Let's Get Real About the Bailout Plan

Vanity | 10/02/2008 | RightFighter

[RightFighter]

Like most of you, I am appalled at the sheer size and scope of this bailout plan, and even moreso with the additions that the Senate has placed in it now. It goes against my very core to think of the federal government getting this involved in the economny and placing this many tax dollars at risk. I want to be upset with those who voted for the bailout and vow that none of them will ever get my vote again.

However, the rational side of me also thinks that I need to examine this situation free of emotion and think about WHY so many Republicans - good, conservative Republicans - voted for this pig of a bill. Republicans like Saxby Chambliss, Tom Coburn, Kay Bailey Hutchison, and Mitch McConnell. Maybe even these four are not the ultra-conservatives we all want to run things, but they are all typically conservative on most issues. I believe that most Republicans who voted for this bill normally believe that they should always vote against tax increases and against large increases in government spending - whether that belief is based on conviction or convenience (the desire to be re-elected) is a question that others can answer.

So, back to the question - why would people who are, if not reliably conservative, at least TYPICALLY conservative, vote for this? Is it possible that the information they've been presented is so bad, so awful, that the consequences of not acting scare them more than the political fallout they will surely suffer for voting for the bill? Consider Harry Reid's "slip of the tongue" when he mentioned that there's a large, well known insurance company that is on the verge of failure. What if that's not the only company that the politicians know of that's about to fail? What if they know that there are dozens of large, well known companies employing hundreds of thousands of people, all of them tied together by the mesh of the American economy, that are teetering on the brink of failure? What if the government knows which companies they are and that the failure of one of these large companies will start a domino effect that brings down the rest very quickly?

I know that most would say that they want to know these details - if these companies (banks, insurance companies, others) are so close to failure that it's necessary to spend this kind of money, then tell us who they are so that we can decide for ourselves. But, what if the very act of naming the companies would cause the dominoes to start falling? If people began to hear the full depth of the problem, it's very possible that millions of people would immediately begin to pull their money out of banks, and the banks that have so far weathered the storm would begin to fail.

I believe that's why there seems to be so much secrecy about what's going on here - they are afraid to tell us the whole story because in telling us how bad things really are, they could make things worse.

Why would John McCain - who is so close to winning this election - vote for a bill that so many conservatives dislike so much and that appears to go against the very principles that he's outlined in his campaign? I would submit that it is possible he may actually be putting his country first, as much as we all want to think that he's just betraying us with this vote.

I don't want to believe that things are that bad - but I can't say that I know for a fact they're not. There may be information that we don't have to make that determination.

[RightFighter]

I'm just interested in examining the other side of this bailout question. I'm not supportive of the bailout, but I'm willing to at least examine the possibility that there may be more to it than we know.

[tcostell]

There isn't that much secrecy about it. It's called "counterparty risk" and is a normal part of any risk management operation for professional money managers.

You want to see who's teetering on the brink too? Look up the insurance sector on Yahoo, and rank them by market cap.

[billhilly]

I believe that there is no other explanation for these extra ordinary actions. I was born in 1937, eight years after the crash of ‘29 and the beginning of the great depression. No one born during the past three or so decades has felt the pain of that event, but a lot of us did. I, for one, don’t want to see this country go through that again.

[Need4Truth]

That Giant Sucking Sound

http://globaleconomicanalysis.blogspot.com/2008/10/that-giant-sucking-sound.html

[ChinaThreat]

The banks have held a knife to the throat of the US taxpayer: “Give us money, or we don’t lend ANY money”. Its extortion, pure and simple abetted by those thieves in DC.

[pennboricua]

there could very well be a collapse of our economy that would make the 1920 collapse dwarf in comparison.

that having been said to not hold anyone accountable for the greed and social experimenting with our financial institutions and not be brought to light would be a massive failure on the part of Mccain

[nicola_tesla]

Why did McCain vote for it ? Because he’s clueless about economics and is not a conservative anyhow.

What were they told ? Assuming they weren’t simply scared into complying by the lying idiots at Treasury and the Fed, there are a number of real scenarios.

One was what the prior poster mentioned - counterparty risk, ie Credit Default Swaps. That is, at last estimate, a 500 trillion dollar market.

Another - the Fed is broke. Their balance sheet is in tatters and needs to be recapitalized - they have no more money left after the banks used the alphabet soup drive-thru windows. Thus, they can’t prop up any more banks to pretend to not fail.

Then - all of the FCBs, especially China, threatened to not buy more Treasury bills if we didn’t buy back our crap assets. Since we currently (before all the bailouts) use 2 billion a DAY of foreign capital to fund government operations, we’d have to do some serious downsizing of government and what CONgresscritter can contemplate that ?

And lastly, with the Fed toppled and the banks insolvent, the credit market rolls over and government and businesses can’t fund their operations.

The next best question - will 700 billion make a difference ? And is it the last bailout ?

The answer - no and no. It will buy some time, but it solves no problems. It puts the gov deeper in debt, will cause interest rates to go up, and will ultimately cause us to default on our debt. With interest rates going up, more foreclosures will occur, real estate will devalue further, and banks will go down anyhow.

And there you have it.

[cripplecreek]

I’m a responsible buyer who bought a home I could afford. Now when the irresponsible borrowers and lenders have cornered themselves we’re going to teach them a lesson by punishing me.

Makes all the sense in the world. [/sarc]

[Notary Sojac]

Funny how the crisis brewed up just a few days late to save Lehman, but just in time to rescue Goldman Sachs’ investments in AIG and to encourage Buffet to buy into GS.

There may, or may not, be an epic crash coming. The current "plan" is unrelated to that. What the "plan" does is help some current individuals and firms to be well positioned as vultures if the crash does arrive.

[Dawn531]

I think the credit crunch is bad, maybe so bad they’re afraid to be completely honest. They don’t want to cause a panic or run on the banks (that’s why they raised the FDIC ins. to 250,000 because they were afraid of runs, and that helps to quiet people’s nerves.)

I work for an online retailer, our credit line has been cut back and we have great credit. I spoke with two other folks who had had their credit limited. Without credit, businesses will dry up quickly. I read last week (in the WSJ, I think) about Caterpillar having a difficult time securing credit. Caterpillar is one of the most diligent companies when it comes to upfront reporting of their actual bottom line. They use the strictest accounting rules (don’t try to cook the books) and their credit has always been excellent. If they’re having a hard time securing credit, what about the others.

Our company received a notice from Google that they were about to cut off our ads. Google ads are paid for by leaving a CC on file with them. We paid off the bill by changing CCs on file, then went looking for the problem. The credit line on the original card had been cut back.

Businesses don’t run on cash, not in this day and age, they run on credit. You pay your suppliers with credit, your advertisers with credit, etc. Cut back on inventory and ads because you don’t have credit and you’ll be out of business in no time.

Plus there’s a ripple effect. If we quit buying from our suppliers, their business suffers; we quit advertising, the advertising company suffers. People use search engines on the internet thinking they are “free.” They are only free because advertisers are paying the bill for the rest of us to use it free, same with many sites. Imagine those ads dry up, then we’ll be seeing a “fee for service” on many internet sites.

Some people right now think they’re immune, but nobody is because every part of the economy relies on the other, right down to municipal jobs. When people lose their jobs because of a business credit crunch, then lose their homes, the tax base is cut...tax base cut, no more money for state/county/city services which mean they start to have to lay off police, fire, sanitation workers, school budgets. etc. The whole thing could come crashing down very quickly if businesses start to fail.

[Jeff Head]

This has been engineered. It is bad, and I believe those who have engineered it wanted it to be bad. They are now using it as an "October Surprise" to force a solution that will further damage our underlying free market system while increasing their chances of winning the Presidency and larger majorities in both the House and Senate.

They and their cohorts will vote for it because it is exactly what they want. Others are voting for it because fear is being used as a weapon to convince them that they simply have to the consequences of not doing so.

A few are voting against it because they values our underlying free market and its fundamental, foundational principles more than they value the pain associated with correcting the problem as it already exists.

I believe that is where we are, but that is just my own opinion.

OBAMA IS IMPLICATED IN THE FINANCIAL CRISIS

NOW WE KNOW WHAT A COMMUNITY ORGANIZER DOES


I'M VOTING FOR SARAH

[Lonely Are The Brave]

“Most Americans have no real understanding
of the operation of the international money lenders.
The accounts of the Federal Reserve System have never been audited.
It operates outside of the control of Congress and
manipulates the credit of the United States.”

Barry Goldwater

[semantic]

Is it possible that the information they've been presented is so bad, so awful

Dude, the government doesn't have information better than anyone else; relationships and risks posed by debt securities & derivatives are known to any who wish to be informed.

The issue is what course of action is best suited to resolve the liquidity problem? There are differences of opinion, with many, many economists suggesting alternative plans.

The Senate chose to use a 'big gov't' approach. Not only will this prove to be insufficient, but it lays the groundwork for further intervention that will require even more debt.

[YellowRoseofTx]

I have considered all the things you mentioned, and I could have swallowed this whole disaster with some comfort if they had addressed the issues that started this whole mess. But Nooooo, just business as usual.

The dims created this disaster and live to create another one, without even a slap on the wrist. The Reps have not stood up for many years, like when they had the power to correct many things.

[hampdenkid]

You have written a clear, concise, and cogent piece. I know that many of us here deeply appreciate it. And you could, in fact, be entirely right.

But, there is another side to this bailout as I see it; a side far more sinister and destructive than most AMericans can even imagine. The fact is, I personally believe that we have just seen the biggest cover-up of unbridled malfeasance in the history of our country. Some of that malfeasance — for example, that of George Bush and John McCain — may have been unintentional. They tried to stop halt the horror, failed, and just went back to playing politics as usual.

But, in my opinion, the malfeasance of others was entirely deliberate. Christopher Dodd, Barney Frank, Barak Obama — and a host of others — took massive amounts of bribe money to conspire with people like Raines and Johnson to defraud the American people.

And then, when the house of cards inevitably collapsed ... when the politicians in Washington realized that if the real truth about their malfeasance ever came to light — they would be run out of office, and very likely thrown into jail.

So, that, in sum, is what I believed happened with the Senate vote yesterday. Yes, I believe that the members of the Senate — in cahoots with George Bush — were trying to avert a disaster. But, the disaster they were trying to divert was the only kind of disaster these self-absorbed prima donnas really understand: the disaster of their own downfall.

If Bernard Ebbers and Ken Lay went to jail for their malfeance, Christopher Dodd, Barney Frank, and Barack Obama should go to jail for theirs. And a host of other malefactors and accomplices should be impeached for theirs.

But, now, they never will be. Because now, they are accepting each others’ plaudits for “solving” the problem they malevolently created.

May God help us.

[tcostell]

It’s clear from your statement that you aren’t interested in the facts of this issue, but if you knew them then it would be clear to you just how silly your “knife to the throat” statement sounds.

[YellowRoseofTx]

This has been engineered. It is bad, and I believe those who have engineered it wanted it to be bad.

I've believed this all along, and I've thought Soros was behind this. Isn't this how he created his enormous wealth, by collapsing the economy in Europe?

[rodeo-mamma]

We need to have some leadership like Michael Savage suggests. He says no more entitlements for illegals, give them 30 days to get their affairs in order and then get out, no more money to foreign countries, and make Iraq help pay for the war by giving some oil to pay for their own liberation. Do you think it could happen? Or is it politics again? Let me think, no it won’t happen, too many politics. Is it good for the taxpayer? Yes, but taxpayers don’t count. They want your vote though. I am ticked at President Bush, he has been too much of a politician concerned about his own special interests. That’s why he can’t lead.

[semantic]

Jeff, I always appreciate your posts, but sometimes you get too far out on the edge. Trust me, there's isn't any grand conspiracy.

What we're seeing is simply human nature: we are driven by avarice and greed, tempered by fear & loathing. Capitalism is a great system because it parlays these core characteristics into an efficient system called the marketplace.

The market works nearly perfectly when individuals are forced to weigh risk & reward with their own capital at stake. But, if the price mechanism is corrupted through outside interference (typically under the guise of noble ideals, like equal outcome), then it distorts marketplace signals.

Dems thought the system was strong enough to pay for their pet programs and achieve their social goals. I cannot believe they actually wanted to kill the golden goose, however that is what they are actually very close to doing this time around.

[tcostell]

That's a fair issue to raise, and I know GS has made a habit (like everyone else) of using their relationships where they could. But the way I see it, it just played out naturally.

Bernanke made a mistake by giving JP a backstop. When he saw the market reaction he knew that, so he couldn't backstop the next one to come along or he'd never be in a position to say no again. Lehman and Merrill came next... more or less together, but Lehman constituted less drawdown so he said no to their foreign buyers to get back his "street cred", and shoved Merrill and BofA together (waiving the cap reqs for the unified company ... a behind the scenes "non-backstop" - backstop). But the fall of Lehman turned what was then still a "serious problem" into a total meltdown. Once it hit AIG his credibility was meaningless in the face of the kind of total collapse that the industry was facing so he reacted to that too by providing more assurances. I don't think Goldman drove it, I think it was driven by vanity, inexperience, and ineptitude by the regulators and the fed.

Besides, in a choice of causes between a conspiracy and stupidity, you'll make a lot more money betting on stupidity.