Ok, help me out here.....

It is not the whole general economy right now, it is the financial sector. It is a total lack of confidence on a global scale for the financial sector. That's why banks like Washington Mutal are going to go down one after another if nothing is done. No bank can survive a public vote of no confidence. Then it is the mutal funds, and maybe all the hedge funds. After all these guys are done then it is the general economy because you cannot get a car loan to buy a car, so GM and Ford cannot sell cars, then they layoff workers, so the cycle goes to DEPRESSION (not recession).

 

Yes, six months of a credit freeze in this country would lead to lots of economic nastiness. That's why its such a bitter pill for a lot of folks.

 

I think it hits the general economy faster than that. Lack of capital for small businesses, companies struggling to make payroll, layoffs begin, unemployment rises, further real estate meltdown, lack of consumer spending hit other companies who then begin to layoff as well, American economy goes into the toilet, dragging the world economy, and so on and so forth.

Of course, this is a worst case scenerio, but it could happen and happen quickly.

 

It could easily wait. A simple bridge bill to get us to January would be fine. They pulled the $700,000,000,000 figure out of a hat... it's just a big number to help the "psychology" of the weak losers we have running our financial system. It does nothing to treat the underlying problems of our economic system or the culture of the selfish bastards who got us here.

This is a travesty.

 

If this happend in China, there would be many public execution of the CEOs of these companies, and the general public would be happy to see it .

 

Thankfully, this is not China. (Yet.)

 

The congress is to slow to react. We need someone to take power in times of emergency and do what needs to be done!

 

I have another friend that says something similar
that alot of the issues that caused this is not touched by these bills

Could you expand further on this. . . .

ASIDE: You know . . alot of americans are getting a ECONOMIC EDUCATION these days.

Rocket River

 

I agree the bill doesn't treat the underlying problem. But that is something we can spend 6 months crafting to get it right. If we do need to keep the gears of the economy from jamming, we wouldn't want to slow a bailout down with discussions on the right reforms. Nor would we want to bungle reforms by rushing them through to keep the economy from quitting on us. So, I don't think we want to deal with the underlying problems until after we decide what we're going to do for the short-term.

 

That would be foolish, which this bill is. Of course you want to look at the underlying problems. By just fixing it for the short-term, you create more opportunity for malfeasance under the old rules.

I agree we don't want to mangle reforms, so we should take our time and craft those carefully, with an attempt to look at all future consequences. That becomes much more difficult with this bill, however, as the people who are getting "rescued" will fight like dogs against any future reform and throw as much money as they can at lawmakers to try and stop any meaningful reform... and they will argue that they have learned their lesson when the only lesson they've learned is that if you screw up bad enough, there's no real penalty.

This $700,000,000,000 is like a new keg showing up at a frat party full of selfish stupid people (redundant, I know). They should study for those finals tomorrow, but hey, look... a new keg! There will be time enough to plead with the prof, lie about some illness in the family as a reason we flunked the exam, and have rich daddy pressure the dean after we down this keg!

 

I supply the following from the only blog I read:

[rquoter]
The "Deal" is not good enough yet...

Stripped of the "Bells and Whistles," the "Christmas Tree Ornaments," and other distractors, the basic bailout remains an arrangement in which the government of the US would:

• Buy bundles of securitized mortgage paper of various kinds from those willing to sell them. These bundles would be bought for prices greater than their current value (why else would they be sold?) but less than they cost the sellers. (Again, why else....)
  
  
• The government will hold the paper until some of it evaluates to a level at which commercial buyers on a preferred list (not just anyone! You there! Forget it!) will be established. The government will then sell the evaluated paper for less than it is then worth. The rest of the paper? (the worthless part) Who knows? I would bet that the government (you and me) eats that part.
  
  
• The buyers of the "good" paper will then seek to enforce the terms of the loans. Why else would they have bought it?

What a good deal for the taxpayer.

We are told that this crisis is about "main street" and not "Wall Street" and that it is about credit shrinkage, not the value of companies like Goldman Sachs where Paulson still has a lot of his money in a "blind" trust. Financial media anchors plead desperately for proletarian plebeian understanding of the immediacy of the threat to every day life. On one CNBC today, the winsome anchor trembled at the story of a woman in California who runs and owns an olive products business. Her enterprise has been a success over the last years and she wants to expand through increased staffing and marketing. Sadly, she went to the local banks and was turned down for a quarter million dollar loan. This is a sad thing. Sigh. Sigh. At the very end of the story the network felt obliged to add that after this story had been run earlier in the day, the olive merchant had received many calls from private investors and a couple of banks offering to loan her the money. Anecdotal? Yes, but much of what is being said about the end of credit operations is worse than anecdotal. It is mere rumor mongering and scare tactics.

The "Bells and Whistles" in the "rescue plan" are such nifty things as increased FDIC insurance limits, and an improvement of the AMT situation. It is quite openly admitted that the "sweeteners" are just that. They are designed to provide cover for members of the House in order to enable them to face voters in their constituencies. The citizenry seems to be widely hostile to the basic deal that I outlined. The citizenry is referred to with thinly concealed contempt by the financial media, most politicians and a lot of bloggers. Well, the financial media speak for traders, not taxpayers. Their reverential attitude toward people like Buffet is revealing. Buffet is the proud owner of five billion dollars (newly purchased) of Goldman Sachs debt. He said today that if the bailout is not passed he will have made a very bad bet. We should take his advice about this?

The framers of the the Constitution deliberately created a system in which the House of Representatives is elected every two years and represents constituencies of a size that make members more vulnerable to the citizenry than the senate. The Constitution also requires that all revenue bills originate in the House.

To overcome that "difficulty" Senator Dodd and friends have arranged to vote on a cleverly shaped non-revenue bill filled with "meatiness." The purpose of this exercise is clearly to chivvy the House along into compliance with the received wisdom of the elites (and the moneyed).

If we accept the claim that the credit markets are in severe danger, then we citizens should demand a better deal for accepting a role. Equity in the companies we are going to save is one possibility. Alternatively, Paul O'Neill has recommended a federal guarantee for the value of the presently rotten paper so that it will trade like money. That would be another way out that would not put taxpayers directly at risk. The alternatives that do not depend on taxpayer exploitation have not been developed.

Citizen voters should remember what happens in the next few days. pl

[/rquoter]

I am convinced that the purported urgency of this plan is a scam foisted on the American people and that members of Congress are unwittingly being duped as well, as most of them have no better ability than the average person watching CNN to judge. I already posted this in another thread, but the example of The Shock Doctrine is clear - crisis and fear is the best tool to push through unpopular reforms which only help the moneyed elite. But in this case, why even bother to create a real crisis when you can convince everybody that a less severe and localized problem is a potentially catastrophic nightmare for the entire country or even the entire world?

The whole industry will be laughing all the way to the bank. They are operating like the high priests of antiquity, demanding that we all tithe at the Temple of Finance in order to prevent the gods from raining their wrath down upon us all. It is the oldest confidence game in the world. The only thing that has changed is the name of the diety.

 

This much I can tell you -- if they don't pass that vote tomorrow, the collapse of the stock market will be EPIC. What happened on Monday will be child's play in comparison. There are extremely strong bearish indications all over the place that are coming to a head...it looks like either we get a great pop or we get slaughtered in the next couple of trading days.

 

Wah! We want our money now! We don't want to wait until Congress can create a bill that's good for the country we live in... we want some money now or the market psychology (I mean our fragile psychopathic egos) just won't be able to stand it and we'll have to take the whole economy down with us because it's important we get our money now.

 

Are you aware that overnight and short-term loans are a staple of the way the economy operates, and that that market has continued to calcify in recent weeks (not yo-yo ing like the DJIA, just going straight down)?

It really IS important that money comes into that system soon (NOW). Or else be wary of your paycheck clearing. Completely serious. And I don't think it's "Wah!" or unpatriotic of me to want to get paid this month rather than forgo it and lessen stress on the CP market until this all sort of blows over - do you?

 

I agree with everything you wrote. We handicap our ability to enact meaningful reform if we've already paid out the money. I suppose I estimate the urgency to be higher than you do. I just don't think we have the time-luxury to do both. Maybe we could write something into the current bill to keep our foot in the door for reform later, but now doesn't seem like the best time to hash it all out.

I also do have some confidence we will get some meaningful reform, even handicapped. Maybe it is foolish optimism, but I think the flaws of the old way were so deep that reform cannot be avoided.

 

The government has to buy a sack of crap and pretend it's gold if they're going to slow the crash. The Fed has pumped hundreds of billions of dollars into the discount window, making huge amounts of money available. Seems to me if Wall St. firms can't afford a 5.75%, 30 day loan (the standards required to borrow at the window have been eased iirc) they have problems too big for taxpayers to fix.

 

The argument that something must be done NOW! is two weeks old. And something doesn't equal this bill. There are other ways to shore things up but we're forced to doing it this way. Why? Because it's a bill that takes advantage of a preventable crisis by rewarding the ruling class for screwing things up.

 

And it's even more urgent now than it was then because the things that they said were going to happen then (increasing borrowing costs, frozen credit lines) are happening now. Do you want to see the graphs? They're not pretty.

I don't understand what you want to happen. You keep saying flush the system etc, not reward the ruling class etc. Short of seizing and redistributing all their wealth I don't understand what you are proposing, other than to let the boat we share sink in order to spite them.

 

Please show them.