Posted: 9/30/2008 5:49:59 PM EDT
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Congress yesterday was deciding on giving Paulson $250 bb to buy mortgage paper. Not to give away. To buy assets. At a discount. Say he buys the paper at 70 cents (probably higher than he will/would) on average, and it's worth 50-something cents. Maybe there's a loss of 25%, maximum. This amount will be reduced by interest because the paper is currently performing and certainly isn't all bad, and by buying at a discount, the effective rate on the paper is quite high. Anyhow, reasonable worst case loss is $50--75 bb. Now say we don't do this. A banking collapse will cost the FDIC many trillions. The FDIC has only tens of billions available. Covering everyone's $100K in their savings accounts is a multi-trillion dollar obligation of the taxpayer. But there's more. If we have a bank failure, we have a depression. In that case, the $6 trillion in Freddie/Fannie mortgages the government has guaranteed will start going very bad. That's a multi-trillion dollar obligation of the taxpayer. But there's more. If we have a depression, federal (and state and local) revenues will go through the floor. But the government isn't going to lay off hordes of people or slash entitlements so quickly. So our budget deficit will go through the roof. Figure the total annual cost of a depression in increased borrowing (and taxpayer obligations) is $500 bb a year. Over several years, that's trillions more. Add in all the extra costs due to unemployment benefits as the same people high fiving each other about how they stopped the bailout will be the first ones in line at the unemployment office when the company they work for lays them off. Bottom line: the cost to the taxpayer of doing nothing is well into the trillions, potentially close to $10 trillion. That amount is probably 100x the amount that Paulson would have at risk in the plan they voted down yesterday. One. Hundred. Times. The market just vaporized $1 trillion dollars of wealth yesterday and the only reason we were up today is that there is renewed hope this will pass. Last, the thing that really galls me is the people saying they don't want to pay are largely amongst the group of citizens who actually don't pay much of anything in taxes. The top 50% of taxpayers pay substantially all taxes, and the top 10% pay the bulk of them. Given that, how dare these arsehole reps who represent meager tax base districts complain about 'taxpayer' bailouts as if their constituents will pay much of anything. That is the worst form of demagoguery. |
I know you want to live in your little capitalist utopia where free markets decide everything but I actually work in the industry and things just dont work that way. Im on phone calls with Fortune 500 clients every day discussing their funding needs. I actually hear the fear in their voices when we tell them that they now can only borrow at 9% versus the 5% of a couple of years ago. That they cant roll their commercial paper. That a 1 year floater will cost them Libor + 700 bps. They we cant provide a bridge loan to them any longer. Most of you really have no idea whats going on out there as it is behind the scenes. But just wait. |
Nah, it will be about 20 years from now. After all, we must allow time for the banks to be "discriminatory" again and then become "predatory" after they are forced to offer cash to every swinging dick in town. |
 The bailout isn't to try to buy "assets" at fire-sale prices. The "assets" are worthless, and the whole idea of the bailout is to pay what the institution paid or is exposed to. Every penny that winds up going to this bailout is gone, because these goofy credit derivatives are all predicated upon a way of doing business that's dead. If it would work, it might be worthwhile. But if (when...  ) it passes, it's just going to create bigger problems a few years down the road. But hey, who cares, since today's politicians will be gone or secure in their seniority.
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those who don't pay most of the taxes are hurt more by giving up what little they do have than those at the top. $100 isn't piss to some people....to others its worth killing for. And you are not considering the other taxes they pay, state/local/property/sales etc, or how much more inflation hurts them than those at the top. but whatever. You got 10k rounds of 223, and the gov wants 100 of them, thats not a problem. You got 30 rounds of 223 and the gov wants 5 of them, thats harder to swallow. |
| $700 Billion won't save the whole banking system. That's the real problem. We are going to give away a bunch of money and still be in the same problem afterwords. Until we fix the problem and adjust the market were it needs to be, this is nothing but a bandage on an ax wound. |
We won't make it ten years. I'll be surprised if we go five. The moral hazard created by this bailout will induce financial institutions to keep doing what they were doing, but more of it... why not, because Uncle Sugar can be relied upon to come save the day! On top of that, confidence in our capital markets will be eviscerated... no longer will loses be handled in a predictable manner, but every investor will have to worry that the government will step in and hand him the shit sandwich, even if he's first in line to be made whole. |
What if I have 10 and the gov wants 5? And my neighbor has none and the goverment wants .... oh wait..... they don't have any to take. jd1 |
Clever.
Yes, yes, dumb misinformed non-taxpaying sheeple, I got it. Thanks for showing us the way, mister. |
1) The $700 billion should not go to the bailout but, instead, should be held in reserve for the FDIC in order to help them protect current bank depositors in any future bank failures. 2) So far, there have been around 11 or 12 major bank failures this year. In addition to those, we have also lost fannie and freddie, lehman brothers, merrill lynch and bear stearns. We've gone through all of that and we still haven't succumb to any financial apocalypse yet. Sorry, but i'm not quite prepared to buy into the "Oh no, the sky is falling" BS. 3) On one hand you want to complain about rising debts and deficits and then, on the other, you want to promote using tax payer money ($700 BILLION dollars worth I might add) to help bailout various wall street investors. Trying to have your cake and eat it, too? |
Well, now that McCain has revealed that the Treasurey has access to $1 TRILLION dollars w/o congressional approval, it seems that the extra $700billion, which congress needs to approve, IS ON TOP OF the $1 Trillion they can access anyhow. |
Funny difference about getting an operating loan for the Farm, and getting a operating loan for any non-Ag business. In Ag, your field is part of the landscape. Everyone see's it. Folks locally talk to each other and compare fields with pride that thiers is not as good as they would like, but better than Joe Schmucks. Guess who has a harder time and pays higher rates at lower limits on operating loans? And guess who calls an Auctioneer when they fail. Yesterday the Auctioneers knocked on your door asking if you needed thier services, and your neighbor just told you to go home and quit begging for money. I know damn well what is at stake. You have clients that can't make payroll, and are looking for a loan to prop up thier insolvent operation. You lose $$$ because you can't secure cash to give them a loan. Your field looks like shit, thier field looked like shit to begin with, and you took a gamble and lost. FAIL. Quit knocking on my door asking to bail out your gambling habit. S-28 |