Bailout, American economy, and failing businesses

[fastortoise]

im just going to throw a discussion starter out there, maybe you guys will be interested:

 

 

 

as the federal government starts to bail out large companies such as AIG and Fannie Mae/Freddie Mac, a two-sided debate arises. while some feel that it is important for the government to help enormous companies such as these out of bankruptcy, others feel the government is gaining too much power in the economy (for example, their 80% stake in AIG now).

 

 

 

how do you feel?

 

Their economy is going into a recession, you can blame it on anything you wish but the government definitely did the right choice in bailing out all those companies. I don't even want to imagine what would have happened if those huge companies went belly-up. And since those big stocks are way down, the government doesn't really have any of that power until they get out of the recession.

[Ginger_Warrior]

Have fun paying those bailouts in tax money, Americans :lol:

 

When you get out of Student-land where everything gets payed for you and start living in the real world, maybe you'll start to understand these things. Nationalising them is a better option than letting them collapse while other banks have got money invested in them.

 

Understand what? That the government disregarded all the signs of these collapses for two years and now bail them out with money they don't have? Of course bailing out an insurance company which nearly everyone in the US are leaning on is better than letting it collapse, but they could have prevented it.

 

It's easy to recommend with hindsight. I'll agree, regulations should have been stricter and regulated tighter, but that's the nature of a capitalist economy. Free enterprise. If someone makes a terrible idea, and enough people follow it, the economy suffers as a result, and those who have no net wealth of their own and have to borrow in order to afford a house (i.e., us) are hit hardest.

 

 

 

And there's no need to attack me personally, by the way :roll:

 

Stop attacking groups personally and I may listen. Frankly, your attitude should be one of more concern. If the government is having to bail out these financial groups, it means it has less money to afford to send half its population to university. Hence, bye bye students. ;)

[hohto]

It's easy to recommend with hindsight. I'll agree, regulations should have been stricter and regulated tighter, but that's the nature of a capitalist economy. Free enterprise. If someone makes a terrible idea, and enough people follow it, the economy suffers as a result, and those who have no net wealth of their own and have to borrow in order to afford a house (i.e., us) are hit hardest.

 

 

 

At first you're defending the bailouts and then you're preacing about the capitalist economy. Sounds pretty ironic in my eyes, after all the american capitalist matra was a bit like "weak ones deserve to go to bankrupt".

 

 

 

I also find it pretty damn hypocritical how the same people who have been privatising pretty much everything and preaching about neoliberalism are now doing bailouts. Seems to me that the trend is to support certain kind of policy as long as we don't need to follow it by ourselves.

[Ginger_Warrior]

At first you're defending the bailouts and then you're preacing about the capitalist economy. Sounds pretty ironic in my eyes, after all the american capitalist matra was a bit like "weak ones deserve to go to bankrupt".

 

Capitalism did exist before America went all anti-Communist, you know.

 

 

 

How is defending government intervention, and then blasting unrestricted free enterprise ironic? Seems pretty consistent in my eyes.

[Faux]

 

Their economy is going into a recession, you can blame it on anything you wish but the government definitely did the right choice in bailing out all those companies. I don't even want to imagine what would have happened if those huge companies went belly-up. And since those big stocks are way down, the government doesn't really have any of that power until they get out of the recession.

 

 

 

No it didn't, it's making things worse. The government is just causing the value of the dollar to decline. Fueling inflation won't get them out of recession.

[magekillr]

 

Their economy is going into a recession, you can blame it on anything you wish but the government definitely did the right choice in bailing out all those companies. I don't even want to imagine what would have happened if those huge companies went belly-up. And since those big stocks are way down, the government doesn't really have any of that power until they get out of the recession.

 

 

 

No it didn't, it's making things worse. The government is just causing the value of the dollar to decline. Fueling inflation won't get them out of recession.

 

 

 

Wow, if you agree with the libertarians that we should have just let those corporations die, you obviously know NOTHING about economics/global economics.

 

 

 

Not only would the US's economy be spiraling out of control beyond our imagination, but the world would be facing very detrimental repercussions as well.

[mrpez]

It's easy to recommend with hindsight. I'll agree, regulations should have been stricter and regulated tighter, but that's the nature of a capitalist economy. Free enterprise. If someone makes a terrible idea, and enough people follow it, the economy suffers as a result, and those who have no net wealth of their own and have to borrow in order to afford a house (i.e., us) are hit hardest.

 

 

 

At first you're defending the bailouts and then you're preacing about the capitalist economy. Sounds pretty ironic in my eyes, after all the american capitalist matra was a bit like "weak ones deserve to go to bankrupt".

 

 

 

I also find it pretty damn hypocritical how the same people who have been privatising pretty much everything and preaching about neoliberalism are now doing bailouts. Seems to me that the trend is to support certain kind of policy as long as we don't need to follow it by ourselves.

 

 

 

america is a mixed economy; a free market with limited government intervention.

 

 

 

if the government intervenes to stop an enormous insurance company from going bankrupt, it doesnt immediately make it hypocritical.

[jackattack]

 

Their economy is going into a recession, you can blame it on anything you wish but the government definitely did the right choice in bailing out all those companies. I don't even want to imagine what would have happened if those huge companies went belly-up. And since those big stocks are way down, the government doesn't really have any of that power until they get out of the recession.

 

 

 

No it didn't, it's making things worse. The government is just causing the value of the dollar to decline. Fueling inflation won't get them out of recession.

 

 

 

Wow, if you agree with the libertarians that we should have just let those corporations die, you obviously know NOTHING about economics/global economics.

 

 

 

Not only would the US's economy be spiraling out of control beyond our imagination, but the world would be facing very detrimental repercussions as well.

 

 

 

What they are doing is unconstitutional. Only congress is supposed be able to appropriate money. They are just creating money out of thin air to get around that.

[mrpez]

They are just creating money out of thin air to get around that.

 

 

 

an article entitled "Where did the government get the $85 billion to bail out AIG?" should provide some interesting discussion on this matter. luckily, i happen to have one right here:

 

 

 

http://www.slate.com/id/2200299/?from=rss

[cryztalwing]

Here is what Ron Paul has to say about it.

 

 

 

[magekillr]

Go Senator Bernie Sanders! The only socialist in the American Congress!

 

 

 

" In my view, we need to go forward in addressing this financial crisis by insisting on four basic principles:

 

 

 

(1) The people who can best afford to pay and the people who have benefited most from Bushs economic policies are the people who should provide the funds for the bailout. It would be immoral to ask the middle class, the people whose standard of living has declined under Bush, to pay for this bailout while the rich, once again, avoid their responsibilities. Further, if the government is going to save companies from bankruptcy, the taxpayers of this country should be rewarded for assuming the risk by sharing in the gains that result from this government bailout.

 

 

 

Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:

 

 

 

a) Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers. That would raise more than $300 billion in revenue;

 

 

 

B) Ensure that assets purchased from banks are realistically discounted so companies are not rewarded for their risky behavior and taxpayers can recover the amount they paid for them; and

 

 

 

c) Require that taxpayers receive equity stakes in the bailed-out companies so that the assumption of risk is rewarded when companies stock goes up.

 

 

 

(2) There must be a major economic recovery package which puts Americans to work at decent wages. Among many other areas, we can create millions of jobs rebuilding our crumbling infrastructure and moving our country from fossil fuels to energy efficiency and sustainable energy. Further, we must protect working families from the difficult times they are experiencing. We must ensure that every child has health insurance and that every American has access to quality health and dental care, that families can send their children to college, that seniors are not allowed to go without heat in the winter, and that no American goes to bed hungry.

 

 

 

(3) Legislation must be passed which undoes the damage caused by excessive de-regulation. That means reinstalling the regulatory firewalls that were ripped down in 1999. That means re-regulating the energy markets so that we never again see the rampant speculation in oil that helped drive up prices. That means regulating or abolishing various financial instruments that have created the enormous shadow banking system that is at the heart of the collapse of AIG and the financial services meltdown.

 

 

 

(4) We must end the danger posed by companies that are "too big too fail," that is, companies whose failure would cause systemic harm to the U.S. economy. If a company is too big to fail, it is too big to exist. We need to determine which companies fall in this category and then break them up. Right now, for example, the Bank of America, the nations largest depository institution, has absorbed Countrywide, the nations largest mortgage lender, and Merrill Lynch, the nations largest brokerage house. We should not be trying to solve the current financial crisis by creating even larger, more powerful institutions. Their failure could cause even more harm to the entire economy."

[Satenza]

I find it funny that the single greatest redistribution of wealth came through the free market.

[assassin_696]

No it didn't, it's making things worse. The government is just causing the value of the dollar to decline. Fueling inflation won't get them out of recession.

 

 

 

A falling dollar boosts exports stimulating the economy. You have demand-pull inflation as a by-product but that's just recession. What you don't want is a situation where the entire financial structure of the world's largest economy was threatening to collapse, which it was last week. Now that problem's been resolved, you've "just" got recession.

[jackattack]

[hide=]

For many years the President and his Administration have not only warned of the systemic consequences of financial turmoil at a housing government-sponsored enterprise (GSE) but also put forward thoughtful plans to reduce the risk that either Fannie Mae or Freddie Mac would encounter such difficulties. President Bush publicly called for GSE reform 17 times in 2008 alone before Congress acted. Unfortunately, these warnings went unheeded, as the President's repeated attempts to reform the supervision of these entities were thwarted by the legislative maneuvering of those who emphatically denied there were problems.

 

 

 

2001

 

 

 

April: The Administration's FY02 budget declares that the size of Fannie Mae and Freddie Mac is "a potential problem," because "financial trouble of a large GSE could cause strong repercussions in financial markets, affecting Federally insured entities and economic activity."

 

 

 

2002

 

 

 

May: The President calls for the disclosure and corporate governance principles contained in his 10-point plan for corporate responsibility to apply to Fannie Mae and Freddie Mac. (OMB Prompt Letter to OFHEO, 5/29/02)

 

 

 

2003

 

 

 

January: Freddie Mac announces it has to restate financial results for the previous three years.

 

 

 

February: The Office of Federal Housing Enterprise Oversight (OFHEO) releases a report explaining that "although investors perceive an implicit Federal guarantee of [GSE] obligations," "the government has provided no explicit legal backing for them." As a consequence, unexpected problems at a GSE could immediately spread into financial sectors beyond the housing market. ("Systemic Risk: Fannie Mae, Freddie Mac and the Role of OFHEO," OFHEO Report, 2/4/03)

 

 

 

September: Fannie Mae discloses SEC investigation and acknowledges OFHEO's review found earnings manipulations.

 

 

 

September: Treasury Secretary John Snow testifies before the House Financial Services Committee to recommend that Congress enact "legislation to create a new Federal agency to regulate and supervise the financial activities of our housing-related government sponsored enterprises" and set prudent and appropriate minimum capital adequacy requirements.

 

 

 

October: Fannie Mae discloses $1.2 billion accounting error.

 

 

 

November: Council of the Economic Advisers (CEA) Chairman Greg Mankiw explains that any "legislation to reform GSE regulation should empower the new regulator with sufficient strength and credibility to reduce systemic risk." To reduce the potential for systemic instability, the regulator would have "broad authority to set both risk-based and minimum capital standards" and "receivership powers necessary to wind down the affairs of a troubled GSE." (N. Gregory Mankiw, Remarks At The Conference Of State Bank Supervisors State Banking Summit And Leadership, 11/6/03)

 

 

 

2004

 

 

 

February: The President's FY05 Budget again highlights the risk posed by the explosive growth of the GSEs and their low levels of required capital, and called for creation of a new, world-class regulator: "The Administration has determined that the safety and soundness regulators of the housing GSEs lack sufficient power and stature to meet their responsibilities, and thereforeshould be replaced with a new strengthened regulator." (2005 Budget Analytic Perspectives, pg. 83)

 

 

 

February: CEA Chairman Mankiw cautions Congress to "not take [the financial market's] strength for granted." Again, the call from the Administration was to reduce this risk by "ensuring that the housing GSEs are overseen by an effective regulator." (N. Gregory Mankiw, Op-Ed, "Keeping Fannie And Freddie's House In Order," Financial Times, 2/24/04)

 

 

 

June: Deputy Secretary of Treasury Samuel Bodman spotlights the risk posed by the GSEs and called for reform, saying "We do not have a world-class system of supervision of the housing government sponsored enterprises (GSEs), even though the importance of the housing financial system that the GSEs serve demands the best in supervision to ensure the long-term vitality of that system. Therefore, the Administration has called for a new, first class, regulatory supervisor for the three housing GSEs: Fannie Mae, Freddie Mac, and the Federal Home Loan Banking System." (Samuel Bodman, House Financial Services Subcommittee on Oversight and Investigations Testimony, 6/16/04)

 

 

 

2005

 

 

 

April: Treasury Secretary John Snow repeats his call for GSE reform, saying "Events that have transpired since I testified before this Committee in 2003 reinforce concerns over the systemic risks posed by the GSEs and further highlight the need for real GSE reform to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America Half-measures will only exacerbate the risks to our financial system." (Secretary John W. Snow, "Testimony Before The U.S. House Financial Services Committee," 4/13/05)

 

 

 

2007

 

 

 

July: Two Bear Stearns hedge funds invested in mortgage securities collapse.

 

 

 

August: President Bush emphatically calls on Congress to pass a reform package for Fannie Mae and Freddie Mac, saying "first things first when it comes to those two institutions. Congress needs to get them reformed, get them streamlined, get them focused, and then I will consider other options." (President George W. Bush, Press Conference, The White House, 8/9/07)

 

 

 

September: RealtyTrac announces foreclosure filings up 243,000 in August up 115 percent from the year before.

 

 

 

September: Single-family existing home sales decreases 7.5 percent from the previous month the lowest level in nine years. Median sale price of existing homes fell six percent from the year before.

 

 

 

December: President Bush again warns Congress of the need to pass legislation reforming GSEs, saying "These institutions provide liquidity in the mortgage market that benefits millions of homeowners, and it is vital they operate safely and operate soundly. So I've called on Congress to pass legislation that strengthens independent regulation of the GSEs and ensures they focus on their important housing mission. The GSE reform bill passed by the House earlier this year is a good start. But the Senate has not acted. And the United States Senate needs to pass this legislation soon." (President George W. Bush, Discusses Housing, The White House, 12/6/07)

 

 

 

2008

 

 

 

January: Bank of America announces it will buy Countrywide.

 

 

 

January: Citigroup announces mortgage portfolio lost $18.1 billion in value.

 

 

 

February: Assistant Secretary David Nason reiterates the urgency of reforms, says "A new regulatory structure for the housing GSEs is essential if these entities are to continue to perform their public mission successfully." (David Nason, Testimony On Reforming GSE Regulation, Senate Committee On Banking, Housing And Urban Affairs, 2/7/08)

 

 

 

March: Bear Stearns announces it will sell itself to JPMorgan Chase.

 

 

 

March: President Bush calls on Congress to take action and "move forward with reforms on Fannie Mae and Freddie Mac. They need to continue to modernize the FHA, as well as allow State housing agencies to issue tax-free bonds to homeowners to refinance their mortgages." (President George W. Bush, Remarks To The Economic Club Of New York, New York, NY, 3/14/08)

 

 

 

April: President Bush urges Congress to pass the much needed legislation and "modernize Fannie Mae and Freddie Mac. [There are] constructive things Congress can do that will encourage the housing market to correct quickly by helping people stay in their homes." (President George W. Bush, Meeting With Cabinet, the White House, 4/14/08)

 

 

 

May: President Bush issues several pleas to Congress to pass legislation reforming Fannie Mae and Freddie Mac before the situation deteriorates further.

 

 

 

*

 

 

 

"Americans are concerned about making their mortgage payments and keeping their homes. Yet Congress has failed to pass legislation I have repeatedly requested to modernize the Federal Housing Administration that will help more families stay in their homes, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance sub-prime loans." (President George W. Bush, Radio Address, 5/3/08)

 

*

 

 

 

"[T]he government ought to be helping creditworthy people stay in their homes. And one way we can do that and Congress is making progress on this is the reform of Fannie Mae and Freddie Mac. That reform will come with a strong, independent regulator." (President George W. Bush, Meeting With The Secretary Of The Treasury, the White House, 5/19/08)

 

*

 

 

 

"Congress needs to pass legislation to modernize the Federal Housing Administration, reform Fannie Mae and Freddie Mac to ensure they focus on their housing mission, and allow State housing agencies to issue tax-free bonds to refinance subprime loans." (President George W. Bush, Radio Address, 5/31/08)

 

 

 

June: As foreclosure rates continued to rise in the first quarter, the President once again asks Congress to take the necessary measures to address this challenge, saying "we need to pass legislation to reform Fannie Mae and Freddie Mac." (President George W. Bush, Remarks At Swearing In Ceremony For Secretary Of Housing And Urban Development, Washington, D.C., 6/6/08)

 

 

 

July: Congress heeds the President's call for action and passes reform of Fannie Mae and Freddie Mac as it becomes clear that the institutions are failing.

[/hide]

 

 

 

EDIT: I guess Joe Biden doesn't think AIG should have been bailed out. #-o

 

 

 

edit: I guess he doesn't know his history either.

"When the stock market crashed, Franklin D. Roosevelt got on the television and didn't just talk about the, you know, the princes of greed. He said, 'Look, here's what happened,'" Barack Obama's running mate recently told the "CBS Evening News."

[1_man_army]

The House of Representatives rejected the bailout. More uncertainty, great...

 

 

 

 

 

Edit - They voted 207 For to 226 against although BBC News 24 is suggesting that the vote isn't finalised until the gavel goes down, so they're trying to get the no voters to change their minds (it only needs 10 people to switch). What a mess.

[Quoi_Tu]

The leaders are still trying to push people to switch, but I don't think they'll get enough before Pelosi will have to end it. Not to mention the DOW is going crazy. This isn't looking good.

[magekillr]

Wachovia was bought out today, so they're no longer in existence. I almost got my private student loans through them, thank god I didn't.

 

 

 

Let's see where this leads...as said above, the DOW is going nuts.

[imbackstinkers]

could somebody give me permission to slap the people who voted no to the bailout

[Ginger_Warrior]

The House of Representatives rejected the bailout. More uncertainty, great...

 

 

 

 

 

Edit - They voted 207 For to 226 against although BBC News 24 is suggesting that the vote isn't finalised until the gavel goes down, so they're trying to get the no voters to change their minds (it only needs 10 people to switch). What a mess.

 

Un...believable. I am totally lost for words.

[imbackstinkers]

*im currently packing my bags to move to china any of you get a chinese to english dictionary because im not staying in the land of idiots any longer (president bush you know who you are!)

 

 

 

seriously id move there if it means it get away from the stupidity that is george w. bush

[anonymous1234]

You hate your government, so you move want to move to...China? =D>

 

 

 

The DOW is crazy yes, but at least oil dropped $10 to $96 a barrel :twss:

[1_man_army]

The House of Representatives rejected the bailout. More uncertainty, great...

 

 

 

 

 

Edit - They voted 207 For to 226 against although BBC News 24 is suggesting that the vote isn't finalised until the gavel goes down, so they're trying to get the no voters to change their minds (it only needs 10 people to switch). What a mess.

 

Un...believable. I am totally lost for words.

 

 

 

I don't understand why they'd even bring it to a vote with it being so close. Surely it would have made more sense to keep talking until they had a comfortable majority before they took it to the floor. Such a lack of common sense.

[Ginger_Warrior]

The House of Representatives rejected the bailout. More uncertainty, great...

 

 

 

 

 

Edit - They voted 207 For to 226 against although BBC News 24 is suggesting that the vote isn't finalised until the gavel goes down, so they're trying to get the no voters to change their minds (it only needs 10 people to switch). What a mess.

 

Un...believable. I am totally lost for words.

 

 

 

I don't understand why they'd even bring it to a vote with it being so close. Surely it would have made more sense to keep talking until they had a comfortable majority before they took it to the floor. Such a lack of common sense.

 

It is just inconceivable logic from the conservatives. I just watched the video posted on the BBC's World Service and one of them stated this was the first step on the slippery slope to socialism.

 

 

 

For 1), to vote against this Bill for ideological reasons instead of having the common sense to realise the grave danger of this situation is idealism in the face of stark reality. I'm a socialist; impulsively, I'm actually against this Bill, but I have the ability to see this is for the good of the global financial system, and if it didn't work, the aftermath would hit the poor hardest and first. You have to be pragmatic.

 

 

 

2) This isn't even socialism. Socialism in its truest form would be calling for these banks to fail, all else failing, total nationalisation. A "bail-out plan" is nowhere near socialism. In fact, the only aspect of socialism I see here is government intervention, very limited at that.

 

 

 

Idiots. Puerile, indoctrinated, foolish idiots.

[magekillr]

Let's go Chris Matthews!!!

 

 

 

[Diesel]

Ugh...Stock Market lost 700+ points today because of the no votes. My parents are are both freaking out about their investments. I have a 5k CD. (pretty much my life savings atm) If more banks fail, will this effect me? I'm pretty sure it won't since it's an insured investment, but if it does, that would stink. (stark understatement)

 

 

 

@imbackstinkers - It's not Bush's fault. -.- Yes, the economy has slowed, but the exponential increases of the US economy weren't going to last forever. It could have stalled last year, this year, 5 years from now, or whatever, but it wasn't going to just keep going up. On top of that, idiot banks were making deals with people with bad credit while the CEOs raked in the cash. Those losses piled up. Insert domino effect and Bingo! The present economy. NOT just Bush's fault.