Originally Posted By Mr X A rather kooky (but kinda makes you go "hmm?") theory is making the rounds regarding the TRUE reason for the panic and gigantic bailout attempts of last week. With all these other banks in trouble, it DOES bring up an interesting question..is the Fed itself the one facing insolvency? After all, it's just another bank. (well, just like Freddie and Fannie were "just another lender", but still...)
Originally Posted By vbdad55 who audits them ( that actually would release results ) ? Would we ever know...short of a catastrophic failure..?
Originally Posted By vbdad55 print a little more - slide it in here, cover it up there ..... who the heck would know unless we stopped making foreign debt payment ? You're dead on
Originally Posted By Sport Goofy This latest move is all about politics and GWB's efforts to not have a recession on his watch. They've already played the shell game with the stimulus checks and manipulating the GDP deflator figures. GWB only has one more quarter left in the White House and there was no more stimulus or other games to play. So, they are using scare tactics to force another round of government spending through Congress that will be dumped into the economy this quarter before the election and before Bush leaves office. That's not to say that action isn't required by Congress, but just dumping good money after bad isn't going to solve the problem and will probably just make matters worse in the long run -- and worse for whoever inherits this mess next year.
Originally Posted By vbdad55 AmI mistaken orhasn't Obama already suggested another round of stimulus payments ? Wouldn't that qualify also as another political move ? I don't think either it totally comfortable with this bail out plan - but neither seems to have the answer either.
Originally Posted By Mr X I'd rather see stimulous checks in the hands of Americans than bailouts in the clutches of irresponsible criminals. But I agree, nothing at all would be best. LET the market sort out this mess. Crash and burn, and then be done with it (and rid ourselves of the scumbags that made this mess possible in the first place once and for all...no bailout, no parachute, no NOTHING). When that happens, we can all happily reinvest.
Originally Posted By SingleParkPassholder Another opinion: <a href="http://money.cnn.com/2008/09/23/news/paulson_blank.fortune/index.htm?cnn=yes" target="_blank">http://money.cnn.com/2008/09/2...?cnn=yes</a>
Originally Posted By EighthDwarf The Fed can't fail unless the entire world economy fails. They raise money by borrowing it from U.S citizens and the rest of the world. And considering the U.S. is still the strongest economy in the world, there is virtually no risk that they can't raise significant capital at the blink of an eye. What they are trying to do is keep the financial sector liquid as only they can - they are best able to raise capital quickly and infuse it into the banking system. Fear of liquidity could cause a run on the banks, which is the last thing they (or anyone for that matter) want. And as far as stimulus goes....what we need now is something to shore up real estate. I would like to see a tax credit for home buyers. If they meet the banks' new lending standards I think the government should invest in them. That could lead to rising home prices if demand picks up. Stimulating the real estate market is the best way to shore up the banks' balance sheets. Sending people checks in the mail is purely a political move. It's like the Caesers launching bread to the crowds in the Colliseum. Appeasing the mob is a very short-term fix and I think we can do better.
Originally Posted By Mr X Good article Passholder..thanks. **I'm extremely worried about this plan," said Steil. "This looks like something cobbled together in a panic."** Ya think? The whole mess about banning short selling is biting them in the ass, by the way...anyone think that near 400 point drop was caused by the scapegoats? Think again. They were out of play. And yet the financials collectively shed 8 percent. Some banks were more harmed than others, some to the tune of 20-30 percent...and NONE by short selling thanks to the new rules. Oh, and liquidity dried up right quick. I think the volatility will only get much more extreme in days to come. I can only assume the "up" days will be extreme on the heels of house and senate acceptance of the "King Hank" bill, and other days will be increasingly down...and worse than necessary given the absence of short sellers keeping things liquid. Just a theory.
Originally Posted By Dabob2 Another good piece on this. <a href="http://www.newsday.com/news/opinion/ny-oppri235854039sep23,0,2527116.story" target="_blank">http://www.newsday.com/news/op...16.story</a> "The Commodity Futures Modernization Act of 2000, passed late one December session by former Senate Banking Committee chairman Phil Gramm (R-Texas), deregulated the privately traded credit derivatives and swaps market. These derivatives have dangerously intertwined with mortgage-backed securities, and require the creditworthiness of the financial institutions that trade them to remain stable. (AIG is an example of one that didn't, and we know how that turned out.) Also, the Gramm-Leach-Bliley Act of 1999 - navigated by Gramm and cheerled by former Treasury Secretary Robert Rubin, who served under President Bill Clinton - repealed those 1933 protections and made it possible for investment banks, insurance companies and commercial banks to merge without requiring greater regulation. Today's mess is a direct result of these two acts." Thank you, Phil Gramm - McCain's top economic adviser. Is that who we want running our economy soon? "To steer this ship, Congress has to bone up on finance - if members don't know what CDOs (collateralized debt obligations) and credit derivatives really are, they can't understand the risk they have incurred on behalf of American taxpayers, and they'll be ill-prepared to evaluate Paulson's plan. And Congress must then regulate credit derivatives and the banking industry. The goliath Bank of America-Merrill Lynch will take months to decipher. Goldman and Morgan's buying up smaller banking players - which they will - will add to the murkiness. None of this stabilizes the system. Instead, it sets it up as a bigger problem to solve later. If our representatives in Washington are serious about fixing the problems that Wall Street has caused, they will shoot the roots of deregulation, not just the messenger of subprime-lending malpractice, or the toxic waste manufactured by Wall Street. Congress also shouldn't let Paulson anywhere near the management of the buyout fund - and frankly, shouldn't feel compelled to approve a $700 billion bailout without strong regulatory protections for American citizens. But that requires a deeper understanding of the complicated mortgage and credit markets than Congress seems to have. Meanwhile, stay tuned for more bank mergers and instability, punctuated by rest periods where Wall Street inhales government money. Or, I should say, our taxpayer money."
Originally Posted By fkurucz <<The Fed can't fail unless the entire world economy fails. They raise money by borrowing it from U.S citizens and the rest of the world.>> It is my understanding that the Federal Reserve, like other central banks around the world, conjures money out of thin air. Now the Federal Gov't, yes they borrow money (by selling treasuries). My understanding is that the Fed cannot buy treasuries directlt from the gov't, but can buy them (and sell them too) on the open market, and that this is one of the mechanisms that the Federal Reserve uses to manipulate the money supply.
Originally Posted By fkurucz Anyway, I'm not sure that the Fed could ever become "insolvent" or "bankrupt". Of course what could happen is that it could go crazy "printing" money and send Uncle Buck into an inflationary death spiral. Of course in theory the Treasury Dept. could start printing money as well, but that would have to be backed up with something of substance (like Fort Knox perhaps). I'm not sure that the "full faith" of the US gov't would be enough.
