A bailout on this scale is simply rewarding the negative behaviors of the investment class. There is no incentive to look at and assess risk if you know the government will come along with a blank check. The investment firms and their insurers should feel the pain from their overly risky loans and investments. It that bankrupts them, well at least they will have learned their lesson.

Let the market collapse, and take the $700 billion and have the government build some infrastructure-- schools, bridges, mass transit, dams, and hospitals (and perhaps, lets stop sending our money to Iraq). If the problem is a lack of liquidity, or even if the problem is simply an unwillingness to loan money, then let's eliminate that part of the economic system; instead of local government borrowing money, let the federal government pay cash. Instead of requiring a corporation to borrow money on unfavorable terms, let the government pay cash. Large government contracts buying things and building services will have the same effect as bolstering private investment firms with the added value that the taxpayer (who is paying the bill and assuming the risk) actually gets services like better schools, better hospitals, better bridges and better mass transit.

If we create a special commission funded with taxpayer money, the taxpayers don't get anything but a lot of risk, a nebulous system doling out their money, and the shitheads who got us into this mess get to play with more money.

ABC has a test at the address below to see whose
campaign statements, McCain's or Obama's, you agree with most. They don't
tell you who made the statements, of course, but provide a statement made by each
candidate on the same topic (economy, immigration, judiciary, etc.)
side by side.


You just pick which statement you agree with and, after
selecting all 13, you will see who your candidate is.

http://www.abcnews.go.com/Politics/MatchoMatic/fullpage?id=5542139

Cops: Carjacking in Jersey City last night

by Paul Koepp/The Jersey Journal
Wednesday September 24, 2008, 1:23 PM

Two young men made off with an Audi S6 in a carjacking in Jersey City last night, according to police reports.

A husband and wife were parking their 2002 dark blue sedan at Duncan and West Side avenues at about 10 p.m. when the men approached, police said.

One brandished a handgun and said "Give me all you got," according to reports. The couple got out of the car and watched their assailants drive south on West Side and out of sight, police said.

They told cops they could identify at least one of the carjackers, who also stole identification cards, credit cards, a cell phone and a portable satellite radio that were in the car.

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No I've never been a supporter of that. I'm not sure that social security has a direct tie-in with this discussion of the bailout. To be honest I'm a little surprised you'd ask me of all people that if you've read any of my posts on the Barack Obama thread...

If you want to get into what we should do about social security, I'm happy to discuss that with you, but I am not sure it's topical to this thread.

HopStop is a good site.

I think google has always (or at least for the last year or so) have had the station icons on the map (when you zoom in you can see the name of the station and all the connections), but this must be a new feature to have the lines drawn on the map as well... Looks very cool

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OK, fine, i agree with you 100% on point #1, they should not have ever been in this situation and yes, they should be held accountable.

The bailout is NOT a big FU to the taxpayer, especially considering they will most likely make out like a bandit on the deal they got. As for your 2nd point in your 2nd paragraph, i don't get what you're saying. Do you want the stock to go UP? If that's the case, why set such punative terms to the bailout? If you want the stockholders and everyone associated with the company to be punished, shouldn't their stock go to zero? You can't have it both ways....

What follows is a long (and some would say boring) explanation of how some of this stuff works. If you have no interest in how this bailout works and why it is occurring, just move along.

Lets start at the end of what AlexC just said:

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Price Discovery is a nice thought in theory, but I'm sorry my friend, but there is no "natural" price discovery right now. What you have right now is forced sellers vs. opportunistic (vulture) buyers. So lets use a typical scenario. I have to sell a bond, i get bids, best bid is 50 and I sell it. Now everyone else who owns a bond like mine has to "value" their security at or near 50. That triggers other who now have a huge loss to sell, so they sell except this time it sells at 40, and that triggers...........

You see where I'm going with this - it's a downward spiral. Now keep in mind that these "losses" come thru people's balance sheets, they have less capital, and now have to go to the market and raise capital (that generally means selling stock in their company or other similar securities). Selling stock dillutes the value of current stock holders which send their shares down, and pushes the prices of stock indexes (the Dow, the S&P, etc) down as well.

Now don't get me wrong, it's not just mark-to-market accounting that's causing the problems, banks won't lend to each other any more either. If i don't know what's on your balance sheet, if i think you're insolvent, why should i lend to you? If you can't get money in the door, you can't send it out and if you can't pay your debts, you go bankrupt. Something has/had to be done to stop this vicious cycle - unless you want the financial world to topple. Some of you do, i think that's probably unwise.

Ok but lets move on to the plan and how you value these securities....

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Look, you haven't seen his assumptions or his projections, so you really don't know how he is/will be valuing these securities. I will say this though, his Pimco Total Return fund is one of the best performing bond funds in the country, so he has largely avoided this fiasco, he's a smart guy with a long track record, I think i'll take his projections over yours (no offense).

But once again, these securities are backed by mortgages and as you know, people pay (or don't pay) their mortgage every MONTH. So as time goes by these securities get payments of principal and interest every month.

The point of this program is to clear these bonds off of balance sheets so that money can start flowing in the system and banks/financial institutions can start lending again. My guess is that there will also be language in the bill to help prevent foreclosures...so what does all this do? REFINANCINGS!! And why is that good for this program... Well if you buy an asset for 50-60cents on the dollar, and then the person who's mortgage you own pays you back, you just doubled your money (paid 50c and got paid back $1).

But forget about all that -- when you pay 50c for $1 in assets, you don't even need all your money back to make a good return! Think of it this way, if you pay $10,000,000 for a set of mortgages with a face value of $20,000,000 and lets say for the sake of argument that your bonds represent 100 loans and each of them was worth $200,000. Lets say half of them are deadbeats and won't pay you, OK, so you foreclose on them and now you've got their house, is their house worthless? Of course not! Ostensibly (Even if they put very little money down) it was worth more than the $200,000 loan they took out at the time of purchase, maybe it's only worth $150,000 now, maybe only $100,000 but it still has value to SOMEONE!

So you probably get half your money back on half your loans through foreclosures, short-sales, loan modifications, etc etc, but that's $5mm and presumably the other half is still paying you (for the next 20-30yrs, since they probably took out 30yr mortgages). So tell me, how is your $700mm going down the drain? If the government were paying $1 for $1 in sh*tty assets, i would have a problem with that. They simply are not.

Furthermore, given that the government will own all these securities (plus the fact that they're...the government) they'll be able to get some leverage over servicers to stop the foreclosure process for many of these borrowers, rework their loans, keep people in their homes etc etc. That will further protect the government's investment in these crappy mortgages.

I don't expect you guys to agree that this is the only/best/ideal solution, I just expect you to understand the basic mechanics of what is going on here. The Government will be paying "cash for trash" but they certainly aren't paying top dollar for the trash....

Finally if you've read this far, some housekeeping items:

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Lehman has $650bn in assets and $614bn in liabilities. They do NOT have $650bn in *mortgage* assets though. Those assets could be corp bonds, government securities, loans, etc etc. So once those assets are liquidated or divvied up, they'll be used to pay Lehman bond holders and chances are those guys WON'T be happy with what they get...

Your other number $500T of credit default swaps is vastly overstated, not sure where you got that number. That is a whole other story, but that number is more like $62T. That issues is beyond the scope of this bailout and regulation there shouldn't be very difficult to enact.

Have a great night! And if you have a better solution write your congressman or post it here on JCList. But my guess is that if it involves the financial system collapsing, you might not get very far, and for your sake, i'm hoping you've converted your FDIC insured bank account into Gold & Silver!

Good for them. A majority of other states (not NJ or NY) have banned the use of eminent domain to seize property from a private owner and hand it over to another private owner. The incentive for corruption when one private entity can get the government to give them an involuntary good deal on someone else's property is obvious.

The attempt to seize the Flamingo diner and the Golden Cicada failed, hopefully this will too. I find the argument that the property is ten years away from being developed mystifying - how is that an argument for seizing it now or ever?

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Whatever you're forced to buy outside of downtown JC is what the downtown market could support, plus any luxuries or leisure items (if done properly). I could use a good hobby store, a CD store, a Rita's... I dunno... minigolf? Pool hall?

Mark.

getting this order effected on the municipal level statewide will be interesting to observe!

and an EQUITY PLAN would certainly be a whole lot easier to manage !

Cash for Trash

By PAUL KRUGMAN
Published: September 21, 2008
New York Times

Krugman is DEAD ON, though somewhat long winded about it.
Why should the taxpayer's purchase these MINCEMEAT Toxic Assets, whose value cannot even be assessed, instead of EQUITY!

Congress needs to see the plan for what it is & not be pressured/diverted by the current administration's bum's rush into thinking that they need to merely modify what is being served up.

Why not look beyond the Goldman mentality of the current designers of the plan to Other Econimists & draft a better plan based on buying EQUITY?

I have a question for Wibbit and SLyng

1. Were you two ever supporters of investing Social Security funds into the stock market?


I don't hear Republicans pushing the privatization of social security in the last few weeks, I wonder why...

This is nothing more than a massive transfer of wealth and power to the financial elite.

It's amazing to sit back and watch people who have praised neo-liberal economic policies around the globe (condeming millions to poverty) and at home when it comes to labor unions, distressed industrial companies, poor single mothers now call for the largest government intervention ever in the economy which not surpsisingly will primarily benefit the financial elite.

Ben Bernanke made his name in Academia studying the great depression. I had to sit through Econ professor after Econ professor (influenced by Bernanke's research) talk about how government intervention in the economy during the great depression (legalization of labor unions, public works projects etc) actually prolonged the depression and that the best medicine for third world countries is to de-nationalize assets and allow their currencies to float...now these hypocrites are asking for a 700 billion dollar wealth transfer.

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Absolutely, the Great Greed Meltdown 2008?from the 12 year old who thinks they?re entitled to a $400 pair of jeans, to the Middle-income guy who thinks he?s entitled to a big screen tv in his refinished basement to his stay-at-home wife who thinks she?s entitled to a $90,000 suv, ?..Surprise!!! That interest-only mortgage just kicked-in, and your payments just went from $2,000 to $6,000, to the Bank?s who handed out these loans like Kohl?s flyers, to the CEO?s and their Golden parachutes, to the Government and our ballooning debt??Where?s the accountability? .We got greedy, greedy, greedy. Of course, the guy with the mortgage over his head is no comparison to these Wall Street a**sholes?. But, there?s a price to pay. And, we?re the one?s who are gonna pay it. I say let the Fed bail them out again, but this time we should all demand a $2300 voucher to personally reinvest in the market ourselves?..Forget Warren Buffet, we should get a chance at a piece of the pie?Afterall, aren?t we the one?s who are about to rescue the world from Economic meltdown

My web research into the soil is issue revealed that plants primarily deposit contaminants into their leaves rather their fruit. So tomatoes in the ground are okay, lettuce not so much. Actually, the only leaf crops I grow is herbs like basil, mint and parsley, in pots. In other pots and barrels and raised beds I grow green beans, sugar snap peas, heirloom climbing zucchini, cucumbers, cherry tomatoes, strawberries and bell peppers. In the ground I have grapes, arctic Kiwis, raspberries, and a recently planted fig I grew from a cutting liberated from an overhanging tree in Hoboken. The great thing about the vines is that they're rooted way down in the water table, I never water them. You can grow enough green beans in a barrel for a family of 4 to eat beans 2 or 3 times a week. Here's a photo of my zucchini barrel, looking more like a zucchini tree. This was a few years ago, if you look behind the left side of the zukes, you can see my failed experiment with sweet corn in a barrel. It was pretty poetic and fun to look at, but apparently you need a large patch for them to pollinate properly.

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AIG should never have been in this predicament to begin with. So what if they have to pay a whole lot more back? Shouldn't the decisionmakers of these corporations be held accountable?

The bail out is a big FU to the taxpayers (many of whom have invested their retirement funds in the MANY mutual funds that AIG is part of). Damn right AIG should pay a stiff penalty.

I'd much rather see that 700 billion bailout / improve our education and health services for all and have a similar system as our cousins in Canada.

Is this 700 billion the government has on hand coming from savings, or are they just going to simply print more money ?

I guess Mr. Mocco didn't grease Mr. Lambiase's hand like everyone else who gets things done illegally in this city so now he feels he has to go after him. It's a shame. People try to do good for the city and they hammered. Have you ever tried to go to 30 Montgomery and get a permit to do work on your house it's ridiculous. There are people who abide by the rules and then there are people who grease some palms and get what they want. Just drive around the city and you'll see all these illegal driveways, some aren't even big enough to put a car in them but they are there, this way that person will always have a spot in front of his house. Wow I wonder how much that goes for now a days.

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His projections assume that the market for these instruments will recover. He is using the same models that got us in this mess in the first place : real estate values will go up.

That's a big IF. It may never recover, and the taxpayer will be on the hook. I think the $700B is just the beginning. Lehman alone had $650B of holdings that must be liquidated. There's $500 Trillion (with a T) of derivatives floating out there, a lot of which must be delevered. Debt destruction must proceed.

There must be natural price discovery - who's going to determine the price for this toxic cesspool? We should let the market sort itself out. After (IF) it blows up, we can rebuild, and there will be incredible opportunities on the other side of the equation.

i want that Chevelle that parks outside. now.

That bar cracks me up. I have seen some severly drunken people stumble out of that place. Love it.

It's going to compete with the crazy puerto rican makeshift bar that blasts music across at Columbus and Coles. I wouldn't want to see that place go. Where will I get my fill of crazy drunk people? Oh wait, it's Jersey City.

I too have been growing more food in my tiny DTJC backyard... but only in containers. I am quite hesitant to eat anything that comes out of the ground in a city with so many chromium dumps and other brownfields. I second the notion of getting soil tested or sticking to containers.

Some of the terms of the AIG bailout for those interested (Point 1 & 2 are "old news" point #3 is the most interesting):

1. The government took control of AIG, agreeing to lend the firm $85 billion in return for preferred stock that represents a 79.9% equity interest (I.e. government now owns 80% of AIG)

2. Interest on the credit line will be based on the three-month London interbank-offered rate, plus 8.5%. (that's about 12% right now)

3. The company will pay a commitment fee on the credit line of 2% of the facility on the closing date, AIG said. And AIG will pay a commitment fee of 8.5% a year on the amount it does not draw down.

This is the kicker my friends! Right off the bat, they've just paid the government $1.7bn (2% of the $85bn) and even if they only use say $35bn of the credit line, they still have to pay 8.5% on the $50bn they DON'T use.

So is that a "bail out" or a big FU to AIG by the government?

Thanks for posting about this. I definitely want to check it out... I really need to find a cozy coffee-shop in JC.

The guy should just pay the City what he owes and be done with it.

I've been growing tomatoes, (cherry, plum & medium/large ), several varieties of basil, rosemary, thyme and several varities of bell peppers (purple, red, green) for some time now in my back yard. Only herb I have problem with is growing Dill but then all of the above are grown in containers on my [redacted ].

Squirrels are my only real problem and sometimes the birds nipping off early blooms of tomatoes. Will start planting veggies in back yard once I get a soil analysis of any toxic metals in soil that may be there. For now I stick to container gardens particularly my EarthBox which are terrific planting systems and idiot-prrof for any urban gardener!

From the 2008 Republican Party Platform: "WE DO NOT SUPPORT GOVERNMENT BAILOUTS OF PRIVATE INSTITUTIONS"

"We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself."

The 2008 Republican Party Platform, adopted earlier this month

http://www.gop.com/2008Platform/Economy.htm