I'm gathering that there are three schools of thought here. (1) The bailout is needed to rescue the economy. It has weaknesses, but whatever. Let's do it! (2) There's no way we should bail out some failed banks. They can go to hell. (3) We really need to rescue the economy, but this bailout bill is horrible. Instead of buying derivative securities, which will just prop up the banks, their management, and the biggest investors such as hedge funds, the government should just purchase mortgages directly. That would be a much better plan. Am I missing anything?
Well this ought to get it done: WASHINGTON - President Bush warned Tuesday that failing to pass a financial rescue plan would bring severe consequences to the U.S. economy. "Congress must act," he declared. http://news.yahoo.com/s/ap/financial_meltdown
For once I actually agree with Bush ... but frankly I think his call for something to get done has about as much pull with the congress as if I had asked for something to be done. I think these representatives are just scared shitless that they're going to get tossed out on their ear if they vote this through; it's wildly unpopular and they have done almost nothing to explain the situation in terms that most Americans can understand.
I fall into Camp Three. The problem is that the issue is at once simple and complicated. The best solution will be difficult to explain to voters, and therefore it's easier to find a crappy solution that people can understand. There are two things that need to happen: Liquidity needs to be re-established in markets frozen by the crisis so that financial institutions can sell these assets; and capital levels need to be raised in these firms so that the market doesn't freeze up again. Any idiot can understand the above paragraph. The problem comes from how to solve it. What if purchasing these bad securities at their perceived "held to maturity" price doesn't help set the market? Time horizons are critical here. You've then wasted a ton of money with no result. Instead of opening a window announcing that the government will purchase all distressed bonds at a held to maturity price, set up a Dutch auction with everyone invited. If the government buys the security, attach Sen. Dodd's proposal of "contingent equity" in the form of stock warrants. Second, require additional capital to be raised. Right now, going out and raising capital sends a signal that you're in trouble. By requiring it, everyone has to go out in the market. Hard bargains will be driven, but money will be attracted to these firms because there will be perceived deals. The Treasury could participate in some firms that can't raise requisite capital, through preferred stock. Those that can't raise the capital will be absorbed by those who can. Finally, get rid of all the political crap off this bill, like compensation capping and steering some of the profits from these security sales to "affordable" housing. We'll see what happens.
I don't know about you, but I own the same amount of stock and shares in various funds as I did yesterday. I didn't lose anything. The people who are truly screwed are the people whose children are about to enter college, and their college funds have tanked. You've got 20+ years before you start withdrawing from your 401K, during which time you will continue to contribute at the "discount" rates, thus mitigating the damage.
Hopefully the (DOW) stock market won't be at 2000 by the time I cash in. That's the direction Nancy says it's headed.
Hopefully. The S&P 500, the Wilshire 4500, and the EAFE Stock Index (international stocks) have all increased over the past five years, and will still show a pretty good cumulative rate of return, even including this recent meltdown. Assuming things don't get any worse.
Sure I do, at a minimum, more banks that have outstanding credit to people who can't pay it back will fail. From there, a domino effect will hit. People will lose their homes, the stock market will tank a bit and available credit will be at a minimum.
The Democrats and the media have spent 8 years telling us what a moron Bush is, and now it is Bush's fault that he has lost the ear of the country. Twisted logic, for sure, and don't forget that true fiscal conservatives are fundamentally against this sort of bail-out.
Stock market up over 500 points today. A healthy and unexpected immediate rebound. I wonder if the Oregonian will use the red ink/WW II-esque 100-size font tomorrow morning to trumpet this news?
What are you saying, that the repubs and independents are now just realizing what the dems have been preaching is true? I backed off on my calling Bush out because of all the responses and me realizing I understand a very thin layer of national politics so I'm probably wrong . . . but I have now read several articles that came out today that also mentioned what I brought up. No one cares or believes what our president has to say about the issues surrounding our nation. Sad really. Some of it might be politics and everyone separting themselves from the Bush era, but I think a large portion of this dynamic can be blamed on the man himself.
And how exactly is that not something that should be attempted to prevent? If yo look around there are companies going out of business every where. Look at how much commercial real estate is vacant right now. Look at unemployment rates. All of that gets worse if the bleeding is allowed to continue. It's extremely naive to sit there and think "hey my assets are covered, I don't want this on principle" but that's not the majority. Small business' are greatly affected by the economy. Take a small business of 10 employees. If it goes under that 's 10 more unemployed, who then either have to find new work which isn't available, or draw on unemployment, which is paid for by... You got it taxes on business'. You have also taken 10 people (households) out of the circle of spending. Which then takes money away from other business'. This literally is not a situation you simply want to try and weather. I am sure the initial proposal was unsatisfactory, but something does need to be done. If executed properly this whole mess could go away with minimal damage and our economy could resurrect o where it was pre-9/11.
