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Drew Dowdell

Oh isn't that rich......

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Now Wall Street may shun $700bn bail-out

Fears are mounting that many Wall Street banks and financial firms will refuse to participate in the US government's $700bn bail-out package, leaving global markets and world economies in a perilous state for months to come.

'There is a growing feeling that banks ... might instead decide to tough it out,' said Thomas Caldwell, chairman and CEO of Caldwell Financial, a $1bn-plus fund manager.

For the past two weeks all eyes in the market have been focused on US Congress and its attempts to pass Treasury Secretary Henry Paulson's bail-out package - a bill to allow the US government to buy up to $700bn of toxic mortgage-related assets from American banks, which would in theory free the credit markets and set the gears of global commerce spinning once more.

Last Monday, after the bill was thrown out by the House of Representatives, more than $1 trillion was wiped off the value of US stocks as the market was gripped by panic. The bill was passed on Friday afternoon, however, after the inclusion of $149bn of tax breaks and strict rules for participating banks.

But Wall Street analysts, believe the addition of so many terms to the bill might deter potential participants.

One of the least attractive elements is a section designed to curb executive pay at banks that participate in the bail-out package. These include limiting stock-related pay and banning 'golden parachutes' for executives.

'I think this hodge-podge of regulations and rules will be enough to put many [chief executives] off participating,' Caldwell said.

Sources close to Goldman Sachs and Merrill Lynch indicated the banks might choose not to participate in the bail-out as there is a growing view on Wall Street that the market may be bottoming out.

Analysts also believe that the mere presence of the government as buyer of last resort will be enough to get credit markets moving again, and that a large number of banks would not need to take part for the legislation to succeed.

Wall Street ended its worst week in seven years with another tumble on Friday. The Dow Jones Industrial Average closed down more than 157 points on Friday at 10,325.38.

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No surprise there, they've already made their money.

That's fine though.

IMO, the government should 1) make it mandatory for the banks to be regulated (deregulation is what screwed this countrys economy over in the first place. A lack of oversight) or 2) Just mail taxpayers a check for the amount that the banks will not use based on not participating.

I for one will be sure to buy my major purchases with cash from now on and I hope most other americans will to. That way, the bloat in the credit side will die off anyway.

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No surprise there, they've already made their money.

That's fine though.

IMO, the government should 1) make it mandatory for the banks to be regulated (deregulation is what screwed this countrys economy over in the first place. A lack of oversight) or 2) Just mail taxpayers a check for the amount that the banks will not use based on not participating.

I for one will be sure to buy my major purchases with cash from now on and I hope most other americans will to. That way, the bloat in the credit side will die off anyway.

In more ways than one we'll be forced to reacquire the ethics and thrift of our parents and grandparents. In my opinion it was easy credit and the ceaseless quest for endless growth on the 'Street and elsewhere that has mainly caused the house of cards to collapse. Every thing that we clung to for the past 30 years is recalibrating in light of the new reality.

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Let's play a game, based on news I heard on TV yesterday: who spent 400K on holidays at their company's expense just days after their company was bailed out?

Edited by ZL-1
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After we take the unused money off the table, we should regulate the hell out of them anyways! The middle class can strike back too!

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1) make it mandatory for the banks to be regulated (deregulation is what screwed this countrys economy over in the first place. A lack of oversight)
Uhmmm no. Banks are still heavily regulated. Fannie Mae and Freddy Mac, somehow, managed to escape greater government regulation DESPITE being backed by the damn government, due to the fact that they are not really a "bank" per-se they aren't regulated as such (despite efforts to get some regulation on them in 2004 before the worst of the worst of these subprime securities, which, apparently Barney Frank believed was a republican plot to keep low income people out of homes <_< .)

DO you realize how bad of a situation we would be in if glass-segal was not repealed? Many of the current bank buy-outs would not have taken place because it would have been illegal for them to have done it. The deregulation has NOTHING to do with Fannie Mae and Freddy Mac + other investment bankers securitizing these mortgages. The FDIC would be bankrupt due to all the bank closures (with far fewer assets being bought out due to regulations) and people would have even less faith in the system than they do now. We would be staring at thousands if not millions of people who would have FLAT OUT LOST their savings instead of now being with a new company.

2) Just mail taxpayers a check for the amount that the banks will not use based on not participating.

Right cause massive inflation is exactly what we need right now yeah?

We will be seeing another FDR style massive government spending era but with no massive WW3 at the end to finally bail us out. Our deficits will be astronomical and our economy will putter along at very low rates until finally the government of the US of A goes bankrupt. T-bills will be worthless and even those who "play it safe" with their retirement will be screwed.

Edited by Teh Ricer Civic!
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After we take the unused money off the table, we should regulate the hell out of them anyways! The middle class can strike back too!

And the bankers can strike back again by not giving you a loan, and if they are further regulated they can always just close shop and pay out to all the stockholders. ^_^

Over regulation will lead to FAR more hurt than help.

Let's play a game, based on news I heard on TV yesterday: who spent 400K on holidays at their company's expense just days after their company was bailed out?

Well sure, what else would AIG use the bail-out money for? Their CEOs gotta be compensated somehow!

In more ways than one we'll be forced to reacquire the ethics and thrift of our parents and grandparents. In my opinion it was easy credit and the ceaseless quest for endless growth on the 'Street and elsewhere that has mainly caused the house of cards to collapse. Every thing that we clung to for the past 30 years is recalibrating in light of the new reality.

Not so much that it is a problem of having to 'reacquire' it as for LOSING it in the first place. If more Americans had more savings we wouldn't be in this problem (of course the economy probably wouldn't be quite as large but that's another argument).

Mostly playing fast and loose with money and credit for the last 16 years has led to this housing bubble and the simultaneous subprime crash. This same exact overabundance led to the Great Depression and trying to fix it with more credit, while it may work, does a really terrible job of fixing the underlying problems.

Edited by Teh Ricer Civic!
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more regulation just makes it's easier for the wealthy to "make more money", control things.

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We will be seeing another FDR style massive government spending era but with no massive WW3 at the end to finally bail us out. Our deficits will be astronomical and our economy will putter along at very low rates until finally the government of the US of A goes bankrupt. T-bills will be worthless and even those who "play it safe" with their retirement will be screwed.

Yeah, you might want to check out the world news....things are falling apart everywhere (banks going of business out all over the world) If something is not done in the US in the next few months, things will really fall apart in other parts of the world.

Then WWW III will be just years away....sad, but when things really go bad- the worse that happens will not start here.......

Granted, things really will suck here....

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Disgusting! [expletive] Selfish! $@%#&*! :explode:

For the record I'm still on the fence about the bailout myself, but this is just (censored)!

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Politicians are between a rock and a hard place here. The crisis was caused by excessively easy credit, in the name of making housing "affordable". Of course what it really did was make it possible for people to pay even more for houses until it got out of control and a) new borrowers could no longer afford the inflated prices and b) existing borrowers could not repay the loans. With foreclosures and losses on bad loans credit started drying up, causing house prices to fall. The more they fell, the more the losses accelerated, so that now with prices within reach people still cannot borrow. People start walking away from mortgages that are worth far more than their properties, and the losses accelerate. Unbelievably right now I am listening to an ad for a lender promising to lend 95% of he property value. Some people never learn I guess. This was not a Bush policy as Obama keeps saying (a blatant lie), it is a global policy encouraged by governments worldwide for the last 20 years or so as a stupid attempt to make housing available to new buyers as prices increased, and to encourage investors using tax incentives to increase the housing supply. Parties of all stripes worldwide have been guilty of the same bad policies for decades, and I notice Obama has never said he will do anything different (except blame Bush). Both candidate's promise to "stabilize" home values is the wrong idea. It was trying to keep house prices from stalling that got us into this mess, and their largely unspecified strategies have not included included anything to solve it. McCain's suggestion of buying and renegotiating mortgages to reflect lower property values is a nice gesture, but not a solution.

There is a solution, but it is one that no politician will ever propose, because it will hurt existing homeowners, property investors and landlords who have already paid way to much for their properties, or were counting on a nice profit before the crash in prices; worry new buyers wanting to borrow as much as they can, and cripple the budgets of local governments dependent on property taxes. To avoid the bubble, stabilize prices, and keep housing affordable there is only one solution—strictly regulate what people can borrow, and remove all tax incentives for property investors (property investing is nothing but a giant ponzi scheme which has just blown up in the faces of anyone who came in too late, as it always does—like most scams it deserves to be heavily penalized and regulated). House prices have nothing to do with supply and demand. Demand for housing is just as high or higher as it has ever been, and the supply of new homes is lower than ever as construction collapses. The price falls because people are no longer willing or able to pay excessive prices. Such strict regulation on what people can borrow will never happen, not because it's a bad idea, but because very few voters will appreciate what it does, and most of those that do will won't like it. They want their property values to recover, not be stuck at levels 30–50% below what they are repaying. Mortgage brokers, realtors and bank managers won't like it, not because their profits will be hurt, but because lenders' and brokers' commissions will suffer. Developers won't like it because the capital gains they have enjoyed won't be as high. But it means that new buyers can actually enter the market and buy a nice house without overextending. Bad loans will decline, improving profitability at the expense of revenue. The construction market will recover, even if developers won't enjoy the same profits, enabling builders to raise employment and increase spending on equipment and materials. Rents will decline, allowing people to save more and get into the housing market sooner.

Oh and for property investors, oh it sucks to be part of a giant ponzi scheme when it crashes down, doesn't it? I have no sympathy for anyone who pushed up property values beyond the reach of real home buyers and then milked them for higher and higher rents. The greedy bastards and the promoters who encouraged them should go to prison like any other con artist.

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And the bankers can strike back again by not giving you a loan, and if they are further regulated they can always just close shop and pay out to all the stockholders. ^_^

Over regulation will lead to FAR more hurt than help.

Well sure, what else would AIG use the bail-out money for? Their CEOs gotta be compensated somehow!

Not so much that it is a problem of having to 'reacquire' it as for LOSING it in the first place. If more Americans had more savings we wouldn't be in this problem (of course the economy probably wouldn't be quite as large but that's another argument).

Mostly playing fast and loose with money and credit for the last 16 years has led to this housing bubble and the simultaneous subprime crash. This same exact overabundance led to the Great Depression and trying to fix it with more credit, while it may work, does a really terrible job of fixing the underlying problems.

The unquenchable thirst for endless growth exhibited by retail and banking drove the upward spiral in credit. I expect the fallout from this to last for a generation. Reaganomics is dead. Trickle-down misery is the order of the day and for the foreseeable future.

Hyper-educated people are standing around numb with shock and lacking the first clue as to what to do. For certain we can't go back to the way it was. We're no longer the powerhouse we were coming out of the Second World War.

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Yeah, you might want to check out the world news....things are falling apart everywhere (banks going of business out all over the world) If something is not done in the US in the next few months, things will really fall apart in other parts of the world.

Then WWW III will be just years away....sad, but when things really go bad- the worse that happens will not start here.......

Granted, things really will suck here....

WWII caused increased capital expenditure, 180% employment rates, increasing savings and investment in war bonds and restricted frivolous expenditure. such conditions are not going to happen again even in a war situation. You're in one now, do you think it is helping?

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The unquenchable thirst for endless growth exhibited by retail and banking drove the upward spiral in credit. I expect the fallout from this to last for a generation. Reaganomics is dead. Trickle-down misery is the order of the day and for the foreseeable future.

Hyper-educated people are standing around numb with shock and lacking the first clue as to what to do. For certain we can't go back to the way it was. We're no longer the powerhouse we were coming out of the Second World War.

Its not so much the quest for continued growth, it is the government (generally) turning a blind eye to the housing bubble all in the name of getting lower income people into homes (plus all the house flippers but they weren't the intended recipients).

The housing market really needs to continue to sink down to their actual market value when it finally hits equilibrium prices should generally be lowish and far more stable, and... guess what... lower income people will be able to afford homes!

Reaganomics itself have very little to do with this particular situation. Besides, you realize that if it weren't for low tariffs etc etc, that stuff would cost more? Sure wages may have stagnated a bit, but stuff adjusted for inflation is still cheaper now than it used to be in several cases (food not withstanding but that's due to other causes).

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I just read today that Canada's banks were ranked safest in the world by the World Economic forum :CanadaEmoticon:

Sweden, Luxembourg, Australia and Denmark were next.

Britain fell to 44th - behind El Salvador and Peru. Now THAT"s embarassing!

The U.S. was 40th, with Germany at 39.

EEK.

I guess that's why my other half yanked all of his savings out of mutual funds and stuffed them under the mattress last night. :AH-HA_wink:

Kind of a lumpy sleep.

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I guess that's why my other half yanked all of his savings out of mutual funds and stuffed them under the mattress last night. :AH-HA_wink:

Hmmm, so he is contributing to the crisis eh? Oh well cant blame him. I feel sorry for all the poor sap investment bank/hedge funds/ whatever that bought freddy and fannie securities because they were "safe" and backed by the government.

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Politicians are between a rock and a hard place here. The crisis was caused by excessively easy credit, in the name of making housing "affordable". Of course what it really did was make it possible for people to pay even more for houses until it got out of control and a) new borrowers could no longer afford the inflated prices and b) existing borrowers could not repay the loans. With foreclosures and losses on bad loans credit started drying up, causing house prices to fall. The more they fell, the more the losses accelerated, so that now with prices within reach people still cannot borrow. People start walking away from mortgages that are worth far more than their properties, and the losses accelerate. Unbelievably right now I am listening to an ad for a lender promising to lend 95% of he property value. Some people never learn I guess. This was not a Bush policy as Obama keeps saying (a blatant lie), it is a global policy encouraged by governments worldwide for the last 20 years or so as a stupid attempt to make housing available to new buyers as prices increased, and to encourage investors using tax incentives to increase the housing supply. Parties of all stripes worldwide have been guilty of the same bad policies for decades, and I notice Obama has never said he will do anything different (except blame Bush). Both candidate's promise to "stabilize" home values is the wrong idea. It was trying to keep house prices from stalling that got us into this mess, and their largely unspecified strategies have not included included anything to solve it. McCain's suggestion of buying and renegotiating mortgages to reflect lower property values is a nice gesture, but not a solution.

There is a solution, but it is one that no politician will ever propose, because it will hurt existing homeowners, property investors and landlords who have already paid way to much for their properties, or were counting on a nice profit before the crash in prices; worry new buyers wanting to borrow as much as they can, and cripple the budgets of local governments dependent on property taxes. To avoid the bubble, stabilize prices, and keep housing affordable there is only one solution—strictly regulate what people can borrow, and remove all tax incentives for property investors (property investing is nothing but a giant ponzi scheme which has just blown up in the faces of anyone who came in too late, as it always does—like most scams it deserves to be heavily penalized and regulated). House prices have nothing to do with supply and demand. Demand for housing is just as high or higher as it has ever been, and the supply of new homes is lower than ever as construction collapses. The price falls because people are no longer willing or able to pay excessive prices. Such strict regulation on what people can borrow will never happen, not because it's a bad idea, but because very few voters will appreciate what it does, and most of those that do will won't like it. They want their property values to recover, not be stuck at levels 30–50% below what they are repaying. Mortgage brokers, realtors and bank managers won't like it, not because their profits will be hurt, but because lenders' and brokers' commissions will suffer. Developers won't like it because the capital gains they have enjoyed won't be as high. But it means that new buyers can actually enter the market and buy a nice house without overextending. Bad loans will decline, improving profitability at the expense of revenue. The construction market will recover, even if developers won't enjoy the same profits, enabling builders to raise employment and increase spending on equipment and materials. Rents will decline, allowing people to save more and get into the housing market sooner.

Oh and for property investors, oh it sucks to be part of a giant ponzi scheme when it crashes down, doesn't it? I have no sympathy for anyone who pushed up property values beyond the reach of real home buyers and then milked them for higher and higher rents. The greedy bastards and the promoters who encouraged them should go to prison like any other con artist.

And people accuse car salesmen of being crooks! Wouldn't it be nice if I could write my own deals, send the credit app to my 'buddy' at the bank, loan my customer money for his car and his boat (on the same deal) and split the $5,000 commission, while neither his bosses or mine bother to oversee the deal? Why would they? They get paid on the 'bottom line,' too.

It seems to me that some very simple, straight forward accounting rules were 'over looked.' There should be quite a few people in jail over this.

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Hmmm, so he is contributing to the crisis eh? Oh well cant blame him. I feel sorry for all the poor sap investment bank/hedge funds/ whatever that bought freddy and fannie securities because they were "safe" and backed by the government.

Yeah, well, things were a little tense in the Carbiz household last night: we have both our investments in the same funds, so I wasn't amused that by his cashing his in, my funds would drop even more. I guess he has seen this kind of thing in Brazil before and is a little 'gun shy.'

Me, I figure the time to panic is over. The time to drink heavily is upon us. Gawd knows I can't afford coke any more.... :lol:

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Its not so much the quest for continued growth, it is the government (generally) turning a blind eye to the housing bubble all in the name of getting lower income people into homes (plus all the house flippers but they weren't the intended recipients).

The housing market really needs to continue to sink down to their actual market value when it finally hits equilibrium prices should generally be lowish and far more stable, and... guess what... lower income people will be able to afford homes!

Reaganomics itself have very little to do with this particular situation. Besides, you realize that if it weren't for low tariffs etc etc, that stuff would cost more? Sure wages may have stagnated a bit, but stuff adjusted for inflation is still cheaper now than it used to be in several cases (food not withstanding but that's due to other causes).

We'd have kept better paying jobs here. Appreciation will be a concept not associated with real estate for some time to come. Flippers or not. A home will be where one lives. We might even reacquaint ourselves with being thrifty.

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We'd have kept better paying jobs here. Appreciation will be a concept not associated with real estate for some time to come. Flippers or not. A home will be where one lives. We might even reacquaint ourselves with being thrifty.

Okay but lets say you make $60,000 now and your bills comes to lets say $54,000 leaving $6,000 after tax income for you to freely dispose. Which is 10% of your wage. Now lets say that we didn't have globalization, you would be making $75,000 a year and your expenses run you $67,500 because stuff is more expensive, that still leaves 10% or $7,500 left of disposable income, but because stuff costs more you really have not gained anything.

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You get what you pay for.

What good are cheap goods when cheap goods are JUNK!?!?!?

If had the $$$ I'd gladly buy a Cadillac CTS like yesterday.

If there was a Chinese knock-off of said Cadillac available

for such short change I could afford it, but with the obvious

and unavoidable quality/content discrepancy I would NOT

buy it no matter how tempting the price.

Perfect example:

My pregnant wife has gone through THREE defective instant

thermometers in her complicated and semi-dangerous pregnancy.

THREE.

Not one of them worked well.... or honestly AT ALL!!!

So am i happy to be abe to purchase this seemingly complex

and futuristic device for as cheap as $6.99?

F#%$ NO!

I' pretty sure my wife's and my baby daughter's LIVES are worth

more than a $10 or $20 dollar savings!

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Okay but lets say you make $60,000 now and your bills comes to lets say $54,000 leaving $6,000 after tax income for you to freely dispose. Which is 10% of your wage. Now lets say that we didn't have globalization, you would be making $75,000 a year and your expenses run you $67,500 because stuff is more expensive, that still leaves 10% or $7,500 left of disposable income, but because stuff costs more you really have not gained anything.

10 million plus are looking for work now. Three-quarters of a million since January. With the turmoil, a million by Thanksgiving perhaps. Jobs. Let prices settle and fix themselves. Still need work for the people. The Chinese maintain a stand-by workforce equal to the population of this country.

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Okay but lets say you make $60,000 now and your bills comes to lets say $54,000 leaving $6,000 after tax income for you to freely dispose. Which is 10% of your wage. Now lets say that we didn't have globalization, you would be making $75,000 a year and your expenses run you $67,500 because stuff is more expensive, that still leaves 10% or $7,500 left of disposable income, but because stuff costs more you really have not gained anything.

But whose job adds more 'value' to an economy: a banker on Wall Street or a guy turning a wrench making a washing machine? That is the rub: all of the job creation here in the past 15 years have been in the 'service sector,' which widely covers everything from the gal at Starbucks to an anaylst on Wall Street.

I think we are seeing how ethereal these paper-pusher jobs truly are: they are mostly smoke and mirrors. A nation cannot eat paper. Globalization is great, but one has to assume all nations are on equal footing and have the same goals in mind. Anyone who believes that has been drinking their own bong water. Great nations need to maintain a degree of self-sufficiency.

A North American Common Market could literally tell the rest of the world to f$#k off. We have everything we need right here. We don't need to drag it from half way around the world. The only reason globalization exists is because we are told that it is good for us. Good for who? The CEO of Coca Cola and ING Bank, to be sure - but to the common person? We are seeing the benefits of globalization right now.

WE WERE LIED TO. This market collapse was not supposed to be possible, we were told. Well, boys and girls: fasten your seatbelts. You ain't seen nothing yet. Pretty soon we are going to look back at the early '80s as the good ol' days.

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Actually... as a preview to a thread I'm probably going to be making in a few days. We are very near the bottom. We'll have "dead cat bounce" till January 2. Stocks will probably rise again in the beginning of 2009 till the retail numbers come out... we'll have a short drop followed by growth again into the rest of 2009. Credit should start to thaw around March 2009 with home and car sales picking up shortly after.

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