House Rejects Bail Out

[Cosmic Charlie]

They wanted 700 Billion dollars spread across about 6 years.

The war in Iraq costs 10 billion a month. that's 700 billion in about 6 years.


Do I have to draw you a picture ?

Stop the war, you have the money you need.


End of problem

 

[Davidnic]

My biggest worry is that the FDIC is underfunded and it is only a matter of time before there are serious issues unless it is refunded. The FDIC really pulled the fat out of the fire and saved things by quick action when Wamu fell. In all of this the FDIC has been really on top of things. I think it is the one agency that has shown real leadership and competence.

And considering Wamu's troubles can be tied nearly directly to a bank run (a 16.7 billion dollar one) and not directly tied to the mortgage issue (they were solvent until the run)...I am glad the FDIC is on the ball. This is just what they were made for. But, ominously, depositor runs are becoming more frequent and it is hard to blame them.

But the FDIC insures our own personal deposits up to 100,000 per depositor per bank and 250,000 in retirement accounts. However...in a worst case senario they are not funded enough to meet those obligations with current reserves.

 

[Voegelin]

Stock market dropped but oil dropped more. Everytime over the last few weeks the government did a stick-save of a failed financial institution, oil shot up. Oil is the key. Its the lifeblood. People can sit on their IRA and wait it out, they need oil at a decent price today. No welfare for Wall Street could tank oil prices which would greatly allievate the economic decline which we are in (and it will decline no matter what Congress or the Fed does).

 

[ShannonMcCatholic]

Man- I wish lower oil prices would yield to lower gas prices...or even that there was predictibly gas available. This over $4 crap is getting old.

QUestion if oil goes down and stays down--will food prices go back down...or are we stuck where they're at now that they're there?

 

[drpepper101]

Not really, most food items have become traded commodities themselves and many other factors shape those markets. Some reduction in shipping prices is unlikely to yield much of a discount to consumers on an individual level.

 

[ShannonMcCatholic]

Not really, most food items have become traded commodities themselves and many other factors shape those markets. Some reduction in shipping prices is unlikely to yield much of a discount to consumers on an individual level.

Thanks for answering! Can I ask you what other kind of factors shape the prices of food? Obviously- demand has got to be part of it, right?? If gas goes back down to $3 we'd save, as a family, about $100 a month--that seems pretty significant on our little micro level--but you are saying that though the price of food has gone up in response to climbing fuel costs- the savings from those fuel costs, won't be passed back to consumers--right??

( I know you don't have a very high opinion of me--but I sure do appreciate you answering my questions )

 

[PassthePeace1]

Shannon,

I am not an expert, but the way I understand it.....when times get hard, people will invest in the commodities, instead of other riskier areas of the market. Corn, wheat, soybeans...etc prices will go up, because food is something that will always be in demand.

Time to plan and plant a victory garden . I have broccoli an onions going in tonight, will plant some greens and turnips tomorrow.

 

[PassthePeace1]

History of U.S. Stock Market Crashes
The Crash of 2000
From 1992-2000, the markets and the economy experienced a period of record expansion. On September 1, 2000, the NASDAQ traded at 4234.33. From September 2000 to January 2, 2001, the NASDAQ dropped 45.9%. In October 2002, the NASDAQ dropped to as low as 1,108.49 - a 78.4% decline from its all-time high of 5,132.52, the level it had established in March 2000.
Causes of the Crash:

• Corporate Corruption. Many companies fraudulently inflated their profits and used accounting loopholes to hide debt. Corporate officers enjoyed outrageous stock options that diluted company stock;
  
• Overvalued Stocks. There were numerous examples of companies making significant operating losses with no hope of turning a profit for years to come, yet sporting a market capitalization of over a billion dollars;
  
• Daytraders and Momentum Investors. The advent of the Internet enabled online trading –a new, quick, and inexpensive way to trade the markets. This revolution led to millions of new investors and traders entering the markets with little or no experience;
  
• Conflict of Interest between Research Firm Analysts and Investment Bankers. It was common practice for the research arms of investment banks to issue favorable ratings on stocks for which their client companies sought to raise capital. In some cases, companies received highly favorable ratings, even though they were actually in serious financial trouble.

A total of 8 trillion dollars of wealth was lost in the crash of 2000.
Following the Crash:

• New Rules for Daytraders. Under the new rules that were introduced, investors need at least $25,000 in their account to actively trade the markets. In addition, new restrictions were also placed on the marketing methods daytrading firms are allowed to use;
  
• CEO and CFO Accountability. Under the new regulations, CEOs and CFOs are required to sign-off on their statements (balance sheets). In addition, fraud prosecution was stepped up, resulting in significantly higher penalties;
  
• Accounting Reforms. Reforms include better disclosure of corporate balance sheet information. Items such as stock options and offshore investments are to be disclosed so that investors may better judge if a company is actually profitable;4. Separation between Investment Banking and Brokerage Research. A major reform was introduced to avoid conflicts of interest in the financial services industry. A clear split between the research and investment banking arms of brokerage houses was mandated.

The Crash of 1987
The markets hit a new high on August 25, 1987 when the Dow hit a record 2722.44 points. Then, the Dow started to head down. On October 19, 1987, the stock market crashed. The Dow dropped 508 points or 22.6% in a single trading day. This was a drop of 36.7% from its high on August 25, 1987.
Causes of the Crash:

• No Liquidity. During the crash, the markets were not able to handle the imbalance of sell orders;
  
• Overvalued Stocks;
  
• Program Trading and the Use of Derivative Securities Software. Large institutional investment companies used computers to execute large stock trades automatically when certain market conditions prevailed. Some analysts claim that the program trading of index futures and derivatives securities was also to blame.

During this crash, 1/2 trillion dollars of wealth were erased.
Following the Crash:

• Uniform Margin Requirements. New margin requirements were introduced to reduce the volatility for stocks, index futures, and stock options;
  
• New Computer Systems. Stock exchanges changed to new computer systems that increase data management effectiveness, accuracy, efficiency, and productivity;
  
• Circuit Breakers. The New York Stock Exchange and the Chicago Mercantile Exchange instituted a circuit breaker mechanism, which halts trading on both exchanges for one hour should the Dow fall more than 250 points in a day, and for two hours, should it fall more than 400 points.

The Crash of 1929
On September 4, 1929, the stock market hit an all-time high. Banks were heavily invested in stocks, and individual investors borrowed on margin to invest in stocks. On October 29, 1929, the stock market dropped 11.5%, bringing the Dow 39.6% off its high.
After the crash, the stock market mounted a slow comeback. By the summer of 1930, the market was up 30% from the crash low. But by July 1932, the stock market hit a low that made the 1929 crash. By the summer of 1932, the Dow had lost almost 89% of its value and traded more than 50% below the low it had reached on October 29, 1929.
Causes of the Crash:

• Overvalued Stocks. Some analysts also maintain stocks were heavily overbought;
  
• Low Margin Requirements. At the time of the crash, you needed to put down only 10% cash in order to buy stocks. If you wanted to invest $10,000 in stocks, only $1,000 in cash was required;
  
• Interest Rate Hikes. The Fed aggressively raised interest rates on broker loans;
  
• Poor Banking Structures. There were few federal restrictions on start-up capital requirements for new banks. As a result, many banks were highly insolvent. When these banks started to invest heavily in the stock market, the results proved to be devastating, once the market started to crash. By 1932, 40% of all banks in the U.S. had gone out of business.

In total, 14 billion dollars of wealth were lost during the market crash.
Following the Crash:

• The Securities and Exchange Commission (SEC) was established;.
  
• The Glass-Stegall Act was passed. It separated commercial and investment banking activities. Over the past decade though, the Fed and banking regulators have softened some of the provisions of the Glass-Stegall Act;
  
• 3. In 1933, the Federal Deposit Insurance Corporation (FDIC) was established to insure individual bank accounts for up to $100,000.

Stock Market Crash 2000 1987 1929

 

[benedictaoo]

HEre's why this is bad--Paulson, et al--ie the Bush administration, has made a big public to do about the absolute necessity of immediate action. Well now guess what- the stability of the market depends on whther or not there is immediate action taken. It's becomes a self- fulfilling prophecy. And Paulson et al, knew this- but acted gravely irresponsibly anyway. Watch closely for the market to plunge this afternoon. Say good bye to your 401 K earnings!

Now the last TWO times the Bush administration has told Congress to act immediately without due deliberation- we ended up at war pursuing phantom WMD and got us the Patriot Act.

The sky is falling was just a tactic to get us to fall for the bail out, no questions asked.

 

[benedictaoo]

Stock market dropped but oil dropped more. Everytime over the last few weeks the government did a stick-save of a failed financial institution, oil shot up. Oil is the key. Its the lifeblood. People can sit on their IRA and wait it out, they need oil at a decent price today. No welfare for Wall Street could tank oil prices which would greatly allievate the economic decline which we are in (and it will decline no matter what Congress or the Fed does).

Yeah but it's still high at the pump, so what's going on?

 

[benedictaoo]

They wanted 700 Billion dollars spread across about 6 years.

The war in Iraq costs 10 billion a month. that's 700 billion in about 6 years.


Do I have to draw you a picture ?

Stop the war, you have the money you need.


End of problem

Drill and you will too.

 

[thereselittleflower]

I think most people don't understand what is going on, and for congress to do what the people want in a situation like this can be very dangerous course to follow. People know what result they want, but they are not educated to know how to navigate the mine fields the world economy presents.

I think it is very, very foolish to follow the dictates of those who do not understand how this economic structure operates or how to get from point A to point Z as safely as possible. In fact, it is a recipe for disaster.

 

[ShannonMcCatholic]

I agree, TLF---I do think,though, that if some leader took the time to teach the American public how it all works, and the fundamental break down which is occurring, and why it's important at this point to pour money into Wall Street--that the public would likely be less panicked and more supportive.

 

[thereselittleflower]

I agree, TLF---I do think,though, that if some leader took the time to teach the American public how it all works, and the fundamental break down which is occurring, and why it's important at this point to pour money into Wall Street--that the public would likely be less panicked and more supportive.

I agree, but that happening is not very likely. And it would take quite a bit of educating, and then you would have the networks pull in other experts who would argue, thus increasing their ratings, and so, while there may be less confusion, there would still be confusion.

There are times when a country must act for the good of its people even if the people do not understand and are not behind the action. I am afraid we are at such a time.

When the credit dries up so that businesses cannot make payroll and people lose their jobs (this is going to happen anyway, but perhaps not so quickly or so severely if congress acts quickly) because they didn't want to allow their tax dollars to make the wealthy wealthier, I wonder what they are going to say then about their elected officials who did what they wanted instead of what was best.

 

[D'Ann]

I'm hoping that they come up with a new plan that won't cost the tax payers 700 billion dollars to bail out the rich people.

I believe that this rejection of the bail out is across the board politics... all of their fault.

I feel let down and disappointed by all of them in Washington. I don't care about the politics... these people need to be fired and we need real folks in Washington. We need to vote out the lawyers and start voting in the teachers and the plumbers and the electricians... the real people... I had enough of career politicians. I had enough of these people and their inability to work together because of their political party. They all are guilty of messing this one up.

Our Country better figure out how to fix this mess, or who knows how we will survive the outcome. Mike is right... this could end up being very devastating to our Country...

 

[thereselittleflower]

I'm hoping that they come up with a new plan that won't cost the tax payers 700 billion dollars to bail out the rich people.

D'Ann I understand, however, I think we need to move away from the concept that it is bailing out rich people, even if it has that as one of its consequences. The bigger picture is us, what is called Main Street.

We have what we have because they have what they have. Our way of life is because of their way of life. Their way of life goes, so does ours.

Are Americans really ready for what would happen if the voice of the American people is heeded in this?

I don't think so. I don't think we really understand what is at risk.

I believe that this rejection of the bail out is across the board politics... all of their fault.

I feel let down and disappointed by all of them in Washington. I don't care about the politics... these people need to be fired and we need real folks in Washington. We need to vote out the lawyers and start voting in the teachers and the plumbers and the electricians... the real people... I had enough of career politicians. I had enough of these people and their inability to work together because of their political party. They all are guilty of messing this one up.

Our Country better figure out how to fix this mess, or who knows how we will survive the outcome. Mike is right... this could end up being very devastating to our Country...

Not just our country - but many countries. If credit dries up so businesses cannot keep their business running, if hyperinflation takes over, if goods are hard to come by, what then? Are we really ready to punish the big guys when it is us little guys who were also taking advantage of all they offered us?

Our greed is just as much a part of the problem as theirs. Our greed sought to always better our status in life, have an easier life. And while there is nothing wrong with that in and of itself, did we not take advantage of what was offered even though there were those telling us this could not last?

Isn't our greed part of the problem too? Are we really justified in casting the first stone?

 

[D'Ann]

D'Ann I understand, however, I think we need to move away from the concept that it is bailing out rich people, even if it has that as one of its consequences. The bigger picture is us, what is called Main Street.

We have what we have because they have what they have. Our way of life is because of their way of life. Their way of life goes, so does ours.

Are Americans really ready for what would happen if the voice of the American people is heeded in this?

I don't think so. I don't think we really understand what is at risk.




Not just our country - but many countries. If credit dries up so businesses cannot keep their business running, if hyperinflation takes over, if goods are hard to come by, what then? Are we really ready to punish the big guys when it is us little guys who were also taking advantage of all they offered us?

Our greed is just as much a part of the problem as theirs. Our greed sought to always better our status in life, have an easier life. And while there is nothing wrong with that in and of itself, did we not take advantage of what was offered even though there were those telling us this could not last?

Isn't our greed part of the problem too? Are we really justified in casting the first stone?

I know... I know... I know... what you mean... I just feel sooo helpless right now.

What worries me is another depression... and something tells me that if we have one of those, it will make the last one in the 20s look like a cake walk.

I just feel sooo angry right now. I need to go and pray.

God Bless

 

[Fantine]

Both sides seem to be more interested in trying to pin the blame on the other side than in working for a solution.

Both want the bill to be bi-partisan, because it's an election year and they don't want one party copping out of the responsibility of solving the problem and then armchair quarterbacking about it on television ads. And they're right.

I do believe that at some point we will get our money back from this bailout. We are buying assets. The assets are devalued right now, but when the housing market recovers the government will recover its investment. All we need is a growing population to help housing prices recover. An immigration law would help that happen.

 

[drpepper101]

It's really not very complicated, the banks have amassed way too much bad mortgage debt. It's their own fault and we can harp on that fact all we want, but the reality is they have no money to lend. So you can feel as smug as you want denying a rescue to "rich people," but the fact is you're going to feel a hell of a lot less smug when you need a car next month and can't find a lender. Or the offer is 30 percent interest despite your nearly perfect credit history and stable employment.
Buying the mortgage debt and allowing the banks to repay, which despite the ignorant comment has nothing to do with giving away tax payer money, over a period of time would clear the clog in the financial sector and normalize lending again. Now we simply have nothing and there's no clear picture on when, or if, the mortgage crisis can be resolved. So the next time you go for a loan and can't get one remember it was all worth it to stop "rich people" from getting something.

 

[ProCommunioneFacior]

Deo gratias that this bill was not passed! First of all Paulson should resign, I believe his armageddon predictions was a ploy to scare the nation into giving him unbelievable power.

The mess, we are in is a systemic mess, our financial system is broken, thanks due to money printing madness of the fed, our all consuming greed which far surpasses our ability to produce, spend happy government, etc, etc.

The bailout would not have solved any "failures", it would have merely prolonged the inevitable, further inflated the dollar and would have made the recession/depression deeper and longer.

The financial situation in this country is far from being able to be saved. We need to accept that and need to start changing our policies and behaviors to come out of this mess quicker and better. We need to get rid of the unaccountable Federal Reserve and the fiat monetary system. We need our money to be tied to something that has intrinsic value, such as gold, this will force discipline on our politicians and will help stop rampant spending and inflation.

We need to learn how to be a country of producers and savers. We need to stop spending money on consumer products which we import from other countries and invest our capital in producing, whether it be agriculture, manufacturing, energy independence, etc.

We need to stop our policing the world and occupation of other countries. We need to bring our troops home, and stop meddling in the business of other countries, unless they attack us first.

We need to stop killing our future workforce. We have a large generation that is about to become dependent on the laborers in this country, and there are 50 million less people in the workforce than there should be because of our barbaric policies of killing our children. You want universal healthcare, then stop killing the people who can provide the healthcare.

We need to be a nation of morality once again. A country of no morals is bound to fail, if we don't fix this, then all of this bantering about bailouts is a waste of time and money, it will only lead to more corruption, greed, and inflation.

That's my two cents.