Originally Posted By vbdad55 <<<What do you do when the government goes bankrupt?>> As we approach that point it would probably be best to cash out the 401(k), pay the taxes and buy precious metals, perhaps stored in a safe deposit box on Switzerland.> board the boats and head for the 'new land' like they did 600 years ago. If the givernment goes caput - tata Social security - and with banks collapsed and 401K gone - I'm figuring Armageddon starts in the streets of our cities.
Originally Posted By mawnck Pelosi was on the radio just a little while ago saying they're still negotiating the bill, and ain't no way Paulson is getting the kind of power that was in the leaked version. Just FYI. I'll withhold comment until I see what they come up with.
Originally Posted By gadzuux >> I'm figuring Armageddon starts in the streets of our cities. << I heard on the radio this morning (stephanie miller show) that national guard reserves are being readied for just that eventuality.
Originally Posted By vbdad55 <>> I'm figuring Armageddon starts in the streets of our cities. << I heard on the radio this morning (stephanie miller show) that national guard reserves are being readied for just that eventuality. < sadly that doesn't surprise me...
Originally Posted By Mrs ElderP I haven't read all the posts, so I don't know if someone else has mentioned this, but it is heartening that neither the Senante or the House banking committees are swallowing this whole. Nobody in Congress likes it that there are bound to be plenty of adjustments. Have you guys already discussed that the fed did something similiar to this 20ish years ago in the Savings and Loan Scandle? It was on a smaller scale, and there was no debate on the price of the distressed assests, two major differences, but it has been tried before. That being said I personally believe that there will be an end of the world sometime. Maybe this is it. Probably not though.
Originally Posted By gadzuux Even Newt Gingrich is opposed to this bailout, and he makes an interesting point. What if it doesn't work? What if wall street 'collapses' even with the $700 billion bailout? What then? We're still in the same boat, except that $700 billion of the american people's money has now been sucked into the maw. Maybe it's better to let these failures occur WITHOUT the $700 billion. It may be inevitable anyway. And here's the part that I don't get - what reasons are Paulson and the bush administration giving for resistance to limitations on executive compensation? The best I can figure is that the CEO's might not go along with the bailout plan if it contains compensation limits. Fine - let them fail. We're GIVING them cash money; it doesn't seem like they're in a position to negotiate. Yet they're practically issuing an ultimatum that either we give them tens of millions of taxpayer dollars as SALARY, or they won't play. It seems crazy, but it's emerging as one of the major sticking points on capitol hill. Which shows just how brazenly corrupt the GOP is. As if we didn't know already.
Originally Posted By mawnck >>It seems crazy, but it's emerging as one of the major sticking points on capitol hill. Which shows just how brazenly corrupt the GOP is.<< Worth noting though ... a lot of the "stuck" congressmen are Republicans. This is clearly an equal opportunity fiasco. Was perusing www.fool.com , and they sound just like the Market Ticker guy. Yeowch.
Originally Posted By Mr X Here's a silly question, if things were as incredibly dire and dangerous as Paulson and Bernanke claimed (DAYS from armageddon, if they were to be believed) and this bailout is so necessary, why did Warren Buffet just invest five BILLION dollars in Goldman Sachs? Did he suddenly go from the most conservative guy in the room to a reckless day trader type overnight or something?
Originally Posted By fkurucz <<Have you guys already discussed that the fed did something similiar to this 20ish years ago in the Savings and Loan Scandle?>> It was similar but much, much smaller in scale. Also John McCain was heavily involved in the scandal. He was one of the Keating 5. He got off the hook, but 3 other Senators saw their careers end because of their involvement.
Originally Posted By RoadTrip I would really like to know who is zooming who on this one. Just as recent analysis shows that the surge in oil prices was NOT due to supply and demand, but because of speculation; I suspect the same thing is going on in the credit markets. Someone out there is making big money by watching these companies choke. Nothing else makes any sense. The foreclosure rate is not that high. As of September 1.19% of U.S. mortgages were in foreclosure. Source: <a href="http://www.hispanicbusiness.com/news/2008/9/5/us_home_foreclosure_rates_reach_new.htm" target="_blank">http://www.hispanicbusiness.co..._new.htm</a> Estimating that the average home remains in foreclosure about 9 months and that this has been going on for about three years, that means lenders have had about 2.68% of their mortgages go into foreclosure during the real estate collapse. So what? Even after foreclosure the lenders are probably going to recover 50% of the original loan, which means they are writing off about 1.35%. Why would that make anyone go belly up? I'm sure someone who knows such things will tell me that the problem is that the majority of that 1.35% of worthless paper is held by just a few firms, and that constitutes a HUGE problem for them. Too bad. They were stupid... screw them. There must be enough firms around that DIDN'T buy worthless paper that there should still be plenty of credit available. I originally thought we had to do SOMETHING and supported the bailout. No more. It just doesn't pass the smell test. Let the bad firms go belly up and let the remaining firms serve our credit needs. What this country needs more than anything is to get the crappy companies out of play. Right now investors wonder "who's next" and even the good companies suffer because of the bad ones. Let the bad ones fail. In fact MAKE THEM FAIL NOW!! The sooner they are gone the better.
Originally Posted By Mr X ***Just as recent analysis shows that the surge in oil prices was NOT due to supply and demand, but because of speculation; I suspect the same thing is going on in the credit markets. Someone out there is making big money by watching these companies choke.*** Well, you can't blame it on the short seller scapegoats anymore, that's for sure. Financials collectively crashed some 10% in the 2 days following the short selling ban. So much for the theory that it was the short sellers mercilessly driving these companies into the ground. Nope, they did it all themselves. Clearly.
Originally Posted By mawnck Our President will be addressing the nation this evening to reassure us or scare the pants off us or something. So everything should be OK.
Originally Posted By Sport Goofy << Nothing else makes any sense. The foreclosure rate is not that high. >> Foreclosures are a symptom, but not a cause of the problem. The root of the problem is the rapid decline in home prices. All these mortgage lenders make bets based on the idea that home prices never decline. They are allowed to structure their balance sheets based on a philosophy that the assets backing up the debt will not likely ever become worthless than the debt. That is not the case right now. Whether the mortgage is in foreclosure or not, all these banks and investors are now holding debt instruments that are worth far more than the value of the assets that are supposed to back them up. As real estate prices continue to fall, the balance sheet problem for these firms and investors becomes more severe. They can't just pretend that the value of the assets they are providing loans against hasn't changed and they have to reflect those paper losses on their books. This is ultimately what did in Fannie Mae and Freddie Mac, even though their loan portfolio was considered to be high quality and low on foreclosures. The news for the real estate market still isn't good. Data released today showed that existing home sales declined from July to August -- a period where it historically rises. There is still an inventory of unsold homes in excess of 10 months on the market. Until the inventories come down to a reasonable level below 6 months, there is little chance for price stabilization. As prices continue to fall, the debt instruments backing up the real estate market become riskier and riskier bets. Add to that the reality that unemployment is rising, a large portion of the U.S. population is moving to fixed incomes, and lending standards have tightened significantly, and you end up in the bad situation that we are now seeing. Its difficult to see a way out of this problem that doesn't involve some amount of pain for both investors and homeowners as house prices reset and people have to start living within their means.
Originally Posted By fkurucz What makes the foreclosure problem worse is the average loss. Its one thing when a bank loses 10-20K on a foreclosure, and quite another when it loses 100-200K. Also, we have an economy that has become very dependent on real estate churn. When prices went too high and started coming back down the churn pretty much slowed down.
Originally Posted By Sport Goofy << Also, we have an economy that has become very dependent on real estate churn. >> Debt churn in general, really. Otherwise known as a Ponzi scheme.
Originally Posted By fkurucz ^^Right, and the house as an ATM was the enabler for the debt churn. <<The root of the problem is the rapid decline in home prices. All these mortgage lenders make bets based on the idea that home prices never decline.>> That's the problem with over leveredging. It doesn't take much of a decline for everything to unravel.
Originally Posted By vbdad55 <Even Newt Gingrich is opposed to this bailout, and he makes an interesting point. What if it doesn't work? What if wall street 'collapses' even with the $700 billion bailout? What then? We're still in the same boat, except that $700 billion of the american people's money has now been sucked into the maw. < I'm not a huge fan of the bailout either - but I do believe $700 B might seem like small change if Wall Street fails - the far reaching implications of that are devastating. Now will it work - we all better hopeso. Start putting you money in the mattress again - it might be the only safe place.
Originally Posted By fkurucz By money, do you gold coins? I have my doubts that those paper green rectangles will be any safer. Oh, and some more good news: Chinese banks told to halt lending to US Banks… <a href="http://www.reuters.com/article/marketsNews/idUSPEK16693720080925" target="_blank">http://www.reuters.com/article...20080925</a> I thik we are going to have a financial Three Mile Island no matter what the gov't does.
Originally Posted By Mr X But I LOVE those paper green rectangles! (great way to put the paper into perspective by the way! funny how important mere paper can be to so many people...when the country behind it falters...it just becomes so much paper right?) The China thing is a bad thing, to be sure. I'm sure there is some saber ratting behind it, but they don't scare me. China ain't all that...yet. Look behind the scenes at what JAPAN is doing right now...THAT'S the true economy of Asia, and as long as Japan is backing the US (and they are), things are okay on the far eastern front. When they decide not to though...watch out!
