whether they will be effective.
Youre a vice president in a bank ? Heres another recent comment by you:
I'm sorry, I don't think we've met. Yes, I don't like Vista. But it's not a religious stance against Microsoft. In fact, I hold 4 Microsoft certifications (MCSE, MCSD VB6, MCSD C#.Net, MCDBA) and work on Microsoft products all day every day. In fact, I did a 6 month contract programming job for Microsoft themselves as a side job.
Certainly a very busy man.
http://validator.w3.org/check?uri=http%3A%2F%2Fwww.slashdot.org Errors found while checking this document as HTML5!
I find this statement unfathomably ironic in the light that the majority of Republicans voted against it while the majority of Democrats voted for it.
That was the 110 page version. The 451 page version pretty much got the whole Republican tax plan shoved into it. http://news.slashdot.org/comments.pl?sid=985597&cid=25257489
Not only that, this article (sorry, NYTimes reg required) details how Henry Paulson, back in 2004, asked the SEC to deregulate Goldman Sachs and other banks to allow them to take on this toxic mortgage debt in the first place.
We have just been ripped off by the most elaborate con in the history of the world. We let a banker tell us "let us break the rules so we can make more money", then when he did and the bottom fell out, we gave him even more money to keep him from going out of business.
My only hope is that the voters check for who is voting for this and get rid of them next election.
"When the president does it, that means it's not illegal." - Richard M. Nixon
Yep, I've heard those and one other rumour.
(Disclaimer: I work for a highly secret govt. agency with unlimited resources).
Basically, a race of aliens threatened to build a new hyperspace-expressway through our solar system unless we provided the capital to bail out the luxury planet building markets. Apparently, the galactic economy recently collapsed and most of the universe is in a pretty bad recession.
Personally, I'm not sure how much of this is true but I agree, it's probably a combination of all three.
Mod me down, my New Earth Global Warmingist friends!
Comment removed based on user account deletion
link to house roll call vote on the "billionaire's socialism bill of 2008"
Personally, I don't want to hear a peep out of any congress weasel who voted for it, or business goon who wanted it (or takes the cash), about "free markets" and "capitalism", because this bill is neither. Those people are big fat hypocritical liars.
Voting yes were 172 Democrats and 91 Republicans.
Voting no were 63 Democrats and 108 Republicans.
anyway, here is my state vote record
GEORGIA
Democrats - Barrow, N; Bishop, Y; Johnson, N; Lewis, Y; Marshall, Y; Scott, Y.
Republicans - Broun, N; Deal, N; Gingrey, N; Kingston, N; Linder, N; Price, N; Westmoreland, N.
across the board Nays by the Rs
Even our allies like britain have gone to a surveliance society and now ponder 2 days detenciton with charges.
For the record, Britain is pondering 22 days detention without charges.
Lil' Thindime, lilting a lacrimose lament, krashes the kwaint konfines of Kokonino Kounty
Close, but no cigar. FORTY-TWO DAYS.. No, you couldn't make it up, could you.
Everything I needed to know about life, I learnt from Blake's Seven
Where are you getting all this from? It's like you're from some alternate reality. The government way "proactive" during the Great Depression, right from the start. That's why it lasted as long as it did. If you want to know what really happened, here's a full analysis of the contributing factors: America's Great Depression. You don't have to agree with the economics, but at least pay attention to the historical aspects, which are fully cited.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
What I object to was the inclusion of so much unrelated crap in the bill. Relief for a racetrack? For a maker of kids' toy arrows? For PR Rum distillers? What kind of nonsense is this? Try visiting "dealbreaker.com", and reading some of the stories there. People withdrawing all their money from their savings/chequing accounts, and hiding it in their safe deposit boxes (or burying it in the backyard, for all we know). The run on physical gold (try buying some gold coins or bars today - good luck finding any). Then, go rent a copy of "It's A Wonderful Life", and try to understand what Jimmy Stewart's saying when he's trying to prevent a run on the building and loan. If a bank has no capital, it can't lend. If everyone tries to withdraw all their cash from the bank, it breaks the bank because it lends out all that cash to others. Without access to capital, the economy freezes up.
For example, with the busy Christmas retail season coming up, many smaller retailers are unable to get the short term loans they need to finance their inventory. Other industries need short term loans to cover the inevitable lag between the time they purchase raw materials, and sell finished goods. They're having trouble finding loans as well. Something had to be done.
Was this bill the best way to do it? I, and many others, think not. It was too diffuse, too laden with pork, and most of all, too rushed. And to me, the worst culprits in the whole mess (the ratings agencies Moody's and S&P) got off scot free. If they had done their job, and not rated the crappiest tranche of CDO's as "AAA", none of the pension funds, smaller banks, and many other mutual funds would not have been allowed to buy them, and much of this mess could have either been prevented, or contained to much smaller amounts. But the ratings agencies didn't do their due diligence, and everyone else has been so conditioned that the ratings were always correct, they didn't bother to do their due diligence either.
I'm Canadian, and our big banks have avoided most of this mess simply because those banks write most of the mortgages here, and they do put people through wringers before they OK a mortgage. The banks ensure you have a steady job, some money to put down, etc., before forking over the cash. DUE DILIGENCE. Remember those two words, apply them to your own investments, and you'll never go broke. It's when you get lazy, and think others are going to look after you, that you get burned.
What was once true, is no longer so
Who created Fannie Mae and Freddie Mac, the true "merger of state and corporate power" in this crisis? Democrats.
Bzzzt, thank you for playing. Freddie Mac was creating in 1970 under Nixon.
Of course, neither of them caused this problem at all. They did not fail, they were not mismanaged, they did not purchase loans that failed, almost all their loans are just fine.
Ihey were created to purchase and securitize home loans, and that is what they did. The fact that housing prices dropped and resulted in them not having enough assets to cover the loses was an intended point of them existing. If it hadn't been them, it would have been the banks.
The actual problem was the drop in housing prices, which was actually caused by the current Administration. No banking system that operates primarily on mortgaged houses can survived a sudden drop in housing prices, which is why you don't let housing bubbles get that big.
Who further extended this by creating the CRA [wikipedia.org]? Democrats. Who expanded its mission [wikipedia.org] into accusing bankers of racism ("redlining") and extorting them to make more bad loans, or else be investigated? Democrats
The CRA only covers banks, not independent mortgage companies, the people who made 75% of subprime loans. That is, only 25% of all subprime loans were given out by institutions that were governed at all by the CRA. And, on top of that, the CRA doesn't actually demand that many are in bad areas, so of that 25%, less than 10% of them were actually requirements of the CRA.
So you're talking about 2.5% of all subprimes loans being mandated by the CRA, and, ironically for you, those loans are failing at slightly less than other subprime loans. (Probably because they're loans given out in bad neighborhoods so are actually examined more. Duh.)
And your 'lawsuit' comment is bullshit. Even the banks covered by the CRA do not get sued for not making enough CRA loans. They cannot be sued for that, at least not via the CRA. In fact, there's almost no enforcement at all of the CRA.
(Of course, anyone can sue anyone for any reason, but people who cannot get bank loans are unlikely to be able to launch a lawsuit.)
And if you actually knew anything about loans, you'd see Obama got a perfectly normal loan. Of course he got better than an 'average rate'. No one gets the 'average rate' unless they have 'average credit'. He, OTOH, has excellent credit, a lot of savings, and no debt at all, and three points below average is a completely normal interest for that. (And 'jumbo loan' just means it's a non-conforming-because-it's-too-large loan that Fannie and Freddie won't buy.)
If corporations are people, aren't stockholders guilty of slavery?
There was an article in last Sunday's Washington Post that described one house on the market after a foreclosure. The article was very instructive about what was really going on. The entire financial mess is a result of the gambling casino mentality of the derivatives market moving over into housing and mortgages. The mentality of the derivatives market was allowed to exist and continue as a result of financial market deregulation.
Many financial experts, most notably Warren Buffett, the Sage of Omaha, have for years warned that there are derivatives nobody understands and that they will cause trouble. Based on the article, it is clear that we now have mortgages nobody understands and derivatives on those mortgages that nobody understands, either. Derivatives in the form of "portfolio insurance" caused the stock market crash of 1987. Since then there have been several occasions (such as Long Term Capital Management) in which derivatives threatened to collapse the world financial system. Well, they've done it again.
The article
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/27/AR2008092702587.html
describes how the homeowner was solicited to refinance her home and took the bait. The interest rate was a teaser. Over a year into the
mortgage she discovered that it was a "negative amortization loan" where the principal increases every month. The transaction probably came nowhere near compliance with Truth in Lending laws. It is shocking that such a piece of financial garbage exists. However, Wall Street wanted mortgages to feed the highly profitable derivatives market and there was a lot of pressure to produce the mortgages, no matter how.
The article doesn't cover what happened next, but the mortgage was likely bundled into a collateralized mortgage obligation that likely had
credit default swaps written on it. Here are some relevant Wikipedia links:
http://en.wikipedia.org/wiki/Collateralized_mortgage_obligation
http://en.wikipedia.org/wiki/Credit_default_swap
http://en.wikipedia.org/wiki/Derivative_(finance)
http://en.wikipedia.org/wiki/Negative_amortization
It turns out that many of the derivatives are really side bets on prices of financial securities, and that the total outstanding value of the derivatives often exceeds by huge factors the total outstanding value of the securities. Furthermore, the derivatives are highly leveraged.
According to a recent program on NPR's This American Life there are about 4 Trillion in bonds and about 60 Trillion in derivatives betting on whether the bonds will pay off.
In the absence of strict regulation, the "free market" becomes the Fraud Market. This mess can be laid squarely at the feet of financial deregulation and Fraud Market Conservatism. Adam Smith's "unseen hand" doesn't work. The financial markets are much more in keeping with Charles MacKay's book "Extraordinary Popular Delusions and the Madness of Crowds". This has been proven over and over, and is now being proven once again.
One part of the eventual cleanup will need to be a shutdown of the derivatives casino. Some of these financial instruments are valuable to
producers and users of real commodities, but most of them need to be eliminated. Whatever remain need to be understandable and should not be
side bets. Eventually, the tails will stop wagging the dogs.