Economy in danger

[ZenkiGTS]

So bush says that 700 billion is needed to bailout our economy because its in danger of folding... retirement fundings could be wiped-out completely and blah blah blah... here's the link... we all knew it was going to happen.... its just a matter of when
Bush warns 'entire economy is in danger' - Yahoo! News (http://news.yahoo.com/s/ap/bush_markets)

[Matej]

It's ironic how every time one of the top 5 banks collapsed, the media reported that the remaining banks are doing well and we don't need to worry about them.
Until all 5 of them collapsed.

Now generations of taxpayers will be stuck with footing the bill, while the CEO's are walking away with billions of dollars.

[duffman1278]

Doesn't really look like its going to pass. I've been watching this lately and the senate doesn't seem too convinced, neither does congress.

[imotion s14]

it shouldn't pass. They gained when the market was up, they should lose when the market goes south.

[ZenkiGTS]

yep not even bush's own conservative republicans agree

[SexPanda]

I personally blame the baby boomers for these problems. Fucking hippies, with their "fight the man" attitude, trying to change everything. Now they are the man, stuffing their pockets with copius amounts of wampum, and being gay like that.

Actually, if you think about it, who's in charge of all these major corporations, and who's all in our government... baby boomers. YOu dont see 90 year olds, you dont see 30 year olds. Just 60 year old fucktards.

[wrapmeup2005]

Just out of curiousity, how much is the "war on terrorism" still costing us per day?

[ESmorz]

Just out of curiousity, how much is the "war on terrorism" still costing us per day?

More than you can afford pal.

[ayuaddict]

ferrari.

vroooom

[Grendel]

Just out of curiousity, how much is the "war on terrorism" still costing us per day?

Or all of our bases in Germany, Korea, Japan, Turkey, etc...

[imotion s14]

Just out of curiousity, how much is the "war on terrorism" still costing us per day?

not costing us anything.. the whole war is funded with borrowed money. The payment has been deferred to future generations to pay.. (well assuming the entire economy doesn't collapse by then)

[aziankingz]

if they dont approve the bailout.. i think that about 100k more people will be out of jobs, the housing market will flop, and stagflation will remain constant or even increase. that is just my theory/opinion..

[SimpleS14]

I don't know about you guys...but the past three days...I've been racking up in the stock market.


Oh how I wish I bought FRE at 22 cents :|



To stay on topic, its hard to say whether or not this is good or bad. I just think that if nothing were to happen then its a sure thing we will hit a depression. It won't be as epic as the Great Depression of 1930s, but it will be pretty distruptive as now there are global markets tied to each other.

I find it ironic that a new gov't entity is being considered as well as new regulators....because its the same thing that happened after the Great Depression. In fact, so was a new monetary system....

[aziankingz]

I don't know about you guys...but the past three days...I've been racking up in the stock market.


Oh how I wish I bought FRE at 22 cents :|



that would have been sweet.. how about LEHMQ? it was at once point .05

[wangan_cruiser]

blame the person who put us to unnecessary war.


funding the war gets america so dry.


seize their money.

[lucky7]

the blame cannot be put on one single person. thats just ignorant.

it wasnt bush that came up with the number. it was a team of the most 1337 economists there are. bernake is pushing for it, because its necessary. hes not in it to screw people. he was appointed chairman of the fed for a reason. greenspan gave him the thumbs up. its just a real shitty situation. there's no question about it.

im confident they will get it. the senate isnt opposed. they just dont want to put all 700B upfront. they wanted 50b at a time. that wont work.

[Dutchmalmiss]

the blame cannot be put on one single person. thats just ignorant.

it wasnt bush that came up with the number. it was a team of the most 1337 economists there are. bernake is pushing for it, because its necessary. hes not in it to screw people. he was appointed chairman of the fed for a reason. greenspan gave him the thumbs up. its just a real shitty situation. there's no question about it.

im confident they will get it. the senate isnt opposed. they just dont want to put all 700B upfront. they wanted 50b at a time. that wont work.


Sounds about right to me. We need to just blame the "nice people" at the banks for preapproving people for loans that aren't supposed to be approved in the first place.

So the bailout was just approved. What now? Just wait?

[lucky7]

it was partially the government as well. they initially made it so that banks and lending companies had to give loans to sub-prime lenders. thus creating an over abundance of defaulted loans.

[Gnnr]

http://marcelinopena.files.wordpress.com/2008/08/8-15-safety-net.jpg?w=435&h=329

[ranger240]

it shouldn't pass. They gained when the market was up, they should lose when the market goes south.

they arn't the only ones that are going to loose. your naive to think the economy could be that insulating between winners and loosers. the 700 billion would be used to buy distressed assets, not your run of the mill b.s. govt spending.

we isolate the stuff disrupting the economy, allow it to recover, prices go up. the govt sells the assets into the private sector.

imagine a elementary school classroom in complete havoc because there are 5 or 6 disruptive kids in it, you put those kids in sped class, give them adhd meds. the rest of the kids settle down and start being productive workers again. then you re-introduce the med'd up formerly disruptive kids.

[SimpleS14]

it was partially the government as well. they initially made it so that banks and lending companies had to give loans to sub-prime lenders. thus creating an over abundance of defaulted loans.

That's very true, especially with Freddie and Fannie. These two entities did not want to touch subprime mortgages at all but once people started to close up shop, the gov't forced them to buy them up.

[Mi Beardo es Loco]

not costing us anything.. the whole war is funded with borrowed money. The payment has been deferred to future generations to pay.. (well assuming the entire economy doesn't collapse by then)
how the fuck did this war go from the oil paying for this war to us paying 3 billion a week? This is bullshit
GWB should have just listened to his dad. George Bush Sr had Germany and Japan pay every fucking dime for Desert Storm. I thought GB sr was a fucking genius with foreign policy or he had some genius's around him. What happened to his own son?

[lucky7]

i cant comment on that. i think i was in 3rd grade when he left office. lol.

[Adikt]

Instead of bailing out the banks they should bailout the citizens...

For example, you have a mortage for $200,000. Have the government buy 1/2 of that and you pay off the rest. Whenever you sell your property $100,000 goes back to the gov. and you keep the rest. When not trying to pay off such a high mortgage people would have more money to spend thus bringing the economy back up.

[Gnnr]

And then there where some?

WaMu becomes biggest bank to fail in US history - Yahoo! News (http://news.yahoo.com/s/ap/20080926/ap_on_bi_ge/washington_mutual_future;_ylt=Ao8IkygbJgL9HwWbkH6t 6Eas0NUE)

[aziankingz]

buy buy WM at 15 cents!!

[RJF]

Well done explanation.

YouTube - Burning Down The House: What Caused Our Economic Crisis? (http://www.youtube.com/watch?v=H5tZc8oH--o)

[OBEEWON]

Enron on a national scale.

Read your bible, pray everyday.

[lucky7]

Read your bible, pray everyday.

i choose death.

[ZenkiGTS]

i think bush is milking all the money out the gov't cause he's broke as fuck

[MudRacer]

Bush? broke? I dont think so. didnt exxon or mobil whatever had the largest profits in the history in the last year or so.

How many of you use wamu? Are we the Wamu Owners now going to have Chase accounts instead?

[RJF]

How many of you use wamu? Are we the Wamu Owners now going to have Chase accounts instead?

It should be business as usual. WaMu continues to operate as normal, and eventually everything will transition to the Chase name.

[Matej]

So does anyone still believe McCain will lower taxes? Haha.

[RJF]

So does anyone still believe that McCain will lower taxes? Haha.

No, but he'll keep tax rates at the same levels that they are now, instead of raising them by letting the current law expire in 2010.

[shmiddy]

keep voting in republicans and see the shit hole where gonna be digging ourself out of next

[Matej]

No, but he'll keep tax rates at the same levels that they are now, instead of raising them by letting the current law expire in 2010.
Oh I see, promise people what they want to hear at the time, doesn't matter if a few months later it won't work.
Always a failproof strategy to get votes, bravo.

[RJF]

Oh I see, promise people what they want to hear at the time, always a failproof strategy.

No, but anyone who has ever taken an economic course knows that increasing taxes will kill the economy even more. :s101:

As small business (Zilvia) owners, both WeST and I would be personally impacted by any government tax increases.

[Matej]

So how is the country going to dig itself out of this hole? By staying in Iraq for another 100 years?

Obviously this isn't just a regular down period during a natural economic cycle.

[RJF]

Obviously this isn't just a regular down period during a natural economic cycle.

Yes it is. Take a look at what happened in the late 70's and late 80's.

In the 70's we had runaway inflation and high interest rates on mortages and in the late 80's there was the "Savings & Loan" crisis, when tons of banks failed.

[boro otaku]

Just out of curiousity, how much is the "war on terrorism" still costing us per day?
Not sure what that has to do with the banks & their sub-prime lending:nono:

But since you asked, how much is it worth to you to live the American lifestyle? Would you rather the government save money, and live with 9/11's happening all the time?

[boro otaku]

keep voting in republicans and see the shit hole where gonna be digging ourself out of next
Republicans gave us some of the best economic years. So yes I will keep voting them in :bigok:

[boro otaku]

Oh I see, promise people what they want to hear at the time, doesn't matter if a few months later it won't work.
Always a failproof strategy to get votes, bravo.
That is Obama's plan :smash:

[imotion s14]

it was partially the government as well. they initially made it so that banks and lending companies had to give loans to sub-prime lenders. thus creating an over abundance of defaulted loans.

Right.

It's funny listening to these socialistards try to blame the free market (as if we were in fact operating a free market) and the lack of regulation. Truth is these loans were compelled by the government to give out these toxic loans.

GSEs like Fannie/Freddy were charted by congress to serve an historically under served segment--ie minorities who normally wouldn't even qualify for loans from NORMAL mortgage companies, and if they did get a loan it would have high interest rate because they were high risk. The free market wouldn't have allowed this crap to become this big and it's thru government interference and price fixing that this happened.

[LongLostLatz]

It does seem like the current FUBAR state of the government has gotten people involved in the political process that normally are too lazy, or just didn't care. Im looking to see the voter turnout increase dramatically versus previous elections.

Just my 2 cents
-LLL

[imotion s14]

they arn't the only ones that are going to loose. your naive to think the economy could be that insulating between winners and loosers. the 700 billion would be used to buy distressed assets, not your run of the mill b.s. govt spending.

we isolate the stuff disrupting the economy, allow it to recover, prices go up. the govt sells the assets into the private sector.

imagine a elementary school classroom in complete havoc because there are 5 or 6 disruptive kids in it, you put those kids in sped class, give them adhd meds. the rest of the kids settle down and start being productive workers again. then you re-introduce the med'd up formerly disruptive kids.

These assets are defaulted loans that will NEVER be paid back. They are worthless. Propping up the housing market when the supply and prices are above that of the demand does NOTHING to help recovery. Allowing the liquidation of bad debt will drive housing prices down and make them affordable again, I guarantee you that will spur a recovery. Not price fixing and artificially keeping prices high that is completely out of sync with what the market can bear.

[OBEEWON]

There won't be an election.

[Matej]

Republicans gave us some of the best economic years. So yes I will keep voting them in :bigok:
When was the last time?
I'm not going to deny that there have been great republican presidents, and there have been great democratic presidents, and also total failures from both parties.
Your vote is based solely on a candidate's party membership?
Wow.


But since you asked, how much is it worth to you to live the American lifestyle? Would you rather the government save money, and live with 9/11's happening all the time?
First of all, for the past decade or so, the American lifestyle is nothing to be proud of.
Secondly, 9/11 9/11 9/11 9/11 9/11 9/11 9/11.
You live in paranoia.

[lucky7]

You live in paranoia.

and you dont, becaue you live in america. it isnt wise to take that for granted so openly.

[RJF]

These assets are defaulted loans that will NEVER be paid back. They are worthless.

The loans may be worthless, but the properties behind them have value. They just can't be accurately assessed right now, so most banks have written them down to $0.

Once they are off the banks books, the properties can be sold off by the Government.

This is exactly what happened in the late 80's and the Government formed the RTC (Resolution Trust Corporation) which sold off all the assets and actually made a profit for the Government when the housing market picked up.

[Matej]

Stole this from another forum.
Yeah I know it's long and many will complain, but it's definitely interesting.


PLEASE READ THIS

Three Times is Enemy Action
by Devilstower
Sun Sep 21, 2008 at 06:03:41 AM PDT

"Once is happenstance. Twice is coincidence. Three times is Enemy Action."
-- Auric Goldfinger

James Bond's wealthy nemesis may have had an obsession with gold, but he judged, quite correctly, that if people keep putting your plans awry, that was likely their intent.

In 1982, the same year John McCain entered the Senate, a bill was put forward that would substantially deregulate the Savings and Loan industry. The Garn-St. Germain Depository Institutions Act was an initiative of the Reagan administration, and was largely authored by lobbyists for the S&L industry -- including John McCain's warm-up speaker at the convention, Fred Thompson. The official description of the bill was "An act to revitalize the housing industry by strengthening the financial stability of home mortgage lending institutions and ensuring the availability of home mortgage loans." Considering where things stand in 2008, that may sound dubious. It should.

Seven years later, the S&L industry was collapsing. What was the cause? Garn-St. Germain handed the S&Ls a greatly expanded range of capabilities, allowing them to go head to head with full service banks, but it didn't give them the bank's regulations. Left to operate in an anarchistic gray area, S&Ls chased profits, indulged in amazing extravagances, and cranked out enough cheap mortgages to fuel a real estate boom. They also experimented with lots of complex, creative -- and risky -- investments, even though they didn't have the economic models to really determine the worth of the things they were buying. The result was a mountain of bad debts and worthless "assets." Does any of that sound eerily (or nauseatingly) familiar?

It wasn't a foregone conclusion. In 1985, three years after the deregulation of the S&Ls, the chairman of the Federal Home Loan Bank Board saw that the situation was already looking shaky, with the potential to become much worse. He instituted a rule to limit the amounts and types of investments S&Ls could carry on their books in an effort to head off disaster. However, many savings and loans -- among them Lincoln Savings & Loan Association of Irvine, CA, which was headed by a fellow named Charles Keating -- promptly ignored these rules.

Now enters a familiar cast of characters. First to pop up was the universally beloved Fed-chief-to-be, Alan Greenspan. Greenspan argued against the loan board's new rules, and persuaded Reagan to appoint one of Keating's pals to the board to blunt the requirements. A quintet of senators, among them John McCain, began having meetings with both the management at Lincoln and the regulators at the loan board. ] Alan Greenspan also helped out with a letter to the regulators, asking that Lincoln be exempt from the new rules. With their help of Greenspan and their pet senators, Lincoln was able to stay in business an additional two years, at the end of which they failed -- taking the life savings of 21,000, mostly elderly, investors with them.

How involved was John McCain? McCain and Keating had known each other since 1981 and had become fast friends. Of all the "Keating Five," it was McCain who moved into the life of the Lincoln S&L chief. The two men vacationed together multiple times, with the whole McCain clan (babysitter included) heading out for Keating's private Caribbean property on Keating's private jet. McCain didn't think to actually report these trips, or pay for them, until the investigators were breathing down his neck. And McCain took his payment in the form of more than just vacations. Keating and other members of Lincoln's parent company padded McCain's pockets with $112,000 in campaign contributions.

In John McCain's biography, he called his meetings with Keating and regulators "the worst mistake of my life," though from the text you'd think this was a spur of the moment decision, not something that McCain did repeatedly over a space of years. Still, you might think that a "worst mistake" would stay fresh in his memory.

It certainly didn't fade quickly for the country. Following the S&L crisis, the Resolution Trust Company was formed to swallow up the debt of Lincoln and 746 other S&Ls gone wild, and taxpayers were left with the $125 billion bill. The resulting budget deficit forced cutbacks in other programs. The artificial real estate boom collapsed and housing starts fell to their lowest levels in decades. Finally, the whole nation settled in for a period nasty enough that three years later someone could still campaign around the idea "It's the economy, stupid."

Even so, by 1999 Phil Gramm -- who had entered the Senate two years after McCain and quickly become the economic guru of the Keating Five maverick -- put forward the Gramm-Leach-Bliley Act. This Act passed out of the Senate on a party line vote with 100% Republican support, including that of John McCain. (To be fair, the bill eventually passed again with a wide margin following revisions in the House.)

This act repealed part of the Glass-Steagall Act. This may sound like a bunch of Congressperson soup, but the gist of it is that Glass-Steagall was put in place in 1933 to control the rampant speculation that had helped cause the collapse of banking at the outset of the depression, and to prevent such consolidation of the banks that the nation had all its eggs in one fiscal basket.

Gramm-Leach-Bliley reversed those rules, allowing not only more bank mergers, but for banks to become directly involved in the stock market, bonds, and insurance. Remember the bit about how S&Ls failed because they didn't have the regulations that protected banks? After Gramm-Leach-Bliley, banks didn't have that protection either.

Gramm wasn't done. The next year he was back with the Commodity Futures Modernization Act, which was slipped into a "must pass" spending bill on the last day of the 106th Congress. This Act greatly expanded the scope of futures trading, created new vehicles for speculation, and sheltered several investments from regulation.

As with both Gramm-Leach-Bliley and Garn-St. Germain, large parts of this bill were written by industry lobbyists. This famously included the "Enron Loophole" that exempted energy trading from regulation and was written by (big suprise) Enron Lobbyists working with Gramm. Not coincidentally, Senator Gramm, the second largest recipient of campaign contributions from Enron, was also key to legislating the deregulation of California's energy commodity trading.

Thanks to this fortunate trifecta of Gramm-crafted legislation, Enron was able to create "EnronOnline" and trade electricity in California with absolutely no oversight or transparency. They quickly worked out how to game the system. Previously, there had been only one Stage 3 rolling blackout in the history of California. Within months, the system had been manipulated by traders to generate 38 such blackouts and wholesale electrical prices had gone up more than 3000%. Despite production capacity equal to four times the demand during winter, energy traders even engineered a blackout in mid-January.

During the confusion of these deliberate "shortages" and "price spikes," the California administration of Gray Davis -- blind to speculator manipulations because of the walls erected by Gramm's legislation -- was forced to sign energy contracts at enormous rates. There was little choice, because most of California's public utilities were on the brink of bankruptcy from the rising wholesale prices.

In a single year, Gramm's legislation allowed speculators to bring the state to its knees. Enron alone looted California of $11 billion. The manipulations of the energy market were also a major factor in Davis getting the hook, helped usher the governator into power, and they still have repercussions in California's budget battles today. By the end of that year, the depth of Enron's deception could no longer be hidden, and the whole company came crashing down in the largest bankruptcy in history -- at the time. This brought more billions lost in mutual funds and pension funds across the country, and played a major role in the economic downturn of 2001.

But that was only the second act. The combination of Gramm-Leach-Bliley and the Commodity Futures Modernization Act was a toxic cocktail whose total damage was greater than the sum of its parts.

The first Act promoted bank buyouts and mergers that reached such an insane pitch that the average consumer could only keep up by tracking the changing names on their checks and credit cards. Mercantile buys Ameribanc and Mark Twain. Firstar buys Federated and First Colonial. US Bancorp buys Mercantile and Firstar. And, because it allowed brokerages and insurance companies to mingle with banks, the Act cemented a trend that was already (and illegally) underway in which all those terms had become rather quaint. Is Wachovia a savings bank, an investment bank, a brokerage, or an insurance provider? The answer is "yes."

In allowing financial institutions to grow to Godzilla-sized proportions, Gramm-Leach-Bliley helped ensure that we would have financial entities that were "too big to fail." Rather than choosing to enforce rules that kept these institutions apart, the deregulators chose to create monster bankeragasurances whose downfall (and existence) was enough to threaten the whole system.

But if Gramm-Leach-Bliley removed the limits on size and scope, these new institutions still needed fuel. With many financial transactions operating on razor thin margins, and increasing automation sapping the profits from trading of all sorts, they needed a new way to generate the funds required to swallow their brethren in the merged fiscal corporation pond. For that, the Commodity Futures Modernization Act was a godsend.

Among those instruments which the CFMA sheltered from regulatory scrutiny was something called the "credit default swap." A kind of insurance one bank could exchange with another, credit default swaps supposedly made it safe for banks to take on ever riskier forms of debt. The Act didn't invent these swaps, though they were relatively new. Instead, by placing them in a state where they were not only unregulated but almost perfectly opaque, credit default swaps were turned into the perfect vehicle to fuel a Wall Street revolution. No one had any idea what these things were actually worth, they were traded "over the counter" without being administered by any exchange, and even the SEC could monitor their existence only indirectly.

Who would cheer for a new kind of financial instrument that was difficult to understand, invisible to regulators, and impossible for even the whizziest of Wall Street whiz kids to value? Guess.

More recently, instruments that are more complex and less transparent--such as credit default swaps, collateralized debt obligations, and credit-linked notes--have been developed and their use has grown very rapidly in recent years. The result? Improved credit-risk management together with more and better risk-management tools appear to have significantly reduced loan concentrations in telecommunications and, indeed, other areas and the associated stress on banks and other financial institutions.
--Alan Greenspan, 2002

Get that? Greenspan loved credit default swaps. He opined again and again that such instruments would be the salvation of the industry by spreading around risks. To the mighty Greenspan, both their complexity and their lack of transparency were good things, since swaps would only be handled by the big boys who knew how to play with fire.

When questioned about his support of Gramm's legislation, John McCain called his friend (and by then, campaign co-chair) Gramm "one of the smartest people in the world on the economy" and pointed out that Greenspan also favored the acts Gramm and his coalition of lobbyists had authored. If both Gramm and Greenspan were on his side, McCain couldn't possibly be in the wrong.

Except, of course, that he could.

[Matej]

CONTINUED

From the beginning, there were plenty of people in the financial community whose opinion of these unregulated credit swaps was not as rosy as that of Gramm, Greenspan, and McCain. Chief among those speaking in opposition was SEC Chairman, Arthur Levitt. Levitt argued that what the industry needed was more transparency, especially when it came to complex instruments like default swaps, and he testified to this before Gramm's Senate Banking Committee,.

"In my judgment, the risk of this regulatory approach is simply unacceptable for America's investors."
--Arthur Levitt, 1999

Gramm paid no attention.

Credit default swaps did allow the banks to share risks. So much so, that banks raced each other in an effort to find more risks. They made it possible for the down payment on homes to become 3%, 1%, 0%. Skip the credit check, avoid the employment requirements, damn the torpedoes, full speed ahead! We've got a credit default swap, we can do anything!

The encouragement and "safety" that credit default swaps provided made the sub-prime mortgage market possible. Just as with the deregulation of S&Ls in the 1980s, the market was suddenly flooded with easy credit. The result was a real estate boom, soaring home prices, and a plague of "Flip that House!" shows on cable.

As the banks piled up crappy mortgages, they heaped on ever more of the credit default swaps -- and they still had no idea how to value the things. Worse, they began to trade the swaps themselves as if they were an investment, treating them like something worth holding instead of a big bundle of cartoon bombs whose fuses were already lit. Since very few loans were falling into default at the time, owning a default swap seemed like a way to collect fees without ever paying out. Banks wanted more, and more, and more.

A secondary market for trading swaps exploded into existence, and swaps were traded with absolutely no consideration for the nature or quality of the underlying investment. Swaps changed hands a dozen or more times, growing in "value" as they went. Worse still, no one regulated who could buy a swap, so it was (and is) perfectly possible for a company to acquire swaps that theoretically cover billions of dollars in loans, even if that company doesn't have a red cent on hand to cover those swaps should the loans default.

How big did this market become? Here's business correspondent Bob Moon and host Kai Ryssdal on American Public Media's Marketplace from back in the spring.

BOB MOON: OK, I'm about to unload some numbers on you here, so I'll speak slowly so you can follow this.

The value of the entire U.S. Treasuries market: $4.5 trillion.

The value of the entire mortgage market: $7 trillion.

The size of the U.S. stock market: $22 trillion.

OK, you ready?

The size of the credit default swap market last year: $45 trillion.

KAI RYSSDAL: That's a lot of money, Bob.

As in three times the whole US gross domestic product, Bob. And the truth is that Moon probably underestimated. The unregulated and poorly reported credit default swaps may have actually passed $70 trillion last year, or about $5 trillion more than the GDP of the entire world.

So, are you starting to get an idea of just how big a genie Phil Gramm and his pals unleashed?

With some regularity over the last eight years, fiscal whistle blowers have tried to raise their hands and register a protest. Um, sirs? Is it altogether a good idea to run up debts exceeding all the assets it's even possible to hold? But so long as no one actually had to pay off on the swaps, the party went on. Even usually conservative (in the fiscal sense) companies like AIG started to worry that they were being left behind and leapt headlong into the swap pool.

Shortly after Greenspan's departure in 2006, the Federal Reserve took the unusual step of issued a joint statement along with the SEC to warn about the risks associated with credit default swaps. But by that point, the damage was already severe. If swaps lost their value, most of those who had played the game would find their giant firms abruptly valued in pocket change. The only solution was to cover the problem with still more swaps and keep moving.

Then a funny thing happened. After years in which banks had handed out loans willy-nilly, guarded by the indestructible swap, people and companies started to really default on those loans. Credit slowed, home prices fell, and the whole snake started to eat itself tail first. Suddenly, credit default swaps were not sources of limitless cash. It turns out that an insurance policy -- even a secret, unregulated policy -- is occasionally expected to pay. Speculators started to look at the paper they were holding and for the first time realized it could all be worthless. Worse, it could (and did) represent a massive debt; one that no one had the funds to cover.

When Bear Stearns fell apart last March, it was only suspected that a big part of the effort in saving the giant investment bank was keeping their holdings in credit default swaps from unraveling and spreading to other institutions. Naturally, part of solving this problem involved creating a new credit default swap to cover Bear Stearn's potential debt. But the all-purpose swap was starting to lose its power. Shortly after Bear Stearns went belly up, AIG reported the largest quarterly loss in the company's history, taking a $11 billion hit on revaluing its holdings of swaps. The party was definitely coming to a close.

When AIG finally collapsed this week, there was no doubt about the primary cause of its failure. The previously well grounded company had "gotten itself involved with something called credit default swaps." Point of irony alert: Arthur Levitt now serves on the AIG board... or at least he did until the government had to take over most of AIG to salvage the company from the very idiocy Levitt had warned of in 1999.

This week, the Bush administration announced the beginnings of a plan to salvage what remains of the financial markets. At first glance, it appears that the plan will consist mainly of creating a kind of "garbage pit," a fund or group of funds -- cousins of the Resolution Trust that was created during the S&L crisis -- into which those people who have dabbled in bad debts can toss their problems. Only this time the cost to the taxpayers is at least $700 billion... and a big bite out of representative democracy.

The expansion of unregulated Savings and Loans in the 1980s brought on the collapse of that industry, a crippling of the economy, and left taxpayers holding the bag. Maybe that was only happenstance. Those pushing for the Garn-St. Germain Depository Institutions Act may not have known what they were doing.

The deregulation of the California electricity market, along with the protections provided to Enron through Phil Gramm's lobbyist-written legislation brought blackouts, fiscal and political chaos, and left taxpayers holding the bag. But the people who engineered that event -- people like Gramm and Greenspan -- had already seen what happened with the S&Ls. They should have known better. Still, perhaps that was only coincidence.

The sub-prime mortgage crisis that has not only come so close to utterly destroying the markets, but has ruined the value of many people's homes and left millions with mortgages they can't pay, was also the outcome of the deregulation created by these men. The very predictable outcome. When taxpayers are left holding the bag for $1 trillion this time around, it's hard to believe it's any sort of accident.

This is enemy action. This is a bullet deliberately fired into the economy by men willing to exercise their ideology regardless of the cost to taxpayers. Men who have every expectation that they can plunder the system again and again, while the public picks up the tab. John McCain may not have had his finger directly on the trigger, but he was there. He assisted. These were his personal friends and philosophical comrades. He may not be the high priest, but he has been a loyal acolyte in the cult of deregulation.

It may come as a surprise to the champions of deregulation, but nobody likes regulation. The restrictions that were placed on banks, S&Ls, and other institutions in the 1930s weren't put there because someone thought it would be fun. They were put in place because they addressed problems that had just been clearly and painfully revealed. They were put in place because they were necessary.

It's bad enough if John McCain didn't know that. It's far worse if he did.

[RJF]

Well done explanation.

YouTube - Burning Down The House: What Caused Our Economic Crisis? (http://www.youtube.com/watch?v=H5tZc8oH--o)

I posted this YouTube video earlier. It shows the history of the problem and might be easier to stomach than having to read the above posted thesis. :)

[Matej]

The video you posted is 3 minutes of explaining it, then 7 minutes of democrat bashing. I wanted to post a different spin on it.

Also, Youtube isn't a credible source and you should never take anything from it as fact, ask driftfreaq.

[RJF]

The video you posted is 3 minutes of explaining it, then 7 minutes of blaming the democrats.
I wanted to post a different spin on it.

Well it just states the facts on who was involved and shouldn't be pinned on the current administration because the history goes back to Jimmy Carter in the 70's.

[boro otaku]

for the past decade or so, the American lifestyle is nothing to be proud of.
Then why do you stay here if you don't like it?! GTFO :bow:

When was the last time?
Bush, Reagan, etc...

Your vote is based solely on a candidate's party membership?
Nope.

[ESmorz]

Then why do you stay here if you don't like it?! GTFO :bow:

Going to have a serious talk about that tonight with the parents.

:keke:

http://www.silverbearcafe.com/private/charlessavoie/images/image035.jpg

Get ready.

[Matej]

Then why do you stay here if you don't like it?! GTFO :bow:
Most of my credits wouldn't transfer so I have to finish school here, then I'm out.

[TheTimanator]

So I read that whole thing.

The proposed bailout thing will be buying up all those defaulted credits/loans? to bailout the banks and let them go back to doing business as usual? Is this correct?

If that does work are there plans to re-regulate things so this can't happen again?

[spikNspan]

I've been looking for a job in the bay area for the last month and a half, no need to tell me the economy is folding. wish it wasn't, but that's what happens when you let idiots run the country.

[LB.Motoring]

buy buy WM at 15 cents!!
Everythings in the fucking dirt. aaaaaaahhhhhhhhhh

[fliprayzin240sx]

buy buy WM at 15 cents!!


Why would you wanna buy that stock?!?! They have over $300 Billion in assets and they got sold to JP Morgan for $1.9 Billion...thats not a good indication of things...

Anyways, its funny how we're in war and our economy is shit. WWII got us out of the Depression, Reagan coming in and building up the military during the Cold War in the 80s got us out of the recession, Usually when the US is at war, our economy gets better...funny how that works out. Dubyah just broke that pattern...

[imotion s14]

The loans may be worthless, but the properties behind them have value. They just can't be accurately assessed right now, so most banks have written them down to $0.

Once they are off the banks books, the properties can be sold off by the Government.

This is exactly what happened in the late 80's and the Government formed the RTC (Resolution Trust Corporation) which sold off all the assets and actually made a profit for the Government when the housing market picked up.

We can't accurately assess them if the G bails them out. How does it help if the government props up these artificially high prices when they aren't worth no where near the asking price? Let the banks fail, let the speculators eat it and the people who got loans they knew they couldn't pay. Let the market adjust the prices and the people who were smart and didn't rush to borrow money get to buy affordable houses.

[imotion s14]

The video you posted is 3 minutes of explaining it, then 7 minutes of democrat bashing. I wanted to post a different spin on it.

Also, Youtube isn't a credible source and you should never take anything from it as fact, ask driftfreaq.

So if someone posted a youtube video of a math problem that states 2+2 is 4, it wouldn't be credible?

There is a little thing called "critical thinking", it's when you take the information presented, you then apply "critical thinking" by analyzing it, researching it and come to a conclusion based on that. Saying "well this source isn't credible!" because you feel it isn't is a fucking copout and ignorance at it's finest.

Federal Home Loan Bank System Created 12 regional banks in 1932, supervised by the Federal Home Loan Bank Board. Provides short-term credit to savings and loans.
Home Owners' Loan Corporation (HOLC) Created 1933. Refinanced residential mortgages in areas of economic distress.
Housing Act of 1934 Created the Federal Housing Administration (FHA), to insure private mortgage loans on residential property and, by thus protecting lenders against loss, encourages the use of long-term mortgages with high loan-to-value ratios.
Federal National Mortgage Association (FNMA, or "Fannie May") Provides a secondary market for FHA and VA mortgage loans by standing ready to purchase loans from financial institutions.


Housing and Urban Development Act of 1968 Created the Government National Mortgage Association (GNMA, or "Ginny May") taking over certain FHA mortgage functions from the FNMA.
Housing and Urban Development Act of 1970 Authorized greater outlays for housing subsidy programs and rent supplements to moderate-income households.
Emergency Home Finance Act of 1970 Authorized the Home Loan Bank System to reduce interest rates on home mortgages by means of a federal subsidy.
Community Reinvestment Act of 1977 The Community Reinvestment Act (CRA) is a federal law requiring banks to use affirmative action in lending to "help meet the credit needs of their entire community, including low-and moderate-income neighborhoods."
Home Mortgage Disclosure Act (HMDA) requires lenders to report data to the government contained in all mortgage applications whether approved or denied.

[SlideWell]

Why would you wanna buy that stock?!?! They have over $300 Billion in assets and they got sold to JP Morgan for $1.9 Billion...thats not a good indication of things...

Anyways, its funny how we're in war and our economy is shit. WWII got us out of the Depression, Reagan coming in and building up the military during the Cold War in the 80s got us out of the recession, Usually when the US is at war, our economy gets better...funny how that works out. Dubyah just broke that pattern...

indeed he did. he failed hard. i remember that from school, we've gone to war in effort to boost he economy and have proven to be correct except during this past fucktards domination. wamu had retarded rates to begin with, my friend worked for them for 8+ years and told me if i ever was to invest that i should go elsewhere. their personal banking was good tho.

[Gnnr]

We've been in "War" too long. We've been in Afghanistan for 7 years and in Iraq for 5 1/2 years!

[jskateborders]

Just copied from another discussion I posted in on another forum, may be a little out of context, but dont feel like typing it all again.

Debt is what got us into this mess, Im seeing it first hand, as I work for sprint finance. People are paying bills with credit cards, paying debt with debt, but never paying themselves out of debt. The whole issue is because of debt, and the fact that people were not paying off their loans. All the sudden banks and other lenders started realizing that they were not collecting on their loans, the stopped giving them. This is the reason that the general population is suffering so bad. We became this society so based on here and now, and Ill pay for it later, and generally people overestimated their financial means, no matter what tax bracket they were in. At the same time, the banks started publicly trading the debts, and since there are so many types of loans, it caused a very confusing shitstorm on wall street. And now the proposed bailout... More debt? That is the most ridiculous "solution" Ive heard. The real solution for this is to let free market take its course. The weak will disappear, people will have to start living off of what they actually make, and not what they can get through credit, and the market will dip really low, but will eventually right itself. Another thing that I think is really ill advised is the move to raise minimum wage at this time. Business' are already suffering, and raising min wage is going to destroy alot of business, causing unemployment to go up. Basically, it has good intentions behind it, but in trying to get people to make something like 35 cents more an hour, its going to put alot of those people out of jobs.

[imotion s14]

The thing that gets me is how this mess is being pinned on the Republicans.

YouTube - Timeline shows Bush, McCain warning Dems of financial mess (http://www.youtube.com/watch?v=cMnSp4qEXNM)

[s13dan]

When the US stoped backing its money with gold, it all went to hell. Not once since then has the US dollar been worth more than the day before. The real problem is the central banks. For those of you who know what they do then you must agree. The central banks are a MAJOR flaw in our economy. Central banks were part of the reason why people migrated to US from Europe in the first place...

[imotion s14]

There is no one single cause of this. I believe political correctness is another cause. the desire to help low-income earners (ie minorities) by encouraging lenders to loan money to high risk borrowers is related. People blame the brokers? Well if borrowers werent looking to borrow, then there wouldn't have any one to lend to. It's like saying if we get rid of drug dealers, there would be no drug users.

I can't totally fault the borrowers either because it's like they were giving away free money. I can't fault the lenders because they were encouraged and compelled to give out these toxic loans. Government's involvement took out all factors of risk asessment that you would normally see in a truly free market.

It is unsound to lend to someone who has spotty credit history. Credit history is a good indication of your financial history. This was totally ignored when subprime mortgages were being lent out. Any lender in a free market would be wary of such a loan given credit history. Yet they did so--with very low interest rates. If free market was in play, these types of loans would have high interest rates attached to them, because the lender would expect a risk of the borrower defaulting. Yet this is NOT the case.

[RJF]

Is this working for and making sure "Main Street" is protected by this bailout?

Rescuing ACORN
By INVESTOR'S BUSINESS DAILY | Posted Friday, September 26, 2008 4:20 PM PT

Election '08: Democrats want to use profits from the bailout as a slush fund for liberal activist groups, even those involved in vote fraud to help elect Barack Obama.


Prior financial bailouts, or "rescues," such as those involving savings and loan failures, and Chrysler, have over time actually made money for the government. It may be the case here as well, as assets bought by the government at bargain prices return to marketable values and are auctioned off.

One of the sticking points in resolving the crisis was a poison pill in the Dodd/Paulson compromise that would move 20% of profits from the bailout into the Housing Trust Fund, a slush fund for political action groups such as ACORN (the Association of Community Organizations for Reform Now) and the National Council of La Raza.

Sen. Lindsey Graham told Greta Van Susteren of Fox News that Democrats had other priorities than just solving this crisis: "And this deal that's on the table now is not a very good deal. Twenty percent of the money that should go to retire debt that will be created to solve this problem winds up in a housing organization called ACORN that is an absolute ill-run enterprise, and I can't believe we would take money away from debt retirement to put it in a housing program that doesn't work."

Groups such as ACORN and La Raza lobby to secure government-funded services for their members and seek to move them to the voting booth. The housing bill President Bush signed in July contained a similar funding mechanism for the HTF — a tax on mortgages backed by Fannie Mae and Freddie Mac.

The tax was designed to channel upwards of $600 million annually in grants for developing and restoring housing, mostly as low-income rentals, available to ACORN and other groups. ACORN gets 40% of its revenues from the American taxpayers and not all of it finds its way into housing.

A new whistle-blower report from the Consumer Rights League claims that ACORN routinely commingles funds from its housing arm into political projects such as voter registration and get-out-the-vote drives. Money is fungible. Any taxpayer money that ACORN gets for housing makes it easier for the group to put its other funds into voter drives.

"These are taxpayer funds, in an indirect method, being used to subsidize political activism," says Rep. Jeb Hensarling, a Texas Republican and chairman of the conservative House Republican Study Committee. "I'm sure they're not going out and registering any Republicans."

Obama cut his community organizer teeth with ACORN. As a young lawyer he represented the group in a suit against the state of Illinois, which was concerned that postcard registration and a new motor voter law might invite fraud. ACORN later invited Obama to train its staff in leadership seminars.
ACORN has a political arm that endorsed Barack Obama for president in February and has stepped up its registration efforts to help elect a future benefactor. The Obama campaign admits to failing to report $800,000 in campaign payments to ACORN. They were disguised as payments to a front group called "Citizen Services Inc." for "advance work."

Consumer Rights League official Jim Terry says: "ACORN has a long and sordid history of employing convoluted Enron-style accounting to illegally use taxpayer funds for their own political gain. Now it looks like ACORN is using the same type of convoluted accounting scheme for Obama's political gain."

A major part of ACORN's sordid history is vote fraud. ACORN has been implicated in voter fraud and bogus registration schemes in Missouri, Ohio and at least 12 other states. Last July, ACORN settled the largest case of voter fraud in Washington state history, involving nearly 2,000 bogus voter forms. In Ohio in 2004, ACORN submitted forms for the likes of Mary Poppins, Dick Tracy and someone named Jive Turkey.

ACORN uses taxpayer money to elect people like Barack Obama who will work to get them more taxpayer money. Democrats are willing to rip off taxpayers in a national crisis to make it happen.

[imotion s14]

here's another kicker.. the democrats have enough votes to pass this abomination. But the Republicans are aren't supporting their party leader in backing the bailout. They don't need votes from the republicans to pass this thing. The politics behind it is to get republicans name on this bill so if it doesn't work, they can blame the republicans for this bullshit.

Oh and check out this video I found..

YouTube - Explosive Video, Fannie Mae CEO calling Obama and the Dems the "Family" and "Conscience" of Fannie Mae (http://www.youtube.com/watch?v=usvG-s_Ssb0)

FannieMae as everyone knows, was one of the biggest contributors to the current economic Meltdown.

[Gnnr]

Interesting read

What Will You Do if the FDIC Fails? (http://www.panamalaw.org/what_will_you_do_if_the_FDIC_fails.html)

I'm gonna go buy some Euros and GB Pounds now...

[ESmorz]

I believe this little collage I created explains everything.

http://i2.photobucket.com/albums/y36/AvrilH8er13/collage.jpg

[imotion s14]

Interesting read

What Will You Do if the FDIC Fails? (http://www.panamalaw.org/what_will_you_do_if_the_FDIC_fails.html)

I'm gonna go buy some Euros and GB Pounds now...

lol.. gold is going to be $1300-1500

I've already bought 2 troy oz of certified gold. Going to keep 35% of my assets in gold.

Paper money is good for something tho..

http://www.goldinformant.com/images/Inflation-1923-24woman.stuffs.her.furnace.with.money.AdsD.der.Fri edrich-Ebert-Stiftung.jpg

[blu808]

I dont have any money so I dont worry about it.

[0100]

^+1

I have no money, just tons and tons of parts. When the madmax era arrives I will be rich, RICH I tells ya.

[Gnnr]

Another good read

The real solution to the financial crisis: recession - Yahoo! News (http://news.yahoo.com/s/csm/ysmith;_ylt=Ag2vAt2c5ucW8XrB6VwFCOcDW7oF)

[boro otaku]

You live in paranoia.
Actually, I do not :bigok:

[Tenchuu]

What's funny is that thought history war is great for the economy (production increases, people pull together and tough it out). only thing is that we are not at war, we are at a peacekeeping mission, so that is not so good for the economy. so we are going the opposite way right now.

[ESmorz]

What's funny is that thought history war is great for the economy (production increases, people pull together and tough it out). only thing is that we are not at war, we are at a peacekeeping mission, so that is not so good for the economy. so we are going the opposite way right now.

War with Russia is the only answer.

:ughd: