Bailout question? What's it for?

[Burgold]

Okay, this may belong in one of the other bailout threads, but it's something that is bugging me and I think it is sideways enough to stand alone.

Here goes.

Okay, the original bailout was to have two purposes as I understood it. Too help with the mortgage crisis and to free up the credit market and get banks lending again. Right? Well, the mortgage crisis hasn't seemed to be addressed and as to lending. Why aren't the big three automakers using the original bailout money? I mean if the point was to give money to the banks and financials so that they could be loaning and lending again... why are the big three coming to the government and not the banks which are supposed to be freed up again?

I realize one bank probably couldn't handle this kind of loan, but several might. More, isn't this really the point of the whole bailout? So, that financials could produce loans for businesses and corporations so that they wouldn't fail, so that they could meet payroll, etc.

If that original 750 billion wasn't for dealing with bad mortgages and it wasn't for easing the lending, credit crunch. What in the hell was it for? What kind of insane con job and crappy deal did Paulson and Congress put together?

[SkinsOrlando]

Nobody knows and they won't tell.

**** congress

[Fergasun]

Think of it like laundering money to the banks. When you look at all of the Federal Reserve and Treasury programs going on now to launder the money the TARP is but a pittance. Don't you see who Congress and Treasury work for?

I've heard a bunch of BS regarding the bank bailout. I don't know why we need to bail them out. You see, the argument is that "without banks our economy will die". But the banks are really bankrupt (no, I'm not kidding) and it's only with them suspending accounting rules and hiding garbage on their balance sheets and bringing their garbage to the Federal Reserve (look up "discount window") can they survive. TARP was just another way for them to shore up their balance sheets.

A better plan would've been to be honest about the banks and let them fail. Then have the government recapitalize the good banks (the real good banks, not just the "too big to fail" banks). I don't know why some people on the right believe saving bankers is a good idea, they are the ones whose shortsidedness let us down this path.

[Special K]

Well, we were "told" one thing. However, nobody knows what the hell problem that money is supposed to be alleviating anymore...not even congress. In it's usual fashion, big government ****s up everything it touches.

In brighter news, the government is poised to dole out a hell of a lot more of OUR money to inept leaders...and that's just a smidgen of the amount of money they are going to ultimately need to remain "viable." Absolutely ridiculous.

Seriously, I have never been this pissed off with the ineptitude of our government.

But I'll take heart in knowing that when I eventually become an important manager in the workforce I can sit on my ass, display blatant ineptitude in my area of supposed expertise, and when I send my company to hell in a handbasket I'll be able to get bailed out for my idiocy. That's cool though, takes the pressure off of worrying about those minor little details like how competently I'm doing my job and stuff...

[chaddukes]

What is it good for?

Absolutely Nothin!

Say it Again!

[wilsonian]

The bailout's purpose is to reward mistakes and bad management. I say, let 'em fail! Every last one of 'em!

[chaddukes]

Nothin' but a heartbreaker!

[Burgold]

The bailout's purpose is to reward mistakes and bad management. I say, let 'em fail! Every last one of 'em!

It does feel a little bit like.

"Billy, you broke the cookie jar! Oh, Billy, don't cry. It's okay. Have a cookie?

Where are the controls? What's the purpose other than giving these guys a stack of cash to do what they want with? Is it just another trickle down that doesn't?

[Thiebear]

..........................................Amount Allocated in Millions of Dollars Spent/Lent
Federal Reserve: (TAF) Term Auction Credit (allocated) 900000 415302
Discount Window Lending 139256
Banks (other loans primary credit) 92645
Investment Banks (other loans Primary dealer and othercredit) 46611
Loans to buy ABCP ( 661923
AIG (allocated minus Treasury 40B) 112500 87397
Bear Stearns (initial loan to JPMorgan) 29500 26919
(TSLF) Term Securities Lending Facility 225000 200524
Swap Lines (other federal reserve assets) 601963
(MMIFF) Money Market Investor Funding Facility (allocated) 540000
(CPFF) Commercial Paper Funding Facility 1800000 270879
(TALF) Term Asset-Backed Securities Loan Facility 200000 200000
GSE MBS NO NAME Program 600000 600000

Treasury:
(TARP) Treasury Asset Relief Program 700000 330000
Exchange Stabilization Fund to guarantee principal in money market mutual funds 50000
Treasury direct purchases of MBS since Sept. 26570
Citigroup (Treasury+FDIC guarantees) 238500

FDIC:
Guarantees for Banks 1900000

Other:
Automakers 25000
(FHA) Federal Housing Administration 300000
Fannie Mae/Freddie Mac 350000

TOTAL 7361917 in millions

[Thiebear]

At this point they could just give:

31,000$
to every man, woman and child in the United States.

Want a car: here's one for free. Buy American..
Have a house of 4: 124,000 should fix that mortgage.
Need a new roof: Easy.

How's that for fixing the ecomony... it's the same thing as their doing but they are trying to use huge chunks of money into businesses that couldnt do it right the first time.

They might as well just say: There will be no taxes this year: enjoy.

[SnyderShrugged]

The bailout concept was severly flawed from day 1. Unfortunately, along with the initial fleecing of the taxpayer, virtual carte blanche power was granted to the Fed and Paulson. The latter is what will compound this thing to degrees unseen in the past.

It's time to end this nonsense.

[Burgold]

The bailout concept was severly flawed from day 1. Unfortunately, along with the initial fleecing of the taxpayer, virtual carte blanche power was granted to the Fed and Paulson. The latter is what will compound this thing to degrees unseen in the past.

It's time to end this nonsense.

Yeah, I hated and hate that part of it. These guys, including Paulson, haven't earned that kind of latitude or trust to handle or use the money. Election year politics always suck. Now, I choose to believe them when they said, things had reached meltdown and we had to do something. I still think that they did the wrong thing and now that we are out of the red zone, we ought to take a deep breath and measuredly figure out what and how this money ought to be used and really install some controls and checks.

More, I really think that the Auto makers need to go out and get money from these banks. That WAS one of the chief purposes of the bailout to create liquidity in the lending market.

[Hubbs]

Honestly, I don't even think Paulson knows. I really don't. It's already been said by multiple people inside the Treasury that they more or less made up the $700 billion number. The recipients of the cash change every week. The strategy changes every week. The rules change every week. They have no. Idea. What. They're. Doing.

...which, by the way, constantly adds credibility to the Top 10 Better Ways to Use the Bailout Money (http://www.meltingpotproject.com/mpp/top-10-better-ways-to-use-the-bailout-money.html).

[SnyderShrugged]

Yeah, I hated and hate that part of it. These guys, including Paulson, haven't earned that kind of latitude or trust to handle or use the money. Election year politics always suck. Now, I choose to believe them when they said, things had reached meltdown and we had to do something. I still think that they did the wrong thing and now that we are out of the red zone, we ought to take a deep breath and measuredly figure out what and how this money ought to be used and really install some controls and checks.

More, I really think that the Auto makers need to go out and get money from these banks. That WAS one of the chief purposes of the bailout to create liquidity in the lending market.


In my heart, and as a former 10 year Ford employee, I think that the auto companies should be treated like any other business, large or small. They should file BK and restructure to become efficient and effective again. Their hubris in claiming that the nation will fial if they dont get help just irks me to no end.:mad:

[Burgold]

Honestly, I don't even think Paulson knows. I really don't. It's already been said by multiple people inside the Treasury that they more or less made up the $700 billion number. The recipients of the cash change every week. The strategy changes every week. The rules change every week. They have no. Idea. What. They're. Doing.


And if that's the case than the bailout has to fail, is destined to create more problems than solutions. You have to go in with a plan and make it work. Tinker with it as needed, but you can't just change it up as the wind changes, because you don't allow any opportunity for any of the fruit to blossom or seeds to even take root.

[SnyderShrugged]

And if that's the case than the bailout has to fail, is destined to create more problems than solutions. You have to go in with a plan and make it work. Tinker with it as needed, but you can't just change it up as the wind changes, because you don't allow any opportunity for any of the fruit to blossom or seeds to even take root.


I wish I even held out any hope that there would ever even be a fruit or a seed that is positive to begin with.

I'm so very negative on this subject. Thanks for the good conversation on it!:cheers:

[TMK9973]

At this point they could just give:

31,000$
to every man, woman and child in the United States.

Want a car: here's one for free. Buy American..
Have a house of 4: 124,000 should fix that mortgage.
Need a new roof: Easy.

How's that for fixing the ecomony... it's the same thing as their doing but they are trying to use huge chunks of money into businesses that couldnt do it right the first time.

They might as well just say: There will be no taxes this year: enjoy.

Will people PLEASE stop posting this chain email. It's false (Bailout was 700 billion. 31k x 330 million equals 10 trillion.
If the Bailout was passed around to every American, it would be 2k.

There is a LOT wrong with the bailout and how it's being used, but this arguement is wrong and pointless.

[JohnLockesGhost]

Will people PLEASE stop posting this chain email. It's false (Bailout was 700 billion. 31k x 330 million equals 10 trillion.
If the Bailout was passed around to every American, it would be 2k.

There is a LOT wrong with the bailout and how it's being used, but this arguement is wrong and pointless.

Well, the bailout was 700 billion in its original form. But after all the "goodies" the Senate stuffed it with it was closer to 850 billion.

[TMK9973]

ok - Still not 31k per person.

[Special K]

ok - Still not 31k per person.
What about if we changed that to giving the money to the tax-paying Americans as well as taking the children out of the equation?

I think I'd STILL rather do that than to just funnel more money into poorly-managed companies, essentially flushing it down the proverbial crapper.

But, if they want to give money to these big businesses, they must ensure proper transparency (which they aren't) and kick out most of the upper management individuals who drove these companies into the ground in the first place. They way I see it, they are simply throwing money at a problem in hopes to "stop the bleeding" instead of actually fixing the problem to make sure that any money they do happen to give them has at least some hope of success.

[frommd]

If the problem were a bucket with hole in it, the government's solution is to pour more water in the bucket. If that doesn't work, pour a lot more water in.

Maybe they should try and plug the hole first.

[PeterMP]

First, the bailout didn't do anything with the mortgage situation, especially as finally implemented because the bailout didn't proceede as we were told and the bad securities weren't bought.

Second, as per the director of the CBO BEFORE the bailout, there was a chance that it wouldn't do any thing for the credit market. Essentially, you just gave a bunch of people that were just insolvent a bunch of money. They aren't likely to go out and spend it, ESPECIALLY if there are still bad securities out there that might be hiding and making seemingly stable companies unstable.

I'd be curious to know how much of the money that was given to the banks ended right back up into goverment securities. My best guess is we just financed our own debt even more.

[Burgold]

If the problem were a bucket with hole in it, the government's solution is to pour more water in the bucket. If that doesn't work, pour a lot more water in.

Maybe they should try and plug the hole first.

I think you are wrong. The government's solution is to give money to the termites that made the hole in first place and tell them to patch the hole and not eat anymore wood.

or

It's like the old folktale about the scorpian and the turtle. The scorpian wants to get across the river and asks the turtle for a ride. Turtle says, "I don't want to give you a ride. You might sting me."

"Why would I do that? If I sting you we both die" The turtle decides that's reasonable and agrees to give the turtle a ride across the river. About halfway across the turtle feels a sting and realizes that the scorpian has indeed stung him.

"Why would you do that?" the turtle says as it begins sinking.

"I couldn't help it?" answered the scorpian, "it's in my nature." and they both drowned.

The bankers are corrupt greedy scorpians. It's in their nature to do this, even if it kills them too.

[PeterMP]

I think you are wrong. The government's solution is to give money to the termites that made the hole in first place and tell them to patch the hole and not eat anymore wood.

or

It's like the old folktale about the scorpian and the turtle. The scorpian wants to get across the river and asks the turtle for a ride. Turtle says, "I don't want to give you a ride. You might sting me."

"Why would I do that? If I sting you we both die" The turtle decides that's reasonable and agrees to give the turtle a ride across the river. About halfway across the turtle feels a sting and realizes that the scorpian has indeed stung him.

"Why would you do that?" the turtle says as it begins sinking.

"I couldn't help it?" answered the scorpian, "it's in my nature." and they both drowned.

The bankers are corrupt greedy scorpians. It's in their nature to do this, even if it kills them too.

It's a frog not a turtle.

[Burgold]

It's a frog not a turtle.

Depends which version you were told as a child. I've heard it told both ways.

Besides frogs do most of their swimming below the water. That wouldn't be very useful to a scorpian. Turtles can swim along the surface or below and their shell is easier to stand on even if their necks are exposed.

[PeterMP]

Depends which version you were told as a child. I've heard it told both ways.

Besides frogs do most of their swimming below the water. That wouldn't be very useful to a scorpian. Turtles can swim along the surface or below and their shell is easier to stand on even if their necks are exposed.

I need a link that says frogs do more simming underwater than turtles.

Turtles normally swim with their necks straigh out (not up like they walk). I think a scorpion standing on the shell (which is higher than the neck anyway) would have a hard time reaching the neck.

:)

[Thiebear]

Will people PLEASE stop posting this chain email. It's false (Bailout was 700 billion. 31k x 330 million equals 10 trillion.
If the Bailout was passed around to every American, it would be 2k.

There is a LOT wrong with the bailout and how it's being used, but this arguement is wrong and pointless.

CBS was the people that posted this... Chain Email :)...

Financial Crisis Balance Sheet Government Entity Amount Allocated in Millions of Dollars Spent/Lent In Millions of Dollars
Federal Reserve:
(TAF) Term Auction Credit (allocated) 900000 415302
Discount Window Lending 139256
Banks (other loans primary credit) 92645
Investment Banks (other loans Primary dealer and other broker-dealer credit) 46611
Loans to buy ABCP (other loans Asset-backed commercial paper money market mutual fund liquidity facility) 661923
AIG (allocated minus Treasury 40B) 112500 87397
Bear Stearns (initial loan to JPMorgan) 29500 26919
(TSLF) Term Securities Lending Facility 225000 200524
Swap Lines (other federal reserve assets) 601963
(MMIFF) Money Market Investor Funding Facility (allocated) 540000
(CPFF) Commercial Paper Funding Facility *upper limit from Reuters 1800000 270879
(TALF) Term Asset-Backed Securities Loan Facility 200000 200000
GSE MBS NO NAME Program 600000 600000

Treasury:
(TARP) Treasury Asset Relief Program 700000 330000
Exchange Stabilization Fund to guarantee principal in money market mutual funds 50000
Treasury direct purchases of MBS since Sept. 26570
Citigroup (Treasury+FDIC guarantees) 238500

FDIC:
Guarantees for Banks 1900000

Other:
Automakers 25000
(FHA) Federal Housing Administration 300000
Fannie Mae/Freddie Mac 350000

TOTAL 7361917

So your saying all of those numbers are wrong?

[TMK9973]

CBS was the people that posted this... Chain Email :)...

Financial Crisis Balance Sheet Government Entity Amount Allocated in Millions of Dollars Spent/Lent In Millions of Dollars
Federal Reserve:
(TAF) Term Auction Credit (allocated) 900000 415302
Discount Window Lending 139256
Banks (other loans primary credit) 92645
Investment Banks (other loans Primary dealer and other broker-dealer credit) 46611
Loans to buy ABCP (other loans Asset-backed commercial paper money market mutual fund liquidity facility) 661923
AIG (allocated minus Treasury 40B) 112500 87397
Bear Stearns (initial loan to JPMorgan) 29500 26919
(TSLF) Term Securities Lending Facility 225000 200524
Swap Lines (other federal reserve assets) 601963
(MMIFF) Money Market Investor Funding Facility (allocated) 540000
(CPFF) Commercial Paper Funding Facility *upper limit from Reuters 1800000 270879
(TALF) Term Asset-Backed Securities Loan Facility 200000 200000
GSE MBS NO NAME Program 600000 600000

Treasury:
(TARP) Treasury Asset Relief Program 700000 330000
Exchange Stabilization Fund to guarantee principal in money market mutual funds 50000
Treasury direct purchases of MBS since Sept. 26570
Citigroup (Treasury+FDIC guarantees) 238500

FDIC:
Guarantees for Banks 1900000

Other:
Automakers 25000
(FHA) Federal Housing Administration 300000
Fannie Mae/Freddie Mac 350000

TOTAL 7361917

So your saying all of those numbers are wrong?

We are now arguing in 2 threads... Love it!
:cheers:

Anyway -The numbers are BS numbers that include things like 1.9 trillion in Bank guarantees - In case EVERY BANK fails.

1.8 trillion for the Money Market insurance.

600 billion for Citibank FDIC coverage.

That money won't be spent. It's like saying State farm is spending to much money because if EVERYONE that they insurance lose their car and house at the same time, they have to pay out.

[Thiebear]

What about the side that has Paid out already?
And they created 2-3 things on top of Tarp???

[wilsonian]

These bailouts are also a bad idea because now EVERYONE is going to want be bailed out. Their argument is, since we bailed out Wall Street, now we have to bail out Detroit, and so on and so forth. Where do we draw the line? This is just adding to the already serious problem of moral hazard.

[chaddukes]

nevermind.......

[Burgold]

These bailouts are also a bad idea because now EVERYONE is going to want be bailed out. Their argument is, since we bailed out Wall Street, now we have to bail out Detroit, and so on and so forth. Where do we draw the line? This is just adding to the already serious problem of moral hazard.

On the other hand, when the Government gives out a 125 billion dollar bailout to Extremeskins (split evenly amongst the members with mods getting a 20% greater share), my only complaint will be if I have to pay taxes on the bailout loot.

[JohnLockesGhost]

On the other hand, when the Government gives out a 125 billion dollar bailout to Extremeskins (split evenly amongst the members with mods getting a 20% greater share), my only complaint will be if I have to pay taxes on the bailout loot.

By that time, those dollars might buy you a soda pop.

[jbooma]

These bailouts are also a bad idea because now EVERYONE is going to want be bailed out. Their argument is, since we bailed out Wall Street, now we have to bail out Detroit, and so on and so forth. Where do we draw the line? This is just adding to the already serious problem of moral hazard.


well if you don't do something with detroit you don't want 6 million people added to the unemployment line, then we are talking depression

remember what many forget about the auto industry you are then talking also about all the dealerships in your area, rental car companies, etc....

it isn't just about the cars

now if you can dissolve the union that would be a good first step

[Burgold]

By that time, those dollars might buy you a soda pop.

killjoy.

And unfortunately, jbooma is right. There's the car companies, the auto suppliers, the rentals, the shops, and so on by the time you're through with all the companies huge and tiny that feed and need the big three you are talking an enormous piece of the pie. It really is one of those rock and a hard place deals.

I actually don't envy Congress at all. I think the bailout is a mistake. Or at least it needs to be done with incredibly tight controls or through private lending.

Mind you, I also hate the grandstanding and petty squawking they aimed at the CEOs. I mean really who cares if they drove the whole way or any of that silliness. It's a symbollic gesture. We all understand that.

[wilsonian]

well if you don't do something with detroit you don't want 6 million people added to the unemployment line, then we are talking depression

remember what many forget about the auto industry you are then talking also about all the dealerships in your area, rental car companies, etc....

it isn't just about the cars

now if you can dissolve the union that would be a good first step

Government spending isn't going to fix the problem, it's going to perpetuate the problem. We need to let these companies go bankrupt so that new, more competent management can come in and run things more effectively and efficiently. If we want to have a vibrant, productive automobile industry, we can't support non-profitable companies with government spending. How many jobs is the government going to destroy by redirecting capital to the auto industry? Sure, we may able to see how many jobs are "saved," but we'll never know how many are destroyed.

We're punishing profitable companies and rewarding non-profitable companies. We bailed out Chrysler 30 years ago, and now they're back, asking for more. Let these companies go bankrupt. Let the market work.

[Seabee1973]

well if you don't do something with detroit you don't want 6 million people added to the unemployment line, then we are talking depression

remember what many forget about the auto industry you are then talking also about all the dealerships in your area, rental car companies, etc....

it isn't just about the cars

now if you can dissolve the union that would be a good first step

They wont dissolve unions

[chaddukes]

They wont dissolve unions Then they gots to go. When the Union stands in the way of the companies solvency....then the workers need to decide what they would rather have a job with a little less pay, or no job.

[Busch1724]

well if you don't do something with detroit you don't want 6 million people added to the unemployment line, then we are talking depression

remember what many forget about the auto industry you are then talking also about all the dealerships in your area, rental car companies, etc....

it isn't just about the cars

now if you can dissolve the union that would be a good first step

I truly believe the bulk of these people will be unemployed anyway becuase they are closing dealerships, garages, plants, etc. Honday, Toyota, etc. will buy the building and create jobs there without the unions.

The unions have helped create this problem and it seems (at least so far) they have gotten off free here. Do these people want jobs or not? I hear union guys all the time we wouldn't have jobs if it wasn't for the union...well they soon may not have jobs. Nice job protection by the union and thousands of folks that have lost their jobs the last couple years.

[SkinsNumberOne]

A lot of people are saying "nobody knows" and stuff like that in this thread.

I agree it's hazy, and I'm less than thrilled about it, but you can see the argument for it as well - or you should be able to.

There are companies and services, that if allowed to go defunct, would have widespread ramifications on our economy. If we were in danger of losing our automotive industry, that creates a huge dependency on foreign companies. That is not something we have in our best interests. Also, those automotive companies make government/military vehicles.

There are similar arguments to be made for banks, in addition to the others mentioned.

There are many levels where it does make sense that "something needed to be done." The problem is, it's certainly not clear that the right something is getting done. That is very unclear. But to say that we should sit idly by and let major banks and industries die is probably an oversimplification of the kind of problem we're facing. That's our quandary.

By the way, I still think the large scale foreclosure bailout plans seem like they are going to be completely unfair to the middle class. I guess we'll see how it looks. Ugh.