The Bailout

[Jimmy Neutron]

Our ARM will kick in in December. Doesn't feel like a good thing.

 

It's really not, IMO. Do what you can to get into a fixed rate if at all possible.

[Grits and Shins]

So with everything going into the crapper why wouldn't it make sense to declare bankrupty as an individual and start with a clean slate?

[Clubfoothead]

It's really not, IMO. Do what you can to get into a fixed rate if at all possible.

 

That's the plan. We are being told the negative equity is going to be a problem. The house taxes at $204,00.00, we borrowed $170,0000.00 and owe $158,000.00. Tried to sell it almost exactly a year ago to save money for the baby's medical bills and the best offer we got was $125,000.00.

[CaP'N GRuNGe]

A couple of other thoughts...

 

What's up with Obama and McCain on this issue - how weak!

 

Obama today: "It will be harder for your to get a mortgage." I get that - it's actually a good thing.

 

Why are the dems blaming republicans for not passing this in the House? The dems have a majority on both floors and could get this through along party lines - the republicans can't. Could it possibly be that there are genuine concerns that this won't fix the problem? Is it possible that members of congress in both parties can see the folly in the bill as written? Could they be doubting the word and experts of the Bush administration and the decades of GOP and dem senate and house leadership that have failed so miserably to do anything useful in years? Say it isn't so!

 

90% of those that voted against the bill were considered to be in contentious races to keep their seat in the House in 5 weeks time. With massive public outcry not to have main street bail out wall street you have your answer as to a good majority of their votes. I have a conservative friend at work who works in our treasury department. He's very ticked off that they did not pass the bill. He hates the idea of the government bailing out the market, but he basically said they screwed it up and now they need to fix it. And main street will be affected by no bill passing in a lot of ways that nobody is even thinking about.

[wiegie]

The two Reps (one was DeFazio - OR) didn't get into a lot of detail, but said that the basic concept worked in the 3 instances they were citing.

And not only that, but I was able to get a pretty good laugh out of the crowd of people today who attended a special panel discussion my university was hosting about the financial crisis when I said that "the financial crisis almost turned into a household crisis for me last week when my wife came downstairs late at night and caught me googling the term 'swedish model'. As I started to explain what I was doing, she just said, 'I'm not worried, you're an economist.'"

[keggerz]

It's really not, IMO. Do what you can to get into a fixed rate if at all possible.

So the banking industry is in serious sh1t because of foreclosures....yet they are still going to kick in ARMs which will

no doubt cause more foreclosures and in turn those foreclosures could be the death of that bank...how does that make

any sense?

[CaP'N GRuNGe]

And not only that, but I was able to get a pretty good laugh out of the crowd of people today who attended a special panel discussion my university was hosting about the financial crisis when I said that "the financial crisis almost turned into a household crisis for me last week when my wife came downstairs late at night and caught me googling the term 'swedish model'. As I started to explain what I was doing, she just said, 'I'm not worried, you're an economist.'"

 

She has nothing to worry about - - as long as you stay out of theohiostate's house late at night...

[wiegie]

So the banking industry is in serious sh1t because of foreclosures....yet they are still going to kick in ARMs which will

no doubt cause more foreclosures and in turn those foreclosures could be the death of that bank...how does that make

any sense?

In many many of the cases, the banks don't own these mortgages any more. In fact, nobody really owns them anymore as they have been sliced and diced, repackaged, and sold off in all sorts of different ways, such that now, one individual mortgage could be partially owned by dozens, if not more, institutions.

[Jimmy Neutron]

And not only that, but I was able to get a pretty good laugh out of the crowd of people today who attended a special panel discussion my university was hosting about the financial crisis when I said that "the financial crisis almost turned into a household crisis for me last week when my wife came downstairs late at night and caught me googling the term 'swedish model'. As I started to explain what I was doing, she just said, 'I'm not worried, you're an economist.'"

 

[Jimmy Neutron]

90% of those that voted against the bill were considered to be in contentious races to keep their seat in the House in 5 weeks time. With massive public outcry not to have main street bail out wall street you have your answer as to a good majority of their votes. I have a conservative friend at work who works in our treasury department. He's very ticked off that they did not pass the bill. He hates the idea of the government bailing out the market, but he basically said they screwed it up and now they need to fix it. And main street will be affected by no bill passing in a lot of ways that nobody is even thinking about.

 

I've heard various statistics about those up for re-election voted yesterday. I also heard that 18 of 21 retiring reps voted against it.

 

More and more people are forming opinions like your friend as the fear is shoveled on. I simply think that's the wrong thing to be afraid of in this situation. I have no doubt that it will get pretty ugly if no bail out is passed. I have even less doubt that it will get even uglier down the road if this precedent is allowed to pass. $700 billion will seem like a bargain 2 years from now if we pass a bill similar to what is before the senate tomorrow. It does far too little to change the causes of this mess and has a bunch of costly crap tacked on to it. How can we be happy with a very expensive, faint maybe?

[CaP'N GRuNGe]

http://news.yahoo.com/s/bw/20080930/bs_bw/...G6kvVPS5SiBGLMF

 

Stalled Cities

 

"The failure of Lehman cratered the commercial paper market," says risk analyst Chris Whalen of Institutional Risk Analytics. "All short-term lines of credit have been pulled."

 

Municipalities, too, are having trouble raising money. Cities are usually considered good bets to pay off their debt, but right now even they're having trouble. New York recently had to pay an interest rate of 9% on a $75 million short-term debt issue -- up from 1.25% at the beginning of September. Other cities, including Denver, have faced similar situations.

 

The freeze-up of lending has serious implications for the broader economy. Credit is the lubricant for the U.S. economic engine. If loans don't get made, businesses don't expand, orders don't get placed, workers don't get hired. A garden-variety economic slowdown can turn into a deep recession.

 

When will the credit crisis get better? Market confidence is a fragile thing, and with the rush of negative headlines credit market players are sticking to their guns. "It'll be a while," Patterson says.

[Jimmy Neutron]

http://news.yahoo.com/s/bw/20080930/bs_bw/...G6kvVPS5SiBGLMF

 

Stalled Cities

 

"The failure of Lehman cratered the commercial paper market," says risk analyst Chris Whalen of Institutional Risk Analytics. "All short-term lines of credit have been pulled."

 

Municipalities, too, are having trouble raising money. Cities are usually considered good bets to pay off their debt, but right now even they're having trouble. New York recently had to pay an interest rate of 9% on a $75 million short-term debt issue -- up from 1.25% at the beginning of September. Other cities, including Denver, have faced similar situations.

 

The freeze-up of lending has serious implications for the broader economy. Credit is the lubricant for the U.S. economic engine. If loans don't get made, businesses don't expand, orders don't get placed, workers don't get hired. A garden-variety economic slowdown can turn into a deep recession.

 

When will the credit crisis get better? Market confidence is a fragile thing, and with the rush of negative headlines credit market players are sticking to their guns. "It'll be a while," Patterson says.

 

This is another example of what is wrong with the legislation in question - it contains no security that the "rescued" institutions will actually free up credit - we're hoping that they will.

 

I don't know any specifics, but a couple of economists were on the tube earlier saying that the very institutions that were bailed out in recent weeks were the very ones initiating the credit freeze. If that's true, it doesn't bode very well for this bailout plan, the economy and all of us.

[Azazello1313]

90% of those that voted against the bill were considered to be in contentious races to keep their seat in the House in 5 weeks time.

 

yup, I heard them list the colorado congressfolk who voted for and against....all the ones in tight or somewhat tight races voted no, all the ones in safe seats voted yes. party affiliation or what I know of their governmental philosophy played no role whatsoever.

[Ursa Majoris]

In many many of the cases, the banks don't own these mortgages any more. In fact, nobody really owns them anymore as they have been sliced and diced, repackaged, and sold off in all sorts of different ways, such that now, one individual mortgage could be partially owned by dozens, if not more, institutions.

So how does the money work? I send off my mortgage payments every two weeks to the mortgage company. Assuming they've sold it on, sliced, diced and trussed up to God knows who else, how do they know who to send the money to?

[CaP'N GRuNGe]

So how does the money work? I send off my mortgage payments every two weeks to the mortgage company. Assuming they've sold it on, sliced, diced and trussed up to God knows who else, how do they know who to send the money to?

 

That's what us accountants with spreadsheets are for.

[H8tank]

Municipalities, too, are having trouble raising money. Cities are usually considered good bets to pay off their debt, but right now even they're having trouble. New York recently had to pay an interest rate of 9% on a $75 million short-term debt issue -- up from 1.25% at the beginning of September. Other cities, including Denver, have faced similar situations.

 

Good.

 

Cut spending.

[Perchoutofwater]

Supposedly the senate plan has added in what will amount to $150,000,000,000 in tax cuts over the next five years. Part of the taxcuts will reduce the number of people paying AMT. Part of it is supposedly geared to small businesses though I've been unable to find any details of it. Another part of it is to provide incentives for researching renewable energy. It sounds like the Senate will pass it pretty easily. I would really like to know more about these tax cuts / breaks, but my first thought is the majority of Americans are agianst a $700,000,000,000 bailout, what makes these dip$hits think that we will be for making the cost of the bailout even higher? I'm the first to tell you think we are all over taxed because I think the government is disgustingly bloated and needs to be scaled back, but without a lot more information on these tax breaks, I thik this may just make the bill worse.

[AtomicCEO]

I think the bill as it went to vote yesterday was decent enough and should have been passed. I do think there are perhaps better ways of doing things, but they wouldn't stand a chance of passing Congress, so they should have gone with what they had yesterday. They will end up passing a bill, but you can bet your ass that it is being loaded up with a bunch of crap that doesn't need to be in it and shouldn't be included in it.

 

A ringing endorsement of the bill.

 

In many many of the cases, the banks don't own these mortgages any more. In fact, nobody really owns them anymore as they have been sliced and diced, repackaged, and sold off in all sorts of different ways, such that now, one individual mortgage could be partially owned by dozens, if not more, institutions.

 

If nobody owns them, then who is authorizing the foreclosures?

[muck]

...for you "no help" types, GE is at a greater risk of failure than any time in recent memory...in 2006, it cost as little as 0.10% to insure against a GE default; today it costs over 6.25% to insure against a GE default...fyi...

 

The stuff below is a copy/paste from some research I get; I thought some of you may be interested (note that the "Analysis" section is theirs, not mine):

 

Credit Crisis Expands and Could Prove Crippling

 

The attention of the press and public has been focused on the roller coaster in the stock market. As entertaining as this may be, it is not the real issue and the stalled plan to rescue the US economy is not all that focused on the vagaries of the investor. The issue is and always has been the state of the credit market and it is here that the data has become exceedingly grim. The vast majority of those in the US who are railing against this plan seem to have little understanding of what the plan’s failure will mean to them and how swiftly the impact will be felt. There is strong evidence that banks are responding to the current situation in the only way they are able to. They are essentially freezing the credit markets as they try to conserve what capital they have.

 

Small businesses are reporting that their lines of credit are being slashed by as much as half, mortgage loans are becoming impossible to get and even the most credit worthy applicants are being turned down for car loans and other forms of credit. Business ventures are finding no opportunities to borrow, large companies have been utterly cut off from the lending market and banks are not loaning to one another. The credit market in the US has been called the life blood of business and even that is probably an understatement. The current attitude is expanding and unless there is a break in the pattern, the economy will shut down in a matter of weeks. The negotiations in Congress are taking place but it is not at all clear that those politicians fearing the reaction of their constituents will find the courage to tell these voters that this package must be passed if their lives are to be a semblance of what it is now. The lack of leadership in Congress is astonishing as the only motivation for most of those voting no seems to be rooted in their desire to remain in office. The anger in the electorate is potent and understandable but the impact of this plan’s failure is not very well understood by those expressing that frustration.

 

Analysis: The latest moves in the debate seem to be designed to provide some political cover as well as address some real financial issues. The suggestion has been made for many years that the FDIC needed to increase the level of coverage from $100,000 to something more in line with modern realities. Many businesses and individuals have to go through a lot of histrionics to ensure that their money is protected and reform has been needed for some time. It now looks as if the limit may be raised to $250,000 and that could take some real pressure off banks that have been experiencing a quite run on their assets as people made certain there was no more the $100,000 in any given account. It is also hoped that this move will help sway some of those that are afraid of voter reaction to the plan.

 

The other tactic that is finally being employed is related to the impact that a credit freeze will have on the general business community and the consumer. As indicated above, the issue is access to debt. Without that availability the reaction of business is predictable – it shrinks. That means unemployment and bankruptcy and recovery in those business communities will be slow if it happens at all. Up to this point the advocates of the plan have assumed that people understood the importance of credit but it has become abundantly clear that despite the fact the average American is up to their ears in debt, there is no real understanding of how different their live would be without it.

.............................

 

For frame of reference for some of you, part of what I do is underwrite loans to businesses, and the the number of opportunities I'm seeing because a bank won't lend are exploding. In fact, just yesterday, I was approached by a small publicly traded company in the law enforcement field about providing them a line of credit, which they were going to collateralize with about 4x the amount of assets that I was going to lend (i.e., I lend $1, and they give $4 of assets as collateral), plus stock in the company, plus possibly up to two board seats.

 

Why this level of compensation?

 

They don't have any other choices.

 

...while this is the first I'm seeing this from a publicly traded company, I am seeing this type of situation quite a bit with private companies...fwiw...

Edited October 1, 2008 by muck

[Perchoutofwater]

WASHINGTON -- The U.S. Senate is set to vote Wednesday evening on its version of the emergency financial rescue package rejected Monday by the House of Representatives, which will include an increase in the cap to the level of deposits in bank accounts insured by the federal government up to $250,000, a senior senate Democratic aide said Tuesday.

 

The vote will also include the Senate version of an extension to a series of renewable energy and other business tax credits.

 

There had been speculation throughout Tuesday that the Senate might move to act on the bailout legislation after a surprise defeat of the bill in the House on Monday.

 

The hope is that increasing the amount the Federal Deposit Insurance Corporation can insure, the necessary votes can be found in the House to approve the measure. Twelve more votes would be needed in the House to pass the bailout legislation based on Monday's vote result.

 

The package of tax credits will also include an annual fix to the alternative minimum tax credit so that more than 20 million middle-class Americans aren't inadvertently affected by the tax.

The Senate will also hold a vote on an amendment to the bill sponsored by Independent Sen. Bernard Sanders, of Vermont, who wants to apply a surtax to millionaires to pay for the potential cost of the bailout.

 

"We're not going to sit around and point fingers, we're going to get the job done, and we're going to get it done this week." said Don Stewart, a spokesman for Republican Senate minority leader Mitch McConnell, of Kentucky.

 

Sen. Barack Obama's campaign issued a statement Tuesday evening that the senator will return to Washington, D.C., for the vote.

 

Write to Corey Boles at corey.boles@dowjones.com

 

This comes from a publication our company subscribes to. It still does not go into any detail as to what tax breaks to businesses would be extended It does appear as though they are trying to sell it to the public by reducing the number of people affected by the AMT, however if the amendment that Senator Sanders is proposing is tagged on, it may actually have an adverse affect on small businesses and their growth, and possibly job creation and/or retention.

[muck]

More from the same research source (note the "Analysis" section is theirs, not mine):

 

Response from Europe and Asia Goes Beyond Concern to Real Anger

 

The average American isn’t closely following the commentary from the European press or from the leaders in Europe and Asia. That is probably a good thing given the generally anti-foreign attitude that has been emerging in the US these days. A week ago the commentary was polite but concerned as the leaders of other nations had some confidence that Winston Churchill’s quote on US behavior still held water – “the Americans will do the right thing…after they’ve exhausted the alternatives”. Now the global community is not sure given the self serving attitude demonstrated in Congress. The comments have ranged from tight lipped critiques to full on rage that the nation whose actions provoked the problem now seems to be sitting passively while the world spins into recession.

 

The most dramatic remarks have been coming from the nation that is closest to the US and has the most to lose if the plan fails – Britain. The comments from Peter Mandelson have been stinging and to the point. He is currently the Trade Commissioner for the European Union but has been a major figure in British politics for years as one of Tony Blair’s allies. His testiness has been an issue in Britain but he now channels that into being an attack dog for the EU. He accused the US Congress of abdicating hits responsibilities for purely political reasons and indicated that he found this activity “disgusting”. He lays the blame for the global situation squarely on the US and demands that action be taken that accepts this responsibility. He is far from alone although the others have been a bit more diplomatic.

 

Analysis: The US voter could probably not care less what the rest of the world has to say about the behavior of the American politician, but the US leadership can ill-afford to adopt the same position. One of the major criticisms of the Bush Presidency was the serious erosion of relations with US allies. It became abundantly clear that the US was suffering from having to address world issues like terrorism, the Iraq War, global trade and others from an isolated position. During the last few years the US has also lost some key allies as Tony Blair in the UK, Junichiro Koizumi in Japan and Paul Howard in Australia left office. The US is now facing a world of leaders that are not hostile to the US but are also not exactly supportive. They have had their differences with the US but most of the areas of contention were manageable. The issue of the global economy is another thing entirely as the situation threatens their countries directly. One of the most active voices in the current conversation is the French President – Nicolas Sarkozy. He is much less hostile to the US than his predecessor Jacques Chirac but he is still first and foremost a nationalist and is very concerned about what all this chaos means to the French economy. He has been calling for a global response to the crisis and is trying to organize a summit for later this year. He has long asserted that there is too little management of global financial affairs and he advocates a much more closely monitored system. This theme is echoed by many in Europe – Angela Merkel in Germany as well as Jose Luiz Rodriguez Zapatero from Spain. It is very likely that the next few meetings of the G-7 and OECD will focus almost exclusively on this issue. There will be considerable input from the IMF and Dominique Strauss-Kahn as well.

 

The commentary from the Asian leaders has been a bit more subdued but there are also remarks suggesting that the UIS would do well to learn the lessons of Japan. The decisions by Japanese politicians in the early 1990s are very similar to those being made by the US leadership today. The bubble bursting in Japan evoked the same kind of anger as in the US and there was no desire to rescue the big banks and investors that had driven the price of real estate into the stratosphere. It was assumed that the banks could lick their wounds and recover as it seemed obvious that these giant institutions had all the resources they would ever need. That proved to be an inaccurate assumption and Japan fell into a decade long recession despite interest rates of zero. The status of Japan declined and China overtook them as the dominant economy in Asia. The threat of recession remains with Japan today as their economy has still not recovered its strength. The Asian analysts keep reminding the US that they are on the same path but thus far this seems to be falling on deaf ears.

Edited October 1, 2008 by muck

[Perchoutofwater]

mortgage loans are becoming impossible to get and even the most credit worthy applicants are being turned down for car loans and other forms of credit.

 

I locked in to a re-finance after congress voted down the bill. my rate is is 0.245% higher than it would have been last week.

[budlitebrad]

They will end up passing a bill, but you can bet your ass that it is being loaded up with a bunch of crap that doesn't need to be in it and shouldn't be included in it.

 

Here are some of the earmarks included in the new and improved bill being voted on tonight:

 

New Tax earmarks in Bailout bill

- Film and Television Productions (Sec. 502)

- Wooden Arrows designed for use by children (Sec. 503)

- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)

 

Tax earmark “extenders” in the bailout bill.

- Virgin Island and Puerto Rican Rum (Section 308)

- American Samoa (Sec. 309)

- Mine Rescue Teams (Sec. 310)

- Mine Safety Equipment (Sec. 311)

- Domestic Production Activities in Puerto Rico (Sec. 312)

- Indian Tribes (Sec. 314, 315)

- Railroads (Sec. 316)

- Auto Racing Tracks (317)

- District of Columbia (Sec. 322)

- Wool Research (Sec. 325)

 

Wish I could say that I'm surprised.

Edited October 1, 2008 by budlitebrad

[Rebellab]

I would agree that the bill killed earlier in the week may not have been the save all end all, but what make any of you think that the House or the Senate can come up with a better plan. Not only that but what will it have in it that will end up screwing us even more.

[Tboogs]

This is another example of what is wrong with the legislation in question - it contains no security that the "rescued" institutions will actually free up credit - we're hoping that they will.

 

I don't know any specifics, but a couple of economists were on the tube earlier saying that the very institutions that were bailed out in recent weeks were the very ones initiating the credit freeze. If that's true, it doesn't bode very well for this bailout plan, the economy and all of us.

We don't know if this is gonna "free up credit"...What it boils down to is these "institutions" (banks) do not trust one another, so they are hording $$$. When we give them this bailout...who is to say that they won't continue to horde the money???

 

This is the real issue here!