Ursa Majoris Posted September 18, 2008 Share Posted September 18, 2008 well yeah, you can say "greed" caused it. you can say "capitalism" caused it (government has probably had a hand too, but that's a tangent we don't need to go out on). that's not really an answer though. market upheavals happen in a capitalistic society. the dotcom bubble arthur andersen crap, the S&L crap, the 70s energy crisis...back to the great depression and beyond. it seems like they are hard to prevent because by their very nature the underlying problem is hidden from just about everybody until it becomes big enough where crisis is difficult to avert. everybody thinks a certain area is "safe" and then, oops, it ain't. and every time a cyclical downturn happens, we come in behind to regulate the hell out of whatever little aspect of the economy ended up being the achilles heel that time. then it all turns around, we have happy times, then we get too happy, then it happens again. that just seems to be how it works. it's not limited to laissez-faire capitalism either, more highly regulated economies have the same problems....look at the news out of russia the last couple days. as far as the bailouts....I think like everyone, I have mixed feelings. the "too big to fail" argument definitely comes into play, and there are times when you could be talking about disastrous effects on the overall economy if a particular business failed. but this path is a minefield. first, once a business gets big enough, they've got this implicit insurance policy (that by rights should cost them BILLIONS) knowing the fed gov will bail them out. that is wrong on a lot of levels. plus, inevitably you're going to get into a situation where the government is underwriting business models that just don't work. like if they were to bail out ford, or like they have done with farm subsidies and the steel industry. same with the airline bailouts -- I can see those in the immediate wake of 9/11, but not for long after that. Capitalism certainly isn't the issue. Capitalism is by far the most successful economic system of all. No-one wants to go to a planned centralized economy - the demise of the Soviet Union should be evidence enough for anyone that doesn't work. The issue lies in not being able to get regulation right (too much, too little), stupidity (just who was it that thought buying sub-prime mortgages was a good idea anyway?), over-complexity (how can any organization buy an instrument that no-one understands?) and managerial laziness (who was watching the store?). The argument from Jim and the rest is that government is always incompetent (except when it's using faulty intelligence to throw away yet more hundreds of billions in unnecessary wars - then it's doing it's job, apparently ). I argue that private enterprise in the financial sector is, at a minimum, at least as incompetent and probably worse. The tech bubble only became a bubble because lazy stupid financial people stuffed great gobs of cash into the pockets of people who could not possibly ever make money with their vaporware "products". (Side note - check out Buffett's views on that, also). There is no track record of competence or common sense in the financial arena - none. They cycle in and out of bust every few years - how about some common sense now and then, some steady growth, as practiced by lots of private companies in other fields? One look at the screaming fools in the assorted market pits around the world shows you quite clearly that they have no f'n idea what they are doing. The current panic is feeding on itself now and none of them - by their own words - have a clue how to apply the brakes. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted September 18, 2008 Share Posted September 18, 2008 The argument from Jim and the rest is that government is always incompetent (except when it's using faulty intelligence to throw away yet more hundreds of billions in unnecessary wars - then it's doing it's job, apparently ). I argue that private enterprise in the financial sector is, at a minimum, at least as incompetent and probably worse. in theory, that would not be true because in the private sector people would have their own well-being vitally at stake. but when you see all these dudes bailing out of sinking ships fluttering safely down with $multi-million golden parachutes, the theory gets a little screwed up. Quote Link to comment Share on other sites More sharing options...
Jimmy Neutron Posted September 18, 2008 Share Posted September 18, 2008 Will you give this drumbeat a rest, Jim? Is it not patently obvious to you that this entire crisis has been created by the witlessness and greed of unregulated private enterprise? Now the government has to use our money to bail this cesspool of turds out yet again. I am f'n tired of hearing you right wing maniacs go on and on about the incompetent government when this gang of f'n criminals and idiots are, at zero cost to their own filthy selves, destroying the savings of millions of people right this second. ...and inept regulators and disinterested / corrupt politicians... This is all I'm saying. I'll keep "beating the drum" as long as raving fans of big government continue to say this crisis is simply the fault of private sector greed. There is a patchwork of regulation on the books and a complete failure of oversight - both responsibilities of your beloved government. I am sticking with the drumbeat because adding more regulation will be worthless in protecting average Joe Americans unless fundemental change occurs in the practice of ovedrsight. Congress is responsible for this oversight and they are corrupt. Dodd, Obama and others (including repubs) took millions from the financial sector and blocked regulation reform. These folks are by and large corrupt and we want to trust them to guard against this type of calamity in the future? Pardon my cynacism, but that seems to be on the far side of stupid. Quote Link to comment Share on other sites More sharing options...
Big John Posted September 18, 2008 Share Posted September 18, 2008 ...and inept regulators and disinterested / corrupt politicians... Disinterested means that they don't have a conflict of interest. (It is NOT synonymous with uninterested meaning they don't care) Quote Link to comment Share on other sites More sharing options...
Egret Posted September 18, 2008 Share Posted September 18, 2008 Does inaccurate work for you, too? Help me out then. What's the difference? What should we call it when the government takes over a private company? Quote Link to comment Share on other sites More sharing options...
jetsfan Posted September 18, 2008 Share Posted September 18, 2008 Help me out then. What's the difference? What should we call it when the government takes over a private company? The Bank of China? Quote Link to comment Share on other sites More sharing options...
Perchoutofwater Posted September 18, 2008 Share Posted September 18, 2008 Kinda ironic how all the anti-government brigade on here (Perch, JN and the rest of the totally independent I-don't-need-no-gubment mountain men) are applauding the fact that this massive show of grotesque private enterprise incompetence is being bailed out by the very government they hate and despise. There are two reasons I don't have a problem with it. The first is if government had done it's job in the first place, and enforced the regulations already in place instead of lining politicians pockets and war chests, this probably wouldn't have happened. The second, is that this should make the government a pretty penny, which could be used to pay down some of our debt. If they were just giving them the money instead of loaning them the money, then I would have a major problem with it. Since the government is loaning them the money at a fairly high rate I might add, the government should make quite a bit. If AIG defaults, it is my understanding that they have enough in assets to make up for any losses. So this essentially makes the government money to pay off some of the national debt, it helps bolster the economy. What's not to like? Quote Link to comment Share on other sites More sharing options...
TimC Posted September 18, 2008 Share Posted September 18, 2008 I have but one question. Where was Sarbanes-Oxley to protect us from all this? All the f'n hard work we had to put in for this crap-o-la SOX bullsheet that didn't amount to anything but a bunch of legislators jumping off the roof over Enron and Worldcom. These recent bailouts make Enron and Worldcom look like you rode down to the local supermarket and stole a loaf of bread in comparison and I'll guarantee you no one serves one day in prison like Ken Lay or will even remember the people's names involved. Quote Link to comment Share on other sites More sharing options...
Jimmy Neutron Posted September 18, 2008 Share Posted September 18, 2008 I have but one question. Where was Sarbanes-Oxley to protect us from all this? All the f'n hard work we had to put in for this crap-o-la SOX bullsheet that didn't amount to anything but a bunch of legislators jumping off the roof over Enron and Worldcom. These recent bailouts make Enron and Worldcom look like you rode down to the local supermarket and stole a loaf of bread in comparison and I'll guarantee you no one serves one day in prison like Ken Lay or will even remember the people's names involved. No doubt. I don't know how SOX applies to other businesses, but we spend a tremendous amount of time complying with it. Quote Link to comment Share on other sites More sharing options...
Clubfoothead Posted September 19, 2008 Share Posted September 19, 2008 well yeah, you can say "greed" caused it. you can say "capitalism" caused it (government has probably had a hand too, but that's a tangent we don't need to go out on). that's not really an answer though. market upheavals happen in a capitalistic society. the dotcom bubble arthur andersen crap, the S&L crap, the 70s energy crisis...back to the great depression and beyond. it seems like they are hard to prevent because by their very nature the underlying problem is hidden from just about everybody until it becomes big enough where crisis is difficult to avert. everybody thinks a certain area is "safe" and then, oops, it ain't. and every time a cyclical downturn happens, we come in behind to regulate the hell out of whatever little aspect of the economy ended up being the achilles heel that time. then it all turns around, we have happy times, then we get too happy, then it happens again. that just seems to be how it works. it's not limited to laissez-faire capitalism either, more highly regulated economies have the same problems....look at the news out of russia the last couple days. as far as the bailouts....I think like everyone, I have mixed feelings. the "too big to fail" argument definitely comes into play, and there are times when you could be talking about disastrous effects on the overall economy if a particular business failed. but this path is a minefield. first, once a business gets big enough, they've got this implicit insurance policy (that by rights should cost them BILLIONS) knowing the fed gov will bail them out. that is wrong on a lot of levels. plus, inevitably you're going to get into a situation where the government is underwriting business models that just don't work. like if they were to bail out ford, or like they have done with farm subsidies and the steel industry. same with the airline bailouts -- I can see those in the immediate wake of 9/11, but not for long after that. Great post. I do have a question about the bailout. If the bailout of AIG is such a sure-fire moneymaker for the government, why isn't there a line of companies trying to buy it? Quote Link to comment Share on other sites More sharing options...
wiegie Posted September 19, 2008 Share Posted September 19, 2008 Great post. I do have a question about the bailout. If the bailout of AIG is such a sure-fire moneymaker for the government, why isn't there a line of companies trying to buy it? it might be that there aren't too many companies with $85 billion in cash lying around Quote Link to comment Share on other sites More sharing options...
Clubfoothead Posted September 19, 2008 Share Posted September 19, 2008 it might be that there aren't too many companies with $85 billion in cash lying around I'm asking what are actual questions for me. Couldn't a company with enough asets assume AIG's debt or is AIG done without an immediate infusion of $85,000,000,000.00? $85 billion is 6 months in Exxon years. Quote Link to comment Share on other sites More sharing options...
wiegie Posted September 19, 2008 Share Posted September 19, 2008 (edited) I'm asking what are actual questions for me. Couldn't a company with enough asets assume AIG's debt or is AIG done without an immediate infusion of $85,000,000,000.00? $85 billion is 6 months in Exxon years. From what I understand, it wasn't just that AIG was in debt, it was that they needed $85 billion in cash basically ASAP (because their credit rating was about to get downgraded and if their credit got downgraded, they were contractually obligated to put up cash as collateral for firms to whom they had sold "credit default swaps"). Now, concerning tax-payer money... it seems that the federal government is now setting up an agency that will buy "bad" assets from corporations. In this case, your original question of "why should taxpayers buy assets that nobody else will?" is directly relevant. (I will note that a similar type of thing was set up to deal with the Savings and Loan Crisis of the 1980s.) (Edit to add: the "actual questions" that you are asking are "actual questions" for a whole whole lot of people right now.) Edited September 19, 2008 by wiegie Quote Link to comment Share on other sites More sharing options...
muck Posted September 19, 2008 Share Posted September 19, 2008 AIG needed $85B in cash money. The US Treasury just hit "print" on the presses, and voila! $85B! Quote Link to comment Share on other sites More sharing options...
muck Posted September 19, 2008 Share Posted September 19, 2008 Now, concerning tax-payer money... it seems that the federal government is now setting up an agency that will buy "bad" assets from corporations. In this case, your original question of "why should taxpayers buy assets that nobody else will?" is directly relevant. (I will note that a similar type of thing was set up to deal with the Savings and Loan Crisis of the 1980s.) (Edit to add: the "actual questions" that you are asking are "actual questions" for a whole whole lot of people right now.) This whole thing of the US Gov't buying up "bad assets" is intriguing. I wonder if I could sell them something? Probably not. ...seriously... This 'thing' (whatever it is) that the US Govt is setting up will enable gobs of enterprising people to pick up good deals on the cheap (just like what happened with the RTC in the 1980s) and should enable them to make a pile of moolah. And the tax payers will probably lose money on this (but, probably not on AIG and don't know about FNM/FRE). Quote Link to comment Share on other sites More sharing options...
wiegie Posted September 19, 2008 Share Posted September 19, 2008 AIG needed $85B in cash money. The US Treasury just hit "print" on the presses, and voila! $85B! Yep. I thought an exchange between Fed Chair Ben Bernanke and Representative Barney Frank was pretty funny: Barney Frank to Bernanke: Do you have 85 billion (to make this loan)? Bernanke replies to Frank: I have 800 billion. Quote Link to comment Share on other sites More sharing options...
muck Posted September 19, 2008 Share Posted September 19, 2008 Yep. I thought an exchange between Fed Chair Ben Bernanke and Representative Barney Frank was pretty funny: Barney Frank to Bernanke: Do you have 85 billion (to make this loan)? Bernanke replies to Frank: I have 800 billion. Apparently, with this new plan, Ben may want to call up his friends at Weyerhauser to see if he can get some more paper. Quote Link to comment Share on other sites More sharing options...
yo mama Posted September 19, 2008 Share Posted September 19, 2008 (edited) Help me out then. What's the difference? What should we call it when the government takes over a private company? Socialsim? But I thought "conservatives" hated that... Typical hypocrisy. Corporate America wants government to stay out of their business when they're making money but as soon things get too scary they go crying to mommy for government assistance. I've got mixed feelings about the bail out. But I'd be a whole lot more in favor of it if the past and present AIG brass responsible for this mess had to put up personal assets as part of the collateral the Fed can look to in the event the $85 billion doesn't get paid back. Edited September 19, 2008 by yo mama Quote Link to comment Share on other sites More sharing options...
muck Posted September 19, 2008 Share Posted September 19, 2008 I've got mixed feelings about the bail out. But I'd be a whole lot more in favor of it if the past and present AIG brass responsible for this mess had to put up personal assets as part of the collateral the Fed can look to in the event the $85 billion doesn't get paid back. +1 Quote Link to comment Share on other sites More sharing options...
budlitebrad Posted September 19, 2008 Share Posted September 19, 2008 I have but one question. Where was Sarbanes-Oxley to protect us from all this? All the f'n hard work we had to put in for this crap-o-la SOX bullsheet that didn't amount to anything but a bunch of legislators jumping off the roof over Enron and Worldcom. These recent bailouts make Enron and Worldcom look like you rode down to the local supermarket and stole a loaf of bread in comparison and I'll guarantee you no one serves one day in prison like Ken Lay or will even remember the people's names involved. Sox is completely worthless and does nothing more than waste the money of business owners and the time of accountants like me who have to push the extra paper around. All it does is give people a false sense of security. Quote Link to comment Share on other sites More sharing options...
Azazello1313 Posted September 19, 2008 Share Posted September 19, 2008 Sox is completely worthless and does nothing more than waste the money of business owners and the time of accountants like me who have to push the extra paper around. All it does is give people a false sense of security. gets back to what I was saying about how the regulators come in behind a crisis and regulate (probably over-regulate) the hell out of whatever area of the economy was responsible. it's a totally reactionary outlook. reminds me a bit of all the new airline safety and air defense regulations in the wake of 9.11. that particular kind of attack will never happen again, just because everybody is now aware of the possibility. yet we've got all these "reforms" aimed at the last problem, rather than the next problem. simply because hindsight is infinitely easier than foresight. Quote Link to comment Share on other sites More sharing options...
Ursa Majoris Posted September 19, 2008 Share Posted September 19, 2008 Feds to buy up toxic debts? NEW YORK (Reuters) - The U.S. government is crafting a sweeping bailout to mop up toxic mortgage debt that will likely cost hundreds of billions of dollars, has curbed short-selling and guaranteed money-market mutual funds, sending global stock markets soaring on Friday. Are you kidding me? What message does this send to the incompetent morans in the financial markets? Quote Link to comment Share on other sites More sharing options...
Perchoutofwater Posted September 19, 2008 Share Posted September 19, 2008 Feds to buy up toxic debts? Are you kidding me? What message does this send to the incompetent morans in the financial markets? Doesn't make me very happy on a number of levels. I'm looking at doing a re-fi and rates go down on bad news and up on good news. Quote Link to comment Share on other sites More sharing options...
budlitebrad Posted September 19, 2008 Share Posted September 19, 2008 A successful short seller isn’t someone who falsely shouts fire in a theater; it’s instead the person who first notices the theater is on fire. Quote Link to comment Share on other sites More sharing options...
muck Posted September 19, 2008 Share Posted September 19, 2008 Feds to buy up toxic debts? Are you kidding me? What message does this send to the incompetent morans in the financial markets? A couple of observations: 1) No way in H3LL these are acquired from the lenders at full value. These will be acquired at current market value (not sure how that's going to be determined, thought). So, the originating lenders will take hugh realized losses upon the sale. This hurts the companies and the shareholders (i.e., "wow, that wasn't much fun ... we probably should do that again"). 2) The hope / intent is that this will go a very long way to cleaning up the blockage in the economic intestinal system. This is supposed to be sorta like ex-lax for the US economy...flush the bad junk off the books of the lenders and they will be freed up to start lending again, hopefully focusing only on deals that really make sense. I'm not sure this will work as it's hoped that it will. Quote Link to comment Share on other sites More sharing options...
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