No-bailout crowd gets help from perfect storm on Wall St.

Maybe Wall Street should have taken that hate mail more seriously.

The obvious disgust that a large segment of the public felt about the financial-system bailout plan, and how that translated into phone calls and e-mails to congressional offices over the weekend, helped deliver today’s shocker: the House’s "no" vote on the plan.

The stock market might not have rallied even if the House had approved the bailout, but it seems unlikely that an OK would have led to a 777.68-point, 7% drop in the Dow industrials, which is what we got.

But there was a lot more weighing on Wall Street today than the bailout, as dominant a factor as that was.

One depressant was the wave of government rescues of banks in Europe over the weekend, from Germany to Iceland. That reminded U.S. investors that the financial system’s woes transcend borders, which nobody should find encouraging.

"The news out of Europe was horrendous," said T.J. Marta, fixed-income strategist at RBC Capital Markets.

European stock markets ended their session with severe losses, though Wall Street managed to outdo them. The German market sank 4.2%, Italian stocks lost 5% and the tiny Icelandic market gave up 4.5%.

Back in the U.S., credit markets remained in crisis mode as stressed banks and big investors continued to hoard cash rather than lend or invest it. The rush into Treasury securities accelerated as the bailout bill appeared likely to fail, sending another dire signal to the stock market.

The calendar also was working against the equity market today: At the end of a dismal quarter for stocks, there’s always more incentive for many money managers to keep raising cash than to try to be a hero. Better that clients see a more defensive posture on those Sept. 30 statements.

Finally, since the Securities and Exchange Commission temporarily banned "short selling" in more than 900 financial stocks beginning Sept. 19, it removed the possibility of short-covering rallies in those stocks -- buying by shorts to close out their bets and book their profits.

Without the ban, "we might at least have had those buyers of last resort in the market, the short-coverers," to come in late in the day, said Art Hogan, market strategist at Jefferies & Co.

Instead, the market closed at its lows for the session.

Now what?

People who oppose the bailout plan, and who want financial companies to pay for their sins in the housing debacle, will see today as a victory.

The question is, will it still be a victory a week from now if the stock market is 25% lower, the economy is skidding into a deep recession, and Main Street, like Wall Street, finds credit nowhere to be had?

Photo: Protesters outside the New York Stock Exchange. Carolyn Cole / Los Angeles Times

Comments

[Lthompson]

what they missed when they were coming up with this plan is how to keep these big companies from sticking it to the people, that is how they got the money in the first place, they need to be regulated closely watch for their practices, the mortgage industry and the banks are paying for how they have cheated the american people the lower class and the middle class out of their money. Government need to protect the people and they are not doing so by letting this companies get away with cheating people and making a profit, i am glad they voted against the plan because it did not state nothing but we are giving these people money, it stated nothing about the working class people the ones who keep this country running and continue to get the shaft.

[david moore]

Committing moral bankruptcy
While attempting to stave off financial bankruptcy, congress, now finds itself, on the verge of moral bankrupt. The idea that the Federal Government could make any profit is morally deficient. Who does the Federal Government propose to make a profit off of. How could it be the same folks who provide them the money. Beside this immorality, the sheer lunacy of this situation is UN-conscionable, given, there is a moral solution. Now, it sounds that the Federal Government want to loan taxpayer money to Wall St, so Wall St. can then use the money, to make money, off of, ultimately (the same folks who gave them the money) the taxpayers, and then, take a cut for doing so (make a profit). Since, the Federal Housing Authority must no longer exist, morally, what needs to happen, is the re-creation of a new FHA, which will convert the OLD Federal Housing Authority, into, the NEW Foreclosed Housing Authority. Next, congress will need to legislate, the authority, the funds, and a mandate which states, "All financial entities, which operate, in American home markets, shall sell all home properties, with a greater loan to value rate, to the new FHA, at the days current fair market value". This will guarantee that the American taxpayers will be receiving true current value of out-laid money, while preventing a "waiting game" to be played by the financial entities, which operate, in American home markets, where they could cherry pick which bad loans, they are ready to give up on now, and those, they have not, quite, given up on, yet. (No ambiguities) A complete purge of the Wall St. financial markets toxic property debt. A new beginning for Wall St.. and Americans. This, will allow Wall St., to sell upside down properties (at a lost for them, allowing Wall St. to morally and financially pay for its own mistakes) while, giving them (Wall St.), new revenues to re-capitalize with. Thus, this will also create a pool of housing, which, can then be fairly and morally sold with 30 yr. Notes, to low income families, at the true fair market value, of the day (without profit). Also, mandate to the new FHA, to give any family, currently in foreclosure, first right of refusal, to a payoff (at the days true fair market value of the Note) to whomever currently possesses the property TITLE, then issue, a new 30 yr. Note on that same particular property.
Now, here is a moral reckoning of reality.
- Rich people, will see their home values drop, but they will still be rich.
- Poor people, currently have no property value.
- Poor people, will now be morally able to afford housing.
- Banks will lose money, but they will have money.
- There will be a new, re-distribution of wealth (towards the middle-class) in America.
In addition, in the grandest scheme of all, by righting this boat we are in, this can be an opportunity, for America, as a whole, to turn a negative, into a positive.
The alternative
As I now understand this, bottom line is that our Federal Government will become TITLE holders of foreclosed properties, which, at some point in time (in the future), these same properties, will be re-sold, either, at a lost, at the same price paid, or even maybe, at a depraved profit.
Now, if this is the case, is it not also true, that until this particular point in time (in the future), all these foreclosed properties, which will now be owned by our Federal Gov., will essentially have to be, either shelved - not for sale (until the market comes back – when fair market value is equal to the true value of the note), or, auctioned off at a lost (pennies on the dollar, perhaps).
So, if this is the case, here is the problem, one (and or) two things will happen.
1) While continuing to reduce my property value, the seven foreclosed homes on my street, will remain UN-occupied (until the market comes back – when fair market value is equal to the true value of the note), maybe years. Or, 2) Sold by the Federal Gov. at a lost, less than the Notes value, which again, will also continue, to drive down my property value.
So, if I have this right, how can congress be contemplating, loaning hundreds of billions of dollars to the Wall Street financial institutions, which in essence, will enable (Wall St.) to then, buy back the same Notes (which they had previously sold, dollar for dollar), and now, for pennies on the dollar. What kind of crap is this?

[DJB]

Don't panic. Calm down.

This bailout stunk to high heaven and it deserved to die. First of all, Congress was being railroaded into passing this bill. $700 billion dollars should not be spent after a few days of deliberations, ever. It would have given too much power to the executive branch, been corrupt and unfair. Congress must take its time, hold detailed hearings and come up with a fair plan to stimulate the economy that a majority of Americans can get behind.

We can come up with a good stimulus plan but not with a gun pointed at our head. We are being scared into this like we were scared into invading Iraq.

Let's not make another huge mistake right now because we're scared. This banking problem wasn't created in a day and it won't be solved in a day. Bailing out the people who messed up will encourage more irresponsible behavior. No corporate welfare!

[Benjamin]

As a consumer neither seeking credit, nor under a mortgage, I will be one of the last to be affected by the fail of the bail bill. I do work for a company though, and am worried that payroll will be affected (why do companies use credit for payroll anyway?). On one hand, I really disagree(d) with the bill--bankers and banks are very greedy, huge gains are never enough, and giving money to people who could never pay it back were terrible decisions; they should suffer for their collective lack of judgment. Lenders gave loans to essential jobless crack whores. I realize that's harsh, and many people were taken advantage of by predatory lending and lies about whether or not the loan was an ARM. On the other hand, the few have always gained from the many, so like an equation, the many now will most likely suffer for the few's bad decisions. I do not think that we should just bail them out, and the stock market is based mostly on faith that the buyers will make money buying. Our dollar is based on faith, all currency is worthless paper. My question is where were they going to get $700 billion? Even if that were feasible, so much of that money has already gone to multiple projects, such as the Iraq War, which we're spending money on even as we speak. Taxpayers are not a bottomless pit. I have no solution, I can only watch and speculate and worry and wish that working families had a bailout of some sort.

[thomas africano]

given the choice between liberty or bread i will always choose liberty. to hell with the bailout

[brad]

Welcome to the "Bush" Depression.

[marc from PA]

The Globe is right, we need to pass this bailout. I am an executive at a large commercial bank and I personally have tens of millions of dollars on the line here. I was hoping that the Democrats were going to do what they do best and execute a wholesale transfer of wealth today, but they didn't and it was a slap in the face. People, please, this bailout is only a few thousand to each of you, but to me it's my whole net worth, over $30 million. We need this bailout. It's time that everyone realizes that capitalism doesn't work and we start to model our system after progressive european and latin american socialist states.

I wanted to thank the Globe for standing up for us in the mortgage industry. It's not our fault. We need a big bailout... I need a big bailout. I am going to have to sell my estate in the Hamptons now in a horrible real estate market. I had to cancel my October vacation in the Maldives and now I can't get my wife a new Cayenne for Christmas. Pleas... Click here to see full comment The Globe is right, we need to pass this bailout. I am an executive at a large commercial bank and I personally have tens of millions of dollars on the line here. I was hoping that the Democrats were going to do what they do best and execute a wholesale transfer of wealth today, but they didn't and it was a slap in the face. People, please, this bailout is only a few thousand to each of you, but to me it's my whole net worth, over $30 million. We need this bailout. It's time that everyone realizes that capitalism doesn't work and we start to model our system after progressive european and latin american socialist states.

I wanted to thank the Globe for standing up for us in the mortgage industry. It's not our fault. We need a big bailout... I need a big bailout. I am going to have to sell my estate in the Hamptons now in a horrible real estate market. I had to cancel my October vacation in the Maldives and now I can't get my wife a new Cayenne for Christmas. Please America, don't listen to the free-market Republicans. Vote Obama and Democrat this November, the industry needs your help.

[Todd]

At this stage in the game, a bailout is an absurdly expensive band-aid solution to a wound sever enough to warrant amputation. I could make a profound and eloquent argument supporting what I'm about to say, but I won't. The bottom line is this. Investment is a gamble. There is risk involved. Those whom have invested in the laughably absurd house of cards that is Wall Street understood that there were risks associated with the potential for profit afforded to them by their investments. They gambled and they lost and now they want to call 'do over' at the expense of everyone else.
I say"Suck it up and deal with your mistakes with some iota of dignity."
Will banks and financial institutions collapse? Yes. Will they collapse even if we bail them out? Yes, it might just take them longer. Mismanagement and ineptitude cannot be resolved by throwing more money to the same self important imbeciles that broke the system to begin with. If these entities are so poorly managed that they cannot survive the natural and inevitable equalization of the world financial market, then they do not deserve to survive. At its core, capitalism is all about the survival and thriving of the the fittest commercial entities. We've past due for a culling and it's now upon us. We can address the inevitable and concentrate on the root causes of this mess after the fodder has been swept away or we can sell out the many to support the privileged few and in the end simply circle the drain for a while longer.

[laura]

So many of you don't understand the entire picture, it is no wonder this did not pass. First you must understand there are many many people to blame, including those who wanted to relax mortgage regulations because they wanted to let the little guy own a home, to participate in the real estate increases...it was a nobel idea, but when Greenspan, and yes even Bush suggested in 2005 that Fannie Mae and Freddie Mac tighted the regulations, they got hit with defeats from Congress who wanted desperately to help out the lower class. And if real estate prices had held up, then all would be fine...It was not only the rich bankers and wall street types at all. It was also the bleeding democrats that thought they could rescue lower class by giving them no down payment housing and interest only for a few years until the real estate appreciated enough to offset the fact that they had no money in the home to begin with...
Now the truth is those on wall street will be fine, they will work a few more years to cover their losses. But the losers if no package is passed is the lowest guy on the ladder...The house keepers, the yard workers, the single mom waitress that is laid off, the construction worker because there is no building or loan to build...the small shop that cash flow is off and this time the bank can't lend them money because they must carry 105% in assets for every 1.00 in loans, and their assets are marked to 20cents on the dollar because they can't sell them. Make no mistake, this is not a wall street issue, it is a country that tried to do good by allowing everyone to get loans and credit and it blew....was it also greed, without a doubt, but when it was time to slow down the cycles, the Congress failed to accept the fact there was risk in lending to people that were not credit worthy. And if you have money in the 401k or a pension plan, rest assured , you are part of wall street too.

[Nathan Mattox]

Where in the hell is Ross Perot!

[Doc]

To the editors:
You sed:
If you are under 13 years of age you may read this message board, but you may not participate.

I am over 13, but I seriously doubt anyone under 13 has an opinion on this subject anyone would care to read.
Heck, I've yet to see one by an adult that I thought was worth reading.

[ZDOKO]

NO BAILOUT OF ANY KIND!!!! NOT ONE PENNY!!!! LET THE CORPORATE CRIMINALS GO BANKRUPT!!!!! RON PAUL R3VOLUTION!!!!

[Jazz4]

The financial bailout of Wall Street bankers is hogging all the headlines and obviously millions will be affected as the problems spread across the economy in the coming months and years but the huge annual Defense Budget is passed without a whimper. No mainstream media debates the implications of spending close to a TRILLION every year. While the US as a country is mired in debt how can the country spend a TRILLION dollars?

[Peter D]

Isn't that weird that Wall Street is waiting for Democrat to vote YES on this bill, not Republican? Then, in turn, Wall Street will still support a Republican to be the President because Obama wants to raise taxes on them.

Weird!

[Vet]

What most people haven't heard yet is #1 How much is this going to cost me personaly?
#2 How the heck am I going to pay it when I'm paying % wise more than the guy that made all the money?
#3 Why should I give a hang what happens to some fat cat who likes shipping jobs overseas.OH and don't threaten me with gloom and doom.I'm living it already.Welcome Aboard!!!!!!!!!!!!!!!!!!!!!! JOHN Q PUBLIC

[Nicholas Ventimiglia]

It’s easy to hate the system and the powerful. But, before people reminisce about the good old days when bankers jumped out of windows maybe should contemplate a system to replace capitalism with; Communism? Feudalism? Maybe Anarchy - Mad Max didn't need to worry about food delivery.

The bail out (originally) worked by buying the CDO’s from the bank at extreme discount (22 Cents) and holding them until maturity (60 Cents). The gains from this ‘Bail Out’ could pay for a FDR style new deal, return jobs to the US (The Root Problem), and drop home interest rates to 0. We will become a nation of Tax Earners, doing well by doing good.

Instead I watch treasury rates fall as people panic out of the American system. Instead I watch money flow from long only retirement funds and into those skilled enough to short this mess.

P.S. If you really must do some lynching go ahead and find Phill Gramm(R-TX) and James Leach (R-IA) who lead the house in repealing the Glass-Steagall Act of 1934. This act prohibits banks whose chief business is investment, from playing with homes or the deposit banking business.

[smrr]

NO BAILOUT!!

Let the weak banks write off the assets, not you and I. Do not support the biggest transfer of wealth from the bottom to the top in history. They threaten we can't buy cars on loan - we weren't this year and we shouldn't - can't get education loans -- education prices are now extortionist - you shouldnt have to mortgage your life for a bachelors - and they don't in europe. You can't get a mortgage - I predicted this on LA Land - the end of mortgages - and you shouldn't get a mortgage if it's more than 3 x your income which it is now -- you retirement funds will suffer -- here's an idea -- move to cash --- let the market tank and assets do their price discovery and buy in again when the 20 year DOW bubble collapses.

No Bailout.

[subgenius]

A Better Bailout
By Joseph E. Stiglitz

September 26, 2008

The champagne bottle corks were popping as Treasury Secretary Henry Paulson announced his trillion-dollar bailout for the banks, buying up their toxic mortgages. To a skeptic, Paulson's proposal looks like another of those shell games that Wall Street has honed to a fine art. Wall Street has always made money by slicing, dicing and recombining risk. This "cure" is another one of these rearrangements: somehow, by stripping out the bad assets from the banks and paying fair market value for them, the value of the banks will soar.

There is, however, an alternative explanation for Wall Street's celebration: the banks realized that they were about to get a free ride at taxpayers' expense. No private firm was willing to buy these toxic mortgages at what the seller thought was a reasonable price; they finally had found a sucker who would take them off their hands--called the American taxpayer.

The administration attempts to assure us that they will protect the American people by insisting on buying the mortgages at the lowest price at auction. Evidently, Paulson didn't learn the lessons of the information asymmetry that played such a large role in getting us into this mess. The banks will pass on their lousiest mortgages. Paulson may try to assure us that we will hire the best and brightest of Wall Street to make sure that this doesn't happen. (Wall Street firms are already licking their lips at the prospect of a new source of revenues: fees from the US Treasury.) But even Wall Street's best and brightest do not exactly have a credible record in asset valuation; if they had done better, we wouldn't be where we are. And that assumes that they are really working for the American people, not their long-term employers in financial markets. Even if they do use some fancy mathematical model to value different mortgages, those in Wall Street have long made money by gaming against these models. We will then wind up not with the absolutely lousiest mortgages, but with those in which Treasury's models most underpriced risk. Either way, we the taxpayers lose, and Wall Street gains.

And for what? In the S&L bailout, taxpayers were already on the hook, with their deposit guarantee. Part of the question then was how to minimize taxpayers' exposure. But not so this time. The objective of the bailout should not be to protect the banks' shareholders, or even their creditors, who facilitated this bad lending. The objective should be to maintain the flow of credit, especially to mortgages. But wasn't that what the Fannie Mae/Freddie Mac bailout was supposed to assure us?

There are four fundamental problems with our financial system, and the Paulson proposal addresses only one. The first is that the financial institutions have all these toxic products--which they created--and since no one trusts anyone about their value, no one is willing to lend to anyone else. The Paulson approach solves this by passing the risk to us, the taxpayer--and for no return. The second problem is that there is a big and increasing hole in bank balance sheets--banks lent money to people beyond their ability to repay--and no financial alchemy will fix that. If, as Paulson claims, banks get paid fairly for their lousy mortgages and the complex products in which they are embedded, the hole in their balance sheet will remain. What is needed is a transparent equity injection, not the non-transparent ruse that the administration is proposing.

The third problem is that our economy has been supercharged by a housing bubble which has now burst. The best experts believe that prices still have a way to fall before the return to normal, and that means there will be more foreclosures. No amount of talking up the market is going to change that. The hidden agenda here may be taking large amounts of real estate off the market--and letting it deteriorate at taxpayers' expense.

The fourth problem is a lack of trust, a credibility gap. Regrettably, the way the entire financial crisis has been handled has only made that gap larger.

Paulson and others in Wall Street are claiming that the bailout is necessary and that we are in deep trouble. Not long ago, they were telling us that we had turned a corner. The administration even turned down an effective stimulus package last February--one that would have included increased unemployment benefits and aid to states and localities--and they still say we don't need another stimulus. To be frank, the administration has a credibility and trust gap as big as that of Wall Street. If the crisis was as severe as they claim, why didn't they propose a more credible plan? With lack of oversight and transparency the cause of the current problem, how could they make a proposal so short in both? If a quick consensus is required, why not include provisions to stop the source of bleeding, to aid the millions of Americans that are losing their homes? Why not spend as much on them as on Wall Street? Do they still believe in trickle-down economics, when for the past eight years money has been trickling up to the wizards of Wall Street? Why not enact bankruptcy reform, to help Americans write down the value of the mortgage on their overvalued home? No one benefits from these costly foreclosures.

The administration is once again holding a gun at our head, saying, "My way or the highway." We have been bamboozled before by this tactic. We should not let it happen to us again. There are alternatives. Warren Buffet showed the way, in providing equity to Goldman Sachs. The Scandinavian countries showed the way, almost two decades ago. By issuing preferred shares with warrants (options), one reduces the public's downside risk and insures that they participate in some of the upside potential. This approach is not only proven, it provides both incentives and wherewithal to resume lending. It furthermore avoids the hopeless task of trying to value millions of complex mortgages and even more complex products in which they are embedded, and it deals with the "lemons" problem--the government getting stuck with the worst or most overpriced assets.

Finally, we need to impose a special financial sector tax to pay for the bailouts conducted so far. We also need to create a reserve fund so that poor taxpayers won't have to be called upon again to finance Wall Street's foolishness.

If we design the right bailout, it won't lead to an increase in our long-term debt--we might even make a profit. But if we implement the wrong strategy, there is a serious risk that our national debt--already overburdened from a failed war and eight years of fiscal profligacy--will soar, and future living standards will be compromised. The president seemed to think that his new shell game will arrest the decline in house prices, and we won't be faced holding a lot of bad mortgages. I hope he's right, but I wouldn't count on it: it's not what most housing experts say. The president's economic credentials are hardly stellar. Our national debt has already climbed from $5.7 trillion to over $9 trillion in eight years, and the deficits for 2008 and 2009--not including the bailouts--are expected to reach new heights. There is no such thing as a free war--and no such thing as a free bailout. The bill will be paid, in one way or another.

Perhaps by the time this article is published, the administration and Congress will have reached an agreement. No politician wants to be accused of being responsible for the next Great Depression by blocking key legislation. By all accounts, the compromise will be far better than the bill originally proposed by Paulson but still far short of what I have outlined should be done. No one expects them to address the underlying causes of the problem: the spirit of excessive deregulation that the Bush Administration so promoted. Almost surely, there will be plenty of work to be done by the next president and the next Congress. It would be better if we got it right the first time, but that is expecting too much of this president and his administration.

[Taxpayer & Voter]

I was disgusted today by a tele-sales call stating that I may be elegible for the "New Economic Stimulus, Mortgage Program", so much so, I didn't stay on long enough to see who it came from. (The Bail-out had already been defeated for several hours when the call came!
Isn't this exactly the problem, somebody smells a possible give-away, and tries to drum up as large as possible a need for it?) Sure, sometimes, I'd rather have my payment money to do something else with, but I was raised that if you signed a contract, you stuck to it. What happened with the rest of America?

I HAVE ONE VERY REAL QUESTION: "IF THE FED CAN MAKE BAND-AID EMERGENCY LOANS TO SHORE UP "Banks, Bisinesses, or Individuals", WHAT ON EARTH ARE THEY DOING WITH ALL THE ARM TWISTING, FINGERPOINTING, CAUSING MASS HYSTERIA AND PANIC THAT'S PLUNGED TO STOCKMARKET INTO A TOTAL TAILSPIN!!!! THE AP ARTICLE I READ SAID THAT THE FED WAS READY TO MAKE "UP TO $630 BILLION AVAILABLE IN EMERGENCY LOANS UNTIL A BILL WAS PASSED!!!

IF THEY CAN DO THAT WHY ON EARTH ALL THE POLITICAL POSTURING THAT'S GOING ON RIGHT NOW, I THOUGHT WE WERE ONLY AFTER $600 BILLION WITH THIS WHOLE BILL.
Could it be to let the Fox escape the Chicken house, and take his feathers with him?

[forgotten%20citizen]

I was working in a mortgage company 16 years ago (though for 2 months only). at that time, if any dubious documents or suspicious activities, people would not get the loan. of course, people forget the documents or information to get the loan. Pretty much people had to commit crime to make loan. Of course, i was in the industry for 2 months only, but I have the feeling any living soul could get the loan in this century. My friend was underwrite in WAMU mortgage for a brief time. She got laid off 2 years ago. She told me how easy it is to get the loan approved. If she suspected any, the management including the VP of the division would pressure the approval of loans. The underwriters job was not to approve the loan or to verify document. their jobs were to sign the names. VP/Managers/loan officers/loan brokers/loan officers would push for the loan approval. People did not even have to use the brain to fabricate the income. The financial industry (Wall Street) created this mess, and they want us to pay. Those CEOs were rewarded big money for creating mess. Even after the crisis, they got golden parachute for killing the economy. starting with CEO of citi bank, countrywide, freddi and fannie mae, wamu, and so on. Many wall street people are not big fan of socialism to the poor, but they are big fans of socialism to the super rich. they want the communism for the corporations they screwed up. while they are enjoying the life with big pay (and no tax ) we have to pay all the taxes, and most of us did not even do anything to cause the problem (or some of them are loan officers, loan brokers, and borrowers who borrowed over their limit).
I understand the importance, but before we start negotiate the corporate communism, let's have some drastically measure
1) no compensation at all to lose money financial institutions who receive our money. The bail out plan has no effect on the current contract. THAT IS RIDICULOUS. Many people lose the jobs (laying off or get fired), what do they get. ABSOLUTE 0 CENTS TO THOSE EXECUTIVE MANAGEMENT FOR THE BAIL OUT
2) Before talking about bail out, have those CEO/executives (starting from Ameriquest, New Century, WAMU, Citiank, Freddie Mac and fannie mae, countrywide to return all their bonus (and not just their golden parachute bonus) back as an initial installment. The wall street want the corporate communism, let's start with real communism on those greedy executives
I know second one sounds too ridiculous, and it will not pass here, but I am not happy if any bail out money go to those greedy management. Yes, something has to be done to those greedy people.
of course, more regulation and oversight. Republican cannot just say more regulation will stop more investment. Yes it flows more investment and flow. We have to pay eventually, bigger

[1929]

Laura, this is in response to your post.... This bailout is a horrible plan and will not work. Look, there are a lot of things going on in this economy right now. High unemployment, consumer spending (70% of our econ.) is falling like a rock, and of course the credit crunch, but spending $700 B on banks that made bad bets will not solve anything.

However, this bill would not have solved anything. By the way, Bernanke just injected the banks this morning w/ $630 Billion dollars, almost the amount that Paulson wants. And guess what??? It did absolutely nothing!!! The Dow Jones was down over 300 points before the vote and that's when everyone believed it would pass. What a vote of confidence right?

This bill would have put us in debt that we could not afford, ultimately it would have cost over a TRILLION dollars! Or would you rather pay about $2,300 for each person that lives in your house right now, so we could pay for it up front? We as a country can not afford it, and need this money for the hard times ahead. Do not be deceived by the liars, who are Paulson and Bernanke. They've lied continuously and only have Wall Street in mind.

We need real solutions that will kill the root of our financial problems. Below is Karl Denniger's (from FedUpUSA.org) plan. His actually really makes sense. Look I lost a lot of money in my 401K, but that's OK, I'd rather save our country, then my money!

1. Force all off-balance sheet "assets" back onto the balance sheet, and force the valuation models and identification of individual assets out of Level 3 and into 10Qs and 10Ks. Enact this requirement beginning with the 3Q 2008 reporting period which begins next month. Total taxpayer cost: $0.00

2. Force all OTC derivatives onto a regulated exchange similar to that used by
listed options in the equity markets. This permanently defuses the derivatives
time bomb. Give market participants 90 days; any that are not listed in 90 days are declared void; let the participants sue each other if they can't prove capital adequacy. Total taxpayer cost: $0.00

3. Force leverage by all institutions to no more than 12:1. The SEC intentionally dropped broker/dealer leverage limits in 2004; prior to that date 12:1 was the limit. Every firm that has failed had double or more the leverage of that former 12:1 limit. Enact this with a six month time limit and require 1/6th of the excess taken down monthly. Total taxpayer cost: $0.00

[Mik]

We as Americans need to understand how economies work and the power of “The Market”. The companies that have failed and will fail in the future are companies that deserve to fail. This is because they are not using their resources in a manner befitting the economy. What happens when a company fails is that its true “good” assets will be sold to profitable companies who will probably continue to make profitable decisions which are good for the economy. It is common sense that “The Market” killed these bad financial companies. Therefore ANY bailout plan would go against common sense. As outsiders we have no obligation to buy bad assets from bad companies so that they can continue to make bad decisions.
Recessions are also not unexplainable and are, in fact, helpful to an economy. A recession comes about after a lot of poor decisions are made by businesses. It is the sorting out process of which businesses are fit to survive and which need to be liquidated. Think of a recession as a drug addict coming clean. In the case of the US cheap money and credit is the drug. By stopping the easy-cash-influx this will kill some companies, but it will allow the rest of the economy to survive and recover. If we do not do this the whole economy will die

[MKL]

I completely agree with forgotten%20citizen. Let's get those corrupt executives. Maybe that's what's missing in the bailout bill and that's why it was not passed. We need to bring them to justice.

[Steve]

Like it or not The USA has done considerable financial damage to the average person all over the the World [yes you do live in the World ], now for Christs sake just agree to the bailout and then sort your Government out it is after all the Us Government that agrees with the corporate Greed of Your Country , Hows this for a plan, Do the Bailout, then investigate the policy makers ,the bankers and anyone involved in over the top money making greedy adventures with other peoples money , then if found guilty of corruption or just down right greed give these people a few choices either give back some of the ill gotten gains [by way of excessive annual wage packets and bonuses ] to the Government to fund part of the bailout or send them to jail or even better take their money and then send them to jail [somewhere in the third world ] .
thats my opinion for what its worth.

Steve In Australia

[Mike D. Dvir]

Apparently no previous commentator tried to learn and understand the history and consequences of the 1929 Wall street crash.Wall street was to be blamed, but the consequent sufferings were universal.. The financial institutions , including the banking system is based on a constant flow of funds.If the flow stops for any reason ,the system colapses .If you suspect that the bank might not be able to repay your deposits .you demand your money back immediatelly but if many do so, rich and poor, the bank goes bankrupt..If many banks are suspected the whole system might colapse. If banks have no money to lend the whole economy may run into a severe slowdown that may cripple the entire nation.
It would be wonderful if you could punish the guilty without hurting the system. but unfortunatly this is impossible if the whole system is faulty. If there is an accident you will first provide first aid to the bleeding and rush them to the hospital before finding who is to be blamed for the crash and punish them. and repair what is needed to be repaired if the road is to be blamed.
You should bear in mind that you can deal with a forest fire as long as it is contained ,if the fire speads it is far more difficult to put it out before it consumes everytrhing in his way..

[Bernard]

Beware of the "mocking birds" making this a Bush - Obama thing - it is an American thing and the corruption of America that has been allowed to fester by all of our compromising of the principles upon which this country was founded.
Think long-term profit overall.
Think justice.
Think no quick fix - that is a hit or miss strategy - this is one we don't want to miss on.
Keep those who stand to gain big, out of the decision process.
Don't give what you don't have.
This debt thing seems to be running like a disease. Where have the days of thrift gone? Keynsian economics did not factor in misuse, and has fostered poor stewardship, elevated self-gratification, and lowered our appreciation for all we do have, leaving most in a pretense of want.
Roosevelt's New Deal was a fix for then - not to be a lifestyle.
National debt is a national disgrace - where has our honor gone?
How about the States' authority - we are the United STATES of America - not The Federal Government.
Too much big government intervention - look where it led - now to have them bail us all out - sounds like a catch-22. Would you trust the guy who shot you to be your doctor? If that is too graphic – you evidently can’t see how big this problem is and how rotten the causes have been.
Where else do you play outside of the rules to re-establish an equal playing field? It does not work.
Take blinders off - this is not the only area that "needs" bail-out - what about other market sectors failing?
How to run a prosperous country's economy - how about Joseph stewarding the affairs of Egypt - confirmed by history their great prosperity and HOW to steward.
Playing with a financial system with no standard – like driving on ice with no tire treads.
Historians see – look at problems AFTER gold standard dropped, debt infiltration allowed to run rampant, give-a-way programs’ true results – all made a morass of confusion and pile of problems. You can repair with a solid weld, or with another cheap band-aid.
Don’t our leaders pledge to uphold the Constitution of the United States of America? How does this fit?
Global economy – built on our tax dollars – see if they come back to help when we need it. Oh, it is their problem too . . . evidently they don’t even want to help themselves – but will continue to help themselves to our abundance at our expense.
Beware of fear-motivated decisions.
God bless America.

[smrr]

Tom,
The argument in today's column is about market fall hitting 401Ks. 401Ks are investment instruments and are subject to the risk of the funds you put them in. Why not just advise people to move to cash until the market turmoil ends?

[susan]

Obama's National Finance Chair/Top Fundraiser/Bundler, Penny Pritzker, cost the American taxpayer $460 million with the bailout of Superior Bank in 2001. After the bailout, the Feds sold Superior's bad loans to EMC, a subsidiary of Bear Stearns. Now with this proposed bailout, the American taxpayer will be buying them again. Penny Pritzker was Chairman of Superior Bank FSB, while her Chicago-based family sat on 50% of the board. Under Penny Pritzker's direction, Superior underwent a nationwide campaign of subprime lending for single family loans, auto loans, mobile homes, multi-family, and commercial properties

Two weeks ago, the nation’s most powerful regulators and bankers huddled in the Lower Manhattan fortress that is the Federal Reserve Bank of New York, desperately trying to stave off disaster.

As the group, led by Treasury Secretary Henry M. Paulson Jr., pondered the collapse of one of America’s oldest investment banks, Lehman Brothers, a more dangerous threat emerged: American International Group, the world’s largest insurer, was teetering. A.I.G. needed billions of dollars to right itself and had suddenly begged for help.

The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein, The New York Times’s Gretchen Morgenson writes, had particular reason for concern.

Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to The Times, which cited six people close to the insurer. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, The Times said.

Days later, federal officials, who had let Lehman die and initially balked at tossing a lifeline to A.I.G., ended up bailing out the insurer for $85 billion.

Their message, Ms. Morgenson says, was simple: Lehman was expendable. But if A.I.G. unspooled, so could some of the mightiest enterprises in the world.

A Goldman spokesman told The Times that the firm was never imperiled by A.I.G.’s troubles and that Mr. Blankfein participated in the Fed discussions to safeguard the entire financial system, not his firm’s own interests.

Yet Ms. Morgenson’s exploration of A.I.G.’s demise and its relationships with firms like Goldman offers important insights into the mystifying, virally connected — and astonishingly fragile — financial world that began to implode in recent weeks.

Go to Article from The New York Times »

am sure this is one of the reason, why the bailout bill did not pass?
Paulson’s conflict of interest.
Making government bigger
He did not introduced this plan the right way.
Now American should send a strong message.

[Dude]

Pretty quiet on this blog since the Dow tanked $1 Trillion. $700B vs $1T, either way, what the ocean want the ocean gets. Hope no one was planning to retire soon.

[Donna]

NO BAILOUT FOR WALL STREET!!! At least, not yet. Why is this such a disaster now when we have a new administration coming in just a few months? We need to be careful about anything that George W. Bush wants to "fix" for us. Have we not learned anything in the last 8 years? This is clearly a last ditch effort to take the American people for every last penny possible. If we have $700 billion lying around now, it'll still be there in a few months when the new President takes office. We should hope and pray that Congress catches on before it's too late.

[Michael Malone]

Being able to give an opinion on a forum is an outstanding source for concerned individuals as myself. I am by no means an expert in economics (who is, really) but it seems to me that FEAR is the only thing driving our economic downturn.
I don't care if Washington Mutual exists tomorrow, it doesn't affect me personnally. Isn't that what this is really about, how it affects us personnally? Do you really care what money goes where, as long as you have a job tomorrow? If you have children, don't you want them to enjoy their lives everyday? I want to provide for my family, and have security in my life, what about you?
This stimulus that our government is trying to hash out, who will it benefit the most? Will it benefit me as a consumer? I already have a home, with a fixed mortgage that I am going to pay every month (as long as I have a job). I have credit cards that I pay off every month. I am a responsible adult who analyzes my debt to income ratio to ensure that I can pay my bills. Why should I suffer for the ineptitude of others, be it the large financial institutions that can't pay their bills, or the middle income person on the street that shouldn't buy the expensive cars and houses at an outrageous interest rate just to debunk on the loans?
FEAR AND IRRESPONSIBILITY HAVE CAUSED THE DOWNTURN!!!!!!
Just two more points I would like to make. First, I heard Newt Gengrich speaking about "Mark to Market" last night. I don't fully understand it, but Newt was sure that if we suspended it, our economy would make a quick turn around. This sounds like a great idea, and I have read great ideas on this post, but there is a problem. These ideas don't seem to be in the thoughts of the people that can implement them. Didn't we as a people elect these officials to solve major problems for our country? Don't you think these elected officials would be able to think of these solutions? Come on, people on this post did it, why can't someone who gets paid to solve problems do it.
Second, I have heard the word "CRISIS" a lot when it comes to the economy. I AM ONLY GOING TO SAY THIS ONCE! IT IS A SCARE TACTIC!!!!
The economy is a problem, a big one. It is yet to become a crisis. GOVERNMENT, SOLVE THE PROBLEM BEFORE IT BECOMES A CRISIS! THAT IS WHAT WE HIRED YOU FOR!!!!!

[Gary%20Noel]

If Wall Street wants my support for a bailout, they first have to apologize to both Al Gore (global warming) and Jerry Brown (era of limits). It would be nice if the developers would also apologize to the environmental community. Then auto companies have to apologize for their refusal to accept mileage requirements. If there was an apology to Ralph Nader, I would consider that extra credit. There might also be some people who think that recipients of IMF loans under very onerous conditions could also be due an apology. Acceptance that you have done something wrong is the first step in receiving forgiveness.

[Jeff lIttle]

>Welcome to the "Bush" Depression.
We never left the Bush Depression from 2001....

[READ THIS]

http://www.stopthehousingbailout.com/

[macy]

Could everyone please stop acting like we're too stupid to understand the seriousness of the situation? We are not. We do not trust anyone.

Unemployment is at a high (I'm one of the laid off), but there is no money for extended unemployemt so I have to tap into my retirement. And I get penalized.

I'm late on my credit card bills, so my interest rate goes up to 29%.

I can not make payments on my medical bills, so I get turned over to collections.

And all of this before this newest crisis.

And I'm supposed to bail them out?

Idiots.

[kris]

Wait just one second.

Are these the same credit markets that thought consumers got away with too much a while ago?

Karma's alive and well.

[julia]

I've been in trouble for some time now. I lost my job 5 months ago. I have lots of skills, a college degree, and lots of experience, but I can't get hired.

Like others, I'm in financial trouble and I'm paying the price for not having over 6 months of living expenses saved up.

The credit markets will do nothing for me. As a matter of fact, the more I'm in trouble the more they charge me. They see this as me being forced to take responsiblity.

But they want to be bailed out?

And nobody in government sees a problem with this.

[LC]

Everyone needs to get a hold of the facts. The real underlying problem is with the total amount of Derivatives and to understand what "Derivatives" mean go to kereport.com as Bob Moriarty speaks out today 9/30/08 and defines it. The scope of the financial crisis is world wide and the $700 billion they are asking for is only one 1/1000 th of the 596 Trillion dollar financial crisis. . The mainstream media doesn't have a clue.
Bush, Paulson, Bernacke and the boys are just infusing fear in the people about U.S. economic collapse when the $700 billion is just a crumb of the pie and can't heal the enormus wound. The $700 billion is about protecting the very few who control the money and has nothing to do with protecting the people. The inevitable crash will hapeen, the question is when?

[revolutionary]

Government = FAIL

Wall Street = PWNED

I can't wait to see the last of both of you.

What a wonderful opportunity to start all over.

[marty]

without bailing out the ordinary people you will see major discontent . They will burn down wall street and the banks. The people living on pennsylvania ave and capitol hill need to look to first street and main street not wall street to solve thge woes. lower interest and make it available to community bankks under an emergency act and the hell with the big guys. Refi at 4 and lower the payments and keep people in their homes. Bay late and over limit fees and drop interest on credit cards to 14%. Usury is killing the economy.

[Gus]

To paraphrase a loser: "No way. No how. No Bailout!

[shawn rheal]

I believe that this bail out is bad, we need secure this 700 billion and do with it by out lawing adjustable mortgages for good these mortgage companies purposly drove the market in the whole to hit up our tax money with adjustable mortgages dont let it happen again. stop bail out and make mortgage companies pay buy only bailing out for fixed mortgages.

[Cyndy]

Americans are being told that this bail out will help them today. I work in the market with sellers in foreclosure. The FHA guidelines being changed did NOTHING to save a single one of their homes, and I have hundreds of files that illustrate that. This plan will NOT do a positive thing for main street, and main street has already figured out how to deal with this, anyway. NO to any bail out of the banks. They sold those loans off, in many cases for 22 cents on the dollar. This bail out will reimburse them for 100% of the loan amount, which will mean that they're now ahead at taxpayer expense. NO to any bail out. This is a scam, and Bush is trying to push this through in an emergency status, just because he's leaving office in a few weeks. NO BAIL OUT!!!

[debara]

Ok, whatever your beliefs are, surely we can agree it was not so simple or straightforward to get to this page.

The LAT would prefer we don't get too far from the(ir) prescribled ideal.

They hate the GOP, the GOP voted more for this stupiid bill than than the Dems,. and now all analysis shall be buried under difficult to navigate pages.

Touche' Dems. You really do hate us quite as much!

Hope you all get along in Hell!

[Bill]

The government's proposed bailout is a failure regardless of how the
our leaders in the senate or congress vote. The plan fails to address to causes of the crisis and strictly aims at getting back to "business as usual" . How can it be a good thing for the govt to take on all this bad debt that crushed banks that had been in business for over 100 years? Sure it will free up the banks to begin lending again, but is that what we need right now? More debt? Debt is at the root of all of our economies woes. Putting an additional trillion dollar debt squarely on the shoulders of the American tax payers is hardly a solution. It's merely a new govt. funded bubble that follows the "tech" and "real estate" bubbles. Meanwhile the root causes of the crisis rremain unchecked. People are still getting subprime loans for goodness sake! Maybe we should plug the hole before we start to bail out the boat. This will only prolong the recession. Americans need to man up and bite the bullet on this otherwise this will turn into a 10-20 year recession rather than a sever 2-4 year recession.