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Re: What does everyone think of the Bailout?
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Globalization IS a good thing. The problem with the current global market is that resources, manufactured goods, ideas, and services are able to traverse borders, but labor cannot. Workers must have the same fluidity as their jobs so that if a position is outsourced from one nation to another, the surplus labor can move along with the job.

However, back to the US Automakers-- without a universal healthcare system, the cost of providing healthcare to the employees has depleted the US Automakers ability to compete. Sure, they also were taking profits when the times were good, but too much of the balance of their profit was diverted into health benefits for their employees away from investments in innovation. Its not just the actual cars like the Japanese hybrid technologies, but basics like the manufacturing process as well.

Last year as high fuel prices shrunk the market for larger vehicles, Japanese automakers simply converted their flexible factories into producing more compact cars to meet demand. They converted the factories in weeks. The Detroit automakers, who also had a shortage of compact cars, could only close SUV factories while still not producing enough compact cars; there was no way to convert large vehicle factories producing undesirable products into factories producing the merchandise that was in demand. The difference is that instead of investing in modern production systems that have the ability to produce multiple products with a minimal effort, the American companies were pouring money into the healthcare of their long retired workforce.

Universal healthcare is not this exotic, untested system. Europe, Canada, most of the third world have provided some form of national healthcare for decades. Healthcare should be like any other necessary service provided by the government. We don't question the responsibility of the government to provide tap water, or put out fires, or provide police protection, or provide for retirees-- so why is providing a basic service like healthcare so difficult to give, universally, to all citizens of the country?

Posted on: 2008/11/13 14:35
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Re: What does everyone think of the Bailout?
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And they say globalization is a good thing !
The same can be said how we get 3rd world countries with cheap labor cost (China & India) to do all our dirty work - then try to enforce carbon sanctions on them and deny them the same 'quality of life' we have.

As a nation we sure love to be global dictators !

Posted on: 2008/11/13 11:30
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With the bank bailout we were supposed to buy up the bad loans. Then we'd sell them at some point and get our money back. Maybe even make a profit. Well, as Paul Grugman predicted, we didn't buy the bad loans, we wrote them a blank check. Now the money's gone, we're not getting it back and the stock market is still tanking. Now they have their hands out for more. I don't know...

-Edit-

Nice...

Asian markets tumble as bad news stacks up

AFP
13 November 2008

TOKYO: Asian stocks plunged Thursday, dragged down by heavy losses on Wall Street after the US government dropped a plan to buy up toxic mortgage assets and new signs of recession emerged in Europe.

Glum link...

(Boxcar Willie anyone?)

Posted on: 2008/11/13 10:32
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Re: What does everyone think of the Bailout?
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Hero, I agree, NO one wants people to lose jobs. No one.

But, the problems with GM go far beyond the gas crisis.

If they get the bailout, and I was a decision-maker in GM, I would:

Bury Hummer.

Kill off Buick and pontiac.
Buick is done. And mostly all of the Pontiac cars are copies of the 2002 honda civics. Their brand is worthless.

I'd merge all the Saturn cars into Chevy.
They are basically copies of each other, but the saturn brand has no more value than chevy does. They ran that into the ground over the past 7 years.

Saab is a great car and a great brand.
But no one knows them. HUGE ad campaign. They should lower their price pts to be slightly lower than audi and bmw, and steal market away from a3 and 328i buyers. Maybe pull some VW people.

People need trucks, no matter what gas prices are, but they don't need to have 90 versions of the same truck with a different logo on it...

Killing off buick, pontiac and saturn, they should create a NEW BRAND that makes ONLY hybrid, or alternative fuel cars. Not hybrids of all-ready failing models. (They have it all backwards...Thinking that making a hybrid of a failing car will increase sales, instead they now have two failing cars...)

The technology is there, I don't care if they run on bio diesel, flubber, or freaking hamster power. Someone needs to set a standard, and the best way to do it is with a whole new BRAND.

Posted on: 2008/11/13 6:36
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hero69 wrote:
It's amazing how narrw-minded so many people are, including GM and Ford as well as so many people on this board.

1. GM, Ford and Chrysler are asking for loans to tide them over until 2010 when union concessions give in.
2. They could not have foreseen gas prices skyrocketing and sapping demand for the big SUV's which had been the moneymakers although I think they should have been focusing on mileage efficiency years ago. But consumers wanted SUV and pickup trucks, who fault is that?
3. How many thousands and thousands would lose their jobs? How do you feel about 10% unemployment rate for the US? Wouldn't that bankrupt most unemployment funds and teh US pension benefits guarantee commission?


Making SUVs by using a truck chasis was the auto industries way to get around having to adhere to CAFE standards. If you don't think there is collusion with BIG OIL you are sorely mistaken.

Posted on: 2008/11/13 6:17
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Re: What does everyone think of the Bailout?
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It's amazing how narrw-minded so many people are, including GM and Ford as well as so many people on this board.

1. GM, Ford and Chrysler are asking for loans to tide them over until 2010 when union concessions give in.
2. They could not have foreseen gas prices skyrocketing and sapping demand for the big SUV's which had been the moneymakers although I think they should have been focusing on mileage efficiency years ago. But consumers wanted SUV and pickup trucks, who fault is that?
3. How many thousands and thousands would lose their jobs? How do you feel about 10% unemployment rate for the US? Wouldn't that bankrupt most unemployment funds and teh US pension benefits guarantee commission?

Posted on: 2008/11/13 6:06
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Re: What does everyone think of the Bailout?
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This bailout garbage is getting out of hand. And the more we give, more companies start sticking their hands out... I don't want to see thousands of people lose their jobs, but GM should have seen this coming 10 years ago. I mean, who the hell is buying pontiacs or buicks anymore. Buick should make ONE car, call it the Senior Citizen and discontinue every other model. The Hummer, one of the worst ideas in the past 100 years. And, the only thing that is saving Cadillac is Hip Hop videos. I think the new Escalades come standard with 4 hooded out thugs in the back.

Gm needs to restructure from the ground up. They need to be innovators not imitators, and they need to FIRE every SINGLE person involved with their marketing effort. That's how they can survive.

Our government cannot afford to bail out BAD businesses.

Posted on: 2008/11/13 5:54
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Instead of modernizing the auto industry has used it's money to lobby and collude with big oil to continue producing the same crap for years. During WW II they were able to switch over to producing tanks and jeeps at several of their plants in a matter of months. We need a program to push our manufacturing capabilities into the future and start producing smaller, more fuel efficient vehicles within a few months. Instead of a bail-out they need a "bitch-slap".

Posted on: 2008/11/13 4:37
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This bailout is bogus - how can we call ourselves capitalists by not allowing our corporate world to sink or swim.

I bet there would be 'others' out there just waiting in the wings to snap up some cheap opportunities - Just like the banks who hover when people foreclose and take the house and any money defaulters had paid into it.

The rich get richer and protected, while the rest of society just polish their shoes.

Posted on: 2008/11/13 4:15
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ianmac47 wrote:
One of the biggest expenses the American automakers face is providing healthcare, not just to their current employees, but their retirees. Its been said that GM is a health insurer that also happens to make cars.

If only there was some sort of organization that could provide healthcare to anyone who needed it...


I agree 100%. One of the biggest burdens on all corporations large and small is providing Healtcare. I think universal healthcare could ease this burden.

Posted on: 2008/11/13 2:46
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One of the biggest expenses the American automakers face is providing healthcare, not just to their current employees, but their retirees. Its been said that GM is a health insurer that also happens to make cars.

If only there was some sort of organization that could provide healthcare to anyone who needed it...

Posted on: 2008/11/13 2:34
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re: "big 3" bailout

Just another thought:
Many countries aid their auto companies in various ways because they believe it is in their country's best interest to build/maintain auto-manufacturing capabilities.

China's ambitions in auto manufacturing are naked.

Japan protects their industry from competition domestically.

Korea has a history of assisting their auto industry.

I believe France and Italy have a history of aiding their auto manufacturers as well.

The one big example of a nation letting go of auto manufacturing is the U.K. If there is one precedent to show that letting all domestic auto corporations fold, merge, or be sold off to the highest bidder can be A-OK, it's the example that the UK has set. So far, they're doing OK without domestically owned auto production.

Posted on: 2008/11/13 2:12
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Quote:

injcsince81 wrote:
Quote:

Br6dR wrote:
Still think the bailout was a good idea?



Obama certainly did.

And the Democrats are pushing to bail out GM as we speak.

We'll have nationalized banks and major auto makers.

Discuss.


re: GM bailout

Ughhh...whether to let the "big 3" go bankrupt with no chance of recovery or extending a government loan to "the big 3" to prolong the misery...

It's like a discussion about whether diarrhea or vomiting is more pleasant.

The free marketer in me says "good riddance" to GM, Ford and Chrysler. In principle, the strongest survive and the weak and dumb die.

The pragmatist in me knows that it's not a good idea to let Michigan implode and to cede the art and science of auto manufacturing (the most technologically advanced manufacturing techniques, bar none) to corporations based in other countries.

It's a big dilemma that requires a wise executive decision. Given that the industry is on the cusp of a technological renaissance, my gut feeling is that keeping GM and Ford around is a good idea for now... no matter what it takes. Even government intervention.

I'm open to brighter ideas, though. Please enlighten me.

Posted on: 2008/11/13 2:01
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ianmac47 wrote:
...but a short collapse of the system-- a few weeks or months is not necessarily bad.


I missed that morsel of wisdom.

You are more dumb than I thought.

Posted on: 2008/11/13 0:56
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Br6dR wrote:
Still think the bailout was a good idea?



Obama certainly did.

And the Democrats are pushing to bail out GM as we speak.

We'll have nationalized banks and major auto makers.

Discuss.

Posted on: 2008/11/13 0:53
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Still think the bailout was a good idea?

http://www.usnews.com/blogs/the-home- ... uxury-resort-reports.html

AIG Reportedly Sent Execs to Another Luxury Resort

By Luke Mullins
U.S. News and World Report
November 11, 2008

Here?s one that will have lawmakers in Washington, D.C. foaming at the mouth: AIG reportedly sent executives to another get-together at a luxury resort last week. You?ll recall that AIG took withering criticism several weeks back for sending executives on a fancy junket to a West Coast resort. (The company changed its get-together policy as a result.)

This gathering reportedly took place at that same time that AIG was begging the Feds to give it additional bailout cash. The government did just that yesterday, increasing the struggling insurance giant?s rescue package to more than $150 billion, up significantly from the original $85 billion loan.

From ABC news:

Even as the company was pleading the federal government for another $40 billion dollars in loans, AIG sent top executives to a secret gathering at a luxury resort in Phoenix last week.

Reporters for abc15.com (KNXV) caught the AIG executives on hidden cameras poolside and leaving the spa at the Pointe Hilton Squaw Peak Resort, despite apparent efforts by the company to disguise its involvement.

"AIG made significant efforts to disguise the conference, making sure there were no AIG logos or signs anywhere on the property," KNXV reported.

A hotel employee told KNXV reporter Josh Bernstein, "We can't even say the word [AIG]."

How Washington's Bailout Will Boost Wall Street Bonuses

By Stephen Gandel Monday
Time
Oct. 27, 2008

Uncle Sam has a new name on Wall Street ? Sugar Daddy. Bonuses for investment bankers and traders are projected to fall 40% this year. But analysts, compensation consultants and recruiters say the drop would be much more severe, perhaps as much as 70%, were it not for the government's efforts to prop up financial firms. "Year-end pay on Wall Street will be higher than it would have been had it not been for the government and mergers," says Alan Johnson, a leading compensation consultant. "You would expect it to be down much more."

Johnson predicts that the average managing director at an investment bank, a title typically earned after eight years on the job, will receive a bonus of $625,000. That's down from nearly $1.1 million last year, but it is still 15 times the income of the average American household. Top bankers could receive as much as $1 million. Even a bond trader just out of business school could see his or her bank account enriched by as much as $170,000 this Christmas. "The firms have had an extremely difficult year," says Joan Zimmerman, a Wall Street career coach. "But they can't afford to lose talent either."

While the government rescue limits the salaries of five top executives from each of the participating financial firms, Congress did nothing to restrict Wall Street firms from using taxpayer funds to boost the compensation of rank-and-file investment bankers. "Some people might argue that these bankers should not be penalized if they weren't personally involved in the risky mortgage-backed securities," says Sarah Anderson, project director of the Global Economy Project at the Institute for Policy Studies, a progressive think tank in Washington. "My response is that the average taxpayer wasn't either, but she is being asked to take a hit."

Earlier this month, the government announced that it planned to quickly inject $125 billion of the $700 billion economic rescue package into nine of the nation's largest financial firms, including Wall Street titans Goldman Sachs and Morgan Stanley, as well as Bank of America, which recently acquired securities firm Merrill Lynch. That, along with other Treasury Department moves to rescue Wall Street, will mean the wallets of many investment bankers will be fatter than they would have been.

More...

Posted on: 2008/11/13 0:08
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AIG plans to host meeting at Ritz

Bloomberg News
October 9, 2008

NEW YORK - American International Group castigated by the White House, Congress, and Barack Obama for hosting a $440,000 conference days after an $85 billion federal bailout, plans to hold another gathering for brokers next week.

The event, at the Ritz-Carlton in California's Half Moon Bay, aims to "motivate and educate" about 150 independent agents who sell AIG coverage to high-end clients, said spokesman Nicholas Ashooh.

White House spokeswoman Dana Perino yesterday called "despicable" expenses from the first gathering, a weeklong conference last month at the St. Regis Resort in Monarch Beach. Those costs included $23,000 for spa services, according to Representative Henry Waxman, chairman of the Oversight and Government Reform Committee.

AIG considered buying advertisements to explain its position, only to be told by public relations consultant George Sard that it would be "a really bad idea."

"To spend the taxpayer's money on an expensive ad campaign to apologize for how you used taxpayer money leaves you open to further attacks," Sard wrote in an e-mail to Ashooh. Sard, chief executive officer of New York-based Sard Verbinnen & Co., declined further comment.

President Bush didn't push for the bailout "to help top executives go to a spa," Perino said at the daily White House briefing. Hours later, the Federal Reserve agreed to loan AIG an additional $37.8 billion on top of the initial $85 billion.

More...

Posted on: 2008/10/9 9:47
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There is no real reason why the health and education should be so bad and expensive.............The government should consider it as an investion in its people!

Posted on: 2008/10/4 22:27
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Re: What does everyone think of the Bailout?
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ianmac47 wrote:
A complete collapse of the economy is not necessarily a bad thing; its a bad thing to happen over a decade or two decades, or a few years, but a short collapse of the system-- a few weeks or months is not necessarily bad.


Oh, for just a few weeks or months? What harm could that do?

Posted on: 2008/10/4 10:34
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A complete collapse of the economy is not necessarily a bad thing; its a bad thing to happen over a decade or two decades, or a few years, but a short collapse of the system-- a few weeks or months is not necessarily bad.

Posted on: 2008/10/4 5:24
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1. It's necessary to avoid a near-complete collapse of the economy.

2. It won't avert a recession in the short-term, but that's not a bad thing for the economy in the long term.

3. I'm concerned that without wise leadership, the economy may remain weak for a long a time.

Posted on: 2008/10/4 3:50
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And the credit crisis moves into state agencies....


Schwarzenegger Tells Paulson States May Need Loans

Oct. 3 (Bloomberg) -- California Governor Arnold Schwarzenegger told the U.S. Treasury that his and other states may need emergency federal loans if turmoil in the credit markets continues to impede their access to financing.

``This credit crisis has the power to grind the U.S. economy to a halt,'' Schwarzenegger wrote in a letter e-mailed to Treasury Secretary Henry Paulson last night, Treasury spokeswoman Jennifer Zuccarelli said in Washington today.

``Absent a clear resolution to this financial crisis that restores confidence and liquidity to the credit markets, California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal Treasury for short-term financing,'' Schwarzenegger wrote.

Rising borrowing costs and declining investor appetite for anything but the safest bonds are forcing states, cities and towns to deter spending on projects from road improvements to maintenance on schools. California may run out of cash at the end of the month if the state can't sell billions in short-term debt, Treasurer Bill Lockyer said Oct. 1.

Schwarzenegger said in his letter that California, the most populous U.S. state, expected to sell $7 billion of revenue anticipation notes in ``a matter of days.''

`So Large'

``While some states may be able to absorb a delay or obtain high-interest financing through private banks, California is so large that our short-term cash-flow needs exceed the entire budget of some states,'' Schwarzenegger wrote.

Without the short-term funding, the state may be forced to halt or significantly delay payments for teachers' salaries, nursing homes, law enforcement and ``every other state-funded service,'' Lockyer said.

Tax-exempt issuers have postponed more than $12 billion in note and bond deals since Lehman Brothers Holdings Inc. declared bankruptcy Sept. 15, according to data compiled by Bloomberg.

Louisiana postponed plans to sell $500 million of bonds this month, while in Chicago, school officials will have to decide which improvements will go forward after delaying a similar offering. Erie County, New York, has delayed dozens of capital projects.

To contact the reporter on this story: Jerry Hart in Miami at jhart@bloomberg.net.

Posted on: 2008/10/3 16:00
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I don't think the Gov't holding a porfolio of bad loans is considered an investment, so this is a bailout. Now, if the Gov't received an equity stake in the banks, like what Warren Buffet got with Goldman, then that would be a superior plan.

Posted on: 2008/10/3 13:59
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Wow, I'm surprised by the amount of intelligent posts on this topic.

My $.02...

We need to stop referring to this as a "Bailout". The media is driving this into a frenzy leading uninformed people to believe that the government is going to just "Hand out money to their CEO buddies." Our government is making an investment, not giving away money.

The past two weeks shows why the government needs to stay out of the economy as much as they possibly can. Most politicians are lawyers, not economists. They have no concept of the big picture. Timing is also a reason. If we had to go to congress every time to adjust rates, it would take weeks of BS...

The housing crisis or bubble burst, whatever you'd like to call it was caused by many different elements acting together. Of course low rates increases buying power, but I think the main cause is more of a social problem.

Democrats supporting freddie and fanny were pushing the limits of the system by demanding more home ownership of minorities, lowering the qualification standards for certain groups to pad their political careers. This, combined with the greed of mortgage brokers, led a ton of people into homes they couldn't afford.

At the same time, you have an influx of people buying property with the pursuit of getting rich. Just turn on your tv and count the shows and infomercials about making millions with realestate. Just look at our neighborhoods... People bought houses in "up and coming areas". WHY? Because they expect their property to double in price, not because they want to live in the community at that moment.

But with all that aside, everyone needs to take a deep breathe, put aside all the politics and focus on resolving this situation. Everyone is trying to play the political card. I think the democrats are trying way to hard to make this mess worse, thinking it will help them win an election. Meanwhile, our system is falling apart. Bloomberg for pres? Where's Mitt Romney when we need him?

Posted on: 2008/10/3 4:38
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Tax Earmarks in the Bailout Bill:

- Film and Television Productions (Sec. 502)
- Wooden Arrows designed for use by children (Sec. 503)
- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)

Tax earmark ?extenders? in the bailout bill:

- Virgin Island and Puerto Rican Rum (Section 308)
- American Samoa (Sec. 309)
- Mine Rescue Teams (Sec. 310)
- Mine Safety Equipment (Sec. 311)
- Domestic Production Activities in Puerto Rico (Sec. 312)
- Indian Tribes (Sec. 314, 315)
- Railroads (Sec. 316)
- Auto Racing Tracks (317)
- District of Columbia (Sec. 322)
- Wool Research (Sec. 325)

Posted on: 2008/10/2 23:53
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This is how we got here:

Article published in December 2006:

http://www.minyanville.com/articles/j ... ge-spending/index/a/19289

Drowning in a Sea of Liquidity
John Succo Oct 02, 2008 11:30 am

US is good at creating credit; bad at paying it back.

Editor's Note: The following originally appeared on December 14, 2006 and, in light of current events, has been reprinted here for the benefit of the Minyanville community.


Everything looks great - and yet you still have that uneasy feeling. When this happens, it's always good to check your premises

I think we can all agree that the markets, from stocks to bonds to art work, are riding on a sea of liquidity, which can come from 2 sources: Income or borrowing.

Real disposable income has actually fallen over the last 5 years. With a negative savings rate and a gigantic trade deficit, it's no secret that Americans are borrowing in order to consume.

Further evidence of this fact can be seen in a total GDP credit of 3.6 times (the next highest was 2.9, in 1929; it's averaged out at approximately 1.5 times over the last decades). We also have the lowest equity levels in homes ever, the highest percentage of disposable income going to service debt ever, government budget deficits of over $300 billion, and a public debt figure approaching $9 trillion (not counting the $500 billion in war costs so far - and not including the $45 trillion in unfunded liabilities from Medicare and Social Security).

Few people really understand the ramifications of this, or the process by which the bureaucrats in Washington compound the harm all this debt will cause by creating ever more of it.

A $1 billion REPO by the Fed doesn?t seem like much - until you check your premises. The Fed just did a $1.3 billion dollar coupon pass, which is like a permanent REPO; it calls up JPMorgan (JPM) and purchases its bonds with credit - credit created from nothing. They just tell JPMorgan: "We owe you money."

JPMorgan now has funds (credit) it can lend out. But because of margin requirements, it can lend out much more than $1.3 billion. In fact, it lends out about 20 times that amount.

So let?s say they call up 20 regional banks and let them borrow $1 billion each. In turn, each regional bank then lends out $5 billion to various mortgage borrowers. These borrowers refinance their houses - and spend the extra cash while the equity in their homes drops.

http://www.minyanville.com/articles/j ... ge-spending/index/a/19289

Posted on: 2008/10/2 17:37
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Re: What does everyone think of the Bailout?
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From today's WSJ, here are the politicians that defended Fannie and Freddie and helped us get in this mess.

OPINION OCTOBER 2, 2008

What They Said About Fan and Fred Article

House Financial Services Committee hearing, Sept. 10, 2003:
Rep. Barney Frank (D., Mass.): I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . . .
Rep. Maxine Waters (D., Calif.), speaking to Housing and Urban Development Secretary Mel Martinez:
Secretary Martinez, if it ain't broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?
* * *
House Financial Services Committee hearing, Sept. 25, 2003:
Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .
* * *
House Financial Services Committee hearing, Sept. 25, 2003:
Rep. Gregory Meeks, (D., N.Y.): . . . I am just pissed off at Ofheo [Office of Federal Housing Enterprise Oversight] because if it wasn't for you I don't think that we would be here in the first place.
Fannie Mayhem: A History
A compendium of The Wall Street Journal's recent editorial coverage of Fannie and Freddie.
And Freddie Mac, who on its own, you know, came out front and indicated it is wrong, and now the problem that we have and that we are faced with is maybe some individuals who wanted to do away with GSEs in the first place, you have given them an excuse to try to have this forum so that we can talk about it and maybe change the direction and the mission of what the GSEs had, which they have done a tremendous job. . .
Ofheo Director Armando Falcon Jr.: Congressman, Ofheo did not improperly apply accounting rules; Freddie Mac did. Ofheo did not try to manage earnings improperly; Freddie Mac did. So this isn't about the agency's engagement in improper conduct, it is about Freddie Mac. Let me just correct the record on that. . . . I have been asking for these additional authorities for four years now. I have been asking for additional resources, the independent appropriations assessment powers.
This is not a matter of the agency engaging in any misconduct. . . .
Rep. Waters: However, I have sat through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke. Housing is the economic engine of our economy, and in no community does this engine need to work more than in mine. With last week's hurricane and the drain on the economy from the war in Iraq, we should do no harm to these GSEs. We should be enhancing regulation, not making fundamental change.
Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. . . .
Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated?
Mr. Raines?
Mr. Raines: No, sir.
Mr. Frank: Mr. Gould?
Mr. Gould: No, sir. . . .
Mr. Frank: OK. Then I am not entirely sure why we are here. . . .
Rep. Frank: I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.
* * *
Senate Banking Committee, Oct. 16, 2003:
Sen. Charles Schumer (D., N.Y.): And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.
Mr. Raines: But more importantly, banks are in a far more risky business than we are.
* * *
Senate Banking Committee, Feb. 24-25, 2004:
Sen. Thomas Carper (D., Del.): What is the wrong that we're trying to right here? What is the potential harm that we're trying to avert?
Federal Reserve Chairman Alan Greenspan: Well, I think that that is a very good question, senator.
What we're trying to avert is we have in our financial system right now two very large and growing financial institutions which are very effective and are essentially capable of gaining market shares in a very major market to a large extent as a consequence of what is perceived to be a subsidy that prevents the markets from adjusting appropriately, prevents competition and the normal adjustment processes that we see on a day-by-day basis from functioning in a way that creates stability. . . . And so what we have is a structure here in which a very rapidly growing organization, holding assets and financing them by subsidized debt, is growing in a manner which really does not in and of itself contribute to either home ownership or necessarily liquidity or other aspects of the financial markets. . . .
Sen. Richard Shelby (R., Ala.): [T]he federal government has [an] ambiguous relationship with the GSEs. And how do we actually get rid of that ambiguity is a complicated, tricky thing. I don't know how we do it.
I mean, you've alluded to it a little bit, but how do we define the relationship? It's important, is it not?
Mr. Greenspan: Yes. Of all the issues that have been discussed today, I think that is the most difficult one. Because you cannot have, in a rational government or a rational society, two fundamentally different views as to what will happen under a certain event. Because it invites crisis, and it invites instability. . .
Sen. Christopher Dodd (D., Conn.): I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time. And we don't want to lose sight of that and [what] has been pointed out by all of our witnesses here, obviously, the 70% of Americans who own their own homes today, in no small measure, due because of the work that's been done here. And that shouldn't be lost in this debate and discussion. . . .
* * *
Senate Banking Committee, April 6, 2005:
Sen. Schumer: I'll lay my marker down right now, Mr. Chairman. I think Fannie and Freddie need some changes, but I don't think they need dramatic restructuring in terms of their mission, in terms of their role in the secondary mortgage market, et cetera. Change some of the accounting and regulatory issues, yes, but don't undo Fannie and Freddie.
* * *
Senate Banking Committee, June 15, 2006:
Sen. Robert Bennett (R., Utah): I think we do need a strong regulator. I think we do need a piece of legislation. But I think we do need also to be careful that we don't overreact.
I know the press, particularly, keeps saying this is another Enron, which it clearly is not. Fannie Mae has taken its lumps. Fannie Mae is paying a very large fine. Fannie Mae is under a very, very strong microscope, which it needs to be. . . . So let's not do nothing, and at the same time, let's not overreact. . .
Sen. Jack Reed (D., R.I.): I think a lot of people are being opportunistic, . . . throwing out the baby with the bathwater, saying, "Let's dramatically restructure Fannie and Freddie," when that is not what's called for as a result of what's happened here. . . .
Sen. Chuck Hagel (R., Neb.): Mr. Chairman, what we're dealing with is an astounding failure of management and board responsibility, driven clearly by self interest and greed. And when we reference this issue in the context of -- the best we can say is, "It's no Enron." Now, that's a hell of a high standard.

Posted on: 2008/10/2 17:09
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Re: What does everyone think of the Bailout?
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By STEVEN A. HOLMES

Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

Posted on: 2008/10/2 13:23
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Re: What does everyone think of the Bailout?
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Quote:


Hope that helps answer your question.


Yes, thank you, it answers some. What it does not answer is what kind of damage will it really inflict, and to whom?

I think a lot of over-leveraged institutions, those that participated in the ramp up to this party where a lot of people made a boatload of money will perish, while good, solid, sensible regional banks and institutions that did not overplay risk will be rewarded.

Is it possible that non-intervention in the markets will result in a financial landscape where the good banks survive and th bad banks go down?

Posted on: 2008/10/1 17:46
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Re: What does everyone think of the Bailout?
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Obama Sells Bailout Plan to Skeptics

By Jeff Zeleny
New york Times
October 1, 2008, 12:04 pm

LA CROSSE, Wis. ? Senator Barack Obama intensified his efforts to rally support for the $700 billion financial bailout package on Wednesday, selling the idea to skeptical voters ? and members of Congress ? as a plan to ?safeguard the American economy.?

?This plan is not perfect. Democrats and Republicans in Congress have legitimate concerns about it,? Mr. Obama said. ?I know many Americans share those concerns, but it is clear that this is what we must do right now to prevent a crisis from turning into a catastrophe.?

On a crisp fall morning in downtown Lacrosse, where thousands of people gathered not far from the Mississippi River, Mr. Obama sought to explain the need for the economic rescue plan. The light applause from the audience, though, underscored the challenge facing both Mr. Obama and Senator John McCain as they prepare to vote for the bill in on Wednesday night in Washington.

Mr. Obama said the plan had been ?misunderstood and, frankly, poorly communicated.? For the second day in a row, he devoted nearly an entire speech to explaining the plan, casting it as essential to warding off a crisis from rippling through the economy. He barely mentioned Wall Street as he presented his argument for the plan, portraying it instead as a necessary challenge for all Americans.

?This is not a plan to just hand over $700 billion of your money to a few banks,? Mr. Obama said. ?If this is managed correctly, we will hopefully get most or all of our money back ? we might even turn a profit on the government?s investment ? everypenny of which will go directly back to you, the investor.?

Lacrosse, a city that sits along the western edge of Wisconsin, has long been one of the key battlegrounds in presidential campaigns. Back-to-back commercials from Mr. Obama and Mr. McCain filled morning television programming here, with each of the messages devoted to the economy.

But in a 36-minute speech, Mr. Obama only mentioned his Republican rival by name one time. While politics was hardly off the table, the sharp rhetoric that has defined the campaign took a momentary backseat to a bipartisan call to action on the economic rescue plan, which both candidates now share ownership of.

?Future generations will judge ours by how we respond to this test. Will they say that this was a time when America lost its way and its purpose? When we allowed our own petty differences and broken politics to plunge this country into a dark and painful recession?? Mr. Obama said, steadily drawing his audience into applause. ?Or will they say that this was another one of those moments when America overcame? When we battled back from adversity by recognizing that common stake that we have in each other?s success? ?

As Mr. McCain made his way to Washington from Missouri on Wednesday, Mr. Obama also was flying back, where he was set to arrive on Capitol Hill in advance of the evening vote scheduled on the Senate floor.

Posted on: 2008/10/1 17:07
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