September 19, 200817 yr WSJ WASHINGTON -- The federal government is working on a sweeping series of programs that would represent perhaps the biggest intervention in financial markets since the 1930s, embracing the need for a comprehensive approach to the financial crisis after a series of ad hoc rescues. At the center of the potential plan is a mechanism that would take bad assets off the balance sheets of financial companies, said people familiar with the matter, a device that echoes similar moves taken in past financial crises. The size of the entity could reach hundreds of billions of dollars, one person said. U.S. Treasury Secretary Henry Paulson will hold a 10 a.m. EDT press conference Friday to discuss a "comprehensive approach to market developments." President George W. Bush will make a statement at 10:45 a.m. to discuss "decisive actions" the federal government is taking to address "the severe disruptions in our financial markets," Press Secretary Dana Perino said. ... In addition, the Federal Reserve is expanding its liquidity programs, which should help money funds meet redemption demand. The initiative includes purchasing certain short-term debt obligations issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The Fed said it will also extend so-called non-recourse loans at the primary credit rate to U.S. banks to finance their purchases of high-quality asset-backed commercial paper from money-market mutual funds. Meanwhile, the Securities and Exchange Commission proposed a temporary ban on short-selling on 799 financial stocks. The ban, which is effective immediately, is set to last for 10 days, but could be extended for up to 30 days.
September 19, 200817 yr Liquidity is a big problem, but one of the root causes of the current market turmoil is government interference in the free market.
September 19, 200817 yr I never in my life thought I'd see the day the Government would intervene so much in the markets. A ban on short selling is something China does, not the US. It's the most preposterous thing I've ever seen 'our' government do and people should be outraged.
September 19, 200817 yr I'm still livid about this, can't get over it. I'm stewing over here watching the talking heads on CNBC saying this is a good deal! Just to give an example of what just happened- Imagine you own a bar, a pretty popular bar, and you decide to let people pay their tabs later. You let them do it over and over again until each patron that goes to your bar has literally hundreds of thousands of dollars in unpaid tabs. That's ok though, because you think the price of liquor will continue to keep going up, and they bought full, unopened bottles of liquor that they can sell later at a higher price and still pay you back. It's also ok because you borrowed money from banks all over the country to pay the unpaid tabs. The banks knew it was ok because the liquor would go up, and they had a signature! So everyone knows about this plan, everyone rushes to different bars across the country and they just keep giving out free liquor in exchange of a signature and an IOU. Then liquor prices plummet, economy slows down, gas prices go up and people all of a sudden can't afford to pay their tabs. Banks can't get paid back from the bars, bars can't get paid back from the patrons. They freak out, Government says ...eh....it's ok...here's some money for all you horrible business people to stay open. We can't have our bar systems collapsing! These bars and banks also happen to be public companies and the public market sees...hey wait...these people don't know dick about business...let's short their stock. But the chairman of this market also happens to be the former CEO of one of the banks who would be hurt by the shorting, so he changes the rules and says whoa whoa wait...we are going to make shorting illegal now! You can only not buy or buy stocks, but you can't bet that they go down! Oh wait...some stocks you can short, but the bad business people who fund us...no no no...you can't short them! Go hurt some other businesses who are actually pretty good at what they do. Of course the politicians also love this deal, because these bars and banks are the ones who fund and control them, so they all come out and say yea it's all good, we can just increase the taxes on the people to pay for the horrible business people to stay in business. Should the people vote for this?? HA! We aren't a government for the people, we are government for the businesses that fund us. Screw you American people! bwahahahahahhaa. Go take some Ritalin and forget this ever happened. muhahahahahaha!
September 19, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade
September 19, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Honestly, a depression would have been better for this. We needed it. It's like we have a huge band aid on our nuts right now and instead of ripping it off in one motion and getting it over with (a depression) we are slowly pulling it off, putting it back on, ripping it a quarter of a way off, putting it back on, slowly pulling it off, pretending to rip it off, leaving it....leaving it...rippiiiiiiiiinnnnnng ...no just kidding lets leave it a little longer.....
September 19, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Honestly, a depression would have been better for this. We needed it. It's like we have a huge band aid on our nuts right now and instead of ripping it off in one motion and getting it over with (a depression) we are slowly pulling it off, putting it back on, ripping it a quarter of a way off, putting it back on, slowly pulling it off, pretending to rip it off, leaving it....leaving it...rippiiiiiiiiinnnnnng ...no just kidding lets leave it a little longer..... I wonder where are we getting the +1 trillion dollars needed for this mega plan? You gotta love it, borrow from your enemies (i.e. China) to buy debt that probably will never be collected. Only in America
September 19, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Agreed. I am doing the same thing. Although I am a strong Democrat, I have issues with all these bailouts. I realize we need to do them in order to avoid a depression, but by doing this we are privatizing profits and socializing losses. That's not how our system is supposed to work.
September 19, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Honestly, a depression would have been better for this. We needed it. It's like we have a huge band aid on our nuts right now and instead of ripping it off in one motion and getting it over with (a depression) we are slowly pulling it off, putting it back on, ripping it a quarter of a way off, putting it back on, slowly pulling it off, pretending to rip it off, leaving it....leaving it...rippiiiiiiiiinnnnnng ...no just kidding lets leave it a little longer..... I wonder where are we getting the +1 trillion dollars needed for this mega plan? You gotta love it, borrow from your enemies (i.e. China) to buy debt that probably will never be collected. Only in America It depends on where the money is originating. If it originates from the Fed, they'll just print most of it. Btw, this whole mess is partly the result of Greenspan's decisions as Fed Chairman.
September 19, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Honestly, a depression would have been better for this. We needed it. It's like we have a huge band aid on our nuts right now and instead of ripping it off in one motion and getting it over with (a depression) we are slowly pulling it off, putting it back on, ripping it a quarter of a way off, putting it back on, slowly pulling it off, pretending to rip it off, leaving it....leaving it...rippiiiiiiiiinnnnnng ...no just kidding lets leave it a little longer..... I wonder where are we getting the +1 trillion dollars needed for this mega plan? You gotta love it, borrow from your enemies (i.e. China) to buy debt that probably will never be collected. Only in America China isn't our enemy, in fact at this point they are our strongest and most important ally. If we go in a depression, they go in a depression because we consume all the junk they make. They need us to be strong thus why they give us so much money to borrow.
September 19, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Agreed. I am doing the same thing. Although I am a strong Democrat, I have issues with all these bailouts. I realize we need to do them in order to avoid a depression, but by doing this we are privatizing profits and socializing losses. That's not how our system is supposed to work. No kidding. You might not believe what I've been saying, but this government intervention in the marketplace is only making matters worse. It will be plainly obvious in the not too distant future. I hope you're wrong, but I am not sure you are. Btw, buying gold is a good idea.
September 20, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Honestly, a depression would have been better for this. We needed it. It's like we have a huge band aid on our nuts right now and instead of ripping it off in one motion and getting it over with (a depression) we are slowly pulling it off, putting it back on, ripping it a quarter of a way off, putting it back on, slowly pulling it off, pretending to rip it off, leaving it....leaving it...rippiiiiiiiiinnnnnng ...no just kidding lets leave it a little longer..... I wonder where are we getting the +1 trillion dollars needed for this mega plan? You gotta love it, borrow from your enemies (i.e. China) to buy debt that probably will never be collected. Only in America I've seen the $1 trillion number all over but whoever came up with it probably just pulled it out of his ass and the way the $1 trillion gets mentioned in the media it's as if they think the $1 trillion will be the cost but they forget or don't understand these are assets that will eventually get sold. On AIG, I wouldn't be surprised if it ends up as a money maker for the goverment with the 11% interest on the $85 billion loan. AIG shareholders are trying to raise the money themselves to pay it off before the government takes the 80% ownership.
September 20, 200817 yr I never in my life thought I'd see the day the Government would intervene so much in the markets. A ban on short selling is something China does, not the US. It's the most preposterous thing I've ever seen 'our' government do and people should be outraged. Outside of maybe Greco, I've been most impressed with your economic sense. Out of curiosity, what are you planning on doing? Buying gold even though it shot up a couple of days ago? Swiss francs? Man, I wish I knew. I own a recruiting business and while business is not horrible for me (it's definitely slowed down though) and I have money saved away, I'm seriously considering going back to school for some sort of career in the medical field, especially if Obama wins. I think the medical field will be the only 'safe' career in the type of business environment I foresee, and it would be satisfying enough work where any money is bonus. Would also allow me to go to any country I wanted to. As far as investing- I am in the market, more as a hobby than anything and I'm not doing well enough to give any advice on that. :lol The hedge funds run everything nowadays. I would definitely check out www.fundmymutualfund.com, this guy is a genius with the financial stuff; I'm addicted to his blog.
September 20, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Honestly, a depression would have been better for this. We needed it. It's like we have a huge band aid on our nuts right now and instead of ripping it off in one motion and getting it over with (a depression) we are slowly pulling it off, putting it back on, ripping it a quarter of a way off, putting it back on, slowly pulling it off, pretending to rip it off, leaving it....leaving it...rippiiiiiiiiinnnnnng ...no just kidding lets leave it a little longer..... I wonder where are we getting the +1 trillion dollars needed for this mega plan? You gotta love it, borrow from your enemies (i.e. China) to buy debt that probably will never be collected. Only in America China isn't our enemy, in fact at this point they are our strongest and most important ally. If we go in a depression, they go in a depression because we consume all the junk they make. They need us to be strong thus why they give us so much money to borrow. We arent allies with China. Neither side trusts each other. The best way to describe it is opportunistic tolerance on both fronts. China's growing world influence, very poor human rights record, government structure, perceived potential threat to U.S. interests down the road, and our warm relationship with Taiwan are major roadblocks in the relationship. Not enemies by any means, but nowhere near friends and definitely not allies.
September 20, 200817 yr While the future is uncertain, and even the scope of the past actions are uncertain.......there are some very serious market dislocations that are certain. And what this means for the future is now certain in one respect. That is Inflation vs. Deflation. The apparent choice of these 2 unappealing scanarios is Inflation. The reason that it's taken goverment to act definitively is because they only had 2 unappealing bad choices....no outs. Neither is appealing, deflation means letting the free market work, weeding out the bad, and moving through a hard time where the value of assets go down, unemployment increases, credit gets very tight, the money supply in the economy contracts. If one chooses this course we hope to contain it to a relatively short-lived Great Recession, rather than Great Depression 2.0 . . . However....things came to a head quicker than they expected and this through out the deflation possibility. Market actions of the last few months, in particular the last 2 weeks, showed that there was going to be a market meltdown unlesss some action was taken. Make no mistake, this credit crisis, with it's root in home credit, is vast, far bigger than any figure mentioned. We're 2 Trillion into it already, but the total tally is more like 10 Trillion, with about 6-7 Trillion placed overseas, mainly Europe. Look at your local Sunday newspaper listing the recent real estate transactions. The buyer in many cases is an overseas bank(seems like DeutschBank was an eager buyer of this toxic debt). But this debt was rated AAA by Moody's and S&P. . . What does this mean for the future. Certain inflation in the US....at this point it's just a matter of if it's 50% or 500% in total....over the next 5 years. 50% over 5 years is tolerable. It's happpened before and things have turned out fine. 500% over 5 years......there's the uncertainty. The possibility that the hidden tax of inflation will eat away at your wealth is tolerable at a rate of 8-10%(50% total) for a few years. Beyond that, it's a good idea to have gold or silver. It also means certain inflation in Europe and Asia, as they have to deal with trillions of this toxic debt. . . . Toxic debt......what is it? It's the bundles of mortgages and other consumer credit that were bundled together and sold, to the tune of 10 trillion plus, around the world. Is it worthless.....hardly. It's worth somewhere between 20-80% of the face value. It could contain my home-refi, or my auto loan, or my cc "loans". The reason it's called "toxic" is because nobody really knows what is bundled and how much is it worth? There is no market. Whatever it's worth, the market needs to be able to price it, so that it can be bought/sold freely. The FED and Treasury thought that they could buy enough time to let the market sort things out....but as we have seen, that's not happening....the goverment has stepped in. . . . What does this mean for you.....and how can you protect yourself? 1. Equities have not yet priced in a 8-10% inflation expectation. They have priced in a 3-5% annual inflation. This means that the stock market will fall in price as expectations get priced in. Prices will drop 20-60%, even from the levels of today. So, if you're thinking about buying equities for the long-term...I'd advise holding off. If you own equities directly, or in a 401k, etc, you should begin to methodically convert the equities into other more liquid investments, like money markets, bank accounts, cash, and gold and also silver. Make the conversion at a speed depending on your aversion to risk. Personally, I'm strictly in MM, checking account and some gold and silver. . The most egregious act of all was the SEC decision on short selling. This is what was responsible for the 1000 point turn-a-round in the markets since Thursday at noon when it was annnounced that the UK version of the SEC had taken what the London Financial Times called "an otherwise unconscionable action 2 days ago, which now seems mandatory". The 1000 point upmove is artificial, created by the short-selling NEW rules, which lead to the 1000 point short covering rally. We don't know what other effects this short selling rule change will have. But, historicallly, attempts to alter a free market have had generally negative effects. In the past it's happened in teeny markets. We're in uncharted waters here with the much larger NYSE market. This is the end of capitalism as it has existed in the USA. A free market, in particular a free financial market, is the bedrock of capitalism. That's gone now. Never again will any investor, from here or from overseas, invest with the level of confidence that they always had. The rules were changed in the middle of the game. That's something Russia or Argentina does, not US. . . Good luck to you all
September 20, 200817 yr I think this is a desperation last recourse measure. No matter what happens it is probably going to be bad. But not doing anything, would have been worst (i.e. Depression). Welcome to socialized economy.... I'm thinking of this as some breathing room to put my financial house in order. Time to prepare for the next decade Honestly, a depression would have been better for this. We needed it. It's like we have a huge band aid on our nuts right now and instead of ripping it off in one motion and getting it over with (a depression) we are slowly pulling it off, putting it back on, ripping it a quarter of a way off, putting it back on, slowly pulling it off, pretending to rip it off, leaving it....leaving it...rippiiiiiiiiinnnnnng ...no just kidding lets leave it a little longer..... I wonder where are we getting the +1 trillion dollars needed for this mega plan? You gotta love it, borrow from your enemies (i.e. China) to buy debt that probably will never be collected. Only in America China isn't our enemy, in fact at this point they are our strongest and most important ally. If we go in a depression, they go in a depression because we consume all the junk they make. They need us to be strong thus why they give us so much money to borrow. We arent allies with China. Neither side trusts each other. The best way to describe it is opportunistic tolerance on both fronts. China's growing world influence, very poor human rights record, government structure, perceived potential threat to U.S. interests down the road, and our warm relationship with Taiwan are major roadblocks in the relationship. Not enemies by any means, but nowhere near friends and definitely not allies. Maybe calling them allies wasn't the best choice of a word, but the point is that they need us to be strong economically and if it weren't for them propping up our economy right now, who knows where we would be...
September 20, 200817 yr AIG will sell an asset and pay off the loan, and the Federal Govenment may take over $700B - $1T in loans, but some of them will pay and all of them will be turned for some money, even at a loss. So the $1 trillion charge is spurious, but the Fannie / Freddie debacle is exactly why the government should not be in business.
September 21, 200817 yr "Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases."..thomas jefferson
September 21, 200817 yr "Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases."..thomas jefferson I don't think any reasonable person wants to make government too large. I am in favor of common sense regulation (require disclosure of all assets and liabilities, transparency, etc.), not non-existent regulation or regulation to chokes business. Basically, Michael Bloomberg's position as he explained on Meet the Press this morning. I wish Obama had picked him as his VP.
September 21, 200817 yr "Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases."..thomas jefferson I don't think any reasonable person wants to make government too large. I am in favor of common sense regulation (require disclosure of all assets and liabilities, transparency, etc.), not non-existent regulation or regulation to chokes business. Basically, Michael Bloomberg's position as he explained on Meet the Press this morning. I wish Obama had picked him as his VP. Government is already way too large. Stated simply our government has made promises it cant possibly keep . I too am for common sense regulation, i think government should be like an umpire who you dont know is calling a game . Government should enforce a limited number of rules to ensure the "game" is being played fairly other than that it shouldnt be involved in determing the outcome. Unfortunately now the government has determined which business will survive and which will fail.
September 21, 200817 yr "Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases."..thomas jefferson beautiful quote
September 21, 200817 yr "Government big enough to supply everything you need is big enough to take everything you have ... The course of history shows that as a government grows, liberty decreases."..thomas jefferson beautiful quote How about what Ronald Reagan once said - "The ten scariest words you can hear are- 'I'm from the Government and I'm here to help you' " I always liked that one. :lol
September 22, 200817 yr I agree that it has become too big. And I think this bailout is part of the cronyism we've seen the last few years. Iraq was very profitable for lots of Bush's friends. Now it looks like this debacle will be profitable for another set of his friends. Unbelievable.
September 22, 200817 yr I agree that it has become too big. And I think this bailout is part of the cronyism we've seen the last few years. Iraq was very profitable for lots of Bush's friends. Now it looks like this debacle will be profitable for another set of his friends. Unbelievable. This bailout benefits a great many Democrats, it is paying the piper for a long period of letting the foxes guard the henhouse.
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.