Posted on 09/29/2008 3:29:05 PM PDT by Libloather
I don’t think you understand what the plan was intended to do.
Section I, short title, of the bailout bill: "Emergency Economic Stabilization Act of 2008, Section 2, Purposes: Provides authority to the Treasury Secretary to restore liquidity and stability to the US financial system and to ensure the economic well-being of Americans."
Does that include individual bankruptcies? Maybe so...
This bill is not perfect. But the situation requires that something be done. The unwinding of the associated derivatives will completely shut down the economy. Credit will come to a complete halt and commerce will cease. I am in no way a pro-government intervention type, but they created this mess (CRA) and the damage that will be done if not fixed will darf anything any terrorist organization could ever do.
95% of mortgages are being paid and most banks are offering credit. Where do you get your information?
Oh good grief.
Bread and soup lines baby! I'm tailgating with a can of beans, 3-days of beard stubble, ripped clothes, a plaid blankie on top of a stick with my belongings in it!!! Just like a Tex Avery cartoon...
Again, I am not a pro-government guy. My screen name should tell you that. I truly feel this is an issue of economic/national survival. We need to get something passed...very few Republicans in Congress disagree with that...let's make it as good and as clean as possible.
Here's Ben Stein on the issue of CDS derivatives:
According to what I hear from my betters in the world of finance, the most serious problems are not with the bundles of subprime mortgages themselves — a large but not lethal quantum as far as I can tell — but with derivatives contracts tied to subprime and other dicey debt. These contracts are superficially an attempt to “insure” against risks of default, hence the name “credit-default swaps.” In fact, they are an immense wager — which anyone with lots of money or borrowing ability can enter — about how mortgage-backed bonds, leveraged loan bonds, student loan bonds, credit card bonds and the like will perform.
These wagers entail amounts many times larger than the total of subprime loans. In fact, there are roughly $62 trillion in credit-default swap derivatives out there, compared with about $1 trillion of subprime mortgages. These derivatives are “weapons of financial mass destruction,” in the prophetic words of Warren E. Buffett. (Apparently believing that the worst is over, at least for one big investment bank, Mr. Buffett is now investing in Goldman Sachs.)
He proposes to simply annul the CDS's existing today. Interesting idea. Not sure the feasibility.
I know. Next time, read the bill.
From a yahoo FAQ page:
“At Investorwords.com, we learned that when you invest in a derivative, the underlying asset is usually a commodity, bond, stock, or currency. You “bet” that the value derived from the underlying asset will increase or decrease by a certain amount within a certain fixed period of time.”
Seems like derivatives are too big a share of the financial markets? So what happens to prevent more problems?
ping
Wyatt: it is time to let Atlas Shrug. Ayn would have enough balls to let it happen. Buck up.
Who? Other than his own 401k, what else does he run again?
Not only did I read it, I understood it.
Certain derivatives serve a very useful purpose as hedges. Many, many companies use hedging strategies to offset wild swings in input costs. for example, FedEx and UPS use fuel hedges to partially offset the increase in the cost of fuel. Companies use FX hedges all the time to stabilize international operations costs. In concept, the Credit Default Swaps were used to offset the risk posed by questionable loans. Unfortunately the leverage ration got way out of whack. I am not an expert on derivatives by any means but common sense would tell me that the leverage ratios allowed should be within certain limits so as to mitigate the potential risk should the underlying assets lose too much value. That can be managed by FASB and GAAP.
Wow, must be really pressing if they take 2 days off of this so called “crisis.”
The Republicans need to wise up and so does Bush. Paulson is a snake along with all of the Dems. We need to pin this whole problem on the Democrats the rest of the way until the election.
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