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Author Topic: A financial S storm is brewing. Fannie/Freddie seized.  (Read 8934 times)
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Blackadar
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« Reply #80 on: September 17, 2008, 09:54:28 PM »

Quote from: gellar on September 17, 2008, 06:53:14 PM

Quote from: Brendan on September 17, 2008, 06:39:37 PM

Quote from: brettmcd on September 17, 2008, 06:34:16 PM

I dont think we should be bailing these companies out, or homeowners either.

Quote from: msduncan on September 17, 2008, 06:38:13 PM

Yes it is.   And I've been upset by this -- even by the first bailout of the twin F's.     Government bailouts and takeovers of sections of the economy IS NOT the answer!    We are on seriously dangerous ground here.

A question to the two of you then:  What, exactly, do you think would then happen to the American economy?  Any predictions to share?


I know this isn't addressed at me, but I'm gonna take a stab anyway.

It's pretty clear we have to bail these companies out.  There is no choice in the matter.  That doesn't mean I have to like it.

We should have never let ourselves get in this area in the first place.  A number of poor laws were passed that circumvented (theoretical*) free market forces.  Too many programs and loopholes were created to allow people to make ridiculously poor decisions.  These people would not have even had the OPTION to make these decisions 20 years ago, since no one would have lent to them.  I'm not saying the current conditions wouldn't exist if the government didn't dick around with the laws, but I am pretty sure they wouldn't be this bad.  

And BOTH parties were at fault here.  If the Republicans want to believe that the government that is actually in charge is a true hands off minimal government, they're insane.  Same goes to the Democrats who think that the Dems in charge didn't help cause this situation by trying to 'help' people who really shouldn't have been helped.

*theoretical because there is no such thing as a true free market.

gellar

I respect your opinion, but I wholeheartedly disagree.  The time for action was two years ago.  Now, it's like sticking your fingers in the dike.  It was said that we needed to bail out Bear Stearns or more collapses would take place.  Then we needed to get Freddie Mac and Fannie Mae involved more in the mortgage mess and told them to buy riskier and larger mortgages.  Then we needed to bail out Freddie Mac and Fannie Mae.  Now we need to bail out AIG.  Where does it end?  How much corporate welfare do we need to pony up?

The AIG bailout is largely due to CDS's - Credit Default Swaps - a type of "insurance" against defaults.  The problem is that we've never gone after the fundamental source of the instability - mortgages .  We've just bailed out the big institutions that helped create the problem and we've never seen any "trickle down" to the root of the problem - the little guy who holds the mortgages.  We need to either one of two things.  Either provide liquidity to those who will then provide additional flexibility to the mortgage holders, or let the big guys fail and let the overblown and overheated market correct itself naturally.  Bailing out investors will only result in additional risky behavior which perpetuates the cycle. 
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gellar
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« Reply #81 on: September 17, 2008, 10:03:08 PM »

Quote from: Blackadar on September 17, 2008, 09:54:28 PM

Quote from: gellar on September 17, 2008, 06:53:14 PM

Quote from: Brendan on September 17, 2008, 06:39:37 PM

Quote from: brettmcd on September 17, 2008, 06:34:16 PM

I dont think we should be bailing these companies out, or homeowners either.

Quote from: msduncan on September 17, 2008, 06:38:13 PM

Yes it is.   And I've been upset by this -- even by the first bailout of the twin F's.     Government bailouts and takeovers of sections of the economy IS NOT the answer!    We are on seriously dangerous ground here.

A question to the two of you then:  What, exactly, do you think would then happen to the American economy?  Any predictions to share?


I know this isn't addressed at me, but I'm gonna take a stab anyway.

It's pretty clear we have to bail these companies out.  There is no choice in the matter.  That doesn't mean I have to like it.

We should have never let ourselves get in this area in the first place.  A number of poor laws were passed that circumvented (theoretical*) free market forces.  Too many programs and loopholes were created to allow people to make ridiculously poor decisions.  These people would not have even had the OPTION to make these decisions 20 years ago, since no one would have lent to them.  I'm not saying the current conditions wouldn't exist if the government didn't dick around with the laws, but I am pretty sure they wouldn't be this bad.  

And BOTH parties were at fault here.  If the Republicans want to believe that the government that is actually in charge is a true hands off minimal government, they're insane.  Same goes to the Democrats who think that the Dems in charge didn't help cause this situation by trying to 'help' people who really shouldn't have been helped.

*theoretical because there is no such thing as a true free market.

gellar

I respect your opinion, but I wholeheartedly disagree.  The time for action was two years ago.  Now, it's like sticking your fingers in the dike.  It was said that we needed to bail out Bear Stearns or more collapses would take place.  Then we needed to get Freddie Mac and Fannie Mae involved more in the mortgage mess and told them to buy riskier and larger mortgages.  Then we needed to bail out Freddie Mac and Fannie Mae.  Now we need to bail out AIG.  Where does it end?  How much corporate welfare do we need to pony up?

The AIG bailout is largely due to CDS's - Credit Default Swaps - a type of "insurance" against defaults.  The problem is that we've never gone after the fundamental source of the instability - mortgages .  We've just bailed out the big institutions that helped create the problem and we've never seen any "trickle down" to the root of the problem - the little guy who holds the mortgages.  We need to either one of two things.  Either provide liquidity to those who will then provide additional flexibility to the mortgage holders, or let the big guys fail and let the overblown and overheated market correct itself naturally.  Bailing out investors will only result in additional risky behavior which perpetuates the cycle. 

Oh I'm absolutely not saying now is the perfect time for action (in fact I'm not sure how on earth you get that from what I posted).  We should have fixed this shit years ago.

gellar
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Brendan
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« Reply #82 on: September 19, 2008, 01:57:47 PM »

On and on it goes:

Quote
The head of the Treasury and the Federal Reserve began discussions on Thursday with Congressional leaders on what could become the biggest bailout in United States history.

While details remain to be worked out, the plan is likely to authorize the government to buy distressed mortgages at deep discounts from banks and other institutions. The proposal could result in the most direct commitment of taxpayer funds so far in the financial crisis that Fed and Treasury officials say is the worst they have ever seen.

Quote
The Fed has already stretched itself very thin by introducing new emergency lending programs for banks, Wall Street firms and, this week, a giant insurance company.

With the Fed running short of unencumbered reserves, the Treasury Department had begun raising fresh cash for the central bank by selling new Treasury bills at an unprecedented pace $200 billion this week alone and parking it at the Fed for whatever use it wanted.

One common measure of a presidency is the before/after stats about economic growth.  I think that comparison is going to be terribly unkind to President Bush.
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Blackadar
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« Reply #83 on: September 19, 2008, 03:17:05 PM »

Quote from: Brendan on September 19, 2008, 01:57:47 PM

One common measure of a presidency is the before/after stats about economic growth.  I think that comparison is going to be terribly unkind to President Bush.

But remember, to the conservatives, it'll somehow be Clinton's fault.
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msduncan
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« Reply #84 on: September 19, 2008, 05:42:51 PM »


Brendan, what happened to your avatar?
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msduncan
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« Reply #85 on: September 19, 2008, 05:45:10 PM »

Quote from: Blackadar on September 19, 2008, 03:17:05 PM

Quote from: Brendan on September 19, 2008, 01:57:47 PM

One common measure of a presidency is the before/after stats about economic growth.  I think that comparison is going to be terribly unkind to President Bush.

But remember, to the conservatives, it'll somehow be Clinton's fault.

Presidents normally have little effect on the economy.     An exception was Reagan who dramatically reduced taxes resulting in a mid to late 80's recovery.

that's right.... I also don't think Carter had much effect, or Bush Sr.   
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Laner
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« Reply #86 on: September 19, 2008, 06:41:47 PM »

Quote from: Brendan on September 19, 2008, 01:57:47 PM

One common measure of a presidency is the before/after stats about economic growth.  I think that comparison is going to be terribly unkind to President Bush.
I'll just point out that the economy looked quite different prior to the 2006 elections than it does today.
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Doopri
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« Reply #87 on: September 19, 2008, 08:55:50 PM »

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I'll just point out that the economy looked quite different prior to the 2006 elections than it does today.

im usually not this aggressive and strident in this forum but some stuff grabs my goat for whatever reason - a generally poor understanding of economic issues is one of them

the "official" beginning of this thing began a scant 6 - 8 months after the november 2006 elections.  and well before that, numerous economists had a worried eye on the subprime market and some of the credit instruments and derivatives it had spawned.  basically it was turning south and everyone sort of balked and said "well were fine for now, its a very narrow sector as long as it doesnt spread".  well it did.  but even assuming the democrat controlled congress passed massive, radical changes in fiscal policy starting day one(which they didnt - both houses but particularly the senate have been in a "holding pattern" because no one has the numbers to get things done) - there is no economist in the world who would suggest the repercussions of that could be felt in 6 - 8 months - fiscal changes generally take AT LEAST that amount of time to begin to kick in, nevermind sink a massive hedge fund

now if you want to suggest that congress didnt act quickly enough thats fine - but neither party was willing to work through the issue early on that far along in an election cycle (god forbid you agree and work with someone in the other party!  how can you govern a country successfully unless the other side is completely and utterly wrong???).  and the problem was essentially denied by government for the longest time (the fundamentals are sound, the economy is strong - as if suggesting theres something wrong would be what? defeat? not "macho" enough?).  so any attempt to preempt this thing would have had to have through those two hurdles, narrow majorities, minorities with "veto" rights and a president with veto rights - there was no way it was going to happen.

so ya that aside, if anyone wants my opinions of todays events feel free but after one diatribe i wont go into another unless anyone wants to discuss it smile
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« Reply #88 on: September 21, 2008, 08:48:37 AM »

I'm just wondering, these massive bailouts by the US government, could they be some kind of nasty poison pill for whatever the next administration is (and that'll probably be democratic).
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Doopri
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« Reply #89 on: September 22, 2008, 06:17:23 PM »

oh its certainly a poison pill as long as you dont mean its intentional - no one ever WANTS to amputate a limb - as msduncan said were between a rock and a hard place here.  i dont really know the specifics of how the bailout will work out or be funded or any such thing (the s&ls basically went out as large bloc, highly discounted auction parcels so thats something that may happen - but the loss will still be enormous)

but ya the entire fiscal situation is going to be a mess for the next admin.  ill put money that whoever it is, ends up a one term wonder unless he is absolutely spectacular or engages in another war (of decent size - im not talking short term, low profile and localized conflict)

and assuming we move toward recession / are already in one tax increases probably wont be the best option to fund it either - he MAY be able to get away with some taxes on the highest earners or profit taxing but i dont really see there being much opportunity out there.  i personally would love to see some sort of heavy tax on short term capital movement because i think thats an underlying cause of a lot of the messes were in now, and i think it will 1) funnel capital to better investments and 2) soak up some of the liquidity from the ridiculous short term speculation thats playing havoc with everyone - were going to need liquidity, but the right kind of liquidity
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« Reply #90 on: September 23, 2008, 06:30:50 PM »

Quote from: msduncan on September 19, 2008, 05:42:51 PM


Brendan, what happened to your avatar?

The Seattle Supersonics don't exist anymore.
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« Reply #91 on: September 23, 2008, 07:30:43 PM »

Quote from: gellar on September 17, 2008, 06:53:14 PM

These people would not have even had the OPTION to make these decisions 20 years ago, since no one would have lent to them.  

While I agree with most of your post, I guess you forgot (or didn't know about) the Savings and Loan Crisis?

Similar.  Deregulated entities mucked around in the market, overleveraging themselves, making bad real estate investments, etc., and ultimately failing, requiring a government bail-out.

That couldn't happen again, right?
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Ridah
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« Reply #92 on: September 24, 2008, 07:48:49 AM »

The problem isn't solely within these corrupt financial companies backed by a corrupt government, the problem is also in people who don't save money and make bad financial decisions. Hopefully we'll mature from all this.
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Doopri
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« Reply #93 on: September 24, 2008, 06:15:05 PM »

Quote
The problem isn't solely within these corrupt financial companies backed by a corrupt government, the problem is also in people who don't save money and make bad financial decisions. Hopefully we'll mature from all this.

sort of true and sort of not.  if this were the problem, a lot of people would have lost their homes (which happened) and some mortgage brokers would have lost money and that would have been the end of the story

the problem now stems from overleveraging too many instruments, and creating secondary and tertiary instruments (if not more!) and swapping them around.  it was essentially numerous brokers, funds and investment banks turning $1 of loans into $5000 of loans and derivatives and many many different kinds of financial instruments (im making up the magnitudes).  so now when that $1 loan goes bad, it takes down $5000 of paper with it - paper that was backed, funded and issued, bought and sold with either borrowed money or money generated by equally untenable OTHER pieces of paper.  it was about as sustainable as everyone getting a seat in musical chairs.  of course now we have to resort to... buying 700 billlion more chairs
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Brendan
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« Reply #94 on: September 25, 2008, 09:17:54 PM »

I can't believe these people have been in power for 8 years.

Forbes:

Quote
In fact, some of the most basic details, including the $700 billion figure Treasury would use to buy up bad debt, are fuzzy.

"It's not based on any particular data point," a Treasury spokeswoman told Forbes.com Tuesday. "We just wanted to choose a really large number."

We just wanted to choose a really large number?  A spokesperson actually said those words?
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Blackadar
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« Reply #95 on: September 26, 2008, 03:55:14 PM »

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« Reply #96 on: September 26, 2008, 11:06:14 PM »

Quote from: Blackadar on September 26, 2008, 03:55:14 PM



Yeah, that's about how I feel regarding this bill. Epic Fail is not a strong enough phrase.
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