House bailout doesn't pass; Shit to hit fan -- News at 11

[Krigloch the Furious]

I want 700 billion. I'd have helms deep built, and live in it.

 

[unknown]

or it could be because of Ronald Reagan and Milton Friedman's theories of economics?

many economists believe bankruptcy is better than the bailout.
http://www.cnn.com/2008/POLITICS/09/29/miron.bailout/index.html

And the party mostly responsible for the bill failing? Republicans. who voted almost 2 to 1 against it compared to the democrats.

 

[zabu of nΩd]

I want 700 billion. I'd have helms deep built, and live in it.

That would rule.

 

[unknown]

Also, somebody from the treasury dept told Forbes that the $700billion figure was just sort of pulled out of thin air.

hey! how about that $620bn defense budget that was just passed the other week? Nobody's raising a stink about that

 

[V.V.V.V.V.]

No shit Repubs voted against this; the Conservative CEOs would lose MORE stuff if they passed the bill

 

[unknown]

No, V5...the Republicans didn't like the tone of Nancy Pelosi's speech. That's the real reason why they didn't vote for it DUH

 

[V.V.V.V.V.]

oh right sry

 

[zabu of nΩd]

That would be hilariously pathetic if it were true.

"Hey, she said bad things about our party! We can't approve this bill which will save our country from a depression just to give her the satisfaction of victory."

 

[General Zaroff]

We shouldn't have to bail out these dipshits in the first place.

 

[Enemy242]

man this really sucks, as if we really need another huge problem. i really hope this goes away soon but i can only see it getting worse.

 

[MasterOLightning]

I'm not getting the sense that this is directly helping CEOs and high level executives. Yes, in that they will not lose their jobs due to their company going bankrupt, but the main goal here is to not save them, but keep the companies in business and save a multitude of jobs. If you have to save executives in spite of that, so be it.

The way the nightly news explained things, the government was buying off the bad assets, such as unpaid homes, and selling them back to the public when a level economy will allow the gov't to at least break even on them. Buying off bad assets should free up capital and credit.

Unless there's something dramatically faulty about the proposed plan, I really think they should have passed it.

 

[The Ozzman]

No shit Repubs voted against this; the Conservative CEOs would lose MORE stuff if they passed the bill

Don't be a fucking gay about this. Something needs to happen. Apparently everyone is shooting for Thursday for a new plan to be approved. If it doesn't get approved, prepare for the market to retract at least a thousand points.

 

[Dak]

Something needs to happen which is letting the markets self correct by allowing badly run, greedy businesses to collapse and make room for the good businesses.
We are long overdue for a recession due to greed in the markets and bad Fed practices. Further attempts to postpone it will only make the inevitable correction worse later.

 

[zabu of nΩd]

That assumes that the government won't be regulating businesses' ability to issue loans after all this, which they would be stupid not to. I'm pretty sure it's worth saving all the jobs and borrowing opportunities for honest people that would be destroyed by not passing this bailout.

 

[Xorv]

I liked how bush earlier last week came on the air:

"we need your money now! don't ask questions, just sign here and I'll take off with 700b before my term is over"

In truth the money should be given to the home owners and small businesses that are really struggling. I don't see why we're bailing out the people that made this mess.

 

[Hubster]

Its a total catch 22 in a way. On the one hand you have the moral issue of the rich tycoons needing a kick up the ass, as well as overspenders who think theyre cool needing a kick up the ass. Its their fault this is going on in the first place. But now, if their asses aren't saved, the world economy becomes toilet paper and we get a mouthful of fresh turd.

 

[The Ozzman]

Just found this on Drudge:

Bailout marks Karl Marx's comeback
Posted: September 29, 2008, 8:03 PM by Jeff White
Martin Masse, mortgage crisis

Marx’s Proposal Number Five seems to be the leading motivation for those backing the Wall Street bailout

By Martin Masse

In his Communist Manifesto, published in 1848, Karl Marx proposed 10 measures to be implemented after the proletariat takes power, with the aim of centralizing all instruments of production in the hands of the state. Proposal Number Five was to bring about the “centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.”

If he were to rise from the dead today, Marx might be delighted to discover that most economists and financial commentators, including many who claim to favour the free market, agree with him.

Indeed, analysts at the Heritage and Cato Institute, and commentators in The Wall Street Journal and on this very page, have made declarations in favour of the massive “injection of liquidities” engineered by central banks in recent months, the government takeover of giant financial institutions, as well as the still stalled US$700-billion bailout package.Some of the same voices were calling for similar interventions following the burst of the dot-com bubble in 2001.
“Whatever happened to the modern followers of my free-market opponents?” Marx would likely wonder.

At first glance, anyone who understands economics can see that there is something wrong with this picture. The taxes that will need to be levied to finance this package may keep some firms alive, but they will siphon off capital, kill jobs and make businesses less productive elsewhere. Increasing the money supply is no different. It is an invisible tax that redistributes resources to debtors and those who made unwise investments.

So why throw this sound free-market analysis overboard as soon as there is some downturn in the markets?

The rationale for intervening always seems to centre on the fear of reliving the Great Depression. If we let too many institutions fail because of insolvency, we are being told, there is a risk of a general collapse of financial markets, with the subsequent drying up of credit and the catastrophic effects this would have on all sectors of production. This opinion, shared by Ben Bernanke, Henry Paulson and most of the right-wing political and financial establishments, is based on Milton Friedman’s thesis that the Fed aggravated the Depression by not pumping enough money into the financial system following the market crash of 1929.

It sounds libertarian enough. The misguided policies of the Fed, a government creature, and bad government regulation are held responsible for the crisis. The need to respond to this emergency and keep markets running overrides concerns about taxing and inflating the money supply. This is supposed to contrast with the left-wing Keynesian approach, whose solutions are strangely very similar despite a different view of the causes.

But there is another approach that doesn’t compromise with free-market principles and coherently explains why we constantly get into these bubble situations followed by a crash. It is centered on Marx’s Proposal Number Five: government control of capital.

For decades, Austrian School economists have warned against the dire consequences of having a central banking system based on fiat money, money that is not grounded on any commodity like gold and can easily be manipulated. In addition to its obvious disadvantages (price inflation, debasement of the currency, etc.), easy credit and artificially low interest rates send wrong signals to investors and exacerbate business cycles.

Not only is the central bank constantly creating money out of thin air, but the fractional reserve system allows financial institutions to increase credit many times over. When money creation is sustained, a financial bubble begins to feed on itself, higher prices allowing the owners of inflated titles to spend and borrow more, leading to more credit creation and to even higher prices.

As prices get distorted, malinvestments, or investments that should not have been made under normal market conditions, accumulate. Despite this, financial institutions have an incentive to join this frenzy of irresponsible lending, or else they will lose market shares to competitors. With “liquidities” in overabundance, more and more risky decisions are made to increase yields and leveraging reaches dangerous levels.

During that manic phase, everybody seems to believe that the boom will go on. Only the Austrians warn that it cannot last forever, as Friedrich Hayek and Ludwig von Mises did before the 1929 crash, and as their followers have done for the past several years.

Now, what should be done when that pyramidal scheme starts crashing to the floor, because of a series of cascading failures or concern from the central bank that inflation is getting out of control? It’s obvious that credit will shrink, because everyone will want to get out of risky businesses, to call back loans and to put their money in safe places. Malinvestments have to be liquidated; prices have to come down to realistic levels; and resources stuck in unproductive uses have to be freed and moved to sectors that have real demand. Only then will capital again become available for productive investments.
Friedmanites, who have no conception of malinvestments and never raise any issue with the boom, also cannot understand why it inevitably leads to a crash.
They only see the drying up of credit and blame the Fed for not injecting massive enough amounts of liquidities to prevent it.

But central banks and governments cannot transform unprofitable investments into profitable ones. They cannot force institutions to increase lending when they are so exposed. This is why calls for throwing more money at the problem are so totally misguided. Injections of liquidities started more than a year ago and have had no effect in preventing the situation from getting worse. Such measures can only delay the market correction and turn what should be a quick recession into a prolonged one.

Friedman — who, contrary to popular perception, was not a foe of monetary inflation, but simply wanted to keep it under better control in normal circumstances — was wrong about the Fed not intervening during the Depression. It tried repeatedly to inflate but credit still went down for various reasons. This is a key difference in interpretation between the Austrian and Chicago schools.

As Friedrich Hayek wrote in 1932, “Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. ... To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about ...”

The confusion of Chicago school economics on monetary issues is so profound as to lead its adherents today to support the largest government grab of private capital in world history. By adding their voices to those on the left, these confused free-marketeers are not helping to “save capitalism”, but contributing to its destruction.

http://network.nationalpost.com/np/...09/29/bailout-marks-karl-marx-s-comeback.aspx

I have no idea about the source, but it's an interesting article (I think. I only scanned it)

 

[V.V.V.V.V.]

It's also kind of wrong sometimes (the bailout has nothing to do with the government taking over banks iirc).

 

[The Ozzman]

It might come to that, but who knows. If the banking system stays private, there will only be 3 or 4 banks in a few years since they will buy up all the regional ones that fail.

The banks will probably be Chase, Wells Fargo, Bank of America and US Bank (this one is speculation).

 

[J.]

I honestly don't want it to pass. The economy will fix itself in time, and probably for the better. Yes, people will lose jobs, money, homes, etc. Yes, businesses will close. Chaos leads to creation, ideas, and better ways of doing things.

Burn, baby, burn. Glad I don't own stocks.