700 Billion Dollar Buyout

Accountable · Post by **Accountable** » Mon Sep 22, 2008 3:24 am

spot;990851 wrote: Acc, I'm a socialist. Ralph Nader's a socialist. Socialists advocate access for all citizens to state-funded health care regardless of an ability to pay. Socialists advocate state-funded safety nets which keep roofs over the heads of the indigent. What you have in the US is two parties with an identical outlook of laissez-faire unregulated capitalism driven entirely by personal greed and corrupted to the extent that the game's been fixed and nobody on the top of the heap can lose whatever mistakes they make. If you want to use the word "capitalism" for something purer then pick a third term but stop appropriating one you happen to dislike, it doesn't at all match what you're faced with and complaining about.
We have state-funded healthcare; We own AIG. We have state-funded mortgages now, too. I call a spade a spade. This socialist spade may very well bury us.

Accountable · Post by **Accountable** » Mon Sep 22, 2008 3:28 am

JP in USA;990800 wrote: The original idea of thickness of thousand million billion came from a teacher workshop I attended in Dallas nearly 10 years ago. However, all the number crunching and text therein is mine. It has been blogged on many websites by me as 'BigNumbers' 'JP' and 'JP in USA'. Had to add the USA for the blog in Belfast. It has also been submitted to the editorials of many major newspapers...

One comment stated that I was too wordy, so I truncated the original posted to the site you reference and the truncated version was placed here.

However, I do not care if the million billion trillion text shows up all over, plagerized by as many as like, as long as the math stays true. This is an image that everyone NEEDS to visualize!!! This county needs to know what 'a trillion dollars' REALLY means!!!!

By the way, the 700 billion? That alone would go about the earth 1.9 times. And that's just the bailout. That info made it to some of the other sites I blogged as well.

As for support?

I have been adding this blog to other sites today, so I will add it here as well ---

The most recent data I found states that 131+ million people filed a tax return in 2003. Round that up to 140 million for the 4 years that have passed (remember, 2008 has not yet been filed) and 700 billion becomes $5000 per tax filer. But, it is important to remember that not all filers are payers; because high school and college students who file generally get all they paid back as a refund. (And then there’s the Earned Income Credits for the baby popping poor¦) I don't have any data on how many actually PAID taxes, so that $5000 could easily go up half again, or even double.

Our taxes HAVE to go up to pay for this, no matter who takes office. The only alternative to higher taxes would be for the USA to mortgage part of the country to the last remaining sovereign that can afford this level of capital – China

America:

Defended and Exploited by the Poor

Financed by the Middle Class

Enjoyed by the Rich

No, I DO NOT support paying off the businesses who pushed ARM's and Interest Only loans on poor and/or ignorant people who did not know or did not/could not understand what they were signing. Bad business led to bad practices which led to a bad situation.

To be completely incorrect, I think this country deserves Great Depression II and should go there if for no other reason to fully drive home the point that Bush is the single most devastating thing ever to happen to this country, either foreign or domestic.
We definitely agree here, though don't fool yourself into believing this sprouted from seed within the last 7 years. There's lots more than one person responsible for this.

Little U.S Dreamer · Post by **Little U.S Dreamer** » Mon Sep 22, 2008 11:05 am

Do any of you realize how few people understand even half of the information you guys talked about in this thread?

I'm sorry for jumping in on you guys here but I'm a young American who is trying to understand what I can do to evoke a reaction from my generation. (for a starter project...)

I'm a film study student - I want to present the facts in a shocking manner but something relatable.

Maybe middle America cares more than you guys think?

qsducks · Post by **qsducks** » Mon Sep 22, 2008 11:11 am

Little U.S Dreamer;991623 wrote: Do any of you realize how few people understand even half of the information you guys talked about in this thread?

I'm sorry for jumping in on you guys here but I'm a young American who is trying to understand what I can do to evoke a reaction from my generation. (for a starter project...)

I'm a film study student - I want to present the facts in a shocking manner but something relatable.

Maybe middle America cares more than you guys think?

I do care. And with this sudden bailout of these moronic companies who do you think is going to be paying the bill? Umm, yeah, us.

And one candidate is running ads implying that "he's going to raise your taxes". Duh, whoever gets to the white house is going to increase our taxes and I don't care if they are repubs or dems. It's gonna happen.

gmc · Post by **gmc** » Mon Sep 22, 2008 11:55 am

Accountable;990732 wrote: It's just proven itself to be a one-party system, and it is socialist. Pretty neat bloodless coup, I must say. I wonder if we can take it back.

Not socialist, what you have looks more like a right wing one party system not a left wing one. It's got all the classic hallmarks of right wing politics not left.

from the pat buchanan article you linked to. interesting link by the way-never heard of pat buchanan.

An unelected financial elite is now entrusted with the assignment of getting us out of a disaster into which an unelected financial elite plunged the nation. We are just spectators.

(OK maybe it's that transatlantic understanding gap perhaps-to us the terms right and left go all the way back to the french revolution when the deputies that wanted more power for the people sat on the left of the chamber in the french parliament and those for the continuing oppression of the people sat on the right. . )

Perhaps you have an elite pulling the strings but the electorate have them by the balls. Your next election will be quite interesting to see what happens.

I've always thought this speech rather prescient

http://coursesa.matrix.msu.edu/~hst306/ ... ndust.html

Military-Industrial Complex Speech, Dwight D. Eisenhower, 1961

Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations.

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence -- economic, political, even spiritual -- is felt in every city, every State house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the militaryindustrial complex. The potential for the disastrous rise of misplaced power exists and will persist.

We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together.

Little U.S Dreamer · Post by **Little U.S Dreamer** » Mon Sep 22, 2008 12:14 pm

I'm aware of that - but the 'masses' aren't. That's the sad truth. I work two jobs and I'm a full time student - it's hard to do more than pick up the newspaper and look up some online articles when I get the chance.

higher taxes? I already know that's a reality coming and so far everyone I have spoken to agrees that's going to happen but most times the conversations go right back to 'GAS PRICES' ... I hope it's not going to be our gas tanks that drive our 'glands' this time to vote....

but unless people have access to truth like they do on youtube or myspace and then they also see others standing up they won't do anything.

I asked a group of 10 or so people around my age (20-30) why they didn't do anything about 'The Out of Control' government actions (which was the topic of the conversation) and they all finally agreed that it was because no one else has stood up. "It's SCARY to go first. " And most had no idea where to start if they DID want to do anything.

So I figured it would have to start with people being educated- right?

NOT ONE YOUTUBE video has 0 hits.

gmc · Post by **gmc** » Tue Sep 23, 2008 2:23 am

Scrat;991763 wrote: If it goes too far, we need a hybrid. We need to protect small business, small companies, small people and infrastructure. Screw these huge investment corps, let them fold into the pit they dug for themselves.

If there is one thing I have noticed in my wanderings around eastern europe in place like Belarus and Poland and the Ukraine, small business is what keeps those places alive though not necessarily at our standards. I'll never forget walking through the Besarabian Market in Kiev, hundreds of small vendors selling everything to do with food, right next to a corporate owned supermarket where the prices were much higher.

Those venders kept thousands of farmers and their families in their own small businesses, truck drivers and the middle man merchants and it gave people alternatives.

I have seen the same thing in Belarus, the Gomel market has been there for centuries, even during Stalins time it never closed its doors, 1000s of people make their living through it.

I don't know exactly what in the hell is going to happen here but we need to take care of the foundation of our society, not the fancy gilded woodwork.

Actually if you look at your own economy you will probably find all the real growth and innovation comes from small companies not the big conglomorates-all they tend to do is milk the farm to death as it were.

Just think of all the big names that started in someones back garden-HP, harley davidson microsoft etc. They might go on to become big companies and corporate sharks run by accountants that try and stifle innovation and competition like microsoft but the real driving force has always been individuals starting up a business.

Name one entrepreneur or technical innovator that started out as an accountant or a banker.

BTS · Post by **BTS** » Tue Sep 23, 2008 8:31 pm

Little U.S Dreamer;991623 wrote: Do any of you realize how few people understand even half of the information you guys talked about in this thread?

I'm sorry for jumping in on you guys here but I'm a young American who is trying to understand what I can do to evoke a reaction from my generation. (for a starter project...)

I'm a film study student - I want to present the facts in a shocking manner but something relatable.

Maybe middle America cares more than you guys think?

Here Dreamer you might start by reading this and go from there, as you choose:

Better not bank on Barney Frank

He brought the (fiscal) house down

By Michael Graham | Tuesday, September 23, 2008 | http://www.bostonherald.com | Op-Ed

“I want [Freddie Mac and Fannie Mae] to help with affordable housing, to help low-income families get loans and to help clean up this subprime mess. Otherwise, why should they exist?”

- Rep. Barney Frank, earlier this month.

The Subprime Panic of ’08 and its $1 trillion (and rising!) price tag is too big to blame on any one man. But if we had to, it would be Newton’s own Rep. Barney Frank.

As Winston Churchill might have put it, never before has one man done so much that was so wrong, or shafted so many on behalf of so few.

Entire business sections of newspapers, including this one, have been dedicated to explaining how we got into this mess, and still the typical taxpayer is asking “So what happened?”

The answer is actually quite simple: Freddie and Fannie happened. And they couldn’t have without the ferocious support of Barney Frank.

Freddie and Fannie were supposed to be safe suppliers of mortgage money for relatively low-risk loans. If you could qualify for a loan, F&F would make sure the banks had access to the money to make that loan, cheap money because it was backed by the American taxpayers.

But liberals like Barney Frank wanted more. They wanted the low cost of low-risk loans to be extended to higher-risk borrowers with lower incomes, fewer assets or less-solid credit. Barney and friends used the regulations of the Community Reinvestment Act to threaten lenders into making these loans. And banks, trying to meet Frank’s demands, expanded riskier lending schemes like subprime mortgages.

That’s when Freddie and Fannie stepped in. As Kevin Hassett of the American Enterprise Institute put it: “They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools.”

Lenders asked themselves, why should I care how shaky these borrowers are or risky the loans if a government-backed body is going to buy them up anyway?

The loans were made, the housing market bubbled, contributions from F&F flowed to Democrats like Chris Dodd and Barack Obama, and everyone was happy. Until they weren’t.

Without Freddie and Fannie’s reckless expansion, the housing bubble doesn’t happen. Without the implied promise behind F&F’s money, investment banks don’t dive into the derivatives market.

Instead, we did it Barney’s way.

Not only has Frank spent his career stopping any real reform of Fannie and Freddie, he repeatedly insisted they weren’t backed by the taxpayers. “There is no federal liability whatsoever,” Frank said in 2000.

But two weeks ago, we had to bail them out with $200 billion in our tax dollars.

Alan Greenspan, John McCain and others warned that F&F were taking on too much risk, but Frank dismissed these “overblown” fears as ideological attacks against his favorite cash cow. Even after Franklin Raines and Joe Johnson were caught red-handed mismanaging these institutions, Frank still insisted “we are not facing any kind of crisis.”

Just how deep in the Fannie/Freddie tank was he? As The Wall Street Journal reports: “Mr. Frank was publicly arguing for an increase in the size of their combined $1.4 trillion portfolios right up to the day they were bailed out. Even now . . . he opposes Treasury’s planned reduction in the size of the portfolios starting in 2010.”

Our markets have collapsed, we’re paying through the nose, and Barney Frank is still fighting to keep Fannie and Freddie on the dole.

Why? Because in his mind, the point of Fannie/Freddie is taxpayer-subsidized housing for low-income borrowers - no matter how bad their credit or how high the cost.

“Otherwise,” he asks, “why should they exist?”

And what about us, the responsible borrowers and hard-working taxpayers stuck with the trillion-dollar tab? In Barney’s world, that’s the only reason we exist. He spends. We pay.

This truly is Barney Frank’s bailout.

Little U.S Dreamer · Post by **Little U.S Dreamer** » Tue Sep 23, 2008 11:40 pm

OK - I'm really tired but I must respond to this -

who is Barney Frank? ok ok I went to wikipedia and looked him up but WHO IS HE? http://http://en.wikipedia.org/wiki/Barney_Frank

He is Jewish?

He is gay?

He supports Medical Marijuiana?

So he has the ethnic edge in politics - and my generation likes him cause he 'doesn't hide in the closet' and he supports 50+% of Americans illegal drug of choice?

...tought fight to pick at the first glance....But that's all I have time for tonight.

...sorry I MUST go to bed. Much to do and little sleep to get there.

Accountable · Post by **Accountable** » Wed Sep 24, 2008 3:38 am

Little U.S Dreamer;993558 wrote: OK - I'm really tired but I must respond to this -

who is Barney Frank? ok ok I went to wikipedia and looked him up but WHO IS HE? http://http://en.wikipedia.org/wiki/Barney_Frank

He is Jewish?

He is gay?

He supports Medical Marijuiana?

So he has the ethnic edge in politics - and my generation likes him cause he 'doesn't hide in the closet' and he supports 50+% of Americans illegal drug of choice?

...tought fight to pick at the first glance....But that's all I have time for tonight.

...sorry I MUST go to bed. Much to do and little sleep to get there.

He's the chairman of the Financial Services Committee. He was in a position to prevent all of this, had he focused on fiscal responsibility rather than immediate gratification. The regulations that were in place kept honest people honest. Frank was the main one that pulled out the linchpin & caused the system to fall apart.

Post by **spot** » Wed Sep 24, 2008 3:58 am

Accountable;993668 wrote: He's the chairman of the Financial Services Committee. He was in a position to prevent all of this, had he focused on fiscal responsibility rather than immediate gratification. The regulations that were in place kept honest people honest. Frank was the main one that pulled out the linchpin & caused the system to fall apart.

Barney Frank took the position in 2006, if you'll excuse my French. I thought you'd been blaming Clinton up until now for pulling lynchpins.

Accountable · Post by **Accountable** » Wed Sep 24, 2008 4:07 am

spot;993675 wrote: Barney Frank took the position in 2006, if you'll excuse my French. I thought you'd been blaming Clinton up until now for pulling lynchpins.
Clinton signed a bill in '99 that started it all, that's true. Barney Frank (and his predecessor) could have stopped this before it started.

Tangle the semantics however you wish, spot. Our federal gov't should not be involved in the housing market. No way no how.

Post by **spot** » Wed Sep 24, 2008 4:35 am

Accountable;993678 wrote: Tangle the semantics however you wish, spot. Our federal gov't should not be involved in the housing market. No way no how.They should be involved in a regulatory capacity. "Frank was the main one that pulled out the linchpin & caused the system to fall apart" seemed a gross partisan exaggeration, that's all. You completely ignore whose watch this disaster built under. We can all remember the years during which these mad mortgages were handed out like confetti. 2003 to 2007. Every month of it was "let's keep the boiler stoked and the pressure high or we'll stop dead on the track". Call a spade a spade, Acc - you've had a White House Administration set on stripping the assets of the US into Corporate America and the pockets of its owners.

Galbally · Post by **Galbally** » Wed Sep 24, 2008 5:04 am

I have to really say here that blaming Barney Frank, or Bill Clinton for what has been something driven my an entire generational ideology of deregulation, uncontrolled markets, a slavish devotion to the belief that financial companies could achieve any sort of economic miracle as long as governments didn't look to hard at what they were actually doing (which was constructing the biggest pyramid scheme in history based on grossly over-inflated US land values) is complete rubbish. Also the fact that George Bush was handed a budget deficit of zero by clinton and has managed to turn that into the greatest budget deficit in American history in 8 years shouldn't be glossed over, he is a republican, supposedly the party of small government and fiscal prudence, I think that myth is well and truly buried for a generation now.

The capitalist ideologs have been worshipping at the feet of Wall Street for decades, Wall Street believed its own hype, everybody turned a blind eye because it seemed like the money would always flow, and an entire sub-economy was constructed out of essentially fraudulent financial practices based on the idea that land values and a service economy could underpin the dismantling of industry and real enterprise, most of which now happens in SE Asia. All the capital, that could have been invested in actually productive, innovative enterprises (both small and large), has been blown on keeping the growing ranks of the financial elite and massivley overpaid financial workers in the lifestyles to which they were accustomed.

The closest parralel I can come up with, is the economic and political collapse of the Ancient Regime in France in 1789, and the destruction of the class of the super-rich disinterested "aristocrats" who based their ridiculous lifestyles of luxury and wealth on the massively inflated value of the land in what was a rentier economy and on the backs of overworked impoverished peasants (unlike the rapidly industrializing Britain at the time where welath was more evenly spread). This total inequality of wealth and social mobility (and the resultant revolution and complete social collapase) has some parallels in the deeply unequal UK and US societies of today, (based on the worst form of darwinian capitalism where the salaries of the top are hundreds of times the salaries of the bottom, and the gap increases all the time as captial draws all wealth unto istself).

Obviously, these modern countries are nowhere near as unequal or unfair as 18th century France (which was an absolute monarchy). However, certainly the previously inassable position of our own super-rich, their ridicouous lifestyles, the scyophantic fawning media attitude toward such people, and the gradual switch away from industrial capitalist socieites to rentier ones (based on land holdings and banking) have many parallels.

So, now we have the modern West, with its legions of Super-Rich "aristos" insulated from reality by their wealth and feted by the media as the last word in everything, living in tandem with a sullen, frightened, impoverished middle class who actually work, and generally pay for everything, and of course the peasants of China who do all the manual work making things. That order has collapsed, and what will replace it is going to look quite different.

No matter what anyone says, the crazy game has well and truly ended, the emperor has no clothes, and the financial gods have failed for good. The bailout will cushion some companies at the expense of the taxpayer, and may help save some of the financial system, but the huge cost is still going to have to be paid (by the real economy and the citizens) for the nonsense of the past decade, and it will take longer than a decade to pay for. This is the time now to ditch this insane glorification of high finance to the detriment of the real economy, and get back to creating and investing in goods and services that are actually productive as opposed to pouring national wealth into a casino run by well-educated con-men and their political and media apologists.

Post by **spot** » Wed Sep 24, 2008 5:21 am

Who knows, maybe Congress will bite the bullet and refuse the bailout after all. Refusal will be a lot more survivable even though it might hurt sooner (meaning next month instead of spread over the next twenty years).

Why do people not see the consequence of leaving the banks flush with good money again? Isn't it blatantly obvious that in a few months they'd be lending against inadequate collateral again, if they had it to lend? The banks need to burn and scrimp and get lean and efficient or die. Handing them this unimaginably large injection of new money for old rubbish isn't a path leading to reform.

Accountable · Post by **Accountable** » Wed Sep 24, 2008 5:08 pm

spot;993705 wrote: Who knows, maybe Congress will bite the bullet and refuse the bailout after all. Refusal will be a lot more survivable even though it might hurt sooner (meaning next month instead of spread over the next twenty years).

Why do people not see the consequence of leaving the banks flush with good money again? Isn't it blatantly obvious that in a few months they'd be lending against inadequate collateral again, if they had it to lend? The banks need to burn and scrimp and get lean and efficient or die. Handing them this unimaginably large injection of new money for old rubbish isn't a path leading to reform.
I completely agree.

http://video.google.com/videosearch?sou ... lout&src=4#

Post by **spot** » Thu Sep 25, 2008 12:33 am

Here we are - essential reading material.

Here's the full text of President Bush's "speech on the economic crisis" from The Associated Press as transcribed by CQ Transcriptions.Good evening.

This is an extraordinary period for America's economy. Over the past few weeks, many Americans have felt anxiety about their finances and their future. I understand their worry and their frustration. We've seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending, credit markets have frozen, and families and businesses have found it harder to borrow money.

We're in the midst of a serious financial crisis, and the federal government is responding with decisive action. We boosted confidence in money market mutual funds and acted to prevent major investors from intentionally driving down stocks for their own personal gain. Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets.

Financial assets related to home mortgages have lost value during the house decline, and the banks holding these assets have restricted credit. As a result, our entire economy is in danger. So I propose that the federal government reduce the risk posed by these troubled assets and supply urgently needed money so banks and other financial institutions can avoid collapse and resume lending. This rescue effort is not aimed at preserving any individual company or industry. It is aimed at preserving America's overall economy. It will help American consumers and businesses get credit to meet their daily needs and create jobs. And it will help send a signal to markets around the world that America's financial system is back on track.

I know many Americans have questions tonight: How did we reach this point in our economy? How will the solution I propose work? And what does this mean for your financial future? These are good questions, and they deserve clear answers.

First, how did our economy reach this point? Well, most economists agree that the problems we're witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad because our country is an attractive and secure place to do business. This large influx of money to U.S. banks and financial institutions, along with low interest rates, made it easier for Americans to get credit. These developments allowed more families to borrow money for cars, and homes, and college tuition, some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.

Unfortunately, there were also some serious negative consequences, particularly in the housing market. Easy credit, combined with the faulty assumption that home values would continue to rise, led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on. Optimism about housing values also led to a boom in home construction. Eventually, the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell, and this created a problem. Borrowers with adjustable-rate mortgages, who had been planning to sell or refinance their homes at a higher price, were stuck with homes worth less than expected, along with mortgage payments they could not afford. As a result, many mortgage-holders began to default. These widespread defaults had effects far beyond the housing market.

See, in today's mortgage industry, home loans are often packaged together and converted into financial products called mortgage-backed securities. These securities were sold to investors around the world. Many investors assumed these securities were trustworthy and asked few questions about their actual value. Two of the leading purchasers of mortgage-backed securities were Fannie Mae and Freddie Mac. Because these companies were chartered by Congress, many believed they were guaranteed by the federal government. This allowed them to borrow enormous sums of money, fuel the market for questionable investments, and put our financial system at risk.

The decline in the housing market set off a domino effect across our economy. When home values declined, borrowers defaulted on their mortgages, and investors holding mortgage-backed securities began to incur serious losses. Before long, these securities became so unreliable that they were not being bought or sold. Investment banks, such as Bear Stearns and Lehman Brothers, found themselves saddled with large amounts of assets they could not sell. They ran out of money needed to meet their immediate obligations, and they faced imminent collapse. Other banks found themselves in severe financial trouble. These banks began holding on to their money, and lending dried up, and the gears of the American financial system began grinding to a halt.

With the situation becoming more precarious by the day, I faced a choice, to step in with dramatic government action or to stand back and allow the irresponsible actions of some to undermine the financial security of all. I'm a strong believer in free enterprise, so my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances.

The market is not functioning properly. There has been a widespread loss of confidence, and major sectors of America's financial system are at risk of shutting down. The government's top economic experts warn that, without immediate action by Congress, America could slip into a financial panic and a distressing scenario would unfold. More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet. Foreclosures would rise dramatically. And if you own a business or a farm, you would find it harder and more expensive to get credit. More businesses would close their doors, and millions of Americans could lose their jobs. Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And, ultimately, our country could experience a long and painful recession.

Fellow citizens, we must not let this happen. I appreciate the work of leaders from both parties in both houses of Congress to address this problem and to make improvements to the proposal my administration sent to them. There is a spirit of cooperation between Democrats and Republicans and between Congress and this administration. In that spirit, I've invited Senators McCain and Obama to join congressional leaders of both parties at the White House tomorrow to help speed our discussions toward a bipartisan bill. I know that an economic rescue package will present a tough vote for many members of Congress. It is difficult to pass a bill that commits so much of the taxpayers' hard-earned money. I also understand the frustration of responsible Americans who pay their mortgages on time, file their tax returns every April 15th, and are reluctant to pay the cost of excesses on Wall Street. But given the situation we are facing, not passing a bill now would cost these Americans much more later.

Many Americans are asking, how would a rescue plan work? After much discussion, there's now widespread agreement on the principles such a plan would include. It would remove the risk posed by the troubled assets, including mortgage-backed securities, now clogging the financial system. This would free banks to resume the flow of credit to American families and businesses. Any rescue plan should also be designed to ensure that taxpayers are protected. It should welcome the participation of financial institutions, large and small. It should make certain that failed executives do not receive a windfall from your tax dollars. It should establish a bipartisan board to oversee the plan's implementation, and it should be enacted as soon as possible.

In close consultation with Treasury Secretary Hank Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox, I announced a plan on Friday.

First, the plan is big enough to solve a serious problem. Under our proposal, the federal government would put up to $700 billion taxpayer dollars on the line to purchase troubled assets that are clogging the financial system. In the short term, this will free up banks to resume the flow of credit to American families and businesses, and this will help our economy grow.

Second, as markets have lost confidence in mortgage-backed securities, their prices have dropped sharply, yet the value of many of these assets will likely be higher than their current price, because the vast majority of Americans will ultimately pay off their mortgages. The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal. And when that happens, money will flow back to the Treasury as these assets are sold, and we expect that much, if not all, of the tax dollars we invest will be paid back.

The final question is, what does this mean for your economic future? Well, the primary steps — purpose of the steps I've outlined tonight is to safeguard the financial security of American workers, and families, and small businesses. The federal government also continues to enforce laws and regulations protecting your money. The Treasury Department recently offered government insurance for money market mutual funds. And through the FDIC, every savings account, checking account, and certificate of deposit is insured by the federal government for up to $100,000. The FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit, and this will not change. Once this crisis is resolved, there will be time to update our financial regulatory structures. Our 21st-century global economy remains regulated largely by outdated 20th-century laws.

Recently, we've seen how one company can grow so large that its failure jeopardizes the entire financial system. Earlier this year, Secretary Paulson proposed a blueprint that would modernize our financial regulations. For example, the Federal Reserve would be authorized to take a closer look at the operations of companies across the financial spectrum and ensure that their practices do not threaten overall financial stability. There are other good ideas, and members of Congress should consider them. As they do, they must ensure that efforts to regulate Wall Street do not end up hampering our economy's ability to grow.

In the long run, Americans have good reason to be confident in our economic strength. Despite corrections in the marketplace and instances of abuse, democratic capitalism is the best system ever devised. It has unleashed the talents and the productivity and entrepreneurial spirit of our citizens. It has made this country the best place in the world to invest and do business. And it gives our economy the flexibility and resilience to absorb shocks, adjust, and bounce back.

Our economy is facing a moment of great challenge, but we've overcome tough challenges before, and we will overcome this one. I know that Americans sometimes get discouraged by the tone in Washington and the seemingly endless partisan struggles, yet history has shown that, in times of real trial, elected officials rise to the occasion. And together we will show the world once again what kind of country America is: a nation that tackles problems head on, where leaders come together to meet great tests, and where people of every background can work hard, develop their talents, and realize their dreams.

Thank you for listening. May God bless you.

Post by **spot** » Thu Sep 25, 2008 1:11 am

Now, granted my position is that I want to see the final collapse of World Capitalism in my lifetime and that, to be honest, as of this month I've seen it and there's no way back, going ahead with this $700 billion bail-out of the existing US banking system is the best way to achieve it sooner rather than later. Feed the beast, that's how to get it to consume itself in an orgy of profiteering. There's no possible way that any US government is ever going to apply sufficient regulation to the industry to prevent the greed factor from tearing it all down again.

Accountable · Post by **Accountable** » Thu Sep 25, 2008 3:09 am

It's not greed, it's greed without consequence. When gov't takes away the risk, life becomes an all-you-can-eat buffet.

Full article here

Barack Obama says, "[Today's economic problems are] a stark reminder of the failures of ... an economic philosophy that sees any regulation at all as unwise and unnecessary" ().

What? Does that mean that until last week the Bush administration embraced the free market? Nonsense. Governments at all levels have regulated and subsidized the housing and financial industries for years. Nothing changed under President Bush.

The government-backed Fannie Mae and Freddie Mac were created precisely to interfere with the housing and mortgage markets. In effect, Freddie and Fannie diverted money to people who wouldn't have qualified for mortgages in a real private market.

Accountable · Post by **Accountable** » Thu Sep 25, 2008 3:51 am

By a margin of 55 percent to 31 percent, Americans say it's not the government's responsibility to bail out private companies with taxpayer dollars, even if their collapse could damage the economy, according to the latest Bloomberg/Los Angeles Times poll.

http://www.bloomberg.com/apps/news?pid= ... K_5_fV5D4M

Post by **spot** » Thu Sep 25, 2008 4:16 am

It's up to Congress to prevent the stripping of the nation's future budgets then, isn't it. Have they the backbone for the job, or are they supine bureaucrats capable of being bought off whenever plunder's being hunted by the predators?

Galbally · Post by **Galbally** » Thu Sep 25, 2008 5:08 am

This is, I suppose a moment of decision. I have to say that based on what is happening, I agree with Spot that the lassire faire model of Anglo Saxon capitalism based on high finance is now dead in the West (at least for the present). There is no dount that the basic concept of Capitalism will survive, but its going to be a much more regulated one, where the economy is mixed between private enterprise, and the public sphere operated through government-regulated public control and targeted government investment conducted in the public interest (like MITI does in Japan, and a lot like you already have in Europe).

I think the important point to note from Bush's speech (which to be fair to a very bad president was not a bad speech at all) was his point that "The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal". So, finally the penny drops for the neocons, that you cannot run wars on the cheap, that you cannot dispense with multilateral relations in geopolitics, and that the markets don't hold the answers to all human questions. That statement is an admission that on occasion the markets and capitalism fail, and that unless you have a strong government at that point, you are in the siht. That puts paid to the lie that all you need are markets and that somehow markets always know best about everything, they demonstrably do not, and never have.

I am sure that America will come back from this, though not for quite some time as its going to be difficult, and its also going to have a huge impact on all of us, partilcularly for us in Europe (the other "Western" people). Hopefully we will all be able to live up to the challenges that confront us. What worries me is that we are encountering mutiple problems (financial crash, climate destabilization, the end of oil, the rise of extremism and religiosity again, geopolitical changes of the first order), each of which would on their own be very serious, but when put together make one worry that we simply don't have the capability any more to deal in any way effectively with them as we have squandered so much of our power and resources on luxury and political navel gazing.

It is certainly a time to be in earnest, as the platitudes and cant that have been passed off as public debate in recent years simply will not do.

Accountable · Post by **Accountable** » Thu Sep 25, 2008 5:25 am

Galbally;995089 wrote: This is, I suppose a moment of decision. I have to say that based on what is happening, I agree with Spot that the lassire faire model of Anglo Saxon capitalism based on high finance is now dead in the West (at least for the present). Isn't it clear yet?? There has been nothing laissez faire about how our gov't has been manipulating the market. Again, laws made to keep honest people honest are fine and necessary. What Congress have been doing is using legislation to stimulate and manipulate the market, not sitting back and letting it work on its on. That's what's wrecked the system, and trying to wrench it back on track will do nothing but more harm.

Post by **spot** » Thu Sep 25, 2008 5:26 am

Galbally;995089 wrote: to be fair to a very bad president was not a bad speech at allQuite honestly, I couldn't bring myself to listen to the murdering bastard read it aloud and it's not as though he wrote any of it himself. That's why I found the paper copy.

Galbally · Post by **Galbally** » Thu Sep 25, 2008 6:20 am

Accountable;995101 wrote: Isn't it clear yet?? There has been nothing laissez faire about how our gov't has been manipulating the market. Again, laws made to keep honest people honest are fine and necessary. What Congress have been doing is using legislation to stimulate and manipulate the market, not sitting back and letting it work on its on. That's what's wrecked the system, and trying to wrench it back on track will do nothing but more harm.

No accountable, what has happened is that the market itself has failed (again), it was deregulated in the forlorn belief that it would then more efficiently be able to allocate capital resources to the best performing businesses, and sort out the chaff (which is exactly the same argument you are making now). That did not happen, the markets did not work, they instead just enriched themselves in the shortest of terms at the cost of future propsperity, which is something it is always in human nature to do. The wiser investors and companies were sidelined and the brash hardball conmen took over, with all the resultant consequences.

What I am telling you now, is that unless you do something to shore up the basic money supply in the US, banks will simply stop lending to anyone, many of the banks will still fail, then enormous swathes of industry (perfecty good industry that is, however, reliant on a line of good credit) will go bust, pension funds and houses will become worthless, and your country will be pitched into a true depression, that could last for 10, 20, god knows how many, years. The only people with the authority and money to do that now are the government, you are looking at wholescale changes to the US financial system, whatever happens.

What has happened to my mind is that the deregulation (and muzzling of the dissent of those not directly involved in high finance) enabled the guru's of Wall Street and elsewhere (egged on by their shrill media and political apologists) to construct a model of business that was inherent nonsense, (and I mean nonsense). However, for a long period of time it was a highly profitable (though nonsensical) model for the individuals invovled, and they have taken their pound of flesh and run. The consequences of their never-land economics, is that they have destoryed any condifence investors had in the system and now the financial markets are engaged in destroying themselves in a growing panic of fear, which I assure you they will do (just as they have in the past on several occasions) unless the government in America takes control of the situation somehow, however, that is going to have enormous political and economic consequences for everyone involved.

I guess we will end up disagreeing on it, but that is my honest opinion. We are moving away from Friedmann once more and back to Keynes, thats the best bet I can make, given the way things have been run for the last few decades, and the decadent, degenerate, and trivialized society that has arisen as a result where human beings have allowed themselves to become commodified just like everything else on the planet, thats no bad thing.

Post by **spot** » Thu Sep 25, 2008 11:05 am

It's looking more like a done deal now. Congress caved.A leading US senator says both parties in Congress have reached agreement on the outline of a $700bn (£380bn) bail-out plan to revive the finance sector. Democrat Senator Christopher Dodd said they had reached "fundamental agreement" on the principles of a package though he did not give details. He said Congress could act in the next few days to pass a bill on the subject.

http://news.bbc.co.uk/1/hi/business/7636542.stm

Accountable · Post by **Accountable** » Thu Sep 25, 2008 2:24 pm

Galbally;995168 wrote: No accountable, what has happened is that the market itself has failed (again), it was deregulated in the forlorn belief that it would then more efficiently be able to allocate capital resources to the best performing businesses, What happened was beyond deregulation. With Fanny and Freddie, the gov't took the risk away, which knocks the market off-balance. When there's no risk, there's no reason not to take (otherwise) stupid gambles.

gmc · Post by **gmc** » Thu Sep 25, 2008 2:38 pm

Accountable;995101 wrote: Isn't it clear yet?? There has been nothing laissez faire about how our gov't has been manipulating the market. Again, laws made to keep honest people honest are fine and necessary. What Congress have been doing is using legislation to stimulate and manipulate the market, not sitting back and letting it work on its on. That's what's wrecked the system, and trying to wrench it back on track will do nothing but more harm.

Just for once I almost agree with you, every time they got themselves in trouble the govt bailed them out by lowering interest rates and the like instead of letting firms go to the wall. yep partisan right wing party politics and cronyism. You have been royally shafted. What you need is a good left wing party to sort them out. power to the people and all that. :sneaky:

posted by spot.

Now, granted my position is that I want to see the final collapse of World Capitalism in my lifetime and that, to be honest, as of this month I've seen it and there's no way back, going ahead with this $700 billion bail-out of the existing US banking system is the best way to achieve it sooner rather than later. Feed the beast, that's how to get it to consume itself in an orgy of profiteering. There's no possible way that any US government is ever going to apply sufficient regulation to the industry to prevent the greed factor from tearing it all down again.

OK what's your alternative?

Post by **spot** » Thu Sep 25, 2008 2:43 pm

gmc;996026 wrote: OK what's your alternative?Communism. Community ownership of the means of production. Community ownership of resources, community allocation to those who need them. I'm prepared to stand back from death to class enemies so long as I'm not opposed.

Oh - and no national borders and no national government. I'm fixing the world, not just the USA.

Galbally · Post by **Galbally** » Thu Sep 25, 2008 3:36 pm

Accountable;996019 wrote: What happened was beyond deregulation. With Fanny and Freddie, the gov't took the risk away, which knocks the market off-balance. When there's no risk, there's no reason not to take (otherwise) stupid gambles.

I think a good line in the sand right now would be to stop rewarding people on Wall Street and the city of London for epic failure based on the idea that these peoples obscene fortunes are somehow ideologically invioable, to me they have earned them through the destruction of their own companies, and creating enormous real-world misery of ordinary Americans (and the rest of us, who are also about to get clattered); that is totally unacceptable in a nation where the citizens are supposed to ultimately be in charge. People who have been unwise and borrowed too much, or not put provision for difficult times aside, or work in certain industries are about to be crucified economically for their unwise choices, why should Wall Street be any different, my attitude is save the system, even the institutions, but let the individuals (and ultimately companies) who were responsible pay heavily and make sure that the tax payer now gets an equity stake to make sure that ordinary people recieve any long term benefits when things pick up again (which may be a long time, but at least its something).

In general, I think most people accept now that the way people were behaving individually was unwise and there is going to be a painful but necessary reckoning. Fine, that the way the system we live by works and in general it has served us well, despite the individual pain it can cause on occasion (when it goes wrong). However, smug arrogant men who have made billions sustaining and promoting that economic lunacy will walk away richer than ever? That to me shows that the market itself and its rules are not based on reality or probity, and instead seems akin to some ghastly casino, where as long as you can get to the top, the rewards are self-sustaining, no matter what you actually do. So the whole market structure, as much as government, totally failed to percive the risk in what was going on, and acted literally like there was no-tomorrow, well guess what? its tomorrow, and now the question is how could anyone have allowed such lunatic behaviour threaten the entire economic structure of the USA and in fact the world. In that I of course agree with you that the governments of our times have been ridiculously lax in tackling the inequities and poor regulation of financial systems. Many people, however, have been warning that this was going to happen, and was in fact long overdue.

The risks that were taken were insane, and the market actually encouraged them because they made short-term profits that looked great on quarterly statements. Thats because thats the way markets actually are, they are like a financial school of bacteria just fulfilling their instinct to expand and enrich. That motivation is fine, it drives economies, however, it is a blind instinct and on occasion it causes diaster, such as now, which is why markets require oversight to ensure they don't conflict with the national interest and the general interest of the citizens, don't you see that?

For instance, 5,000 people working for Lehman Brothers in London were summarily dismissed once the company went bust; however, the CEO and several senior executives in New York that made the decisions (that directly caused the bank to fail) are going to be paid off by Barclay's Shareholders to the tune of billions. That firstly is sickening, also it is an insane idea to give such irresponsible people un-checked control of economic decisions that have a global impact, while rewarding them implicitly for hitting the self-destruct button.

Currently not only is there no sanction against such criminal irresponsibility, its actually rewarded, all because "the market" would somehow be unhappy if the individuals involved were no longer shielded from the consequences of their actions. In this case, what "the market" means is the class of financiers, traders, and bankers who naturally don't want their candy taken away. They are placated because somehow they have the god-given right to demand whatever they want. How does that make sense? These people are citizens who are accountable for their actions, what they do is not magic, in fact its just fancy betting with borrowed money and pension funds etc, and they do not have any special claim to these rewards they recieve.

This is what happens when people become so enamoured by the philosophical castles that they have constructed that they no longer accept that perhaps the reality is not quite as perfect as their text book economics would suggest. Thats precisely why communism collapsed like a pack of cards, and I suspect that unless there is a serious wake up call in the bastions of capitalism (to temper the enthusiasm for worshipping the belief that markets have the answers to all economic questions) the countries that currently espouse that ideology will go the same way.

Economic systems are tools, they are not the end point of society, I am a capitalist, but not an ideolog, and if the system is disfunctional, then the system needs to be looked at. I am all in favour of their being minimal (but actually effective) control on people's economic decisions, but issues of the magnitude of a Nation's money supply cannot be just left to the whim of the financial mob, its not a stable long term solution. We also need to get markets investing in long term productive enterprise, not just moving money around to make massive 3-monthly profits, thats got to do with how the entire system is set up, make returns based on a 12 monthly as opposed to 3 monthly cycle, tax short term profit taking but reward long term investment, this can all be done, and not at the cost of 700 billion dollars. The next big issue is what is going to be the driver of the US economy in the future, as it has been based so much on debt in the past years. Now that money is not available for people to spend so the US has to become an exporting and manufacturing nation again.

The other issue is housing, and turning houses from something that people live in, to financial instruments of supposedly never ending wealth. Any first year economics student could tell you that unless your nation actually does something productive to enable it to earn currency from trade (both internal and external) selling houses to each other and underwriting all debt based on the idea that the prices will continue to rise indefintely with no ceiling can only end one way, which of course it has.

gmc · Post by **gmc** » Fri Sep 26, 2008 1:04 am

spot;996028 wrote: Communism. Community ownership of the means of production. Community ownership of resources, community allocation to those who need them. I'm prepared to stand back from death to class enemies so long as I'm not opposed.

Oh - and no national borders and no national government. I'm fixing the world, not just the USA.

Can't work won't work-a utopian ideal that has been thoroughly discredited. You are one of a dying breed and socialism moves on. Communism was the dead end answer of middle class philosophers to problems he saw around him who thought those around him were stupid and needed the benefit of good leadership to show them the way. You swop one set of masters for another, george orwell wasn't the only one that saw that.

Post by **spot** » Fri Sep 26, 2008 1:35 am

gmc;996452 wrote: Can't work won't work-a utopian ideal that has been thoroughly discredited. You are one of a dying breed and socialism moves on. Communism was the dead end answer of middle class philosophers to problems he saw around him who thought those around him were stupid and needed the benefit of good leadership to show them the way. You swop one set of masters for another, george orwell wasn't the only one that saw that.

That's a fair description of Russia and China, it has nothing to do with Communism.

There's two ways of looking at how wealthy a given society is. You can look at the rich and say wow, there's a whole bunch of rich people among them and if they each try hard there's a chance they could get to be rich too. That's capitalism. The other is to look at the poorest 10% of the society and say Jesus, how on earth can that crowd live with itself if it allows that sort of deprivation on its doorstep? Communism deals with that. Communism has no interest whatever in achieving wealth, it has an interest in preventing poverty. The capitalist excuse is the big lie that the 10% have only themselves to blame for being so idle and lacking any drive. No honest analysis would substantiate such an assessment.

Look at the bottom 10% and then decide how to cut the cake. It's called social justice, and Capitalism is utterly incompetent at dealing with it. Socialism works, Communism is the underlying theory behind Socialism.

Once you get past looking at the lowest 10% in a given area, expand the area. The other aspect of Capitalism is that it hoards within a group and the major grouping is national. If the bottom 10% of society in Somalia needs resourcing then Communism's more than happy to resource that group from outside Somalia, unlike Capitalism which ring-fences any token gesture it makes toward the welfare of the poor. They're not our poor so they're not our problem? Oh yes they are.

Galbally · Post by **Galbally** » Fri Sep 26, 2008 2:20 am

spot;996476 wrote: That's a fair description of Russia and China, it has nothing to do with Communism.

There's two ways of looking at how wealthy a given society is. You can look at the rich and say wow, there's a whole bunch of rich people among them and if they each try hard there's a chance they could get to be rich too. That's capitalism. The other is to look at the poorest 10% of the society and say Jesus, how on earth can that crowd live with itself if it allows that sort of deprivation on its doorstep? Communism deals with that. Communism has no interest whatever in achieving wealth, it has an interest in preventing poverty. The capitalist excuse is the big lie that the 10% have only themselves to blame for being so idle and lacking any drive. No honest analysis would substantiate such an assessment.

Look at the bottom 10% and then decide how to cut the cake. It's called social justice, and Capitalism is utterly incompetent at dealing with it. Socialism works, Communism is the underlying theory behind Socialism.

Once you get past looking at the lowest 10% in a given area, expand the area. The other aspect of Capitalism is that it hoards within a group and the major grouping is national. If the bottom 10% of society in Somalia needs resourcing then Communism's more than happy to resource that group from outside Somalia, unlike Capitalism which ring-fences any token gesture it makes toward the welfare of the poor. They're not our poor so they're not our problem? Oh yes they are.

How on earth do you propose to tackle poverty if you don't also try to create wealth? My own take on all these issues would be pragmatic. There are aspects of capitalism that I would find indispensible, the right to own property, the right to earn a profit, the right for private individuals to form companies, the laws of limited liability, all these things are tried and tested methods that allow human beings to create economic sucess for themselves and their families.

There is also the aspects of a free market society that gives ordinary people a stake in the economic life of their country as opposed to just being labour. Of course one of the major problems with Communism is that it has in all cases requried a tyranny to achieve the assent of people to complete state control of all means of production of goods and services. The quality of the people that have run that sort of tyranny has ranged from not so bad (like Gorbachev) to horrendous (Stalin or Mao), the point it it was still a totalitarian tryanny whether of a commitee or just one man.

What I do like from democractic European-style socialism is the emphasis on human beings being part of a wider society, that everything should not be left to private enterprise as frankly they cannot be trusted with the well being of average citizens, that we all contribute into and take out of, as long as that doesn't end up being a stick with which to beat the individual with. Also, as has become apparent, there are some functions of the economy that are probably so vital to the national interest that they cannot and should not be left to the whims of private enterprise.

Post by **spot** » Fri Sep 26, 2008 2:26 am

My apology, Galbally, I was being slightly condensed and assuming my thought would be clear. Communism has no interest whatever in achieving personal wealth for the individual. Obviously it has an interest in increasing the common wealth within society as a whole, though I'd throw in the concept of long-term sustainable at that point (something else that Capitalism manifestly fails at).

gmc · Post by **gmc** » Fri Sep 26, 2008 2:28 am

spot;996476 wrote: That's a fair description of Russia and China, it has nothing to do with Communism.

There's two ways of looking at how wealthy a given society is. You can look at the rich and say wow, there's a whole bunch of rich people among them and if they each try hard there's a chance they could get to be rich too. That's capitalism. The other is to look at the poorest 10% of the society and say Jesus, how on earth can that crowd live with itself if it allows that sort of deprivation on its doorstep? Communism deals with that. Communism has no interest whatever in achieving wealth, it has an interest in preventing poverty. The capitalist excuse is the big lie that the 10% have only themselves to blame for being so idle and lacking any drive. No honest analysis would substantiate such an assessment.

Look at the bottom 10% and then decide how to cut the cake. It's called social justice, and Capitalism is utterly incompetent at dealing with it. Socialism works, Communism is the underlying theory behind Socialism.

Once you get past looking at the lowest 10% in a given area, expand the area. The other aspect of Capitalism is that it hoards within a group and the major grouping is national. If the bottom 10% of society in Somalia needs resourcing then Communism's more than happy to resource that group from outside Somalia, unlike Capitalism which ring-fences any token gesture it makes toward the welfare of the poor. They're not our poor so they're not our problem? Oh yes they are.

That's because communism is a utopian ideal that isn't going to work. It's got much in common with religious utopian ideals which is why some of it's adherents exhibit what looks like religious fervour, unable to cope with dissenters and having their very own versions of the inquisition. Lenin called it the infantile disorder (although obviously he said it in russian) which I always think is very apt. It's adherents also tend to see thing in black and white, this or that, that way or this way ignoring anything that conflicts with what they choose to believe. Marx and engels Lenin and stalin and mao were the political pat robertsons of their day using a mighty book to make their case and chastising those who diod not copnform.

A marxist view of history has some relevance but is no means an adequate explanation. Same with great man theories and all the other theories floating around.

communism never really got a grip in societies where you had an educated work force used to thinking for itself. I.E exactly those kind of societies marx thought a socialist revolution would happen in due course. It did but not quite the way he expected. Those who advocate blood and violence always believe in their own logic and my way is the only way. It's surprising anyone still believes we will all see the light and follow the way-actually no it's not given where I live but now they seem friendly remnants of a long ago past. I had an uncle that first told me about red clydeside and showed me pictures of the tanks standing ready.

None of this is relevant to to thread except in passing but if you fancy an arguement elsewhere I don't mind.

Accountable · Post by **Accountable** » Fri Sep 26, 2008 3:07 am

Okay, I got a little education last night, so I'm a little dangerous.

As I understand it:

In 1999 Fanny Mae and/or Freddy Mac changed their rules in an effort to increase home ownership among lower-income people (bad credit risk). They did it by selling securities backed by the risky loans. Now people can buy houses that they can't afford. Now lenders are free to take bigger risks because the gov't guaranteed they won't lose. That in and of itself was dumb, but didn't collapse anything.

In 2001, after 9/11, the Fed dropped interest rates in an effort to keep the economy from stalling. A good idea, if you believe it's the government's responsibility to manipulate the markets.

http://www.bankrate.com/brm/news/fed/ke ... -rates.asp

In 2004, Goldman-Sachs, Merrill Lynch, Lehman Brothers,Bear Stearns, and Morgan Stanley asked for special permission to increase the amount of money they could borrow from the Fed. Up until this time, they were limited to borrow $12 for every $1 they held in reserves. The SEC allowed that to increase to $40 for every $1.

Three different federal offices - Congress, the Federal Reserve System, and the Securities and Exchange Commission - in an effort to manipulate market forces, encouraged unwise risk-taking and removed the balancer of consequences.

The problem was not deregulation, but artificial acceleration. Had the gov't not tried to accelerate the economy, it would not have crashed.

Post by **spot** » Fri Sep 26, 2008 3:12 am

Accountable;996578 wrote: In 1999 Fanny Mae and/or Freddy Mac changed their rules in an effort to increase home ownership among lower-income people (bad credit risk). They did it by selling securities backed by the risky loans.Focus in on that, especially that year. I'd quite like to read something on the rule change and who instigated it, and what volume of bad-risk trades it generated year by year from then until now. My suspicion is that the bad risk trades were minimal in volume and value before September 2001 but I'd like to find out.

Accountable · Post by **Accountable** » Fri Sep 26, 2008 3:38 am

spot;996583 wrote: Focus in on that, especially that year. I'd quite like to read something on the rule change and who instigated it, and what volume of bad-risk trades it generated year by year from then until now. My suspicion is that the bad risk trades were minimal in volume and value before September 2001 but I'd like to find out.
I'm sure it spiked in '01 and again around '04. There were crazy loan deals in '04 & '05 when we were shopping for a house. Zero-down, low interest, pay iterest-only for the first few years. Things I simply didn't believe at the time because it promised everything for nothing. We knew we were uneducated and insisted on paying 20% down on a good old-fashioned 30-year fixed mortgage. That disqualified us from getting a Veteran's Administration (VA) guaranteed loan. Turns out that free stuff costs too much.

Accountable · Post by **Accountable** » Fri Sep 26, 2008 3:42 am

Haven't read it, but just found this pdf on home ownership rates. Looks like good stuff.

http://research.stlouisfed.org/publicat ... arriga.pdf

Galbally · Post by **Galbally** » Fri Sep 26, 2008 3:42 am

Accountable;996578 wrote: Okay, I got a little education last night, so I'm a little dangerous.

As I understand it:

In 1999 Fanny Mae and/or Freddy Mac changed their rules in an effort to increase home ownership among lower-income people (bad credit risk). They did it by selling securities backed by the risky loans. Now people can buy houses that they can't afford. Now lenders are free to take bigger risks because the gov't guaranteed they won't lose. That in and of itself was dumb, but didn't collapse anything.

In 2001, after 9/11, the Fed dropped interest rates in an effort to keep the economy from stalling. A good idea, if you believe it's the government's responsibility to manipulate the markets.

In 2004, Goldman-Sachs, Merrill Lynch, Lehman Brothers,Bear Stearns, and Morgan Stanley asked for special permission to increase the amount of money they could borrow from the Fed. Up until this time, they were limited to borrow $12 for every $1 they held in reserves. The SEC allowed that to increase to $40 for every $1.

Three different federal offices - Congress, the Federal Reserve System, and the Securities and Exchange Commission - in an effort to manipulate market forces, encouraged unwise risk-taking and removed the balancer of consequences.

The problem was not deregulation, but artificial acceleration. Had the gov't not tried to accelerate the economy, it would not have crashed.

Yes, the figures are damning. Again, its been the work of many people over many years to get the finanical system into such a state. Governments (or the lack of them), champagne party economics, totally irresponsible companies and CEOs, banks who seemed to have forgotten some of the main rules of banking, an avalanche of capital flowing into the West from the east that (instead of being invested wisely) has been used to have a 10 year party by people who should know better, and a general population that feel such a sense of economic entitlement that they bought into things they could not afford and took on the hype lock, stock and barrel.

It has to be said that I have read from many commentators over the past decade who have maintained that the West was headed for a terrible fall caused by an over-reliance on high finance and the buying and selling of paper money and assets, rapid deindustrialization, the rush away from rationality, science and technology, the promotion of very short term profittering over long term investment in Britain and America, the reliance on China to keep inflation down and Banks balance books filled with foreign cash, the death of serious public discourse, the running of the US Government on credit that one day was going to be called in, and spoiled indulged populations who wanted candy today, and screw tomorrow. Will Huttons books "The State We are In" and "The World We are In" are two good examples.

Well now the worst has happened (or in my opinion is probably about to happen as the inevitable real panic is about to set in), and the issue is one of where do we go from here? What is cerainly unquestionable is that we are all now in a terrible mess, and its going to take a long time to just get out of it.

Post by **spot** » Fri Sep 26, 2008 3:50 am

Galbally;996601 wrote: Well now the worst has happened (or in my opinion is probably about to happen), and the issue is one of where do we go from here? What is cerainly unquestionable is that we are all now in a terrible mess, and its going to take a long time to just get out of it.

I'd want to see the collapse mitigated, the calamity averted, if it weren't for reports like http://news.bbc.co.uk/1/hi/world/south_asia/7635307.stm continually ramming it home that the utter ignorance of these maniacs has to be neutered. Some things matter, some things don't. The total destruction of US foreign policy is all that counts.

Galbally · Post by **Galbally** » Fri Sep 26, 2008 3:57 am

spot;996614 wrote: I'd want to see the collapse mitigated, the calamity averted, if it weren't for reports like http://news.bbc.co.uk/1/hi/world/south_asia/7635307.stm continually ramming it home that the utter ignorance of these maniacs has to be neutered. Some things matter, some things don't. The total destruction of US foreign policy is all that counts.

I don't share your animus toward the US; and they are certainly not alone in mistreating people, I recall there being similar issues in relation to the British Army and of course lets not bother discussing the record of the Taleban when it comes to Human Rights . However, I can tell you that the situation the US finds itself in is going to seriously curtail its ability to project force across the globe, and perhaps this will force those in power to use that power more wisely in the future. What outcomes that leads to remains to be seen.

Post by **spot** » Fri Sep 26, 2008 4:01 am

I still distinguish between the citizens of America, whom I more and more regard as victims of their ruling class, and the people responsible for what's reported on that link. I hope I'm pardoned for bringing it up at all, it just reminded me of quite how incensed I am at what's happened.

Accountable · Post by **Accountable** » Sat Sep 27, 2008 10:07 am

Today's Radio Address

President Lame Duck wrote: The problems in our economy are extremely complex, but at their core is uncertainty over "mortgage-backed securities." Many of these financial assets relate to home mortgages that have lost value during the housing decline. In turn, the banks holding these assets have restricted credit, and businesses and consumers have found it more difficult to obtain affordable loans. As a result, our entire economy is in danger. So I proposed that the Federal government reduce the risk posed by these troubled assets, and supply urgently needed money to help banks and other financial institutions avoid collapse and resume lending. Isn't reducing risk by gov't manipulation exactly what got us into this mess in the first place?? :yh_doh Seems that I remember some word being defined as doing the same thing over and over expecting a different result.