Alternative Bail-out Ideas

Because that's not the way the system was crumbling. Liquidity and credit is the lifeblood of any bank weak or strong, and when it shuts down they all go down like dominoes.

Goldman Sachs made billions last year because they bet against the real estate market, and they have only a small amount of level 3 assets on their books, but that didn't matter because they were heavily leveraged like all I-banks and the market decided (rightly) that without credit, a highly leveraged bank can't survive, so had they not taken the steps they had taken, they could very well have gone under regardless of their degree of caution.

 

How about doing nothing? Let the system fix itself. The credit crunch was a long time coming.

We get hit either way. Do nothing and all the people on the bottom lose on 401k and IRAs or spend 700 bil which ends up coming from tax-payers anyway.

 

Well, you could have a major depression. with unemployment rate of 20%, people lined up to get bread like in the 1920's.

 

Hardly the case but yes, as a dooms day scenario, it could happen. But if you bail out the crooks, you'll definately have a higher chance of it happening later on compared to right now.

Just let other banks buy the thieves out even if they pay lower than true market value. Yes, our mutual funds will take a hit but its probably better in the long run. No more creating bubbles by the rich just so they can pop it and let us take the hit.

 

We don't know yet if the bail out is going to slow or speed up the inevitable. But as far as a depression like the 1920's. That is what debt and central banks can do to a nation.

So unless private wealth is being used for the bailout- it somehow is going to be borrowed money to bailout bankers.

 

according to CNBC, this isn't $700B of taxpayer money the government is spending, this is $700B of assets the government is taking over, and those assets can actually MAKE money (if things go well).

the government isn't writing a blank check to buy these assets, they're taking them off the books of these drowning companies.

 

You do realize that they are paying above market prices for basically junk bonds, right? That they aren't getting these for free? That there will actually be $700,000,000,000 - $1,000,000,000,000 of taxpayer dollars going to Wall St. bankers in exchange for these defaulting bonds? If CNBC is giving you some other impression then they are in full PR spin mode.

 

Thanks.

 

Understatement.

 

This simply isn't how it works. People buy distressed assets all the time - and make a profit when they are no longer distressed. Junk bonds don't all just default, and they are already being discounted at distressed-asset prices. But no one can buy them now because without a bailout, you'll have a crash and the bonds WILL crash and default. But with stability, and without a great depression causing the default, the assets will be worth something down the line.

The problem is it only works if you stabilize the market - and no individual firm or investor can stabilize the market, so no one from the private sector will buy the stuff right now. Jim Cramer, who I'm not a fan of but did foresee this coming and proposed this bailout idea months ago, suggested that with the market floor and stability, private firms will even buy up a lot of this stuff and the government won't have to. Who knows if it's true or not, but you all are assuming worst-case-scenario in your bailout price, and that scenario generally will only come true if there is no bailout.

Unless you believe we're headed into a massive depression even with the bailout, the $700B price tag is totally misleading. Every single loan purchased would have to immediately default for that to be the actual net price.

 

pretty much what they said.

thanks.

 

CNBC isn't spinning they know these individual assets can make money or loose money, but they should make money as a whole. The deal is valuing them, that will be a cumbersome process. no one is actually going to go out and see that properties backing up these mortgages. mortgage default rates in california are different from those in tx, etc, etc.

 

See, here's where I have a disconnect. The Masters of the Universe are going to sell this junk at a price that allows the government to make money? I don't think so. If there is a way for this junk to make money, somebody on Wall Street would have figured it out and would be the first trillionaire in our country by 2020. That they are so gung-ho to unload this junk on the government should be a big clue as to the eventual profitability. They're not selling the stuff for what the current market will bear in the hopes of getting inflated prices from Paulie.

 

Dude, read major's post, these bonds will possibly make money only if our banks don't fail all together.

And some people ARE buying the mortgage papers, last 6 month I have seen a large number of hedge funds move into these areas, they obviously sees value. Of course they can't take in all, considering how much lever 3 assets banks are holding.

The bail out will essentially turn the US government into the biggest hedge fund in the world.

 

that's the reason we're here in the first place - liquidity. that's why the government is stepping in in the first place.

 

No thanks. I'm a Liberal, even a New Deal Liberal, but I have my limits.

 

Its not as bad as it sounds, being essentially a hedge fund means there is the possibility to make a profit, not just a straight handout. Or maybe that's what you prefer.

 

And I've got a bridge for sale.