Bailout, American economy, and failing businesses

[mrpez]

edit2: feel free to discuss any failing businesses (AIG, Lehman Brothers, etc.), the Bailout plan being rejected, or problems with the American economy in general.

 

 

 

edit: feel free to discuss any of the aforementioned businesses and any others.

 

 

 

as some of you may or may not know, Freddie Mac and Fanny Mae recently tanked in the stock market.

 

 

 

their stock dropped from somewhere around $70 to below $1. Freddie Mac and Fanny Mae are sister companies that controlled over 50% of the real-estate loan market. due to a number of faulty loans, the companies were unable to repay their debts and plunged.

 

 

 

the government recently decided to bail out Freddie Mac and Fanny Mae, thereby placing them under government control.

 

 

 

the american government now controls over 50% of the real-estate in america (by loans).

 

 

 

http://www.cnbc.com/id/26603489/

 

 

 

The nationalization of Fannie Mae and Freddie Mac shows that the U.S. is "more communist than China right now" but its brand of socialism is meant only for the rich, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe on Monday.

 

 

 

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich it's just bailing out financial institutions," Rogers said.

 

 

 

Stock markets jumped after the U.S. government's decision to launch what could be its biggest federal bailout ever, in a bid to support the housing market and ward off more global financial market turbulence.

 

 

 

But Rogers said in the long term the move spelled trouble.

 

 

 

"This is madness, this is insanity, they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents. I'm not quite sure why I or anybody else should be paying for this," Rogers told "Squawk Box Europe."

 

 

 

European stocks soared on Monday, led by banks. UBS was up 11 percent, BNP Paribas up 8 percent, Credit Agricole up 11.1 percent and HBOS up 13.8 percent.

 

 

 

"You certainly gonna see a huge jump in any financial institutions which owned a lot of Fannie [FNM 0.99 0.26 (+35.62%) ] or Freddie [FRE 0.88 --- UNCH (0) ] because they don't have to worry about going bankrupt all of a sudden," Rogers said. (Watch the video on the left for the full interview)

 

 

 

"Bank stocks around the world are going through the roof, that's 'cause they've all been bailed out. You don't see the homeowners in Kansas going through the roof 'cause they're not being bailed out," he added.

 

 

 

"A Huge Mess"

 

 

 

However, despite the rally in Asian and European markets, the decision to take over Fannie and Freddie is likely to cause more volatility and needs careful consideration by investors, according to Rogers.

 

 

 

It's rarely good to jump in a moving bus and right now you got a lot of buses moving. I might short some more investment banks in the US, depending on how they rally over the next week, but other than that, I'll just sit and watch," he said.

 

 

 

Rogers, who is short on U.S. bonds, said these are likely to fall while commodities may rally. The two government-sponsored enterprises don't have good loans on their books, because "everybody else took the good stuff and dumped the bad stuff onto Fannie and Freddie," he said.

 

 

 

From 2010, Fannie and Freddie will have to shrink their portfolios by 10 percent a year until they reach $250 billion, to reduce the risk to the taxpayer, according to the Treasury plan. But this may put additional pressure on the housing market, Rogers said.

 

 

 

"That's going to also ensure that house prices continue to go down. It's going to be harder and harder to get a mortgage."

 

 

 

Investors should not pin their hopes on this year's presidential election for a solution to the problems, as none of the candidates is likely to find one, Rogers said.

 

 

 

"This is a big huge mess and neither one of them has a clue what to do next year. It's going to be a mess."

[Lenticular_J]

That isn't exactly communism, but I'm not particularly familiar with communistic ideas.

 

 

 

Of course, China's hardly communist these days as well. They're transforming into a capitalist nation quite fast.

[mrpez]

the quote was from the article.

 

 

 

it was meant as a joke since in communist countries there is no private property; it is all government-owned.

[Da Pirates]

TL;DR

 

 

 

 

 

And trust me, the only that WILL EVER be more communist than China...Is obviously Russia, Since Russia owns china, like USA does Pueto Rico

[ThurinEthir]

 

 

"This is madness, this is insanity

 

THIS IS CHINAAAAA!!?!?

[Barihawk]

TL;DR

 

 

 

 

 

And trust me, the only that WILL EVER be more communist than China...Is obviously Russia, Since Russia owns china, like USA does Pueto Rico

 

 

 

...

 

 

 

We don't own Puerto Rico, PR is actually a part of the United States. They can participate in elections, nominate Presidents, serve in and are protected by the military, and live life like any other state. Just no federal taxes. While we are at it, here are some other territories: Guam, American Samoa, the US Virgin Islands...

 

 

 

And Russia does not "own" China. In fact, they have been constantly on the brink of war for nearly 40 years.

[Stilev]

That does not make us Communist by any means whats so ever. Communism is more about sharing food, technology, medical care, etc instead of having money. everyone is equal

 

 

 

basically its says, since im a doctor i should give the everyone free medical care, TV guy gives everyone free TV, farmer gives everyone free Food, but since humans (some more then others) are trying to one up everyone else the system is flawed. at lest that's what i know about communisim

[Quoi_Tu]

Now there he goes confusing socialism with communism. Silly man.

 

 

 

Also, Fannie Mae and Freddie Mac make up about 50% of the secondary housing market (think the stock exchange of mortgages). As most know, they aren't doing so well, but the problem is if the two companies go under the housing sector will become worse than it already is. What the government is doing is in the best intrest of the economy to try to keep us from going into a recession.

[mrpez]

i understand what communism is.

 

 

 

for those of you apparently too challenged to see past the title, which was meant as a hook, communism is not the topic of this thread. i know, shocker right?

 

 

 

FREDDIE MAC AND FANNIE MAE.

[Barihawk]

And that's why hook titles are frowned upon here.

[l0l0lpur32]

A sensible decision, the effects of letting them collapse would've being disastrous.

[dsavi]

Seriously, I listened to a 15-minute interview of some financhial advisor or something on NPR, as well as hearing other programs on FM&FM, and I still have no Idea what it is about. This all confuses me.

[Deiophobus]

They broadcast NPR in Finland? Cool.

 

 

 

Sorry, nothing to contribute to the post, just annoying dsavi with my Finland obsession.

[dsavi]

Yeah, there's an international station. They are progressively broadcasting less and less of NPR, they used to have half an hour of Talk of the nation, which I found extremely interesting, then an hour of All things considered, then some Canadian polar Bear Calvary. Now it's just All things considered for a bit. :( I'm thinking of writing to the broadcaster asking for moar NPR. :x

 

NPR is a great source for unbiased news though.

[Deiophobus]

Well you could say it's a bit biased, being fairly liberal, but it's still a great news broadcast.

[mrpez]

And that's why hook titles are frowned upon here.

 

 

 

it wasnt my title. it was the title of the original article.

[fastortoise]

Doesn't that just mean the government is buying out a private company? I don't see how it relates to communism.

 

Here in Quebec, Hydro-Quebec is owned by our government, and is our main source of electricity. Does that make us communists too?

[Ginger_Warrior]

Doesn't that just mean the government is buying out a private company? I don't see how it relates to communism.

 

Here in Quebec, Hydro-Quebec is owned by our government, and is our main source of electricity. Does that make us communists too?

 

Didn't you hear? Any sort of state ownership is just one step on the slippery slope to Communism in these post-Cold War days. :shame:

 

 

 

Companies should be allowed to do whatever they like, even if that means irresponsibly lending out loads of money to families which can't pay it back and causing an international credit crunch in the process.

 

 

 

If you picked up sarcasm in that post, your senses are indeed correct.

[BlueTear]

Maybe I'm missing something here - probably in the exact nature of the bailout - but isn't this taxpayers having to step in and cover for the inane risk taking by private corporate entities...?

[tameelf]

Fannie Mae and Freddie Mac have many outside goverments mainly china that hold vast shares.the usa could not let f and f go to the wall simply because all these EXTERNAL investorers would MASS DUMP the doller .therefore without the peoples concent the usa have delayed for the time being the end of the doller. in the meantime you the people will pick up the tab that in turn will be collected by a private company called the fed reserve

[hohto]

I find that kind of protectionism kinda funny, seeing that it's against the neoliberal principals of the goverment putting their hands into the markets. It might be socially almost a must, but I find it pretty hypocritical how the american advisors (such as Sachs for example) were against this kind of actions in Russia, Poland, etc.

 

 

 

Oh well, dunno how funny it is to see the money of american tax payers being spend in this case: those are the ones who pay this "saving" and it's away from something else. My own guess that something is not the military budget however. This is my capitalism: a small minority does mistakes with private companies and the public suffers from the results.

[krisc6]

British economy went into fluctuation when Northern rock was nationalised and caused a furor in the press and oppinions.The US government having to bail out Mae and mac is distressing.Its the old adage that when the american economy sneezes, the whole world gets a cold.

 

 

 

All i can say is that this is self induced by the american economy with the sub prime mortgage market and damn those who thought it was a good idea to, in some cases, hand out mortgages to people who are jobless and there income isnt enough to afford meals for there family.

 

 

 

Ok its the lesser of two evils bailing out, we dont want another dustbowl incident, but this should never have happened.Hopefully this is the kind of lesson which puts peopel off for good but the boom and bust economics with the high high high's and the low low low's can overcome peoples common sense.

[dusqi]

Looks like Lehman Brothers investment bank is going into insolvency, since the US government says that they won't bail them out.

 

 

 

Interesting times!

[magekillr]

I normally do not support bail outs, but this is the one time that I do (oh, and for airlines).

 

 

 

Another thing that's annoying is if the government had gotten involved to begin with, this mess wouldn't have happened.

[Barihawk]

Just a note that bailouts will not affect taxpayers.