Bailout being rejected, thoughts?
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Bailout being rejected, thoughts?
| Mon, 09-29-2008 - 3:35pm |
Hi –
The bailout being rejected is not a good thing, it affects EVERYONE. Banks have no money, we have no money (generally speaking).
I was speaking with a co-worker that said the Democrats insisted the Parachute Clause be put into the plan otherwise they’d vote against it (keeping Exec’s from these millions of dollars) so that is why the Republican’s majority anyhow rejected it. They are so greedy and now they have cut their nose to spite their face.
Thoughts everyone?
SP

How many pounds of peanuts are consumed in the United States each year?
2.4 billion pounds! About 50% is consumed as peanut butter.


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Just like the Republicans, the Democrats don't vote as some dang block.
This was supposed to be a bipartisan issue.
Hi There! I'm new to this board, as I usually am not interested in such 'serious' stuff on the bds (I come to escape RL, as I work w/this stuff!) Just wanted to say 'bravo' for standing up for what you believe & posting on what is clearly a controversial & widely misunderstood issue.
I just want to make a few points -- some sort of rescue plan/bailout is absolutely essential!! I agree that the timing of the break is a bit unfortunate due to the Jewish holidays, but time is absolutely of the essence & we will see the world response tonight & tomorrow & Wed. in other financial markets. The saying, 'When America sneezes, the rest of the world catches a cold' -- accurately describes what we will see shortly, with the world economy. This is not just a problem affecting just Wall St. or well-paid corporate CEOs, and is not about rescuing rich people.
This is a Credit Crisis that truly will affect everyone, worldwide. We will see a lot of businesses go under due to the slowing economy & inability to borrow at reasonable rates. (So, businesses will see a slow down, generate less revenues, but still have real bills to pay like rent, salaries, insurance, etc. If people can't afford to pay their bills, it affects every one up and down the ladder. If businesses can't sell their products/services -- they will be making less revenue & profit & be forced to down-size which leads to layoffs -- & possibly bankruptcy.
The problems that the large banks & investment banks are having -- dates back to when interest rates were cut dramatically to encourage lending. Government oversight was reduced due to the Republicans intense lobbying towards deregulation. Banks reduced their lending standards & every one was happy to borrow much more than they could afford because the real estate markets were booming. People started borrowing against the growing equity in their homes & spent, spent, spent - hence, tons of credit card debt and inability to pay it down. Yes, the banks were at fault for offering these loans & the consumers were gambling that the markets would keep going up & they would be able to sell their properties for more than they owed. These days, a growing number of people owe more on their mortgages than their homes are worth. We will see many more people stop paying on these mortgages as they don't see themselves building any equity -- this is aside from those who will be unable to pay their bills due to job losses. The lending standards are getting stricter & the cost of business, of any kind, is going to go up.
The purpose of the bailout is to restore stability to the markets -- the U.S. cannot afford to alienate the rest of the world -- we need them to buy our treasury debt to fund the growing deficit! Right now, FEAR is running rampant. The bill was a bi-partisan effort with many hours of intense negotiations and hard work put into it. This was not something that was just slapped together in a couple of hours! No one thought this was going to be a 'slam dunk' to pass, however Wall St. did not anticipate that it would not pass, so the markets reflected this reaction. This crisis is unprecedented and there's a lot of things that are unknown, so the finer details need to be worked out in an evolving process. Until every bank's portfolio of mortgages & mortgage-related investments are looked at -- no one really knows the depth of the problem, nor how much money is going to be required to purchase these bad assets from the entities in trouble. There's no question that Congressional overnight is implicit in asking for this much money.
Just because the Dems hold the majority in Congress, doesn't mean that everyone piles on the bandwagon -- each Congressman has their own constituencies to think about & whether they are facing reelection this year or not. The Dems believed that there were something like 70 or some Reps committed to the bill. Clearly some of the Reps changed their mind when it came to vote. Finding a way to deal with this crisis was never solely one party's problem to solve. This crisis is very complicated, confusing -- with lots of moving parts. It was clear even at the Congressional hearings last week -- that many members of Congress had trouble understanding more than the basic issue -- so one can imagine the position they are in trying to explain to their constituents!! Another thing to keep in mind is that there were, as always, some pet projects that were thrown into the bill -- that alone makes me think that some people are not taking this crisis seriously, at all! That part is just politics at work, as usual!
Sorry to go on for so long!
Keep up the good work, peanut!
I think that there is a difference between the S&L's losses and these investment banks.
Sopal
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<Then why did some dems vote against it? >
Politics...their constituents don't approve of the bill.
Sopal
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Yes thank you.
Sopal, you're absolutely correct that it would have been 'cheaper' for the bailout plan to have passed in Congress than the meltdown in the financial mkts (which, BTW, has not seen the end of the suffering).
You're also correct that the S&L problem of the 80s & those of the investment banks are different. The S & Ls were making loans in a high interest rate environment, but were limited in how much interest they could pay to depositors. So, the depositors were taking their $ out of the banks & putting them in money mkt mutual fds to take advantage of the higher interest rates being paid there. So, the cheap source of funds dried up for the banks & then the banks were stuck with bad loans because the borrowers couldn't afford to pay when the real estate market fell (a lot of the loans were used to finance rental properties & other investment real estate that generated lots of tax benefits to the borrower, but highly leveraged transactions). The Resolution Trust Co. was established to take over all these properties that were owned by the bankrupt S&Ls. The RTC didn't have to pay anything for them because the banks were already gone. The RTC did profit, overall, when the real estate market recovered.
The investment banks, on the other hand, operate differently, in that they must borrow money every night in order to finance their trading operations. As soon as the cost of that credit goes up or no one it willing to lend at a reasonable rate, that puts the bank at risk because no one wants to do business with an entity whose credit worthiness is in question. Also, now there are so many esoteric investments that didn't exist back in the early 80s, so everything is more complex now.
I agree that something will be passed before the end of the week and the Federal Reserve will probably need to drop interest rates & keep pumping more money into the system, worldwide, to keep the credit markets alive.
Hbunny
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