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Default Bailout (politics)

On Sep 27, 11:48*am, Puddin' Man wrote:
On Sat, 27 Sep 2008 05:20:13 -0700 (PDT), wrote:
I've not even heard the likes of Bush, etc mention "depression": not certain
why you would.

Do you really expect the president to use word "depression" to make
things worse and start a panic? *

If he and his spin-docs thought it'd serve their purpose, yes.
Whether true or not.

I used the word because this clearly
is the worst financial mess that we've had since the Great Depression
and the possibility for this to spin out of control is very real.

It has already spun out of control.

No, it hasn't. So far, everything is under control. Out of control
would be runs on banks both sound and unsound, dumping of US
securities by foreign investors, credit becoming unavailable to any
borrowers whether credit worthy or not, the Dow going down a few
thousand points in short order, etc. The problem would then extend
to the economy at large, with a resulting drop in GDP, unemployment
going higher to 10%, people taking big hits on their 401Ks, more
layoffs resulting in more foreclosures, etc. So far, this problem
has been largely confined to certain financial institutions and some
of the home building industry.

Washington Mutual experienced a net withdrawal of $16Bil in deposit
from panicked customers with money in their bank in the last 2
weeks. * It's not too far fetched to imagine that spreading. * With
credit drying up, banks failing, it's not too far fetched to imagine a
potential scenario where worldwide investors start to panic, pull all
money out of US institutions, start a panic in govt bonds, etc.

I don't even think that is the central issue.

Of course it is one of the central issues which could occur if nothing
is done.

The US now produces near nothing save WMD's and services.

Complete nonsense. Boeing, Intel, Microsoft and a whole list of
other great world leading companies make that such a silly statement
that it's laughable. But when you drag WMD nonsense into a financial
discussion, it does show where you're coming from.

Wall Street
used to have numerous trusted financial institutions. NYC was the
"Money Center" of the world.

And NYC still is the money center of the world.

As production in countries like China
and India has ramped up, foreign investment has become an increasingly
important component of the US economy.

Wall Street, as the foreign investors knew it, is gone. Never to
return. They have acted so irresponsibly that full trust will never
be restored, regardless of what the gov't does/doesn't-do.

There is zero evidence that foreigners have the jaundiced view that
you do of the USA. They haven't left and they still own huge amounts
of US securities and assets. And that's because they know the US
economy and assets are basicly sound and good investments. If Wall
Street is finished, why do you think Warren Buffet, who is known the
world over as the greatest investor of our time, just put $5Bil into
Goldman Sachs? Maybe he knows a little more than you.

Or why you'd think it would be avoidable.
Recessions are part of the normal and expected business cycle.

It's widely recognized that the Great Depression was so severe and
lasted so long because both the FED and the govt refused to take the
steps as it was beginning that would have mitigated it. *In fact, they
what little they did was the wrong thing. * *Just about everyone
agrees that this is no ordinary recession.

1.) We don't even have definitive evidence of recession (yet), let alone
* * depression.

Recessions are declared by a non-partisan board that reviews data
months after the data is first released, revised, etc. In other
words, they are looking in the rear view mirror and don't declare a
recession until it's been under way for 6 months to a year. If we
wait for that to happen, it will very likely be too late and/or even
more of a bailout will be necessary.

2.) Comparisons to the Great Depression are not the least bit
* * appropriate. Economic conditions then and now are very, -very-
* * drastically different.

Really, pray tell those very very drastic differences? The problems
then were caused by far too much leaveraging of assets and greed
turning into fear. Very similar to what is occuring today. Who do
you think knows more about the risks to the banking system and
economy? You or Bernanke?

The "bailout" violates the very free-market principles that these folks
purportedly worship. If that doesn't tell you something, you sho'ly,
sho'ly aren't listening.

I agree it's not desirable for the govt to do this. *I believe in free
markets to the fullest extent possible. *

So do they. But only when it is convenient and profitable for them.

These institutions that are going to be assisted, have already taken
huge hits. It hasn't been profitable to them, nor will it make it
profitable. Bear Stearns is wiped out, the investors lost
everything. Same thing at Lehman. Both of those companies are gone
and tens of thousands of employees have lost their jobs. Under the
current plan, the govt is going to be buying these sub-prime loans
deeply discounted. The institutions are NOT being made whole.

But you would rather have the economy go down on principle. I notice
none of the liberal Dems in Washington, who are always anti-business,
are claiming the risk to the economy isn't real. Obama agrees in
principle with the bailout too.

But when the choices are
either doing something that could prevent a severe recession or
worldwide depression, or just standing by and letting this spiral, I'm
not going to let the country go down in flames because of
principle. * * It's not the first time this has been done. * And in
the major prior cases that I can think of, ie Chrysler, Mexico, the
govt wound up getting all it's money back or actually turned a
profit. *Also, consider that even if this just turns into a severe
recession that lasts several years, the resulting loss of tax revenue
to the govt could easily approach the $700Bil.

You assume a.) doomsday and b.) gov't spending, essentially the
nationalization of the investment banks mutant loan bundles,
will save us. It's just not rational.

Only not rational to you. As to whether it's a potential doomsday,
I'm not willing to take that gamble.

You believe precisely what they want you to believe.

My, I wish I could be enlightened like you, so I could go around
claiming the US economy is based on producting WMDs.

We've spent $1 trill on the war in Iraq. * It seems to me, coming up
with $700Bil for this, with a good chance that much of the money will
be recovered, isn't unreasonable. *If you're against this plan, as I
asked before, what is your plan? *From the above, it sounds like it's
do nothing and let the chips fall where they may.

Very close to the mark, that last.

If practical, I'd support unbundling the loans, separating speculative
loans from those on primary residences.

If you pay attention, most of these problem loans ARE on primary

Let the former default, provide
some re-financing for foreclosures on the latter. And that's all. Maybe

Refinancing for foreclosures? That's totally stupid. By
refinancing, the govt would be paying off the existing mortgage in
full, letting the current lender completely off the hook. The
lending insitution would be made whole. Under the proposed plan, the
lender takes a big hit, the govt buys the mortgage from them deeply
discounted, perhaps for 30 cents on the dollar.

I think that what most people don't understand is that the US gov't
has become quintessentially hostile to all US citizens save the
"financial elite". The (gummint) gloves are off ... and the brass knuckles
are on.


Spoken like a true crackpot. How is it that people can come here
from all over the world with nothing, become citizens, buy homes, send
their kids to college, prosper and live the American dream, while guys
like you just bitch and have nothing positive to say about the