Financial bailout bill does not pass

[Paula in MS]

I feel like this was a good decision. You can only manipulate the economy for so long. Our economy is cyclical; it has its ups and downs. It can't grow indefinitely without a downturn of some type. The economy will suffer and then recover much stronger and with many lessons learned along the way. It will be tough for those individuals who are affected in a big way, but voting against the bailout was the right thing to do.

 

Paula

[LizzyBee]

What makes you think we are going to have to print money? Are you assuming the assets will not perform?

 

FWIW, in a tax update I received at work today, the assets were described as "virtually worthless."

[Mama Lynx]

My congressman voted for it.

 

Guess what? That clears up that race for me, come November.

 

Ugh, ugh, ugh. No one is running against him. :glare:

[Spy Car]

What is also confusing is that plenty of very smart people, a great many of them well respected economists, are saying this whole package isn't even necessary. There are cheaper and easier ways to handle this crisis.

 

Can you point to one single mainstream respected economist who feels this bailout isn't necessary?

 

I don't know of any, and I do know the overwhelming consensus of respected economists is strongly in favor of the bailout.

 

Personally, I think the handwriting is on the wall. We're going down, and there is not much we can do to stop it.

It's happened plenty of times to other nations as well, collapse and then rebuilding on the ashes.

 

It does not have to be that way. We don't need to have a total crash. If we act wisely the worst can be avoided.

 

I wonder what our country will be like 10 years from now. Things are not really that bad now, comparatively speaking. Maybe it won't get as bad as the depression. Our standard of living is so high now that even if it fell dramatically, we may still be better off than people were in the 30's. Goodness, our family now has much more than either dh or I had when we were growing up in the 60's and 70's.

 

The question is could you (or any of us) is how long can we hold on to our homes and feed our families if we have no work, or our businesses fail, if the value of our investments evaporate.

 

Being homeless, hungry and desperate in the 21st Century would be just as devastating now as it was in the 1930's if we have a systemic failure. This is not a condition to be viewed "romantically" nor one to be underestimated.

 

Bill

[Audrey]

 

I don't agree in governments buying out the private sector. That's socialism.

 

 

Some socialists wouldn't agree with govt. bailing out private sector businesses either. They might say let the capitalist pigs sink on their own. ;)

[Spy Car]

I feel like this was a good decision. You can only manipulate the economy for so long. Our economy is cyclical; it has its ups and downs. It can't grow indefinitely without a downturn of some type. The economy will suffer and then recover much stronger and with many lessons learned along the way. It will be tough for those individuals who are affected in a big way, but voting against the bailout was the right thing to do.

 

Paula

 

With all due respect there is a big difference between an economic "cycle" and an economic "meltdown". The former can be allowed to self-correct, the latter has such devastating consequence that the market (without intervention) is incapable of self-correction. This is not a simple "downturn" and we will all be affected in a huge way if something isn't done.

[kokotg]

Can you point to one single mainstream respected economist who feels this bailout isn't necessary?

 

I don't know of any, and I do know the overwhelming consensus of respected economists is strongly in favor of the bailout.

 

 

 

I don't know of any who are saying nothing should be done at all, but it looks to me like plenty of economists are not fans of the bailout as proposed and think an alternative plan would work better. Really, the only argument I've seen FOR this particular plan is that it's already there, so it's faster to go with this one than to come up with an alternative and try to get support for it (this seems to be Krugman's take on it: http://krugman.blogs.nytimes.com/2008/09/29/bailout-questions-answered/). But now, maybe not so much.

[Amy loves Bud]

"Bold action" yes, "the bailout", not necessarily

 

I know that this is a few days old and based on an earlier draft of the plan, but I think it demonstrates that many mainstream economists are not okay with even the most current plan, based on the three objections they stated.

[Sara R]

This is not a simple "downturn" and we will all be affected in a huge way if something isn't done.

 

You're right--it's a big problem. But government can't solve this. If the government had piles of spare cash lying around, then maybe they could solve it. Where is the money coming from? As far as I understand, it comes from inflation. I'd rather relive the Great Depression than become Zimbabwe or the Weimar Republic.

 

The time to prevent the problem should have been 7 years ago, when the housing bubble was inflating. We've gone through a 7-year supposedly prosperous time that was actually financed by debt. You don't fix for that by going into more debt.

[Kathleen in VA]

I was listening to a press conference (or something like it) of the House Republicans earlier this evening and one of them (sorry, can't remember who) said that Chris Cox, chairman of the SEC, could change the rule about "mark to market value" with the "stroke of a pen" and this whole bailout thing being called for wouldn't be needed. He then went on to challenge Mr. Cox to carry out the deed immediately. Then, later on, Greta Susteren interviewed Steve Forbes and he said the exact same thing. Why doesn't Mr. Cox do this if it is that simple??? Seems like it would save a lot of people a whole lot of trouble.

[Parrothead]

There are cheaper and easier ways to handle this crisis. I'm with those that smell a skunk even if we can't see it. Sooner or later it should come to light.

I've been wondering for the last few days which politicians pushing this stand to loose the most if the bailout doesn't pass or possibly gain the most if it does pass.

 

I'm glad the current bill didn't pass. I'm looking forward to seeing what they come up with next.

[Laura in VA]

I've been wondering for the last few days which politicians pushing this stand to loose the most if the bailout doesn't pass or possibly gain the most if it does pass.

 

I'm glad the current bill didn't pass. I'm looking forward to seeing what they come up with next.

 

Does anyone know when they will go back to work? It bothers me that they've left with things the way they are. I know it's due to the Rosh Hashanah holiday, but I wish they would have stayed to work on some alternatives. And, before anyone asks, I would feel that way if it was Christmas or Easter. ;)

[Sara R]

change the rule about "mark to market value" with the "stroke of a pen" and this whole bailout thing being called for wouldn't be needed.

 

Again, I hope someone who knows more will fill in the details--

 

The "mark to market" rule means that if asset prices fall, the way house prices have, the banks' balance sheet has to reflect the new price. This way they can't pretend that they have a healthy balance sheet because they list an inflated house value. If they changed the mark to market rule, then they could keep pretending that there isn't a problem, which would postpone the bailout for a little while, but couldn't really solve the problem. Unless you believe that house prices are going to magically go up very soon--but I don't see any logical reason that would happen.

[Parrothead]

Does anyone know when they will go back to work? It bothers me that they've left with things the way they are. I know it's due to the Rosh Hashanah holiday, but I wish they would have stayed to work on some alternatives. And, before anyone asks, I would feel that way if it was Christmas or Easter. ;)

 

I read the earliest that any thing new could pass was Thursday. So they should be back to work soon,

[Spy Car]

"Bold action" yes, "the bailout", not necessarily

 

I know that this is a few days old and based on an earlier draft of the plan, but I think it demonstrates that many mainstream economists are not okay with even the most current plan, based on the three objections they stated.

 

These economists were (are) asking for clarifications and modifications to the original Paulson plan (which I would agree with) and many of which were incorporated in today's compromise plan.

 

But these same economists did add:

 

"We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function."

 

If the economic system is allowed to collapse by, for example, treating this as a "typical" downturn, we will all suffer.

[Aggie]

I've been wondering for the last few days which politicians pushing this stand to loose the most if the bailout doesn't pass or possibly gain the most if it does pass.

 

This is what I wish the media would research and report. Not that I don't trust those life-long politicians.:glare:

 

And I may have missed it, but why haven't the major news channels outlined how this has all come to be and how we can prevent it 'next time'? (We don't have cable and I don't get to watch the news every night, so I may have missed it, really.)

 

Aggie

[Alana in Canada]

I have been reading this thread off and on all day and I just wanted to say thank you. I've learned a great deal about this issue and I'm overwhelmingly impressed with the civility of the discussion.

 

I am terribly afraid that in ten years we may not be sitting at our computers discussing anything with each other.

 

We found out today we need to buy a new furnace. Fortunately, there are such things still available.

 

But with a massive loss such as this in the money supply, there may very well not be too many available in the future. (Already, there are only two retailers which carry "energystar rated" furnaces in our city of 3/4 million. One of them was recently bought out by an American retail company).

 

I don't have an opinion about the "bailout" --(I don't know enough about it and as a Canadian I have no say) but we, too, will be affected by this.

[Spy Car]

You're right--it's a big problem. But government can't solve this. If the government had piles of spare cash lying around, then maybe they could solve it. Where is the money coming from? As far as I understand, it comes from inflation. I'd rather relive the Great Depression than become Zimbabwe or the Weimar Republic.

 

Except remember the Weimar Republic (pre-Nazi Germany in the period between the World Wars) suffered from both the world-wide Great Depression and hyper-inflation. While the US didn't suffer hyper-inflation during our Depression the economic maladies are not mutually exclusive.

 

I'm not without inflation fears. Especially as I'm well aware that the easiest way (in short term thinking) to pay off foreign debts (read China) is to inflate currency and pay-off with "cheap" money. Inflation fears are warranted.

 

The time to prevent the problem should have been 7 years ago, when the housing bubble was inflating. We've gone through a 7-year supposedly prosperous time that was actually financed by debt. You don't fix for that by going into more debt.

 

I agree this should have been fixed years ago. That things have gotten to this point is a scandal. But we are where we are, and making sure the system doesn't seize is imperative.

[Amy loves Bud]

These economists were (are) asking for clarifications and modifications to the original Paulson plan (which I would agree with) and many of which were incorporated in today's compromise plan.

 

But these same economists did add:

 

"We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function."

 

If the economic system is allowed to collapse by, for example, treating this as a "typical" downturn, we will all suffer.

 

That's why I labeled it "bold action" yes, "this bailout," no. You asked for one economist who opposed "this bailout." There are lots of ways to take bold action without a 700 billion dollar bailout.

 

For example, The Marginal Revolutionthrows out a few ideas that are bold, but much smaller in magnitude than the hunormous bailout we've been discussing.

 

I'm going to bed. Thanks for making me think, Bill and everyone. I'm learning a lot and having to dig in, which is good, even if it is stressing me out in this case! Have a good night!

[Jane in NC]

I was listening to a press conference (or something like it) of the House Republicans earlier this evening and one of them (sorry, can't remember who) said that Chris Cox, chairman of the SEC, could change the rule about "mark to market value" with the "stroke of a pen" and this whole bailout thing being called for wouldn't be needed. He then went on to challenge Mr. Cox to carry out the deed immediately. Then, later on, Greta Susteren interviewed Steve Forbes and he said the exact same thing. Why doesn't Mr. Cox do this if it is that simple??? Seems like it would save a lot of people a whole lot of trouble.

 

How does an accounting maneuver circumvent potential economic meltdown? Could someone please educate me? :confused:

 

Jane (who is wondering if such a simple solution exists why was this not discussed by the Fed last week)

[Guest Virginia Dawn]

Google "economists against bailout"

 

I don't have time to research each of this sites and individual economists. Just skimming the first page it will be obvious that there are thousands of economists, some described as well respected, who do not want this particular plan.

 

Whether or not they are "mainstream" I don't know. Right now I would question whether we really want the opinion of a mainstream economist.

 

I have no "romantic" views of the depression. I was just musing about how bad it may or may not get, in relation to circumstances now, considering my husband used to eat cold oatmeal or baked beans when he got home from school as a child. That was in the 70's.

[Robin in Tx]

Right now that's what they're being marked down as... but in a stabilized economy there will be value. When they are written down to practically nothing, they have nowhere to go but up.

[Sara R]

Right now that's what they're being marked down as... but in a stabilized economy there will be value. When they are written down to practically nothing, they have nowhere to go but up.

 

Homes aren't marked down to "practically nothing" yet. They are only down to 2003 or 2004 price levels. This bubble inflated much higher than previous bubbles, so it has a lot farther to fall to get to 1998 levels. And usually these kinds of bubbles overshoot the bottom, and go a little below.

 

In order for prices to rise again, you have to have a lot of people be in good economic circumstances who can afford the prices with traditional loan standards (20% down, amortizing loan). We have to clear the inventory. There are a lot of people renting homes out because they can't sell them. The option payment ARMs don't reset till 2009-2011, which will likely lead to another wave of foreclosures. We have a long way until we reach bottom.

[Robin in Tx]

Homes aren't marked down to "practically nothing" yet.

 

No, but the value of sub-prime *loans* are marked down to practically nothing. That's where the bargain is - buy the loan for pennies on the dollar.

[Paula in MS]

With all due respect there is a big difference between an economic "cycle" and an economic "meltdown". The former can be allowed to self-correct, the latter has such devastating consequence that the market (without intervention) is incapable of self-correction. This is not a simple "downturn" and we will all be affected in a huge way if something isn't done.

 

 

But isn't it possible that at least some of this crisis is due to the fact that we continue to manipulate the market to avoid downturns. The downturns are catching up with us. We have kept interest rates fairly low for many years, why not allow them to rise? People will borrow less; bad loans will be written off. Some things will be cleaned up, and the economy will stabilize again. ( I know that this is too little, too late at this point.)

 

I'm not saying that there won't be devastating consequences, but I just feel like this bailout won't solve the problem. I feel like the bailout will bring its own set of economic problems that may be just as bad. We are trading one problem for another. There has got to be a better way.

 

I was an economic major in college. I sure wish I had kept my books. :D

 

Paula

[Bev in B'ville]

I posted this earlier on it's own thread, but that thread has fallen by the wayside.

 

I am really interested in feedback on this alternative plan. Take a look, it's only 1-1/2 pages (the summary) here.

 

And, if you're so inclined and agree in principle with what is laid out in this plan, perhaps you could contact your representative?

[Kathleen in VA]

I posted this earlier on it's own thread' date=' but that thread has fallen by the wayside.

 

I am really interested in feedback on this alternative plan. Take a look, it's only 1-1/2 pages (the summary) here.

 

And, if you're so inclined and agree in principle with what is laid out in this plan, perhaps you could contact your representative?

 

It looks good and includes that "mark to market value" thingy I heard about and posted about earlier. That seems hopeful. I am trying to get through on my Congressman's website but it is slow going - I'm guessing I'm not the only one.:) Thanks for posting (and reposting) this link.

[Slartibartfast]

I was listening to a press conference (or something like it) of the House Republicans earlier this evening and one of them (sorry, can't remember who) said that Chris Cox, chairman of the SEC, could change the rule about "mark to market value" with the "stroke of a pen" and this whole bailout thing being called for wouldn't be needed. He then went on to challenge Mr. Cox to carry out the deed immediately. Then, later on, Greta Susteren interviewed Steve Forbes and he said the exact same thing. Why doesn't Mr. Cox do this if it is that simple??? Seems like it would save a lot of people a whole lot of trouble.

 

 

Mark to market is what resulted in ENRON. Just because it results in a lot of fast trading doesn't mean it would be a good idea.

 

The rule helps prevent accounting fraud.

 

 

I am not a economist though so I don't understand all the details.

Edited September 30, 2008 by Sis

[Demal]

I am really interested in feedback on this alternative plan.

 

My feedback: this plan is insane.

 

The Financial Times on the insurance component:

 

There are some serious drawbacks. To be self-financing it would require massive transfers of capital across the financial sector – otherwise the taxpayer would end up picking up the bill.

 

The goal – to restore troubled mortgage-backed securities to their full par value – is far more ambitious than the Paulson plan. It implies offsetting the full financial effect of the biggest US housing crash in history. But someone would still have to pay for the cash losses. This would be the better-managed financial institutions with less exposure to these assets than the others.

 

The plan would create enormous moral hazard. It would arguably constitute more intrusive intervention than the Paulson plan.

 

It would also imply the liquidity constrained sector – the banks – at first transferring liquidity to the only sector that is not liquidity constrained – the government. That could initially worsen rather than ease liquidity conditions in the market.

 

 

http://www.ft.com/cms/s/0/7dd752a6-8c1e-11dd-8a4c-0000779fd18c,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html?nclick_check=1 (bolding mine)

 

New York Times summary: http://economix.blogs.nytimes.com/2008/09/28/the-house-republicans-alternative-rescue-plan/

[Robin in Tx]

How does an accounting maneuver circumvent potential economic meltdown? Could someone please educate me? :confused:

 

Jane (who is wondering if such a simple solution exists why was this not discussed by the Fed last week)

 

A company usually puts assets on their books at book value. Mark to market requires that they adjust the value of the asset to reflect current market value.

 

Banks are required to maintain a certain margin of liquidity in order to protect their depositors. The amount of money that a bank owes its investors and depositors has to be offset by assets with enough value that they can be liquidated and satisfy those obligations. This is often referred to as their reserve.

 

Right now, because of the real estate problem, mortgage backed securities have a market value of about 10% of their original book value. No one wants to touch them. And, despite what is being said elsewhere in this thread, the value of the homes/collateral is NOT what appears on the bank's balance sheet. The homes are NOT the asset - the LOANS are the asset. Right now, the market value of the LOANS (you've heard of financial institutions selling loans to investors, etc.), is *less* than the value of the homes that are collateral. We're talking the market value of the actual loan (how much a bank or investor will pay to buy that loan from the bank). We're not talking about the loan balance or the value of the collateral.

 

Mark to market accounting laws force the banks to report the market value of those assets (the loans) - many have been written down to basically nothing. All of the sudden, banks don't have the assets that they once had. All of the sudden, total assets are way down in relationship to their liabilities. Cash and the other assets that the bank holds are now frozen because they are earmarked for required liquidity margins. And some banks don't have enough other assets to cover the required market mark down of their real estate portfolio - these are the banks that fail. The end result is that these banks can no longer make loans because they can't free up other assets to make funds available to borrowers - those assets have been moved to their reserve because asset depreciation depleted their reserves. That's what they mean by their balance sheet being frozen.

 

If mark to market were relaxed, the banks would be able to carry their real estate portfolios on their balance sheet at something closer to book value. The good thing about mark to market is it can and does prevent fraud (you can't overstate the value of your assets). The bad thing is that in times like this (liquidity crisis, and instability due to panic - yes, panic), it tends to exaggerate the bad news. Everyone knows that the value of these mortgage backed securities is much more than 10% of their original value. Only 20% of homes are in foreclosure, and each of them are collateralized by real estate that is worth a lot more than 10% of the loan balance. The devaluation of these mortgages is exaggerated and temporary.

 

Robin

 

P.S. Many don't want to get rid of mark to market completely because they believe it prevents fraud. So there is a legitimate argument there. The package that was voted against yesterday gave the SEC the authority to suspend mark to market when immediately necessary.

[Jane in NC]

A company usually puts assets on their books at book value. Mark to market requires that they adjust the value of the asset to reflect current market value.

 

 

(wonderful explanation snipped)

 

 

So...According to Kathleen in VA's post, this rule change would completely eliminate the need for a bailout (at least according to Steve Forbes). I do see how this could free up some liquidity--but does it solve the problem?

 

Those weird credit default swaps and other derivatives continue to haunt me. How would this accounting change have altered the picture for AIG?

 

Thanks to Robin for being my financial guru.

 

Jane

[kokotg]

A company usually puts assets on their books at book value. Mark to market requires that they adjust the value of the asset to reflect current market value.

 

 

 

Okay. And that IS exactly what happened with Enron, yes?

[Renee in NC]

So...According to Kathleen in VA's post, this rule change would completely eliminate the need for a bailout (at least according to Steve Forbes). I do see how this could free up some liquidity--but does it solve the problem?

 

Those weird credit default swaps and other derivatives continue to haunt me. How would this accounting change have altered the picture for AIG?

 

Thanks to Robin for being my financial guru.

 

Jane

 

I don't think it will end all of the problems, but it would possibly cause a much lower need. There needs to be some markdown, though, because many of these mortgages *will* be defaulted on.

[Robin in Tx]

If I understand correctly, the only reason for a bail out is to free up the credit market. If the current problems were not effecting the availability of credit, the govt wouldn't be trying to come up with a rescue plan.

 

It doesn't solve the problems and causes of the sub prime fall out, but it keeps the fall out from destroying the availability of credit. So, in a way, it's not aimed at solving the problem, but containing the damage.

 

P.S. How would it have helped AIG? I don't know that it would have... don't know as much about AIG except that the reason why the govt stepped in and gave them a two year loan is because they couldn't get financing from any banks, and the govt did this to avoid their going into bankruptcy.

Edited September 30, 2008 by Robin in Tx

[Robin in Tx]

Okay. And that IS exactly what happened with Enron, yes?

 

Yes. Since there is no definitive way of quoting or valuing long term commodities such as gas, Enron used unprecedented methods for calculating market value of their assets which were, in their case, fraudulently overstated.

 

For the most part, though, mark to market is considered a protection from fraud.

 

It seems that most economists think it should be eliminated. Some are not so sure. The bill yesterday would have relaxed the law, or at least given the SEC some flexibility.

[Kathleen in VA]

Yes. Since there is no definitive way of quoting or valuing long term commodities such as gas, Enron used unprecedented methods for calculating market value of their assets which were, in their case, fraudulently overstated.

 

For the most part, though, mark to market is considered a protection from fraud.

 

It seems that most economists think it should be eliminated. Some are not so sure. The bill yesterday would have relaxed the law, or at least given the SEC some flexibility.

 

Thanks, Robin, for all this great info - I'm reading this all out loud to Dd15 (she's the only one old enough to understand who is home right now) and we are both learning a lot.

 

So, my question is, does Chris Cox, Chairman of the SEC, have the authority to relax those mark to market rules himself without the approval of Congress? If he can, should he? Could he do it as a temporary measure until things settle down?

[Robin in Tx]

Thanks, Robin, for all this great info - I'm reading this all out loud to Dd15 (she's the only one old enough to understand who is home right now) and we are both learning a lot.

 

So, my question is, does Chris Cox, Chairman of the SEC, have the authority to relax those mark to market rules himself without the approval of Congress? If he can, should he? Could he do it as a temporary measure until things settle down?

 

First, something that hasn't been mentioned here is that mark to market post Enron is different than pre Enron. Mark to market may not be new, but the way it has been enacted since Enron is. As a matter of fact, I think that specifically what we are talking about here is only a year old or less. We're just now feeling the fall out.

 

Actually, I don't understand why Cox can't just suspend the accounting practice. It's not law, I don't think... it's just an SEC audit rule. Can Congress make him do it? I don't know. That's a good question. I really don't have a clue. I get the sense that he is not comfortable with the idea, and you know... there are plenty out there who don't believe this will help, and may even hurt. The problem with it is it is so new, less than a year old.

 

I wonder if anyone has any quotes from Cox on this topic? I read somewhere that he evaded this question from Congress...

[MgoBlue]

I don't know how congress voted, but if I dig deep in the gray matter...isn't there a congressional record somewhere...and something else for the house?

You could probably google it but it's lots of wading thru stuff...have to be a good google person.

 

My dh found this link that was interesting..I'm for no bailout myself here..in the minority I'm sure. And it probably will happen.

 

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

[K&Rs Mom]

If I understand correctly, the only reason for a bail out is to free up the credit market. If the current problems were not effecting the availability of credit, the govt wouldn't be trying to come up with a rescue plan.

 

It doesn't solve the problems and causes of the sub prime fall out, but it keeps the fall out from destroying the availability of credit. So, in a way, it's not aimed at solving the problem, but containing the damage.

 

Here's an unruly thought - so what if credit is not easily available? People would have to live within their incomes? Doesn't seem like a catastrophe. What am I missing?

[Spy Car]

I don't know how congress voted, but if I dig deep in the gray matter...isn't there a congressional record somewhere...and something else for the house?

You could probably google it but it's lots of wading thru stuff...have to be a good google person.

 

My dh found this link that was interesting..I'm for no bailout myself here..in the minority I'm sure. And it probably will happen.

 

http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

 

Here is a list of how all the House members voted.

 

http://www.slate.com/blogs/blogs/trailhead/archive/2008/09/29/the-house-vote-roll-call.aspx

[fractalgal]

Our school for the afternoon - watching the vote on C-Span. It looks like it has failed for now. 227-206.

 

It is good that it did not pass. You will notice Congress living up to it's 10% approval rating by the fact that it was seriously considered in the first place.

 

Here is a letter from several economists pertaining to the failed bill:

 

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm

[Spy Car]

It is good that it did not pass. You will notice Congress living up to it's 10% approval rating by the fact that it was seriously considered in the first place.

 

Here is a letter from several economists pertaining to the failed bill:

 

http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm

 

This petition does not pertain to the failed bill. It pertains to the original Paulson plan, which they asked to be reviewed and revised to meet their concerns (which they enumerate). They also make the following point (which was already addressed earlier in this thread):

 

"We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function".

[Amy loves Bud]

This petition does not pertain to the failed bill. It pertains to the original Paulson plan, which they asked to be reviewed and revised to meet their concerns (which they enumerate). They also make the following point (which was already addressed earlier in this thread):

 

"We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function".

 

Bill,

 

I'm curious if you think those three concerns were addressed.

 

Also, I note that the original date was 9/24, but he signatories were updated 9/27, the night before the vote. I'm not sure exactly what that means, but to my way of thinking the signatories were standing by their objections as of Sunday night.

 

As I mentioned in my previous post, I don't see how "bold" is limited to a 700 billion dollar bailout. Isn't there anything on the continuum between "nothing" and "$700billion bailout" that qualifies as bold?

[Parrothead]

Here's an unruly thought - so what if credit is not easily available? People would have to live within their incomes? Doesn't seem like a catastrophe. What am I missing?

 

It isn't people in general that this is about. It is about banks not being able to lend money. I don't understand it all but I think it boils down like this:

 

mortgages default

banks loose money

many more mortgages default

banks loose lots of money

banks can't lend money to other banks

banks can't lend money to companies that use lines of credit to make payroll

payroll isn't made people are out of a job.

more people out of jobs the more mortgages that are defaulted on

Repeat cycle

[Sara R]

I just found these quotes about the Mark-to-Market rule:

 

"Suspending mark-to-market accounting, in essence, suspends reality."

Beth Brooke, global vice chair at Ernst & Young LLP, WSJ, Sept 30, 2008

 

"Blaming fair-value accounting for the credit crisis is a lot like going to a doctor for a diagnosis and then blaming him for telling you that you are sick."

analyst Dane Mott, JPMorgan Chase & Co., Bloomberg

 

"Suspending the mark-to-market prices is the most irresponsible thing to do. Accounting does not make corporate earnings or balance sheets more volatile. Accounting just increases the transparency of volatility in earnings."

Diane Garnick, Invesco Ltd., Bloomberg

[Sara R]

Here's an unruly thought - so what if credit is not easily available? People would have to live within their incomes? Doesn't seem like a catastrophe. What am I missing?

 

Also, businesses use credit to put in inventory. I was reading that the credit crunch was one reason why gasoline inventories were low before the hurricanes hit, leading to the shortages in the South. Because of the higher price of gas, that makes the inventory more expensive, and they use credit to pay for the inventory until people pay for it at the pump.

[fractalgal]

Bill,

 

I'm curious if you think those three concerns were addressed.

 

Also, I note that the original date was 9/24, but he signatories were updated 9/27, the night before the vote. I'm not sure exactly what that means, but to my way of thinking the signatories were standing by their objections as of Sunday night.

 

As I mentioned in my previous post, I don't see how "bold" is limited to a 700 billion dollar bailout. Isn't there anything on the continuum between "nothing" and "$700billion bailout" that qualifies as bold?

 

You are correct, they did not address the three concerns in a satisfactory way.

[Robin in Tx]

With time and google, I can find just as many quotes, or more, that say the opposite.

 

Let's take a subprime loan that originated at $90,000. At the time, the house was worth $95,000 and the borrower put down $5,000. Let's assume that the market has reduced the value of the home by 15%, down to about $80,000. Let's also assume that the borrower is not in default (the majoritiy of subprime loans are NOT in default, but they are packaged together with the ones that are, so they are caught up in the same securities market). This is a borrower who wants to stay in the house and is willing to ride it out until home values come back up.

 

Forcing a bank to write down a $90,000 loan that is not delinquent to a value of only $15,00 when, again, it is not delinquent and the collateral for the loan is worth $75-80,000 on the market is plain ridiculous. This is an instance where mark to market accounting exaggerates reality. Saying that that loan is should be valued at $15,000 is NOT reality.

 

Even if the borrower was in default, writing the value of the loan below $50-60,000 is not realistic.

 

This is the problem - the subprime securities are worthless on the financial market right now, but that doesn't mean that they are really as worthless as the current securities market treats them (which is panic driven).

[fractalgal]

This is the problem - the subprime securities are worthless on the financial market right now, but that doesn't mean that they are really as worthless as the current securities market treats them (which is panic driven).

 

Then let private companies or individual Americans buy them and when the market rebounds (which it will) Americans will profit, not the Government.

Edited October 1, 2008 by fractalgal

[lovemyboys]

I've been wondering for the last few days which politicians pushing this stand to loose the most if the bailout doesn't pass or possibly gain the most if it does pass.

 

I'm glad the current bill didn't pass. I'm looking forward to seeing what they come up with next.

 

Last night, one of the incumbent Democrats was on CNN (?) and said that they (Dems) had to bring 120 votes (I think) and the Rep. had to bring xx number. Dh and I realized that those numbers (at least for his party) were the members who are in "safe" seats for the upcoming elections. They can vote on the bailout and not worry about a backlash during the reelection if their constituents don't agree with it.

 

So, they don't want to involve anyone in a risky district in the bailout vote. So much for putting the country and our kids' future first.:glare: