Bailout Passes Congress - Smart Move or Big Mistake?

[Literalist-Luke]

http://www.foxnews.com/story/0,2933,432282,00.html

Looks like we've managed to delay the inevitable for a while longer - that just means the tree will hit even harder when it finally comes down.

[stoomart]

It makes me sick to my stomach that so many would switch to swallowing this tripe only after adding some salt to make it go down easier. It's obvious they didn't vote for what they believed was right the second time around, they did that the first time but I guess they had their price tag. It wasn't until it would benefit them personally that they sold out, again, makes me sick.

stoo

[HisLeast]

It makes me sick to my stomach that so many would switch to swallowing this tripe only after adding some salt to make it go down easier. It's obvious they didn't vote for what they believed was right the second time around, they did that the first time but I guess they had their price tag. It wasn't until it would benefit them personally that they sold out, again, makes me sick.



I suppose its absolutely impossible that the changes to the plan's fundamentals had nothing to do with their changing their mind?

[HisLeast]

Looks like we've managed to delay the inevitable for a while longer

Since you've seen the future, I'd like to ask you a few questions on the upcoming horse races....

[stoomart]

I suppose its absolutely impossible that the changes to the plan's fundamentals had nothing to do with their changing their mind?As far as I am aware, the fundamental goal for this whole thing is for the government to purchase garbage loans from institutions that had no business but greed to give them to people that had no business but covetousness to get them. Is this no longer the case or am I in error in my understanding, I'm genuinely curious.

[HisLeast]

As far as I am aware, the fundamental goal for this whole thing is for the government to purchase garbage loans from institutions that had no business but greed to give them to people that had no business but covetousness to get them. Is this no longer the case or am I in error in my understanding, I'm genuinely curious.

Sounds like you've got a pretty solid conclusion of what both bills "are". Would it even be worth it for me to present objective facts?

[stoomart]

By all means, cuz I'm sure I got way too much emotion wrapped up in what I'm saying, like everything else seems to be lately I'm sure.

p.s. the condescending sarcasm isn't necessary here, let's move beyond that and emotions to facts.

[HisLeast]

By all means, cuz I'm sure I got way too much emotion wrapped up in what I'm saying, like everything else seems to be lately I'm sure.

Then lets save ourselves the time and trouble.

[stoomart]

I was saying yes, please do present the objective facts as I am genuinely curious.

[Literalist-Luke]

Since you've seen the future, I'd like to ask you a few questions on the upcoming horse races....Certainly, what would you like to know?

[Laish]

Can we vote the smartest of the dumb moves that could have been done .
Your brother in Christ
Bill

[HisLeast]

Certainly, what would you like to know?

Glad you asked! Which horse win's this year's Breeder's Cup Classic?

[Tanya~]

HisLeast,

I would be interested in understanding the differences between the two bills. Please share!

[Paladin54]

Dire consequences, we need to move fast, blah, blah, blah...

The fools in congress have sunk us. Now some say it won't make difference until the housing market turns arounds. Ouch, we are in so much trouble.

We are going to start hearing of people who will get rich off of this scheme, the average person won't be helped at all.

They just blew nearly twice as much money as the Iraq war has cost and it probaly won't make a difference.

But at least Congress got its pork barrel spending in there. :(

[HisLeast]

HisLeast,

I would be interested in understanding the differences between the two bills. Please share!

I'd like to know too. I haven't read them each verbatim yet, given their size. I just wanted to know if it was worth it for me to do so.... since so many people figure they've got it pretty much figured out.

[Literalist-Luke]

Glad you asked! Which horse win's this year's Breeder's Cup Classic?Um, the one that reaches the finish first. :D

[HisLeast]

Um, the one that reaches the finish first. :D

Yeah. What was its name again?

[EarlyCall]

I haven't heard too many of the details, but I've heard a number of items that were thrown in that were nothing mroe than pork to the extreme and the absurd.

Now I'm not sure who the bigger fools are: congress or us. We are told that we are in dire straights and the bill must happen to avoid further consequences that would be devastating to us.

So congress creates a bill that requires billions of dollars and we go further into debt. And then they throw in more for pork.

I guess to me it is like the doctor telling you they must operate on your child to save their life. They must repair internal injuries through surgery because of the accident. And the doctor adds as he walks through the doors to surgery, "And by the way, we'll be removing your child's right arm. No, it isn't necessary and has nothing to do with the internal injuries, but while we're in there and we've got her, we figured we'd go for it."

[Tanya~]

I just wanted to know if it was worth it for me to do so....

Yes, it is worth it. Why is the second version good compared to the first? What were the changes?

[stoomart]

According to liberal and conservative articles alike, they seem to all agree that the core of both proposals is the $700 billion purchase of illiquid mortgage backed securities by the US government.

I'm reading through this wikipedia entry right now, which I find are much better at providing raw facts and different perspectives as opposed to any major news outlet, hope to discuss further soon: http://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008

[tango]

My concern is the idea of buying these toxic mortgage-backed securities. Presumably the government will subsequently look to sell them later.

I haven't read the bill in detail, although it seems anything that goes from three pages to the size of a novel isn't going to have been improved along the way. My concern is that the government pays a high price for this toxic waste and then auctions it. If nobody wants it then it sells very cheaply, crystallising a huge loss for the taxpayer.

If the government buys them cheaply then all they achieve is crystallising huge losses for the companise that currently own the junk, which doesn't really help anybody. If they buy them for a theoretical "mark-to-model" price then the chances are they are going to massively overpay. Unless the subprime mortgages stop going bad (which seems unlikely at best) these things aren't going to recover any time soon.

Speculating as to what the future might hold, if the government has bought these things at a price over the fair market price (i.e. what they would raise in a standard auction) and then sells them, I wonder what would prevent Bank A from buying up Bank B's paper cheaply, while at the same time Bank B bought Bank A's paper cheaply. If that is allowed to happen the banks have effectively dumped their junk on the taxpayer at a high price, then bought it back cheaply, shuffling it around in the process and making another huge profit.

Update: From the Wikipedia article linked by stoomart (above), I noticed what George Soros had to say about it (the emphasis is mine):
Investor George Soros (http://en.wikipedia.org/wiki/George_Soros) is opposed to the original Paulson plan – "Mr Paulson’s proposal to purchase distressed mortgage-related securities poses a classic problem of asymmetric information. The securities are hard to value but the sellers know more about them than the buyer: in any auction process the Treasury would end up with the dregs. The proposal is also rife with latent conflict of interest issues. Unless the Treasury overpays for the securities, the scheme would not bring relief." – but calls Barack Obama (http://en.wikipedia.org/wiki/Barack_Obama)'s list of conditions for the plan "the right principles".

[Tanya~]

I would be very concerned if these mortgages can be sold to a foreign entity. I'm not sure if that is an option or not.