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| Tuesday, September 23, 2008 |
| Why $700 Billion? Why this week? |
The NYTimes is live blogging the bailout hearing currently underway in D.C. Here is a snippet of what was said recently: Next, Mr. Schumer proposed a staged bailout instead of one big one. How about doing this in stages, with, say, $150 billion now, and then come back in January and see how we’re doing?, he asked. Mr. Paulson said that he sought full authority up front, even though we are unlikely to spend the full amount by January.
“Could you live with less?” Mr. Schumer asked, specifically accepting a provision like that in the legilsation. “I think that would be a grave mistake,” Mr. Paulson said. “Give us the tools we need to make this work.” Hum, give a group of men who will all be out of a job once the new administration takes office in January $700 Billion with no restrictions on how it should be allocated or distributed.
That sounds like a genius idea! |
| posted by Boston Gal @ 1:10 PM *
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| 9 Comments: |
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Remember Boston Gal,
This is all about the American shareholder... I mean taxpayer! - Paulson
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"Could you live with less?" If these crazy, speculating companies and money-seeking homebuyers had contented themselves with less, we wouldn't be in this mess to begin with.
But yeah, seriously, why do they need $700 billion for this bailout? Gee, why don't they just bump that number up to $1 trillion and continue to ask for carte blanche? What's another $700 billion when our national debt is already so freakin' high?
Can't wait for a new administration to take office already. I prefer a certain party, but partisanship aside, it's just time for out with the old (all crappy eight years of it) and in with the new.
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not that it will fly anywhere anytime, but here is my suggestion:
- suspend all golden parachutes for all financial company execs rightaway
- allow banks to take back all properties that are upside down - at cost price - up to one house per year-2008-tax-return (i.e., if someone bought a house for 300k and it is worth only 200k now, just pay the family the difference between 300k and their current loan obligation). i wonder how much that will set back the government. one thing it will definitely do is jump start the economy as no one will be negative anymore.
ok ok ... it was just a thought. ain't gonna happen.
- s.b.
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hey, while the govt is at it. can they bail out my 401K? I didn't invest in a mortgage I couldn't afford but all those people who did, are going to be bailed out. Now my retirement acct has sunk 15% because of everyone that needed to have a home even though they couldn't afford it, and now I want my money back too. Why should the gov't only bailout 5 million homeowners? What about the other 245 million of us? where's our handout? What makes them more worthy than the rest of us?
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Deep breaths, if this is just a liquidity crisis, we may actually profit from it. It isn't like they are spending $700b - they are buying assets for $700b. In the Mexican peso crisis of 1994, the US gov't actually made a profit from the guarantees to the mexican gov't - and saved mexico from a very sharp economic decline. If things go well, these assets will go up in value if the economy stablizes and volia - we'll get a dividend from the gov't in a few years...
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$700b won't touch the $63 trillion dollars in Credit Default Swaps that are the sleeping giant behind this mess.
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It's amazing "smart" people always get us in these messes and then more "smart" people try and get these "smart" people out of the mess. Just once it would be nice to see our "capitalistic" society work correctly and allow these "smart" people to fail.
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@s.b. - sorry, I'm not understanding your proposal...
@12:58 - I believe the reason they are so anxious for this bailout is b/c they want to prevent the events that would trigger all the CDSs. If the balance sheets of banks get fixed, then they won't be in fear of credit default anymore. Furthermore, since the CDS cover the toxic MBSs, it's likely that when the gov't takes over the securities, they will at the same time break the CDS obligation, letting the counter-party off the hook.
@12:30 - yeah, I heard that one before, back in March, w/ Bear Stearns. As they say, "Fool me once, shame on — shame on you. Fool me — you can't get fooled again."
P.S. BG, you might want to consider bolting your solar panels down:
http://www.nytimes.com/2008/09/24/technology/24solar.html?_r=1&ref=business&oref=slogin
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kady:
let's see if i can explain better ...
tom lives in a house he bought a house in 2005 for 400k. it is worth 200k today (if sold). he owes 300k on his mortgage. uncle sam will offer 400k for the house, 300k will go to the bank, and 100k to tom (his equity based on his cost price).
dick lives in one of the five houses (all similar to tom's above) he bought in 2005 for 400k apiece. since he used interest free loans, he still owes 390k on each of the five houses. uncle sam will buy one of the five houses for 400k, 390k of which will go to the lender and 10k to dick. dick is free to do whatever he does to his other four houses, but uncle sam won't give him anything more.
tom and dick are free to buy the house back - or any other citizen can bid for those houses - from ucle sam provided they are approved financing (with at least 20% down) for a fixed APR 30-year loan term based on full income disclosure.
what this plan would do is make sure that none of the homeowners is upside down or negative as a result of either their own foolishness or because of speculators/investors.
the drawbacks i see of this plan is that there are no incentives for:
- renters
- folks whose houses are worth more now than they paid for them
also, i've no clue how much this plan would cost uncle sam.
- s.b.
p.s.: tom and dick must have filed their taxes in 2007 as legal residents in the usa. investors from outside the usa are sol.
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Remember Boston Gal,
This is all about the American shareholder... I mean taxpayer! - Paulson