$700 billion Bailout Fails

The $700 billion dollar bailout failed to pass in the house. Now we will get to see what happens when the government doesn't interfere.
Currently, the market's down 455 points.
http://money.cnn.com/2008/09/29/news/economy/bailout/index.htm?cnn=yes

Discuss...

BUY BUY BUY!

TRogers wrote:

BUY BUY BUY!

def.

And 30 million people north of the border collectively cry ..... "AWWWWWWW CRRRRRRRRRRRRRAAAAAAAAAAAAAAPPPPPPPPPPPPP!"..."eh!"

**** the companies that can't run their buisness properly and handle the money. The market will bounce back. Will take some time. But it will. Another company will come along and take its place.

uh, what?

You know what though? If the gov had stepped in and bailed em out, that would create a cushion for other businesses to take more risks and the same thing can happen again. They already took on F Mae and F Mac which was 4 trillion. The housing market needs to be stabilized and that was a step forward for them. Rules will be developed and put into place to prevent this kind of crap again. The market may be down and it will rebound, its all cyclical, it will come back, it just takes time.

A couple ideas being tossed around are that the US go towards a canadian/european system where you pay your home loan off in 5 years. This means you put up a considerable down payment which will encourage borrowers to stick it through with their loans. Time deals with inflation and higher risk. The less time you borrow the less chance you have of losing your job and defaulting. This is safer for the lenders as they wil get their money and be able to turn it around.

Truth is, most of us wont own homes for a good portion of our lives at this rate unless you have stellar credit and a large down payment.

The gov can't be expected to fix everyones mistake and sometimes you need to let nature take its course it will just be interesting to see where things go.

kornholio788 wrote:

**** the companies that can't run their buisness properly and handle the money. The market will bounce back. Will take some time. But it will. Another company will come along and take its place.

qft.

why bail out the companies that made bad decisions?

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

Quote:

CAMBRIDGE, Massachusetts (CNN) -- Congress has balked at the Bush administration's proposed $700 billion bailout of Wall Street. Under this plan, the Treasury would have bought the "troubled assets" of financial institutions in an attempt to avoid economic meltdown. This bailout was a terrible idea. Here's why. The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk. Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared. This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle. Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets. Don't Miss * Bailout plan rejected * Financial rescue 101: the bill * Commentary: Financial crisis a disaster * In Depth: Commentaries The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government. The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company. Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable. In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources. Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time. Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen. Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents. The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion. If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth. The bailout has more problems. The final legislation will probably include numerous side conditions and special dealings that reward Washington lobbyists and their clients. Anticipation of the bailout will engender strategic behavior by Wall Street institutions as they shuffle their assets and position their balance sheets to maximize their take. The bailout will open the door to further federal meddling in financial markets. So what should the government do? Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending. The right view of the financial mess is that an enormous fraction of subprime lending should never have occurred in the first place. Someone has to pay for that. That someone should not be, and does not need to be, the U.S. taxpayer.

almost 800 points, wow.

So.... Someone put this simply for me.... Are we screwed?

hyewarrior wrote:

So.... Someone put this simply for me.... Are we screwed?

for a while...
nothing like catastrophic, though...for now.

Our government has failed us. Not by not passing this deal, but because of the mess they have allowed us to get into. **** on politians.

Mexicans drop their price on cocaine, buy now!

AHAHAHAHAHAHAHAHA Only you Phil hahaha

Phil wrote:

Mexicans drop their price on cocaine, buy now!

Cocaine made Miami thrive when the rest of the country was down on their luck so let's just sell it nationwide and boost everyone's economy!

I'm down for selling some cocaine.

TRogers wrote:

I'm down for selling some cocaine.

This is a bad time to sell. You should be in the buying market.

TRogers wrote:

BUY BUY BUY!

That's the thing, you have to buy to sell. So you buy now, lace it with baking powder, and maximize profit.

As long as it doesn't cross the northern border... no care

ShadowBOX wrote:

Our government has failed us. Not by not passing this deal, but because of the mess they have allowed us to get into. **** on politians.

its isn't the gov's per say, the people that were in charge of enforcing rules to try and prevent this werent doing their jobs, so that helped us all along.

someone say coke!?

no drug discussions please...you make the mods angry

The corporations screwed up and under normal conditions I would say let the fail and go bankrupt...but it causes too much of a strain on the normal life of our society. Many people who would otherwise qualify for loans for houses, autos, college etc would not get them because the banks would stop lending to one another and to people....our country is based off a system of credit, without that, no one will get anything.

I dont exactly grow my own food, provide my own gas or build my own house and car...I need credit.

They need a different plan but more importantly they need to fix the infrastructure that allowed this to occur in the first place. Checks and Balances failed along the route as there were not enough of them in place to prevent this. CEO's should walk with nothing....If I work at McDonald's and am horrible at my job and get fired I dont get a severence package...I am simply unemployed and out of luck; I think the same should be said here.

02BlueStang wrote:

I dont exactly grow my own food, provide my own gas or build my own house and car...I need credit.

No, you WANT credit.

What ever happened to being frugal? Working hard, saving up a bunch of money, THEN buying what you want? Like a fancy car, new house, or a T-Bone steak?

Many many companies rely on credit to make their cash flow more consistant. Without it, many will have issues buying, selling, or even paying employees. These aren't the companies that were irresponsible with their lending practices. These are small businesses that are caught in a bad spot because of this economic crisis.

itzbjorn wrote:

02BlueStang wrote: I dont exactly grow my own food, provide my own gas or build my own house and car...I need credit. No, you WANT credit. What ever happened to being frugal? Working hard, saving up a bunch of money, THEN buying what you want? Like a fancy car, new house, or a T-Bone steak?

x2. EXACTLY

I do save....but it would take me quite awhile to save up 26K to buy my truck outright....or 300k to buy a house....I save quite a bit of money when I can, but it makes it easier to have it now vs when I am 40 if credit is available. And our society runs off credit, the banks and companies loan to each other all the time.

PwrRngr wrote:

itzbjorn wrote: 02BlueStang wrote: I dont exactly grow my own food, provide my own gas or build my own house and car...I need credit. No, you WANT credit. What ever happened to being frugal? Working hard, saving up a bunch of money, THEN buying what you want? Like a fancy car, new house, or a T-Bone steak? x2. EXACTLY

Because while you're saving for that house, you still have to live somewhere. You'd be better off getting a loan, buying a house, and making payments on that, instead of making rent payments AND trying to save at the same time.

Because if your car gets wrecked, stolen, breaks, etc, you can't just not have a car for 5 years while you save to buy another one. You need credit to get another vehicle right away.

I do agree with saving for other things though. I've bought everything I own (car included, actually), paid in full. No buying TVs and the such with a credit card for me.

Phil wrote:

Mexicans drop their price on cocaine, buy now!

Phil your not supposed to tell everyone Oznium's real business..... What will people say when they find out we get it made in China 50% less cost than we can get it from Colombia.

They'll buy more

02BlueStang wrote:

no drug discussions please...you make the mods angry