Arkansas Blog

Any news on how the Arkansas Representatives voted?

Looks like all that lobbyist money to Fannie Mae and Freddie Mac didn't do the trick.

I'm glad everything I have is in land.

I really have little sympathy for those stupid enough to keep their money in the stock market. With the national debt doubling in 6 years with no end in site, why would anyone be surprised that this is happening?

The $700 billion would only be a temporary fix and make the problem (debt) worse in the long run.

Admittedly, my knowledge of the underpinnings of the breakdown is limited to that which I've read in the newspapers and seen on tv. However, when people who know much more than me about it, Warren Buffett for one, say that if we don't pass this bill then the repercussions will be monumental, then I cannot understand how we second guess these experts. Maybe I'm wrong and there are other financial experts who say that the bailout won't work, but I haven't heard any reputable opinions saying we don't need to do this. It just doesn't make any sense to me. I'd love for somebody to explain to me why my impression on this situation is wrong.

DMitch, Buffet knows it would help the stock market in the short run. And he has billions in the stock market so of course he's going to support it. He would be doing a great disservice to his stockholders if he didn't.

The problem is the ever increasing debt and ever weakening dollar. The bailout only makes that problem worse in the long run, but it would help in the short run sure.

Perhaps we need a bailout of wall street to save our economy, perhaps we don't. I don't know. I do know we need more than one week of information and debate before committing 700,000,000,000 dollars (did I get enough zeroes in there? I lose count sometimes.) of taxpayer money and turning the USA into the USSA.

In short, I agree with the following comments by Rep. Dennis Kucinich:

"None of this has been subject to a critical analysis," charged Rep. Kucinich. "We haven't had access to the books to the people who are claiming they are going broke."

"The $700 billion bailout for Wall Street is driven by fear, not fact," Kucinich said on the House floor Sunday. "This is too much money in too a short a time going to too few people while too many questions remain unanswered. Why aren't we having hearings on the plan we have just received? Why aren't we questioning the underlying premise of the need for a bailout with taxpayers' money? Why have we not considered any alternatives other than to give $700 billion to Wall Street? Why aren't we asking Wall Street to clean up its own mess? Why aren't we passing new laws to stop the speculation, which triggered this? Why aren't we putting up new regulatory structures to protect investors? How do we even value the $700 billion in toxic assets?"

read this... http://globaleconomicanalysis.blogspot.com/2008/09/final-push-to-kill-bailout-monstrosity.html

and this... http://www.salon.com/opinion/greenwald/2008/09/29/bailout/index.html

and contact your congressman and senators and tell them to vote against this current bailout bill.

Paulson aka Mr Risk said himself last week on CSPAN before a committee... he really only needed 50 billion per month.. Outrageous enough... Why on earth should we/congress give him more than that?

Oh, I don't know. All my money is in Switzerland, with some petty cash in the Caymans.

So my question.

You mean Wall Street is finally going to be treated exactly like the rest of overreaching Americans whose beyond-their-means property's been foreclosed and is now owned by financial institutions (The Government)?

Don't be silly. Injustice will prevail, Hog fans.

The goal here is twofold: 1) Republicans own the government, and 2) Republicans own all property.

Systematically disenfranchising Democratic voters around the country and otherwise stealing elections with impunity, they want to do it again.

They HAVE to because they've been caught and exposed. They must act quickly.

Here are their two choices.

They can apologize, turn tail and run and hope they're not indicted and imprisoned for their crimes.

Flee justice, in other words.

NOT gonna happen.

OR, they can press forward and go all-in with their determination to shred the Constitution and Bill of Rights and privatize their ownership of ABSOLUTELY EVERYTHING (you know, like Halliburton and our Armed Forces), so the rest of us never own anything and just lease or pay rent (plus interest on defaults) on our "military," "homes," "property," "transportation," "food," "fuel," -- in effect shaking down America.

Like the Mafia.

"I'm glad everything I have is in land."
It's none of my bidness, eark, but I wish you were more broadly diversified.

People need to realize that this is all because of debt. Our government and its people have been living off debt. Consumers are having a hard time making debt payments because of the high price of oil and inflation. We are a consumer driven economy so why is this surprsing to anyone?

Why durango? So I could be losing money with the rest of you?

Everyone knew this was coming. We passed the point of soft landing several years ago, didn't even aim for a hard landing, and this plan was just a controlled crash. Doesn't look like we get that either. Just let the mother-effer burn.

Norma,

Your argument doesn't make sense to me because Republicans voted against the bill: 133 against and 65 in favor.

Democrats voted for the bill: 141 in favor and 94 against.

So if this bill was some Republican contrived trick to get us to bail them out, then why did they overwelmingly vote against it. And why did Dems vote for it?

I'm a Democrat. But I am unbiased enough to see that your argument doesn't stack up.

I thought I was lucky owning my home outright. But I'm a couple of years from retirement. My retirement fund that I prudently put into "safe" areas is gone. Property taxes and utilities bills are going to take my home away. There are not enough WalMart greeter jobs available for us geezers. Let's just repossess the homes of these speculators and move in. What's the addresses of all of the Stephens' homes, as a start?

Let's foreclose on their homes and those of their congressional lapdogs. I'm starting to hear the sounds of Jefferson Airplane's "Volunteers"

"Look whats happening out in the streets
Got a revolution got to revolution
Hey I'm dancing down the streets
Got a revolution got to revolution
Ain't it amazing all the people I meet
Got a revolution got to revolution
One generation got old
One generation got sold
This generation got no destination to hold
Pick up the cry
Hey now its time for you and me
Got a revolution got to revolution
Come on now were marching to the sea
Got a revolution got to revolution
Who will take it from you
We will and who are we
We are volunteers of America"

FBI, take notice, they, not we, are the enemy. But we will end up in Guantanamo.

At least we will have a roof and 3 meals ... for a while. For a short while.

You have to know when to play the game and when to walk away.
When Wal-mart was growing, it was time to play.
When Wal-mart stopped growing as fast, it was time to walk away.
When the dot com boom took off, again it was time to play.
When the dot com was too high, it was time to walk away.

Diversification is for people who don't have a clue in what to invest so they cover all bets.

If things go as I think they will, land won't be worth much for a long time either. BUT at least it won't vanish. Eventually it will be worth something again.

re: "the repercussions will be monumental"

They will be monumental but they have to be faced. I thought September 11th would wake this country from it's slumber but opportunists seized the moment for short-term political gain. How many new strip malls have you seen get built in the last 10 years that never have full or sometimes even 1/2 occupancy? They weren't occupied because they should have never been built. This financial crisis is going to force us to make hard decisions about what we really need. Brother-in-lawin' it ain't going to get it anymore.

I have mixed feelings about the bailout. I am generally against expanding government and spending great deals of taxpayer dollars, however I lean towards supporting it and here's why...

The biggest concern is the credit markets. While EARK and I disagree on the bailout, he/she nailed it when they said "our government and its people have been living off debt." The problem is we still do.

If the credit markets freeze up our economy is going to come to a screeching halt. Car dealers won't be able to sell cars - because who buys a car in cash anymore? Banks won't give loans or lines of credit for small businesses who need extra cash flow for expansion. Retailers like Best Buy aren't going to sell many big screen TVs - because people won't be able to get financing.

its the credit market freeze that really scares me. i think the bailout would have helped prevent that from happening - but no one really knows if it would have been a long term solution or not.

We've gotten to this point by living off of debt and by greed at ALL levels. Greed on Wall Street AND greed on Main Street. Helping low income Americans buy houses is admirable. But helping them buy at $150,000 house when a $90,000 house will do is part of the problem. Community banks are to blame for that - as are consumers who DID know better, but they wanted that "nicer" or "bigger" house.

Warren Buffett has shown some good sense in the past. Not the kind that is focused on his own pocketbook exclusively. He came out against abolishing the estate tax, for one. I am inclined to believe his intentions aren't merely selfish.

I haven't read anything extensive yet on Krugman's position on this current plan, but I've seen headlines indicating that he at least has tepid support for it.

I don't know what the ramifications would be, but I do know that I'm still getting credit card offers and the banks are still making loans.

Maybe waiting would be prudent. Wait and see if natural healing hurts that bad before we fill the expensive perscription.

I'm open to persuasion here, but chicken little protestations aren't persuasive. The Dow isn't either. If someone who thinks this bailout is a good idea could explain the cause and effects of this thing or point to a link with that kind of information, I'm interested.

BusDriver, where do you think the $700 billion will come from?

ANSWER: The credit market.

It will be new bonds sold.

It's not a matter of credit not existing.
It's a matter of credit not willing to invest.
Bonds are safe enough so they can be sold to prop up the stock market which is not safe.

Also BusDriver, there is no shortage of credit. The problem is that consumers have reached their debt limits. What good is credit if consumers don't have enough money to pay off debt?

There is nothing wrong with buying a house. The problem is when you can no longer afford the payments, or you have borrowed more against it than it's worth.

This problem was not caused by people buying homes and getting mortgages. The problem was caused by the doubling of oil prices, inflation, and lack of increase in incomes.

The "mortgage crisis" is a symptom. It's not the cause.

Just hit -711.
This is interesting.
I wonder what it's gonna do to po-folk like me who don't have any money in the market...
The whole situation is kinda exciting, in a perverse way.
May have to go back to relying on what the old timers told me when I was a kid. Invest what little I have into fish hooks and .22 shells.

"Car dealers won't be able to sell cars"

That one's got me crying.

Hahahahahaha.
Republicans blaming Pelosi for the fact they could not get their members in line to vote for a bill McCain supported and "suspended" his campagin for.
They got their feelings hurt....what a bunch of big babies....whaaaaa, Nancy hurt our widdle feelings....

You DO see how this takeover works, don't you?

A private citizen owns property. She or he decides to sell it. The "financial institutions" (which The Government plans to take over anyway) heavy-sell sub-prime lending.

You, private citizen, unload your property and make a profit.

The new owners are soon foreclosed on. Their "property" reverts to the financial institution, which then goes under because of all those bad loans and is taken over, bailed out, OWNED by The Government.

Which now owns all that formerly private property and utterly controls it.

THAT'S how they take over private property on a massive scale.

You DO understand, as renters rather than owners, that "management" has the contractual right to enter your domicle whenever they wish, for any reason, don't you?

MSM, as you know in America, is already effectively owned and controlled by five mega-conglomerates. ALL Republican.

Solution?

Oh, girlfriends, it's so ancient and so simple.

"Lysistrata."

We've got what "they" want.

More precious than oil in the Middle East.

The most valuable commodity on earth.

The secret to desire, Love, pleasure and the continuance of the human race.

We've got it, women.

Let's start brokering it in the Halls of Power.

Only put out if they show you their voting record paper trails.

Aristophanes got it right in 411 B.C.

Keep our legs crossed for a month and regain America, women.

I care less about consumers being able to use credit to BUY things. But if retailers and businesses can't sell products and expand their businesses, people are going to lose jobs, businesses are going to fail, and the market is going to tank even more than it already is.

The reason Rwingers and DINOs voted this down is because more neo-con provisions were not included. Like huge credits which allow the "free market" to work. The other reasons are that their mail is running 100:1 against it. It's been sold as a Wall St. bailout but it's not. It will bail out lots more than Wall St.

>>They can apologize, turn tail and run and hope they're not indicted and imprisoned for their crimes.<<
NormaBates

Sorry sweet thing, FBI has an ongoing massive investigation into Wall St. corruption. Unfortunately the arrests and expose` will not be available until after the election.
That is not inside info. Google it.

eark. Hang on to your land. Unlike securities they're not making anymore of it. Unfortunately if you need funds to live on from your land sale there may not be any "qualified" buyers.
But, you can always sell gold in scary times, small quantities at a time.
.

"Car dealers won't be able to sell cars"

That one's got me crying.

It's an example, Rod, of the fact that the public (right or wrong) uses credit for virtually everything in this day and age. Some, like myself, pay it back but many don't. Its also an example that there are two parties that depend on these transactions - the seller and the buyer, and its in the best interest of our economy for things to be bought and sold. Sorry the car dealer example wasn't good enough for you - the same could be said for grocery and department stores, or most businesses for that matter.

i'm glad you think that our country's economic situation is comical.

The car dealers that sell economic cars won't have any problem- you will see a fast-tracking of things that are not wasteful, it doesn't take capital as much as it takes cutting the fat. The ones that clear away forests on the edge of town LIKE STEVE LANDERS- might consider opening an electric car dealership in the MIDDLE OF TOWN.

You might not see so many 16 year-olds rolling down Kavanaugh in Range Rovers.

BTW, does anyone know how you can check to see if your bank has a chance of failing?

"Keep our legs crossed for a month and regain America, women."

OK, Norma Lysatrata Bates. Keep your mouth shut and nothing else! Understand?

"The car dealers that sell economic cars won't have any problem".

it doesn't matter what kind of car it is. Even a Toyota Prius costs $25,000. The point is that if your credit isn't perfect you're not going to get the LOAN to BUY the car. most people don't have 25 grand laying around to buy a car. and even if you do get the loan, who knows how high the interest rate will be?

wake up rod.

Absolutely right, eLwood.

As I said:

"They can apologize, turn tail and run and hope they're not indicted and imprisoned for their crimes.

"Flee justice, in other words.

"NOT gonna happen."

It doesn't take an astrologer to predict these criminals, including the War Criminals at the top, will never be convicted of anything.

That leaves them with their only other choice.

And thank you for this:

"The reason Rwingers and DINOs voted this down is because more neo-con provisions were not included."

Bingo!

eark,
Where the hell do you think the credit comes from? It comes from bleeding the people dry. It comes from being a vampire until there is no more and then retiring to a non-extraditable country with a numbered account.

We are on the verge of class warfare in the real, not metaphorical, sense. People outside of Washington are scared, angry, and frustrated. George McCain (name on purpose) tells us to believe the fundamentals of this economy are strong. How many of his homes are being foreclosed?

McCain had the same platitudes when his buddies in the savings and loans disaster went belly-up and he helped to bail them out. We got to revolution.

If the real issue is the credit markets, why can't the $700 Bil be used for new loans only? infused to banks all over the country to get to the main streets borrowers.

re: "wake up rod."

Dude, move closer to work. Ride a bike. Buy a used car. I wouldn't pay $5,000 for a car, much less $25,000. The car I have now cost $2,700 and it's the most expensive I've ever owned. Adjust already.

"OK, Norma Lysatrata Bates. Keep your mouth shut and nothing else!"
I dunno, Cato. Maybe you oughta reconsider that one, if you get my drift.

>>We are on the verge of class warfare in the real, not metaphorical, sense.

Oh how I wish you were right Bro Jim. But you and I know what's gonna happen. Preachers
are gonna soothe people's souls, saying this time of over extended frenzy is the work of
the devil. Prayer meetings will go from one night per week to 5 as they attempt to soothe
the soul of those on the verge. Just as prayer and preaching settled the masses into
voting against their own interests prayer and preaching will be used to soothe them into
accepting the enema of corporate finance failure. More With Less. It's Jesus' Way.

I'm thinking we should begin a prayer meetin right here on these pages. Of course I offer
up prayers to my god, money, which may run contrary to the majority view of Methodists,
Presbyterians, Episcopalians on here. I doubt we have many fundies since chasv is booted and
LargeAssHole can barely read and write.

But let's have a member of the faithful to lead us in conjuring and conjure up some prosperity,
forgiveness for the greedy, sinner who got us into this mess and above all lets pray for our President in this time of need to guide him into Grace.
.

"Dude, move closer to work. Ride a bike. Buy a used car. I wouldn't pay $5,000 for a car, much less $25,000. The car I have now cost $2,700 and it's the most expensive I've ever owned. Adjust already."

you're missing the point. not worth the time in trying to educate you.

Eark, you are *dangerously* wrong about this. Believe what you want about this government intervention, but please don't spread inaccurate information. If you want more background on the problems going on right now, google commercial paper. Read about how it makes our corporate system function, and then you'l understand why a bailout (of some kind) needs to happen.

This is not about *people* buying cars or flat screen TVs -- this is about comapnies not being able to buy inventory or pay receivables. Imagine: all of a sudden, your company doesn't have the short-term funds it used to borrow monthly to buy corn and steel and silicon. This means cars and cereal and semiconductors don't get made. So corporate earnings plummet...a bunch of people get fired... maybe your company goes bankrupt...government tax receipts go down. Then GDP drops. Our deficit goes up even more. The dollar falls to new lows, and oil goes to new highs, we have more people unemployed and with no healthcare, and even less money for social programs, etc.

This is a worst case scenario but it's an attempt to explain why the seemingly esoteric world of overnight lending, if it does not unfreeze, will affect 'normal folks' in a lot of bad ways.

Other things I just want to correct :
"there is no shortage of credit"

Yes, there is. The high yield market is closed. The investment grade market is closed. The convertible debt market is closed. The asset-backed market is closed. PS, eark -- credit is not just what you and I charge on our cards.

"Where will the $700b come from? the credit market."
No. It will come from the Treasury. The US Treasury, though it does issue fixed-income securities, is not part of the bond market. The US Treasury can always find buyers of its paper (theoretically at least although at some point I assume China and the Middle East may stop humoring us), but right now, banks and companies can't.

I this is the first time in the history of the blog that I've agreed with one of TheBusDriver's comments, but he/she actually seems to understand what is going on and why it matters WAY beyond Wall St. I would rather "the bailout" had provisions for homeowners that allowed bankruptcy judges to modify mortgages or a moratorium on foreclosures. I would rather Paulson had less control over the disbursement of assets (because I do, frankly, believe that he rewards indviduals he favors and punishes those he does not). I would rather we had to more time to think this through (although please take a look at the scope of intervention in Europe that occurred last night and tell me this isn't urgent). Finally, I want far tighter leverage and asset disclosure oversight put in place by the OCC (office of hte comptroller of the currency), FDIC, SEC, etc.

But for now? I just want no more banks to go under.

From my seat on the trading floor it looks like big trouble for moose and squirrel.

Clicky for cartoon

"you're missing the point. not worth the time in trying to educate you."

I feel that you miss the point. The point being, you can't spend what you don't have. Quite simple really.
THIS IS CALLED CHANGE. It's not 94.1 the Point. It's not baseball , hot dogs, apple pie and Chevrolet. It's real. Get used to it.

Ok, packers, the markets are closed and the God of Money, gold, WON the Day !

915. 50 !! Up from Friday's close at 888.50

T-Bills are the only other winner.

Pork bellies down
Oil down (-$10 barrel)
Home heating oil down.
Live cattle Down.
Silver Down
Soy beans Down.
Platinum Down...and that's a rich man's commodity.
It's all down
Save for Gold
T-Bills. So the government's promise to pay is still good.
Faith fellow travelers.
.

One of my favorite bailout cartoons. Clicky

From my seat on the trading floor it looks like big trouble for moose and squirrel. <<

MarthaB I tried simple explains on a previous thread, to no avail.
If folks will support this Emergency Measure the gov will end up profiting
from it. Just like the Chrysler and Mexico bailouts. Both profitable. Safeguards are in the
final draft.

Ok, Razor Trekkies, one more time. America operates, runs, must have, etc CREDIT.
Without it stuff don't get made, traded, bought, exchanged, exported. How many on
here paid cash for their homes? Inheriting a home doesn't count but if you did inherit
your home did your family finance it or pay cash?
See what I mean.

How many on here have ever put a a vacation on a credit card?
See what I mean.

How many on here, under 50, have financed or leased a car?

.

S&P @1110.00. If memory serves that was what it was on the last presidential election day. Looks like for the Bush' legacy it still has a long way to go down.

Another fact for the bus driver is that I heard last week that over half of the homes in Arkansas do not even have mortgages on them. If true so much for common perception vs. reality.

I am right there with you eLwood...

I am also thinking we might want to use the tried-and-true xenophobia method to get people to support the bailout... here is my final attempt:

So all these US banks own billions and billions of dollars of mortgages that aren't worth crap anymore. If the banks want to get back to their normal business, they gotta get rid of them. If the government doesn't give them some temporary help, they'll have to go bankrupt or look elsewhere.

Who has money these days? Um, let's see. Russia. The Middle East. China.

So for these banks, either they liquidate like Lehman or they sell all those toxic mortgages for pennies on the dollar...to the Saudis. Or Chinese. Whatever, take your pick of evildoers.

Yes, that's right, Americans. Default on your mortgage and a gen-u-wine Arab will own your home.

Unless, of course, what actually ends up happening is most people don't actually default, and so the foreign buyer who paid 20 cents on the dollar makes a 400% return on his investment.

That would be just great for America.

I was prepared to learn some stuff, but some of Y'all got me rolling. First, I'm with Rod on this one:

"Car dealers won't be able to sell cars"

That one's got me crying."

I understand credit is needed, but I also understand people are driving/living waay beyond their means...with our government leading the spree. I will not finance a car that costs more today than my first house, AND IS A PIECE OF PLASTIC SHIT THAT WILL BE LUCKY TO RUN AS LONG AS THE DEBT. How come we've advanced so far that we now can't make cars/appliances as good as they were fifty years ago...because making quality doesn't benefit the 'right people.' Anyway, I just had to chime in with my 2-cents about roads filled with overly priced cheap cars...and agree with Rod.

Given that my hubby's had me convince for about seven years that 'hard times are a coming,' and that Monkeyboy has been at the helm for about the same...I fully expect the worst to happen. (How long can any country continue to fight a based-on-lies war that's economic cost is charged to the future...or continue to sell its middle class to China without a day of reckoning occurring?) I hope not...'cause shit runs downhill. And, before those Wall Street millionaires (aka our elected officials and their families) suffer the consequences of their greed, they will make sure we suffer more.

I don't want to stand in soup lines...or watch any other human do the same.

But maybe some drastic changes are needed so our children/grand children aren't paying for ALL our crap.

I don't know, norma, about all that legs-shut stuff...I'd like to think I have more to negotiate with than JUST that; but I'd really like to think that I don't have to negotiate a damn thing 'cause I have what it takes to enjoy my legs wide open and get what I want because what I want is fair.

elwood I thought you were telling people for days on here to call the reps and tell them to vote against it or was that someone else?

Martha B, since you are so smart, why don't you tell us what the root of this problem is. If it's not a lack of money in the hand of consumers (ie. consumer spending), what exactly caused this.

Ah, zelda, you slay me. Fair is fair, huh, with the gender whose brains are you know where? Just how do you explain females control about 90% of the wealth in America? Being fair? Hahahahahahahaha. I think it's from being smart........*grin* There's no telling the wealth that Norma has squirreled away.....

>>>So all these US banks own billions and billions of dollars of mortgages that aren't worth crap anymore. <<

Martha, Martha, Martha! Shame on you. You're in the bidness girl. Calm down. Surely in Econ 101 or Financial Management 201 you learned about inflation. It's inevitable in a fractional reserve banking society. It's also inevitable in a deficit spending society.

Sooner or later inflation will increase and the those mortgages, representing homes, will be worth more than they are presently. Then along with inflation will come population increases. It won't be the quick payback Bushco is selling but it will pay out.

But somewhere in the not-so-distant future companies are going to have to write down the value of those remaining mortgages. They're going to have to re-negotiate the terms since Congress would not mandate it. If none of that occurs they MarthaB is right on, Saudis will own millions of American homes and

Stranglove wins! Saudi Muslims will come here en masse and kill us,each and every one of us. So the bailout must proceed!

eLwood, all the gold I have I wear on my body but, I have been in the pantry counting how

many bags of dried beans/peas I have and salt pork to season them.

I've been a kept woman all my life so know little about money, except how to spend it and give

big chunks to those less fortunate.

Gramps already spinning todays vote like crazy.

I worry about the young and what the future holds for them.

PS. The Feds have been making money (credit) available and will continue to do so. This bailout was about buying bad investments from a few companies. It's not about credit.

The Saudis already own 1/6th of this country. And were do you think the $700 billion is going to come from anyway? The tooth fairy?

go to bauerfinancila.com to check your bank rating.

MarthaB - What are we making.. is the question? What is our economy based on... just as important as questions such as -what is the real bottom/real value of our real estate and what is the real value of the junk paper Paulson/we are going to buy or make loans?

I'm poor as a church mouse now... These cretins put my dollar value in the tank..and I work seven days a week while falling further and further behind ( I don't have hours in the day to add to my work load)... lower quality foods, lower amount of food, no health or dental care..and I do not abuse credit nor do I live in any extravagant manner at all. My vehicle is over 20 years old and I won't buy another until I can buy one powered by electricity or which gets 40 to 60 mpg on dirt roads. Most of the people on this blog have money..live way above the average workers living standard. Do not be fooled by your pleasant little fuzzy bubble. People are hurting, they are worried and angry... as soon as enough of them realize taking a day off with their pitchforks in hand will serve them far better than working at a loss... we will have our next revolution... it's simmering now. The top needs to feel pain which they have inflicted upon so many since America dumped Carter thought for Reagan divisive greed.

We need to get real on so many levels...and we absolutely do not need to spend 700b on the same direction with the same crooks for more of the same Friedman economic theories. It's time to base our economy on something besides needless war, oil and other commodity speculation, and trumped up paper pushing. I don't understand derivatives... but I know enough now to see we absolutely should not help these critters continue to hide them.

If business needs loans... then borrow directly from Government directly for a while... not bail out crooks and liars with their junk... who are still loaning away a shark rates. WHy pay Wall Street to do what we can do ourselves for with much more efficiency, a better rate for all and much more assurance of better returns for all?

We need strong new regulations, with strong guarantees of returns (taxes and fees on the rich and their stock transactions).. and an entirely new plan... a new economic model.

Stop trying to help the miserable greedy Wall Street cretins which who got us in this situation and have no intention of doing anything else until the law forces them to do so.

eLwood -- sarcasm. If I didn't think those mortgages would eventually appreciate in value, I wouldn't have suggested Saudis could make a 400% return. Saying they were worth crap was a dramatic flourish. But, as you should well know, from a market-based perspective, something's value is what someone else will pay for it. If there's no bid for those mortgages, then, pray tell, what is their worth?

Which, eark, leads me to your question of what got us in all this trouble. So basically, no, this crisis has very little (if anything) to do with consumer spending. What happened was, financial instutions used leverage to buy and sell a lot of new kinds of securities -- in particular, CDOs, which are made up of lots of itty bitty pieces of mortgages (and other assets that generate cash flows -- you can make a CDO out of anything that pays you money on a regular basis). These CDOs were rated AAA (top quality!) by the ratings agencies, so banks thought they were very safe assets and held a lot of them on their balance sheet as collateral for the money they borrowed. Then, as those mortgages began to reset, and property prices declined, banks started to realize those securities were not worth the $100 they had paid for them. No one knew what they were actually worth because there wasn't a market for them (they don't trade all the time like GE shares). So they had to mark them down -- which meant all of a sudden the banks were underwater....sort of like homeowners on their homes.

Then, everybody got really freaked out about lending to each other. See the whole post on commercial paper earlier. And then LIBOR (the intra-bank overnight rate) went CRAZY and then REALLY nobody would lend to each other.

In a nutshell, it's complicated. But no, it isn't about consumer spending. It would be better if people hadn't bought houses they couldn't afford...but that's only a tiny part of the problem.

If there's no credit out there, could someone explain how Bank of America and other companies are buying up the failing companies?

Bad companies fail, and are taken over by stronger companies.
Bad investments lose money and are bought cheap by smarter investors.

That's how the free market works. Of course it sucks when you are one of the losers, but that's not our fault.

Dude, Bank of America is buying Merrill with stock

NOT CREDIT!!!

Martha B you are the one telling me that oil prices were not high due to investment speculation. So explain how oil shot up $26 one day last week with no increase in demand and no decrease in supply? You are clueless and blindly believe the MSM and wall street.

And I'd bet my land that Martha B works for and investment firm on Wall Street.

That is CAPITAL Martha B and they have it. BOA is doing just fine. Most companies are making money. The bailout is for those financial firms that are not making money.

>>elwood I thought you were telling people for days on here to call the reps and tell them to vote against it or was that someone else?<<

You have it half right. I was opposed to the bail-out as written, those 2.5 pgs of total giveaways and without oversight by Congress. That's what I wrote my 2 Senators about. The provisions.

The Devil is ALWAYS in the details.

Now there is Congressional oversight, executive bailouts or golden handcuffs have been limited to $500K per year instead the tens of millions they were getting after running their companies into the ground, profiteering on preferred shares in Fannie Mae and Freddie Mac has been curtailed.

I will tell you what frightened me eark. In Sunday's The Morning News was an article (entitled Capital Defense) about Ark community banks being so severely leveraged ... 92% of their deposits being loaned out. That will
be a big hit. The Bail-out will give them time to contract enough to be safe provided regulators act accordingly. Some greed has to go. Their receivables must be collected and margins increased. I don't want to see small banks failing. Do you? Last time I looked FDIC
was using a ONE Per Cent Fiduciary rate for insuring bank deposits. Recently saw an article about increasing the fiduciary reserves.

Another bothering thing is our Current Account Balance. Without credit-financing it will become dangerously larger even with the Import-Export Bank helping out. Jobs will quickly dry up.

But I think about all the jobs losses if credit dries up quickly.
My brother once had to operate his business from credit. It was
a very profitable business but he carried large account receivables
and found it necessary to finance his operations for months until the
receivables flowed in... they always did.

Is that enough for you?
.

Bear Sterns was bought with a loan backed by the feds Martha B.
AIG was loaned 85 billion by the Feds with its stock as collateral.
There's no need to give a handout to wall street.
We just need to loan money to the successful companies to take over the bad companies.

Yes, I work for an investment firm (not on Wall Street). I think that my multiple mentions of working on a trading floor made that clear. :)

eark, you don't have to agree with me, but I'm not clueless. I don't understand everything (terrible at options pricing) but I would venture to say I have a more sophisticated understanding of the financial system than the average American **because it's my job**.

I have been trying to explain some of the subtleties because I think the rescue package deserves support and because I think it is hard for people who don't deal with ABS and CDOs and CDS every day to understand.

Back to oil -- the long explanation I gave about speculation was to explain what "speculation" actually was -- why it wasn't market manipulation being done by lone actors but by the same fund that manages your pension. I see it didn't get through.

Oh well.

elwood, if a bank is run badly then it should fail. The same goes for a company.

When will people realize that never ending debt (credit) is not the answer? Debt must be paid back at some point. It's one thing to borrow money for business purposes which will make a profit. It's another thing to borrow money for consumption. That's what this country has been doing.

These people that hold bad debts should lose their money. Others will come in and buy those assets (not the government) when it becomes profitable to do so, and it will. That's how it works. We need government involvement on the front end and not the back end.

Mistakes were made and its time for those who made the mistakes to pay. Everyone will suffer but that's how a free society works. That's why government oversight and regulations are prudent.

"Martha B, since you are so smart, why don't you tell us what the root of this problem is. If it's not a lack of money in the hand of consumers (ie. consumer spending), what exactly caused this."

Posted by: eark

eark, here is our problem:

"They're called "Off-Site Weekends"-rituals of the high-finance world in which teams of bankers gather someplace sunny to blow off steam and celebrate their successes as Masters of the Universe. Think yacht parties, bikini models, $1,000 bottles of Cristal. One 1994 trip by a group of JPMorgan bankers to the tony Boca Raton Resort & Club in Florida has become the stuff of Wall Street legend-though not for the raucous partying (although there was plenty of that, too). Holed up for most of the weekend in a conference room at the pink, Spanish-style resort, the JPMorgan bankers were trying to get their heads around a question as old as banking itself: how do you mitigate your risk when you loan money to someone? By the mid-'90s, JPMorgan's books were loaded with tens of billions of dollars in loans to corporations and foreign governments, and by federal law it had to keep huge amounts of capital in reserve in case any of them went bad. But what if JPMorgan could create a device that would protect it if those loans defaulted, and free up that capital?

What the bankers hit on was a sort of insurance policy: a third party would assume the risk of the debt going sour, and in exchange would receive regular payments from the bank, similar to insurance premiums. JPMorgan would then get to remove the risk from its books and free up the reserves. The scheme was called a "credit default swap," and it was a twist on something bankers had been doing for a while to hedge against fluctuations in interest rates and commodity prices. While the concept had been floating around the markets for a couple of years, JPMorgan was the first bank to make a big bet on credit default swaps. It built up a "swaps" desk in the mid-'90s and hired young math and science grads from schools like MIT and Cambridge to create a market for the complex instruments. Within a few years, the credit default swap (CDS) became the hot financial instrument, the safest way to parse out risk while maintaining a steady return. "I've known people who worked on the Manhattan Project," says Mark Brickell, who at the time was a 40-year-old managing director at JPMorgan. "And for those of us on that trip, there was the same kind of feeling of being present at the creation of something incredibly important."

Like Robert Oppenheimer and his team of nuclear physicists in the 1940s, Brickell and his JPMorgan colleagues didn't realize they were creating a monster. Today, the economy is teetering and Wall Street is in ruins, thanks in no small part to the beast they unleashed 14 years ago. The country's biggest insurance company, AIG, had to be bailed out by American taxpayers after it defaulted on $14 billion worth of credit default swaps it had made to investment banks, insurance companies and scores of other entities. So much of what's gone wrong with the financial system in the past year can be traced back to credit default swaps, which ballooned into a $62 trillion market before ratcheting down to $55 trillion last week-nearly four times the value of all stocks traded on the New York Stock Exchange. There's a reason Warren Buffett called these instruments "financial weapons of mass destruction." Since credit default swaps are privately negotiated contracts between two parties and aren't regulated by the government, there's no central reporting mechanism to determine their value. That has clouded up the markets with billions of dollars' worth of opaque "dark matter," as some economists like to say. Like rogue nukes, they've proliferated around the world and now lie hiding, waiting to blow up the balance sheets of countless other financial institutions."

Click on name for full article. Not all of the problem a HUGE part.

"Just how do you explain females control about 90% of the wealth in America? Being fair? Hahahahahahahaha. I think it's from being smart........*grin*"--cato

Absolutely! But I am amazed by that 90% thing of yours...true...or you just playing?

Women are the quintessential 'multi-taskers'; been doing it before they could vote or own property. So now that we vote and own property...look out. And it's quite the disadvantage to the one-track gender. Kinda unfair...perhaps y'all could get some kind of disability check for being perpetually one track (from all that government money). I definitely think it's one. Ha to hubby, son and the males on this blog.

Now, jazzy, you have been a partner who didn't get an OFFICIAL paycheck for your work. You are not a kept woman...but an underpaid woman who hasn't been appreciated by her culture. YOU HAVE EARNED AT LEAST HALF OF EVERY DAMN DIME YOUR 'KEEPERS' EARNED. When people ask me if I'm working I tell them 'Yes, I'm just not working for a paycheck.' There is no harder job on the planet than being a stay-at-home mom of young children...lordy it's hard.

I love our representatives revolting against the leadership/White House...just wish it had been over something like a based-on-lies war, torture, child abuse, Guantanamo, the Bankruptcy sellout, poison from China...

urgh, eark - a little bit of knowledge is a dangerous thing.

- re Bear: no, it was not bought with "loans". it was bought with $2B of JP Morgan's cash. The Fed simply backstopped up to $30B of liabilities because Bear's books were so messed up that JPM wouldn't take on their debts without some cap on losses.

- re Bank of America stock: yes, stock is equity capital. But it's not the same as debt. When BofA issues stock to Merrill shareholders, it is essentially taking money from its own shareholders by giving away part of their ownership. There is no cash involved. What is messed up right now are the credit markets, in which someone gives you cash and you promise to pay them back. And, by the way, there is a way to raise cash through equity -- it's called an initial public offering. Guess what? That market is closed too.

if I give you a 10,000 loan, you have 10,000 to spend. if I give you 1 share of Martha, Inc., you ain't got much of anything and I own less than before. That is a very simplified explanation of BofA using stock to buy Merrill. And why it doesn't make everything okay.