Bailout: lesser of evils or extortion of a country? (student loan, transaction, percentage)

[bale002]

Not sure how to make a poll.

A week has passed now and we've been through many threads.

Right now the argument in favor of the bailout is that, if we don't, credit will dry up for mortgages, cars, student loans and similar.

Some have argued that not all lending institutions have issued bad loans and they do not need bailing out. What is the estimate of the percentage of entities in danger of failure? What percentage of these are deposit-taking institutions? What would it cost to guarantee deposits - including money market funds - as opposed to the cost of buying these bad mortgage loans and mortgage-backed securities?

In other words, is this a bailout of Wall Street banks and brokerages or of main street banks?

Keep in mind that there are virtually no more big pure investment banks now that Bear and Lehman are gone, Merrill Lynch has been absorbed by BoA, and that Morgan Stanley and Goldman are now commercial banks and they are both in the process of raising new capital.

So which exactly are these banks and brokerages that "need" bailing out?

For example, WaMu just failed, the biggest failure of a deposit-taking institution in history (I believe), but JP Morgan Chase just bought up their deposits. Why can't the same happen for other eventual main street bank failures?

So we'd wind up with three to five universal banks in the US, a situation that prevails in most European countries in some cases for decades, surrounded by constellations of community banks and credit unions.

My biggest concern is not mortgages, car loans and student loans, it is whether the actual payments system for day-to-day transactions could be in danger.

Is that concern too far-fetched or a real possibility?

Assuming that the ones pushing this proposal are extortionists, and that Congress resists, would they threaten all deposits and the payments system? Would they have the power to carry out such a threat? Would they have the arrogance to actually carry it out?

This country needs to restructure the relationship between consumption and production. Continuing to subsidize the relatively unproductive in inefficient housing and motor vehicles ain't gonna work.

What is the best way of supporting these people during the transition?

Or do we let the charade continue?

[jimmyP]

Originally Posted by bale002

Not sure how to make a poll.

A week has passed now and we've been through many threads.

Right now the argument in favor of the bailout is that, if we don't, credit will dry up for mortgages, cars, student loans and similar.

Some have argued that not all lending institutions have issued bad loans and they do not need bailing out. What is the estimate of the percentage of entities in danger of failure? What percentage of these are deposit-taking institutions? What would it cost to guarantee deposits - including money market funds - as opposed to the cost of buying these bad mortgage loans and mortgage-backed securities?

In other words, is this a bailout of Wall Street banks and brokerages or of main street banks?

Keep in mind that there are virtually no more big pure investment banks now that Bear and Lehman are gone, Merrill Lynch has been absorbed by BoA, and that Morgan Stanley and Goldman are now commercial banks and they are both in the process of raising new capital.

So which exactly are these banks and brokerages that "need" bailing out?

For example, WaMu just failed, the biggest failure of a deposit-taking institution in history (I believe), but JP Morgan Chase just bought up their deposits. Why can't the same happen for other eventual main street bank failures?

So we'd wind up with three to five universal banks in the US, a situation that prevails in most European countries in some cases for decades, surrounded by constellations of community banks and credit unions.

My biggest concern is not mortgages, car loans and student loans, it is whether the actual payments system for day-to-day transactions could be in danger.

Is that concern too far-fetched or a real possibility?

Assuming that the ones pushing this proposal are extortionists, and that Congress resists, would they threaten all deposits and the payments system? Would they have the power to carry out such a threat? Would they have the arrogance to actually carry it out?

This country needs to restructure the relationship between consumption and production. Continuing to subsidize the relatively unproductive in inefficient housing and motor vehicles ain't gonna work.

What is the best way of supporting these people during the transition?

Or do we let the charade continue?

Nice to see a thoughtful post without emotional arguments.

Your questions are good and I believe we would suffer some severe consequences because interbank lending would slow down. This can create short term cash problems that could stop day to day transactions. This would, IMHO, create a scenario where we could have a "run on the bank" where people got scared and withdrew all funds. This would then snowball.

I think we need to do something but I have little support for anything that helps mismanaged institutions get out of hot water at our expense.

I think the fundamental problem is that we have been lied to so much from our leaders that we really don't know what is what. A classic "little boy who cried wolf". Is the wolf really at the door? Or are we helping out the crony network?

I am willing to risk a severe recession to call their bluff this time.

[tallrick]

We don't need more personal debt. The Government made a promise to support savings and they should do that. However, a recession is a small price to pay to liquidate the bad debt. Once the inflated real estate prices fall, the average person will get a boost in the form of lower mortgage payments and lower property taxes. Some homes may be so cheap that people can buy them outright!

"This country needs to restructure the relationship between consumption and production. Continuing to subsidize the relatively unproductive in inefficient housing and motor vehicles ain't gonna work."

Money needs to go into energy and communications tech. Real estate is the stupidest investment ever devised as long term it parallels inflation.

[bale002]

Originally Posted by tallrick

We don't need more personal debt. The Government made a promise to support savings and they should do that. However, a recession is a small price to pay to liquidate the bad debt. Once the inflated real estate prices fall, the average person will get a boost in the form of lower mortgage payments and lower property taxes. Some homes may be so cheap that people can buy them outright!

"This country needs to restructure the relationship between consumption and production. Continuing to subsidize the relatively unproductive in inefficient housing and motor vehicles ain't gonna work."

Money needs to go into energy and communications tech. Real estate is the stupidest investment ever devised as long term it parallels inflation.

Thank you for the entire answer, especially the highlighted part.

On that basis, I think this bailout mostly sucks.

But the reality is, the last holdouts are probably just bargaining for a bigger buy-off of their votes.

[NJ Chutzpah]

there are plenty of off-wall street firms that I have not heard about in this debacle, so I am assuming they are just fine

E Jones, T Rowe, Frank Temp, etc are probably just fine

PNC, US Bank, boiling springs, and smaller ones I do not hear about hurting

I COULD BE WRONG OF COURSE

Just let the big banks and firms fail, and let the lesser ones take over their market share

[induhvidual]

Dear American:

I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.

I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.

I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.

This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.

Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.

Yours Faithfully Minister of Treasury Paulson

[bale002]

Originally Posted by NJ Chutzpah

there are plenty of off-wall street firms that I have not heard about in this debacle, so I am assuming they are just fine

E Jones, T Rowe, Frank Temp, etc are probably just fine

PNC, US Bank, boiling springs, and smaller ones I do not hear about hurting

I COULD BE WRONG OF COURSE

Just let the big banks and firms fail, and let the lesser ones take over their market share

I think Senator Shelby stated that this bailout would mostly benefit four or five banks. I wonder which he is referring to.

If more institutions are really in trouble, and this were are transparent democracy, they should publish a list.

To be sure, the argument against that is there would then be a run against those banks.

So it comes down to what their word is worth, doesn't it?

[findingmesomeday]

Originally Posted by jimmyP

Nice to see a thoughtful post without emotional arguments.



I am willing to risk a severe recession to call their bluff this time.

I think that's key and I agree with you. Let the market correct itself. It will be ugly but if we are truly a free market society, then social-engineering any solutions will only come back to bite us badly in the long-term.

It's difficult to point to just ONE thing and say: AHA! So that's what caused this mess. It was a lot of factors. But just like in the 1920's, money got too free and easy to get, gambling on a win seemed like a sure bet and everyone got careless. How quickly we forget. It's not a surprise that history is repeating itself.

NO! To the bailout.

[Friendly blogger]

Originally Posted by bale002

Not sure how to make a poll.

A week has passed now and we've been through many threads.

Right now the argument in favor of the bailout is that, if we don't, credit will dry up for mortgages, cars, student loans and similar.

Some have argued that not all lending institutions have issued bad loans and they do not need bailing out. What is the estimate of the percentage of entities in danger of failure? What percentage of these are deposit-taking institutions? What would it cost to guarantee deposits - including money market funds - as opposed to the cost of buying these bad mortgage loans and mortgage-backed securities?

In other words, is this a bailout of Wall Street banks and brokerages or of main street banks?

Keep in mind that there are virtually no more big pure investment banks now that Bear and Lehman are gone, Merrill Lynch has been absorbed by BoA, and that Morgan Stanley and Goldman are now commercial banks and they are both in the process of raising new capital.

So which exactly are these banks and brokerages that "need" bailing out?

For example, WaMu just failed, the biggest failure of a deposit-taking institution in history (I believe), but JP Morgan Chase just bought up their deposits. Why can't the same happen for other eventual main street bank failures?

So we'd wind up with three to five universal banks in the US, a situation that prevails in most European countries in some cases for decades, surrounded by constellations of community banks and credit unions.

My biggest concern is not mortgages, car loans and student loans, it is whether the actual payments system for day-to-day transactions could be in danger.

Is that concern too far-fetched or a real possibility?

Assuming that the ones pushing this proposal are extortionists, and that Congress resists, would they threaten all deposits and the payments system? Would they have the power to carry out such a threat? Would they have the arrogance to actually carry it out?

This country needs to restructure the relationship between consumption and production. Continuing to subsidize the relatively unproductive in inefficient housing and motor vehicles ain't gonna work.

What is the best way of supporting these people during the transition?

Or do we let the charade continue?

In the 1990 a microcosm of this giant mess occurred when over 1600 banks did the same thing. They were liquidated and their assets were sold. And those people whose mortgages were more than they could afford were taken over by the F.D.I.C. and sold to the highest bidder. We lost two banks in our community, within one year. The golddiggers got away with their golden parachutes and many people lost everything. There was no bailout. What I would suggrest is that we scream for real reform, like curbing the lobbyists and the influence peddlars. Please, I challenge all of you the best way to support people during any transition of this kind is to make sure it doesn't repeat itself.
In Massachusetts, no lobbyist can give anything to a legislator, they can if they want to give a personal check but no more than $500.

Please, please click on this site and see for yourselves who is involved in the mess. Those Congress men and women ate at the trough. They took money from the very people who led this onslaught. ANY TIME THEY WANTED TO STOP IT, IT ONLY TOOK A MAJORITY OR A TWO THIRDS VETO PROOF VOTE TO STOP IT. THEY DIDN'T BECAUSE THEY HAD AN INVESTMENT NOT TO.
CLICK ON www.opensecrets.org do your own statistics. See who the top spenders and top recipients are. How can Christopher Dodd, Barney Frank, Obama and the rest of them pontificate to us?
We lost our two Main St. Banks, but they were liquidated. These guys are being rewarded. Over three hundred of our Congressmen and women of both parties ate at the trough. There are a lot of pigs down there in Washington and many of them don't wear lipstick.