Bush asks for US$700 billion bad debt bailout

[gsdx]

In case you didn't read this in the American news sites, it's in our news today and I thought it might be important:

Bush asks for US$700 billion bad debt bailout

In what is being described as part of the biggest bailout package in the U.S. since the Great Depression, the White House is asking Congress to allow the government to takeover US$700 billion in bad debts.


CTV.ca News Staff

If Congress approves the plan, a draft of which was obtained by The Associated Press early Saturday, it would give Washington broad power to buy bad mortgages of any American financial institution in the next two years.

The Bush Administration also wants to raise the legal limit on the national debt from $10.6 trillion to $11.3 trillion to allow for the bailout.

"We're going to work with Congress to get a bill done quickly," U.S. President George Bush said at the White House.

"This is a big package because it was a big problem," he said, although he did not refer to details of the plan.

Full Report: http://news.sympatico.msn.ctv.ca/ab...emid=CTVNews/20080920/congress_economy_080920

 

[star-warrior]

$700 billion to buy up bad debt - that's throwing good money after bad.

Vote Republican for more financial mismanagement.

 

[metta]

^
The US economy would have halted without government intervention. The govenment has not told the people how bad the financial crisis really is yet. I don't know if they are willing to do that before the election.

I'm glad that it is a Republican President that did it. The Republicans would have destroyed the future of the Democrats if a Democratic President did it. And either way, the govenment has to step in, or we are looking at way more than just a recession.

I do question whether it is Obama or McCain, whether they will be able to offer tax cuts now. Is that really a safe thing to do when we are looking at a debt of over $11 trillion dollars, with the threat of long term major inflation because of it. The dollar should fall more.

 

[Croynan]

If the administration had acted with force and determination in August or September of last year when all of this was surfacing they would not be in the position they are now.

their intervention into the market place should have occurred twelve months ago and regulations on wall street and the banking industry should have taken place years ago.

eM.

 

[metta]

^
Yes, we all knew this a long time ago. But the Repulican belef that the government should not interfere in business really bit us all in the butt.

I think that it shows the failure of the Republican belief (greed) system. (j/k)

 

[rareboy]

Along the way over the last ten years, a lot of pension fund managers, traders and executives pocketed at least 700 billion dollars in bonuses. Most of it is probably around their mistresses necks or moved offshore.

But after pissing away at least a trillion dollars in Iraq, why not spread the moolah around to mop up the economic debris at home as well?

The question is...will Americans take debt seriously now that Uncle Sam has demonstrated that all you have to do is boohoo enough and someone is always there to bail you out?

Scary times.

And the worst isn't over yet. If the international economy softens, get ready for real wreckage like the 30's.

 

[ejbonk]

With the loss of manufacturing jobs,the current price of crude oil,3rd world trade,and the de-regulation of every major industry,free trade(no job or industry is protected.)off-shore everything,but legal,and the end of any credit in the market-place.

The US has begun to slip into a Economic Depression to rival the GREAT DEPRESSION OF THE 1930's. This will set-off a World Wide Depression.
The Government had to do something to prevent a total world economic shut-down. AIG was so large and inter-connected to the World Wide Economy it had to be taken over by the Government to prevent a total Economic Disaster beyond most average peoples understanding.
Leman Bros was not that large,thus no government bailout.

Only the largest will be saved,to prevent Canada,Japan,India,China,The Middle East and The European Union from joining in a Depression that would be far worst than the one started on Black Tuesday,October 28,1929 and ending August 31,1939.With the Invasion of Poland.

 

[3stripes]

Yes, lets save big business from going to the wall.

Mom & Pop(s) and even members of JUB who have lost their homes already - tough titties the pres dont care about you (only his big business pals).

 

[ejbonk]

Either that or let Putin have his vision of the future.
> <

 

[cityboy-stl]

I hope this bailout works but I have my doubts. It will short term, but will make things worse long term if they don't address fundamental structural problems with the economy. This republican top heavy economic approach must end. Unrestricted free markets has meant nothing but unrestricted abuse. This idea of piling money on the top while eroding the middle class foundation is doomed to destroy the economy. Trickle down economics is a failure. All you get is a dribble in order to keep the gush coming in at the top. Mink coats don't shed. It all stays at the top. The foundation becomes so weakened with rising prices, debt, outsourced jobs and little opportunity, and the top runs amuck with abuse, that everything collapses. The top jumps off with their golden parachutes and We The People get crushed with the burden. That is exactly what happened. Further eroding the foundations of the economy with bailouts will only trigger a disastrous depression in a few years if they don't start taking a bottom up economic approach. End the cash bleed for the fucking war. Stop the outsourcing job bleed. Rebuild our manufacturing base and repair our crumbling infrastructure. Get energy prices under control; some good old-fashioned oil company trust busting wouldn't hurt either. Do something about health care and social security and our failing educational system. Strictly regulate the markets to control the abuses. Balance the budget. In short concentrate on rebuilding rest of the 90% of us; the top 10% can compete for their share.

This is the basic difference I see in our candidates. Obama has a bottom up philosophy that rebuilds the fundamental foundations of the economy and makes it work for all of us. McCain has the republican top heavy feed-the-rich from the bottom approach and hope they give us a few crumbs back.

If McCain is elected this top heavy approach will continue despite his lying rhetoric the past few days about regulation. This bailout will be like giving the economy a heroin injection. After a short term high, then will come a complete collapse and a bloody and violent depression that will make the 1930's look prosperous.

If Obama is elected and he follows through with his promise to rebuild the middle class I still see some tough times ahead but we will be in far better shape to weather it than otherwise. The bailout could turn out to actually be profitable for the American people if it is used to rebuild our society.

I am taking my chances with Barack Obama.


.

 

[ejbonk]

Beware My Son,never A Borrower Or Lender Be.

 

[Xenrai]

So how is going into more debt going to solve out current debt problems? It's like using a credit card to pay off your bills. Seems like they are simply trying to stave off the inevitable.

 

[star-warrior]

I'm glad that it is a Republican President that did it. The Republicans would have destroyed the future of the Democrats if a Democratic President did it. And either way, the govenment has to step in, or we are looking at way more than just a recession.

Why isn't the Democratic Party making any political gain out of this crisis?

Ah, that's right, the Dems control the House of Reps. Don't wanna shoot yourselves in the foot do you?

 

[gaypiper]

I think it's more than a bit ironic that the conservatives have led us into what is essentially socialized business and insurance.

 

[ejbonk]

Money that exsist only on paper has been making the World Go Round for a Very Long Time Now.

 

[ejbonk]

It just proves that old saying right.

"A man with a briefcase can steal more money from a bank,than a man with a gun."

 

[star-warrior]

There are 300 million Americans. If you each pay 100 dollars each every day of the year to the government, you can clear the $11,000,000,000,000 debt in one year. Or, if you pay $1 per day, every day, it'll take you a hundred years to clear the debt.

 

[gsdx]

As I was eating my dinner awhile ago, I recalled reading that the war in Iraq is costing the United States about $780 million per day. (I can't remember where I read it, so I can't cite the amount.)

Does that sound true or is it grossly exaggerated?

 

[jonboy1645]

I know that most of the headlines that point to this story refer to all the BAD debt that the treasury may/will be buying, but that's not exactly the case. The plans call for the Treasury to buy up mortgage backed securities from banks, brokerage, insurance companies. The BAD term is coming from this debt has been stuck on the books, and not tradable, for reasons to be discussed below.

There are lots of mortgage backed securities that are really gumming up the works of the credit markets. The main problem with these is that there is no real system to figure out the quality of the securities, estimate the default rate, figure out the value of the underlying collateral, and determine a price at which they should be bought and sold.

It's very obvious that the prices of these instruments are down, but without any guides to pricing, they can't be bought and sold, which holds up cash flows that banks, brokerage firms, and insurance companies, and others need to continue to operate. Note: in it's current form, this program is not out to help hedge fund speculators with Mortgage backed securities in their portfolio.

There are two main benefits if this government plan is implemented:

1) By the purchase of these securities, the cash generated would be used to run the financial companies. This allows them to pay their bills and helps them stay out of bankruptcy, or having to sell off parts of their company to raise cash

2) These mortgages are still due, and the treasury will be collecting back the money that they use to buy these up. And they are buying them at a discount - not dollar for dollar, likely through a reverse auction process. So for random example: Bank A needs to raise cash, and they hold $50 Million in mortgage backed securities that they can't figure out how to price, and find a buyer for on open market. They can bid to the Treasury - you can have them for $35MM. and Bank B needs money, has $50MM in mortgage backed securities, they call the treasury and say, you can buy these up for $32MM. Bank B get's bought. Bank A will have to come back to the next reverse auction. Throughout time, people are paying their mortgage best they can, and in that huge mortgage pack, say 20 percent default. Well, it's written in at $50MM, if there is 10MM default, then there is 40MM realized. Therefore, it is possible, actually probable, that when all is said and done 15-20 years down the road, the cost of this program could be negative - and the treasury could actually profit.

2a) Have you ever had something that you didn't know how much it was worth, so you looked it up on eBay to see what people are paying for it? Same benefit is likely to happen here. When companies see like in the example above, that 50MM in mortgages brought 32MM at the auction, it will help establish pricing - which will help these companies balance their books properly, and therefore run stronger because they have a better picture of the strength of the company.

There are risk concerns to be looked at also, and that list is long . .. the point I wanted to try to make is calling it "BAD" debt isn't correct in my professional opinion.

 

[jonboy1645]

As to the cost of the war in Iraq:

Depends on how you count:

Democrats.org says $195MM per day

Center for American Progress (liberal thinktank) $177MM per day

The number you are thinking of comes from American Friends Service Committee which judges the daily cost of the war in at 280MM and then another $440MM per day in "incurred but unpaid" costs - for example, long term health care for wounded - which added together comes to $720MM per day.